In re: Marsha Howard

FILED 1 NOT FOR PUBLICATION MAY 07 2018 SUSAN M. SPRAUL, CLERK 2 U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT

3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. NC-17-1064-STaB 6 ) MARSHA HOWARD, ) Bk. No. 5:10-bk-52527 7 ) Debtor. ) 8 ______________________________) ) 9 MARSHA HOWARD, ) ) 10 Appellant, ) ) 11 v. ) MEMORANDUM* ) 12 DEVIN DERHAM-BURK, Chapter 13 ) Trustee, ) 13 ) Appellee. ) 14 ______________________________) 15 Argued and Submitted on January 25, 2018 at San Francisco, California 16 Filed – May 7, 2018 17 Appeal from the United States Bankruptcy Court 18 for the Northern District of California 19 Honorable Stephen L. Johnson, Bankruptcy Judge, Presiding 20 Appearances: Cathleen Cooper Moran of Moran Law Group, Inc. argued for appellant; Nanette Dumas argued for 21 appellee. 22 Before: SPRAKER, TAYLOR and BRAND, Bankruptcy Judges. 23 24 25 26 * This disposition is not appropriate for publication. 27 Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. 28 See 9th Cir. BAP Rule 8024-1.

1 INTRODUCTION 2 Chapter 131 debtor Marsha Howard appeals from an order 3 granting in part and denying in part her counsel’s supplemental 4 fee application. After Howard received her chapter 13 discharge, 5 her counsel, the Moran Law Group, Inc. (“Moran”), sought approval 6 of fees and expenses incurred in litigating a dispute that arose 7 after Howard completed her scheduled plan payments. The 8 bankruptcy court approved the fees as reasonable and necessary, 9 but sustained an objection from the chapter 13 trustee that 10 Howard’s obligation to pay such fees was discharged. 11 Howard contends that Moran’s fees and costs were not 12 administrative expenses discharged under the confirmed plan. We 13 disagree. The fees fall within the statutory definition of 14 administrative expense claims. They were awarded under 15 § 330(a)(4)(B), and such fees are specifically covered by the 16 administrative expense statute, § 503(b)(2). Alternately, Howard 17 posits that, even if Moran’s fees were administrative expenses, 18 the Code permits their payment outside of the plan when the 19 claimant agrees to such treatment. While this statement 20 generally is correct, it does not help Howard here because 21 Howard’s chapter 13 plan did not provide for this treatment, and 22 she never amended her plan to provide for such treatment. 23 Accordingly, we AFFIRM. 24 25 26 1 Unless specified otherwise, all chapter and section 27 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and all "Rule" references are to the Federal Rules of Bankruptcy 28 Procedure, Rules 1001-9037.

1 FACTS 2 Howard commenced her chapter 13 case in March 2010. Shortly 3 thereafter, Howard and her bankruptcy counsel, Moran, entered 4 into a form Rights and Responsibilities Agreement (“RARA”).2 By 5 entering into the RARA, Howard and Moran adopted as part of their 6 agreement the bankruptcy court’s “guidelines” for debtors’ legal 7 representation in chapter 13 cases, “[u]nless the Court orders 8 otherwise. . . .” RARA (April 29, 2010) at p. 1. Among other 9 things, the RARA fixed Moran’s initial compensation for certain 10 basic chapter 13 legal services at $6,500 and further set forth a 11 schedule of presumptive fees for additional services as might be 12 necessary. The RARA also provided: 13 if the above fees ordered by the court are not sufficient to compensate the attorney for the legal 14 services rendered and costs incurred in the case, the attorney further agrees to apply to the court for 15 approval of such fees and costs. . . . Fees shall be paid through the plan unless otherwise ordered. The 16 attorney may not receive fees directly from the debtor other than the initial retainer. 17 Id. (emphasis added). 18 The bankruptcy court confirmed Howard’s first amended 19 chapter 13 plan (“Amended Plan”) in December 2010. The Amended 20 Plan was for the maximum term of five years and was derived from 21 the bankruptcy court’s April 2006 Model Chapter 13 Plan. It 22 required the trustee to pay all allowed administrative expenses 23 24 2 The RARA was not included in the parties’ excerpts of 25 record. However, we reviewed the RARA and other bankruptcy court 26 documents not included in the excerpts of record by accessing them on the bankruptcy court’s electronic docket. We can take 27 judicial notice of their contents. Caviata Attached Homes, LLC v. U.S. Bank, N.A. (In re Caviata Attached Homes, LLC), 481 B.R. 28 34, 37 n.4 (9th Cir. BAP 2012).

1 in deferred payments over the life of the plan.3 The plan 2 included as administrative expenses “initial” attorneys’ fees in 3 the amount of $6,500. 4 In December 2015, Howard made her final regular plan payment 5 under the Amended Plan. As required by Rule 3002.1(f), the 6 chapter 13 trustee filed and served a notice of final cure 7 payment on Howard’s mortgage holder, PNC Bank.4 In response, PNC 8 Bank claimed that Howard was delinquent on her mortgage 9 obligations. Over the next several months, Moran filed a series 10 of motions on Howard’s behalf. Moran successfully precluded PNC 11 Bank from introducing evidence of alleged outstanding escrow 12 advances under Rule 3002.1(i)(1) and was awarded fees and costs 13 incurred in this matter under Rule 3002.1(i)(2).5 Moran 14 3 15 By order entered January 25, 2013, the bankruptcy court confirmed a modified plan at Howard’s request. The plan 16 modifications are not relevant to our analysis and resolution of this appeal. 17 4 Rule 3002.1(f) provides in part: 18 19 (f) Notice of final cure payment

20 Within 30 days after the debtor completes all payments under the plan, the trustee shall file and serve on the 21 holder of the claim, the debtor, and debtor’s counsel a 22 notice stating that the debtor has paid in full the amount required to cure any default on the claim. The 23 notice shall also inform the holder of its obligation to file and serve a response under subdivision (g). 24 5 Rule 3002.1(i) provides: 25 26 (i) Failure to notify

27 If the holder of a claim fails to provide any information as required by subdivision (b), (c), or (g) 28 (continued...)

1 separately obtained a determination that Howard was current on 2 her PNC Bank mortgage obligations under Rule 3002.1(h). However, 3 the bankruptcy court denied Howard’s request that PNC Bank pay 4 the balance of Moran’s fees and costs arising from the motion 5 under Rule 3002.1(h) because that subdivision does not provide 6 for the recovery of attorneys’ fees.6 The bankruptcy court 7 entered its final order disposing of the dispute between Howard 8 and PNC Bank on August 15, 2016. Neither Howard nor Moran 9 appealed these orders. 10 A month later, on September 14, 2016, the chapter 13 trustee 11 requested entry of a chapter 13 discharge order. The bankruptcy 12 court entered the discharge order that same day. 13 Roughly a month after entry of Howard’s discharge, Moran 14 15 5 (...continued) 16 of this rule, the court may, after notice and hearing, take either or both of the following actions: 17 (1) preclude the holder from presenting the 18 omitted information, in any form, as evidence in 19 any contested matter or adversary proceeding in the case, unless the court determines that the 20 failure was substantially justified or is harmless; or 21 22 (2) award other appropriate relief, including reasonable expenses and attorney’s fees caused by 23 the failure. 6 24 Rule 3002.1(h) provides: 25 (h) Determination of final cure and payment 26 On motion of the debtor or trustee filed within 21 days after service of the statement under subdivision (g) of 27 this rule, the court shall, after notice and hearing, determine whether the debtor has cured the default and 28 paid all required postpetition amounts.

1 filed a supplemental fee application for approval and payment of 2 $5,590 in fees and $224.07 in expenses incurred between June 6, 3 2016 and November 24, 2016.7 These fees were primarily the 4 unpaid balance owed for Moran’s work on the Rule 3002.1(h) motion 5 but included a small amount for preparation of the fee 6 application. The application sought to recover these fees 7 directly from Howard outside of the bankruptcy case. 8 The chapter 13 trustee did not oppose the amount or the 9 reasonableness of the supplemental fees and expenses sought, but 10 she did oppose payment of those fees and expenses. She asserted 11 that the Amended Plan provided for the payment of Howard’s 12 attorneys’ fees and costs as administrative expenses in deferred 13 payments over the life of the plan. According to the trustee, 14 the plan treatment was binding even if the supplemental fees and 15 expenses had not actually been paid through the Amended Plan. 16 She further contended that, in light of the entry of Howard’s 17 discharge, the bankruptcy court could not authorize Moran to 18 collect the supplemental fees and expenses directly from Howard. 19 At the hearing on the supplemental fee application, the 20 chapter 13 trustee focused on the fact that a month had passed 21 between the conclusion of Howard’s dispute with PNC Bank and the 22 entry of the discharge order. The trustee maintained that Moran 23 should have filed its supplemental fee application before entry 24 of the discharge order. 25 26 7 Though the supplemental fee application was filed on 27 October 10, 2016, it included estimated fees for appearance at the hearing on the fee application and drafting a final fee 28 order.

1 According to Moran, the fees incurred litigating against PNC 2 Bank were not an administrative expense because they were 3 incurred after completion of payments under the Amended Plan. 4 Moran also noted that the Amended Plan could not be modified to 5 provide for payment of the supplemental fees. Additionally, 6 Moran recognized that the RARA executed at the commencement of 7 the representation prohibited payment directly from Howard unless 8 otherwise ordered. 9 The bankruptcy court found that Moran’s supplemental fees 10 and costs were both necessary and reasonable but determined that 11 Howard’s discharge precluded payment of Moran’s supplemental fees 12 and expenses. The bankruptcy court explained that, under 13 § 503(b), fees awarded pursuant to § 330(a), like Moran’s, are 14 administrative expenses and are entitled to priority treatment as 15 specified in § 507(a)(2) and in the confirmed plan. “Because 16 postconfirmation attorneys’ fees are treated as administrative 17 expenses, the plan’s provision for payment of administrative 18 expenses includes payment of those fees.” Order Granting in Part 19 and Denying in Part Supplemental Application for Compensation 20 (Feb. 9, 2017) at p. 5. Therefore, the court concluded, as 21 administrative expenses provided for in the Amended Plan, Moran’s 22 supplemental fees and costs were discharged regardless of whether 23 they actually were paid. The bankruptcy court allowed Moran’s 24 supplemental fees and costs but denied the request for 25 authorization to collect them directly from Howard. Howard 26 timely appealed. 27 JURISDICTION 28 The bankruptcy court had jurisdiction pursuant to 28 U.S.C.

1 §§ 1334 and 157(b)(2)(A), and we have jurisdiction under 2 28 U.S.C. § 158. 3 ISSUE 4 Did the bankruptcy court commit reversible error when it 5 determined that Moran’s supplemental fees and costs were 6 administrative expenses, had been discharged, and could not be 7 collected directly from Howard? 8 STANDARD OF REVIEW 9 Howard’s issue on appeal requires us to construe the Code 10 sections and Rules governing compensation of chapter 13 debtors’ 11 counsel. The task of construing statutes and Rules is subject to 12 the de novo standard of review. Litton Loan Serv’g, LP v. 13 Garvida (In re Garvida), 347 B.R. 697, 703 (9th Cir. BAP 2006). 14 When we apply the de novo standard, we consider the matter 15 anew, without any deference to the bankruptcy court’s decision. 16 Calderon v. Lang (In re Calderon), 507 B.R. 724, 728 (9th Cir. 17 BAP 2014). 18 DISCUSSION 19 A. Moran’s Allowed Fees Were Administrative Expenses. 20 Howard argues that her attorneys’ fees were not 21 administrative expenses, payment of which was tied to the 22 chapter 13 plan. She contends that Moran’s fees incurred after 23 completion of her chapter 13 plan were not connected with a 24 debtor’s case and, therefore, fell outside the purview of 25 administrative expenses as that term is defined in the Code. 26 The distinction Howard draws is a potentially significant 27 one. 28 When a confirmed chapter 13 plan “provides for” payment of

1 administrative expenses through the plan, the debtors’ discharge 2 includes their counsel’s postconfirmation attorneys’ fees whether 3 or not they actually were paid. See In re Hanson, 223 B.R. 775, 4 778 & n.8 (Bankr. D. Or. 1998). This is so because all fees 5 awarded to a chapter 13 debtor’s counsel under § 330(a)(4)(B) 6 qualify as administrative expense claims pursuant to § 503(b)(2). 7 In turn, administrative expenses are entitled to priority 8 treatment in chapter 13 plans and must be paid in full during the 9 course of the plan, unless the claimant agrees to an alternate 10 treatment. §§ 507(a)(2), 1322(a)(2); see also Wolff v. Johnson 11 (In re Johnson), 344 B.R. 104, 107 (9th Cir. BAP 2006); Keith M. 12 Lundin & William H. Brown, Chapter 13 Bankruptcy, 4th Edition, 13 § 294.1, at ¶ [4] (Sec. Rev. June 17, 2004). 14 Because most chapter 13 plans provide for payment of all 15 administrative expenses through the plan, such fees can be 16 discharged upon completion of the plan even if such fees were not 17 actually paid. In re Hanson, 223 B.R. at 778-79. Accord, 18 In re Rios, 2006 WL 6811006 at *4 (“an administrative claim 19 ‘provided for’ in a chapter 13 plan is discharged upon entry of 20 discharge.”); In re Cripps, 549 B.R. 836, 852 (Bankr. W.D. Mich. 21 2016). In this instance, the RARA further compels such treatment 22 as it requires payment of attorneys’ fees through the plan and 23 precludes direct payment of any fees by the debtor, other than 24 the initial retainer, absent a court order to the contrary. 25 Boone v. Ryder (In re Ryder), 358 B.R. 794, 798-99 (Bankr. N.D. 26 Cal. 2005). 27 In light of the above, Howard does not challenge the effect 28 of her discharge on unpaid administrative expenses. Instead, she

1 contends that the fees for Moran’s services provided after 2 completion of the plan fall beyond the scope of administrative 3 expenses. Because those fees do not qualify as administrative 4 expenses, Howard argues, the discharge does not affect her 5 liability for those fees. 6 Neither Howard, nor this court, has found any case that 7 specifically addresses her argument. Howard suggests that this 8 is because the few cases to consider the effect of the discharge 9 on postconfirmation chapter 13 attorneys’ fees involve fees 10 incurred before completion of the plan. She argues that because 11 the dispute with the secured creditor arose after the 60th month 12 and completion of her plan, such services could not have been in 13 furtherance of her plan. 14 Howard’s focus on the plan is too narrow. Moran’s fees 15 remained subject to bankruptcy court approval and constituted 16 administrative expenses so long as such fees fell within the 17 broad scope of § 330(a)(4)(B), which applies to all chapter 13 18 debtors’ counsels’ fees incurred while “representing the 19 interests of the debtor in connection with the bankruptcy case.”8 20 Courts have broadly construed § 330(a)(4)(B) to facilitate 21 chapter 13 debtors’ efforts to obtain and use competent legal 22 23 8 Section 330(a)(4)(B) provides in full: 24 In a chapter 12 or chapter 13 case in which the debtor 25 is an individual, the court may allow reasonable 26 compensation to the debtor's attorney for representing the interests of the debtor in connection with the 27 bankruptcy case based on a consideration of the benefit and necessity of such services to the debtor and the 28 other factors set forth in this section.

1 counsel to resolve issues arising in their chapter 13 cases that 2 otherwise might impede either their voluntary repayment of their 3 creditors or their successful financial rehabilitation and fresh 4 start. See In re Busetta-Silvia, 314 B.R. 218, 224 n.30 (10th 5 Cir. BAP 2004); In re Davis, 2009 WL 4856199, at *3-4 (Bankr. 6 S.D. Miss. 2009) (citing 3 Collier on Bankruptcy ¶ 330.04[1][b] 7 (15th ed. rev. 2009)). 8 We recognize that Moran’s services did not relate to 9 Howard’s ongoing performance under the plan because she already 10 had completed her regular plan payments by the time Moran 11 rendered her services. Nonetheless, the services were necessary 12 to ensure that PNC Bank did not, after the fact, undermine 13 Howard’s right under § 1322(b)(5) to cure any arrears and 14 maintain her contractual payment obligations over the course of 15 her plan and, ultimately, to obtain the fresh start she was 16 entitled to by virtue of having successfully completed her plan. 17 See In re Tatum, 2017 WL 3311219, at *2 (Bankr. D. N.J. May 15, 18 2017); In re Gravel, 556 B.R. 561, 568-69 (Bankr. D. Vt. 2016). 19 As explained in Gravel: 20 Bankruptcy Rule 3002.1 . . . was promulgated in 2011, in response to a growing problem that had arisen in 21 Chapter 13 cases throughout the country: debtors who had successfully completed their Chapter 13 plans, and 22 paid all of their mortgage arrears and post-petition installment payments, would find themselves in renewed 23 foreclosure proceedings due to undisclosed and unpaid post-petition charges and fees — a result clearly at 24 odds with a debtor’s right to a fresh start. To promote further transparency and more emphatically 25 safeguard debtors’ fresh starts, the Rule requires the holder of a claim secured by a Chapter 13 debtor’s 26 principal residence to file a detailed notice setting forth all post-petition fees, expenses, and charges it 27 seeks to recover from the debtor. 28 Id. at 568.

1 In short, all of the procedures set forth in Rule 3002.1, 2 and any litigation arising therefrom, are inextricably 3 intertwined with the chapter 13 debtor’s efforts to pay her 4 creditors over the course of her plan and to achieve a fresh 5 start upon the successful completion of her plan payments. In 6 this very real sense, the Rule 3002.1 procedures are undoubtedly 7 connected to the debtor’s bankruptcy case. 8 Howard attempts to analogize Moran’s services to fees 9 incurred to enforce a debtor’s discharge, but she cites no 10 authority to support her contention that fees incurred after 11 discharge necessarily are not expenses of administration. The 12 Code indicates to the contrary because the controlling statute 13 contains no such categorical temporal limitation. See § 503(b).9 14 Similarly, the Rules do not fix any specific bar date for filing 15 administrative expense claims. Instead, the Rules leave it to 16 the bankruptcy courts to determine the timeliness of requests for 17 allowance and payment of administrative expense claims. See 18 Deere Credit, Inc. v. Wiley (In re Wiley), 2014 WL 294330, at *4 19 (Bankr. S.D. Ga. Jan. 24, 2014) (citing 4 Collier on Bankruptcy 20 ¶ 503.02 (16th ed. rev. Sept. 2013)). 21 For the reasons set forth above, Moran’s argument lacks 22 merit. The postconfirmation fees Howard incurred at the end of 23 her chapter 13 case were administrative expenses that were 24 discharged pursuant to Howard’s chapter 13 plan. 25 9 26 The wisdom of this approach is evident. For example, if a chapter 7 case was reopened to administer newly discovered 27 assets, the trustee and her duly retained professionals may request allowance and payment of their reasonable fees and 28 expenses as administrative expenses.

1 B. Means of Repayment. 2 Howard also argues that if her counsel’s fees are considered 3 administrative expenses, she is left without a remedy as she 4 could not modify her plan after completion of her payments under 5 the plan. § 1329(a). We are not unsympathetic to Moran’s 6 situation. Both the chapter 13 trustee and the bankruptcy court 7 acknowledged the benefit of the services she provided to Howard. 8 We do not agree, however, that there was no means to pay Moran’s 9 administrative expenses incurred after the completion of Howard’s 10 plan. The plan still required payment of all administrative 11 expenses. Although the completion of the plan payments and term 12 precluded modification of the plan, it did not necessarily 13 foreclose the debtor from making additional payments on 14 outstanding plan obligations if required. See In re Hill, 374 15 B.R. 745, 750 (Bankr. S.D. Cal. 2007). Similarly, while the RARA 16 precluded Moran from receiving direct payments from the debtor, 17 that prohibition stands unless otherwise ordered by the court. 18 Courts may allow debtors to make payments directly to counsel on 19 fees excepted from the discharge. See In re Johnson, 344 B.R. at 20 107. Unfortunately, entry of discharge foreclosed these options. 21 Even after entry of discharge, nothing prevents Howard from 22 voluntarily repaying Moran’s approved fees. § 524(f). While 23 Howard is no longer legally obligated to repay Moran’s awarded 24 supplemental fees, this option always has been available and 25 continues to be available. In re Conner, 559 B.R. 526, 532 n.8 26 (Bankr. D. N. M. 2016); In re Cripps, 549 B.R. at 863 n.31. 27 We recognize that Moran having to rely upon Howard to 28 voluntarily repay the debt for the critical, effective and

1 beneficial services Moran provided is the least desirable option 2 available to Moran because it leaves her with no control over, or 3 legal right to, payment. Nonetheless, no matter how imperfect, 4 it remains an option still available to ameliorate the potential 5 harshness of the result here. 6 CONCLUSION 7 This case poignantly demonstrates that counsel must be 8 particularly mindful of compensation issues relating to their 9 fees when unanticipated situations arise requiring their services 10 after debtors complete their regular plan payments. 11 Because Howard’s plan provided for payment of administrative 12 expenses, including attorneys’ fees, through regular plan 13 payments, and because Moran did not arrange for and obtain 14 compensation by any alternate means before Howard received her 15 discharge, Moran’s fees were discharged administrative expenses. 16 We AFFIRM. 17 18 19 20 21 22 23 24 25 26 27 28