FILED FEB 01 2012 1 SUSAN M SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT 2 UNITED STATES BANKRUPTCY APPELLATE PANEL 3 OF THE NINTH CIRCUIT 4 5 In re: ) BAP No. CC-10-1499-MkLaPa ) 6 STEPHEN LAW, ) Bk. No. LA 04-10052-TD ) 7 Debtor. ) ______________________________) 8 ) STEPHEN LAW, ) 9 ) Appellant, ) 10 ) v. ) MEMORANDUM* 11 ) ALFRED H. SIEGEL, Chapter 7 ) 12 Trustee, ) ) 13 Appellee. ) ______________________________) 14 Argued and Submitted on January 20, 2012 15 at Pasadena, California 16 Filed - February 1, 2012 17 Appeal from the United States Bankruptcy Court for the Central District of California 18 Honorable Thomas B. Donovan, Bankruptcy Judge, Presiding 19 20 Appearances: Daniel Gill of Ezra Brutzkus Gubner LLP argued on behalf of Appellee Alfred Siegel, Chapter 7 21 Trustee; Stephen Law, in propria persona, did not appear for oral argument. 22 23 Before: MARKELL, LAFFERTY** and PAPPAS, Bankruptcy Judges. 24 25 * This disposition is not appropriate for publication. 26 Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. 27 See 9th Cir. BAP Rule 8013-1. 28 ** Hon. William J. Lafferty, III, U.S. Bankruptcy Judge for the Northern District of California, sitting by designation. 1 Debtor Stephen Law (“Law”) appeals the bankruptcy court’s 2 approval of the Final Report (“Final Report”) of chapter 71 3 trustee Alfred H. Siegel (“Trustee”) and its award of final fees 4 to the Trustee and his professionals. We AFFIRM IN PART, AND 5 VACATE AND REMAND IN PART. 6 FACTS 7 Law filed his chapter 7 bankruptcy case over eight years 8 ago, on January 5, 2004. He is no stranger to our court or to 9 the Court of Appeals, as he has appealed many of the bankruptcy 10 court’s rulings.2 The history we glean from these prior appeals 11 12 1 All chapter and section references are to the Bankruptcy 13 Code, 11 U.S.C. §§ 101-1330, as enacted and promulgated prior to October 17, 2005, the effective date of most of the provisions of 14 the Bankruptcy Abuse Prevention and Consumer Protection Act of 15 2005, Pub. L. 109-8, April 20, 2005, 119 Stat. 23 (“BAPCPA”). All "Rule" references are to the Federal Rules of Bankruptcy 16 Procedure. 17 2 As we stated in one of our prior decisions: 18 The many disputes involving [Law] arising in his 19 bankruptcy case have resulted in over a dozen appeals to the Panel and several to the Court of Appeals. In 20 its many decisions issued over the years, the Panel has provided in great detail the facts surrounding [Law's] 21 bankruptcy filings, and his numerous contests with the chapter 7 trustee concerning the administration of the 22 bankruptcy estate. See, e.g., Law v. Siegel (In re 23 Law), BAP nos. CC–05–1303/1344 (9th Cir. BAP December 29, 2006), aff'd 308 F. App'x 161 (9th Cir. 2009); Lin 24 v. Siegel (In re Law), BAP nos. CC–06–1427/1379 (9th Cir. BAP July 10, 2007), aff'd 308 F. App'x 152 (9th 25 Cir. 2009); Law v. Siegel (In re Law), BAP no. 26 CC–07–1127 (9th Cir. BAP October 5, 2007).
27 Law v. Siegel (In re Law), 2009 WL 7751415 at *1 n.4 (9th Cir. BAP Oct. 22, 2009), aff’d, 435 F. App’x 697 (9th Cir. Jun. 6, 28 2011).
2 1 reflects that Law has opposed the Trustee’s administration of the 2 bankruptcy estate at every step. For our purposes, a detailed 3 account of the entire case history is unnecessary. An overview 4 will suffice. 5 1. Overview 6 The disputes between Law and the Trustee have centered on 7 Law’s former residence in Hacienda Heights, California 8 (“Property”) and the proceeds from its sale. The Property was 9 Law’s only significant asset. He claimed a $75,000 homestead 10 exemption in the Property, to which the Trustee did not object. 11 In addition to the exemption claim, Law asserted in his schedules 12 that the Property was encumbered by a first deed of trust in 13 favor of Washington Mutual Bank and a second deed of trust in 14 favor of “Lin's Mortgage & Associates” (the “Lin Deed of Trust”). 15 According to Law, the Property was only worth about $363,000 at 16 the time of his bankruptcy filing. 17 Based on his exemption claim and the scheduled liens against 18 the Property, Law argued that the Property had no value to the 19 estate, and he vigorously opposed turnover of the Property to the 20 Trustee and the Trustee’s efforts to sell the Property. But the 21 bankruptcy court ordered turnover of the Property and approved 22 its sale. The Trustee ultimately was successful in selling the 23 Property for a sale price of approximately $680,000. 24 Only one creditor, Cau-Min Li (“Li”), timely filed a proof 25 of claim. The Trustee reached a compromise/settlement with Li 26 concerning that claim, which was based on a prepetition judgment 27 in the principal amount of $131,821.74. The court approved the 28 settlement, pursuant to which the Trustee paid Li $120,000.00 out
3 1 of the proceeds from the sale of the Property. As with every 2 other Trustee action referenced herein, Law vigorously opposed 3 the settlement and the settlement payment. 4 In addition, the bankruptcy court twice entered orders 5 granting the Trustee’s motions to surcharge Law’s homestead 6 exemption. On appeal from the first surcharge order, the Panel 7 reversed because the bankruptcy court had based that order not on 8 proof of Law’s misconduct but rather merely on his litigiousness. 9 However, on appeal from the second surcharge order, the Panel 10 affirmed. Unlike the first surcharge order, the second order was 11 based on the bankruptcy court’s findings: (1) that the Lin Deed 12 of Trust was a fiction perpetuated by Law in an attempt to 13 preserve for himself the equity in the Property and to defraud 14 his creditors and the court, and (2) that the harm to the estate 15 resulting from Law’s misconduct far exceeded the amount of Law’s 16 $75,000 homestead exemption. In re Law, 2009 WL 7751415 at *4. 17 Among other things, the Panel held that the bankruptcy court’s 18 findings were not clearly erroneous and that the bankruptcy court 19 did not abuse its discretion when it granted the second surcharge 20 motion based on these findings. Id. at *8. The Court of Appeals 21 affirmed both of our surcharge decisions. 308 F. App'x at 161; 22 435 F. App’x at 697. 23 2. Trustee’s Final Report and the Professional Fee Applications 24 On October 20, 2009, pursuant to Rule 2016-1(c)(4)(a) of the 25 Local Rules for the United States Bankruptcy Court for the 26 Central District of California (“Local Rules”), the Trustee filed 27 and served notice of his intent to file his Final Report. In 28 response to this notice, Trustee’s counsel filed their second and
4 1 final fee application on November 11, 2009, and Trustee’s 2 accountants filed their first and final fee application on March 3 22, 2010.3 4 On September 14, 2010, the Trustee filed his Final Report. 5 As part of his Final Report, the Trustee requested fees in the 6 amount of $25,298,45 pursuant to §§ 326(a) and 330(a) as 7 compensation for his services as Trustee. As stated in the Final 8 Report, the Trustee was eligible under § 326(a) for a maximum 9 compensation award of up to $54,395.00, based on gross receipts 10 he obtained and disbursed on behalf of the estate of 11 $1,018,169.15. The Trustee’s counsel and his accountants filed 12 separate applications for compensation pursuant to Rule 2016, 13 but, importantly, the Trustee did not. 14 At the same time he filed his Final Report, the Trustee 15 filed his Notice of Trustee’s Final Report and Applications for 16 Compensation and Deadline to Object (“Notice”), which was served 17 on Law. The Notice included a summary (“Summary”) of the Final 18 Report and of the fee applications filed by the Trustee’s 19 professionals. The Summary identified the name of each 20 professional applying for fees and the amount of fees and 21 expenses applied for as follows: 22 23 24 25 3 The Panel obtained copies of these documents by accessing 26 the bankruptcy court’s electronic docket. The Panel can take judicial notice of their filing and contents. See O'Rourke v. 27 Seaboard Sur. Co. (In re E.R. Fegert, Inc.), 887 F.2d 955, 957-58 (9th Cir. 1989); Atwood v. Chase Manhattan Mortg. Co. (In re 28 Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003).
5 1 Reason/Applicant Fees Expenses 2 Trustee: ALFRED H. SIEGEL, TRUSTEE $25,298.45 $0 3 Attorney for trustee: 4 EZRA, BRUTZKUS, GUBNER4 $106,462.00 $0 5 Accountant: 6 GROBSTEIN, HORWATH & COMPANY $3,985.33 $0 7 8 On October 20, 2010, Law filed an opposition to the Final 9 Report and the fee applications (“Opposition”). According to 10 Law, the Trustee’s proposed fee of $25,298.45 was unreasonable 11 because, according to Law, the Trustee only appeared in court 12 “two or three times.” In addition, Law argued that the proposed 13 fee exceeded the statutory maximum allowed under § 326(a). By 14 Law’s reckoning, the Trustee only garnered on behalf of the 15 estate roughly $500,000, rather than the $1,018,169.15 in gross 16 receipts and disbursements the Trustee reported. Law also argued 17 that the amounts already awarded and paid to the Trustee’s 18 counsel, and the additional amount applied for, were unreasonable 19 20 21 4 Neither the Notice nor the Summary refers to Trustee’s 22 counsel’s first interim fee application or the amounts awarded 23 and paid to Trustee’s counsel pursuant to that application. More specifically, Trustee’s counsel filed in 2008 a first interim fee 24 application seeking approval of over $600,000 in fees and $38,532.19 in expenses. The court granted the interim fee 25 application and overruled Law’s opposition thereto. The order on 26 the interim fee application expressly allowed and authorized immediate payment of the full amount of expenses requested, plus 27 $211,467.81 in fees, for a total interim payment of $250,000. The Final Report reflects that the Trustee paid the $250,000 to 28 his counsel.
6 1 in relation to the benefit to the estate.5 2 Law further asserted that the court should not make any 3 determination on the Final Report and the fee applications until 4 his appeals of certain orders were fully resolved. More 5 specifically, Law had taken appeals to our court from the 6 bankruptcy court’s second surcharge order and from its order 7 directing the Trustee to pay the $120,000 owed to Li on account 8 of the Trustee’s prior settlement with her. When the Panel ruled 9 against Law in both of these appeals, he took further appeals to 10 the Court of Appeals. While the appeals to the Court of Appeals 11 were pending when Law filed his opposition, the Court of Appeals 12 has since then decided both of these appeals against Law. See 13 In re Law, 435 F. App'x at 697; Law v. Li (In re Law), 430 F. 14 App’x 620 (9th Cir. May 3, 2011). 15 Finally, Law complained that the Trustee gave inadequate 16 notice of the Final Report and the fee applications. Law 17 admitted that he had received the Notice, but Law argued that the 18 entire Final Report and all fee applications should have been 19 served on all creditors and interested parties, including Law 20 himself. 21 On November 3, 2010, the bankruptcy court held the hearing 22 on the Final Report and on the fee applications. The court 23 rejected Law’s assertion that the Trustee only had collected 24 roughly $500,000 on behalf of the estate. As the court pointed 25 5 26 Law has not argued on appeal that the Trustee’s counsel’s fees were unreasonable, so he has waived that argument. See 27 Golden v. Chicago Title Ins. Co. (In re Choo), 273 B.R. 608, 613 (9th Cir. BAP 2002); Branam v. Crowder (In re Branam), 226 B.R. 28 45, 55 (9th Cir. BAP 1998), aff'd, 205 F.3d 1350 (9th Cir. 1999).
7 1 out, the Trustee in his Final Report certified under penalty of 2 perjury that he had received and disbursed over $1,000,000 in 3 receipts, and Law offered no evidence to counter the Trustee’s 4 figures. The court also rejected Law’s argument that the court 5 should not render its ruling on the Final Report and the fee 6 applications until all of his appeals had been fully resolved. 7 According to the Court, there was no need or requirement to wait 8 for all of Law’s appeals to run their course because Law had not 9 obtained any stay pending appeal. In addition, the court 10 rejected Mr. Law’s complaint regarding his not receiving copies 11 of the Final Report or the fee applications. In so ruling, the 12 court apparently relied on Law’s admission that he had received 13 the Notice and further noted that Law was aware that the Final 14 Report and the fee applications were available upon request from 15 either the Trustee or the court’s website. 16 Accordingly, the court approved the Final Report and granted 17 the fee applications. The court did not make any express 18 findings regarding the Trustee’s fee request, but the court did 19 make several comments regarding the fees sought by the Trustee’s 20 counsel. The gist of these statements was that the value of the 21 services provided by Trustee’s counsel far exceed the amount that 22 they were going to receive in compensation for the services they 23 rendered. As the court explained, the lack of sufficient 24 compensation simply reflected that there were insufficient funds 25 in the bankruptcy estate to cover the Trustee’s counsel’s time 26 and expenses incurred in dealing with Law’s allegations, 27 arguments and objections: “whatever money they receive in this 28 case would seem to be grossly inadequate for all of the work that
8 1 [Trustee’s counsel] have gone through.” Hr’g Tr. (Nov. 3, 2010) 2 at 14:11-13. The court also pointed out that Trustee’s counsel 3 had not sought any fees in their second and final fee application 4 beyond the half million dollars or so they had sought in their 5 first interim fee application, which the court had approved in 6 full and determined to be reasonable. In short, according to the 7 court, the limitation on compensation to Trustee’s counsel was a 8 function of the limited amount of estate assets available and not 9 a reflection of the reasonableness of the fees requested. 10 The court entered an order on November 19, 2010 (“Fee 11 Order”) awarding fees to the Trustee and his professionals. Even 12 though the Notice only had referenced those amounts that the 13 Trustee anticipated actually distributing to the professionals, 14 and even though there were insufficient funds in the estate to 15 pay any more to the professionals beyond the amounts noticed,6 16 the Fee Order allowed fees and expenses in amounts greater than 17 that set forth in the Notice, as follows: 18 19 20 21 6 Indeed, on June 30, 2011, after Law commenced this appeal, 22 the Trustee filed his final account and distribution report, 23 which reflected that the Trustee ultimately received $25,300.81 in total compensation; his counsel received, in aggregate, 24 $317,959.56 in fees ($106,491.75, plus the $211,467.81 previously paid on account of the first interim fee application) and 25 $38,532.19 in expenses; and, Trustee’s accountants received 26 $3,985.70 in fees. These amounts generally are consistent with the amounts set forth in the Notice. The Panel can take judicial 27 notice of the filing and contents of the Trustee’s final account and distribution report. In re E.R. Fegert, Inc., 887 F.2d at 28 957-58; In re Atwood, 293 B.R. at 233 n.9.
9 1 Total Final Total Allowed Paid To Date Remaining 2 Request Balance Trustee’s 3 counsel: 4 fees: $683,592.00 $683,592.00 $211,467.81 $472,124.19 5 exps.: $68,623.47 $68,623.47 $38,532.19 $30,091.00 6 Trustee’s 7 accountant: fees: 8 $8,569.00 $8,569.00 $0.00 $8,569.00 9 exps.: $0.00 $0.00 $0.00 $0.00 10 Trustee: 11 fees: $54,394.92 $54,394.92 $0.00 $54,394.92 12 exps.: $0.00 $0.00 $0.00 $0.00 13 14 Law timely appealed the Fee Order by filing a notice of 15 appeal on November 23, 2010. 16 JURISDICTION 17 The bankruptcy court had jurisdiction under 28 U.S.C. 18 §§ 1334 and 157, and the Panel has jurisdiction under 28 U.S.C. 19 § 158. 20 ISSUES 21 1. Did the bankruptcy court err when it determined that the 22 Trustee and his professionals met the service requirements 23 applicable to the Final Report and their fee applications by 24 serving on Law the Notice and the Summary? 25 2. Did the bankruptcy court err when it determined that the 26 Trustee’s fee request met the requirements of §§ 326(a) and 27 330(a)? 28 3. Did the bankruptcy court err by approving the Final
10 1 Report and granting the fee applications even though Law had 2 appeals pending in the Court of Appeals from the bankruptcy 3 court’s prior orders? 4 4. Should the bankruptcy court have denied all of the fee 5 applications because of false statements allegedly made by 6 Trustee’s counsel at the hearing on the fee applications? 7 STANDARDS OF REVIEW 8 Issues regarding the sufficiency of service are reviewed de 9 novo. See Rubin v. Pringle (In re Focus Media, Inc.), 387 F.3d 10 1077, 1081 (9th Cir. 2004). 11 The court’s determination of how much money the Trustee 12 disbursed for purposes of calculating the § 326(a) cap was a 13 finding of fact subject to the clearly erroneous standard of 14 review. Under the clearly erroneous standard, the Panel may not 15 reverse the bankruptcy court's findings of fact unless they were: 16 “‘[1] illogical, [2] implausible, or [3] without support in 17 inferences that may be drawn from the facts in the record.’” 18 Forest Grove School Dist. v. T.A., 638 F.3d 1234, 1239 (9th Cir. 19 2011) (quoting United States v. Hinkson, 585 F.3d 1247, 1263 (9th 20 Cir. 2009) (en banc)). 21 The Panel reviews a bankruptcy court’s decision to grant 22 fees under § 330(a) for abuse of discretion. See Ferrette & 23 Slater v. U.S. Trustee (In re Garcia), 335 B.R. 717, 722 (9th 24 Cir. BAP 2005). Under the abuse of discretion standard of 25 review, we first "determine de novo whether the [bankruptcy] 26 court identified the correct legal rule to apply to the relief 27 requested." Hinkson, 585 F.3d at 1262. And if the bankruptcy 28 court identified the correct legal rule, we then determine under
11 1 the clearly erroneous standard whether its factual findings and 2 its application of the facts to the relevant law were: 3 "(1) illogical, (2) implausible, or (3) without support in 4 inferences that may be drawn from the facts in the record." Id. 5 (internal quotation marks omitted). 6 DISCUSSION 7 A. Standing 8 As a threshold matter, the Panel will consider Law’s 9 standing to appeal. See Palmdale Hills Prop., LLC v. Lehman 10 Commercial Paper, Inc (In re Palmdale Hills Prop., LLC), 654 F.3d 11 868, 873-74 (9th Cir. 2011); Veal v. Am. Home Mortg. Servicing, 12 Inc. (In re Veal), 450 B.R. 897, 906 (9th Cir. BAP 2011). In 13 order to have standing to appeal, Law must be a “person 14 aggrieved” by the order appealed. In re Palmdale Hills Prop., 15 654 F.3d at 874. The “‘person aggrieved test’ provides that 16 ‘[o]nly those persons who are directly and adversely affected 17 pecuniarily by an order of the bankruptcy court . . . have 18 standing to appeal that order.’” Id. (quoting Fondiller v. 19 Robertson (In re Fondiller), 707 F.2d 441, 442 (9th Cir.1983)). 20 An order affecting the size of the estate does not directly and 21 adversely affect pecuniarily a hopelessly insolvent debtor 22 because “[s]uch an order would not diminish the debtor's 23 property, increase his burdens, or detrimentally affect his 24 rights.” In re Fondiller, 707 F.2d at 442. 25 In this instance, if the Fee Order were reversed and the 26 roughly $400,000 in fees and expenses paid to the Trustee and his 27 counsel were disallowed, as Law seeks on appeal, Law’s residual 28 interest in the estate apparently would have value. The record
12 1 reflects that the only timely-filed unsecured proof of claim, 2 Li’s judgement claim, has been satisfied in full, and the only 3 other unsecured proofs of claims filed against the estate are 4 tardily-filed claims in the aggregate amount of roughly 5 $10,000.00. Consequently, Law does have a pecuniary interest in 6 the outcome of this appeal and thus has standing to appeal. 7 B. Compliance With Service Requirements 8 Law has admitted that he received a copy of the Notice, 9 which contained the Summary of the Final Report.7 But Law claims 10 that the Trustee and his professionals also should have served 11 upon him the full Final Report and all final fee applications. 12 We disagree. None of the Local Rules that Law has cited require 13 a trustee to serve a full final report on the debtor, nor are we 14 aware of any such rule. In fact, the Federal Rules of Bankruptcy 15 Procedure, particularly Rule 2002(f)(8), indicate to the 16 contrary. That Rule merely requires service of “a summary of the 17 trustee’s final report in a chapter 7 case . . . .” (Emphasis 18 added.) 19 Similarly, Law has not cited to any rule that would have 20 required the Trustee or his professionals to serve their final 21 fee applications on Law. Rule 2002(a)(6) merely provides for 22 service of notice of the hearing on any such fee applications. 23 And Local Rule 2016-1(c)(4)(C) provides: 24 All final fee applications by professional persons must be set for hearing with the chapter 7 trustee’s final 25 26 7 Law did not assert either in the bankruptcy court or on 27 appeal that the Notice or the Summary were misleading or incomplete. Consequently, Law has waived any such issues. See 28 In re Choo, 273 B.R. at 613; In re Branam, 226 B.R. at 55.
13 1 application for allowance and payment of fees and expenses. Notice of a final fee application must be 2 given by the chapter 7 trustee as part of the notice of the hearing on the trustee’s request for compensation. 3 A separate notice by the applicant is not required. 4 Simply put, the Panel is not aware of any rule requiring the 5 trustee or his professionals to serve their full final fee 6 applications on the debtor in a chapter 7 case. Therefore, Law’s 7 argument regarding service lacks merit.8 8 C. Compliance With §§ 326(a) and 330(a) 9 Law asserts that the compensation awarded to the Trustee did 10 not comply with the statutes governing trustee compensation, 11 namely § 326(a) and § 330(a). The Panel will address each of 12 these statutes in turn. 13 1. § 326(a) 14 Section 326(a) sets a maximum amount, or cap, on fees that 15 may be awarded on account of a chapter 7 trustee’s services in a 16 chapter 7 case. As provided in § 326(a): 17 In a case under chapter 7 or 11, the court may allow reasonable compensation under section 330 of this title 18 of the trustee for the trustee's services, payable after the trustee renders such services, not to exceed 19 25 percent on the first $5,000 or less, 10 percent on any amount in excess of $5,000 but not in excess of 20 $50,000, 5 percent on any amount in excess of $50,000 but not in excess of $1,000,000, and reasonable 21 compensation not to exceed 3 percent of such moneys in excess of $1,000,000, upon all moneys disbursed or 22 turned over in the case by the trustee to parties in 23 8 Law also claims that the Trustee and his professionals were 24 required to give 120 days advance notice of the hearing on their 25 fee applications. This argument appears to be based on Law’s misreading of Local Rule 2016-1(a)(2)(A), which provides in 26 relevant part: “Unless otherwise ordered by the court, hearings on interim fee applications will not be scheduled less than 120 27 days apart.” On its face, this statement only applies to interim fee applications and only restricts how far apart interim fee 28 applications may be set.
14 1 interest, excluding the debtor, but including holders of secured claims. 2 Law in essence contends that, for purposes of calculating 3 the cap on the Trustee’s compensation under § 326(a), the court 4 should have used the amount of net sale proceeds received by the 5 estate after deducting the costs of sale. Law admits that the 6 Property sold for $680,000, but he claims that only the net sale 7 proceeds (which he figures to be $489,511.81) should have been 8 counted in calculating the § 326(a) cap on trustee compensation. 9 We disagree. The appropriate numbers for calculating the cap are 10 not net sale proceeds but rather are monies the Trustee disbursed 11 to parties in interest. See U.S. Trustee v. Tamm (In re Hokulani 12 Square, Inc.), 460 B.R. 763, 2011 WL 5924442 at **6-10 (9th Cir. 13 BAP 2011) (applying plain meaning and contextual definition of 14 “moneys disbursed” in holding that secured creditor’s credit bid 15 in exchange for its purchase of estate property should not be 16 counted in calculating the cap on trustee compensation). Such 17 monies disbursed included monies paid at the Trustee’s behest 18 from the sale escrow pursuant to the bankruptcy court’s order 19 authorizing the sale of the Property. See In re Blair, 313 B.R. 20 865, 870 (Bankr. E.D. Cal. 2004), aff’d, 329 B.R. 358 (mem. dec. 21 9th Cir. BAP Jun. 20, 2005); see also 3 Collier on Bankruptcy 22 ¶ 326.02[1][f][i] (Alan N. Resnick and Henry J. Sommer, eds., 23 16th ed. 2011) (stating that weight of authority holds cap 24 calculation should include monies paid by escrow agent, including 25 funds paid to secured creditors, and explaining why as a matter 26 of bankruptcy policy that is appropriate). Here, the Final 27 Report reflects that, with the exception of $20,000 in deposit 28 funds paid directly to the Trustee, the full purchase price for
15 1 the Property of $681,294.63 was paid into escrow, and the escrow 2 agent in turn disbursed all of the funds on the Trustee’s behalf 3 in accordance with the bankruptcy court’s February 22, 2006 order 4 authorizing sale of the Property. Some of those escrow funds, 5 specifically $469,591.08,9 were disbursed by the escrow agent to 6 the Trustee, who in turn disbursed them in accordance with the 7 terms of the Final Report. 8 Based on these facts, the Panel concludes that the 9 appropriate amount the court should have considered for purposes 10 of calculating the §326(a) cap was $681,294.63. 11 The Trustee’s Final Report claims receipts and disbursements 12 of $1,018,169.15. But the Trustee has not explained how the 13 $681,294.63 in gross proceeds from the sale of the sole asset of 14 the estate generated $1,018,169.15 in disbursed funds.10 15 16 9 According to Exhibit B attached to the Final Report, the 17 Trustee received from escrow net sale proceeds of $188,777.91, plus $280,813.17 on account of the avoidance and preservation for 18 the estate of Lili Lin’s lien, for total net receipts of $469,591.08. 19 10 Looking at the numbers in Exhibit B to the Final Report, 20 we suspect that the difference between these two numbers consists 21 of the following:
22 Interest accrued: $19,591.35
23 Lili Lin lien avoidance/recovery: $280,813.17 24 Amount deposited by prospective purchasers in 25 conjunction with proposed sale of Property (ultimately refunded when prospective purchasers 26 were not the successful bidders at bankruptcy court auction): $16,470.00 27 (continued...) 28 16 1 In any event, assuming without deciding that the court erred 2 when it accepted the Trustee’s disbursal number of $1,018,169.15 3 rather than the lower number of $681,294.63, any such error was 4 harmless. The amount that the Trustee ultimately received in 5 compensation ($25,300.81) was well within the § 326(a) cap under 6 either number. The Panel acknowledges that the Fee Order 7 purported to award the Trustee $54,394.92 in fees, but the award 8 amount set forth in the Fee Order is largely irrelevant under the 9 circumstances of this case. What mattered here was the amount 10 actually paid to the Trustee; any other amount did not actually 11 inure to anyone’s benefit or detriment, and the Panel must ignore 12 harmless error. See Litton Loan Serv'g, LP v. Garvida (In re 13 Garvida), 347 B.R. 697, 704 (9th Cir. BAP 2006) (citing 28 U.S.C. 14 § 2111, Rule 9005, Civil Rule 61, and Donald v. Curry (In re 15 10 16 (...continued) Amount deposited by second-highest bidders at 17 bankruptcy court auction accepted by trustee as backup offer (ultimately refunded when sale to 18 highest bidder closed): $20,000.00 19 Sum of the above amounts: $336,874.52 20 Difference between Trustee’s claimed 21 disbursements and gross sale proceeds: $336,874.52 22 Other than the interest accrued, it is questionable whether any 23 of these other amounts should have been counted in calculating the §326(a) cap. The counting of the $280,813.17 lien recovery 24 is particularly questionable as it does not appear to be “moneys disbursed or turned over” within the meaning of § 326(a). See In 25 re Hokulani Square, 460 B.R. at 763, 2011 WL 5924442 at *12. 26 Moreover, the $280,000 lien already was “counted” as part of the purchase price received and disbursed from the sale of the 27 Property. Consequently, counting the lien recovery again separately appears to constitute double counting of the same 28 funds already accounted as disbursed.
17 1 Donald), 328 B.R. 192, 203-04 (9th Cir. BAP 2005)). 2 Law also complains that the Trustee’s request for fees in 3 his Final Report only sought $25,298.45 in fees, whereas the 4 court’s Fee Order awarded the Trustee $54,394.92 in fees. Once, 5 again, assuming without deciding that the court erred in ordering 6 an award of more than $25,298.45, any such error was harmless. 7 The Trustee actually received in fees essentially the same amount 8 that he requested in his Final Report. The Panel simply cannot 9 reverse on the basis that the court’s fee award stated a higher 10 amount when the higher amount was not paid and never will be 11 paid. See id. 12 2. § 330(a) and Rule 2016 13 Liberally construing Law’s pro se appeal brief as we must, 14 see Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th 15 Cir. 1990), Law challenges on appeal the reasonableness of the 16 Trustee’s fee and asserts that the Trustee should have filed a 17 separate fee application satisfying the requirements of § 330(a) 18 and Rule 2016.11 We agree with this assertion, as explained 19 below. 20 Section 330(a) requires the court to consider “the nature, 21 the extent and the value of such services” for which the trustee 22 seeks compensation. § 330(a)(3). These considerations in turn 23 require the court to take into account “all relevant factors” 24 including: (1) the time the trustee expended providing the 25 services; (2) the necessity of the services; (3) the rate the 26 11 27 At oral argument, Trustee’s counsel conceded that Law had raised the issue of the reasonableness of the Trustee’s fee 28 request.
18 1 trustee charged; and (4) the complexity, importance and nature of 2 the issues addressed or tasks undertaken. See § 330(a)(3)(A)- 3 (F); see also Gill v. von Wittenberg (In re Fin. Corp. of Am.), 4 114 B.R. 221, 223 (9th Cir. BAP 1990), aff'd, 945 F.2d 689 (9th 5 Cir. 1991).12 6 The trustee bears the burden of establishing that the fees 7 requested are reasonable. Roderick v. Levy (In re Roderick 8 Timber Co.), 185 B.R. 601, 606 (9th Cir. BAP 1995); Locke v. 9 Walsh (In re Travel Headquarters, Inc.), 140 B.R. 260, 261-62 10 (9th Cir. BAP 1992). As the Panel stated in Roderick Timber, “In 11 obedience to the statute, in every case, a bankruptcy court 12 should award only those fees that are proven to be actual, 13 necessary and reasonable. Any lesser requirement would make the 14 trustee's burden of proof a mere shell.” In re Roderick Timber, 15 185 B.R. at 605-06. As part of his or her efforts to meet this 16 burden, the trustee must submit to the court a fee application 17 complying with the requirements of Rule 2016. Id.; In re Travel 18 Headquarters, Inc., 140 B.R. at 261-62. In relevant part, Rule 19 2016(a) provides “An entity seeking interim or final compensation 20 for services, or reimbursement of necessary expenses, from the 21 estate shall file an application setting forth a detailed 22 statement of (1) the services rendered, time expended and 23 expenses incurred, and (2) the amounts requested.” (Emphasis 24 25 12 BAPCPA added a new provision to § 330(a), codified as 26 § 330(a)(7), which states: “In determining the amount of reasonable compensation to be awarded to a trustee, the court 27 shall treat such compensation as a commission, based on section 326.” This new provision is inapplicable to this case because 28 this case predates BAPCPA.
19 1 added.)13 2 Here, neither of the parties provided us with anything 3 suggesting that the Trustee prepared and filed a fee application 4 complying with the requirements of 2016, nor have we found 5 anything of that nature in our own search of the bankruptcy court 6 record. We note that the Final Report, which included the 7 Trustee’s fee request, also included a narrative summary of the 8 entire case history. But this narrative summary does not 9 identify the services provided by the Trustee (as opposed to 10 those provided by his attorneys or his accountants), nor does the 11 narrative summary give us any indication whatsoever of the amount 12 of time the Trustee expended undertaking whatever services he 13 provided. 14 We do not need to decide in this appeal whether Rule 2016 15 always requires a chapter 7 trustee to submit a separate fee 16 application containing an itemized statement of the services 17 rendered and the time expended in rendering those services. For 18 our purposes, it suffices for us to say that none of the 19 Trustee’s submissions in this case were sufficient to satisfy the 20 minimum requirements of Rule 2016. 21 22 13 Even before the 1978 enactment of the Bankruptcy Code and 23 the later enactment of Rule 2016, the time the Trustee expended providing services was a critical factor in assessing the 24 reasonableness of the fees requested. As the Panel stated in Roderick Timber, “[i]t has long been the rule in this circuit 25 that trustees have a duty to meticulously maintain accurate 26 records of time expended on behalf of the estate.” Roderick Timber, 185 B.R. at 605 (citing Matter of Beverly Crest 27 Convalescent Hospital, Inc., 548 F.2d 817, 820 (9th Cir. 1976), and York Intern. Building, Inc. v. Chaney, 527 F.2d 1061, 1069 28 (9th Cir. 1975)).
20 1 The court made no finding that the Trustee’s requested fees 2 were reasonable, nor is the record sufficient (in light of the 3 above-referenced deficiencies) for us to say that it affords us 4 with a complete understanding of the basis for the court’s ruling 5 on the Trustee’s fee request. 6 Under these circumstances, the Panel must vacate the portion 7 of the Court’s Fee Order granting the Trustee’s fee request. 8 When the bankruptcy court does not make sufficient findings to 9 support its ruling and when the record is not sufficient to 10 provide us with a complete understanding of the basis for the 11 court’s ruling, the Panel must vacate and remand. See Alpha 12 Distrib. Co. of Cal., Inc. v. Jack Daniel Distillery, 454 F.2d 13 442, 452-53 (9th Cir. 1972); Canadian Comm'l Bank v. Hotel 14 Hollywood (In re Hotel Hollywood), 95 B.R. 130, 132-34 (9th Cir. 15 BAP 1988) (same). 16 D. Waiting for Court of Appeals Decisions 17 Law argues that the bankruptcy court erred in approving the 18 Final Report and granting the fee applications before all of his 19 pending appeals before the Court of Appeals had been resolved. 20 Law’s contentions in support of this argument are exceedingly 21 difficult to follow. For instance, his contentions seem to 22 implicitly assume that the Panel never upheld the bankruptcy 23 court’s second surcharge order and never upheld its determination 24 that the Lin Deed of Trust was a fiction created by Law in an 25 attempt to defraud his creditors. But Law’s assumptions are 26 simply wrong; the Panel did uphold these bankruptcy court 27 rulings. See In re Law, 2009 WL 7751415 at **7-8. Furthermore, 28 the Court of Appeals has ruled against Law on both of his pending
21 1 appeals, thereby rendering moot Law’s argument that the 2 bankruptcy court should have waited to see if Law would prevail 3 on these pending appeals. 4 Put another way, there is no meaningful relief the Panel can 5 afford to Law given that the position he has taken on appeal 6 hinges on his prevailing in two prior appeals that the Court of 7 Appeals has now decided against him. See Lowenschuss v. Selnick 8 (In re Lowenschuss), 170 F.3d 923, 933 (9th Cir.1999) (stating 9 that mootness of an appeal turns on whether appellate court can 10 fashion some form of effective relief); United States v. Gould 11 (In re Gould), 401 B.R. 415, 422-23 (9th Cir. BAP 2009) (same). 12 Consequently, this argument of Law’s is moot.14 13 E. False Statements Supposedly Leading to Entry of Fee Order 14 Finally, Law claims that, at the November 3, 2010 hearing on 15 the Final Report and the fee applications, Trustee’s counsel made 16 false statements regarding the amount of fees allowed on account 17 of their first interim fee application. According to Law, based 18 on these false statements, all of the fees requested by the 19 Trustee and his professionals should have been disallowed. First 20 of all, as a preliminary matter, based on the record provided to 21 us, it is far from clear that there was anything false or 22 misleading about the statements of Trustee’s counsel made at the 23 November 3 hearing. Law asserts Trustee’s counsel represented 24 14 Even if this argument were not moot, we agree with the 25 bankruptcy court’s stated reason for rejecting this argument. 26 The bankruptcy court’s prior final orders, unless stayed, were immediately effective, and Law could not treat the court’s prior 27 orders as ineffective while he was appealing them absent a stay pending appeal. See Gemmill v. Robison (In re Combined Metals 28 Reduction Co.), 557 F.2d 179, 190 (9th Cir. 1977).
22 1 that $683,592.00 in fees were allowed on account of their first 2 interim fee application. Actually, the hearing transcript does 3 not reflect that Trustee’s counsel said what Law claims that he 4 said. Rather, counsel said that the court “approved the entire 5 [first interim] application for well in excess of what is being 6 requested but only allowed $200,000.00 to be paid.” Hr’g Tr. 7 (Nov. 3, 2010) at 4:9-11. Rather, it was the court that said, to 8 the best of its recollection, the first interim fee application 9 sought fees of “well over half a million dollars” and that it 10 allowed “all the fees because I found them to be reasonable and 11 appropriate” but only authorized the firm to be paid at that time 12 $250,000.00 in fees and expenses because of the amount of funds 13 available to the estate. Id. at 5:3-9. 14 Thus, Law’s argument really challenges the court’s 15 recollection rather than the statements of counsel. More 16 importantly, even if we were to credit Law’s argument and 17 conclude that the court’s recollection was somehow erroneous, Law 18 has once again pointed us to what is, at most, harmless error. 19 Without relying on its prior ruling on the first interim fee 20 application, the court found reasonable the total amount of 21 compensation to be paid to Trustee’s counsel on account of their 22 services rendered during the entire case. Indeed, the court’s 23 finding on this issue went much further. The court stated: 24 “whatever money they receive in this case would seem to be 25 grossly inadequate for all of the work that [counsel] have gone 26 through.” Id. at 14:11-13 (emphasis added). 27 Law has not argued on appeal that the court erred when it 28 determined that trustee’s counsel’s fees were reasonable, so he
23 1 has waived that argument. See In re Choo, 273 B.R. at 613; In re 2 Branam, 226 B.R. at 55. Furthermore, on the record presented, we 3 could not conclude that the court’s reasonableness determination 4 was illogical, implausible or without support in inferences that 5 could be drawn from the facts in the record. 6 Accordingly, we reject as meritless Law’s argument regarding 7 the so-called false statements made by Trustee’s counsel. 8 CONCLUSION 9 For the reasons set forth above, we VACATE the portion of 10 the Fee Order granting the Trustee’s fee request, and we REMAND 11 for further proceedings on that issue. The remainder of the Fee 12 Order is AFFIRMED. 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28