November 6, 2009
Transcript in Schwab v. Reilly
I'm finally getting a chance to read it. You can access it here.
Questions to the Trustee's Counsel:
JUSTICE GINSBURG: The question is whether -- the question is whether the trustee had to make an objection, when it seems really as clear as could be that what she was seeking was to keep her equipment, not to get the -- some monetary equivalent for it.
JUSTICE KENNEDY: What -- what -- what you are doing there, you -- you argue that ambiguities are construed against the person that made the form. I think that's a little harsh when the trustee is a repeat player and knows -- and know the rules.
Questions to Debtor's Counsel:
JUSTICE BREYER: How long do these creditors meetings last? How easy are they to postpone? How -how easy is it for the trustee to get the information together during the creditors meeting, et cetera, et cetera; where do I look to find out the answer to that question?
JUSTICE SOTOMAYOR: Counsel, in -- what's interesting is that all of the circuits or most of the majority have not address -- announced the fixed rule. The rule they said is, it depends on the circumstances. And so it appears to me that most of the courts are saying to us, we don't want a default rule, because we have to see what has happened and see what has happened between the parties to determine in one situation rather than another what the intent was. It's not an irrational rule. Why shouldn't we be considering that as an alternative? Because once we make an announcement like the one that you're proposing, it is an inducement to undervalue your property for a debtor because -- in the hopes that an overly worked trustee won't have either the time or opportunity or wherewithal to understand that the value is off and that they're going to lose something that the estate is entitled to.
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The rule they said is, it depends on the circumstances. And so it appears to me that most of the courts are saying to us,
Posted by: debt advice | Nov 6, 2009 11:47:41 AM
The case study in point avoids deeper issues all together. You have an auctioneer acting as an Examiner - which is forbidden by the rules ("an Examiner cannot be a Trustee") - as it is clearly a conflict of interest issue - the auctioneer seeks the right to profit from the sale - so he is biased on the appraisal.
The question is NET result - a Trustee cannot be permitted the unseemly pursuit of money/fees etc., under the presumption of more worth.
The Auctioneer here stated it is worth $17,000 - an auction takes time to inventory, insure, advertise and sell. Auctioneers take 10% from the sell side as well - with all expenses. (and some also violate the Code by Charging 10% buyers premium - the rules do not permit diminish returns to estate value)
So 10% for sell, 10% (buyer knows he has to pay sales tax and buyers premium) cost of ad, cost of auction set up, insurance and labor prior and during auction.
The justices are in deep water here - making presumptions that the decision has to go one way or the other on what was the "intent" or "may be hidden" value.
Trustee's are experts at what they do.
What cannot be done - as is affirmed in the record - is most 7's and 13's have automobiles that will be addressed by this rule.
The trustee must get a firm bid within 30 days - certifying a higher value than claimed as (net higher value to the estate) or we will have brite line time line crossings everywhere - and by the time the dust settles the system is spending $20,000 per chase of $3,000 item.
Posted by: Laser Haas | Nov 7, 2009 6:50:01 PM