In re Savage, Bankruptcy No. 84-00549.

• Decision Date: 24 November 1986
• Docket Number: Bankruptcy No. 84-00549.
• Citation: 67 BR 700
• Parties: In re Robert E. SAVAGE, Debtor.
• Court: U.S. District Court — District of Rhode Island

67 B.R. 700 (1986)

In re Robert E. SAVAGE, Debtor.

Bankruptcy No. 84-00549.

United States District Court, D. Rhode Island.

November 24, 1986.

Boyajian, Coleman & Harrington, Andrew S. Richardson, Providence, R.I., for standing trustee/appellant.

Paula Bonnell, Office of the U.S. Trustee, U.S. Dept. of Justice, Boston, Mass., for U.S. trustee Virginia A. Greiman.

Raskin & Berman, Peter G. Berman (W. Berman, co-counsel), Providence, R.I., Richard Panciera, Westerly, R.I., for debtor.

William Hague, Jr., Providence, R.I., Donald Packer, East Providence, R.I., for various creditors.

OPINION AND ORDER

SELYA, District Judge.

The sole issue presented in this consolidated appeal is whether or not a bankruptcy court possesses authority under the Bankruptcy Code to review the statutory fees of a so-called Chapter 13 "standing trustee" operating under the United States Trustee Pilot Program, 28 U.S.C. §§ 581-589 and 11 U.S.C. §§ 1501 et seq (Pilot Program). Jurisdiction is premised on the provisions of 28 U.S.C. § 158(a). Because the case presents a purely legal question, no special deference is owed to the conclusions of the court below. In re Hoffman, 65 B.R. 985, 986 (D.R.I.1986); In re Roco Corporation, 64 B.R. 499, 500 (D.R.I.1986).

I.

The case may be stated with dispatch. On or about October 4, 1984, the debtor, Robert E. Savage, filed a petition and plan under Chapter 13 of the Bankruptcy Code, 11 U.S.C. § 101 et seq. The schedules prepared by the debtor listed among the estate's assets a lobster boat and a parcel of real property located in Charlestown, Rhode Island. As originally constructed, the plan contemplated extended payments to creditors, funded by the debtor's future earnings and by monies from an anticipated sale of the boat. The bankruptcy court confirmed the plan on December 19, 1984, ordering, inter alia, that sale proceeds, as and when received, be turned over to the trustee.

The debtor thereafter entered into an agreement for the sale of his Charlestown real estate. And in consequence of this bright prospect, Savage sought to modify the plan to provide for a single payment in full to all creditors, funded entirely from the expected avails of the real estate transaction. In furtherance thereof, the trustee filed a notice (Notice) pursuant to 11 U.S.C. § 363, in which he proposed a sale of the Charlestown property for the price contemplated by the purchase agreement. Paragraph 5 of the Notice stated that "any statutory trustee's fees will be withheld from the proceeds of the sale." On May 29, 1985, the bankruptcy court allowed the sale to go forward in accordance with the terms set forth in the Notice. Subsequent to consummation of the deal, the trustee effected due distribution to creditors, withholding some $6000 as his statutory allowance for fees and expenses under 28 U.S.C. § 586(e)(2).

On August 30, 1985, the debtor interposed an objection to the statutory allowance which had theretofore been paid to the standing trustee. The bankruptcy court (Votolato, J.) sustained the objection, declared itself entitled to regulate the compensation of the standing trustee in an individual Chapter 13 case, and requested the trustee to submit an application for fees. On July 24, 1986, following a hearing, Judge Votolato awarded the trustee fees and expenses in the amount of $3,000. Dismayed both by this niggardliness and by the perceived invasion of forbidden terrain, the instant notices of appeal were prosecuted by the United States Trustee (UST) and by the standing Chapter 13 trustee for this district, respectively.

II.

Before passing on the precise question at bar, a brief assay of the Pilot Program, 28 U.S.C. §§ 581-589 and 11 U.S.C. §§ 1501 et seq., is in order.

Congress created the Pilot Program as part of the Bankruptcy Code of 1978. In so-called `pilot' jurisdictions, of which this district is one, see 28 U.S.C. § 581(a)(1), the UST was authorized to appoint an individual to serve as a standing trustee for all Chapter 13 cases within the district.¹ The appointment was expressly subject to the approval of the Attorney General, 28 U.S.C. § 586(b), who in turn enjoyed broad supervisory authority over standing trustees. Id.

The idea behind the Pilot Program was to rid the bankruptcy court of administrative and clerical responsibility for the conduct of Chapter 13 cases, and to transfer this burden to the UST and his appointees.² "Experience with the administration of Chapter 13 cases demonstrated that the appointment of a standing trustee responsible for a broad range of duties in all Chapter 13 cases filed from within a specified geographical area resulted in a more efficient and effective Chapter 13 program than the appointment of different trustees to serve in particular Chapter 13 cases." 5 Collier on Bankruptcy ¶ 1302.01 at 1302-20 (15th ed. 1984). See also H.R.Rep. No. 595, 95th Cong., 1st Sess. 105 (1978); S.Rep. No. 989, 95th Cong., 2d Sess. 139 (1978), U.S.Code Cong. & Admin.News 1978, p. 5787. The standing Chapter 13 trustee performs the wide variety of legal, quasi-legal, and lay functions commonly associated with all trustees in bankruptcy; his duties are identical to those of his private counterparts in non-pilot districts. Compare 11 U.S.C. § 1302(b) with 11 U.S.C. § 151302(b).³

In 1978, pursuant to 28 U.S.C. § 586(b), the UST for the district of Rhode Island appointed John Boyajian, an appellant, to act as the standing Chapter 13 trustee within this district. Boyajian has held the office continuously since that time. It was Boyajian who laid claim to the fees at issue in this matter, in accordance with the compensation scheme prescribed by the Code and Title 28, see post. The appellant contended then, as now, that enactment of the Pilot Program by Congress was designed to eliminate any role on the bankruptcy court's part in overseeing payment of fees and expenses to a standing Chapter 13 trustee, and to transfer such administrative authority to the Attorney General. The court below, In re Savage, 60 B.R. 10 (Bankr.D.R.I.1986) (Savage I) held otherwise. Relying on its earlier decision, In re Sousa, 46 B.R. 343 (Bankr.D.R.I.1985), the court ruled that the Pilot Program had not fundamentally altered the fees landscape; in Judge Votolato's view, he retained the authority to review the fees and expenses claimed by a standing Chapter 13 trustee in any given case. Savage I, 60 B.R. at 11. Although conceding that the Bankruptcy Code contained no express provision for judicial review of such allowances, the bankruptcy judge found this to be the result of "congressional oversight." See In re Sousa, 46 B.R. at 346. The court drew an analogy to standing Chapter 13 trustee fee cases in non-pilot districts, see, e.g., Foster v. Heitkamp, 670 F.2d 478, 6 C.B.C.2d 285 (5th Cir.1982); In re Case, 11 B.R. 843 (Bankr.D.Utah 1981), concluding that

Administrative fixing of percentage rates of compensation, and judicial review of the reasonableness of such fees are separate functions, and there is nothing inconsistent in the Attorney General fixing such schedules and the Court hearing objections to and determining the reasonableness of fees paid pursuant there to. . . . It is absolutely essential to the proper administration of bankruptcy matters for the court to have and to exercise the authority to review disputed fee applications and to allow appropriate compensation. These determinations are basic to judicial responsibility, and are not administrative functions pre-empted by the advent of the United States Trustee Pilot Program.

In re Sousa, 46 B.R. at 346-47.

It now falls to this tribunal to determine if the decision below correctly interpreted the legislative intent behind the Pilot Program and its enacted scheme for standing trustee compensation.

III.

We begin with an examination of the statutory apparatus which governs the compensation of standing Chapter 13 trustees appointed under the Pilot Program. 28 U.S.C. § 586(e) provides in relevant part:

(1) The Attorney General, after consultation with a United States trustee that has appointed an individual under subsection (b) of this section to serve as standing trustee in cases under chapter 13 of title 11, shall fix —

(A) a maximum annual compensation for such individual, not to exceed the lowest annual rate of basic pay in effect for grade GS-16 of the General Schedule prescribed under section 5332 of title 5; and

(B) a percentage fee, not to exceed ten percent, based on such maximum annual compensation and the actual, necessary expenses incurred by such individual as standing trustee.

(2) Such individual shall collect such percentage fee from all payments under plans in the cases under chapter 13 of title 11 for which such individual serves as standing trustee. Such individual shall pay to the United States trustee, and the United States trustee shall pay to the Treasury —

(A) any amount by which the actual compensation of such individual exceeds five percent upon all payments under plans in cases under chapter 13 of title 11 for which such individual serves as standing trustee; and

(B) any amount by which the percentage for all such cases exceeds —

(i) such individual actual compensation for such cases, as adjusted under subparagraph (A) of this paragraph; plus

(ii) the actual, necessary expenses incurred by such individual as standing trustee in such cases.

This labyrinthine language cries out with some degree of desperation for the catharsis of an explication. 28 U.S.C. § 586(e)(1)(A) requires the Attorney General, upon consultation with the UST, to "fix" a salary for the standing trustee that may not be greater than the lowest rate of basic pay for grade GS-16⁴ of the General Schedule prescribed under 5 U.S.C. § 5332. Paragraph (e)(1)(B) further requires the Attorney General to "fix" a percentage fee, not to exceed 10% "based on such maximum annual compensation and the actual, necessary expenses incurred by such individual...