Opinion
Case No.:03-46558 (NLW).
10-5-2009
Kaliopi Makris
Meridith F. M. Mason, Esq. Hill Wallack, LLP, Princeton, NJ. Christina J. Vassiliou, Esq. Sterns & Weinroth Trenton, NJ.
Dear Counsel:
This matter was before the court to determine the fees to be awarded to Amboy Bank f/k/a Amboy National Bank ("Amboy"). The debtor, Kaliopi Makris ("Makris") objected to Amboy's fee application on the basis that the fees sought exceeded the fees permitted under the promissory note ("Note") signed by Makris, which simply provided that Amboy could recover the costs and expenses, including reasonable attorney fees, of enforcing the Note. Makris argued that the only fees permissible were those incurred to file the proof of claim.
The court declined to read the language of the Note in such a limited fashion, but agreed that the fees should be reduced by reducing the time kept in increments of .25, and by disallowing fees that appear attributable to services in connection with the guaranty given by Benjamin Levine. Additionally, the court indicated that it would apply the usual standards for review of fee applications under Code § 330, in particular, attention to appropriate time spent on a matter and proper delegation of services. Finally, the court advised the parties that while it would not disallow entirely the legal fees resulting from Amboy's unsuccessful efforts, such as the appeal, it would nonetheless apply the concept of billing judgment to limit Amboy to fees that were reasonably incurred.
Subsequently, counsel for Makris filed an unsolicited supplemental objection setting forth legal authority for the proposition that a creditor should not be awarded attorney fees for matters decided adversely to it. Amboy's counsel requested that the court not consider Makris' submission. While the court agrees with Amboy that it need not consider the most recent legal authority provided by Makris, it nevertheless does so for completeness of the record in the event that either party wishes to appeal.
Under Code § 506(b) an oversecured creditor's claim may include reasonable fees, costs or charges provided for under the agreement on which the claim is based. United States v. Ron Pair Enter., Inc., 489 U.S. 235, 241 (1989). Understandably, the focus of the courts has been on the reasonableness of the fees requested. One court has observed that this requirement "mandates that the bankruptcy court consider, among other things, both the policies, purposes and provisions of the Bankruptcy Code." Matter of Nicfur-Cruz Realty Corp., 50 B.R. 162, 167 (Bankr. S.D.N.Y. 1985). Further, in Nicfur-Cruz Judge Abrams held that" It is inherently unreasonable to ask a debtor to reimburse attorneys' fees incurred by a creditor that are not cost-justified either by the economics of the situation or necessary to preservation of the creditor's interest in light of the legal issues involved." See also, In re Reposa, 94 B.R. 257, 261-62 (Bankr. D.R.I.). In In re West Electronics, Inc., 158 B.R. 37, 40 (Bankr. D.N.J. 1993) Judge Gindin declared that the test for reasonableness "has two facets: (1) the itemized fees must be reasonable, and (2) the creditors actions must be reasonable." Applying that test, Judge Gindin determined in West that it is possible to award compensation for unsuccessful efforts by a secured creditor's counsel. Id. However, in applying the test for the facts before it, the court determined that the creditor's actions were not reasonable. It specifically noted that" the creditor was aware that the debtor was in the process of settling matters in an attempt to settle the creditor's claim, but instead of allowing the debtor to carry out its efforts, the creditor loaded it down with excessive motions." Id. at 42. Accordingly, while not disallowed entirely, the fees sought were substantially reduced.
By contrast, the courts in In re Circle K Corp., 165 B.R. 649, 653 (Bankr. F. Ariz. 1994) and In re Williams, 97 B.R. 330, 333 (Bankr. N.D. Tex. 1989) simply pronounced that unsuccessful efforts cannot be compensated. Because neither Circle K nor Williams provides reasoning for such a conclusion, and this holding is neither required by Code § 506(b) nor consistent with better reasoned case authority, the court declines to adopt their holdings.
In the matter before this court, Amboy has not engaged in aggressive motion practice. Rather, its posture has been that of defending Makris' efforts to reduce its claim. Essentially, Makris' position is that since she prevailed on appeal, Amboy's legal position was without merit, and no fee should be awarded. However, Makris overlooks the fact that Amboy prevailed in this court and therefore cannot be viewed as persisting in a completely unjustified defense. Nonetheless, it does not appear to the court that all of the services rendered were in connection with enforcement of the Note. For example, a number of entries reflect docket review and conferences with Amboy. These have been disallowed. While Amboy may have desired to be kept abreast of routine Chapter 13 matters it is not reasonable to charge Makris with these services.
Second, the cost for defending the Makris motions began to rival the outstanding amount of Amboy's note. It is the court's view that at least as of December 2007 Amboy should have recognized this and taken steps to effects a simpler resolution. The court does not question whether each service was rendered, but it does question whether it was wise (for both Amboy and Makris) to continue to accrue such fees when they were becoming disproportionate to the amount of the Note. Accordingly, for services rendered from December 2007 onward, the court has reduced the monthly billing statements by one-half Additionally, the court measured services in . 10 increments rather that .25 increments, eliminating what it views as unnecessary services, and reduced time spent in preparation for some of the hearings. In total, the court reduced the fees sought by the sum of $38,520.70, resulting in a total allowance of $52,215.04 for attorneys fees. Costs are allowed as requested.
Examples of the reductions are annexed for review by counsel. Each itemization is not set forth because a line by line recapitulation is burdensome. The court has retained its work papers and if either counsel desires, will conference the matter for a line by line explanation.
Counsel for Amboy Bank shall submit an Order on notice to counsel for Makris.