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In Re: Makris

February 10, 2011

IN RE: MAKRIS, KALLIOPI, DEBTOR.


The opinion of the court was delivered by: William J. Martini, U.S.D.J.:

OPINION HON. WILLIAM J. MARTINI

This matter comes before the Court on Debtor Kalliopi Makris's ("Makris") appeal from an order entered on October 14, 2009 by the Honorable Novalyn Winfield, United States Bankruptcy Judge (the "2009 Order"), allowing attorneys' fees and costs to Amboy National Bank ("Amboy"). This Court has jurisdiction to hear the appeal pursuant to 28 U.S.C. § 158(a). For the reasons state below, the decision of the Bankruptcy Court is AFFIRMED.

I.Background

In 1987, Amboy agreed to provide Makris with financing for the purchase of a home. This agreement was memorialized in a note executed by the parties (the "Note"). Under the Note, Makris agreed to be liable for any reasonable costs or fees -- including attorneys' fees -- that Amboy incurred in enforcing the Note in the event of default.

Makris defaulted in 2000, and Amboy agreed to a modification of the Note on the condition that Makris provide additional security for the debt. In satisfaction of that agreement, Makris's employer, Dr. Benjamin Levine ("Levine"), issued a personal Gauranty to Amboy that he would be liable for the debt in the event of default (the "Gauranty"). Makris was not a party to the Gauranty.

In 2002, Makris again defaulted, and Amboy sought payment from Levine, eventually bringing suit in the Superior Court of New Jersey to enforce the Guaranty (the "Levine litigation"). Amboy then commenced foreclosure proceedings against Makris, and Makris filed for Chapter 13 bankruptcy (collectively, the "Makris litigation"). A Chapter 13 plan for repayment was confirmed on April 16, 2004.

As part of its claim against the bankruptcy estate, Amboy sought reimbursement for fees arising out of both the Makris litigation and the Levine litigation, arguing that the fee provision of the Note made Makris responsible for the fees and costs associated with both litigations. The Bankruptcy Court agreed and issued an order (the "2005 Order") deeming that Amboy had a first mortgage lien against Makris of $172,706.20, which included over $60,000 in fees and costs from both the Makris litigation and the Levine litigation from their inception until August 22, 2005.

Makris appealed in 2008. On appeal, Judge Debevoise's held that the Note did not obligate Makris to be responsible for the fees from the Levine litigation, reversed the award as to those fees, and remanded for a new determination of the proper fee allocation. On remand, Amboy applied for $92,614.46 in fees and costs. Amboy claimed the new application included none of the fees from the Levine litigation. But the application did include fees and costs incurred in the Makris litigation for the period of November 7, 2003, through July 31, 2009, including the fees and costs associated with litigating whether or not Makris was responsible for the fees from the Levine litigation (the "Fees-on-Fees litigation").

After hearing argument from the parties and making some reductions and disallowances, the bankruptcy court ordered $54,093.75 in fees and costs, including some portion of the Fees-on-Fees litigation (the "2009 Order").

II.Legal Analysis

The parties identify three issues presented on appeal: (1) whether the Bankruptcy Court erred as a matter of law by failing to abide by Judge Debevoise's Order; (2) whether the Bankruptcy Court abused its discretion by awarding fees that were unreasonable; and (3) whether the Bankruptcy Court erred as a matter of law by allowing Amboy to recover attorneys' fees for legal services incurred on issues decided adversely to Amboy. The Court will address each issue. Because the first two issues overlap, the Court will analyze them together.

a.The Bankruptcy Court abided by Judge Debevoise's Order.

First, Judge Debevoise's Order reversed the 2005 Order to the extent that it included any fees for services provided to enforce the Guaranty against Levine. Amboy asserted that its second fee application contained no fees even related to litigation with Levine. Makris points to nothing in the record to show that assertion is incorrect. Thus there is no argument that the Bankruptcy Court erred by including some portion of those fees explicitly disallowed by Judge Debevoise's Order.

Second, Judge Debevoise's Order remanded to the Bankruptcy Court to determine the proper fee allocation. The Bankruptcy Court analyzed the proper fee allocation under the standard of 11 U.S.C. § 506(b), which provides that an oversecured creditor may be entitled to attorneys' fees if the fees are: (1) provided for under the agreement under which such claim arose; and (2) reasonable. Ryker v. Current, 338 B.R. 642, 651 (D.N.J. 2006), aff'd, 2007 WL 2138590 (3d Cir. July 27, 2007); see also United States v. Ron Pair Enter., Inc., 489 U.S. 235, 241 (1989). Neither party challenges that the ...


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