Al Iman Plaza LLC

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
In re:
AL IMAN PLAZA LLC,
Debtor.
NOT FOR PUBLICATION
Case No. 17-12072
Chapter 7
MEMORANDUM OPINION AND ORDER GRANTING APPLICATION FOR
COMPENSATION OF BROKER FOR SALE OF REAL PROPERTY
A P P E A R A N C E S:
LaMONICA HERBST & MANISCALCO, LLP
3305 Jerusalem Avenue
Wantagh, NY 11793
By: 	Gary F. Herbst, Esq.
Jordan D. Weiss, Esq.
Attorneys for Interim Chapter 7 Trustee, Salvatore LaMonica
GONZALEZ LAW ASSOCIATES
75 South Broadway, 4th Floor
White Plains, NY 10601
By: 	Carlos Gonzalez, Esq.
Attorney for Debtor
MARTIN GLENN
UNITED STATES BANKRUPTCY JUDGE
Pending before the Court is the Broker’s Application for Compensation for the Sale of the
Real Property Located at 2008 Westchester Avenue, Bronx, New York 10462 (the “Application,”
ECF Doc. # 81) of Maltz Auctions, Inc. (the “Broker,” or “Maltz”). The Broker also filed a
Report of Sale (ECF Doc. # 79). By the Application, Maltz seeks a commission of $215,000.00.
The Application is supported by the certification of Richard B. Maltz (the “Maltz Certification,”
ECF Doc. # 81-1). The Application is opposed by Al Iman Plaza LLC (the “Debtor”), who filed
its Opposition to Approval for Disbursement of Funds (the “Opposition,” ECF Doc. # 86). An
affidavit by Isa Mamudoski (“Mamudoski”), sole owner of the Debtor, was filed in support of
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the Opposition (the “Affidavit,” ECF Doc. # 86-1). Salvatore LaMonica, the interim chapter 7
trustee in this case (the “Trustee”), filed his reply in further support of the Broker’s Application
(the “Reply,” ECF Doc. # 88). Attached as Exhibit A to the Reply is the Declaration of Richard
B. Maltz.
For the reasons set forth below, the Opposition is OVERRULED and the Application for
compensation of $215,000 is GRANTED.
I. 	BACKGROUND
A. 	The Motion
Maltz requests entry of an order (i) approving the Application, and (ii) authorizing the
Trustee to pay Maltz a commission of $215,000.00 for the sale of the real property located at
2008 Westchester Avenue, Bronx, New York 10462 (the “Property”) from the buyer’s premium
paid by the successful bidder. (App. ¶ 8.) As set forth by the Broker, on October 11, 2017, Malz
was retained by the Trustee as his broker to market and sell the Property (the “Retention Order,”
ECF Doc. # 31). (Id. ¶ 1.) On December 12, 2017, a public sale was conducted and received a
high bid of $4,300,000.00 for the Property, plus a 5% buyer’s premium of $215,000.00 by the
successful bidder. (Id. ¶ 2.)
B. 	The Opposition
In the Affidavit attached to the Opposition, Mamudoski claims that the sale process of the
Property was tainted and that the Broker’s fees should be reduced. Specifically, Mamudoski
alleges that only 4 of the 20 registered bidders at the sale attended the auction, and that potential
bidders were excluded from participating in the sale. (Aff. at 1.) Mamudoski further alleges that
potential bidders with certified funds were frustrated when they were not able to bid for the
property. (Id.) Mamudoski also points out that the sale was delayed on the day of the auction,
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and that the closing was required to be within 30 days of the confirmation order dated December
21, 2017 (the “Confirmation Order,” ECF Doc. # 62), but did not close until after that deadline.
(Id. at 12.) Finally, Mamudoski claims that the terms of the sale were different than what he
was previously told was to be the required deposit, i.e. that he was told that a buyer needed a
10% deposit to register, but at the sale, only 5% were collected. (Id. at 2.)
C. 	The Reply
In his Reply, the Trustee argues that the Opposition seeks to collaterally attack the
Confirmation Order by claiming that the sale was tainted and that the Brokers’ fees should be
reduced for Mamudoski’s benefit. (Reply ¶ 1.) But the Trustee explains that a collateral attack
on the Confirmation Order is improper and untimely since the Confirmation Order is now a final,
non-appealable order and the closing of the sale occurred on January 23, 2018. (Id.) The
Trustee further alleges that the Objection also seeks to taint the sale process “with bald and
naked self-serving accusations that have no support in fact or law.” (Id. ¶ 2.) More specifically,
addressing Mamudoski’s accusations, the Trustee contends that:
i. 	None of the registered bidders left the sale: The other 21 bidders present on the
day of the auction were registered bidders for another property being sold in an
unrelated bankruptcy sale;
ii. 	All of the registered bidders were present at the sale and were afforded the right to
bid at the sale;
iii. 	At the sale, prior to the commencement of the auction, it was announced that all
parties interested in bidding must register before the sale begins in order to be
allowed to bid;
iv. 	The sale being slightly delayed was within the discretion of the Trustee and was
due to a bidder attempting to become a registered bidder by arranging for a
deposit to be posted;
v. 	The Stalking Horse Agreement approved by the Court and the Amended Bidding
Procedures (ECF Doc. # 50) required a $432,000.00 qualifying deposit, an
additional deposit sufficient to augment the qualifying deposit such that the buyer
deposited 10% of the sale price, and a buyer’s premium deposit equal to 5% of the
sale price. And in fact, all bidders were required to, and did tender a qualifying
deposit of $432,000.00 (a 10% deposit) in order to bid at the sale, and not 5%;
and
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vi. 	The three-day delay in closing the sale, which occurred on January 23, 2018
rather than before 30 days after the Confirmation Order dated December 21, 2018,
was due to a scheduling conflict between the Trustee and the purchaser, and in
any event is not related to and has no relevance as to the Application.
(Reply ¶¶ 2326.)
The Court concludes that it is not necessary to determine whether the Debtor’s challenge
to the Application is an impermissible collateral attack on the Confirmation Order. The record
establishes that the auction sale was properly conducted, and under the applicable standards for
reviewing compensation requests, the Application should be granted.
II. 	LEGAL STANDARD
The court may award fees to professional persons pursuant to § 330 of the United States
Bankruptcy Code. 11 U.S.C. § 330. Section 330 provides in relevant part:
After notice to the parties in interest and the United States Trustee and a
hearing, and subject to sections 326, 328 and 329, the court may award . . .
(A) 	reasonable 	compensation 	for 	actual, 	necessary 	services
rendered 	by 	the 	trustee, 	examiner, 	ombudsman, 	professional
person, or attorney and by any paraprofessional person employed
by an such person; and
(B) reimbursement for actual, necessary expenses.
11 U.S.C. § 330(a)(1).
In determining reasonable compensation, section 330 directs the court to consider:
(A) the time spent on such services;
(B) the rates charged for such services;
(C) whether the services were necessary to the administration of, or
beneficial 	at 	the 	time 	which 	the services 	was 	rendered 	toward 	the
completion of, a case under this title;
(D) whether the services were performed within a reasonable amount of
time commensurate with the complexity, importance and nature of the
problem issue, or task addressed;
(E) with respect to a professional person, whether the person is board
certified or otherwise has demonstrated skill and experience in the
bankruptcy field; and
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(F) whether the compensation is reasonable based on the customary
compensation charged by comparably skilled practitioners in cases other
than cases under this title.
11 U.S.C. § 330(a)(3).
Since fee applications are required under the Bankruptcy Code, courts may award fees for
time spent in actually preparing a fee application “based on the level and skill reasonably
required to prepare the application.” 11 U.S.C. § 330(a)(6).
Whether services are necessary is determined from the perspective of the time at which
the services were rendered. 3 COLLIER ON BANKRUPTCY ¶ 330.04[1][b][iii] (15th ed. rev. 2007).
In the Second Circuit, the “necessary” standard in § 330 is given a broad interpretation. Services
are “necessary” if they benefit the estate. In re Keene Corp., 205 B.R. 690, 695 (Bankr.
S.D.N.Y. 1997) (Bernstein, J.). The test considers whether services provided were “reasonably
likely to benefit the estate” and is an objective test, considering the services that a reasonable
lawyer would have performed in the same circumstances. In re Ames Dept. Stores, Inc., 76 F.3d
66, 72 (2d Cir. 1996).
The court has an independent duty to review fee applications and evaluate the
compensation requested. In re Keene, 205 B.R. at 695. The court may reduce or disallow a
request if the services provide no real benefit to the estate. Id. at 696. The court may also reduce
compensation if the request is based on incomplete or inaccurate time records. In re Hamilton
Hardware Co., 11 B.R. 326 (Bankr. E.D. Mich. 1981).
Fee applications must also comply with FED. R. BANKR. P. 2016, which requires “a
detailed statement of (1) the services rendered, time expended and expenses incurred, and (2) the
amounts requested.” 	FED. R. BANKR. P. 2016. 	Rule 2016 requires disclosure of any payments
previously made to the applicant and of the existence of any compensation agreement between
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the applicant, their client and any third party who will share the compensation. 	Id. 	Also,
S.D.N.Y. Bankruptcy Local Rule 2016-1 requires that such entities “shall comply with the
requirements contained in any guidelines for fees and disbursements promulgated by the Court.”
General Order M-447 requires certifications by the professional responsible for
compliance with the guidelines that the fee application has been read, that the application and the
fees therein comply with the guidelines and that the fees are billed at rates customary to the
applicant and generally accepted by the applicant’s clients. The application must also contain
certifications of service of the fee application on the trustee, the debtor or the chair of each
official committee. The certifications also require a list of all professionals working on a given
case, aggregate hours spent by each professional, and a reasonably detailed breakdown of the
disbursements incurred and an explanation of billing practices.
In the Second Circuit, fee requests may be approved when the fees incurred were
“reasonably likely to benefit the estate.” In re Ames Dept. Stores, Inc., 76 F.3d 66 (2d Cir.
1996). The determination of whether particular fees were “reasonably likely to benefit the
estate” is an objective test, considering the services that a reasonable lawyer would have
performed in the same circumstances. Id. As noted above, the determination of reasonableness
should not be made in hindsight but as of the time when the services were rendered. 3 COLLIER
ON BANKRUPTCY ¶ 330.04[1][b][iii].
In this case, the Broker’s retention set forth the amount of compensation payable to the
Broker upon the successful sale of the Property. Retention Order at 2 (“ORDERED, that Maltz
shall be paid a commission in the form of a buyer’s premium in the amount of five percent (5%)
of the gross sale price of the Real Property, which amount shall be added to the amount of the
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sale price and payable by the purchaser of the Real Property, and in such event, no
reimbursement of expenses shall be sought by Maltz . . . .”).
III. 	DISCUSSION
Maltz requests a commission of $215,000.00, earned from the sale of the Debtor’s
Property at a public sale conducted on December 12, 2017. The Court’s Retention Order
authorized and approved the retention of Maltz as the Trustee’s broker to market and sell the
Property. Maltz was entitled to “a commission in the form of a buyer’s premium in the amount
of five percent (5%) of the gross sale price of the Real Property, which amount shall be added to
the amount of the sale price and payable by the purchaser of the Real Property.” (See Retention
Order at 2.) As a result of Maltz’s efforts, the Trustee received and accepted an offer for the sale
of the Property of $4,300,000.00, plus a 5% buyer’s premium in the amount of $215,000.00 by
the successful bidder, which was approved by the Court on December 21, 2017. (See ECF Doc.
# 62.) The Maltz Certification certifies compliance with the applicable rules. Maltz’s
commission for the sale of the Property is also reasonable given the circumstances.
The Debtor’s Opposition to the disbursement of funds to Maltz “for poor work” is
OVERRULED. First, the Debtor does not cite any relevant authority supporting its argument
that poor work performed by a retained professional should lead to a deduction to that
professional’s allowed compensation. Rather, the Debtor refers to out of Circuit cases that
merely stand for the inverse proposition, i.e. that courts permit bonuses to retained counsel for
work well done. Further, as argued by the Trustee, the Debtor’s accusation that the auction
proceedings were not properly performed and lead to a lowered winning bid appear self-serving
and are only based on Mamudoski’s allegations asserted in his Affidavit. Particularly relevant is
Mamudoski’s accusation that only 4 registered bidders took part in the auction. The Trustee
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explains that the additional parties that the Debtor contends were prevented from bidding on the
Property were registered for bidding at a previous bankruptcy auction unrelated to the sale of the
Property. Further, attached to the Declaration of Richard B. Maltz is a transcript of the auction
sale, and a review of the transcript shows that there were no irregularities during the auction.
Throughout this case, Mamudowski has done everything he could to frustrate the timely,
fair and efficient disposition of this case. This case was originally filed as a case under chapter
11, but on the motion of the United States Trustee (ECF Doc. # 6), on September 20, 2017, the
case was converted to case under chapter 7. (ECF Doc. # 16.) Mamudowski continued in his
efforts to frustrate the efficient handling of this chapter 7 case thereafter. The fact of the matter
is that the sale of the Debtor’s Property was successful in maximizing the value of Debtor’s
estate. The Trustee and the Broker properly arranged and conducted the successful auction of
the Property.
Accordingly, Application seeking a Broker’s Commission of $215,000 is GRANTED.
IT IS SO ORDERED.
Dated: 	April 10, 2018
New York, New York
_____Martin Glenn____________
MARTIN GLENN
United States Bankruptcy Judge
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