In re Roco Corp., Civ. A. No. 85-0200-S

• Decision Date: 12 September 1986
• Docket Number: Civ. A. No. 85-0200-S,Bankruptcy No. 80007181.
• Citation: 64 BR 499
• Parties: In re ROCO CORPORATION d/b/a Standard Supply, Debtor. [Appeal of Avram N. COHEN, Esq., Trustee].
• Court: U.S. District Court — District of Rhode Island

64 B.R. 499 (1986)

In re ROCO CORPORATION d/b/a Standard Supply, Debtor Appeal of Avram N. COHEN, Esq., Trustee.

Civ. A. No. 85-0200-S, Bankruptcy No. 80007181.

United States District Court, D. Rhode Island.

September 12, 1986.

Avram N. Cohen, trustee, Providence, R.I., pro se.

Winograd, Shine & Zacks, Allan M. Shine, Providence, R.I., for trustee.

David F. Haskell, Roberts, Feldstein & Tucker, Providence, R.I., for creditors.

MEMORANDUM AND ORDER

SELYA, District Judge.

After review of the final report and accounting (Account) submitted by the trustee in this straight bankruptcy case, the United States Bankruptcy Court for the District of Rhode Island (Votolato, J.) awarded the trustee his commission. Disappointed by the size of the award, and unable to persuade the bankruptcy judge to up it, the trustee prosecuted this appeal.

Following the docketing of the appeal and the passage of some time, the case was transferred to the calendar of the undersigned district judge in June 1986. The court met with counsel on July 28, 1986 and afforded them an opportunity for oral argument, which was eschewed by all concerned.¹ The matter was taken under advisement at that time. It has been briefed to the nines.

I.

When a district court reviews a decision of the bankruptcy court, the latter tribunal's findings of fact must be accepted unless they are clearly erroneous. Fed.R. Bankr.P. 8013 (West 1984). See In re Kimzey, 761 F.2d 421, 423 (7th Cir.1985). "A finding is `clearly erroneous' when, although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948). See Anthony v. Abbott Laboratories, 106 F.R.D. 461, 463 (D.R.I. 1985). This standard adheres with undiminished force to inferences which the judge below has drawn from facts of record. Id. See also Commissioner v. Duberstein, 363 U.S. 278, 290-91, 80 S.Ct. 1190, 1199-1200, 4 L.Ed.2d 1218 (1960). It is applicable even to findings of fact predicated upon documentary evidence. Anderson v. Bessemer City, 470 U.S. 564, 105 S.Ct. 1504, 1512, 84 L.Ed.2d 518 (1985). But, the "clearly erroneous" test does not apply to the bankruptcy court's conclusions of law. Pullman-Standard v. Swint, 456 U.S. 273, 287, 102 S.Ct. 1781, 72 L.Ed.2d 66 (1982); In re Kimzey, 761 F.2d at 423.

These principles are fully operative upon appellate review of a lower court's fee award in a bankruptcy matter. E.g., Southwestern Media, Inc. v. Rau, 708 F.2d 419, 422 (9th Cir.1983).

II.

The case can be stated succinctly. The appellant, Avram N. Cohen, is a well-regarded bankruptcy lawyer and member of the bar of this court. On or about September 29, 1980, he accepted an appointment as the trustee in this chapter 7 filing. At approximately the same time, Cohen applied for permission to engage counsel for the trustee. That application was seasonably granted, and the trustee's legal work has without exception been performed by independent attorneys retained pursuant to decrees of the bankruptcy court.

As the matter wound down, Cohen prepared and submitted his final Account, as contemplated by 11 U.S.C. § 704(8). He stated therein that his receipts qua trustee aggregated $309,759.51 and that disbursements to the date of the Account (June 21, 1984) totalled $31,206.69. He requested, inter alia, that he be awarded a trustee's commission in the sum of $3,977.60² pursuant to 11 U.S.C. § 326(a). The bankruptcy court demurred. By order entered November 19, 1984, Judge Votolato set $3,000 as the fee. (The stipend was strictly for services rendered qua trustee. All of the legal work was done by Cohen's lawyers, see ante, and was the subject of separate fee applications.)

The trustee, bitterly disappointed, filed a timely motion to reconsider. A hearing was held in the bankruptcy court and, in an order entered on March 15, 1985, the bankruptcy judge reconfirmed the initial award. It is from this reduction of his commission request that the trustee appeals.

III.

The parties agree that 11 U.S.C. § 326(a) (1978) governs the matter at bar.³ The statute itself declares:

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, payable after the trustee renders such services, not to exceed fifteen percent on the first $1,000 or less, six percent on any amount in excess of $1,000 but not in excess of $3,000, three percent of any amount in excess of $3,000 but not in excess of $20,000, two percent on any amount in excess of $20,000 but not in excess of $50,000, and one percent on any amount in excess of $50,000, 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.

11 U.S.C. § 326(a) (1978).

It should be noted that 11 U.S.C. § 330(a) provides in pertinent part that, with certain exceptions and subject to certain conditions not material here,

the court may award to a trustee, . . . —

(1) reasonable compensation for actual, necessary services rendered by such trustee, . . . based on the time, the nature, the extent, and the value of such services, and the cost of comparable services other than in a bankruptcy case . . . ⁴

In this case, Cohen performed the chores required of a chapter 7 trustee, see 11 U.S.C. § 704, in a workmanlike manner. He was plainly entitled to a commission for his services. The trustee applied to be paid the maximum allowed under 11 U.S.C. § 326(a) (1978), quoted ante.⁵ This prayer having been denied, he now offers a double-barrelled argument. Cohen asseverates, first, that the bankruptcy judge misconstrued the force and effect of § 326(a); and second, that the judge abused his discretion in fixing the trustee's commission. This court will consider these thrusts seriatim.

A. The trustee contends that 11 U.S.C. § 326(a) is not solely a limitation on the upward spiral of trustee's fees. Rather, in Cohen's view, the statute comprises a minimum fee — or at least a standard fee — which should routinely be awarded in the absence of (i) churning or other self-serving inflation of the assets on the trustee's part, (ii) incompetence or sub-par performance by the trustee, or (iii) an utter (or near-complete) lack of funds in the bankrupt estate. And, the appellant asserts, since none of these offsetting conditions obtained in the case at bar, his fee should have been set at (or at least near) the statutory maximum.

This asseveration, although passionately espoused and vigorously made, is fundamentally flawed. First, the explicit language of § 326(a) militates against the appellant's view; there is nothing in the context of the Act to suggest that the precatory "may" was an accidental slip of the collective congressional tongue or that the phrase "not to exceed" should be given other than its plain and usual meaning. Cf. Quiros v. Colon, 800 F.2d 1, 2-3 (1st Cir.1986) ("The statutory language of 42 U.S.C. § 1988 — `the court, in its discretion, may allow' fees to prevailing parties — is permissive and therefore invests the district court with a reasonable measure of discretion to withold sic fees in cases where there are good reasons for doing so.") Second, if the fee structure limned by § 326(a) is seen as a grant to trustees rather than as a mere ceiling on fees, there would have been little need for Congress to have provided separate standards in 11 U.S.C. § 330(a) for calculating the amount of such stipends.

The sockdolager is simply this: the legislative history of the Bankruptcy Act of 1978 shows beyond cavil that the Congress was unhappy that maximum limits of compensation in bankruptcy cases had tended, under prior law, to become minima, and desired to put an end to this practice. As the House noted in its report on proposed § 326 of what would become the 1978 Act:

This section is derived in part from section 48c of prior law. . . . This section simply fixes the maximum compensation of a trustee. Proposed 11 U.S.C. 330 authorizes and fixes the standard of compensation. Under section 48c . . . 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. 595, 95th Cong., 1st Sess. 327, reprinted in 1978 U.S. Code Cong. & Ad. News 5963, 6283 (emphasis supplied). See also S.Rep. No. 989, 95th Cong., 2d Sess. 37, reprinted in 1978 U.S. Code Cong. & Ad. News 5787, 5823 (same).

The purport of this unequivocal legislative history is as plain as day. 11 U.S.C. § 326(a) (1978) capped the fees which could be awarded to a trustee for his services in such capacity, but created no entitlement to a commission in that amount. There is nothing in the statute, in its legislative history, or in the relevant caselaw for that matter, which suggests an opposite conclusion. The statutory scheme distinguishes between eligibility and entitlement. Cohen's argument, which attempts to blur this distinction by urging that a trustee, in the absence of misconduct, bungling, or other extraordinary circumstance, is invariably entitled to the maximum commission for which he is eligible, can best be written off as wishful thinking on his part. The law runs exactly to the contrary. See, e.g., In re Garland Corp., 8 B.R. 826, 832-34 (Bankr.D.Mass.1981) (awarding trustee who had "done an extremely commendable job, probably a superb job," id. at 832, approximately 50% of the maximum statutory commission). As the Garland court perspicaciously observed, "the maximum fee under § 326(a) really has no correllation with fair value for services." Id. at 833.

B. The second line of attack...