In re Sedona Institute, BAP No. AZ-97-1258-BoMR
| Citation | 220 BR 74 |
| Decision Date | 19 March 1998 |
| Docket Number | Bankruptcy No. 92-08152-PHX-RTB,93-02133-PHX-RTB.,BAP No. AZ-97-1258-BoMR |
| Parties | In re SEDONA INSTITUTE, an Arizona non-profit corporation, Debtor. In re SEDONA SELF REALIZATION GROUP, an Arizona non-profit corporation, Debtor. The LAW OFFICES OF NEIL VINCENT WAKE, Appellant, v. SEDONA INSTITUTE and Sedona Self Realization Group, Appellees. |
| Court | Bankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Ninth Circuit |
Terry A. Dake, Phoenix, AZ, for Law Offices of Neil Vincent Wake.
Thomas E. Littler, Warnicke & Littler, Phoenix, AZ, for Sedona Institute, et al.
Before: BOWIE1, RUSSELL and MEYERS, Bankruptcy Judges.
Appellant, as co-counsel for certain creditors, moved the bankruptcy court for appointment of a trustee or an examiner with expanded powers. After much contest the court appointed a traditional examiner.
Appellant then moved the court under Bankruptcy Code § 503(b)(4) for an award of the attorney's fees incurred in obtaining the appointment of the examiner.2 The court denied the motion (and the motion for reconsideration) on the ground that fees could not be granted under § 503(b)(4) unless the creditor had an independent expense, beyond the attorney's fees, allowable under § 503(b)(3).
We conclude that the bankruptcy court misapplied Bankruptcy Code § 503(b); a creditor who provides a substantial benefit in a case need not incur an expense other than attorney's fees as a prerequisite to an award of such fees and costs under § 503(b)(4). We reverse and remand to the bankruptcy court for a determination of: 1) whether the attorney's fees of Appellant were an obligation and expense owed by those creditors in the first place (i.e., whether the creditors would ever be liable for the fees); 2) whether Appellant's clients made, through Appellant, a substantial contribution in the case; and if so, 3) what portion of the fees sought are reasonable and related to producing the substantial contribution.
In 1992, Sedona Institute filed a voluntary petition under Chapter 11. In March 1993, Sedona Institute was joined in bankruptcy by Sedona Self Realization Group (collectively "Debtors").
Appellant, the Law Offices of Neil Vincent Wake ("Appellant"), is a real estate and commercial litigator who, along with general bankruptcy counsel, Joseph C. McDaniel of McDaniel & Gan, P.C. and Dwight Flicker of Howard, Lewis & Peterson, represented 29 creditors of the jointly administered estate of the Debtors. On April 20, 1993, Appellant, Flicker & McDaniel moved, in the name of the 29 creditors, for the appointment of an examiner with significantly expanded powers. On May 23, 1993, Appellant and co-counsel changed the motion to one for a trustee. After a hearing the bankruptcy court appointed a standard examiner.
On January 18, 1994, Appellant filed an application for an award of the fees it incurred in moving for the examiner ("Application"). A hearing on the Application was held nearly three years later on January 15, 1997 (after the plan had been confirmed and other matters had been resolved).
On January 29, 1997, the bankruptcy court entered a minute order denying the Application ("Minute Order"). The court found that none of the creditors represented by Appellant had incurred an allowable expense under § 503(b)(3) and, thus, as a matter of law they were not entitled to recover attorney's fees or expenses under § 503(b)(4).
On or about February 19, 1997, Appellant filed a motion to reconsider ("Motion to Reconsider"). Appellant argued that the court erred as a matter of law in holding that a claim for attorney's fees under § 503(b)(4) is contingent upon an independent allowable expense under § 503(b)(3). Appellant also pared down the items in the Application for which reimbursement was sought.
On February 24, 1997, the court entered an order denying the Application for "good cause appearing therefore as stated in the minute entry dated January 29, 1997."
On March 5, 1997, Appellant reasserted the Motion for Reconsideration. A hearing was held on March 12, 1997. At the hearing the court elaborated on the grounds for denying the Application, making it very clear that the ruling was based upon the legal conclusion that a claim for attorney's fees under § 503(b)(4) is contingent upon an independent allowable expense under § 503(b)(3).
On March 19, 1997, the court entered the final order denying the Motion for Reconsideration without stating any specific grounds.
Appellant appeals from the order denying the Application and from the order denying the Motion for Reconsideration.
In the Minute Order the court stated that the Application was denied on alternative grounds: that as a matter of law fees could not be granted under § 503(b)(4) unless the creditor had an independent expense under § 503(b)(3), and that there was no substantial contribution to the estate. Appellant's notice of appeal simply states that it appeals the order denying the Application and the order denying the Motion for Reconsideration. In the Motion for Reconsideration, however, the appellant raised only the first ground. The court was not asked to reconsider the purported finding of lack of substantial contribution.
Appellant does not discuss the issue of substantial contribution in his brief. The BAP has recently reaffirmed the position that an issue not briefed is deemed waived. In re Jodoin, 209 B.R. 132, 143 (9th Cir. BAP 1997):
We "will not ordinarily consider matters on appeal that are not specifically and distinctly argued in appellant\'s opening brief." Miller v. Fairchild Indus., 797 F.2d 727, 738 (9th Cir.1986); see also Meehan v. County of Los Angeles, 856 F.2d 102, 105 n. 1 (9th Cir.1988) (). Because of Defendant\'s waiver, we decline to consider this issue on appeal.
In Jodoin the appellant included the issue in his statement of issues but not in his brief. In the present case, Appellant did not even include the "substantial contribution" finding as an issue. See also Martinez-Serrano v. I.N.S., 94 F.3d 1256, 1259 (9th Cir.1996) (), cert. denied, ___ U.S. ___, 118 S.Ct. 49, 139 L.Ed.2d 15 (1997). Indeed, Appellee contends that the legal issue of the proper interpretation of § 503(b) need not be decided because the substantial contribution issue has not been preserved for appeal.
After having reviewed the Minute Order and the transcript of the hearing on the Motion for Reconsideration, we conclude that the bankruptcy court did not in fact make a finding that there was no substantial contribution. While the court stated in the Minute Order that it found no substantial contribution, the explanation which follows indicates that the actual finding was that the Application was overly broad. At the hearing on the Motion for Reconsideration the court focused exclusively on the § 503(b) legal issue. Counsel for the Debtors attempted to clarify that the Motion for Reconsideration should be denied on the alternative ground that the Appellant did not provide substantial contribution. However, the court maintained its focus on the § 503(b) issue, concluding:
THE COURT: All right. For the reasons stated, I\'m going to deny the motion to reconsider. And I think I can do that as a matter of law, because, as I read § 503(b)(3) and (4), Mr. Wake doesn\'t meet the initial test that having a creditor who\'s got an allowable claim under § 503(b)(3) and, therefore, as a matter of law, I don\'t think I can award him professional compensation or the entity slash creditors he represented reimbursement for their professional compensation. . . .
We conclude that the basis for the bankruptcy court's rulings on the Application and the Motion for Reconsideration was the legal issue of whether attorney's fees can be recovered under § 503(b)(4) where the creditor incurring such fees has no other allowable expense under § 503(b)(3). This is the issue before this Panel.
The bankruptcy court's findings of fact are reviewed under the "clearly erroneous" standard while conclusions of law are reviewed de novo. In re A & C Properties, 784 F.2d 1377, 1380 (9th Cir.1986), cert. denied, Martin v. Robinson, 479 U.S. 854, 107 S.Ct. 189, 93 L.Ed.2d 122 (1986). The issue of whether attorney's fees can be recovered under § 503(b)(4) where the creditor incurring such fees has no independent expense under § 503(b)(3) is an issue of statutory interpretation. We review the bankruptcy court's interpretation of the Bankruptcy Code de novo. In re Harrell, 73 F.3d 218, 219 (9th Cir.1996); In re Than, 215 B.R. 430, 433 (9th Cir. BAP 1997).
The bankruptcy court ruled as a matter of law that a creditor who makes a substantial contribution in a bankruptcy case may not recover attorney's fees under § 503(b)(4) unless the creditor incurring such fees incurred an independent expense allowable under § 503(b)(3).
Bankruptcy Code § 503(b) provides in relevant part:
To continue reading
Request your trial