Bisges v. Gargula
Filing
19
MEMORANDUM AND ORDER. The decision in bankruptcy is affirmed. Signed on 08/13/13 by District Judge Howard F. Sachs. (Duer, Tina)
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI
CENTRAL DIVISION
IN RE ANNE ELIZABETH CLINK,
Debtor,
NANCY J. GARGULA,
UNITED STATES TRUSTEE,
Appellee,
v.
NOEL BISGES,
Appellant.
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Case No. 13-4122-CV-C-HFS
MEMORANDUM AND ORDER
This is an appeal from a ruling in a proceeding brought in bankruptcy by the
United States Trustee. She sought and obtained sanctions against Noel Bisges, former
attorney for the debtor, Ms. Clink. The Bankruptcy Judge has also referred to the district
court possible disciplinary proceedings against Mr. Bisges for misconduct “based on
advising his client to mislead and lie to the Court.” In re Clink, 2013 WL 1741945
(Bkrtcy. W.D. Mo.). The ruling adverse to Mr. Bisges, required him to disgorge $1,411 in
fees paid by Ms. Clink because he failed to obtain a written contract and to pay treble that
amount, $4,233 as sanctions for other alleged misconduct.
The memorandum opinion on appeal is well written and thorough, and will be
adopted. Detailed rewriting is unnecessary. The most serious bankruptcy finding was that
Mr. Bisges had advised the debtor to conceal her recent repayment of a loan from her
mother. The e-mail message to that effect was discovered during investigation of the
omission of several horses from the debtor’s statement of assets, allegedly by the
attorney’s faulty handling of the listing of assets. Other allegations are that there was a
failure to obtain the required written retainer contract and that filings of amended
documents were improperly made without being signed by the debtor.
The facts regarding the nondisclosure of the horses as assets are in considerable
dispute, and the issue was settled by the debtor’s paying $1,000. The e-mail advice
regarding the potential preference is admitted. While conceding misconduct, Mr. Bisges
contends that the e-mail advice is not condemned by statute (11 U.S.C. § 526(a)(2))
because his advice was not taken and is not reflected in any filings. The debtor
independently caused her mother to repay the proceeds that might have been challenged
as a voidable preference,
On the assumption that the bankruptcy ruling will be reviewed by the reader of
this opinion, I will move directly to the challenge to the findings of fact, which are to be
accepted on appeal unless “clearly erroneous.”
The record clearly supports conclusions that Mr. Bisges, as counsel for the
bankrupt, Ms. Clink, (1) recommended that she conceal from the official records a
substantial transaction with her mother that looked like a preference for a favored
creditor; (2) at some point condoned a reported practice of minimizing the reporting of
assets such as pets, including horses, some of which, as in this case, may have significant
value; and (3) disregarded procedural rules such as having a written contract with a
debtor and obtaining signed verification of final drafts of papers prior to filing. Contrary
findings could hardly be justified. I affirm the Bankruptcy Court findings of fact as not
being clearly erroneous.
The most vulnerable flaw in the Clink testimony (at the hearing and at the
meeting of creditors) was what the trustee’s notes refer to as her claim that she had
“secured” creditors when she had none. My best reconstruction of this would be that Ms.
Clink intended the “loan” from her mother to pay off liens to be an unusual temporary
event, to be repaid with tax refund moneys within days. This would account for her using
quotation marks in the e-mail reference to the loan, indicating she considered it an oddity
of some sort. As a college-trained debtor giving much thought to her predicament, she
might well have conceptualized a version of the transaction as being “secured,” when the
source of repayment had been identified at the beginning of the event. It was thus
“secured” in planning if not in documentation.1
Ms. Clink’s recall of the payment to her mother demonstrates an intention to
comply with the law and avoid misconduct, even when contrary advice has been
received, whereas cynical remarks and the recommendation by Mr. Bisges shows a
censurable disregard for applicable legal rules and procedures.2
Credibility findings favoring Ms. Clink and ruling against Mr. Bisges are not
reversible error, particularly considering the contents of the Bisges testimony on direct
and cross examination. While some aspects of the Clink testimony might be questioned
1
The missing recording of the creditors’ meeting, destroyed by third parties routinely despite the pendency
of this proceeding, is probably not sanctionable against the Trustee, in my judgment, and certainly would
not warrant dismissing this proceeding. Menz v. New Holland N. Am., Inc., 440 F.3d 1002 (8th Cir. 2006).
The pertinent law is not changed by Hallmark Cards, Inc. v. Murley, 703 F.3d 456 (8th Cir. 2013). In any
event the routine destruction of the recording was not prejudicial. There were several attentive witnesses
who could reconstruct the proceeding. The debtor’s testimony on that occasion apparently contains no
material information or basis for impeachment, except as noted above with reference to “secured” creditors.
Even if the horse concealment issue was not in any way the fault of Mr. Bisges, which I doubt, the
sanctions imposed were not excessive and would surely have been used by the Bankruptcy Judge in any
event.
2
Because I may need to participate in further disciplinary proceedings against Mr. Bisges, I refrain from
unnecessary judgments about how deep-seated or atypical his misconduct may be, or how far it may depart
from common attitudes and practices among bankruptcy practitioners. The procedural improprieties are
perhaps common irregularities - but maybe not.
as improbable, acceptance of her testimony was not clearly erroneous, given the
opportunity of the Bankruptcy Judge to observe the witnesses.
The issue of statutory construction is best expressed on pp. 11-14 of the Bisges
Reply Brief (Doc. 18). Before the ruling of the Bankruptcy Judge here “there are no
reported decisions that involved a violation of [Title 11] §526(a)(2) when a false
document was not filed with a bankruptcy court.” Page 14, id. Mr. Bisges emphasizes the
underlined reference to a filed false document by contending that the Bankruptcy Judge
erred in reading the statute to refer to a “document THAT COULD BE filed in a case or
proceeding under this title.” Page 13, ibid. The Bisges version of the statute would
apparently make it applicable only to amending a filing that had already been made. That
is clearly not the thrust of the language- -it clearly contemplates advocating false
language for documents to be filed.
I agree that the statute is limited to the preparation of filed documents, not idle
talk about conduct that would not be disclosed in such documents. It would not apply to
recommending false testimony, for example. One would need to search for other
provisions applicable to that form of misconduct. But the real issue Mr. Bisges raises, but
fails to argue, is whether the document, as filed, must itself contain false information.
Does the statute apply to attempts that fail?
A fair and reasonable reading of the statute, given the likely legislative intent,
would be that it forbids counseling or advising untrue or misleading statements, even
when the document in question is thereafter filed without adopting the proposal. Neither
party submits authority on this point. I believe it to be novel, in applying the statute
adopted some eight years ago. Since it is directed toward improper advice or counseling,
the success of the bad counseling would seem to be a matter that at most goes to
punishment. The misconduct is complete when it occurs, although a document filing is
essential to the offense. I agree with the legal conclusion reached by the Bankruptcy
Judge.
There is enough uncertainty as to the sound reading of the section so that the rule
of liberal construction, in order to carry out the remedial purposes of the legislation,
comes into play. On the other hand, I do not find the serious degree of ambiguity that
would cause use of the rule of lenity in dealing with potentially punitive legislation.
Having reviewed the record and the briefs on appeal, I find no error in the
conclusions of law reached by the Bankruptcy Judge, and accept the findings of fact. The
decision in bankruptcy is therefore AFFIRMED.
/s/ Howard F. Sachs
HOWARD F. SACHS
UNITED STATES DISTRICT JUDGE
August 13 , 2013
Kansas City, Missouri
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