Red Carpet Corp. of Panama City Beach, In re
| Decision Date | 04 June 1990 |
| Docket Number | No. 89-3012,89-3012 |
| Citation | 902 F.2d 883 |
| Parties | 23 Collier Bankr.Cas.2d 663, Bankr. L. Rep. P 73,413 In re RED CARPET CORPORATION OF PANAMA CITY BEACH, Debtor. Jimmy HATCHER, Petitioner-Appellant, v. John MILLER, Respondent-Appellee. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Jimmy Hatcher, Bristol, Fla., pro se.
William C. Owen, Carlton & Fields, Mary E. Haskin, Tallahassee, Fla., for John Miller.
Appeal from the United States District Court for the Northern District of Florida.
Before FAY, Circuit Judge, RONEY *, Senior Circuit Judge and PITTMAN **, Senior District Judge.
This case commenced on July 27, 1976, when appellee John Miller filed a petition for a Chapter XI reorganization on behalf of the Red Carpet Corporation of Panama City Beach (Red Carpet). After nearly fourteen years, the case remains open. We are hopeful that the issuance of this opinion finally will terminate the litigation. Appellant Jimmy Hatcher, appearing pro se, raises several issues concerning an award of attorneys' fees to John Miller for services rendered to Red Carpet. Essentially, Hatcher contends that the district court made incorrect factual findings, misapplied
the law, erroneously failed to conduct more than one evidentiary hearing, and erred in awarding Miller interest on attorneys' fees from the date of the original order awarding attorneys' fees. After thorough review of the expansive and confusing record, we AFFIRM in part and REVERSE in part.
The relationship between Jimmy Hatcher, president of Red Carpet, and John Miller began in July 1976, when Miller was recommended to Hatcher to handle the bankruptcy of Red Carpet. Hatcher retained Miller, who proceeded to file a Chapter XI petition on July 27, 1976. On that same date, the bankruptcy court approved Red Carpet's petition and allowed Red Carpet to continue operations as debtor in possession.
A plan was filed on October 16, 1976. Listing real property holdings valued at $9,919,956.17 with mortgages of approximately $4,900,000.00, Red Carpet agreed to pay all unsecured creditors except Hatcher one hundred percent of the amount owed to them. Hatcher agreed to take nothing until all other unsecured creditors were paid. Secured creditors were assured that the plan did not affect their security interests and that they would be paid according to their security agreements. The court approved this plan on November 12, 1976.
Subsequently, Hatcher and Miller encountered serious problems in their efforts to dispose of the properties. Many of the properties on which the distribution plan was based had been overvalued, Red Carpet retaining little or no equity in excess of the mortgage encumbrances upon them. Consequently, on May 2, 1977, a group of creditors, both secured and unsecured, filed a petition for the appointment of a receiver alleging that the debtor in possession had made no substantial progress since the plan was approved and that Hatcher was experiencing a conflict of interests because of his individual liability for many of the obligations of Red Carpet. On April 17, 1978, after numerous delays of which most were caused by Hatcher, the court appointed Edwin Rude as receiver for Red Carpet.
On April 24, 1978, Miller filed an application for attorneys' fees and expenses in the amount of $36,228.19. The receiver responded that consideration of the application was not appropriate until the receiver produced a report concerning conversion of the proceedings to a Chapter X reorganization. Rather than convert the case to Chapter X, however, the receiver, after obtaining consent from secured creditors and agreements to restructure their mortgages, successfully sold the Artist of America Inn, the largest remaining asset of Red Carpet. Subsequently, on February 28, 1979, Miller amended his request for attorney's fees to $37,917.75.
On February 13, 1979, the court verbally reinstated Hatcher as debtor in possession, limiting the receiver to overseeing only special matters. 1 In his report to the court filed May 21, 1979, Hatcher explained that on April 28, 1979, he sent a letter to John Miller informing him that his services were no longer desired. A copy of this letter was sent to the receiver, some unsecured creditors, and the clerk of the bankruptcy court. In his report, Hatcher further stated that he had retained the law firm of Carlisle & Chason to represent the debtor in possession. Hatcher simultaneously filed a petition for court approval of Carlisle & Chason as attorneys for the debtor in possession. This petition was granted on June 19, 1979.
On May 29, 1979, after having been informed of his termination but before the court appointed Hatcher's new attorneys, Miller filed an application to adjudicate the debtor a bankrupt. After considering the objections of two approved creditors and the testimony of Hatcher, the receiver, and Miller, the court denied Miller's application for adjudication.
Hatcher and his attorney then set out to prevent Miller from recovering the attorneys' fees that he had requested. The On April 27, 1981, Hatcher's attorney filed a motion to surcharge Miller and his law firm for losses caused by Miller's alleged negligence during his representation of Red Carpet. The motion includes several of the same allegations that Hatcher asserted during the hearing concerning Miller's request for attorneys' fees. For example, the motion contains allegations of fee-splitting, conflicts of interest, Miller's failure to zealously defend Hatcher in the Fun-n-Sand Motel foreclosure, and his refusal to deliver the lease agreement between Red Carpet and Resorts of America, Inc. The court denied the motion, reasoning that the bankruptcy court in the context of a Chapter XI proceeding is without jurisdiction to surcharge the attorney of the debtor in possession. The court further noted that most of the allegations raised in the motion similarly were raised defensively in response to Miller's fee application. Hatcher appealed the bankruptcy court's decision; the district court affirmed. Hatcher then appealed to this court, and this court affirmed, stating that while an attorney for the debtor in possession may be denied his fees because of poor quality work, "a bankruptcy court cannot order money damages against an attorney for a debtor in possession." In re Red Carpet Corp. v. Miller, 708 F.2d 1576, 1578 (11th Cir.1983) (per curiam).
hearing on allowance of attorneys' fees was conducted on March 21, 1980. At that hearing, Hatcher not only attempted to prove that the amount of fees was incorrect, but also that Miller was entitled to nothing because of his negligent representation of Red Carpet. Although Hatcher's attorney did not "intend to try to prove a malpractice case and damages," he introduced evidence regarding the "skill and diligence" of Miller over the objection of Miller's counsel. R12-23a-49. Hatcher's counsel elicited testimony regarding a possible fee-splitting arrangement between Miller and Hatcher's first attorney, Gary Tennyson. Hatcher contended that Miller agreed to split the retainer of $5,000.00 with Tennyson simply because Tennyson referred Hatcher to Miller. Hatcher's counsel similarly adduced testimony indicating that Miller negotiated a ten percent commission for real estate that he sold on behalf of Red Carpet. Hatcher sought to prove that because Miller desired commission from the sale of the properties, Miller advised Hatcher to refrain from selling individual parcels of Red Carpet's property, for which Hatcher's real estate broker, Mr. Commander, had already found buyers, and to sell all the properties as a package to large investors whom Miller and his partner would locate. Additionally, Hatcher's counsel introduced evidence that Miller was negligent in failing to pursue an affirmative defense in a foreclosure action regarding the Fun-n-Sand Motel, which was owned by Red Carpet. 2 Over objection, the court also allowed Hatcher's testimony concerning Miller's alleged negligence in handling a lease agreement between Red Carpet and Mr. Abdo and Mr. McCormick of Resorts of America, Inc. Hatcher stated that both parties had entered into the agreement and had instructed Miller to deliver the lease to the court for its approval, but Miller failed to deliver the document as directed
On December 14, 1981, the bankruptcy court, after considering evidence presented at the hearing on attorneys' fees, awarded Miller $41,700.00 as being the total reasonable compensation allowable. After subtracting credits in the amount of $12,482.00, the balance due was $29,218.00. The court explained that it had considered the quality of service and all other factors as directed in In re First Colonial Corp. Before the bankruptcy court made its expanded findings, Hatcher submitted various motions urging the court to alter its findings of fact to reflect facts to which Hatcher had testified at the hearing on attorneys' fees, and Hatcher requested admissions from Miller. The court denied the motions and requests and entered its order of expanded findings on December 21, 1984. Although the court recognized that the remand order authorized reopening of the proceedings and holding of additional hearings, it concluded that more hearings were unnecessary. Rather the court attempted to make more specific and expanded findings based on the evidence presented at the initial fee determination hearing. In making its finding regarding the quality of legal work rendered by Miller, the bankruptcy judge stated that "no weight was, or should have been, given to the cursory evidence" of negligence and alleged malpractice. R7-40-25. The court explained that such matters should be accorded plenary treatment, including a jury, in an appropriate forum, not the bankruptcy court. On April 3, 1985, the court awarded interest on the fees to run from the date of the original order awarding fees (December 14, 1981)...
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