FILED JUL 29 2014 1 NO FO PUBL A IO T R IC T N 2 SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT 3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. CC-13-1344-DKiTa ) 6 STEPHEN LAW, ) Bk. No. 04-10052-TD ) 7 Debtor. ) ______________________________) 8 ) STEPHEN LAW, ) 9 ) Appellant, ) 10 ) v. ) M E M O R A N D U M1 11 ) ALFRED H. SIEGEL, Chapter 7 ) 12 Trustee, ) ) 13 Appellee. ) ______________________________) 14 Submitted on the Briefs 15 on June 26, 2014 16 Filed - July 29, 2014 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: Appellant Stephen Law pro se on brief; Steven T. Gubner and Jessica L. Bagdanov of Ezra Brutzkus 21 Gubner LLP on brief for Appellee Alfred H. Siegel, chapter 7 trustee. 22 23 Before: DUNN, KIRSCHER and TAYLOR, Bankruptcy Judges. 24 25 26 1 This disposition is not appropriate for publication. 27 Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. 28 See 9th Cir. BAP Rule 8013-1. 1 The pro se debtor, Stephen Law (“Debtor”), following a well- 2 traveled path, comes before us once more, this time appealing the 3 bankruptcy court’s order allowing and authorizing pro rata 4 payment of the chapter 7 trustee’s (“Trustee”) professionals’ 5 fees pursuant to the Trustee’s amended final report.2 What the 6 Debtor really wants is his $75,000 homestead exemption that the 7 Supreme Court held could not be surcharged to pay administrative 8 expenses in bankruptcy consistent with the provisions of the 9 Bankruptcy Code. As the bankruptcy court advised the Debtor at 10 the time the matter before us was considered, if the Supreme 11 Court so held, the issue of the Debtor’s entitlement to homestead 12 exemption funds would be resolved in separate further proceedings 13 before the bankruptcy court, not in the instant proceeding. For 14 the reasons set forth below, we AFFIRM. 15 16 FACTS 17 The Debtor filed his chapter 7 bankruptcy petition over ten 18 years ago, on January 5, 2004. Alfred H. Siegel has been the 19 Trustee since the inception of the Debtor’s bankruptcy case. The 20 case has had a long and convoluted history that included the 21 Debtor’s numerous appeals of many of the bankruptcy court’s 22 rulings concerning his former residence in Hacienda Heights, 23 California (“Property”). 24 2 25 Unless otherwise indicated, all chapter and section references are to the federal Bankruptcy Code, 11 U.S.C. 26 §§ 101-1532, and all “Rule” references are to the Federal Rules 27 of Bankruptcy Procedure, Rules 1001-9037. All “Local Rule” references are to the Local Bankruptcy Rules of the U.S. 28 Bankruptcy Court for the Central District of California.
2 1 As we noted in one of our prior decisions, “The history [of 2 this bankruptcy case] reflects that [the Debtor] has opposed the 3 Trustee’s administration of the bankruptcy estate at every step.” 4 Law v. Siegel (In re Law), 2012 WL 603773 at *1 (9th Cir. BAP 5 2012)(“In re Law”). This appeal is but another instance of the 6 Debtor’s opposition to the Trustee’s administration of the 7 estate. 8 We have taken many of our facts from our prior disposition 9 in In re Law. That decision addressed the Debtor’s appeal of the 10 bankruptcy court’s previous order (“Original Fee Order”) 11 approving the Trustee Final Report (“Original Final Report”) and 12 allowing and authorizing payment of the fees of the Trustee and 13 his professionals: his accountants, Grobstein Horwath & Co. LLP 14 (“Trustee Accountant”), and his attorneys, Ezra Brutzkus 15 Gubner LLP (“Trustee Attorney”). 16 In In re Law, we vacated and remanded the bankruptcy court’s 17 Original Fee Order with respect to the Trustee’s fees only. But 18 we affirmed the bankruptcy court’s Original Fee Order with 19 respect to the fees awarded to the Trustee Attorney and the 20 Trustee Accountant. We describe our prior disposition in more 21 detail below, relating only those facts relevant to this appeal. 22 A. Overview of the Debtor’s Bankruptcy Case 23 The numerous disputes between the Debtor and the Trustee 24 have revolved around the Property and the proceeds from its sale. 25 See id. at *1. The Debtor scheduled the Property’s value at 26 approximately $363,000 as of the petition date. He also 27 scheduled two liens against the Property: a first trust deed lien 28 in favor of Washington Mutual Bank and a second trust deed lien
3 1 in favor of Lin’s Mortgage & Associates (“Lin Lien”). The Debtor 2 claimed a $75,000 homestead exemption in the Property, to which 3 the Trustee did not object. 4 Based on his exemption claim and the liens against the 5 Property, the Debtor contended that the Property had no value to 6 the bankruptcy estate. The bankruptcy court nonetheless ordered 7 the Debtor to turn over the Property to the Trustee and 8 authorized the Trustee to sell it. The Trustee ultimately sold 9 the Property for $680,000 (“Sale Proceeds”). 10 As part of his efforts to sell the Property, the Trustee 11 initiated an adversary proceeding alleging that the Lin Lien was 12 fraudulent. After highly contentious and lengthy litigation, 13 including several appeals, the bankruptcy court determined that 14 the loan underlying the Lin Lien was “a fiction, meant to 15 preserve Debtor’s equity in his residence beyond what he was 16 entitled to exempt as a homeowner, and a fraud on his creditors 17 and the court.” In re Law, 401 B.R. 447, 453 (Bankr. C.D. Cal. 18 2009).3 19 The Trustee incurred more than $500,000 in attorney’s fees 20 to overcome the Debtor’s fraud regarding the purported Lin Lien. 21 To help defray the Trustee’s attorney’s fees, the bankruptcy 22 court granted the Trustee’s motion to surcharge the entirety of 23 the Debtor’s homestead exemption (“Surcharge Order”). 24 25 3 The Supreme Court ultimately determined that the Debtor’s 26 homestead exemption could not be surcharged for his fraud. Law 27 v. Siegel, 134 S. Ct. 1188 (2014). However, the Supreme Court did not disturb the bankruptcy court’s fact finding that the Lin 28 Lien was fraudulent. Id.
4 1 The Debtor appealed the Surcharge Order, and this Panel and 2 the Ninth Circuit affirmed. In re Law, 2009 WL 7751415 (9th Cir. 3 BAP 2009), aff’d, 435 F. App’x. 697 (9th Cir. 2011). However, in 4 Law v. Siegel, 134 S. Ct. 1188, 1198 (2014), the Supreme Court 5 reversed. 6 The Supreme Court reasoned that, although a bankruptcy court 7 has statutory and inherent authority to issue any order to carry 8 out the Bankruptcy Code’s provisions and to sanction abusive 9 litigation practices, it cannot take any action expressly 10 prohibited by or otherwise in contravention of the provisions of 11 the Bankruptcy Code. Id. at 1194-97. The Supreme Court found 12 that the bankruptcy court exceeded its authority in surcharging 13 the Debtor’s homestead exemption because such surcharge 14 contravened a specific provision of the Bankruptcy Code: 15 § 522(k).4 Id. at 1194. It reversed the ruling of the Ninth 16 Circuit Court of Appeals and remanded the matter for further 17 proceedings consistent with its opinion. Id. at 1198. 18 On April 23, 2014, the Ninth Circuit entered an order 19 vacating its ruling. It also reversed this Panel’s and the 20 bankruptcy court’s decisions and remanded with instructions to 21 the bankruptcy court to conduct further proceedings consistent 22 with the Supreme Court’s ruling. 23 B. Trustee’s Final Report 24 Meanwhile, on October 20, 2009, the Trustee had filed and 25 served notice of his intent to file his Final Report and Account, 26 4 27 Section 522(k) provides in relevant part: “Property that the Debtor exempts under this section is not liable for payment 28 of any administrative expense . . . .”
5 1 advising professionals to file their applications for 2 compensation (“Fee Applications”). Accordingly, the Trustee 3 Attorney filed its final fee application (“Final Attorney Fee 4 Application”)(docket no. 379) on November 11, 2009. The Trustee 5 Accountant filed its first and final fee application (“Accountant 6 Fee Application”)(docket no. 388) on March 22, 2010. 7 Before filing the Final Attorney Fee Application, the 8 Trustee Attorney had filed its first interim fee application on 9 March 10, 2008 (“First Attorney Fee Application”)(docket no. 10 247). In its First Attorney Fee Application, the Trustee 11 Attorney sought $683,592 in total fees and $38,532.19 in total 12 expenses for services rendered from April 21, 2004 through 13 January 31, 2008. 14 The Debtor opposed the First Attorney Fee Application. 15 After a hearing on April 3, 2008, the bankruptcy court overruled 16 the Debtor’s opposition and granted the First Attorney Fee 17 Application. It entered an order on April 22, 2008 (“Interim Fee 18 Order”)(docket no. 261), allowing the Trustee Attorney 19 $211,467.81 in interim fees and $38,532.19 in costs, for a total 20 of $250,000. The bankruptcy court also authorized the Trustee to 21 disburse $250,000 to the Trustee Attorney from funds on hand at 22 that time. 23 In the Final Attorney Fee Application, the Trustee Attorney 24 referenced its prior request for fees and costs. It disclosed 25 that it had been paid $211,467.81 in fees and all of its costs 26 pursuant to the First Attorney Fee Application, leaving a balance 27 of $472,124.19 in unpaid interim fees. 28 The Trustee Attorney reported in its Final Attorney Fee
6 1 Application that it incurred additional fees of $263,410.50 and 2 additional expenses of $15,327.04 since its First Attorney Fee 3 Application. But, it acknowledged that the bankruptcy estate was 4 administratively insolvent. 5 The Trustee Attorney therefore sought approval and payment 6 of its additional expenses of $15,327.04 and the balance of its 7 fees from its First Attorney Fee Application only. That is, it 8 sought final approval of the fees and costs set forth in its 9 First Attorney Fee Application and its additional costs set forth 10 in the Final Attorney Fee Application. The Trustee Attorney 11 requested that the Trustee be authorized to pay its allowed fees 12 on a pro rata basis from available funds. 13 The Trustee Accountant had made no prior request for fees 14 and costs. It sought in the Accountant Fee Application a total 15 of $8,569 in fees for services rendered from March 16, 2006 16 through December 7, 2008. The Trustee Accountant did not seek 17 reimbursement of any costs. 18 The Debtor did not oppose the Final Attorney Fee 19 Application. However, he opposed the Accountant Fee Application 20 (“Accountant Fee Opposition”)(docket no. 388) on the grounds that 21 it violated Local Rule 2016(a)(2) because the Trustee Accountant 22 failed to: 1) set a hearing on the Accountant Fee Application; 23 2) provide 45 days notice of the date and time of the hearing; 24 3) include in a notice of hearing the specific language set forth 25 in Local Rule 2016(a)(2); and 4) serve the United States Trustee, 26 20 largest unsecured creditors and other parties in interest, as 27 provided for in Local Rule 2016(a)(2). 28 The Debtor also challenged the amount of fees incurred by
7 1 the Trustee Accountant, claiming that its fees were unreasonably 2 high. He argued that the Trustee Accountant overcharged for 3 preparing the bankruptcy estate’s tax returns. He also contended 4 that the Trustee Accountant should not have charged so much for 5 its services, given that it only needed to safeguard the Sale 6 Proceeds. 7 The Debtor moreover claimed he had never seen any of the 8 bankruptcy estate’s tax returns. He further contended that the 9 Bankruptcy Code did not require the bankruptcy estate to file any 10 tax returns. 11 On September 14, 2010, the Trustee filed the Trustee’s Final 12 Report (“Original Final Report”)(docket no. 389). As part of his 13 Original Final Report, the Trustee sought $25,298.45 in fees 14 under §§ 326(a) and 330(a) for his services in administering the 15 Debtor’s estate. 16 Concurrently with the Original Final Report, the Trustee 17 filed the Notice of Trustee’s Final Report and Applications for 18 Compensation and Deadline to Object (“Original Notice”)(docket 19 no. 390). The Trustee served the Original Notice on the Debtor. 20 The Original Notice contained a summary (“Original Summary”) 21 of the Original Final Report and of the fee applications filed by 22 the Trustee’s professionals. The Original Summary disclosed that 23 the Trustee sought $25,298.45 in fees but no expenses. The 24 Original Summary identified the Trustee Attorney and the Trustee 25 Accountant as the only professionals applying for fees and 26 expenses. 27 The Debtor opposed the Original Final Report and the Fee 28 Applications (“First Opposition”)(docket no. 392). He argued
8 1 that the Trustee’s fees were unreasonable because the Trustee 2 appeared in court “two or three times” only. He further claimed 3 that the Trustee’s fees exceeded the statutory maximum allowed 4 under § 326(a) because, by his reckoning, the Trustee only 5 collected $500,000 on the bankruptcy estate’s behalf, not 6 $1 million plus in gross receipts. The Debtor also alleged that 7 the Trustee gave inadequate notice of the Original Final Report 8 and the Fee Applications because the Trustee should have served 9 the entire Original Final Report and the Fee Applications on all 10 creditors and interested parties, including himself. However, 11 the Debtor admitted that he received the Original Notice. 12 The Debtor moreover argued that the bankruptcy court lacked 13 authority to make any determination on the Original Final Report, 14 the Accountant Fee Application and the Final Attorney Fee 15 Application until his appeal of the Surcharge Order was resolved. 16 The Debtor also contested payment of the Trustee’s fees and 17 the Trustee Attorney’s fees, arguing that neither he nor the 18 unsecured creditors obtained any benefit from the bankruptcy 19 case, though the Trustee and Trustee Attorney did by getting 20 their fees. He raised no other arguments against the Trustee 21 Attorney’s fees. The Debtor also challenged the Trustee 22 Accountant’s fees, repeating the same arguments he made in his 23 Accountant Fee Opposition. 24 The bankruptcy court held a hearing on the First Opposition 25 on November 3, 2010 (“First Opposition Hearing”). It rejected 26 the Debtor’s claims. The bankruptcy court specifically rejected 27 the Debtor’s complaint that he did not receive copies of the 28 Original Final Report and the Fee Applications. In so ruling, it
9 1 relied on the Debtor’s admission that he had received the 2 Original Notice. The bankruptcy court further noted that the 3 Debtor was aware that the Original Final Report and the Fee 4 Applications were available online or upon request from the 5 Trustee. 6 The bankruptcy court moreover rejected the Debtor’s 7 contention that it should refrain from ruling on the Original 8 Final Report and the Fee Applications until all of his appeals 9 had been fully resolved. It pointed out that it did not need to 10 wait for all of the Debtor’s appeals to run their course because 11 the Debtor had not obtained any stays pending appeal. 12 The bankruptcy court did not make any express findings 13 concerning the Trustee’s fee request. However, with respect to 14 the fees requested by the Trustee Attorney, the bankruptcy court 15 noted that 16 [The Trustee Attorney] filed a complete application for fees for all the work that had been 17 done, none of which had been paid for up to that point, as [the bankruptcy court] recall[ed]. The fees were 18 quite substantial. They were well over half a million dollars. There was about a half a million dollars in 19 the estate at that time, and the decision that I came to at that time was to allow all the fees because I 20 found them to be reasonable and appropriate under the circumstances of this case, and I further allowed that 21 [the Trustee Attorney] be paid at that time $250,000. There were other things that happened in that 22 period about two years ago. All of those things were done on an interim basis, and now we’re at the final 23 stage of this case where the Trustee has determined, but it doesn’t alter the decision [the bankruptcy 24 court] made two years ago that the total fees incurred were appropriate on the part of [the Trustee Attorney]. 25 [Moreover], there is no evidence before [the bankruptcy court] today to allow [it] to revisit the 26 decision [it] made two years ago. So the fees stand as approved, and [the Debtor’s] objection must be 27 overruled for that reason. 28 Tr. of Nov. 3, 2010 hr’g, 4:24-25, 5:1-21.
10 1 The bankruptcy court further noted that 2 [i]n the applications that are pending before [it] today, [the Trustee Attorney had] said that [it] was 3 not seeking any additional compensation over the compensation that was allowed to [it] two years ago by 4 [the bankruptcy court’s] order. That’s simply a reflection of the fact that there is no money in this 5 estate sufficient to cover all the time and expenses that [the Trustee Attorney’s] firm has gone through in 6 dealing with [the Debtor’s] allegations, your claims, your bankruptcy case. 7 . . . So there really is nothing more in this estate for 8 the Trustee to administer, and his election to treat this case as fully administered would seem to be 9 correct and appropriate. Nobody’s going to make any money on this case, certainly not [the Trustee 10 Attorney]. [The Trustee Attorney] has done this out of a sense of loyalty to [its client, i.e., the Trustee], 11 out of [its] professional obligations to the [bankruptcy court], and [it is] – whatever money [the 12 Trustee Attorney] receive[s] in this case would seem to be grossly inadequate for all the work that [the 13 Trustee Attorney has] gone through. 14 Tr. of Nov. 3, 2010 hr’g, 13:13-25, 14:1-13. 15 Accordingly, the bankruptcy court overruled the Debtor’s 16 First Opposition and approved the Original Final Report and 17 granted the Fee Applications. It entered an order (“Original Fee 18 Order”)(docket no. 393) on November 19, 2010, allowing the fees 19 of the Trustee and his professionals. 20 The Original Fee Order allowed fees and expenses in amounts 21 greater than those set forth in the Original Notice, as 1) the 22 Original Notice only referenced those amounts that the Trustee 23 anticipated actually distributing to the professionals, and 24 2) the bankruptcy estate had insufficient funds to pay any more 25 to the professionals beyond the amounts noticed. 26 Specifically, with respect to the Trustee Attorney’s fees, 27 the bankruptcy court allowed a total of $683,592 in fees and 28 $68,623.47 in expenses. The Trustee Attorney had been paid
11 1 $211,467.81 in fees to date, leaving a $472,124.19 balance. 2 On June 30, 2011, the Trustee filed his final account and 3 distribution report (“Final Account”)(docket no. 404), which 4 showed that the Trustee Attorney received a total of $317,959.56 5 in fees ($106,491.75 plus $211,467.81 previously paid on account 6 of the First Attorney Fee Application) and $38,532.19 in expense 7 reimbursements. The amounts generally were consistent with those 8 set forth in the Original Notice. In re Law, 2012 WL 603773 at 9 *3 n.6. The Final Account further showed that the Trustee was 10 entitled to receive a total of $54,394.92 in fees only. (The 11 Trustee did not seek reimbursement of any expenses.) 12 C. Appeal of the Original Fee Order 13 Several months before the Trustee filed the Final Account, 14 the Debtor appealed the Original Fee Order, challenging the 15 Trustee’s fees on the ground of reasonableness under § 330(a). 16 On appeal, we determined that the Trustee did not bear his 17 burden of establishing that his requested fees were reasonable 18 under § 330(a) because he failed to submit a fee application 19 complying with the requirements of Local Rule 2016. Local 20 Rule 2016 required the Trustee to file an application setting 21 forth a detailed statement of the services rendered, time 22 expended and expenses incurred and the amounts requested. 23 We pointed out that the Trustee merely provided in the 24 Original Final Report a narrative summary of the entire case 25 history. We determined that the Trustee’s narrative summary 26 neither identified his services nor gave any indication of the 27 amount of time he spent undertaking those services. We thus 28 concluded that the Trustee’s Original Final Report was
12 1 insufficient to satisfy Local Rule 2016. 2 We noted that the bankruptcy court made no findings as to 3 the reasonableness of the Trustee’s requested fees. We moreover 4 determined that the record was insufficient for us to state that 5 it afforded us “with a complete understanding of the basis for 6 the [bankruptcy] court’s ruling on the Trustee’s fee request.” 7 In re Law, 2012 WL 603773 at *8. We therefore concluded that the 8 bankruptcy court erred in allowing the Trustee’s fees.5 9 The Debtor also contested the Trustee Attorney’s fees. He 10 argued that, at the First Opposition Hearing, the Trustee 11 Attorney made false statements regarding the amount of fees 12 allowed on account of its First Attorney Fee Application. He 13 contended that, because it made these false statements, the 14 Trustee Attorney’s fees should not have been allowed. 15 Reviewing the record, we determined that “it [was] far from 16 clear that there was anything false or misleading about the 17 [Trustee Attorney’s] statements . . . made at the [First 18 Opposition Hearing].” In re Law, 2012 WL 603773 at *8. It was 19 the bankruptcy court that recollected that the Trustee Attorney 20 sought more than half a million dollars in fees in its First 21 Attorney Fee Application. We noted that the bankruptcy court 22 also stated that it allowed the fees because it “found them to be 23 24 5 The Debtor also raised the argument that the bankruptcy 25 court erred in approving the Final Report and granting the fee applications before all of his pending appeals had been resolved. 26 We determined that we could give the Debtor no meaningful relief 27 given that his position on appeal “hinge[d] on his prevailing in two prior appeals that the Court of Appeals [had] decided against 28 him.” In re Law, 2012 WL 603773 at *8.
13 1 reasonable and appropriate,” though it authorized the Trustee to 2 pay the Trustee Attorney only $250,000 in fees and expenses due 3 to the amount available in the bankruptcy estate. 4 We construed the Debtor’s argument as a challenge to the 5 bankruptcy court’s recollection. But we concluded that, even if 6 we agreed with the Debtor that the bankruptcy court’s 7 recollection was erroneous, the Debtor simply “pointed us to what 8 is, at most, harmless error.” Id. We noted that, without 9 relying on its prior ruling on the First Attorney Fee 10 Application, the bankruptcy court found reasonable the total 11 amount of fees to be paid to the Trustee Attorney for the 12 services it rendered throughout the entire bankruptcy case. Id. 13 We moreover pointed out that the Debtor did not argue on 14 appeal that the bankruptcy court erred when it determined the 15 fees of the Trustee Attorney were reasonable. We thus concluded 16 that the Debtor waived that argument. 17 In the end, we vacated and remanded that part of the 18 Original Fee Order allowing the Trustee’s fees but affirmed the 19 remainder of the Original Fee Order (“Remand Order”). 20 The Debtor appealed the Remand Order to the Ninth Circuit 21 Court of Appeals (“Remand Appeal”). It dismissed the Debtor’s 22 Remand Appeal for lack of jurisdiction, as the Remand Order was 23 not final or appealable. 24 D. Trustee’s Amended Final Report 25 In response to the Remand Order, the Trustee filed an 26 amended Trustee’s Final Report (“Amended Final Report”)(docket 27 no. 416) on June 10, 2013. He filed the Amended Final Report 28 because he had additional funds to distribute once he decided to
14 1 forgo seeking an award of fees for himself. Tr. of July 18, 2013 2 hr’g, 4:17-21. 3 The Trustee also filed the Notice of Amended Trustee’s Final 4 Report and Applications for Compensation and Deadline to Object 5 (“Amended Notice”)(docket no. 417). He served the Amended Notice 6 on the Debtor (docket no. 418). 7 The Amended Notice contained a summary (“Amended Summary”) 8 showing receipts of $981,643.19 and approved disbursements of 9 $956,380.97, which left a balance of $25,262.22. The Amended 10 Notice did not include a fee request from the Trustee. The 11 Amended Notice indicated that a total of $25,262.22 was available 12 to pay chapter 7 administrative expenses. 13 The Trustee Accountant sought a total of $8,569 in fees and 14 disclosed that it already had received an interim payment of 15 $3,985.70. The Trustee proposed that the Trustee Accountant be 16 paid $312.75. The Trustee Attorney sought a total of $683,592 in 17 fees and disclosed that it already had received interim payments 18 totaling $317,959.56. The Trustee proposed that the Trustee 19 Attorney be paid $24,949.47. 20 The Debtor did not file a written opposition to the Amended 21 Final Report. Instead, he appeared at the July 18, 2013 hearing 22 on the Amended Final Report. 23 At the hearing, the Debtor referenced Local Rule 2016(a)(2), 24 which he construed as requiring the Trustee to schedule a hearing 25 on fee applications “at least within 120 days apart.” Tr. of 26 July 18, 2013 hr’g, 3:18. He argued that the Trustee violated 27 Local Rule 2016(a)(2) by setting the hearing only 35 days out 28 from the date on which he served the Amended Notice. He also
15 1 alleged that the Trustee Attorney had failed to serve its fee 2 application on him. The Debtor urged the bankruptcy court to 3 “deny” the Amended Final Report until the Supreme Court issued a 4 final ruling regarding the Surcharge Order. 5 At the hearing, the bankruptcy court pointed out that, 6 contrary to the Debtor’s assertion, the Amended Final Report had 7 been timely served on the Debtor. Tr. of July 18, 2013 hr’g, 8 11:20-22. It further pointed out that the Debtor failed to 9 submit a timely opposition pursuant to local bankruptcy court 10 procedures. Tr. of July 18, 2013 hr’g, 6:20-21, 11:23-24. 11 The bankruptcy court acknowledged that if the Debtor 12 prevailed before the Supreme Court, he would be entitled to more 13 than $25,000. Tr. of July 18, 2013 hr’g, 6:8-10. It also 14 acknowledged that parties who had received distributions of 15 bankruptcy estate funds might have to disgorge funds. Tr. of 16 July 18, 2013 hr’g, 6:12-14. It noted that if the Debtor 17 prevailed before the Supreme Court, the bankruptcy court itself 18 would address the issue of disgorgement. Tr. of July 18, 2013 19 hr’g, 6:8-12. However, the bankruptcy court stressed that the 20 Debtor did not obtain a stay barring the Trustee’s proposed 21 distribution of the remaining funds to the Trustee Attorney to 22 pay its already approved fees. Tr. of July 18, 2013 hr’g, 23 6:17-19, 12:2. Because the Debtor did not obtain a stay, there 24 was “nothing to establish that [the Debtor was] entitled to 25 anything.” Tr. of July 18, 2013 hr’g, 6:15-16. 26 The bankruptcy court therefore approved the Amended Final 27 Report. It entered its order on the Amended Final Report 28 (“Amended Fee Order”) on August 15, 2013.
16 1 The Debtor timely appealed. 2 3 JURISDICTION 4 The bankruptcy court had jurisdiction under 28 U.S.C. 5 §§ 1334 and 157. We have jurisdiction under 28 U.S.C. § 158. 6 7 ISSUES 8 (1) Does the Debtor have standing to challenge the Trustee 9 Attorney’s fees at the end of an insolvent chapter 7 case? 10 (2) Did the bankruptcy court abuse its discretion in 11 approving the Amended Final Report? 12 13 STANDARDS OF REVIEW 14 We are required sua sponte to examine jurisdictional issues, 15 including standing. Bernhardt v. Cnty. of Los Angeles, 279 F.3d 16 862, 868 (9th Cir. 2002)(“[F]ederal courts are required sua 17 sponte to examine jurisdictional issues such as standing.”) 18 (quoting B.C. v. Plumas Unified Sch. Dist., 192 F.3d 1260, 1264 19 (9th Cir. 1999)). “Standing is an issue of law which we review 20 de novo.” Palmdale Hills Prop., LLC v. Lehman Commercial Paper, 21 Inc. (In re Palmdale Hills Prop., LLC), 654 F.3d 868, 872 (9th 22 Cir. 2011). 23 We will not disturb a bankruptcy court’s award of attorneys’ 24 fees on appeal “absent an abuse of discretion or an erroneous 25 application of the law.” In re Nucorp Energy, Inc., 764 F.2d 26 655, 657 (9th Cir. 1985). We apply a two-part test to determine 27 objectively whether the bankruptcy court abused its discretion. 28 United States v. Hinkson, 585 F.3d 1247, 1261-62 (9th Cir.
17 1 2009)(en banc). First, we “determine de novo whether the 2 bankruptcy court identified the correct legal rule to apply to 3 the relief requested.” Id. Second, we examine the bankruptcy 4 court’s factual findings under the clearly erroneous standard. 5 Id. at 1252 & n.20. A bankruptcy court abuses its discretion if 6 it applied the wrong legal standard or its factual findings were 7 illogical, implausible or without support in the record. 8 Trafficschool.com, Inc. v. Edriver Inc., 653 F.3d 820, 832 (9th 9 Cir. 2011). 10 We do not disturb a bankruptcy court’s factual findings made 11 in the course of awarding fees unless they are clearly erroneous. 12 See Friedman Enters. v. B.U.M. Int’l, Inc. (In re B.U.M. Int’l, 13 Inc.), 229 F.3d 824, 830 (9th Cir. 2000). Factual findings are 14 clearly erroneous if they are “illogical, implausible or without 15 support in the record.” Retz v. Samson (In re Retz), 606 F.3d 16 1189, 1196 (9th Cir. 2010)(citing Hinkson, 585 F.3d at 1261-62 & 17 n.21). 18 We may affirm on any basis supported by the record. Shanks 19 v. Dressel, 540 F.3d 1082, 1086 (9th Cir. 2008). 20 21 DISCUSSION 22 A. Standing 23 As mentioned earlier, we must address the issue of the 24 Debtor’s standing to appeal, even though neither the Debtor nor 25 Trustee has raised it. See Bernhardt, 279 F.3d at 868. To have 26 standing to appeal, the Debtor must be a “person aggrieved” by 27 the order appealed. Id. at 874. A “person aggrieved” is one who 28 is “directly and adversely affected pecuniarily by an order of
18 1 the bankruptcy court.” Fondiller v. Robertson (In re Fondiller), 2 707 F.2d 441, 442 (9th Cir. 1983). “[A] hopelessly insolvent 3 Debtor does not have standing to appeal orders affecting the size 4 of the estate” because such orders “would not diminish the 5 Debtor’s property, increase his burdens, or detrimentally affect 6 his rights.” Id. 7 “Accordingly, ‘[u]nless the estate is solvent and the excess 8 will eventually go to the Debtor, or unless the matter involves 9 rights unique to the Debtor, the Debtor is not a party aggrieved 10 by orders affecting the administration of the bankruptcy 11 estate.’” C.W. Mining Co. v. Aquila, Inc. (In re C.W. Mining 12 Co.), 636 F.3d 1257, 1260 (10th Cir. 2011)(quoting In re Weston, 13 18 F.3d 860, 863-64 (10th Cir. 1994)). In other words, a Debtor 14 ordinarily “cannot challenge a bankruptcy court’s order unless 15 there is likely to be a surplus after bankruptcy.” Duckor 16 Spralding & Metzger v. Baum Trust (In re P.R.T.C., Inc.), 17 177 F.3d 774, 778 n.2 (9th Cir. 1999)(citing Fondiller, 707 F.2d 18 at 442)). 19 In this instance, now that the Supreme Court has issued a 20 ruling in the Debtor’s favor on the Surcharge Order, we cannot 21 conclude that the Debtor has no standing to contest further 22 administration of his bankruptcy estate. He does have a 23 financial stake in the administration of his estate until his 24 allowed $75,000 homestead exemption claim is paid even though his 25 bankruptcy estate clearly is insolvent. Accordingly, we conclude 26 that the Debtor has standing in this appeal. 27 B. Approval of the Amended Final Report 28 The Debtor advances various arguments challenging the
19 1 Amended Fee Order. But the essence of the Debtor’s arguments is 2 this: He is seeking payment of his homestead exemption now that 3 the Supreme Court has ruled that it cannot be surcharged. We 4 address each of the Debtor’s arguments, but ultimately determine 5 that this appeal is not the appropriate vehicle to pursue his 6 right to payment. 7 1. Compliance with Service Requirements 8 The Debtor repeats here an argument he made in his appeal of 9 the Original Fee Order: the Trustee Attorney failed to serve him 10 with the Final Attorney Fee Application as required under Local 11 Rule 2016-1(a)(2). However, he misreads the Local Rule. 12 Local Rule 2016-1(a)(2) does not apply to final fee 13 applications but to interim fee applications only.6 Local Rule 14 15 6 Local Rule 2016 provides in relevant part: 16 (a) Interim Fee Applications. 17 . . . (2) Notice of Interim Fee Application and Hearing. 18 (A) In all cases where the employment of more than one 19 professional person has been authorized by the court, a professional person who files an application for 20 interim fees must give other professional persons employed in the case not less than 45 days notice of 21 the date and time of the hearing. The notice of the 22 hearing must further state:
23 “Other professional persons retained pursuant to court approval may also seek approval of interim 24 fees at this hearing, provided that they file and 25 serve their applications in a timely manner. Unless otherwise ordered by the court, hearings on 26 interim fee applications will not be scheduled 27 less than 120 days apart.”
28 continue...
20 1 2016-1(c) actually pertains to final fee applications. But it 2 does not say what the Debtor claims it does. 3 Local Rule 2016-1(c) provides, in relevant part: 4 c) Final Fee Application. 5 (1) Who Must File. The trustee, if any, and each professional person employed in the case must file 6 a final fee application. (2) Contents. An application for allowance and 7 payment of final fees and expenses must contain the information required of an interim fee 8 application under LBR 2016-1(a)(1). . . . 9 10 11 6 12 ...continue (B) Applicant must serve not less than 21 days notice 13 of the hearing on the Debtor or Debtor in possession, 14 the trustee (if any), the creditors’ committee or the 20 largest unsecured creditors if no committee has been 15 appointed, any other committee appointed in the case, counsel for any of the foregoing, the United States 16 trustee, and any other party in interest entitled to 17 notice under FRBP 2002. The notice must identify the professional person requesting fees, the period covered 18 by the interim application, the specific amounts 19 requested for fees and reimbursement of expenses, the date, time and place of the hearing, and the deadline 20 for filing and serving a written opposition. (C) In addition to the notice, a copy of the 21 application, together with all supporting documents, 22 must be served on the Debtor or the Debtor in possession, the trustee (if any), any committee 23 appointed in the case, counsel for any of the foregoing, and the United States trustee. A copy of 24 the complete application must also be promptly 25 furnished upon specific request to any other party in interest. 26 (3) Objections. Any opposition or other responsive document 27 by the United States trustee or any other party in interest must be served and filed at least 14 days prior to the 28 hearing in the form required by LBR 9013-1(f).
21 1 (4) When Filed; Notice Required in Chapter 7 Cases. 2 (A) A chapter 7 trustee must give at least 30 days written notice of intent to file a final 3 report and account to the attorney for the Debtor, the trustee’s attorney and 4 accountant, if any, and any other entity entitled to claim payment payable as an 5 administrative expense of the estate. (B) A professional person seeking compensation 6 must file and serve an application for allowance and payment of final fees and expenses on the 7 trustee within 21 days of the date of the mailing of the trustee’s notice. The failure to timely 8 file an application may be deemed a waiver of compensation. 9 (C) All final fee applications by professional persons must be set for hearing with the chapter 7 10 trustee’s final application for allowance and payment of fees and expenses. Notice of a final 11 fee application must be given by the chapter 7 trustee as part of the notice of the hearing on 12 the trustee’s request for compensation. A separate notice by the applicant is not required. 13 (5) Objections. Any opposition or other responsive document by the United States trustee 14 or other party in interest must be served and filed at least 14 days prior to the hearing in the 15 form required by LBR 9013-1(f). 16 Nothing in the language of Local Rule 2016-1(c) required the 17 Trustee Attorney to serve the Debtor with a copy of the Final 18 Attorney Fee Application. As we noted in our prior disposition 19 concerning the Original Fee Order, we were “not aware of any rule 20 requiring the trustee or his professionals to serve their full 21 final fee applications on the Debtor in a chapter 7 case.” 22 In re Law, 2012 WL 603773 at *5. Based on our review of the 23 Local Rules, the Debtor’s argument is without merit. 24 2. Compliance with Prior Panel Orders7 25 26 7 The Debtor challenges the Trustee’s fees again in this 27 appeal. He argues that the Trustee failed to meet the requirements we set forth in our prior disposition. He further 28 continue...
22 1 The Debtor references two of our prior dispositions, one 2 issued on December 29, 2006, in Lin v. Siegel (In re Law), 2006 3 WL 6810960 (9th Cir. BAP 2006)(BAP No. 06-1180)(“Lin”), and the 4 other issued on October 5, 2007, in Law v. Siegel (In re Law), 5 2007 WL 7545164 (9th Cir. BAP 2007)(BAP No. CC-07-1127)(“Law I”). 6 He claims that in both of these dispositions, we reversed the 7 Surcharge Order. The Debtor contends that paying the Trustee 8 Attorney its fees before his homestead exemption, which has 9 “priority” over the Trustee Attorney’s fees, would contravene 10 these prior dispositions. 11 The Debtor is correct that in both dispositions, we reversed 12 bankruptcy court rulings with respect to the surcharge of his 13 homestead exemption. In Lin, we determined that no extraordinary 14 circumstances were shown to justify an equitable surcharge of the 15 Debtor’s entire homestead exemption, as required under then- 16 current Ninth Circuit case law. Lin, 2006 WL 6810960 at *8. 17 However, we also stated in Lin that “[w]e express no opinion 18 whether specific instances of mischief by the [Debtor] in the 19 past might support further monetary sanctions in the future, 20 including a surcharge against his exemption.” Id. at *8 21 (emphasis added). 22 In Law I, we dealt with the Debtor’s motion for an order 23 24 7 ...continue 25 contends that the Trustee failed to follow the requirements under § 330(a) and Local Rule 2016-1. The Debtor then accuses the 26 Trustee and the Trustee Attorney of “conspiring” together to take 27 bankruptcy estate funds. However, we conclude the Debtor’s challenge to the Trustee’s fees is moot, as the Trustee has 28 decided to forgo fees as indicated in the Amended Final Report.
23 1 directing the Trustee to pay him his claimed homestead exemption 2 (“Homestead Payment Motion”). The bankruptcy court had denied 3 the Homestead Payment Motion because it concluded that a pending 4 appeal of the Surcharge Order before the Ninth Circuit divested 5 it of jurisdiction. Law I, 2007 WL 7545164 at *3. We determined 6 that because the Trustee failed to challenge the validity of the 7 Debtor’s claimed homestead exemption, the Debtor’s right to the 8 homestead exemption became final. Id. at *4. Because the 9 Debtor’s claimed homestead exemption was final, we concluded that 10 the bankruptcy court had authority to act on the Homestead 11 Payment Motion and to issue an appropriate order, notwithstanding 12 the appeal of the Surcharge Order. Id. We therefore reversed 13 and remanded to the bankruptcy court for further proceedings and 14 to issue an appropriate order under the circumstances of the 15 case. Id. But we further noted that “the trustee may renew his 16 motion to surcharge the [Debtor’s] claimed homestead exemption, 17 as long as appropriate factual and legal bases exist to justify 18 such a surcharge . . . .” Id. 19 The Debtor seems to believe that these two prior 20 dispositions directed the Trustee to pay him the homestead 21 exemption. But we gave no such directive in our dispositions. 22 We reversed the bankruptcy court’s first ruling in Lin on the 23 ground that surcharging the Debtor’s entire homestead exemption 24 was unwarranted under Ninth Circuit authority at that time. We 25 reversed and remanded the bankruptcy court’s ruling in Law I on 26 the ground that the bankruptcy court had jurisdiction to make a 27 determination as to whether the Trustee should pay the Debtor his 28 homestead exemption. Neither Lin nor Law I required payment of
24 1 the Debtor’s homestead exemption to him. 2 The landscape of homestead exemption law has changed since 3 we issued Law and Lin; of course, we now recognize that the 4 Supreme Court has overruled prior Ninth Circuit and BAP 5 precedent. Still, the Debtor’s reading of Law and Lin is 6 incorrect. 7 3. Debtor’s Homestead Exemption 8 The Debtor echoes the Supreme Court’s reasoning by arguing 9 that his homestead exemption should not be surcharged to pay the 10 Trustee Attorney’s fees. He demands that, in light of the 11 Supreme Court’s ruling, the Trustee Attorney should disgorge its 12 fees to pay his homestead exemption. 13 Reviewing the bankruptcy case docket, we have discovered 14 that no arrangements have been made subsequent to the Supreme 15 Court’s decision, to pay the Debtor his homestead exemption. See 16 O’Rourke v. Seaboard Sur. Co. (In re E.R. Fegert, Inc.), 887 F.2d 17 955, 957-58 (9th Cir. 1988)(taking judicial notice of underlying 18 bankruptcy records); Atwood v. Chase Manhattan Mortg. Co. 19 (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003)(citing 20 E.R. Fegert, Inc., 887 F.2d at 957-58, for this same point)). We 21 note that, in the past, the Debtor unsuccessfully has sought 22 payment of his homestead exemption three times; on February 5, 23 2007, October 11, 2007, and April 10, 2008, the Debtor filed 24 motions for orders requiring the Trustee to pay the Debtor his 25 homestead exemption, which were denied by the bankruptcy court. 26 See docket nos. 193, 204, 225, 239, 259, 325 and 338. 27 We do not question that the Debtor is entitled to homestead 28 exemption funds. Under California law, once a Debtor is allowed
25 1 his claimed homestead exemption, a property right to $75,000 of 2 the proceeds of the sale of his home revests in the Debtor and is 3 no longer part of the bankruptcy estate. Schwaber v. Reed 4 (In re Reed), 940 F.2d 1317, 1321 (9th Cir. 1991)(citing Cal. 5 Civ. Proc. Code §§ 704.720 and 704.730). As we reasoned in 6 Law I, an unopposed homestead exemption claim is analogous to a 7 judgment. Law I, 2007 WL 7545164 at *3. “In the absence of an 8 order granting an extension of time, once the period to object to 9 a claimed exemption expires, a party-in-interest is time-barred 10 from challenging the validity of the exemption claim, and the 11 property claimed as exempt is exempt.” Id. “Similar to an 12 unstayed judgment, an unopposed homestead exemption claim stands 13 final.” Id. As we noted in Law I, the Debtor’s homestead 14 exemption is final because no party in interest challenged its 15 validity. 16 But the Debtor cannot use this appeal of the Amended Fee 17 Order to obtain payment on his homestead exemption claim. The 18 issue before us involves only a determination as to whether the 19 bankruptcy court erred in approving the Amended Final Report. 20 Among the criteria the bankruptcy court must consider in 21 determining the amount of reasonable compensation to be awarded a 22 trustee’s attorney, see § 330(a)(3)(A)-(E), it must look to 23 whether the services were necessary to the administration of or 24 beneficial toward the completion of a bankruptcy case. See Stasz 25 v. Gonzalez (In re Stasz), 2011 WL 6934442 at *4 (9th Cir. BAP 26 2011). The trustee bears the burden of establishing entitlement 27 to fees requested from the estate. Id. 28 The Debtor did not oppose the Final Attorney Fee
26 1 Application. He also did not oppose timely the Amended Final 2 Report. The Debtor further did not submit any evidence showing 3 that the services of the Trustee Attorney did not benefit the 4 estate or were unnecessary to its administration. (In fact, 5 through numerous actions over a lengthy period of time, the 6 Debtor hindered the administration of the estate, generating much 7 work for the Trustee Attorney.) Based on the record before us, 8 we cannot conclude that the bankruptcy court abused its 9 discretion in approving the Amended Final Report. 10 We point out that the bankruptcy court acknowledged that if 11 the Debtor prevailed before the Supreme Court, he would be 12 entitled to more than $25,000 (i.e., his claimed homestead 13 exemption). It further acknowledged that it may need to order 14 parties who received distributions of bankruptcy estate funds to 15 disgorge them to cover the Debtor’s homestead exemption. The 16 Debtor therefore must return to the bankruptcy court and seek 17 relief there in further proceedings, as contemplated by the 18 Supreme Court. This appeal is not the appropriate vehicle for 19 such relief. 20 21 CONCLUSION 22 Based on the foregoing, we AFFIRM. 23 24 25 26 27 28