In re McMullen
| Decision Date | 04 February 2001 |
| Docket Number | No. 01-83873.,01-83873. |
| Citation | 273 B.R. 558 |
| Parties | In re Kevin Leroy McMULLEN, Debtor. |
| Court | U.S. Bankruptcy Court — Central District of Illinois |
Karl R. Niebuhr, Peoria, IL, for debtor.
The issue before the Court concerns the reasonableness of a creditor's flat rate attorney fees and costs, that are to be paid through a Chapter 13 plan to cure a mortgage default. At the scheduled evidentiary hearing, both the Debtor and the creditor chose not to present any evidence and jointly requested that the Court decide the issue based solely on the information contained in the court file.
The DEBTOR, Kevin Leroy McMullen ("DEBTOR"), resides at 1020 Lincoln Road, Marquette Heights, Illinois. Fairbanks Capital Corporation ("FAIRBANKS"), holds a first mortgage on the property. The Chapter 13 plan proposes to pay the mortgage arrearage in the amount of $2,750.00 through the plan, with current mortgage payments to be paid outside the plan. FAIRBANKS objected to the plan asserting that the correct amount of its mortgage arrearage is $5,147.45. FAIRBANKS' proof of claim itemizes the arrearage amounts as follows:
5/01—9/01 5 @ 524.98 2,624.90
LATE CHARGES 5 @ 31.50 157.50
FORECLOSURE COSTS 981.00
FORECLOSURE FEES 800.00
BANKRUPTCY FEES 450.00
APPRAISAL FEE 134.05
__________
TOTAL 5,147.45
FAIRBANKS did not attach any documentation to its claim supporting the itemization of its prepetition arrearage. However, on December 18, 2001, FAIRBANKS filed a response to the DEBTOR'S objection to its proof of claim and attached ten exhibits marked by consecutive letters A through J. At the scheduled evidentiary hearing, the DEBTOR stipulated to the admission into evidence of Exhibits A through J as attached to FAIRBANKS' response. The DEBTOR also stipulated that the five mortgage payments totaling $2,624.90 and the five late charges totaling $157.50, as itemized on FAIRBANKS' proof of claim, are properly included as part of the allowable arrearage. Accordingly, the only disputed items are the foreclosure costs and foreclosure fees incurred by FAIRBANKS prepetition and the bankruptcy fees incurred postpetition.
ANALYSIS.
Where a Chapter 13 plan proposes to cure a default, Section 1322(e) of the Bankruptcy Code provides that the amount necessary to cure the default "shall be determined in accordance with the underlying agreement and applicable nonbankruptcy law." 11 U.S.C. § 1322(e).1 FAIRBANKS' mortgage and mortgage note are governed by Illinois law and both documents contain a generic provision for recovery of reasonable attorney fees and expenses incurred by the mortgagee. In the absence of a state court judgment awarding fees and costs, the Bankruptcy Court must put itself in the shoes of the state court judge and determine whether the requested fees and costs should be awarded under Illinois law.
Contractual provisions shifting liability for a party's attorney fees and expenses to the other party to the contract are enforceable under Illinois law to the extent that the fees and costs are reasonable. Illinois Mortgage Foreclosure Law provides that reasonable attorney fees and other costs incurred in connection with the foreclosure suit are recoverable to the extent provided for in the mortgage. 735 ILCS 5/15-1510; First Federal Sav. Bank of Proviso Tp. v. Drovers Nat. Bank of Chicago, 237 Ill.App.3d 340, 606 N.E.2d 1253, 180 Ill.Dec. 176 (2d Dist.1992).
The party seeking the fees has the burden of presenting the court with sufficient evidence from which it can determine the reasonableness of the fees. J.B. Esker & Sons, Inc. v. Cle-Pa's Partnership, 325 Ill.App.3d 276, 757 N.E.2d 1271, 259 Ill.Dec. 136 (5th Dist.2001). Ordinarily, the party seeking attorney's fees must set forth with specificity the legal services provided, the identity of the attorney providing the legal services, an itemization of the time expended for the individual service, and the hourly rate charged. Id. The determination of reasonableness is a matter for the trial court's discretion and the court may use its own knowledge and experience in making that determination. Selvy v. Beigel, 309 Ill.App.3d 768, 723 N.E.2d 702, 243 Ill.Dec. 399 (1st Dist.1999).
The record is devoid of any information as to the specific terms of the fee agreement between FAIRBANKS and its attorneys. The only documents in the file from which the Court is able to glean any information at all about the fees charged are copies of the invoices sent to FAIRBANKS by its attorneys. Ordinarily, this would be insufficient. Because the Court concludes that the attorney fees are charged on a flat fee basis, and because the Court has substantial knowledge of foreclosures, the Court is able to determine reasonableness without time records. Further, both parties have requested that the Court make a decision based on the file documents and it is apparent that the parties are looking to the Court for direction on this issue for future cases. Therefore, the Court will decide the issue on the basis of the file information, drawing reasonable inferences therefrom.
The mortgaged property is located in Tazewell County, Illinois. FAIRBANKS filed its foreclosure complaint in the Tazewell County Circuit Court on August 2, 2001. The DEBTOR filed his Chapter 13 petition on September 12, 2001, prior to entry of a Judgment of Foreclosure. FAIRBANKS requests "foreclosure fees" in the amount of $800.00. Supporting, detailed time records from its attorneys are conspicuously absent. The invoice attached as Exhibit E breaks the fees down into two parts: $600.00 for "Atty Fees — Foreclosure" and $200.00 for "ADDITIONAL ATTY FEES PREP REPAY PLAN."2 At the hearing, the DEBTOR stipulated that the $200.00 figure for preparation of a prepetition repayment plan is reasonable but he disputed the reasonableness of the attorney's fees of $600.00 relating to the foreclosure action.
In determining the reasonableness of fees incurred in a foreclosure action, Illinois courts consider a variety of factors, including the skill and standing of the attorneys employed, the novelty and difficulty of the issues involved, the degree of responsibility required, the usual and customary charge for the same or similar services in the community, and whether there is a reasonable connection between the fees charged and the litigation. Chicago Title & Trust Co., Trustee Under Trust No. 89-044884 v. Chicago Title & Trust Co., Trustee Under Trust No. 1092636, 248 Ill.App.3d 1065, 618 N.E.2d 949, 188 Ill.Dec. 379 (1st Dist.1993). Where reasonableness of a flat fee is at issue, the court must establish a baseline for comparison by engaging in a lodestar analysis, taking into consideration the number of hours reasonably expended times a reasonable hourly rate. In re Smith, 230 B.R. 437 (Bankr.N.D.Fla.1999). This baseline amount is determined by the evidence presented and by the court's own experience and knowledge of customary fees and costs charged in comparable cases. If the flat fee amount is less than the baseline, it may be allowed in full; if greater than the baseline, the fee should be reduced to the baseline amount.
While the failure of the creditor's attorney to submit detailed time records would ordinarily be fatal to the claim for attorney's fees, this Court has substantial personal experience with mortgage foreclosure actions, and has the knowledge and experience to determine the reasonableness of the attorney's fees and expenses in question. Applying the above factors here, based on this Court's own knowledge of services rendered and the reasonable value thereof, FAIRBANKS' fee of $600 to $800 would be fair and reasonable for handling a routine foreclosure suit from beginning to end.3
That fee is excessive, however, given the fact that the foreclosure action in question had only recently been commenced. In this Court's view, FAIRBANKS' flat fee must be prorated. As the court recognized in In re Smith, 230 B.R. 437, 439 (Bankr.N.D.Fla.1999), in holding a flat rate attorney's fee to be excessive, "the debtor should not have to bear the burden of paying a fee for services that have not been performed," otherwise the creditor's attorneys "would be getting a windfall at the expense of debtors."4 In this Court's experience it is fair and reasonable to prorate a flat fee for a foreclosure case on the basis of one-third for the complaint stage, one-third for the judgment stage, and one-third for the sale stage. Here, only the complaint stage was completed. A fee of $200.00 (one-third of $600.00), is the portion of the flat fee reasonably attributable to the preparation and filing of the complaint. The sum of $200.00 for these services is within the baseline boundary for the same services charged hourly.
Accordingly, the sum of $200.00 will be allowed as reasonable attorney's fees for the tasks performed in the foreclosure case, not including the repayment plan. Since the DEBTOR stipulated to the additional $200.00 for the repayment plan, of the $800.00 total requested for foreclosure fees, the sum of $400.00 will be allowed, based on the evidence before the Court, as a reasonable attorney's fee for the foreclosure action.
The foreclosure costs are itemized on Exhibits D and E as follows:
Complaint $ 78.00
Summons 100.00
Lis Pendens 18.00
Title Commitment Report 550.00
Post Complaint Title Report 50.00
Duplicate Summons 80.00
Alias Summons 40.00
Federal Express
...To continue reading
Request your trial
-
In re Padilla
...default through § 1322(b)(5)] is the same amount as would be required to cure if the debtor were not in bankruptcy." In re McMnllen, 273 B.R. 558, 564 (Bankr.C.D.Ill.2001). The use of § 506(b) as the starting point of their analyses suggests that the Jones Cases are based on a false premise......
-
In re Powe
...Schueler v. Roman Asphalt Corp., 827 F.Supp. 247 (S.D.N.Y.1993); In re Haskew, 2001 WL 589043 (Bankr.D.Idaho 2001); In re McMullen, 273 B.R. 558 (Bankr.C.D.Ill.2001). In fact, several witnesses opined that overall the flat fee resulted in reduced cost to debtors as evidenced by the falling ......
-
In re Boyd, No. 08-14279 (RTL).
...that the statute does, indeed, apply to attorney's fees."); In re Plant, 288 B.R. 635, 641-42 (Bankr.D.Mass.2003); In re McMullen, 273 B.R. 558, 561 (Bankr. C.D.Ill.2001); In re Landrum, 267 B.R. 577, 581 (Bankr.S.D.Ohio 2001); but see, In re Madison, 337 B.R. 99, 102-3 (Bankr. N.D.Miss.200......
-
In re Thueson, No. 4-08-bk-10121-JMM (Bankr.Ariz. 3/12/2009)
...experience with petition preparer fees in the district); In re Rauch, 110 B.R. 467, 477 (Bankr. E.D. Cal. 1990); In re McMullen, 273 B.R. 558, 562 (Bankr. C.D. Ill. 2001). As noted above, a document preparer may not give legal advice nor represent a client-customer in court or before any ot......