In re Mandeville
596 B.R. 750
Bankr. N.D. Ala.2019Background
- Debtor filed two back-to-back chapter 13 cases in 2017; first was dismissed and second was filed four days later; plan proposed to cure 13 months of mortgage arrears and pay ongoing payments through the trustee.
- Carrington, holder of an FHA-form mortgage on Debtor's residence, timely filed an amended proof of claim (POC) listing prepetition arrears and attachments; Debtor did not object to the POC.
- Carrington served a Rule 3002.1(c) Postpetition Fee Notice claiming $600 in postpetition attorney fees ($300 for work on the dismissed First Case and $300 for the instant case); Debtor moved to determine/disallow those fees.
- Carrington's counsel described services: case monitoring, review of petition/schedules/plan, review of Note/Mortgage and loan history, and preparation/signing/filing of the POC and the Postpetition Fee Notice; flat fee charged was $300 per case.
- The Mortgage contains paragraph 7 (permit Lender to “do and pay whatever is necessary” to protect its rights in events including bankruptcy) and paragraph 8 (Lender may collect HUD-authorized fees); HUD guidance (2016 Mortgagee Letter and Attachment) sets maximum allowable attorney fees for specified bankruptcy tasks.
- Court held an evidentiary hearing and concluded it had core jurisdiction to determine allowance of the postpetition fees under Rule 3002.1(e) and applicable nonbankruptcy law (Alabama law governs).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Mortgage authorizes recovery of postpetition attorney's fees incurred in the chapter 13 case | Debtor: Mortgage does not specifically list bankruptcy attorney fees in paragraph 7; charging for plan review and proof-of-claim work is not authorized | Carrington: Paragraph 7's "do and pay whatever is necessary" plus paragraph 8's incorporation of HUD-authorized fees permits recovery; HUD expressly authorizes bankruptcy-related attorney fees | Held: Mortgage authorizes reasonable, necessary postpetition attorney fees under Alabama law; paragraph 8 plus HUD guidance supports recoverability |
| Whether preparing and filing a proof of claim and plan review are merely ministerial (thus per se non-recoverable) | Debtor: Proof-of-claim preparation and plan review are ministerial tasks; courts have held such work per se unreasonable to bill debtors | Carrington: POC preparation and plan review involve legal analysis, jurisdictional submission, risk of sanctions and loss of prima facie status; HUD requires prompt referral to counsel | Held: Not ministerial here; POC and plan review can be legally significant for mortgagees and employing counsel was reasonable and prudent |
| Whether the $300 flat fee is reasonable | Debtor: The amount is unreasonable and unnecessary for the limited work performed | Carrington: Fee is market-based, flat, and covers the described services; less than HUD maximum | Held: $300 is reasonable for the services performed (and below HUD's $650 cap for proof-of-claim/plan review) |
| Whether fees from the dismissed First Case may be recovered via the Postpetition Fee Notice | Debtor: Objected generally to postpetition fees; specific point that fees for the First Case predate the instant filing | Carrington: Included $300 for First Case in the Postpetition Fee Notice | Held: Fees incurred in the First Case were prepetition to the instant case and may not be claimed via the Rule 3002.1(c) Postpetition Fee Notice; only $300 for the instant case allowed, excess disallowed |
Key Cases Cited
- Johnson v. U.S. Mortg. Co., 991 F. Supp. 1302 (M.D. Ala. 1997) (mortgage provisions permitting lender to recover attorney's fees are enforceable but fees must be reasonable)
- American Mortg. Co. v. Bateman (In re Bateman), 331 F.3d 821 (11th Cir. 2003) (confirmed plan binds creditors under §1327 even if plan conflicts with §1322)
- In re Powe, 278 B.R. 539 (Bankr. S.D. Ala. 2002) (preparing and filing a proof of claim can require legal analysis and may justify attorney fees)
- In re England, 586 B.R. 795 (Bankr. M.D. Ala. 2018) (Rule 3002.1(e) requires looking to underlying agreement and nonbankruptcy law; discussed reasonableness and HUD guidance)