In re King

• Decision Date: 03 August 1988
• Docket Number: Bankruptcy No. 84-00191-A.
• Citation: 88 BR 768
• Parties: In re Richard Dwight KING, Deborah M. King, Debtors.
• Court: U.S. District Court — Virgin Islands, Bankruptcy Division

88 B.R. 768 (1988)

In re Richard Dwight KING, Deborah M. King, Debtors.

Bankruptcy No. 84-00191-A.

United States Bankruptcy Court, E.D. Virginia, Alexandria Division.

August 3, 1988.

Richard A. Bartl, Tyler, Bartl, Burke & Albert, Alexandria, Va., for debtors.

Gordon P. Peyton, Alexandria, Va., Trustee in Bankruptcy.

Ethan Allen Turshen, Arlington, Va., Peter S. Leyton, White, Fine & Verille, Washington, D.C., for Trustee.

Thomas A. Cox, Jr., Office of the United States Trustee, Alexandria, Va.

MEMORANDUM OPINION

MARTIN V.B. BOSTETTER, Jr., Chief Judge.

We consider here a fee application for services rendered by the attorney for the trustee in the instant case. Fee applications filed by the trustee, counsel for the trustee, and special counsel for the trustee, were set for hearing on May 24, 1988. Although no objections were filed in response to the applications, the debtors raised objections on the day of the hearing to the amounts claimed by counsel for the trustee, alone. Satisfied with the applications filed by the trustee, and special counsel, this Court approved the same and took under advisement the remaining application for the trustee's counsel (hereinafter "Counsel"). Upon further review, the United States Trustee filed an objection to Counsel's application on July 1, 1988.

Prior to considering the trustee's filing, we review briefly the guidelines applicable to requests for compensation generally. The Fourth Circuit has determined that a court reviewing fee applications must evaluate the nature and extent of the services provided by the attorney in light of the factors established by the Fifth Circuit in Johnson v. Georgia Highway Express, 488 F.2d 714 (5th Cir.1974).¹See Barber v. Kimbrell's, Inc., 577 F.2d 216, 226 n. 28 (4th Cir.) (adopting Johnson guidelines), cert. denied, 439 U.S. 934, 99 S.Ct. 329, 58 L.Ed.2d 330 (1978). A court must then ascertain the customary hourly rate of compensation for such services and multiply the hours reasonably expended by the hourly rate approved. Daly v. Hill, 790 F.2d 1071, 1077 (4th Cir.1986).

In reviewing the fee application of an attorney hired by a trustee, a bankruptcy court also must take into consideration the relevant provisions of the Bankruptcy Code ("the Code") and the Federal Rules of Bankruptcy Procedure. See 11 U.S.C. § 101 et seq.; Fed.R.Bankr.P. 1001 et seq. Section 327(a) of the Code authorizes the employment of professional persons to represent or assist the trustee in carrying out the trustee's duties, upon court approval. 11 U.S.C. § 327(a) (1986). The legislative statements applicable to section 327(a) indicate that this section "contained a technical amendment to clarify that attorneys, and perhaps other officers enumerated therein, represent, rather than assist, the trustee in carrying out the trustee's duties." Historical and Revision Notes to 11 U.S.C. § 327, Legislative Statements (emphasis supplied). Congress' intent to distinguish the two roles is explicit in section 328(b) which prohibits the compensation of a trustee, acting as his own attorney, for the "performance of any of the trustee's duties that are generally performed without the assistance of an attorney or accountant to the estate." 11 U.S.C. § 328(b) (1984).

The specific duties of the trustee are prescribed in section 704 of the Code which obligates a trustee to:

(1) collect and reduce to money the property of the estate for which such trustee serves, and close such estate as expeditiously as is compatible with the best interests of parties in interest;

(2) be accountable for all property received;

(3) ensure that the debtor shall perform his intention to retain or surrender property as specified in section 521(2)(B) of this title;

(4) investigate the financial affairs of the debtor;

(5) if a purpose would be served, examine proofs of claims and object to the allowance of any claim that is improper;

(6) if advisable, oppose the discharge of the debtors;

(7) unless the court orders otherwise, furnish such information concerning the estate and the estate\'s administration as is requested by a party in interest;

(8) if the business of the debtor is authorized to be operated, file with the court, with the United States trustee, and with any governmental unit charged with responsibility for collection or determination of any tax arising out of such operation, periodic reports and summaries of the operation of such business, including a statement of receipts and disbursements, and such other information as the United States trustee or the court requires; and (9) make a final report and file a final account of the administration of the estate with the court and with the United States trustee.

11 U.S.C. § 704 (1986); see also Historical and Revision Notes to 11 U.S.C. § 704, Notes of the Committee on the Judiciary, Senate Report No. 95-989, U.S.Code Cong. & Admin.News 1978, p. 5787; 11 U.S.C. § 1106 (1986) (incorporating duties of the trustee stated in section 706 and adding others specifically relevant to chapter 11 proceedings). Finally, section 330 captures the essence of the Johnson factors by authorizing only the payment of services actual and necessary, with Bankruptcy Rule 2016 specifying the necessary format for fee requests. 11 U.S.C. § 330; Fed.R. Bankr.P. 2016.

In view of the above, it is well settled that courts may not compensate an attorney appointed to represent the trustee for services statutorily required of the trustee. See In re Meade Land & Dev. Co., Inc., 527 F.2d 280, 285 (3d Cir.1975) (decided under the Act); In the Matter of Mabson Lumber Co., 394 F.2d 23, 24 (2d Cir.1968) (same); In re Wiedau's, Inc., 78 B.R. 904, 907 (Bankr.S.D.Ill.1987); In re Wildman, 72 B.R. 700, 706 (Bankr.N.D.Ill. 1987); In re Taylor, 66 B.R. 390, 392 (Bankr.W.D.Pa.1986); Matter of Wilmon, Inc., 61 B.R. 989, 990 (Bankr.W.D.Pa.1986); In re Shades of Beauty, Inc., 56 B.R. 946, 949 (Bankr.E.D.N.Y.1986); In re Impact Publications, Inc., 24 B.R. 980, 982 (Bankr.N.D.Tex.1982); In re Crutcher Transfer Line, Inc., 20 B.R. 705, 711 (Bankr.W.D.Ky.1982); In re Auto Train Corp., 15 B.R. 160, 162 (Bankr.D.C.1981); In re McAuley Textile Corp., 11 B.R. 646, 648 (Bankr.D.Me.1981). Trustees must perform all ministerial and administrative duties of the estate, see Connelly v. Hancock, Dorr, Ryan & Shove et al., 195 F.2d 864, 869 (2d Cir.1952); Matter of Minton Group, Inc., 33 B.R. 38, 41 (Bankr.S.D.N. Y.1983), while attorneys appointed to represent the trustee must exercise professional legal skills and expertise beyond the ordinary knowledge and skill of the trustee to receive compensation. Meade, 527 F.2d at 284; Taylor, 66 B.R. at 393; Wilmon, 61 B.R. at 990; Shades of Beauty, Inc., 56 B.R. 949; Crutcher, 20 B.R. at 711; McAuley, 11 B.R. at 648. Accordingly, attorneys have been denied compensation for: (1) services relating to the sale of the debtor's assets, the collection of accounts due, the examination of the debtor's papers, In re Eureka Upholstering Co., 48 F.2d 95, 96 (2d Cir.1931); (2) the preparation of notices and advertisements for the sale of the debtor's assets, and license renewals, Taylor, 66 B.R. at 393-94; (3) entries relating to routine telephone calls and correspondence with information seekers, Matter of Minton Group, Inc., 33 B.R. at 41; (4) charges for the reduction of the estate to money, the payment of routine bills—including taxes, the arranging of insurance coverage for the estate, and the examination of the debtor's books and records, McAuley Textile, 11 B.R. 648-49 (citations omitted); (5) and the arrangement for the sale of the properties of the debtor's estate, In the Matter of Leader Int'l Indus., Inc., 2 B.C.D. 588, 590-91 (Bankr.E.D.Mich.1976).

Courts have acknowledged that differentiating between the trustee and attorney roles is a difficult task. See Meade, 527 F.2d at 285; Taylor, 66 B.R. at 393; Wilmon, 61 B.R. at 991; In re Red Cross Hospital Assoc., Inc., 18 B.R. 593, 594 (Bankr.W.D.Ky.1982). Therefore, courts consistently have requested that the demarcation between the trustee's services and the attorney's services be clear and distinct in the attorney's application, and that the specific subject matter and the nature of the problem that implicated legal services be apparent from the records. Minton, 33 B.R. at 40; see Wildman, 72 B.R. at 707; Matter of Santoro Excavating, Inc., 56 B.R. 546, 550 (Bankr.S.D.N.Y. 1986); McAuley, 11 B.R. at 648.

The reasons proferred for the above rules are first that the duplication of the trustee's and attorney's services would result in the unnecessary depletion of the debtor's estate, and second that the attorney's assumption of the trustee's duties would be a derogation of the statutory scheme. Meade, 527 F.2d at 285. The above guidelines, however, have not been applied in a mechanical fashion. In unique circumstances when matters normally handled by the trustee involve complex legal issues, and the applicant has demonstrated the need for his involvement, courts have allowed compensation. See, e.g., Meade, 527 F.2d at 286; McAuley, 11 B.R. at 649. The burden, however, is entirely on the attorney requesting compensation to justify the services rendered. In re Whitney, 27 B.R. 352, 354 (Bankr.Me.1983).

Not all courts have expressed the attorney's burden to be as stringent. See e.g., Shades of Beauty, 56 B.R. at 949 (holding that burden is on attorney, but noting that court will attempt to resolve all reasonable doubt in favor of attorney). Such a position, however, is compelled by section 328 which "requires the court to differentiate between the trustee's services as trustee and his services as trustee's counsel, and to fix compensation accordingly," and by Bankruptcy Rule 2016 which requires that a detailed statement of services rendered be provided to the court. Historical and Revision Notes to section 328, Notes of the Committee on the Judiciary, Senate Report No. 95-989 (emphasis supplied); ...