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James Angell v. Stubbs & Perdue, P.A., 4th Cir. (2016)
James Angell v. Stubbs & Perdue, P.A., 4th Cir. (2016)
No. 15-1316
In Re:
Appeal from the United States District Court for the Eastern
District of North Carolina, at Wilmington. James C. Fox, Senior
District Judge. (7:14-cv-00079-F; 10-00809-8-SWH)
Argued:
December 9, 2015
Decided:
ARGUED:
Trawick Hamilton Stubbs, Jr., STUBBS & PERDUE, P.A.,
New Bern, North Carolina, for Appellant.
Paul Andrew Allulis,
UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.; James B.
Angell, HOWARD, STALLINGS, FROM, HUTSON, ATKINS, ANGELL & DAVIS,
P.A., Raleigh, North Carolina, for Appellees. ON BRIEF: Joseph
Z. Frost, STUBBS & PERDUE, P.A., Raleigh, North Carolina, for
Appellant.
Caroline D. Ciraolo, Acting Assistant Attorney
General, Thomas J. Clark, Tax Division, UNITED STATES DEPARTMENT
OF JUSTICE, Washington, D.C.; Thomas G. Walker, United States
Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Raleigh, North
Carolina; Nicholas C. Brown, HOWARD, STALLINGS, FROM, HUTSON,
ATKINS, ANGELL & DAVIS, P.A., Raleigh, North Carolina, for
Appellees.
&
Perdue,
P.A.
(Stubbs)
represented
Henry
L.
approximately
representation.
$200,000
in
legal
fees
from
that
In practical
to
fees.
Stubbs
argues,
however,
that
application
of
and
that
it
can
prevail
under
the
and
the
district
court,
we
prior
version
of
disagree,
and
we
therefore
I.
A.
On February 3, 2010, the Debtor filed a voluntary petition
for
relief
under
Chapter
11
of
3
the
Bankruptcy
Code,
which
governs
reorganizations
of
debtors
estates.
Shortly
necessary
expenses
of
preserving
the
Debtors
estate,
gave
The Bankruptcy
See 11 U.S.C.
507(a)(2).
On
November
demonstrate
that
17,
he
2011,
could
after
the
effectuate
Debtor
a
final
failed
to
plan
of
bankruptcy
court
then
appointed
James
B.
Angell
(the
Trustee
was
able
to
accumulate
$702,630.25
for
$1
million
and
Stubbss
unsecured
Chapter
11
So unless
Whether Stubbs
In re Midway Airlines, Inc., 383 F.3d 663, 669 (7th Cir. 2004).
Secured
claims,
in
other
words,
take
priority.
Under
that
general rule, the IRSs claim in this case would be paid first
and nothing
would
be
left
for
payment
on
Stubbss
unsecured
Stubbss
total
allowed
compensation
amounted
to
$213,408.06. But because the Debtor paid $27,977.85 of Stubbss
fees, Stubbs is now owed $185,430.21.
5
securing
the
tax
claims
is
sold,
the
unsecured
(2000).
that
created
it
debtors
and
perverse
their
incentives,
representatives
encouraging
to
incur
Chapter
11
administrative
Mach.
&
Tool
Co.,
816
F.2d
238,
248
(6th
See In re
Cir.
1987)
In
2005,
Congress
responded
with
fix.
Under
the
limit
the
class
of
administrative
expenses
covered
by
of
their
claims
status
by
expenses
incurred
under
The Bankruptcy
claims
for
unsecured
administrative
expenses
through
U.S.C.
507(a)(1)
(2000).
So
when
Congress
See
amended
this title and shall not include expenses incurred under chapter
11 of this title).
added).
for
unsecured
claims,
dropping
administrative
expense
the
exclusion
of
Chapter
11
expenses
inserted
into
At the time,
the
Debtors
case
remained
in
11,
Congress
See 156 Cong. Rec. H7161 (daily ed. Sept. 28, 2010)
to
administrative
Chapter
11
507(a)(2),
expenses
are
now
administrative
where
unsecured
enumerated,
expense
to
clarifying
claimants
claims
do
that
not
hold
No. 111-327.
Congress enacted the corrected BTCA version of 724(b)(2)
in December 2010.
Now
in
724(b)(2)s
Chapter
exception
to
proceeding,
the
general
Stubbs
rule
could
that
invoke
unsecured
claims like its own take a back seat to secured claims like the
IRSs
but
only
if
its
claim
to
Chapter
11
administrative
BTCA
there
version
is
no
controlled,
question
but
and
that
that
under
Stubbss
that
unsecured
And
subordination
724(b)(2).
the
plain
rights
under
the
current
BTCA
version
language
of
the
prior
version
of
724(b)(2)
of
to
Stubbs,
application
of
the
new
and
did
And
corrected
cutting
administrative
off
its
expenses
right
to
incurred
recover
before
for
Congress
Chapter
fixed
11
its
drafting error.
The bankruptcy court agreed with the Trustee and dismissed
Stubbss objection.
Bd.
of
Richmond,
416
696,
711
(1974)).
The
2014 WL
590481, at *3.
In the alternative, the bankruptcy court found that even
under the BAPCPA version of 724(b)(2), Stubbs would hold no
right to subordinate the IRSs secured tax claim.
the
passage
legislative
court
of
the
history
thought
it
BTCA,
of
its
[the
clear
legislative
BAPCPA]
that
history,
Section
Congress
Analyzing
and
the
724(b)(2), the
intended
to
exclude
Id. at *4.
In
re
Feb.
court
Anderson,
No.
26,
2015).
held
that
7:14-cv-00079-F,
Like
the
law
the
in
2015
bankruptcy
effect
at
WL
892363
court,
the
time
the
of
Stubbs
had
no
vested
right
to
subordinate
under
some
eleven
months
after
Congress
had
already
passed
the
Id. at
Stubbss
claim
to
subordination,
the
district
court did not decide whether the same result would follow under
the BAPCPA version of 724(b)(2).
11
II.
A.
This court reviews the judgment of a district court sitting
in review of a bankruptcy court de novo.
Jacksonville Airport,
Inc. v. Michkeldel, Inc., 434 F.3d 729, 731 (4th Cir. 2006).
We
Id.
Whether 724(b)(2)
time
quotation
it
renders
marks
its
decision.
omitted)).
The
(citation
second
is
and
internal
effectively
an
retroactive
effect
on
12
conduct
predating
the
laws
its
retroactively
decision,
without
unless
clear
that
congressional
law
would
operate
authorization.
See
Gordon v. Petes Auto Serv. of Denbigh, Inc., 637 F.3d 454, 458
(4th Cir. 2011) (describing Landgraf framework for analysis).
The bankruptcy and district courts concluded that this is
the ordinary case, in which the law in effect at the time of
decision here, the BTCA version of 724(b)(2) applies.
Stubbs,
on
exception,
the
other
because
hand,
argues
application
that
of
this
the
BTCA
case
is
the
version
of
impermissible
retroactive
effect. 2
We
agree
with
the
to
administer.
And
bankruptcy context.
that
is
especially
important
in
the
Requiring
of
complicate
the
Bankruptcy
the
process
Code,
on
the
significantly,
other
hand,
necessitating
would
an
the
administration
potential
for
substantial
delays
in
and
Cf.
Yadkin Valley Bank & Trust Co. v. McGee, 819 F.2d 74, 76 (4th
Cir. 1987) (trustee subject to liability for negligently failing
to reduce the assets of the estate to money as expeditiously as
possible).
Stubbs argues, however, that it would be unjust to apply
the
BTCA
payment
version
on
Landgraf,
its
511
of
724(b)(2)
unsecured
U.S.
at
265
claim
retroactively
for
Chapter
(presumption
11
against
to
fees.
See
retroactivity
disallow
Prior to
We disagree.
It
time
the
case
converted
to
Chapter
in
November
By
2011,
Like
the
bankruptcy
and
district
courts,
2015
WL
recognize,
724(b)(2)
is
incurrence
and
being
of
course,
applied
approval
of
in
that
the
this
case
legal
15
fees
in
BTCA
to
version
conduct
the
Chapter
of
the
11
Supreme
Court
has
made
clear,
that
by
But as
itself
does
not
Landgraf,
application
retroactive
of
effect
new
under
statute
to
Landgraf
old
conduct
whenever
it
Nor
have
upsets
Before
F.3d
764,
77172
(4th
Cir.
2014)
(finding
impermissible
in
which
bankruptcy
court
held
impermissibly
Id. at 22425.
years
before
enactment
of
the
BTCA,
so
that
the
BAPCPA
That
we
have
emphasized,
the
retroactivity
inquiry
is
an
impermissible
specifically
whether
retroactive
applying
effect
the
in
statute
any
to
case,
the
but
person
Gordon,
637
F.3d
at
17
459
(emphasis
in
original)
We need not
decide
version
here
whether
application
of
the
BTCA
of
retroactive
that
retroactivity
which
the
J.R.
as
to
pre-BTCA
effect.
Hale
the
is
no
person
version
It
is
authority
objecting
of
enough
for
in
724(b)(2)
for
present
finding
this
case,
never
had
in
any
controlling effect.
Accordingly, and like the district court, we hold that the
bankruptcy
court
properly
applied
the
BTCA
version
it
the
is
clear
IRSs
that
secured
Stubbs
tax
is
claim
not
in
of
Under that
entitled
favor
of
to
its
Whether
the same result would have obtained under the pre-BTCA version
of 724(b)(2), as urged by the Trustee and the United States,
is a question we need not reach.
III.
For the foregoing reasons, we affirm the judgment of the
district court.
AFFIRMED
18