In re Vogt
| Decision Date | 09 June 2000 |
| Docket Number | No. 94-11416.,94-11416. |
| Citation | 250 BR 250 |
| Parties | In re Debra M. VOGT, Debtor. |
| Court | U.S. Bankruptcy Court — Middle District of Louisiana |
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Neal G. Johnson, Lafayette, LA, for debtor.
Samera L. Abide, Baton Rouge, LA, for trustee.
REASONS FOR JUDGMENT
Before the Court is the Chapter 7 Trustee's Final Report, which is subject to an objection by the debtor, who has standing because there is sufficient money to allow for a distribution to her pursuant to 11 U.S.C. § 726(a)(6). Resolution of this proceeding requires this Court to interpret 11 U.S.C. § 726(a)(5) to determine whether interest should accrue upon a trustee's claim for compensation and expenses and, if interest should accrue, upon what date should the accrual of interest commence.1 As well, we have determined it necessary to discuss the specific calculation methodology by which a trustee's maximum compensation amount, set by § 326(a), is established.
Jurisdiction is grounded in 28 U.S.C. § 157(b)(2)(A).
Administration of the assets of this Chapter 7 estate, which involved the liquidation of tax refunds and the settlement of a pre-petition personal injury/product liability claim, generated some $89,773.78 (plus accruing interest) for disbursement and distribution. Administration of the claims allowance process resulted in the disallowance of numerous claims against the estate (in an aggregate amount greatly in excess of the total allowed claims to be paid through the final distribution). Ultimately, there is a surplus available for payment of interest on all claims paid under § 726(a) and for a distribution to the debtor.
The disbursements from the trustee/estate prior to submission of the "Trustee's Final Report of Administration of Estate, Report of Receipts and Disbursements, Application for Compensation and Reimbursement of Expenses, and Notice of Proposed Distribution" (the Final Report or Trustee's Final Report), amounted to $22.25 for payment towards the trustee's blanket bond premium, and $28,914.81 in payment of the attorney's fees and costs paid to the trustee's attorney for handling the estate's tort claim (these disbursements total $28,937.06). Other than trustee compensation, the claims against the estate that have been allowed and are to be paid through the Final Report distribution, are as follows: (1) priority claims amount to $2,146.38 (this includes the trustee claim for reimbursement of expenses of $119.53 and a state tax claim of $2,026); (2) the unsecured general claims amount to $26,934.83; and (3) the subordinated non-compensatory penalty (tax) claims amount to $589.60. Claims to be paid through the Final Report distribution, excluding the trustee's compensation, total $29,670.81. The compensation requested by the trustee is $6,325.73.
The Final Report proposes to pay interest upon all claims to be paid through the final distribution, with the interest rate fixed at the rate established by 28 U.S.C. § 1961 as of the date of the filing of the petition, and with the interest to accrue from the petition date. The prior disbursements, toward payment of the bond premium and in payment of the estate's attorney's fees and costs for the handling of the tort claim on behalf of the estate, are not to accrue interest according to the Final Report.
The debtor has objected to the portion of the Trustee's Final Report whereby interest is to be accrued from the petition date upon the trustee's compensation claim and is to be paid through the Final Report distribution. There are other vague assertions concerning the trustee's compensation claim, but these are so unfleshed-out that they are not worthy of recapitulation. For reasons set forth below, the Court approves the Final Report as submitted, including the payment of interest upon trustee compensation (and expenses) from the petition date. We recognize and attempt to deal with the fact that our opinion will place us in the unenviable position of having created a one-court-strong minority view, in conflict with a majority view (that trustee compensation claims are not entitled to interest from the petition date), strongly held by courts from all levels (bankruptcy to circuit). As will be shown, we advance an interpretation of the statute (§ 726(a)(5)) that is no different from that reached by the courts with whom we differ. However, we diverge from the other courts who have considered the matter, because of our unwillingness to ignore the statutory directive in favor of a judicially-created better way. We think § 726(a)(5) can be plainly read, can be (even by us) understood, and can (and must) be applied as written, within the context in which it is applicable.
The argument of the debtor is that the surplus is improperly reduced by the interest accrued in the Final Report upon the trustee's compensation and expense reimbursement claims. The trustee has suggested that her compensation claim is less than that allowed under the statutory maximum, but has not provided the alternative calculation of what she thinks her compensation maximum would be, under § 326(a).2 Our first thought was to calculate the statutory maximum compensation under § 326(a) to determine whether the requested compensation, plus the requested interest, would generate a sum less than the statutory maximum compensation amount. The thinking behind this first thought was that maybe we did not have to deal with the interest question, if we could some way establish that the interest component might not affect the surplus if the maximum compensation amount was earned.3
Unfortunately (for us), in attempting to arrive at the statutory maximum compensation amount, we have concluded that there are two distinct ways in which the maximum compensation amount can be fixed under § 326(a). We have found much authority which pre-supposes a working knowledge of how to calculate the compensation maximum, but (probably as we would have figured had we thought about it) none which shows this knowledge actually at work.
We have found that until there is more money available than the principal amount of all claims to be paid through the final distribution (other than trustee compensation), the two methods present distinction without a difference, as the maximum amount of compensation fixed by § 326(a) will be the same regardless of the method used. As we will see, though, when the amount available for distribution becomes greater than the principal amount of the claims to be paid (other than the trustee compensation), the methods yield different results. We point out that the following explanation of the two calculation methods assumes that the trustee compensation claim is entitled to interest accruing from the petition date. Because our analysis of § 726(a)(5) requires this conclusion, we do not offer alternative calculations without interest.
The first calculation method starts with the amount of claims, other than trustee compensation, to be paid through the final distribution. As mentioned, these claims amount to $29,670.81. Interest accrues upon these claims, pursuant to § 726(a)(5), from the petition date, and has been calculated to aggregate $4,693.42.4 The aggregate claims to be paid through the Final Report, including interest thereon, is $34,364.23. This figure excludes the claim for trustee compensation. To this amount must be added the sum of the pre-Final Report disbursements, given the language of § 326(a). The total of $34,364.23 plus $28,937.06 is $63,301.29.5
The trustee's maximum compensation amount, under this approach, is calculated according to § 326(a) as follows:
$63,301.29 compensation maximum
- 5,000.00 = $1,250
__________
$58,301.29
-45,000.00 = $4,500
__________
$13,301.29
× .05 = $665.06
__________
Total maximum compensation to
which trustee is entitled = $6,415.06
As mentioned, the trustee in this case is requesting $6,325.73 in compensation.
From this determination of the maximum compensation amount, we see that there is a difference of only $89.33 between the maximum and the amount requested. The interest that has been accrued from the petition date has been accrued upon $6,325.73, the claimed compensation, and amounts to $1,925.66. (Interest that would accrue upon the maximum amount would be $1,955.05). The requested compensation plus interest is $8,251.39. The maximum compensation amount plus interest would be, under this calculation method, $8,370.11.
We can now determine the surplus that is available in this case and that would be available if the maximum compensation, as herein calculated would be approved. To get the actual surplus, the $63,301.29 is added to the requested trustee compensation, plus interest thereupon (the sum of $8,251.39). The total, $71,552.68, is subtracted from the total receipts (plus interest) to arrive at the surplus to be returned to the debtor. In this case, the surplus to be paid to the debtor will be in excess of $18,221.10. Had maximum compensation been requested and approved, the surplus would have been reduced by the $89.33 difference between the maximum compensation and the requested compensation, plus accrued interest thereupon (approximately $27.22), or $116.55. This would yield a surplus of $18,104.55. This calculation method interprets the language of § 326(a), "monies disbursed or turned over in the case by the trustee to parties in interest, excluding the debtor, but including holders of secured claims" to exclude the trustee from the term "parties in interest." In other words, this calculation method carves out from...
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