Now Updating
In re- 450 S. WESTERN AVE., LLC,

Summarizing by Bradley Pearce

Tamm v. United Sates Trustee, Honolulu (In re Hokulani Square, Inc.)

Case No. 11-60072 (9th Cir. 2015)
Relying on plain language, legislative history, and following prior decisions by the Third and Fifth Circuits, the Ninth Circuit Panel held that section 326(a) of the Bankruptcy Code does not permit trustee compensation for returning property to a secured lender after a successful credit bid. Section 326(a) permits the court to "allow reasonable compensation" to the trustee, not to exceed a certain percentage of "all moneys disbursed or turned over in the case by the trustee to parties in interest, excluding the debtor, but including holders of secured claims." The Panel held, "section 326(a) does not permit a trustee to collect fees on a credit bid transaction in which the trustee disburses only property, not 'moneys,' to the creditor. Other courts of appeal have reached the same conclusion and we find no basis for creating a circuit conflict."
Procedural context:
The bankruptcy court awarded the full fee requested by the trustee. The BAP reversed and the chapter 7 trustee appealed to a panel of the Ninth Circuit.
One of the primary assets of a corporate Chapter 7 debtor's estate was an underwater condominium complex. The chapter 7 trustee moved to sell the property and two secured creditors jointly submitted a winning credit bid of $1.5 million at the auction. The chapter 7 trustee ultimately petitioned for approximately $110k in fees, including the winning $1.5 million credit bid figure in the fee calculation (the fee would have been $40k without inclusion of the credit bid amount). The United States Trustee objected, asserting inclusion of the credit bid was improper under Section 326(a) of the Bankruptcy Code.
Alex Kozinski, Raymond C. Fisher, and Paul J. Watford, Circuit Judges. Opinion by Judge Kozinski.

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