568 B.R. 96
Bankr. E.D. Ark.2017Background
- Debtor Turner Grain Merchandising filed Chapter 11 (Oct 2014); case converted to Chapter 7 (May 2015). Richard L. Cox was appointed trustee, resigned May 12, 2016, and M. Randy Rice was appointed successor trustee the same day.
- During Cox’s tenure he received and disbursed funds: $619,251.39 turned over from the Chapter 11 estate, $240,059.30 from an accounts-receivable action, and $314,688.38 from a bank recovery; total disbursements Cox made that are contested equal $844,921.31; Cox transferred $329,077.76 to Rice on resignation.
- Cox applied for trustee compensation of $45,496.07 (calculating under 11 U.S.C. § 326(a) using a “first-in, first-out” approach) and $2,923.64 in expenses; Rice did not oppose the expenses but objected to Cox’s fee calculation.
- Rice argued fees for multiple trustees should be computed on total case disbursements under § 326(a) and allocated pro rata by each trustee’s disbursements, to avoid overcompensating the initial trustee and undercompensating the successor who will perform most remaining work.
- The Court found extraordinary circumstances rebutted the presumption that the statutory cap is presumptively reasonable for Cox: Cox’s record showed limited administrative effort, most funds he disbursed were turn‑over payments to a secured creditor, and Rice will perform substantially more ongoing administration.
- The Court allowed Cox’s expenses ($2,923.64) but denied Cox’s fee request without prejudice; it adopted the Calhoun pro rata method: compute aggregate commission under § 326(a) on total case disbursements and allocate to trustees by each trustee’s share of total disbursements, with final fees determined at case conclusion.
Issues
| Issue | Plaintiff's Argument (Cox) | Defendant's Argument (Rice) | Held |
|---|---|---|---|
| Proper method to calculate trustee commissions when more than one trustee serves | Use § 326(a) percentages applied to the disbursements the trustee actually made ("first-in, first-out") | Compute aggregate commission on total case disbursements under § 326(a) then allocate pro rata by each trustee’s disbursements | Adopted Rice’s approach: calculate aggregate under § 326(a) on total disbursements and apportion pro rata at case end |
| Whether Cox is entitled to the maximum statutory commission now | Cox requested the statutory maximum based on his disbursements and customary district practice | Opposed: awarding full statutory maximum to Cox would unfairly overcompensate him relative to Rice’s future work and violate reasonableness under § 330 | Denied Cox’s requested fee now: extraordinary circumstances rebut presumption of reasonableness; fee to be recalculated pro rata at case conclusion |
| Whether expenses requested are allowable | Expenses of $2,923.64 requested | Rice did not object to expenses | Expenses allowed ($2,923.64) |
| Timing of final fee determination | Cox sought current allowance (with possible pro rata distribution later) | Rice and Court favored waiting until case conclusion so total disbursements are known for aggregate calculation | Court required determination at case end; Cox may reapply using pro rata method then |
Key Cases Cited
- In re Rowe, 750 F.3d 392 (4th Cir. 2014) (statutory commission under § 326 is presumptively reasonable but may be rebutted by extraordinary circumstances)
- In re Calhoun, 430 B.R. 536 (Bankr. W.D. Wis. 2010) (adopted method: calculate aggregate commission on total disbursements and apportion pro rata between successive trustees)
- Gold v. Guberman (In re Computer Learning Ctrs., Inc.), 407 F.3d 656 (4th Cir. 2005) (supporting aggregate disbursement-based calculation of trustee commissions)
- In re Mack Props., Inc., 381 B.R. 793 (Bankr. M.D. Fla. 2007) ("may" in § 326(a) indicates court discretion to award less than statutory cap)
- In re Scoggins, 517 B.R. 206 (Bankr. E.D. Cal. 2014) (discussing examples of "extraordinary circumstances" that can rebut presumption of awarding maximum commission)