In re Blue Coal Corp.

206 B.R. 730, 1997 Bankr. LEXIS 688, 1997 WL 133307
CourtUnited States Bankruptcy Court, M.D. Pennsylvania
DecidedJanuary 15, 1997
DocketBankruptcy Nos. 76-1311, 78-604
StatusPublished

This text of 206 B.R. 730 (In re Blue Coal Corp.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, M.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Blue Coal Corp., 206 B.R. 730, 1997 Bankr. LEXIS 688, 1997 WL 133307 (Pa. 1997).

Opinion

OPINION AND ORDER

JOHN J. THOMAS, Bankruptcy Judge.

A Motion requesting allowance of fees has been filed by the Trustee, Frank M. McDonnell, requesting the maximum award possible under the provisions of § 48.e.(2) of the Bankruptcy Act of 1898 (hereinafter “Act”) providing for compensation to a trustee authorized to operate a business. That request amounts to $619,982.83, with credit for earlier payments to the Trustees.

The trustee’s maximum commission is based on the provisions of § 48.c.(l) of the Act as follows.

(1) Normal Administration. — When the trustee does not conduct the business of the bankrupt, such sum as the court may allow, but in no event to exceed 10 per centum on the first $500 or less, 6 per centum on moneys in excess of $500 and not more than $1,500, 3 per centum on moneys in excess of $1,500 and not more than $10,000, 2 per centum on moneys in excess of $10,000 and not more than $25,-000, and 1 per centum on moneys in excess of $25,000, upon all moneys disbursed or turned over by them to any persons, including lienholders:

The maximum for a trustee conducting the bankrupt’s business is set forth in § 48.e.(2) as twice the maximum fees allowed under § 48.c.(l).

This request has been opposed by two creditors of the estate, that is, the State of New York and The Commonwealth of Pennsylvania, who appear to limit their objections to the request for double compensation.

A history of Blue Coal, both pre and post bankruptcy has been set forth in the numerous reported opinions of the court. The reader is referred to those cases for details not found in this opinion.1 This Movant is [732]*732the third Trustee over a twenty year span charged with liquidating the massive mineral reserves and land holdings of the Bankrupt.

The case began as an involuntary proceeding in 1976, the major assets of which were fully encumbered by lienholders. Years later, in 1987, the District Court for the Middle District of Pennsylvania, after approximately 120 trial days, declared that the Bankrupt’s 17,000 acres of land, together with the largest anthracite coal reserves in the world, were virtually lien-free. United States v. Gleneagles Inv. Co., 565 F.Supp. 556 (M.D.Pa.1983), aff'd in part and vacated in part sub nom. United States v. Tabor Court Realty Corp., 803 F.2d 1288 (3d Cir.1986), cert. denied sub nom. McClellan Realty Corp. v. United States, 483 U.S. 1005, 107 S.Ct. 3229, 97 L.Ed.2d 735 (1987).

Initially, Charles A. Shea, Jr. was appointed Receiver and then Trustee. The parties agree that he has been fully compensated for his services by an earlier allowance in the amount of $2,584.28. (Final Report, Accounting, and Application for Allowance by Trustee, Charles A. Shea, Jr., filed March 17, 1980.)2 He was succeeded as Trustee by Attorney James P. Haggerty on January 16, 1979. In 1987, Mr. Haggerty was tabbed by the Governor of Pennsylvania, Robert A. Casey, to be his official counsel. Attorney Haggerty resigned and his law partner, Attorney Frank M. McDonnell, was appointed to succeed him. While Attorney McDonnell originally sought compensation only for himself, subsequent pleadings, as well as the testimony of both Haggerty and McDonnell, indicate that McDonnell is pursuing his commission not only for his own benefit, but also for the benefit of his partnership including James Haggerty. In that regard, Haggerty also maintains that his period of service should be considered when making the award.

The Objectors question this procedure and assert that Haggerty has waived his claim by failing to file an appropriate application by the administrative claims bar date set earlier in this case.

'While McDonnell’s request to collect all commissions owing to both he and his partner is unorthodox, I am inclined to grant the request and treat this application as a joint one of both Messrs. Haggerty and McDonnell. Both were present during the hearing. The commissions to be awarded are based on total disbursements, the bulk of which occurred during Attorney McDonnell's tenure. Furthermore, the court is independently required to evaluate earlier administrations if only to measure the degree to which the Bankrupt continued operations.

Despite the protests of Objectors, they appeared well prepared to cross-examine Attorney Haggerty on his activities. Even after the court provisionally allowed the joint request to proceed, no request to continue the hearing was made.

References to the “Trustee” in this opinion shall be interpreted to mean either Mr. [733]*733McDonnell or Mr. Haggerty, or both, unless otherwise indicated.

In advancing the Trustee’s case for maximum commissions, counsel for the Trustee makes the following arguments.

(1) During his tenure, Trustee McDonnell has liquidated 98% of the estate’s 17,000 acres.

(2) He was successful in the highly litigious bulk sale to Earth Conservancy.

(3) He secured over $2,000,000.00 in liquidated damages from two earlier failed sale attempts.

(4) He obtained settlements with the principal creditors.

(5) He is responsible for an anticipated dividend of approximately 63% to general unsecured creditors.

(6) The Trustees conducted the business of the Bankrupt by employing people, entering into coal leases, supervising strip mine operations, securing insurance, paying taxes, and maintaining inventories.

(7) The Trustees’ estimated time, based on their hourly rate as lawyers, justify the request.

The Objectors counter by alleging that

(1) Double compensation is only available to a trustee conducting business. The Trustees did not conduct the Bankrupt’s business.

(2) The Trustees brought no special knowledge to the case, but rather hired professionals, such as attorneys, accountants, and appraisers, to advise them.

(3) The Trustee kept no time records.

(4) The Bankruptcy Act includes a standard of “strict economy” which requires the court to be conservative in considering the award of fees.

Rule 219. Compensation for Services Rendered and Reimbursement of Expenses Incurred in a Bankruptcy Case

(c) Factors in Allowing Compensation.

(1) General. The compensation allowable by the court to a trustee, receiver, marshal, attorney, accountant, or other person entitled to compensation for services rendered in the administration of a bankrupt estate shall be reasonable, and in making allowances the court shall give due consideration to the nature, extent, and value of the services rendered as well as to the conservation of the estate and the interests of creditors.
2A Collier Bankruptcy Manual (2d ed. 1977)

On August 1, 1983, the then-existing Bankruptcy Rules were “superseded” by new Bankruptcy Rules which omitted reference to “conservation of the estate” as a factor in the allowance of compensation.

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Related

In Re Gilbert
276 U.S. 294 (Supreme Court, 1928)
Coskery v. Roberts & Mander Corp.
200 F.2d 150 (Third Circuit, 1952)
United States v. Gleneagles Investment Co.
565 F. Supp. 556 (M.D. Pennsylvania, 1983)
United States v. Gleneagles Inv. Co., Inc.
571 F. Supp. 935 (M.D. Pennsylvania, 1983)
In Re Blue Coal Corp.
67 B.R. 798 (M.D. Pennsylvania, 1986)
In Re Blue Coal Corp.
59 B.R. 157 (M.D. Pennsylvania, 1986)
In Re Blue Coal Corp.
166 B.R. 816 (M.D. Pennsylvania, 1993)
In Re Blue Coal Corp.
150 B.R. 592 (M.D. Pennsylvania, 1993)
In Re Blue Coal Corp.
47 B.R. 758 (M.D. Pennsylvania, 1985)
In Re Blue Coal Corp.
168 B.R. 553 (M.D. Pennsylvania, 1994)
United States v. Gleneagles Inv. Co., Inc.
584 F. Supp. 671 (M.D. Pennsylvania, 1984)
In re Blue Coal Corp.
47 B.R. 754 (M.D. Pennsylvania, 1985)
In re Blue Coal Corp.
152 B.R. 710 (M.D. Pennsylvania, 1993)
In re Duke
15 F.2d 92 (U.S. Circuit Court for the District of Eastern Missouri, 1924)
In re Nixon
23 F. Supp. 310 (W.D. Pennsylvania, 1938)
In re Slattery & Co.
294 F. 624 (Second Circuit, 1923)
United States v. Tabor Court Realty Corp.
803 F.2d 1288 (Third Circuit, 1986)
McClellan Realty Co. v. United States
483 U.S. 1005 (Supreme Court, 1987)

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Bluebook (online)
206 B.R. 730, 1997 Bankr. LEXIS 688, 1997 WL 133307, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-blue-coal-corp-pamb-1997.