Opinion
No. 13-01-11205 SA
January 29, 2003
AMENDED ORDER ON INTERIM APPLICATION FOR ALLOWANCE AND PAYMENT OF COMPENSATION AND REIMBURSEMENT OF EXPENSES AND COSTS FILED BY DEBTORS' COUNSEL
The Interim Application for Allowance and Payment of Compensation and Reimbursement of Expenses and Costs, filed by Debtors counsel James M. Nye on January 11, 2002 (doc 52), came before the Court for a hearing on the Courts own setting on Thursday, April 18, 2002. No objections have been filed to the application. The Court has reviewed the application, the employment application and related documents, portions of the file, and the subsequent letter from Mr. Nye. Based on this review and the contents of the hearing conducted by the Court, the Court finds and concludes as follows:
1. The total amount requested for fees, GRT and costs is $3,454.61, including prepetition services for 1.5 hours for which approval of $238.08 is sought ($ 225.00 fees plus $13.08 gross receipts tax). The total amount (post petition and prepetition fees, tax and costs) is a reasonable charge for the work done, and the work done appears to have been reasonable and required by the circumstances.
2. Prior to the filing of the petition, Mr. Nye received a retainer of $415.00 plus $185.00 for the filing fee, for a total of $600.00. Mr. Nye performed services on October 5, 2000 at no charge to the debtors, and on January 16, 2001, consisting of .7 hour, and February 23, 2001 of .8 hour, at $150.00/ hour. The petition was filed on February 23, 2001, before which filing Mr. Nye had drawn down the $600.00 for payment of the court filing fee, and past and future fees for services to be incurred during the chapter 13. At this point, Mr. Nye was entitled to the $238.08 fees and a $185.00 filing fee, for a total of $423.08, and leaving $176.92 available for future fees. (Nothing in this order is intended to address the propriety of drawing down on a retainer before the work equal to the amount of the retainer is completed; that was an issue only mentioned in passing during the hearing. Nevertheless, paying oneself for work done on an hourly basis before the work is done raises serious questions.)
3. Prior to the filing of the petition Mr. Nye was entitled to pay himself from the retainer for prepetition services and costs in the amount of $423.08; the remainder of the retainer continued to be client property and then became estate property upon the filing of the petition, (to be) held in trust by Mr. Nye for the estate.
4. Had Mr. Nye not drawn down the retainer prior to the filing of the petition, the entire retainer would have become property of the estate, and Mr. Nye would not have been entitled to pay himself out of the retainer for the prepetition services.
5. A fee application can only seek compensation for services rendered post petition. This is particularly the case where debtors counsel is required to obtain an employment order as a condition of being paid, such as for representing the debtor in possession in a chapter 11 case, but also applies when the debtors counsel ordinarily is not required to have a court order as a condition of being paid, such as counsel representing a chapter 13 debtor, as here.
6. This application in part effectively seeks approval of compensation billed and paid for prior to the filing of the petition. See 11 U.S.C. § 329(b) (Debtors transactions with attorneys). As suggested in paragraph 1 above, the review of the prepetition services and fees would show that they were reasonable.
IT IS THEREFORE ORDERED as follows:
1. The application for post petition services is approved in the amount of $3,031.53, which figure is comprised of $2,865.00 in fees (19.1 hours postpetition) plus $166.53 for New Mexico gross receipts tax thereon.
2. Mr. Nye may draw down what is left of the retainer, $176.92, to pay these sums, if he has not done so already.
Nothing about this order is to be construed as a requirement that, after the filing of a petition, counsel may only draw down on a prepetition retainer with the prior permission of the Court.
3. The unpaid balance of the postpetition fees, tax and cost, in the amount of $2,854.61, will be an administrative priority claim for the estate, to be paid as provided by the plan.