627 B.R. 705
Bankr. D.C.2020Background
- Debtor Stuart M. Davenport filed Chapter 13 on Oct 14, 2015 to stop a foreclosure and to address an $80,000 note secured by a deed of trust held by Babak Djourabchi & Monica Welt.
- Court confirmed an amended Chapter 13 plan on Jan 15, 2016: trustee to pay the allowed secured claim fixed as of confirmation, with postconfirmation interest at 6% per annum.
- On July 21, 2016 the court fixed the allowed secured claim at $55,717.03 (principal $80,000 + pendency interest - $26,422.90 credit).
- Davenport paid the trustee $31,474.50 in Jan 2017 and moved to modify his confirmed plan to reduce monthly payments, asserting the secured claim had been satisfied.
- Creditors countered that postpetition attorney fees/expenses (incurred and paid after confirmation) and additional interest remained unpaid and sought allowance/reimbursement; court had to decide (1) whether modification should be allowed and (2) which postconfirmation fees/expenses are recoverable and on what terms.
Issues
| Issue | Plaintiff's Argument (Davenport) | Defendant's Argument (Djourabchi & Welt) | Held |
|---|---|---|---|
| Whether the modified plan may be allowed because the secured claim is paid | Trustee disbursement + payments satisfied the allowed secured claim; modify to lower payments | Claim unpaid because of unpaid interest and postpetition fees/expenses | Modification granted: trustee funds + remaining small interest suffice to complete payment; modify plan approved |
| Scope of allowed secured claim under § 506(b) / rate for pendency interest | Amount fixed at confirmation controls; postconfirmation fee reimbursements are not part of § 506(b) claim | Creditors entitled to pendency interest and any reasonable contract fees allowed by § 506(b) | Allowed secured claim fixed as of confirmation; pendency interest at contract rate (10.5%) applies until confirmation; postconfirmation interest under plan = 6% |
| Recoverability and reasonableness of postconfirmation attorney fees/expenses | Fees largely not recoverable in full: debtor had no preconfirmation reimbursement obligation; many creditor positions lacked merit | Creditors entitled to reimbursement under deed of trust for reasonable fees paid to protect secured interest | Creditors may recover some postconfirmation fees/expenses but large portions disallowed as unreasonable under D.C. law; specific amounts allocated and majority disallowed |
| Effectiveness of debtor’s May 27, 2015 tender/check and whether creditors were required to accept it | Tender of $60,980 was sufficient to pay the loan and should be accepted | Tender defective: no 20-day prepayment notice required by Note; creditors reasonably refused | Tender rejected properly: prepayment notice requirement and ‘‘perfect tender in time’’ rule controlled; creditors acted in good faith in refusing |
Key Cases Cited
- Hoopai v. Countrywide Home Loans, 581 F.3d 1090 (9th Cir.) (§ 506(b) applies only to fees/interest incurred preconfirmation)
- Garner v. First United Sec. Bank (In re Garner), 663 F.3d 1218 (11th Cir.) (postconfirmation fees not governed by § 506(b))
- Milham v. Key Bank N.A. (In re Milham), 141 F.3d 420 (2d Cir.) (distinguishing pre- and postconfirmation fee treatment)
- Welzel v. Advocate Realty Inv., LLC (In re Welzel), 275 F.3d 1308 (11th Cir.) (oversecured creditor may recover reasonable contractual fees under § 506(b))
- Copeland v. Marshall, 641 F.2d 880 (D.C. Cir.) (lodestar method and limits on compensable hours)
- Johnson v. Georgia Highway Express, 488 F.2d 714 (5th Cir.) (factors for adjusting lodestar)
- Manchester Gardens, Inc. v. Great W. Life Assur. Co., 205 F.2d 872 (D.C. Cir. 1953) (under D.C. law, contractual fee clauses may be reduced or denied when creditor's claims lack substantial merit)
- Barron & Newburger, P.C. v. Texas Skyline, Ltd. (In re Woerner), 783 F.3d 266 (5th Cir.) (compensation may be allowed even when litigation fails, in certain § 330 contexts)