Opinion ID: 693409
Heading Depth: 2
Heading Rank: 2

Heading: Other Surcharges.

Text: 29 Once Northwestern's arguments about the vehicle proceeds fall, its other contentions must fall with them. Thus, we may dispose of them more quickly. 30 The bankruptcy court determined that the $15,408.85 which Wells Fargo paid Duck for liquidating its collateral was an improperly gained fee which belonged to the estate. The BAP's affirmance of that ruling was not erroneous. Trustees are entitled to fees only pursuant to 11 U.S.C. Sec. 326(a). In re Dinsmore Tire Ctr., Inc., 81 B.R. 136, 138 (Bankr.S.D.Fla.1987). It is true that costs for the preservation or disposition of creditors' property are allowable under 11 U.S.C. Sec. 506(c). However, as Northwestern admitted, the auction fee money was received for the benefit of the estate. See id. Even if it were a gift to the estate, it became estate property. Duck breached his obligations in receiving the money and not turning it over to the estate. Northwestern is accountable. In re Traffic Safety Co., 21 B.R. 669, 672 n. 8 (Bankr.E.D.Pa.1982) (A breach by the principal of any one of the conditions of the bond will impose liability on the surety.). 31 The 1988 judgment in Duck's interpleader action also provided that the estate was to receive $2,596.00 in attorney's fees. The bankruptcy court determined that Duck stol[e] this amount, and Northwestern does not dispute that. Northwestern contends that the money was to be paid to Wells Fargo's law firm, Pillsbury, Madison & Sutro. To the extent that the money was received in order to pay for the fees of any counsel in the interpleader action but embezzled instead, the money must be repaid to the estate so that it may pay off its debt and obey the court order. In the alternative, if the money was received by Duck as reimbursement for his participation in the interpleader action, it must be turned over to the estate because he was only entitled to statutory fees, and must be deemed to have held the funds for the estate. 32 The bankruptcy court ordered that Northwestern pay back the $16,996.81 that the faithless Duck recovered as an interim fee award. Those fees had earlier been vacated by the bankruptcy court. A trustee who embezzles or otherwise breaches his trust forfeits his fee. See, e.g. Restatement (Second) of Trusts, Sec. 243 (1959); cf. In re Endeco, Inc., 675 F.2d 166, 167 (8th Cir.1982) (under the former Bankruptcy Act bankruptcy court had authority to withhold compensation if trustee misused bankrupt's assets). Duck forfeited his fee when he breached his fiduciary duties. Consequently, his surety must reimburse the estate for any of Duck's interim fees which were paid to and not returned by him. 33 Finally, the bankruptcy court held Northwestern liable for the costs of investigating Duck's violations. Northwestern objects to that, but the surety is liable for the increased administrative costs incurred by the estate in investigating the former trustee's defalcation. Traffic Safety, 21 B.R. at 671. Walsh provided evidence that significant sums were spent on bringing Duck's activities to light. The bankruptcy court did not err when it awarded the estate its investigation costs. 2