In re Woods Auto Gallery, Inc.

• Decision Date: 27 December 2007
• Docket Number: No. 07-41123-DRD.,07-41123-DRD.
• Citation: 379 B.R. 875
• Parties: In re WOODS AUTO GALLERY, INC., Debtor.
• Court: U.S. Bankruptcy Court — Western District of Missouri

Page 875

379 B.R. 875

In re WOODS AUTO GALLERY, INC., Debtor.

No. 07-41123-DRD.

United States Bankruptcy Court, W.D. Missouri, Jefferson City Division.

December 27, 2007.

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Alan Jeffrey Misler, James F. B. Daniels, McDowell Rice Smith & Buchanan, PC, Kansas City, MO, for Debtor.

MEMORANDUM OPINION

DENNIS R. DOW, Bankruptcy Judge.

This matter is before the Court on the objection of Debtor Woods Auto Gallery, Inc. ("Debtor") to the Motion for Allowance of Fees, Costs and Expenses filed by Bank Star One ("Bank Star" or "Bank"), which is based on a Promissory Note, Commercial Security Agreement, Floor Plan Security Agreement and Signatory Authorization, and Floor Plan Agreement between Bank Star and Debtor. Debtor objects to the fees, costs and expenses claimed by Bank Star for services performed by employees and consultants of Bank Star and by Bank Star's counsel in representing Bank Star both pre and post-petition. Debtor contends that many of the actions taken by professionals hired by Bank Star and Bank Star's employees were unnecessary to protect the Bank's interests and that the amount of time spent on these and certain other matters was not reasonable. Bank Star contends that its aggressive pursuit of its legal rights and remedies was a direct result of Debtor's lack of credibility and that many of the tasks performed by its counsel were done in response to pleadings filed by Debtor. This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334(b) and 157(a) and (b). This is a core proceeding which this Court may hear and determine pursuant to 28 U.S.C. § 157(b)(2)(B). This Memorandum Opinion contains my Findings of Fact and Conclusions of Law pursuant to Rule 52 of the Federal Rules of Civil Procedure as made applicable to this matter by Rules 7052 and 9014(c) of the Federal Rules of Bankruptcy Procedure. For all the reasons set forth below, the objection is sustained in part and overruled in part. The Court finds that certain actions undertaken by Bank Star's counsel, such as prosecution of the motion for relief from stay, opposition to Debtor's motion to use cash collateral, initiation of the adversary proceeding to determine lien priority, and the attempted foreclosure of certain real property, were unnecessary and that the associated fees should be disallowed. The Court does not, however, believe that Bank Star's efforts to repossess and subsequently safeguard its collateral were unwarranted and overrules Debtor's objection for the fees and expenses incurred in that regard. Finally, after reviewing the detailed billing statements, the Court finds that certain fees, costs and expenses should be disallowed or reduced for various reasons including lack of specificity in time entries, or lumping of numerous tasks into one description, impairing the Court's ability to determine whether time billed was reasonable for the tasks listed, duplication of effort or lack of need for the described services.

I. FACTUAL AND PROCEDURAL BACKGROUND

Debtor is a retailer of high-end, pre-owned vehicles. Greg Woods is the owner and holder of all of the issued and outstanding capital stock of Debtor. Debtor's business premises is located in Columbia, Missouri and is leased from a related entity G.A. Woods Properties, LLC ("Woods Properties"), a limited liability company, organized and existing under Missouri law. Greg Woods is the owner and holder of more than two-thirds (2/3) of the equity interest in Woods Properties. On September 29, 2006, Debtor, its principal, Greg Woods, and Greg Woods' wife, Angella Woods, executed a promissory note in favor of Bank Star in the original principal amount of $1,609,365 and obtained a line of credit in the amount of $1,965,000 for the purpose of acquiring or carrying inventory for resale. As security for the loan, Debtor, along with non-debtor entities, Greg Woods, Angella Woods and Woods Properties, and Bank Star executed, some or all of, a series of documents ("Loan Documents"), including the following: (a) a Floor Plan Agreement and Signatory Authorization, executed by Debtor and Bank Star; (b) a separate Floor Plan Security Agreement, executed by Debtor and Bank Star; (c) a Commercial Security Agreement, executed by Debtor and Greg and Angella Woods as individuals and Bank Star; (d) a Real Estate Deed of Trust, purporting to grant Bank Star a mortgage on 18.8 acres of real property, located in Columbia, Missouri and commonly referred to as 6300 Scott Rd., which is owned by Woods Properties; and (e) a Real Estate Deed of Trust, purporting to grant Bank Star a mortgage on two commercial properties, which consist of Debtor's business premises, located at 124 and 202 E. Nifong Boulevard, located in Columbia, Missouri, also owned by Woods Properties.

At some point after the execution of the Loan Documents, but prior to March 28, 2007, Debtor defaulted in performance of its obligations by failing to pay Bank Star for a number of vehicles that were subject to the terms of the Floor Plan Security Agreement and by failing to account for the proceeds from those sales. On or about March 28 and April 5, 2007, Bank Star exercised its rights under the Loan Documents and seized possession of 41 vehicles from Debtor. Bank Star obtained insurance for the vehicles and incurred expenses for them to be transported and stored at a facility located in St. Louis, Missouri. On April 4, 2007, Bank Star filed a Petition against Debtor in the Circuit Court of Boone County, Missouri and obtained a writ of prejudgment attachment on all assets of Debtor and Greg Woods and Angella Woods, as individuals. Bank Star incurred attorney's fees and expenses associated with Debtor's default under the Loan Documents, the initiation of the state court action and the repossession.

On April 10, 2007 Debtor filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. On April 12, 2007, Debtor filed the following pleadings: an Emergency Motion to Use Cash Collateral, Granting Adequate Protection to Bank Star and Scheduling a Final Hearing on the Use of Cash Collateral; Adversary Complaint No. 07-02015 in which Debtor sought turnover of the vehicles which Bank Star seized and the avoidance of Bank Star's purported security interest in certain of Debtor's assets; and an emergency motion in the adversary to compel Bank Star to turnover Debtor's vehicle inventory pursuant to 11 U.S.C. 542.

In its April 12 pleadings, Debtor sought the immediate return of all the vehicles and related documentation seized by Bank Star on March 28 and April 5, 2007. In exchange, Debtor offered Bank Star the following adequate protection: a promise to pay, in cash and in full, the entire unpaid principal balance due and owing to Bank Star, including accrued and unpaid interest, within 90 days from the entry of the Order for Relief; a detailed plan for satisfying its obligation to the Bank, which consisted of paying Bank Star the net proceeds received from Greg Woods' proposed refinancing of Woods Properties' interest in the properties located at 6300 Scott Rd. and 124 and 202 E. Nifong Blvd. and all funds received from the sale of Debtor's vehicle inventory; a requirement that Debtor pay all proceeds received from the sale of vehicles to Bank Star within 48 hours of the sale; a provision that Bank Star be permitted to maintain physical possession of the keys and titles to the vehicles until its receipt of sale proceeds therefor; a provision that Bank Star be permitted access to Debtor's business premises and records at any time; and a provision that Bank Star be permitted to maintain a bank employee, or a "keeper," at the dealership at all times to safeguard the Bank's collateral.

Also filed on April 12, 2007, was Bank Star's Emergency Motion for Relief from the Stay wherein Bank Star sought an order allowing it to complete the foreclosure on Debtor's vehicle inventory or, alternatively, for adequate protection. On April 16, 2007, the Court conducted an omnibus hearing on Debtor's motion to use cash collateral, Debtor's motion for turnover of its inventory and Bank Star's motion for relief. The Court issued an order which authorized Debtor's use of cash collateral, granted Bank Star adequate protection upon substantially the terms proposed by Debtor and preliminarily denied Bank Star's motion for relief. By subsequent order dated, April 20, 2007, the Court granted Debtor's emergency motion for turnover of Debtor's vehicle inventory.

On April 30, 2007, Bank Star filed Adversary Case No. 07-02021 against Debtor and 20 consumers who had purchased vehicles from Debtor prior to the filing of the bankruptcy. Bank Star sought a determination that it, rather than the consumer-defendants, was entitled to "ownership" and possession of the vehicles because it had possession of the certificates of title for those vehicles. A final hearing was held on the motion to use cash collateral and the motion for relief from the automatic stay on May 31, 2007 and subsequent orders were entered authorizing Debtor to use cash collateral and denying Bank Star's motion for relief.

Subsequent to the Court's order authorizing Debtor's motion to use cash collateral, which specifically included an adequate protection provision involving Greg Woods refinancing certain mortgages of Woods Properties in order to satisfy its debt, Bank Star initiated a non judicial foreclosure of those precise mortgages. This action by Bank Star resulted in the filing of an emergency motion to enjoin the pending foreclosures and a hearing before this Court on June 15, 2007. On June 19, 2007, the Court entered a preliminary injunction against Bank Star and its counsel, Charles Hapke, to cease and desist from any attempt to foreclose the referenced mortgages, which was to expire by its own terms on July 10, 2007, On July 3, 2007, Debtor filed an emergency motion commanding Bank...