Appeal from the United States Bankruptcy Court for the District of Arizona Honorable Eileen W. Hollowell, Bankruptcy Judge, Presiding Bk. No. 02-02215-EWH
U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT
Argued and Submitted on February 17, 2010 at Tucson, Arizona
Before: PAPPAS, DUNN and JURY, Bankruptcy Judges
Robert W. Nichols and Mary Ann Nichols ("Mrs. Nichols") appeal the bankruptcy court's order denying Mrs. Nichols' request for approval and payment of alleged administrative expenses. We AFFIRM the bankruptcy court's order.
On May 9, 2002, the Nichols filed a voluntary petition under Chapter 7*fn4 of the Bankruptcy Code. Sharon Maxwell ("Trustee") was appointed trustee of the Nichols' bankruptcy estate. Among the assets listed in the Nichols' petition was a one-third interest in a lakeside cabin in Michigan (the "Property") which Mrs. Nichols owned as a joint tenant with right of survivorship with her two brothers.
Trustee investigated the Property to determine if there was any value to be realized for the estate if it were administered.
Under the Arizona law of community property, Trustee determined that Mrs. Nichols held her interest in the Property independently 1 from her husband. See ARIZ. REV. STAT. § 25-213(A). Under Michigan 2 law applicable to rights of joint tenants of real property located 3 in that state, an interest in Michigan real property held by co- 4 tenants with the right of survivorship is deemed a joint life 5 estate followed by contingent remainders. See Albro v. Allen, 6 454 N.W.2d 85, 88 (Mich. 1990). Trustee concluded that the only 7 interest held by the estate in the Property which she could sell 8 was a life estate in the Property based on the life of 9 Mrs. Nichols. Id. at 93 (holding that dual contingent remainders 10 are not subject to partition, i.e., the purchaser of a life estate 11 has no right to the contingent remainder). Trustee therefore 12 determined that this life interest had little or no market value 13 as an estate asset, nor did any other assets, and filed a "No 14 Asset Report" in the bankruptcy case on May 26, 2005.
15 Trustee's conclusion concerning the value of the Property was 16 not shared by creditors Louise Whipple and the estate of Edson 17 Whipple ("Whipple"). On January 20, 2009, Whipple filed a motion 18 to compel Trustee to sell assets of the estate, including 19 Mrs. Nichols' interest in the Property. Then, on or about 20 February 11, 2009, Trustee received an unsolicited offer from a 21 third party to purchase the estate's interest in the Property for 22 $50,000 cash.
23 Trustee withdrew her No Asset Report. The bankruptcy court 24 conducted a series of status conferences concerning Whipple's 25 motion to compel the sale of the Property. On April 9, 2009, the 26 court directed Trustee either to move to sell or to abandon the 27 Property within 90 days.
On the same day, Mrs. Nichols, together with her brothers/ co-tenants William and Robert Cambridge, submitted their original application for allowance and payment of administrative expenses of $37,343.00, representing what they alleged was one-third of the post-petition costs of preserving and maintaining the Property during the bankruptcy case. Whipple objected to the original application on April 14, 2009, arguing, among other points, that the claimants had provided inadequate documentation of their claim.
Trustee submitted a motion seeking authority to sell the Property (the "Sale Motion") on May 11, 2009. In the Sale Motion, Trustee proposed to sell at auction in the bankruptcy court "whatever interests the estate [held in the Property and other real property*fn5 ], via quitclaim conveyance, on an 'as is-where is' basis, without any warranty of any type or manner whatsoever."
The bankruptcy court considered the Sale Motion at a hearing on June 16, 2009. Mrs. Nichols and her brothers, Trustee, and Whipple were represented by counsel and heard. At that time, Mrs. Nichols and her brothers bid $50,010.00 for Mrs. Nichols' interest in the Property, which was the highest and best bid. The Minute Entry for the hearing reflects that the bankruptcy court ruled that: "The backup bid for $50,000 [the third party's bid] will be accepted if within ten business days of today $50,010 [the Nichols' bid] is not delivered to the trustee."
There is no subsequent entry in the docket regarding the Sale Motion, nor was any order approving a sale ever entered by the bankruptcy court. However, Trustee has informed the Panel that Mrs. Nichols' brothers paid Trustee the $50,010 purchase price.
After the hearing, Mrs. Nichols*fn6 filed an Amended Application for Allowance and Payment of Administrative Expenses relating to the Property. The Amended Application reduced the requested administrative expense claim to $14,280, representing one-third of the alleged expenses from the petition date through 2009 for property hazard insurance, real property taxes, utility costs, and non-labor "out of pocket expenses" for the Property. The attached documentation included copies of bills and lists indicating amounts due for the various expenses. However, there was no evidence submitted with the Amended Application to show that any payments had actually been made for these expenses, or by whom such payments were made.*fn7
Whipple objected to the Amended Application on August 20, 2009. Whipple argued that: (1) the expenses in question had not been paid based on any transaction with the trustee; (2) the expenses were incurred for the Nichols' personal benefit, and not for the benefit of the bankruptcy estate; (3) there was no evidence that Nichols in fact paid any of the expenses; and (4) Nichols had failed to carry her burden of proof.
Trustee also filed an objection to the Amended Application on September 22, 2009. Trustee noted that she had never been contacted regarding the expenses for which Nichols sought an administrative expense and had never approved any of the expenses. Additionally, Trustee argued that the ...