Max Tarbox, a Chapter 7 Trustee (the “Trustee”), filed a final report in a bank *339 ruptcy proceeding in which the Trustee proposed to pay interest on administrative fees and expenses from the date of the filing of the petition, arguing that 11 U.S.C. § 726(a)(5) requires such a result in cases where the estate contains enough assets to redistribute a remainder to the debtor, i.e., a surplus case. The United States Trustee for the Northern District of Texas (the “UST”) objected to the proposed payment, arguing that to allow interest to accrue from the date of the petition permits payment of money from the estate for a claim during a time period when no claim in fact existed. The UST urged, alternatively, that interest should accrue from the date the bankruptcy court awards compensation to the trustee. The bankruptcy court followed a third path in determining that the relevant statute denies interest on administrative fees and expenses altogether. The Trustee appealed the decision to the district court, which affirmed the finding of the bankruptcy court essentially for the reasons stated by the bankruptcy court. The Trustee timely filed the instant appeal. For the reasons set forth below, we AFFIRM.
BACKGROUND AND PROCEDURAL HISTORY
Willadeen Reed, the debtor, filed a petition for relief under Chapter 7 in May 1999. Tarbox was subsequently appointed trustee of the bankruptcy estate. The Trustеe secured approximately $42,700 in the debtor’s estate for distribution to the creditors of record. After paying off the creditors, the debtor’s estate contained a surplus of approximately $10,700. The Trustee thereafter submitted to the bankruptcy court an Application for Compensation and Report of Proposed Distribution (thе “Final Report”), in which the Trustee proposed to pay interest on administrative claims that the Trustee argued are mandated in surplus cases by § 726(a)(5). 1 The UST objected to the Final Report, essentially arguing that the Trustee was seeking to claim interest for work during a period of time that no work was being performed. The UST contended the Trustee did not earn any monies that could, in turn, earn interest between the date the petition is filed and the date the Trustee actually is awarded his fees, and therefore, the Trustee should not be allowed to claim interest on his fees during that time. The only allowable interest, argued the UST, is calculated from the time the compensation award is determined and the time it takes to pay that award.
The bankruptcy court conducted a hearing during which both parties presented their respective arguments. In May 2003, the bankruptcy court issued a memorandum opinion in which the Trustee and his professionals were awarded compensation under 11 U.S.C. § 330(a), authorized under 11 U.S.C. § 503(b)(2). The bankruptcy court furthеr concluded, however, that the Trustee was not entitled to any interest under § 726(a)(5). In its memorandum order, the bankruptcy court cited a “majority view,” which holds that a strict application of § 726(a)(1) disallows the accrual of interest on fees for services which have yet to be performed; instead, the interest on the trustee’s fees accrues from the date of the award. 2 The bankruptcy *340 court also noted the “minority view,” which compels a strict application of the plain language of the applicable statutory provisions. The minority view holds that § 726(a)(1) simply means what it says: interest must be paid on the trustee’s compensation and expenses from the date of the filing of the pеtition.
After discussing both views, the bankruptcy court concluded that it could not fully agree with either position and instead developed a third view, which holds that § 726(a)(1) precludes the recovery of interest on administrative fees and expenses altogether. Specifically, the bankruptcy court determined that interest under § 726(a)(1) was only recoverable for creditors who submitted claims against the estate — not by administrators of the estate who are awarded compensation and fees for their work in settling the bankruptcy estate. The district court agreed, affirming the decision of the bankruptcy court on appeal. The district court determined that interest is not payablе on administrative claims that arise during pendency of a Chapter 7 bankruptcy case for which no proof of claim is filed, even though a surplus exists. The Trustee timely filed the instant appeal.
DISCUSSION
Whether the district court erred in determining that 11 U.S.C. § 726(a)(1) precludes the recovery of interest for administrative fees and expenses.
We review
de novo
the district court’s statutory interpretation of 11 U.S.C. § 726(a).
See United States v. Phillips,
As a preliminary matter, it should be noted that the application of § 726(a)(5) arises only in cases where there are assets remaining in the debtor’s estate after all appropriate distributions have been made under § 726(a)(l)-(4).
See In re Vogt,
Section 726(a)(5) specifically provides that “property of the estate shаll be distributed ... in payment of interest at the legal rate from the date of the filing of the petition, on any claim paid under paragraph (1).” 11 U.S.C. § 726(a)(5). Paragraph (a)(1) gives priority to the “payment of claims of the kind specified in ... section 507 of this title, proof of which is timely filed under section 501.” Id. § 726(a)(1), (a)(2)(A). Section 507, in turn, refers to administrative expenses undеr § 503(b). Id. § 507(a)(1). Section 503(b) allows administrative expenses for “compensation and reimbursement awarded under section 330(a) of this title.” Id. § 503(b)(2). Finally, § 330(a) provides that “the court may award to a trustee, an examiner, a professional person ... reasonable compensation for actual, necessary services rendered ... and reimbursemеnt for actual, necessary expenses.” 3 Id. § 330(a)(l)(A)-(B).
In a case of first impression in this Circuit, the precise issue we are faced with is whether § 726(a)(5) entitles a trustee to interest on his compensation and reimbursement award, and if so, at what point such interest begins to accrue. To better understand the nature of the controversy, we begin with a survey of thе case law that has developed in this area.
*341 A. The Majority View
As the bankruptcy court notes, and as described in note 2
supra,
the issue of
when
interest on administrative fees and expenses arises has been considered by only two courts of appeals — the Ninth and the Eleventh Circuits. Both courts conclude that the better rule is to allow such fees and expenses to accumulate interest from the date the bankruptcy court awards the trustee his fees and expenses. The Ninth Circuit, in
In re Riverside-Linden Investment Co.,
The provision which defines [trustee]’s fees as a compensable administrative expense, Section 503(b), refers to “compensation and reimbursement awarded under section 330.” ... It is not until the fees have been awarded by the bankruptcy court pursuant to Section 330, therefore, that they become an administrative expense entitling them to treatment as a claim under Section 726(a)(5).
Id. at 324.
The Eleventh Circuit followed another line of reasoning in bolstering the majority view, noting that to award interest to the trustee at the time the debtor initially files the petition is contrary to the purpose of 11 U.S.C. § 326, which sets limits on the amount of trustee compensation.
In re Glados,
Recognizing that the “majority rule” diverges from the plain language approach to statutory construction, the Eleventh Circuit nevertheless reasoned that such a divergence is pеrmissible “in the rare cases [in which] the literal application of a statute will produce a result demonstrably at odds with the intent of its drafters.” Id. at 1366 (alteration in original) (citation and internal quotation marks omitted). “Allowing interest to accrue prior to actual awards is contrary to the remainder of the statutory scheme, as well as to the case law interpreting it.” 7ct 4
B. The Minority View
The minority view simply involves applying the plain language of the relevant statutory provisions. Accordingly, the minori *342 ty view holds that interest must be paid on the trustee’s fees and expenses “from the date of the filing of the petition.” See 11 U.S.C. § 726(a)(5).
In
In re Smith,
C. The Decisions Below
As previously stated, while most courts have addressed when interest on administrative fees and expenses are recoverable, in this case the bankruptcy court determined (and the district cоurt agreed) that the more pertinent issue is whether interest on such fees and expenses is proper at all. For the reasons discussed below, we find the reasoning employed by both the bankruptcy court and the district court to be persuasive.
The basic theory underlying the holding reached by the lower courts here is: While § 726(a)(5) allows for the payment of interest from the date of filing on any claim paid under paragraph (1) of § 726(a), paragraph (a)(1) refers to payment of section 507 claims, “proof of which is timely filed under section 501.” 11 U.S.C. § 726(a)(1) (emphasis added). The fact that § 501(a) specifically addresses the filing of proofs of claims by creditors and proofs of interest by equity security holders necessarily excludes trustees from recovering interest on them compensation and reimbursements. Id. § 501(a).
A trustee is not a “creditor” as that term is defined by the Bankruptcy Code because a trustee does not have “a claim against the debtor that arose at the time of or before the order for relief concerning the debtor.”
Id.
§ 101(10)(A). The Trustee concedes this point, acknowledging that, in his capacity as a trustee, he did nоt hold a pre-petition claim. And, as the district court noted, “[although § 726(a)(1) at first seems to include [administrative fees and expenses] by its reference to claims of the kind specified in § 507, they are winnowed out by the reference to § 501, because they are not of the kind proof of which is timely filed under § 501 for pre-petition claims by creditors.”
In re Reed,
The interpretation of § 726(a) adopted herein draws support from the Second Circuit’s decision in
In re Klein Sleep Products, Inc.,
The Trustee argues that by removing trustees from the entities eligible to receive distribution of the debtor’s estate under § 726(a), this Court would, in effect, eliminate the vehicle through which trustees receive their administrative fees and expenses. However, in
In re Van Gerpen,
Additionally, we conclude that to interpret § 726(a) as urged by the Trustee (and followed by the minority view) would produce results at odds with Congress’s intention in drafting the legislation.
8
The district court determined that it would “not be satisfied with a plain-meaning-of-the-
*344
language construction that yields an inequitаble result, until it is convinced no equitable construction of that same language is possible.”
Reed II,
CONCLUSION
Having carefully reviewed the entire record of this case, and having fully considered the parties’ respective briefing and arguments, we find no reversible error in the district court’s memorandum opinion. We therefore AFFIRM the final judgment of the district court essentially for the reasons stated in its order.
Notes
. Specifically, the Trustee's Final Report claimed interest in the amount of $295.55 on the Trustee's fees, $30.01 on the Trustee’s expenses, $92.59 on the Trustee’s attorney's fees, $3.74 on the Trustee’s attorney's expenses, and $51.47 on the Trustee’s accountant's fees, for a total interest amount of $473.36.
. As discussed
infra,
only two circuit courts, the Ninth and the Eleventh Circuits, have addressed this issue, both of which have adopted the majority view.
See In re Glados,
*340
Inc.,
. An award under § 330(a) is subject to the limitation provided in § 326, which caps a trustee’s сompensation by means of a percentage formula applied to the actual amounts disbursed to the estate's claimants. 11 U.S.C. § 326(a).
. Importantly, we observe that the majority view adopted by the Ninth and Eleventh Circuits is distinguishable from the instant case because it involves the interpretation of § 726(a)(1) before the statute was amended in 1996 intо its current version. The pre-amendment version of § 726(a)(1) provided that:
[Pjroperty of the estate shall be distributed-—
(1) first, in payment of claims of the kind specified in, and in the order specified in, section 507 of this title....
11 U.S.C. § 726(a)(1) (1994). Conspicuously absent from the pre-amendment language is the reference to the provision granting priority to section 507 claims, "proof of which is timely filed under section 501.” 11 U.S.C. § 726(a)(1) (2003) (emphasis added). As discussed infra, the addition of this provision necessarily аffects our analysis here.
. Admittedly, the Bankruptcy Code’s reference to “administrative' expenses” under § 507 is not necessarily exclusive of the term "claim,” and § 726(a)(5) specifically refers to "a claim allowed under section 503(b).”
In re Reed,
. The Code defines an "equity security” as:
(A) share in a corporation, whether or not transferable or denominated "stock", or similar security;
(B) interest of a limited partner in a limited partnership; or
(C)warrant or right, other than a right to convert, to purchase, sell, or subscribe to a share, security, or interest of a kind specified in subparagraph (A) or (B) of this paragraph.
11 U.S.C. § 101(16).
. Neither § 503(b)(2) nor § 503(a) provides for the recovery of interest.
. We further note that nothing in the 2005 Bankruptcy Reform Act recently passed by the United States Senate affects our interpretation of § 726. See Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, S. 256, 109th Congress (2005).