In re Lettie

597 B.R. 637
CourtUnited States Bankruptcy Court, E.D. Wisconsin
DecidedFebruary 22, 2019
DocketCase No. 18-24510-beh
StatusPublished

This text of 597 B.R. 637 (In re Lettie) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. Wisconsin primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Lettie, 597 B.R. 637 (Wis. 2019).

Opinion

Beth E. Hanan, United States Bankruptcy Judge

The debtors' counsel have asked this Court-via a motion to vacate the Court's *639prior order granting their application for compensation-to direct the Chapter 13 trustee to pay counsel's approved fees before the debtors proceed with their imminent intent to convert their case to Chapter 7. CM-ECF Doc. No. 55. The debtors were unable to achieve a confirmed plan, largely because of limited income and a recent fire loss on their uninsured home. See In re Lettie , No. 18-24510, 2018 WL 3636827 (Bankr. E.D. Wis. July 30, 2018). Although the Court grants reconsideration of the November 19, 2018 order, on reconsideration it denies the request to authorize payment of allowed administrative expenses preconfirmation and in anticipation of conversion, in line with Harris v. Viegelahn , --- U.S. ----, 135 S.Ct. 1829, 191 L.Ed.2d 783 (2015).

BACKGROUND

The debtors filed their Chapter 13 case on May 7, 2018. Their counsel first submitted a fee application, CM-ECF Doc. No. 39, on October 17, 2018. The request stated "[c]ounsel believes that interim compensation will not create an undue hardship on any party, since payments can be made in the usual course of the Chapter 13 plan." Id. , at 4. The application requests "this amount to be paid as an administrative claim by the Chapter 13 Trustee pursuant to 11 U.S.C. § 330(a), 503(b), and 1326." Counsel's proposed order likewise asked that fees be paid through the debtors' plan. CM-ECF Doc. No. 41, at 2. The proposed order, but not the application, added that "if the Debtors' case is dismissed, or converted, before this claim is paid in full, the Trustee will pay this administrative priority claim prior to refunding any funds to the Debtor." Id. The Court deleted that last sentence,1 and, on November 19, 2018, simply ordered that counsel's fees be paid through the plan. CM-ECF Doc. No. 43.

But there was no confirmed plan at the time the fee order was signed. That same day, the trustee objected to confirmation of the debtors' plan, an objection the Court sustained. The Court's December 10, 2018 order (docketed on December 11) required the debtors to file an amended plan or convert their case to Chapter 7 on or before December 28, 2018. CM-ECF Doc. No. 48.

On December 21, 2018, the debtors' counsel filed correspondence, noting the differences between their original proposed fee order and the edited order signed by the Court. Counsel stated "the original Application should have been clearer as to the Debtors' intentions. The Debtors are under an existing Order to convert the case or file a Modified Plan.... Counsel wishes to be paid the awarded fees upon conversion of the case." CM-ECF Doc. No. 50. Counsel attached another copy of their original proposed order for fees, and asked the Court to vacate its November 19, 2018 order, and instead enter the originally proposed order with the alternative language about payment.

On December 28, 2018, the Court directed counsel to file their letter request in the form of a formal motion with supporting *640memorandum. The Court also directed counsel to address Harris v. Viegelahn , --- U.S. ----, 135 S.Ct. 1829, 191 L.Ed.2d 783 (2015), and the ensuing split among courts on the question of whether the Chapter 13 trustee can pay approved administrative expenses when a preconfirmation case is to be converted to Chapter 7.2 The Court requested a responsive memorandum from the trustee, and extended the time for the debtors to amend their plan or convert. CM-ECF Doc. No. 52.

Counsel thereafter submitted a motion to vacate and memorandum of law. CM-ECF Doc. Nos. 55, 54, 57. The motion reiterated that "it is the intention of the debtors to convert this case to a Chapter 7 bankruptcy prior to confirmation, and counsel therefore wishes to be paid the approved fees prior to conversion.... Should the Court agree the approved fees can be paid prior to conversion, any remaining funds the Trustee is holding above and beyond the fees awarded and paid to counsel will be paid to debtors upon conversion." The motion also stated, "[c]ounsel for debtors hereby requests that the order is corrected so as to account for the likelihood that this case will be converted to Chapter 7, and that any approved fees are paid to counsel prior to conversion." CM-ECF Doc. No. 55, at 1.

The trustee also filed a legal memorandum. CM-ECF Doc. No. 58. The Chapter 13 trustee has $ 5,735.88 on hand. The fee application seeks $ 2,750.00. No parties have objected.

DISCUSSION

1. Rule 60 Standard

The debtors' counsel filed a motion to vacate this Court's order of November 19, 2018, an order which allowed counsel's fees to be paid through the debtors' plan. Counsel's motion cites Federal Rule of Bankruptcy Procedure 9024, which incorporates Federal Rule of Civil Procedure 60, to support their request to vacate due to "an omission from that order, as well as any other reason that justifies relief." CM-ECF Doc. No. 55, at 1.

Federal Rule of Civil Procedure 60(a), made applicable by Federal Rule of Bankruptcy Procedure 9024, provides that "[t]he court may correct a clerical mistake or a mistake arising from oversight or omission whenever one is found in a judgment, order, or other part of the record. The court may do so on motion or on its own, with or without notice." The bankruptcy court may correct an order under Rule 60(a) if the error was mechanical in nature and not the result of a deliberate choice, and the correction reflects the intent of the bankruptcy court at the time it entered the order. In re McClellan , 459 B.R. 371, 373 (Bankr. E.D. Wis. 2011), citing Wright & Miller, Federal Practice and Procedure § 2854 at 441 (2d ed. 1995, Supp. 2011).

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Related

Norwest Bank Worthington v. Ahlers
485 U.S. 197 (Supreme Court, 1988)
In Re: Barry L. Michael v.
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459 B.R. 371 (E.D. Wisconsin, 2011)
Law v. Siegel
134 S. Ct. 1188 (Supreme Court, 2014)
Harris v. Viegelahn
575 U.S. 510 (Supreme Court, 2015)
In re Dorff
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Cite This Page — Counsel Stack

Bluebook (online)
597 B.R. 637, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-lettie-wieb-2019.