Goodman v. Doll (In re Doll)

• Decision Date: 18 January 2023
• Docket Number: 22-1004
• Citation: 57 F.4th 1129
• Parties: IN RE: Daniel Richard DOLL, Debtor. Adam M. Goodman, Chapter 13 Trustee, Appellant, v. Daniel Richard Doll, Appellee. The National Association of Chapter 13 Trustees; National Consumer Bankruptcy Rights Center; National Association of Consumer Bankruptcy Attorneys, Amici Curiae.
• Court: U.S. Court of Appeals — Tenth Circuit

57 F.4th 1129

IN RE: Daniel Richard DOLL, Debtor.Adam M. Goodman, Chapter 13 Trustee, Appellant,

v. Daniel Richard Doll, Appellee.The National Association of Chapter 13 Trustees; National Consumer Bankruptcy Rights Center; National Association of Consumer Bankruptcy Attorneys, Amici Curiae.

No. 22-1004

United States Court of Appeals, Tenth Circuit.

FILED January 18, 2023

Adam M. Goodman (Jennifer K. Cruseturner, Staff Attorney for Trustee Adam M. Goodman on the briefs), Denver, Colorado, for Appellant Goodman.

Stephen E. Berken (Sean M. Cloyes with him on the brief), Berken Cloyes, P.C., Denver, Colorado, for Appellee Doll.

Henry E. Hildebrand, III, Chapter 13 Standing Trustee, and James M. Davis, Staff Attorney, Nashville, Tennessee, filed an Amicus Curiae brief for the National Association of Chapter Thirteen Trustees, in support of Appellant.

Tara Twomey, National Consumer Bankruptcy Rights Center, San Jose, California, filed an Amici Curiae brief for the National Consumer Bankruptcy Rights Center and the National Association of Consumer Bankruptcy Attorneys, in support of Appellee.

Before HOLMES, Chief Judge, EBEL, and EID, Circuit Judges.

EBEL, Circuit Judge.

This bankruptcy appeal presents a question of statutory interpretation involving the fee a debtor pays to a standing trustee appointed in the debtor's Chapter 13 reorganization case. A Chapter 13 debtor makes payments to a trustee who then disburses those payments to creditors according to a confirmed reorganization plan. A Chapter 13 standing trustee is compensated through fees he collects by taking a percentage of these payments the trustee receives from the debtor. 28 U.S.C. § 586(e)(2) directs that the standing trustee "shall collect" his fee "from all payments received ... under" Chapter 13 reorganization plans for which he serves as trustee. 11 U.S.C. § 1326(a)(1) provides that a Chapter 13 debtor "shall commence making payments" to the standing trustee within thirty days of the date the debtor files a proposed reorganization plan. Often these payments begin before the confirmation hearing on the proposed plan occurs. In light of that, 11 U.S.C. § 1326(a)(2) directs the standing trustee to "retain" these pre-confirmation payments until the confirmation hearing, when the proposed reorganization plan is either confirmed or confirmation is denied. Id. § 1326(a)(2). "If a plan is confirmed, the trustee shall distribute any such [pre-confirmation] payment in accordance with the plan ...." Id. But "[i]f a plan is not confirmed, the trustee shall return any such [pre-confirmation] payments ... to the debtor." Id. The question presented here is: If a plan is not confirmed, can the standing trustee deduct and keep his fee before returning the rest of the pre-confirmation payments to the debtor or must the trustee instead return the entire amount of pre-confirmation payments to the debtor without deducting his fee? We conclude that, read together, 28 U.S.C. § 586(e)(2) and 11 U.S.C. § 1326(a)(2) unambiguously require the trustee to return the pre-confirmation payments to the debtor without deducting the trustee's fee when a plan is not confirmed. Our conclusion is bolstered by the fact that, in bankruptcies under Chapter 12 and Chapter 11 (Subchapter V), Congress expressly directed a standing trustee to deduct his fee before returning pre-confirmation payments to the debtor when a proposed plan is not confirmed, but Congress did not direct Chapter 13 standing trustees to deduct their fee before returning pre-confirmation payments to the debtor. Having jurisdiction under 28 U.S.C. § 158(d)(1), we, therefore, AFFIRM the district court's decision denying the trustee his fee in this case.

I. BACKGROUND

A. Chapter 13 bankruptcies generally

"Congress established two main types of consumer bankruptcy": liquidation under Chapter 7 and reorganization under Chapter 13. In re Johnson, 634 B.R. 806, 807 (Bankr. D. Colo. 2021). Chapter 13, at issue here,

provides bankruptcy protection to "individual[s] with regular income" whose debts fall within statutory limits. 11 U.S.C. §§ 101(30), 109(e). Unlike debtors who file under Chapter 7 and must liquidate their nonexempt assets in order to pay creditors, see §§ 704(a)(1), 726, Chapter 13 debtors are permitted to keep their property, but they must agree to a court-approved plan under which they pay creditors out of their future income, see §§ 1306(b), 1321, 1322(a)(1), 1328(a).

Hamilton v. Lanning, 560 U.S. 505, 508, 130 S.Ct. 2464, 177 L.Ed.2d 23 (2010). Chapter 13, thus,

affords individuals receiving regular income an opportunity to obtain some relief from their debts while retaining their property. To proceed under Chapter 13, a debtor must propose a plan to use future income to repay a portion (or in the rare case all) of his debts over the next three to five years. If the bankruptcy court confirms the plan and the debtor successfully carries it out, he receives a discharge of his debts according to the plan.

Bullard v. Blue Hills Bank, 575 U.S. 496, 498, 135 S.Ct. 1686, 191 L.Ed.2d 621 (2015). "A bankruptcy trustee oversees the filing and execution of a Chapter 13 debtor's plan." Hamilton, 560 U.S. at 508, 130 S.Ct. 2464. "The plan ... shall provide for the submission of all or such portion of future earnings or other future income of the debtor to the supervision and control of the trustee as is necessary for the execution of the plan." 11 U.S.C.A. § 1322(a)(1).

1. Standing trustees

There will, then, always be a trustee of some sort appointed in a Chapter 13 case. See Hamilton, 560 U.S. at 508, 130 S.Ct. 2464 ; see also 11 U.S.C. § 1302. In this case, there was a standing trustee. Congress provided for the possibility of standing trustees as part of its U.S. Trustee program.

Generally speaking, before 1978, bankruptcy courts conducted administrative tasks for each bankruptcy case themselves or, when necessary, bankruptcy courts appointed private trustees to conduct administrative tasks in a given case. See Siegel v. Fitzgerald, ––– U.S. ––––, 142 S. Ct. 1770, 1775, 213 L.Ed.2d 39 (2022). Bankruptcy courts would oversee and approve the compensation for a private trustee's work and expenses in each case. Beginning with a pilot program in 1978, which was made permanent in 1986, Congress "transferred the administrative functions previously handled by the bankruptcy courts to newly created U.S. Trustees, housed within the Department of Justice rather than the Administrative Office of the U. S. Courts." Id. at 1776. As part of that transfer, Congress directed the Attorney General to appoint a U.S. Trustee for each judicial district (except those in Alabama and North Carolina), and to supervise those U.S. Trustees. See 28 U.S.C. §§ 581, 586(c) ; see also Siegel, 142 S. Ct. at 1776. Compensation for the U.S. Trustee program is based on "user fees" paid by debtors. Siegel, 142 S. Ct. at 1776. Reflecting Congress’ transfer of administrative duties from bankruptcy courts to the U.S. Trustee Program, which is part of the Department of Justice, the statutes addressing the U.S. Trustee Program are found in Title 28 of the U.S. Code, rather than in Title 11, which contains the Bankruptcy Code.

Congress authorized U.S. Trustees to appoint, when necessary, and then to supervise "standing trustees" in several types of bankruptcy cases, including those filed under Chapter 13:

If the number of cases under subchapter V of chapter 11 or chapter 12 or 13 of title 11 commenced in a particular region so warrants, the United States trustee for such region may, subject to the approval of the Attorney General, appoint one or more individuals to serve as standing trustee, or designate one or more assistant United States trustees to serve in cases under such chapter.

28 U.S.C. § 586(b) (emphasis added). Section 586(b), then, addresses standing trustees for Chapter 13 cases, as well as Chapter 12 cases involving reorganization by family farmers and fishermen and cases under Chapter 11 (Subchapter V) involving small business reorganization. See generally 11 U.S.C. §§ 1183(a), 1202(a), 1302(a) (addressing appointment of standing trustees in these types of cases).

As we have said, there will always be a trustee of some sort appointed in a Chapter 13 case. See Hamilton, 560 U.S. at 508, 130 S.Ct. 2464 ; see also 11 U.S.C. § 1302. If the U.S. Trustee for a district does not invoke 28 U.S.C. § 586(b) to appoint one or more standing trustees, the U.S. Trustee can designate an assistant U.S. Trustee to act as trustee in Chapter 13 cases, see 28 U.S.C. § 586(b), or appoint a "disinterested" private trustee in a given case, see 11 U.S.C. § 1302(a). This case involves a standing trustee appointed by the U.S. Trustee for the District of Colorado.

The trustee performs a number of duties in a Chapter 13 case, both before and after a plan's confirmation. Id. § 1302(b) - (d) ; see McCallister v. Harmon (In re Harmon), BAP No. ID-20-1168-LSG, 2021 WL 3087744, at *7 (BAP 9th Cir. July 20, 2021) (unpublished) (describing standing trustee's pre-confirmation duties). Those duties include facilitating the debtor's development of a proposed reorganization plan and receiving payments from the debtor and disbursing those payments to creditors according to a confirmed reorganization plan.

A standing trustee is compensated through fees paid by debtors. Those fees are based on a percentage of the payments the trustee receives from the debtor for disbursement to creditors under the confirmed reorganization plan. See 28 U.S.C. § 586(e). The Attorney General sets the standing trustee's maximum annual compensation, id. § 586(e)(1)(A), and, after considering the standing trustee's annual compensation and his projected yearly expenses, the Attorney General establishes a percentage of the payments that the trustee receives from the debtor that the trustee will take as his fee. Id. § 586(e)(1)(B). For Chapter 13 bankruptcies, Congress has capped that "percentage fee" at 10%, id. § 586(e)(1...