In re: Nashwa Kattouah, Chapter 13, Debtor.

Case No. 09-53287.United States Bankruptcy Court, E.D. Michigan.
July 27, 2011

WALTER SHAPERO, Bankruptcy Judge

The matter before the Court is Debtor’s Objection to Amended Proof of Claim of Marc A. Goldman Associates, P.C. (Docket No. 117).

Nashwa Kattouah (“Debtor”) filed her Chapter 13 bankruptcy petition on April 28, 2009. Creditor filed a secured Proof of Claim on June 30, 2009 (Claim 6-1) in the amount of $95,303.00. On November 18, 2009, Creditor filed an Amended Proof of Claim (Claim 6-2) in the amount of $122,351.64, which includes interest from the date of filing his first claim and his own attorney fees and costs incurred in pursuing the matter against the Debtor.[1]
Creditor’s claim arose from a March 16, 2009 assignment of two Wayne County Circuit Court judgments in favor of Faiz Ayar, Ayar Property Management, L.L.C., and Lakeview Oil, Inc. (collectively referred to as “Ayar”), clients of Creditor, to Creditor as payment for attorney fees.[2] Debtor filed Objections to Claim 6-1 and Claim 6-2 on January 12, 2010 (Docket Nos. 85 and 86), February 10, 2010 (Docket No. 98), and February 16, 2010 (Docket No. 100). On March 22, 2010, Ayar assigned to Creditor the benefits of a Settlement Agreement that was entered into on August 25, 2004 between Faiz Ayar, Ayar Property Management, LLC, Lakeview Oil, Inc., Marathon of Plymouth, Inc., and Nashwa Kattouah. That Settlement Agreement contained an indemnification provision in paragraph 10, which states:

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Partial execution not invalidating this Agreement and indemnification. In the event PETROL CO., INC and/or EMAD HOZAIN do not execute this Agreement, the provisions of this Agreement shall be applicable to all parties having signed this Agreement and further MARATHON OF PLYMOUTH, INC., and BILL THOMAS and NASHWA T. KATTOUAH, jointly and severally, shall indemnify and hold harmless AYAR PROPERTY MANAGEMENT, L.L.C. and LAKEVIEW OIL, INC. and Frank (Fiaz) Ayar (“Indemnitees”) from all claims, loss, damage, or expenses, including reasonable attorney fees from any and all claims of PETROL CO., INC and/or EMAD HOZAIN if Indemnitees, or any one of them, are made a party or threatened to be made a party, or any demand is made upon Indemnitees, with respect to any pending, completed or future action, suit, or proceeding, whether civil, criminal, administrative, or investigative, and whether formal or informal, including an action brought by or in the right of PETROL CO., INC and/or EMAD HOZAIN, or their assignee(s), arising or accruing after the January 4, 2005 Agreement relating to such Agreement or the subject matter of this Settlement Agreement.

Debtor filed her most recent Objection to Creditor’s Amended Proof of Claim on April 5, 2010 (Docket No. 117); that Objection being the one currently before the Court. The Court entered an Order Consolidating Amended Proofs of Claim filed by Creditor on May 5, 2010.

The question before the Court is whether Creditor, an unsecured creditor, is entitled to recover post-petition attorneys’ fees and costs. Debtor argues that Creditor cannot collect post-petition attorney fees and costs it incurred during this bankruptcy proceeding because (1) a claim is determined as of the date of the filing of the case, and (2) additional costs incurred after the filing of the case are not allowable unless contractually agreed upon by the parties. Creditor argues that it is entitled to collect post-petition attorney fees and costs pursuant to the referred to assigned indemnification provision, which it argues is an ongoing obligation. The attorney fees and costs involved here are approximately some $27,000, which, if allowed, would increase the amount available to Creditor by some $3,510 (general unsecured creditors are to be paid 13% of their claims under the Debtor’s plan).[3]

Creditor cites Ogle v. Fidelity Deposit Co. of Maryland, 586 F.3d 143 (2d Cir. 2009) to support his claim. In that case, Fidelity Deposit Co. of Maryland and Agway, Inc. entered into several agreements which required Agway to indemnify Fidelity for attorneys’ fees that it might incur to enforce those agreements against Agway. Agway filed a Chapter 11 bankruptcy

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petition. Afterward, Fidelity made payments to Agway’s creditors, unsuccessfully demanded indemnity under the Agreements, and incurred attorneys’ fees in litigation to collect from Agway. In that case, the Second Circuit held that the Bankruptcy Code entitled an unsecured creditor to recover post-petition attorneys’ fees that were authorized by a pre-petition contract, but were contingent on post-petition events. Ogle v. Fidelity Deposit Co. of Maryland, 586 F.3d 143, 147-48 (2d Cir. 2009). Interpreting the Supreme Court’s opinion in Travelers Cas. and Sur. Co. of America v. Pacific Gas and Elec. Co., 549 U.S. 443 (2007), the Second Circuit found that “the Code does not prohibit an unsecured creditor from collecting post-petition attorneys’ fees pursuant to an otherwise enforceable pre-petition contract of indemnity” regardless of the dispute in which the attorneys’ fees are incurred. Ogle, 586 F.3d at 148.

In this case, as noted, Creditor relies on the indemnity provision in paragraph 10 of the August 25, 2004 Settlement Agreement, the benefit of which was assigned to Creditor by Ayar on March 22, 2010. That indemnity provision, however, was not assigned to Creditor until almost a year after Debtor filed her bankruptcy petition. Pursuant to 11 U.S.C. § 502(b), the amount of a claim is determined “as of the date of the filing of the petition.” “A claim, in turn, is a `right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal equitable, secured, or unsecured.'” Ogle, 586 F.3d at 146
(citing 11 U.S.C. § 101(5)(A)) (emphasis added). “A `right to payment . . . usually refer[s] to a right to payment recognized under state law.'” Ogle, 586 F.3d at 146 (citing Travelers Cas. and Sur. Co. of America v. Pacific Gas and Elec. Co., 549 U.S. 443, 451 (2007)). As of the date of the filing of this petition, Creditor did not have any right to payment under the referred to indemnity provision of the August 25, 2004 Settlement Agreement as such was not assigned to it until March 22, 2010. As such, Creditor may not rely on that indemnity provision as the basis for the collection of its post-petition attorney fees. Even if that indemnity provision had been assigned to Creditor pre-petition, it is unclear whether the language of that indemnity provision would extend to the collection of these post-petition attorney fees (the Court was not provided with the complete Settlement Agreement from which it might determine the context of the indemnity provision).

For the reasons indicated, the Debtor’s objection to the claim is granted. Debtor shall present an appropriate order.

[1] Creditor filed two Amended Proof of Claims, Claim Numbers 6-2 and 6-3, which were consolidated by a May 5, 2010 Order.
[2] Judgments were entered in favor of Ayar and against Kattouah and Marathon of Plymouth, Inc. in the amount of $80,469.61 i Petrol Co., Inc. v. Marathon of Plymouth, Inc., et al., Case No. 06-601684-CK (Oct. 3, 2008) and $15,189.40 in Partner Partner, Inc. v. Ayar Property Mgmt., et al., Case No. 07-723188-CK (Feb. 11, 2009).
[3] Creditor is a general unsecured creditor. Creditor’s judgment lien filed with the Oakland County Register was held to be invalid in Kattouah v. Marc A. Goldman Assoc., P.C., Ch. 13 Case No. 09-53287, Adv. No. 10-05148, Docket No. 15 (E.D. Mich. Oct. 7, 2010).

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