___________

No. 95-4114

___________

Joel Pelofsky, United States *

Trustee, *

*

Appellant, *

*

v. *

*

Milus Gary Wallace, doing *

business as Wallace's * Appeal from the United States

Greenhouse; Wanda Harline * District Court for the

Wallace, * Eastern District of Missouri.

*

Appellees. *

*

William Frye, *

*

Trustee. *

_______________________________

Joel Pelofsky, United States *

Trustee, *

*

Appellant, *

*

v. *

*

Jackie Wallace; Jacqueline *

Wallace, *

*

Appellees. *

*

William Frye, *

*

Trustee.

_______________________________

Joel Pelofsky, United States *

Trustee, *

*

Appellant, *

*

*

Samuel R. McAnally; Shirley L. *

McAnally, *

 *

Debtors. *
 1

The Honorable David S. Doty, United States District Judge for

the District of Minnesota, sitting by designation.

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William Frye, *

*

Trustee. *

___________

 Submitted: June 10, 1996

 Filed: December 12, 1996

___________

Before WOLLMAN, Circuit Judge, HENLEY, Senior Circuit Judge, and

DOTY,1 District Judge.

HENLEY, Senior Circuit Judge. 

The sole issue in this consolidated appeal is whether under 28

U.S.C. § 586(e) the percentage fee for a Chapter 12 standing

trustee in a case filed under the Family Farmer Bankruptcy Act of

1986, 11 U.S.C. §§ 1201-31 (the Act), is based on amounts the

trustee receives from the debtor and disburses to creditors, as the

debtors argue, or on all amounts received by the trustee from the

debtor -- including amounts for the trustee's fee -- as the United

States Trustee (UST) argues. The district court, upholding a

decision of the bankruptcy court, In re Wallace, 167 B.R. 531

(Bankr. E.D. Mo. 1994), agreed with the debtors. Pelofsky v.

Wallace, 197 B.R. 82 (E.D. Mo. 1995). We affirm.

Chapter 12 "was designed to 'give family farmers facing

bankruptcy a fighting chance to reorganize their debts and keep

their land . . . while at the same time, preventing abuse of the

system and ensuring that farm lenders receive a fair repayment.'"

Rowley v. Yarnell, 22 F.3d 190, 192 (8th Cir. 1994) (quoting H.R.

Conf. Rep. No. 958, 99th Cong., 2d Sess. 48 (1986), reprinted in

1986 U.S.C.C.A.N. 5227, 5249)). Because family farmers had found
 2

"With some exceptions, Chapter 12 is modeled after Chapter 13

but is available only to an individual family farmer and his or her

spouse." In re Wagner, 36 F.3d 723, 725 n.1 (8th Cir. 1994). 

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reorganization under "Chapter 11 needlessly complicated, unduly

time consuming, inordinately expensive, and, in too many cases

unworkable," H.R. Conf. Rep-99-958 at 48, 1986 U.S.C.C.A.N. at

5249, it was the intent of Congress to "provide farmers with a

faster, simpler, and cheaper alternative to Chapter 11 . . .

procedures." Rowley, 22 F.3d at 193. Thus, under Chapter 12, as

a general rule, the farmer, as debtor-in-possession, stays on his

land and operates his farm. 11 U.S.C. § 1203. In addition, in

every Chapter 12 case a trustee is appointed. Id. § 1202. The Act

requires that a farmer submit "all or such portion of his future

earnings or other future income . . . to the supervision and

control of the trustee as is necessary for the execution of the

plan[,]" id. § 1222(a)(1), and "[e]xcept as otherwise provided in

the plan or in the order confirming the plan, the trustee shall

make payments to creditors under the plan." Id. § 1226(c).

If the number of Chapter 12 or 132 cases in a region "so

warrants," the UST in that region may "appoint one or more

individuals to serve as standing trustee to serve in cases under

such chapter." 28 U.S.C. § 586(b). Section 586 provides for

compensation of a Chapter 12 or 13 standing trustee. Section

586(e)(1) provides:

The Attorney General, after consultation with a [UST]

that has appointed an individual . . . to serve as

standing trustee in cases under chapter 12 or 13 of title

11, shall fix-

* * *

(B) a percentage fee not to exceed-

* * *

(ii) in the case of a debtor who is a family farmer, the

sum of-

(I) not to exceed ten percent of the payments made

under the plan of such debtor, with respect to payments
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in an aggregate amount not to exceed $450,000; and 

(II) three percent of payments made under the plan

of such debtor, with respect to payments made after the

aggregate amount of payments made under the plan exceeds

$450,000; 

based on such maximum annual compensation and the actual,

necessary expenses incurred by such individual as

standing trustee. 

(Emphasis added.) Section 586(e)(2), in relevant part, provides:

Such individual [the standing trustee] shall collect such

percentage fee from all payments received by such

individual under plans in the cases under chapter 12 or

13 of title 11 for which such individual serves as

standing trustee. 

(Emphasis added.) The percentage fee is paid "[b]efore or at the

time of each payment to creditors under the plan." 11 U.S.C.

§ 1226(b). 

In this case, the debtors' plans calculated the standing

trustee's percentage fee based on payments to creditors under the

plan. For example, if payments to creditors under the plan were

$10,000.00 and the trustee's fee was set at 10%, the trustee's fee

was $1,000.00. The UST objected because the debtors' calculations

conflicted with the policy of the Executive Office of the United

States Trustee (EOUST). According to the EOUST's Handbook for

Chapter 12 Standing Trustees, "the percentage fees are calculated

on all payments received by the trustee under plans" -- including

amounts the trustee receives for his fee. UST's Addendum at Ex. B

at 2. The manual provides that the debtor should be instructed

that "computation can be made by dividing the total amount that is

needed under the plan for payments on claims, not including the

trustee's fee, by the number derived from subtracting the trustee's

percentage fee from 100%." Id. at Ex. B at 3. For example, under

the EOUST's calculation, if $10,000.00 was required to make all

plan payments on claims excluding the trustee's fee and the fee was

set at 10%, $10,000.00 is divided by .90 (100% minus 10%) which
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equals $11,111.11, and the trustee's fee is $1,111.11, which is 10%

of $11,111.11. Id.

In the bankruptcy court, the debtors and the UST all argued

that the meaning of section 586(e) was unambiguous, but disagreed

on its meaning. The UST argued that section 586(e)(2) was the

relevant provision and that the phrase "all payments [the trustee]

received under plans" plainly meant all payments, which would

include payments for the trustee's fee. The debtors argued that

section 586(e)(1) was the relevant provision and that the plain

meaning of the phrase "payments made under the plan" in the context

of bankruptcy meant amounts disbursed to creditors. In the

alternative, the UST argued that if section 586 were ambiguous, the

bankruptcy court should defer to the EOUST's interpretation of the

statute under Chevron, USA, Inc. v. Natural Resources Defense

Council, Inc., 467 U.S. 837 (1984). 

The bankruptcy court noted that lower courts were split on the

question whether the section 586(e) percentage fee was calculated

on all amounts the trustee received from the debtor or only on

amounts he received and disbursed. Compare, e.g., In re Edge, 122

B.R. 219, 221 (D. Vt. 1990) ("funds paid to a standing trustee for

purposes of paying the standing trustee's percentage fee are not

payments under a Chapter 13 repayment plan") with In re Weaver, 118

B.R. 730, 730 (Bankr. D. Neb. 1990) ("the trustee's fee is not a

percentage of payment to creditors and claimants"). The bankruptcy

court also noted that in In re BDT Farms, Inc., 21 F.3d 1019 (10th

Cir. 1994), the Tenth Circuit had held that section 586(e) was

ambiguous and under Chevron deferred to the UST's interpretation of

section 586(e). However, the bankruptcy court believed no Chevron

deference was due, because the plain meaning of "a 'payment under

the plan' is a payment by the trustee to the creditors." 167 B.R.

at 533. In the alternative, the bankruptcy court held that even if

section 586(e) were ambiguous, the UST's interpretation was not

entitled to deference because it resulted in a 11.11% fee, in
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violation of the 10% cap of subsection (e)(1). The court also

believed that the UST's interpretation was unreasonable because it

allowed a standing trustee to collect a fee for "merely receiving

its paycheck, . . . a function which has no benefit to the estate."

Id. at 534. 

On de novo review, the district court affirmed the bankruptcy

court's decision. The district court noted that this court's

decision in In re Wagner, 36 F.3d 723 (8th Cir. 1994), which was

decided several months after the bankruptcy court's opinion,

provided further support for the opinion. 197 B.R. at 87. In

Wagner, this court held that a Chapter 12 debtor could make

payments directly to an impaired secured creditor and such direct

payments were not subject to a trustee's percentage fee. We noted

that section 586(e)(1) "only establishes the fee structure for

Chapter 12 standing trustees[,]" but that section 586(e)(2)

"directs when trustee's fees are owing." 36 F.3d at 727. We

reasoned that subsection (e)(2) was the applicable provision and

held that the phrase "all payments received by the [trustee] under

plans" in subsection(e)(2) "means what it says and requires

trustee's fees only on those payments 'received by' the trustee."

Id. at 727-28. The district court also found that Wagner supported

the bankruptcy court's alternative holding that the UST's position

was impermissible. The district court believed that allowing the

standing trustee to collect a fee on his fee ran counter to this

court's statement in Wagner that "'[t]rustee's fees . . . are fees

levied for services provided in administering the plan.'" 197 B.R.

at 92 (quoting Wagner, 36 F.3d at 726).

On appeal, we review this legal issue de novo. We are aware

that under Chevron courts "defer to the reasonable judgments of

agencies with regard to the meaning of ambiguous terms in statutes

that they are charged with administering." Smiley v. Citibank

(South Dakota), N.A., 116 S. Ct. 1730, 1733 (1996). However, "that

deference does not permit abdication of the judicial responsibility
 3

The debtors correctly point out that Chevron deference is

only appropriate "[w]hen Congress . . . has delegated policy making

authority to an administrative agency." Pauley v. BethEnergy

Mines, Inc., 501 U.S. 680, 696 (1991). In this case, the debtors

do not deny that section 586 delegates authority to the Attorney

General to set the percentage fee, but argue that there is no

showing that the Attorney General delegated authority to the EOUST.

We do not resolve the delegation issue. Even assuming proper

delegation, for reasons to be stated, in the circumstances of this

case we believe no Chevron deference is due to the UST. 

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to determine whether the challenged [action] is contrary to

statute, . . . devoid of administrative authority[,]" or is

otherwise unreasonable.3 Aerolineas Argentinas v. United States,

77 F.3d 1564, 1574 (Fed. Cir. 1996). Moreover, "[t]he plain

meaning of a statute controls, if there is one, regardless of an

agency's interpretation." Hennepin County Med. Ctr. v. Shalala, 81

F.3d 743, 748 (8th Cir. 1996). Thus, our first task is to

determine the question whether section 586(e) is ambiguous. In

doing so, we keep in mind that "[a]mbiguity is a creature not of

definitional possibilities but of statutory context." Brown v.

Gardner, 115 S. Ct. 552, 555 (1994). In other words, "the meaning

of statutory language, plain or not, depends on context." Id.

(internal quotation omitted). As the parties remind us, "we must

not be guided by a single sentence or member of a sentence, but

look to the provisions of the whole law, and to its object and

policy." Hennepin County Med. Ctr., 81 F.3d at 748 (internal

quotation omitted). At the same time, we must "seek to interpret

the statute in a way that includes every word and clause." Id. 

The UST argues that section 586(e)(2) is the relevant

subsection concerning calculation of the percentage fee and that

the plain meaning of "payments received under plans" means all

payments received, including payments for the percentage fee. The

UST asserts that had Congress intended to limit a Chapter 12

percentage fee to amounts disbursed, it would have said so
 4

In Stahn v. Haeckel, 920 F.2d 555 (8th Cir. 1990), cert.

denied, 500 U.S. 953 (1991), this court appears to have rejected

the UST's assertion that if a plan is not confirmed there would be

no payments to creditors and thus no fee owing. In Stahn, we noted

section 1226(a) did not expressly authorize a bankruptcy court to

authorize pre-confirmation payments, but held that "a bankruptcy

court may in its discretion require a debtor to make payments prior

to plan confirmation." Id. at 558. "Thus, a debtor in a chapter

12 proceeding may be subjected to involuntarily paying trustee fees

. . . if a bankruptcy judge orders pre-confirmation payments." Id.

at 557. See also Randy Rogers, et al. Collier Farm Bankruptcy

Guide, § 4.07[6], at 4-89 (1994) (trustee's fee due in unconfirmed

plan because of payments to administrative creditors).

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explicitly. See Brown v. Gardner, 115 S. Ct. at 556. The UST

notes that 11 U.S.C. § 326(a), which concerns trustee's fee in

Chapters 7 and 11, provides that the trustee's fee is a percentage

of "moneys disbursed or turned over in the case by the trustee to

the parties in interest." In the context of Chapter 12, the UST

also notes that Chapter 12 differentiates between payments and

payments to creditors. For example, the UST points out that

section 1226(b) provides that "[b]efore or at the time of each

payment to creditors under the plan, there shall be paid" certain

unpaid administrative expenses and "the percentage fee fixed for

[any] such standing trustee." In addition, the UST notes that

section 1226(a) provides that "[i]f a plan is not confirmed, the

trustee shall return any such payments to the debtors, after

deducting" certain unpaid administrative expenses and "the

percentage fee fixed for such standing trustee." The UST argues

that if "payments" meant disbursements to creditors, as the debtors

contend, then there would be no percentage fee owing if the plan

was not confirmed since there would be no payments to creditors.4

On the other hand, the debtors argue that section 586(e)(1) is

the applicable provision, but even if subsection (e)(2) is the

relevant subsection, it must be read in combination with subsection

(e)(1). The debtors argue that in the context of bankruptcy the
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term "payments made under the plan" as used in either section

plainly means payments to creditors. See In re Beard, 45 F.3d 113,

115 (6th Cir. 1995) (court without analysis assumes that standing

trustee's fee is based on "payments that the debtor transfers

through the trustee to creditors under the reorganization plan's

terms"). The debtors assert that the structure of Chapter 12 makes

clear that payments are disbursements to creditors. See Rake v.

Wade, 508 U.S. 464, 474 (1993) (internal quotation omitted)

("statutory terms are often clarified by the remainder of the

statutory scheme"). Noting that 11 U.S.C. § 1226(c) provides that

"[e]xcept as otherwise provided in the plan or in the order

confirming the plan, the trustee shall make payments to creditors

under the plan," the debtors argue that the trustee's primary duty

is to act as a disbursing agent, and it is for this function that

he is compensated. See Beard, 45 F.3d at 115 ("standing trustee's

role in a family-farm reorganization . . . primarily involves

collecting the debtor's postpetition income and making proper

payments, in accordance with the plan, to the waiting creditors").

The debtors also point out that section 1226(a) provides that

"[p]ayments and funds received by the trustee shall be retained by

the trustee until confirmation or denial of confirmation of a plan"

and argue that the word "funds" means amounts for the standing

trustee's fee. At oral argument, the debtors pointed out that 11

U.S.C. § 1222, which lists the required contents of a plan, and

section 1225, which lists requirements for confirmation of a plan,

do not mention the percentage fee.

Although we agree with the UST that 586(e)(2) is the relevant

provision for calculation of the percentage fee, we also agree with

the debtors that it must be read in combination with subsection

(e)(1). After consideration of the statutory language and context,

we conclude that the meaning of section 586(e) is ambiguous.

Moreover, "[w]e have searched for guidance in the legislative

history." BDT Farms, 21 F.3d at 1022. Unfortunately, we found "no

legislative history reflecting Congressional consideration of . . .
 5

Although in BDT Farms the Tenth Circuit held that the UST's

interpretation was reasonable, it did so "essentially without

analysis." In re Turner, 168 B.R. 882, 885 (Bankr. W.D. Tex.

1994). In Turner, the court believed that the Tenth Circuit "[i]n

apparent frustration . . . simply elected to defer to the United

State Trustee's proffered interpretation of section 586(e)." Id.

As indicated previously, Chevron deference does not mean judicial

abdication. 

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Chapter 12 provisions in relation to the applicable provisions of

Title 28 governing United States Trustee fees." Id. (internal

quotation omitted). Thus, like the Tenth Circuit in BDT Farms, we

conclude that "[w]hether Congress intended to allow the standing

trustee to, in effect, collect a fee on his or her fee, or intended

to limit the trustee's fee to a percentage of disbursements, is not

clear from the statutory language, the larger statutory context, or

the legislative history." Id. at 1023. 

However, unlike the Tenth Circuit, we do not accord the UST

Chevron deference. We agree with the district court and bankruptcy

court that the UST's interpretation is unreasonable.5 The UST's

interpretation effectively results in an 11.11% fee in violation of

the 10% cap of section 586(e)(1). As the bankruptcy court

reasoned:

[u]nder the UST's position, . . . [i]f the Farmer pays

$110 to the trustee, with $100 intended for the Bank

under the plan and $10 for the 10% commission, under the

trustee's theory of entitlement to 10% of monies

received, he would then assess a 10% fee against that $10

(i.e. $1). Once the trustee obtains this additional $1,

another 10% fee would be charged (i.e. 10 cents). Again,

when the Farmer transfers the 10 cents, the trustee would

charge 10% (i.e. 1 cent). Thus it would cost the Farmer

$111.11 to ensure that Bank receives its promised $100.

 

167 B.R. at 532-33. 

We realize that the EOUST manual sets forth a method of

calculation to justify its position that a trustee's fee of
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$1111.11 on a plan payment of $10,000.00 is not an 11.11% fee, but

is a 10% fee. Although there is no legislative history precisely

on the issue of the calculation of the percentage fee, we do not

believe that the drafters, whose intent was "to provide family

farmers with a faster, simpler, and cheaper alternative" to

bankruptcy, Rowley, 22 F.3d at 193, envisioned that the UST would

instruct the farmer that "computation [of the percentage fee] can

be made by dividing the total amount that is needed under the plan

for payments on claims, not including the trustee's fee, by the

number derived from subtracting the trustee's percentage fee from

100%." UST's Add. at Ex. B at 3. Nor do we believe that the

drafters envisioned that a farmer would be told to disregard common

sense and economic reality and accept the UST's assertion that a

fee of $1,111.11 on a plan payment of $10,000.00 is a 10% fee, not

an 11.11% fee. It seems to us the "faster, simpler, and cheaper"

way to calculate the percentage fee is on the basis of payments to

creditors. Moreover, we share the concerns of the bankruptcy court

and the district court that a family farmer attempting to

reorganize might find it difficult to understand why a trustee

should collect a fee for "merely receiving its paycheck." 167 B.R.

at 534. See also In re Westphall, 168 B.R. 337, 366 (Bankr. C.D.

Ill. 1994) ("standing trustee should not receive a fee for

disbursing funds to himself").

We also believe that the UST's interpretation is difficult to

reconcile with this court's decision in Wagner. The UST is correct

that on the merits Wagner only decided that payments a farmer makes

directly to creditors are not subject to the percentage fee because

the trustee does not receive the payments as required by section

586(e)(2). However, the UST ignores the fact that before reaching

the merits this court was confronted with a mootness challenge, the

resolution of which we believe is instructive. 

In Wagner, the farmers argued that any issue regarding

trustee's fees was moot because they had been discharged from
 6

In Turner, the court contrasted a Chapter 13 standing

trustee's percentage fee with a trustee's fee in a Chapter 7 case.

The court noted that "[t]he trustee's fee in chapter 7 cases is

regulated by the court," 168 B.R. at 887, via section 11 U.S.C.

§ 326(a), which provides that a court "may allow reasonable

compensation under section 330 of this title of the [Chapter 7 or

11] trustee for the trustee's services." The court further noted

that the compensation award "qualifies as an administrative expense

claim under section 503(b)(2) that is entitled to priority

treatment under section 507(a)." 168 B.R. at 887. See also In re

Larsen, 59 F.3d 783, 785-86 (8th Cir. 1995) (explaining 11 U.S.C.

§§ 330, 503(b), and 507). 

In contrast, the Turner court noted that 11 U.S.C. § 326(b),

provides that a "court may not allow compensation for services or

reimbursement of expenses of a . . . standing trustee appointed

under section 586(b) of title 28." The court explained that

because section 326(b) removed a standing trustee's percentage fee

from court supervision under section 326(a), the fee was also

"take[n] [] out of section 330(a) (the compensation section), and

so out of section 503(b)(1)(A) (the administrative expense

section)." 168 B.R. at 886. In addition, the court noted that

"[t]here is no 'priority' for the trustee's percentage fee in

section 507, and it does not stand as a 'claim' against the

estate." Id. 

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bankruptcy and the trustee had failed to stay or appeal the

discharge. This court disagreed. We noted that "[a] discharge

under the bankruptcy code discharges 'debts provided for by the

plan,'" citing 11 U.S.C. § 1228(a), but reasoned that under Chapter

12 standing "[t]rustee's fees are not 'debts provided for by the

plan,' but are fees levied for services provided for in

administering the plan." 36 F.3d at 726. Indeed, we characterized

"[a] claim against the debtors for trustee's fees [a]s collateral

to the bankruptcy action." Id. Thus, under Wagner, if a claim for

trustee's fees is "collateral" to the bankruptcy proceeding,

although a payment for trustee's fee may be a payment, we do not

believe it is a payment "under" a plan, as is required by section

586(e)(2). See In re Turner, 168 B.R. 882, 887 (Bankr. W.D Tex.

1994) (trustee's percentage fee is "paid outside the distributional

scheme of the statute");6 In re Edge, 122 B.R. at 221 ("funds paid

to a standing trustee for purposes of paying the standing trustee's

percentage fee are not payments under a . . . plan"). 
 7

We are also aware of the importance of uniform nationwide

standards in administering bankruptcy cases. Because the meaning

of section 586 concerning calculation of the standing trustee's

percentage fee under section 586(e) has split inferior federal

courts, perhaps Congress, or the Supreme Court, will clarify this

issue.

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We are aware, as the UST points out, that the standing trustee

performs services in addition to disbursing funds to creditors.

See 11 U.S.C. § 1202(b). However, in Wagner the services for which

the standing trustee was compensated were his services as a

disbursing agent. 36 F.3d at 726. See also In re Beard, 45 F.3d

at 119-20 (acknowledging standing trustee performs services in

addition to disbursing funds, but holding debtor can bypass trustee

and avoid paying fees on direct payments). As the court stated in

Beard, if rejecting the UST's position "'will undermine the funding

of the trustee system, as the [UST] suggest[s], a remedy must be

sought in Congress, not the courts.'" Id. at 120 (quoting In re

Erickson Partnership, 83 B.R. 725, 729 (S.D. 1988)).7 

Accordingly, we affirm the judgment of the district court.

A true copy.

Attest:

CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.