Ovation Services, LLC
Filing
7
OPINION AND ORDER re: The judgment of the Bankruptcy Court is VACATED. This case is REMANDED for further proceedings consistent with this opinion. (Signed by Judge Charles Eskridge) Parties notified.(jengonzalez, 4)
Case 4:22-cv-00424 Document 7 Filed on 06/21/22 in TXSD Page 1 of 3
United States District Court
Southern District of Texas
ENTERED
June 21, 2022
Nathan Ochsner, Clerk
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
FELIX AUGUSTO AUZ
SR and ROCIO DEL
CARMEN AUZ,
Debtors,
vs.
OVATION SERVICES
LLC,
Appellant.
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CIVIL ACTION NO.
4:22-cv-00424
JUDGE CHARLES ESKRIDGE
OPINION AND ORDER
The United States Bankruptcy Court denied an
application under 11 USC § 506(b) by Appellant Ovation
Services LLC for the reimbursement of fees and expenses,
finding that such fees and expenses had previously been
paid in full. Ovation appeals from that order. Dkt 4. The
judgment is vacated with the case remanded for further
proceedings consistent with this opinion.
A district court functions as an appellate court when
reviewing the decision of a bankruptcy court as to a core
proceeding, thus applying the same standard of review as
would a federal appellate court. See In re Webb, 954 F2d
1102, 1103–04 (5th Cir 1992). Findings of fact are reviewed
for clear error. In re Seven Seas Petroleum Inc, 522 F3d 575,
583 (5th Cir 2008); see also Fed R Bankr P 8013.
At hearing, it appeared that the Bankruptcy Court
misapprehended the previous fees and expenses that had
been paid as compared to the fees and expenses that were
subject to the pending request. Dkt 6. This is due primarily
to the fact that the Bankruptcy Court canceled the noticed
Case 4:22-cv-00424 Document 7 Filed on 06/21/22 in TXSD Page 2 of 3
hearing on the application and instead denied it solely
based on the papers, even though unopposed.
To be sure, the business affairs of Debtors Felix
Augusto Auz Sr and Rocio Del Carmen Auz (together,
Debtors) made for a complicated bankruptcy proceeding,
even if not dealing with a large amount at issue. Requiring
time and attention at the outset were permission for the
sale of certain of Debtors’ real estate, agreement between
the parties regarding repayment of Ovation’s related tax
loan, and defaults in that regard. See ROA 115–19 (parties’
agreed order), 303 (notice of default), 135–47 (sale motion).
Debtors in the midst of this filed their first plan of
reorganization on July 31, 2021. ROA 120–32. That plan
asserted that Ovation’s loan would be paid in full upon
approval by the Bankruptcy Court of Debtors’ emergency
motion for the sale of property subject to that loan.
ROA 126. Debtors’ sale motion was ultimately granted on
September 1st. The order of the Bankruptcy Court in that
regard provided terms of the sale and amounts owed to
objecting parties. Of import here, this included $7,292.25
to Ovation for attorney fees and costs accrued as of
August 31, 2021. ROA 251–52.
Due to various issues the sale didn’t occur in
September 2021 as expected, instead closing later that year
on December 1st. Ovation received a wire transfer from
Fidelity National Title Insurance on December 2nd in the
amount of $220,928.57. ROA 334. Contending this amount
was insufficient to cover post-petition claims as the result
of the delayed sale—being $7,726.45 in attorney fees and
expenses—Ovation objected to entry of Debtors’ initial
reorganization plan on December 13th. ROA 305–12.
Debtors then twice amended their plan, each time
asserting no balance owed to Ovation. See ROA 341–53
(first amended), 354–66 (second amended).
Maintaining that it hadn’t been properly paid, Ovation
ultimately objected to Debtors’ then-pending plan on
December 20st and filed an application for reimbursement
of fees and expenses pursuant to 11 USC § 506(b) on
December 28th. ROA 367–70 (objection), 382–90
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Case 4:22-cv-00424 Document 7 Filed on 06/21/22 in TXSD Page 3 of 3
(application). The application sought reimbursement in the
amount of $7,726.45 for attorney fees and expenses
incurred “from the date after the Sale Order was entered
and the date of the Application”—thus being the period of
September 3rd to December 21st of 2021. Dkt 4 at 7; see
also ROA 385.
No party objected to the application. Hearing was set
for January 26, 2022. ROA 403–04. But the Bankruptcy
Court canceled the hearing and denied the application on
January 24th, explaining that “under the Sale Order . . .
Ovation has previously been paid in full.” ROA 408.
Ovation’s single issue on appeal is whether the
Bankruptcy Court erred in denying its unopposed
application without notice of the grounds and a hearing.
Dkt 4 at 4. It did. To be clear, the $7,726.45 presently
sought by Ovation is and remains an amount wholly
separate from the prior $7,292.25 it previously sought and
received. ROA 252. Factual conclusion to the contrary was
clearly erroneous. It needn’t be decided further whether
cancelation of the hearing and denial of the unopposed
application was itself legal error. But the facts leading to
the factual error would no doubt have been clarified and
understood had the hearing proceeded as scheduled.
The judgment of the Bankruptcy Court is VACATED.
This case is REMANDED for further proceedings
consistent with this opinion.
SO ORDERED.
Signed on June 21, 2022, at Houston, Texas.
__________________________
Hon. Charles Eskridge
United States District Judge
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