In Re Schachter

228 B.R. 359, 1999 Bankr. LEXIS 10, 33 Bankr. Ct. Dec. (CRR) 915, 1999 WL 10405
CourtUnited States Bankruptcy Court, E.D. Pennsylvania
DecidedJanuary 8, 1999
Docket19-10952
StatusPublished
Cited by5 cases

This text of 228 B.R. 359 (In Re Schachter) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.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 Schachter, 228 B.R. 359, 1999 Bankr. LEXIS 10, 33 Bankr. Ct. Dec. (CRR) 915, 1999 WL 10405 (Pa. 1999).

Opinion

OPINION

DAVID A. SCHOLL, Chief Judge.

A INTRODUCTION

After successfully prosecuting a proceeding (“the Proceeding”) objecting to the Chapter 7 bankruptcy discharge of SYLVAN SCHACHTER (“the Debtor”), and objections (“the Objections”) to certain of the Debtor’s claimed exemptions, per our decision reported at 214 B.R. 767 (“Schachter I ”), Lini, Inc. (“Lini”), a large unsecured creditor of the Debtor, seeks compensation from the Debt- or’s estate in two separate pleadings. The first is Lini’s motion (“the Motion”) for its counsel’s fees and costs of approximately $60,000 arising from its 1997 prosecution of Schachter I, pursuant to 11 U.S.C. § 503(b)(3)(B). The second is an Application (“the Application”) by Lini’s counsel, the law firm of Jacoby Donner, P.C. (“Jacoby”), for services performed as special counsel for BARRY A. SOLODKY, the Chapter 7 trustee (“the Trustee”), after the February 6, 1998, effective date of Jacoby’s appointment, in the amount of approximately $11,000.

We will allow the Application in the amount of $9661.75, plus costs of $52.92, despite its slightly-belated filing. However, the Motion, seeking, inter alia, nunc pro tunc appointment back to June 1, 1997, cannot be granted, because the “extraordinary circumstances” under which nunc pro tunc appointment is permissible, see F/S Airlease II, Inc. v. Simon, 844 F.2d 99, 105-06 (3d Cir.1988); and In re LaBrum & Doak, LLP, 1998 WL 341933, at *1 (Bankr.E.D.Pa. June 25, 1998), have not been proven. Specifically, Lini was responsible for filing the Motion itself, it was under no particular time-pressure to begin service, and the delay in its seeking nunc pro tunc approval persisted through a lengthy period of several unsuccessful prior attempts to obtain compensation from the estate for 1997 services until the hearing on the Motion.

B. PROCEDURAL AND FACTUAL HISTORY

The Debtor, though married, commenced the underlying case as a voluntary individual Chapter 7 case on February 20, 1997. Schachter I, 214 B.R. at 770-71, recites a history of the case through the consolidated trial of the Proceeding and hearing (“the Hearing”) on the Objections on September 30, 1997, through the November 10, 1997, decision date. The hearing and at least oversight of post-trial briefing was performed by the Honorable Mary F. Walrath, then an eminently-qualified practitioner at Jacoby who was appointed to the bankruptcy bench of the District of Delaware, effective September 9,1998.

On April 15, 1997, prior to its initiation of any matters against the Debtor on its own, Lini, per Richard H. Lowe, Esquire, of Jaco-by, who had been representing Lini in pre-petition federal litigation with the Debtors, sent a seven-page letter to the Trustee suggesting that he challenge the Debtor’s discharge and investigate certain of his financial dealings in the year prior to his bankruptcy filing. Although the letter offers assistance to the Trustee and indicates that Lini is committed to taking any appropriate action on the Trustee’s behalf, it does not request appointment of Jacoby as special counsel nor express any basis for Lini’s assertion of an administrative claim against the Debtor’s estate.

*362 Lini’s first attempt to seek such compensation was reflected in an application of the Trustee to appoint Jacoby as his special counsel, filed October 30, 1997. When this application was objected to by the Debtor, it was withdrawn by the Trustee on the date of a hearing on the objection, December 9,1997.

On December 12, 1997, Lini filed what it termed an application for an administrative claim pursuant to 11 U.S.C. §§ 503(b)(3) and (b)(4), which was very similar to the instant Motion. Upon objection by the Debtor, a hearing was scheduled on this matter on January 20,1998.

It is necessary to quote 11 U.S.C. § 503(b)(3)(B), which reads as follows, to understand the issues discussed at that hearing:

(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;

At that hearing, Lini made clear for the first time, that its application was based on § 503(b)(3)(B), not § 503(b)(3)(D). See, e.g., In re Beck Bumbaugh Associates, Inc., 84 B.R. 369, 371 (E.D.Pa.1988) (§ 503(b)(3)(D) is inapplicable to Chapter 7 cases). The Debt- or’s counsel raised the presently-significant issue that the Motion could not be approved because Lini had not obtained prior court “approval” or appointment to represent the Debtor’s estate. This court, not having researched any pertinent issues, raised the separate issue that the Motion may not be allowable because no sums may had been as yet recovered for the Debtor’s estate. When it was established that the application had not been served on all interested parties, the hearing was continued until February 10, 1998, for service to be made.

In very brief proceedings of February 10, 1998, Judge Walrath announced that the application was being withdrawn without prejudice, explaining that “[t]he [Tjrustee has filed an application to employ us as counsel for the [Tjrustee and we’ll proceed that way.” We also indicated that, having researched § 503(b)(3)(B) cases in the interim in preparation for the hearing, we agreed with the Debtor that a prior appointment of Jacoby was a prerequisite for an application under that Code section.

On February 6, 1998, the Trustee had indeed filed a second application seeking Jaco-by’s appointment as his special counsel, requesting that it be deemed effective as of November 1,1997. The Debtor opposed this application. After a hearing of March 12, 1998, this application was granted, although it was deemed effective as of only February 6, 1998, the date of the filing of the application. No appeal from that order was taken.

We also noted at that time that the Trustee had not filed the final audit papers on March 1, 1998, as required by an Order of September 4, 1997. Therefore, we also scheduled a status hearing to determine when the Trustee would file the audit papers on March 31, 1998. After that hearing we entered an order of April 1, 1998, setting October 1, 1998, as the date for this filing. The April 1, 1998, order also provided as follows:

2. If the Applications and time sheets of the Trustee and the Trustee’s professionals are not filed and served by October 1, 1998, the Trustee’s commissions may be limited to $500 and all compensation of the Trustee’s professionals may be barred....

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Bluebook (online)
228 B.R. 359, 1999 Bankr. LEXIS 10, 33 Bankr. Ct. Dec. (CRR) 915, 1999 WL 10405, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-schachter-paeb-1999.