Market Center East Retail Property, Inc.

1 The identical motion and attachment were also filed as doc
172.
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UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
MARKET CENTER EAST RETAIL PROPERTY, INC.,
Debtor. 	No. 11-09-11696 SA
MEMORANDUM OPINION AND ORDER ON
SUPPLEMENTAL APPLICATION FOR ALLOWANCE OF
ATTORNEY FEES AS PART OF SECURED CLAIM
OF ORIX CAPITAL MARKETS, LLC
The Supplemental Application for Allowance of Attorney Fees
as Part of Secured Claim (doc 174) 1, filed by ORIX Capital
Markets, LLC (“ORIX”), together with Debtor’s Response to
Supplemental Application for Allowance of Attorney Fees as Part
of Secured Claim (doc 175), has come before the Court for a
ruling, pursuant to the Order Resulting from Preliminary Hearing
on ORIX Capital Markets, LLC’s Supplemental Application for
Allowance of Attorney Fees as Part of Secured Claim (doc 180)
(“Supplemental Application Order”). 	Having reviewed the papers
filed by the parties, the Court rules that the Supplemental
Application should be granted in the amount of $15,615.43.
Background
On August 3, 2010, this Court issued its Memorandum Opinion
on ORIX Capital Market [sic], LLC’s Motion to Allow Secured Claim
Pursuant to 11 U.S.C. §506 and to Order Payment Thereof and On
Objection to ORIX Capital Market’s Claim (doc 167), In re Market
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2 The Court assumes the reader has some familiarity with the
factual and procedural background of the dispute as set out in
the Secured Claim Order. 	433 B.R. at 342-350.
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Center East Retail Properties, Inc., 433 B.R. 335 (Bankr. D.N.M.
2010) (together with the resulting order, the “Secured Claim
Order”). 2 	In the Secured Claim Order, the Court authorized ORIX
to file a supplemental claim for reimbursement of attorney fees,
as follows:
In its post-hearing briefs, ORIX claimed that it was
entitled to reimbursement for additional fees and costs
incurred subsequent to those represented by the
exhibits. For example, ORIX may seek reimbursement of
Thuma & Walker bills beginning in January 2010
(including for litigating the issues addressed in this
memorandum opinion, though the Debtor is already
objecting to those), for [Jeffer, Mangels, Butler &
Marmaro, LLP] bills beginning in February 2010, for
[Atkinson, Thal & Baker, P.C.] bills for March 2010,
etc. At least some of those expenses might be
reimbursable. Debtor and ORIX should confer on this
issue, and present the Court with a process for
resolving that dispute, or at least request a hearing
from the Court if they cannot agree on anything.
Id. at 376, n. 51. 	This Supplemental Application is for fees
incurred by Thuma & Walker, P.C. from January 2010 in prosecuting
and defending ORIX’s secured claim. 	The Supplemental Application
seeks payment of $23,247.50 in fees, $1,545.27 in New Mexico
gross receipts tax (“GRT”), and reimbursement of costs of
$396.53, for a total of $25,189.30. 	Supplemental Application at
1-2.
Analysis
Debtor concedes that ORIX is entitled to some fees, just not
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all of those claimed. 	Response at 1. 	It asks the Court to
disallow certain charges as unrelated to litigating ORIX’s
secured claim, and to prorate the remainder of the fees and
expenses to reflect that ORIX was awarded only 41% of what it
asked for in its Motion to Allow Secured Claim.
Also, Debtor has asked the Court to force ORIX to litigate
in this case the attorney fee issues stemming from the guaranty
litigation in California against Debtor’s principal and sole
shareholder Danny Lahave and Top Terraces, Inc. 	Response at 3-5.
The Court orally ruled at the preliminary hearing conducted on
October 18, 2010 that it would not so rule. 	The Court now makes
that ruling in writing. 	Assuming without deciding that this
Court has the authority to do what Debtor asks, it is
nevertheless the case that the California state court is
competent to decide what if any fees Mr. Lahave and Top Terraces,
Inc. ought to have to pay based on the guaranty. 	As for the
estate paying any of those claims (which claims do not include
these Thuma & Walker bills), decretal paragraph 2 of the
Supplemental Application Order provides that “[u]pon
[adjudication of the claim] and payment of any allowed amount
from the Court registry, ORIX’s claim against the Debtor in this
bankruptcy case shall be paid in full.” 	Thus by not submitting
the bills from any other counsel to this Court for decision, ORIX
is giving up the right to receive further payment from the estate
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for those bills. 	Whether Mr. Lahave then chooses to have Debtor
reimburse him out of any surplus remaining after all of the
claims against the estate are paid in full, is his decision. 	But
whether and how much the other law firms should be paid will not
affect the estate. 	In consequence, even if the Court had subject
matter jurisdiction of the dispute, see Gardner v. United States,
913 F.2d 1515, 1517-19 (10 th Cir. 1990) (bankruptcy court had no
subject matter jurisdiction of a dispute between the Internal
Revenue Service and spouse of debtor when neither debtor nor the
estate had any interest in the property in dispute), a question
the Court does not decide, the Court nevertheless declines to
decide those disputes.
Debtor first argues that charges incurred for other than
litigating the payment of the remaining secured claim are not
payable by the estate. This Court finds, however, that a
reasonable amount of time keeping apprised of the California and
other New Mexico litigation is something competent counsel would
be expected to do, and so is reimbursable. 	More than that,
however, the Court has already ruled that the loan documents
permit ORIX to reimburse itself for the fees and costs of
pursuing the guaranty collection action and defending the
counterclaims. 	In re Market Center East Retail Properties, Inc.,
433 B.R. at 370. 	Such charges must however be reasonable. 	Id.
In that light the Court ruled that the charges for Jeffer,
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3 Several of the daily entries contain numerous individual
entries lumped together with the aggregate time shown for that
day, making it impossible to precisely sort out compensable from
non-compensable activities. 	However, the Court is comfortable
that, based upon a review of its previous decision, it is
sufficiently close to the mark.
4 The rate is 7%. 	Available at
http://www.tax.newmexico.gov/SiteCollectionDocuments/Tax-Library/
Tax-Policy-and-Revenue-Program-History/Current-and-Historic-Tax-R
ates/Gross-Receipts-Tax-Rates/GRT%20Rate%20Schedule%20July%202010
%20-%20Revised.pdf (last visited November 23, 2010).
Page 5 of 	8
Mangels, Butler & Marmaro, LLP (California counsel pursuing the
guaranty collection action) for work done in January 2010 was no
longer necessary in light of the receipts from the Lowe’s
litigation which were more than sufficient to ensure full payment
of any sums that might be left owing to ORIX. 	Nor was the New
Mexico counterclaim defense by Atkinson, Thal & Baker, P.C.
necessary, id. at 373-75, which presumably would not have arisen
had the California guaranty collection not continued.
The Court has reviewed the Thuma & Walker billings from this
perspective and makes its best estimate 3 that the charges set out
on the exhibit A attached hereto are the gross amount
appropriately charged to the collateral. 	Those figures are
respectively $21,296.00 for fees, $396.53 for costs, totaling
$21,692.53, and $1,518.48 for GRT 4 on the total of fees and
costs, for a grand total of $23,211.01. 	Almost all the fees and
costs allowed are for trial preparation, conducting the trial,
and then briefing the issue of what the charges to the collateral
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5 Not having heard the voice mail, the Court makes no
judgment whether it constituted a “threatening message” as
described by Mr. Walker in his time entry of March 2, 2010.
Page 6 of 	8
should be. 	A small amount of time is allowed for keeping up with
what else is going on, and a very small amount is allowed for
dealing with a voice mail message that Mr. Lahave apparently left
for Mr. Lingle. 5
The Court further reduces the fees and applicable gross
receipts tax by 1/3, resulting in a final total allowed charge
against the proceeds of the collateral of $15,615.43. 	The Court
chooses a 1/3 reduction in part because ORIX’s claim of
$642,397.44 was reduced to $265,211.86. 	433 B.R. at 349 and 377.
That constitutes, as Debtor correctly calculates, a 59% reduction
in the amount requested. 	The discussion in the underlying
opinion of what collection costs ought to be allowed, 433 B.R. at
370-74, cites both New Mexico and bankruptcy authority, some of
which suggests a more liberal award of fees, e.g., Fort Knox Self
Storage, Inc. v. Western Technologies, Inc., 140 N.M. 233, 242,
142 P.3d 1, 10 (Ct. App. 2006) (affirming award of $240,000 in
attorney fees based on a damage award of $110,000), and others
which suggest just the opposite. 	E.g., In the Matter of
Nicfur-Cruz Realty Corp., 50 B.R. 162, 169 (Bankr. S.D.N.Y.
1985); accord, In re Precision Tool and Die Mfg. Co. Inc., 285
B.R. 621, 623 (Bankr. W.D.Pa. 2002) (right to collect fees out of
collateral is not a blank check for needless litigation). 	A
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6 The specific numbers are ($21,296 * 2/3 =) $14,197.33
allowed for fees, ($1,490.72 * 2/3 =) $993.81 GRT on the fees,
$396.53 allowed for costs, $27.76 GRT on those components of the
costs for which GRT is chargeable, with total GRT allowable of
$1,021.57.
Page 7 of 	8
creditor holding a secured claim is entitled to assert a
reasonable claim against the collateral for collection costs, and
the mere fact that it is not entirely successful does not mean
that it was unreasonable to make the claim, or that it was
unreasonable to include in the claim all the components of the
claim that might be recovered. 	At the same time, some reduction
in the reimbursement of collection costs out of the collateral
when the result is the allowance of a much smaller amount than
was claimed is appropriate. 	There is no precise formula to make
that determination, but the Court is comfortable that a 1/3
reduction of the fees (and of the GRT applicable to the fees),
and full reimbursement of the costs (and applicable GRT) strikes
a reasonable balance in these circumstances. 6
Conclusion and Order
For the foregoing reasons, the Court finds that the amount
requested by ORIX out of the collateral for its collection
efforts should be substantially reduced.
IT IS THEREFORE ORDERED that the Supplemental Application
for Allowance of Attorney Fees as Part of Secured Claim (doc 172)
is allowed in the total amount of $15,615.43 for fees, costs and
New Mexico gross receipts tax on the total fees and taxable
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costs.
IT IS FURTHER ORDERED that immediately upon entry of this
order, and consistent with the stipulation of the parties
contained in the Order Resulting from Preliminary Hearing on ORIX
Capital Markets, LLC’s Supplemental Application for Allowance of
Attorney Fees as Part of Secured Claim, the Clerk is authorized
to deliver $15,615.43 to Thuma & Walker, P.C. as counsel for
ORIX Capital Markets, LLC.
James S. Starzynski
United States Bankruptcy Judge
Date Entered on Docket: 	November 30, 2010
COPY TO:
Daniel J Behles
Moore, Berkson & Gandarilla, P.C.
P.O. Box 7459
Albuquerque, NM 87194
David T Thuma
500 Marquette Ave NW Ste 650
Albuquerque, NM 87102-5309
United States Trustee
PO Box 608
Albuquerque, NM 87103-0608
NOTE: 	This memorandum opinion and order supercedes the
memorandum opinion and order entered on the docket 11/24/2010 as
docket entry number 191. 	The only changes are the attachment of
the exhibit A referred to on page 5 of the original version and
to identify the correct docket number for the application.
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MARKET CENTER EAST RETAIL PROPERTY, INC. 	No. 11‐09‐11696 	Exhibit to Memo Opinion
Fees approved by Court 	Costs Approved
02/08/2010 	$21.50 	02/10/2010 	$332.42
02/12/2010 	$160.00 	03/10/2010 	$22.30
$64.50 	04/10/2010 	$8.49
$86.00 	05/10/2010 	$1.22
02/14/2010 	$43.00 	06/10/2010 	$32.10
02/17/2010 	$666.50 	07/10/2010 	$0.00
02/18/2010 	$192.00
$512.00 	Total 	$396.53
$208.00
$279.50
02/19/2010 	$224.00
$365.50
02/20/2010 	$21.50
02/23/2010 	$1,999.50
$320.00
02/24/2010 	$817.00
$2,408.00
$175.50
02/25/2010 	$1,720.00
02/26/2010 	$32.00
02/27/2010 	$64.50
03/01/2010 	$43.00
$48.00
$215.00 (Lahave var)
03/02/2010 	$129.00
$32.00
$43.00
03/03/2010 	$112.00
$43.00
03/04/2010 	$279.50
03/09/2010 	$432.00
03/11/2010 	$224.00
03/12/2010 	$240.00
03/15/2010 	$21.50
03/16/2010 	$432.00
03/18/2010 	$21.50
03/22/2010 	$368.00
03/23/2010 	$272.00
03/24/2010 	$112.00
03/25/2010 	$576.00
$176.00
$43.00
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03/26/2010 	$881.50
$432.00
03/29/2010 	$1,096.00
$64.00
03/30/2010 	$43.00
03/31/2010 	$301.00
$416.00
04/02/2010 	$304.00
04/07/2010 	$736.00
04/08/2010 	$288.00
$247.50
04/09/2010 	$544.00
$382.50
04/12/2010 	$202.50
04/13/2010 	$427.50
04/15/2010 	$450.00
$80.00
05/14/2010 	$22.50
05/17/2010 	$22.50
06/09/2010 	$45.00
06/21/2010 	$45.00
07/22/2010 	$22.50
fees total 	$21,296.00 	See page 5 of opinion
costs total 	$396.53
subtotal 	$21,692.53
taxes 	$1,518.48 7% grt
total 	$23,211.01
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