In re: Jeanette Dryer

FILED 1 NOT FOR PUBLICATION FEB 27 2015 SUSAN M. SPRAUL, CLERK 2 U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT 3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. CC-14-1333-KuDKi ) 6 JEANETTE DRYER, ) Bk. No. 14-13018 ) 7 Debtor. ) ______________________________) 8 ) EARSEY GREENWOOD, ) 9 ) Appellant, ) 10 ) v. ) MEMORANDUM* 11 ) UNITED STATES TRUSTEE; ) 12 JEANETTE DRYER; TIMOTHY J. ) YOO, Chapter 7 Trustee, ) 13 ) Appellees. ) 14 ______________________________) [15] Argued and Submitted on February 19, 2015 16 at Los Angeles, California 17 Filed – February 27, 2015 18 Appeal from the United States Bankruptcy Court for the Central District of California [19] Honorable Ernest M. Robles, Bankruptcy Judge, Presiding [20] 21 Appearances: Appellant Earsey Greenwood argued pro se; Ron Maroko argued for Appellee United States Trustee; 22 Appellee Jeanette Dryer, on brief, pro se. [23] Before: KURTZ, DUNN and KIRSCHER, Bankruptcy Judges. [25] 26 * This disposition is not appropriate for publication. 27 Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. 28 See 9th Cir. BAP Rule 8024-1. 1 INTRODUCTION 2 Appellant Earsey Greenwood, who is not an attorney, admitted 3 to assisting debtor Jeanette Dryer in preparing the forms she 4 filed to commence her chapter 71 bankruptcy case. The bankruptcy 5 court fined Greenwood under § 110 for not complying with the 6 restrictions and requirements § 110 imposes on non-attorney 7 bankruptcy petition preparers. 8 Greenwood appealed the bankruptcy court’s ruling. In both 9 the bankruptcy court and on appeal, Greenwood only has offered 10 one argument why he should not be fined under § 110. He has 11 argued that he was unaware of the statute’s requirements and was 12 unaware that the statute applied to him. But § 110 does not 13 condition the imposition of fines on the non-attorney petition 14 preparer’s knowledge of the statute or its applicability. In any 15 event, the bankruptcy court found Greenwood’s claimed ignorance 16 of § 110 not credible, and we hold that this finding was not 17 clearly erroneous. 18 Accordingly, we AFFIRM. 19 FACTS 20 In February 2014, without the assistance of a licensed 21 attorney, Dryer commenced her bankruptcy case. Roughly one month 22 later, the United States Trustee convened the § 341(a) meeting of 23 creditors for Dryer’s case, and Dryer duly appeared at the 24 creditor’s meeting for examination pursuant to § 343. At that [25] 26 1 Unless specified otherwise, all chapter and section 27 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532 , and all "Rule" references are to the Federal Rules of Bankruptcy 28 Procedure, Rules 1001-9037. [2] 1 time, the United States Trustee’s representative directed Dryer 2 to complete a standard form Declaration for Debtors Without 3 Attorney, which asks debtors whether and to what extent they were 4 assisted in filing their bankruptcy papers by someone other than 5 an attorney. In her declaration, Dryer disclosed that she paid 6 $1,000 to Greenwood to assist her in preparing her bankruptcy 7 papers. Dryer further disclosed that Greenwood advised her: 8 (1) whether or not to file a bankruptcy petition; (2) the 9 difference between chapter 7, 11, 12 and 13 of the bankruptcy 10 code; (3) whether she would be able to retain her home, car or 11 other property after the bankruptcy filing; and (4) how her debts 12 should be listed in her bankruptcy schedules as either priority, 13 secured or unsecured debts.2 Dryer subsequently provided the 14 United States Trustee with copies of two cancelled checks 15 totaling $1,000 that she paid to Greenwood. The reverse side of 16 each check shows what appears to be Greenwood’s signature as an 17 endorsement. 18 Based on Dryer’s declaration and the contents of her 19 bankruptcy filings, the United States Trustee filed and served a 20 motion against Greenwood pursuant to § 110(h)(3) seeking 21 disgorgement of the $1,000 in fees that Greenwood collected from 22 Dryer and seeking the imposition of fines against Greenwood based 23 on his violations of § 110. The United States Trustee pointed [2] Greenwood included with his appeal papers a new declaration 25 signed by Dryer in which she recanted many of the statements she 26 had made in her Declaration for Debtors Without Attorney. This new declaration, dated August 14, 2014, was not part of the 27 record before the bankruptcy court. Therefore, we will not consider it. See Castro v. Terhune, 712 F.3d 1304 , 1316 n.5 (9th 28 Cir. 2013). [3] 1 out that Greenwood: (1) had not signed any of Dryer’s bankruptcy 2 filings (in violation of § 110(b)(1)); (2) had not filed the 3 required Bankruptcy Petition Preparer’s form declaration and 4 notice (Bankruptcy Official Form B19) regarding his fees and the 5 limited scope of non-attorney services he was permitted to 6 perform for debtors (in violation of § 110(b)(2) and (h)(2)); and 7 (3) had not placed his social security number on Dryer’s 8 bankruptcy filings (in violation of § 110(c)). 9 Greenwood filed an opposition to the motion in which he 10 admitted that he helped prepare Dryer’s bankruptcy papers by 11 inputting or typing in the relevant information into the forms, 12 but he claimed that he was unaware that he qualified as a 13 bankruptcy petition preparer or that he needed to comply with 14 § 110. The United States Trustee then filed a reply. In 15 relevant part, the United States Trustee countered Greenwood’s 16 assertion that he did not know he qualified as a bankruptcy 17 petition preparer and did not know of § 110's requirements. The 18 United States Trustee presented evidence demonstrating that, in 19 2013, the bankruptcy court had fined Greenwood in another 20 bankruptcy case for violating § 110. 21 At the hearing on the United States Trustee’s motion, the 22 bankruptcy court ruled in favor of the United States Trustee and 23 against Greenwood. The court found that Greenwood was a 24 bankruptcy petition preparer within the meaning of the statute. 25 The bankruptcy court also found that Greenwood committed four 26 separate violations of § 110(b)(1) by not signing Dryer’s 27 petition, her schedules, her statement of financial affairs and 28 her statement of intention. The bankruptcy court further found [4] 1 that Greenwood committed three separate violations of § 110(c)(1) 2 by not putting his social security number or other “identifying 3 number” on Dryer’s petition, her schedules and her statement of 4 financial affairs. According to the court, Greenwood also 5 violated § 110(b)(2) by not filing the required form notice to 6 the debtor regarding the limitations and restrictions on his 7 services and violated § 110(h)(2) by not signing and filing a 8 declaration regarding the fees Dryer paid him. 9 Finally, the bankruptcy court found Greenwood was not 10 credible when he claimed he was not aware of the above-referenced 11 requirements. The court pointed out that Greenwood previously 12 had been fined for similar violations. The court additionally 13 pointed out that the petition Greenwood filled out for Dryer 14 contained a prominent signature block for non-attorney petition 15 preparers. In any event, the court reasoned, even if Greenwood 16 had not been aware of § 110's requirements, lack of knowledge of 17 the requirements is not a valid excuse for noncompliance. 18 On account of its findings, the court imposed $4,000 in 19 fines based on eight separate violations of § 110 at $500 per 20 violation (see § 110(l)(1)) and then trebled the $4,000 in 21 accordance with § 110(l)(2)(D), thereby bringing the total fines 22 imposed to $12,000. The court also ruled that Greenwood had 23 forfeited the $1,000 in fees he collected from Dryer pursuant to 24 § 110(h)(3)(B) because of his violation of § 110's other 25 provisions. The court ordered Greenwood to reimburse the $1,000 [5] 1 to Dryer.3 2 On June 30, 2014, the bankruptcy court entered its order 3 imposing the $12,000 in fines and directing Greenwood to disgorge 4 the $1,000 in fees, and Greenwood timely appealed. 5 JURISDICTION 6 The bankruptcy court had jurisdiction pursuant to 28 U.S.C. 7 §§ 1334 and 157(b)(2)(A). We have jurisdiction under 28 U.S.C. 8 § 158. 9 ISSUE 10 Did the bankruptcy court err when it fined Greenwood for 11 violating § 110? 12 STANDARDS OF REVIEW 13 We review the bankruptcy court's imposition of fines under 14 § 110 for an abuse of discretion. See Frankfort Digital Servs., 15 Ltd. v. U.S. Trustee (In re Reynoso), 315 B.R. 544, 550 (9th Cir. 16 BAP 2004), aff'd, 477 F.3d 1117 (9th Cir. 2007). 17 The abuse of discretion standard of review first requires us 18 to consider whether the bankruptcy court identified the correct 19 legal rule to apply. Berger v. Home Depot USA, Inc., 741 F.3d 20 1061, 1067 (9th Cir. 2014). And second, if the court identified 21 the correct legal rule to apply, we then must determine whether [3] Greenwood claimed that he used a portion of the $1,000 from 24 Dryer to pay Dryer’s filing fees. The bankruptcy court found that Greenwood’s claim was not as credible as Dryer’s statement 25 in her Declaration for Debtors Without Attorney that she 26 separately paid her bankruptcy filing fees. In any event, as the court noted, § 110(g) prohibited Greenwood from collecting the 27 court fees from Dryer, and Greenwood’s violation of this prohibition served as a separate and independent basis for 28 Greenwood’s forfeiture of the entire $1,000. [6] 1 the court's findings of fact, and its application of those 2 findings to the law, were illogical, implausible, or without 3 support in the record. Id. 4 DISCUSSION 5 Perceiving a need to curtail widespread fraud, abuse and the 6 unauthorized practice of law, Congress enacted legislation in 7 1994 seeking to restrict the activities of non-attorney 8 bankruptcy petition preparers. See Ferm v. U.S. Trustee 9 (In re Crawford), 194 F.3d 954, 957 (9th Cir. 1999). The 10 centerpiece of that legislation was § 110. Id. As indicated in 11 the facts section above, § 110 imposes a number of requirements 12 and restrictions on bankruptcy petition preparers and also 13 imposes fines for noncompliance. See In re Branch, 504 B.R. 634 , 14 639 (Bankr. E.D. Cal. 2014)(explaining requirements, restrictions 15 and fines). In the 2005 amendments to the Bankruptcy Code, 16 Congress went even further and enhanced the restrictions, added 17 further requirements, and streamlined the procedures for imposing 18 fines for noncompliance. See H.R. Rep. No. 109-31(Pt. 1), at 62, 19 as reprinted in 2005 U.S.C.C.A.N. 88, 132. 20 In the bankruptcy court and on appeal, Greenwood contends 21 that he did not know that he qualified as a bankruptcy petition 22 preparer. According to Greenwood, he should not have been fined 23 under § 110 when he was unaware that the statute applied to him 24 or of the statute’s requirements. Interpreting Greenwood’s pro 25 se contentions liberally as we must, see Keys v. 701 Mariposa 26 Project, LLC (In re 701 Mariposa Project, LLC), 514 B.R. 10 , 12 27 (9th Cir. BAP 2014), we will first consider the bankruptcy 28 court’s determination that Greenwood qualified as a bankruptcy [7] 1 petition preparer, and then we will address Greenwood’s argument 2 regarding his lack of knowledge. 3 The statute defines the term “bankruptcy petition preparer” 4 broadly, as follows: 5 (a) In this section – 6 (1) “bankruptcy petition preparer” means a person, other than an attorney for the debtor or an employee of 7 such attorney under the direct supervision of such attorney, who prepares for compensation a document for 8 filing; and 9 (2) “document for filing” means a petition or any other document prepared for filing by a debtor in a United 10 States bankruptcy court or a United States district court in connection with a case under this title. [12] 11 U.S.C. § 110 ; see also In re Reynoso, 477 F.3d at 1123 13 (broadly construing § 110's definition of bankruptcy petition 14 preparers). 15 Under the statute’s broad definition of the term “bankruptcy 16 petition preparer,” the record here amply supports the bankruptcy 17 court’s determination that Greenwood qualified as a bankruptcy 18 petition preparer. Greenwood admitted that Dryer compensated him 19 for inputting information into the relevant forms to assist Dryer 20 in filing her bankruptcy documents. Under these circumstances, 21 we perceive no error regarding the court’s bankruptcy petition 22 preparer determination. 23 As for Greenwood’s asserted lack of knowledge, § 110 does 24 not condition the imposition of fines for noncompliance on the 25 violator’s state of mind. When it wants to do so, Congress knows 26 how to limit the consequences for noncompliance with the 27 Bankruptcy Code to violators who acted knowingly and/or wilfully. 28 See, e.g., §§ 111(g)(2), 362(k)(1), 363(n), 524(i), [8] 1 1141(d)(6)(B)(ii). Congress included no such limitation in 2 § 110, and we know of no rationale that would permit us to read 3 into the statute such a limitation. See generally Lamie v. U.S. 4 Trustee, 540 U.S. 526, 534 (2004) (when interpreting statute that 5 is clear on its face, the court’s only task is to apply the 6 statute in accordance with its non-absurd plain meaning). Our 7 reading of § 110 also is consistent with the general principle 8 that ignorance of the law is no excuse. See Antonio-Martinez v. 9 INS, 317 F.3d 1089, 1093 (9th Cir. 2003). 10 Furthermore, as the United States Trustee has pointed out, 11 § 110 previously contained language that directed the court to 12 excuse noncompliance when there was a “reasonable cause” for the 13 violator’s noncompliance. However, when Congress amended the 14 bankruptcy code in 2005, it deleted the “reasonable cause” 15 language from § 110 and thereby removed it as an exception to the 16 imposition of fines under § 110. See In re Woodward, 314 B.R. 17 201, 205 (Bankr. N.D. Iowa 2004) (pre-2005 case explaining former 18 reasonable cause exception). Simply put, Congress’ 2005 deletion 19 of the reasonable cause exception from § 110 bolsters our 20 conviction that there is no excuse available to Greenwood based 21 on his asserted ignorance of § 110. 22 Even if there existed some exception to § 110's fines based 23 on Greenwood’s ignorance of the statute, the bankruptcy court 24 found that Greenwood’s asserted ignorance was not credible. The 25 basis for the court’s credibility determination was twofold. 26 First, the court pointed out that the bankruptcy forms Greenwood 27 filled out for Dryer contained conspicuous signature blocks for 28 bankruptcy petition preparers to complete. Given that Greenwood [9] 1 was confronted with these signature blocks when he filled out the 2 forms for Dryer, the court reasoned that Greenwood’s asserted 3 ignorance of § 110's requirements was feigned. Second, according 4 to the court, Greenwood previously was fined under § 110 in 5 another bankruptcy case, and thus the court could not accept 6 Greenwood’s claim to have been unaware of § 110 and its 7 requirements. 8 Greenwood has not offered any explanation or argument why 9 the bankruptcy court’s finding that he was aware of § 110 was 10 illogical, implausible or without support in the record. Nor is 11 any such deficiency evident to us. Accordingly, we have no 12 grounds to overturn the bankruptcy court’s finding on this point. 13 Greenwood does not challenge or dispute any other aspect of 14 the bankruptcy court’s decision. Moreover, having reviewed the 15 record, we cannot say that any of the bankruptcy court’s other 16 findings were illogical, implausible or unsupported by the 17 record. Consequently, there are no grounds here that would 18 justify our reversing the bankruptcy court’s decision. 19 CONCLUSION 20 For the reasons set forth above, we AFFIRM the bankruptcy 21 court’s order against Greenwood based on his violation of § 110.