VICTOR D REECE

• Court: United States Bankruptcy Court, D. Arizona
• Decided: February 26, 2020
• Docket: 4:19-bk-03836
• Status: Unknown

Opinion

Dated: February 26, 2020

1 □

; Benn Perf — 3 Brenda Moody Whinery, Chief Bankruptcy

4 5 6 7 UNITED STATES BANKRUPTCY COURT g DISTRICT OF ARIZONA Inre: Chapter 13 10] VICTOR D. REECE, Case No. 4:19-bk-03836-BMW 11 Debtor. RULING AND ORDER RE: DEBTOR’S OBJECTION TO PROOF OF CLAIM 4-1] 12 AND RELATED NOTICE OF POST- PETITION MORTGAGE FEES, 13 EXPENSES, AND CHARGES 14 15 This matter came before the Court pursuant to Proof of Claim 4-1 (the “Claim’’) filed bv 16] Timothy Williams, Trustee of the Wilmore Wholesale Inc. Profit Sharing Plan & Trust □□□□ 17} July 29, 2019, and Jean Williams, Trustee of the Jean E. Williams Revocable Family Trust 18] (collectively, the “Creditors”) on April 25, 2019; the accompanying Notice of □□□□□□□□□□□ Mortgage Fees, Expenses, and Charges (the “Notice’”) filed by the Creditors on September 12 2019; the Objection to Proof of Claim (the “Objection’’) (Dkt. 36) filed by Victor D. Reece (th 21] “Debtor”) on September 16, 2019; the Response to Objection to Proof of Claim (the “Response” (Dkt. 38) filed by the Creditors on September 20, 2019; and all pleadings related thereto. 23 On November 5, 2019, the Court held a hearing on the Objection (the “Hearing’’), at whicl 24 || time the parties presented oral argument, rested on their pleadings, and agreed to allow the Cour to rule on the remaining issues of whether the pre-petition trustee’s fees and post-petitiot attorneys’ fees, costs, and trustee’s fees sought by the Creditors are reasonable, without evidenc: or a further hearing. Based upon the pleadings, arguments of counsel, and entire record befor 28 || the Court, the Court now issues its ruling.

1 I. Jurisdiction 2 The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334(b) and 157(b). 3 This is a core proceeding pursuant to 28 U.S.C. §§ 157(b)(2)(A) and (B). 4 II. Factual & Procedural Background 5 On April 3, 2019 (the “Petition Date”), the Debtor filed a voluntary petition for relief 6 under chapter 13 of the Bankruptcy Code. 7 On April 16, 2019, the Debtor filed a chapter 13 conduit plan (the “Plan”) (Dkt. 10). 8 On April 25, 2019, the Creditors filed the Claim in the amount of $56,194.85, which 9 amount includes $2,356.48 in pre-petition trustee’s fees and $15,623.03 in pre-petition arrears. 10 The Creditors assert that the Claim is fully secured by a deed of trust on the Debtor’s residence. 11 On the same date, the Creditors filed an objection to the Plan on the basis that the Plan, 12 among other things: (1) failed to account for pre-petition arrears; (2) failed to account for 13 § 506(b)1 fees, costs, and charges; (3) was impermissibly proposing to modify the Debtor’s 14 mortgage; and (4) was not feasible. (Dkt. 16). 15 On June 7, 2019, the Creditors filed a motion for stay relief (the “Stay Relief Motion”), in 16 which they sought relief under §§ 362(d)(1) and (d)(2). (Dkt. 18). The Debtor objected to the 17 Stay Relief Motion on the basis that there was an equity cushion in the Creditors’ collateral, plan 18 payments were current, and post-petition conduit mortgage payments were current. (Dkt. 23). 19 On August 8, 2019, the Debtor filed an amended chapter 13 conduit plan (the “Amended 20 Plan”). (Dkt. 29). The Creditors objected to the Amended Plan for the same reasons they objected 21 to the Plan. (Dkt. 30).2 22 On September 12, 2019, the Creditors filed the Notice in which they assert that they are 23 entitled to § 506(b) attorneys’ fees and costs in the amount of $4,776.30, plus post-petition 24 trustee’s fees in the amount of $275.00 through September 12, 2019. Billing statements itemizing 25 and describing the fees and costs at issue are attached, according to which the Creditors primarily 26

27 1 Unless otherwise indicated, statutory citations are to the Bankruptcy Code, title 11 of the United States Code. 28 2 A proposed stipulated order of confirmation has since been submitted to the chapter 13 trustee for 1 incurred post-petition fees and costs in connection with: (1) the filing and pursuit of the Claim; 2 (2) the filing and pursuit of the Stay Relief Motion; (3) the filing of objections to the Debtor’s 3 Plan and Amended Plan; (4) communications with third parties about the Claim; and (5) the 4 monitoring of the status of this case. 5 On September 16, 2019, the Debtor filed the Objection, in which the Debtor questions the 6 reasonableness of the pre-petition trustee’s fees and asks the Court to disallow the post-petition 7 fees and costs in their entirety on the basis that they are not reasonable because he has been 8 current on plan payments, which payments include post-petition mortgage payments, since the 9 commencement of this case. 10 On September 17, 2019, the Court held a preliminary hearing on the Stay Relief Motion, 11 at which time counsel for the Creditors reported that the Debtor was current on post-petition 12 mortgage payments and plan payments, so the Creditors were not pursuing their request for stay 13 relief. Given the representations of counsel, the Court questioned why the Stay Relief Motion 14 was filed. 15 On September 20, 2019, the Creditors filed the Response, which is nearly unintelligible, 16 but in which they: (1) appear to seek additional post-petition attorneys’ fees related to the 17 preparation of the Response; and (2) acknowledge that the post-petition attorneys’ fees incurred 18 to file and pursue the Stay Relief Motion were unnecessarily incurred as a result of incorrect 19 information relayed by the Creditors’ account servicing agent. 20 On November 5, 2019, the Court held the Hearing at which time Counsel for the Debtor 21 asked the Court to review the pre-petition trustee’s fees in addition to the post-petition attorneys’ 22 fees, trustee’s fees, and costs, and the parties agreed to rest on their pleadings and allow the Court 23 to rule on the outstanding reasonableness issues. At the hearing the Court made it clear that the 24 Court would not entertain any request for additional post-petition fees related to the preparation 25 of the Response. 26 III. Legal Analysis 27 A. Pre-Petition Trustee’s Fees 28 Creditors’ counsel represented to the Court that the $2,356.48 in pre-petition trustee’s fees 1 included in the Claim, which fees are itemized in a statement attached to the Claim, represent 2 routine trustee’s fees. (See 11/5/2019 Hearing Tr. 3:8-18). The Debtor has asserted a blanket 3 objection to these trustee’s fees, but the Debtor has not identified which of the itemized fees he 4 asserts are not reasonable. Further, the Debtor has not objected to the pre-petition arrears portion 5 of the Claim in which the Creditors assert that the Debtor was more than $15,000 in arrears as of 6 the Petition Date. The Debtor’s concession of the pre-petition arrearages supports a finding that 7 the pre-petition trustee’s fees are justified and reasonable. 8 Based upon the foregoing, the Court will overrule the Debtor’s objection to the pre- 9 petition trustee’s fees. 10 B. Post-Petition Trustee’s Fees, Attorneys’ Fees, and Costs 11 Section § 506(b) provides in relevant part:

12 To the extent that an allowed secured claim is secured by property the 13 value of which . . . is greater than the amount of such claim, there shall be allowed to the holder of such claim, interest on such claim, and any 14 reasonable fees, costs, or charges provided for under the agreement or State statute under which such claim arose. 15 16 The parties do not dispute that the Creditors are entitled to reasonable fees, costs, and 17 charges pursuant § 506(b) and the terms of the Promissory Note Secured by Deed of Trust (Proof 18 of Claim 4-1 at 4-5). Rather, the parties disagree about whether the post-petition fees and costs 19 the Creditors are seeking to recover are reasonable. 20 A party seeking § 506(b) fees and costs has the burden of establishing that its fees and 21 costs are reasonable. In re 1910 Partners, No. AP 15-90006, 2017 WL 6273314, at *7 (B.A.P. 22 9th Cir. Dec. 8, 2017). 23 “[A]ttorneys applying to a court for attorneys’ fees should exercise good billing judgment 24 by making ‘a good faith effort to exclude from a fee request hours that are excessive, redundant, 25 or otherwise unnecessary . . . .’” In re Thomas, No. BAP.CC-08-1307-HMOPA, 2009 WL 26 7751299, at *4 (B.A.P. 9th Cir. July 6, 2009), aff’d, 474 F. App’x 500 (9th Cir. 2012) (quoting 27 Hensley v. Eckerhart, 461 U.S. 424, 434, 103 S. Ct. 1933, 1939–40, 76 L. Ed. 2d 40 (1983)). 28 Because block billing prevents a court from being able to evaluate the necessity of services or 1 the time spent on tasks, block billing is “universally disapproved by bankruptcy courts,” and 2 warrants a fee reduction. In re Thomas, 2009 WL 7751299, at *5-6. 3 For purposes of § 506(b), “[t]he key determinant for ‘reasonableness’ is whether the 4 creditor incurred expenses and fees that fall within the scope of the fees provision in the parties’ 5 agreement and took the kinds of actions that similarly situated creditors might reasonably 6 conclude should be taken.” In re 1910 Partners, 2017 WL 6273314, at *7. Courts should consider 7 all relevant factors including “whether . . . the creditor reasonably believed that the services 8 employed were necessary to protect its interests in the debtor’s property.” Id. However, courts 9 should not reward overly aggressive parties or attorneys. Id. 10 1. Post-Petition Trustee’s Fees 11 As with the pre-petition trustee’s fees, the $275.00 in post-petition trustee’s fees are 12 itemized in a statement attached to the Notice and appear to be routine trustee’s fees. The Debtor 13 has asserted a blanket objection to the trustee’s fees, but the Debtor has not identified which of 14 the itemized fees he asserts are not reasonable. 15 Based upon the foregoing, the Court will overrule the Debtor’s objection to the post- 16 petition trustee’s fees. 17 2. Post-Petition Attorneys’ Fees & Costs 18 The Creditors have been active participants in this case and the Court does not find 19 Creditors’ counsel’s hourly rate to be unreasonable. However: (1) the Creditors have 20 acknowledged that the $2,344.00 in fees and costs incurred to file and pursue the Stay Relief 21 Motion were incurred unnecessarily as a result of incorrect information the Creditors received 22 from a third party servicer; and (2) Creditors’ counsel block-billed a number of entries, which 23 entries lump attorney and non-attorney tasks together and prevent the Court from conducting a 24 meaningful reasonableness review of each of the tasks therein.3 A fee reduction is therefore

25 3 For example, an April 19, 2019 entry bills 3.00 hours at counsel’s attorney rate for the following: 26 “Commenced analyzing Debtor’s Schedules, Statement of Affairs and Chapter 13 Plan, commenced analyzing additional documents supplied by Total Lender Solutions and LoanCare, respectively, 27 commenced preparing Clients’ anticipated Rule 4001-1(b) Letter, undertook a myriad of calculations, held several extended TCW Ms. Tina Biskupiak at Total Lender Solutions, prepared drafts of 28 Reinstatement and Pay-off Statements, forwarded same to Ms. Biskupiak for her review/input, and lastly, 1 warranted. 2 Specifically: (1) a reduction of $2,344.00 is warranted for fees and costs incurred in 3 connection with the stay relief proceedings based on the Creditors’ counsel’s own representations 4 that these fees and costs were unnecessarily incurred; and (2) a reduction of $500.00 is warranted 5 in light of Creditors’ counsel’s block-billed entries, which entries lump together attorney and 6 non-attorney tasks, all of which were charged at counsel’s attorney rate, and which entries leave 7 the Court with no way to evaluate whether any individual task therein was expeditiously 8 performed. 9 Wherefore, based upon the foregoing, upon consideration of the entire record and for good 10 cause shown; 11 IT IS HEREBY ORDERED that the Objection is sustained in part and overruled in part. 12 IT IS FURTHER ORDERED that the fees and costs, as asserted in the Claim and Notice 13 are allowed as follows: 14 1) the pre-petition trustee’s fees are allowed in the amount of $2,356.48; 15 2) the post-petition trustee’s fees are allowed in the amount of $275.00; and 16 3) the post-petition attorneys’ fees and costs are approved in the reduced 17 amount of $1,932.30. 18 DATED AND SIGNED ABOVE. 19

20 Notice to be sent through the 21 Bankruptcy Noticing Center (“BNC”) to the following: 22

23 Victor D. Reece 678 W Shannons Wy 24 Coolidge, AZ 85128 25 26 / / / 27 / / / 28 1 through the CM/ECF System, to the following registered users: 2 James J. Gentile 3 James J. Gentile PC 4 Counsel for Debtor

5 David L. Knapper Law Offices of David L. Knapper 6 Counsel for Creditors 7 Dianne C. Kerns, Chapter 13 Trustee 8

9 U.S. Trustee, Office of the U.S. Trustee

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