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24660 - In the Matter of Kenneth L. Edwards

THE STATE OF SOUTH CAROLINA

In The Supreme Court

In the Matter of Kenneth L.

Edwards, Respondent,

Opinion No. 24660

Heard April 2, 1997 - Filed August 4, 1997

DEFINITE SUSPENSION

Russell Brown, of Charleston, for Respondent.

Attorney General Charles Molony Condon, Senior Assistant Attorney

General James G. Bogle, Jr., both of Columbia, for Complainant.

PER CURIAM: In this attorney disciplinary matter, the Hearing Panel ("Panel")

and Executive Committee ("Committee") found Edwards committed misconduct in

connection with: (1) several personal bankruptcy filings in which he represented himself

or in which he assisted his lawyer; and (2) two of the bar applications he submitted to the

Committee on Character and Fitness. Specifically, the Panel and Committee found that

Edwards committed misconduct by failing to appear for a 2004 examination1 and for a

civil contempt hearing; in transferring certain property to his parents during the pendency

of his Chapter 13 case and without the permission of the Bankruptcy Court; and in failing

to amend his own filings to keep his address updated. The Panel and Committee did not

conclude, however, that Edwards' actions in the bankruptcies constituted intentional abuse

of the bankruptcy system. Finally, the Panel and Committee found Edwards had failed

to reveal on his bar applications the existence of a lawsuit and, later, a judgment, against

him.

After considering its findings of misconduct and Edwards' prior disciplinary

sanctions, the Panel recommended he receive a six-month suspension and be required to

attend all ethics CLEs offered by the South Carolina Bar for two years. Opining that

Edwards "has no appreciation for the ethical practice of law," the Committee

recommended, by a vote of five to two, that Edwards be disbarred. The two dissenting

members of the Committee voted for imposition of an indefinite suspension.

We have considered the convoluted facts of this case and concur with the Panel and

Committee's findings of misconduct. Additionally, we find that Edwards intentionally

abused the bankruptcy system. After consideration of all pertinent facts and

circumstances, we conclude an eighteen-month suspension is the appropriate sanction.

DISCIPLINARY VIOLATIONS

A BANKRUPTCY MATTERS

The State alleges Edwards committed the following misconduct in relation to his

bankruptcy filings: (1) intentional abuse of the bankruptcy system; (2) fraud and deceit

in conveying certain property to his parents; (3) inappropriate behavior in telling a process

server there would be "bloodshed" over the bankruptcy and in threatening the bankruptcy

trustee and his lawyer; and (4) failure to comply with orders of the bankruptcy court

despite receiving notice of meeting dates and times. The Panel and Executive Committee

found misconduct as to allegations (2) and (4), but not as to allegations (1) and (3). To

determine the extent of Edwards' misconduct, a thorough review of the testimony and

evidence presented at the Panel hearing is necessary.

1. FACTS

Edwards was not licensed to practice law until June 1, 1992. Many events relating

to his bankruptcy filings occurred before that date. Therefore, conduct occurring before

the date Edwards was admitted to the bar is not sanctionable.

On February 26, 1991, Charleston Joint Ventures obtained a judgment in state

court2 against Edwards in connection with the lease of business property at Citadel Mall.

Edwards' motion for reconsideration was denied on August 20, 1991.

On November 8, 1991, Edwards transferred two properties ("the Kiawah Island

properties") to his aunt and brother. The consideration for each transfer was $5.00.

Approximately two months later, on January 2, 1992, Edwards filed his first

Chapter 3 Petition in the federal bankruptcy court. According to testimony presented at

the disciplinary hearing, Edward Brown represented Edwards during this first Chapter 13

petition,

On August 26, 1992, Edwards transferred a piece of property ("the Bees Ferry

Road property") to his parents, in contravention of the Bankruptcy Code. Brown testified

that he advised Edwards to transfer this property. The rationale for the transfer was that

the parents had an unrecorded mortgage on the Bees Ferry Road property anyway, and the

transfer would allow the parents to be paid. Brown testified that he thought the trustee

would agree that the transfer would be an acceptable way to dispose of the debt "outside

the Plan."

Ultimately, the first Chapter 13 Petition was dismissed by the bankruptcy court

because Edwards failed to make certain required payments to the bankruptcy trustee.

During a particular period, these payments were set as least as high as $1,658.00 per

month, payable by Edwards to the trustee. Although Edwards obviously tried to make

some of these payments, he fell behind and was unable to catch up. For that reason, the

bankruptcy court dismissed the first Chapter 13 Petition on October 29, 1992.

On March 10, 1993, Charleston Joint Ventures, Edwards' judgment creditor, filed

an action in state court seeking to have set aside the transfers of the two Kiawah Island

properties to Edwards' brother and aunt. Less than two weeks later, on March 19, 1993,

Edwards, acting pro se, filed a second Chapter 13 Petition. After a hearing held on May

20, 1993, the bankruptcy judge issued an Order on May 28, 1993 dismissing the second

Chapter 13 Petition. The judge's Order dismissing the Petition stated:

[Edwards] has been a debtor in a previous Chapter 13 case pending within

180 days of the filing of the Petition herein. Further, [Edwards] has failed

to show any change in circumstances arising subsequent to the dismissal of

the previous action and has failed to offer any justification for his failure to

comply with the previous Orders of this Court.

Further, this Court finds that the Petition of [Edwards] herein was

filed in bad faith, for an improper purpose and in an attempt to abuse the

bankruptcy system, in that the Petition was filed for the purpose of

preventing, hindering, and delaying the legitimate collection efforts of

Charleston Joint Venture, and without any intention of financial

rehabilitation. Therefore, the Petition of [Edwards] is hereby dismissed with

prejudice.

The bankruptcy judge had stated from the bench on May 20, 1993 that he would dismiss

the Petition.

On May 24, 1993, four days before Edwards' second Chapter 13 Petition was

dismissed, Edwards filed a Chapter 7 Petition. He listed his address on the Chapter 7

Petition as 82 1/2 Spring Street, which at one point had been Edward Brown's office.

Edwards occasionally worked and slept in that office.

On July 9, 1993, the first meeting of creditors was held in Edwards' Chapter 7. At

the meeting, the trustee said he intended to investigate the transfers of the Kiawah Island

properties and the Bees Ferry Road property. If the conveyances were fraudulent, the

trustee planned to have them set aside. Shortly after the first meeting of creditors,

Edwards had the case converted to a Chapter 11. The trustee successfully had the case

reconverted to a Chapter 7 on September 14, 1993.

On October 4, 1993, the bankruptcy judge issued an Order requiring Edwards to

be present to answer questions at a 2004 meeting to be held on November 10,,1993. On

October 18, 1993, notice of the 2004 meeting was mailed to 82 1/2 Spring Street,

Edwards' listed address.3 Edwards did not show up for the 2004 meeting. He also had

not shown up for a 341 meeting4 scheduled for November 5, 1993.

On November 17, 1993, the bankruptcy court issued a Rule to Show Cause for

Contempt. The Rule to Show Cause ordered Edwards to appear on December 13, 1993

at 11:00 a.m. to show why he should not be held in contempt for his failures to attend the

341 meeting and the 2004 meeting and for his abuse of bankruptcy procedures. Edwards

was served by first class mail at 82 1/2 Spring Street. Personal service was also

attempted, but was not effected before the meeting.

Edwards did not show up at the hearing on the Rule to Show Cause for Contempt.

The bankruptcy judge rescheduled the hearing for 2:30 p.m. the same day and told the

trustee's attorney to attempt personal service. Chris Mullen, a process server, finally

served Edwards at 12:09 p.m. According to Mullen, Edwards got very angry and

launched into a diatribe against the justice system. Edwards told Mullen he would not go

to the hearing. Mullen said that Edwards said there would be "bloodshed" over this

matter. Mullen testified to the bankruptcy court that Edwards threatened the bankruptcy

trustee and the trustee's lawyer. At the disciplinary hearing, however, Mullen claimed he

should not have characterized Edwards' diatribe as "threatening" anyone.

On January 4, 1994, the bankruptcy judge issued a civil contempt order against

Edwards for failure to appear at the 2004 examination. The Order did not address

Edwards' failure to appear at the 341 meeting held on November 5, 1993, or Edwards'

alleged abuse of the bankruptcy system. Finally, on January 10, 1994, the bankruptcy

judge had United States Marshals take Edwards into custody, forcing Edwards to answer

questions from the trustee and from creditors about Edwards' assets and the property

transfers. The incident with Mullen, as well as the subsequent contempt order and the

involvement of the United States Marshals, were reported in the Charleston Post &

Courier.

2. DISCUSSION

The Panel and Executive Committee found misconduct in Edwards' (1) failure to

appear for the 2004 examination and for the civil contempt hearing; (2) transfer of the

Bees Ferry Road property to his parents during the pendency of his Chapter 13 case; and

(3) failure to provide the bankruptcy court with an accurate address. They did not find,

however, that there was clear and convincing evidence Edwards intentionally abused the

bankruptcy system. Rather, they observed the evidence "equally suggests a newly

admitted attorney's doubtful decision to represent himself in a specialized field leading to

a misapplication of rules and filing rights." Additionally, they failed to find misconduct

in Edwards' behavior toward the process ser-ver, but characterized Edwards' diatribe and

comment regarding "bloodshed" as "[e]xpressions of frustration with the system," which,

while "not . . . the best or most appropriate action," were not unethical. The Panel

expressed reservations about Edwards' misconduct in failing to appear for the 2004

examination, because Rule 2004 appears to require personal service and Edwards was

served by first class mail. 5

We agree with the findings of misconduct by the Panel and Committee. We also

find by clear and convincing evidence that Edwards intentionally abused the bankruptcy

system to hinder the legitimate collection efforts of Charleston Joint Ventures. Taken

separately, Edwards' missteps might show nothing more than incompetence. When

considered in their entirety, however, Edwards' actions compel the conclusion that he

intentionally abused the bankruptcy system: Among other things, Edwards (1) displayed

a complete disregard for the Bankruptcy Code's prohibition on fraudulent transfers; (2)

took no care to provide the bankruptcy court with accurate information so that the court

could give him notice of hearings and examinations at which his attendance was required;

(3) refused to attend court proceedings even after personal service giving him notice of

the hearings; (4) improperly filed a second Chapter 13 Petition after his first one was

dismissed. These actions show Edwards' disregard for his responsibilities as a lawyer and

as a bankruptcy debtor.

Edwards' actions violate many Rules of Professional Conduct, Rule 407, SCACR,

including Rule 1.1 (duty to provide competent representation); Rule 1.3 (duty to act with

reasonable diligence and promptness); Rule 3.4 (fairness to opposing party and counsel);

Rule 8.4 (misconduct, including conduct involving fraud, deceit, or misrepresentation, or

conduct prejudicial to the administration of justice). Edwards also violated several

subsections of Paragraph 5 of the Rule on Disciplinary Procedure, Rule 413, SCACR, 6

which defines as misconduct "[a]cts or omissions by an attorney ... which violate ...

the Rules of Professional Conduct," "[c]onduct tending to pollute the administration of

justice or to bring the courts or the legal profession into disrepute or conduct

demonstrating unfitness to practice law," and "[c]onduct demonstrating a lack of

professional competence in the practice of law."

B. BAR APPLICATIONS

1. FACTS

The findings of misconduct relating to Edwards' applications to the South Carolina

bar concern two separate applications, filed by Edwards. Edwards filed the first

application at issue on or about September 1, 1990. 7 Question 16 on that bar application

asked for a list of all suits or judicial actions of any kind to which Edwards was a party.

Edwards listed only his 1987 divorce. Question 20 of the same application asked whether

there were any pending actions or suits, or any unsatisfied judgments or decrees against

Edwards. Edwards answered this question negatively. Charleston Joint Ventures had sued

Edwards on or about June 26, 1990, more than two months before Edwards filed his bar

application with the South Carolina Supreme Court. Edwards testified he was not served

with the Charleston Joint Ventures lawsuit until approximately August 1, 1990. Edwards

failed the February 1991 bar examination.

On September 3, 1991, Edwards filed with the South Carolina Supreme Court a

supplemental bar application so that he could take the February 1992 bar examination.

Though filed on September 3, 1991, Edwards' application was signed and dated April 25,

1991. Question 7(i) of the Supplemental Bar Application asked whether there had been

any change as far as civil suits or proceedings since his last bar application, and Edwards

answered "no." Question II of the Supplemental Bar Application asked whether there

were any material facts not disclosed "in this or prior Applications which should now be

brought to the attention of the Committee on Character and Fitness." Edwards again

answered "no."

Contrary to Edwards' representations on the supplemental bar application, there had

been changes in the status of the "civil suits [and] proceedings" in which Edwards was

involved. On February 26, 199 1, a South Carolina circuit court judge had signed an order

of judgment against Edwards in the Charleston Joint Venture lawsuit. The order of

judgment was filed on March 11, 1991, and Edwards' lawyer was served with the order

on March 14, 199 1. Edwards moved for reconsideration on March 2 5, 199 1, and an order

denying the motion for reconsideration was signed by the court on August 20 and filed

on August 21, 1991. That order was mailed to Edwards' attorneys on September 3, 1991,

the same day Edwards' Supplemental Bar Application was filed with the South Carolina

Supreme Court.

In short, Edwards failed to disclose in his September 1990 bar application the

existence of the Charleston Joint Ventures lawsuit against him. He failed to disclose in

his September 1991 supplemental bar application Charleston Joint Ventures' judgment

against him. The Panel found that Edwards "did in fact fail to disclose required

information in his application for the South Carolina Bar," and the Executive Committee

agreed with this finding. Edwards does not deny he omitted the Charleston Joint Ventures

lawsuit and judgment from his bar applications, but argues that they did not constitute

"material fact[s]" under Rule 8.I(a), Rule 407, SCACR.

2. DISCUSSION

We concur with the finding of the Panel and Committee that Edwards violated Rule

8.1. Rule 8.1(a) of South Carolina's Rules of Professional Conduct forbids bar applicants

from "knowingly mak[ing]" false statements of material fact on the application form

submitted to the Committee on Character and Fitness. The Comment to the rule explains

that "if a person makes a material false statement in connection with an application for

admission, it may be the basis for subsequent disciplinary action if the person is admitted."

Rule 8.1(b) requires an applicant for admission to the bar to correct information known

to create a misapprehension regarding its correctness or completeness.

Edwards' misrepresentations certainly were knowing. He himself testified that he

was served with the Charleston Joint Ventures lawsuit in August 1990, a month before he

filed his September 1990 bar application. One can only conclude Edwards was aware of

the lawsuit when he filed his bar application. When Edwards filed his September 1991

bar application, the Charleston Joint Ventures judgment had already been entered against

him and he had already moved for reconsideration of the judgment. He did not reveal the

judgment on the application. Given the fact he had moved for reconsideration of the

judgment, it strains belief for one to assume Edwards was unaware of the judgment.

Edwards does not seriously dispute that the misrepresentations were knowing.

However, he suggests that the Charleston Joint Ventures lawsuit and judgment were not

"material" facts, such that their omission would violate Rule 8.l. We disagree.

There are few published South Carolina disciplinary cases concerning

misrepresentations in bar applications. In re Elliott, 268 S.C. 522, 235 S.E.2d 11 1 (1977)

is the most notorious South Carolina case on this subject. There, Elliott provided false

information regarding her place of birth, her past criminal record, and the high school and

college she attended. Although she was not a college graduate, she held herself out as a

graduate of Vassar College. The Court disbarred Elliott for this misconduct. Although

South Carolina had not adopted the current Rules of Professional Conduct at the time of

Elliott's misconduct, Elliott's false statements plainly were material.

Cases from other jurisdictions indicate that a failure to disclose lawsuits or

judgments is material. In In re Chandler, 641 N.E.2d 473 (111. 1994), the Supreme Court

of Illinois found that a bar applicant's failure to give a correct social security number was

material, as was her failure to supplement her bar application with information regarding

a false loan application and a foreclosure action against her. In In re Gouiran, 613 A.2d

479 (N.J. 1992), the New Jersey Supreme Court found that a bar applicant's failure to

disclose disciplinary proceedings concerning a real estate license constituted a material

misstatement. In In re Redding, 672 N.E.2d 76 (Ind. 1996), the Indiana Supreme Court

found that a bar applicant's failure to inform the Board of Law Examiners of a claim filed

against her during the pendency of her application violated Rule 8.l(b). See also In re

Rosen, 570 A.2d 728 (D.C. 1989)(per curiam)(finding misconduct where lawyer failed to

supplement Maryland bar application with information regarding civil lawsuits and

disciplinary proceedings filed against him while Maryland application was pending); cf.

In re Application of Leff, 618 P.2d 232 (Ariz. 1980)(denying applicant admission to the

bar partly because he failed to reveal his once declining to testify before federal grand

jury); Greene v. Committee of Bar Examiners, 480 P.2d 976 (Cal. 1971)(denying applicant

admission to the bar where he failed to reveal separate maintenance action brought by his

former wife and declaratory judgment action he brought relating to validity of annulment);

In re Bar Admission of Gaylord, 456 N.W.2d 590 (Wis. 1990)(denying admission to the

bar because, inter alia, applicant failed to disclose traffic charges and convictions). See

generally Annotation, Falsehoods, Misrepresentations, Impersonations, and Other

Irresponsible Conduct as Bearing on Requisite Good Moral Character for Admission to

Bar, 30 A.L.R. 4th 1020 (1984 & Supp. 1996).

These cases show that a failure to reveal the existence of a lawsuit should generally

be considered material. Although the fact of a lawsuit or judgment does not indicate an

applicant's lack of fitness, the Committee on Character and Fitness should know of the

judgment so that it may determine such issues as whether the underlying lawsuit involved

any fraud or dishonesty by the bar applicant. Unless it knows of lawsuits and judgments,

it cannot make these determinations. Consequently, misrepresentation recording the

existence or status of a lawsuit or a judgment is material. Edwards' actions violated not

only Rule 8. 1, but also Rule 8.4, a general prohibition on conduct involving fraud, deceit,

or misrepresentation and on other conduct prejudicial to the administration of justice.

SANCTION

Because lawyers' honesty is central to the effective functioning of our legal system

and to public faith in the system, this Court imposes severe sanctions for misconduct

involving dishonesty. In In re Elliott, 268 S.C. 522, 235 S.E.2d Ill (1977), the Court

disbarred Gabrielle Ann Scott Elliott for making false representations on her bar

application. In In re Brooks, 274 S.C. 601, 267 S.E.2d 74, cert. denied, 449 U.S. 984

(1980), the Court disbarred a lawyer who caused a false affidavit to be prepared and filed

concerning criminal charges against him. See also In re Iseman, 290 S.C. 391, 350 S.E.2d

922 (1986)(imposing temporary suspension for attorney who knowingly submitted false

CLE report). But see In re Pridgen, 288 S.C. 96, 341 S.E.2d 376 (1986)(imposing public

reprimand for submitting false CLE report); In re Altman, 287 S.C. 321, 338 S.E.2d 334

(1985)(imposing public reprimand on lawyer who misrepresented facts concerning

registration for CLE seminar).

Edwards' dishonesty was less serious than that of Gabrielle Ann Scott Elliott but

more extensive than that at issue in Pridgen and Altman. Edwards clearly lied on his bar

application, which many jurisdictions have recognized as an extremely serious violation.

See, e.g., In re Chandler, 641 N.E.2d 473 (imposing three year suspension for, inter alia,

failing to disclose on bar application foreclosure action filed against her and fraudulent

actions committed in obtaining loan); In re Charos, 585 N.E.2d 1334 (Ind. 1992)(imposing

one year suspension where attorney failed to disclose on his bar application an application

to practice law in another state and his alleged role in a robbery); Attorney Grievance

Comm'n v. Joehl, 642 A.2d 194 (Md. 1994)(disbarring attorney who failed to disclose

series of traffic offenses and charge of battery that was later nol prossed); In re Warren,

888 S.W.2d 334 (Mo. 1994)(imposing six month suspension where, inter alia, lawyer

failed to disclose on his bar application that he had failed the bar examination in another

state); In re Cherryhomes, 858 P.2d 401 (N.M. 1993)(imposing indefinite suspension

where lawyer, inter alia, forged a physician's signature certifying his mental and physical

health on the bar application for another state); Columbus Bar Ass'n v. Ewing, 661 N.E.2d

1109 (Ohio 1996)(imposing indefinite suspension where lawyer failed to disclose on his

bar application that he had possessed a real estate license and that it had been suspended).

Additionally, Edwards failed to furnish the bankruptcy court with accurate information and

transferred property to his parents in an apparent attempt to defraud a creditor.

We also note that Edwards has committed professional misconduct in the past. In

a judicial disciplinary matter, Edwards received a public reprimand for acting in a manner

that erodes public confidence in the integrity and impartiality of the judiciary. See In re

Edwards, 459 S.E.2d 837 (1995). Specifically, Edwards was found to have misused his

authority as a judge for personal gain in issuing a bench warrant for the arrest of a process

server who had served him with a summons and complaint. The Court found that the

process server had served Edwards without any disturbance or disruption of the

magistrate's court and that, therefore, Edwards had no cause to issue the bench warrant.

Although we are not punishing Edwards a second time for this misconduct, the incident

reinforces our current view that Edwards exhibits a cavalier attitude toward the legal

system and toward his responsibilities to it.

After considering the scope and nature of the misconduct in this case, we conclude

an eighteen month suspension is an appropriate sanction. Edwards shall file, within fifteen

(1 5) days of this opinion, an affidavit with the clerk of this Court stating he has complied

with Paragraph 30 of Rule 413, SCACR.

DEFINITE SUSPENSION.

1 Rule 2004 of the Bankruptcy Rules empowers the bankruptcy court to order the

examination of any person, including the debtor, for questioning relating to "the acts,

conduct, or property or the liabilities and financial condition of the debtor, or any

matter which may affect the administration of the debtor's estate, or the debtor's right

to a discharge."

2 This judgment was filed on March II, 199 1, and served on Edwards's attorney on

March 14, 1991.

3 Apparently the notice was sent by first class mail. Rule 2004(c) appears to require

personal notice by subpoena as provided for in Rule 45 of the Federal Rules of Civil

Procedure, but Edwards never raised defective service as a defense to his failure to appear.

4 11 U.S.C. § 341 provides for a meeting of creditors. The bankruptcy debtor

typically is required to attend this meeting.

5 See Note 3 supra.

6 Rule 413 has been completely revised, but the revised version of the rule applies

to all complaints filed on or after January 1, 1997. The complaints against Edwards were

filed prior to the effective date of revised Rule 413.

7 This was an application to take the February 1991 bar examination.