Carrington at Stonebridge Condominium Association v. Galanos

Filing 10

OPINION AND ORDER: The decision of the Bankruptcy Court is AFFIRMED. Signed by Judge William C Lee on 1/26/2015. (tc)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
CARRINGTON AT STONEBRIDGE
CONDOMINIUM ASSOCIATION,

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Appellant/Creditor,
v.
GEORGE P. GALANOS,
Appellee/Debtor.

CIVIL NO. 2:14cv270
(Bankruptcy No. 10-20144 kl)

OPINION AND ORDER
This matter is before the court on an appeal from the Bankruptcy Court. The
Appellant/Creditor, Carrington as Stonebridge Condominium Association, filed its brief on
November 14, 2014. The Appellee/Debtor, George P. Galanos, filed his brief on November 26,
2014.
For the following reasons, the Decision of the Bankruptcy Court will be affirmed.
Discussion
On January 19, 2010, the Appellee/Debtor filed a Voluntary Petition for Relief under
Chapter 13 of the Bankruptcy Code. The Appellant/Creditor is a secured creditor of the Debtor
in the approximate amount of $120,000.00, and holds a secured interest in the luxury
condominium owned by the Debtor at 2310 Carrington Court, Unit 103, Naples, Florida (the
“Naples Condo”), which is not the Debtor’s primary residence.
Although the Debtor has now filed three separate Chapter 13 Plans with the Bankruptcy
Court during the past five years, the Plan has not yet been confirmed. The original confirmation
hearing was scheduled for July 7, 2010 and the most recent pre-hearing on the Plan was held by
the Bankruptcy Court on September 16, 2014.

The Debtor filed numerous objections to the claims of creditors, including the prepetition Proofs of Claim filed by the Appellant/Creditor. The Proofs of Claim are evidenced by a
Judgment entered against the Debtor prior to the commencement of the bankruptcy case. On
November 14, 2013, the Debtor stipulated that the claims of the Creditor should be treated as
fully secured under the Plan. The Debtor also agreed to the principal amount due and owing, but
disputed the attorney fees claimed by the Creditor.
The Creditor holds two different claims against the Debtor: (1) a fully secured claim for
unpaid assessments and maintenance services for the Naples Condo, and (2) a fully secured claim
for related charges and services at the Stonebridge Country Club.
The Debtor has failed to pay his post-petition obligations to the Creditor and is also in
default on his payments to the Chapter 13 Trustee. As a result the secured claims have tripled in
size.
In the Plan, the Debtor acknowledges the pre-petition secured claims of the Creditor and
proposes to pay the Creditor $1,157.55 per month during the life of the Plan. However, the
Debtor has failed to pay the Creditor its ongoing monthly obligations during the past 58 months.
Thus, the total amount now owing to the creditor is $119,765.62.
The sole factual dispute on appeal is whether the Creditor should be allowed to assess the
attorney fees and costs to its fully secured claims against the Naples Condo. The amount in
controversy is $24,020.80 and covers both the litigation before the Chapter 13 case was filed in
January of 2010 and the amounts expended in defending against the Debtor’s objections to the
Creditor’s claims and filing several objections to the Plan.
The Bankruptcy Court determined that none of the attorney fees and costs should be
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allowed and entered an Order to that effect on May 23, 2014. The procedure leading up to this
Order is as follows.
On or about October 4, 2012, the Bankruptcy Court held a partial hearing and issued its
Order where the Creditor and Debtor stipulated in open court that Creditor will file on or before
November 1, 2012, an itemized statement setting out all of the attorney fees its claims and how
interest on its claim is calculated. The parties further stipulated that the Debtor will within 30
days thereafter file a detailed, line-item objection as to each discrete entry on the statement that
Debtor asserts is objectionable setting out a factual or legal basis for any such objection. The
Bankruptcy Court ordered that the attorney fee claim by Creditor shall be a detailed
chronological statement on a daily basis by the tenth of the hour of the services rendered, time
expended and expenses; and, that said statement shall set out specifically who performed each
item of service, and the hourly rate charged for the services of each person.
It is undisputed that the Creditor failed to comply with the stipulated November 1, 2012
deadline for the filing of its itemized statement. Thus, on December 12, 2012, the Debtor filed
its “Notice of Expiration of Time to File Evidence and For Court to Rule on Matters Previously
Submitted.” In response, on January 17, 2013, the Bankruptcy Court filed an “Order to Show
Cause Why Motion and As Assignee of Stonebridge Condo Association (“Carrington”), and As
Assignee of Stonebridge Country Club (“Stonebridge”) Should Not Be Dismissed For Want of
Prosecution as to Attorney’s Fees Only Pursuant To Order Dated October 5, 2012 (Docket No
486)” directed to Appellant/Creditor for its failure to comply with the Court imposed deadline of
November 1, 2012 to file its itemized statement setting out all of the attorney fees it claims by it
and how interest on its claim is calculated.
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On or about February 8, 2013, Appellant/Creditor filed an “Objection of Carrington At
Stonebridge Condominium Association to the Order to Show Cause Issued by the Court” as its
response to the Bankruptcy Court’s “Order to Show Cause” along with its statement setting out
all of the attorney fees it claims. However, the statement of attorney fees claimed by
Appellant/Creditor failed to comport with the Bankruptcy Court’s Order of October 5, 2013
which specifically ordered that Appellant/Creditor file an itemized statement setting out all of the
attorney fees it claims, how interest on its claim is calculated in a detailed chronological
statement on a daily basis by the tenth of the hour of the services rendered, time expended and
expenses, along with specificity on who performed each item of service, and the hourly rate
charged for the services of each person.
On or about February 24, 2013 and as provided by the Bankruptcy Court’s Order of
October 5, 2012, Appellee/Debtor filed its “Debtor’s Rebuttal & Objection to the Objection of
Carrington at Stonebridge Condominium Association to the Order to Show Cause Issued by the
Court” whereas it detailed, by line-item objection as to each discrete entry on the statement of
attorney fees claimed by Appellant/Creditor that Appellee/Debtor asserted is objectionable,
setting out a factual or legal basis for any such objection. In its rebuttal and objection,
Appellee/Debtor specifically objected that the total attorney fees claimed along with the costs and
expenses being sought were excessive and not reasonable; did not comport with the Bankruptcy
Court’s Order of October 5, 2012. Appellee/Debtor further objected and specifically pointed out
that unreasonable services were rendered.
On or about April 24, 2013, the Bankruptcy Court held a Telephonic Status Conference
where it withdrew its Show Cause Order but raised sua sponte the threshold legal issue of
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whether Appellant/Creditor may be awarded an administrative expense claim per 11 U.S.C.
§503(b)(3)(D) in a chapter 13 case.
On or about November 18, 2013, the Bankruptcy Court held a Status Conference. At the
Status Conference, the parties stipulated that the Application for Administrative Expenses filed
by Appellant/Creditor will be deemed to be treated as a Motion to Allow a Secured Claim rather
than an Administrative Claim. Appellee/Debtor stipulated that it would allow and pay the
principal amount of said claim but objected to the fees and expenses with said issue to be decided
by the Bankruptcy Court. At the Partial Hearing held on or about October 4, 2012, the Parties,
Appellant/Creditor and Appellee/Debtor, stipulated (Order of October 5, 2012) that the principal
amount of said claim for Carrington is $7,350.00 for quarter ending September 30, 2012 and the
amount of said claim for Stonebridge is $12,986.00 for quarter ending September 30, 2012.
On or about May 23, 2014, the Bankruptcy Court decided the issue of attorney fees and
expenses and issued its Memorandum Opinion and Order on Motion of Carrington At
Stonebridge Condominium Association and As Assignee of Stonebridge Country Club to Compel
Debtor to Pay Administrative Expenses and the Objection Thereto By The Chapter 13 Debtor
George P Galanos, Pro Se and Order which denied Appellant/Creditor’s fee request in its
entirety. Appellant/Creditor has appealed this decision by the Bankruptcy Court to this Court
pursuant to 28 U.S.C. §158.
A bankruptcy court’s legal conclusions are reviewed de novo and its findings of fact for
clear error. Kovacs v. U.S., 614 F.3d 666, 672 (CA 7, 2010). Where the Bankruptcy Code
commits a decision to the discretion of the bankruptcy court, the reviewing court reviews that
decision only for abuse of discretion. In re Fortney, 36 F.3d 701, 707 (CA 7, 1994). A court
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abuses its discretion when its decision is premised on an incorrect legal principle or a clearly
erroneous factual finding, or when the record contains no evidence on which the court rationally
could have relied. Wiese v. Cmty Bank of Cent. Wis., 552 F,3d 584, 588 (CA 7, 2009). A finding
is “clearly erroneous” when although there is evidence to support it, the reviewing court on the
entire evidence is left with the definite and firm conviction that a mistake has been committed. In
re Smith, 582 F3d 767, 777 (CA 7, 2009). If the bankruptcy court’s account of the evidence is
plausible in light of the record viewed in its entirety, the reviewing court will not reverse its
factual findings even if the reviewing court would have weighed the evidence differently. Stamat
v. Neary, 635 F3d 974, 979 (CA 7, 2011).
In the present case, Appellant/Creditor’s appeal of the Bankruptcy Court’s Decision is not
based upon the findings of fact by the Bankruptcy Court. Appellant’s appeal is seeking review of
the Bankruptcy Court’s decision based upon its belief that the Bankruptcy Court erred in its legal
conclusions.
The case cited by Appellant/Creditor, Sun ‘n Fun Waterpark,, LLC, 408 BR 361 (CA 10
BAP, 2009) deals with pre-petition attorney fees. The holding of Sun ‘n Fun Waterpark holds
that Bankruptcy Rule 2016 does not apply to pre-petition attorney fees. Pre-petition fees are not
at issue in this case. Thus, the holding of Sun ‘n Fun Waterpark is not applicable to the case at
bar.
This Court holds that the Bankruptcy Court did not err in its Decision denying
Appellant/Creditor’s fee application. Appellant/Creditor failed to comply with the Order of
October 5, 2012 which specifically expressed the parameters for submission of the itemized
attorney fee statement for the Bankruptcy Court’s consideration. Appellee/Debtor objected to the
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fees and expenses sought by Appellant/Creditor as being excessive and not reasonable. See In Re
Pierce, 165 B.R. 252 (Bankr, N.D. Ind., 1994). Appellee/Debtor further objected to the hourly
rate charged by the attorney for Appellant/Creditor as being excessive of the prevailing hourly
rate in the District, along with the amount of time expended as being excessive and not
reasonable. Appellee/Debtor further objected to the fee application as set out in the various
attorney fee statements filed as not comporting to the expressed parameters as set forth
specifically in the Bankruptcy Court’s Order of October 5, 2012, including duplicative charges
by multiple entities for the same service.
Fed R Bank Pro R 2016 provides in relevant part the requirements for an entity seeking
compensation. The Rule states that an entity seeking compensation must set forth a detailed
statement of the services rendered, time expended and expenses incurred, along with the amounts
requested. Fed R Bank Pro R 2016. All of the necessary information for the court to decide a fee
application must be in the fee application itself. The applicant has the burden of proof to show
entitlement to fees. In re Pettibone Corp, 74 B.R. 293, 299 (Bankr. N.D. Ill., 1987). The failure
to do so justifies the rejection of the request for fees. Matter of Central Ice Cream Co., 836 F3d
1068, 1074 (CA 7, 1987).
In deciding a fee application, the District Court for the Northern District of Indiana in
Cohen & Thiros, PC v. Keen Enterprise, Inc., 44 B.R. 570 (N.D. Ind., 1984) held that “the
records must reveal not only the duration, but the substance of the activity” and that “an
acceptable fee petition will list each activity, its date, the attorney performing the work, a specific
description of the subject matter, and the time spent on each activity.” Cohen & Thiros, PC, 44
B.R. at 573, as cited by the Bankruptcy Court in its Decision. The fees requested must be
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determined within a reasonable time and the failure to do so may warrant denial of the
application. Matter of Central Ice Cream Co., 836 F.2d at 1074 cited in Matter of Hunt’s Health
Care, Inc., 161 B.R. 971 at 980 (Bankr. N.D. Ind.,1993).
Minimum billing time should be in one-tenth of an hour which is reasonable and the more
accurate method of time keeping. In re Wabash Valley Power Ass’n, Inc., 69 B.R. 471, 478
(Bankr. S.D. Ind., 1987). Time records must show how time was spent with specificity versus
generality. In re Pettibone, 74 B.R. at 301. Lumping of time entries is not appropriate and may
be grounds to deny compensation. Cohen & Thiros, P.C., 44 B.R. at 573.
A court’s discretion to award a reasonable attorney fee extends to more than just whether
a fee will be awarded, its discretion may result in no award for attorney fees. Brown v Stackler,
612 F.2d 1057, 1059 (CA 7, 1980), cited in In Re Pierce, 165 B.R. at 254. The court’s discretion
encompasses not only whether a fee will be awarded but also the “the quantum of the fee to be
awarded.” supra. An applicant seeking an attorney fee award must exercise “billing judgment”:
“Cases may be overstaffed, and the skill and experience of lawyers
vary widely, Counsel for the prevailing party should make a good faith
effort to exclude from a fee request hours that are excessive,
redundant, or otherwise unnecessary, just as a lawyer in private
practice ethically is obligated to exclude such hours from his fee
submission. In the private sector, billing judgment is an important
component in fee setting. It is no less important here. Hours that are
not properly billed to one’s client are not properly billed to one’s
adversary . . .” Hensley v. Eckerhart, 461 U.S. 424, 434; 103 S.Ct.
1933, 1939-40; 76 L.E.2d 40 (1983).

Billing entries which are vague are impossible to evaluate and determine whether
“appropriate billing judgment” was exercised. See Tully v. Haughee, (In Re Haughee) Case No.:
05- 68688 jpk Adv No 06-6079 at 33 (Bankr. N.D. Ind., 2012) citing to Needham v. Innerpac,
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Inc., 2008 WL 5411638, 2 (N.D. Ind., 2008). The burden is on the applicant seeking an attorney
fee award to demonstrate that the charges are reasonable and properly billed. In Re Haughee,
supra. Also see In re Hunt’s Health Care, Inc., 161 B.R. 971 at 976 (Bankr. N.D. Ind., 1993).
In the case at bar, the Bankruptcy Court properly decided the fee application of
Appellant/Creditor in its Decision of May 23, 2014. The Bankruptcy Court specifically found
that none of the attorney fee statements filed with the Bankruptcy Court complied with the
Bankruptcy Court’s Order of October 5, 2012. In addition, the Bankruptcy Court found that many
of the entries in the fee application were replete with numerous entries that constitute improper
lumping or which were duplicative. Further, the Bankruptcy Court found that many of the entries
were made by other unidentified entities – and without disclosure of that entity’s identity, hourly
rate or position. Moreover, the Bankruptcy Court found that many of the entries were vague and
impossible to evaluate. Thus, the Bankruptcy Court found that it could not determine whether
proper billing judgment was not exercised. Having failed to comply with the expressed
parameters as set out in its Order of October 5, 2012, the Bankruptcy Court found that
Appellant/Creditor failed to meet its burden. As a result of Appellant/Creditor failing to meet its
burden, the Bankruptcy Court denied its fee application in its entirety. It is abundantly clear that
the Bankruptcy Court’s Decision was well within its discretion. Accordingly, the Decision of the
Bankruptcy Court should be affirmed and the appeal of the Appellant/Creditor denied.

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Conclusion
On the basis of the foregoing, the Decision of the Bankruptcy Court is hereby
AFFIRMED.

Entered: January 26, 2015.

s/ William C. Lee
William C. Lee, Judge
United States District Court

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