Doll v. GoodmanDoll v. Goodman
THE NATIONAL ASSOCIATION OF CHAPTER 13 TRUSTEES; NATIONAL CONSUMER BANKRUPTCY RIGHTS CENTER; NATIONAL ASSOCIATION OF CONSUMER BANKRUPTCY ATTORNEYS,
Amici Curiae.
Adam M. Goodman (Jennifer K. Cruseturner, Staff Attorney for Trustee Adam M. Goodman on the briefs), Denver, Colorado, for Appellant Goodman.
Stephen E. Berken (Sean M. Cloyes with him on the brief), Berken Cloyes, P.C., Denver, Colorado, for Appellee Doll.
Henry E. Hildebrand, III, Chapter 13 Standing Trustee, and James M. Davis, Staff Attorney, Nashville, Tennessee, filed an Amicus Curiae brief for the National Association of Chapter Thirteen Trustees, in support of Appellant.
Tara Twomey, National Consumer Bankruptcy Rights Center, San Jose, California, filed an Amici Curiae brief for the National Consumer Bankruptcy Rights Center and the National Association of Consumer Bankruptcy Attorneys, in support of Appellee.
Before HOLMES, Chief Judge, EBEL, and EID, Circuit Judges.
This bankruptcy appeal presents a question of statutory interpretation involving the fee a debtor pays to a standing trustee appointed in the debtor‘s Chapter 13 reorganization case. A Chapter 13 debtor makes payments to a trustee who then disburses those payments to creditors according to a confirmed reorganization plan. A Chapter 13 standing trustee is compensated through fees he collects by taking a percentage of these payments the trustee receives from the debtor.
I. BACKGROUND
A. Chapter 13 bankruptcies generally
“Congress established two main types of consumer bankruptcy“: liquidation under Chapter 7 and reorganization under Chapter 13. In re Johnson, 634 B.R. 806, 807 (Bankr. D. Colo. 2021). Chapter 13, at issue here,
provides bankruptcy protection to “individual[s] with regular income” whose debts fall within statutory limits.
11 U.S.C. §§ 101(30) ,109(e) . Unlike debtors who file under Chapter 7 and must liquidate their nonexempt assets in order to pay creditors, see §§ 704(a)(1), 726, Chapter 13 debtors are permitted to keep their property, but they must agree to a court-approved plan under which they pay creditors out of their future income, see §§ 1306(b), 1321, 1322(a)(1), 1328(a).
Hamilton v. Lanning, 560 U.S. 505, 508 (2010). Chapter 13, thus,
affords individuals receiving regular income an opportunity to obtain some relief from their debts while retaining their property. To proceed under Chapter 13, a debtor must propose a plan to use future income to repay a portion (or in the rare case all) of his debts over the next three to five years. If the bankruptcy court confirms the plan and the debtor successfully carries it out, he receives a discharge of his debts according to the plan.
Bullard v. Blue Hills Bank, 575 U.S. 496, 498 (2015). “A bankruptcy trustee oversees the filing and execution of a Chapter 13 debtor‘s plan.” Hamilton, 560 U.S. at 508. “The plan . . . shall provide for the submission of all or such portion of future earnings or other future income of the debtor to the supervision and control of the trustee as is necessary for the execution of the plan.”
1. Standing trustees
There will, then, always be a trustee of some sort appointed in a Chapter 13 case. See Hamilton, 560 U.S. at 508; see also
Generally speaking, before 1978, bankruptcy courts conducted administrative tasks for each bankruptcy case themselves or, when necessary, bankruptcy courts appointed private trustees to conduct administrative tasks in a given case. See Siegel v. Fitzgerald, 142 S. Ct. 1770, 1775 (2022). Bankruptcy courts would oversee and approve the compensation for a private trustee‘s work and expenses in each case. Beginning with a pilot program in 1978, which was made permanent in 1986, Congress “transferred the administrative functions previously handled by the bankruptcy courts to newly created U.S. Trustees, housed within the Department of Justice rather than the Administrative Office of the U. S. Courts.” Id. at 1776. As part of that transfer, Congress directed the Attorney
Congress authorized U.S. Trustees to appoint, when necessary, and then to supervise “standing trustees” in several types of bankruptcy cases, including those filed under Chapter 13:
If the number of cases under subchapter V of chapter 11 or chapter 12 or 13 of title 11 commenced in a particular region so warrants, the United States trustee for such region may, subject to the approval of the Attorney General, appoint one or more individuals to serve as standing trustee, or designate one or more assistant United States trustees to serve in cases under such chapter.
As we have said, there will always be a trustee of some sort appointed in a Chapter 13 case. See Hamilton, 560 U.S. at 508; see also
The trustee performs a number of duties in a Chapter 13 case, both before and after a plan‘s confirmation.
A standing trustee is compensated through fees paid by debtors. Those fees are based on a percentage of the payments the trustee receives from the debtor for disbursement to creditors under the confirmed reorganization plan. See
Summarizing this system of standing trustees, the Rhode Island district court, taking a 30,000-foot view, explained that the standing trustees Congress established
represented an effort to transfer ministerial responsibilities incident to Chapter 13 cases from a judicial arena to an administrative one, that is, from the bankruptcy courts to the Attorney General. The method of compensating standing trustees must realistically be viewed as an important part of this endeavor. Rather than enmire the courts in the laborious business of setting fees in individual cases—many of them small in terms of assets, and some of them bone-dry—the Code and Title 28 authorized the Attorney General to fix the allowances of standing trustees on a yearly basis. An overall sense of balance thus became achievable. The “no asset” or “meagre assets” cases can be handled professionally, because the system is not dependent upon each individual matter to generate its own fees. To the contrary, the Attorney General considers the volume of cases committed to the trustee, reviews the trustee‘s program-related expenses for the prior year, and projects the amount of funds that will be handled during the upcoming year. This overall forecast—rather than the vicissitudes of each individual filing—becomes the cynosure of the fee calculation. And, there is some built-in prophylaxis: lest the remuneration for standing trustees prove excessive, the statute sets a ceiling on both annual and per case compensation. See
28 U.S.C. §§ 586(e)(1)(A) ,(e)(2) .
In re Savage, 67 B.R. 700, 706-07 (D. R.I. 1986). “Congress has . . . plainly chosen to spread the costs of trusteeship pro rata over all Chapter 13 debtors within the court‘s jurisdiction.” Id. at 707. In light of this structure,
[t]he percentage fixed by the Attorney General to determine allowable compensation in no way purports to constitute a precise prognostication of what the value of a trustee‘s services will be in every Chapter 13 case. It is certainly true that in some instances, . . . the allowance collected under the statute will exceed the fair value of the work performed. But, in as many (or more) instances say, where the case had an inordinate degree of complexity or is one in which no monies whatever are available for distribution the statutory percentage will provide remuneration insufficient to reimburse the trustee fully (or, in the worst cases, at all) for his time and expenses.
Id. at 708. Thus,
[a] standing trustee undertakes the obligation to serve as trustee in all cases filed within the district. She cannot know in advance which cases will actually arise or the degree of effort they will require. Her agreement to accept the percentage fee in exchange for a commitment to undertake all of the district‘s trusteeship duties is thus based on a calculation of the average effort required compared with the average payments involved. The cases in which she receives greater compensation will presumably be counterbalanced by those for which her fees will be minimal.
In re Schollett, 980 F.2d at 645.
2. Chapter 13 procedures generally
Chapter 13 cases are designed to move fairly quickly. After a debtor files
carry out the plan, or whether some modification is necessary.” In re Acevedo, 497 B.R. 112, 121 n. 22 (Bankr. D. N.M. 2013) (quoting S. Rep. No. 98-65, at 15–16 (1983)). The pre-confirmation payments at issue in this case had to include the trustee‘s fee. Bankr. D. Colo. R. 2083-1(a).
As for what becomes of those pre-confirmation payments that
[a] payment made under paragraph (1)(A) shall be retained by the trustee until confirmation or denial of confirmation. If a plan is confirmed, the trustee shall distribute any such payment in accordance with the plan as soon as is practicable. If a plan is not confirmed, the trustee shall return any such payments not previously paid and not yet due and owing to creditors pursuant to paragraph (3) to the debtor, after deducting any unpaid claim allowed under section 503(b).2
(Emphasis, footnote added.)
A debtor whose proposed plan is denied can usually file a new proposed plan and seek to have it confirmed. See Bullard, 575 U.S. at 498. A Chapter 13 case can, instead, be converted to another type of bankruptcy case or can be dismissed completely, at the debtor‘s request or the request of the trustee or an interested party.
B. This case
In 2017, Debtor Daniel Doll lived in Rifle, Colorado, and was the sole proprietor of Doll Ventures LLC, a business that repaired forklifts. Doll, through counsel, initiated this Chapter 13 case in November 2017. Doll proposed four reorganization plans over the next year and a half. Each proposed plan called for Doll to make monthly payments to the standing trustee for the benefit of his creditors. The bankruptcy
Department of Revenue to cover some of Doll‘s taxes; and retained $2,596.70 as the trustee‘s fee. Doll then filed a “Motion to Disgorge Trustee‘s Fees” by which Doll sought to have the standing trustee return to Doll the $2,596.70 fee the trustee had kept, arguing the trustee was not entitled to any fee because no plan had been confirmed before Doll‘s case was dismissed.
The bankruptcy court denied the “Motion to Disgorge.” Doll appealed. The district court6 reversed, agreeing with Doll that the standing trustee was not entitled to keep any fee because no plan had been confirmed and thus such payments should be returned to Doll. The Trustee challenges the district court‘s decision in this appeal.7
II. DISCUSSION
We review de novo questions of statutory interpretation. See William F. Sandoval Irrevocable Tr. v. Taylor (In re Taylor), 899 F.3d 1126, 1129 (10th Cir. 2018). In doing so, we must give a statute its “plain,” Lamie v. U.S. Tr., 540 U.S. 526, 534 (2004), or “natural” reading, United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241 (1989). Only if a statute is ambiguous—that is, when “its text, literally read, admits of two plausible interpretations,” Graham Cty. Soil & Water Conservation Dist. v. U.S. ex rel. Wilson, 545 U.S. 409, 420 n. 2 (2005)—will a court consider legislative history or, when appropriate, defer to an agency‘s interpretation of that statute. See Estrada-Cardona v. Garland, 44 F.4th 1275, 1283 (10th Cir. 2022); Nelson v. United States, 40 F.4th 1105, 1117 (10th Cir. 2022). Whether a statute is ambiguous “‘is determined [not only] by reference to the language itself, [but as well by] the specific context in which that language is used, and the broader context of the statute as a whole.‘” Yates v. United States, 574 U.S. 528, 537 (2015) (quoting Robinson v. Shell Oil Co., 519 U.S. 337, 341 (1997) (alterations added in Yates)).
A. 28 U.S.C. § 586(e)(2) and 11 U.S.C. § 1326(a) , read together, unambiguously require a Chapter 13 standing trustee to return pre-confirmation payments to the debtor without deducting the trustee‘s fee when no plan is confirmed
The question presented here is resolved unambiguously by reading together both
standing trustee to “collect” his fee from “all payments received . . . under plans” for which he acts as trustee.
It is
(1) Unless the court orders otherwise, the debtor shall commence making payments not later than 30 days after the date of the filing of the plan or the order for relief, whichever is earlier, in the amount--
(A) proposed by the plan to the trustee;
. . . .
(2) A payment made under paragraph (1)(A) shall be retained by the trustee until confirmation or denial of confirmation. If a plan is confirmed, the trustee shall distribute any such payment in accordance with the plan as soon as is practicable. If a plan is not confirmed, the trustee shall return any such payments not previously paid and not yet due and owing to creditors pursuant to paragraph (3) to the debtor, after deducting any unpaid claim allowed under section 503(b).
(Emphasis added.)
As an initial matter, there are several situations addressed in
is not an administrative claim within the meaning of § 503(b).” (citing In re Ward, 132 B.R. 417, 419 (Bankr. D. Neb. 1991))).
Our focus here is on
payments that the trustee receives from the debtor,
Our conclusion is bolstered by how Congress addressed the same fee question in Chapter 12 and Chapter 11 (Subchapter V) bankruptcies. See, e.g., State of Utah v. Babbitt, 53 F.3d 1145, 1148 (10th Cir. 1995) (“In determining the meaning of a statute, we look at not only the statute itself but also at the larger statutory context.“). Like Chapter 13 cases,
Payments and funds received by the trustee shall be retained by the trustee until confirmation or denial of confirmation of a plan. If a plan is confirmed, the trustee shall distribute any such payment in accordance with the plan. If a plan is not confirmed, the trustee shall return any such payments to the debtor after deducting-- (1) any unpaid claim allowed under section 503(b) of this title;
(2) any payment made for the purpose of providing adequate protection of an interest in property due to the holder‘s secured claim; and
(3) any fee owing to the trustee.
(Emphasis added.) Similarly, in Chapter 12 cases,
Payments and funds received by the trustee shall be retained by the trustee until confirmation or denial of confirmation of a plan. If a plan is confirmed, the trustee shall distribute any such payment in accordance with the plan. If a plan is not confirmed, the trustee shall return any such payments to the debtor, after deducting--
(1) any unpaid claim allowed under section 503(b) of this title; and
(2) if a standing trustee is serving in the case, the percentage fee fixed for such standing trustee.
(Emphasis added.)
While Congress, then, in
pre-confirmation payments to the debtor when a plan is not confirmed. “[W]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.” Russello v. United States, 464 U.S. 16, 23 (1983) (internal quotation marks omitted). Said another way, had Congress intended Chapter 13 trustees to deduct their fees before returning pre-confirmation payments to debtors when a plan is not confirmed, Congress “presumably would have” stated that “expressly as it did” in
The Trustee in this case, focusing primarily on Chapter 12, seeks to distinguish that chapter from Chapter 13. Among other differences, the Trustee points out that Chapter 12 bankruptcies are less common than Chapter 13 cases; while pre-confirmation payments to a trustee are mandatory under Chapter 13, they are only voluntary under Chapter 12 unless the bankruptcy court orders them; Chapter 12 pre-confirmation payments, thus, occur less frequently than in Chapter 13 cases; the timeline for Chapter 13 bankruptcies is quicker than it is for Chapter 12 bankruptcies; and
expressly said so as in Chapter 12 and Chapter 11 (Subchapter V). But Congress did not so provide in Chapter 13 cases.
Congress reiterated the language in
Congress‘s differing treatment of standing trustee fees in these various types of bankruptcy reorganization cases is compelling. Congress‘s treatment of trustee fees in Chapter 12 and Chapter 11 (Subchapter V) cases establishes that Congress knew how to direct the standing trustee to deduct his fees before returning any pre-confirmation payments to the debtor when a proposed plan is not confirmed. Yet Congress did not direct a Chapter 13 standing trustee to deduct his fees before returning pre-confirmation payments to a Chapter 13 debtor.
If we were to conclude instead, as the Trustee urges, that Congress just stated more clearly in
While the Trustee asserts several policy arguments for why requiring him to return his fee to a Chapter 13 debtor when no plan is confirmed is a bad idea,
Congress has unambiguously already made that policy decision for Chapter 13 debtors. See Fla. Dep‘t of Rev. v. Piccadilly Cafeterias, Inc., 554 U.S. 33, 52 (2008) (stating “it is
We, therefore, hold that
B. The Trustee‘s other arguments lack merit
The Trustee makes several additional arguments which, as we briefly explain, we find unpersuasive.
1. The Trustee argues 28 U.S.C. § 586(e)(2) , read by itself, permits him to keep his fee when no Chapter 13 plan is confirmed
The Trustee contends that
This argument fails, however, because it conflates the initial “collection” of funds from which subsequent payments may be made, and the subsequent act by the trustee of the disbursement of those funds to various creditors or claimants. The Trustee seeks to support his position by reading the word “irrevocable” into the statute as an adjective defining “collect.” See Lamie, 540 U.S. at 538 (declining to “read an absent word into the statute,” distinguishing between filling in a statutory “‘gap left by Congress’ silence,‘” which might be acceptable, and rewriting the statute, which is not acceptable (quoting Mobil Oil Corp. v. Higginbotham, 436 U.S. 618, 625 (1978))).
Moreover, “collect” in
before returning pre-confirmation payments to debtors when no plan is confirmed but used no such language in Chapter 13. See
11 U.S.C. § 1326(b)(2) permits him to keep his fee when no Chapter 13 plan is confirmed
Next, the Trustee cites to
The Trustee relies on this language to argue that the trustee was already paid his fee at the moment the trustee received the debtor‘s pre-confirmation payments. When
Section 1326(b) requires the standing Chapter 13 trustee to pay the trustee‘s percentage fee “before or at the time of each payment to creditors under the plan.” But the trustee may pay creditors only under a confirmed plan. See
In re Acevedo, 497 B.R. at 120–21. Our conclusion that
3. The Trustee relies, alternatively, on the Chapter 13 Trustee Handbook
The Trustee also argues, alternatively, that
In resisting that conclusion, the Trustee argues
trustee gets a fee if no plan is confirmed. However, the fact that In re BDT Farms deemed
In light of that conclusion, we need not consider the Trustee‘s arguments for affording Chevron deference to the Chapter 13 Trustee Handbook. But we note that there are additional problems with such an argument. In re BDT Farms afforded the Chapter 12 Trustee Handbook Chevron deference in 1994. The Supreme Court has since held that an agency‘s “interpretations contained in policy statements, agency manuals, and enforcement guidelines, all of which lack the force of law—do not warrant Chevron-style deference.” Christensen v. Harris Cnty., 529 U.S. 576, 587 (2000). Instead, such documents are “‘entitled to respect‘” only to the extent they “have the ‘power to persuade.‘” Id. (quoting Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944)).
In this case, the Trustee asserts that the Chapter 13 Trustee Handbook should “still be given a measure of deference.” (Aplt. Br. 48.) But the Handbook is not strongly persuasive on the issue before us. It provides, in relevant part:
The standing trustee is authorized to collect the percentage fee upon receipt of the payment. The trustee must transfer the percentage fee to the operating expense account at least monthly. If the plan is dismissed or converted prior to confirmation, the standing trustee must reverse payment of the percentage fee that has been collected upon receipt if there is controlling law in the district requiring such reversal or if (after consultation with the United States Trustee) the standing trustee determines that there are other grounds for concern in the district.
(Aplt. App. 162 (emphasis added).) As drafted, then, it appears that the Handbook‘s default position is that, when a plan is not confirmed, the trustee should keep his fee unless a court says he cannot or unless there are “other grounds for concern in the district.” It is not apparent what “other grounds for concern in the district” might mean. This is hardly the exercise of agency expertise in interpreting an ambiguous statute or filling a regulatory gap left by Congress to which a court usually defers. In any event, we need not decide here whether the Handbook is entitled to any sort of deference because the statutory language at issue here is unambiguous.10
III. CONCLUSION
Read together,
the debtor without deducting the trustee‘s fee, when a proposed Chapter 13 plan is not