Before the court for consideration is the debtor's objection under § 502 and Bankruptcy Rule 3007 to the amounts of the claims filed by its secured creditors, Reilly Mortgage Group and Trilex Financial Services. Specifically, the debtor objects to the attorneys' fees and costs claimed by these creditors under § 506(b) in the amounts of $95,270.22 and $166,043.77, respectively. For the reasons set forth herein, the debtor's objections are sustained in part and overruled in part. FACTS

Capital West Investors is a limited partnership that owns and operates The Woods Apartments, a 160-unit apartment complex located at 40640 High Street in Fremont, California. The debtor purchased the property in February 1985 for $8.4 million. The court found that the fair market value of the property was $8.4 million for purposes of confirmation. The deeds of trust on the property total approximately $7.6 million. Reilly Mortgage Group, Inc. is the servicing agent for Riggs National Bank of Washington, the holder of the first deed of trust on the debtor's property in the approximate amount of $2,500,000, which is insured by the Department of Housing and Urban Development (HUD). Trilex Financial Services, Inc. is the servicing agent for Ceresa, the holder of the second deed of trust, which is in the approximate amount of $3,700,000. Jim Woodson and Denny McLarry hold a third deed of trust in the amount of $1,400,000.

The Reilly note incorporates an attorneys' fees clause, providing in relevant part:

If action be instituted on this note, the undersigned promise(s) to pay in addition to the costs and disbursements allowed by law such sum as the Court may adjudge reasonable as attorney's fees in said action.

The Reilly deed of trust provides in pertinent part:

To protect the security of this Deed of Trust, Trustor covenants and agrees . . . [t]o appear in and defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee, and to pay all costs and expenses, including . . . attorneys' fees in a reasonable sum, in any such action or proceeding in which Beneficiary or Trustee may appear.

The Trilex note also includes an attorneys' fees clause by providing in relevant part:

(7)(E) If the Note Holder has required me to pay immediately in full as described above, the Note Holder will have the right to be paid back by me for all of its costs and expenses in enforcing this Note to the extent not prohibited by applicable law. Those expenses include, for example, reasonable attorney's fees.

Also, the Trilex deed of trust provides:

7.Protection of Lender's Security. If Borrower fails to perform . . . or if any action or proceeding is commenced which materially affects Lender's interest in the Property, including, but not limited to, . . . proceedings involving a bankrupt, then Lender, at Lender's option . . . may make such appearances, disburse such sums and take such action as is necesary to protect Lender's interest, including, but not limited to, disbursement of reasonable attorneys' fees. . . . Any amounts disbursed by Lender pursuant to this paragraph 7, with interest thereon, shall become additional indebtedness of Borrower secured by this Deed of Trust.

The court confirmed the debtor's plan of reorganization on October 21, 1994 over the objections of Reilly and Trilex. Reilly originally objected to confirmation on the basis that the plan was not fair and equitable, that it unfairly discriminated against Reilly, and that the provisions of the proposed plan contravened the law. Trilex objected to confirmation on the basis that the plan was not fair and equitable because the interest rate proposed did not provide Trilex with the present value of its secured claim, the plan was not feasible, it unfairly discriminated against Trilex, and debtor's management was unable to provide adequate management and controls of the property.

Reilly filed a motion for reconsideration of the court's order confirming the plan, which the court denied. Trilex filed a separate motion to alter or amend judgment or for reconsideration of the portion of the court's opinion that dealt with the turnover of excess cash collateral. The court held a contested cash collateral hearing on the debtor's motion and on Trilex's motion for reconsideration. Both the debtor and Trilex subsequently appealed the order authorizing the debtor's use of cash collateral.

Reilly, HUD and Trilex appealed the confirmation order. The distict court reversed the opinion of the bankruptcy court, finding that the court erred when it balanced the goals of Chapter 11 of the Bankruptcy Code against the policies of the National Housing Act. The debtor amended its plan, which the court confirmed in June 1996. The consensual amended plan reinstated Reilly's rights under the HUD Regulatory Agreement and established a variable rate for the Trilex note between 9% and 12.695%.

In contesting confirmation of the debtor's plan and prosecuting the appeals, Reilly incurred attorneys' fees and costs of $95,270.22 through November 1994. Trilex incurred attorneys' fees and costs of $166,043.77 through January 1995. The debtor incurred approximately $126,000 in attorneys' fees during the same time period. Both Reilly and Trilex also assert a claim for attorneys's fees that are continuing to accrue post-confirmation. DISCUSSION A. Applicable Legal Standard

11 U.S.C. § 506(b) provides:

(b)To the extent that an allowed secured claim is secured by property the value of which . . . is greater than the amount of such claim, there shall be allowed to the holder of such claim, interest on such claim, and any reasonable fees, costs, or charges provided for under the agreement under which such claim arose.

Four elements must be satisfied in order to recover attorneys' fees under § 506(b): the claim must be an allowed secured claim; the creditor must be oversecured; the fees must be reasonable under the circumstances; and the fees must be provided for under the agreement. In re Salazar, 82 B.R. 538, 540 (Bankr. 9th Cir. 1987). When fees are provided for in the underlying agreement, and the creditor is oversecured, allowance of the attorneys' fees under § 506(b) is mandatory. In re Le Marquis Associates, 81 B.R. 576, 578 (Bankr. 9th Cir. 1987); In re Dalessio, 74 B.R. 721, 723 (Bankr. 9th Cir. 1987). However, the mandatory award of fees is limited by the requirement of reasonableness. Le Marquis, 81 B.R. at 578. An oversecured creditor does not have a blank check to incur fees and costs that will automatically be reimbursed out of its collateral. In re Circle K Corp., 141 B.R. 688, 692 (Bankr. D. Ariz. 1992).

In reviewing a request for fees under § 506(b), the bankruptcy court exercises discretion, considering factors such as whether the fees and costs were reasonably calculated to protect the creditor. In re Salazar, 82 B.R. at 540 n.2.

Reasonableness embodies a range of human conduct. The key determinant is whether the creditor incurred expenses and fees that fall within the scope of the fees provision in the agreement, and took the kinds of actions that similarly situated creditors might reasonably conclude should be taken, or whether such actions and fees were so clearly outside the range as to be deemed unreasonable. The bankruptcy court should inquire whether, considering all relevant factors, including duplication, the creditor reasonably believed that the services employed were necessary to protect [its] interests in the debtor's property.

Dalessio, 74 B.R. at 723. Accord Circle K, 141 B.R. at 692 (in defining reasonableness, the key is whether the creditor incurred expenses that fall within the scope of the agreement and took action that similar creditors would take). B. Reilly's Attorneys' Fees 1. Whether the Fees Are Covered by the Note and Deed of Trust

Capital West disputes that Reilly is entitled to attorneys' fees under § 506(b) pursuant to the language of the Reilly note and deed of trust, which limits the recovery of attorneys' fees to an "action . . . instituted on the note" or a "proceeding purporting to affect the security," contending that Reilly never commenced an "action on the note" because the debtor was never in default. Capital West also submits that the contested confirmation hearing was not a proceeding purporting to affect Reilly's security. Reilly disagrees with this analysis.

In support of its argument, the debtor cites a line of authority that appears to impose a broad prohibition on the recovery of attorneys' fees in bankruptcy proceedings. See In re Fobian, 951 F.2d 1149 (9th Cir. 1991)(confirmation of chapter 12 plan); In re Johnson, 756 F.2d 738 (9th Cir. 1985)(relief from stay); In re Coast Trading Co., Inc., 744 F.2d 686 (9th Cir. 1984)(reclamation of delivered good from bankrupt buyer). These cases stand for the general proposition that attorneys' fees are not recoverable for litigation costs incurred in bankruptcy proceedings. In each of these cases, the Ninth Circuit held that absent bad faith or harassment by the losing party, attorneys' fees will not be awarded to the prevailing party where the issues litigated were peculiar to federal bankruptcy law instead of basic contract enforcement.

In Fobian, a secured creditor sought recovery of its attorneys' fees pursuant to its note and deed of trust for successfully opposing confirmation of the debtor's chapter 12 plan. The issues litigated in that case were the extent of the creditor's secured status under § 506(a) and the confirmability of the debtors' plan under § 1225. The Ninth Circuit declined to grant the creditor's request for an award of attorneys' fees. However, the court's denial of attorneys' fees in Fobian was not based on a consideration of the applicability of § 506(b) because the creditor did not seek recovery of fees under § 506(b) and, moreover, had an undersecured claim. The basis of the Ninth Circuit's denial of attorneys' fees was that the issues litigated did not involve basic contract enforcement but rather issues of federal bankruptcy law, in particular, the application of §§ 506 and 1225. Fobian, 951 F.2d at 1153.

Johnson involved the debtors' request as the prevailing party on a motion for relief from stay for fees under the state law governing the award of attorneys' fees. California Civil Code § 1717 provides for an award of attorneys' fees to the prevailing party in an action to enforce the contract where the underlying contract includes a provision for attorneys' fees. The narrow question in Johnson was whether a motion for relief from stay constitutes an "action on a contract" as contemplated under California Civil Code § 1717. Johnson, 750 F.2d at 740. Finding that the scope of stay proceedings is narrow and that state contract law is not determinative in stay litigation, the Ninth Circuit concluded that the bankruptcy court erred when it awarded attorneys' fees to the debtors based on state law. Id. at 740. Its rationale was that state substantive law on attorneys' fees is not controlling in a determination whether to award attorneys' fees for litigating a motion for relief from stay, which is strictly governed by federal law. Id. at 740-42. It concluded that federal law should govern the disposition of a request for attorneys' fees for litigating a motion for relief from stay. Id.

Finally, Coast Trading dealt with the parties' request for attorneys' fees under state law for litigating the respective parties' reclamation claims in bankruptcy court. Oregon law permits the parties to an agreement to contract for attorneys' fees. The Ninth Circuit declined to award attorneys' fees applying the relevant Oregon statutes because the underlying action was not one for contract enforcement. Coast Trading, 744 F.2d at 693. The question of enforcement of a contract under state law is distinct from the question of the applicability of bankruptcy law to a particular contract, which involves a unique, separate area of federal law. Id.

However, the cases on which Capital West relies are inapposite. They deal specifically with the narrow issue whether the proceedings were in the nature of contract enforcement. The question before this court is whether the secured creditors are entitled to attorneys' fees under a federal statute, § 506(b). It is significant that Fobian, Johnson and Coast Trading did not deal with a secured creditor's request for attorneys' fees under § 506(b) but were decided on the basis of the applicable state law on attorneys' fees. These cases merely restate the American rule that, absent a specific statute awarding attorneys' fees, each party bears its own costs in litigation. Alpine Group, 151 B.R. 931, 934 (Bankr. 9th Cir. 1993). Here, however, § 506(b) is a specific provision in the Bankruptcy Code that allows for the payment of attorneys' fees. Id.

Awarding attorneys' fees to Reilly pursuant to § 506(b) is consistent with the reasoning in the cases relied upon by Capital West. In Fobian, the Ninth Circuit recognized that where a contract or statute provides for an award of attorneys' fees, a creditor may be entitled to such fees in bankruptcy proceedings. Fobian, 951 F.2d at 1153. It also recognized in Coast Trading that a party may be entitled to attorneys' fees in a bankruptcy proceeding in accordance with applicable state law. Coast Trading, 744 F.2d at 693. In Johnson, the Ninth Circuit expressly recognized that the prohibition of an award of attorneys' fees in bankruptcy proceedings had no effect on an oversecured creditor's ability to recover fees under § 506(b). Johnson, 756 F.2d at 741 n.3; Salazar, 82 B.R. at 540. It further held that a claim for attorneys' fees should be determined under federal law where federal law governs the issues litigated. Id. at 741. Moreover, § 506(b) was simply inapplicable to the circumstances in Johnson, in which the debtors sought to recover attorneys' fees. Where, as in this case, the substantive issues are strictly federal in nature, federal law provides the basis for entitlement to attorneys' fees. Id. This is true regardless of whether the underlying action is one for contract enforcement. Unlike in Fobian, Johnson, and Coast Trading, § 506(b) specifically provides the basis for Reilly's claim for attorneys' fees in this case. See Alpine Group, 151 B.R. at 934.

Ninth Circuit law is clear that an award of attorneys' fees under § 506(b) is mandatory where the underlying agreement includes an attorneys' fees provision. Applying the elements required for an award of attorneys' fees under § 506(b) as set forth in Salazar, 82 B.R. at 540, it appears that two of the elements are clearly satisfied: Reilly has an allowed secured claim, and it is oversecured. The court must then determine whether the fees requested are for services that are within the scope of the contract clause under which the claim is asserted. See In re Davidson Metals, Inc., 152 B.R. 917, 919 (Bankr. N.D. Ohio 1993), aff'd, 65 F.3d 168 (6th Cir. 1995); Alpine Group, 151 B.R. at 935; In re Gwyn, 150 B.R. 150, 154 (Bankr. M.D.N.C. 1993). The deed of trust includes a broad attorneys' fees provision that "any action or proceeding purporting to affect the security . . . or the rights or powers of [the] Beneficiary. . . ." By objecting to confirmation, Reilly sought to preserve its rights under the HUD Regulatory Agreement, specifically to maintain its mortgage insurance premiums and surplus cash provisions. The result is that the Reilly loan documentation provides a basis for the recovery of reasonable attorneys' fees. See Salazar, 82 B.R. at 540. 2. Whether the Fees Are Reasonable

Reilly retained two law firms, Greenstein Delorme & Luchs in Washington, D.C. and Pettit & Martin in San Francisco as local counsel, to represent its interests in these proceedings. Pettit & Martin made the initial court appearance for Reilly until the Greenstein firm sought and obtained authority to appear pro hac vice. The debtor asserts that Reilly unnecessarily incurred excessive attorneys' fees by retaining two law firms to represent its interests in these proceedings.

Capital West further argues that even if Reilly were entitled to recover its attorneys' fees under § 506(b), Reilly's attorneys' fees of $82,427.85 in addition to costs of $12,842.37 are patently unreasonable in view of the circumstances of the case. Capital West contends that the plan's modification of the HUD Regulatory Agreement amounted to an actual loss of approximately $25,000 had Reilly simply declared a default and invoked the HUD insurance provisions. It further contends that Reilly's attorneys' fees are grossly disproportionate in view of the amount of exposure to Reilly, the loan to value ratio, and the relatively narrow legal issue involved. The debtor submits that the narrow issue affecting Reilly in this case is whether the debtor's plan can modify certain provisions of the standard HUD Regulatory Agreement, specifically, the requirement of mortgage insurance and the "surplus cash" provisions relating to junior obligations.

Reilly responds that a conscientious effort was made to allocate tasks in order to avoid duplication between the two law firms. It further responds that the fees incurred were reasonable and necessary in view of the treatment of Reilly's interests under the debtor's First Amended Plan, which stripped Reilly of protections under the note and deed of trust and significantly increased its risk of nonpayment. Reilly further argues that:

[t]he prospect that future debtors could easily render lenders that once could rely upon the protections afforded under a HUD insured loan to ordinary secured lenders through bankruptcy was also at issue as a result of the Debtor's proposed plan of reorganization. The mere promise of repayment in full under the terms if the plan was insufficient to overcome the substantial loss of rights Reilly would be forced to endure if the plan were confirmed.

Reilly submits that the actions it took to protect its interests were reasonable.

The court's first consideration is whether the legal services by Greenstein Delorme & Luchs and Pettit & Martin were duplicative. A review of the time records of the Greenstein firm and Pettit & Martin indicates that co-counsel engaged in numerous telephonic conferences together, exchanged information and materials for review and comment, and devoted substantial time to the same tasks, in particular, Reilly 's objection to confirmation of the debtor's plan, its motion for reconsideration of the confirmation order, and the appeal of the confirmation order. An oversecured creditor should not be reimbursed for unnecessary or redundant tasks. Dalessio, 74 B.R. at 723-34. Although it may have been desirable and even prudent for Reilly to employ two competent law firms to represent its interests in this case, it is unreasonable for Capital West to absorb the entire expense of the representation. Duplication of services is a factor in the court's determination of the reasonableness of Reilly's fees under § 506(b).

To determine reasonableness, the court must inquire whether, considering all relevant factors including duplication, Reilly reasonably believed that the services employed were necessary to protect its interests in the debtor's property. See Dalessio, 74 B.R. at 723. The key determinant is whether the creditor incurred expenses and fees that fall within the scope of the fees provision in the agreement, and took the kinds of actions that similarly situated creditors might reasonably conclude should be taken Id. Its time records indicate that Reilly spent an inordinate amount of time meeting and addressing the impact in future cases and on the secondary mortgage market of permitting a debtor to modify or delete the protections in the standard HUD Regulatory Agreement through filing bankruptcy.

The HUD insurance provisions provided that Reilly had the right to declare a default upon elimination of the mortgage insurance and surplus cash provisions under the plan. The result is that Reilly's exposure to risk of nonpayment was limited to $25,000. However, instead of declaring a default, Reilly assumed an "all or nothing" approach to opposing plan confirmation. In In re Dominguez, 51 B.R. 171, 173 (Bankr. C.D. Cal. 1985), the bankruptcy court declined to reimburse counsel for an oversecured creditor for all of its attorneys' fees incurred under § 506(b) for the preparation of the fee application. The court reasoned that since the research and brief that the law firm prepared would benefit all of the secured creditor business of the law firm, it would be inequitable to impose the entire cost of those legal services on the debtors in that case alone. Id. See also In re McGaw Property Managment, Inc., 133 B.R. 227, 231 (Bankr. C.D. Cal. 1991)("all or nothing" approach unreasonable under the circumstances of case). Similarly, in this case, Reilly concedes that it pursued the issue aggressively because of the broader ramifications to the HUD secondary mortgage market. Although Reilly's actions may have been necessary to protect its interests in its view, it would be unreasonable for Capital West to bear all the costs of Reilly's litigation to enforce its rights relating to mortgage insurance and excess cash reserves under the HUD Regulatory Agreement.

Because the maximum exposure by Reilly could not exceed $25,000 under its insurance policy with HUD, the court awards fees and costs in the amount of $25,000 as a reasonable amount to have incurred in protecting its interests under the circumstances of this case. The balance of Reilly's claim for attorneys' fees is disallowed. C. Trilex's Attorneys' Fees

Capital West concedes that Trilex is entitled to recover its reasonable attorney's fees under § 506(b); however, it contends that attorneys' fees and costs of $166,043.77 are unreasonable. Capital West asserts that Trilex's position was always adequately protected by an equity cushion and that its efforts to prosecute a motion for relief from stay and a motion to retain the receiver were unnecessary to protect Trilex's interests. Capital West also asserts that the fees incurred in connection with case administration, plan confirmation, and protection of Trilex's interest in cash collateral were excessive.

Trilex responds that all the services were encompassed within its attorneys' fees provisions and that the amount of the fees were reasonable because Trilex held the single largest claim, and its promissory note was the primary target of the debtor's plan. 1. Whether the Fees Are Reasonable

The question is whether the services rendered were reasonably necessary to protect Trilex's position. The court must view the fees incurred in the context of the entire case. The debtor was in post-petition default on monthly payments of approximately $38,000, so Trilex had a substantial amount at stake in the proceedings. There were several hearings on the debtor's use of cash collateral in which complex issues arose involving entitlement to turnover of accumulated cash collateral. Trilex also filed a motion for relief from the automatic stay in April 1994, which the court denied in May 1994 while confirmation of the debtor's First Amended Plan was pending. The motion sought limited relief to record a notice of default in the event the plan was not confirmed. The proposed plan extended the term of the Trilex loan and reduced the floor of the variable interest rate of the note. There was a bifurcated confirmation hearing that was contested. The court held two evidentiary hearings over several days during which expert testimony was taken. The legal issues raised by Trilex's objection to confirmation relating to the appropriate interest rate were difficult and complex.

The attorneys' fees clause in the Trilex loan documentation is sufficiently broad to include the proceedings relating to relief from stay and retention of a receiver. Specifically, the deed of trust provides that Trilex is entitled to reasonable attorneys' fees for any action or proceeding which materially affects Trilex's interest in the debtor's property. Recordation of a notice of default and the retention of a receiver both serve to protect Trilex's security. The fees associated with Trilex's motion for relief from stay totalled $1,719. There is no per se rule in this circuit that an oversecured creditor is not entitled to recover its attorneys' fees for unsuccessfully prosecuting a motion for relief from stay. Le Marquis, 81 B.R. at 579; In re Dix, 140 B.R. 997, 999 (Bankr. S.D. Cal. 1992). Under the circumstances, it was reasonable for Trilex to file a motion for relief from the automatic stay notwithstanding the substantial equity in the property. The debtor was in post-petition default on the Trilex obligation, and the debtor was using Trilex's cash collateral. For example, the court may grant relief from stay for cause under § 362(d)(1).

With respect to Capital West's assertion of clumping and non-compensable paraprofessional time, the court's Guidelines for Compensation and Expense Reimbursement for the Northern District of California are not specifically applicable to secured creditors seeking fees unde § 506(b). Based on the court's knowledge of this case and review of the time records of Trilex's counsel, the court finds the fees incurred to be reasonable. This is not a case in which the secured creditor's aggressive attorney harassed and opposed the debtor at every stage of the bankruptcy proceeding. Dalessio, 74 B.R. at 723; Circle K, 141 B.R. at 692. Trilex cooperated and negotiated with the debtor in an attempt to reach consensual use of cash collateral and confirmation of a plan. The amount of fees that Trilex incurred in this case were reasonable because a creditor in the same circumstances as Trilex would have taken similar action.

Of particular significance to the court's determination is the fact that Trilex is not an institutional lender and that over the extended term of the loan, as modified under the plan, Trilex had at least $2 million at risk if the proposed plan were confirmed. Moreover, Trilex's counsel had exercised billing discretion by reducing the fees billed to its client. For these reasons, the court concludes that the attorneys' fees incurred by Trilex in the amount of $135,340 were reasonable under the circumstances and are allowed. Trilex's actual costs in the amount of $30,703.77 are also allowed. D. Post-Confirmation Attorney's Fees

With respect to Reilly's and Trilex's requests for continued accrual of attorneys' fees under § 506(b), the court finds that the weight of authority suggests that postconfirmation attorneys' fees may be added to the amount of a creditor's secured claim under § 506(b); however, allowance of those fees is subject to the scope of the attorneys' fees provision in the loan documents as well as limitation for reasonableness. See, e.g., In re Gwyn, 150 B.R. 150 (Bankr. M.D.N.C. 1993)(supplemental fees incurred after confirmation of chapter 11 plan allowed under § 506(b) if services within scope of fee provision); In re Longwell, 38 B.R. 709 (N.D. Ohio 1984)(reasonable for secured creditor to receive attorneys' fees under § 506(b) for defending appeal of order confirming chapter 13 plan); In re Calzaretta, 35 B.R. 92 (Bankr. N.D. Ill. 1983)(secured creditor entitled to attorneys' fees reasonably incurred to protect its interests after confirmation of chapter 13 plan). But see In re Barrett, 136 B.R. 387 (Bankr. E.D. Pa. 1992)(confirmatioin of chapter 13 plan generally concludes claims allowance process). At such time that Reilly and Trilex file their supplemental fee applications under § 506(b), the court will consider those applications and review counsel's time records for reasonableness. CONCLUSION

Based on the foregoing discussion, the court concludes that Reilly is entitled to recover reasonable attorneys' fees and costs under § 506(b) in the amount of $25,000. Trilex is entitled to recover its reasonable attorneys' fees and costs in the amounts of $135,340 and $30,703.77, respectively. Postconfirmation fees are generally permissible but are subject to the scope of the attorneys' fees provision and to review for reasonableness.

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