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In re Reynolds

United States District Court, D. Utah

September 24, 2019



          DALE A KIMBALL United States District Judge.

         This matter is before the court on appeal from an order of the United States Bankruptcy Court for the District of Utah (“bankruptcy court”) denying the full compensation requested by Prince Yeates and Geldzahler (“Appellant”), special counsel to the Chapter 7 Trustee, J. Kevin Bird (“Trustee”), in its First and Final Application for Allowance of Attorney Fees and Costs as supplemented (“Fee Application”). The Trustee joined Appellant in filing this appeal. Appellant's appeal is unopposed, and the court concludes that a hearing would not significantly aid in its determination of the issues presented. The court has carefully considered the materials submitted by Appellant and the law and facts relevant to this appeal. Now being fully advised, the court issues the following Memorandum Decision and Order.


         This appeal is taken from the bankruptcy court’s Memorandum Decision and Order (“Order Denying Compensation”), entered on May 10, 2018, denying Appellant the full compensation requested in its Fee Application. Appellant requested $22, 221.50 in fees and $853.44 in costs. The bankruptcy court denied all but $2, 896.00 of the requested fees, and approved Appellant’s request for costs as prayed.


         Appellant has outlined three issues on appeal. However, the court believes that the first and second issues deal with essentially the same question, which is whether the bankruptcy court erred by misapplying, omitting, or using factors other than those set forth in 11 U.S.C. § 330(a)(3) and Johnson v. Georgia Highway Express, Inc. 488 F.2d 714 (5th Cir. 1974), in determining the reasonableness of the attorney's fees requested in Appellant's Fee Application. The final issue on appeal is whether the bankruptcy court abused its discretion because its findings were without factual support in the record or the product of an error of law.


         Whether a bankruptcy court has erred in applying the 11 U.S.C. § 330(a)(3) and Johnson factors to the denial of a professional's fee application is subject to de novo review; its factual findings are reviewed under the clearly erroneous standard. In re Commercial Fin. Servs., 427 F.3d 804, 810 (10th Cir. 2005). “A finding of fact is clearly erroneous if it is without factual support in the record or if, after reviewing all of the evidence, we are left with the definite and firm conviction that a mistake has been made.” Id. “Review of the bankruptcy court’s factual determinations in connection with a fee award is highly deferential, and the factual determinations are reviewed for clear error.” In re Market Center East Retail Property, Inc. 730 F.3d 1239, 1244-1245 (10th Cir. 2013). A bankruptcy court’s discretion is reviewed under the abuse of discretion standard. “Under the abuse of discretion standard[, ] ‘a trial court’s decision will not be disturbed unless the appellate court has a definite and firm conviction that the lower court made a clear error of judgment or exceeded the bounds of permissible choice in the circumstances.’” Moothart v. Bell, 21 F.3d 1499, 1504 (10th Cir. 1994) (quoting McEwan v. City of Norman, 926 F.2d 1539, 1553-54 (10th Cir. 1991)).


         A. Filing of the Bankruptcy Petition

         Ronald J. Reynolds and Charolett Kay Reynolds (“Debtors”) filed a joint voluntary petition for relief under Chapter 7 of the Bankruptcy Code on March 16, 2016 (“Petition Date”). The Trustee was appointed thereafter. In their bankruptcy filings, the Debtors disclosed two parcels of real property located in Mt. Pleasant, Utah. Debtors stated that, on the Petition Date, they owned a parcel of real property described as “Pine Creek Acres #11” (“Lot 11"), valued at $25, 000.00, and secured by a trust deed in the amount of $35, 550.00. Debtors also disclosed they had owned another parcel of real property located in Mt. Pleasant, Utah, described as “Pine Creek Acres, Lot #9" (“Lot 9"), which they sold pre-petition to Gary Black (“Black”) for $1000 in cash.

         B. Appointment of Special Counsel for the Chapter 7 Trustee

         On May 26, 2016, the Trustee filed a motion to employ Appellant to represent him as special counsel, citing that Appellant would “[a]ssist the Trustee in investigating and recovering any interest the bankruptcy estate may have in property located in Sanpete County which were transferred from the Debtors to Gary Black for less than a reasonably equivalent value." The Trustee believed there was sufficient cause to investigate the Debtors' sale of real property to Black as an avoidable transfer and that there may have been cause to object to the Debtors' discharge if the Debtors had undervalued and sold Lot 9 with fraudulent intent. The bankruptcy court granted the Motion to Employ Special Counsel.

         C. Motion to Extend Time to Oppose Discharge and Order Discharging Debtors

         On June 9, 2016, Appellant filed a Motion to Extend the Time to Oppose the Debtors' Discharge. The bankruptcy court held a hearing on the motion on July 12, 2016 and granted the motion on July 29, 2016. The bankruptcy court extended the deadline to oppose discharge to September 17, 2016, and in the absence of opposition to ...

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