In re Panuelo [2008] FMSC 38; 15 FSM Intrm. 640 (Pon. 2008) (4 June 2008)

FSM SUPREME COURT TRIAL DIVISION
BANKRUPTCY CASE NO. PB 001-2007

In re IOANIS PANUELO,
Debtor.
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ORDER REQUIRING NEW PROPOSAL

Andon L. Amaraich
Chief Justice

Decided: June 4, 2008

APPEARANCES:

For the Receiver: Nora Sigrah, Esq.
P.O. Box 1237
Kolonia, Pohnpei FM 96941

For the Debtor: Ron Moroni, Esq.
134 West Soledad Avenue, Suite 402
Hagatna, Guam 96910

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HEADNOTES

Statutes  Construction

Although it is a settled rule of statutory construction that a statute adopted from another jurisdiction is presumed to have been adopted as construed by the courts of that jurisdiction, when the statute's substance departs from the other jurisdiction's statute, the result will also differ. In re Panuelo[2008] FMSC 38; , 15 FSM Intrm. 640, 641 (Pon. 2008).

Bankruptcy  Receiver/Trustee

A receiver's proposed compensation of $125 an hour with a cap on the amount paid based on a percentage of the amount disbursed to creditors, even though the proposal places an upper limit on the compensation, this proposed compensation is still based solely on time-referenced billing, which the court is statutorily barred from approving. In re Panuelo[2008] FMSC 38; , 15 FSM Intrm. 640, 641 (Pon. 2008).

Bankruptcy  Receiver/Trustee

When a $125 per hour compensation rate is barred because the statute prohibits compensation based solely on time-referenced billing; when $125 an hour seems to be proposed merely because it is the prevailing rate for private attorneys on Pohnpei and the receiver is a lawyer; and when much of the work needed in administering a debtor's estate in bankruptcy may not be lawyer work and non-lawyer work is not compensated at lawyer rates even when done by a lawyer, the receiver will be asked to submit a new compensation proposal. In re Panuelo[2008] FMSC 38; , 15 FSM Intrm. 640, 641-42 (Pon. 2008).

Bankruptcy  Receiver/Trustee

Bankruptcy Rule 2008 refers only to blanket bonds in Rule 2010 which may be authorized when a trustee or receiver is qualified in a number of cases. A bond will not be required when the receiver has been qualified in only one case, and when the bond requirement is discretionary, especially in this early stage of development of bankruptcy law and the small number of persons who might be able to qualify as a bankruptcy receiver or trustee and the lack of insurance companies that could issue a bond. In re Panuelo[2008] FMSC 38; , 15 FSM Intrm. 640, 642 (Pon. 2008).

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COURT'S OPINION

ANDON L. AMARAICH, Chief Justice:

On April 30, 2008, receiver Nora Sigrah filed her proposal for compensation as the receiver of debtor Ioanis Panuelo's estate. On May 13, 2008, the debtor served, and on May 23, 2008, the debtor filed a response to the proposal. No creditor filed a response.

The receiver asks that she be compensated for work performed as receiver at the rate of $125 per hour with a ceiling on that compensation of 25% of the first $5,000 or less of funds disbursed to the estate's creditors, including those holding secured claims; 10% of any funds in excess of $5,000 but not exceeding $50,000; 5% of any amount over $50,000 but not in excess of $1,000,000; and a reasonable compensation for any amount of $1,000,000, not to exceed 3% of the amount in excess of $1,000,000. This compensation proposal is drawn from and except for the $125 hourly rate, identical to the provisions in a U.S. bankruptcy statute, 11 U.S.C. § 326(a), for compensation of trustees (and receivers) in U.S. bankruptcy cases.

The debtor questions whether the compensation proposal would violate 31 F.S.M.C. 112(4), which bars nsation for receivers and trustees "based solely on time reme referenced billing." The debtor further questions the $125 hourly rate since it appears to be based on what attorneys on Pohnpei charge although being an attorney and being a receiver are not the same thing. The debtor also notes that on Guam accountants are often bankruptcy trustees. The debtor also suggests that under Bankruptcy Rule 2008 a bond may be required and further suggests that some documentation should be required that the compensation sought is comparable to that received in other bankruptcy cases.

The receiver proposes to be paid $125 an hour with a cap on the amount paid based on a percentage of the amount disbursed to creditors. Although many provisions in the FSM Bankruptcy Act of 2004 (Title 31) mirror provisions in the U.S. Bankruptcy Code (U.S. Code Title 11), the provision in which the court is "specifically prohibited from fixing compensation based solely on time referenced billing," 31 F.S.M.C. 112(4), has no counterpart in the U.S. Bankruptcy Code. Therefore, a compensation proposal drawn directly from the U.S. Bankruptcy Code cannot be presumed to be in compliance with FSM Bankruptcy Act of 2004. Although it is a settled rule of statutory construction that a statute adopted from another jurisdiction is presumed to have been adopted as construed by the courts of that jurisdiction, Andohn v. FSM, [1984] FMSC 4; 1 FSM Intrm. 433, 441 (App. 1984), when the statute's substance departs from the other jurisdiction's statute, the result will also differ, cf. Tammow v. FSM, 2 FSM Intrm. 53, 58 (App. 1985) (when FSM Constitution provision departs from U.S. Constitution's counterpart, a different meaning is intended).

Although the receiver's proposal places an upper limit on the compensation from time-referenced billings, this proposed compensation is still based solely on time-referenced billing. The court is thus statutorily barred from approving it. Furthermore, the $125 rate seems to be proposed merely because $125 an hour is the prevailing rate for private attorneys on Pohnpei and the receiver is a lawyer. Much of the work needed in administering a debtor's estate in bankruptcy may not be lawyer work. The court has previously held that non-lawyer work is not compensated at lawyer rates even when done by a lawyer. People of Rull ex rel. Ruepong v. M/V Kyowa Violet, [2007] FMSC 39; 15 FSM Intrm. 53, 67, 69 (Yap 2007) (when an attorney spent a half hour delivering case materials to a hotel, this was delivery work, delivery work valued at delivery service rates, not attorney rates, regardless of whether an attorney preformed the task). It would also seem that much of the lawyer work that might be involved in this case, e.g., seeking to void preferences, might be better compensated by a contingency or percentage rate.

The receiver is therefore asked to submit by June 16, 2008, a new compensation proposal, keeping these considerations in mind. A bond will not be required. Bankruptcy Rule 2008 refers only to blanket bonds in Rule 2010 which may be authorized when a trustee or receiver is qualified in a number of cases. The receiver in this case has been qualified in only this one case, and the bond requirement is discretionary, especially in this early stage of development of bankruptcy law and the small number of persons who might be able to qualify as a bankruptcy receiver or trustee and the lack of insurance companies that could issue a bond.

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