In re Moore

619 B.R. 35

IN RE Katina M. MOORE, Debtor.

BK 18-12444 CLB

United States Bankruptcy Court, W.D. New York.

Signed August 4, 2020

Barry H. Sternberg, Esq., Barry Sternberg Law Office, 4245 Union Road, Suite 101, Cheektowaga, New York 14225, Attorney for Debtor

Woods Oviatt Gilman LLP, Aleksandra K. Fugate, Esq., of counsel, 500 Bausch & Lomb Place, Rochester, New York 14604, Attorneys for M&T Bank

DECISION & ORDER

Bucki, Chief U.S.B.J., W.D.N.Y.

The debtor objects to the claim of a secured creditor for reimbursement of legal costs incurred post-petition. A central issue is whether guidelines of the Department of Housing and Urban Development control in determining the reasonableness of these charges.

Katina Moore filed a petition for relief under Chapter 13 of the Bankruptcy Code on November 26, 2018. Utilizing Official Bankruptcy Form 113, the debtor also filed a proposed plan. Among other provisions, the plan contemplated a cure of outstanding arrears on a mortgage that M & T Bank holds on the debtor's home at 20 Dakota Street in the City of Buffalo, New York. Part 3.1 of the plan includes the following recitation: "In the absence of a contrary timely filed proof of claim, the amounts stated below are controlling." The debtor then represented that the outstanding arrears totaled $3,000, and that the current installment payment on the mortgage was $880.

On January 29, 2019, M & T Bank filed an objection to confirmation. This objection raised two concerns. First, the mortgagee asserted actual arrears of $3,891.13, rather than the sum of $3,000 listed in the debtor's plan. Second, the bank noted that regular monthly mortgage payments were in the amount of $890.87, and not the $880 that the debtor had indicated. Then on February 1, 2019, M & T Bank filed a proof of claim that reiterated the same facts recited in the plan objection. At a confirmation hearing on April 2, 2019, the Court was advised that the parties had resolved all disputes. Accordingly, on April 18, the Court approved a plan whose modified provisions included the debtor's commitment to resume regular monthly mortgage payments and to cure the amount of arrears that the bank claimed as due and owing.

Bankruptcy Rule 3002.1(c) imposes a noticing requirement on lenders holding claims that are secured by the debtor's principal residence, as follows:

"The holder of the [secured] claim shall file and serve on the debtor, debtor's counsel, and the trustee a notice itemizing all fees, expenses, or charges (1) that were incurred in connection with the claim after the bankruptcy case was filed, and (2) that the holder asserts are recoverable against the debtor or against the debtor's principal residence."

Pursuant to this rule, the attorneys for M & T Bank served a notice that the debtor would be charged for post-petition fees totaling $1,150. In papers filed on June 18, 2020, counsel advised that these charges include $150 for its review of the Chapter 13 plan, $500 for preparation of a plan objection, and $500 for preparation of a proof of claim. Pursuant to Bankruptcy Rule 3002.1(e), the debtor now challenges these items. In particular, she asserts that $1,150 "is excessive for the amount of time that it would normally take to perform such a routine task."

The claim of M & T Bank is based on a note that Katina Moore signed on June 4, 2010. Prepared on a form approved for FHA insured loans, this note includes the debtor's promise "to pay costs and expenses including reasonable and customary attorneys' fees for enforcing this Note." Counsel for M & T contends that its charges of $1,150 are reasonable and customary, in that they are consistent with the HUD Schedule of Standard Attorney Fees. In relevant part, this schedule states that "[t]he maximum attorney fee varies based on the chapter under which the bankruptcy action is filed." For Chapter 13 bankruptcies, "the maximum allowable fee" includes charges for proof of claim preparation and plan review in the amount of $650, and charges for an objection to planin the amount of $500. See http://www.hud.gov/sites/documents/16-03ML.PDF.

The HUD Schedule of Standard Attorney Fees merely sets a maximum permissible charge. By its language, therefore, this schedule suggests only a ceiling and not a floor of reasonableness. A finding of reasonableness must still address at least two considerations: whether the services were necessary and whether the proposed charges are appropriate under the circumstances. For...