Labbadia v. Martin (In re Martin)

In re: BRADFORD J. MARTIN, Debtor

PAT LABBADIA, III, D/B/A LAW OFFICE OF

PAT LABBADIA Plaintiff v. BRADFORD J. MARTIN, Defendant

Case No.: 18-31636 (AMN)

Adv. Pro. No. 19-3001 (AMN)

UNITED STATES BANKRUPTCY COURT DISTRICT OF CONNECTICUT NEW HAVEN DIVISION

May 28, 2020

Chapter 7

Re: AP-ECF Nos. 30, 155¹

MEMORANDUM OF DECISION AFTER TRIAL

APPEARANCES

Pat Labbadia, III, Esq.

d/b/a Law Office of Pat Labbadia

63 West Main Street

P.O. Box 365

Clinton, CT 06413

Plaintiff Proceeding Pro se²

Patrick W. Boatman, Esq.

Jenna N. Sternberg, Esq.

Law Offices of Patrick W. Boatman, LLC

111 Founders Plaza, Suite 1000

East Hartford, CT 06108

Counsel for the Defendant

I. INTRODUCTION

Before the court is the plaintiff's³ complaint seeking a determination that a debt the debtor owes him is non-dischargeable pursuant to 11 U.S.C. § 523(a)(2)(A), and, more broadly, seeking a denial of the debtor's Chapter 7 discharge pursuant to 11 U.S.C. § 727(a)(4)(A).⁴ This dispute arose when Bradford J. Martin ("Mr. Martin", the "Debtor" or the "Defendant") failed to pay the attorney's fees owed for the plaintiff's work on his behalf during divorce proceedings and through a trial. Prior to the start of the divorce trial when substantial fees were already owed, the defendant promised he would pay the plaintiff in two installments: (1) $10,000.00 soon thereafter; and, (2) the balance of the fees at an eventual closing of the sale of the marital residence. When the divorce was concluded and the house sold, the defendant refused to use the sale proceeds to pay the plaintiff, and the plaintiff sued him in state court. The defendant then filed the Chapter 7 bankruptcy case underlying this adversary proceeding.

II. JURISDICTION AND VENUE

The United States District Court for the District of Connecticut has jurisdiction over this matter pursuant to 28 U.S.C. § 1334(b). The Bankruptcy Court, in turn, has jurisdiction to hear and determine this matter pursuant to 28 U.S.C. § 157(a) and the Order of Reference of the District Court dated September 21, 1984. This is a core proceeding pursuant to 28 U.S.C. §§ 157(b)(2)(I) and (J). This Court has jurisdiction over core proceedings pursuant to 28 U.S.C. §§ 157(b)(1) and 1334, and, may hear and enter a final order in this matter subject to traditional appeal rights.

This adversary proceeding arises under the defendant's Chapter 7 case pending in this District and venue is proper pursuant to 28 U.S.C. § 1409. The plaintiff's standing stems from his status as a creditor in the Chapter 7 case, and he may object to both the granting of a discharge pursuant to § 727(c)(1) and the dischargeability of a debt pursuant to Fed.R.Bankr.P. 4007(a). This memorandum shall serve as the court's findings of facts and conclusions of law pursuant to Fed.R.Civ.P. 52, made applicable here through Fed.R.Bankr.P. 7052.

III. PROCEDURAL HISTORY

The court assumes familiarity with the procedural history of the Defendant's Chapter 7 case, case number 18-31636, and this adversary proceeding as set forth in the court's earlier Ruling and Memorandum of Decision Granting the Motion to Amend Complaint and Granting the Motion to Dismiss Complaint, in Part (the "Partial Dismissal Decision"). AP-ECF No. 81.

When this adversary proceeding commenced on January 8, 2019, the plaintiff's primary protest was that the defendant, Mr. Martin used the proceeds from the sale of his former marital residence to purchase an interest in real property he used as a residence when he filed the Chapter 7 case, rather than to pay the plaintiff's claim. The plaintiff complained that the defendant's apparent conversion of non-exempt property to exempt property on the eve of bankruptcy was a scheme designed to place the funds beyond the plaintiff's reach. Because the plaintiff did not timely object to the defendant's homestead exemption, any claims asserted on this basis were dismissed as more fully set forth in the Partial Dismissal Decision. AP-ECF No. 81.⁵ Besides the deferment of Counts Onethrough Three, all that remained of the plaintiff's Second Amended Complaint (the "Complaint") after the Partial Dismissal Decision were portions of Counts Four and Five. Those remaining claims included:

a. Count Four, only to the extent it seeks to deny the defendant a discharge for making a false oath on his bankruptcy petition claiming he paid $500.00 in rent pursuant to 11 U.S.C. § 727(a)(4)(A); and

b. Count Five, only to the extent it seeks a determination that a debt owed to the plaintiff for attorney's fees is non-dischargeable because the fees were incurred after the defendant falsely promised, prior to the start of his divorce trial, he would pay the fees owed in full when the marital home was sold pursuant to 11 U.S.C. § 523(a)(2)(A).

AP-ECF No. 81.

A trial on the two remaining counts proceeded on December 16, 2019 and December 19, 2019. On the morning of December 16, 2019, the plaintiff moved to amend his complaint to add an allegation that the defendant had falsely stated on his Statement of Financial Affairs he paid his counsel, Attorney Patrick Boatman, Three Thousand Three Hundred and Thirty-five ($3,335.00) Dollars, when - as later revealed -- he had paid a total of Six Thousand ($6,000.00) Dollars for services that included filing bankruptcy and purchasing property in Westbrook, Connecticut. AP-ECF Nos. 134, 135. However, the plaintiff mistakenly attached an amendment that failed to contain his intended revisions and I denied the motion but allowed plaintiff to present evidence regarding Attorney Boatman's fees, if he so chose. AP-ECF No. 138 at 00:04:15 - 00:10:28⁶; AP-ECF No. 136. During trial, I reserved decision regarding plaintiff's Exhibits 2T and 2S. AP-ECF No. 141 at 00:42:52 - 01:00:20. Following trial, both parties submitted post-trial briefs. See, AP-ECF Nos. 154, 157, 162.

On January 31, 2020, the same day as the filing of his post-trial brief, the plaintiff filed another motion seeking to amend his Complaint to add the allegation regarding the amounts paid to Attorney Boatman. AP-ECF No. 156. Specifically, the plaintiff amended paragraph numbers 26 and 54(c) alleging the defendant should be denied a discharge pursuant to 11 U.S.C. § 727(a)(4) because there was a discrepancy between the defendant's disclosure that he paid $3,335.00 to Attorney Boatman in his Statement of Financial Affairs versus his deposition testimony that he paid a total of $6,000.00. AP-ECF No. 155-2, p. 5. The defendant objected on the basis that any amendment would be futile. See, AP-ECF No. 158.

IV. FINDINGS OF FACT

In accordance with Fed.R.Civ.P. 52 and Fed.R.Bankr.P. 7052, after review and analysis of the trial testimony, the documents admitted into evidence, and examination of the official record of the bankruptcy case and the instant adversary proceeding, I find the following facts:

1. On October 1, 2018 (the "Petition Date"), the defendant commenced the Chapter 7 case by filing a voluntary Chapter 7 petition. ECF No. 1.

2. On the Petition Date, the defendant resided at 21 Salt Island Road, Westbrook, Connecticut ("Westbrook Property"). AP-ECF No. 30, 80, ¶ 2. At that time, he held a one-quarter interest in the title to the Westbrook Property.

3. Until approximately October of 2013, Mr. Martin resided with his wife at a home in Guilford, Connecticut (the "marital residence"), which he and his wife owned jointly. AP-ECF No. 138 at 01:01:15 - 1:01:40; AP-ECF No. 142 at 02:54:11 - 02:54:18.

4. After twenty-seven years of marriage, Mr. Martin consulted with his close friend, Gerald Ryan ("Attorney Ryan"), an attorney who had assisted Mr. Martin withvarious civil matters over the years, about getting a divorce from his wife. AP-ECF No. 142 at 02:54:40 - 02:56:02. Attorney Ryan referred Mr. Martin to the plaintiff. AP-ECF No. 142 at 02:56:07 - 02:56:50.

5. Pasquale (referred to as "Pat") Labbadia is a licensed attorney operating a solo practice doing business as The Law Office of Pat Labbadia. AP-ECF No. 141 at 01:29:06 - 01:31:28. During all relevant times, the plaintiff's wife, Mary Labbadia, worked full time as a paralegal and secretary in the plaintiff's office. AP-ECF No. 139 at 01:54:10 - 01:54:30.

6. The defendant retained the plaintiff to represent him in his divorce and entered into a written retainer agreement for that representation. AP-ECF No. 138 at 00:31:16 - 00:31:24; 00:41:15 - 00:41:32; AP-ECF No. 141 at 01:31:40 - 01:32:05. The retainer agreement, dated July 19, 2011, called for a Five Thousand ($5,000.00) Dollar retainer and for the plaintiff to be compensated on an hourly basis. Pl. Ex. 7; AP-ECF No. 138 at 00:39:31 - 00:41:15; AP-ECF No. 141 at 01:31:40 - 01:32:05. In a series of payments, Mr. Martin paid the $5,000.00 retainer. AP-ECF No. 138 at 00:40:35 - 00:40:42; AP-ECF No. 141 at 01:32:14 - 01:32:28.

7. In July of 2013, the plaintiff presented Mr. Martin with an initial invoice totaling $9,920.00. Pl. Ex. 8. Mr. Martin paid the $9,920.00. AP-ECF No. 138 at 01:00:14 - 01:00:30.

8. At some point in October 2013, Mr. Martin moved out of the marital residence and into the Westbrook Property, which at that time was owned solely by the defendant's close friend, Thomas Holthausen. The defendant paid rent of $500.00 a month in exchange for residing at the Westbrook Property. AP-ECF No. 30, ¶¶ 20 - 24, AP-ECF No. 88, ¶¶ 20-24, Pl. Ex. 26, p. 21, L. 12-16.

Divorce Trial and The Promise of Payment

9. While Mr. Martin could not recall specific details, it was undisputed that the divorce case⁷ was contested and the divorce trial was delayed on multiple occasions for various reasons, none of which are relevant to the issues before this court.

10.The defendant was frustrated by the length of time it was taking to complete the divorce case and its growing expense, and, at one point considered proceeding pro se. However, the plaintiff persuaded him it was in his best interests to continue having the plaintiff represent him. AP-ECF No. 138 at 01:48:10 - 01:48:25; AP-ECF No. 142 at 00:37:50 - 00:40:10.

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