In re Tirado

• Decision Date: 17 August 2005
• Docket Number: No. 03-36040-SVK.,03-36040-SVK.
• Citation: 329 B.R. 244
• Parties: In re Louis TIRADO, Debtor.
• Court: U.S. Bankruptcy Court — Eastern District of Wisconsin

329 B.R. 244

In re Louis TIRADO, Debtor.

No. 03-36040-SVK.

United States Bankruptcy Court, E.D. Wisconsin.

August 17, 2005.

Steven R. McDonald, Michael J. Watton, Milwaukee, WI, for Debtor.

David W. Asbach, Mary B. Grossman, Louis R. Jones, Milwaukee, WI, for trustee.

MEMORANDUM DECISION

SUSAN V. KELLEY, Bankruptcy Judge.

Louis Tirado (the "Debtor") filed a chapter 13 bankruptcy petition in this court on October 27, 2003. His assets included his residence located in the City of Milwaukee (the "Property"). In his schedules, the Debtor valued the Property at $62,400, subject to a mortgage lien of approximately $60,500. Apparently the Debtor was current on his mortgage payments at the time he filed chapter 13, as no pre-petition arrearage was scheduled to be paid through the plan. The plan proposed that the Debtor would pay $187 weekly for 36 months, which would pay the Debtor's attorneys fees, a car loan and two other secured creditors in full, and provide a dividend of not less than 53% to the unsecured creditors. The plan also provided that the Debtor would continue to make his regular monthly mortgage payments directly to the mortgagee.

The plan was confirmed on June 23, 2004. Sometime in early 2005, the Debtor began having difficulty making his monthly mortgage payments. According to testimony that was later presented to the court, Steven M. Jenkins ("Jenkins") assisted the Debtor and staved off foreclosure proceedings. Jenkins located a tenant for the Property, Thyron Lyles ("Lyles"), and the rent payments were used to make the Debtor's mortgage payments. With assistance from Jenkins, Lyles sought and obtained financing to purchase the Property, at a price that would be sufficient to pay the mortgage, taxes, and other obligations, and return some equity to the Debtor and his co-owner.

On May 23, 2005, Lyles executed an offer to purchase the property for $80,000. In an attached Addendum signed by the Debtor, Lyles and Jenkins, at the closing of the sale, the Debtor agreed to pay $4,500 of Lyles' closing costs and $6,000 to Jenkins as an "administration fee." The Debtor sought approval from the chapter 13 trustee for the sale of the Property, and the Trustee approved the sale, but not the administration fee for Jenkins. The Trustee advised that only the court could approve Jenkins' compensation.

On June 21, 2005, Jenkins filed a handwritten request for approval of his fee, and on July 1, 2005, Jenkins filed another type-written request for payment of his administration fee, accompanied by the Residential Offer to Purchase and the Addendum. The court set the matter for hearing July 19, 2005.

A week before the hearing, the Trustee filed an Objection to Jenkins' request, listing four reasons that he should not be paid: 1) there was no listing contract attached to the application; 2) there was no evidence that Jenkins is a licensed real estate broker; 3) there was no evidence that Jenkins is an "uninterested party"¹; and 4) the compensation of $6,000 was excessive since 6% of the sale price of $80,000 would be $4,800.

At the hearing, Jenkins, the Debtor's bankruptcy attorney, a previously undisclosed co-owner of the Property, and the attorney for the Chapter 13 Trustee appeared. Jenkins testified that he had worked hard to secure Lyles as a tenant, which enabled the Debtor's mortgage payments to be made while Lyles obtained financing to purchase the Property. The Debtor's attorney admitted that Jenkins was instrumental in facilitating the sale of the Property, but argued that the fee should be reduced to $4,800, commensurate with a standard 6% real estate broker's commission. The Trustee argued that Jenkins could not be paid since his employment was not approved in advance by the court, and there was no evidence that Jenkins is a licensed real estate broker. The co-owner indicated no objection to Jenkins' fee being paid in full from the sale.

None of those present disputed that Jenkins' labors saved the Debtor's property from foreclosure. As a result of his services, the mortgage and real estate taxes will be paid in full, and equity is available for the Debtor and his unsecured creditors. It is apparent that Jenkins' efforts enhanced and benefited the bankruptcy estate. After considering the arguments of counsel and the equities of the situation, the court proposed a compromise: Jenkins would be allowed an administrative claim in the bankruptcy case in the amount of $4,000. Jenkins initially requested that the fee be increased to $4,800 as originally proposed by the Trustee, but the court denied the request, and asked him to accept $4,000. He agreed to do so, and the court's notes indicate that both counsel for the Debtor and counsel for the Trustee affirmatively stated that they had no objection to the allowance of Jenkins' administrative claim in the amount of $4,000. The court entered the Order on Application for Compensation on July 19, 2005.

Ten days later, the Trustee filed a Motion asking the court to vacate the July 19 Order, and deny Jenkins' request for compensation. The Trustee argues that the administrative claim was inappropriate under § 503(b)(1)(A) of the Bankruptcy Code because Jenkins is a professional who can only be compensated pursuant to the procedures set forth in Bankruptcy Code §§ 327 and 330. According to the Trustee, if Jenkins is not a qualified professional under §§ 327 and 330, Jenkins cannot be compensated at all.

The Trustee's Motion for Reconsideration

Bankruptcy Rule 9023 provides that "Rule 59 F.R. Civ. P. applies in cases under the Code, except as provided in Rule 3008 [relating to orders allowing or disallowing claims against the estate]." Similarly, "all substantive motions served within 10 days of the entry of a judgment will be treated as based on [Federal Rule of Civil Procedure] 59." Charles v. Daley, 799 F.2d 343, 347 (7th Cir.1986). F.R. Civ. P. Rule 59(e) specifically provides that "[a]ny motion to alter or amend a judgment shall be filed no later than 10 days after entry of the judgment." "Rule 59(e) motions are used to request `reconsideration of matters properly encompassed in a decision on the merits.'" Lentomyynti Oy v. Medivac, Inc., 997 F.2d 364, 366 (7th Cir.1993) (quoting White v. New Hampshire Dept. of Employment Sec., 455 U.S. 445, 451, 102 S.Ct. 1162, 71 L.Ed.2d 325 (1982)).

"Motions for reconsideration serve a limited function: to correct manifest errors of law or fact or to present newly discovered evidence. Such motions cannot in any case be employed as a vehicle to introduce new evidence.... Nor should a motion for reconsideration serve as the occasion to tender new legal theories for the first time." Publishers Res., Inc. v. Walker-Davis Publ'ns, Inc., 762 F.2d 557, 561 (7th Cir.1985) (quoting Keene Corp. v. Int'l Fid. Ins. Co., 561 F.Supp. 656, 665-666 (N.D.Ill.1982), aff'd 736 F.2d 388 (7th Cir.1984)) (emphasis in original). The purpose of a Rule 59(e) motion "is not to give the moving party another `bite at the apple' by permitting the arguing of issues and procedures that could and should have been raised prior to judgment." Yorke v. Citibank, N.A. (In re BNT Terminals, Inc.), 125 B.R. 963, 977 (Bankr.N.D.Ill.1990). "A motion brought under Rule 59(e) is not a procedural folly to be filed by a losing party who simply disagrees with the decision; otherwise, the Court would be inundated with motions from dissatisfied litigants." Id.

In this case, the sole procedural basis in the Trustee's Motion is that the court's Order allowing an administrative claim for Jenkins is "improper." Nowhere in the Motion does the Trustee allege anything other than the impropriety of the $4,000 administrative expense award. The Trustee does not assert that the court made any "manifest errors of law or fact"² nor that the Trustee is "present[ing] newly discovered evidence." Publishers Res., Inc., 762 F.2d at 561.

The Motion is troubling because the Trustee's attorney stated on the record that she had no objection to the allowance of the administrative claim in the reduced amount. Thus, the Trustee's Motion appears to reflect a change of heart, or worse, that the Trustee's attorney lacked authority to speak on behalf of the Trustee at a hearing before the court. However, viewing the Motion in the light that the Trustee believes that the court made a manifest error of law — even though the Trustee's Motion does not use those words — and the Trustee would not have agreed to the court's suggested compromise if it were grounded on a manifest error of law, the merits of the Motion will be addressed.

Application of 11 U.S.C. § 327

Section 327 of the Bankruptcy Code provides, in relevant part:

(a) Except as otherwise provided in this section, the trustee, with the court's approval, may employ one or more ... professional persons, that do not hold or represent an interest adverse to the estate, and that are disinterested persons, to represent or assist the trustee in carrying out the trustee's duties under this title.

(b) If the trustee is authorized to operate the business of the debtor under [Chapter 7, Chapter 12, or Chapter 11], and if the debtor has regularly employed ... professionals on salary, the trustee may retain or replace such professional persons if necessary in the operation of such business.

(c) In a case under chapter 7, 12, or 11 of this title, a person is not disqualified for employment under this section solely because of such person's employment by or representation of a creditor....

(d) The court may authorize the trustee to act as attorney or accountant for the estate if such authorization is in the best interest of the estate.

(e) The trustee, with the court's approval, may employ, for a specified special purpose, other than to represent the trustee in conducting the case, an attorney that has represented the debtor....

(f) The trustee may not employ a person that has served as an examiner in the case.

Bankruptcy Code § 330 is...