HON. RALPH B. KIRSCHER, Bankruptcy Judge.
In this Chapter 7 bankruptcy, after due notice, hearing was held October 4, 2000, at Billings on Gary S. Deschenes' ("Deschenes") — attorney for the Debtor — and Tim J. Watts' ("Watts") — economist for the Debtor — "Motion for this Court's Reconsideration of its Order dated September 13, 2000." Deschenes and Watts appeared at the hearing both personally and through counsel Joel E. Guthals. Additionally, Neal G. Jensen, Assistant U.S. Trustee, appeared at the hearing in support of Deschenes' and Watts' request for reconsideration.
On April 21, 2000, Deschenes and Watts filed applications for fees requesting an award of fees and costs from the Chapter 7 bankruptcy estate in the sum of $53,653.28 and $20,624.13, respectively. A hearing on approval of the fee applications was held June 19, 2000. After a thorough review of the record and after careful consideration of the testimony and exhibits presented at the hearing, the Court entered an Order on September 13, 2000, awarding Deschenes $15,000.00 in fees and costs and awarding Watts $7,500.00 in fees and costs. The Court's fee award as set forth in the Order of September 13, 2000, prompted Deschenes' and Watts' instant request for reconsideration.
Prior to the October 4, 2000, hearing, the Court reviewed Deschenes' and Watts' request for reconsideration, the transcript from the hearing held June 19, 2000, the record in this proceeding and the Court's Order of September 13, 2000. Based upon a review of the foregoing, the Court, at the commencement of the October 4, 2000, hearing supplemented the Court's Order of September 13, 2000, by recognizing that Doug James — counsel for Dakota Western Bank, Craig D. Martinson — counsel for ResourceFund, L.P.I., and James A. Patten — counsel for Basic Earth Science Systems, Inc. appeared and testified in support of Deschenes and Watts fee applications. The Court's Order of September 13, 2000, only referred to the appearance made by the Chapter 7 Trustee, Joseph V. Womack.
Additionally, after further consideration of the record, the Court corrected its finding that Deschenes had filed a false certificate of mailing with this Court. In the Order entered September 13, 2000, the Court wrote:
Deschenes testified that he knew in January 1998 that the plan of reorganization could not be confirmed with such low oil prices. In fact, the per barrel oil price fell below $15.23 in December 1997 and remained below that price for eighteen (18) months. Ex. 11, p. 2. As a consequence, Deschenes testified that he did not mail the Plan to all creditors; the high costs of copying and mailing associated with sending the Plan to so many creditors were not warranted when he knew it could not be confirmed. Deschenes' testimony directly contradicts his certificate of mailing which was filed together with the Plan and Disclosure Statement on January 20, 1998, in which Lisa Peck of Deschenes' office certifies "under penalty of perjury" that the Plan and Disclosure Statement were mailed by first class mail to all parties on January 15. 1998.
The Court reached the above factual finding based upon the following testimony given by Deschenes at the June 19, 2000, hearing:
That [January 1998] Plan we knew didn't work and we weren't about to come to this Court and try to put forth the feasibility on a plan that just was not going to work any longer. So we filed the amended plan. This Court in fact ordered that . . . did an Order to Show Cause why the case should not be dismissed because I had not distributed that January plan to the creditors. In this case your honor, there are over 500 creditors. Had I done that, just the mailing costs alone I think was something like $1,000.00.
The Court concluded, based upon Deschenes above testimony and the fact that Deschenes had only requested postage costs of $70.47 in January of 1998, that Deschenes had not served Debtor's January 14, 1998, Disclosure Statement and Plan of Reorganization on all parties-in-interest despite the "Certificate of Mailing Disclosure Statement for Plan of Reorganization and Plan of Reorganization dated January 14, 1998", which certified that all parties-in-interest had been properly served.
Deschenes clarifies in his request for reconsideration that the costs associated with mailing Debtor's January 1998 Disclosure Statement and Chapter 11 Plan are set forth in a Trustee's Report — a document not routinely filed with this Court, nor routinely considered by this Court. Moreover, Deschenes request for reconsideration states that while he did properly serve Debtor's Disclosure Statement and Chapter 11 plan in January of 1998, Deschenes did not reserve Debtor's amended Disclosure Statement or Chapter 11 Plan dated January 14, 1998, along with the notice of confirmation hearing and ballot by May 18, 1998, as earlier instructed by the Court. Deschenes' supplemental explanation comports with the record and thus, the Court will delete its previous finding as set forth above from the Order entered September 13, 2000.
After making the above adjustments to the Court's Order of September 13, 2000, the Court then allowed Deschenes and Watts to proceed with their request for reconsideration. As noted by the Court at the hearing held October 4, 2000, motions for reconsideration serve a limited purpose: to correct manifest errors of fact or law or to present newly discovered evidence. In re Parcel, 12 Mont. B.R. 535 (Bankr. Mont. 1993); In re Teigen, 11 Mont. B.R. 91-92 (Bankr. Mont. 1992) (quoting In re Brazier Forest Products, 122 B.R. 119, 121-22 (D.W.D. Wash. 1989)). A motion for reconsideration cannot be used to raise arguments that could and should have been made before a decision or judgment was issued.
Because of the limited nature of motions for reconsideration, the Court allowed Deschenes and Watts an opportunity to make offers of proof in support of their request for reconsideration, but noted that the record was complete based upon the extensive testimony and exhibits presented at the prior hearing, in addition to the nine files which have been generated since the inception of this case in August of 1997. Deschenes and Watts, through their counsel, Mr. Guthals, made the following offers of proof:
1. Mr. Womack, the Chapter 7 Trustee would testify a manifest error of law and fact was made with respect to the Court's determination that the services performed by Mr. Deschenes and Mr. Watts did not benefit the Debtor or the bankruptcy estate.
• Mr. Womack's testimony would show that the joint operating agreement with Rimco preserved the operation of the wells and improved the condition of the wells and resulted in the distribution of royalties to lessees and further, resulted in the realization of $92,500 when the Trustee sold that particular asset. If the joint operating agreement had not been negotiated and entered into through the efforts of Mr. Deschenes and Mr. Watts, the wells would have been "shut in" and worthless, producing nothing for the estate;
• Because Rimco had operated the wells, there was a sum of $37,000 in accounts payable owed to the bankruptcy estate at the time this case was converted to Chapter 7;
• Seven wells in North Dakota were eventually sold to Titan Oil for the sum of $31,000. The availability of these wells was directly related to the efforts of Mr. Deschenes and Mr. Watts;
• The money generated by the sale of these assets and the recovery of accounts payable to the estate allowed the bankruptcy trustee to reach a settlement with the Bureau of Land Management regarding all of their claims and to take care of all the environmental claims as well; and
• Through the efforts of Mr. Deschenes and Mr. Watts, shareholder loans resulted in adversary proceedings for the recovery of preferences. The estate has recovered $35,000 from the shareholders so far and the Trustee has a judgment for $44,000 which has not yet been recovered but which is an asset of the bankruptcy estate.
In all, Mr. Womack's testimony would show that the value of this bankruptcy estate is $200,000, perhaps more, rather than the $125,000 as set forth in the Court's September 13, 2000, Order and as a result, there are sufficient funds to pay increased fees to Deschenes and Watts and also to have money available to pay the tier two creditors.
Mr. Womack, the Chapter 7 Trustee, testified at the hearing held June 19, 2000, that there was only $125,000 in the estate. Mr. Womack made his statement to the Court on June 19, 2000, without the benefit of first reviewing his file in this case and thus, the Court will adopt the $200,000 as now represented by Mr. Guthals.
2. Mr. Womack would also testify that because of Mr. Deschenes' and Mr. Watts' work, the bankruptcy estate was in an orderly condition to allow it to be wound up and liquidated avoiding years of litigation involving the BLM, EPA and conflicting ownership claims.
3. Mr. Deschenes and Mr. Watts believe the Court's Order of September 13, 2000, contains additional errors of fact and law that are manifest and should, therefore, be corrected through the presentation of additional evidence:
• The standard announced by the Court in its Order, that the services must be reasonably likely to benefit the estate at the time the services were rendered was not correctly applied to the services performed by Mr. Deschenes and Mr. Watts and the Order overlooks many services they provided, including those provided after January;
• Mr. Deschenes and Mr. Watts did not make a mistake in continuing to work on the case when reorganization was not feasible. Instead, the evidence they would like to put on today will show that they did not learn that the reorganization could not be accomplished through restructure until May of 1998 as opposed to early 1998 as understood by the Court from the previous record;
• The Court erred in its determination that Mr. Deschenes and Mr. Watts were deficient in not disclosing the fluctuation in oil prices. Evidence will show they had numerous meetings with creditors at which oil prices were discussed over a period of several months. In addition, the liquidating plan of reorganization contains a disclosure of the fact that oil prices had dropped; and
• Mr. Deschenes and Mr. Watts believe the Court made an error with respect to their deficiencies in addressing the BLM claims and the tax situation with the IRS. Mr. Deschenes and Mr. Watts could offer testimony on this issue.
In addition, Deschenes and Watts proposed to introduce Exhibits B, K and L, which exhibits were not offered at the June 19, 2000, hearing and were only offered for the first time in conjunction with the request for reconsideration.
Neal Jensen, Assistant U.S. Trustee, also appeared and stated that even though Mr. Womack testified there was about $125,000 in the estate at the prior hearing, additional evidence would show that in addition to the $92,500 obtained from the sale of oil interests, $37,000 was collected in the form of proceeds from production, $31,000 was realized from the sale of seven wells in North Dakota, $35,000 was received from shareholder settlements, $44,000 is owed on a judgment against the shareholders and, finally, Mr. Deschenes has $30,000 in his trust account in the form of a partial retainer, showing $225,500 for the estate of which $29,500 has been paid by the Trustee to satisfy the BLM claims and to settle the EPA bond claims. In sum, Jensen argued there was a promotion of the bankruptcy process and administration through Deschenes' and Watts' efforts because (1) the BLM would have had to foreclose its liens in state court; (2) the wells would have been shut down; (3) the EPA bonds would not have been sufficient to cover potential liability (4) royalties would not have been collected and paid; and (5) the case would have required years of litigation to resolve who owned what.
The Court has carefully considered the offers of proof and appreciates the parties comments with regard thereto, but the offers of proof and comments involve matters that could have been raised by Deschenes and Watts at the hearing held June 19, 2000, and indeed many of the offers of proof are merely duplicative of evidence submitted to the Court at the June 19, 2000, hearing. Extensive testimony has been taken, numerous exhibits have been offered and several Orders have been entered in this case since August 1, 1997, when Debtor filed its voluntary petition. In the instant request for reconsideration, Deschenes and Watts attempt to undo findings and conclusions made by this Court as far back as September 9, 1998, when this case was converted from Chapter 11 to Chapter 7.
At that time, the Court found Debtor's evidence in support of confirmation "deplorably week and even non-existent." The Court further found that Debtor was "losing money at an alarming rate, on property that [was] admittedly in a dismal state of repair", all arguably occurring while Debtor was under the counsel of Deschenes and Watts.
The Court set forth extensive findings of fact and conclusions of law in its Order entered September 13, 2000. The factual corrections concerning the veracity of Deschenes certificate of mailing made by the Court at the commencement of the hearing held October 4, 2000, do not change the outcome of that Order. In sum, Deschenes and Watts have failed to show that this Court committed a manifest error of fact or law in its prior Order. As noted above, motions for reconsideration serve a limited purpose and cannot be used to raise arguments that could and should have been made before a decision or judgment was issued.
IT IS THEREFORE ORDERED the Motion for this Court's Reconsideration of It's Order dated September 13, 2000, filed September 22, 2000, is granted in part and denied in part; the Court's Order of September 13, 2000, is amended to reflect that in addition to Joseph V. Womack, Doug James, Craig D. Martinson and James A. Patten appeared at the hearing held June 19, 2000, in support of Gray S. Deschenes' and Tim J. Watts' fee requests; the factual finding made by this Court in the Order entered September 13, 2000, that Debtor's Disclosure Statement and Chapter 11 plan or reorganization dated January 14, 2000, were not mailed to all parties-in-interest is hereby deleted from the Court's September 13, 2000, Order; and all other factual findings, conclusions of law and ruling shall stand as entered in the Court's Order entered September 13, 2000.
Comments