Nardello v. Balboa (In re Nardello)

• Decision Date: 04 August 2014
• Docket Number: Civil Action Nos. 13–6564 (JBS), 12–36287 (GMB).
• Citation: 514 B.R. 105
• Parties: In re George A. NARDELLO, Debtor. George A. Nardello, Appellant, v. Isabel C. Balboa, Appellee.
• Court: U.S. District Court — District of New Jersey

514 B.R. 105

In re George A. NARDELLO, Debtor.George A. Nardello, Appellant,

v.Isabel C. Balboa, Appellee.

Civil Action Nos. 13–6564 (JBS), 12–36287 (GMB).

United States District Court, D. New Jersey.

Signed Aug. 4, 2014.

Kenneth A. Sandler, Esq., Marlton, NJ, for Appellant George A. Nardello.

Isabel C. Balboa, Esq., Raymond H. Shockley, Esq., Office of the Chapter 13 Standing Trustee, Cherry Hill, NJ, for Appellee Isabel C. Balboa.

OPINION

SIMANDLE, Chief Judge.

I. INTRODUCTION

This action comes before the Court on George A. Nardello's (“Debtor” or “Appellant”) appeal from Bankruptcy Case No. 12–36287, in which the Bankruptcy Court issued an order on September 18, 2013 overruling Debtor's objection to the Trustee's Final Report and Account. The Order permitted Isabel C. Balboa (“Standing Trustee” or “Appellee”) to take a percentage fee on all payments received and disbursements made in the case. For the following reasons, the Bankruptcy Court's order is affirmed. The Standing Trustee is entitled to the percentage fee permitted by the Bankruptcy Court.

II. BACKGROUND

On October 26, 2012, Debtor filed a petition under Chapter 13 of the Bankruptcy Code. On the same date, Isabel C. Balboa was appointed to serve as standing trustee in Debtor's Chapter 13 bankruptcy case. On November 7, 2012, Kenneth A. Sandler, Esq., entered his appearance on behalf of Debtor. On November 13, 2012, Wells Fargo, N.A. (“Wells Fargo”) filed a motion for relief from automatic stay to permit Wells Fargo to repossess and sell Debtor's 2001 Carver yacht, and on November 19, 2012, Nathan and Darlene Supnick (“the Supnicks”) filed a motion for approval of the sale of real estate in North Wildwood, New Jersey jointly owned by Debtor and the Supnicks. The Bankruptcy Court, after holding hearings regarding the value and conditions of the sale of the yacht, vacated the automatic stay by order entered March 6, 2013. The Court entered an order on November 27, 2012 authorizing the sale of the North Wildwood property and ordering the proceeds to be held by the Standing Trustee pending further order of the court. Accordingly, the property was sold on December 12, 2012 and the Standing Trustee received payments of $147,076.57. By order entered January 15, 2013 and without any objection from Debtor, the Court authorized the Standing Trustee to pay the realtor, Joseph Iezzi, $18,375.00, and the Trustee disbursed the payment on January 17, 2013.

On December 10, 2012, Debtor filed his Plan, which proposed to make monthly payments of $360.80 for 60 months to the Standing Trustee. Such payments were to be funded by Debtor's future earnings and the sale of Debtor's yacht, which he valued at $225,000. Confirmation of the Plan was delayed due to a dispute over the value of the yacht, the Plan's omission of a debt owed to TD Bank, as well as the need to amend the Plan to address the Wildwood property proceeds.

On March 6, 2013, the Court directed the Trustee to distribute $64,350.78 to the Supnicks, which represented their one-half share in the net proceeds of the sale of the North Wildwood property, as well as $19,500.00 to the Supnicks “from the remaining proceeds of the sale which Debtor acknowledged as owing to said creditors for payment of Debtor's share of the mortgage on said property.” [Bankr. Docket Item 96.]

On March 7, 2013, the Court entered an order allowing Debtor to voluntarily dismiss the case. Subsequently, Debtor's counsel filed a fee application, and on March 20, 2013, the Court entered an order approving a fee of $4,400.00 plus costs of $146.78 to Debtor's attorney. An amended order dated April 3, 2013 required Debtor's counsel to return a check issued to him by the Standing Trustee in the amount of $5,625.00, which represented the remaining balance of the net proceeds from the sale of the North Wildwood property. These proceeds were to be paid by the Standing Trustee to the Supnicks' attorney, pending resolution of a controversy regarding the remaining balance of the net proceeds. The Standing Trustee issued a check to the Supnicks' attorney on April 15, 2013.

On April 5, 2013, the remaining proceeds of the sale of the North Wildwood property, a total of $25,308.94, were disbursed to Debtor as a debtor refund following dismissal of the case on March 7, 2013.

On May 7, 2013, the Standing Trustee filed a Final Report and Account itemizing all payments received and disbursements made by the Standing Trustee in the case. In the section titled “Receipts,” the Report identifies $147,437.29 as the “Total paid by or on behalf of the debtor” and $25,308.94 as the “amount refunded to debtor,” thus yielding “net receipts” of $122,128.35. In the section titled “Disbursements,” the Report identifies $122,128.35 as “Expenses of Administration” and $0.00 as “Disbursements to Creditors.” The “Expenses of Administration” section contains four line-items for the $122,128.55: (1) $4,546.78 for “Attorney's Fees Paid Through the Plan;” (2) $0.00 for “Court Costs;” (3) $9,730.79 for “Trustee Expenses & Compensation;” and (4) $107,850.78 for “Other.” The Report also indicates a 6.6 percentage fee in the amount of $9,730.79 to the Standing Trustee.

On May 31, 2013, Debtor filed an Objection to the Trustee's Final Report and Account in which Debtor objected to the Standing Trustee's percentage fee and argued that 11 U.S.C. §§ 1326(a) and (b) do not provide for payment of a percentage fee where the Debtor's case is dismissed prior to confirmation. On June 25, 2013, the Bankruptcy Court heard oral argument on Debtor's objection. Chief Judge Burns convened a telephone conference on September 10, 2013, during which she announced her decision in favor of the Standing Trustee and authorized the percentage fee identified in the Final Report and Account. Chief Judge Burns found 11 U.S.C. § 1326(a) inapplicable to Debtor's case because the funds on which the Trustees percentage fee was based were not payments proposed by the plan. (Sept. 10, 2013 Hr'g Tr. at 7:4–6; 9:21–24.) Instead, Judge Burns found that that only 28 U.S.C. § 586(e) applies and she noted that the use of the plural, “plans,” indicates Congress' intent for the section to apply to all plans, not just confirmed plans. ( Id. at 10:2–3.) Judge Burns distinguished the instant action from cases where no payments were made to creditors on the grounds that Debtor here consented to disbursement of funds to the Supnicks from the sale of the North Wildwood property prior to confirmation. ( Id. at 7:7–8:6.) Moreover, Judge Burns emphasized that Debtor insisted that the proceeds from the sale be held by the Trustee and only agreed to disbursement to the Supnicks after a motion by the Supnicks' counsel.¹ ( Id. at 9:12–20.) As such, Judge Burns found that Debtor “impliedly consented” to [the Trustee] receiving compensation, which could only be paid by way of a percentage fee.” ( Id. at 9:17–20.) Judge Burns also distinguished Section 1326(a) from Section 1226(a), pertaining to Chapter 12 cases, because Section 1226(a) refers to both payments and funds received by the Trustee. ( Id. at 8:21–9:5.) Judge Burns concluded that “[t]he Trustee relied upon the Court orders to render service to the estate, and should not be penalized now for performing those services which were necessitated by the debtor's actions and consensual Court orders in anticipation of a modified plan, which was to have been provided by the debtor.” ( Id. at 10:17–22.)

On September 18, 2013, Chief Judge Burns entered an order (“September 18, 2013 Order”) memorializing her decision overruling Debtor's objection to the Trustee's Final Report and Account. The September 18, 2013 Order constitutes a final order of the Bankruptcy Court, and the debtor timely appealed. This Court has jurisdiction to hear this appeal pursuant to 28 U.S.C. § 158(a)(1).

III. STANDARD OF REVIEW

Bankruptcy Rule 8013 provides that a district court “may affirm, modify, or reverse a bankruptcy judge's judgment, order, or decree or remand with instructions for further proceedings.” Fed. R. Bankr.P. 8013. The Rule further provides that “[f]indings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses.” Fed. R. Bankr.P. 8013. Essentially, the district court must “review the bankruptcy court's legal determinations de novo, its factual findings for clear error and its exercise of discretion for abuse thereof.” In re Am. Pad & Paper Co., 478 F.3d 546, 551 (3d Cir.2007) (quotation omitted).

IV. DISCUSSION

Appellant argues that the Bankruptcy Court erred as a matter of law in allowing the Standing Trustee to take a percentage fee on all monies received in a Chapter 13 case that was dismissed prior to confirmation. Appellant contends that without any plan confirmation, there could not have been any payments “under the plan” for the purposes of 28 U.S.C. § 586(e) and 11 U.S.C. § 1326(b). Even if Debtor's unconfirmed plan constituted a plan within the meaning of these statutes, Appellant argues that Debtor's plan only provided for two sources of payment: monthly payments of $360.80 and monies received from the sale of Debtor's yacht. Appellant emphasizes that the amounts distributed to the Supnicks for their share of the sale proceeds from the North Wildwood property cannot constitute a payment received under the plan because they were not Debtor's property nor part of Debtor's earnings. Additionally, Appellant notes that the Final Report and Account lists no payments to creditors.²

Appellee responds that the Bankruptcy Court correctly concluded that the Standing Trustee was entitled to a percentage fee pursuant to 28 U.S.C. § 586(e) and that 11 U.S.C. § 1326 does not prohibit collection of a percentage fee in an unconfirmed case. Appellee contends that the relevant statutes make no distinction between confirmed...