Matter of Santoro Excavating, Inc.
| Decision Date | 07 March 1986 |
| Docket Number | Bankruptcy No. 82 B 20039. |
| Citation | 56 BR 546 |
| Parties | In the Matter of SANTORO EXCAVATING, INC., Debtor. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
DECISION ON APPLICATIONS FOR FINAL COMPENSATION
The task of ascertaining appropriate and reasonable fees for legal services performed in a bankruptcy case is often more difficult and time consuming in those instances when the trustee in bankruptcy acts as his or her own attorney, or where the trustee is employed by the law firm seeking such allowance. In this case, Miriam Teitelbaum, was appointed as trustee in bankruptcy following the conversion of the debtor's Chapter 11 reorganization attempt to a liquidation case under Chapter 7 of the Bankruptcy Code. Mrs. Teitelbaum then retained as her counsel the law firm of Jules Teitelbaum, P.C., where she is employed as an attorney. Applications for final compensation have now been submitted at the close of this case.
Mrs. Teitelbaum seeks commissions pursuant to 11 U.S.C. § 326 in the amount of $5863.90, less $3,764.40 previously awarded to her as interim commissions. Jules Teitelbaum, P.C., as attorney for the trustee in bankruptcy, has applied for the sum of $100,811.80 for legal services in this case, less $24,408.19 previously awarded as interim compensation. Included in the application for legal fees is a requested bonus of $20,000. The accountant for the trustee, Eli Rosman, seeks compensation in the amount of $7,995.00, less $3,510 previously received as interim compensation.
On January 14, 1982, the debtor, Santoro Excavating, Inc., filed with this court a petition for reorganization under Chapter 11 of the Bankruptcy Code. The debtor had been in the business of operating a construction company. The debtor's proposed liquidating plan was rejected by the creditors' committee which believed that the debtor's estimate of the value of its assets was lower than that which the committee thought could be realized upon liquidation. On May 19, 1982, upon the request of the creditors' committee, which was then represented by Jules Teitelbaum, P.C. as counsel, the court entered an order converting the Chapter 11 reorganization case to a Chapter 7 liquidation. Miriam Teitelbaum was selected by the United States trustee as the interim trustee and thereafter continued as the trustee in bankruptcy. She then obtained court approval to retain the law firm of Jules Teitelbaum, P.C. as counsel for the trustee.
In addition to collecting accounts receivable and objecting to improper claims, the trustee and her counsel demanded that insiders, Frank and Ruth Santoro, reconvey to the debtor certain real property that was allegedly transferred to them by the debtor. It was claimed that this transfer was a voidable fraudulent conveyance. The property was reluctantly returned and sold at auction for $100,000. Other assets of the estate consisting of construction equipment were also sold at the auction. A secured claim in the amount of $22,033.48 was settled for $20,500.00 because the trustee claimed that the security interest was not fully perfected.
The trustee brought a preference suit against Barclays Bank to recover for an alleged voidable preference of $20,000 because the bank released collateral which had been pledged to it by the Santoro family as guarantors of the bank's loan to the debtor. After the bank released the collateral in the amount of $20,000 to the guarantors it charged the debtor's bank account in like amount. The court dismissed the trustee's complaint because the bank, as a secured claimant, had the right to exercise a setoff against the debtor's account in accordance with 11 U.S.C. §§ 506(a) and 553. In re Santoro Excavating, Inc., 32 B.R. 947, 10 B.C.D. 1369, 10 C.B.C.2d 603 (Bankr.S.D.N.Y.1983). The court stated that the dismissal of the trustee's complaint was without prejudice to any complaint that the trustee might file against the Santoro guarantors to the extent that their contingent claims against the debtor were satisfied when Barclays released the collateral. The trustee then commenced a preference action against Frank and Ruth Santoro for $20,000, which was in return settled for a $10,000 payment to the estate.
The trustee realized additional funds for the estate when she sold certain real estate owned by the debtor for $160,000. The total gross receipts in this estate amounted to $498,389.76. The disbursements, including interim allowances, totalled $177,321.47, leaving a net balance in this estate of $321,068.29. The administration claims and priority claims, excluding the applications for compensation by the professionals, amount to $187,883.39, leaving a balance of $133,184.90. This balance of $133,184.90 must be applied first to the payment of compensation to the professionals for their services as an administrative expense in accordance with 11 U.S.C. § 503(b)(2). The funds available after the payment of compensation to the professionals, as authorized under 11 U.S.C. § 330(a), will be distributed to the general unsecured claim holders whose allowed claims amount to $390,499.21. If the compensation sought by the professionals were allowed to the full extent requested, the unsecured creditors would receive a distribution amounting to approximately 12% of their claims, whereas the professionals would have received approximately 25% of the gross estate, of which approximately 20% represents counsel fees.
In her capacity as trustee in bankruptcy, Mrs. Teitelbaum was required to make and receive numerous telephone calls to and from creditors and their attorneys, as well as to attend various conferences with her own counsel and accountant. She was also required to receive and review correspondence to the estate and, conversely, she was obliged to communicate and send letters to creditors and other interested parties who inquired about the status of administration of the case. For these services the trustee properly calculates her maximum statutory commissions to be $5,863.90, which sum is allowed, less $3764.40, which was previously paid as interim commissions.
As counsel for the trustee in bankruptcy, the firm of Jules Teitelbaum, P.C. seeks an allowance of $56,403.61, in addition to interim compensation previously received in the amount of $24,408.19, together with a bonus of $20,000, for a total of $100,811.80.
In reviewing the time sheets submitted in support of counsel's application the court ascertained that there were 182 instances where the trustee, Miriam Teitelbaum, had telephone calls with various creditors, attorneys and interested parties where no details were given as to what the subject matter was, or whether the services involved were of a nature not generally performed by a trustee. These telephone conferences totalled 64.67 hours of billable time, and do not include those other instances where telephone calls were listed as attributable to a specific pending matter or subject. Similarly, the law firm of Jules Teitelbaum, P.C. charged for 9.67 billable hours when Miriam Teitelbaum received and reviewed correspondence in 21 instances where no explanation was given as to what the subject matter was or why this charged time involved services not generally performed by a trustee. Finally, in addition to charging for his own time, Jules Teitelbaum, P.C. charged for office conferences attended by Miriam Teitelbaum on 13 occasions where no details were given as to why a conference with the trustee in bankruptcy should be billed as legal services performed by the trustee. There were additional...
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