Starion Fin. v. McCormick, No. 14-6008 (8th Cir. 2014)
Annotate this CaseDebtors and Starion entered into loan transactions. The promissory notes and mortgages provided that the Debtors were liable for Starion’s attorney fees and costs of collections. The Debtors also executed personal guarantees. Defaults resulted in a 2012 Workout Agreement between Starion and the Debtors, who consented to entry of judgments against them to secure their personal guarantees. Based upon properly filed confessions of judgment, executed under the Agreement, a North Dakota state court entered judgments against Debtors for $2,078,034.26 and $1,000,000.00, plus interest. Debtors filed a voluntary chapter 11 petition. The Debtors’ Second Amended Plan of Reorganization stated: Debtors agree to pay Starion’s allowable attorney’s fees and costs associated with both Debtors’ bankruptcy proceedings including but not limited to reasonable attorneys’ fees, consulting, appraisal, filing fees, late fees … as provided in the Plan. The Plan was confirmed. Later the Debtors refused to pay requested appraisal and engineering costs and attorneys’ fees. Starion requested that the bankruptcy court compel payment of $125,014.64 based upon the Plan and 11 U.S.C. 506(b). The bankruptcy court ruled in favor of the Debtors. The Eighth Circuit Bankruptcy Appellate Panel reversed, noting that the obligation has appeared throughout the long documented history of the relationship.
Court Description: Bankruptcy Appellate Panel. The bankruptcy court erred in denying the creditor's motion to compel fees under the confirmed plan of reorganization as the claims were permitted under the underlying loan documents, the Workout Agreement, Plan and addendum, and the district court erred in limiting the agreement required by Section 506(b) to the state court judgments, as the judgments did not change the instruments under which the claim to attorneys' fees arose. [ December 23, 2014
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