In re Evans

• Decision Date: 13 February 2020
• Docket Number: Bankruptcy Case No. 19-40193-JMM
• Citation: 615 B.R. 290
• Parties: IN RE: Roger A. EVANS and Lori A. Steedman Debtors.
• Court: U.S. Bankruptcy Court — District of Idaho

615 B.R. 290

IN RE: Roger A. EVANS and Lori A. Steedman Debtors.

Bankruptcy Case No. 19-40193-JMM

United States Bankruptcy Court, D. Idaho.

Signed February 13, 2020

Alexandra O. Caval, CAVAL LAW OFFICE, Twin Falls, Idaho, Attorney for Debtors.

Kathleen A. McCallister, Meridian, Idaho, Chapter 13 Trustee.

Brett R. Cahoon, Boise, Idaho, Attorney for Acting United States Trustee

MEMORANDUM OF DECISION

JOSEPH M. MEIER, CHIEF U. S. BANKRUPTCY JUDGE

Introduction

In this chapter 13¹ case, the Court addresses an issue concerning the disgorgement of a trustee's fees in the event a case is dismissed prior to plan confirmation. The standing Chapter 13 trustee, Kathleen A. McCallister ("Trustee"), filed her final report and account on October 30, 2019. Dkt. No. 29. On November 21, 2019, the debtors, Roger Evans and Lori Steedman ("Debtors"), filed an objection to Trustee's final report claiming that the Trustee lacks the statutory authority to retain the "Trustee Expenses and Compensation" because the case was dismissed prior to plan confirmation. Dkt. No. 31. Debtors filed an amended objection on the same date. Dkt. No. 32. The Court conducted a hearing on the Debtor's objection on December 10, 2019, and thereafter took the matter under advisement. Dkt. No. 36. The Court has considered the stipulated facts, briefs, and arguments of counsel, as well as the applicable law, and this memorandum of decision constitutes the Court's findings and conclusions, and explains the reasons for its disposition of the Objection. Rules 7052; 9014.

Facts

Debtors filed this Chapter 13 case on March 7, 2019, and a plan was filed on the same date, but no plan was ever confirmed. Dkt. No. 34. During the pendency of this case, Trustee received a total of $11,600 in payments from the Debtors, but no payments were disbursed to creditors. Dkt. No. 35. The Debtors filed a voluntary motion to dismiss on September 18, 2019. Dkt. No. 26. The Trustee filed a final report and account on October 30, 2019. Dkt. No. 34. The Trustee disbursed $1,081.80 for trustee expenses and compensation and returned the balance to the Debtors. Dkt. No. 38. The Debtors objected to the final report and account and sought an order requiring the Trustee to disgorge her fees and return the $1,081.80 to the Debtors. Id. The acting United States Trustee for Region 18 ("U.S. Trustee") filed a response to Debtors' objection in support of the Trustee, Dkt. No. 34, as did the Trustee. Dkt. No. 35.

The Court heard oral argument on the objection on December 10, 2019, and permitted the parties to file supplemental briefings. Dkt. No. 37. Trustee argues that she is entitled to the trustee expenses pursuant to § 586(e) whether or not a plan is confirmed. Dkt. No. 39. Debtors argue that Trustee must disgorge all fees collected pursuant to § 1326(a)(2) because the case was dismissed prior to plan confirmation. Dkt. No. 38.

For the reasons set forth below, this Court finds that § 586(e)(2) directs the trustee to collect and hold the payments pending plan confirmation, while § 1326(a)(2) tells the trustee when and how to disburse payments before or after confirmation.

Analysis and Disposition

"Determining whether a standing Chapter 13 trustee is entitled to a statutory fee in a case dismissed before confirmation of a debtor's Chapter 13 plan requires construction of two statutes, specifically, 11 U.S.C. § 1326 and 28 U.S.C. § 586(e)." In re Lundy , No. 15-32271, 2017 WL 4404271, at *4 (Bankr. N.D. Ohio Sept. 29, 2017). The issue presented is, in a case dismissed prior to confirmation, whether § 1326(a)(2) requires a chapter 13 trustee to disgorge all fees collected, or whether § 586(e) entitles the trustee to retain her compensation. The controlling statutes do not provide clear guidance, and few courts have addressed the issue. Among those that have, there is disagreement about how the two statutes should be applied.²

A. Statutes at Issue

1. 28 U.S.C. § 586(e)

Section 586, entitled "Duties," provides the following:

(2) [The standing trustee] 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 [the statutorily required amounts] ....

§ 586(e)(2).

2. 11. U.S.C. § 1326(a)

Section 1326, entitled "Payments," provides the following:

(a) (1) Unless the court orders otherwise, the debtor shall commence making payments not later than 30 days after the date of the filing of the plan ... in the amount—

(A) proposed by the plan to the trustee;

....

(2) A payment made under paragraph (1)(A) shall be retained by the trustee until confirmation or denial of confirmation. If a plan is confirmed, the trustee shall distribute any such payment in accordance with the plan as soon as is practicable. If a plan is not confirmed, the trustee shall return any such payments not previously paid out and not yet due and owing to creditors pursuant to paragraph (3) to the debtor, after deducting any unpaid claim allowed under section 503(b).

§ 1326(a).

3. The Apparent Conflict

The statutes quoted above appear to conflict. The language in § 586(e) directs the trustee to collect the trustee percentage fee from all payments received while § 1326(a)(2) requires, in a case dismissed prior to confirmation, the trustee to return any payments not yet due and owing to creditors back to the debtor.³

This Court has reviewed several decisions that have wrestled with the interpretation of the statutes, as well as the legislative history. For the reasons set forth below, the statutes, especially when construed together, are ambiguous. It is not clear from the statutory language whether Congress intended to allow a trustee to collect her fee on all payments received pre- or post-confirmation, or intended to limit a trustee's fee to a percentage of post-confirmation disbursements.

B. Rules of Statutory Interpretation

When interpreting a statute, the court's "task is to construe what Congress has enacted." Duncan v. Walker , 533 U.S. 167, 172, 121 S. Ct. 2120, 2124, 150 L. Ed. 2d 251 (2001). Courts will "look first to the plain language of the statute, construing the provisions of the entire law, including its object and policy, to ascertain the intent of Congress." Nw. Forest Res. Council v. Glickman , 82 F.3d 825, 830 (9th Cir. 1996) (internal quotation marks and citation omitted). "A primary canon of statutory interpretation is that the plain language of a statute should be enforced according to its terms, in light of its context." ASARCO, LLC v. Celanese Chem. Co. , 792 F.3d 1203, 1210 (9th Cir. 2015) (citing Robinson v. Shell Oil Co. , 519 U.S. 337, 340, 117 S. Ct. 843, 846, 136 L. Ed. 2d 808 (1997) ; Wilshire Westwood Assocs. v. Atl. Richfield Corp. , 881 F.2d 801, 803 (9th Cir. 1989) ). "If the terms are ambiguous, [the Court] may look to other sources to determine congressional intent, such as the canons of construction or the statute's legislative history." United States v. Nader , 542 F.3d 713, 717 (9th Cir. 2008) (citing Jonah R. v. Carmona , 446 F.3d 1000, 1005 (9th Cir. 2006) ). However, courts will resort to legislative history, even where the plain language is unambiguous, "where the legislative history clearly indicates that Congress meant something other than what it said." Perlman v. Catapult Entm't, Inc. (In re Catapult Entm't, Inc. ), 165 F.3d 747, 753 (9th Cir. 1999).

1. The Court must construe every statute in context to avoid superfluities and give every word some operative effect

"Where Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion." Russello v. United States , 464 U.S. 16, 23, 104 S. Ct. 296, 300, 78 L. Ed. 2d 17 (1983). The statute is construed in context to avoid superfluities. Hibbs v. Winn , 542 U.S. 88, 101, 124 S. Ct. 2276, 2286, 159 L. Ed. 2d 172 (2004). If possible, a court will "construe a statute to give every word some operative effect." Cooper Indus., Inc. v. Aviall Servs., Inc. , 543 U.S. 157, 158, 125 S. Ct. 577, 579, 160 L. Ed. 2d 548 (2004) (citing United States v. Nordic Vill., Inc. , 503 U.S. 30, 35–36, 112 S. Ct. 1011, 1015, 117 L. Ed. 2d 181 (1992) ).

In order to construe the meaning of the statutes, it is important to consider the parallel provision in chapter 12.

Section 1226(a), provides:

(a) Payments and funds received by the trustee shall be retained by the trustee until confirmation or denial of confirmation of a plan. If a plan is confirmed, the trustee shall distribute any such payment in accordance with the plan. If a plan is not confirmed, the trustee shall return any such payments to the debtor, after deducting—

(1) any unpaid claim allowed under section 503(b) of this title; and

(2) if a standing trustee is serving in the case, the percentage fee fixed for such standing trustee.

11 U.S.C. § 1226(a) (emphasis added). A leading bankruptcy treatise states "the authority granted to the standing chapter 12 trustee to deduct a percentage fee is unique to chapter 12. When a chapter 13 plan is denied confirmation, a standing chapter 13 trustee is authorized to pay unpaid administrative claims but is not authorized to deduct the standing trustee's percentage fee." 8 COLLIER ON BANKRUPTCY ¶ 1226.01 (Richard Levin & Henry J. Sommer eds., 16th ed.).

The court in In re Lundy discussed the difference between chapters 12 and 13:

Congress knows how to provide for allowance of a standing trustee's percentage fee in cases where a plan is not confirmed. Section § 1226(a) was enacted in 1986, two years after Congress added what is now § 1326(a). At that time, § 1326 was also amended ... yet Congress did not include a similar provision in § 1326(a).

In re Lundy , ...