Menu    1 ABR 304 

HERBERT A. ROSS
U.S. Bankruptcy Judge


UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF ALASKA
605 West 4th Avenue, Anchorage, AK 99501-2296




_________________________________x 
In re 
JAY WALKER;Case No. 3-84-00076-HAR

GARY W. STOREY and MARY L.

Case No. 3-86-00737-HAR
STOREY; 
DENNIS M. JOHNSON andCase No. 3-87-01056-HAR
CORINNE JOHNSON; 
 PROCEEDINGS UNDER CHAPTER 13
Debtor(s).MEMORANDUM REGARDING DENIAL OF
PERCENTAGE INCREASE TO STANDING
TRUSTEE ON CASES PRECEDING U.S.
TRUSTEE CERTIFICATION
_________________________________x 

      The standing trustee, Beatrice Furman, took over a number of pending chapter 13 cases from former chapter 13 trustees. She has over 60 cases still under her supervision. The plans in the three cases at bar were confirmed prior to the certification of the United States Trustee in Alaska under § 302 of the Bankruptcy Judges, United States Trustees and Family Farmers Bankruptcy Act of 1986 (Public Law No. 99-554) (BJUST) which was passed on October 27, 1986. Certification of Alaska as a United States Trustee district occurred on November 27, 1988.

TOP    1 ABR 305  At the time these plans were confirmed, each plan provided for a specific trustee's fee. It was 5% in the Walker and Storey cases and 10% in the Johnson case (apparently, she has only been collecting 5% in the Johnson case). Ms. Furman now wants to raise her fee to 10%. She cites as her authority, 28 U.S.C. § 586(e). In fact, she was told by the U.S. Trustee's auditors that she should be receiving 10%. Nonetheless, the court will deny the motions.

      28 U.S.C. § 586(e) authorizes the Attorney General, after consulting with the United States trustee, to fix the maximum annual compensation and a maximum percentage fee that a standing chapter 13 trustee may charge an estate. The maximum percentage fee is currently set at 10%. The Bankruptcy Analyst in the U.S. Trustee's Office in Anchorage, indicated that the current standing chapter 13 trustee's fee was negotiated with Ms. Furman, and is currently 10%. Cf. In re Martens, 98 B.R. 530, 532 fn2 (Bankr.D.Colo. 1989).

      Most courts that have discussed the authority of a bankruptcy court to vary a standing trustee's fees from those set by the Department of Justice hold that the court has no such power. See In re Rodgers, 111 B.R. 621, 625 fn3 (Bankr.W.D.Mich. 1989); In re Teagardner, 98 B.R. 318 319-320 (Bankr. S.D. Ohio, 1989); In re Citrowske, 72 B.R. 613, 615 (Bankr.D.Minn. 1987); and In re Savage, 67 B.R. 700 (D.R.I. 1986). At least one court, however, has suggested there is still a possibility of bankruptcy court intervention in an appropriate case. In re Melita, 91 B.R. 358, TOP    1 ABR 306  363 (Bankr.E.D.Pa. 1988). See also  5 Collier on Bankruptcy ¶ 1302.01[5][A][i] (15th ed. 1990]. All those cases, however, were filed when the debtors were under the U.S. Trustee system.

      Under the transition section of BJUST, 28 U.S.C. § 586(e) does not apply to chapter 13 cases confirmed in Alaska before the certification date of November 27, 1988. See § 302(e)(2) of Pub.L. 99-554. Thus, in none of three cases at bar would Ms. Furman be able to rely on 28 U.S.C. § 586(e) since all were confirmed before the U.S. Trustee was certified in Alaska.

      There is an additional reason for denying the motions in the cases where the plans called for a 5% fee. In some of the sixty plus cases Ms. Furman has taken over, payments are keyed to just barely satisfying a debt which would be nondischargeable under chapter 7. Raising the fee will leave payment short for this class. Some may have payment of the amount needed to cure the arrearage on a residential deed of trust keyed to the 5% fee, and an increase to 10% would leave the plan short in curing the arrearage. In short, plans have been filed in which the payment of only 5% is an integral part. Cf. In the Matter of Baldwin, 97 B.R. 965, 967 (Bankr. N.D. Ind., 1989), in which the court held that a trustee's fee could not be raised since the lower fee had been established by a confirmed plan and was res judicata. The court will follow the reasoning of the Baldwin case. Since the plans in the three cases involved in our hearing were confirmed before BJUST and specified a specific percentage fee, they will be treated as res judicata.

TOP    1 ABR 307  When I gave my oral ruling denying her motions on January 17, 1991, Ms. Furman asked if there would be any objection to just adding her expenses for these older cases on top of the 5% fee which is already approved. She said that the court had allowed her or former trustees to collect some added expenses in addition to the regularly allowed percentage fee, presumably under either former §§ 1302(a) or 1302(e) of the Bankruptcy Code [§ 1302(a) was modified and § 1302(e) was repealed in 1986 by § 228 of BJUST]. She admits these expenses would eat up an extra 5%, thus achieving the result she seeks, a 10% bite out of plan payments.

      The court declined to rule on the suggestion that Ms. Furman merely add her expenses on top of the already authorized 5%. Instead, I requested that Ms. Furman file a formal motion setting out her request. There was no evidence that the expenses should be 5% in these or the other pre-U.S. Trustee cases. Some may have large lump sum payments to a minimal number of creditors. To allow, for example, a $1,000 fee on a $10,000 payment, all of which might go to the IRS, would probably be excessive.

      If the cases involved in these motions are "standing trustee" cases, Ms. Furman has some obstacles to recovering "expenses" as an additional item. Repealed § 1302(e) of the Bankruptcy Code reads a lot like the present 28 U.S.C. § 586(e). § 1302(e)(1)(B) provided for:

TOP    1 ABR 308  a percentage fee, not to exceed ten percent, based upon such maximum annual compensation [i.e., no more than a GS-16 employee under the government scale] and the actual, necessary expenses incurred by such individual as standing trustee.

It appears, therefore, that the percentage fee already subsumes an amount necessary to recover the annual projected salary and expenses of a standing trustee. The legislative history concerning the pilot U.S. Trustee districts indicates that the percentage fee fixed by the Attorney General is "based upon the standing trustee's projected office expenses and the maximum salary fixed by the Attorney General" (emphasis added). See H.Rep. 95-595 to the Bankruptcy Reform Act of 1978 (PL 95-598) at 106 and 5 Collier on Bankruptcy ¶ 1302.01[5][A][i] (15th ed. 1990].

      It should be established whether or not these pre-U.S. Trustee cases involved a "standing trustee" when they were confirmed. 11 U.S.C. § 1302(d) (repealed) provided that the court may appoint a standing trustee where the case load warrants. If, however, the trustee in the three cases were appointed under § 1302(a) (amended in 1986) on a case-by-case basis, compensation was governed by § 326(b) of the Bankruptcy Code which limited payment for services to no more than 5% of all payment under the plan. This is probably why Ms. Furman is only collecting 5% from the Johnson case when the plan itself allows 10%.

      § 326(b) states that a chapter 13 trustee who is not a

standing trustee may, subject to the 5% cap, be allowed reasonable compensation under § 330. § 330(a) provides the court may award a TOP    1 ABR 309  trustee, "after notice and hearing", reasonable compensation and "reimbursement for actual, necessary expenses."

      At the time I took the bench on October 1, 1986, Elaine Nelson, and later, James Dodson, was acting in most cases as trustee in Anchorage and Southeast chapter 13 cases and Jeannette James for Fairbanks cases. Mark Weber took over as trustee in many of the Anchorage and Fairbanks chapter 13 cases in about 1988. Although I had always thought of them as "standing trustees" before this hearing, it appears from the files they were appointed under § 1302(a) and not as standing trustees under § 1302(d). Ms. Furman should have the opportunity to verify this.

      Beatrice Furman has done a good job in establishing a chapter 13 program in this district. She has been dedicated and eager to learn. The 5% fee may well be uneconomical, but the number of old cases have a limited life. The debtors are entitled to rely on the fees previously established. The motions are therefore denied without prejudice to Ms. Furman making a motion that she is entitled to recover expenses under §§ 326(b), 330, or 1302(a) of the Bankruptcy Code, but not under 28 U.S.C. § 586(e).



DATED: January 17, 1991. 
  
 _______________
 HERBERT A. ROSS
 Bankruptcy Judge


TOP    1 ABR 310 
Serve: 
Gordon Schadt, Esq., for Beatrice Furman 
Beatrice Furman, Trustee 
Peter Giannini, Esq., for Debtor Walker 
Diane Vallentine, Esq., for Debtors Storey 
Debtors Dennis and Corinne Johnson, Pro Se 
Brent Wadsworth, Esq., listed counsel for Johnsons 
Jamilia George, Chief Deputy ClerkH3303(HAR/lp)