Stine

BACKGROUND

Elsie Stine’s son, John Flynn, filed a Chapter 7 bankruptcy case on July 30, 2001. Richard Diamond was appointed trustee. The property of Flynn’s estate included a 50 percent interest in real property located in Downey, California. The other half interest was owned by Stine.

At the time the bankruptcy case was filed, the property was the subject of a state court partition action between Stine and Flynn. After the trustee stepped in and continued to litigate the partition action, the trustee and Stine agreed to sell the property under 11 U.S.C. § 363(h).1 They reserved, without resolving, other claims in the partition action.

The sale of the property produced approximately $120,000 in net proceeds after the payment of outstanding liens and real estate commissions. Under § 363(j), the trustee applied for attorney’s fees incurred by his law firm for services allegedly chargeable to the proceeds prior to distribution, including fees for (1) defending the property from relief from stay proceed- ings ($3,430.00); (2) marketing and selling the property ($20,368.50); (3) litigating the partition suit and negotiating the proposed stipulation with Stine ($7,109.50); and (4)…