In re Polishuk, No. 98-02320-M.
| Decision Date | 31 January 2001 |
| Docket Number | No. 98-02320-M. |
| Parties | In re Richard C. POLISHUK, Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Oklahoma |
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John Jarboe, Joseph T. Howard, Tulsa, OK, for Plaintiff.
Scott W. Bradshaw, Tulsa, OK, for Defendant.
THIS MATTER came before the Court for consideration of the Application by Counsel for Debtor for Order Approving Attorney's Fees and Costs and Allowing Chapters 11 and 13 Attorney's Fees and Expenses as Administrative Priority in Chapter 7 (the "Jarboe Application") filed by the law firm of Jarboe & Stoermer, P.C. ("J & S"), and the First Amended Application for Attorney's Fees (the "Howard Application") filed by Joseph T. Howard, Special Counsel ("Mr.Howard"). Objections to the Jarboe Application and the Howard Application were filed by Scott W. Bradshaw, the duly appointed Chapter 7 Trustee in this case ("Trustee" or "Mr. Bradshaw") and Nancy Polishuk ("Ms. Polishuk"), a creditor holding a non-dischargeable priority claim. Evidentiary hearings with respect to the Jarboe Application and the Howard Application were held on November 30, 2000, and December 14, 2000, respectively. The following findings of fact and conclusions of law are made pursuant to Bankruptcy Rule 7052 and Federal Rule of Civil Procedure 52, which are made applicable to these contested matters by Bankruptcy Rule 9014.
The Court has jurisdiction over these contested matters pursuant to 28 U.S.C.A. § 1334(b).1 Their reference to this Court is proper pursuant to 28 U.S.C.A. § 157(a). They are core proceedings as contemplated by 28 U.S.C.A. § 157(b)(2)(A) & (B).
J & S and Mr. Howard each seek an award of fees and expenses for services rendered during the course of this bankruptcy case. Any professional seeking to be paid fees and expenses from a bankruptcy estate has the burden "to prove and establish the reasonableness of each dollar, each hour, above zero." In re Burke, 147 B.R. 787, 798 (Bankr.N.D.Okla.1992) (citing Mares v. Credit Bureau of Raton, 801 F.2d 1197, 1210 (10th Cir.1986)). Several courts have noted that "this burden is not to be taken lightly, especially given the fact that every dollar expended on fees results in a dollar less for distribution to creditors of the estate." In re Mahaffey, 247 B.R. 823, 825 (Bankr.D.Mont.2000) (). Similarly, an applicant is required to present its fee application in such a form as to make the tasks performed and the time spent readily apparent. The court need not speculate or theorize as to the work performed. Cf. In re Seneca Oil Co., 65 B.R. 902, 908 (Bankr.W.D.Okla.1986). The substantive requirements for such an application are set forth in Bankruptcy Rule 2016(a).2
A rather detailed recitation of the facts of this case is necessary in order to understand today's ruling. Richard C. Polishuk ("Debtor" or "Mr. Polishuk") filed an original petition for relief under Chapter 11 of the United States Bankruptcy Code on Friday, June 12, 1998, at 12:20 p.m. At the time, Mr. Polishuk was the defendant in a divorce action (the "Divorce Action") brought by Ms. Polishuk in the District Court in and for Tulsa County, Oklahoma (the "State Court"). Within minutes of filing his bankruptcy petition, Mr. Polishuk sought to remove the Divorce Action to this Court. See Adv. Proc. No. 98-0179-M, Docket No. 1. The Court, on its own motion, held a hearing in the late afternoon of June 12, 1998, and ordered the Divorce Action remanded to the State Court.3 See Adv. Proc. No. 98-0179-M, Docket No. 2.
The Divorce Action proceeded to trial on Monday, June 15, 1998. After a four-day trial, the State Court entered its Nunc Pro Tunc Journal Entry of Judgment and Decree of Divorce (the "Divorce Decree") on August 10, 1998. In the Divorce Decree, the State Court ordered Mr. Polishuk to hold Ms. Polishuk harmless from certain credit card obligations. In addition, one of the major assets at issue between Debtor and Ms. Polishuk was an investment account with a brokerage firm known as A.G. Edwards & Sons (the "A.G. Edwards Account"). The State Court awarded one-half of the A .G. Edwards Account to Ms. Polishuk, much to the chagrin of Mr. Polishuk. Later, in a separate order, the State Court entered judgment against Mr. Polishuk and in favor of Ms. Polishuk in the amount of $44,909.78, which represented an award of her attorneys' fees and costs incurred in the Divorce Action.
On June 18, 1998, immediately upon the conclusion of the Divorce Trial, Mr. Howard filed an application to be employed as special counsel to the Debtor for purposes of trying the Divorce Action. Ms. Polishuk objected to the appointment. The objection was overruled, and Mr. Howard was appointed as special counsel to the debtor on a nunc pro tunc basis by virtue of an order entered on August 25, 1998. See Docket Nos. 37M and 38.4
After completion of the Divorce Action, this case proceeded as a Chapter 11 case until March 3, 1999, when, upon the request of Mr. Polishuk, it was converted to a case under Chapter 13. See Docket No. 93. During the nine-month duration of the case as a Chapter 11, the Debtor hired J & S as his attorneys,5 and also hired an accountant. Debtor filed various operating reports during the pendency of the Chapter 11 case. In his initial report (Docket No. 27), Debtor projected net income during the first four months of the bankruptcy case of $49.00, $49.00, $549.00 and $549.00. The monthly operating reports for that four-month period (June, July, August and September of 1998) reflected actual net income of $142.00, ($112.69), $154.98 and ($250.55), amounts far less than projected. See Docket Nos. 51, 52, 54 and 60. Debtor's net income failed to improve significantly at any time while the case remained in Chapter 11.6
The battle between Mr. Polishuk and Ms. Polishuk which began in the State Court continued unabated in this Court. After the State Court entered the Divorce Decree, Mr. Polishuk appealed the same to the Oklahoma Court of Civil Appeals. Ms. Polishuk sought conversion of this case to Chapter 7. See Docket No. 44. In addition, Ms. Polishuk sought to enforce provisions of the Divorce Decree relating to the division of property (most notably the A.G. Edwards Account), and sought relief from this Court in order to do so. See Docket No. 29. The requested relief was granted by order of this Court entered on October 8, 1998. See Docket No. 46. Eventually, the parties settled the issues relating to the appeal of the Divorce Decree and the division of the A.G. Edwards Account. Under the terms of the settlement, Ms. Polishuk waived her interest in the A.G. Edwards Account, and Mr. Polishuk dismissed his appeal of the Divorce Decree. The compromise was approved by order of this Court entered on January 12, 1999. See Docket No. 77.
Approval of the compromise did little to douse the fires of litigation between Mr. and Ms. Polishuk. Ms. Polishuk continued to seek conversion of the bankruptcy case to Chapter 7. She also continued to prosecute an adversary proceeding (which was hotly contested by Mr. Polishuk) seeking a determination that the obligations of Mr. Polishuk under the Divorce Decree were non-dischargeable. In response, Mr. Polishuk argued that all but $29.70 of the amounts due under the Divorce Decree were dischargeable, and proposed various plans which provided for payment of less than the full amount of Ms. Polishuk's claim, all of which is discussed more fully below.
On September 15, 1998, Ms. Polishuk filed the aforementioned adversary proceeding against Mr. Polishuk (the "Adversary Proceeding"), claiming that certain amounts owed to her under the Divorce Decree were in the nature of alimony, maintenance or support, and were thus non-dischargeable under the provisions of § 523(a)(5).7 She also contended that said amounts were entitled to priority claim status under § 507(a)(7).8 In response, Mr. Polishuk alleged that the only item which should be held non-dischargeable was the sum of $29.70 in unpaid child support, and claimed that the balance of his obligations under the Divorce Decree should be discharged.
The Adversary Proceeding was tried to the Court on August 11, 1999. On August 24, 1999, this Court issued its memorandum opinion and judgment finding Mr. Polishuk's obligation to hold Ms. Polishuk harmless with respect to certain credit card debt and his obligation to pay her attorneys' fees incurred in the Divorce Action to be non-dischargeable. In addition, the Court found these claims entitled to priority status under § 507(a)(7). See Polishuk v. Polishuk (In re Polishuk), 243 B.R. 408 (Bankr.N.D.Okla.1999). Mr. Polishuk appealed the decision of this Court to the United States District Court for the Northern District of Oklahoma, which affirmed this Court's decision. Polishuk v. Polishuk (In re Polishuk), No. 99-CV-901-C(J), slip op. (N.D.Okla. October 19, 2000).
Debtor's motor vehicle was the subject of a motion for relief from the automatic stay filed by Toyota Motor Credit Corporation ("TMCC"). The matter was resolved by the entry of an agreed order requiring Debtor to make adequate protection payments to TMCC. See Docket No. 67. Mr. Polishuk later defaulted under the terms of said order and relief from the automatic stay was granted to TMCC on March 17, 1999. See Docket No. 101M. Notwithstanding the entry of the relief order, Debtor continued to negotiate with TMCC for the retention of the vehicle. On April 23, 1999, Debtor and TMCC submitted an agreed order vacating the prior order granting relief from the automatic stay and allowing Mr. Polishuk to retain the vehicle upon certain terms and conditions. See Docket No. 118.
At the request of Mr. Polishuk, the case was converted to a case under Chapter 13...
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