Appellants F/V Pacific Star and F/V Topaz appeal an order of the bankruptcy court awarding Appellee William Barstow trustee's fees in the amount of $26,250, and the law firm of Bundy & Christianson $52,161.52, in attorney fees and costs from the sale of the primary assets of the debtor, Eagle Fisheries. Appellants argue that the trustee's fees and his attorney fees cannot be paid out of the sale proceeds because the activities did not directly benefit the secured creditors, including them. Appellants also challenge the reasonableness of the fees and costs awarded to the trustee and his counsel. This court has jurisdiction to decide this bankruptcy appeal pursuant to 28 U.S.C. § 158(a).

The record on appeal establishes the following facts. The debtor, Eagle Fisheries, operated a fish processing plant in Kodiak, Alaska. On June 7, 1990, Eagle Fisheries filed a Chapter 11 petition for bankruptcy, and was subsequently converted to a Chapter 7 liquidation. As of the date of filing, the debtor's assets included a long term lease of real property on which the fishing plant was located, the adjacent parcel of real property owned in fee, on which a bunkhouse was located, and various equipment. Kyokuyo was the debtor's largest secured creditor, and held the first deed of trust on the fee parcel, a deed of trust on the leased parcel, subordinated to the ground lease, and a security interest in approximately one-eighth of the equipment. The debtor leased the real property on which the fish processing plant is located from the Fuller Trust. The equipment outside of Kyokuyo's security interest secured the interests of an equipment supplier and five fishermen lien creditors. The fishermen lien creditors also held a second deed of trust on the fee parcel.

Appellant William Barstow was appointed trustee for the Eagle Fisheries bankruptcy. Mr. Barstow decided that the value of the processing plant would be greatly enhanced if sold as an ongoing concern. Pending the sale of the assets, the trustee attempted to rent out the fishing plant to generate revenue. Although eventually successful in renting the fish processing plant for three months, the plant was vacant for much of the bankruptcy proceeding's duration. The bunkhouse was under lease at the time the debtor filed for       3 ABR 116  bankruptcy. However, the tenant stopped paying rent, and the trustee eventually evicted the tenant.

The trustee hired a real estate broker to sell the fish processing plant, the debtor's interests in the real property, and the equipment. The trustee received several offers for the plant package. Several creditors objected to the sale on the grounds that the sales price was inadequate. An auction was held in open court. Eventually, the package was sold for $875,000 to International Seafoods Association, Inc. (ISA), along with negotiated concessions that reduced Kyokuyo's claim from $634,000 to $525,740. Toby Cook, the real estate broker, also agreed to reduce its real estate commission from $87,500 to $70,000. Appellants did not object to the sale of assets to ISA, but reserved their right to challenge the distribution of the sale proceeds.

The trustee applied for the maximum fees allowed under the Bankruptcy Code, and for attorney fees and costs in the amount of $47,758⁽¹⁾. The trustee also sought to be paid from the proceeds of the sale to ISA under 11 U.S.C. § 506(c). Appellants objected to payment of the trustee and his counsel out of the proceeds of the sale base upon the absence of a direct, quantifiable benefit to the secured creditors. Appellants also argued that not all of the fees and costs were reasonable.

The bankruptcy court held a hearing on the trustee's motions on July 9, 1993. The court concluded that all fees and costs incurred by the trustee and his counsel were directed towards preserving the assets as a package rather than selling the assets individually. The court also concluded that the fees and cost were reasonable, necessary, and the secured creditors benefited from the actions of the trustee and his counsel, because the secured creditors received more from the sale of the assets as a package than if the trustee had not acted. Finally, the court awarded the trustee the maximum fee under 11 U.S.C. § 326(a).

Payment of the trustee's costs and fees from the sale proceeds left appellants undersecured. Appellants hold unsatisfied secured claims in the amount of $72,558. The trustee's fees and attorney's fees paid totalled $78,412.50⁽²⁾. Appellants seek to apply the money paid to the trustee and his attorney to their unpaid secured debt.

Appellants challenge the trustee's, and his attorney's, entitlement to recover their fees and costs from the proceeds of the sale of the assets to ISA. However, the initial question presented on appeal concerns the amount owed as fees and costs. Section 330(a) of the Bankruptcy Code provides that professionals, such as the trustee and his attorney, may receive reasonable fees and costs. 11 U.S.C. § 330(a). The bankruptcy court found that all fees and costs requested by the trustee and his counsel were reasonable. This court reviews the award of fees and costs for an abuse of discretion or an erroneous application of the law. In re Nucorp Energy, Inc. 764 F.2d 655, 657 (9th Cir. 1985).

Appellant, citing Southwestern Media, Inc. v. Rau, 708 F.2d 419 (9th Cir. 1983), urges the court to review the fee awards in light of the results obtained, and savings on administrative expenses to the estate. While these factors are certainly significant, the court also looks to the time spent on the case, the labor involved, the novelty and difficulty of the issues presented by the case, and the experience and ability of the professional. In re: Financial Corp. of America, 114 B.R. 221, 223 (9th Cir. B.A.P. 1990), affd 946 F.2d 689 (9th Cir. 1991).

Trustee compensation is subject to an additional limitation. Section 326 limits the trustee's compensation to a maximum of three percent of the monies distributed by the trustee to parties in interest, including secured creditors. 11 U.S.C § 326(a). The three percent is not mandatory, but serves as a ceiling upon any recovery allowed under § 330.

I. TRUSTEES FEE'S

The bankruptcy court found that the trustee was entitled to the maximum three percent of the sales price under §§ 326 and 330, for a total amount of $26,250. Appellants contend that Mr. Barstow is not entitled to the statutory maximum under § 326. Appellants argue that the results obtained, which they contend cannot be attributed to the trustee's actions, and the lack of administrative savings to the estate require an award less than three percent.

Indeed, several secured creditors did object to the original proposal for the property, and, in fact, the property was ultimately sold for more than the original price. However, the ultimate sales price is but the simplest view of the result obtained. In this case, the result       3 ABR 119  which entitles the trustee to the maximum three percent of the sales price is not the ultimate purchase price alone, but also the trustee's ability to put together and preserve a viable package including the leased property, the plant and the equipment. As noted by the bankruptcy court, outside bankruptcy the debtor would not have been able to maintain its interest in the leased property. The court presumes that the reason for this finding lies in the debtor's defaults, however, the record does not make this fact clear. But for the trustee's actions to preserve the property as a package, the bankruptcy court concluded, the assets would fetch significantly less in separate sales.

Appellants also rely on the lack of administrative savings as a factor militating against an award of the maximum three percent of the sales price for the trustee's fee. Appellants note that the real estate broker received $70,000 as his commission from the sale of the fish plant. The court admits that the brokers fee's do seem excessive given the fact that the sale was consummated through an auction in open court. However, the sales commission was not surcharged against the sales proceeds. Rather, the largest secured creditor, Kyokuyo, paid the broker's commission from its secured claim. Also, the trustee negotiated a $15,000 reduction in the broker's commission. The sales proceeds were not surcharged for the broker's commission, obviously conferring a significant benefit to the secured creditors. I cannot say that the award of trustees fees in the amount of 3% of the sales price to ISA was clearly erroneous.

Appellants objected to the inclusion of time spent objecting to creditor's claims. The court's review of the time records submitted by the trustee and his counsel indicate that the       3 ABR 120  trustee spent hours on claims objections. Trustee's counsel spent minimal time on claims objections. Time spent objecting to creditor's claim is certainly appropriate for a trustee. However, this time may not have directly benefited the secured creditors, and, therefore, would not be recoverable under § 506(c) . See In re Baum's Bologna, Inc., 50 B.R. 689 (Bankr. E.D. Penn. 1985).

II. ATTORNEY'S FEES

Appellants also object to several costs awarded to Bundy & Christianson. Actual and necessary expenses are compensable under § 330(a)(2). In re Ginii Corp., 117 B.R. 983, 995 (Bankr. D. Nev. 1990). However, the recovery of costs is not intended to provide profit centers for the local bankruptcy bar. Id. Additionally, professionals may not recover overhead costs, such as secretarial time, messenger services, time spent copying documents, or other administrative functions, absent special circumstances. Id.

Specifically, appellants object to charges for three parking tickets, a blanket $10 charge for facsimile transmissions, and the use of a messenger service. The court agrees that the award of these costs was clearly erroneous. First, there is simply no justification to charge the estate for parking tickets. See In re Convent Guardian Corp., 103 B.R. 937, 945 (N.D. Ill. 1989). (parking charges part of overhead and not compensable under § 330) The costs of the parking tickets shall be disallowed.

Second, Bundy & Christianson charged the estate $1,590 for facsimile charges, at a blanket charge of $10 per fax. In the same vein, Bundy & Christianson charged $2962.50 for 11850 copies at $ .25 per copy. Such items are compensable at the professional's actual       3 ABR 121  cost. In re Ginji Corp., 117 B.R. at 995. Outgoing faxes should be charged only at the rate of the phone call. In re Bank of New England Corp., 134 B.R. 450, 458 (Bankr. E.D. Mass. 1991), aff'd 142 B.R. 584 (D. Mass. 1992); In re CF & I Fabricators of Utah, 131 B.R. 474, 494 (Bankr. D. Utah 1991). Both charges seem excessive. Moreover, there is no evidence in the record to support any finding that the charges reflect the actual costs incurred by Bundy & Christianson. On remand, Bundy & Christianson shall be compensated for the actual costs of the facsimiles and copying.

Finally, Bundy & Christianson charged $185 for messenger services at $5.00 each, $52.50 for express messenger service, plus a $160 charge for messenger service incurred on April 30, 1991. An award of messenger costs is also clearly erroneous absent some factual support for incurring those costs. In re Convent Guardian Corp., 103 B.R. at 940. Such support is absent in the record, and these costs will be disallowed as well.

III.  SURCHARGE OF THE SECURED CREDITOR'S COLLATERAL; UNDER § 506(c)

Separate from the question concerning the amount of Mr. Barstow's and Bundy & Christianson's fees and expenses under § 330(a), the trustee sought to recover his allowed fees, as well as the fees and expenses of his counsel, from the proceeds of the sale to ISA securing various liens and debts. Generally, professional's fees and expenses, found to be reasonable under § 330(a), constitute administrative expenses paid out of the bankruptcy estate. 11 U.S.C. 503(b)(1)(A). However, fees and expenses incurred in preserving and protecting secured property may be charged against the collateral. In the Matter of Senior-G & A Operating Co., 957 F.2d 1290, 1298 (5th Cir. 1992)

Section 506(c) codifies the pre-Code equitable exception to the. general rule that expenses for the administration of a bankruptcy are not borne by the secured creditors. See In the Matter of Trim X, Inc., 695 F.2d 296, 301 (7th Cir. 1982). Pursuant to § 506(c), a trustee may recover the payment of administrative expenses where: (1) the expenditure was necessary; (2) the amounts expended were reasonable; and (3) the creditor benefitted from the expenses. In re Cascade Hydraulics and Utility Service, Inc., 815 F.2d 546 (9th Cir. 1987). The trustee bears the burden of proving his entitlement to surcharge the sale proceeds under § 506(c). Id. The bankruptcy court's factual determination that the trustee and his attorney were entitled to surcharge the collateral will not be overturned unless the findings are clearly erroneous.

Judge Ross specifically found that the sale of the fish processing plant was both reasonable and necessary under § 506(c). Appellants do not dispute this finding. Rather, appellants contend that the sale provided only an incidental benefit to the secured creditors. Appellants argue "there is nothing in the record that indicates the secured creditors could not have sold the property to ISA on the same terms and conditions as the did the trustee." Appellants Reply Brief (Docket No. 9), at 2. This argument, in reality, goes to the amount of the benefit bestowed by the trustee's actions, rather than questioning whether those acts provided a benefit to the secured creditors.

Appellants concede that the "sale of the property as a 'package' would realize more than if the property were sold piecemeal." Appellants Reply Brief, at 1. This admission alone ends the inquiry necessary to determine if the trustee's actions benefitted the secured       3 ABR 123  creditors. The record demonstrates that the trustee took affirmative steps to keep the property occupied, to prevent vandalism and effect improvements, to remove or reduce environmental claims and problems at the property, and otherwise maintain the asset as a package. Courts have long recognized that a trustee's actions to preserve collateral for the benefit of the secured creditors confers a sufficient benefit under § 506(c) to support a surcharge on the secured creditor's collateral. In the Matter of Trim X, Inc., 695 F.2d 296 (7th Cir. 1982); In re: North County Place, 92 B.R. 437 (C.D. Cal. 1988). The instant case is no exception. Mr. Barstow took steps that preserved and enhanced the benefit of the collateral for all the parties holding security in the property sold to ISA.

While the record demonstrates that the trustee and his attorney conferred a direct benefit upon the secured creditors, a trustee's recovery under § 506(c) is "limited to the extent that the secured creditor benefitted from the services." In re Cascade Hydraulics and Utility Service, Inc., 815 F.2d at 548. (citing In re Sonoma V, 24 B.R. 600, 603 (9th Cir. B.A.P. 1982)). A trustee "must establish in quantifiable terms that it expended funds directly to protect and preserve the collateral." Id. The benefit conferred by the trustee's actions limit his recovery against the collateral by acting as a ceiling. In re North County Place, Ltd., 92 B.R. 437 (C.D. Cal. 1988). The trustee did not quantify the benefit its services provided to the secured creditors.

Appellees direct the court's attention to Judge Ross's conclusion that, but for the trustee's actions, the secured creditors would not have received anything for their collateral.       3 ABR 124  Yet, there is no evidence to support this conclusion. ⁽³⁾ The secured creditors held security interests in both pieces of real property, one under a long term lease on which the fish processing plant was located, and the other owned in fee. The secured creditors also held security interests in most of the personal property located on the real property. The collateral had some foreclosure value outside bankruptcy prior to the trustee's action leading up to the sale to ISA. The difference between that undetermined value and the ultimate sales value, $850,000, sets the maximum the trustee and his attorney may surcharge the secured creditors under § 506(c). The case will be remanded to determine the quantifiable benefit provided by trustees actions.

IV. ALLOCATION OF SURCHARGE UNDER § 506(c)

The final issue raised on appeal concerns the allocation of the surcharge against the sales proceeds to pay for the fees and costs of the trustee and his counsel. Appellant argues that any surcharge should be allocated pro rata among the benefitted secured creditors. The bankruptcy court rejected this argument, and imposed the surcharge prior to any payment of the secured creditor's claims. This priority surcharge left the F/V Topaz undersecured, and the F/V Pacific Star unsecured.

Appellees cite In the Matter of Stable Mews Associates, 49 B.R. 395, 398 (Bankr. S.D.N.Y. 1985) for the proposition that § 506(c) expenses should be imposed on a priority basis rather than pro rata. Although Stable Mews does support the appellee's position, it is contrary to the majority of decisions that address this matter. In the Matter of Senior G & A Operating Co., Inc., 957 F.2d 1290 (5th Cir. 1992) (secured creditor was liable for pro rata 5.95% of the expenses incurred in a postpetition oil well workover where the secured creditor held an 85% interest in the debtor's 7% interest in an oil well); In re Olympia Ho1ding Corporation, 127 B.R. 478 (Bankr. M.D. Fla. 1991) (court imposed a pro rata expense upon the secured creditor limited by the quantifiable benefit to the creditor); See also In re Swann, 149 B.R. 137 (Bankr. D. S.D. 1993).

The equitable origins of § 506(c) support a pro rata allocation of expenses. Simply stated, those who benefit from the trustee's reasonable and necessary actions that primarily benefit them should be required to pay a pro rated amount of the expenses up to the amount of the benefit that the trustee's actions added. To tax the secured creditors that have not received any quantifiable benefit from the trustee's actions to pay the trustee's fees contravenes the nature of, and policy behind, § 506(c). In some instances this may only partially compensate the trustee and his counsel. However, § 506(c) is not intended as a substitute for the recovery of administrative expenses normally the responsibility of the debtor's estate." In re Cascade Hydraulics and Utility Service, Inc., 815 F.2d 546, 548 (9th Cir. 1987). Any fees and expenses that Mr. Barstow and Bundy & Christianson may recover under § 506(c) on remand shall be paid on a pro rata basis.

IT IS THEREFORE ORDERED:

The case is remanded to bankruptcy court to quantify the benefit, if any, provided by the trustee, William Barstow, and his counsel, Bundy & Christianson, to the secured creditors. Subject to any limitation arising from the requirement that a direct benefit to the secured creditors be provided: (1) the order awarding Mr. Barstow three percent of the $850,000 sales price for the fish processing plant sold to ISA is affirmed; (2) the award of fees and costs to Bundy & Christianson is affirmed, except that costs in the amount of $30.00 for parking tickets, and $397.50 for messenger services and overnight deliveries are disallowed, and the award for facsimile and copying charges shall be reduced to the actual, direct costs incurred. Any fees and expenses recoverable under 11 U.S.C. § 506(c) are to be allocated on a pro rata basis among the secured creditors benefitting from the actions of the trustee and his counsel.

DATED the 14 day of April, 1993, at Anchorage, Alaska.

John W. Sedwick
United States District Judge

N O T E S:

      3 ABR 116  1. The law firm of Bundy & Christianson filed its Application for Payment of Attorney Fees on December 12, 1922 for $17,446 in attorney fees and $2,342.82 in costs. On April 10, 1993, the trustee filed his Second Application for Payment of Attorney's Fees, seeking $28,650 in fees, and $3,723.70 in costs. The bankruptcy court awarded Bundy & Christianson $52,161.52 in fees and expenses. However, Bundy & Christianson has received $4,404.07 from insurance proceeds paid to the estate. Thus, Bundy & Christianson seeks $47,757.45 from the sale proceeds.

      3 ABR 117  2. The total unpaid secured fisherman claims equal $110,308.

      3 ABR 124  3. The record on appeal does contain sporadic references to appraisals and brokers opinions regarding the value of the real and personal property sold to ISA. See Transcript of the February 12, 1992 Hearing on Trustee's Motion to Assume and Assign Lease, Sell Fish Processing Facility and Pay Real Estate Commission (Docket No. 390). However, the parties have not attempted to quantify the benefit of the trustee's actions and these partial references do not constitute a finding of the amount of benefit provided by the actions of the trustee and his counsel.