Opinion
Case No. 99-10444-SSM
March 9, 2000
James M. Towarnicky, Esquire, James M. Towarnicky, P.L.L.C., Springfield, VA, Of Counsel for the Debtor
MEMORANDUM OPINION AND ORDER
A hearing was held in open court on March 7, 2000, on the motion of the debtor's attorney, James M. Towarnicky, P.L.L.C. for approval of $3,212.50 in fees. All creditors and the trustee were given notice of the motion and hearing. No objections were filed, and no one appeared at the hearing to oppose the motion. Upon review, however, the court concludes that there is no authority for payment of the fees of debtor's counsel from the bankruptcy estate. Accordingly, the motion will be denied without prejudice to counsel's right to receive distribution from the estate on account of his prepetition fee and to collect his post-petition fees from the debtor.
Anne T. Taylor, an attorney who was a defendant in a large number of lawsuits, filed a voluntary chapter 7 petition in this court on February 1, 1999, and received a discharge on May 19, 1999. She was represented in this court by James M. Towarnicky, an able and experienced practitioner. Prior to the filing of the petition, Mr. Towarnicky received no payment toward an agreed $850.00 fee. It appears that the trustee has liquidated some assets from which a distribution to creditors can be made, but there is no information before the court as to the amount available.
An order was entered on May 4, 1999, sustaining the trustee's objection to the debtor's exemption of $6,049 of the balance in an IRA and directing turnover of that amount to the trustee.
On February 8, 2000, Mr. Towarnicky's firm filed the motion that is currently before the court. It seeks approval and payment from the bankruptcy estate of $3,212.50 in attorney's fees. Of this sum, $850.00 is the "base rate" for the bankruptcy filing, while the remaining $2,362.50 consists of 15.75 hours of post-petition services performed for the debtor. This included filing a motion and brief in a civil case that was pending against the debtor at the time of the bankruptcy filing, preparing amendments to the schedules, preparing a motion to require the trustee to abandon the debtor's interest in a home jointly owned with her mother, and negotiating a settlement of a civil suit against the debtor.
Counsel has excluded from his request an additional 2.5 hours spent contesting the trustee's objection to the debtor's exemptions.
On the face of it, the fees charged by counsel appear to be reasonable and within the customary range for such services. The problem is that there is no legal authority to compensate counsel for the debtor in a chapter 7 case. Of course, counsel's prepetition fee of $850.00 is properly allowable as an unsecured claim. But there is no statutory basis to grant priority status to such fees. Under § 503(b)(2), Bankruptcy Code, priority status does attach to compensation awarded to professionals under § 330(a), Bankruptcy Code. Section 330(a), in turn permits compensation from the bankruptcy estate to a "professional" who is employed under § 327, Bankruptcy Code. Section 327, however, only applies to "one or more attorneys, accountants, appraisers, auctioneers, or other professional persons" employed by the trustee, or, in a chapter 11 case, by the debtor in possession. The only provision that expressly provides for compensation of a debtor's attorney as an administrative expense is § 330(a)(4)(B):
Counsel's motion cites to § 503(b)(1)(A), Bankruptcy Code, which permits the approval, as an expense of administration, of "the actual, necessary costs and expenses of preserving the estate, including wages, salaries, or commissions for services rendered after the commencement of the case." In context, it is clear that the "wages, salaries, or commissions" in question must be for services provided to the bankruptcy estate. Accordingly, § 503(b)(1)(A) provides no authority for compensating counsel for a debtor.
In a chapter 12 or chapter 13 case in which the debtor is an individual, the court may allow reasonable compensation to the debtor's attorney for representing the interests of the debtor in connection with the bankruptcy case based on a consideration of the benefit and necessity of such services to the debtor and the other factors set forth in this section.
The language and revision history of § 330, Bankruptcy Code, have led most courts to conclude that an award of compensation cannot be made from the bankruptcy estate to a debtor's attorney in a chapter 7 case. In re American Steel Product, Inc., 197 F.3d 1354, 1356 (11th Cir. 1999) ("We agree with the district court that the plain reading of § 330 precludes an award of attorney's fees to a debtor's attorney in a Chapter 7 or Chapter 11 proceeding"); accord, Andrews Kurth L.L.P. v. Family Snacks, Inc. (In re Pro-Snax Distributors, Inc.), 157 F.3d 414 (5th Cir. 1998); contra, In re Century Cleaning Services, Inc., 195 F.3d 1053, 1058-60 (9th Cir. 1999) (opining that Congress made a drafting error of some kind when revising § 330 in 1994).
This court is reluctantly constrained to concur with those courts that have concluded that § 330 does not permit an award of fees to counsel for the debtor in a chapter 7 case, notwithstanding the generalized assertion in the motion that the services rendered "were of potential benefit to the Bankruptcy Estate." There may well be some exceptional set of facts — for example, where the efforts of the debtor's attorney materially assists the trustee in recovering assets for the bankruptcy estate — which might justify an award of fees based on a finding of direct benefit to the bankruptcy estate, but the present motion does not present such facts. Accordingly, the motion must be denied notwithstanding the lack of opposition. Counsel is of course free to seek payment from his client for legal services provided post-petition.
Indeed, the 6.5 hours that were spent researching, drafting and editing the motion to compel the trustee to abandon the debtor's interest in the jointly-owned house was clearly in the interest only of the debtor and her mother, not the bankruptcy estate.
ORDER
For the foregoing reasons, it is
ORDERED:
1. The motion for approval and payment of counsel fees is denied, without prejudice to the allowance of the $850.00 in prepetition fees as a general unsecured claim and without prejudice to movant's right to collect the post-petition fees directly from the debtor.
2. The clerk will mail a copy of this memorandum opinion and order to the parties listed below.