In re Maqsoudi

566 B.R. 40, 77 Collier Bankr. Cas. 2d 990, 2017 Bankr. LEXIS 924, 63 Bankr. Ct. Dec. (CRR) 260
CourtUnited States Bankruptcy Court, C.D. California
DecidedApril 3, 2017
DocketCase No.: 6:13-bk-26429-MH
StatusPublished
Cited by4 cases

This text of 566 B.R. 40 (In re Maqsoudi) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, C.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 Maqsoudi, 566 B.R. 40, 77 Collier Bankr. Cas. 2d 990, 2017 Bankr. LEXIS 924, 63 Bankr. Ct. Dec. (CRR) 260 (Cal. 2017).

Opinion

MEMORANDUM DECISION AND ORDER GRANTING MOTION FOR PAYMENT OF ADMINISTRATIVE EXPENSES

Mark Houle, United States Bankruptcy Judge

I. BACKGROUND

On October 3, 2013, Iraj Maqsoudi (“Debtor”) filed a Chapter 7 voluntary petition. On January 4, 2014, Debtor received a discharge.

On January 21, 2014, Trustee commenced an adversary proceeding against [42]*42Mandana Banihashem. (“Defendant”). On January 30, 2014, Trustee commenced an adversary proceeding against Debtor. The complaints involved the undisclosed transfer of real property by Debtor to Defendant within one year of the petition date. The adversary proceeding against Defendant resulted in the avoidance of the transfer and the recovery of the real property by Trustee. ■

On February 9, 2016, Trustee filed a motion to sell the property and an order approving the sale was entered on March 22, 2016. On April 8, 2016, Mustafa Mayar (“Mayar”), Michael Berger’s (“Applicant”) client, received partial payment of $210,000 from the proceeds of the sale.

On February 2, 2017, Applicant filed a motion for payment of administrative expenses. On February 24, 2017, Trustee filed comments, recommending granting of the motion. The Court held a hearing on the matter on March 8,2017, at which time the hearing was continued for additional briefing. On March 17, 2017, Applicant filed a brief. On March 29, 2017, the Court held a continued hearing on the matter, at which time the Court orally granted the motion, allowing a significantly reduced administrative claim.

II. DISCUSSION

A. Jurisdiction

This Court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 157 and 1334. Venue is proper under 28 U.S.C. § 1409(a).

B. Administrative Expense under 11 U.S.C. § 503(b)

11 U.S.C. § 503(b)(4) (2005).states:

(b) After notice and a hearing, there shall be allowed administrativé expenses, other than claims allowed under section 502(f) of this title, including—
(4) reasonable compensation for professional services rendered by an attorney or an accountant of an entity whose expense is allowable under sub-paragraph (A), (B), (C), (D), or (E) of paragraph (3) of this subsection, based on the time, the nature, the extent, and the value of such services, and the cost of comparable services other than in a case under this title, and reimbursement for actual, necessary expenses incurred by such attorney or accountant

11 U.S.C. § 503(b)(3)(B), (D) provides:

(b) After notice and a hearing, there shall be allowed administrative expenses, other than claims allowed under section 502(f) of this title, including—
(3) the actual, necessary expenses, other than compensation and reimbursement specified in paragraph (4) of this subsection, incurred by—
(B) a creditor that recovers, after the court’s approval, for the benefit of the estate any property transferred or concealed by the debtor;
(D) a creditor, an indenture trustee, an equity security holder, or a committee representing creditors or equity security holders other than a committee appointed under section 1102 of this title, in making a substantial contribution in a case under Chapter 9 or 11 of this title

In order for Applicant to be entitled to an administrative claim for his reasonable compensation under § 503(b)(4), Mayar must be an “entity whose expense is allowable” under § 503(b)(3). Section 503(b)(3)(A), (C), and (E) are inapplicable in the present case because they deal with involuntary petitions, prosecution of criminal offenses, and custodians, respectively. That leaves § 503(b)(3)(B) and (D).

[43]*43Section 503(b)(3)(B) requires that creditor obtain court approval, and then subsequently recover certain property for the benefit of the estate. Here, Mayar did not recover any property. The Trustee maintained the adversary proceeding against Defendant that led to the recovery of property. See e.g,, In re Autosport Int'l. Inc., 2013 WL 3199826 (Bankr. C.D. Cal. 2013) (providing an example of a situation in which a creditor recovered property); see also In re Lahijani, 325 B.R. 282 (9th Cir. BAP 2005). Furthermore, the creditor must obtain prior court approval for its efforts to recover property in order to maintain a claim under § 503(b)(3)(B). See, e.g., In re Maximus Computers, 278 B.R. 189, 197 (9th Cir. BAP 2002) (“Section 503(b)(3)(B) carries forward the long-settled authority under former Bankruptcy Act § 64(a)(1) for creditors to sue in the name of the trustee to recover property for the benefit of the estate and to be compensated as administrated expenses.”). Therefore, when the creditor is not the party maintaining the adversary proceeding, but is merely providing important assistance to the Trustee, that creditor is forced to rely on § 503(b)(3)(D). Section 503(b)(3)(D), however, only applies to cases under Chapter 9 or 11 and cannot be utilized in a Chapter 7 case. See In re United Educ. & Software, 2005 WL 6960237 at *9 (9th Cir. BAP 2005) (“While § 503(b)(3) acknowledges the substantial contributions of creditors to a chapter 9 or 11 bankruptcy estate, even an equitable approach cannot vary its plain meaning in order to allow such priority for services rendered in a chapter 7 case.”).

Applicant’s brief, in essence, contends that it would be proper for the Court to approve his request for an administrative expense outside the framework of § 503(b)(3)(B) or (D).1 Applicant relies on the language of § 503(b), which uses the word “including,” to make an argument that the enumerated administrative expense categories are not exhaustive. Applicant refers to a Sixth Circuit case, In re Connolly N. Am., LLC, 802 F.3d 810 (6th Cir. 2015), which supports his argument and which held that § 503(b)(3)(D) did not preclude the bankruptcy court from awarding an administrative expense to a creditor that'made a substantial contribution in a Chapter 7 case.

In order for Applicant’s argument to prevail, the Court must conclude that the reasoning of the Sixth Circuit is persuasive, and that the facts of this case warrant allowance of an administrative expense outside the enumerated categories. For the reasons stated below, the Court adopts the legal position of Applicant, and concludes that the situation warrants the allowance of an administrative claim. The Court notes, however, that the Sixth Circuit opinion was a split decision and admitted that its interpretation created a circuit split on the issue. Id. at 819, n.8.

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Bluebook (online)
566 B.R. 40, 77 Collier Bankr. Cas. 2d 990, 2017 Bankr. LEXIS 924, 63 Bankr. Ct. Dec. (CRR) 260, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-maqsoudi-cacb-2017.