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Wells Fargo Bank, N.A. v. 804 Congress, L.L.C.

United States Court of Appeals, Fifth Circuit

June 23, 2014

In the Matter of: 804 CONGRESS, L.L.C., Debtor
v.
804 CONGRESS, L.L.C., Appellant. Cons w/ 12-50392 WELLS FARGO BANK, N.A.; GRETA GOLDSBY, Appellees, In the Matter of: 804 CONGRESS, L.L.C., Debtor, WELLS FARGO BANK, N.A., Appellee,
v.
804 CONGRESS, L.L.C., Appellant. Cons w/ 12-50425 In the Matter of: 804 CONGRESS, L.L.C., Debtor, GRETA GOLDSBY, Appellee,
v.
804 CONGRESS, L.L.C., Appellant

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[Copyrighted Material Omitted]

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Appeals from the United States District Court for the Western District of Texas.

For Wells Fargo Bank, N.A., Greta Goldsby, Appellees (12-50382): James G. Ruiz, Attorney, Alexander Sin Valdes, Winstead, P.C., Austin, TX.

For 804 Congress, L.L.C., Appellant (12-50382): Stephen W. Sather, Barron, Newburger & Sinsley, P.L.L.C., Austin, TX.

For Wells Fargo Bank, N.A., Appellee (12-50392): James G. Ruiz, Attorney, Alexander Sin Valdes, Winstead, P.C., Austin, TX.

For 804 Congress, L.L.C., Appellant (12-50392): Stephen W. Sather, Barron, Newburger & Sinsley, P.L.L.C., Austin, TX.

For Greta Goldsby, Appellee (12-50425): James G. Ruiz, Attorney, Alexander Sin Valdes, Winstead, P.C., Austin, TX.

For 804 Congress, L.L.C., Appellant (12-50425): Stephen W. Sather, Barron, Newburger & Sinsley, P.L.L.C., Austin, TX.

Before JOLLY, GARZA, and OWEN, Circuit Judges.

OPINION

PRISCILLA R. OWEN, Circuit Judge.

The principal issue in this case is whether, after an automatic stay in bankruptcy has been lifted and a creditor is permitted to foreclose on real property, federal or state law governs an oversecured creditor's recovery of attorneys' and other fees from the sale proceeds. A corollary issue is whether the bankruptcy court has jurisdiction over the sale proceeds for purposes of determining the creditor's right to recover attorneys' fees and the Deed of Trust trustee's right to recover a contractually specified commission for conducting the non-judicial foreclosure sale. The bankruptcy court held that it had jurisdiction. It denied the request for attorneys' fees, based on the lack of supporting evidence, and substantially reduced the Deed of Trust trustee's commission, finding the contractual commission unreasonable under 11 U.S.C. § 506(b). The district court reversed, holding that the bankruptcy court had no jurisdiction. We reverse the district court's judgment and remand for further proceedings.

I

The debtor in the bankruptcy proceedings is 804 Congress, whose only significant asset was an office building in Austin, Texas (to which we will refer as " the property" ). Wells Fargo Bank, N.A. (Wells Fargo) had financed the purchase of the property and held a " Real Estate Lien Note" (the Note). To secure the Note, 804 Congress executed a " Deed of Trust Security Agreement/Financing Statement" (the Deed of Trust), which granted Wells Fargo a first-priority lien on the property. Greta Goldsby

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(Goldsby, and, collectively with Wells Fargo, the Creditors) became the substitute trustee under the Wells Fargo Deed of Trust. After purchasing the building, 804 Congress obtained a loan from another creditor, VIA Lending (VIA), secured by a second-priority lien on the property.

This bankruptcy proceeding is 804 Congress's second. In response to threatened foreclosure by VIA, 804 Congress first filed for bankruptcy in 2009. That case was dismissed. 804 Congress commenced the present bankruptcy proceeding after a foreclosure sale was scheduled by Wells Fargo.[1]

Wells Fargo filed an Emergency Motion for Relief from Stay, seeking to proceed with a non-judicial foreclosure sale of the property. The bankruptcy court granted Wells Fargo's motion in an order that provided that Wells Fargo " shall be permitted to conduct a foreclosure sale of the Property on September 7, 2010, in accordance with applicable state laws" if 804 Congress had not met certain conditions designed to permit it to sell the property under the superintendence of the bankruptcy court before that date. 804 Congress did not meet these conditions.

Goldsby conducted a non-judicial foreclosure sale of the property in accordance with the Deed of Trust, and that sale yielded proceeds of approximately $4.355 million. Pursuant to the terms of the Deed of Trust,[2] Goldsby determined that

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the proceeds should be distributed ...


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