In re Nelson

96 B.R. 868, 1989 Bankr. LEXIS 231, 1989 WL 16380
CourtDistrict Court, C.D. Illinois
DecidedFebruary 27, 1989
DocketNo. 184-00831
StatusPublished

This text of 96 B.R. 868 (In re Nelson) is published on Counsel Stack Legal Research, covering District Court, C.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Nelson, 96 B.R. 868, 1989 Bankr. LEXIS 231, 1989 WL 16380 (C.D. Ill. 1989).

Opinion

OPINION AND ORDER

WILLIAM V. ALTENBERGER, Bankruptcy Judge.

This matter came on to be heard upon the Amended Application for Final Fee Allowance and Reimbursement of Costs in the amount of $61,977.33 filed by Debtors’ current attorney. The Debtors originally filed a Chapter 11 proceeding on April 25, 1984, and several days later Debtors’ original attorney was approved as attorney of record. Several months later, in October of 1984, the Debtors’ original attorney was replaced by the Debtors’ current attorney. The reason given for the replacement was that the Debtors did not want to liquidate, as was apparently being recommended by their then attorney, and wanted to reorganize. There then ensued a lengthy and bitterly contésted Chapter 11 proceeding, with the Debtors or certain of their creditors opposing any action proposed by the other. Certain creditors filed numerous motions to dismiss and motions to lift stay. One of the motions to dismiss was allowed, but was reversed on appeal. The Debtors filed six disclosure statements, none of which were approved, and various motions designed to permit the Debtors to continue to operate. At one point certain creditors proposed a partial liquidation that would permit the Debtors to continue their farming operation at a reduced level. This, too, was opposed by the Debtors. The Debtors also filed two adversary proceedings. One, No. 185-0063, was to determine the amount, nature, and extent of a claim of a major secured creditor and to set aside a conveyance as a preference. The other, No. 185-0228, was against the same se[870]*870cured creditor and sought to subordinate the claim and for turnover of property. Both of these adversaries were decided substantially against the Debtors.

Finally in August of 1986, the case was converted to one under Chapter 7. During the course of the Chapter 11 proceeding, and in the Chapter 7 proceeding, the Debtors’ current attorney filed various applications for interim fees and costs advanced, the first such application being filed on April 19, 1985. From time to time four other judges heard portions of the Chapter 11 proceedings. The last of these judges allowed the Debtors’ current attorney two small payments, one on December 2, 1985, in the amount of $1,656.43 for costs, and another on April 9, 1986, in the amount of $912.42 for costs. At various times, this judge continued the hearings on fees, and in March of 1986, he indicated he wouldn’t consider the issue of fees until confirmation stage was reached.

On January 5, 1989, this Court held a hearing on the Amended Application for Final Fee Allowance and Reimbursement of Costs, to which there were several objections. The Chapter 7 trustee objected on the following factual grounds: that the Chapter 11 proceeding was a relatively small one; a disclosure statement was never approved and a plan was never submitted to creditors for voting; and after liquidating the Debtors’ assets, the trustee now holds only approximately $85,000.00 of which approximately $73,000.00 would be paid for taxes, leaving only approximately $12,000.00 for unsecured creditors. The trustee therefore argues that the request for fees is disproportionate to the size of the estate and the benefit that creditors receive. A major creditor also objected, taking the position that the Chapter 11 was not successful and that the amount already paid to the Debtors’ first attorney ($4,556.73), Debtors’ current attorney ($6,000.00), and to a consultant ($7,275.50), which total $17,832.23, is sufficient payment for the results achieved.

Citing Matter of First Colonial Corp. of America, 544 F.2d 1291 (5th Cir.1977), and Section 330 of the Bankruptcy Code, the Debtors’ current attorney argues that his fees and costs advanced should be allowed in full because through his hard work and diligence the Debtors were able to stay in possession of their assets which generated income for payments to creditors and preserved assets of the estate which generated the approximately $85,000.00 the Chapter 7 trustee now holds.

This Court begins its analysis by first noting that four other judges handled the Chapter 11 proceeding and this Court did not get involved until the proceeding was converted to one under Chapter 7. Therefore, this Court’s familiarity with what occurred is based upon a review of the pleadings and any applicable record. The fact that this Court was not involved with the Chapter 11 proceedings does not prevent it from ruling on the request for attorney fees and costs. In the Matter of First Colonial Corp. of America, supra, the court stated:

Because the lower court “has a far better means of knowing what is just and reasonable than an appellate court can have,” Trustees v. Greenough, 105 U.S. 527, 537, 26 L.Ed. 1157, 1162 (1881), district courts and bankruptcy judges have broad discretion in determining the amount of attorneys’ fees to award as compensation for services performed in connection with bankruptcy proceedings, and their exercise of that discretion will not be disturbed by an appellate court absent a showing that it was abused. In re Bemporad Carpet Mills, Inc., 434 F.2d [988] at 989 [(5th Cir.1970)]; Massachusetts Mutual Life Insurance Co. v. Brock, 405 F.2d [429] at 432 [(5th Cir.1968)]; Calhoun v. Hertwig, 363 F.2d 257, 261 (5th Cir.1966), cert. denied, 386 U.S. 966, 87 S.Ct. 1047, 18 L.Ed.2d 116 (1967); See 3A J. Moore & L. King, Collier on Bankruptcy, para. 62.12[4] (14th ed. 1975). The fact that much of the work for which the attorneys for the trustee desire compensation was performed before a special master appointed by the district court to hear the plenary suits, and not before either the bankruptcy judge or the district court, does not [871]*871change the scope of review. But in awarding attorneys’ fees under these conditions the bankruptcy judge and the district courts “should be particularly diligent in setting forth the facts that support [their] conclusion.” Lindy Brothers Builders, Inc. v. American Radiator & Standard Sanitary Corp., 487 F.2d 161, 166, n. 9 (3rd Cir.1973).

In In the Matter of First Colonial Corp. of America, supra, the court also indicated that the determination of reasonable attorney’s fees is a three-step process. The first step involves the bankruptcy judge ascertaining the nature and extent of the services supplied by the attorney. To this end, the attorney seeking compensation should file a statement which recites the number of hours worked and contains a description of how each of those hours was spent. In the case before this Court each application sets forth in a detailed fashion, the name of each attorney or paralegal providing service, their requested hourly rate, the total number of hours of services performed, a specific listing of dates, itemization and time of all services performed, and an itemization of costs.

The second step is to hold an evidentiary hearing if there are disputed issues of fact. In this case, a hearing was held and all interested parties were given an opportunity to present whatever evidence and arguments they wished to make. Neither side presented any evidence, but merely argued their position, primarily relying upon what can be gleaned from the filings in this bankruptcy proceeding.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
96 B.R. 868, 1989 Bankr. LEXIS 231, 1989 WL 16380, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-nelson-ilcd-1989.