595 B.R. 409
10th Cir. BAP2019Background
- Debtor Samuel Morreale owned single-member LLC (MHLLC); MHLLC was in Chapter 11 and Morreale filed individual bankruptcy later converted to Chapter 7.
- Tom Connolly was appointed Chapter 7 trustee in Morreale’s individual case; the Chapter 7 estate included Morreale’s membership interest in MHLLC.
- Bankruptcy court authorized Connolly to replace Morreale as manager of MHLLC (Operating Order); Connolly, acting as manager, abandoned MHLLC’s plan and sold MHLLC’s properties in the Chapter 11 case.
- Sale proceeds were used to pay MHLLC creditors; surplus funds were paid to Morreale’s Chapter 7 estate. Connolly was not appointed as Chapter 11 trustee nor retained as a professional under § 327 in the Chapter 11 case.
- Connolly sought Chapter 7 trustee commissions under 11 U.S.C. § 326(a) calculated using disbursements he made in both the Chapter 7 case and MHLLC’s Chapter 11 case; debtor objected. Bankruptcy court denied commissions based on Chapter 11 disbursements; this appeal followed.
Issues
| Issue | Connolly's Argument | Morreale's Argument | Held |
|---|---|---|---|
| Whether § 326(a)’s phrase “upon all moneys disbursed or turned over in the case” permits including disbursements made in a separate Chapter 11 case when calculating a Chapter 7 trustee’s commission | “In the case” modifies only “turned over,” so commissions may be based on disbursements in related cases that benefited the Chapter 7 estate | “In the case” modifies both “disbursed” and “turned over,” so commission base is limited to moneys disbursed/turned over in the Chapter 7 case where the trustee was appointed | The phrase is plain: both “disbursed” and “turned over” are modified by “in the case.” Trustee’s § 326(a) commissions are limited to moneys disbursed/turned over in the case in which the trustee was appointed; Chapter 11 disbursements cannot be included. |
Key Cases Cited
- United States v. Ron Pair Enters., Inc., 489 U.S. 235 (statutory interpretation starts with plain meaning)
- Lamie v. U.S. Trustee, 540 U.S. 526 (courts must apply Congress’ words even if result seems harsh)
- Hamilton v. Lanning, 560 U.S. 505 (undefined statutory terms receive ordinary meaning)
- In re JFK Capital Holdings, L.L.C., 880 F.3d 747 (§ 326 percentages treated as presumptively reasonable compensation)
- In re Rowe, 750 F.3d 392 (trustee fees must be calculated under § 326 and are presumptively reasonable absent extraordinary circumstances)
- In re Schupbach Invs., L.L.C., 808 F.3d 1215 (unapproved volunteers in a chapter estate are not entitled to compensation)
- Interwest Bus. Equip., Inc. v. U.S. Tr. (In re Interwest Bus. Equip., Inc.), 23 F.3d 311 (similar rule that services performed without court approval are uncompensable)
- In re BDT Farms, Inc., 21 F.3d 1019 (standard of review and de novo review of legal questions)