Matter of Dooley, Bankruptcy No. 82-02886A.

• Citation: 41 BR 31
• Decision Date: 31 January 1984
• Docket Number: Bankruptcy No. 82-02886A.
• Parties: In the Matter of William J. DOOLEY and Fannie J. Dooley, Debtors.
• Court: United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Northern District of Georgia

41 B.R. 31 (1984)

In the Matter of William J. DOOLEY and Fannie J. Dooley, Debtors.

Bankruptcy No. 82-02886A.

United States Bankruptcy Court, N.D. Georgia, Atlanta Division.

January 31, 1984.

Paul C. Parker, Decatur, Ga., for petitioner.

Thomas E. Prior, McCalla, Raymer, Padrick, Cobb, Nichols & King, Atlanta, Ga., for respondent.

OPINION

WILLIAM L. NORTON, Jr., Bankruptcy Judge.

This matter is before the Court on the debtors' objection to creditor Commonwealth's ("Commonwealth") proof of claim. In response to the debtors' Chapter 13 joint petition, Commonwealth filed a claim as a secured creditor in the amount of $21,242.50, of which $50.00 was charged as attorney's fees. The awarding of attorney's fees in the instant circumstances is governed by 11 U.S.C. § 506(b), Rule 219 of the Rules of Bankruptcy Procedure, then in effect, and the standards and procedures set forth in Johnson v. Georgia Highway Express, 488 F.2d 714 (CA5, 1974); In re First Colonial Corp. of America, 544 F.2d 1291, (CA5), cert. denied, 431 U.S. 904, 97 S.Ct. 1696, 52 L.Ed.2d 388 (1977); and In re U.S. Golf Corp. (Neville v. Eufaula Bank & Trust Co.), 639 F.2d 1197 (CA5, 1981).

Unsatisfied with the affidavits and briefs requested previously on the objection to the part of the claim comprising the $50.00 attorney's fee, on September 22, 1983, this Court held an evidentiary hearing. The question is whether the creditor's attorney is entitled to his claim for $50.00 in attorney's fees. Although at the hearing the debtor's attorney withdrew objections to the $50.00 claim for attorney's fees, this Court is mindful that a judicial determination is required on the issue of the reasonableness of attorney's fees. In re Meade Land and Sign Development Co., Inc., 527 F.2d 280, 284 (CA3, 1975), aff'd 577 F.2d 858 (CA3, 1978). After review of applicable law and procedure, this Court finds that the evidence presented by the record fails to meet the "strict standard" required of an attorney seeking compensation in the Bankruptcy Court. Meade Land, supra, at 283. Because the hearing disclosed that the amount of time spent could not be documented with any specificity, the opportunity to amend the claim would be futile as it could not produce the required information. Therefore, the award of $50.00 for attorney's fees sought by the creditor's attorney must be denied.

FINDINGS OF FACT

1. The Security Deed executed by the parties on October 13, 1978, contained language which permitted the lender to collect attorney's fees incurred in court proceedings, litigation or other proceedings affecting the property;

2. On June 22, 1982, the debtors filed a joint Chapter 13 petition;

3. The debtors listed Commonwealth as a creditor with a security interest in the debtors' principal residence;

4. The debtors listed the value of their principal residence as $30,000.00;

5. Commonwealth filed a proof of claim showing the total amount owed as $21,242.50. The total pre-petition arrearage was $1,197.75, of which $50.00 was charged as attorney's fees;

6. Debtors objected to the creditor's charge of the $50.00 attorney's fees;

7. In support of creditor's charge of the $50.00 attorney's fee the following documentation was submitted:

(a) Proof of claim indicating a $50.00 charge for attorney\'s fees;

(b) Security Deed and Security Deed Note, signed by the parties October 13, 1978, which had language expressly giving the lender the right to collect attorney\'s fees in circumstances similar to the instant one;

(c) Affidavit by the attorney for the creditor indicating the $50.00 attorney\'s fee charge was for review of the summary of the Chapter 13 plan and preparation and filing of the proof of claim. Affiant\'s description of work done is of a general character; specific information such as time spent and level of difficulty of professional services regarding this particular matter does not appear in this documentation.

8. On September 22, 1983, an evidentiary hearing was held on this dispute at which the following additional information was elicited:

(a) The affidavit previously submitted by the creditor\'s attorney, stating what he had done in the case, was probably a form (pp. 4-5);

(b) Employment of and payment to an attorney is justified in these circumstances because failure to comply with proper procedures may reduce a secured creditor\'s claim to an unsecured one (p. 6);

(c) In preparation of a proof of claim the attorney looks at the mortgage documents, the notice the court sends out of the summary of the plan, and makes some decisions as to what amount of arrearage should be paid or should be included on the claim to be paid (p. 9);

(d) The previously submitted affidavit had failed to include mention of the "liability involved" to the attorney should the attorney fail in the correct preparation for filing, "the risk of the attorney is worth something" (p. 10);

"For the risk that the attorney undertakes of doing it wrong, some compensation is in order. And our position is $50.00" (p. 14);

Part of the fee is for legal exposure (pp. 15-16);

(e) Sometimes the attorney is given only a short time to handle the proof of claim, e.g., less than three weeks (p. 13);

(f) The actual work is neither the most sophisticated nor the most complicated (p. 14);

(g) The reply to the question of how long it takes the attorney was "very little time" (p. 14);

(h) The attorney trains and supervises others who may actually do the work but is always responsible for their work (p. 16);

(i) The attorney generally reviews the preparation of the proof of claim, but all preparations do not necessarily get his review (p. 16) (j) The time spent was less than a half hour, nor is the $50.00 fee based on the time spent (p. 16);

9. Both sides have submitted written briefs.

DISCUSSION

The attorney for the creditor supports the argument that the creditor is entitled to an award of attorney's fees in the amount of $50.00 by way of the following arguments:

(1) the debtor lacks standing to challenge the creditor\'s proof of claim;

(2) pursuant to § 506(b), the creditor is oversecured and thus entitled to reasonable attorney\'s fees as the contract between the parties expressly so provided;

(3) review of the summary of a Chapter 13 plan, calculation of interest pursuant to § 1325(a)(5)(B)(ii), the preparation and filing of a proof of claim for an out-of-town secured creditor, the attorney\'s legal exposure if done wrong, and the training and supervision of those who may do the actual work warrant the employment and payment of reasonable fees to an attorney familiar both with local rules and procedures and national rules and procedures;

(4) the burden of proof is on the party objecting to the proof of claim.

(1) The Debtor Has Standing

Title 11 U.S.C. § 502(a) provides that a claim shall be deemed allowed unless a party in interest objects to it. This Court finds unpersuasive the creditor's argument that the trustee in this Chapter 13 case is the only party who may properly object to Commonwealth's proof of claim. The debtor is a party in interest, and, consequently, has standing to object. In re Mitcham, Case No. 82-02133A (BC ND GA, June 28, 1983); In re Roberts, 20 B.R. 914, 916-17 (BC ED NY, 1982).

(2) Section 506(b) Entitles an Oversecured Creditor to Reasonable Attorney's Fees

The debtors, in schedules filed with their joint petition, valued their principle residence at approximately $30,000.00. The amount shown in Commonwealth's proof of claim was less than $22,000.00. Clearly, Commonwealth falls within the requirements of § 506(b) to be an oversecured creditor.

Section 506(b) authorizes payment of "any reasonable fees, costs, or charges provided under the agreement under which such claim arose" for a creditor whose claim "is secured by property the value of which . . . is greater than the amount of such claim." Paragraph 5 of the Security Deed provided:

that such expenses and fees as may be incurred in the protection of said premises, including the fees of any attorney employed by the grantee or the collection of any or all of the indebtedness hereby secured, or foreclosure by grantee\'s sale or court proceedings or in any other litigation or proceeding affecting said premises, and attorney\'s fees reasonably incurred in any other way, shall be paid by the grantor and secured by this instrument.

Thus, the agreement between Commonwealth and the debtors expressly provided for the collection of attorney's fees in such circumstances as presented here.

(3) Review, Preparation and Filing of a Claim for a Secured Creditor

The state of the law on this issue, e.g., whether attorney's fees can be collected for reviewing the Chapter 13 plan, and preparation and filing of the claim remains unsettled. See In re Cipriano, 8 B.R. 697 (BC RI, 1981) (Attorney's fees involved with collection under contract for automobile between debtor and secured party awarded but "time spent to prepare, execute and file a proof of claim" was held "non-compensable." Id. at 699); In re Banks, 31 B.R. 173 (BC ND Ala., 1982) (Attorney's fees for filing proof of claim not awarded: not required to be performed by an attorney and can be performed by non-lawyers); but cf. In re Rutherford, 28 B.R. 899, (BC ND Ill., 1983) and In re Mitcham, Case No. 82-02133A (BC ND Ga, June 28, 1983) (Attorney's fees awarded).¹ This Court does not reach this issue in the instant proceeding because the creditor has failed to meet his burden of proof on the issue of attorney's fees.

(4) Burden of Proof on the Issue of Attorney's Fees

The secured creditor's position as initially briefed was that the trustee or debtor objecting to the proof of claim had the burden of proof on this issue; the creditor was under no obligation to justify its claim. Citation to § 502(a) and Rule 301(b) in Collier on Bankruptcy was given to support the creditor's assertion. 3 Collier on Bankruptcy ¶ 502.02, at 502-20 (15th Ed.1979). This Court rejects...