Court Opinion

ID: 9373984
Source: CourtListenerOpinion
Date Created: 2023-02-22 16:10:57.722728+00
Date Added: 2024-06-11T17:16:49.254202
License: Public Domain

FILED
                                                                                FEB 2 2022
                          NOT FOR PUBLICATION                              SUSAN M. SPRAUL, CLERK
                                                                             U.S. BKCY. APP. PANEL
                                                                             OF THE NINTH CIRCUIT

          UNITED STATES BANKRUPTCY APPELLATE PANEL
                    OF THE NINTH CIRCUIT

 In re:                                             BAP No. CC-21-1162-FLS
 JAMES LLOYD WALKER,
              Debtor.                               Bk. No. 6:15-bk-21418-MH

 JAMES LLOYD WALKER,
                  Appellant,
 v.                                                 MEMORANDUM*
 ROBERT S. WHITMORE, Attorney,
 Chapter 7 Trustee,
                  Appellee.

               Appeal from the United States Bankruptcy Court
                    for the Central District of California
                Mark D. Houle, Bankruptcy Judge, Presiding

Before: FARIS, LAFFERTY, and SPRAKER, Bankruptcy Judges.

                                 INTRODUCTION

      Chapter 71 debtor James Lloyd Walker appeals the bankruptcy

court’s order awarding nearly $90,000 in fees and costs to the chapter 7

      *
        This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
      1
        Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1532, and all “Rule” references are to the Federal
Rules of Bankruptcy Procedure.
trustee and his counsel. We agree with the bankruptcy court, appellee, and

Mr. Walker’s own counsel that the unusually large fee award was the

result of Mr. Walker’s obstructive and obstreperous conduct. We discern

no error and AFFIRM.

                                         FACTS 2

A.     Mr. Walker’s chapter 7 petition

       Mr. Walker, through counsel, filed a chapter 7 petition in November

2015. Appellee Robert S. Whitmore (“Trustee”) was appointed chapter 7

trustee. In March 2016, the Trustee sought to retain the law firm of Best

Best & Krieger LLP (“BBK”). Over Mr. Walker’s objection, the bankruptcy

court granted the application.

       Meanwhile, the Trustee had filed a motion for turnover of

Mr. Walker’s books and records. He asserted that Mr. Walker’s schedules

disclosed only two pieces of real property,3 yet his 2014 tax return listed

five rental properties. He also stated that Mr. Walker twice failed to appear

at his § 341 meeting of creditors and, when he finally appeared, he

mentioned assets that were not listed in his schedules. The Trustee

requested certain documents from Mr. Walker but received no response.

       Mr. Walker opposed the motion through his second attorney, arguing

       2
         We exercise our discretion to review the bankruptcy court’s docket in this case,
as appropriate. See Woods & Erickson, LLP v. Leonard (In re AVI, Inc.), 389 B.R. 721, 725 n.2
(9th Cir. BAP 2008).
       3
           The Trustee abandoned the two scheduled properties in December 2017.
                                             2
that his prior counsel filed the chapter 7 petition fraudulently without his

approval. He requested that the bankruptcy court dismiss his case or

convert it to one under chapter 13. The bankruptcy court held a hearing

and granted the turnover motion.

      In July 2016, the U.S. Trustee filed an adversary complaint to deny

Mr. Walker’s discharge based on his failure to disclose assets, false

statements, and the like. Very soon thereafter, in August 2016, Mr. Walker

waived his discharge.

      Creditors filed only five proofs of claim. The Trustee successfully

objected to two claims, and the remaining creditors withdrew their claims

or amended their claim to $0.

B.    The sale of Mr. Walker’s rental property

      The Trustee continued his investigation into Mr. Walker’s assets. In

March 2018, the Trustee filed a motion for turnover of an undisclosed

rental property located in Hesperia, California.

      Mr. Walker, represented by his third counsel, filed a very brief

opposition to the motion for turnover. He argued that there were no

unsecured creditors remaining in his case. He offered to pay the existing

administrative claims in lieu of turning over the rental property.

      Mr. Walker’s counsel explained in his declaration that Mr. Walker

initially agreed to pay the administrative expenses and not oppose the

turnover motion. Counsel had communicated that decision to the Trustee,

and the parties agreed to continue the hearing on the turnover motion

                                      3
multiple times. When Mr. Walker discovered that the Trustee’s expenses

were $50,000, he insisted that he did not have to pay anything.

      After a hearing, the court granted the motion and ordered

Mr. Walker to turn over to the Trustee possession and control of the rental

property, its books and accounting records, and its postpetition proceeds.

      Mr. Walker continued to refuse to turn over the rental property or

cooperate with the Trustee. The Trustee filed a motion for an order to show

cause why Mr. Walker should not be held in contempt. The bankruptcy

court issued the order to show cause and set a hearing date. Mr. Walker

did not respond. After multiple continuances, the bankruptcy court issued

an interim order directing Mr. Walker to cooperate with the Trustee and

allow the Trustee access to the rental property.

      The Trustee next filed a motion for approval to sell the rental

property. Mr. Walker did not file an opposition to the sale motion. After a

hearing, the bankruptcy court approved the sale of the rental property for

$310,000, subject to overbid.

      Soon thereafter, the Trustee filed an emergency application for an

amended order to sell the property, asserting that Mr. Walker’s wife was

impeding the sale of the rental property. The bankruptcy court issued an

amended order clarifying that Mrs. Walker’s community property interest

was also subject to the sale order and allowing the Trustee to execute

documents on her behalf.

      The Trustee reported in August 2019 that he successfully sold the

                                      4
rental property for $310,000.

C.    The Trustee’s request for administrative fees

      In the meantime, BBK filed an interim application for fees and costs

totaling approximately $43,000. Mr. Walker did not file any objection. After

a hearing, the court reduced the amount requested and awarded BBK

$34,358.50 in fees and $2,029.19 in costs.

      Mr. Walker appealed the interim fee award to the BAP. He sought a

stay pending appeal, which the Trustee opposed; the bankruptcy court

denied the stay. Mr. Walker then successfully moved to dismiss the appeal.

Inexplicably, he filed an application for a writ of mandamus with the Ninth

Circuit, but the Ninth Circuit denied his application.

      The Trustee’s accountant filed an application for fees totaling $1,838

and costs totaling $277.80. Mr. Walker did not oppose the application.

      In November 2020, BBK filed a final application for compensation. It

sought an additional $42,006.00 in fees and $4,812.26 in costs that it

represented were incurred as a result of Mr. Walker’s obstructive conduct.

Mr. Walker did not oppose the application.

      In May 2021, the Trustee filed his final report and request for

compensation. He reported that he had realized $310,365.92 for the estate

and incurred a total of $24,751.96 in administrative expenses plus

compensation for himself, BBK, and the Trustee’s accountant in the amount

of $95,574.83, leaving a balance of $190,039.13 payable to Mr. Walker. (As is

noted above, the Trustee had eliminated all unsecured claims.)

                                       5
     Mr. Walker objected to the fee application. He argued that the

requested administrative expenses were excessive, given the limited

unsecured claims. He argued that he should have had the opportunity to

pay the Trustee’s fees rather than lose the rental property. He contended

that BBK should not have run up fees trying to sell the rental property.

     The Trustee pointed out that the fees were largely due to

Mr. Walker’s own obstructive and obstreperous conduct. He also argued

that he had tried to settle the matter with Mr. Walker multiple times and

years before filing the motion for turnover, yet Mr. Walker was either

unresponsive or chose to renege on the proposed settlement agreement.

     At the hearing on the fee application, counsel for Mr. Walker argued

that BBK’s fees were unusually high, but the bankruptcy court commented

that, as “a result of the debtor’s actions the Trustee was forced to do much

more than would otherwise be the case and, as a consequence, the fees are

much higher than one would normally expect in a situation like this.” It

said that “[t]he problem again in Mr. Walker’s case was Mr. Walker. He . . .

was his own worst enemy.”

     Mr. Walker’s attorney agreed with the court’s assessment of his

client’s behavior. He said that he was not arguing that BBK did not do the

work but rather that some of the work was unnecessary and the Trustee

could have accomplished his goal of obtaining control of the rental

property with only a few hours’ work or by seeking to have the U.S.

Marshals evict Mr. Walker’s tenant.

                                      6
      The bankruptcy court continued the hearing to further review the fee

application. The court issued a tentative ruling acknowledging that most of

the fees were incurred due to Mr. Walker’s obstruction but criticized

certain billing entries as “excessive, vague, and unnecessary billing by

Counsel.” It was inclined to reduce BBK’s fees by $5,952 to $36,054.

Combined with the earlier interim fee award, BBK’s fees totaled $70,412.50,

and its expenses totaled $6,841.45. The court stated that it was inclined to

award the Trustee most of his requested fees and costs.

      At the continued hearing, Mr. Walker’s counsel stated that the court’s

tentative ruling was “very fair” and submitted the matter on the tentative

ruling. BBK took issue with some of the bankruptcy court’s harsher

criticism in the tentative ruling. The bankruptcy court agreed that the

language should have been “toned down” and conveyed an “incorrect

message.” The court granted the fee application and approved the fees and

expenses in the amounts stated in the tentative ruling.

      Mr. Walker timely appealed.

                              JURISDICTION

      The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and

157(b)(2)(A). We have jurisdiction under 28 U.S.C. § 158.

                                   ISSUE

      Whether the bankruptcy court abused its discretion in its award of

fees and costs to BBK and the Trustee.

                                      7
                          STANDARD OF REVIEW

      “A bankruptcy court’s award of attorney fees will not be disturbed

unless the bankruptcy court abused its discretion or erroneously applied

the law.” Tevis v. Wilke, Fleury, Hoffelt, Gould & Birney, LLP (In re Tevis), 347

B.R. 679, 685 (9th Cir. BAP 2006). To determine whether the bankruptcy

court has abused its discretion, we conduct a two-step inquiry: (1) we

review de novo whether the bankruptcy court “identified the correct legal

rule to apply to the relief requested” and (2) if it did, we consider whether

the bankruptcy court’s application of the legal standard was illogical,

implausible, or without support in inferences that may be drawn from the

facts in the record. United States v. Hinkson, 585 F.3d 1247, 1262-63 & n.21

(9th Cir. 2009) (en banc).

                                DISCUSSION

A.    The bankruptcy court may award reasonable compensation to
      professionals providing services to the Trustee.

      “Section 330(a)(1) provides that, after notice and a hearing, the court

may award to counsel for the trustee reasonable compensation for actual,

necessary services rendered and reimbursement for actual and necessary

expenses.” In re Tevis, 347 B.R. at 694. Section 330(a)(3) directs the

bankruptcy court to consider “the nature, the extent, and the value of such

services” as determined by factors including:

      (A) the time spent on such services;

      (B) the rates charged for such services;

                                        8
      (C) whether the services were necessary to the administration
      of, or beneficial at the time at which the service was rendered
      toward the completion of, a case under this title;

      (D) whether the services were performed within a reasonable
      amount of time commensurate with the complexity,
      importance, and nature of the problem, issue, or task
      addressed[.]

§ 330(a)(3)(A)-(D); see also § 330(a)(4) (prohibiting compensation for

“(ii) services that were not – (I) reasonably likely to benefit the debtor’s

estate; or (II) necessary to the administration of the case”); Roberts, Sheridan

& Kotel, P.C. v. Bergen Brunswig Drug Co. (In re Mednet), 251 B.R. 103, 108

(9th Cir. BAP 2000) (“A bankruptcy court also must examine the

circumstances and the manner in which services are performed and the

results achieved in order to arrive at a determination of a reasonable fee

allowance.”).

B.    The bankruptcy court did not err in awarding fees to BBK.

      Mr. Walker complains that BBK ran up its fees by “churning” the

case. We reject these arguments.

      The bankruptcy court carefully reviewed BBK’s billing entries and

reduced its requested fees by approximately fifteen percent. It provided

clear reasons for its reductions and otherwise found the fees reasonable. In

particular, the bankruptcy court found that BBK reasonably incurred the

allowed fees in dealing with Mr. Walker’s obstructive and difficult

behavior. The bankruptcy court acted within its discretion, and we discern

                                       9
no error.

      1.    Necessity of BBK’s work

      Mr. Walker argues that BBK’s fees were excessive and unnecessary,

given that there was no distribution to unsecured creditors, and contends

that the rental property was liquidated merely to enrich the Trustee and his

professionals. We reject this argument.

      Mr. Walker ignores the fact, acknowledged by his own counsel, that

BBK’s fees were incurred as a result of his own obstructive conduct: he

failed to cooperate with the Trustee, concealed his business and property

interests, and tried to prevent the Trustee from selling the rental property,

necessitating multiple motions for turnover, an order to show cause, and

further motions. The bankruptcy court did not err in determining that

BBK’s actions were necessary and reasonable given Mr. Walker’s

unreasonable posture.

      Mr. Walker argues that he should not be punished for being a

“confused and frightened” pro se debtor who did nothing. But Mr. Walker

was represented by counsel for much of the proceedings, and his

intermittent pro se status is no reason to overlook his failure to cooperate

with the Trustee and comply with his responsibilities as a chapter 7 debtor.

See In re Morris, BAP No. NC-19-1071-FBG, 2019 WL 5846841, at *3 (9th Cir.

BAP Nov. 6, 2019) (“While courts construe pro se litigants’ filings liberally,

pro se litigants must still comply with all procedural rules and must

provide the information that is necessary to administer the bankruptcy case

                                      10
and evaluate their entitlement to relief.”); § 521(a)(3) (the debtor shall

“cooperate with the trustee as necessary to enable the trustee to perform

the trustee’s duties”); Rule 4002(a)(4) (the debtor shall “cooperate with the

trustee in the preparation of an inventory, the examination of proofs of

claim, and the administration of the estate”). Furthermore, Mr. Walker did

not merely “do nothing”; he often strenuously opposed the Trustee’s

motions and sought to thwart the Trustee’s efforts to recover his

administrative expenses, thus forcing the Trustee and BBK to respond

accordingly.

      2.    Writ of assistance

      Mr. Walker argues that the Trustee should have obtained a writ of

assistance and directed the U.S. Marshals Service to evict his tenants

quickly and inexpensively. Mr. Walker offers no support for the

astonishing proposition that “one hour of work” could have resulted in a

“simple” eviction “within a week.” He conveniently forgets that he resisted

turnover of the rental property and refused to give the Trustee information

about and access to the rental property. Mr. Walker did everything he

could to ensure that the process was not “simple.”

      3.    Fraud

      Mr. Walker argues for the first time on appeal that BBK’s fee

application was false and fraudulent. He never made this contention in the

bankruptcy court. In fact, his own counsel told the bankruptcy court that

he did not contest the accuracy of the billing records. Mr. Walker has thus

                                       11
waived this argument on appeal. See Padgett v. Wright, 587 F.3d 983, 985 n.2

(9th Cir. 2009) (we do not consider arguments and allegations raised for the

first time on appeal).

      Even if we were to consider this argument, we would find no merit.

Mr. Walker did not identify any instance of fraud concerning BBK’s billing

records. Contrary to his assertions, the bankruptcy court never suggested

that the Trustee or BBK engaged in fraud. Although the court criticized

some of the billing entries, it later tempered its criticism and found the

remainder of BBK’s fees reasonable. This was not error.

C.    The bankruptcy court did not err in awarding fees to the Trustee.

      Mr. Walker argues (without support) that the Trustee ran up his bills.

We reject this argument for the same reasons stated above.

      He also contends that the Trustee’s fees were limited by a statutory

maximum in § 326. However, Mr. Walker did not raise any objection in the

bankruptcy court on the basis that the Trustee’s fee exceeded the statutory

cap. He has waived this argument on appeal. See Padgett, 587 F.3d at 985

n.2. In any event, the Trustee’s fees, as documented in his final report,

comport with § 326. 4

      4
         Contrary to Mr. Walker’s hopes, § 326 does not limit BBK’s fees. That section
refers to compensation awarded to the case trustee, not his professionals. See § 326(a)
(“the court may allow reasonable compensation under section 330 of this title to the
trustee for trustee’s services”). Section 328, which governs compensation of
professionals, imposes no percentage cap.
                                            12
                            CONCLUSION

     The bankruptcy court did not err in its award of administrative

expenses to BBK or the Trustee. We AFFIRM.

                                   13