cases let's start with a backdrop it bears emphasizing your honour's how extraordinarily successful the trustees efforts were in the underlying chapter seven case it is truly rare that creditors are paid in full in the chapter seven liquidation case still more rare thank goodness or the rising done very real estate market day partly partly your honor him partly from very hard work on the on the point of the trustee and very  aggressive creative deal making and marketing of these properties it's there is a riding rising tide but that wasn't it in the bankruptcy judge credited both it is you know it is still more rare to get a result like this out of a failed chapter eleven reorganization case with the time lost with the additional layer of expenses incurred on those assets before this trustee ever stepped in the size of the surplus distribution here is also extraordinary it will be well into the six figures on top of the fresh start and exemptions that an honest better always gets it is a fact of life here hon that chapter seven trustees must deal with losers along with their winners this case was a winner against this extraordinary success the trustee was awarded compensation penciling out to fifty nine dollars and zero dollars nine cents an hour before substitute manager then as i understood it crawley indicated that he has not and will not be seeking a commission on the sale of the properties in this chapter eleven and i know this that in your favor or against you it does a cut either twenty six provides for a compensation set on a sliding scale based on monies disbursed to creditors those are two different thing one thing one and the same no not necessarily your honor and you know the idea here was nowhere and there's no statement in any record anywhere that mr connelly agreed to provide over a one thousand hours free that's not in the record that certainly wasn't relied on by anybody the court was not troubled by this you know by by the state of the record the debtor himself at the bankruptcy court level conceded that it was not a basis to deny compensation in this case so your honor going back to the fifty nine dollars nine cents this was connelly appointed a professional no he was not your honor why not because trustees hire professionals they are not professionals i think you know there  excuse me is there any case or law that would have fluted his appointments that professional well yes i think the the definition of what is a professional person itself cuts against the argument he was performing the role of a business principle or a trustee or you know something to that effect buying and selling properties he was not acting as a lawyer he was not acting as a learned appraiser or anything like that you know as you would see as your honour's would see as a professional instead the statute contemplates that a trustee hires professionals i would never seek to ever seek to be hired as a professional no he did not know and there's one other as as we jump to that you know potential work around to the issue that we have is that itself is problematic because that would circum that could be used then to circumvent section outside the us the statutory three hundred and twenty six limits altogether that creates that creates a bigger problem than anyone would be solving by suggesting a professional person you know that that is a professional person would have worked here if we were to affirm on the bases that are given below where would that leave a chapter seven trustee you say fifty nine dollars an hour and so forth just the way it is from henceforth or could the chapter seven trustee do something to protect a i don't believe that there's anything a chapter there certainly nothing in this case the chapter seven trustee can do to protect against that what about what about not opposing appointment of a chapter eleven trustee your honor i would like to answer that broadly and then specifically because we're talking about a number of different workarounds i would like to think of these workarounds and i would ask like to ask your honour's to think of these workarounds as tools in the tool box some might work in some situations some might not work in some situations just because a hammer worked in one instance does not mean it will work to you know to tighten a screw and hear your honour's appointment of a separate chapter eleven trustee would have in our view created a two headed monster that would not have resulted in you finish in or effective administration of these properties and would not have delivered to creditors the results that mr connelly was able to do you know deliver by doing so here alternately your honor also just like when there are tools in a tool box there is a hammer there is something else if the trustee picks up one and uses it and it's permissible you know the idea that he should have you a different one really isn't fair to him and here the problem still comes back to we have and it will be a growing problem this will be seen in more courts and courts of appeal as use of of single member l l c s and you know disregarded entities becomes more common we will have this the trustees in this district are she really aware of the issues that are before the court today and not all of these were workarounds will work for every situation here i think if we just come back to the statutory language we're ok but to but that's where i'm i'm struggling is i read your statutory language here you're kind of arguing about what the word in practice correct you basically want to ask as i see it to read in the words in regard to this case instead of in this case i think your honor the word in itself can mean many different things depending on the context one can be in this courtroom in this courthouse  in the city of denver at the same time one can in a different sense be in control or in compliance or in an effort but in this case at least within the statutory scheme seems to be fairly straightforward in in other provisions in the code i think the appellate cites that in this case means within the confines of that case i think actually your honor the the term the case is used i'm sorry  yes and i think the emphasis on the case is misplaced we don't dispute that it these services the dispersants need to be attributable to the chapter seven case we were not arguing anything different were you know the question is  it's not defined in the code it's not used elsewhere in the code and you know so when when we look to normal statutory principles and we look you know in this contest we haven't pulled out black's law dictionary you know referring to in elastic print proposition synonymous with in regard to respecting common sense supports that here and frankly your honour's the bankruptcy appellate panel while we disagree with the ruling helped clarify the issue for us was the trustee acting as a volunteer here or not and clearly your honor so there was some evidence that there was some reservation on the compensation would be the trustee did state actually it was the counsel for mari alley hotels l l c stated that the trustee would not seek compensation or commission on the sales  was a very substantial amount well your honor i would say this which is equivalent to or greater than the commission iow i would say this about this issue and frankly any other issue about the facts here which is this is an interim compensation award no matter what this court orders there will be further proceedings in the bankruptcy court no matter how the this court interprets the statute that is before the  is that what you're saying no what i'm saying your honor is if that bothered the bankruptcy court he could have acted on that before he did not he specifically asked the debtor and the debtor specifically said to the bankruptcy judge this was not a basis to deny compensation because of the nature of the statements and the fact that nobody nobody there was no reliance on that we the court did not feel misled the united states  client is not entitled to compensation in the chapter eleven proceedings and that that's all not even advisory that the that the court below can go ahead after back on remand with instructions to apply further proceedings to the standard this court sets if the if the bankruptcy court were bothered by the statements the bankruptcy court could have denied compensation on that basis it was before the court did not the bankruptcy judge may well have a nd bite because this is an interim compensation a war in there will be a final compensation approval after remained of this appeal and if it bothers the bankruptcy judge th  he can he can do it again but in point of fact there what we believe there was no one who was misled there was and the statement is accepted you may just be asking us for an advisory opinion you may please the court my name is jordan factor and i represent jesse mori alley mr connelly asks mr connelly asks this court to strike the phrase in the case by the trustee from section three hundred and twenty six dollars if congress wanted trustees to be compensated based on all dispersement to parties an interest it would have said so it didn't in order to be compensable the monies must have been distributed in the case by the trustee here the monies that issue were neither distributed by a trustee nor in the case the monies it issue were distributed by mor hotels l l c as a debtor in possession they were not distributed by tom connelly as chapter seven trustee that could end dispose of this issue furthermore they were not distributed in the case in no way can it be said that these monies were distributed in the chapter seven case these monies were not property of the chapter seven estate they were not derived from the liquidation of property of the chapter seven estate they didn't come out of an account in the name of the chapter seven estate they were not dispersed pursuant to orders entered in the chapter agree that the term even may have some flexibility but there has to be a significant tie to the case itself and that is not present here congress was not engaged in some esoteric philological exercise when it used the phrase in the case it used it in plain meaning to mean within the bounds of a certain proceeding from cited over by a particular judge with a particular case number with that particular choice speak none of that took place here well mr connelly wasn't a stranger to all of the better you had a role he certainly did have a role and that wouldn't have happened it would have how if mr connelly had chosen to seek the appointment of a professional manager that professional manager could have been compensated hourly or on a flat fee for substantially less than mr connelly and that same professional manager could have chosen to sell these properties at the height of the recovering denver real estate market as we look to these words in the case and we try to interpret what that means and we look back and say why do we have three hundred and twenty six in the shape that it's and with the commissions and so forth one reason was we need to have trustees to run the bankruptcy system right we need to have trustees fulfill their obligations under seven  one and if mr connelly truly is making fifty nine dollars an hour on large number of expanded hours all to achieve the result everybody likes how does that serve ever getting a trustee to do this again well congress has determined the trustees are not compensated by the hour so yes mr connelly put in a number of hours but that cannot be the basis of his compensation indeed in passing babsy in two thousand  congress expressly removed trustee compensation from three o three hundred and eighty three and inserted three o three a seven congress said don't look at anything other than the monies that were dispersed to in interest by the trustee in the case and to your point about how that ties to the trustees function the trustees core function is expressed in seven hundred and four a one which provides that the trustee is to quote reduced to money the property of the estate for which such trustee serves here the broadway property and the colfax property were not property of the estate for which mr connelly served they were property of an entirely independent state so i think it makes sense to read the word moneys in section three hundred and twenty six as tied to the word money in seven  a one the compensation base is the money that is derived from the liquidation of property of the estate which is the core function of a chapter seven trustee and here he is seeking compensation based on money that was not derived from the liquidation of property of the estate so if he were wanted to fulfill his core function under seventy dollars for a one which is to produce the money the property of the estate for which he served he could have chosen to sell the equity interests in more reality hotels l l c indeed he did sell the equity interests in other single asset single purpose l l c s that mr mori alie own here he chose not to do an equity sale he chose to hold the properties and wait for an asset sale that was his choice but he didn't make that choice as chapter seven trustee fulfilling his seven o four function he made that choice as a self appointed manager of moriah alley hotels l l c when he became the chapter seven trustee he succeeded to the ownership interest of the l l c that gave him the right as the owner to appoint any manager to manage that l l c he chose to appoint himself moreover he did so in the face of a motion to appoint a chapter eleven trustee by mr mori alley and mr connelly opposed the appointment of a chapter eleven trustee on the basis that the compensation for the chapter eleven trustee would be excessive in fact it would have been the same amount the mr connelly is seeking here had he had he appointed another manager you say that would have been his choice not to  point him self to find someone else who he might have approved that manager would have been compensated current yes or honor but that time obviously perhaps or perhaps he would have been compensated on a salary or flat fee basis but the compensation would have been some compensation it certainly would which i wasn't here because that is right because in order to be compensated for performing services within the context of the bankruptcy system you need to have prior approval from the bankruptcy court to serve in a compensable role and that simply could not understand that argument is just trying to clarify that had he made the choice you're suggesting he could have still had some control essentially over who he selected yes but not put his own time and effort into it that's exactly right and he would have a right as the owner of m hotels l l c he would effectively have served the function of a board of directors in a typical corporation overseeing the manager who would serve the function of a c e o or president so he absolutely would have overseen that manager if that manager were compensated by the hour he would have had an opportunity to ensure that that manager was fulfilling his functions efficiently he would have scrutinized that managers bills to make sure that they were not wasted time but even if that manager were compensated by the hour and even if that manager put in the same number of hours that mr conley did he would have had to have been compensated to the tune of over three hundred dollars an hour in order to get the compensation  connelly is seeking here and that never would have been approved by a bankruptcy court so the basis for mr connally's assertion of his role as manager was that he would represent a cost savings he would have had to ask for approval in advance of reasonable compensation by the hour and if he had sought compensation at over three hundred dollars an hour it would have been vigorously opposed and i think the and so this litigation would have happened up front and his compensation would have had to be commensurate with the compensation that a similarly situated professional manager would have sought had he sought an independent manager but he did sought to appoint himself which represents a significant conflict of interest which may have barred is hiring as a coach as a professional in the st place had he actually teed up this issue in advance that he wanted to be compensated for performing this role then the court could have scrutinized number one is he not conflicted is there a conflict between his charge to maximize the return in the chapter seven estate versus his interest in maximizing his compensation as manager and we could have litigated that in advance and gotten clarity on how he's to be compensated instead he hit the ball and he suggested if not outright stated that he would not seek compensation from the sale of these properties which is precisely what he's doing here well just so that we're fair to him and i want to make sure the that's correct and my understanding is that mr connelly's asking for compensation from the chapter eleven distributions that satisfied chapter seven creditor claims which is a smaller amount than would be all of the  sale proceeds amount to approximately ten million dollars he's seeking compensation based on over eight million dollars and chapter seven creditors claim so in this case it's not as though what he's asking is completely divorced from chapter seven there chapter seven credit claims it's not completely divorced from the chapter seven creditor claims it's completely divorced from the language of the statute and other judges who have dealt with similar situations where chapter seven trustees efforts resolve claims in the chapter seven pais have determined that those trustees are not compensated for those efforts because of the plain language of three hundred and twenty six this comes up in the context where chapter seven trustees turn over property of the estate to secured creditors in that instance the turnover of the secured property of the estate might resolve nearly all if not all of the claims of the case if all the creditors are secured creditors and all of them are permitted to realize upon their collateral in satisfaction of their claims and the trustee facilitates that the trustee has eliminated all creditor claims but the law is clear the trustee doesn't get compensated for that because he hasn't dispersed monies he's only dispersed property and this estrada factor if  be performing services and not be up and i don't believe so your honor i think instead it would encourage trustees to fulfill the function of owner of an l l c in a more efficient way in a way that  is better for the l l c itself and that probably would be the appointment of a professional manager under three hundred and twenty seven dollars but if the trustee really wanted to maximize his own compensation what he would do is sell the equity of the l l c within the bankruptcy case as mr connelly did here with other entities and there are plenty of purchasers out there who specialize in purchasing the equity of entities that are in bankruptcy and getting the advantage of bankruptcy orders that facilitate their ownership of the entity and dispose of creditor claims he could have chosen to go that route now perhaps he may have fetch less for the l l c interests than if he held the properties until the height of the denver real estate market that was a strategy that he decided to deploy and he decided to kick the can of compensation down the road but that was his choice and if this court merely enforces the plain language of the statute what will happen is trustees will act in accordance with the law and they will certainly maximize the value of the estate and i suspect they'll find a way to maximize their own compensation as well if there are no further questions thank you thank you your honour's we're not his far apart on the standards we think because what i think i just heard was the standard is met if there's a significant tie to the chapter seven case and with out that's essentially the standard we're arguing and there is without question a significant tie to the chapter seven case here st as judge phillips points out we are only seeking compensation on just disbursements to creditors who file claims in the chapter seven case in this definitely arises from performance of the chapter seven trustee statutory duties the existence of the case has been considered by the bankruptcy court and it's been considered by the bankruptcy have they gone so far off the track that we should now reversed both courts this is purely a matter of statutory determination your honor that can be reviewed to novo and i believe as a matter of fact is  for st impression for this circuit or any other interpret in this provision of section three hundred and twenty six on in this circumstance the bankruptcy judge did not find that there was some reasonable ness you know on the facts the judge found that he was constrained to allow you know higher compensation based on the reading of three hundred and twenty six so what we're asking your honour's to do is review three hundred and twenty six to no avail thank you the asset of the l l  excuse me the assets of the estate include interest in the i'll see that as a separate interest yes there is more than one tool in the tool box there was more than one way to convert that asset to money come you know the wind tried case from the supreme court forty years ago says trustees must maximize value albright says trustees can take over administration in order to do so he exercised those powers in order to make this work thank you  says well presented cases submitted