In re Nickleberry
| Decision Date | 14 July 1987 |
| Docket Number | 86-1422S.,Adv. No. 86-1358S,86-04465S,Bankruptcy No. 86-03649G,86-04196S and 86-04828S |
| Citation | 76 BR 413 |
| Parties | In re Cheryl NICKLEBERRY, Debtor. In re Margaret JACKSON, Debtor. Margaret JACKSON, Plaintiff, v. BOULEVARD MORTGAGE COMPANY, Defendant. In re Leatrice DAVIS, Debtor. Leatrice DAVIS, Plaintiff, v. CITICORP HOMEOWNERS SERVICE, INC., Defendant. In re LaFennis and Yvonne DAVIS, Debtors. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
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Arthur L. Haywood, Philadelphia, Pa., for debtor Cheryl Nickleberry.
Gary E. McCafferty, Philadelphia, Pa., for Germantown Sav. Bank, Boulevard Mortg. Co., Citicorp Homeowners Service, Inc. and Bell Sav. Bank.
Jana-Lyn Weisman, Philadelphia, Pa., for debtors/plaintiffs Margaret Jackson and Leatrice Davis.
Margaret A. Lenzi, Chester, Pa., for debtors LaFennis and Yvonne Davis.
Edward Sparkman, Philadelphia, Pa., Trustee.
The above-captioned four cases are decided together because they raise related questions about demands of Mortgagees for counsel fees (and certain items of costs) against their respective Mortgagor-Debtors in cases where the Debtors seek to cure mortgage arrearages in Chapter 13 Plans for the following categories of services performed by the Mortgagees' counsel: (1) Pre-petition services in state court foreclosure proceedings; and (2) Post-petition services in the bankruptcy court.
We hold that, as to the first category of services, state law controls and reasonable counsel fees can be claimed. We accommodate the expressed desire of the Mortgagees' and Debtors' counsel to establish a more or less prophylactic determination as to what fees are reasonable in this context. However, we decline the Mortgagees' invitation to hold that a $500.00 maximum fee reimburseable by the Federal National Mortgage Association (hereinafter referred to as "FNMA") and established as a set fee for these services by Mortgagees' counsel is per se reasonable for handling routine, uncontested foreclosures through sheriff's execution sales. We hold, instead, that, unless the Mortgagee meets a burden of showing that higher fees are justified because the foreclosure was not routine or uncontested, a fee of $200.00 for services prior to judgment, and an additional $100.00, or a total of $300.00, for services subsequent to filing execution process is reasonable.
As to the second category of services, we hold that the Bankruptcy Code controls. Failing to find any authority in the Code to rule otherwise, we hold that, unless all of the requirements of 11 U.S.C. § 506(b) are established or the matter fits into a narrowly-defined class of extraordinary situations, Mortgagees, like any other litigants, are not entitled to fees for any post-petition services.
With the exception of the matter at issue in the Nickleberry case, all of these matters arose in the context of Objections by Mortgagor-Debtors to Proofs of Claim for mortgage arrearages filed by their respective Mortgagees in Chapter 13 bankruptcy cases. The Nickleberry controversy arose in the context of a Motion for relief from the automatic stay filed on January 15, 1987, by the Debtor's Mortgagee, Germantown Savings Bank. The matter was presented to us on a Stipulation of Facts, filed on May 26, 1987, and Briefs of the parties filed thereafter on or about June 9, 1987, and June 26, 1987, respectively. After the Debtor remitted several delinquent post-petition payments, the dispute devolved into a resolution of two issues: (1) May the Debtor include her August, 1986, mortgage payment, due one day after she filed her petition on July 31, 1986, in her Plan, or must she make this post-payment before the Plan can be confirmed? (2) Is the Mortgagee entitled to the $300.00 counsel fee which it seeks for services in connection with the prosecution of the stay motion?
We agree with the Debtor on the first issue, as we believe that a modest and justifiable post-petition delinquency can be cured by a Plan without violating 11 U.S.C. §§ 1322(b)(2) or (b)(5). See In re Minick, 63 B.R. 440, 442-46 (Bankr.D.D.C.1986); In re Canipe, 20 B.R. 81, 83-84 (Bankr.W.D. N.C.1982); and In re Simpkins, 16 B.R. 956, 967-68 (Bankr.E.D.Tenn.1982). Here, certainly, the delinquency is modest (one month) and the fact that, had the Debtor delayed in filing her petition for but one day, the disputed August payment would have been pre-petition rather than post-petition, provides, to our thinking, sufficient justification for treating the August payment as if it were a post-petition payment. Therefore, only the counsel fee issue remains and that is discussed subsequently.
The LaFennis Davis dispute arose from the Debtors' Objection to the Proof of Claim of Bell Savings Bank, their Mortgagee, filed on February 10, 1987. The only issue raised was a dispute of the $500.00 counsel fee sought by the Mortgagee, solely for pre-petition services in a state court mortgage foreclosure action, the Debtors contending that only fees of $150.00 were reasonable and hence all that were justified.
On May 7, 1987, we conducted a hearing in this matter, at which Joseph A. Goldbeck, Jr., Esquire, the Mortgagee's counsel, was the sole witness, the substance of which is summarized at pages 418-19 infra. In the course of that testimony, we became aware that our colleague, the Honorable Bruce Fox, had heard a similar case involving the same counsel, In re Smith, Bankr. No. 86-04728F (Bankr.E.D.Pa.), on April 9, 1987. In the Smith proceeding, Mr. Goldbeck had also testified, and, at that hearing, additional testimony was adduced from another attorney who frequently represents mortgagees in foreclosure actions in state court and in our court, Lawrence T. Phelan.1 It was stipulated in the Smith case and our case, respectively, that three other members of the "foreclosure bar," Jonah Levin, Sheldon C. Jelin, and Werner vonRosenstiel, would, if called, provide testimony consistent with that of Mr. Phelan.
On May 22, 1987, and June 5, 1987, respectively, the parties submitted their Briefs in this case.
Meanwhile, we became aware of the fact that two other matters which we had under advisement, the Jackson and Leatrice Davis adversarial proceedings, attacking Proofs of Claim of Boulevard Mortgage Company and Citicorp Homeowners Service, Inc., respectively, raised, inter alia, similar issues.2
In Jackson, the Mortgagee sought the following aggregation of fees and costs:
$ 75.00 Prothonotary
141.80 Title Search
275.00 Counsel Fee
50.00 Bankruptcy Action
48.00 Prothonotary's Fee
72.00 Sheriff—Service
369.75 Sheriff—Sale
20.00 Certified Mail & Notary Fee
150.00 Counsel Fee
78.00 Inspection Fees (13 @ $6.00)
_________
$1,279.55 TOTAL
The Debtor contended that the only justified charges were the top two charges and $150.00 of the original Counsel Fee, or a total of $366.80.
A major discrepancy arose due to the fact that Jackson involved a state court default foreclosure judgment which was stricken due to improper service on a minor daughter of the Debtor in a previous adversarial proceeding between the parties in this Court, at Adv. No. 86-1153S (). As we indicated in our Memorandum of June 1, 1987, we agree with the Debtor that whether the Mortgagee had a valid judgment against the Debtor is the key factor to determining whether costs can be imposed upon the Debtor, and indeed is the only relevant inquiry as to whether the entry of the judgment should have any impact whatsoever, including serving as the basis for a claim of fees and costs. While the Mortgagee may have reasonably relied upon the sheriff's return as regular on its face, the important issue is whether it was a proper return of valid service. Since it admittedly was not, that settles the question. In response to the Mortgagee's argument that it is inequitable to impose these costs upon it, since it had a "right to rely on the sheriff's return," we observe that it was certainly within the Mortgagee's power to examine the return and determine from such examination whether there was any question as to its validity and to inquire further before proceeding to judgment. Certainly, this error was not the fault of the Debtor.
However, this disposition did not totally resolve that the issue of what counsel fees and costs imposed were in fact proper in the Jackson matter.
Similarly, we did not undertake to resolve the Leatrice Davis counsel fee issue in the Memorandum. The discrepancy there, between $1,492.65 demanded by the Mortgagee and $1,117.15, which the Debtor agreed was reasonable, was $350.00 in requested counsel fees. The Mortgagee sought $500.00 for services in the pre-petition foreclosure action and $100.00 for filing the Proof of Claim in the bankruptcy; the Debtor contended that imposition of only $250.00 of the sum requested for prepetition services upon her was justified.
In our Memorandum of June 1, 1987, addressing the Jackson and Leatrice Davis cases, we denied both the Debtors' and the Mortgagees' cross-motions for summary judgment as to the fees and costs issues. We invited both parties to either adduce additional testimony relevant to these cases on June 11, 1987; incorporate the testimony from the LaFennis Davis and/or the Smith case before Judge Fox in their records; or both. Despite our strong suggestion to the parties in that Memorandum that a record as to the specific legal work for which counsel fees were sought in each case would be helpful due to the muddle which we perceived in ascertaining which party had the burden of proof,3 the parties decided to merely incorporate the LaFennis...
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