In re Roman Catholic Church of the Archdiocese of Santa FE

• Decision Date: 31 March 2023
• Docket Number: 18-13027-t11
• Parties: In re: ROMAN CATHOLIC CHURCH OF THE ARCHDIOCESE OF SANTA FE, Debtor.
• Court: United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of New Mexico

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In re: ROMAN CATHOLIC CHURCH OF THE ARCHDIOCESE OF SANTA FE, Debtor.

No. 18-13027-t11

United States Bankruptcy Court, D. New Mexico

March 31, 2023

OPINION

Hon David T. Thuma United States Bankruptcy Judge

Before the Court is the Reorganized Debtor's motion for entry of a final decree. The United States Trustee objected, arguing that the estate is not "fully administered" under 11 U.S.C. § 350 because final professional fee applications have not been filed, possibly objected to, and ruled on. The dispute has some significance because U.S Trustee fees of about $50,000 could accrue if the case stayed open until fee application objections (if any) were adjudicated. The Court holds that the estate has been fully administered. It therefore will enter a final decree and close the case.

A. Facts.

The Court finds:^[1]

Debtor filed this chapter 11 case on December 3, 2018. Its plan of reorganization, filed October 11, 2022, was confirmed on December 28, 2022. The effective date of the Plan was February 16, 2023.

The confirmation order is final and nonappealable. The "ASF Settlement Trust," established pursuant to the plan, has been funded. Likewise, the "Unknown Tort Claims Trust" has been established and funded to the extent required under the plan.

All property to be transferred under the Plan has been transferred. The Reorganized Debtor has assumed and continues the business of the Debtor. No assets remain in the bankruptcy estate; they have all been transferred to the Reorganized Debtor, the ASF Trust, or the Unknown Tort Claims Trust.

The Debtor received a discharge pursuant to § 1141.^[2] All filed motions, contested matters, and adversary proceedings have been finally resolved. The Plan has been substantially consummated.

Anticipated final professional fee applications have not been filed. Under the confirmed plan, the deadline to file the applications is April 3, 2023. The objection deadline is May 18, 2023. While no objections have been filed to previous fee applications, the U.S. Trustee reserves the right to object to one or more of the final fee applications. All approved fees will be paid by the Reorganized Debtor.

Section 14.4 of the Plan provides that "As soon as practicable after the Effective Date, when the Reorganized Debtor deems appropriate, the Reorganized Debtor will seek authority from the Bankruptcy Court to close the Bankruptcy Case… ."

In the Plan, Section 21.1.1, the Court retains jurisdiction to determine fee applications:

21.1 Notwithstanding confirmation of this Plan and the occurrence of the Effective Date, the Bankruptcy Court will retain jurisdiction for the following purposes: 21.1.1 In General. The Bankruptcy Court will retain jurisdiction to determine the allowance and payment of any Claims upon any objections thereto (or other appropriate proceedings) by the Debtor, by the Reorganized Debtor, or by any other party in interest entitled to proceed in that manner. As part of such retained jurisdiction, the Bankruptcy Court will continue to determine the allowance of Administrative Claims and any request for payment thereof, including Administrative Claims for Professional Charges.

In the confirmation order, the Court retained "jurisdiction over the matters as set forth in the Plan."

From the petition date through March 31, 2023, Debtor and Reorganized Debtor will have paid about $1,000,000 in U.S. Trustee fees. Currently, Debtor is being charged U.S. Trustee fees at the rate of .8% of disbursements, or about $12,000 a month. In addition, Reorganized Debtor anticipates paying about $1,600,000 to professionals in connection with the final fee applications, which would result in additional U.S. Trustee fees of about $12,800. Thus, total U.S. Trustee fees for the second quarter of 2023 would be about $49,000.

If the U.S. Trustee objects to one or more of the final fee applications and the case remains open until the objection(s) are resolved, case closure could be delayed until June 30, 2023, or later.

This has been a difficult case for all concerned. The Reorganized Debtor and other parties in interest would benefit by case closure.

B. U.S. Trustee Fees.

Chapter 11 debtors are required to pay quarterly fees to the U.S. Trustee. 28 U.S.C. § 1930(a)(6). Based on the Reorganized Debtor's income and expenses, it currently pays fees of .8% of all disbursements.

U.S. Trustee fees are not charged after a chapter 11 case is closed. See 28 U.S.C. § 1930(a)(6)(B); see also In re CF& I Fabricators of Utah, Inc., 150 F.3d 1233, 1237 (10th Cir. 1998) (construing 28 U.S.C. § 1930(a)(6)(A), the Tenth Circuit held that "Congress intended debtors pay UST fees until a case is converted, dismissed, or closed leaving no open docket in which to assess the fees.") (emphasis in original).^[3]

Until January 27, 1996, U.S. Trustee fees were chargeable only through plan confirmation. In re Harness, 218 B.R. 163, 164 (D. Kan.1998) (citing the Balanced Budget Downpayment Act, PL 104-99, 110 Stat. 26). Thereafter, fees were payable until the case was closed, dismissed, or converted.

U.S. Trustee fees have increased significantly over the years. For example, in 1994 the quarterly fee for disbursements of $3,000,000 was $3,750. Today, it is $24,000. Similarly, the maximum quarterly fee in 1994 was $5,000. Now it is $250,000. C. Entry of a Final Decree in Chapter 11 Cases.

Section 350 provides:

(a) After an estate is fully administered and the court has discharged the trustee, the court shall close the case.

(b) A case may be reopened in the court in which such case was closed to administer assets, to accord relief to the debtor, or for other cause.

Fed. R. Bankr. Pro. ("Rule") 3022 provides:

After an estate is fully administered in a chapter 11 reorganization case, the court, on its own motion or on motion of a party in interest, shall enter a final decree closing the case.

"A final decree is essentially an administrative task, a docket entry reflecting the conclusion of a case for record-keeping purposes." In re McClelland, 377 B.R. 446, 453 (Bankr. S.D.N.Y. 2007), citing In re Fibermark, Inc., 369 B.R. 761, 767 (Bankr. D. Vt. 2007). D. The "Fully Administered" Requirement.

1. The bankruptcy court's discretion.

The key issue under § 350 is whether the estate has been "fully administered," a term not defined by the Code or Rules. In the Tenth Circuit and elsewhere, bankruptcy courts use their sound discretion to rule on the "full administration" issue:

[D]etermining when a case is 'fully administered' is a decision for the bankruptcy court based on consideration of numerous case-specific, procedural, and practical factors. The bankruptcy court is uniquely positioned to make this determination given that it will have overseen the particular debtor's case from the beginning and will have first hand knowledge of what matters have been, or need to be, completed before closure of the case. Further, the bankruptcy court will be very familiar with the debtor's confirmed plan of reorganization, the requirements for consummation of that plan, as well as the status of any pending motions, contested matters, and adversary proceedings.

In re Union Home and Indus., Inc., 375 B.R. 912, 917 (10th Cir. BAP 2007); see also In re Shotkoski, 420 B.R. 479, 483 (8th Cir. BAP 2009) (bankruptcy court decision on entry of a final decree is reviewed for abuse of discretion); In re Spokane Raceway Park Inc., 2013 WL 3972429, at *4 (9th Cir. BAP) (abuse of discretion standard applied to bankruptcy court's decision to enter a final decree and close a Chapter 11 case); In re Hoti Enters., L.P., 2016 WL 8674684, at *1 (S.D.N.Y.) (same); In re MBF Inspection Services, Inc., 609 B.R. 889, 892 (Bankr. D.N.M.) (same).

2. "Fully administered" refers to the estate, not the case.

Although some decisions refer to the full administration of cases, see, e.g., Union Home, 375 B.R. at 917,^[4] both § 350 and Rule 3022 require closure after the estate has been fully administered.

3. Substantial consummation.

Two courts have held that a bankruptcy estate is "fully administered" once a confirmed chapter 11 plan has been "substantially consummated." See In re BankEast Corp., 132 B.R. 665, 668 n.3 (Bankr. D.N.H. 1991) ("[t]his Court deems a chapter 11 estate to be "fully administered" pursuant to Bankruptcy Rule 3022 at the point of substantial consummation as defined by § 1101(2) of the Bankruptcy Code"); and Walnut Associates v. Saidel, 164 B.R. 487, 492 (E.D. Pa. 1994) (citing and following BankEast); see also In re Gates Community Chapel of Rochester, Inc., 212 B.R. 220, 224 (Bankr. W.D.N.Y. 1997) (noting the holding in BankEast and Walnut Associates). This appears to be a minority view. See, e.g., In re IDC Services, Inc., 1998 WL 547085, at *3 (S.D.N.Y.).

4. The Advisory Committee factor test.

The majority view is to apply the factors listed in the 1991 Advisory Committee Note for Rule 3022. The Tenth Circuit Bankruptcy Appellate Panel stated:

The definition of "fully administered" is not provided anywhere in the Code or Rules. The few courts that have considered the issue have looked to the 1991 Advisory Committee Note for guidance. That Note provides the following list of factors:

Entry of a final decree closing a chapter 11 case should not be delayed solely because the payments required by the plan have not been completed. Factors that the court should consider in determining whether the estate has been fully administered include (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

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