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#2146

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF KANSAS



In Re:

HAROLD L. RUSH, JUNE M. RUSH,

DEBTOR(S)

CHAPTER 11

NO. 91-41171-11

ORDER ON ATTORNEY FEES

This matter is before the Court on the application of oversecured creditor Citizens State Bank & Trust Company (Citizens) for allowance of its attorney fees and expenses pursuant to 11 U.S.C.A. §506(b). Citizens appears by counsel Phillip A. Burdick. The debtors have objected to the application. They appear by counsel William E. Metcalf. The Court has reviewed relevant pleadings, and is now ready to rule.

The Court has reviewed the total time spent on the case from July 1, 1991, to July 21, 1992, and in accordance with its previous decision in In re Smith, No. 83-40427 (Dec. 10, 1984), motion to modify and amend denied, Jan. 30, 1985, finds as follows.

The applicant has requested fees in the amount of $7,916.20. After the debtors objected to the application, the applicant supplied additional information. The debtors still complain that: (1) the application does not comply with the Court's guidelines; (2) the parties' contract allows Citizens to recover only certain expenses, and the bank has failed to meet its burden to establish that the requested fees fall within the contract; (3) the applicant has failed to prove that the fees are reasonable; and (4) Citizens should now be precluded from making any further efforts to meet its burden of proof. Citizens has claims against the debtors totalling about $600,000.

The Court has reviewed the application and finds certain charges that cannot be allowed as described. As the Court explained in In re Wullschleger, No. 84-40495, Order (Bankr.D.Kan. Dec. 10, 1984), a creditor is not entitled to recover under §506(b) fees made necessary by the mere filing of bankruptcy, in essence, fees for activities which all creditors, oversecured or not, must undertake in bankruptcy. In this case, such fees amounted to $662.90 for attending the 341 meeting and for activities related to preparing and filing a proof of claim. These activities could also have been accomplished by nonlawyers, so the debtors should not be saddled with such fees merely because Citizens chose to have an attorney do them. Charges of $58.10 relating to the "answers of other parties" will not be allowed because the Court cannot determine how they relate to protecting Citizens' claims. Another $426.90 will be disallowed for items which omit the identity of the entity conferred with, or omit the purpose or subject of the activity. Finally, Mr. Burdick has indicated that a round trip from his office to Topeka takes two and one-half hours. Four entries not included in the above items appear to include travel to and from Topeka but do not clearly comply with this Court's rule that travel time is ordinarily allowable only at one-half of counsel's normal hourly rate. Consequently, for each of those entries, the Court will disallow $87.50 (one and one-quarter hours at $70 per hour), or a total for the four of $350, pursuant to the Court's rule. The remaining descriptions, while probably not as informative as they might be, are sufficient to enable the Court to determine that the fees charged were necessary to protect Citizens' position in the bankruptcy case. Thus, under its ordinary procedure, the Court would disallow $1,497.90 of the requested fees, leaving $6,418.30 in allowable fees. These deductions resolve the debtors' first complaint.

The debtors base their second complaint on the language of Citizens' promissory notes. Three of the notes state that the debtors agree to pay the fees if Citizens must "hire a lawyer to collect" the note. The fourth states that they agree "to pay all costs of collection, including . . . reasonable attorney's fees, paid or incurred by [Citizens] on account of such collection, whether or not suit is filed with respect thereto." The debtors argue that the common understanding of the words "collect" or "collection" is that they refer to legal proceedings or solicitation of payments after the note was unpaid and in default. While it might be that a lender would not ordinarily choose to take any actions to "collect" a debt until the debtor was in default, the debtors here changed the ordinary course of the relationship by filing for bankruptcy, forcing Citizens to take steps to protect its ability to "collect" on its claims even though the debtors may not have been in default when they filed for bankruptcy. The Court is convinced a creditor's actions to protect its rights in bankruptcy are actions taken to "collect" its debts.

The debtors' third complaint is that Citizens has failed to meet its burden to prove the fees charged were reasonable. At least as reduced by the amounts discussed above, the Court is convinced that the fees were reasonably incurred to protect Citizens' rights in the debtors' bankruptcy case. The Court agrees with the debtors' fourth complaint, and will not give Citizens any further opportunity to prove its right to recover the fees charged.

For these reasons, the total fees allowed are $6,418.30.

Reimbursement of expenses in the amount of $60 was also requested. This expense was the fee for filing a stay relief motion. Total reimbursable expenses allowed are $60.

The total sum awarded is therefore $6,478.30.

IT IS SO ORDERED.

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













__________________________________

JAMES A. PUSATERI

CHIEF BANKRUPTCY JUDGE

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