In re Russell

In re: THOMASENA E. RUSSELL Debtor.

Number 16-40484-EJC

United States Bankruptcy Court for the Southern District of Georgia Savannah Division

March 28, 2017

Chapter 13

OPINION¹ ON JUDSON C. HILL'S MOTION TO ALLOW ADMINISTRATIVE PRIORITY CLAIM

Pending before the Court is the Motion to Allow Administrative Priority Claim (the "Motion") (dckt. 59) filed by the Debtor's attorney, Judson C. Hill ("Hill"). In this Chapter 13 case, the Court granted the Debtor's application to pay the filing fee in installments, allowing her to pay such fee within 120 days from her petition date. However, prior to the deadline set for paying that fee, the Debtor informed her counsel, Hill, that she was unable to pay the fee. Rather than seeking additional time pursuant to Federal Rule of Bankruptcy Procedure 1006(b), Hill elected to pay the filing fee to the clerk and then seek reimbursement as an administrative expense. The Court is now called upon to determine whether Hill may seek reimbursement for his advance of the filing fee through the Debtor's Chapter 13 plan.

I. JURISDICTION

The Court has subject-matter jurisdiction over this proceeding pursuant to 28U.S.C. § 1334(a), 28 U.S.C. § 157(a), and the Standing Order of Reference signed by then Chief Judge Anthony A. Alaimo on July 13, 1984. This is a "core proceeding" under 28 U.S.C. § 157(b)(2)(B) (providing that core proceedings include "allowance or disallowance of claims against the estate . . . ").

II. PROCEDURAL BACKGROUND

A. The Debtor's Chapter 13 Plan

The Debtor filed her Chapter 13 bankruptcy petition and plan on April 1, 2016. (Dckts. 1, 4). In her plan, the Debtor proposed to make 60 monthly payments of $750.00 and pay unsecured creditors a 0% dividend or a prorata share of $ 1,000.00, whichever is greater. (Dckt. 4). To date, nine (9) claims have been filed in this case: two (2) secured claims totaling $29,429.70, six (6) unsecured claims totaling $80,097.01, and Hill's $310.00 priority unsecured claim.

On April 12, 2016, the Trustee issued a Notice to Commence Wage Withholding (dckt. 19) and subsequently began to receive the Debtor's proposed monthly plan payments. A confirmation hearing was held on June 2, 2016. On June 6, 2016, the Trustee filed his Motion on Plan Confirmation which provided:

Trustee moves that debtor(s)' plan be confirmed, subject to payment of the filing fee. The plan commits Debtor(s)' disposable income to the plan for a period of at least thirty-six (36) months and otherwise conforms to the requirements of Title 11. The plan will pay $1,000.00 or more to unsecured creditors, but in any event will pay not less than 0% of the total allowed unsecured claims.

(Dckt. 29). The Court granted confirmation of the Debtor's plan on August 30, 2016. (Dckt. 45).

B. Filing Fee Installments

Along with her petition, the Debtor filed an Application to Pay Filing Fee in Installments (dckt. 2), which was granted by this Court's order dated July 13, 2016 (dckt. 34). Pursuant to this order, the Debtor was required to pay the $310.00 Chapter 13 filing fee on or before August 1, 2016² in no more than four installment payments. (Dckt. 34). The Debtor failed to pay her filing fee by the August 1, 2016 deadline and did not seek a 60-day extension of such deadline as allowed by Bankruptcy Rule 1006(b)(2). As a result, on August 2, 2016, the Court entered its Order To Pay Filing Fees (dckt. 39) requiring the Debtor to pay her filing fee in full, or provide a written request to be heard on or before August 16, 2016, to avoid dismissal of her case. The Debtor failed to pay her filing fee by such deadline. However, on August 17, 2016, Hill "advanced" the $310.00 expense and electronically paid the filing fee on the Debtor's behalf.

C. Hill's Proof of Claim

Shortly after paying the filing fee, on August 25, 2016, Hill filed a proof of claim (Official Form 410) for a $310.00 claim based on "[a]dvance for Court's filing fee³." (Claims Register 8-1). Hill made the following representations in his proof of claim:

1) Paragraph 12 of Official Form 410 asks: Is all or part of the claim entitled to priority under 11 U.S.C. § 507(a)? Hill did not check "Yes" or "No," butindicated that his claim is entitled to priority under 11 U.S.C. § 507(a)(2)⁴.

2) Part 3 of Official Form 410 asks who is the person completing the proof of claim. Hill checked "I am the trustee, or the debtor, or their authorized agent."

(Claims Register 8-1). On September 1, 2016, the Trustee filed an Objection to Claim, which provided, in pertinent part:

* * *

2) Mr. Hill is the attorney of record for Debtor in the Chapter 13 case. By filing a claim in the case, Mr. Hill is a creditor of the estate and no longer a disinterested person as required by 11 U.S.C. § 327. Mr. Hill may hold an interest adverse to the estate.

3) The provisions of Title 11 allowing for the payment of compensation and reimbursement awarded under 11 U.S.C. § 330(a) do not contemplate reimbursement for the filing fees due the Court in order to file a Chapter 13 petition. Notice and hearing is required in order to have an administrative claim allowed in the case. 11 U.S.C. § 503(b).

4) The claim is for post-petition payment of the filing fees due the Court for the filing of the Chapter 13 petition. The motion circumvents the provisions of General Order 2015-5⁵ providing for the payment of the filing fee directly to the Clerk.

(Dckt. 37).

D. The Hearing

On October 13, 2016, the Court held a hearing on the Trustee's Objection to Claim. Notably, the Debtor did not appear. At the hearing, Hill stated that the Debtorsuffered fire damage to her apartment after filing her petition, which left her unable to pay the filing fee by the Court's deadline. As a result, Hill made the decision to advance the expense and seek reimbursement as an administrative expense pursuant to 11 U.S.C. § 503(b)(1)(A). Hill also argued that as a debtor's attorney, he may apply to the Court for reimbursement of expenses incurred (i.e. the filing fee) under 11 U.S.C. § 331. At the conclusion of the hearing, the Court took the matter under advisement and instructed Hill to file a motion to allow claim to set forth the specific Code provisions that serve as the basis for his administrative expense claim. On October 18, 2016, Hill filed the instant Motion setting forth his arguments made at the hearing. (Dckt. 59).

III. CONCLUSIONS OF LAW

There are several ways to characterize what Hill is really seeking to accomplish in his Motion. The first option urged by Hill is to consider the claim a request for allowance of an administrative expense under § 503(b)(1)(A), on the theory that advancing the filing fee was an "actual and necessary cost or expense of preserving the estate." Secondly, Hill appears to assert that his claim is an administrative claim under § 503(b)(2) relating to the compensation and expenses awarded under § 330(a)⁶; the Trustee argues this is improper. Third, Hill's post-petition claim might be allowable under 11 U.S.C. § 1305(a)(2)-it is, after all, a claim which arose post-petition. While neither party invoked § 1305(a)(2)⁷, the Courtwill address it anyway. Ultimately, none of these theories support allowance of Hill's asserted claim or his request for reimbursement through the Debtor's plan.

A. Hill Is Not Entitled to Payment of an Administrative Expense Pursuant to § 503(b)(1)(A)

Pursuant to 11 U.S.C. § 503(a), "an entity may timely file a request for payment of an administrative expense, or may tardily file such request if permitted by the court for cause." Section 503(b) provides a non-exclusive list⁸ of allowable administrative expenses, including the "actual, necessary costs and expenses of preserving the estate." 11 U.S.C. § 503(b)(1)(A). In order to maximize the value of the estate preserved for the benefit of all creditors, § 503 administrative expenses are to be construed narrowly. Varsity Carpet Servs., Inc. v. Richardson (In re Colortex Indus., Inc.), 19 F.3d 1371, 1377 (11th Cir.1994). To determine whether a claim qualifies as an administrative expense under § 503(b)(1)(A), courts generally apply a two-prong test: 1) the claim must arise from a transaction with the bankruptcy estate; and 2) the claim must have directly and substantially benefitted the estate⁹. 4 Collier on Bankruptcy ¶ 503.06[3] (16th ed. 2015).

In his Motion, Hill argues that his filing fee advance was "actual and necessary, and served to preserve the bankruptcy estate." The Court does not find this argument persuasive. First, Hill's "advance" arises out of a transaction with the Debtor, not her estate. While it is true that the Debtor's bankruptcy estate was in existence at the time Hill advanced the filing fees, the obligation to pay the filing fee under 28 U.S.C. § 1930 is not an obligation of the estate. Rather, 28 U.S.C. § 1930, requires the party commencing a bankruptcy case (here, the Debtor) to pay the appropriate filing fee. Accordingly, Hill's "advance" benefitted the Debtor personally by satisfying her obligation to pay the required filing fee.

Second, Hill's "advance" does not provide a direct or substantial benefit to the estate. Generally, claims predicated on the actual and necessary costs and expenses of preserving the estate involve, for example, outlays for repairs, upkeep, rent, insuring the value of property, or other goods and services incidental to protecting, conserving, maintaining and rehabilitating the estate. 4 Collier on Bankruptcy 503.06[1] (16th ed. 2015). Such expenses provide a benefit to the estate, and its creditors, by maintaining or adding to the value of the assets of a debtor's estate. The advancement of the Debtor's filing fee does not provide such a benefit to her estate. Rather, it only serves to satisfy the Debtor's requirement to pay a filing fee under 28 U.S.C. § 1930.

Because Hill's advance fails both prongs of the two-prong test under 11 U.S.C. § 503(b)(1)(A), he is not entitled to an administrative expense under that code section.

B. Hill Is Not...