In re: Rosa M. Melendez Torres

Opinion

IN THE UNITED STATES BANKRUPTCY COURT 3 IN RE: : CASE NO. 09-09187(ESL) ° ROSA M. MELENDEZ TORRES CHAPTER 13° 6 FILED &@ ENTERED 7 Debtor :

° OPINION AND ORDER = ANIUAN. PUERTO Ice 10 On January 19, 2011 the United States Bankruptcy Appellate Panel for the First Circuit i (“BAP”) vacated this court’s orders of May 10, 2010 and May 24, 2010 granting debtor’s objection to the claim filed by Banco Popular de Puerto Rico (“BPPR”) and denying BPPR’s motion for 13 reconsideration. The BAP found that this court erred in sustaining Debtor’s vague objection and 14 remanded the case for further proceedings. On March 24, 2011 the Debtor filed an amended IS objection to the amended claim filed by BPPR. The amended objection was opposed by BPPR: The 16 court scheduled the matter for a pretrial conference to be held on April 29, 2011. A pretrial report was M7 filed on April 26, 2011 wherein the parties detailed the uncontested facts, contested facts and legal 18 issues. 19 During the pretrial hearing the parties agreed to the disposition of several matters. The court 20 allowed as reasonable the amount of $75.00 for attorney’s fees and $65 for expenses. Upon the 71 agreement of the parties the court ordered the Chapter 13 trustee to stop payment to unsecured 22 creditors until the pending issues related to BPPR’s proof of claim were ultimately decided by this 23 court. The parties further agreed that the Chapter 13 trustee may disburse the amount of $375 for 24 expenses incurred in filing the appeal to the BAP. Three issues remained pending after the pretrial 25 hearing: first, whether an oversecured creditor may claim post petition fees and expenses in the proof 26 of claim filed for amounts owed prepetition; second, whether the attorney’s fees and expenses 27 incurred by BPPR in prosecuting the appeal are an administrative expense that may be claimed when 28 the BAP did not award costs and expenses to the prevailing party; and, third, assuming that BPPR

1 claim the administrative expenses, if the same are actual and reasonable. See minutes and 2 jtranscript of the pretrial hearing, dkt. #s 51 and 53. 3 BPPR filed its brief in compliance with this court’s order. BPPR alleges that in the particular 4 Icircumstances of this case it is irrelevant if the fees are treated as an administrative expense or as an 5 jexpense of an oversecured creditor. Debtor alleges that a request for postpetition fees and expenses 6 comply with the requirements of 11 U.S.C. § 506(b), Rule 2016(a) of the Fed. R. Bankr. P., and 7 LBR 2016-1. The Chapter 13 trustee filed a comprehensive brief acknowledging the conflicting 8 japproaches that bankruptcy courts have take on the issues before the court and concluded that the best 9 japproach is the one adopted by the debtor, that is, that an application for postpetition fees and 10 lexpenses be required. BPPR replied alleging that the terms of the contract entitle the to the fees and 11 liexpenses requested and that the Chapter 13 trustee’s position is not supported by applicable law. 12 Discussion 13 At the outset, the court notes that there is clear difference between claiming prepetition fees 14 expenses and postpetition fees and expenses in a Chapter 13 case. Recently, this court concluded 15 that Section 1322(b), in conjunction with Section 1322(e) override and displace § 506(b) and Rule 16 2016 for prepetition fees and expenses. In re Virgen P. Mercado Alvarez, B.R._, 2011 WL 17 4101506 (Bankr. D. Puerto Rico, September 9, 2011). This court found that prepetition fees and 18 llexpenses were determined solely in accordance with the underlying agreement and applicable non 19 bankruptcy law, and that the same were not subject to the reasonable standard required by the federal 20 bankruptcy law. A request for postpetition fees and expenses is different. 21 Congress expressly provided in Section 1322(e) as arequirement to confirm a Chapter 13 plan 22 prepetition fees and expenses be determined in accordance with the underlying contract and 23 japplicable state law. However, postpetition fees and expenses incurred by mortgage lenders in 24 protecting their security interests over debtor(s)’ home directly impinge on the equitable distribution 25 creditors, and Congress did not include any provision governing this situation as it did in Section 26 11322(b). Consequently, the general reasonableness standard in § 506(b) and Rule 2016 come into 27 jjeffect. 28 The court in Inre Benjamin Allen Padilla, 379 B.R. 643 (Bankr. S.D. Texas 2007), considered

1 jland explained in detail the issue before this court, that is, if postpetition fees and expenses in Chapter 2 are subject to § 506(b) and Rule 2016. The court concluded that they did. This court agrees with 3 adopts the reasoning in the above cited case. Consequently, the court concludes that BPPR’s 4 request for postpetition fees and expenses must be made under section 506(b) and Rule 2016, and that 5 Ithe same are subject to the actual and reasonable standard. 6 Conclusion 7 In view of the foregoing, the court orders BPPR to file an application for postpetition fees and 8 lexpenses following § 506(b) and Rule 2016 within 14 days. The debtor and the Chapter 13 trustee 9 file an opposition within 21 days from its filing. 10 SO ORDERED. git Ja nyirg rv 11 In San Juan, Puerto Rico, this / day of October-2611.

RIQUE S. LAMOUTTE 14 U.S. Bankruptcy Judge 15 16 17 18 19 20 21 22 23 24 25 26 27 28