In re Morris
| Decision Date | 15 May 2019 |
| Docket Number | Case No. 18-13787-JDL |
| Citation | 603 B.R. 127 |
| Parties | IN RE: Wilma Jeanne MORRIS, Debtor. |
| Court | U.S. Bankruptcy Court — Western District of Oklahoma |
Jason A Sansone, Sansone Howell PLLC, Del City, OK, for Debtor.
ORDER DETERMINING FEES PURSUANT TO RULE 3002.1
Quicken Loans Inc. ("Quicken") is the holder of a first mortgage on the Chapter 13 Debtor's residence. Debtor challenges the reasonableness of Quicken's claim of $ 900 for post-petition attorney's fees. Before the Court for consideration are: (1) Debtor's Amended Motion for Determination of Fees, Expenses, or Charges Pursuant to Rule 3002.1(E) [Doc. 37]; and (2) Response to Amended Motion to Determine Mortgage Fees and Expenses filed by Quicken Loans Inc. [Doc 41].
On April 12, 2019, the matter came on for evidentiary hearing.1 After consideration of the arguments of counsel, the evidence submitted and the applicable law, the Court announced its decision from the bench. For the reasons stated in open court which are incorporated herein by reference, the Court makes the following Findings of Fact and Conclusions of Law pursuant to Fed.R.Civ.P. 52(a), made applicable to these bankruptcy proceedings by Fed.R.Bankr.P 7052 and 9014(c)2 .
This Court has subject-matter jurisdiction pursuant to 28 U.S.C. § 1334(a), 28 U.S.C. § 157(a) and the Order of Reference contained in Local Rule LCvR 81.4 of the United States District Court for the Western District of Oklahoma. This is a contested matter under Rule 9014 to determine whether attorney's fees incurred post-petition in a Chapter 13 case by a creditor holding a claim secured by a mortgage encumbering a debtor's principal residence are allowable under Rule 3002.1(e). Thus, this is a "core proceeding" under 28 U.S.C. § 157(b)(2)(B) - allowance or disallowance of claims against the estate - and the court may enter a final order herein. Both parties have participated fully in the litigation of this matter without challenging the jurisdiction of this Court to enter final orders and have thus consented to the same.
1. On September 6, 2018, Debtor filed a voluntary petition for relief pursuant to Chapter 13 of Title 11 of the United States Bankruptcy Code. [Doc. 1].
2. In her Schedule D, Creditors Who Have Claims Secured by Property, the Debtor valued the claim of Quicken which was secured by the Debtor's principal residence at $ 109,898 and valued the residence at $ 140,000. [Doc. 1, pg.18].
3. On October 1, 2018, pursuant to Rule 3001, Quicken timely filed a Proof of Claim (POC) (Official Form 410) asserting a secured claim as of the date of the filing of the petition in the amount of $ 109,658.66. [POC 8-1].
4. On November 1, 2018, Quicken supplemented POC 8-1 by filing Official Form 410S2 -"Notice of Post-petition Mortgage Fees, Expenses, and Charges"- which included a claim of $ 150 for "attorney's fees", $ 500 for "Bankruptcy/Proof of claim" and $ 250 for "Other - 410A" fees and expenses, for a total of $ 900. [POC 8-1, doc., 11/1/2018]. No further detail or documentation regarding the fees was provided in the Form 410S2.
5. Quicken is entitled to the recovery of post-petition attorney fees under the terms of the Note and Mortgage with the Debtor.3
6. Matthew Hudspeth, an attorney in practice for 27 years including 16 years with Baer & Timberlake responsible for handling bankruptcy matters for Quicken, including the Debtor's case, testified, consistent with his Affidavit [Doc. 31-1, Quicken Ex.1] and time records of Baer & Timberlake [Doc's. 31-2 & 31-3: Quicken Ex. 2 & 3] as to post-petition attorney fees expended in the Debtor's bankruptcy. Hudspeth testified that he either created or supervised the preparation of the time records. Hudspeth testified that while experienced attorneys at Baer & Timberlake customarily charged clients $ 350 per hour and staff at $ 125 per hour, the hourly fee normally charged Quicken was at the preferential, "blended" hourly rate of $ 275. The time records testified by Hudspeth regarding this Debtor indicated the time expended for "plan review" was 1.3 hours [Doc. 31-2; Quicken Ex. 2] and for "Proof of Claim" was 5.2 hours. [Doc. 31-3, Quicken Ex. 3]. Hudspeth testified that he either made the entries on the time records or supervised their preparation. Hudspeth testified that the time entries on the records were not made contemporaneously with the description of the work contained therein but were "reconstructed" by examining the firm's computer system, case management system, emails, the court's docket sheet and other sources which contained the date, nature of the service provided and the name of the person performing the same. Hudspeth concluded that based upon his experience and knowledge of the Debtor's file that the time records were an accurate representation of the time and services charged by Baer & Timberlake and were fair and reasonable.
7. Hudspeth testified, consistent with his Affidavit [Doc. 31-1; Quicken Ex.1], that had the law firm billed Quicken for the 1.3 hours for "plan review" at its preferential hourly rate of $ 275, the charges would have been $ 357.50. If the time had been billed at the firm's hourly rate of $ 350 for attorneys and $ 125 for staff, the charge would be $ 286.25. Baer & Timberlake, however, under its contractual agreement with Quicken for such bankruptcy "plan review" services charged a "flat fee" of $ 150. This is less than would have been charged for work under either Baer & Timberlake's normal hourly rate or its preferential blended rate to Quicken and is the amount for which it is seeking Court approval.
8. Hudspeth testified, as supported by the time records, that 5.2 hours4 had been expended for services related to the preparation and filing of Quicken's POC and required mortgage lender supplements. [DOC. 31-3; Quicken Ex. 3]. If charged at the preferential, blended rate of $ 275 per hour the time billed to Quicken would have been $ 1,430. If the fee for attorney time would have been charged at $ 350 an hour and 4.7 hours at the staff rate of $ 125 per hour, the charge would have been $ 762.50. Both of these hourly rate based fees are more than the $ 750 flat-fee which is sought for the post-petition work provided for combined "proof of claim" and "other attorney" work.
9. Michael McCormick, a senior partner in the bankruptcy department of McCalla Raymer, LLC, a national law firm with offices in 10 states, was called as an expert witness by Quicken. McCormick is licensed to practice in 11 states and the concurrent federal court districts. He has written many articles and has been an instructor in numerous continuing legal education seminars/webinars on federal regulations governing escrow accounts and the Bankruptcy Rule amendments in 2011 and 2016 pertaining to Rule 3002.1. He has been active with the National Association of Chapter 13 Trustees Mortgage Committee by helping to draft "Best Practices for Trustees and Mortgage Servicers in Chapter 13".5 McCormick testified at length as to the methodology and importance of proper preparation and filing of a creditor's Proof of Claim (Official Form 410), Mortgage Proof of Claim Attachment (Official Form 410A) and Notice of Postpetition Mortgage Fees, Expenses and Charges (Official Form 410S2). McCormick testified that he reviewed Baer & Timberlake's computer records, client screens and interviewed personnel responsible for plan review and preparation of proofs of claim forms (410, 410A and 410S2) and found that they were accurate and in accordance with Baer & Timberlake's procedures. In McCormick's expert opinion the charge of $ 500 made by Baer & Timberlake for proof of claim matters was "more than reasonable" and "on the low end from what I've seen". McCormick noted that the Federal Home Loan Mortgage Corporation (Freddie Mac) had just announced, effective April 18, 2019, a suggested $ 950 fee for plan review and proof of claim preparation and filing, less than the amount charged in this case by Baer & Timberlake to Quicken. According to McCormick, the $ 150 for "plan review" on the Official Form 410S2 is not only reasonable, "it is actually consistent with other Governmental Service Enterprises (GSE's) and Freddie Mac allows a higher fee." The Quicken Mortgage attached to the POC filed by Quicken provides in paragraph 13 regarding fees that "[l]ender may collect fees and charges authorized by the [HUD] Secretary." He testified that HUD had authorized the recovery of attorney's fees in bankruptcy matters. Baer & Timberlake seeks $ 250 for "attorney fee: 410A", and McCormick testified that is consistent with HUD's allowable charges for other GSE's for that service; Freddie Mac permits a greater recovery; and it is a reasonable fee request. As to the Burk6 factors applicable to the present case, McCormick testified that specialized knowledge is used to prepare the proof of claim, that Baer & Timberlake has the specialized skill requisite to perform the legal services properly, that Quicken has had a relationship with Baer & Timberlake for more than 10 years and further the complexity of the work involved presents significant risks to the client and attorneys.
Under Rule 3002.1(d), the prima facie evidentiary benefits of filing a proof of claim under Rule 3001(f) do not apply to a creditor's notice of post-petition fees. In re Susanek , 2014 WL 4960885, at * 2 (Bankr. W.D. Pa. 2014) (). As one court pointed out that the lack of evidentiary benefits under Rule 3002.1:
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