Trevino v. U.S. Bank Trust, N.A. (In re Trevino)

633 B.R. 485

IN RE: Jose Sr. TREVINO and Teresa Trevino, Debtors.

Teresa Trevino and Jose Sr. Trevino, Plaintiffs,

v.U.S. Bank Trust, N.A. and Caliber Home Loans, Inc., Defendants.

CASE NO: 10-70594

ADVERSARY NO. 13-7031

United States Bankruptcy Court, S.D. Texas, McAllen Division.

Signed September 10, 2021

Catherine Stone Curtis, Pulman, Cappuccio & Pullen, LLP, McAllen, TX, Karen L. Kellett, Caitlyn Nicole Wells, Theodore O. Bartholow, Kellett & Bartholow PLLC, Dallas, TX, for Plaintiffs.

Michael Peter Parmerlee, Golden Operating Corporation, Richardson, TX, Melissa S. Hayward, Zachery Z. Annable, Hayward & Associates PLLC, Julian Preston Vasek, Munsch Hardt Kopf & Harr P.C., Dallas, TX, for Defendants.

MEMORANDUM OPINION

Eduardo Rodriguez, United States Bankruptcy Judge

U.S. Bank Trust, N.A., as trustee for LSF8 Master Participation Trust, and Caliber Home Loans, Inc. seeks summary judgment as to Teresa and Jose Trevino's claims for compensation and expenses as set forth in the application of Plaintiffs’ counsel for "Allowance of Compensation and Reimbursement of Expenses" jointly filed by Kellett & Bartholow PLLC and Stone Curtis PLLC. On July 15, 2021, the Court held a hearing. For the reasons stated herein, summary judgement is granted against Kellett & Bartholow PLLC and Stone Curtis PLLC regarding their fees between December 2013 and July 7, 2014. If Kellett & Bartholow PLLC and Stone Curtis PLLC carry their burden at trial to show that their fees and expenses are reasonable and necessary for that time period, they will be awarded no more than $1,837.50 in fees and $247.99 in expenses. Additionally, as for Kellett & Bartholow PLLC and Stone Curtis PLLC's fees between July 8, 2014, and March 21, 2016, if they carry their burden at trial to show that their fees and expenses are reasonable and necessary for that time period, they will be awarded no more than $28,105.00 in fees and $1,871.56 in expenses. The remainder of U.S. Bank Trust, N.A., as trustee for LSF8 Master Participation Trust, and Caliber Home Loans, Inc.’s motion for summary judgment is denied. Additionally, the Court denies Kellett & Bartholow PLLC and Stone Curtis PLLC's request for summary judgment that they are entitled to fees and costs for their defense of the fee application.

As required by Rule 56(f)(1), notice is hereby given to U.S. Bank Trust, N.A., as trustee for LSF8 Master Participation Trust, and Caliber Home Loans, Inc. of the Court's intention to grant summary judgment for Kellett & Bartholow PLLC and Stone Curtis PLLC, finding that they are entitled to recover reasonable and necessary attorneys’ fees pursuant to this Court's prior judgment awarding fees pursuant to 11 U.S.C. § 105(a) and 15 U.S.C. § 1692k(a)(3) and that in determining the necessity and reasonableness of their requested fees and expenses, there is no proportionality analysis required in connection with Teresa and Jose Trevino's damages award. U.S. Bank Trust, N.A., as trustee for LSF8 Master Participation Trust, and Caliber Home Loans, Inc. have twenty days from the entry of this Court's accompanying order to respond to the Court's notice. Kellett & Bartholow PLLC and Stone Curtis PLLC are granted twenty days from the date of U.S. Bank Trust, N.A., as trustee for LSF8 Master Participation Trust, and Caliber Home Loans, Inc.’s response, if any, to reply. No other briefing will be accepted on the matter.

A genuine dispute of material fact remains regarding the amount, necessity and reasonableness of Kellett & Bartholow PLLC and Stone Curtis PLLC's fees and expenses which will be determined after a final trial on the merits.

I. BACKGROUND

1. On August 25, 2010, Jose Trevino ("Mr. Trevino ") and Teresa Trevino ("Ms. Trevino "), (together, "Plaintiffs ") filed a voluntary petition for relief under chapter 13 of title 11 of the United States Code, commencing the above-captioned bankruptcy case ("Bankruptcy Case ").¹

2. On August 25, 2010, Ellen Stone of The Stone Law Firm, P.C. ("Stone Firm "), in McAllen, Texas filed her "Bankruptcy Rule 2016(b) Disclosure and Application for Approval of Fixed Fee Agreement" ("Fixed Fee Agreement ") setting forth the services to be rendered by, and fees to be paid to Stone as counsel for the Trevinos in their Bankruptcy Case.² The Fixed Fee Agreement specifically states that the fixed fee arrangement set forth therein "does not include ... [r]epresentation of the Debtors in an adversary proceeding, either as a plaintiff or a defendant."³

3. On August 26, 2010, the Court approved the Fixed Fee Agreement.⁴

4. On December 31, 2010, HSBC Mortgage Services, Inc. ("HSBC "), the holder of the loan on Plaintiffs’ residential property ("Property "), filed a proof of claim in Plaintiffs’ Bankruptcy Case ("Claim #21 ").⁵

5. On July 24, 2013, HSBC filed its "Notice of Post-Petition Mortgage Fee, Expenses, and Charges" ("3002.1 Notice "),⁶ claiming that it paid, inter alia, certain 2010 ad valorem taxes on the Property in the amount of $2,933.83.⁷

6. On November 18, 2013, U.S. Bank Trust, N.A., as trustee for LSF8 Master Participation Trust ("USBT ") acquired Plaintiffs’ loan on the Property ("Loan ") from HSBC, and Caliber Home Loans, Inc. ("Caliber ," and together with USBT "Defendants ") began servicing the Loan.⁸ That same day, USBT filed its "Transfer of Claim Other than for Security" ("Claim Transfer Notice ").⁹ The Claim Transfer Notice transferred Claim #21 from HSBC to USBT.¹⁰

7. On December 30, 2013, Plaintiffs filed the instant adversary proceeding.¹¹

8. On January 2, 2015, the servicing of Plaintiffs’ Loan was again transferred, this time to Select Portfolio Servicing, Inc.¹²

9. On February 25, 2015, Plaintiffs’ Loan was transferred by USBT to Wilmington Savings Fund Society, FSB, d/b/a Christiana Trust, as Indenture Trustee, for the CSMC 2015-RPL1 Trust, Mortgage-Backed Notes, Series 2015-RPL1.¹³

10. On March 12, 2015, Plaintiffs filed an amended complaint ("Amended Complaint ").¹⁴ The gravamen of Plaintiffs’ complaint was:

HSBC's 3002.1(c) Notice started a chain reaction that would have destroyed Plaintiffs’ bankruptcy case and their ability to save their home from foreclosure. The chapter 13 Trustee filed a motion to dismiss the [Plaintiffs’] bankruptcy case because payment of HSBC's 3002.1(c) Notice would cause Plaintiffs’ chapter 13 bankruptcy plan to be deficient. But for this lawsuit and emergency measures taken by Plaintiffs’ counsel, the 3002.1 Notice would have caused the [Plaintiffs’] case to be dismissed ...¹⁵ 11. On April 1, 2015, HSBC, USBT, and Caliber filed motions to dismiss Plaintiffs’ Amended Complaint.

12. On June 19, 2015, this Court ruled on those motions to dismiss, dismissing several of Plaintiffs’ claims.¹⁶ This Court amended its order on July 31, 2015.¹⁷

13. On July 6, 2015, Claim #21 was transferred from USBT to Wilmington.¹⁸

14. On September 17, 2018, Kellett & Bartholow PLLC ("KB Firm ") and Stone Law Firm, P.C. (Stone Firm ," and together with KB Firm, "Applicants "), filed their "Amended Disclosure of Compensation of Attorneys for Debtors" ("Disclosure "), disclosing their fee arrangement with Plaintiffs.¹⁹ Attached to the Disclosure is an "Agreement for Employment and Power of Attorney," by and between Plaintiffs, the KB Firm, and the Stone Firm.²⁰ The Disclosure includes a second attachment expressing a co-counseling agreement between the KB Firm and the Stone firm regarding the representation of Plaintiffs.²¹ The Disclosure was filed approximately five years after the Applicants began representing Plaintiffs in this adversary proceeding and more than two years after Plaintiffs received their discharge in their Bankruptcy Case.

15. On August 7, 2019, a trial was conducted on Plaintiffs’ remaining claims ("Trial ").²² The Trial ultimately concluded on October 1, 2019.²³ At no time prior to the Trial did the KB Firm or the Stone Firm file an application in Plaintiffs’ Bankruptcy Case to be employed as special counsel for Plaintiffs in the adversary proceeding.

16. On January 31, 2020, the Court issued a memorandum opinion ("Trial Opinion ") and judgment ("Judgment "), denying Plaintiffs relief on numerous causes of action and denying Plaintiffs’ claims for actual damages.²⁴ The Court concluded, however, that Defendants violated the Fair Debt Collection Practices Act and committed an abuse of process by not withdrawing the 3002.1 Notice during the period of time when Defendants owned Plaintiffs’ Loan. As a result, the Court found Defendants liable to Plaintiffs for $1,000 in statutory damages under the FDCPA and $9,000 in punitive damages. The Court further deemed Defendants liable for Plaintiffs’ reasonable and necessary attorneys’ fees and expenses pursuant to 11 U.S.C. § 105(a) and 15 U.S.C. § 1692k(a)(3), in an amount to be determined following further proceedings.²⁵

17. On May 15, 2020, Applicants filed their "Application of Plaintiffs’ Counsel for Allowance of Compensation and Reimbursement of Expenses" ("Fee Application "), seeking, collectively, $676,576.50 in attorneys’ fees and $67,121.59 in expenses, for a grand total of $743,698.09.²⁶

18. On August 14, 2020, Defendants filed their objection to the Fee Application ("Fee Objection "), objecting to the Fee Application in its entirety.²⁷

19. On August 31, 2020, Plaintiffs entered their notice of consent to entry by this Court of final orders on non-core matters²⁸ and Defendants entered their notice of non-consent.²⁹

20. On March 19, 2021, Defendants filed their "Motion for Summary Judgment as to Application of Plaintiffs’ Counsel for Allowance of Compensation and Reimbursement of Expenses" ("Motion ").³⁰ Plaintiffs filed a response on April 16, 2021 ("Response ").³¹ Defendants filed their reply on April 23, 2021.³² Plaintiffs filed a sur-reply on April 30, 2021.³³

21. On June 3, 2021, the Court held a hearing on the Motion.

II. JURISDICTION, VENUE, AND CONSTITUTIONAL AUTHORITY

This Court holds jurisdiction pursuant to 28 U.S.C. § 1334 and now...