Pritchard v. U.S. Trustee , 153 F.3d 232 ( 1998 )

Revised September 16, 1998
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
____________________
No. 97-10378
____________________
In The Matter Of: CHARLES ENGLAND,
Debtor.
--------------------
J GREGG PRITCHARD,
Appellee,
v.
US TRUSTEE,
Appellant,
v.
PALMER & PALMER, PC,
Appellant.
---------------------------------------------
In The Matter Of: WESLEY R ENGLAND,
Debtor.
--------------------
J GREGG PRITCHARD, Trustee,
Appellee,
v.
US TRUSTEE,
Appellant,
v.
PALMER & PALMER, PC,
Appellant.
_________________________________________________________________
Appeals from the United States District Court
for the Northern District of Texas
_________________________________________________________________
August 28, 1998
Before KING and DAVIS, Circuit Judges, and HEARTFIELD,* District
Judge.
KING, Circuit Judge:
Appellants, the United States Trustee and Palmer & Palmer,
P.C. appeal the district court’s judgment reversing the
bankruptcy court’s judgment which limited bankruptcy trustee
J. Gregg Pritchard’s compensation for administering the debtors
estates. We reverse the district court’s judgment.
I. BACKGROUND
Trustee-appellee J. Gregg Pritchard (the Trustee) served as
the bankruptcy trustee in the Chapter 7 liquidations of the
jointly administered estates of two brothers, debtors Charles
England and Wesley R. England. Real estate provided the bulk of
the assets for both estates, and some of the properties were
owned jointly by the debtors. The Trustee successfully sold some
of the properties, but the other properties proved more difficult
to sell. To avoid delay in closing the estates and with only six
unsecured creditors left to be paid, the creditors and the
*
District Judge of the Eastern District of Texas, sitting
by designation.
2
Trustee entered into an agreement to transfer the unsold real
estate and other property to two of the creditors in full
satisfaction of their claims and to pay the other four creditors
in full. This settlement, including the transfer of property,
was approved by the bankruptcy court without any objection from a
party-in-interest.
The Trustee then sought $89,359.99 in compensation from the
estates. The bankruptcy court reduced the Trustee’s compensation
to $38,009.30 based upon 11 U.S.C. § 326(a), which caps a Chapter
7 trustee’s compensation based upon a percentage of the moneys
disbursed. The Trustee appealed the bankruptcy court’s
compensation decision to the district court, which reversed the
decision and ruled that the Trustee’s maximum compensation would
be based upon the moneys and property disbursed. The United
States Trustee (the U.S. Trustee) and Palmer & Palmer, P.C.
(Palmer), the debtors’ counsel, appeal.1
II. STANDARD OF REVIEW
This case presents only a question of statutory
interpretation, which is a question of law reviewed de novo. See
Bruner v. United States (In re Bruner), 55 F.3d 195, 197 (5th
Cir. 1995).
1
The Trustee suggests that Palmer is not a proper
appellant. We need not reach this question because the United
States Trustee is undoubtedly a proper party and is requesting
the identical relief, and therefore we may entertain this appeal
even without Palmer.
3
III. DISCUSSION
Section 330 of the Bankruptcy Code provides authority for
the bankruptcy court to award the bankruptcy trustee “reasonable
compensation for actual, necessary services rendered by such
trustee.” See 11 U.S.C. § 330(a)(1).2 Under § 330, the
bankruptcy court may award less compensation than requested, and
the section sets out relevant factors to consider in determining
reasonable compensation. See id.;3 3 COLLIER ON BANKRUPTCY
§ 330.02[1][c][i] (Lawrence P. King ed., 15th ed. rev. 1998).
However, § 326 of the Bankruptcy Code limits the bankruptcy
court’s power to award compensation to the trustee by setting a
maximum limit on the trustee’s compensation. Section 326(a)
2
The relevant portions of §§ 330 and 326 were both amended
in 1994. See Bankruptcy Reform Act of 1994, Pub. L. No. 103-394,
§§ 107, 224, 108 Stat. 4106, 4111, 4130-31. Those amendments do
not apply to this bankruptcy proceeding because it was filed
before their effective date. See id. § 702, 108 Stat. 4150.
Therefore, all references, unless otherwise noted, are to the
previous versions of §§ 326 and 330 applicable in this case.
3
Section 330 provides:
(a) After notice to any parties in interest and to
the United States trustee and a hearing, and subject to
sections 326, 328, and 329 of this title, the court may
award to a trustee . . . --
(1) reasonable compensation for actual,
necessary services rendered by such trustee . . .
based on the nature, the extent, and the value of
such services, the time spent on such services,
and the cost of comparable services other than in
a case under this title; and
(2) reimbursement for actual, necessary
expenses.
11 U.S.C. § 330.
4
provides that
[i]n a case under chapter 7 or 11, the court may
allow reasonable compensation under section 330 of this
title of the trustee for the trustee’s services,
payable after the trustee renders such services, not to
exceed [decreasing percentages of increasing dollar
amounts], upon all moneys disbursed or turned over in
the case by the trustee to parties in interest,
excluding the debtor, but including holders of secured
claims.
Id. § 326(a) (emphasis added). The proper outcome of this appeal
turns upon whether “moneys disbursed” as used in § 326(a)
includes the disbursement of unliquidated property from the
estate.
Before interpreting the statute, we must first address the
Trustee’s argument that the law of the case controls the outcome
of this case. Under the law-of-the-case doctrine, a court
follows its prior final decisions in the case as the law of that
case, except for a few narrow exceptions. See Alberti v.
Klevenhagen, 46 F.3d 1347, 1351 n.1 (5th Cir. 1995). The
doctrine encompasses those decisions “‘decided by necessary
implication as well as those decided explicitly.’” Id. (citing
Dickinson v. Auto Ctr. Mfg. Co., 733 F.2d 1092, 1098 (5th Cir.
1983)). The Trustee argues that the bankruptcy court determined
that the definition of “money” includes property when it approved
the transfer of the property to the unsecured creditors in full
satisfaction of their claims. He bases his argument upon the
trustee’s duty to reduce the property of the estate to money
under 11 U.S.C. § 704(1), contending that, in order to approve
5
the transfer, the bankruptcy court necessarily had to decide that
money included property or else the court could not have approved
the transfer. However, the bankruptcy court made no such
determination, either implicitly or explicitly; the court was
simply presented with a method, urged by the Trustee and the
creditors, to satisfy all of the remaining creditors’ claims in
full while avoiding the delay of waiting for the sale of the
remaining properties. No one objected to the transfer of
property to satisfy the remaining claims against the estates, and
the bankruptcy court approved the transfer without making any
decision as to the meaning of “money” under the Bankruptcy Code.
We return, then, to our statutory inquiry. To determine the
meaning of a statute, a court must begin with the plain meaning
of its language. See United States v. Ron Pair Enters., 489 U.S.
235, 241 (1989). “Courts properly assume, absent sufficient
indication to the contrary, that Congress intends the words in
its enactments to carry ‘their ordinary, contemporary, common
meaning.’” Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd.
Partnership, 507 U.S. 380, 388 (1993) (quoting Perrin v. United
States, 444 U.S. 37, 42 (1979)). Because the Bankruptcy Code does
not define “moneys” (or “money”), we must rely upon the word’s
common everyday meaning, which does not include property. See
WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 1458 (Philip Babcock Gove
ed., 1963) (defining “money” as “something generally accepted as
a medium of exchange, a measure of value, or a means of
6
payment”); BLACK’S LAW DICTIONARY 1005 (6th ed. 1990) (defining
“money” as “coins and paper currency used as circulating medium
of exchange, and does not embrace notes, bonds, evidences of
debt, or other personal or real estate”). The plain language of
§ 326(a) indicates that the statute caps a trustee’s compensation
based upon only the moneys disbursed, without any allowance for
the property disbursed. See In re Barnett, 133 B.R. 487, 489-90
(Bankr. N.D. Iowa 1991) (relying upon the plain language of the
statute to hold that property disbursements could not increase
the maximum compensation); In re New England Fish Co., 34 B.R.
899, 901-02 (Bankr. W.D. Wash. 1983) (same); see also In re
Brigantine Beach Hotel Corp., 197 F.2d 296, 299 (3d Cir. 1952)
(interpreting the same language in the Bankruptcy Act of 1898 and
finding that “moneys” is not the equivalent of property); In re
North Am. Oil & Gas, Inc., 130 B.R. 473, 480-81 (Bankr. W.D. Tex.
1990) (finding unliquidated assets turned over did not increase
the trustee’s maximum compensation). But see In re Toole, 294 F.
975, 977 (S.D.N.Y. 1920) (interpreting the same language in the
Bankruptcy Act of 1898 and finding “moneys disbursed or turned
over” broad enough to encompass securities disbursed).
The Trustee argues that the plain meaning of money should
not be used in interpreting § 326(a) because to do so conflicts
with fundamental policies of the Bankruptcy Code, including
prompt administration of the bankruptcy estate and maximization
7
of the payments to creditors.4 See 11 U.S.C. § 704(1) (including
among the duties of the trustee the duty to “collect and reduce
to money the property of the estate for which such trustee
serves, and close such estate as expeditiously as is compatible
with the best interests of parties in interest”). According to
the Trustee, these policies support his decision to transfer the
property to the unsecured creditors, and the conflicts with these
policies that a plain language interpretation of § 326(a) creates
are “‘demonstrably at odds with the intentions of [the statute’s]
drafters,’” requiring courts to give controlling effect to their
intentions over the statute’s plain meaning.5 See Ron Pair
Enters., 489 U.S. at 242 (quoting Griffin v. Oceanic Contractors,
Inc., 458 U.S. 564, 571 (1982)).
Restated, the Trustee’s argument is that, by excluding
property distributions from the calculation of his maximum
compensation, the plain meaning of § 326(a) creates an incentive
4
The Trustee also argues that the term “money,” as used in
the Bankruptcy Code, does not have a plain meaning that excludes
property because, in approving the transfer of the property to
satisfy creditors’ claims, the bankruptcy court interpreted
“money” to include property. This argument fails for the same
reasons as the Trustee’s law-of-the-case argument discussed above
in the text: the bankruptcy court’s approval of the transfer of
the property in no sense carried with it an explicit or implicit
determination of what constituted “money.”
5
In this case, we are concerned only with the
interpretation of 11 U.S.C. § 326(a) and do not express any
opinion as to the propriety of the Trustee’s transfer of the
property to the unsecured creditors as a method of settling the
debtors’ estates under the Bankruptcy Code.
8
for a trustee to liquidate assets even though that action may not
be in the best interest of the estate. However, § 330, not
§ 326(a), provides authorization for compensating the trustee and
sets the standards for that compensation, and it allows a
bankruptcy court to award a lesser amount of compensation when
the trustee has manipulated the handling of an estate to increase
his maximum compensation to the detriment of the estate. See 11
U.S.C. § 330(a)(1)-(2) (authorizing reasonable compensation only
for “actual necessary services” and “actual necessary,
expenses”); In re Prairie Cent. Ry., 87 B.R. 952, 957 (Bankr.
N.D. Ill. 1988); see also Southwestern Media, Inc. v. Rau, 708
F.2d 419, 424 (9th Cir. 1983) (interpreting 11 U.S.C. § 326(a)’s
substantially similar predecessor in the Bankruptcy Act of 1898).
Section 326(a)’s intended role within the Bankruptcy Code is
simply to set a maximum limit on the trustee’s compensation. See
S. REP. NO. 95-989, at 37 (1978), reprinted in 1978 U.S.C.C.A.N.
5787, 5823; H.R. REP. NO. 95-595, at 327 (1977), reprinted in 1978
U.S.C.C.A.N. 5963, 6283;6 see also 11 U.S.C. § 326 (entitled
6
The Senate and House Reports read identically in relation
to § 326 and its intended purpose as an upper limit on trustee
compensation:
It must be emphasized that this section does not
authorize compensation of trustees. This section
simply fixes the maximum compensation of a trustee.
Proposed 11 U.S.C. 330 authorizes and fixes the
standard of compensation. Under section 48c of current
law, the maximum limits have tended to become minimums
in many cases. This section is not intended to be so
interpreted. The limits in this section, together with
9
“Limitation on compensation of trustee”); Southwestern Media, 708
F.2d at 424; Prairie Cent. Ry., 87 B.R. at 957. Therefore, a
trustee who manipulates a bankruptcy estate to increase his
maximum compensation risks being denied compensation regardless
of what the maximum compensation may be under § 326(a) because
the compensation is unreasonable in light of the trustee’s
manipulations. See Southwestern Media, 708 F.2d at 425; Prairie
Cent. Ry., 87 B.R. at 957.
The policy concerns raised by the Trustee do not demonstrate
that using the plain meaning of “moneys disbursed” in
interpreting § 326(a), especially in light of § 330’s role in
setting compensation, is at odds with Congress’s intent. See
Barnett, 133 B.R. at 489-90. The section is consistent with the
duty of a Chapter 7 trustee to collect and reduce the property of
the bankrupt’s estate to money. See 11 U.S.C. § 704(1).
Additionally, § 326(a) does not in itself prohibit the court, in
setting the trustee’s compensation under § 330, from taking into
account the services that the trustee rendered in arranging for
the property distribution in settlement of claims, but merely
the limitations found in section 330, are to be applied
as outer limits, and not as grants or entitlements to
the maximum fees specified.
S. REP. NO. 95-989, at 37 (1978), reprinted in 1978 U.S.C.C.A.N.
5787, 5823; H.R. REP. NO. 95-595, at 327 (1977), reprinted in 1978
U.S.C.C.A.N. 5963, 6283.
10
sets an upper limit on the trustee’s compensation from the
estate. See 11 U.S.C. §§ 326(a), 330. Congress’s decision to
set a maximum limit on trustee compensation based only upon
moneys disbursed may arguably lead to a trustee receiving
inadequate compensation in a particular case, but that is a
problem for Congress to remedy. See Barnett, 133 B.R. at 490.
We recognize that, despite the plain meaning of § 326(a),
some bankruptcy courts have interpreted the section to include
disbursements other than money within the calculation of a
trustee’s maximum compensation. See In re Greenley Energy
Holdings of Pa., Inc., 102 B.R. 400 (E.D. Pa. 1989) (including
guaranteed contracts in the calculation of maximum compensation
where the trustee actually sought out and entered the contracts
for the estate); In re Toole, 294 F. 975 (S.D.N.Y. 1920)
(interpreting the same language in the Bankruptcy Act of 1898 to
include securities disbursed in a difficult bankruptcy); In re
Stanley, 120 B.R. 409 (Bankr. E.D. Tex. 1990) (including liens on
property that remained in force on the property after sale in the
calculation of maximum compensation); see also North Am. Oil &
Gas, 130 B.R. at 480 n.15 (relying upon Greenley Energy for the
idea that the rare case may present a situation where property
distributions which can be readily valued are includable in
determining the trustee’s maximum compensation). We simply
disagree that the plain language of § 326(a) permits a different
result from that reached by the bankruptcy court in this case.
11
IV. CONCLUSION
For the foregoing reasons, we REVERSE the district court’s
judgment and REMAND the case for further proceedings consistent
with this opinion.
12