In re Sousa, Bankruptcy No. 8201021.
| Decision Date | 08 February 1985 |
| Docket Number | Bankruptcy No. 8201021. |
| Citation | 46 BR 343 |
| Parties | In re Edmund SOUSA, Mary Sousa, Debtors. |
| Court | U.S. Bankruptcy Court — District of Rhode Island |
E. Lucius Zarlenga, Providence, R.I., for debtors.
John Boyajian, Boyajian, Coleman & Harrington, Providence, R.I., Trustee.
William H. Tucker, Boston, Mass., U.S. Trustee.
DECISION SUSTAINING DEBTORS' OBJECTION TO THE CHAPTER 13 TRUSTEE'S STATUTORY FEE
Heard on the debtors' objection to the allowance to the trustee of the full statutory fee computed pursuant to 28 U.S.C. § 586(b). This controversy raises the issue, apparently of first impression, whether the Court may review the statutory compensation of a standing Chapter 13 trustee operating under the provisions of the United States Trustee Pilot Program, 28 U.S.C. §§ 581-589 and 11 U.S.C. §§ 1501 et seq. For the reasons discussed below, we conclude that in pilot as well as in non-pilot areas the court retains the authority and the responsibility to make determinations concerning the reasonableness of all awards, including the one now before the Court.
The relevant facts are as follows:1 On December 9, 1982, the debtors filed a joint Chapter 13 petition. The plan was to be partially funded by the proceeds from the sale of two parcels of the debtors' real estate on Walnut Street, in East Providence, Rhode Island, which were covered by a blanket mortgage to Old Colony Cooperative Bank in the amount of $57,590. Both properties were sold in September 1983, for $35,291 and $23,080, respectively. The debtors turned over the total proceeds from both sales ($58,371) to the trustee, who in turn forwarded a check to the bank in the amount of $57,590, the balance due on the mortgage. The plan does not provide for the mortgage to be paid by the trustee, and the parties agree that the trustee's involvement in this transaction was not required. The trustee contends, however, that pursuant to 28 U.S.C. § 586(e), he is required to collect compensation equal to ten percent of any funds passing through his hands. The statutory commission amounts to $5,759 in this instance, and it is this fee to which the debtors object.
The trustee takes the position that there is no judicial review of fees to a standing trustee serving in a U.S. Trustee pilot area, and bases his argument on 28 U.S.C. § 586(e)(2) which provides that the trustee "shall collect such percentage fee from all payments under plans . . ." (emphasis added). Because the single disbursement in question was not made pursuant to the plan, the trustee may not prevail under § 586(e)(2), which refers solely to fees for "payments under plans."
We decide this dispute, however, not solely because the payment in question was made outside the plan, but also under the broader concept that as part of its general power the Court retains authority to review the reasonableness of all fees in bankruptcy.
There is no reference in the U.S. Trustee Pilot Program provisions, 28 U.S.C. §§ 581-589 and 11 U.S.C. §§ 1501 et seq., as to how disputes like the one now before the Court should be resolved, but we would find it most difficult to draw the inference, as we must if we are to agree with the trustee, that Congress actually intended to create, in this instance, the lone situation in the entire area of bankruptcy law where compensation to be paid out of the estate is not subject to judicial review. It is clear that under 28 U.S.C. § 586(e) the Attorney General of the United States is authorized to fix trustee fees:
For the following reason, however, we conclude that § 586(e) serves to establish the mechanical procedure for accumulating a reserve fund from which trustees under the pilot program will receive compensation, but that the intent of the statute is not to eliminate or preclude judicial review of the reasonableness of fees paid pursuant to this section. Section 586(e) is virtually identical to 11 U.S.C. § 1302(e), except for the distinction giving rise to the instant dispute, i.e., that under the pilot program the Attorney General, not the bankruptcy judge, fixes fees. We hold, however, that the power to fix fees, does not restrain or impair the Court's authority to review fees.
Notwithstanding the percentage fee structure set in § 1302(e), the bankruptcy judge has broad discretion in determining the compensation awarded to Chapter 13 trustees in non-pilot districts. See Foster v. Heitkamp (Matter of Foster), 670 F.2d 478, 6 C.B.C.2d 285 (5th Cir.1982) (); In re Case, 11 B.R. 843 (Bankr.D. Utah 1981) (); In re Eaton, 1 B.R. 433 (Bankr.M.D. N.C.1979) (); see also 5 Collier on Bankruptcy ¶ 1326.01 at 1326-6 (15th ed. 1984) (general survey of instances where courts have made adjustments to fees). Given the traditional approach taken by courts with respect to non-pilot districts, it would be quite inconsistent and illogical to construe the fee provisions of 28 U.S.C. § 586(e) as an absolute entitlement clause allowing pilot program trustees to collect a fixed percentage fee, regardless of the extent and nature of the services rendered in connection with the generation of said fee, solely because he (she) happened to be serving in a pilot area.
We reach this conclusion notwithstanding the trustee's argument that the pilot program strips the Court of all discretion over standing Chapter 13 trustee fees, without vesting any alternate authority for review in the Attorney General, or in anybody else, for that matter. He notes that 11 U.S.C. § 15103(f)2 makes inapplicable § 326(b) which states:
In a case under chapter 13 of this title, the court . . . may allow reasonable compensation under section 330 of this title of a trustee appointed under section 1302(a) of this title for the trustee\'s services, . . . (emphasis added).
Section 15326, which in pilot areas replaces § 326, provides:
In a case under Chapter 13 of this title, the court may not allow compensation for services . . . of the United States trustee or of a standing trustee appointed under section 586(b) of title 28, . . . (emphasis added).
Because § 326 authorizes the court to allow compensation to trustees in "all other situations," and because § 15326 removes that authority with respect to trustees appointed under the U.S. Trustee Program, the trustee contends that "this Court is without any statutory authority to make a determination of the reasonableness of the fees, or to reduce the fees." Trustee's Memorandum at 4. For the following reasons, we disagree:
To begin with, the trustee overlooks that § 326(b) also provides: "the court may not allow compensation for services or reimbursement of expenses of a standing trustee appointed under § 1302(d) of this title . . ." (emphasis added). Section 330, which pertains to the awarding of compensation to trustees in cases under Chapter 7 and Chapter 11, is subject to the limitations of § 326(b) which excludes the Chapter 13 trustee whose fee is fixed under § 1302(d). Contrary to the trustee's basic premise, therefore, there is no difference between non-pilot and pilot district provisions regarding the authority of the court to review and allow compensation to a Chapter 13 standing trustee. Accordingly, the reasoning in the above cited non-pilot district cases, which sanction judicial discretion over Chapter 13 standing trustee fees, applies equally in pilot districts. See Matter of Foster, supra; In re Case, supra; In re Eaton, supra.
Although the pilot program is administered by the executive branch under the supervision of the Attorney General, neither the language nor the legislative intent of 28 U.S.C. §§ 581 et seq. may remove from the bankruptcy court its inherent jurisdiction to hear and resolve disputed issues having a direct bearing on the case being presided over by the judge in all other respects. See 1 Collier on Bankruptcy, Chapter 6 (15th ed. 1984); H.R. Rep. No. 595, 95th Cong., 1st Sess. 88 (1977) at 107-108, U.S.Code Cong. & Admin.News 1978, pp. 5787, 6069 () (emphasis added.) It must be kept in mind that once a dispute arises, review of applications for and determination of reasonable fees in bankruptcy are no longer administrative matters. Consistent with the general purpose of the pilot program, section 586(e) of title 28 and 11 U.S.C. § 15326 were intended to transfer to the Attorney General the administrative responsibility for "fixing" the percentage of trustee compensation. Administrative fixing of...
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