In re Merkle

575 B.R. 704
United States Bankruptcy Court, W.D. Texas·Decided August 15, 2017·No. CASE NO. 16-50026-CAG·Published·Cited by 1 cases

Opinion

ORDER GRANTING IN PART, DENYING IN PART PILGRIM REO, LLC AND CAPITAL CROSSING SERVICING COMPANY, LLC MOTION FOR APPROVAL OF DEFAULT INTEREST, COSTS, EXPENSES AND ATTORNEYS’ FEES UNDER 11 U.S.C. § 506(b) (ECF. NO. 203)

CRAIG A. GARGOTTA, UNITED STATES BANKRUPTCY JUDGE

On June 20 and 21, 2017, came on for hearing Pilgrim REO, LLC (“Pilgrim”) and Party-in-Interest Capital Crossing Servicing Company, LLC (Capital Crossing) (also referred to as “Respondents”) Motion for Approval of Default Interest, Costs, Expenses, and Attorneys’ Fees Under 11 U.S.C. § 506(b) (the “Motion”— ECF No. 203).1 Debtor filed an Objection and Response on June 19, 2017 (the “Objection”) (ECF No. 210). Respondents filed their Reply on July 19, 2017 (ECF No. 215). Debtor and Pilgrim each appeared through counsel and presented argument. The Court heard and took the matter under advisement at the conclusion of the hearing.2 After considering the arguments made and evidence presented, and the file and record in the ease, the Court finds that the Motion allowing Respondents attorneys’ fees is granted in part, and, denied in part.

JURISDICTION

The Court has subject matter jurisdiction over this Motion pursuant to 28 U.S.C. § 1334(b). This matter is referred to this Court under the United States District Court for the Western District of Texas’ Order of Reference of Bankruptcy Cases and Proceedings dated October 4, 2013. This is a core matter pursuant to 28 U.S.C. § 157(b)(2)(A) (matters affecting the administration of the estate) and § 157(b)(2)(B) (allowance or disallowance of claims against the estate). Venue in this district is proper under 28 U.S.C. §§ 1408 and 1409. The parties have agreed to invoke the adversary procedures in the resolution of this dispute.

PROCEDURAL HISTORY

Debtor filed his Debtor’s Second Amended Objections and Counterclaims to Original Claim No. 6 and Amended Claim No. 6 Filed by Pilgrim REO, LLC and Capital Crossing Servicing Company, LLC on May 4, 2017 (ECF No. 159). Respondents filed their Response on May 18, 2017. The Court denied in part, and granted in part, Debtor’s Second Amended Objections and Counterclaims to Original Claim No. 6 and Amended Claim No. 6 Filed by Pilgrim REO, LLC and Capital Crossing Servicing Company, LLC (ECF No. 224). Respondents also filed their Motion to Dismiss Debtor’s Counterclaims Pursuant to Fed. R. Civ. P. 12(b)(6) on May 18, 2017 (ECF No. 164). Debtor filed his Response to the Motion to Dismiss on June 12, 2017 (ECF. No. 183). Respondents then filed a Reply in support of their Motion to Dismiss on June 16, 2017 (ECF No. 202). On July 14, 2017," the Court [706]*706granted Pilgrim and Capital Crossing’s Motion to Dismiss and dismissed with prejudice the Debtor’s counterclaims (ECF No. 214).

Pilgrim and Capital Crossing filed their Motion for Approval of Default Interest, Costs, Expenses, and Attorney’s Fees Under 11 U.S.C. § 506(b) of the Bankruptcy Code (ECF No. 203). Debtor filed his Objection and Response on June 19, 2017 (ECF No. 210). The parties provided further briefing on the issues contained in the Motion and Response. The Court will address the allowance of Respondents attorneys’ fees in this Order.

BACKGROUND

Debtor (Carl N. Merkle) owns and operates an apartment complex known as the Northeast Village Apartments, located at 4535 Schertz Rd., San Antonio, Texas 78233 (the “Property”). See Second Amended Claim Objection ¶ 1.17. On or about July 11, 2005, Debtor entered into a Multifamily Note (the “Note”) to purchase the Property and a Multifamily Deed of Trust Assignment of Rents and Security Agreement (“Deed of Trust,” and together with the Note, the “Loan Documents”), which secured payment of all sums due under the Note. See Second Amended Claim Objection ¶ 2; Respondents’ (“R”) Exhibits 34 and 35. The Property is collateral subject to the Deed of Trust. (R-35).

Pilgrim is the current holder of the Loan Documents. Capital Crossing services the Note on behalf of Pilgrim. Motion ¶ 7. At various times since 2005, the Debt- or has been in default under the terms of the Loan Documents. Specifically, Debtor has, inter alia, failed to make monthly installment payments of principal, interest, and escrow in full and on time. See Second Amended Claim Objection ¶¶ 12-13.

On or about September 4, 2015, the Respondents sent Debtor a Notice of Default and Notice of Intent to Accelerate (“Notice of Default”), noting Debtor’s ongoing payment defaults and invoking the remedy of acceleration under the Loan Documents. See Second Amended Claim Objection ¶ 15; (R-53).

On or about October 8, 2015, Debtor had not cured the payment defaults, and Respondents sent Debtor a Notice of Acceleration. See Second Amended Claim Objection ¶¶ 12-16 (admitting that Debtor had not paid the full amounts due for January, 2015 to July, 2015; admitting that Respondents sent the Notice of Default in September 2015; and alleging that Respondents sent the Notice of Acceleration “despite the fact that Debtor had made a full payment for August”) (R-54). Debtor did not pay the full amount owed under the Loan Documents as required by the Notice of Acceleration, and the Second Amended Claim Objection does not contain any factual assertion that Debtor made full payment in compliance with the Notice of Acceleration. On or about December 15, 2015, Respondents sent Debtor a letter transmitting the Notice of Substitute Trustee’s Sale (“Sale Notice”), See Second Amended Claim Objection ¶ 17; (R-55),

On January 4, 2016 (the “Petition Date”), the Debtor filed a voluntary petition seeking relief under title 11 of the Bankruptcy Code (11 U.S.C. § 101 et seq,) (ECF no. 1) (R-l). Debtor proposed a First Amended Plan of Reorganization and Debtor’s Order Confirming First Amended Plan was entered on April 5, 2017 (ECF No. 128) (R-26).

On April 29, 2016, Pilgrim filed its Proof of Claim No. 6, asserting a secured claim of $877,134.63 (R-7). On November 4, 2016, Pilgrim filed an Amended Proof of Claim No, 6, asserting a secured claim for $922,675.19 (R-8). On May 18, 2017, Pilgrim filed a Second Amended Proof of [707]*707Claim, asserting a secured claim for $964,253.16 and providing additional support for the claim. (Referred to as “Pilgrim’s Claim”) (R-9).

On March 17, 2017, Debtor filed his Objections and Counterclaims to Original Claim No. 6 and Amended Claim No. 6 filed by Pilgrim REO, LLC and Capital Crossing Servicing Company, LLC (ECF No. Ill); (R-21). On March 27, 2017, Debtor filed his First Amended Objections and Counterclaims to Original Claim No. 6 and Amended Claim No.

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In re Merkle, 575 B.R. 704 (Tex. 2017).

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