Trauner v. State Bank & Trust Co. (In re Solid Rock Development Corp.)

481 B.R. 221, 2012 WL 4903051, 2012 Bankr. LEXIS 4845
CourtUnited States Bankruptcy Court, N.D. Georgia
DecidedSeptember 27, 2012
DocketBankruptcy No. 10-72777-WLH; Adversary No. 12-5238
StatusPublished
Cited by1 cases

This text of 481 B.R. 221 (Trauner v. State Bank & Trust Co. (In re Solid Rock Development Corp.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, N.D. Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Trauner v. State Bank & Trust Co. (In re Solid Rock Development Corp.), 481 B.R. 221, 2012 WL 4903051, 2012 Bankr. LEXIS 4845 (Ga. 2012).

Opinion

ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT

WENDY L. HAGENAU, Bankruptcy Judge.

This matter is before the Court on the cross motions for summary judgment filed by the Plaintiff Trustee and Defendant secured creditor. The Trustee’s Complaint seeks to recover the amount of the Defendant’s credit bid in a foreclosure sale conducted after stay relief was granted, consisting of statutory attorney’s fees in excess of the fees allowable under the Eleventh Circuit’s decision in Welzel v. Advocate Realty Invs. (In re Welzel), 275 F.3d 1308 (11th Cir.2001). For the reasons stated below, the Court grants in part and denies in part each of the cross motions and directs the parties to set an evidentiary hearing on the value of the property and the amount of allowable fees.

Factual Background

The parties largely agree on the undisputed material facts of this case.

On or about February 3, 2009, the Debt- or Solid Rock Development Corporation, Inc. (“Solid Rock”) executed two promissory notes secured by a deed to secure debt and security agreement. State Bank and Trust Company (“SB & T”) is the holder of the notes and the security deed. On April 30, 2010, the Debtor filed its voluntary petition under Chapter 11 of the United States Bankruptcy Code. The Debtor scheduled the property subject to the security deed (“Property”) and also scheduled the claim of SB & T. SB & T filed a proof of claim in the amount of $1,522,825.13 including principal, interest, late charges, and actual attorney’s fees. The proof of claim asserts the property value is $1,500,000.00. The bankruptcy case was converted to one under Chapter 7 of the Bankruptcy Code on January 31, 2011, and the Plaintiff Trustee was appointed as trustee.

On August 6, 2010, SB & T filed a motion for relief from the automatic stay. On May 6, 2011, the Court entered an order modifying the automatic stay, which order was prepared by counsel for SB & T and signed as “not opposed” by counsel for the Trustee. The order provided:

The automatic stay of 11 U.S.C. § 362 of the Bankruptcy Code is modified to allow SB & T to exercise its rights and remedies under applicable law, including foreclosure of its security interest in the Property, promptly accounting to the Trustee for any proceeds received in excess of the lawful claim of SB & T.

Based upon this order, SB & T sent to the Debtor a notice of acceleration and foreclosure sale on September 21, 2011. The notice included the language required under O.C.G.A. § 13-1-11 to perfect a creditor’s right to attorney’s fees — that if principal and interest were not paid within 10 days of the date of the letter, attorney’s fees as allowed by O.C.G.A. § 13-1-11 would also be owed.

Since the Debtor did not pay SB & T the amounts that were due, SB & T conducted a foreclosure sale of the Property on November 1, 2011, and credit bid its debt in the amount of $2,025,182.00. The credit bid was applied to the balance owed to SB & T at the time, including principal and interest, but also including statutory [225]*225attorney’s fees in the amount of $262,386.87. There is no question that the statutory attorney’s fees exceed the amount of actual attorney’s fees incurred by SB & T, although the precise amount of actual, reasonable attorney’s fees has not been stipulated by the parties.

Summary of Arguments

This dispute centers on SB & T’s claim to statutory attorney’s fees in calculating any surplus owed to the Trustee. Georgia law, O.C.G.A. § 13-1-11, provides:

Obligations to pay attorney’s fees upon any note or other evidence of indebtedness, in addition to the rate of interest specified therein, shall be valid and enforceable and collectable as a part of such debt if such note or other evidence of indebtedness is collected by or through an attorney after maturity, subject to subsection (b) of this Code section and to the following provisions:
,(1) If such note or other evidence of indebtedness provides for attorney’s fees in some specific percent of the principal and interest owing thereon, such provision and obligation shall be valid and enforceable up to but not in excess of 15% of the principal and interest owing on said note or other evidence of indebtedness;
(2) If such note or other evidence of indebtedness provides for the payment of reasonable attorney’s fees without specifying any specific percent, such provision shall be construed to mean 15% of the first $500 of principal and interest owing on such note or other evidence of indebtedness and 10% of the amount of principal and interest owing thereon in excess of $500; and
(3) The holder of the note or other evidence of indebtedness or his or her attorney at law shall, after maturity of the obligation, notify in writing the maker, endorser or party sought to be held on said obligation that the provisions relative to payment of attorney’s fees in addition to the principal and interest shall be enforced and that such maker, endorser or party sought to be held on said obligation has 10 days from the receipt of such notice to pay the principal and interest without the attorney’s fees. If the maker, endorser or party sought to be held on any such obligation shall pay the principal and interest in full before the expiration of such time, then the obligation to pay the attorney’s fees shall be void and no court shall enforce the agreement....

The Trustee argues this case is governed by the Eleventh Circuit decision in Welzel, where the court held that, notwithstanding the provisions of the contract or the provisions of O.C.G.A. § 13-1-11, the creditor was limited under Section 506(b) to the recovery of reasonable attorney’s fees. 275 F.3d at 1315. The Trustee therefore argues that SB & T could not recover statutory attorney’s fees through its foreclosure sale. The Trustee argues further that the credit bid by SB & T of the statutory fees constitutes a cash bid in excess of the allowable claim of SB & T, and SB & T must therefore pay to the Trustee the amount of the credit bid in excess of the allowable claim.

SB & T argues in response that, once the stay is lifted, this Court no longer has jurisdiction to determine if there are excess proceeds from the foreclosure to be paid to the Trustee, and that any such claim regarding the excess proceeds is not a core proceeding. SB & T also argues that, once the stay is lifted, it is entitled to collect the full amount allowed under state law, notwithstanding any limitations which bankruptcy law might provide. Finally, SB & T argues that the credit bid was not really a cash bid and therefore there is no surplus to return.

[226]*226After review of the cross motions, the responses and replies of each party, the Court holds as follows:

1.

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Louis Michael Goldberg
E.D. North Carolina, 2020

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Bluebook (online)
481 B.R. 221, 2012 WL 4903051, 2012 Bankr. LEXIS 4845, Counsel Stack Legal Research, https://law.counselstack.com/opinion/trauner-v-state-bank-trust-co-in-re-solid-rock-development-corp-ganb-2012.