In re Davenport
Citation | 627 B.R. 705 |
Decision Date | 24 November 2020 |
Docket Number | Case No. 15-00540 |
Parties | IN RE Stuart Mills DAVENPORT, Debtor. |
Court | United States Bankruptcy Courts. District of Columbia Circuit |
Jeffrey M. Orenstein, Wolff & Orenstein, LLC, Michael G. Wolff, Goren, Hofberg & Wolff, Rockville, MD, for Debtor.
Stuart Mills Davenport commenced this case as the debtor by filing a voluntary petition under Chapter 13 of the Bankruptcy Code (11 U.S.C.) on October 14, 2015. He owns a property located at 1700 1st Street, N.W., Washington, D.C. 20001 (the "Property").1 Babak Djourabchi and Monica Welt hold a claim against Davenport pursuant to a Note issued for $80,000.00 that is secured by a Deed of Trust against the Property. This Memorandum Decision addresses Davenport's Motion to Modify Chapter 13 Plan After Confirmation (Dkt. No. 125) and the Application of Secured Creditors Babak Djourabchi and Monica Welt, for Allowance and Payment of Interest, Costs, Fees and Other Expenses Due on Secured Note (part of Dkt. No. 137) ("Application for Fees and Expenses ").
On January 15, 2016, the court confirmed Davenport's amended Chapter 13 plan, which called for Davenport to make payments of $4,400.00 per month to the Chapter 13 trustee, and for the trustee to pay Djourabchi and Welt's allowed secured claim (which had to be fixed as of the date of confirmation), with postconfirmation interest at 6% per annum on the amount of the allowed secured claim. In an order of July 21, 2016, the court fixed the allowed secured claim of Djourabchi and Welt as consisting of:
The Note and Deed of Trust governed Davenport's debt obligations up to the point of confirmation. Under the terms of the Note , the $26,422.90 credit could not be applied to the $80,000.00 principal amount of the Note during the period preceding confirmation because the Note had not been paid in full.2 However, pursuant to 11 U.S.C. § 1325(a)(5)(B), the confirmed plan altered Djourabchi and Welt's rights and thereby permitted application of the $26,422.90 credit to be applied as of the confirmation date in fixing the amount of the allowed secured claim remaining at the conclusion of that date.
On January 17, 2017, Davenport filed a Motion to Modify Chapter 13 Plan After Confirmation (Dkt. No. 125), contending that he had submitted to the Chapter 13 trustee sufficient funds to satisfy the allowed secured claim, and seeking (based on a reduced income) to modify the plan by reducing his remaining monthly plan payments to $1,425.00 per month, an amount sufficient to satisfy the only other allowed claim in the case, a claim of the Internal Revenue Service ("IRS"). Djourabchi and Welt opposed the Motion to Modify and filed their Application for Fees and Expenses seeking allowance of fees and expenses for which they had incurred liability postpetition (Dkt. No. 137). They do not seek prepetition fees and expenses.
Under the Deed of Trust , upon being given notice of a payment of reasonable attorney's fees and expenses incurred by Djourabchi and Welt in protecting their secured position, Davenport became liable to reimburse Djourabchi and Welt for the amount of that payment. It was only after confirmation of Davenport's Chapter 13 plan that Djourabchi and Welt gave Davenport notice of payments of any of the attorney's fees and expenses at issue, and thus Davenport incurred a reimbursement obligation regarding the fees and expenses only after confirmation of his plan, and therefore the amounts owed pursuant to that reimbursement obligation are not part of the allowed secured claim (fixed as of the confirmation date). Nevertheless, the claims in that regard remain debts secured by the Deed of Trust , and had a potential impact on the debtor's performance under his confirmed plan, such that the court had subject matter jurisdiction to adjudicate the amounts owed.
The court issued a scheduling order regarding the litigation of the Motion to Modify and the Application for Fees and Expenses . The claim was oversecured. Accordingly, under 11 U.S.C. § 506(b), the allowed secured claim included:
There were, however, no such reimbursement obligations incurred during the postpetition period prior to the date of confirmation. In a Memorandum Decision and Order re Motions in Limine of September 11, 2017 (Dkt. No. 168) ("In Limine Decision "), the court found that the amount of the allowed secured claim (fixed as the confirmation date) was $55,717.03 (consisting of the $80,000.00 of principal, plus postpetition interest of $2,139.93, less the credit of $26,422.90).
For reasons set forth below, I conclude with respect to the Motion to Modify that under the modified plan more than sufficient funds will be available to complete payment of the allowed secured claim (and the postconfirmation interest thereon) plus the IRS's claim. Accordingly, I will grant Davenport's Motion to Modify .
As to Djourabchi and Welt's Application for Fees and Expenses , I will reject Davenport's attempt to have the court deny all of the claim for reimbursement of payments of attorney's fees and expenses. However, under District of Columbia law, which governs the reasonableness of amounts incurred as a reimbursement liability after the date of confirmation, the fee and expense amounts incurred in the bankruptcy case and for which reimbursement is sought are in large part unreasonable.3
Finally, I conclude that with respect to Davenport's obligation to reimburse Djourabchi and Welt for any payment of reasonable attorney's fees and expenses, Davenport is required to pay interest at the Note rate of 10.5% per annum from the date of notice that the payment had been made.
The history of this case is extensive, but essential to understanding the issues being considered, especially Davenport's defenses to postconfirmation attorney's fees and expenses. The pertinent facts are set forth below.
On September 22, 2006, Davenport executed the Note (titled Promissory Note for Business and Commercial Purposes ) and the Deed of Trust in favor of Djourabchi and Welt, who were his neighbors, for a loan of $80,000 secured by the Property. The Property was already subject to an existing first deed of trust in favor of Bayview Loan Servicing, LLC ("Bayview"). The Note was drafted by Djourabchi, an attorney, although his usual legal work did not encompass the drafting of promissory notes. Several provisions of the Note and the Deed of Trust are significant to the questions at hand. The Note provides in part:
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Hilgartner v. Yagi
...for post-petition awards have recently been enforced despite the filing of a bankruptcy petition. See, e.g., In re Davenport , 627 B.R. 705, 731-32 (Bankr. D.D.C. 2020) (applying the Travelers rule to allow post-petition fees and costs). Furthermore, this Court agrees with the Bankruptcy Co......
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Hilgartner v. Yasuko Yagi
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