In the
United States Court of Appeals
For the Seventh Circuit
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No. 15‐1150
IN RE: JOHN M. WILSON, et al.,
Debtors.
APPEAL OF: MOHNS, INC.,
Creditor.
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Appeal from the United States District Court for the
Eastern District of Wisconsin.
No. 14‐C‐1280 — Lynn Adelman, Judge.
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ARGUED MAY 29, 2015 — DECIDED AUGUST 10, 2015
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Before POSNER, EASTERBROOK, and SYKES, Circuit Judges.
POSNER, Circuit Judge. This appeal challenges as excessive
the fee—$28,030.33—awarded by the bankruptcy court to
the bankruptcy trustee, Bruce Lanser, in a Chapter 7 bank‐
ruptcy and upheld by the district court. The challenge is by
the debtors’ principal unsecured creditor, Mohns, Inc.
The debtors (a married couple) had hired Mohns to build
a house for them, but they were dissatisfied with Mohns’s
work and refused to pay. Mohns sued them in state court
2 No. 15‐1150
and obtained a $142,899 judgment. Unable to pay it, the
debtors filed a Chapter 7 petition in February 2011. The
bankruptcy proceeding, including the culminating tussle
over the trustee’s fee, has lasted for more than four years,
during which time the trustee has collected a total of
$498,621.56 to distribute to Mohns and the debtors’ other
creditors. “In a case under chapter 7 or 11, the court may al‐
low reasonable compensation … of the trustee for the trus‐
tee’s services, payable after the trustee renders such services,
not to exceed 25 percent on the first $5,000 or less, 10 percent
on any amount in excess of $5,000 but not in excess of
$50,000, 5 percent on any amount in excess of $50,000 but not
in excess of $1,000,000, and reasonable compensation not to
exceed 3 percent of such moneys in excess of $1,000,000, up‐
on all moneys disbursed or turned over in the case by the
trustee to parties in interest, excluding the debtor, but in‐
cluding holders of secured claims.” 11 U.S.C. § 326(a). The
amount awarded the trustee by the bankruptcy court was
just under the maximum amount allowable for the services
that he had rendered; as the result of a mistake in his fee ap‐
plication he had asked for slightly less than the maximum
allowable amount.
A different section of the Bankruptcy Code authorizes
the bankruptcy court to award a trustee “reasonable com‐
pensation for actual, necessary services rendered by the trus‐
tee.” 11 U.S.C. § 330(a)(1)(A); and section 330(a)(7) provides
that “in determining the amount of reasonable compensation
to be awarded to a trustee, the court shall treat such com‐
pensation as a commission, based on section 326,” the key
subsection of which (subsection (a), which governs Chapter
7 cases) we quoted above. But should such treatment over‐
compensate the trustee, because he had sold assets of the
No. 15‐1150 3
bankrupt estate below fair market value or committed other
serious errors, the award to the trustee can be reduced. See
In re Rowe, 750 F.3d 392, 397–98 (4th Cir. 2014).
The principal unsecured creditor—the fiercely litigious
Mohns, the only objector to the fee awarded to the trustee—
mounts only one objection that merits extended considera‐
tion. It is that most of the money distributed by the trustee to
creditors of the bankrupt—$370,996.54—went to mortgagees
of the debtors’ home, which the trustee had sold to raise
money for the creditors. Secured creditors, such as mortga‐
gees, don’t have to participate in their debtor’s bankruptcy
proceeding in order to collect their secured debt; they can
instead foreclose their mortgages (assuming the court has
lifted the automatic stay) and from the proceeds of the fore‐
closure sale collect the debt owed them. By selling the debt‐
ors’ home the trustee saved the secured creditors the bother
and expense of foreclosure. Yet that was not a saving of the
entire $370,996.54 that they received, for they would have
received most of it (net of expenses) had they foreclosed.
But Mohns goes too far in asking that for purposes of cal‐
culating the trustee’s fee the entire amount (every penny of
the $370,996.54 received by the mortgagees) be subtracted
from the disbursement by the trustee in calculating the fee to
which the trustee was entitled. Such a subtraction would re‐
sult in calculating the net disbursement by the trustee to the
creditors to be only $127,625.02, an estimate that would re‐
duce the trustee’s maximum fee to $9,631.25 in accordance
with the formula in section 326(a). That would be an ex‐
traordinarily meager fee for the trustee’s labors. Remember
that he was entitled by section 330(a)(1)(A) to be compen‐
sated for services that were both “actual” and “necessary”
4 No. 15‐1150
(“necessary” including required to compensate secured
creditors without putting them to the bother and expense of
foreclosure—section 326(a) specifies that the calculation of
the commission should include disbursements to “holders of
secured claims”). Trustees are entitled to “compensation
commensurate with the services they perform. Secured
claims and those entitled to priority constitute a large pro‐
portion of most estates. The administration of estates with
such secured claims frequently presents complex issues for
the trustee. Insofar as the purpose of section 326 is to com‐
pute a trustee’s maximum compensation based on the mon‐
eys that the trustee administers, it would be inequitable to
exclude from that fund the moneys associated with compli‐
cated secured claims.” 3 Collier on Bankruptcy
¶ 326.02[1][f][i].
The trustee has no automatic entitlement to a fee based
on the amount of time that he spends, for his fee is to be
based on the “services” he renders in the bankruptcy pro‐
ceeding and a “commission” is a payment for a specific ser‐
vice rather than being based, as in the case of a salary, on
number of hours worked. See generally Alvarado v. Corporate
Cleaning Services, Inc., 782 F.3d 365 (7th Cir. 2015). Even so,
the amount of time a trustee works on a case is relevant to
valuing his services. The trustee has estimated without con‐
tradiction that he and his staff (which presumably he had to
compensate out of his own pocket) spent at least 200 hours
working on the case—a reasonable amount of time given
Mohns’s litigiousness—at an average hourly expense of
$140.15 ($28,030.33 ÷ 200), which is not excessive.
Mohns also argues that the trustee’s fee should not be
based on the sale of the home because the trustee initially
No. 15‐1150 5
objected to the sale and then spent only a little time on the
sale itself. The trustee objected to the sale because his calcu‐
lations showed that after subtraction of the homestead ex‐
emption, sale expenses, and secured claims there would be
nothing left for the debtors’ estate. That was a reasonable
position; and anyway after insisting on the sale Mohns will
not now be heard to object to the trustee’s recovering fees
based on it, because as we said commission compensation is
not based on the amount of time spent on a project.
By way of further objection Mohns points out that Rule
2016 of the Federal Rules of Bankruptcy Procedure states
that a trustee seeking fees must submit an application speci‐
fying “the services rendered, time expended and expenses
incurred.” The trustee did not fully comply with the rule; he
did not account for specific services rendered for every sin‐
gle hour billed. But this violation of the rule’s literal lan‐
guage was harmless, considering his uncontroverted esti‐
mate that he spent 200 hours on the bankruptcy, and the
bankruptcy judge’s personal observation of the trustee’s
work.
The two statutes governing trustee compensation are not
overgenerous. Taken together they set clear limits on such
compensation that were not exceeded by the fee awarded
the trustee.
AFFIRMED