ROBERT G. MAYER, United States Bankruptcy Judge
THIS CASE is before the court on the motion of Robert Goldsten to reconsider the court's order entered on December 19, 2000, establishing the amount necessary to release his deed of trust. The amount set was $161,000.00. He asserts that the payoff amount computed is in error in that interest was not properly computed and he was not awarded attorney's fees.
Mr. Goldsten's counsel was late to court for the December 5, 2000, hearing establishing the payoff amount. She arrived after the court heard the motion and debtor's counsel had left the courthouse. She filed a motion for reconsideration. It is this motion to reconsider that is before the court today. In light of counsel's stipulation that interest would abate on December 5, 2000, because of her tardiness in attending court and so as not to punish Mr. Goldsten for his counsel's tardiness, the court will grant the motion to reconsider.
The debtor owns the real estate known as 7601 Pohick Road, Lorton, Virginia, which she scheduled with a value of $376,000.00 on her original schedules. The property was, as of the date of the filing of the petition, subject to liens of two deeds of trusts and one judgment. The first deed of trust was in favor of Robert Goldsten and was scheduled in the amount of $156,000.00. The second deed of trust was in favor of Banc Mortgage Finance in the scheduled amount of $132,000.00. The judgment lien was in favor of Robert Kinsel. The note secured by the first deed of trust is dated February 16, 1998, and is in the original principal amount of $145,000.00. It bore interest at the rate of 16 percent. However, in the event that the note was not paid in full at or before maturity, the unpaid principal balance at maturity was to bear interest at the rate of 2 percent per month.
There are two issues to be determined with respect to the amount of the payoff. The first is whether the penalty rate of interest should be allowed and the second is the amount of actual attorney's fees that should be allowed.
The note provides for interest at the rate of 16 percent per annum until maturity and thereafter 24 percent per annum. The note matured February 16, 2000. In this case, it would be inequitable to award Mr. Goldsten the penalty rate of interest provided for in the note. The general rule is that no interest will accrue after a tender of payment is made to a note holder if he wrongfully refuses the tender. Here, no tender could be made because the creditor was demanding amounts in excess of those permitted under the note and deed of trust. More particularly, the creditor demanded 25 percent attorney's fees on the $145,000.00 note. The note provides for attorney's fees of 25% if judgment is confessed. Judgment has never been confessed. No substantial legal activity had been undertaken by counsel to collect the note at the time of the demand. Because judgment had not been confessed, the provision for attorney's fees in the note was not applicable. The only other provision permitting the recovery of attorney's fees is in the deed of trust. It provides for actual attorney's fees in limited circumstances. The debtor offered to pay actual attorney's fees and estimated them at various times between $2,000.00 and $5,000.00. The time records produced by counsel support this offer. However, the creditor would not accept the amount offered. Because he would not accept it, it was impossible for the debtor to go to closing on the property and make an actual tender of funds. Closing could not be completed without a release from the creditor or his agreement to give a release. The creditor's demand at that time was unjustified and improper. As a consequence, the note remained outstanding and interest accrued at the default rate of 24 percent per annum. Because of the improper demand and consequent impossibility of closing on the property, it is not appropriate to reward the creditor with the default interest rate. As a matter of equity, the court will apply the non-default note rate through December 5, 2000. At the hearing on the motion to reconsider, counsel stated that in light of the fact that any delay after December 5, 2000, was caused by her failure to timely appear in court to argue the motion, the note will accrue no interest after December 5, 2000, through 14 days after the date of the entry of this order. Thereafter, interest shall accrue at the non-default note rate, 16 percent, until paid.
The second issue relates to the amount of attorney's fees to be awarded to Mr. Goldsten's counsel. Virginia follows the American rule with respect to attorney's fees. Absent a specific contractual or statutory provision to the contrary, attorney's fees are not recoverable by a prevailing litigant from a losing litigant. Mullins v. Richlands Nat'l Bank, 241 Va. 447, 449, 403 S.E.2d 334, 335 (1991). The attorney's fees provision in the note is peculiar in that it only authorizes attorney's fees if judgment is confessed against the maker. In this event, the attorney's fees are agreed to be 25 percent of the principal and interest. It is undisputed that judgment was never confessed against the maker of the note. Consequently, attorney's fees cannot be awarded pursuant to the provision in the note. The deed of trust provides for recovery of attorney's fees in limited circumstances and makes them subject to the lien of the deed of trust. The attorney's fees need not be incurred in connection with a suit. However, attorney's fees are recoverable only if they are necessary to sustain the lien of the deed of trust or its priority, to protect or enforce any of the beneficiary's rights under the deed of trust, or to recover any indebtedness secured by the deed of trust. In this case, no action was taken to challenge the lien of the deed of trust or its priority. The only actions taken were to protect the beneficiary's rights under the deed of trust and to recover the note. The deed of trust does not set forth an agreed upon amount for an award of attorney's fees and it is therefore necessary to determine what reasonable attorney's fees are in the context of this case. The Virginia Supreme Court set out the rule for determining the amount of the attorney's fees in Mullins where it stated:
Where, as here, the contracts provided for attorney's fees, but did not fix the amount thereof, a fact finder is required to determine from the evidence what are reasonable fees under the facts and circumstances of the particular case. See Beale v. King,
204 Va. 443, 446,
132 S.E.2d 476, 478 (1963). In determining a reasonable fee, the fact finder should consider such circumstances as the time consumed, the effort expended, the nature of the services rendered, and other attending circumstances.
Mullins, 241 Va. at 449, 403 S.E.2d at 335.
In this case, Mr. Goldsten's attorney was involved in three principal activities. The first was a suit filed in the Circuit Court of Fairfax County, Virginia to obtain a judgment on the note. Counsel filed a motion for judgment, the defendants filed an answer, and counsel discussed resolution of the matter. No discovery was undertaken; no motions were prepared, filed or argued; no substantive action was taken in the case.
The second activity counsel undertook was to look into foreclosing the deed of trust. No sale was ever noticed or scheduled.
The third activity was this bankruptcy case. The chapter 13 plan provided for the sale of the property and the payment to Mr. Goldsten of $161,000.00. Counsel objected to the confirmation of the chapter 13 plan and filed a motion for relief from stay. The confirmation of the chapter 13 plan was basically uncontested notwithstanding the objection filed by Mr. Goldsten. Debtor's counsel filed an objection to the proof of claim filed by Mr. Goldsten, filed a motion to sell the property free and clear of liens, and filed a motion seeking the determination of the amount of the payoff due to Mr. Goldsten. No pleading was filed in response to the objection to the proof of claim; however, Mr. Goldsten's counsel did appear at the scheduled hearing. Mr. Goldsten asserted that he was entitled to 25 percent attorney's fees on the note and to compounded interest. The court ruled that the claim would be allowed in the amount of $161,000.00 subject to an amended proof of claim being filed which computed the claim at simple interest and counsel filing a statement of her time so that actual attorney's fees could be determined. An amended proof of claim is not in the court's file although counsel states that she filed an amended proof of claim. No statement of counsel's time was filed with the clerk except as an attachment to a motion. No response was filed to the motion to fix a payoff amount. Counsel was not present when the case was called on December 5, 2000, and the court entered an order setting the payoff amount at $161,000.00. Counsel's hourly rate is $265.00. This hourly rate is an appropriate hourly rate for an experienced attorney. Experienced attorneys should be paid a higher hourly rate than new and less experienced attorneys. They bring with them substantially greater legal skill. They have dealt with similar issues before. They do not have to take the time to educate themselves on the law and can move forward much more rapidly than a novice attorney. It is therefore to be expected that the hours that an experienced attorney spends on a matter will be less than the hours spent by a novice attorney. The difference in hourly rate compensates the experienced attorney for his or her experience and expertise.
In reviewing the time records in this case, however, it appears that counsel spent an excessive amount of time on various aspects of the case. In particular, counsel spent 11.5 hours with respect to a prospective foreclosure which was never noticed. This is an excessive amount of time. An experienced attorney should be able to review the documents necessary to prepare a foreclosure sale and to notice a foreclosure sale in much less time than that.
Counsel spent 16.3 hours with respect to the suit filed in the Circuit Court of Fairfax County, Virginia. This suit was a basic suit seeking judgment on a promissory note. Counsel spent 12.4 hours preparing and filing this suit and 3.9 hours in discussion with counsel after the suit had been filed. The amount of time spent to prepare and file the suit was excessive.
Counsel spent 2.8 hours preparing and appearing in court with respect to the motion for relief from stay. While many counsel could have accomplished this in less time, particularly since the background had been gleaned from the foreclosure and lawsuit filed in Fairfax, it is not itself unreasonable. Counsel however spent 18.9 hours with respect to the bankruptcy including the objection to the confirmation of the chapter 13 plan, the objection to the proof of claim, and the motion to fix the payoff of the deed of trust. Overall, in reviewing the pleadings and considering the nature of the issues involved, this amount should be reduced by a third.
There are various items that should not be charged to the debtor. The award of attorney's fees pursuant to the deed of trust is for particular matters. It does not include other business advise to the creditor. Creditor's counsel spent many hours attempting to negotiate an extension of the note. There were other negotiations as well relating to the bankruptcy proceeding. Not all of these negotiations are compensable. The deed of trust only provides for attorney's fees to recover the note. To the extent that there was an attempt not to recover on the note, but rather to negotiate a new business venture, the time cannot be charged to the borrower. To the extent the negotiations were an attempt to recover on the note, they would be compensable. After reviewing the time records, the court is of the view that 12.0 hours are related to the business activities of the creditor that are not included within the attorney's fee provision and that 3.4 hours are involved in negotiations to recover on the note. Also not covered by the attorney's fees provision are communications with the holder of the second deed of trust. These communications, while appropriate in representing Mr. Goldsten, are not included in the attorney's fees that can be charged back to the debtor. The position of the second deed of trust holder does not affect the priority of the first deed of trust or the ability to recover against the debtor. There was also time charged by an inquiry from the Commonwealth of Virginia with respect to whether Mr. Goldsten was required to be licensed by the Commonwealth as a mortgage broker or mortgage lender. These are matters not related to recovery on the note and are not compensable. After a thorough review of the time records of counsel and taking into account the circumstances of this case, the time consumed, the effort extended, and the nature of the services rendered, the court awards counsel $7,366.67 for her fees for the creditor.
Counsel also requested reimbursement of certain expenses. The expenses for the title insurance, the courier, the filing fee in the Circuit Court, the filing fee in this court for the motion for relief from stay, and the copies of the bankruptcy file are appropriate costs to be reimbursed under the terms of the deed of trust. However, a computer research fee for researching Virginia licensing statutes cannot be allowed. The Virginia licensing statutes do not come within the terms of the attorney's fees provision of the deed of trust.
Finally, the debtor has paid the chapter 13 trustee certain funds pursuant to the confirmed chapter 13 plan and the trustee has disbursed $2,683.33 to Mr. Goldsten. This disbursement is a credit against the note.
The amount due to Mr. Goldsten is as follows:
Principal on December 1, 1999 $145,000.00
Interest from December 1, 1999 to
December 5, 2000 at 16.00% $23,517.81
Attorney's fees $7,366.67
Costs $826.73
Total $176,711.21
Credit for Chapter 13
Distribution $2,683.33
Balance due as of
December 5, 2000 $174,073.88
No interest shall accrue from December 5, 2000, through 14 days after the entry of the order setting this amount.