In Re Hages

252 B.R. 789, 2000 Bankr. LEXIS 1008, 2000 WL 1280929
CourtUnited States Bankruptcy Court, N.D. California
DecidedSeptember 5, 2000
Docket19-30103
StatusPublished
Cited by11 cases

This text of 252 B.R. 789 (In Re Hages) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, N.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re Hages, 252 B.R. 789, 2000 Bankr. LEXIS 1008, 2000 WL 1280929 (Cal. 2000).

Opinion

MEMORANDUM DECISION

DENNIS MONTALI, Bankruptcy Judge.

I. Introduction

The former chapter 7 trustee, who served before this case was converted to chapter 13, has applied for allowance of her fees. The United States Trustee (“UST”) has objected on the grounds that *791 Bankruptcy Code section 326(c) bars such fees to the extent that, when they are combined with the fees payable to the chapter 13 trustee, the total exceeds the maximum allowable under section 326(a). 1 Under the UST’s reading of the statute, in a converted case a chapter 7 trustee could receive little or nothing while the chapter 13 trustee is paid in full, even if the chapter 7 trustee generated all the estate’s assets and the chapter 13 trustee simply distributed those assets. The UST claims this is the unfortunate result of the plain words of section 326. This court disagrees.

II. Facts 2

The debtor filed her voluntary chapter 7 case on June 16, 1999. On the same date E. Lynn Schoenmann (“Schoenmann”) was appointed chapter 7 trustee. Schoenmann asserts that she spent 5.1 hours administering the estate, including investigation into the debtor’s financial affairs, ascertaining that the debtor’s residence has value in excess of her homestead exemption, and retaining a real estate broker. The debtor converted her case to chapter 13, presumably to prevent Schoenmann from selling her home. At the time the case was converted Schoenmann had not taken possession of any funds or assets. On December 20, 1999 the case was converted to chapter 13, and the standing chapter 13 trustee assumed his responsibilities in the case.

On April 24, 2000 Schoenmann filed her First and Final Application for Compensation by Former Chapter 7 Trustee, re: questing $1,530.00 in fees, for 5.1 hours of work at $300.00 per hour, (the “Fee Application”). On the same date Schoenmann’s attorneys filed an application for $2,037.50 in fees and $79.44 in expenses, of which a total of $1,664.44 was subsequently allowed, and this court confirmed the debt- or’s chapter 13 plan. The plan provides for payment of section 507(a)(1) administrative expense claims, which would normally include the full amount of Schoen-mann's and her attorneys’ allowed fees.

On April 26, 2000 the UST filed an objection to the Fee Application. The UST did not object to the propriety of Schoenmann’s fees, nor to their amount per se, but argued that such fees are capped by sections 326(a) and (c). Although the UST noted that several bankruptcy courts have allowed chapter 7 trustees’ fees in similar circumstances as administrative claims based on quantum meruit, the UST argued that quantum meruit fee awards are not allowed in the Ninth Circuit. Instead the UST proposed that this court allow Schoenmann’s fees subject to the limitation that the total of her fees, plus the chapter 13 trustee’s fees, not exceed the cap in section 326(a).

The UST argued, and Schoenmann does not question, that this court has no authority to reduce the fees payable to the chapter 13 trustee, and therefore the section 326(a) cap would reduce only Schoen-mann’s fees. The chapter 13 trustee has taken no position regarding Schoenmann’s fees, nor otherwise appeared on this matter.

The court originally heard the Fee Application on June 14, 2000. It requested further briefing, and continued the hearing to July 14, 2000. On June 30, 2000 Scho-enmann filed her reply to the UST’s objection. She argued that under the UST’s reading of the statute, the more assets a chapter 7 trustee recovers for distribution to creditors the greater the chapter 13 trustee’s fee will be and therefore, ironically, the less the chapter 7 trustee can be compensated. At some point, Schoenmann points out, the chapter 7 trustee could *792 have no compensation, because the chapter 13 trustee’s fees would equal or exceed the maximum amount under section 326(a). 3 The UST does not dispute this assertion.

Schoenmann’s reply also increased her fee request. She calculated that over the life of the confirmed chapter 13 plan the debtor will make total payments of $13,-613.00. Treating this as the amount distributed, Schoenmann determined her maximum allowable fee under section 326(a) as $2,111.30, and requested allowance of the full amount. The UST filed a supplemental brief on July 18, 2000, after which the matter was taken under submission.

III. Discussion

Section 326 provides, in relevant part:

(a)In a case under chapter 7 or 11, the court may allow reasonable compensation under section 330 of this title of the trustee for the trustee’s services, payable after the trustee renders such services, not to exceed 25 percent on the first $5,000 or less, 10 percent on any amount in excess of $5,000 but not in excess of $50,000, 5 percent on any amount in excess of $50,000 but not in excess of $1,000,-000, and reasonable compensation not to exceed 3 percent of such moneys in excess of $1,000,000, upon all moneys disbursed or turned over in the case by the trustee to parties in interest, excluding the debtor, but including holders of secured claims.
(b) In a case under chapter 12 or 13 of this title, the court may not allow compensation for services or reimbursement of expenses of [a standing chapter 13 trustee] appointed under section 586(b) of title 28, but may allow reasonable compensation under section 330 of this title of [a chapter 13 trustee appointed by the court under section 1302(a) ] for the trustee’s services, payable after the trustee renders such services, not to exceed five percent upon all payments under the plan.
(c) If more than one person serves as trustee in the case, the aggregate compensation of such persons for such service may not exceed the maximum compensation prescribed for a single trustee by subsection (a) or (b) of this section, as the case may be.

Four questions are before this court. First, because Schoenmann has not made any distributions — and has not taken possession of any funds or assets at the time of conversion — have any moneys been “disbursed or turned over” by her to parties in interest within the meaning of section 326(a), and if so, when? Second, does the statutory cap in section 326(c) bar this *793 court from allowing Schoenmann’s fees, or limit those fees by counting the fees to be paid to the chapter 13 trustee toward the maximum amount allowed by section 326(a)? Third, are Schoenmann’s fees of equal administrative priority with the chapter 13 trustee’s fees, and entitled to be paid simultaneously and pro rata? Fourth, in what amount should Schoen-mann’s fees be allowed?

A. Moneys “Disbursed or Turned Over in The Case by The Trustee to Parties in Interest”

Schoenmann argues that distributions made by the chapter 13 trustee out of the debtor’s chapter 13 plan payments should be imputed to her, citing In re Rodriguez, 240 B.R.

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Cite This Page — Counsel Stack

Bluebook (online)
252 B.R. 789, 2000 Bankr. LEXIS 1008, 2000 WL 1280929, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-hages-canb-2000.