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UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ALASKA


In re

VERB, INC., an Alaska corpora-
tion, dba The Pump House, Inc.,

                                 Debtor(s) 		Case No. A96-00049-HAR
Chapter 11

MEMORANDUM DECISION DENYING ADMIN-
ISTRATIVE EXPENSE STATUS TO FIRST
NATIONAL BANK OF ANCHORAGE UNDER
11 USC §§ 5O3(b)(3)(E) and 503(b)(1)(A)


     1. INTRODUCTION- First National Bank of Anchorage (FNBA), a secured creditor, filed a motion for allowance of a portion of its claim as an administrative expense, in addition to its secured status (Docket Entry 91, filed December 12, 1996).

     The two grounds for claiming an administrative expense are:      Given the tightness of debtor's budget, allowance of an administrative claim in the amount of $50,000 might be sufficient to block a confirmation. Cf 11 USC § 1129(a)(9)(A). I conclude, however, that FNBA is not entitled to administrative expense status on either grounds.

     2. FNBA AS "CUSTODIAN" UNDER § 543- The principal asset of the Verb, Inc. chapter 11 case is the Pump House Restaurant in Fairbanks, Alaska. It is a supper club and bar on the Chena River.

     The property was one of many involved in a prior bankruptcy, In re Sea Galley Stores, Inc., No. 94-08946 in the United States Bankruptcy Court for the Western District of Washington at Seattle. The Honorable Karen Overstreet presided over the case.

     On about September 29, 1995, Judge Overstreet approved a stipulated order among the attorneys for the debtor, Sea Galley; FNBA and Alaska Industrial Development and Export Authority; and Verb, Inc. and Vivian Bubbell. A copy of the order appears as Exhibit A to FNBA's motion (Docket Entry 91). It provides in ¶ 6:

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6. From the date of the order approving this stipulation and granting Senior Secured Creditors relief from stay, First National shall take possession and control of the premises and shall assume and pay all reasonable and necessary costs of insuring, maintaining and preserving the Pump House Restaurant, including costs of utilities, from that date forward, which costs shall be added to Sea Galley's indebtedness and shall be secured by First National's first deed of trust over the property. Said costs shall not be separately allowed as administrative expenses pursuant to section 503(b) of the Bankruptcy Code, except in the event Sea Galley seeks and obtains an injunction during the Holding Period as discussed in paragraph 8 below. If Sea Galley does obtain such an injunction, all costs expended by First National on the Pump House Restaurant as discussed above in this paragraph shall be a priority claim against the estate under 11 USC section 507(b) to the extent they exceed the proceeds from sale of the Pump House Restaurant after satisfaction of the Senior Secured Creditors' underlying claims.
     FNBA alleges it spent about $35,000 before Verb filed its own chapter 11 for security, utilities, and insurance under the auspices of this provision.

     By the terms of ¶ 6, FNBA, one of the "Senior Secured Creditors," was not to be accorded administrative expense status except in one event. Otherwise, any claim FNBA had for entering into possession and paying the reasonable and necessary costs of insuring, maintaining and preserving the property, was to be added to its secured claim. Only in the event that Sea Galley was able to secure an injunction in aid of a bona fide offer to purchase, would FNBA have been entitled to an administrative expense status. It is difficult to see a realistic scenario in which FNBA would not have been paid off from such a sale, making the administrative status claim moot.

     Sea Galley never sought to enjoin FNBA's pending foreclosure, which was scheduled for January 25, 1996, so the event which would have triggered administrative expense status never occurred in the Sea Galley Stores case. Before FNBA could complete its foreclosure, however, Verb, Inc. completed its own foreclosure and recovered the Pump House property and filed chapter 11.

     The court can see no good reason for elevating FNBA's claim to an administrative expense status in the present case on the basis that FNBA   TOP   4 ABR 494 was a "custodian" when it could not claim such status in the Sea Galley Stores case in which it was "appointed." When Verb foreclosed pre-petition in the present case, it realistically ended the possibility of the custodian provision kicking in under Judge Overstreet's order. The property was effectively removed from the Sea Galley Stores estate.

     The September 29, 1995, order in Sea Galley appears to be nothing more than an agreed to relief from stay. I have serious doubts whether any of the parties thought of the situation in relation to § 543.



     FNBA alleges "custodian" status by virtue of 11 USC § 101(11)(C):

(11) "custodian" means-- . . . . .

     (C) trustee, receiver, or agent under applicable law, or under a contract, that is appointed or authorized to take charge of property of the debtor for the purpose of enforcing a lien against such property, or for the purpose of general administration of such property for the benefit of the debtor's creditors; . . .
     The Bankruptcy Appellate Panel has held that a custodian "normally controls all the assets of the debtor . . ." In re Metropolitan Adjustment Bureau, 22 BR 67, 77 (9th Cir BAP 1982). Here, the Pump House property was apparently only a small portion of the Sea Galley Stores estate. Many cases determine that when a creditor is acting principally for its own benefit, it is not a § 543 custodian. See, e.g., In re Meyer's, Inc., 15 BR 390, 392 (Bankr SD Cal 1981).

     FNBA is a substantially oversecured creditor. It was principally acting for its own interest in protecting the Pump House property in anticipation of a smooth foreclosure sale, rather than acting as an agent for a group of creditors. As such, it is not entitled to the status of custodian under § 543, nor an administrative expense claim under §503(b)(3)(E).

     3. ADMINISTRATIVE EXPENSE FOR POST-PETITION EXPENSES IN VERB, INC.- FNBA argues that it spent approximately $15,000 after January 23, 1996, when Verb filed its chapter 11 in Alaska. This was for security, utilities, and insurance expenses. FNBA's request is under 11 USC § 503(b)(1) (A) for the necessary cost of preserving property of the Verb estate.

     The debtor objects to allowing administrative expense priority to these claims.

  TOP   4 ABR 495      From the commencement of this chapter 11, Verb has indicated that it intended to operate the Pump House Restaurant. It sought to recover physical possession from FNBA soon after the case was filed. FNBA resisted. While FNBA's payments may have benefitted the estate, they were principally made to protect its own security interest, which is ample. The court may take this into account in deciding if administrative expenses are justified. Lebron v Mechem Financial, Inc., 27 F3d 937 (3rd Cir 1994); Wolf Creek Collieries Co.v GEX Kentucky, Inc., 127 BR 374, 379 (ND Ohio 1991) (Claimant's self-interest in paying postpetition expenses may be considered when determining whether expenses were actual, necessary costs and expenses of preserving estate, and thus whether claimant is entitled to administrative expense priority); and, In re Meyer's, Inc. at 392.

     Had the court been asked to rule on the status of any advances by FNBA to adequately protect it, the court would have undoubtedly looked to the equity cushion FNBA enjoyed, before granting it an administrative expense. The bankruptcy court has discretion whether to award administrative expense status. In re Dant & Russell, Inc., 853 F2d 700, 707 (9th Cir 1988). Here, the granting of such status to FNBA, already well secured, would impair the debtor's chance to reorganize. Therefore, the post-petition administrative expense claim will be denied.

     DATED: February 7, 1997
HERBERT A. ROSS
U.S. Bankruptcy Judge