In re Taal, Bk. No. 14-10163-JMD

2016 BNH 007

In re: Guylaine L. Taal, Debtor

Bk. No. 14-10163-JMD

UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW HAMPSHIRE

May 16, 2016

Chapter 13

Nancy H. Michels

Parnell, Michels & McKay, PLLC

Londonderry, NH

Attorney for the Debtor

Gregory T. Uliasz

Feniger & Uliasz, LLP

Manchester, NH

Attorney for St. Mary's Bank

MEMORANDUM OPINION

I. INTRODUCTION

Before the Court are two motions of the Debtor: (1) "Motion of Debtor for Fees to be Paid by St. Mary's Bank as a Sanction to Attorney for Guylaine L. Taal" (Doc. No. 165) (the "Fee Shifting Motion")¹ and (2) "Application for Fees Pursuant to Court Order (Doc. No. 152) Entered October 27, 2015" (Doc. No. 162) (the "Fee Application"). In the Fee Shifting Motion, the Debtor requests that the Court order St. Mary's Bank (the "Bank") to pay the legal fees she incurred objecting to the Bank's proof of claim, its notice of post-petition fees, expenses, and charges (Doc. Nos. 56 and 58) (together the "Objections), as well as defending a motion to compel the production of financial information (Doc. No. 138) (the "Motion to Compel"). The Debtorfiled the Fee Application in response to orders requiring the Bank to pay attorney's fees she incurred defending and prosecuting various contested matters involving the Bank. The following opinion sets out the Court's findings and conclusions with respect to both the Fee Shifting Motion and Fee Application, as both involve common facts and legal issues.

II. FACTS

The Court will set out only the general procedural background of this case. The Court has written two other published decisions in this case that contain more nuanced facts. See In re Taal, 520 B.R. 370 (Bankr. D.N.H. 2014) (Taal I) (denying Bank's motion to dismiss this bankruptcy case and for in rem relief from the automatic stay); In re Taal, 540 B.R. 24 (Bankr. D.N.H. 2015) (Taal II) (reducing Bank's attorney fee and expense claim based both on New Hampshire's fee shifting statute, NH RSA § 361-C:2, and on the basis that certain fees requested were unreasonable under the federal lodestar approach). The specific facts relevant to this decision involve only those contested matters for which the Debtor seeks legal fees.

The Bank holds a mortgage on the Debtor's primary residence. The Debtor recently confirmed a chapter 13 plan that pays the Bank's mortgage directly and cures the arrearage on the mortgage through the plan. The mortgage arrearage mostly consists of legal fees and costs that the Bank accrued pre-petition attempting to foreclose on its mortgage. Early in the case, the Debtor was successful in fending off the Bank's attempt to get this case dismissed as a bad-faith filing and to get in rem relief from the automatic stay. See Taal I, 520 B.R. at 370. After this legal fight was resolved, the parties began to litigate over the Bank's proof of claim and the post-petition legal fees and costs it was seeking to recover from the Debtor.

The Debtor first objected to the proof of claim and post-petition legal fees and costs in November 2014. Broadly, her objections fell into two categories: (1) errors the Bank made in accounting for the Debtor's pre-petition and post-petition mortgage payments and (2) the sizeable amount of legal fees and costs the Bank claimed it was owed. These objections were further complicated during the Spring of 2015 when the Bank erroneously issued several notices to the Debtor indicating that she was behind on her mortgage payments and demanding payment of legal fees incurred pre-petition. The Bank also reported this inaccurate information to the major credit bureaus. Over the course of 2015, the Court issued several written decisions resolving various facets of these disputes.

Accounting Disputes

The Court issued its first lengthy order, see Doc. No. 88 (the "First Accounting Order"), finding that the Bank had incorrectly calculated the amount of interest and principal due on the mortgage as of the petition date and directing the Bank to correctly account for those balances. After the Bank recomputed its accounting, it took another round of objections and responses before the parties were able to stipulate to the amount of pre-petition principal and interest due on the mortgage. Unfortunately, this truce was short-lived; virtually at the same time the parties were entering into the stipulation, the Bank was sending out erroneous collection notices to the Debtor. In response, the Debtor asked the Court to sanction the Bank for violations of the automatic stay, and the Bank moved to clarify the First Accounting Order, arguing that confusion regarding the Court's instructions was at least partly to blame for the erroneous collection notices.

The Court then issued its second major order, see Doc. No. 132 (the "Second Accounting and Sanctions Order"),² finding that the Bank had violated the automatic stay and improperly followed the First Accounting Order, with the result that the Bank's claim was still incorrect. To remedy this situation, the Court ordered the Bank to again fix its accounting and sanctioned the Bank for its violation of the automatic stay. The sanction included the following: (1) a flat $500 sanction to the Debtor for time she missed from work to attend the hearing, (2) a requirement that the Bank contact the credit bureaus to expunge the incorrectly reported delinquencies, and (3) a fee award to the Debtor, including her attorney's fees for filing the sanctions motion, objecting to the Bank's clarification motion, and expending time "tracking the remedies"³ provided for in the Second Accounting and Sanctions Order.

The Bank again recomputed the mortgage payment history and the Debtor again found additional problems with the accounting. See Doc. Nos. 137, 139. The Court resolved the dispute without a hearing, making a slight adjustment to the Bank's calculations. See Doc. No. 147. In this order, the Court awarded the Debtor further attorney's fees for having to file another objection.

Fee Disputes

During the same time the Court was resolving these disputes, it was also addressing the second part of the Debtor's Objections. To that end, the Bank and Debtor submitted a stipulated record detailing the attorney's fees the Bank was seeking to recover from the Debtor. The Court resolved these issues in its memorandum opinion, Taal II, 540 B.R. at 24. Taal II had the effect ofsubstantially reducing the Bank's attorney fee claim and awarding the Debtor attorney's fees pursuant to NH RSA § 361-C:2. Finally, because the Court had not yet determined the amount of attorney's fees to which the Debtor was entitled—with respect to any of its orders—it directed the Debtor to file the Fee Application. The Debtor complied and also filed the Fee Shifting Motion, seeking additional fees beyond those the Court had already awarded.

III. DISCUSSION

A. The Fee Shifting Motion

In the Fee Shifting Motion, the Debtor requests attorney's fees for the Objections and the Motion to Compel. These are attorney's fees that the Court has not yet awarded. The Debtor has three legal theories that support the Fee Shifting Motion: (1) that as the prevailing party she is entitled to legal fees pursuant to the terms of the note and mortgage with the Bank, (2) that the Court should sanction the Bank for failing to properly support its proof of claim and request for post-petition legal fees, and (3) that the Court should award the Debtor attorney's fees pursuant to 11 U.S.C. § 105(a).⁴ The Bank has specific legal arguments against each of the Debtor's theories of recovery. The Court will address these arguments when discussing the specifics of the Debtor's three requests. First, however, the Court will address the Bank's general objection to the Debtor recovering any attorney's fees via the Fee Shifting Motion.

i) Preclusion

The Bank argues that the Debtor is precluded from asking for attorney's fees for any of the attorney time covered in the Fee Shifting Motion because the Court already determined that the Debtor was not entitled to legal fees for those efforts. The substance of the Bank's argument is asfollows: the Debtor requested attorney's fees in the Objections; the Court issued orders on these pleadings, see First Accounting Order, Taal II, 540 B.R. at 28, and declined to award fees for any of the attorney time covered in the Fee Shifting Motion. To support this request, the Bank cites the Court's decision Tayla Nixon Site Developers, Inc. v. Stowe (In re Stowe), Adv. No. 11-1139-LHK, 2012 WL 6094126 (Bankr. D.N.H. Dec. 7, 2012). In Stowe, the Court briefly discussed the concepts of issue and claim preclusion. See id at *2 (citing Banco Santander de Puerto Rico v. Lopez-Stubbe (In re Colonial Mortg. Bankers Corp.), 324 F.3d 12, 16 (1st Cir. 2003) (discussing the elements of claim preclusion); Pisnoy v. Ahmed (In re Sonus Networks Inc., Shareholder Derivative Litigation), 499 F.3d 47, 58 (1st Cir. 2007) (discussing the elements of issue preclusion)). The Bank does not specify whether it is referring to issue or claim preclusion. The distinction does not make a difference in this context, however; an essential element of both issue and claim preclusion is a final judgment on the merits.

Here, the Court has not rendered a final judgment on the merits regarding the attorney's fees the Debtor is seeking in the Fee Shifting Motion. The Bank refers to several of the Court's orders, arguing that they resolved the Debtor's fee requests, but none of these orders did so. The First Accounting Order was just the first order on the Debtor's claim objection. In fact, in Taal II, the Court noted that it was resolving only specific disputes and leaving all other aspects of the Objections for future disposition. See Taal II 540 B.R. at 28 n.3. It should be evident from the procedural history of this case, that while the Court has made final decisions on discrete legal matters, it has not completely disposed of the Objections. For example, the Court has determined that the Debtor is entitled...