In re: Hurricane Technological Systems, Corp.

• Court: United States Bankruptcy Court, D. Puerto Rico
• Decided: January 20, 2011
• Docket: 09-00515
• Status: Unknown

Opinion

1 IN THE UNITED STATES BANKRUPTCY COURT 5 FOR THE DISTRICT OF PUERTO RICO

° IN RE: : CASE NO. 09-00515 (ESL) HURRICANE TECHNOLOGICAL 5 |ISYSTEMS, CORP. CHAPTER 7 6 Debtor : aq 8 9 OPINION AND ORDER 10 This case is before the court upon Mr. José M. Monge Robertin, CPA, CIRA and Monge 11 |/Robertin & Co.’s (hereinafter referred to as “Mr. Monge”) motion for reconsideration of a court order 12 No. 132) whereby Mr. Monge’s application for compensation (Docket No. 99) was stricken 13 its entirety as requested by the Chapter 7 trustee (Docket No. 142). The Chapter 7 trustee argues 14 Mr. Monge’s application for compensation should be stricken in its entirety based on the 15 following: (i) fees, if any, prior to March 2, 2009 (date in which application for employment was 16 |}@pproved) should not be approved; (ii) the application is overly excessive and fails to benefit Debtor’s 17 in conformity with Section 330(a)(4) of the Bankruptcy Code; and (iii) Mr. Monge complies 1g the definition ofa bankruptcy petition preparer pursuant to Section 110 of the Bankruptcy Code, 19 as such failed to sign the schedules (Docket Nos. 112, 132, 137 & 166). For the reasons stated 9 |herein, Mr. Monge’s fees in invoice #7467 are stricken in their entirety, and fees charged in invoice 91 are partially stricken, as the effective date ofemployment pursuant to Fed. R. Bankr. P. 2014(a) 99 |jand P.R. LBR 2014-1(e) was February 27, 2009. The professional fees charged in invoice #7468, 93 #7470, #7471 and #7472 are reduced or denied in conformity with Section 330(a)(3) and (4) 4 the Bankruptcy Code. 5 Facts and Procedural Background 2% Hurricane Technological Systems, Corp. (hereinafter referred to as “Hurricane” or “Debtor”) 97 a bankruptcy petition under Chapter 11 of the Bankruptcy Code on January 29, 2009. On ag |[February 27, 2009, Debtor filed the application for leave to retain Mr. Monge, CPA. CIRA and | □ Monge Robertin & Co., as insolvency and restructuring advisors particularly for “...services [which]

1 required in the reorganization process of the Debtor in the areas of Plan Development, feasibility, 2 |negotiations, investment and financing,” due to Mr. Monge’s “extensive experience in bankruptcy 3 and his understanding of the complex matters pertaining to this case.” (Docket No. 12, pgs. 1 4 |& 2). The engagement letter was included as part of Mr. Monge’s employment application which 5 |\stated that they would “provide specialized restructuring and insolvency services as well as consulting 6 the areas of accounting, tax, systems and financial matters” to reorganize Debtor (Docket No. 12, 7 6). The engagement letter detailed the services to be performed as part of the engagement. Amongst 8 services the following were included: (i) assist legal counsel in preparation and amendments of | □ 9 Chapter 11 schedules; (ii) assist legal counsel in preparation and amendments of the Statement of 10 ||FinancialAffairs; (iii) assist legal counsel to obtain the financial information required by U.S. 11 |Trustee’s Office for Initial Debtor Interview and 341 meetings; (iv) assist [external] auditors to 12 |jcomplete the audit and tax returns; (v) prepare cash flow projections with our report and notes; (vi) 13 |lassist counsel to develop drafts on the Disclosure Statement and plan; (vii) preparation of feasibility 14 analysis for confirmation of the Plan; (viii) reconcile claims, classify in accordance with the Code 15 |land design strategies for a Reorganization Plan; (ix) prepare liquidation analysis with our accountants 16 |jreport and notes; (x) review tax and other proof of claims to recommend and support claim 17 |jobjections; (xi) assist Debtor in preparation of monthly operating reports (MORS) required by the 18 |iguidelines of the Office of the U.S. Trustee. Review all MORS prepared by Debtor; (xii) ifnecessary, 19 will assist Debtor in developing internal systems and procedures to facilitate reporting and control 20 jjofthe operations; (xiii) ifnecessary assist with industrial engineer to review costs and processes; (xiv) 21 jjassistance to obtain additional capital contributions or DIP financing; (xv) assistance to legal counsel 22 any adversary proceedings that may arise in the course of the reorganization that may require 23 ||financial and accounting support or testimony; (xvi) assistance to legal counsel and Debtor in any 24 negotiations with creditors or post-petition financing; (xvii) other financial and management 25 |iconsulting to improve financial conditions; (xviii) assist counsel and Debtor to organize dockets, 26 of claims and other documents to reduce electronic filing costs and provide efficient access to 27 |\documents; (xix) assist counsel to tabulate ballots and preparation of draft of 1129 statement; (xx) 28 |lprepare Substantial Consummation Report to request Final Decree; and (xxi) any other support

| |[requested by counsel or Debtor (Docket No. 12, pgs. 6 & 7). On March 2, 2009, the court approved 2 Monge’s and Monge Robertin & Co.’s application for employment but noted that the same failed 3 |[to include the required statements in accordance with P.R. LBR 2014-1(a)(5) and (6) (Docket No. 14). 4 On May 5, 2009, Mr. Monge filed an informative motion on P.R. LBR 2014-1 noting the following: 5 no opposition as of this date has been filed by the Office of the U.S. Trustee; (ii) “[t]he attached 6 of the Verified Statement filed as part of Docket No. 12 includes in page 2 (b) a statement in 7 compliance with LBR 2014-1(a)(6); and (iii) “[a]s to LBR 2014-1(a)(5), the Debtor did not provide 8 deposit and therefore we understand that this rule does not apply.” (Docket No. 32). 9 The 341 meeting of creditors was held on March 9, 2009, and was continued sine die pending 10 filing of amended schedules and documents requested by the Office of the United States Trustee | . 11 (Docket No. 19). On March 27, 2009 a status conference was held in which Debtor was given until 12 30, 2009 to file the Disclosure Statement and Plan of Reorganization (Docket No. 25). 13 Subsequently, on June 8, 2009 the court ordered Debtor to show cause within thirty (30) days as to 14 |lwhy this case should not be dismissed for failure to file amended schedules, monthly operating 15 |lreports, disclosure statement and plan of reorganization (Docket No. 40). 16 On June 19, 2009, the Office of the United States Trustee filed a motion for conversion to 17 ||Chapter 7 pursuant to 11 U.S.C. §1112(b)(4)(E), (F), (A) and (J) of the Bankruptcy Code and for 18 |[Debtor’s alleged breach of its fiduciary duty in refusing or delaying to file an avoidance action 19 |pursuant to Section 548 of the Bankruptcy Code (to avoid fraudulent transfers of estate property to 20 corporations and/or individuals) (Docket No. 43). The U.S. Trustee in its motion to dismiss 21 jlincluded a copy of the Asset Purchase Agreement between Export National, Inc.' and Debtor which 22 |jwas executed on October 4, 2007 (Docket No. 43, Exhibit B). In the Asset Purchase Agreement, 23 24 "Export National, Inc. (case number 03-01827) filed for bankruptcy on February 25, 2003. On May 6, 2003 the court granted Mr. Monge’s application for employment as financial insolvency 25 || and restructuring advisors for Export National, Inc. (Docket Nos. 18, 22 & 37). Export National, 26 Inc. was a closely held company dedicated to the distribution of aluminum materials to manufacturers at the wholesale level, particularly supplies employed in the construction of windows 27 || and doors (Docket No. 95, pgs. 5-6 of Disclosure Statement). In this particular case, Mr. Monge’s last application for compensation was on January 28, 2005 (Docket No. 159). The court confirmed 28 || Export National, Inc’s amended plan of reorganization on February 15, 2005 (Docket No. 162).

1 (as the buyer) would purchase from Export National, Inc. (as the seller) certain assets, namely 2 |jraw materials, used equipment and machinery used for manufacturing aluminum windows and doors 3 jjas well as a trademark which was employed by National Export, Inc. (Docket No. 43, Exhibit B, pg. 4 One of the clauses of the Asset Purchase Agreement states the reason for the same was that, 5 to serious financial difficulties that lead to insolvency and in the best interest of the Seller’s 6 jcreditors and employees, the Seller decided to follow an orderly liquidation by selling, transferring 7 conveying to the Buyer certain assets, in exchange for the Buyer to absorb and assume certain 8 |fiabilities and to rescue employment of all former employees of Seller” (Docket No. 43, Exhibit B, 9 21). On July 10, 2009, the Debtor filed its opposition to the U.S. Trustee’s motion for conversion 10 |ito Chapter 7 and its request for voluntary dismissal (Docket No. 48). Debtor in said opposition 11 |\clarified certain facts which are pertinent to the instant controversy, namely: (i) “[i]t is further 12 |clarified that Debtor has an in-house accountant, Mrs. Jenny Santana. Mrs. Santana is in charge of 13 accounting matters of the Debtor and the preparation of Monthly Operating Reports. The financial 14 jadvisors provide support to the accountant when necessary in all matters pertaining the 15 |reorganization”(Docket No, 48, paragraph # 3); (ii) “[w]hat was in fact stated in the 341 meeting was 16 Export National’s primary reason for the sale of assets to [Hurricane Technological Systems, 17 was due to inability to further develop the company for lack of financing. Financing was not 18 jlavailable due to Export’s bankruptcy, and that its president, Mr. Manuel Gandara had also filed for 19 bankruptcy subsequently due to personal problems” (Docket No. 48, paragraph #11); and (iii) 20 |*...Debtor has failed to file its Monthly Operating Reports since the date of filing. This averment is 21 jjadmitted, however, the reason for this delay has been that debtor’s accountant, Mrs. Jenny Santana 22 |jwas ill and suffered a serious automobile accident. She has recently returned to work and is expected 23 complete the Monthly Operating Reports from February to May 2009 within 20 days. The 24 ||Operating report of February 2009 has already been provided to the Debtor’s financial advisors for 25 review” (Docket No. 48, paragraph #30). 26 On August 27, 2009, Debtor filed a motion requesting conversion to Chapter 7 (Docket No. 27 Subsequently, on August 28, 2009 Mr. Monge filed a motion withdrawing as Debtor’s financial 28 due to the conversion to Chapter 7 (Docket No. 73). The instant case was converted to

1 ||Chapter 7 on September 1, 2009 (Docket No. 71). 2 On October 14, 2009, Mr. Monge submitted his application for compensation for the period 3 January 9, 2009 to June 30, 2009 in the amount of $29,779.75, 282.80 hours and expenses in the 4 |amount of $240.03, for a total reimbursement amount of $30,019.78. (Docket No. 99). The figure in 5 |the amount of $29,779.75 includes a 30% discount. On December 22, 2009, the Chapter 7 Trustee 6 |Ifiled a motion objecting to Mr. Monge’s application for compensation in its entirety since the same □ 7 |lwas overly excessive and did not benefit the estate (Docket No. 112). The Chapter 7 Trustee also 8 jlargued that fees, if any, prior to March 2, 2009 should not be approved. The Chapter 7 objection to 9 |Mr. Monge’s application for compensation is based particularly on the following: (i) 60.90 hours 10 amount to $9,455 (without the 30% discount) were spent preparing schedules which should 11 been completed by an internal accountant working closely with the bankruptcy attorney; (ii) 12 hours which amount to $7,465 (exclusive of the 30% discount) were dedicated in the 13 preparation of the initial debtor interview (“IDI”) which should have been prepared by Debtor’s 14 |attorney in conjunction with its internal accountant; (iii) 27 hours which amount to $4,050 (exclusive 15 the 30% discount) was billed in the preparation of monthly operating reports which were never 16 |{filed with the court; (iv) 39.50 hours which amount to $5,925 (without the. 30% discount) were 17 dedicated in the summary of claims and claims administration but no objections to the claims were 18 jlever filed with this court; (v) 20.60 hours were dedicated in preparing Debtor for the 341 creditors’ 19 |Imeeting which amounts to $3,690 (exclusive of the 30% discount) which should have been done by 20 |Debtor’s internal accountant which has extensive knowledge regarding Debtor’s financial affairs; 21 |\(vi) the application for employment does not disclose that Mr. Monge had any prior knowledge of 22 ||Debtor’s financial affairs; and (vii) Mr. Monge in the 2014 Statement of Application for Employment 23 |jindicated under penalty of perjury, that there is no prior connection with the Debtor (Docket No. 112). 24 November 30, 2009, Mr. Monge filed his response to the Chapter 7 Trustee’s objection to his 25 |lapplication for compensation alleging the following: (i) CIRA’s (“Certified Insolvency and 26 |[Restructuring Advisors”) services include the preparation of Schedules since “...we are able to access 27 |and understand the books of the Debtors and produce more accurate Schedules at a lower cost;” (ii) 28 ||Debtor’s internal accountant was unable to assist us significantly in the preparation and amendment

1 jjof the schedules due to serious health problems; (iii) “[i]n all our Chapter 11 cases we are involved 2 producing the IDI documents for counsel. In this process we visit the Debtor’s offices, provide the 3 jflist of documents to the internal accountant, review the documents to ascertain they are what is 4 |irequested. In this particular case the Debtor’s internal accountant was sick and was single handedly: 5 |fworking most of the accounting procedures of the company and needed additional assistance in order 6 comply with all documentation requested by the US Trustee’s Office;” (iv) “[t]he operating report 7 included visiting the Debtors offices and multiple telephone conferences to provide formats and 8 |jassistance to the Debtor’s internal accountant. The monthly operating report for the month of 9 February (which would include the last two days of January 2009 could not be filed because the 10 accountant was unable to produce the appropriate information. Time expended involved the 11 meetings and telephone calls with the accountant to provide assistance to understand the forms 12 |jand attachments needed and review of the initial data provided;” (v) the summary of claims work 13 |linvolves: (a) “...imputing all scheduled amounts and Proofs of claims in a worksheet (the summary 14 claims and plan payments) that reconciles these balances, provides status on all POC’s reviewed, 15 calculates the expected amount to be allowed and payments for all creditors;” (b) “[i]n the 16 |isummary of claims and plan payments we had already identified POCs to be allowed, and those 17 recommended for objection;” (c) “the summary work also includes reconciling the Proofs of Claim 18 |jregistered in the Claims Register of the Court with the POCs themselves and the amounts posted to 19 |Ithe summary as POCs;” and (d) “[d]iscrepancies must be reviewed and explained;” (vi) Debtor had 20 (2) meetings of creditors (February 28, 2009 and March 9, 2009) that required prior meetings 21 Debtor and counsel as well as assistance to produce documents requested by the Office of the 22 ||US Trustee; (vii) in the IDI Debtor testified that Mr. Monge had been involved as Debtor’s financial 23 |iconsultants prior to the bankruptcy filing; (viii) “[a]s to the issue of ‘benefit to the estate’ all 24 |procedures were for the sole purpose of developing a reorganization plan in good faith;” (ix) the 25 statement (Docket No. 12) filed with this court disclosed that Mr. Monge had provided 26 |[professional consulting services to Debtor prior to filing its bankruptcy petition; (x) the application 27 employment was filed on February 27, 2009 (Docket No. 12) “due to delays on the approval and 28 by the shareholders [on January 31, 2009] and filing by counsel [on February 27, 2009] for

1 |Debtor because we do not have access to electronic filing,” thus, “[t]he period that would not be 2 covered under [P.R. LBR 2014-1(e)] is from January 9 to February 13, 2009;” (xi) Mr. Monge citing 3 case of In re Trafalgar Enterprises Inc. (Case # 04-09288, Docket No. 200) alleges that 4 ljextraordinary circumstances are present in this case because the filing was unreasonably delayed by 5 Debtor; and (xii) the Chapter 7 Trustee’s objection fails to address/object to compensation related to 6 |the following areas: (a) accounting; (b) business operations; (c) case administration; (d) case _7 jlevaluation; (e) filing; (f) liquidation analysis; (g) plan and disclosure statements; (h) planning; (i) 8 |istatement of financial affairs; (i) travel time; (j) tax issues; and (k) expenses which add up to 131.8 9 and amounts to $19,210.50 in fees and $240.03 in expenses (Docket 115). 10 On December 22, 2009, the court issued a Notice of Hearing informing the parties that a 11 would be held on March 1, 2010 to consider the following: (i) Mr. Monge’s application for 12 compensation (Docket No. 99); (ii) Chapter 7 Trustee’s opposition (Docket No. 112) and Mr. 13 ||Monge’s response (Docket No. 115) (Docket No. 120). The hearing was held on March 1, 2010 but 14 Monge failed to appear (Docket No. 132). The court ordered for Mr. Monge’s application for 15 |icompensation (Docket No. 99) to be stricken for the reasons included by the Chapter 7 trustee in her 16 |lwritten objection (Docket No. 112) and the oral reasons she stated at the hearing (Docket No. 137). 17 ||As part of its findings to support its decision the court noted the following: (a) a number of entries 18 jilack sufficient detail to put the court, the creditors, and parties in interest in a position to determine 19 |lwhether the amounts being claimed are reasonable; and (b) the record fails to show that action was 20 as claimed in the application for compensation such as performing claims review when there 21 no objections to the plan; work performed on a liquidation analysis which was not submitted; 22 the filing of monthly operating reports which do not appear on the record (Docket No. 137, pgs. 23 18 & 9). 24 On March 8, 2010, Mr. Monge filed a motion requesting ten (10) days to file a motion of 25 reconsideration (Docket No. 134). On March 12, 2010, the court granted the motion filed by Mr. 26 requesting additional time to file the motion for reconsideration (Docket No. 135). On March 27 29, 2010, Mr. Monge filed a motion for relief from order pursuant to Fed. R. Bankr. P. 9024 and Fed. 28 |IR. Civ. P. 60(b) and a memorandum of law in support of the same by which he argues that after

1 |lcarefully reviewing the transcript of the hearing the Chapter 7 Trustee brought new arguments which 2 not included in her written objection (Docket No. 112) filed with this court (Docket Nos. 142 3 143). 4 Subsequently, on June 30, 2010 the court issued an Order and Notice (Docket No. 155) 5 |lscheduling a hearing for August 13, 2010 to consider Mr. Monge’s motion for relief of order and the 6 legal memorandum in support of the same (Docket Nos. 142 & 143). The court informed Mr. Monge 7 |that a hearing had been scheduled as a matter of due process because in the motion it is alleged that 8 were made in open court based on allegations that were not included in the written motion 9 by the Chapter 7 Trustee (Docket No. 166). At the hearing, Mr. Monge testified that he was 10 |[involved in this case because he had previously worked on the reorganization of Export National. 11 also stated that the feasibility of Debtor’s reorganization was tied to a capital injection of 12 approximately half a million dollars from an undisclosed investor. However, “at a point in time” the 13 |linvestor “started to give signs that he really wasn’t going to be able to put in the money” (Docket No. 14 p. 12). Mr. Monge explained that in this case, “the principal problem in the whole process was 15 fact that the comptroller (Jenny Santana) was sick and was not available all the time” and that “to 16 the data, we normally try to request all the information from the Debtor so that we can process it and not have to go in and review the schedules in such detail, but in this case, we 18 to go in and produce information, because there had been changes in the amounts paid” (Docket 19 166, pgs. 13-14). Following is a summary of Mr. Monge’s testimony which for clarity’s sake has 20 |been categorized by the type of professional service provided to the estate. 21 Schedules & Statement of Financial Affairs 22 Mr. Monge stated that prior to filing the bankruptcy petition, his professional corporation 23 |made a preliminary evaluation of the case and was involved in the actual filing process, which Debtor 24 prepetition. However, subsequent to the petition there were significant changes in the schedules. 25 Monge informed the court that he does not prepare the schedules himself, but that his office staff 26 jjuse the program Easy-Filing to prepare the schedules for the clients. In this particular case, “CPA 27 |\Samuel Pérez which was in charge of the case, and he would recollect the information necessary in 28 case, and either he would input the data or give somebody the data to be inputted” (Docket No.

1 166, pg. 19). 2 Mr. Monge further stated that in bankruptcy cases, they prepare and review the documentation, 3 have Debtor and Counsel review the same and the latter files its (Docket No. 166, p. 25). Mr. 4 testified that he was not a bankruptcy preparer pursuant to Section 110(a) of the Bankruptcy 5 since he provides financial advice and litigation support and is engaged by the Debtor not the 6 jjattorney. 7 Disclosure Statement 8 Mr. Monge testified that they started a template of the disclosure statement “and subsequent 9 that, we actually put in additional time” but the same was never filed due to the conversion of the 10 to Chapter 7 (Docket No. 166, p. 16). 11 Monthly Operating Report (MOR) 12 Mr. Monge stated that they invested over twenty (20) hours working on the MORs and that 13 |jsome drafts were given to the Debtor with notes of things that had to be changed (Docket No. 166, 14 16-17). 15 Initial Debtor Interview (IDI) & Meeting of Creditors 16 Mr. Monge stated that as part of the Debtor preparation for the IDI they explain to the Debtor 17 the guidelines of the Office of the U.S. Trustee, prepare initial Debtor’s interview checklist, 18 licommence preparation of documents required by the Office of the U.S. Trustee. He also explained 19 |Ithat attorneys prefer for them to engage in the guidelines process because they are able to explain 20 how the books are closed and how to deal with specific situations that arise when you close 21 payroll account and credit card links that you have to transfer to new accounts (Docket No. 166, 22 35). 23 Liquidation Analysis 24 Mr. Monge explained that the liquidation analysis is one of the core analysis CIRAs are best 25 liqualified to perform since CIRAs have been trained to understand better the implications of a 26 {liquidation analysis to develop a liquidation analysis that is more complete (Docket No. 166, p. 32). 27 Investment Strategies & Complex Matters 28 Mr. Monge testified that they were not involved in developing investment strategies for

| or the amounts that were going to be invested or in the negotiations with the investors. Their 2 |participation was limited in assisting the comptroller in the preparation of cash flows for a meeting 3 investors (Docket No. 166, p. 38). Mr. Monge stated that in this particular case they had a 4 manufacturing concern and the same was complex because of its cost basis. He also stated that, 5 |i[t]here were several very, very distinct strategies to develop the company in conjunction with other 6 |lcompanies that were going to work together to market new products.” (Docket No. 166, p. 63). 7 Claims Administration & Review 8 Mr. Monge explained that the claims analysis process entails preparing a “basic operating 9 worksheet” to “reconcile the scheduled amounts and all amendments and to schedules so that we can 10 that the amended schedule is correct” (Docket No. 166, p. 48). Then all the proofs of claims 11 |jare included in the worksheet to be able to identify any differences between the proof of claims and 12 scheduled amounts. The claims are analyzed by a CPA to determine if it is a proper claim. The 13 then proceeds to identify those differences and if it’s a technical matter, such as a tax issue the 14 |jsame is referred to our tax specialist. The attorney receives a summary of claims which has been 15 analyzed and the attorney can focus on the legal aspects of the case. Once the deadline for filing the 16 |Iproofs of claims has elapsed, we prepare a report to counsel for claim objections which includes the 17 as well as the evidence for such objection (Docket No. 166, pgs. 48-49). In this case the report 18 claims objections was never prepared. 19 Case Administration 20 Mr. Monge explained that his staff reviews the pacer system to check on all dockets and proof 21 |lof claims that are filed because from past experience counsel did not refer the proofs of claims and 22 |jat the end of the case we had to redo a plan that was prepared without taking into consideration a 23 |\particular proof of claim (Docket No. 166, p. 55). 24 Applicable Law & Analysis 25 R. Bankr. P. 2014(a) & P.R. LBR 2014-1 (e)- Post Facto Authorization for Employment .

26 Fed. R. Bankr. P. 2014 provides, 27 “lajn order approving the employment of attorneys, accountants, appraisers, auctioneers, agents, or other professionals pursuant to §327, §1103, or §1114 of the Code shall be made 28 only on application of the trustee or committee. The application shall be filed and, unless the 10

1 case is a chapter 9 municipality case, a copy of the application shall be transmitted by the applicant to the United States Trustee. The application shall state the specific facts showing 2 the necessity for employment, the name of the person to be employed, the reasons for the selection, the professional services to be rendered, any proposed arrangement for 3 compensation, and, to the best of the applicant’s knowledge, all of the person’s connections with the debtor, creditors, any other party in interest, their respective attorneys and 4 accountants, the United States trustee, or any person employed in the office of the United States trustee. The application shall be accompanied by a verified statement of the person to 5 be employed setting forth the person’s connections with the debtor, creditors, any other party in interest, their respective attorneys and accountants, the United States trustee, or any person 6 employed in the office of the United States trustee.” Fed. R. Bankr. P. 2014(a). 7 P.R. LBR 2014-1(e) provides the following regarding the effective date of the application for 8 jiemployment, 9 “lilf the court approves an application for the employment of a professional person, the approval is deemed effective as of the date of the filing of the application, However, if the 10 application is filed within fourteen (14) days of either the commencement of the case or the date the professional first rendered services—whichever is later— court approval is deemed effective on the date that the services were first rendered. The court will not grant otherwise retroactive approval, absent extraordinary circumstances.” P.R. LBR 2014-I(e). 12 A bankruptcy court’s discretion to approve a post facto employment application is 13 circumscribed to the applicant satisfying the following; (1) that the employment satisfies the statutory 14 requirements, and (2) that the delay in seeking court approval resulted from extraordinary 15 circumstances, Inre Jarvis, 53 F. 3d 416, 418 (1* Cir. 1995). Mere oversight or inadvertence does not 16 constitute an extraordinary circumstance. Id: See Butler v. Indiano (In re Ponce Marine Farm, Inc.), 17 259 B.R. 484, 493 (D. P.R. 2001) 18 In the instant case, the application for employment was filed on February 27, 2009 and 19 approved on March 2, 2009 (Docket Nos. 12 & 14). Thus, under P.R. LBR 2014-1(e), the same would 20 be deemed effective as of its filing date, given that the same was not filed within fourteen (14) days 21 of either the commencement of the case (January 29, 2009) or the date the professional first rendered 22 services (January 9, 2009). The Debtor’s president, Mr. James Coldén de Jesus, certified that he had 23 read the application to the best of his knowledge on January 31, 2009, two (2) days after the Debtor 24 filed its bankruptcy petition (Docket No. 12, p. 3). The court granted Mr. Monge’s application for 25 employment on March 2, 2009, but noted that the same failed to include the statements in P.R. LBR 26 2014-1(a)(5) and (6) (Docket No. 14). On May 5, 2009, Mr. Monge filed an informative motion on 27 Rule 2014-1 whereby he explains that he has complied with P.R. LBR 2014-1(a)(5) and (6) (Docket 28 11

1 32). Thus, the first prong of the test articulated in In re Jarvis is not in controversy, namely the 2 |/suitability of the applicant’s appointment, given that the court authorized Mr. Monge’s employment 3 |las of February 27, 2009. 4 The factors a court may consider to determine whether the delay in seeking court approval 5 |fresulted from extraordinary circumstances are the following: (i) whether the applicant or some other 6 person bore responsibility for applying for approval; (ii) whether the applicant was under time 7 pressure to begin service without approval; (ii) the amount of delay after the applicant learned that 8 approval had not been granted; and (iv) the extent to which compensation to the applicant will 9 |prejudice innocent third parties. In re Jarvis, 53F. 3d 416, 420-421 citing F/S Airlease II v. Simon, 10 844 F. 2d. 99,105-106 (Gd. Cir. 1988), cert. denied, 488 U.S. 852, 109 S. Ct. 137, 102 L. Ed. 2d 110 11 4(1988)). Mr. Monge only touches upon the first factor, which is discussed herein in more detail. 12 On October 14, 2009, Mr. Monge filed the first application for interim compensation and 13 |jreimbursement of expenses for the period of January 9, 2009 to June 30, 2009 (Docket No. 99). Thus, 14 Monge is seeking compensation for services rendered pre-petition (January 9, 2009- January 28, 15 as well as retroactive approval for services performed post-petition. Mr. Monge in his answer 16 |Ito the objection to the application for compensation argues that his application for employment falls 17 llunder the extraordinary circumstances exception, due to the first factor, namely; (i) delays caused in 18 |lobtaining the necessary shareholder approval and filing through the office of counsel for the Debtor, 19 |jsince they are unable to file electronically because they are not attorneys; (ii) the application for 20 |lemployment was signed on January 31, 2009 and the same was filed by counsel on February 27, 2009; 21 jland (ati) “[w]e understand that extraordinary circumstances apply and the Court could approve the 22 |lappointment as of the filing date. In addition the Court has ruled in the case of Trafalgar Enterprises 23 (Case #04-09288 (ESL), dkt #200) that the application was effective the date in which the 24 jengagement was signed because the filing was delayed unreasonably by the Debtor. In this case the 25 ||Court states: ‘the professional should not be penalized for Debtor’s failure to file the formal 26 |japplication before the Court at a subsequent date.’”’(Docket No. 115, p. 8). 27 Mr. Monge’s first argument regarding a delay in obtaining the necessary shareholder approval 28 contradictory, given that Mr. Monge states that the application for employment was signed on 12

1 |January 31, 2009, merely two (2) days after Debtor’s bankruptcy filing. Mr. Monge’s second 2 |jargument is that the application for employment was filed tardily due to Debtor’s counsel’s fault. 3 ||However, Mr. Monge could have filed his application for employment in paper on his own behalf 4 {pursuant to P.R. LBR 1005-1. “Although the more common practice is for the trustee, debtor in 5 |[possession or committee to file the application as the client, the professional may, and in some 6 |jinstances must, file the application on its own behalf.” Allan N. Resnick & Henry J. Sommer, 9 7 on Bankruptcy §2014.02 (15 ed. rev. 2010). Moreover, it is the professional’s responsibility, 8 |Iparticularly if he or she has rendered professional services to debtors in bankruptcy proceedings in 9 |Ithe past, to adhere himself or herself to the requirements of Fed. R. Bankr. P. 2014 and P.R. LBR 10 2014. “Compliance with Rule 2014 is ordinarily the responsibility and burden of the professional 11 a showing that the professional is ‘a person, completely ignorant of the requirement of the 12 Bankruptcy Code and without legal representation, [who] justifiably relied on the superior expertise 13 jjof another.’” Id at 42014.07 quoting F/S Airlease IL Inc. v. Simon, 844 F.2d 99, 107 C.B.C. 2d 959, 14 1963 (Gd. Cir. 1988), cert. denied, 488 U.S. 852, 109 S. Ct. 137, 102 L. Ed. 2d 110 (1988)). 15 Mr. Monge argues that in the case of In re Trafalgar Enterprises, Inc., this court held that the 16 employment application would be effective from the date in which the engagement was signed, given 17 |Ithat, “[t]he professional should not be penalized for Debtor’s failure to file the formal application 18 |before the Court at a subsequent date.” (Case No. 04-09288, Docket No. 200, p. 17). This court has 19 |reviewed the Trafalgar Enterprises, Inc. case and notes that according to the docket it was Mr. Monge, 20 |Inot the debtor’s attorney, who filed both.a hard copy application for employment as well as a hard 21 application for compensation, given that both were duly stamped (Case No. 04-09288, Docket 22 ||Nos. 85 & 177). However, it must be noted that Mr. Monge in his answer to the objection to fees by 23 Debtor (which he filed in paper format) (Case No. 04-09288, Docket No. 193) in the Trafalgar 24 ||Enterprises, Inc. case explained that the delay in filing the application for employment which was 25 on July 7, 2005 (for professional services rendered from May 18, 2005 through November 30, 26 |/2005) was due to the transition to e-filing and a misfiling of documents that required a new set to be 27 |\prepared in order to file the originals (Docket No. 193, pgs. 1-2). Moreover, in the instant case, Mr. 28 filed a hard copy application for compensation on October 14, 2009 (Docket No. 99). The 13

1 |jcourt further notes that in Mr. Monge’s application for compensation, as part of invoice #7468, there 2 an entry under the heading “case administration,” dated 02/27/09 by MO (Maria Oquendo) which 3 in the following manner, “Scan insolvency & restructuring, application for leave and verified 4 |statement signed by client and send via e-mail to legal counsel for filing.” (Docket No. 99, p. 16). The 5 finds that this description is inconsistent with Mr. Monge’s allegation attributing the tardy filing 6 |iof the employment application to Debtor’s counsel. 7 The court concludes that Mr. Monge’s arguments for retroactive approval of his application 8 employment do not establish extraordinary circumstances because they all hinge upon Mr. 9 ||Monge’s tardiness. Thus Mr. Monge’s effective date of the application of employment is February 10 27, 2009, the date when it was filed. It is ultimately the professional’s responsibility to duly file his 11 for her application for unemployment. Consequently, invoice #7467 for the month of January 2009 12 lis stricken completely and invoice #7468 for the month of February 2009 is partially stricken with 13 exception of the entries dated on and after February 27, 2009, which amount to $1,957.50 (without 14 30% discount) and expenses of $26.70. 15 Bankruptcy Petition Preparer- 11 U.S.C. §110(a) 16 Section 110(a)(1) defines a bankruptcy petition preparer as, “a person, other than an attorney 17 the debtor or an employee of such attorney under the direct supervision of such attorney, who 18 |prepares for compensation a document for filing.” 11 U.S.C. §110(a)(1). Section 110(a)(2) defines 19 ithe term “a document for filing” as, “a petition or any other document prepared for filing by a debtor 20 a United States bankruptcy court or a United States district court in connection with a case under 21 title.” 11 U.S.C. §110(a)(2). “In the face of increasingly frequent judicial confrontations with 22 services’ that actually offered, and charged debtors for, bankruptcy related services, section 23 110 was enacted to remedy what was perceived to be widespread fraud and unauthorized practice of 24 by nonattorneys who prepared bankruptcy documents for consumer debtors.” Allan N. Resnick 25 |& Henry J. Sommer, 2 Collier on Bankruptcy §110.01 (16" ed. 2010). 26 Mr. Monge fails to meet the definition of a bankruptcy petition preparer since he and his 27 \\professional corporation are professionals employed by the Debtor pursuant to 11 U.S.C. §327. The 28 |lentries related to the Debtor’s schedules were for the review and adjustments of the schedules not 14

1 initial preparation. Moreover, the Bankruptcy Schedules were revised and signed by Debtor’s 2 |jcounsel. 3 ||Reasonableness of Compensation and Benefit to the Estate- 11 U.S.C. $330(a)(3) & (4) 4 Sections 330 and 331 as well as Fed. R. Bankr. P. 2016(a) establish the guidelines for 5 |jobtaining interim or final compensation for services rendered by a professional whose employment 6 |lapplication has been previously approved by the court._See In re C.P. Del Caribe, Inc., 143 B.R. 11, 7 15 (Bankr. D. P.R. 1992). Fed. R. Bankr. P. 2016(a) requires in pertinent part that, “an entity seeking 8 or financial compensation for services, or reimbursement of necessary expenses, from the 9 shall file an application setting forth a detailed statement of (1) the services rendered, time 10 jiexpended and expenses incurred, and (2) the amounts requested.” Fed. R. Bankr. P. 2016(a). The 11 |jcourt has the duty to examine and inquire independently into the reasonableness of the fees of 12 |lprofessionals even if there are no objections to an application for compensation. Inre Chas A. Stevens 13 1& Co., 109 B.R. 853, 855 (Bankr. N.D. III. 1990). Moreover, the application for compensation should 14 |iclearly describe and explain the services provided to the estate to enable the court to review the 15 |freasonableness of the compensation requested. Allan N. Resnick & Henry J. Sommer, 3 Collier on 16 |[Bankruptcy §330.03[6] (16 ed. 2010). “The applications for compensation of the professional fees 17 be self-contained; in other words, they must be sufficiently detailed and accurate to place the 18 in a position to make an independent decision on the application.” Butler v. Indiano (In re Ponce 19 Farm, Inc.), 259 B.R. 484, 495 (D. P.R. 2001) citing In re Fruits Int’], Inc., 87 B.R. 769, 772 20 D. P.R. 1988) (quoting In re Matter of Perez Hernandez, 73 B.R. 329, 331 (Bankr. D. P.R. 21 See Inre Environmental Waste Control, 122 B.R. 341, 348 (Bankr. N.D. Ind. 1990)(“Entries 22 to be specific and identify what is being done, and what it concerns, or it will be reduced or 23 lidenied”). Lumping a number of activities into a single entry does not allow the court to determine 24 |whether the time spent on a specific task was reasonable, thus courts do not fully compensate 25 |professionals that engage in lumping. See Allan N. Resnick & Henry J. Sommer, 3 Collier on 26 |/Bankruptcy §330.03[6] (16" ed. 2010). If the applicant is requesting compensation for meetings, 27 |\iconferences, telephone calls and correspondence, the entry, “should identify the participants, describe 28 |Ithe subject matter of the communication and justify its necessity.” In re Fruits Int’l, Inc., 87 B.R. at 15

1 2 Section 330(a)(3) provides the court with certain factors which constitute a “reasonableness 3 |\standard” to determine the amount of reasonable compensation to be awarded to a professional person 4 |for actual, necessary services rendered after consideration of the nature, the extent and the value of 5 |lsuch services. 11 U.S.C. §330(a)(3); See Inre High Voltage Eng’g Corp., 311 B.R. 320, 330 (Bankr. _ 6 Mass. 2004). The relevant factors are the following; “(A) the time spent on such services; (B) the 7 charged for such services; (C) whether the services were necessary to the administration of, or 8 |beneficial at the time at which the service was rendered toward the completion of, a case under this 9 (D) whether the services were performed within a reasonable amount of time commensurate with 10 |ithe complexity, importance, and nature of the problem, issue, or task addressed; (E) with respect to 11 professional person, whether the person is board certified or otherwise has demonstrated skill and 12 experience in the bankruptcy field; and (F) whether the compensation is reasonable based on the 13 |lcustomary compensation charged by comparably skilled practitioners in cases other than cases under 14 title.” 11 U.S.C. §330(a)(3)(A)-(F). Section 330(a)(4)(A)(ii)() and (ID) states in pertinent part, 15 court shall not allow compensation for services that were not reasonably likely to benefit the 16 estate; or necessary to the administration of the case.” 11 U.S.C. §330(a)(4)(A)(ii)(D and (ID. 17 |Discussion 18 This court finds that this particular case is not of a complex nature, from a business operations 19 land reorganization standpoint. Mr. Monge testified that the feasibility of Debtor’s reorganization was 20 to a capital injection of approximately $500,000.00 from an unknown investor which never 21 |materialized. Moreover, Mr. Monge was familiar with Debtor’s operations since he stated that he was 22 |linvolved in this case because of his previous participation in the reorganization of Export National, 23 which conducted a similar business as Debtor, namely, the distribution of aluminum materials 24 manufacturers at the wholesale level, particularly supplies employed in the construction of 25 |}windows and doors. Debtor was engaged in the business of manufacturing aluminum windows and 26 and filed for bankruptcy due to a decrease in sales (Docket No. 25). The court further notes that 27 are several time entries in Mr. Monge’s application which are indicative that this chapter 11 case 28 16

1 |lwould be short lived.” 2 After perusing Mr. Monge’s application for compensation, this court finds that the time entries 3 detail and specificity, and many of them lump services together, which make it difficult for the 4 |icourt to ascertain whether the amount of time for certain tasks is reasonable. Also, there are a number 5 entries for meetings, conferences and telephone calls which fail to identify the participant and 6 |ldescribe the subject matter of the communication. The court will not compensate Mr. Monge for 7 which are vague and unspecific and also for the entries regarding telephone conversations, 8 meetings and conferences which lack the necessary detail as described above. The court will not 9 llcompensate Mr. Monge for professional services rendered that resulted in a working product that was 10 filed or submitted with this court, since the court is not in a position to adjudicate whether it 11 |lwas of any benefit to the estate or whether it was actually prepared.” However, the court will 12 compensate Mr. Monge for 50% of the fees charged for those entries that have lumped services 13 |together without a breakdown of the time expended for each service performed. In the aggregate 14 services appear to have benefitted the estate. A detail follows. 15 Invoice #7468 16 This court finds that the following entries for fees which are dated on or after February 27, 17 (6 entries) and pertain to invoice #7468 are vague and unspecific: (1) IDI Documentation - 18 |}02/27/09- “Review Status of IDI Documentation;” (2) Meeting of Creditors-2/28/09- “Meet with legal 19 and debtor prior to hearing;” (3) Meeting of Creditors- 2/28/2009-“Attend 341 creditors 20 Imeeting.’® The court further finds that the following entries pertaining to invoice #7468 lump several 21 (1) IDI Documentation- 02/27/2009- “Review documentation for IDI. Checklist. Incorporate 22 23 24 ? Invoice #7470: (1) Planning-04/22/09- “Meeting to discuss plan and difficulties 25 encountered with continued loss of market” (JMR); and (2)Case Administration- 4/29/2009- 6 “Telephone calls to counsel to coordinate meeting and request dismissal” (JMR) (Docket No. 99, pgs. 28 & 29). 27 >The court notes that there was only one (1) 341 creditors meeting held on March 9, 2009 28 || (Docket Nos. 5 & 19) before this case was converted from a chapter 11 to a chapter 7. 17

1 new information provided by Debtor for IDI. Telephone conversations with Debtor’s accountant, 2 |Jenny Santana to discuss IDI. Checklist package. Telephone conversations with debtor’s attorney to 3 over IDI. Documentation sent to legal counsel for review and filing with US Trustee’s Office;” A Case Administration- 2/27/09- “Scan insolvency & restructuring application for leave and verified 5 |lstatement signed by client and send via e-mail to legal counsel for filing.” Thus, for invoice #7468, 6 |Ithe court will compensate Mr. Monge in the amount of $352.63 (inclusive of the 30% discount). 7 Invoices # 7469, #7470, #7471 and #7472 for the period March 1, 2009 through June 30, 2009 8 |lwill be discussed by the type of professional service provided to Debtor’s estate. 9 Amended Schedules and Statement of Financial Affairs 10 The court will not compensate Mr. Monge for the alleged work rendered on the amended 11 llschedules and statement of financial affairs, because there are three (3) entries dated 03/17/09 and 12 03/19/2009 regarding the preparation of amended schedules and statement of financial affairs which 13 llwere never filed with this court (Docket No. 99, pgs. 21 & 24). Particularly when almost three (3) 14 later, on June 8, 2009, the court entered an order to show cause as to why this case should not 15 dismissed for failure to file amended schedules and statement of financial affairs, file timely 16 of operations and file disclosure statement and plan (Docket No. 40). □ 17 Case Administration 18 Under the heading of “case administration” the majority of the entries which are lumped are 19 review of pacer system to check, download and file on server new docket entries and proofs of 20 Over a three (3) month period, 17.40 hours were charged in fees which amounts to $1,010.45 21 |i(inclusive of the 30% discount). In this case, as of June 30, 2009 there were 59 proofs of claims filed 22 the claims register. The court will compensate Mr. Monge for 50% of the fees charged under this 23 |icategory which amount to $505.23 (inclusive of the 30% discount). 24 Claims Review and Summary of Claims 25 Almost all of the entries for claims review and summary of claims are vague and unspecific. 26 ||The general description, “review new proof of claims filed,” “review additional proof of claims filed 27 last update,” “update summary of claims and plan payments to incorporate new proof of claims 28 “review summary of claims and plan payments and reconcile,” is insufficient. The only fees 18

1 charged for claims review that this court will fully compensate is for the entry dated 4/06/2009- 2 “review Internal Revenue Service’s proof of claim 9-1; compare to scheduled amount as to 3 llcorrectness; note differences and mark for further discussion with debtor” which amounts to $147.00 4 |(inclusive of the 30% discount). The only fees charged for summary of claims that this court will fully 5 |lcompensate is for the entry dated 04/22/2009- “telephone conversation with debtor’s comptroller to 6 status of case, monthly operating report and information still missing previously requested. 7 adjustments to summary of claims including amount of claims deferred, suggested terms, 8 |Imonthly payments” which amounts to $199.50 (inclusive of the 30% discount). 9 IDI Documentation & Meeting of Creditors 10 The initial debtor’s interview is conducted prior to the 341 creditors meeting which in this 11 took place on March 9, 2009. The court is unable to ascertain from the record the actual date of 12 IDI. The entries under this heading are dated 03/03/2009-03/09/2009. The entries under both of 13 headings are vague, unspecific and repetitive (particularly the entries under the heading IDI 14 Documentation). Moreover, many of the entries have services performed which are lumped together 15 making it difficult for the court to ascertain their reasonableness. Thus, the court will only compensate 16 50% of the fees charged for the entries under the Meeting of Creditors’ heading which amount to 17 $1,018.50 (inclusive of the 30% discount). 18 Operating Reports, Liquidation Analysis, Plan & Disclosure Statement 19 The court will not compensate Mr. Monge for the alleged professional services rendered on 20 operating reports, liquidation analysis and plan and disclosure statement, because these work 21 |lproducts or drafts were never filed with this court or submitted as evidence to substantiate the 22 |lapplication for compensation. 23 Tax Issues, Planning, Business Operations, Case Evaluation and Claims Administration 24 The court will fully compensate Mr. Monge for the fees charged which correspond to the 25 under the tax issues, planning, business operations, case evaluation and claims administration 26 |lheadings since they provide enough detail for the court to assess its reasonableness. These entries 27 to $2,289.00 (inclusive of the 30% discount). 28 19

1 ||\Travel Time & Expenses 2 The court will compensate Mr. Monge fully for the travel time and the associated expenses 3 this particular case, which amount to $523.25 (inclusive of the 30% discount) and $240.03 for 4 llexpenses, including the travel time and expenses for invoice #7468. 5 Conclusion 6 In view of the foregoing, the court finds and concludes as follows: (1) Mr. Monge’s fees 7 |regarding invoice #7467 are stricken completely and fees charged in invoice #7468 are partially 8 |Istricken, as the effective date of employment pursuant to Fed. R. Bankr. P. 2014(a) and P.R. LBR 9 |2014-1(e) was February 27, 2009, and this case is devoid of exceptional circumstances which would 10 [justify post facto authorization of employment; (2) Mr. Monge is not a bankruptcy petition preparer 11 |Ipursuant to Section 110(a) of the Bankruptcy Code; and (3) the professional fees charged in invoices 12 #7469, #7470, #7471 and #7472 have been reduced or denied in conformity with Section 13 330(a)(3) and (4) of the Bankruptcy Code. After a careful examination of Mr. Monge’s application 14 compensation, this court concludes that Mr. Monge should be compensated in the amount of 15. [$5,035.11 in professional fees and $240.03 in expenses for a total amount of $5,931.48. 16 The amounts are allowed as a Chapter 11 administrative priority to be distributed in 17 llaccordance to 11 U.S.C. §§726(b), 507(a)(2), and 503(b), that is, subordinated to the payment in full 18 lof the Chapter 7 administrative priorities. 19 In view of the foregoing, Mr. Monge’s motion for reconsideration is partially GRANTED. 20 SO ORDERED. 21 In San Juan, Puerto Rico, this 20th day of January 2011. 22 23 Akarneulle onield States Balruptcy Court 25 26 27 28 .