In re Silvus, 04-51612-SCS.
| Decision Date | 26 August 2005 |
| Docket Number | No. 04-51841-SCS.,No. 04-52108-SCS.,No. 04-51612-SCS.,No. 04-51549-SCS.,04-51612-SCS.,04-51841-SCS.,04-51549-SCS.,04-52108-SCS. |
| Citation | 329 B.R. 193 |
| Court | U.S. Bankruptcy Court — Eastern District of Virginia |
| Parties | In re Nathaniel R. & Ina M. SILVUS, Debtors. In re Donald E. & Rosemarie Jurgensen, Debtors. In re Joey B. & Lisa A. Sanders, Debtors. In re Steve S. Lee, Debtor. |
Richard G. Poinsett, Law Office of Richard G. Poinsett, Michael C. Bruno, P.C., Hampton, VA, David W. Cassidy, Newport News, VA, Michael J. Heath, Law Offices of Steve C. Taylor, P.C., Chesapeake, VA, for Debtors.
STEPHEN C. ST. JOHN, Bankruptcy Judge.
These matters came on for hearing on July 8, 2005,1 upon the Applications for Administrative Expense ("Applications") filed in the cases of Nathaniel R. and Ina M. Silvus, Donald E. and Rosemarie Jurgensen, and Joey B. and Lisa A. Sanders by the Former Chapter 7 Trustee in those cases, David R. Ruby ("Ruby").2 At the conclusion of the hearings, the Court ordered Ruby to file amended applications setting forth the proposed resolutions in Case Numbers 04-51841-SCS and 04-51549-SCS as well as the factual basis upon which he believed his services benefitted the respective estates in each of those cases. The Court took all three matters under advisement. This Court also held a hearing on August 12, 2005, on the Application for Administrative Expense in the case of Steve S. Lee, Case Number 04-52108-SCS, in which the same issue was presented to the Court. Thus, the Court also took the Lee case under advisement. The Court has jurisdiction over these proceedings pursuant to 28 U.S.C. §§ 157(b)(2) and 1334(b). Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409. Upon consideration of the evidence and arguments presented by counsel at the hearings and of the pleadings submitted by each party, the Court makes the following findings of fact and conclusions of law.
These four cases have generally the same procedural history, differentiated primarily by the dates on which certain events occurred. Additional factual background for each case is separately set forth below.
Each of the above-captioned cases was originally filed under Chapter 7 of the Bankruptcy Code. After having comparative market analyses performed upon the residential real property in each of the cases, Ruby determined that the residences were undervalued by the respective debtors in amounts ranging from $28,000.00 to $45,000.00, and that the residences, as assets of the individual estates, should be administered and liquidated. Ruby then filed Applications to Employ a Real Estate Agent and Motions to Grant Access to Estate Property in each of the cases.
In response to Ruby's actions, the respective debtors in each case exercised their absolute right, pursuant to 11 U.S.C. § 706, to convert their cases from ones under Chapter 7 to ones under Chapter 13 of the Bankruptcy Code. Frank J. Santoro ("Santoro") was appointed Chapter 13 Trustee in each of the cases upon their respective conversions. In all of the cases, Ruby filed objections to confirmation of the respective Chapter 13 plans, and in two of the four cases, to the amended Chapter 13 plans, which were either resolved by the parties or sustained by the Court. Ruby also filed Motions to Reconvert two of the four cases. Applications for Administrative Expenses were filed by Ruby in all of the cases; each Application requests a different amount in compensation and expenses, but are all based upon the same theory of recovery, that of quantum meruit. In short, Ruby argues that, but for his diligence and aggressiveness pre-conversion, each of the cases would have been a "no asset" case, and thus, that general unsecured creditors would have received no distribution from the bankruptcy estate. According to Ruby, his diligent and aggressive actions led him to uncover equity in the properties, and "forced the Debtors to convert their case to a Chapter 13 case to meet their responsibilities to their creditors through a Chapter 13 plan." See Motion for Allowance and Payment of Administrative Priority Expense Claim by David R. Ruby, filed March 25, 2005, Case No. 04-51612-SCS, Docket Entry No. 68. The remainder of Ruby's arguments in support of his Applications is discussed in more detail in Section III.
FINDINGS OF FACT
Nathaniel R. and Ina M. Silvus filed under Chapter 7 of the Bankruptcy Code on June 3, 2004. David R. Ruby was appointed Chapter 7 Trustee. On August 30, 2004, Ruby requested that the Clerk of the Bankruptcy Court send a notice to all creditors and parties in interest that there may be assets available for distribution in the Silvuses' case. Also on August 30, 2004, Ruby filed an Application to Employ Evelyn Wilby as Real Estate Agent and Motion to Grant Access to Estate Property. Ruby subsequently amended his application and motion on August 31, 2004. The Silvuses contested the Motion to Grant Access prior to exercising their right to convert. That contest was subsequently mooted by the Silvuses' conversion of their case to one under Chapter 13 on October 7, 2004.
After the conversion, on October 25, 2004, Ruby filed a proof of claim in the Silvuses' case, asserting an administrative priority claim of $3,511.57. That amount was itemized as $1,903.50 for "Quantum meruit value of services provided by Trustee;" $108.07 for expenses; and $1,500.00 for "Quantum meruit value of services provided by real estate agent." The Silvuses objected to Ruby's claim, asserting that Ruby was not entitled to file a claim because, as the Former Chapter 7 Trustee, he was not a creditor of the debtor as defined in Section 101 of the Bankruptcy Code. The objection to Ruby's claim was resolved by the parties, and an order was entered on March 14, 2005, which provided that Ruby's claim was thereby withdrawn.3 That order also permitted Ruby to file an application for the payment of administrative expenses.
In the interim, Ruby objected to the confirmation of both the original and amended Chapter 13 plans; both objections were resolved by the parties. Also in the interim, Ruby filed an Objection to Dismissal and Motion to Reconvert the Silvuses' case in response to an order that was entered settling the objection by the Chapter 13 Trustee to the Silvuses' Chapter 13 plan. That order provided, in part, that if the Silvuses failed to timely file a modified Chapter 13 plan, the Chapter 13 Trustee could submit an order dismissing the Silvuses' case without notice or further opportunity for a hearing. The Objection to Dismissal and Motion to Reconvert was later withdrawn by Ruby, per an order entered on April 26, 2005. The Silvuses' Chapter 13 plan was confirmed by an order of this Court entered July 8, 2005.
An additional issue arose during the course of the Silvus case prior to confirmation, that of proper categorization of their debt. More particularly, the debtors originally scheduled their debts as held solely by joint creditors. The debtors filed modified schedules on March 15, 2005, to clarify that only a small amount (approximately $3,000.00) of their total unsecured debt consisted of joint debt.
Ruby filed his Application for Administrative Expense in the Silvus case on March 25, 2005. In his Application, Ruby asserts that Mr. and Mrs. Silvus undervalued their residential real property in their bankruptcy schedules by valuing the property at $110,200.00. Ruby claims that, "based upon a comparative market analysis and personal inspection of the Property conducted by the Former Trustee's Court-approved, experienced local real estate agent, Evelyn Wilby of Reliance Realty, Inc., the Property has been valued at $149,900.00." See Motion for Allowance and Payment of Administrative Priority Expense Claim by David R. Ruby, filed March 25, 2005, Case No. 04-51612-SCS, Docket Entry No. 68. Thus, Ruby asserts that Mr. and Mrs. Silvus undervalued their property, and accordingly understated the equity in that property, by $39,700.00. The original Application requested the sum of $1,903.50 in compensation, plus $108.07 in expenses, for a total of $2,011.57. At the hearing held on May 13, 2005, Ruby orally amended his Application to request the reduced amount of $1,453.50 in compensation and $55.57 in expenses, for a total of $1,509.07.4
Counsel for Mr. and Mrs. Silvus made an oral objection at the May 13, 2005, hearing, asserting that she did not agree that quantum meruit was the correct method by which to measure any compensation that Ruby might be entitled to receive. The Court heard testimony from Ruby at that hearing5 and admitted into evidence a Statement of the Trustee's Services. The Court also heard arguments from the parties. The Court continued the matter to June 10, 2005, for the Court to give its oral ruling after having the opportunity to review the evidence and the Silvuses' objection.
At the hearing on June 10, 2005, the Court noted that the Chapter 13 plan in the case had not been confirmed. Upon inquiry, counsel for the Chapter 13 Trustee stated that outstanding issues existed as to whether the liquidation analysis set forth in 11 U.S.C. § 1325(a)(4) would be satisfied as well as whether the debtors would be objecting to any unsecured claims. Thus, the Court continued the matter to the July 8, 2005, to be heard with the hearings on the Applications in the Jurgensen and Sanders cases.
Donald E. and Rosemarie Jurgensen filed under Chapter 7 of the Bankruptcy Code on July 1, 2004. David R. Ruby was appointed Chapter 7 Trustee. On October 6, 2004, Ruby requested that the Clerk of the Bankruptcy Court send a notice to all creditors and parties in interest that there may be assets available for distribution in the Jurgensens' case. On October 7, 2004, Ruby filed an Application to Employ Evelyn Wilby as Real...
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