In Re: Celano

• Court: Court of Appeals for the Fifth Circuit
• Decided: November 19, 2002
• Docket: 02-30162
• Status: Unpublished

Opinion

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

____________________

No. 02-30162

Summary Calendar ____________________

In The Matter Of: JOSEPH CELANO; ANN MARIE CELANO

Debtors ________________________

CYNTHIA LEE TRAINA

Appellant

v.

JOSEPH CELANO; ANN MARIE CELANO

Appellees and

R MICHAEL BOLEN, United States Trustee, Region 5

Trustee - Appellee _________________________________________________________________

Appeal from the United States District Court for the Eastern District of Louisiana (No. 01-CV-1310) _________________________________________________________________ November 18, 2002

Before KING, Chief Judge, and WIENER and CLEMENT, Circuit Judges.

PER CURIAM:*

* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4. Appellant Cynthia Lee Traina appeals from the district

court’s affirmance of the bankruptcy court’s denials of her

application for compensation pursuant to 11 U.S.C. § 326(a)

(1994) and her motion pursuant to Rule 59 of the Federal Rules of

Civil Procedure. For the reasons set forth below, we AFFIRM the

district court’s affirmance of the denials.

I. FACTUAL AND PROCEDURAL BACKGROUND

The instant appeal primarily concerns Cynthia Lee Traina’s

request for fees that she believes are owed for services rendered

as a bankruptcy trustee. On March 31, 1998, Traina was appointed

the trustee of the estate of debtors Joseph and Ann Marie Celano

after the couple voluntarily filed a Chapter 7 bankruptcy

petition. On June 7, 1999, the Celanos converted their case into

a Chapter 11 proceeding and, although Traina tried to be

appointed the Chapter 11 trustee, the Celanos moved to dismiss

the Chapter 11 case. The Celanos eventually settled with their

creditors and submitted an Agreed Order to the bankruptcy court

that included the terms of the monetary distributions to all

interested parties. The bankruptcy court entered the Agreed

Order and allowed the Celanos to dismiss voluntarily the Chapter

11 case, but retained jurisdiction to determine whether Traina

was entitled to compensation for her time served as the Celanos’

Chapter 7 trustee.

2 Traina filed a Fee Application and requested $8,000 in fees.

On March 13, 2001, the bankruptcy court denied her request for

compensation, finding that § 326(a) barred Traina from receiving

compensation because she did not disburse any funds while serving

as trustee. Soon after, the bankruptcy court denied Traina’s

post-judgment motion pursuant to Rule 59(e) requesting the

bankruptcy court for a new trial, or in the alternative, to alter

or amend the judgment (“Rule 59(e) Motion”).

On December 7, 2001, the district court affirmed the

bankruptcy court’s decision, holding that: (1) Traina’s request

for compensation was correctly denied because, even in non-fully

administered cases, the plain language of § 326(a) indicates that

only money that the trustee distributes can be included in

calculating the compensation base; and (2) Traina’s Rule 59(e)

Motion was correctly denied because she failed to establish any

of the bases for relief available under the Rule.

Traina timely appeals the district court’s affirmance of the

bankruptcy court decision.

II. STANDARD OF REVIEW

This court, acting essentially as a second court of appeals,

reviews a bankruptcy court’s findings of fact under the clearly

erroneous standard, and a bankruptcy court’s conclusions of law

and mixed questions of law and fact de novo. In re U.S. Brass

Corp., 301 F.3d 296, 306 (5th Cir. 2002). In the instant appeal,

3 review of the bankruptcy court’s denial of Traina’s request for

compensation under § 326(a) based on her services rendered as a

bankruptcy trustee presents a mixed question of law and fact and

is thus subject to de novo review.1

III. TRAINA’S REIMBURSEMENT CLAIM

On appeal, Traina contends that the district court erred in

affirming the denial of her compensation under §§ 326(a) and 330

of the Bankruptcy Code. As to § 326(a), she criticizes the

district court’s method of calculating fees owed to trustees,

particularly the court’s failure to appreciate the distinction

between fully and non-fully administered cases. Traina concludes

that the court erred by grouping this non-fully administered case

with all other cases and thereby finding that § 326(a) applies to

non-fully administered cases. Appellee R. Michael Bolden, United

States Trustee, does not address these arguments in his Brief.

Regarding § 330, Traina contends that there was sufficient

evidence to support her entitlement to reasonable compensation

for her actual and necessary services rendered. She points to

her investigation into and identification of the Celanos’ wholly-

owned corporation called INTRX HealthCare (“INTRX”). Traina

asserts that her investigation into INTRX lead to the discovery

of accounts receivable that could be used to pay the Celanos’

1 As explained in Part IV, Traina’s Rule 59 motion is not amenable to appellate review.

4 creditors. Traina also contends that she had an essential role

in the formation of the Agreed Order between the creditors and

the debtors and that she encouraged the Celanos to convert the

case and ultimately settle it.

Bolen counters that the district court was correct in

finding that proof of this ownership was disclosed at the onset

of the bankruptcy litigation. He also suggests that Traina’s

role in the negotiations was minimal and it was the Celanos’

motivations, not Traina’s encouragement, that contributed to the

conversion of the Chapter 7 case and the settlement of the

Chapter 11 case.

The relevant statutory provisions are relatively straight-

forward. Section 326(a) of the Bankruptcy Code provides that a

limitation on the bankruptcy court’s power to award compensation

to the trustees by setting a maximum limit on the trustee’s

compensation, In re England, 153 F.3d 232, 234 (5th Cir. 1998),

while § 330 provides the statutory authority for a bankruptcy

court to award bankruptcy trustees “reasonable compensation for

actual, necessary services rendered by such trustee.” 11 U.S.C.

§ 330(a)(1). While Traina raises novel arguments concerning the

proper method for calculation of fees under § 326(a), we need not

delve into this relatively complicated matter of statutory

interpretation because the record strongly suggests that under

§ 330, Traina was not entitled to reasonable compensation for her

services rendered.

5 Section 330 lists several factors to consider in assessing

an award for reasonable compensation including “(1) the nature,

the extent, and the value of [the trustee’s] services; (2) the

time spent on such services; and (3) the costs of comparable

services other than in a cause under this title.” Id.

Significantly, § 330(a)(4)(A)(ii) admonishes that a “court should

not allow for compensation for ... services that were not (I)

reasonably likely to benefit the debtor’s estate; or (II)

necessary to the administration of the case.” Id.

§ 330(a)(4)(A). The rather subjective quality of the factors

laid out in the Bankruptcy Code affords a reviewing court broad

discretion in determining whether to award or deny trustee

compensation. See, e.g., In re Prudhomme, 43 F.3d 1000, 1003-04

(5th Cir. 1995) (citing § 330 for support of the proposition).

Even without such broad discretion, we would still find that

Traina has difficulty circumventing the plain language of

§ 330(a)(4)(A)(ii). It requires a serious suspension of

disbelief to accept that Traina was solely responsible for the

“discovery” of INTRX and its available funds. The record

indicates that, prior to Traina’s investigation, the Celanos were

aware of the INTRX’s existence and asset potential. We cannot

ignore the facts that the Celanos owned and controlled all stock

in INTRX; Joseph Celano founded the corporation; the Celanos

disclosed their ownership interest in the statement of financial

affairs; and the Celanos’ Schedule F disclosed that most of their

6 debt consisted of contingent liabilities associated with the

INTRX account. Furthermore, Traina did not introduce evidence of

the Celanos’ absence of knowledge or awareness of the amounts

receivable in INTRX. Effectively, Traina’s investigation yielded

a negligible amount of new useful information for the Celanos in

their bankruptcy proceedings.2

Traina’s contention that her contributions were essential to

the settlement and Agreed Order are also problematic. Given that

§ 330 lists the nature and extent of the service as relevant

factors in trustee compensation determinations, it is

questionable whether Traina’s non-opposition to the dismissal of

the Celanos’ Chapter 11 case, which she claims was vital to the

Agreed Order, would constitute the kind of “actual, necessary

service” triggering compensation under the Bankruptcy Code.3 11

U.S.C § 330(a)(1). Moreover, even if Traina’s agreement of non-

opposition did provide a cognizable service, Traina’s acts did

not benefit the Celanos’ estate in the manner she depicts. The

relevant portion of the Agreed Order fails to indicate that

2 Although the Celanos failed to list (in their Schedule B) assets related to their interest in INTRX, this occurrence alone does not indicate that they needed Traina to locate and secure the documentation related to the amounts receivable in INTRX. 3 As to this contention, the district court keenly observed that “[a]greeing not to oppose dismissal is a far cry from putting together the ingredients necessary for the settlement with the creditors.”

7 Traina’s involvement was particularly essential.4 In addition,

the only evidence pertaining to the quality of Traina’s services

as trustee is in the form of a letter from a participant in the

relevant negotiations. The letter states in pertinent part that,

“Traina did nothing to facilitate a settlement” and that the

“INTRX matter would have been resolved sooner had Ms. Traina ...

not been involved.... [She] actually obstructed the settlement

negotiations.”5 This evidence, taken in the aggregate, simply

overwhelms Traina’s evidence and assertions to the contrary.

In sum, Traina’s proffered actions as Chapter 7 trustee

either were unnecessary for the administration of the Celanos’

estate or unlikely to benefit the Celanos in the resolution of

their bankruptcy proceedings. Under such circumstances, the

4 The Agreed Order states, in pertinent part:

Considering the statements of counsel, agreement of the parties, evidence, applicable law, [and] the lack of opposition of the former trustee to dismissal of the proceeding conditioned only upon the Court’s receipt of evidence from counsel for the debtors that debtors have paid all amounts required under their agreements with Crescent Bank & Trust, the U.S. Small Business Administration, Hibernia National Bank and Adams & Reese, L.L.P., and the deposit by the debtors of the sum of $500.00 into the registry of the Court for the purpose of paying any and all sums which may be awarded Cynthia Lee Traina as compensation as Chapter 7 trustee. 5 In her Brief, Traina objects to the district court’s use of this letter because it was “never introduced as evidence at the hearing.” However, inclusion of the letter in the Bankruptcy Record, see Letter of Donna G. Klein, R. 000180, implies that, it was indeed submitted to the bankruptcy and district courts and is therefore completely available for our consideration.

8 Bankruptcy Code compels that no compensation should be awarded.

Using the same standards as the bankruptcy court, we conclude

that it acted appropriately in holding that Traina was not

entitled to reasonable compensation under § 330 and thus, under §

326(a).

IV. TRAINA’S RULE 59(e) MOTION

Relying on Rule 9023 of the Federal Rules of Bankruptcy

Procedure, Traina contends that the district court erroneously

affirmed the bankruptcy court’s denial of her Rule 59(e) Motion.

In denying the motion, Traina argues, the bankruptcy court

prevented her from emphasizing several factual and legal errors

allegedly made in the court’s order; the denial of the motion,

Traina continues, constituted an abuse of discretion. Bolen

counters that the bankruptcy court did not abuse its discretion

in denying the motion because Traina failed to meet at least one

of the four requirements to prevail on a Rule 59 motion.

Discussion of the merits of this claim is not essential to

its ultimate resolution, however. The Fifth Circuit has informed

that a motion based on Bankruptcy Rule 9023 (which adopts Rule

59) can be argued only up to the point of the federal district

court’s review of a bankruptcy court; the Rule cannot be invoked

in subsequent arguments before a federal court of appeals

reviewing the district court’s decision. See In re Butler, Inc.,

2 F.3d 154, 155 (5th Cir. 1993); see also In re Eichelberger, 943

9 F.2d 536, 539 (5th Cir. 1991) (“A Rule 59(e) motion may be

brought from a judgment of the bankruptcy court ... but not from

a judgment of the district court exercising appellate

jurisdiction in a bankruptcy case.”). As a result, Traina is

procedurally precluded from asserting her Rule 59 arguments

before this court. Hence, the district court’s affirmance of the

bankruptcy court’s denial represents the final word on Traina’s

Rule 59(e) Motion.

V. CONCLUSION

For the foregoing reasons, we AFFIRM the judgment of the

district court. Traina’s motion for costs and damages is DENIED.