In re BSJ Tower Associates, Bankruptcy No. B-81-00360-A.

• Decision Date: 13 April 1983
• Docket Number: Bankruptcy No. B-81-00360-A.
• Citation: 35 BR 131
• Parties: In re BSJ TOWER ASSOCIATES, Debtor.
• Court: U.S. Bankruptcy Court — District of Puerto Rico

35 B.R. 131 (1983)

In re BSJ TOWER ASSOCIATES, Debtor.

Bankruptcy No. B-81-00360-A.

United States Bankruptcy Court, D. Puerto Rico.

April 13, 1983.

Charles Cuprill Hernández, Ponce, P.R., for debtor.

David Freedman from O'Neill & Borges, Hato Rey, P.R., for GEPT.

OPINION AND ORDER

ANTONIO I. HERNANDEZ-RODRIGUEZ, Bankruptcy Judge.

On January 3, 1983, debtor-in-possession filed an application for appointment of appraiser nunc pro tunc and for approval of compensation. In said application debtor requests that we enter a nunc pro tunc order authorizing the appointment of Robert F. McCloskey as appraiser for BSJ Towers Inc., as of the date his services were rendered. Debtor also requests the nunc pro tunc approval by the court of disbursements by BSJ to Mr. McCloskey totalling the sum of $18,300.00. Said application has been opposed by General Electric Pension Trust ("GEPT"). Both parties have fully briefed the issue and the matter stands presently submitted for our consideration.

The parties agree on the factual background of this controversy: the appointment of the appraiser and the rendering of his services to debtor have already been performed. Mr. McCloskey was paid $18,300.00 for said services. The appointment of the appraiser, the rendering of his services and the actual compensation for services rendered was performed without this court's prior approval.

We thus address the specific issue facing us, to wit, whether to give retroactive validity to debtor's acts by issuing a nunc pro tunc order appointing Mr. McCloskey as appraiser as of the date when his services were first rendered and approving the compensation subsequently paid by debtor for such services.

Analysis

There should be no doubt that the equity powers vested in this court include the authority to issue a nunc pro tunc order such as the one sought in this case. In re Hite 2 F.Supp. 536 (W.D.Pa.1932). Thus, the scope of our present analysis is properly whether we should, in the exercise of our equitable discretion, issue said order.

The applicable law in regard to the appointment of professional persons to render services for the trustee or debtor is contained in section 327(a) of the Bankruptcy Code.:

"(a) Except as otherwise provided in this section, the trustee, with the court\'s approval, may employ one or more attorneys, accountants, appraiser, auctioneers, or other professional persons, that do not hold or represent an interest adverse to the estate, and that are disinterested persons, to represent or assist the trustee in carrying out the trustee\'s duties under this title." (Emphasis added).

11 U.S.C. section 327(a).

Rule 606 of the Bankruptcy Rules, dealing with the appraisal of property and the compensation and eligibility of appraisers, should also be taken into consideration. Such rule was applicable to Chapter X and Chapter XI proceedings under Rules 10-607 and 11-54 respectively, and at present should be interpreted together with section 327(a) of the Bankruptcy Code. Rule 606 provides in its pertinent parts:

"(a) Appraiser: Appointment and Duties. The Court shall appoint one or more competent and disinterested appraisers, unless it determines that such appointment is unnecessary. Unless the court directs otherwise, the appraiser or appraisers shall appraise all the property of the estate and shall prepare and file a report of the appraisal with the court . . . "

"(c) Compensation and Eligibility of Auctioneers and Appraisers. No auctioneers shall be employed or appraiser appointed except upon an order of the court fixing the amount or rate of compensation." (Emphasis added).

Bankruptcy Rule 606 is still applicable under the Bankruptcy Code, except that under section 327(a) of the Code, the Court now approves rather than appoint the appraiser to be employed by the trustee. See Collier, 1981 Pamphlet Edition, Part 2, p. 176.

Also applicable is Rule 2006 of the Interim Bankruptcy Rules, which provides:

"An order approving the employment of attorneys, accountants, appraisers, auctioneers, agents, or other professional persons pursuant to Rule 327 or Rule 1103 of the Bankruptcy Code shall be made only on application of the trustee or committee, stating the specific facts showing the necessity for such employment, the name of the person to be employed, the reasons for his selection, the professional services to be rendered, and to the best of the applicant\'s knowledge all of such person\'s connections with the debtor, the creditors, or any other party in interest, and their respective attorneys and accountants."

The statutory and regulatory scheme sketched above indicate, without doubt, that nunc pro tunc orders of appointment and compensation of appraisers are not to be favored. The rule is quite clear: before any services to a trustee or debtor-in-possession are rendered by a person, such services must be authorized by the court. In re Garland Corp. 8 B.R. 826, 828 (Bkrtcy. D.Mass.1981).

It is the "longstanding rule" that professional services performed for the estate or the debtor-in-possession may only be compensated by the estate if such services were authorized by the court prior to being rendered. See Collier, op. cit; In re Morton Shoe Companies, Inc., 22 B.R. 449, 450-51 (Bkrtcy.D.Mass.1982) (financial expert unauthorized by Court to render services to debtor denied compensation); In re W.F.D.R., Inc., 22 B.R. 266 (Bkrtcy.N.D.Ga.1982) (unauthorized management consultant denied compensation); In re Hydrocarbon Chemicals, Inc., 411 F.2d 203 (3rd Cir.1969) (Counsel employed without authorization by debtor's counsel denied compensation); In the Matter of Hucknall Agency, Inc., 1 B.R. 125 (Bkrtcy.W.D.N.Y.1979) (accountant ordered to return to estate unauthorized payments); In re Mork, 19 B.R. 947, 948-49 (Bkrtcy.Minn.1982) (accountants denied compensation for work not authorized by Court); In re Johnson, 21 B.R. 217 (Bkrtcy. D.C.1982) (attorneys denied compensation for work not authorized by Court); In re René Press, Inc., 23 B.R. 381 (Bkrtcy.Mass. 1982) (accountant denied compensation for services rendered without the authorization of the Court and ordered to return the sum of $4,400.00 already disbursed by the estate).

Notwithstanding the above debtor insists that a nunc pro tunc order is proper in this case and cites several cases in support of this proposition. Without citing said cases in extenso we think that a reasonable formulation of the rule contained in said case law is that a nunc pro tunc order of appointment and compensation of a professional person who has rendered services to a trustee or debtor in possession may be issued in cases showing extraordinary circumstances.

Does this case present us with such "extraordinary circumstances" as to move us to exercise our equity powers? We think not.

In re Hite, 2 F.Supp. 536 (W.D.Pa.1932), the receiver appointed by the Court had filed a petition requesting the appointment of an attorney, pursuant to General Order 44 (then 11 U.S.C.A. sec. 53). The appointment was properly made by the Court. Subsequently, the receiver was elected trustee but by inadvertence failed to formally request to the court the appointment of counsel. The same attorney continued to render services for the trustee. It is significant to note the reasoning of the Court in allowing compensation to the attorney:

"Although we are in accord with the general reasoning of the referee in his opinion, wherein he explains his reason for refusing the nunc pro tunc order and allowance of compensation, we are of the opinion that his order in the instant matter is not demanded by General Order 44. It is the undoubted intent of that order that before an attorney can be appointed a proper showing must be made as to the necessity of the appointment, and the absence of disqualifying interests in the person suggested for appointment. Had the Court not passed upon the necessity of counsel and the qualifications of the attorney proposed, by order approving appointment of the attorney for the receiver, we should feel compelled to agree with the position of the referee in holding that a nunc pro tunc order would not be permissible. But the petition and affidavit contemplated by the General Order having been made, and the necessity of counsel and the qualifications of the attorney suggested having been determined by the Court, we feel that the essential requirements of the General Order have been met." (Emphasis added).

The facts recited above are very different from those in the instant case, where Debtor appointed, without the Court's approval, Mr. Robert McCloskey as BSJ's appraiser and disbursed, with no previous authorization, sums totalling $18,300.00.

A similar situation to that in In re Hite, supra, existed in the case of In the Matter of Womack, Inc., 1 B.R. 95 (Bkrtcy.D.Ne...