James Howard Winslow and Billie Reid Winslow

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
GREENVILLE DIVISION
IN RE:
JAMES HOWARD WINSLOW and
BILLIE REID WINSLOW,
DEBTORS.
CASE NO. 10-06745-8-JRL
CHAPTER 11
ORDER
This matter came before the court on creditor AgCarolina Financial, ACA’s application
for compensation. A hearing was held on May 10, 2011 in Raleigh, North Carolina.
BACKGROUND
AgCarolina Financial, ACA (“AgCarolina”) is one of several secured creditors in James
and Billie Winslow’s chapter 11 proceeding. The Winslows operate Tanglewood Farms, Inc. of
Elizabeth City, another entity which filed for chapter 11 relief with the Winslows on August 23,
2010. AgCarolina filed a proof of claim in the Winslows’ case and is owed approximately
$1,452,115.00 on a prepetition promissory note secured by six tracts of land owned by the
debtors. The majority of AgCarolina’s collateral has been sold. Most recently, the debtors sold
the creditor’s real property collateral on March 22, 2011 at a public auction. AgCarolina, an
oversecured creditor, now applies for attorneys’ fees in the amount of $37,580.00 and expenses
SO ORDERED.
SIGNED this 22 day of June, 2011.
________________________________________
J. Rich Leonard
United States Bankruptcy Judge
____________________________________________________________
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1A creditor seeking attorneys’ fees cannot collect more than 15% of the outstanding
balance on the debt at issue. § 6-21.2(1). AgCarolina’s request does not approach this limit.
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in the amount of $545.25 incurred through March 29, 2011 to be paid out of the proceeds of the
March 22, 2011 auction. Creditor C.A. Perry & Son, Inc. (“C.A. Perry”) objected to
AgCarolina’s application on the grounds that $4,010.00 of the attorneys’ fees sought were for
matters not reasonably related to the collection of AgCarolina’s secured debt.
The issue of whether attorneys’ fees can be awarded under 11 U.S.C. § 506(b) is based
on interpretation of applicable state law. In Independence Nat’l Bank v. Dye Master Realty, Inc.
(In re Dye Master Realty, Inc.), 15 B.R. 932 (Bankr. W.D.N.C. 1981), the court held that before
an award of fees under § 506(b) can be made, compliance with state law as to any conditions
precedent to the recovery of attorneys’ fees must be found. Id. at 935-36. Construction of
contracts providing for attorneys’ fees is done through the lens of state law. Id. After assessing
whether conditions precedent have been fulfilled and interpreting the contract under state law,
federal courts must then determine whether the amount of fees is reasonable under federal law.
Id.; See also 4 Collier on Bankruptcy ¶ 506.04[3][d] (Alan N. Resnick & Henry J. Sommer eds.,
16th ed.). Under this standard, courts may inquire into whether the services in question were
reasonably required under the circumstances. Id.
North Carolina law allows for the recovery of reasonable attorneys’ fees incurred in
connection with the collection of debts where a note provides for such a recovery. N.C. Gen.
Stat. § 6-21.2. 1 The note and deed of trust held by AgCarolina grant a broad range of attorneys’
fees to the creditor in the event the creditor must collect on the debt or enforce or preserve its
rights related to the security of the note. This provision specifically includes fees incurred in any
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bankruptcy case involving the borrower. Based on the broad language of the attorneys’ fees
provision in the note, the services described in AgCarolina’s application are reasonable.
Furthermore, the fees requested are reasonable under the federal standard described above in
light of the contractual provision and the fact that the debtors’ ability to repay AgCarolina has
been murky since the commencement of the case. As a result of this uncertainty, the actions
described in AgCarolina’s detailed application were justified. Both AgCarolina and C.A. Perry
agree that $75.00 of the fees applied for were incurred in a separate bankruptcy case not
involving the Winslows and were erroneously included in the application. The fees awarded are
therefore reduced by this amount.
Based on the foregoing, the court APPROVES AgCarolina’s application for attorneys’
fees in the amount of $37,505.00 and costs in the amount of $545.25.
END OF DOCUMENT
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