In re Dickens

• Citation: 513 B.R. 906
• Decision Date: 25 July 2014
• Docket Number: No. 4:12–bk–16982 E.,4:12–bk–16982 E.
• Parties: In re Richard DICKENS and Lee Ann Dickens, Debtors.
• Court: United States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — Eastern District of Arkansas

513 B.R. 906

In re Richard DICKENS and Lee Ann Dickens, Debtors.

No. 4:12–bk–16982 E.

United States Bankruptcy Court,

E.D. Arkansas,

Little Rock Division.

Signed July 25, 2014.

Joyce Bradley Babin, Chapter 13 Standing Trustee, Little Rock, AR, Trustee.

Kimberley F. Woodyard, Attorney at Law, Little Rock, AR, for Debtors.

MEMORANDUM OPINION AND ORDER GRANTING MOTION TO DISGORGE TRUSTEE'S FEE

AUDREY R. EVANS, Bankruptcy Judge.

Now before the Court is an Amended Motion to Disgorge Trustee's Fee, filed by Kimberley F. Woodyard on behalf of Richard William Dickens and Lee Ann Dickens (the “Debtors”). (Dkt. # 96). Joyce Bradley Babin, the standing Chapter 13 Trustee (the “Trustee”), has filed a response and objection to the Debtors' amended motion. (Dkt. # 102). Charles W. Tucker has also filed a response and objection to the Debtors' Amended Motion, on behalf of the United States Trustee (the “U.S. Trustee”). (Dkt. # 106).

The issue before the Court is whether the Trustee is permitted to retain a collected percentage fee provided for by 28 U.S.C. § 586 when the Debtors' case was dismissed prior to confirmation of a plan. This issue has been percolating through the courts recently.¹ Joined by the U.S. Trustee, the Trustee asserts that § 586 unambiguously provides for the retention of the fee in such cases. The Debtors argue that § 586 is ambiguous and must be read in conjunction with 11 U.S.C. 1326(a) of the Bankruptcy Code. By reading these statutory provisions together, the Debtors maintain that they are entitled to a refund of certain percentage fees collected by the Trustee in their case. For the reasons stated below, the Court finds that the Trustee must remit the percentage fee to the Debtors. Accordingly, the Debtors' Amended Motion to Disgorge Trustee's Fee is granted.

A motion to disgorge a trustee's fee is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), and the Court has jurisdiction to enter a final judgment in the case. The following constitutes the Court's findings of fact and conclusions of law pursuant to Federal Rules of Bankruptcy Procedure 7052 and 9014.

FACTS

The basic facts of this case are not in dispute. The Debtors filed a voluntary Chapter 13 petition along with their proposed plan on December 2, 2012. Paragraph 3(A) of the form language of the Debtors' plan provided: “Trustee's Fees and Expenses. Trustee shall receive a fee for each disbursement, the percentage of which is fixed by the United States Trustee.” (Dkt. # 2). After the meeting of creditors was held pursuant to 11 U.S.C. § 341(a), the Debtors filed a modified plan that retained the language in Paragraph 3(A). See Ch. 13 Amend. Plan (listing changes in payments to creditors) (Dkt. # 27). The modified plan was never confirmed, and on September 27, 2013, the Court entered an order granting the Debtors' motion to dismiss their case.

After the case was dismissed on November 26, 2013, the Trustee submitted her “Final Report and Account” to the Court. (Dkt. # 92). The report indicates that the Debtors made eight payments under their proposed original and modified plans totaling $21,900.² The report further reflects that upon dismissal of their case, the Trustee returned $11,770.55 to the Debtors.

Of the $21,900 paid by the Debtors to the Trustee, $9,000 went to monthly adequate protection payments to two secured creditors: Wells Fargo Bank, N.A. and Santander Consumer USA Inc. When the adequate protection payments were disbursed, the Trustee withheld and retained a percentage fee. The Trustee's collected percentage fee on adequate protection payments totaled $477.26.³ Neither the adequate protection payments nor the percentage fee collected on them were returned upon dismissal of the Debtors' case, and these monies are not at issue in this case. The dispute in this case involves the $652.19 percentage fee deducted by the Trustee from the remaining undisbursed funds that were returned to the Debtors.

Shortly after the Trustee issued her final report, the Debtors filed a Motion to Disgorge Trustee's Fee on December 2, 2013. (Dkt. # 93).⁴ Citing the recent decision In re Acevedo, 497 B.R. 112 (Bankr.D.N.M.2013), the Debtors argue the Trustee is not permitted to retain a percentage fee in a case that is dismissed prior to confirmation of a Chapter 13 plan. Therefore, upon dismissal of their case, they maintain that the Trustee should have returned the $652.19 in addition to the $11,770.55. The Trustee and the U.S. Trustee, objected to the Debtors' motion on numerous grounds. A hearing on the motion was held on January 30, 2014, and considerable testimony was given on how the percentage fee is set and collected in Chapter 13 cases in this district. Given the complexity of the legal arguments raised by the parties, the Court permitted additional closing briefs to be submitted. The Court has carefully read those briefs and now issues its decision.

DISCUSSION

The dispute between the parties boils down to how to interpret 28 U.S.C. § 586(e) and 11 U.S.C. § 1326(a).⁵ The U.S. Trustee and the Trustee argue that § 586 unambiguously provides for the retention of a percentage fee by the standing Chapter 13 trustee when a case is dismissed prior to confirmation of a plan. The Debtors argue that § 586 is ambiguous and must be read in conjunction with § 1326(a). Reading these two provisions together, they contend that § 586(e) specifies how the fee is collected while § 1326(a) governs when the fee must be returned to the debtor. In their view, when a Chapter 13 case is dismissed prior to confirmation of a plan, § 1326(a) requires the return of the collected percentage fee. In interpreting § 586 and § 1326(a), the Court is guided by longstanding principles of statutory construction.

Principles of Statutory Construction

Interpretation of a statute begins “where all such inquiries must begin: with the language of the statute itself.” Ransom v. FIA Card Servs., N.A., ––– U.S. ––––, 131 S.Ct. 716, 723–24, 178 L.Ed.2d 603 (2011) (quoting United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989)). “Where statutory language is plain, ‘the sole function of the courts—at least where the disposition required by the text is not absurd—is to enforce it according to its terms.’ ” Contemporary Indus. Corp. v. Frost, 564 F.3d 981, 985 (8th Cir.2009) (quoting Lamie v. United States Tr., 540 U.S. 526, 534, 124 S.Ct. 1023, 157 L.Ed.2d 1024 (2004)). Undefined terms in a statute are to be given their ordinary meaning. See Clark v. Rameker, ––– U.S. ––––, 134 S.Ct. 2242, 2246, 189 L.Ed.2d 157 (2014); Ransom, 131 S.Ct. at 724 (citing Hamilton v. Lanning, 560 U.S. 505, 513, 130 S.Ct. 2464, 177 L.Ed.2d 23 (2010)). The Court is also cognizant that:

[s]tatutory construction ... is a holistic endeavor. A provision that may seem ambiguous in isolation is often clarified by the remainder of the statutory scheme—because the same terminology is used elsewhere in a context that makes its meaning clear ... or because only one of the permissible meanings produces a substantive effect that is compatible with the rest of the law....

United Sav. Ass'n v. Timbers of Inwood Forest Assocs., 484 U.S. 365, 371, 108 S.Ct. 626, 98 L.Ed.2d 740 (1988). With these principles in mind, the Court turns to the two statutory provisions at issue.

28 U.S.C. § 586(e)

Section 586(e)(1) requires the Attorney General to consult with the U.S. Trustee and “fix” a maximum annual compensation and a percentage fee for standing trustees in Chapter 12 and Chapter 13 cases. 28 U.S.C. § 586(e)(1). In Chapter 13 cases, the percentage fee cannot exceed ten percent of all payments received by the standing trustee under the plan. See id. §§ 586(e)(1)(B)(i) & (e)(2). Subsection (e)(2) delineates how the percentage fee is collected:

(2) Such individual shall collect such percentage fee from all payments received by such individual under plans in the cases under chapter 12 or 13 of title 11 for which such individual serves as standing trustee. Such individual shall pay to the United States trustee, and the United States trustee shall deposit in the United States Trustee System Fund—

(A) any amount by which the actual compensation of such individual exceeds 5 per centum upon all payments received under plans in cases under chapter 12 or 13 of title 11 for which such individual serves as standing trustee; and

(B) any amount by which the percentage for all such cases exceeds—

(i) such individual's actual compensation for such cases, as adjusted under subparagraph (A) of paragraph (1); plus

(ii) the actual, necessary expenses incurred by such individual as standing trustee in such cases. Subject to the approval of the Attorney General, any or all of the interest earned from the deposit of payments under plans by such individual may be utilized to pay actual, necessary expenses without regard to the percentage limitation contained in subparagraph (d)(1)(B) of this section.

28 U.S.C. § 586(e)(2).

The Debtors argue that § 586(e)(2) does not provide a clear answer to the question of whether percentage fees can be retained in cases where a Chapter 13 plan is not confirmed. Conversely, the U.S. Trustee and the Trustee take the position that § 586(e)(2) is unambiguous and “clearly authorizes standing trustees to be paid their percentage fees in all their cases, regardless of whether a plan has been confirmed.” Resp. to and Obj. to Debtors' Amend. Mot. to Disgorge Trustee's Fee at 1–2 (Dkt. # 106); Br. in Supp. of Tr.'s Resp. and Obj. to Mot. to Disgorge Trustee's Fee at 10–15 (Dkt. # 108). Their argument is tied to the first sentence in § 586(e)(2), providing that standing trustees “... shall collect such percentage fee from all payments received ... under plans” in Chapter 13 cases. They argue (1) “plans” includes both confirmed and unconfirmed plans; (2) “collect” means to “obtain payment”; and (3) payment of the percentage fee is irrevocable and cannot be returned to the...