Appeal from the U.S. Bankruptcy Court Central District of Illinois Hon. Mary Gorman, presiding. Bankruptcy No. 04-71343.
The opinion of the court was delivered by: Jeanne E. Scott, U.S. District Judge
John S. Narmont, attorney for Debtor Ronald Gibson (Gibson), appeals from an Order of the Bankruptcy Court finding him in contempt. The Bankruptcy Court found Narmont in contempt for recording a Memorandum of Judgment against Gibson in Greene County, Illinois, while Gibson's Chapter 12 bankruptcy was still pending. The Memorandum of Judgment stated that an interim award of attorney fees in Gibson's bankruptcy proceeding constituted a judgment in favor of Narmont and against Gibson. Narmont appeals the Bankruptcy Judge's Order finding him in contempt on the basis that he was not given proper notice of the contempt proceedings and opportunity to defend. The Court agrees with Narmont with respect to the contempt finding and therefore reverses and remands the case to allow the Bankruptcy Court to provide Narmont with adequate notice and opportunity to be heard.
On December 24, 2003, Gibson and his wife, Rosa Gibson, put their farm property in Carrollton, Illinois, in a land trust. Record on Appeal (d/e 1) (Record), Part 8, Objection to Motion to Avoid Lien (Objection), Exhibits D and E, Trust Agreement dated December 22, 2003, and Warranty Deed in Trust, dated December 23, 2003. They then paid Narmont a retainer of $10,000.00, and $239.00 for expenses, and Narmont represented the Gibsons in two bankruptcy proceedings. Rosa Gibson filed a Chapter 7 liquidation bankruptcy proceeding. On March 22, 2004, Gibson filed this proceeding, which was originally a Chapter 11 reorganization, but was converted to a Chapter 12 farm reorganization proceeding.
On May 18, 2004, Narmont filed an application for an interim award of $3,293.75 in fees and $619.00 in costs. The Court approved the award by an interim order entered June 8, 2004. Record on Appeal (d/e 1) (Record), Part 9, Bankruptcy Court Opinion entered November 4, 2008 (Bankruptcy Opinion), at 2. On December 15, 2004, the Bankruptcy Court approved Narmont's second interim application for attorney fees in Gibson's bankruptcy. The second interim order stated:
The Application for Approval of Attorney Fees and Expenses incurred in Chapter 11 case totaling $8,560.50 as of November 23, 2004 in the above captioned cause is heard and allowed. Record, Part 3, Gibson Letter dated September 24, 2008, docketed as Motion to Reopen Case and Avoid Lien (Gibson Letter), Exhibit H, Order Approving Application for Approval of Attorney's Fees and Expenses entered December 15, 2004.*fn1
Gibson's Chapter 12 plan of reorganization was confirmed on April 8, 2005. The day before, on April 7, 2005, they assigned the beneficial interest in the land trust to their daughter Carla Haydon and her husband Jason S. Haydon, but retained a life estate in the beneficial interest. Objection, Exhibit F and G, Assignment of Beneficial Interest, dated April 7, 2005, and Acceptance by Assignee, dated April 7, 2005.
On May 5, 2005, the Bankruptcy Court entered a third interim order approving attorney fees in Gibson's bankruptcy. The May 5, 2005, Order stated:
The Petition for Approval of Attorney Fees in the amount of $6,963.00 as of April 25, 2005 in the above captioned cause is heard and allowed.
Objection, Exhibit B, Order Approving Petition for Approval of Attorney's Fees, entered May 5, 2005.
On May 24, 2005, Gibson wrote Narmont asking that the Chapter 12 bankruptcy be dismissed. Gibson reaffirmed his decision to dismiss the case voluntarily by letter to Narmont dated June 21, 2005. On July 5, 2005, Gibson wrote Narmont and the Bankruptcy Court to request the dismissal. On that same date, Narmont recorded a Memorandum of Judgment against Gibson in the Greene County, Illinois, recorder's office asserting a judgment against Gibson in the sum of $8,560.50. The Memorandum of Judgment stated that the judgment was rendered on December 15, 2004, in Gibson's bankruptcy. Objection, Exhibit C, Memorandum of Judgment.
The Bankruptcy Court dismissed the bankruptcy on Friday, July 8, 2005. Narmont filed a motion to dismiss on Monday July 11, 2005, after the case had already been dismissed.
On September 29, 2008, the Bankruptcy Court received a letter from Gibson dated September 24, 2008. The letter was treated as a motion to reopen the Chapter 12 bankruptcy and to avoid Narmont's judgment lien. The Bankruptcy Court reopened the proceeding. The Bankruptcy Court then sent out a notice for a hearing to be ...