In re Financial Corp. of America, BAP No. CC-89-1823 MeOV
| Decision Date | 30 May 1990 |
| Docket Number | BAP No. CC-89-1823 MeOV,Bankruptcy No. SA 88-05405-JW. |
| Citation | 114 BR 221 |
| Parties | In re FINANCIAL CORPORATION OF AMERICA, Debtor. David A. GILL, Chapter 11 Trustee, Appellant, v. Davis H. von WITTENBURG, United States Trustee, Appellee. |
| Court | U.S. Bankruptcy Appellate Panel, Ninth Circuit |
Richard K. Diamond, Los Angeles, Cal., for David Gill, Chapter 11 Trustee.
Arthur N. Marquis, Santa Ana, Cal., for Davis H. von Wittenburg.
Before MEYERS, OLLASON and VOLINN, Bankruptcy Judges.
I
A trustee in bankruptcy under Chapter 11 of the Bankruptcy Code ("Code") turned over substantial funds to himself as Chapter 7 trustee when the case was converted. As Chapter 11 trustee he then sought fees based in part on such funds. From a denial of fees on those funds, the Chapter 11 trustee appeals. REVERSED and REMANDED.
II
The facts are not disputed. The debtor, Financial Corporation of America ("FCA"), was chiefly engaged in business as the owner of a securities brokerage firm and the American Savings & Loan Association, the assets of which had been seized by the Federal Savings and Loan Insurance Corporation. FCA filed for reorganization under Chapter 11 of the Code on September 9, 1988, and four days later David A. Gill ("Gill") was appointed as the trustee.
Gill served as Chapter 11 trustee until March 3, 1989, when he successfully moved to have the case converted to Chapter 7. On March 7, 1989, Gill was appointed Chapter 7 trustee.
As Chapter 11 trustee Gill paid out a total of $5,208,189.93. Of this amount, $3,663,192.48 was turned over to himself as Chapter 7 trustee and the remainder of $1,544,997.45 was disbursed to various other parties. In filing his final account Gill sought a fee award of $150,000. If the entire sum of $5,208,189.93 qualifies as "moneys disbursed or turned over in the case" under Section 326(a) of the Code, the maximum allowable compensation to the trustee under that Section would be $156,425.70. However, if only the disbursements of $1,544,997.45, to parties other than the Chapter 7 trustee, qualify under the language of Section 326(a), the maximum compensation of the trustee would be $46,529.92.
The United States Trustee objected to Gill's proposed award of $150,000 on the ground that the turnover of $3,663,192.48 to himself as Chapter 7 trustee should not be counted for purposes of determining the ceiling on Chapter 11 trustee compensation. Gill was allowed a final fee of $46,520.92 notwithstanding the trial court's observation that Gill had performed valuable services to the Chapter 11 estate in an extremely complex case.
III
Generally, compensation awards to professionals in bankruptcy cases are made under the criteria set out in Section 330(a). So set, the fees "will not be disturbed on appeal absent an abuse of discretion or an erroneous application of the law." In re Nucorp Energy, Inc., 764 F.2d 655, 657 (9th Cir.1985). See also In re Knudsen Corp., 84 B.R. 668, 670 (9th Cir. BAP 1988); Southwestern Media, Inc. v. Rau, 708 F.2d 419, 422 (9th Cir.1983) (Bankruptcy Act).
In the instant case the trial court seems to have interpreted Sections 330 and 326 erroneously, so as to preclude the full exercise of judicial discretion. The case thus turns on issues of statutory interpretation. Knudsen, supra, 84 B.R. at 670. Statutory interpretation is a question of law that is reviewed de novo. In re Hunters Run Ltd. Partnership, 875 F.2d 1425, 1426 (9th Cir.1989); Mission Indians v. American Mgmt. & Amusement, Inc., 840 F.2d 1394, 1401 (9th Cir.1987); In re Hill, 811 F.2d 484, 485 (9th Cir.1987).
IV
Three issues are presented by this appeal: First, the criteria to be used by the trial court in setting trustee compensation awards and the scope of discretion in applying those criteria; second, whether the fee to be paid to a Chapter 11 trustee in a case that is converted to Chapter 7 must be split with the Chapter 7 trustee under Section 326(c); and third, whether the calculation of the statutory maximum compensation to the Chapter 11 trustee under Section 326(a) may include sums paid over to a successor Chapter 7 trustee.
Authorization for compensation of trustees is found in Section 330(a) of the Code, which states in pertinent part:
The court may award to a trustee . . .
(1) reasonable compensation for actual, necessary services rendered . . . based on the nature, the extent, and the value of such services, and on the time spent on such services, and the cost of comparable services. . . .
As implemented, these criteria for setting trustee fees have closely resembled the factors used for awarding attorney fees. In re Garland Corp., 8 B.R. 826, 829-32 (Bankr.Mass.1981). See generally 2 Collier on Bankruptcy, ¶ 330.052 (15th ed. 1989). See also Matter of Urban America Development Co., 564 F.2d 808, 809 (8th Cir.1977) ( Bankruptcy Act Section 241). Classically, those factors include the time and labor involved; the novelty and difficulty of the questions presented by the case; and the experience, reputation and ability of the professional. See, e.g., Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir.1974); In re Pacific Exp., Inc., 56 B.R. 859, 862-63 (Bankr.E.Cal.1985); In re Jansen, 47 B.R. 641, 642 (Bankr.Ariz.1985).
Once reasonable fees are determined according to the above criteria, a trustee's fees are cut down, if required, to the statutory maximum stated in Section 326(a). This provision, which refers specifically to the initial determination of fees by the Section 330(a) standard, reads as follows:
(a) In a case under Chapter 7 or 11, the court may allow reasonable compensation under section 330 of this title of the trustee for the trustee\'s services, . . . not to exceed certain percentages upon all moneys disbursed or turned over in the case by the trustee to parties in interest, excluding the debtor, but including holders of secured claims.
Crucially, the provisions of Sections 330(a) and 326(a) are independent of one another. In re Orthopaedic Technology, Inc., 97 B.R. 596, 601 (Bankr.Colo.1989); In re Roco Corp., 64 B.R. 499, 502-04 (D.R.I. 1986). Trustee fees should be set according to the Section 330 criteria, not merely according to the amount of moneys disbursed. Roco, supra, 64 B.R. at 502-03 (). As stated in the legislative history to Section 326:
It must be emphasized that this section does not authorize compensation of trustees. This section simply fixes the maximum compensation of a trustee. Proposed 11 USC 330 authorizes and fixes the standard of compensation. Under the superseded Bankruptcy Act the maximum limits have tended to become minimums in many cases. This section is not intended to be so interpreted. The limits in this section, together with the limitations found in section 330, are to be applied as outer limits, and not as grants or entitlements to the maximum fees specified.
H.R.Rep. No. 95-595, 95th Cong., 1st Sess. 327 (1977), U.S.Code Cong. & Admin.News 1978, pp. 5787, 6823 (emphasis added).
In employing the fee setting criteria of Section 330(a), the bankruptcy judge is accorded wide discretion. According to In re Gulf Hills Development Corp., 60 B.R. 366, 369 (S.D.Miss.1985), a bankruptcy judge has sole discretionary power to award reasonable fees to the trustee and his attorney, subject to the maximum ceiling. See also In re McCombs, 751 F.2d 286, 288 (8th Cir.1984); In re Lee Way Holding Co., 102 B.R. 616, 628 (S.D.Ohio 1989); Roco, supra, 64 B.R. at 505.
As suggested above, it is not clear that the Section 330(a) factors were used in determining Gill's fees. The trial court's Memorandum Decision re Fees does not elaborate the reasons for reaching its conclusion on Gill's fee. The Memorandum Decision reads in pertinent part: "To allow the Chapter 11 and Chapter 7 Trustee to be paid a commission on the same funds would result in `double-dipping,' especially in cases in which the Chapter 11 and Chapter 7 Trustees are the same person."1 The statement "to be paid a commission on the same funds," connotes an improper focus on Section 326(a) in determining fees.
Although the two remaining issues are legally distinct they are best treated together. The first of these issues is whether in a converted case the Chapter 11 trustee fee is independent from the Chapter 7 fee or whether the compensations to the trustees must be aggregated when applying the statutory limits of Section 326(a). The second issue is whether the funds turned over to the Chapter 7 trustee may be counted in determining the Section 326(a) maximum amount. We conclude, first, that the two fees are independent of one another; and second, that in making an interim award to the Chapter 11 trustee the funds turned over to the Chapter 7 trustee should be counted in determining the Section 326(a) statutory maximum. The above conclusions provide desirable flexibility to the trial court to award fees appropriate to the two trustees.
Section 326(c) reads as follows:
(c) If more than one person serves as trustee in the case, the aggregate compensation of such persons for such service may not exceed the maximum compensation prescribed for a single trustee by 326(a). . . .
The legislative history makes clear that this provision addressed the Bankruptcy Act problem of a receiver receiving a full fee and a subsequent trustee also receiving a full fee. This was said to be especially egregious where the receiver and trustee were the same individual. H.R.Rep. No. 95-595, 95th Cong., 1st Sess. 327-28 (1977); S.Rep. No. 95-989, 95th Cong.,...
To continue reading
Request your trial