Matter of Lagasse, Bankruptcy No. 2-86-00490.

• Decision Date: 16 March 1987
• Docket Number: Bankruptcy No. 2-86-00490.
• Citation: 71 BR 551
• Court: U.S. Bankruptcy Court — District of Connecticut
• Parties: In the Matter of Bertrand J. LAGASSE, Catherine Lagasse, Debtors.

71 B.R. 551 (1987)

In the Matter of Bertrand J. LAGASSE, Catherine Lagasse, Debtors.

Bankruptcy No. 2-86-00490.

United States Bankruptcy Court, D. Connecticut.

March 16, 1987.

Nicholas A. O'Kelly, Schatz & Schatz, Ribicoff & Kotkin, Hartford, Conn., for claimant, Society For Savings.

Theodore A. Lubinsky, Hartford, Conn., for debtors.

Gilbert L. Rosenbaum, Hartford, Conn., Trustee.

MEMORANDUM OF DECISION

ROBERT L. KRECHEVSKY, Chief Judge.

The matter before the court is the objection of Bertrand J. Lagasse and Catherine Lagasse (the debtors) to the amount of attorney fees included in a claim filed in their chapter 13 case by Society for Savings (Society). The following facts are taken from the case file and a brief evidentiary hearing held on February 3, 1987.

I.

Society holds a first mortgage on the debtors' residence at 4 Landers Road, East Hartford, Connecticut (property). At some time prior to April 12, 1985, the debtors fell into default on mortgage payments. Society retained Schatz & Schatz, Ribicoff & Kotkin (Schatz & Schatz) to bring a mortgage foreclosure action in the Connecticut Superior Court. The Superior Court, on August 12, 1985, entered a judgment of foreclosure by sale, finding the debt due Society to be $27,163.22 and the value of the property to be $63,000.00. The court, based on a mortgage note provision entitling Society to "reasonable attorney's fees" in the event suit was brought to collect the note, awarded Society $1,500.00 in legal fees and $1,052.35 in costs. The debtors filed a chapter 13 petition on October 31, 1985, staying the foreclosure sale set for November 2, 1985. The debtors, on December 2, 1985, converted their chapter 13 case to one under chapter 7, and they received a discharge from indebtedness on March 18, 1986.

Immediately following the debtors' discharge, Society obtained a supplemental judgment of foreclosure in the state court. This judgment, dated March 31, 1986, provided for a public sale of the property on May 10, 1986, and included a further award to Society of $1,500.00 for additional attorney fees. The debtors filed their present chapter 13 case on May 8, 1986, again staying the sale. Thereafter, this court, over the objection of Society, confirmed the debtors' chapter 13 plan which provides for the reinstatement of the Society mortgage and the payment to Society of the mortgage arrearage plus costs.

Society initially claimed that the debtors should be responsible for the legal fees of $11,877.60¹ incurred by Society during the litigation in the state court and bankruptcy court. Notwithstanding the state court award of $3,000.00 in fees to Society during the foreclosure proceeding, Society, in fact, paid $7,621.35 in fees to Schatz & Schatz for the same period. Schatz & Schatz thereafter billed Society for additional fees of $4,256.25 during the present chapter 13 case. Although Society has paid these fees, according to the testimony of Frank J. Hayes, Society's Assistant Vice-President, the fees were paid upon the understanding that they would later be collected from the debtors. In the event such fees were not collectible from the debtors, Hayes said, the amount of the fees would be subject to renegotiation between Society and Schatz & Schatz. Society never reviewed the bills received from Schatz & Schatz, as indicated by the fact that one of the bills inadvertently included two hours of time for legal services rendered in a matter having nothing to do with the debtors.

II.

The debtors contend that the attorney fees incurred by Society in connection with the foreclosure action (prepetition fees) should be limited to $3,000.00, the amount determined by the state court as reasonable. As to the postpetition fees, primarily involving Society's objection to confirmation of the debtors' chapter 13 plan, the debtors assert that the amount of legal fees claimed by Society is unreasonable because they include duplication of effort by various attorneys and are excessive in view of the amount of the debt.

Society focuses on the mortgage note, which, it claims, provides that the "Debtors agreed to reimburse the bank for all attorney's fees incurred in connection with the recovery of the mortgage debt." Society Memorandum at 1. Society argues the prepetition legal fees should not be limited to the amount awarded by the state court as reasonable because "the case in question has proven to be troublesome as a result of the Debtors' delay tactics." Id. at 4. Society acknowledges that it "would have gladly accepted the award by the State Court for attorney's fees had it been allowed to complete its foreclosure action but insofar as the Debtor sic has opposed the foreclosure by way of these repeated filings, it seems inconsistent that the Debtor sic now wishes to rely on that portion of the foreclosure judgment, which best suits their financial interests." Id. As to the postpetition fees, Society, in its memorandum, agrees to "waive that portion of its claim where there appears to be duplication of efforts", and to withdraw $230.00 of its claim "inadvertently billed to this account." Id. at 6. Society maintains that all remaining fees are legitimate expenses, having been paid to Schatz & Schatz, and must be borne by the debtors.

III.

A.

Conn.Gen.Stat. § 49-7 governs attorney fees in foreclosure actions and provides as follows:

Any agreement contained in . . . any mortgage, to pay costs, expenses or attorneys\' fees . . . incurred by the holder of that . . .

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