Meritor Mortgage Corp. v. Salazar (In Re Salazar)Meritor Mortgage Corp. v. Salazar (In Re Salazar)
OPINION
Meritor Mortgage Corporation, West (“Meritor”) appeals from an order of the bankruptcy court rеfusing Meritor’s request for reasonable attorney’s fees under section 506(b) of the Bankruptcy Code.
The trial court’s order denying attorney’s fees to the appellant was expressly predicated on the Ninth Circuit case of
In re Johnson,
FACTS
The bankruptcy court made the following findings of fact which are undisputed on appeal. 1 The Debtor is the owner of record on a certain piece of real property. Meritor held a first Deed of Trust on the subjеct property in the amount of $72,885.72. The total liens against the property amounted to $84,883.73. The debtor filed for relief under Chapter 7 on April 24, 1986, and on July 31, 1986 was in default on payments on a promissory note secured by the Deed of Trust. The debtor’s schedules listed the subject property with a fair market value of $80,000 and under 11 U.S. C. § 506(b), Meritor is an oversecured creditor. Both the note and the deed of trust provide by their terms for the payment of attоrney’s fees by the obligor in the event legal action is instituted on the note.
Meritor filed with the bankruptcy court a Motion For Relief From Automatic Stay on July 8, 1986. After a hearing on the matter, the trial court entered an order on October 9, 1986, terminating the automatic stay, but specifically ordered that Meritor was not entitled to attorney’s fees. In the trial court’s Conclusions of Law it states:
[Meritor], under In re Johnson,756 F.2d 738 (1985) is not entitled to recover the attorneys’ feеs incurred by it in the within Motion proceeding.
... [E]xcept for this Court’s finding that [Meritor’s] request for attorneys fees is barred by In re Johnson, supra, [Mеritor] would otherwise be entitled to recover such fees under 11 U.S.C. Section 506(b).
Appendix to Appellant’s Opening Brief, Exhibit D.
DISCUSSION
This Panel will review a bankruptcy сourt’s conclusions of law
de novo. Anderson v. City of Bessemer,
(b) To the extent an allowed secured claim is secured by property the value of which, ... is greater than the amount of such claim, there shall be allowed to the holder of such claim interest on such claim and any reasonable fees, costs, or charges provided for under the agreement under which such claim arose.
11 U.S.C. § 506(b).
Although section 506(b) does not use the specific language of “attorney’s fees,” the legislative history “make[s] it quite clear that attorneys [sic] fees and costs that are agreed to by contracting parties are to be allowed an oversecured claimant regardless of contrary law.”
In re Carey,
Thus, under section 506(b) four elements must be met in order to recover attorney’s fеes when bringing a motion to lift the automatic stay: 1 — it is an allowed secured claim; 2-the creditor is “overse-cured;” 3-the fees are “reasonable” under the circumstances; and 4-the fees are provided for undеr the agreement. In the instant case, the undisputed facts conclusively establish that Meritor is an overse-сured creditor of an allowed secured claim and that the underlying note and deed of trust provided for аttorney’s fees. Accordingly, the only issue before this Panel is whether In re Johnson, supra, prohibits such an award.
In the
Johnson
case, the
debtors
requested attorneys’ fees under Californiа Civil Code section 1717 for having successfully opposed a motion for relief from the automatic stay brought by a real property secured creditor. As a basis for its decision, the Ninth Circuit stated, “[n]o federal statutе provides for an allowance of attorneys’ fees to the debtors in circumstances as in this casе.”
The [debtors] argue that because the [secured creditors] may have been able to recover attornеy’s fees under 11 U.S.C. [section] 506(b), the debtors should be allowed to recover their attorney’s fees. This argument is inaрposite. Section 506(b) concerns only the award of attorney’s fees to oversecured creditоrs with a contractual right to reimbursement and is not applicable to the [debtors]. See In re Carey,8 B.R. 1000 , 1002-04 (Bankr.S.D.Cal.1981) (court did not construe section 506(b) to incorporate stаte law on the availability of attorney’s fees).
CONCLUSION
It is clear from the legislative history to section 506(b) that the Cоngressional intent was to allow oversecured creditors to recover reasonable attornеy’s fees when the underlying agreement so provided. Further, the Ninth Circuit Court of Appeals expressly recognizеd this important secured creditor’s right and in no way intended that their decision in In re Johnson, supra, should be construed to negate such right.
We, therefore, hold that the bankruptcy court misapplied
In re Johnson
to the instant case. Accordingly, this Panel hereby VACATES that portion of the bankruptcy court’s order which provides that Meritor is not entitled to a reasonable attorney’s fees. Further, this matter is hereby REMANDED to the bankruptcy court to determine the extent tо which Meritor’s fees were reasonable and to award such fees as a
Notes
. The appellees have failed to file a responsive brief on this matter.
. It is well recognized that in reviewing any award for fees the bankruptcy court possesses inherent discretionary powers and "will consider such factors as whether the attorneys [sic] fees and costs were incurred in an action reasonably calculated to protect creditors’ rights.”
In re Carey,