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#2140

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF KANSAS

In Re:

WISTON XXIV LIMITED PARTNERSHIP,

DEBTOR(S)

NO. 91-40410-11

CHAPTER 11

MEMORANDUM OF DECISION

This matter is before the Court on the application of the Marshall Companies, Inc. (Marshall), for allowance of fees and expenses. Balcor Pension Investments V (Balcor) objects to the application. Marshall is represented by Keith Kocher of Shaw, Hergenreter, Quarnstrom & Kocher of Topeka, Kansas. Balcor is represented by Jonathan A. Margolies of McDowell, Rice & Smith, P.C., of Kansas City, Missouri.

FACTS

The basic facts are not in dispute. During the debtor's chapter 11, real property it owned was damaged by a severe hail storm which struck the Greater Kansas City Area. The debtor hired Marshall to help it evaluate the damage to the property, and to negotiate and settle its claim with its insurer, Kemper Corporation (Kemper). Unfortunately, the debtor neglected to seek timely approval of Marshall's employment, as required by 11 U.S.C.A. §327. When the debtor first disclosed that it had hired Marshall and sought approval of the compensation it had agreed to pay for Marshall's services, Balcor objected and, after a hearing, the Court ruled it would not grant compensation according to the contract with the debtor but would consider an appropriate application for fees. Ultimately, this dispute resulted.

After the hail storm, Kemper offered the debtor $237,967.64 in insurance proceeds to repair the damage. The debtor then contacted Marshall, which evaluated the damage to the premises, negotiated with Kemper, and obtained a new offer of $514,338.27, which the debtor accepted. The repairs were then accomplished for $78,000 less than the amount recovered from Kemper. The debtor ultimately failed to achieve a successful reorganization and lost the premises to its mortgagee, Balcor. Balcor now is in possession of the premises and the $78,000.

Marshall stated that its normal fee is 10% of the full amount it obtains from an insurance company, but it agreed to charge the debtor only 7%. Seven percent of the amount recovered here would be $36,003.68. Marshall also claimed at first that its actual labor and expenses came to $49,754.21. When it submitted detailed documentation of its labor and expenses, however, this amount was reduced to $44,778.21. This reduced figure includes $35,839.25 in employee time, $4,706.88 for outside consultants' fees, and $4,232.08 in expenses.

DISCUSSION AND CONCLUSIONS

The debtor hired Marshall, and though the employment was belatedly approved, the agreed compensation was not approved. The bankruptcy estate, and thus Balcor, benefited from Marshall's work. Though Balcor contends the only possible benefit was the $78,000 left after the repairs were completed, it is clear that the amount Kemper was willing to pay increased by over $276,000 after Marshall was employed. It is not possible to ascertain what portion of the $276,000 increase would have been obtained without Marshall's help, though it seems probable that Kemper would have increased the offer to some degree.

Marshall initially sought fees of $36,003.68, 7% of the total amount recovered from Kemper. After being told that its contract with the debtor would not be honored, it sought over $8,700 more than the contract called for. Its new request contains charges for a number of items which this Court does not ordinarily allow professionals to recover, including: (1) fees for an unapproved outside consultant; (2) purchases of alcoholic beverages, smokeless tobacco, an iron, and other items; and (3) travel time billed at full hourly rates rather than one-half the normal rates. For certain other items, the Court would have to hear testimony to determine their compensability. Though it benefited from the settlement Marshall negotiated with Kemper, Balcor asks the Court to disallow all of Marshall's claim on the ground Marshall has failed to establish what an appropriate fee should be. Balcor also contends that the only benefit Marshall generated was the $78,000 received in excess of the cost of the repairs, rather than any other portion of the $276,000 recovered in excess of Kemper's initial offer.

The Court concludes that the estate and Balcor benefited from Marshall's work. Although its employment has been approved, Marshall has no enforceable contract provision establishing how its compensation should be computed. The Court believes it is more reasonable to base the award on some percentage of the recovery rather than hourly billing because: (1) a percentage fee is what Marshall originally expected; (2) a percentage is an accepted measure of an appropriate fee; and (3) the Court would probably need to hear more evidence to be able to determine appropriate fees based on hourly billing and this matter has already been delayed enough. Under the circumstances, the Court will award Marshall 10% of the increase obtained from Kemper after Marshall was hired, or $27,637.06, as its fees and expenses. This amount roughly approximates the hourly billing fees the Court would be likely to award even if additional evidence were presented, so requiring any further hearing would be needlessly inefficient.

The foregoing constitutes Findings of Fact and Conclusions of Law under Rule 7052 of the Federal Rules of Bankruptcy Procedure and Rule 52(a) of the Federal Rules of Civil Procedure. A judgment based on this ruling will be entered on a separate document as required by FRBP 9021 and FRCP 58.

Dated at Topeka, Kansas, this ____ day of May, 1995.













_________________________________

JAMES A. PUSATERI

CHIEF BANKRUPTCY JUDGE

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF KANSAS



In Re: )

)

WISTON XXIV LIMITED ) NO. 91-40410-11

PARTNERSHIP, ) CHAPTER 11

DEBTOR(S). )



JUDGMENT ON DECISION

This matter was before the Court on the application of the Marshall Companies, Inc. (Marshall), for allowance of fees and expenses. Balcor Pension Investments V (Balcor) objected to the application. Marshall was represented by Keith Kocher of Shaw, Hergenreter, Quarnstrom & Kocher of Topeka, Kansas. Balcor was represented by Jonathan A. Margolies of McDowell, Rice & Smith, P.C., of Kansas City, Missouri. The Court considered the relevant pleadings and the parties' arguments, and has now issued its Memorandum of Decision resolving the dispute.

For the reasons stated therein, judgment is hereby entered awarding Marshall $27,637.06 as its fees and expenses.

IT IS SO ORDERED.

Dated at Topeka, Kansas, this _____ day of May, 1995.













__________________________________

JAMES A. PUSATERI

CHIEF BANKRUPTCY JUDGE

 

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