In re Samson Industries, Inc.
| Decision Date | 09 January 1990 |
| Docket Number | Bankruptcy No. 85-03616S. |
| Citation | 108 BR 545 |
| Parties | In re SAMSON INDUSTRIES, INC., Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
Howard S. Klein, Philadelphia, Pa., Donald McCurdy, Media, Pa., for debtor.
Max Schwartz, Philadelphia, Pa., trustee.
James J. O'Connell, Asst. U.S. Trustee, Philadelphia, Pa Edward J. DiDonato, Philadelphia, Pa., for trustee.
At issue, once again, in light of certain statements by the district court in In Greenley Energy Holdings of Pennsylvania, Inc., 102 B.R. 400, 405-06 (E.D.Pa. 1989) (hereinafter "Greenley II"), disapproving our statements on the same subject in a decision reported as In re Greenley Energy Holdings of Pennsylvania, Inc., 94 B.R. 854, 854-55, 857-58 (Bankr.E. D.Pa.1989) (hereinafter "Greenley I"), is the degree of specificity of recitation of services rendered which must accompany an Application of a trustee for compensation pursuant to 11 U.S.C. §§ 326(a), 330(a). We conclude that, while the trustee's adherence to the procedural structures of In re Meade Land & Development Co., Inc., 527 F.2d 280, 285 (3d Cir.1975), is not a necessary condition for receipt of commissions in excess of $500, it is always preferable; and it is necessary for a trustee to submit, at a minimum, an estimate of hours spent at particular tasks and a basis for an hourly rate claimed. We are therefore obliged to insist that the Trustee in the instant case provide us with more detail as to the services that he has rendered before we will allow him any commission in excess of $500.
This voluntary Chapter 7 business bankruptcy case was filed on August 30, 1985. The Trustee, MAX SCHWARTZ (hereinafter "the Trustee"), accepted his appointment, well over four years ago, on September 10, 1985. The Trustee is not an attorney nor has he received any appointments as a trustee in any cases in this court for over three years. We have no knowledge of his professional qualifications or particular competency to serve as a trustee. It appears that his counsel, appointed on October 1, 1985, and awarded over $56,000 in compensation for attorneys' fees and reimbursement of costs in this case, has performed most, if not all, of the services necessary in collecting the assets of the estate, which the Trustee's Final Account indicates total $379,391.86. Almost all of these assets were collected in receipt of the sale proceeds of a single parcel of realty formerly owed by the Debtor ($284,258.99); rentals collected on another parcel of realty ($44,000); and interest earned on these sums over the years of administration of this case ($41,464.36).
The docket of this case reflects 181 entries, making it a case of moderate size. Most of the legal activity, the filing of objections to proofs of claim and institution of a few preference actions, was not begun until October, 1987, and completed by October 1, 1988. Due to the apparent delays in administration of this case to conclusion, the United States Trustee filed a motion to remove the Trustee, for cause, pursuant to 11 U.S.C. § 324(a), on September 7, 1989. A hearing of October 11, 1989, resulted in an Order of that date requiring a Final Audit Hearing to be conducted on November 21, 1989; a proposed Order of Distribution to be filed by the Trustee or his counsel on or before January 1, 1990; and the production of a zero bank balance and copies of cancelled checks to be supplied by the Trustee or his counsel on or before March 1, 1990.
The Final Audit Hearing was conducted on November 21, 1989. All papers filed, including the Trustee's Final Account and final compensation requests for all professionals except the Trustee, were in order and orders have been entered. In his Application, the Trustee remitted only a schedule reciting his receipts and a computation of the maximum allowable commission under the formula set forth in 11 U.S.C. § 326(a), which came to a figure of $11,561.76. He apparently felt that this submission justified his request for this sum. But see Greenley I, 94 B.R. at 856-58.
We requested the Trustee, who appeared only by counsel, to submit a more detailed Application if compensation in excess of $500 were requested. In apparent response thereto, a document entitled "Record of Services Performed by Trustee" was filed on December 12, 1989. This consisted of a list of four generalized tasks, i.e., collecting property of the estate; investigating the Debtor's financial affairs; performing all services required by the Bankruptcy Code; and "specific services." The latter includes 28 services described with no degree of particularity nor date, e.g., two entries entitled "Participate in collection of various receivables" (only one receivable in addition to the rent, which was apparently paid regularly in due course, is listed on the Trustee's Final Account); and a total estimate of 250 hours of time spent (this works out to an hourly rate of about $46 per hour). This is apparently all that the Trustee feels obliged to provide to us in order that we "plug in" his maximum statutory fee.
Contrary to the belief of the Trustee, as expressed by his counsel, we do not believe that Greenley II provides that this remittance is sufficient to justify our allowing him compensation in excess of $500 in this case. In Greenley, the principal issue was on what basis the commissions of the Trustee should be computed. We never questioned that the Greenley trustee had performed sufficient services to merit the commission that we were prepared to allow, even though he had not submitted time records in compliance with the procedural standards of Meade Land. Greenley I, 94 B.R. at 856, 858, 861.
Also, Greenley involved a trustee who not only ran the Debtor's business, but the unusual circumstance of a Trustee who greatly enhanced its operations during his tenure. Greenley II, 102 B.R. at 401-02; and Greenley I, 94 B.R. at 855. The district court properly recognized that the trustee had accomplished a "small miracle" in turning the Greenley debtor, an owner of coal-mining wastes which constituted environmental hazards and presenting a corporate environment which was fraught with internal stockholders' disputes, into a profitable enterprise. 102 B.R. at 401.
In the context of these facts, the district court held as follows, 102 B.R. at 405, regarding the requirement that the trustee in that case comply with Meade Land:
a trustee entrusted with the difficult task of running a failing business may have many on-going functions to perform. Further, the trustee may be involved with more than one trusteeship along with other business engagements. To require the trustee to keep detailed time records traditionally required to be kept by attorneys seeking fees would be unduly burdensome. Such a requirement while desirable in the abstract is not without real world costs. Not only do detailed time reports consume additional trustee time, but it might also force the trustee to deal with trusteeship matters on a more rigid schedule, that is, the trustee might be forced to block his time and only handle trustee matters at certain times. This could have detrimental effects on a debtor\'s business since many practical business problems which arise require prompt resolutions, and cannot be forced to arise only at specialized times.
The district court clearly did not indicate that the time spent and the duties performed by the trustee in furtherance of duties was irrelevant to the determination of his proper commissions. Rather, that court reiterated that the time spent, the intricacies of the problems presented, and the opposition encountered in trying to resolve those problems were all pertinent inquiries in determining the appropriate commission to be allowed to a trustee. 102 B.R. at 406.
The district court cited two cases in support of its holding that, in the Greenley factual context, compliance with the formalities of Meade Land was unnecessary, In re Missionary Baptist Foundation of America, 77 B.R. 552, 554 (Bankr.N.D.Tex. 1987); and In re Doctors, Inc., 4 B.R. 346, 347-48 (Bankr.E.D.Pa.1980). In Missionary Baptist, the court emphasizes, as did the district court in Greenley II, that the trustee "was not engaged in a liquidation, but rather a reorganization and continuing operation of a business." 77 B.R. at 554. Furthermore, at a hearing in that case (as in Greenley II), the trustee had "estimated his time as closely as possible" in support of his application. In Doctors, supra, the trustee was himself an attorney for 51 years, whose competence was apparently well-known to the court, and, at a hearing, he "proceeded to testify in detail regarding his services." 4 B.R. at 348.1
In the instant case, the Trustee's expertise is not known to us. There was no duty on his part to operate a business, as this case began as a Chapter 7 liquidation. No "small miracles" were expected, and none were performed. All indications are that the Trustee here performed simply ministerial functions under the direction of his counsel. Compare In re Candy Lane Corp., 64 B.R. 459, 460-61 (Bankr.S.D.N.Y. 1986). Therefore, even under the standards enunciated in Greenley II and the cases cited by it, the Trustee has provided us with totally insufficient information to support the compensation which he has requested.
In Greenley I, we did not undertake any significant discussion of the cases addressing the format of trustees' applications for compensation. We do so here, and conclude that courts are most reluctant to excuse a trustee from the requirement of filing an application in at least basic conformity with Meade Land as a precondition for recovery of compensation in all cases except those where the trustee, as in Greenley, was engaged in "hands-on" operation of a business.
The basic considerations which underlie an application of a trustee seeking compensation for services...
To continue reading
Request your trial