Caffe Piazza, Inc.

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE:
CAFFE PIAZZA, INC.
DEBTOR
CASE NO.
05-00748-5-ATS
ORDER ALLOWING APPLICATION FOR COMPENSATION
The matter before the court is the chapter 7 trustee’s application
for authority to pay Douglas M. Gurkins of Country Boys Auction &
Realty, Inc. an auctioneer commission. A hearing took place in
Raleigh, North Carolina on June 28, 2005.
Caffe Piazza, Inc. filed a petition for relief under chapter 7 of
the Bankruptcy Code on March 1, 2005, and Gregory B. Crampton was
appointed trustee. The debtor filed its schedules on March 22, 2005,
and on or around that same date Michael Gurkins of Country Boys made
arrangements with the debtor’s landlord to enter the debtor’s premises
and inspect the assets to be sold. Mr. Gurkins testified that he
discussed the feasibility of conducting an auction at the premises (a
retail mall), but the landlord refused. Because Mr. Gurkins had
another auction of restaurant equipment scheduled on April 14, 2005,
Mr. Gurkins made arrangements to pick up the equipment to be auctioned
and transported it to Washington, North Carolina.
After Mr. Gurkins removed the items to be sold from the premises,
Ralph Pisacane, a shareholder of the debtor, contacted the trustee’s
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1 When the parties met at the premises, Mr. Crampton discovered
that Mr. Pisacane retained a key to the restaurant. After discussing
the abandoned property, Mr. Crampton allowed Mr. Pisacane to keep the
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office to inquire about the items that remained in the premises. Mr.
Crampton, his paralegal, Phyllis Hill, and Mr. Gurkins met with Mr.
Pisacane and his son at the restaurant premises to review the remaining
items. Mr. Gurkins explained why he chose not to remove each specific
item, Mr. Crampton indicated that he agreed with the decisions, and Mr.
Crampton discussed with Mr. Pisacane his intent to abandon those items.
These items included a walk-in cooler, a bar and wine racks, a sink, an
ice maker, a beverage system, and dishwashing tables. Mr. Crampton and
Mr. Gurkins contend that the walk-in cooler and bar and wine racks were
left because the cost of removal would exceed any value they would
bring to the estate, the sink was left because the landlord contended
it was a fixture, and the ice maker, beverage system and dishwashing
tables were left because they were leased items belonging to a third
party.
After the parties walked through the property and discussed each
item, Mr. Crampton explained to Mr. Pisacane that he planned to
negotiate a waiver of an administrative rent claim with the landlord,
and that he would use some of the remaining items as leverage. He then
explained that he intended to abandon those items once the rent claim
was negotiated, and told Mr. Pisacane that he was free to remove the
items, but not to dispose of them, before the abandonment.1 Mr.
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key to remove any additional items. Neither Mr. Crampton nor Mr.
Gurkins ever had a key to the premises.
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Crampton did successfully negotiate a waiver of the administrative rent
claim, and he filed a notice of abandonment that was allowed without
objection.
The auction took place on April 14, 2005, and brought in proceeds
of $20,797.50. To compensate the auctioneer, the trustee applied a
commission of 10 percent ($2,079.75) plus reimbursement of expenses in
the amount of $2,213.39 (constituting a pro rata share for advertising
plus labor for removal and transportation of equipment and mileage).
Mr. Pisacane objected to the auctioneer’s compensation, questioning his
decisions to leave certain equipment at the premises, contending that
certain items were removed from the premises but did not appear at the
auction, and asserting that the decision to conduct the auction sale in
Washington, North Carolina added unreasonable transportation costs.
Specifically, Mr. Pisacane disagreed that the walk-in cooler, bar,
and wine racks would cost more to remove than it would to sell,
contending that instead Mr. Gurkins failed to remove them because he
did not have enough truck space. There was no evidence, however, that
Mr. Pisacane disagreed with the assessment of the removal issues
related to these items when he walked through the premises with the
trustee and Mr. Gurkins, nor did he object to the trustee’s notice of
abandonment. Mr. Pisacane also contended that the ice maker, beverage
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system, and dishwashing tables were not leased, but were owned by the
debtor, yet there was no evidence that he advised the trustee or Mr.
Gurkins of this during the walk-through, nor did he object to the
abandonment of these items. Mr. Pisacane testified that there were
items picked up from the premises that were not sold at that auction,
but Mr. Gurkins credibly testified that all the items he removed from
the restaurant were sold.
Essentially, Mr. Pisacane contends that Mr. Gurkins exercised poor
judgment in determining what assets should not be removed from the
premises and sold for the benefit of the estate, and that Mr. Gurkins
gave the trustee bad advice about the cost of removal compared to the
potential value to the estate. Mr. Pisacane maintained that the
auctioneer’s real reason for leaving the items behind was a failure to
adequately estimate the load and to provide sufficient truck space, and
as a result the auctioneer should not receive his full commission.
A chapter 7 trustee is charged with maximizing the recovery to the
bankruptcy estate. To perform this obligation, the trustee must
exercise a certain degree of business judgment, and, when challenged,
the court must consider whether that exercise of business judgment was
reasonable at the time. The auctioneer has the same obligations to the
estate, and must also exercise his business judgment. Here, the
auctioneer and the trustee conferred about the items that were left in
the premises and ultimately abandoned. The auctioneer and the trustee
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also agreed that combining the assets with other restaurant equipment
already scheduled for auction would benefit the estate. The
auctioneer’s advice to Mr. Crampton was reasonable, and Mr. Crampton
exercised his own business judgment in agreeing with Mr. Gurkins’
assessment. Mr. Gurkins then did as he was instructed by the trustee
and sold the items the trustee chose not to abandon, bringing proceeds
into the estate in the amount of $20,797.50.
Based on the foregoing, the trustee’s application for authority
to pay the auctioneer its commission in the amount of $2,079.75 and
expenses in the amount of $2,213.39 is ALLOWED.
SO ORDERED.
DATED: July 5, 2005
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