Opinion
NOT FOR PUBLICATION
Argued and Submitted at Sacramento, California, March 24, 2006
Appeal from the United States Bankruptcy Court for the Eastern District of California. Honorable Thomas C. Holman, Bankruptcy Judge, Presiding. Bk. No. 01-34212-D-13L.
Before: MONTALI, PAPPAS and BUFFORD, [ Bankruptcy Judges.
Hon. Samuel L. Bufford, Bankruptcy Judge for the Central District of California, sitting by designation.
MEMORANDUM
Chapter 13 debtors filed and the court approved an amended plan providing that all secured, priority and administrative expenses would be paid with a lump sum payment by December 25, 2004. In April 2005, the chapter 13 trustee filed a final report and account indicating that the debtors had completed their plan payments by December 29, 2004, and that all disbursements had been made, including payments for the allowed fees of debtors' counsel. Debtors' counsel did not object to the final account, but instead filed a fee application two weeks later requesting an additional $2, 166.50 in fees for work performed between April 13, 2004 and December 15, 2004. The court approved the final account and granted debtors their discharge on May 26, 2005.
Unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. § § 101-1330, and to the Federal Rules of Bankruptcy Procedure, Rules 1001-9036, as enacted and promulgated prior to the effective date (October 17, 1995) of The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. 109-8, Apr. 20, 2005, 119 Stat. 23.
On June 21, 2005, the bankruptcy court held a hearing on the fee application of debtors' counsel. The court approved the fees, but denied counsel's request that the fees be paid through the plan as moot, since the final account had been approved and the debtors had made payments as set forth in the amended plan. The court also denied counsel's request that the debtors be ordered to pay the additional fees directly. Counsel appealed and we AFFIRM.
I.
FACTS
Appellant Mark A. Wolff, Esq. (" Attorney") was counsel for chapter 13 debtors David and Eleanor Rios (" Debtors"). On October 8, 2004, Debtors filed their second modified plan and a motion to confirm that plan. The second modified plan provided that " Debtors shall pay a lump sum payment by December 25, 2004 to complete this plan. The amount of the lump sum shall be the amount necessary to pay all secured, priority and administrative expenses . . . ." The second modified plan also stated that " [Attorney] opts to have his or her fees approved and paid in accordance with the court's Guidelines for Payment of Attorneys' Fees in Chapter 13 Cases." The second modified plan also deleted a provision from Debtors' prior plan stating that additional attorneys fees " shall be paid directly by debtor to the extent such funds are not paid through this Chapter 13 Plan." The bankruptcy court entered an order confirming the second modified plan on December 15, 2004.
The Eastern District of California's Guidelines for Payment of Attorneys' Fees in Chapter 13 Cases (" Guidelines") provide that, except for pre-petition retainers, all attorney fees " shall be paid through the plan unless otherwise ordered." Guidelines at ¶ 5. " Absent court authorization, the attorney may not receive fees directly from the debtor other than the pre-petition retainer." Id. If an attorney's initial fee is insufficient to compensate him or her fully for the legal services rendered in the case, he or she may apply for additional fees. Id. at ¶ 4. Here, Attorney applied for and received approval of $3, 341 in additional fees and costs incurred between December 2001 and April 2004. Pursuant to the order approving the fees, the confirmed plan then in effect and the Guidelines, those fees were treated as a priority administrative expense.
On April 14, 2005, appellee Lawrence Loheit (" Trustee"), chapter 13 trustee in Debtors' case, filed a final report and account indicating that Debtors had completed their plan on December 29, 2004, that Attorney had been paid $4, 841.00 in allowed fees and costs, and that Debtors would be receiving a refund in the amount of $2, 134.63. Trustee served the final account on Attorney on April 14, 2005.
Attorney did not object to the final account, but instead filed (on April 28, 2005) a second application for additional fees and costs in the amount of $2, 166.50 (the " Application"). Attorney requested that these additional fees be paid through the chapter 13 plan " to the extent available" and " directly by Debtor to the extent not available through the Chapter 13 plan." No one opposed the Application.
Debtors have taken no position either before us or at the bankruptcy court. We question Trustee's standing before us since he took no position on the Application. Investors Thrift v. Lam (In re Lam), 192 F.3d 1309, 1310-11 (9th Cir. 1999). Nevertheless, we are obligated to decide the merits of Attorney's position whether or not there is opposition.
On June 7, 2005, the bankruptcy court held a hearing on the Application, but continued the hearing so that Attorney could file further briefs. Attorney did so and the court held a further hearing on June 21, when it approved the fees requested in the Application, but denied as moot Attorney's request that the fees be paid through the plan. The court also denied Attorney's request that Debtors be directed to pay the fees personally, citing In re Hanson, 223 B.R. 775 (Bankr. D. Ore. 1998) and holding that Debtors' personal liability for the fees was discharged when Debtors received their discharge.
On June 27, 2005, the bankruptcy court entered its civil minute order granting the Application in part and denying it in part. Attorney filed a timely notice of appeal on July 1, 2005.
II.
ISSUE
Did the bankruptcy court err in concluding that, upon entry of an order of discharge, Debtors were not personally liable for attorneys' fees incurred by Attorney during the course of their case?
III.
STANDARD OF REVIEW
A bankruptcy court's findings of fact are reviewed for clear error, and conclusions of law are subject to de novo review. Devers v. Bank of Sheridan, Mont. (In re Devers), 759 F.2d 751, 753 (9th Cir. 1985). To the extent that questions of fact cannot be separated from questions of law, we review these questions as mixed questions of law and fact, applying a de novo standard. Ratanasen v. Cal. Dep't of Health Servs., 11 F.3d 1467, 1469 (9th Cir. 1993).
IV.
DISCUSSION
Citing Hanson, the bankruptcy court held that upon entry of Debtors' discharge, their personal liability for any unpaid administrative expenses owed to Attorney was discharged. In Hanson, the court held that the chapter 13 discharge bars collection of postconfirmation fees not paid through the plan where the plan provides for payment of postconfirmation fees. Hanson, 223 B.R. at 778. The Hanson analysis applies in this case.
As noted in Hanson, a chapter 13 discharge applies to " all unsecured debts provided for by the plan." 11 U.S.C. § 1328(a); Hanson, 223 B.R. at 778. " [T]he phrase 'provided for' . . . simply requires that for a claim to become dischargeable the plan must 'make a provision for' it, i.e., deal with it or refer to it." Lawrence Tractor Co. v. Gregory (In re Gregory), 705 F.2d 1118, 1122 (9th Cir. 1983).
Here, the second modified plan contained a specific term providing specific treatment for administrative expenses: Debtors were to make a lump sum payment by December 25, 2004, in an amount sufficient to pay all secured, priority and administrative expenses. As in Hanson, the Eastern District of California clearly treats chapter 13 attorneys' fees as administrative expenses, with the Guidelines requiring fee applications for fees in excess of the initial fee and granting priority treatment to the fees. Hanson, 223 B.R. at 778 (" In this district, expenses of administration in Chapter 13 have long been understood to include debtor's attorney fees throughout the case, including through the discharge."). Therefore, because the second amended plan did " provide for" Attorney's administrative claim, the claim is discharged. Id. If Attorney wanted to avoid such a discharge, he and Debtors could have amended the plan to provide that his additional fees would be paid outside the Plan. See Opinion in In re Johnson, BAP No. EC- 05-1286-MoPaBu, issued contemporaneously with this Memorandum.
In light of this provision, Attorney's repeated assertions in his brief that Debtors' plan did not make explicit provision for treatment of his claim are inaccurate.
Attorney argues that the decision of the district court in Cornelison v. Wallace, 202 B.R. 991, 993 (D. Kan. 1996) -- and not Hanson -- should apply in this case. We disagree. In Cornelison, the district court merely pointed out that the bankruptcy court had " noted that the [chapter 13 attorney's] fee was a postpetition obligation that would not be affected by the discharge to be granted the debtors." Id. The district court did not explicitly adopt this holding, and the bankruptcy court's comment is not accompanied by any further analysis. In any event, the plan in effect at that time did not make any provision for the additional fees, as the district court held that an award of fees would require amendment of the plan. In contrast, the plan in effect here does specifically provide for administrative expenses. Thus, the reasoned analysis of Hanson is more applicable in this case.
As noted earlier, Debtors' prior confirmed plan (the first modified plan) specifically provided that any additional attorneys' fees would be paid directly by Debtors to the extent the claim was not paid in full under the Plan. Attorney and Debtors deleted this provision in the second modified plan and substituted the provision that all administrative fees would be paid in full through the balloon payment. This revision reflects a deliberate decision by Debtors and Attorney that the balloon payment would be in an amount sufficient to pay any additional attorneys' fees in full.
At the time the third amended plan was filed in October 2004, Attorney had received all of his initial fees and most of his additional fees requested in his first fee application. Therefore, the provision that administrative expenses would be satisfied in full through the balloon payment necessarily applied to any other fees and administrative expenses incurred by Attorney during the course of the case. It was thus incumbent on Attorney to make Debtors and Trustee aware of the full extent of his administrative claim prior to the balloon payment and disbursement. Failing that, he should have asked for a delay in the distribution provided in the final account (which was approved by the court in May 2005) and requested that his additional administrative expenses be paid from the balloon payment prior to discharge (and, in this case, prior to a refund to Debtors in an amount exceeding Attorney's administrative claim).
The Trustee's disbursement report shows that Attorney received monthly disbursements through May 31, 2002. Disbursements to Attorney recommenced on July 30, 2004 (immediately after his additional fees were approved by the court) and ended on October 29, 2004.
At the time Debtors made their final plan payment and Trustee made his final distributions, Attorney had incurred additional fees (which were later approved by the court). He has not received payment in full for these fees. Nevertheless, Debtors' liability for these additional amounts is discharged; Attorney is not excused from the consequences of section 1328 because of his delay in filing a fee application until after the final payment by Debtors and until after final disbursement by Trustee. As several courts have held, a debtor who has provided for full payment of priority claims in his or her plan is entitled to discharge of priority debts that have not been paid in full when the priority claimant filed its claim after completion of the debtor's chapter 13 payments. See In re Friauf, 172 B.R. 273, 276 (Bankr. D. Minn. 1994) (debtor was entitled to discharge of priority debts not paid in full -- despite plan's provision that such claims would be paid in full -- when priority claimant delayed filing claim until debtor had almost completed her plan payments); United States v. Vlavianos (In re Vlavianos), 71 B.R. 789, 793 (Bankr. W.D. Va. 1986) (Debtor's chapter 13 provided for full payment of priority tax claims; however, IRS did not receive full payment " simply because it did not amend its claim to assert a higher amount until after all payments under the debtor's plan had been completed. . . . Since the only prerequisite under § 1328(a) for the discharge of a debt is that the plan provide for the payment of the debt, not that the debt actually be paid, the court concludes that the balance of IRS's claim . . . is dischargeable.").
We agree with Hanson that an administrative claim " provided for" in a chapter 13 plan is discharged upon entry of discharge. Attorney's administrative claim was " provided for" under the second modified plan and Debtors' personal liability for that claim is therefore discharged under section 1328(a).
V.
CONCLUSION
For the foregoing reasons, we AFFIRM.