Neville v. Eufaula Bank & Trust Co.

639 F.2d 1197, 24 Collier Bankr. Cas. 2d 246, 1981 U.S. App. LEXIS 19235, 7 Bankr. Ct. Dec. (CRR) 717
CourtCourt of Appeals for the Fifth Circuit
DecidedMarch 16, 1981
DocketNo. 78-3122
StatusPublished
Cited by1 cases

This text of 639 F.2d 1197 (Neville v. Eufaula Bank & Trust Co.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Neville v. Eufaula Bank & Trust Co., 639 F.2d 1197, 24 Collier Bankr. Cas. 2d 246, 1981 U.S. App. LEXIS 19235, 7 Bankr. Ct. Dec. (CRR) 717 (5th Cir. 1981).

Opinion

RANDALL, Circuit Judge:

This appeal arises from a determination by a bankruptcy judge in the Middle District of Alabama of a legal fee sought by William V. Neville, Jr., an attorney for a trustee in bankruptcy in proceedings before that judge. Neville, contending that the fee was inadequate, appealed to the district court, which affirmed the decision of the bankruptcy judge. In this further appeal, Neville argues that the bankruptcy judge abused his discretion in two separate respects. First, he contends that the bankruptcy judge did not seriously apply the twelve factors set forth as guides to the judicial determination of attorneys fees in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974). Although the bankruptcy judge discussed these factors in his opinion, he limited the hourly rate to the maximum allowed under a local policy of the Middle District of Alabama for bankruptcy matters. The district court did not rely on this policy but did affirm on the basis of a general principle under the old Bankruptcy Act in favor of economical bankruptcy administration; Neville argues that this principle, as applied by the district court, also resulted in a failure to apply the Johnson factors. Second, Neville contends that the bankruptcy judge abused his discretion by reducing Neville’s compensable hours by a substantial percentage without first explaining to him the reason for the proposed reductions so that he could specifically respond.

We hold that the bankruptcy judge did abuse his discretion by applying a maximum limit despite the favorable findings he had made of the Johnson factors; the district court also ignored the relevant Johnson findings by elevating the principle of economy to the exclusion of other considerations. We hold that the bankruptcy judge did not abuse his discretion by failing to confront Neville with the specific reason for disallowances, for Neville had the burden of establishing the value of his services and had an adequate evidentiary hearing at which to do so. Since an appellate court has the authority to award legal fees on its own, we have in the interests of judicial economy determined such fees in this case.

I. THE FACTS

Neville was appointed as receiver for the U. S. Golf Corporation, a bankrupt, on February 27, 1975 in the Bankruptcy Court for the Middle District of Alabama. He was appointed as trustee for U. S. Golf on April 9, 1975, and as attorney for the trustee on April 23, 1975; Neville served as both trustee and attorney for the trustee for the duration of the bankruptcy proceedings.

[1200]*1200As attorney for the trustee, Neville’s services fell into four broad categories. First, he challenged a security interest held by Eufaula Bank & Trust Company in the personal property of U. S. Golf. The interest was attacked on a number of grounds, and was defeated because Eufaula Bank & Trust had not properly recorded a Uniform Commercial Code financing statement covering the property. The property was liquidated at auction and brought approximately $90,000 into the estate. Second, Neville filed a suit against Tri-City Golf Company on the basis of a contract between Tri-City and U. S. Golf. The case was prepared for trial but was settled for approximately $30,-000. Third, Neville filed a preference suit against Eaton Corporation; this suit resulted in a payment from Eaton of almost $15,000, the full amount of the preference. These three actions, taken together, increased the estate by over $135,000; absent these recoveries, the estate would have totalled approximately $15,000. In the fourth place, Neville challenged a number of claims filed against the estate. Although he was unsuccessful in his challenge to a $300,000 claim held by Eufaula Bank & Trust, he succeeded in having a number of smaller claims entirely disallowed by the bankruptcy court, including a claim by Tennessee Investment Castings Company for approximately $45,000, and one by the Barber County Tax Collector for over $1,000. One individual’s claim was reduced from $24,200 to $2,700, and another claim was reduced from over $60,000 to approximately $55,000. Altogether, Neville successfully challenged over $92,000 in claims against U. S. Golf; this amount reduced the total claims against the bankrupt estate by 21.77%.

U. S. Golf’s primary creditor in bankruptcy was Eufaula Bank & Trust. As attorney for the trustee, one of Neville’s most important tasks was to challenge the bank’s claim (which amounted to 74% of the total sought by creditors) and to attack the bank’s security interest in the personal property of U. S. Golf. Neville took on this responsibility despite the fact that Eufaula Bank & Trust is the largest bank in Eufaula, Alabama, the community in which Neville practices law, and despite the personal interest of certain of the bank’s officers and directors who had guaranteed U. S. Golf’s debt to the bank.

Following the due administration of the bankruptcy estate, Neville filed on February 21, 1977 an application for allowance of an attorneys fee in the amount of $36,-464.44. Several creditors filed letters objecting to the proposed fee, and the bankruptcy judge held a hearing on Neville’s application on March 21, 1977. At that time Neville submitted a written summary of time he had spent on the case, claiming a total of 582.75 hours of time expended in his role as attorney to the trustee. Neville also introduced the testimony of a bankruptcy lawyer from Montgomery, Alabama; that attorney testified that a reasonable rate for the services provided by Neville would be approximately $60 per hour, and that a reasonable fee in this case would lie between $29,940 and $31,700. On April 19, 1977, the bankruptcy judge issued a memorandum opinion and order in which he found that only 268.25 hours of Neville’s time could be compensated as attorney time, and determined that Neville should be paid $30 per hour for out-of-court time and $50 per hour for in-court time. The bankruptcy judge set the attorneys fee at $8,750.

After this fee was approved by the district court, Neville filed a petition for rehearing in the bankruptcy court. The bankruptcy judge granted the petition and held an evidentiary hearing on May 27, 1977. Neville introduced the testimony of four Montgomery attorneys and affidavits from a number of other attorneys from Florida, Georgia and Alabama as to the reasonableness of the fee he had requested; the reasonable hourly rates suggested by these attorneys ranged from $40 to $60. Neville also submitted at this hearing a detailed personal resume and a sixty page time record setting forth his work in more detail than in his original presentation to the court. On December 12,1977, the bankruptcy judge held an additional hearing, at which Eufaula Bank & Trust introduced the [1201]*1201testimony of several lawyers from Eufaula, all of whom placed the usual hourly rate for comparable work in that town at some point between $40 and $50. On May 11, 1978, the bankruptcy judge issued a second order setting an attorneys fee for Neville. In this order the judge increased Neville’s compensable time to 310 hours of out-of-court time and 16 hours of in-court time. The judge did not change his initial conclusion as to hourly rates, however, and awarded a total attorneys fee of only $10,100 to Neville. The judge added a fee of $1,643.97 for Neville’s service as receiver and a fee of $1,918.97 for his service as trustee. Ne-ville’s total compensation, therefore, was $13,662.94.

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Related

In The Matter Of U.S. Golf Corporation
639 F.2d 1197 (Fifth Circuit, 1981)

Cite This Page — Counsel Stack

Bluebook (online)
639 F.2d 1197, 24 Collier Bankr. Cas. 2d 246, 1981 U.S. App. LEXIS 19235, 7 Bankr. Ct. Dec. (CRR) 717, Counsel Stack Legal Research, https://law.counselstack.com/opinion/neville-v-eufaula-bank-trust-co-ca5-1981.