United States Bankruptcy Appellate Panel of the First Circuit
COREY R. WHEATON, Debtor. JEFFREY P. WHITE AND ASSOCIATES, P.C., Appellant,
PETER C. FESSENDEN, Chapter 13 Trustee, Appellee
from the United States Bankruptcy Court for the District of
Maine. Bankruptcy Case No. 12-21291-PGC. (Hon. Peter G. Cary,
U.S. Bankruptcy Judge).
P. White, Esq., on brief for Appellant.
C. Fessenden, Chapter 13 Trustee, on brief for Appellee.
Boroff, Godoy, and Finkle, United States Bankruptcy Appellate
U.S. Bankruptcy Appellate Panel Judge.
P. White and Associates, P.C. (" Attorney White" )
appeals from the bankruptcy court's July 16, 2015 order
(the " Vacating Order" ), vacating its June 8, 2015
order on a motion for a review of attorney's fees filed
by Peter C. Fessenden, Esq., Chapter 13 Trustee (the "
Trustee" ). For the reasons set forth below, we REVERSE
the Vacating Order and REMAND the matter to the bankruptcy
court for entry of an order consistent with this opinion.
The Bankruptcy Case
October 16, 2012, Corey R. Wheaton (the " Debtor" )
filed a petition under chapter 13 of the Bankruptcy
Code, together with his schedules,
statements and a chapter 13 plan. He has been represented by
Attorney White at all relevant times prior to the issuance of
the Vacating Order.
the course of his case, the Debtor filed two amended plans.
Numerous parties objected to those plans, and neither was
ever confirmed. On February 28, 2014, the Trustee filed a
motion to dismiss the case alleging that the Debtor had
failed to make certain payments under the Debtor's most
recent unconfirmed plan. The Debtor opposed the motion,
arguing that he would recommence making payments and cure any
existing defaults over the remaining life of his plan through
a plan modification. But the Debtor did not file another
April of 2014, the Trustee grew tired of waiting. On April 8,
he filed a motion requesting a status conference and a
scheduling order to address the stagnation of the case. The
bankruptcy court granted the motion, ordering the Debtor to:
(a) " notice and schedule a status conference . . . on
the status and progress of confirmation; " (b) consult
with the Trustee and those parties objecting to confirmation;
and (c) " file a proposed form of scheduling order for
the prompt prosecution of final confirmation" of the
plan. The Debtor failed to comply, and on June 4, 2014, the
bankruptcy court responded to the Debtor's moribund
behavior by issuing an order to show cause why the case
should not be dismissed for failure to prosecute.
11, 2014, the bankruptcy court held a hearing on, among other
things, the Trustee's motion to dismiss and the order to
show cause. And the next day, the bankruptcy court entered an
order warning that the case would be dismissed in 14 days
unless the Debtor converted the case " to a more
appropriate chapter." The order also provided that
" [i]f the case [were] dismissed . . . the court [would]
expressly retain jurisdiction over any funds held by the
trustee for the purpose of acting upon any application for
fees for the debtor['s] attorney or other professionals
employe[d] by the estate." The Debtor failed to seek
conversion of the case to any other chapter of the Bankruptcy
Code, and, on June 27, 2014, the bankruptcy court entered an
order dismissing the case.
The Fee Applications
White filed his first application for compensation on
November 13, 2013, seeking $5,709.75 in attorney's fees
and $188.14 in expenses for the period of February 6, 2012,
through November 7, 2013. No party objected, and on December
17, 2013, the bankruptcy court granted the application
without a hearing (" 2013 Fee Award" ).
White filed a further and final application for compensation
on June 25, 2014, seeking $4,062.00 in attorney's fees
and $65.04 in expenses for the period of November 8, 2013,
through June 25, 2014. No party objected, and on July 29,
2014, the bankruptcy court granted the final application
without a hearing (" 2014 Fee Award" ). The
bankruptcy court authorized the Trustee to disburse the 2014
Fee Award to Attorney White to the extent of available funds.
It also ordered the Trustee to disburse to Attorney White
$2,816.89 in outstanding fees due under the 2013 Fee Award.
August 13, 2014, the Trustee paid the $2,816.89 in
outstanding fees due under the 2013 Fee Award to Attorney
White, and refunded $7,596.91 to the Debtor. That was a
mistake. The Trustee inadvertently overlooked the 2014 Fee
Award and, therefore, did not pay it to Attorney White before
returning funds to the Debtor. Although Attorney White
and the Trustee attempted to recover the disbursed funds from
the Debtor, those efforts proved futile.
January 26, 2015, the Trustee filed his Final Report and
Account (" Final Report" ) showing that he had
distributed $4,297.89 to Attorney White and $7,596.91 to the
Debtor. The Final Report did not reflect the 2014 Fee Award.
Attorney White objected to the Final Report, maintaining that
the Trustee had an obligation to pay the 2014 Fee Award
before he returned funds to the Debtor, and the bankruptcy
court should not approve the Final Report until the Trustee
corrected his error.
March 31, 2015, the Trustee filed a Motion for Turnover
seeking to recover the $7,596.91 refunded to the Debtor so
that he could pay the 2014 Fee Award to Attorney White.
However, the Trustee also attempted to resolve the matter by
a different tack. He filed a Motion for Review of Fees
seeking bankruptcy court review of the two fee applications
filed by Attorney White and a reduction of the 2013 and 2014
Fee Awards. The Trustee did not offer any basis for why he
was entitled to seek reconsideration of those awards and
Attorney White objected, in part, on the ground that the
period for appealing the 2014 Fee Award had long since
passed. There followed settlement conference with the
bankruptcy judge which resulted in an agreement on a
stipulation for the disposition of the Motion for Review of
Fees. And on June 8, 2015, the bankruptcy court, pursuant to
that stipulation, entered an Order on Trustee's Motion
for Review of Fees (the " Review of Fees Order" ),
reducing the amount of unpaid fees due to Attorney White to
$3,000.00, and directing the Trustee to pay that amount. It
is undisputed that the Trustee paid $3,000.00 to Attorney
White in accordance with that order.
24, 2015, the bankruptcy court held a hearing on the Motion
for Turnover and the Trustee's Final Report. At that
hearing, the parties and the bankruptcy court discussed
whether, in light of the U.S. Supreme Court's ruling
in Harris v. Viegelahn, 135 S.Ct. 1829, 191 L.Ed.2d
783 (2015), the Trustee had the obligation all
along to refund all monies in his possession to the Debtor
upon dismissal of the case, rather than first paying the
allowed attorney's fees to Attorney White, and if so,
whether Attorney White ought to return the $3,000.00 in
attorney's fees received from ...