EDMOND E. CHANG, District Judge.
This appeal arises out of Appellant Morgan & Bley's quest to get attorneys' fees for its work on Appellee Victoria Group's bankruptcy. Victoria Group and one of its creditors, Appellee Northbrook Bank & Trust, oppose those fees. In a June 2014 hearing, the bankruptcy court concluded that Morgan & Bley's proposed fees were reasonable but did not want to give Morgan & Bley a "judgment" that would allow the law firm to collect those fees from the debtor. The court nevertheless entered an order that appeared to award Morgan & Bley its requested fees in full. Armed with that order, Morgan & Bley went to state court to try to collect. When Northbrook Bank was served with a third-party citation to discover assets, it returned to the bankruptcy court and asked that the bankruptcy case be reopened and the fee award vacated. On July 17, 2014, the bankruptcy court denied this request, saying: "The motion to reopen and to vacate is denied as the Order granting Morgan & Bley's fee application contained no mistake and the award was against the bankruptcy estate, not the Debtor, and the Court did not enter a `judgment.'" Dkt. 194, Order Denying Mot. Reopen at 1.
Victoria Group, the debtor in the bankruptcy case, owns and operates banquet halls. R. 4, Appellant's Br. at 2; R. 12, Appellee's Resp. Br. at 9. One of the company's primary sources of business is hosting weddings. Appellee's Resp. Br. at 9. Northbrook Bank held a mortgage on one of Victoria's banquet facilities and initiated foreclosure proceedings on that property. Id. The day before the summary-judgment hearing in foreclosure court, Morgan & Bley filed a Chapter 11 Petition on behalf of Victoria Group. Id. The bankruptcy court granted Morgan & Bley's application to be employed as counsel for the debtor under 11 U.S.C. §§ 327, 328, and 1107(b). See R. 1-3, Docket Sheet at 6. Northbrook Bank was Victoria's principal secured creditor. Appellee's Resp. Br. at 9.
According to Northbrook Bank, the bankruptcy was plagued by problems. Dkt. 84, Mot. Appoint Trustee at 2-3. Northbrook Bank claimed that Victoria had written several checks before filing its bankruptcy petition to pay off pre-petition debts; that it had initiated post-petition payment of pre-petition debts; that it had made substantial payments to companies owned by its own officers; and that the company was unwilling or unable to create a reasonable and accurate budget. Id. Based on these issues, Northbrook Bank moved to appoint a trustee to manage the debtor's estate. Id. Shortly after Northbrook Bank filed its motion, Morgan & Bley moved to withdraw as counsel for Victoria Group. Dkt. 85, Mot. Withdraw at 1. The bankruptcy court granted Morgan & Bley's motion. Dkt. 99, Order Granting Mot. Withdraw at 1. Morgan & Bley then filed a final fee petition, seeking $40,085.50 for services rendered to Victoria Group, but less an already-paid retainer of $15,279.50, for a final total of $24,806.00. Dkt. 133, Final Fee Petition. Both Northbrook Bank and Victoria objected to the fee petition, essentially arguing that Victoria did not have the funds to pay Morgan & Bley's fees. Dkt. 137, Northbrook Bank's Objection to Fees at 3-4; Dkt. 151, Victoria's Objection to Fees at 2.
Before the fee petition was resolved, Northbrook Bank filed a motion to dismiss or to convert the bankruptcy case. Dkt. 153, Mot. Dismiss or Convert. Citing many of the same issues discussed in the motion to appoint a trustee, Northbrook Bank argued that the bankruptcy was initiated to avoid paying the bank any judgment awarded in the foreclosure action. Id. at 4-15. It asked the bankruptcy court to dismiss the bankruptcy case or, in the alternative, to convert the petition to one under Chapter 7 of the bankruptcy code. Id. at 15. Morgan & Bley "reluctantly" objected to Northbrook Bank's motion, arguing that it was entitled to fees (either from Victoria or Northbrook Bank, which it alleged had been paid $21,000 in "rent" from Victoria despite not being Victoria's landlord) before the estate was extinguished by dismissal. Dkt. 179, Morgan & Bley's Resp. to Mot. Dismiss at 1.
On June 17, 2014, the bankruptcy court held a hearing on the motion to dismiss. Dkt. 197, June 17, 2014 Hrg. Tr. At the hearing, Northbrook Bank expressed concern for the weddings scheduled at Victoria's facility throughout the end of October. June 17, 2014 Hrg. Tr. at 7:16-9:14. Specifically, Northbrook Bank argued that any fees paid to Morgan & Bley would come out of the deposits for those weddings, possibly preventing couples from getting the wedding venue that they had paid for (not to mention the impact on Victoria's viability as an ongoing business). Id. at 9:6-14, 12:6-10. Victoria agreed. Id. at 12:23-15:1. Morgan & Bley objected to this characterization, arguing that, based on the monthly operating reports entered in the bankruptcy case, Victoria had the money to pay Morgan & Bley's fees. Id. at 5:15-6:10. The bankruptcy court, though sympathetic to Morgan & Bley's position, was concerned about ensuring that the scheduled weddings could go forward. Id. at 24:19-34:16. The court determined that Morgan & Bley's fees were reasonable, but deleted the portion of the proposed order describing the fee award as a "judgment." Id. at 31:9-37:11. The court did not want the fee award to be a "judgment" because it did not want Morgan & Bley to do an "end-around" on the court's decision that Morgan & Bley could not recover fees from the wedding deposits by filing a citation against Victoria or a third-party citation to discover assets on Northbrook Bank. Id. (stating that Northbrook Bank's concerns "convinced" the court that it should not enter a judgment). The court reasoned that the issue was probably irrelevant anyway, because "the only reason why [Morgan & Bley would] need an order approving fees is if [it were] going to take the money out of the estate. And there is no estate anymore the moment [the court] dismiss[es the case]." Id. at 32:10-22. The court ultimately entered an order that read:
Dkt. 183, Order Granting Fee Petition at 1. Moments later, the court granted Northbrook Bank's motion to dismiss the bankruptcy case. June 17, 2014 Hrg. Tr. at 39:2-4. No party appealed the order granting the fee order.
Despite the bankruptcy court's statements during the June hearing, Morgan & Bley registered the fee order as a judgment and initiated collection proceedings against Victoria in the Circuit Court of Cook County.
The next day, Northbrook Bank and Victoria filed another emergency motion—this time asking the court to reopen the bankruptcy case and to vacate the fee award. Dkt. 191, Northbrook Bank's Second Emergency Motion to Vacate at 4-5. Morgan & Bley objected to the motion, arguing that the bankruptcy court had awarded a judgment and that judgment should not be vacated "[j]ust [b]ecause." Dkt. 192, Morgan & Bley's Objection to Emergency Motion at 9. At the hearing on the newest motion, the court reiterated its earlier admonition that the parties should address the issue in state court, but that Northbrook Bank would apparently "rather not make that argument and go the easy route, reopen the case, and ask [the court] to vacate [its] order." Dkt. 199, July 17, 2014 Hrg. Tr. at 3:4-7. The court then asked the parties to describe precisely what mistake the court made in entering the fee award. Id. at 3:8-4:11. To the court, the award was "only relevant vis-à-vis an estate, and an estate no longer exists." Id. at 5:1-4. Moreover, the court "actually worded the order so it would not be crafted as a judgment for the very purpose that wedding would not be interfered with." Id. at 5:15-7:1 (stating that the court could not have been "any clearer on the record what [its] intent was"). Because the court did not believe it had made a mistake, it denied the motion to reopen the estate as unnecessary and said that the parties would "have to deal with it in state court." Id. at 7:6-11. The court entered a minute order that said: "The motion to reopen and to vacate is denied as the Order granting Morgan & Bley's fee application contained no mistake and the award was against the bankruptcy estate, not the Debtor, and the Court did not enter a `judgment.'" Order Denying Mot. Reopen at 1. This is the order the Morgan & Bley now appeals.
A federal district court has jurisdiction, under 28 U.S.C. § 158(a), to hear appeals from the rulings of a bankruptcy court. On appeal, the district court reviews the factual findings of the bankruptcy court under the clearly erroneous standard and reviews the bankruptcy court's legal findings de novo. Wiese v. Cmty. Bank of Cent. Wis., 552 F.3d 584, 588 (7th Cir.2009). Because this appeal only challenges the bankruptcy court's legal decisions, the Court's review is de novo.
Although no party appealed the June order awarding fees, that order is at the heart of the issue in this case. After the June 17th hearing, both Morgan & Bley and Northbrook Bank
There are two parts to the July order. The first is the denial of the motion to reopen the bankruptcy case; that ruling is not, on its surface, adverse to Morgan & Bley. See generally Morgan & Bley's Objection to Emergency Motion (objecting to the reopening of the bankruptcy case). The second is the bankruptcy court's statement that "the [fee] award was against the bankruptcy estate, not the Debtor, and the Court did not enter a `judgment.'" Order Denying Mot. Reopen at 1. It is from this portion of the July order that Morgan & Bley appeals. Morgan & Bley argues that this statement by the bankruptcy court effectively modified the June order awarding a judgment of fees. Appellant's Suppl. Br. at 2. The critical question, then, is whether the second portion of the bankruptcy court's order, which characterized the fee award as something that was not a "judgment" and that was solely against the now-extinguished bankruptcy estate, was in error.
It is the language of the fee order—not the bankruptcy court's intent—that is controlling here. See Mendez v. Republic Bank, 725 F.3d 651, 663 (7th Cir. 2013) (holding that, although hearing transcripts and other court documents make the judge's intent clear, "the proper inquiry ... should not extend beyond the text of the court's order"). "Litigants as well as third parties must be able to rely on the clear meaning of court orders setting out their substantive rights and obligations, and appellate courts should interpret those orders in the same manner." In re Trans Union Corp. Privacy Litigation, 741 F.3d 811, 816 (7th Cir. 2014) (citing Mendez, 725 F.3d at 663). In this case, the plain language of the fee award says that Morgan & Bley is entitled to an award of $24,806.00 for its service on behalf of Victoria. See Order Granting Fee Petition at 1. Contrary to the stated intent of the bankruptcy judge, the order does not merely state that the fees sought are "reasonable," or that the fees were not collectible. The text of the order simply says that "The Attorneys are granted final-post petition compensation" of $24,806.00. Id. Deleting the language calling the award a "judgment" did not change that the order "set forth the relief to which the prevailing party is entitled." Paganis v. Blonstein, 3 F.3d 1067, 1069 (7th Cir. 1993) (quoting Reyblatt v. Denton, 812 F.2d 1042, 1043 (7th Cir. 1987)) ("To determine whether a judgment is final, the language of the judgment itself is controlling."). And although the order was not a "final judgment" in the sense that it did not end the case, it was an appealable order (once the bankruptcy was dismissed) and thus a "judgment" under applicable bankruptcy rules.
On a related issue, the bankruptcy court did not have the benefit of a very recent Seventh Circuit case, and thus was also incorrect when it said that the fee award was only against the estate, which ceased to exist when the bankruptcy case was dismissed. Perhaps relying on the reasoning set forth in In re Sweports, Ltd., 511 B.R. 522 (Bankr. N.D. Ill. 2014), the bankruptcy judge believed that the attorneys would not be able to collect the fees once the bankruptcy was dismissed. See June 17, 2014 Hrg. Tr. at 32:10-22. But in the intervening months, the Seventh Circuit reversed Sweports, holding that there is a "critical difference" between "determining an entitlement to fees and ordering payment of fees." In re Sweports, Ltd., 777 F.3d 364, 365 (7th Cir. 2015). The Seventh Circuit made clear that, by awarding fees under 11 U.S.C. § 330 (as in this case), the bankruptcy court was "determin[ing] that [the attorney] had a valid claim to a fee in the amount he was seeking." Id. at 366-67. "Such a ruling would create a debt of [the debtor to the attorney], and if [the debtor] refused ... to pay, [the attorney] could, like any other creditor, sue [the debtor] in state court."
So, notwithstanding the bankruptcy court's intent in entering the June fee award, the court's July interpretation of that order was incorrect based on its express language and in light of controlling law. That is not to say, however, that once the fee award was put to paper, the bankruptcy court's intent became irrelevant. Federal Rule of Civil Procedure 60(a)—applicable to proceedings in bankruptcy through Bankruptcy Rule 9024—exists for just this situation. Under Rule 60(a), "[t]he court may correct a clerical mistake or a mistake arising from oversight or omission whenever one is found in a judgment, order, or other part of the record." Fed. R. Civ. P. 60(a). That is, a court can "make the judgment speak the truth." Paganis, 3 F.3d at 1072; see also Klingman v. Levinson, 877 F.2d 1357, 1360 (7th Cir. 1989) ("Whether 60(a) is available depends upon whether the judgment said what the judge actually meant."). Given the bankruptcy court's clear statements of intent on the record, it seems likely that it would be receptive to granting a motion to correct under Rule 60(a).
But the bankruptcy court did not grant such a motion, and that failure is the basis for this Court's jurisdiction.
For the reasons discussed above, the July 17, 2014 order of the bankruptcy court is vacated, and the case is remanded for proceedings consistent with this decision.