IN RE ALEXANDER, (Bankr.D.Wyo. 1995)

PETER McNIFF, United States Bankruptcy Judge.

In this chapter 13 case, the debtors objected to the amended secured claim of the Equality State Bank, which was filed on December 27, 1994. On February 1, 1995, the court held a hearing on the claim objection at which the debtors were represented by George L. Arnold, the creditor was represented by Walter C. Urbigkit, and the standing chapter 13 trustee, Sharon A. Dunivent, appeared personally.

The secured claim of Equality State Bank (Equality), totalling $133,947.00, contains an itemization which includes principal of $112,313, interest of $5,187, and insurance costs of $523. The claimant also seeks its attorney fees associated with this case in the amount of $15,389, and deposition costs of $535. The major issue raised by the objection. is the amount of the attorney fees. The claim is secured by a first mortgage on the debtors I motel, and the parties apparently agree that the value of the collateral is at least $250,000. Thus, Equality's claim is oversecured.

Under their proposed chapter 13 plan, the debtors will divide the property and surrender a portion to the creditor. This court previously valued the surrendered parcel at $85,000. After application of that sum to the obligation, Equality will retain its lien on the remaining parcel and the rest of the claim will be repaid in accordance with the plan terms.

Jurisdiction

This claim objection is a core proceeding under 28 U.S.C. § 157 (b)(2)(B). The court has jurisdiction under 28 U.S.C. SS 1334 and 157(a).

Attorney Fee Issue

The Bankruptcy Code provides, in 11 U.S.C. § 506(b), that a secured creditor is entitled to "fees, costs and charges" as part of its secured claim to the extent that the contract so provides, the fees are reasonable, and the value of the collateral exceeds the total amount of the claim. Most bankruptcy courts discussing this section have held that whether the contract provision allowing such fees is valid is a question of state law. In re Schriock Construction Inc., 1994 W.L. 722979 (Bankr. N.D. 1994). Under Wyoming law, such attorney fee awards are permissible if provided for in the loan agreement. UNC Teton Exploration Drilling, Inc. v. Peyton, 774 P.2d 584, 594 (Wyo. 1989).

The promissory note executed by the debtors in this case specifically provides for fees and expenses to the extent permissible under the United States Bankruptcy Code. Consequently, that condition of § 506(b) is satisfied. As the value of Equality's collateral exceeds the amount of its claim, that requirement is satisfied as well.

The question remaining for resolution is whether the attorney fees and expenses claimed are reasonable, and thus are included as part of the claim in this bankruptcy. This question is one of federal law. In re Lederman Enterprises, Inc., 106 B.R. 674 (Bankr.D.Colo. 1989).

In the Tenth Circuit, the standards for making a determination of reasonableness are addressed in In re Permian Anchor Services, Inc., 649 F.2d 763 (10th Cir. 1981). In that case, the Tenth Circuit court adopted the twelve-factor test detailed in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974). The Johnson factors are also the standards applied by the Wyoming state courts. UNC Teton Exploration Drilling, 774 P.2d at 595.

More recently, the Tenth Circuit discussed the lodestar analysis (reasonable hours times reasonable rates) and reiterated that the Johnson test is relevant to and usually subsumed into the lodestar reasonableness determination. Mares v. Credit Bureau of Raton, 801 F.2d 1197 (10th Cir. 1986). And in In re Lederman Enterprises, Inc., 997 F.2d 1321 (10th Cir. 1993), the Tenth Circuit court specifically applied the lodestar analysis to an award of debtor's attorney fees.

The reasonableness determination is made by the court within the context of the court's own knowledge, experience, and expertise of the time required to complete similar activities. This is not a mechanical function, and does not necessarily involve a detailed review and discussion of the line by line entries. Rather, the court may make a subjective judgment based on the entire circumstances presented. Mares, 801 F.2d at 1203. The attorney has the burden of establishing entitlement to a fee award with appropriate, detailed documentation. Further, attorneys are required to exercise billing restraint Id. at 1201.

In cases where the fees sought are included in a secured claim under § 506 (b), the bankruptcy courts consider other factors as well. For example, the fact that a creditor is oversecured inherently provides protection of the claim. Thus, the creditor is only entitled to include services reasonably required to protect its interest in the loan. In re Villa Capri of Ga. Assoc. Ltd., 141 B.R. 257, 263 (Bankr.N.D.Ga. 1992). Overzealousness will not to be compensated through the claim paid by the debtors, even if the creditor approves of such action by its counsel. In re Huhn, 145 B.R. 872, 877 (W.D.Mich. 1992). The courts also recognize that the fees of both parties are being paid by the debtors from property of the bankruptcy estate, a consideration which requires particular billing restraint.

Finally, this court is aware that even if the fees are not permitted as part of the § 506 (b) award, the attorney may rightfully be compensated by his client. The services performed may be completely bona fide from the creditor's perspective. In re Villa Capri, 141 B.R. at 264.

With all of the preceding factors in mind, the court turns to the fees included in Equality's secured claim. The debtors' counsel argued vigorously that many of the services performed by Mr. Urbigkit were unnecessary to protect Equality's interest in the collateral, particularly because there is no concern that Equality will not be fully compensated on its claim. The debtors referred to specific instances where counsel appeared to have exercised little billing restraint, such as excessive trial preparation and extensive research unnecessary in an uncomplicated case. They also point to pleadings filed in zealousness produced by vengeance and argue that those fees are not compensable under the claim.

This court recognizes that the surrender of a portion of the collateral by partition is a novel issue in a chapter 13 case. Consequently, this case is less straightforward than most chapter 13 cases. Even so, the time requested for research is excessive. As the court stated in In re Automobile Warranty Corp., 138 B.R. 72, 81(Bankr.D.Colo. 1991), "[c]ounsel are presumed to be sufficiently experienced and to have an adequate background in the applicable law."

In his itemization, Equality's counsel included non-research matters in the same entries with the time requested for research, making a determination of the specific number of research hours impossible. The total time in which research entries appear exceeds 24 hours. Adequate research in this case should have been accomplished in much less time. Thus., the court will deduct 12 hours for legal research, or $1,800, and allow the remaining 12 hours.

On December 20, 1994, a three (3) hour valuation hearing was held to determine the value of the surrendered parcel of property. Counsel requests fees for trial preparation in connection with the hearing in excess of 55 hours, or $8,250. Additionally, on two (2) separate days, counsel included time entries of 11 and 12 hours for services connected with this trial preparation.

The debtors allege that Equality's counsel initially refused to submit the appraisals to the court without expert testimony. And Mr. Urbigkit previously indicated to the court that the valuation issue would require at least a two (2) day trial with witness testimony. Also, the entries include time spent on trial depositions and trial preparation of Equality's appraiser. Yet, the appraiser did not appear at the hearing, and the hearing was never contemplated by the court to be a two-day trial.

The court finds that 12 hours of preparation for the valuation hearing is reasonable. Accordingly, the fee request is reduced by 43 hours, or by $6,450.

The debtors contend that services related to plan feasibility issues were not necessary to protect Equality's claim and argue that no fees should be included for objections to the chapter 13 plan. However, the feasibility issue is sufficiently related to the creditor's protection of its collateral for the court to find the fee request reasonable.

Other Issues

The debtors also objected to the per them rate, $28.07, at which interest is calculated on the claim. The creditor responded that the contract provides for an interest calculation based upon a 360 day year. In the absence of any authority that such a contract provision is invalid, the court will allow interest at the contract rate and in accordance with the contract calculation provision. The debtors also object, and the creditor concedes, that the interest calculation to the date of the claim is actually $5,178, rather than the amount of $5,187 claimed.

Finally, the court will not allow the claim to include trial deposition costs of $535. The bank deposed its own appraiser, and the debtors should not have to pay for his failure to appear at the hearing.

In summary, the total attorney fee award allowed as reasonable under § 506(b) and as part of Equality State Bank's secured claim is $7,139. Therefore, it is

ORDERED that the total claim, as of December 23, 1994, is allowed in the amount of $125,153, subject to the court's previous order on valuation of the surrendered collateral.