In re Lundy
| Decision Date | 29 September 2017 |
| Docket Number | Case No. 15-32271 |
| Parties | In Re: Claude Darus Lundy and Chanda Marie Lundy, Debtors. |
| Court | U.S. Bankruptcy Court — Northern District of Ohio |
The court incorporates by reference in this paragraph and adopts as the findings and analysis of this court the document set forth below. This document has been entered electronically in the record of the United States Bankruptcy Court for the Northern District of Ohio.
MEMORANDUM OF DECISION
This opinion addresses two related motions filed by Debtor Chanda Marie Lundy ("Debtor") in this joint Chapter 13 case. They are her (1) "Motion Pursuant [to] Rule 9023 of the Code for the Court to Amend the Order Dismissing to Clarify Judge's Court Order with Regard to the Debtors Refund" ("Motion to Amend Dismissal Order") [Doc. # 154] and (2) "Motion to Disgorge Trustee's Fee and Objection to the Chapter 13 Standing Trustee's Final Report and Account" ("Motion to Disgorge Fee") [Doc. # 161].
This case was dismissed before the court confirmed a Chapter 13 plan. The motions raise two procedural questions stemming from that fact. Should the dismissal order be amended to remove the court's authorization to the standing Chapter 13 trustee to retain her percentage fee fixed and collected under 28 U.S.C. § 586(e) from the plan payments made before dismissal? If so, should the fee retained by the trustee from those plan payments under the authority she was granted by the dismissal order be disgorged? The answers to these two procedural questions in turn depend on the same basic legal issue. In a case where no plan was confirmed, do 11 U.S.C. § 1326(a)(2) or 28 U.S.C. § 586(e) authorize retention of a standing Chapter 13 trustee's statutory percentage fee collected from pre-confirmation plan payments before they are returned to a debtor?
The two motions were pending when the case was transferred after the judge originally assigned to hear it recused himself from further proceedings. The newly assigned judge held a status hearing on the motions. The purpose of the status hearing was to aid the court in deciding whether there are any relevant facts that require an evidentiary hearing to determine. In setting the status hearing, the court perceived two relevant facts needed to decide the motions that were not apparent from the then-existing case docket and record. They are (1) whether Debtor (as opposed to her co-Debtor, who is not a party to the two motions) was a payor of funds from which the trustee's fee was collected, such that she has standing to seek the relief she is asking for; and (2) the Chapter 13 trustee's set fee percentage under 28 U.S.C. § 586(e)(1)(B).
The standing Chapter 13 trustee, Elizabeth Vaughan ("Trustee"), appeared at the status hearing in person, as did an attorney for creditor United States of America Internal Revenue Service. An attorney for the Office of the United States Trustee for Region 9 appeared by telephone. Debtor, who is representing herself in this case, also appeared at the status hearing in person.
When questioned at the status hearing about evidence of the payor of the funds and her standing, Debtor stated that "I filed an affidavit," referring to her affidavit filed at Docket No. 207, and that she otherwise relies on the arguments and case law included in her Motion to Amend Dismissal Order and Motion to Disgorge Fee and on the court record. The court stated that it would construe her affidavit as her evidence of standing.1
The Trustee stated that she would file an affidavit setting forth how her fee was calculated, including the applicable fee percentage under 28 U.S.C. § 586(e)(1)(B), as well as her records regarding copies of the deposits of plan payments made in this case. Both the Trustee and Debtor agreed that no other facts are necessary to decide the motions and an evidentiary hearing is not necessary. The court granted the Trustee fourteen days leave to file her affidavit, after which the court would take the motions under advisement.
The Trustee's affidavit [Doc. # 241] having been timely filed, the court now addresses Debtor'sstanding to seek the relief that she has requested and the legal issue raised by both her Motion to Amend Dismissal Order and her Motion to Disgorge Fee.
Representing themselves, Debtors filed a bare bones joint Chapter 13 petition on July 10, 2015. They filed their bankruptcy schedules and a proposed Chapter 13 plan on July 27, 2015, and proposed amended plans on October 2, 2015, and June 14, 2016.2 None were ever confirmed.
The Trustee filed a motion to dismiss the case based in part on Debtors' failure to file income tax returns. The court conducted a hearing on the Trustee's motion to dismiss, at which Debtor Chanda Marie Lundy ("Debtor"), with the court's permission, appeared by telephone. At the hearing, Debtor stated that she did not oppose dismissal based on the failure to file timely tax returns and that she wanted all of the plan payments paid to the Trustee to be refunded to her. The court granted the Trustee's motion on December 22, 2016, and entered an order dismissing the case and requiring the Trustee to "refund to the Debtor(s) any funds on hand less statutory fees." [Doc. # 152].
The Trustee filed her Final Report and Account ("Report") on February 6, 2017. [Doc. # 160]; see 11 U.S.C. §§ 1302(b)(1), 704(a)(9). The Report states that Debtors made payments under their proposed plan in the total amount of $10,446.97. [Id.]. Of that amount, $600.00 was remitted by co-Debtor Claude D. Lundy, $7,631.97 was remitted pursuant to cashier's checks purchased by Debtor or pursuant to a checking account or a joint checking account in which Debtor has an interest and $2,215.00 was remitted pursuant to cashier's checks purchased by the Chanda M Lundy LLC ("the LLC").3 . The Report shows that $920.45 was disbursed as administration expenses for "Trustee Expenses and Compensation" and that the balance of $9,526.52 was refunded to Debtors. [Doc. # 160]. The $920.45 retained as the Trustee's "Expenses and Compensation" represents her percentage fee established by the Office of the United States Trustee. . The Trustee's percentage fee fluctuated between 4.8% and 10% of payments received during the course of this case. .
Debtor Chanda Marie Lundy, only, filed a Motion to Amend Dismissal Order and Motion toDisgorge Fee.4 Debtor's Motion To Amend Dismissal Order cites Rule 9023 of the Federal Rules of Bankruptcy Procedure, which incorporates Rule 59 of the Federal Rules of Civil Procedure. The court thus construes the Motion to Amend Dismissal Order as a motion for reconsideration brought under Rule 59(e) of the Federal Rules of Civil Procedure. See Howard v. United States, 533 F.3d 472, 475 (6th Cir. 2008) (). The time limit for filing a motion to alter or amend judgment under Rule 59(e) is 28 days after entry of the judgment at issue. Her Motion to Amend Dismissal Order was timely filed within that period.
While Debtor's Motion to Disgorge Fee was not filed within 28 days after entry of the Dismissal Order, it objects and was filed in response to the Report, which was filed on February 6, 2017. Under Rule 5009(a) of the Federal Rules of Bankruptcy Procedure, the United States Trustee or other party in interest has 30 days to object to a Chapter 13 trustee's final report and account, absent which the estate shall be considered fully administered. Debtor's Motion to Disgorge Fee was timely filed on the thirtieth day after the Trustee filed her Report. The court thus construes her Motion to Disgorge Fees as a timely objection to the Report under Rule 5009(a).
Standing is "the threshold question in every federal case." Warth v. Seldin, 422 U.S. 490, 498 (1975). "The Supreme Court has stated that the standing requirement limits federal court jurisdiction to actual controversies so that the judicial process is not transformed into 'a vehicle for the vindication of the value interests of concerned bystanders.'" Coal Operators and Associates, Inc. v. Babbitt, 291 F.3d 912, 915-16 (6th Cir. 2002) (quoting Valley Forge Christian College v. Americans United for Separation of Church & State, Inc., 454 U.S. 464, 473 (1982)).
To satisfy the standing requirement set forth in Article III of the United States Constitution, a plaintiff must have suffered some actual or threatened injury due to the alleged conduct of the defendant; the injury must be fairly traceable to the challenged action; and there must be a substantial likelihood that the relief requested will redress or prevent the plaintiff's injury. See Spokeo, Inc., -U.S.-, 136 S.Ct. 1540, 1547 (2016); Valley Forge, 454 U.S. at 472. Injury in fact is the "first and foremost" of Article III standing's three elements. Spokeo, Inc., 136 S.Ct. at 1547 (quoting Steel, Co. v. Citizens for Better Environment, 523U.S. 83, 103 (1998)). In addition, "as a prudential matter, [the party invoking the court's jurisdiction] must be a proper proponent." Pestrak v. Ohio Elections Comm'n, 926 F.2d 573, 576 (6th Cir. 1991). That party must thus "assert [her] own legal rights and interests, and cannot rest [her] claim to relief on the legal rights or interests of third parties." Warth, 422 U.S. at 499.
The need arises in this case to address specifically constitutional and prudential standing because this is a joint case, but only Debtor Chanda Marie Lundy filed the Motion to Amend Dismissal Order and Motion to Disgorge Fee. Indeed, she has pointedly emphasized to the court that her co-Debtor Claude Darus Lundy is not a party to the two motions. [See Doc. # 184, pp. 2-3]. And since they are non-attorneys representing themselves, Debtor Chanda Marie Lundy cannot represent just co-Debtor Claude Darus Lundy's interests or the LLC's interests. S...
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