541 B.R. 892
9th Cir. BAP2015Background
- Debtor filed Chapter 7; trustee discovered and auctioned a 2007 Dodge Ram, which sold for $21,000.
- Lienholder and auctioneer were paid, leaving $3,195.16 for the estate.
- Trustee’s maximum §326 commission on $21,000 disbursements was $2,850; he requested $2,300 (below the statutory cap) and $52.44 expenses, leaving $842.72 for unsecured creditors.
- Bankruptcy court, citing In re Salgado‑Nava and In re Scoggins, sua sponte treated any trustee fee request exceeding the proposed unsecured distribution as an “extraordinary circumstance,” ordered time records, and applied a per se rule.
- Lacking detailed time records, the court nevertheless concluded extraordinary circumstances existed and awarded the trustee $1,597.58 (half of net proceeds).
- BAP vacated and remanded, holding the per se rule (fee > unsecured distribution = extraordinary circumstance) is an incorrect legal standard and an abuse of discretion.
Issues
| Issue | Trustee's Argument | Bankruptcy Court / Appellee Argument | Held |
|---|---|---|---|
| Whether the bankruptcy court abused its discretion by reducing trustee compensation below the §326 cap based on the relationship between trustee fees and unsecured distributions | §326 commissions are presumptively reasonable; trustee requested less than statutory maximum and provided a narrative of services; any reduction must be based on trustee deficiency or other specific extraordinary circumstances | Per In re Scoggins, a trustee’s requested compensation that exceeds the amount proposed to unsecured creditors constitutes an extraordinary circumstance justifying detailed review and possible reduction | The BAP held the bankruptcy court erred: compensation exceeding unsecured distribution is not per se extraordinary. Vacated and remanded for proceedings consistent with Salgado‑Nava |
Key Cases Cited
- In re Salgado‑Nava, 473 B.R. 911 (9th Cir. BAP 2012) (trustee commissions under §326 are presumptively reasonable absent extraordinary circumstances)
- In re Scoggins, 517 B.R. 206 (Bankr. E.D. Cal. 2014) (adopted a rule treating compensation exceeding unsecured distribution as a trigger for heightened review)
- TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820 (9th Cir. 2011) (standards for abuse of discretion review)
- United States v. Hinkson, 585 F.3d 1247 (9th Cir. 2009) (abuse of discretion legal standard)
- Mohns, Inc. v. Lanser, 522 B.R. 594 (E.D. Wis. 2015) (position that trustees are entitled to statutory commission in nearly every case; contrasted by BAP)