Scott v. US Trustee

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
W. STEPHEN SCOTT,
Plaintiff-Appellant,
v. No. 97-1285
U. S. TRUSTEE,
Defendant-Appellee.
Appeal from the United States District Court for the
Western District of Virginia, at Charlottesville.
James H. Michael, Jr., Senior District Judge.
(CA-96-57-C, BK-693-01681-WA3-7)
Argued: October 30, 1997
Decided: December 24, 1997
Before RUSSELL, NIEMEYER, and
WILLIAMS, Circuit Judges.
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Affirmed by unpublished per curiam opinion.
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COUNSEL
ARGUED: Neal Lawrence Walters, GILLIAM, SCOTT &
KRONER, P.C., Charlottesville, Virginia, for Appellant. Bruce G.
Forrest, Appellate Staff, Civil Division, UNITED STATES
DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. ON
BRIEF: W. Stephen Scott, GILLIAM, SCOTT & KRONER, P.C.,
Charlottesville, Virginia, for Appellant. Martha L. Davis, General
Counsel, John L. Daugherty, Executive Office for U.S. Trustee;
James G. Cosby, Office of the U.S. Trustee, District of West Virginia;
Frank W. Hunger, Assistant Attorney General, Michael Joseph
Yamaguchi, United States Attorney, William Kanter, Appellate Staff,
Civil Division, UNITED STATES DEPARTMENT OF JUSTICE,
Washington, D.C., for Appellee.
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Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
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OPINION
PER CURIAM:
W. Stephen Scott, Trustee in Bankruptcy, appeals the district
court's decision affirming the bankruptcy court's order sustaining the
United States Trustee's objection to Scott's final Chapter 7 report and
proposed distribution. We affirm.
In November 1993, Ernest Benjamin Allen, III (Debtor) filed a vol-
untary petition under Chapter 13 of the Bankruptcy Code. In October
1994, the case was converted to Chapter 7. At that time, Scott was
appointed Chapter 7 trustee.
The primary asset of the Chapter 7 estate was real property located
at 676 East Jefferson Drive, Palmyra, Fluvanna County, Virginia. The
property was secured by a first lien deed of trust in favor of Comdial
Charlottesville Federal Credit Union (Comdial) in the amount of
$41,576.32. On December 8, 1994, Debtor filed a homestead deed
claiming a homestead exemption of $6,998.00 for the land and
improvements on the Palmyra property.
In January 1995, the fair market value of the property in an "as is"
condition was estimated to be $67,500.00, an amount that would be
sufficient to repay all outstanding debts related to the property and to
reimburse any necessary expenses incurred in connection with a sale.
In February 1995, Comdial and Scott decided to proceed with a public
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auction of the Palmyra property. Scott took on the responsibility of
organizing the auction. For his services, Scott expected a commission
based upon the gross proceeds of the sale as well as reimbursement
for out-of-pocket costs related to conducting the sale.
The public auction occurred in March 1995. Unfortunately, the sale
yielded only $52,200.00. The proceeds of the sale were insufficient
to repay in their entirety the outstanding secured debts on the property
(Comdial's outstanding lien, past due real estate taxes, and homeown-
ers' association fees), the Debtor's homestead exemption, and Scott's
compensation and expenses. Nonetheless, the bankruptcy court autho-
rized the sale free of lien in an order dated April 25, 1995.
Subsequently, Scott filed his final Chapter 7 trustee's report and
proposed distribution wherein Comdial was fully compensated for its
lien, taxes and fees were repaid, and Scott was fully reimbursed for
his commission and expenses. Under Scott's proposed distribution,
however, the debtor received only $4,466.17 of his $6,998.00 home-
stead exemption. The United States Trustee objected to the proposed
distribution stating "the Debtor's homestead exemption should not be
taken to fund the shortfall of the sale proceeds." (J.A. at 43.) The
United States Trustee proffered an alternate distribution in which the
debtor would receive a homestead exemption in the amount of
$6,971.82 and Scott would collect neither his commission nor his
expenses.
The bankruptcy court sustained the United States Trustee's objec-
tion. The court determined that Scott's commission and expenses
resulting from his role in the public auction were administrative
expenses, and, therefore, could not be claimed against exempt prop-
erty. See 11 U.S.C.A. § 522(k) (West 1993) ("Property that the debtor
exempts under this section is not liable for payment of any adminis-
trative expense . . . .").
Scott appealed the bankruptcy court's decision to the district court.
The district court also ruled that the clear language of the bankruptcy
code requires that a debtor's homestead exemption take precedence
over the payment of administrative expenses.
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Scott now appeals the district court's decision on the ground that
the expenses he incurred are not administrative expenses, but are
expenses cognizable under 11 U.S.C.A. § 506(c) (West 1993).* Addi-
tionally, Scott argues for the first time that the United States Trustee
lacked standing to raise this objection in the bankruptcy court. We
have carefully reviewed the record, briefs, and pertinent case law in
this matter and we have had the benefit of oral argument. We con-
clude that the United States Trustee had standing. See 11 U.S.C.A.
§ 307 (West 1993) ("The United States trustee may raise and may
appear and be heard on any issue in any case or proceeding under this
title . . . ."); cf. United States Trustee v. Clark, 927 F.2d 793, 796 (4th
Cir. 1991) (noting that § 307 provides United States Trustees standing
to pursue an appeal before this court). Further, we agree with the dis-
trict court that the expenses claimed by Scott in this instance are
administrative expenses and that the language of the bankruptcy code
clearly precludes the use of exempt funds to pay administrative
expenses. Accordingly, we affirm on the reasoning set forth in the
district court's opinion. See Scott v. United States Trustee, C.A. No.
96-0057-C (W.D. Va. Jan. 15, 1997), aff'g In re: Allen, No.
93-01681-WA3-7 (Bankr. W.D. Va. July 1, 1996).
AFFIRMED
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*11 U.S.C.A. § 506(c) (West 1993) provides:"The trustee may
recover from property securing an allowed secured claim the reasonable,
necessary costs and expenses of preserving, or disposing of, such prop-
erty to the extent of any benefit to the holder of such claim."
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