SUMMITBRIDGE NATIONAL INVESTMENTS III, LLC, Creditor-Appellant,
OLLIE WILLIAM FAISON, Debtor-Appellee.
Argued: October 30, 2018
from the United States District Court for the Eastern
District of North Carolina, at Raleigh. Terrence W. Boyle,
Chief District Judge. (5:17-cv-00384-BO)
Christopher Paul Schueller, BUCHANAN INGERSOLL & ROONEY
PC, Pittsburgh, Pennsylvania, for Appellant.
Arlington Northen, NORTHEN BLUE, LLP, Chapel Hill, North
Carolina, for Appellee.
L. Parrott, NORTHEN BLUE, LLP, Chapel Hill, North Carolina,
FLOYD and HARRIS, Circuit Judges, and Donald C. COGGINS, Jr.,
United States District Judge for the District of South
Carolina, sitting by designation.
HARRIS, CIRCUIT JUDGE.
question in this appeal is whether the Bankruptcy Code bars a
creditor from asserting an unsecured claim for attorneys'
fees, if those fees are incurred after the filing of a
bankruptcy petition but guaranteed by a pre-petition
contract. We join other federal courts of appeals in holding
that the Code does not preclude such claims. Accordingly, we
reverse the contrary determination of the district court and
remand for further proceedings.
2003 through 2012, Branch Banking and Trust Company
("BB&T") loaned $2.1 million to Ollie William
Faison. To effectuate the loans, Faison signed three
promissory notes secured by deeds of trust for farmland that
Faison owned in North Carolina. Faison agreed that if the
notes were placed with an attorney for collection, he would
pay "all costs of collection, including but not limited
to reasonable attorneys' fees." J.A. 73, 101, 129.
January 3, 2014, Faison filed a petition for relief under
Chapter 11 of the Bankruptcy Code. During the ensuing
bankruptcy proceedings, BB&T filed three proofs of claims
- documents providing proof of a right to payment - for the
outstanding principal and interest due on its promissory
notes as of the date of Faison's petition. Those three
claims were entitled to preferential treatment under the Code
because the promissory notes underlying them were secured by
collateral - namely, Faison's farmland in North Carolina.
See Welzel v. Advocate Realty Invs., LLC (In re
Welzel), 275 F.3d 1308, 1318 (11th Cir. 2001) (en banc)
(describing the provisions of the Code that give preferential
treatment to secured claims). That preferential treatment
meant that BB&T's claims would be satisfied from the
value of the farmland before any distributions were made to
lower-priority unsecured claims. See Stubbs & Perdue
v. Angell (In re Anderson), 811 F.3d 166, 168 (4th Cir.
assigned its interest in the promissory notes - and in turn,
the three bankruptcy claims based on those notes - to
SummitBridge National Investments III, LLC
("SummitBridge") in January 2015. Now holder of the
notes, SummitBridge began to defend the three claims in
Faison's bankruptcy proceedings, incurring attorneys'
fees in the process.
two years after BB&T assigned its claims to SummitBridge,
Faison proposed a plan for repaying his creditors, ultimately
approved by the bankruptcy court. The plan treated
SummitBridge's three claims as one aggregate secured
claim for $1, 715, 000, the value of the farmland securing
the three notes. That amount was enough to cover the
outstanding principal and pre-petition interest on the three
notes, as well as a portion of SummitBridge's
post-petition interest and attorneys' fees. To the extent
that SummitBridge had incurred excess attorneys' fees not
covered by the farmland's value, the plan made clear,
SummitBridge could file an unsecured claim to recover those
did just that, filing the claim at issue here: an unsecured
claim against Faison's estate for the remainder of the
post-petition attorneys' fees it had incurred. Faison
objected to SummitBridge's claim on two alternative
grounds. First, Faison argued that SummitBridge's
underlying contractual claim for attorneys' fees was
unenforceable under North Carolina law because SummitBridge
had failed to comply with state-law notice requirements. And
second, Faison raised the federal-law issue we address today,
arguing that "the Bankruptcy Code does not provide for
allowance of an unsecured claim for post-petition
attorneys' fees or costs." J.A. 265.
bankruptcy court addressed only Faison's federal-law
argument, agreeing with him that the Code does not allow
creditors like SummitBridge to assert unsecured claims for
post-petition attorneys' fees. SummitBridge appealed the