In re Reposa

• Decision Date: 29 December 1988
• Docket Number: Bankruptcy No. 8500579.
• Citation: 94 BR 257
• Parties: In re Arthur REPOSA, Peter Reposa Debtors.
• Court: U.S. Bankruptcy Court — District of Rhode Island

94 B.R. 257 (1988)

In re Arthur REPOSA, Peter Reposa Debtors.

Bankruptcy No. 8500579.

United States Bankruptcy Court, D. Rhode Island.

December 29, 1988.

Donald M. Collins, Stradley, Ronon, Stevens & Young, Philadelphia, Pa., Harold Demopulos, Demopulos and Demopulos, Providence, R.I., for Mellon Bank.

Louis A. Geremia, Quinn, Cuzzone & Geremia, Providence, R.I., Trustee.

William Chaika, Cranston, R.I., for Arthur Reposa and Trustee.

Thomas Quinn, Providence, R.I., for Peter Reposa and Trustee.

DECISION ON APPLICATIONS FOR ATTORNEY FEES

ARTHUR N. VOTOLATO, Jr., Bankruptcy Judge.

These are converted Chapter 11 cases in which, from the outset, there was constant pressure and activity by the first secured creditor, Mellon Bank, to obtain relief from the automatic stay, and to foreclose upon its security interest in a fishing vessel owned by the debtors prior to these filings.

Before us for consideration are applications for compensation by Donald M. Collins, Esq. of the firm of Stradley, Ronon, Stevens & Young, and Harold W. Demopulos, Esq. of the firm of Demopulos and Demopulos, for services rendered as co-counsel for Mellon Bank. The applicants request $70,568 and $7,271, respectively, totaling $77,839 for services in collecting the Bank's claim in the amount of $314,845.96, which includes principal and interest. The debtors and the Trustee object to the applications on the ground that they are excessive, and we agree.

At the outset, and although it is by no means the only basis for our rulings below, we note that the applicants have failed to provide the degree of documentation required in the First Circuit regarding fee applications. The information submitted by Mr. Demopulos fails to identify the amount of time expended for a particular service, or a description of the services rendered. Mr. Collins' records, while slightly more informative than Mr. Demopulos', are confusing in their organization, and lack, in at least one-third of the invoices submitted with the fee application, any supporting material to detail dates of services, hours expended or the nature of the services rendered. The general "services rendered" invoices sent to Mellon Bank by Collins provide no assistance in determining what services and what amounts of time are compensable for the collection of this debt, in this Court.

In King v. Greenblatt, 560 F.2d 1024, 1027 (1st Cir.1977), the First Circuit Court of Appeals established that "attorneys must submit to the court a detailed record of the time spent on the case and the duties performed." Where the applications "simply list a certain number of hours and lack such important specifies as dates and the nature of the work performed during the hour or hours in question they should be refused." In 1984, in Grendel's Den, Inc. v. Larkin, 749 F.2d 945 (1st Cir.1984), the First Circuit again dealt with this issue and concluded that "henceforth, in cases involving fee applications for services rendered after the date of this opinion, the absence of detailed contemporaneous time records, except in extraordinary circumstances, will call for a substantial reduction in any award, or in egregious cases, disallowance." Id. at 952. Based on these instructions, we are required to reduce the subject fee petitions: (1) wherever we are unable to ascertain the nature of the service provided; (2) whenever it is unclear whether the activity involved collection of the obligation in question; or (3) wherever the hours expended are not stated. Clearly, reductions are in order, based on the foregoing guidelines. Additional factors, however, also weigh heavily against the applications in question. The legal services rendered concern the collection of a pre-petition debt, originally in the amount of $300,000,¹ which was assumed by the Reposas when they purchased the WILFRETA LEE² from North Atlantic Fishing, Inc. (hereinafter "NAF"). The note and suretyship agreement originally entered into between Mellon Bank and Lee/NAF on April 29, 1983, was assumed by the Reposas by an Assumption of First Preferred Mortgage and a Guaranty executed on May 11, 1984. Said Guaranty provided that

Guarantors hereby authorize any attorney of any Court of Record in Pennsylvania, or elsewhere, to appear for Guarantors (or either of them) in any action brought on this Guaranty, and to confess judgment against Guarantors (or either of them) in any action brought on this Guaranty, and to confess judgment against Guarantors (or either of them) for all principal and interest and all other sums then due pursuant to the terms of the Note, Mortgage, Security Agreements, and other agreements and documents delivered therewith, or any of them, and for costs of suit and a reasonable attorney\'s commission not to exceed five (5%) percent of the amount due and for so doing this shall be a good and sufficient warrant.

The applicants seek to enforce this provision under 11 U.S.C. § 506(b), which provides:

To the extent that an allowed secured claim is secured by property the value of which, after any recovery under subsection (c) of this section, is greater than the amount of such claim, there shall be allowed to the holder of such claim, interest on such claim, and any reasonable fees, costs, or charges provided for under the agreement under which such claim arose.

Hence, to collect such attorneys' fees, three requirements must be met: (1) the underlying agreement must provide for fees;³ (2) the value of the collateral must exceed the amount of the debt, including the interest and fees sought; and (3) the fees requested must be reasonable. In re B & W Management, Inc., 63 B.R. 395, 400, 14 B.C.D. 837, 838 (Bankr.D.C.1986).

The first two requirements are met here. The guaranty provides for the collection of fees, and the collateral, which sold for $425,000, exceeds the claim of Mellon Bank ($314,845.96, excluding attorney fees). Therefore, the only issue remaining is the reasonableness of the fee requests. In this regard, "the ultimate determination of reasonableness is one that the Court alone must make." In re B & W Management, supra, 63 B.R. at 401, 14 B.C.D. at 839; see also In re Miracle Enterprises, Inc., 57 B.R. 133, 135 (Bankr.D.R.I.1986). In making such determinations, bankruptcy courts in the First Circuit are required to consider the criteria outlined in King, supra,⁴ and to apply these factors according to the "lodestar" approach.⁵ In re Casco Bay Lines, Inc., 25 B.R. 747, 754 (B.A.P. 1st Cir.1982); Lindy Bros. Builders, Inc. v. American Radiator & Standard Sanitary Corp., 487 F.2d 161 (3rd Cir.1973), adopted by First Circuit in Furtado v. Bishop, 635 F.2d 915 (1st Cir.1980).

The first of the King factors requires scrutiny of the "time and services provided." To justify the time spent and services provided, the applicant must demonstrate the necessity for and reasonableness of those services. "An oversecured creditor who seeks reimbursement for attorney's fees under Sec. 506(b) must show how those services rendered were necessary to protect its interest regardless of a broadly worded provision in the agreement." Pasatiempo Properties & Pacific Loan Management v. LeMarquis Associates (In re LeMarquis Associates), 65 B.R. 719, 724, 15 B.C.D. 238, 241 (Bankr.E.D.Cal. 1986). In this proceeding, as in In re Miracle Enterprises, Inc., supra, Mellon Bank was never "in jeopardy of being undersecured," since it was the first secured mortgage holder on the WILFRETA LEE, whose value was always far in excess of the bank's claim,⁶ and since the Reposas neither challenged the validity of the bank's security interest nor objected to the amount of its claim, legal services were not required as to either of these matters.

Of the services performed by Mr. Collins, he first requests $4,300 for services in representing Mellon Bank during the negotiations of the NAF-Reposa sale of the WILFRETA LEE. We fail completely to see how these services were related to the collection of the debt of the Reposas, since they hadn't yet even obligated themselves to NAF or Mellon Bank. At that time, the bank was simply looking for a new candidate to start making mortgage payments, after NAF and Lee became delinquent, and although Mellon Bank had an obvious interest in monitoring such activities, legal services for doing so are not chargeable against either of the Reposa bankruptcy estates. Accordingly, $4,300 is disallowed, for the reasons stated.

In August 1984, the Reposas defaulted on their loan obligations, and at that time negotiations took place with the bank. While certain of those post-default services may have been necessary, Mr. Collins has failed to state the amount of time involved in this activity, on what dates, or at what hourly rate.⁷ On September 12, 1985, Arthur Reposa filed his petition in bankruptcy. From that point on, the activities of Mellon Bank, which ranged from hyperactive to nearly hysterical, were essentially carried on by Mr. Collins (and his associates), and Harold Demopulos, Esq. Mr. Demopulos was retained as co-counsel because "he is familiar with the judicial procedures, customs and personnel of the bench and bar of Providence." (Mellon Bank's Exhibit E-3 to the Motion for Distribution Among Lien Creditors), even though Collins "has had several decades of experience in the bankruptcy courts of the Philadelphia area and throughout the country." (Mellon's Exhibit E-3).

While this Court recognizes the importance of, and in fact requires the presence of local counsel, see local District Court Rule 5, it also has the responsibility to assure that the debtor's estate does not pay twice for the same service by each co-counsel. In re Bible Deliverance Evangelistic Church, 39 B.R. 768, 777 (Bankr.E. D.Pa.1984). We have previously noted the fundamental premise that "courts may not allow double compensation for the same services, where attorneys are acting jointly in the same...