In re Gates Community Chapel of Rochester, Inc.
| Decision Date | 25 August 1997 |
| Docket Number | Bankruptcy No. 90-21729. |
| Parties | In re GATES COMMUNITY CHAPEL OF ROCHESTER, INC., Debtor. |
| Court | United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Western District of New York |
COPYRIGHT MATERIAL OMITTED
David D. MacKnight, Lacy, Katzen, Ryen & Mittleman, Rochester, NY, for Debtor.
Trudy A. Nowak, Assistant U.S. Trustee, Office of U.S. Trustee, Rochester, NY.
DECISION & ORDER
On August 18, 1990, Gates Community Chapel of Rochester, Inc. (the "Debtor"), a church incorporated under Article 8 of the Religious Corporation Law of the State of New York, filed a voluntary petition initiating a Chapter 11 case. On April 19, 1993, the Court entered an Order (the "Confirmation Order") confirming the Debtor's Fifth Amended Plan (the "Plan"). Among its provisions, the Plan: (1) provided for the creation of a fund (the "Fund") of $2,650,000.00 by the payment to a "Liquidating Agent" of a sum of not less than $22,083.33 per month; (2) provided that the Liquidating Agent would manage the liquidation of four parcels of real estate owned by the Debtor, as well as the contents of a dwelling on one of the parcels, and make semi-annual pro rata distributions from the Fund to the unsecured creditors who held total claims of $19,841,377.53; (3) authorized the Liquidating Agent to retain professionals; and (4) required the Liquidating Agent to file a report with the Office of the United States Trustee (the "U.S. Trustee") along with each semi-annual distribution and file a final account upon the completion of all distributions under the Plan.
The Confirmation Order required the Debtor to file a report of substantial consummation and a final report within ninety (90) days after the date of the entry of the Confirmation Order and pay all "quarterly U.S. Trustee fees" pursuant to 28 U.S.C. Section 1930(a)(6) ("Section 1930") within ten (10) days of the entry of the Order.1 On August 28, 1993, after the ninety-day period had run, the attorney for the Debtor was advised by the Bankruptcy Court Clerk's office that unless a report of substantial consummation and a final report were filed by October 28, 1993, an order to show cause would issue. On October 28, 1993, the Debtor filed its Report of Substantial Consummation and a Final Account (the "Final Report") on the standard form utilized in the Western District of New York. The Final Report included a Statement that the Plan had been substantially consummated and a request that the Court enter a final decree closing the case.
Because at the time the Debtor filed its Final Report and request for an order closing the case, there were unresolved issues between the Debtor and the Liquidating Agent with respect to the initial distribution due under the Plan, and shortly thereafter motions were made by a secured creditor for relief from the stay2 and by the Debtor to replace the Liquidating Agent, the case was not closed. Thereafter, on May 19, 1994, the Court received a letter from the attorney for the Liquidating Agent requesting that the case not be closed and that it remain open because of: (1) the still unresolved legal issues between the Debtor and the Liquidating Agent concerning the semi-annual distributions due under the Plan; and (2) the expectation that the Liquidating Agent would continue to incur expenses for legal services, the payment of which would need to be approved by the Court. Finding that there was sufficient cause to conclude that the estate had not been fully administered, the Court allowed the case to remain open.
On June 20, 1995, the Liquidating Agent filed his First Interim Report which included his reports covering the first and second distributions to unsecured creditors, and on November 7, 1996, the Court entered an Order approving the payment of professional fees incurred by the Liquidating Agent for the period March 25, 1993 through August 16, 1996.
On January 3, 1997, the Debtor made a motion (the "Closing Motion") for an Order closing its Chapter 11 case. On January 10, 1997, the U.S. Trustee filed an objection (the "U.S. Trustee Objection") to the Closing Motion which also requested that the Debtor be required to pay all quarterly U.S. Trustee fees due and owing as of the date of the Objection and through the date any order closing the case was entered.
At the hearing on the return date of the Closing Motion, the attorneys for the Debtor and the U.S. Trustee presented oral argument as to whether, given the provisions of the Plan and the status of all post-confirmation activity, the estate had been fully administered, and the Debtor: (1) objected to any proposed order that would require it to pay post-confirmation quarterly U.S. Trustee fees asserting that: (a) any post-confirmation fees required to be paid should be paid by the Liquidating Agent out of the Fund; (b) such fees were nothing more than a tax, which the Debtor was not required to pay since it was a church and was exempt from paying Federal Income Taxes; (c) requiring it to pay such fees would be a violation of the "Establishment Clause" of the First Amendment; and (d) requiring it to pay such fees would violate the Religious Freedom Restoration Act; and (2) asserted that any quarterly U.S. Trustee fees due should be calculated solely on the disbursements being made by the Liquidating Agent under the Plan, and not on the gross disbursements of the "Reorganized Debtor". Written submissions were subsequently made by the parties, including a May 20, 1997 Response on behalf of the U.S. Trustee (the "U.S.T. Response").
Bankruptcy Code Section 350 provides that:
Although the Bankruptcy Code does not define the term "fully administered", the Advisory Committee Note to the 1991 Amendments to Rule 3022 (the "Advisory Committee Note") sets forth the following non-exclusive list of factors that a bankruptcy court should consider in determining whether an estate has been fully administered: (1) whether the order confirming the plan has become final; (2) whether deposits required by the plan have been distributed; (3) whether the property proposed by the plan to be transferred has been transferred; (4) whether the debtor or the successor of the debtor under the plan has assumed the business or the management of the property dealt with by the plan; (5) whether payments under the plan have commenced; and (6) whether all motions, contested matters, and adversary proceedings have been finally resolved.
In addition, several courts have concluded that a Chapter 11 case should be considered "fully administered" when it reaches the point of substantial consummation as defined in Section 1101(2).3 See In re Walnut Associates v. Saidel, 164 B.R. 487 (E.D.Pa.1994); In re BankEast Corp., 132 B.R. 665 (Bankr.D.N.H.1991).
Section 1101(2) provides that "substantial consummation" means: (A) transfer of all or substantially all of the property proposed by the plan to be transferred; (B) assumption by the debtor or by the successor to the debtor under the plan of business or of the management of all or substantially all of the property dealt with the plan; and (C) commencement of distribution under the plan.4
Other decisions have made it clear that a bankruptcy court should not maintain its jurisdiction only because of a mere possibility that such jurisdiction may be invoked by the parties in the future, and that the entry of a final decree in no way completely deprives the court of its jurisdiction to reopen the case, enforce or interpret an Order or determine a pertinent issue. See In re John G. Berg Associates, Inc., 138 B.R. 782 (Bankr. E.D.Pa.1992); In re Jordan Mfg. Co., Inc., 138 B.R. 30 (Bankr.C.D.Ill.1992).
It appears that all of the applicable factors enumerated in the Advisory Committee Note have now been completed, in that: (1) the Order confirming the Plan became final on April 16, 1993; (2) the property of the Debtor has been transferred or is being liquidated by the Liquidating Agent; (3) the Reorganized Debtor has assumed the business and management of the property dealt with by the Plan; (4) payments under the Plan have commenced; and (5) all anticipated motions, contested matters and adversary proceedings have been resolved. In addition, the Plan has been substantially consummated within the meaning of Section 1101(2). Therefore, notwithstanding that the Liquidating Agent may be filing further reports and an accounting with the U.S. Trustee, this case is fully administered within the meaning of Section 350(a) and Rule 3022 and will be closed. See In re Jay Bee Enterprises, Inc., 207 B.R. 536 (Bankr.E.D.Ky.1997); In re Indian Creek Limited Partnership, 205 B.R. 609 (Bankr.D.Ariz.1997); In re Wade, 991 F.2d 402 (7th Cir.1993).
Prior to January 26, 1996, Section 1930 required the payment of quarterly U.S. Trustee fees until the case was converted or dismissed or a Chapter 11 plan was confirmed.
On January 26, 1996, pursuant to Public Laws 104-91 and 104-99, Section 1930 was amended to provide, "In addition to the filing fees paid to the clerk, a quarterly fee shall be paid to the United States Trustee in each case under Chapter 11 of Title 11 for each quarter (including any fraction thereof) until the case is converted or dismissed, whichever occurs first."
On September 30, 1996, in response to court decisions refusing to require payments in cases where plans...
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