Anderson, In re
| Decision Date | 22 July 1991 |
| Docket Number | No. 90-4358,90-4358 |
| Citation | 936 F.2d 199 |
| Parties | , Bankr. L. Rep. P 74,237 In re Harolyn ANDERSON, Debtor. Richard M. ANDERSON, Appellant, Cross-Appellee, v. Harolyn ANDERSON, Appellee, Cross-Appellant, and John F. Bufe, Trustee, Appellee. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Edwin Buckner, Jr., Sandlin & Buckner, Richard M. Anderson, Marshall, Tex., for appellant, cross-appellee.
Patrick Kelley, Ireland, Carroll & Kelly, Tyler, Tex., for Harolyn Anderson.
John F. Bufe, Potter, Guinn, Minton, Roberts & Davis, Tyler, Tex., pro se.
Appeals from the United States District Court for the Eastern District of Texas.
Before THORNBERRY, JOLLY and WIENER, Circuit Judges.
Appellant, Cross-Appellee, Richard M. Anderson, attorney at law, appeals the district court's judgment affirming the bankruptcy court's award to him of attorney's fees in the amount of $82,500. The debtor and the trustee cross appeal. In light of the bankruptcy court's broad, equitable discretion in matters such as attorneys' fees, the judgment appealed from is affirmed.
This action arises out of the death of Norman Anderson (decedent), and the subsequent involuntary bankruptcy of his estate and of his surviving spouse, Harolyn Anderson (Harolyn). The bankruptcy proceedings against Harolyn were initiated in November of 1984. At that time, Harolyn engaged Paul Anderson (Paul), a relative of decedent, to represent her in the bankruptcy and related civil actions for the proceeds of certain insurance policies insuring the life of decedent, all on a one-third contingency fee. Paul in turn hired his attorney son, Richard Anderson (Richard), to assist in the prosecution of the various suits and other matters in the bankruptcy proceedings. Paul and Richard did not normally practice law together. Richard actively represented Harolyn in the various actions from November of 1984 until September of 1986 when he was elected to the Texas State Senate. From that time on Richard had little active participation in Harolyn's legal matters.
In 1987, Harolyn voluntarily converted her case into Chapter 11. The Chapter 7 trustee continued to serve as a Chapter 11 trustee. In 1988, the bankruptcy court granted Harolyn's application to employ Richard as special counsel nunc pro tunc. In 1989 the civil litigation was substantially settled and Richard filed two applications for attorney's fees. He sought a total fee of $318,830 claiming 1,478.4 hours of services at an hourly rate of $150, plus an enhancement of 50% based on the quality of the services he provided.
Thereafter, Richard disclosed that, early on, he had received a $10,000 payment from Harolyn for his services. It is uncontroverted The bankruptcy court found that (1) Richard had not been approved as attorney for debtor and had not sought court approval at the time the $10,000 payment was made as contemplated by 11 U.S.C. Sec. 329 and Bankruptcy Rule 2016; (2) Richard had no particular expertise in bankruptcy law; and (3) Richard's time records supporting his fee application were not prepared contemporaneously and were not credible. The bankruptcy court ruled Richard's application deficient under the criteria this court set out in In the Matter of First Colonial, 544 F.2d 1291 (5th Cir.1977) for reasons including (1) failure to serve the United States Trustee, (2) failure to obtain court approval of employment, (3) excessive hourly rates, (4) batching description of services, (5) excessive time for work as described, (6) unclear benefit of the estate, (7) charging full rate for travel, (8) charging overhead items as attorney's fees, (9) excessive time on fee applications, and (10) failure to explain services rendered in sufficient detail. These deficiencies were present throughout the fee application.
that Richard had received this sum from the bankruptcy estate before Harolyn applied for employment of counsel nunc pro tunc, and that the payment was not disclosed at that time but was made without prior notification or approval of the bankruptcy court. Richard claims that he received the payment from Paul, his father, and that he (Richard) was not aware that the payment was derived from the bankruptcy estate. Richard asserts that he became aware of that payment's origin at a later hearing in the bankruptcy court.
In spite of the deficiencies and violations of the Bankruptcy Code and Rules, the bankruptcy court determined that Richard should be compensated for some of the time he had expended on Harolyn's behalf. The court awarded Richard the net sum of $72,500, representing $82,500 for 550 hours of work at $150 per hour, minus the $10,000 he had previously been paid.
Richard appealed the bankruptcy court's award to the district court claiming, among other things, that the bankruptcy court lacked subject matter jurisdiction over Harolyn's case and that the bankruptcy court erred, both legally and factually, in determining his award. The trustee and Harolyn cross-appealed claiming that Richard was not entitled to any fee because of his violations of the Bankruptcy Code and Rules or, alternatively, that he was estopped from contesting the award on appeal because he had accepted payment of the award from the estate. The district court determined that the bankruptcy court had jurisdiction over the case ab initio and that any issue of jurisdiction was mooted by the 1987 voluntary conversion of the initial Chapter 7 proceedings to Chapter 11 proceedings. The district court also found that the award was not clearly erroneous, but did not address the issues of estoppel and per se bar raised by the trustee and Harolyn.
On appeal, Richard claims that the district court erred in determining that the bankruptcy court had jurisdiction over Harolyn's case and that the jurisdictional issue was not mooted by the conversion into Chapter 11. Richard also claims that the district court erred in not setting aside the bankruptcy court's award since the bankruptcy court did not apply the appropriate standards in determining his fees. The cross-appeal of the trustee and Harolyn raises the same issues they put before the district court, namely, whether the bankruptcy court was precluded from awarding Richard any fees at all and, in the alternative, whether Richard's acceptance of payment estops him from appealing the amount of the award.
To the extent that Richard's appeal requires this court to examine the findings of fact of the bankruptcy court, as with the district court, we apply the clearly erroneous standard. Mitsubishi International Corp. v. Clark Pipe & Supply Co., Inc., 735 F.2d 160, 163 (5th Cir.1984). Bankruptcy and district court conclusions of law are examined de novo.
Richard claims that the district court erred in ruling that the bankruptcy court had subject matter jurisdiction over Harolyn's case. His basic assertion is that because Harolyn did not meet the equity insolvency test for involuntary bankruptcy under 11 U.S.C. Sec. 303(h)(1), the bankruptcy court did not have jurisdiction ab initio and thus ultimately did not have jurisdiction to adjudicate the bankruptcy or award fees at all. Richard bases his argument on a convoluted analysis of Texas property law which we need not recount here. He contends that the entire case should be remanded with instructions to transfer all creditors' claims to Texas probate court.
The district court characterized this argument as "daedal" and ruled that, "whatever the merits," Richard had failed to preserve the claim because there was no timely appeal from the bankruptcy court's Order of Relief in 1986, and that the voluntary conversion to Chapter 11 in 1987 essentially mooted the issue. The district court is correct.
After the involuntary petition was filed in 1984, Richard filed an initial answer pleading the insolvency issue. The bankruptcy court held the case pending evidence of Harolyn's insolvency. In August of 1986, the bankruptcy court entered its Order of Relief adjudicating her an involuntary bankrupt pursuant to 11 U.S.C. Sec. 303. Richard failed to file a notice of appeal. A later motion to vacate the order was denied. In 1987, after Richard ceased active representation of Harolyn, she voluntarily converted her case to Chapter 11. As that voluntary conversion from Chapter 7 to Chapter 11 cured any possible defect the petition could have had under 11 U.S.C. Sec. 303(h)(1), Richard's claim of lack of jurisdiction is meritless. See Alpine Lumber and Nursery, 13 B.R. 977, 979 (Bankr.S.D.Ca.1981).
Richard also assigns as error the district court's conclusion that the amount of the bankruptcy court's award was not clearly erroneous. The trustee and Harolyn counter that the bankruptcy court's findings--that Richard's time records and testimony were not credible and that he had violated both the Bankruptcy Code and Rules by failing to seek approval of or report the payment of $10,000 from the estate--precluded the bankruptcy court from making any fee award whatsoever. Although the district court did not expressly address these contentions, it implicitly concluded that they were without merit when it affirmed the award.
While we review the bankruptcy court's findings of fact under the clearly erroneous standard, we review the ultimate award of fees under the abuse of discretion standard. Matter of Evangeline Refining Co., 890 F.2d 1312, 1323 (5th Cir.1989). Applying those standards we conclude that the bankruptcy court's findings are not clearly erroneous and that the facts thus found do not establish that the court abused its discretion in the fee award it made.
The bankruptcy court found that Richard violated Sec. 329 of the Bankruptcy Code and Rule 2016 by failing to seek prior court approval or timely to disclose payment of $10,000 in fees rightfully part of the bankrupt's estate. Richard's response to...
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