In Re: Celano ( 2002 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
____________________
No. 02-30162
Summary Calendar
____________________
In The Matter Of: JOSEPH CELANO; ANN MARIE CELANO
Debtors
________________________
CYNTHIA LEE TRAINA
Appellant
v.
JOSEPH CELANO; ANN MARIE CELANO
Appellees
and
R MICHAEL BOLEN, United States Trustee, Region 5
Trustee - Appellee
_________________________________________________________________
Appeal from the United States District Court
for the Eastern District of Louisiana
(No. 01-CV-1310)
_________________________________________________________________
November 18, 2002
Before KING, Chief Judge, and WIENER and CLEMENT, Circuit Judges.
PER CURIAM:*
*
Pursuant to 5TH CIR. R. 47.5, the court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIR. R.
47.5.4.
Appellant Cynthia Lee Traina appeals from the district
court’s affirmance of the bankruptcy court’s denials of her
application for compensation pursuant to 11 U.S.C. § 326(a)
(1994) and her motion pursuant to Rule 59 of the Federal Rules of
Civil Procedure. For the reasons set forth below, we AFFIRM the
district court’s affirmance of the denials.
I. FACTUAL AND PROCEDURAL BACKGROUND
The instant appeal primarily concerns Cynthia Lee Traina’s
request for fees that she believes are owed for services rendered
as a bankruptcy trustee. On March 31, 1998, Traina was appointed
the trustee of the estate of debtors Joseph and Ann Marie Celano
after the couple voluntarily filed a Chapter 7 bankruptcy
petition. On June 7, 1999, the Celanos converted their case into
a Chapter 11 proceeding and, although Traina tried to be
appointed the Chapter 11 trustee, the Celanos moved to dismiss
the Chapter 11 case. The Celanos eventually settled with their
creditors and submitted an Agreed Order to the bankruptcy court
that included the terms of the monetary distributions to all
interested parties. The bankruptcy court entered the Agreed
Order and allowed the Celanos to dismiss voluntarily the Chapter
11 case, but retained jurisdiction to determine whether Traina
was entitled to compensation for her time served as the Celanos’
Chapter 7 trustee.
2
Traina filed a Fee Application and requested $8,000 in fees.
On March 13, 2001, the bankruptcy court denied her request for
compensation, finding that § 326(a) barred Traina from receiving
compensation because she did not disburse any funds while serving
as trustee. Soon after, the bankruptcy court denied Traina’s
post-judgment motion pursuant to Rule 59(e) requesting the
bankruptcy court for a new trial, or in the alternative, to alter
or amend the judgment (“Rule 59(e) Motion”).
On December 7, 2001, the district court affirmed the
bankruptcy court’s decision, holding that: (1) Traina’s request
for compensation was correctly denied because, even in non-fully
administered cases, the plain language of § 326(a) indicates that
only money that the trustee distributes can be included in
calculating the compensation base; and (2) Traina’s Rule 59(e)
Motion was correctly denied because she failed to establish any
of the bases for relief available under the Rule.
Traina timely appeals the district court’s affirmance of the
bankruptcy court decision.
II. STANDARD OF REVIEW
This court, acting essentially as a second court of appeals,
reviews a bankruptcy court’s findings of fact under the clearly
erroneous standard, and a bankruptcy court’s conclusions of law
and mixed questions of law and fact de novo. In re U.S. Brass
Corp., 301 F.3d 296, 306 (5th Cir. 2002). In the instant appeal,
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review of the bankruptcy court’s denial of Traina’s request for
compensation under § 326(a) based on her services rendered as a
bankruptcy trustee presents a mixed question of law and fact and
is thus subject to de novo review.1
III. TRAINA’S REIMBURSEMENT CLAIM
On appeal, Traina contends that the district court erred in
affirming the denial of her compensation under §§ 326(a) and 330
of the Bankruptcy Code. As to § 326(a), she criticizes the
district court’s method of calculating fees owed to trustees,
particularly the court’s failure to appreciate the distinction
between fully and non-fully administered cases. Traina concludes
that the court erred by grouping this non-fully administered case
with all other cases and thereby finding that § 326(a) applies to
non-fully administered cases. Appellee R. Michael Bolden, United
States Trustee, does not address these arguments in his Brief.
Regarding § 330, Traina contends that there was sufficient
evidence to support her entitlement to reasonable compensation
for her actual and necessary services rendered. She points to
her investigation into and identification of the Celanos’ wholly-
owned corporation called INTRX HealthCare (“INTRX”). Traina
asserts that her investigation into INTRX lead to the discovery
of accounts receivable that could be used to pay the Celanos’
1
As explained in Part IV, Traina’s Rule 59 motion is not
amenable to appellate review.
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creditors. Traina also contends that she had an essential role
in the formation of the Agreed Order between the creditors and
the debtors and that she encouraged the Celanos to convert the
case and ultimately settle it.
Bolen counters that the district court was correct in
finding that proof of this ownership was disclosed at the onset
of the bankruptcy litigation. He also suggests that Traina’s
role in the negotiations was minimal and it was the Celanos’
motivations, not Traina’s encouragement, that contributed to the
conversion of the Chapter 7 case and the settlement of the
Chapter 11 case.
The relevant statutory provisions are relatively straight-
forward. Section 326(a) of the Bankruptcy Code provides that a
limitation on the bankruptcy court’s power to award compensation
to the trustees by setting a maximum limit on the trustee’s
compensation, In re England, 153 F.3d 232, 234 (5th Cir. 1998),
while § 330 provides the statutory authority for a bankruptcy
court to award bankruptcy trustees “reasonable compensation for
actual, necessary services rendered by such trustee.” 11 U.S.C.
§ 330(a)(1). While Traina raises novel arguments concerning the
proper method for calculation of fees under § 326(a), we need not
delve into this relatively complicated matter of statutory
interpretation because the record strongly suggests that under
§ 330, Traina was not entitled to reasonable compensation for her
services rendered.
5
Section 330 lists several factors to consider in assessing
an award for reasonable compensation including “(1) the nature,
the extent, and the value of [the trustee’s] services; (2) the
time spent on such services; and (3) the costs of comparable
services other than in a cause under this title.” Id.
Significantly, § 330(a)(4)(A)(ii) admonishes that a “court should
not allow for compensation for ... services that were not (I)
reasonably likely to benefit the debtor’s estate; or (II)
necessary to the administration of the case.” Id.
§ 330(a)(4)(A). The rather subjective quality of the factors
laid out in the Bankruptcy Code affords a reviewing court broad
discretion in determining whether to award or deny trustee
compensation. See, e.g., In re Prudhomme, 43 F.3d 1000, 1003-04
(5th Cir. 1995) (citing § 330 for support of the proposition).
Even without such broad discretion, we would still find that
Traina has difficulty circumventing the plain language of
§ 330(a)(4)(A)(ii). It requires a serious suspension of
disbelief to accept that Traina was solely responsible for the
“discovery” of INTRX and its available funds. The record
indicates that, prior to Traina’s investigation, the Celanos were
aware of the INTRX’s existence and asset potential. We cannot
ignore the facts that the Celanos owned and controlled all stock
in INTRX; Joseph Celano founded the corporation; the Celanos
disclosed their ownership interest in the statement of financial
affairs; and the Celanos’ Schedule F disclosed that most of their
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debt consisted of contingent liabilities associated with the
INTRX account. Furthermore, Traina did not introduce evidence of
the Celanos’ absence of knowledge or awareness of the amounts
receivable in INTRX. Effectively, Traina’s investigation yielded
a negligible amount of new useful information for the Celanos in
their bankruptcy proceedings.2
Traina’s contention that her contributions were essential to
the settlement and Agreed Order are also problematic. Given that
§ 330 lists the nature and extent of the service as relevant
factors in trustee compensation determinations, it is
questionable whether Traina’s non-opposition to the dismissal of
the Celanos’ Chapter 11 case, which she claims was vital to the
Agreed Order, would constitute the kind of “actual, necessary
service” triggering compensation under the Bankruptcy Code.3 11
U.S.C § 330(a)(1). Moreover, even if Traina’s agreement of non-
opposition did provide a cognizable service, Traina’s acts did
not benefit the Celanos’ estate in the manner she depicts. The
relevant portion of the Agreed Order fails to indicate that
2
Although the Celanos failed to list (in their Schedule
B) assets related to their interest in INTRX, this occurrence
alone does not indicate that they needed Traina to locate and
secure the documentation related to the amounts receivable in
INTRX.
3
As to this contention, the district court keenly
observed that “[a]greeing not to oppose dismissal is a far cry
from putting together the ingredients necessary for the
settlement with the creditors.”
7
Traina’s involvement was particularly essential.4 In addition,
the only evidence pertaining to the quality of Traina’s services
as trustee is in the form of a letter from a participant in the
relevant negotiations. The letter states in pertinent part that,
“Traina did nothing to facilitate a settlement” and that the
“INTRX matter would have been resolved sooner had Ms. Traina ...
not been involved.... [She] actually obstructed the settlement
negotiations.”5 This evidence, taken in the aggregate, simply
overwhelms Traina’s evidence and assertions to the contrary.
In sum, Traina’s proffered actions as Chapter 7 trustee
either were unnecessary for the administration of the Celanos’
estate or unlikely to benefit the Celanos in the resolution of
their bankruptcy proceedings. Under such circumstances, the
4
The Agreed Order states, in pertinent part:
Considering the statements of counsel, agreement of
the parties, evidence, applicable law, [and] the lack
of opposition of the former trustee to dismissal of
the proceeding conditioned only upon the Court’s
receipt of evidence from counsel for the debtors that
debtors have paid all amounts required under their
agreements with Crescent Bank & Trust, the U.S. Small
Business Administration, Hibernia National Bank and
Adams & Reese, L.L.P., and the deposit by the debtors
of the sum of $500.00 into the registry of the Court
for the purpose of paying any and all sums which may
be awarded Cynthia Lee Traina as compensation as
Chapter 7 trustee.
5
In her Brief, Traina objects to the district court’s use
of this letter because it was “never introduced as evidence at
the hearing.” However, inclusion of the letter in the Bankruptcy
Record, see Letter of Donna G. Klein, R. 000180, implies that, it
was indeed submitted to the bankruptcy and district courts and is
therefore completely available for our consideration.
8
Bankruptcy Code compels that no compensation should be awarded.
Using the same standards as the bankruptcy court, we conclude
that it acted appropriately in holding that Traina was not
entitled to reasonable compensation under § 330 and thus, under §
326(a).
IV. TRAINA’S RULE 59(e) MOTION
Relying on Rule 9023 of the Federal Rules of Bankruptcy
Procedure, Traina contends that the district court erroneously
affirmed the bankruptcy court’s denial of her Rule 59(e) Motion.
In denying the motion, Traina argues, the bankruptcy court
prevented her from emphasizing several factual and legal errors
allegedly made in the court’s order; the denial of the motion,
Traina continues, constituted an abuse of discretion. Bolen
counters that the bankruptcy court did not abuse its discretion
in denying the motion because Traina failed to meet at least one
of the four requirements to prevail on a Rule 59 motion.
Discussion of the merits of this claim is not essential to
its ultimate resolution, however. The Fifth Circuit has informed
that a motion based on Bankruptcy Rule 9023 (which adopts Rule
59) can be argued only up to the point of the federal district
court’s review of a bankruptcy court; the Rule cannot be invoked
in subsequent arguments before a federal court of appeals
reviewing the district court’s decision. See In re Butler, Inc.,
2 F.3d 154, 155 (5th Cir. 1993); see also In re Eichelberger, 943
9
F.2d 536, 539 (5th Cir. 1991) (“A Rule 59(e) motion may be
brought from a judgment of the bankruptcy court ... but not from
a judgment of the district court exercising appellate
jurisdiction in a bankruptcy case.”). As a result, Traina is
procedurally precluded from asserting her Rule 59 arguments
before this court. Hence, the district court’s affirmance of the
bankruptcy court’s denial represents the final word on Traina’s
Rule 59(e) Motion.
V. CONCLUSION
For the foregoing reasons, we AFFIRM the judgment of the
district court. Traina’s motion for costs and damages is DENIED.
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