In Re Mbi Business Centers, Incorporated, T/a the Math Box,t/a Micro South Corporation, D/b/a/ Computer South, T/amicro Source Financial, Incorporated, in Re Prodigy Systems,incorporated, Debtors.campbell's Moving Company, Incorporated, Appellant, v. Martin L. Goozman, Trustee-appellee.in Re Mbi Business Centers, Incorporated, T/a the Math Box,t/a Micro South Corporation, D/b/a/ Computer South, T/amicro Source Financial, Incorporated, in Re Prodigy Systems,incorporated, Debtors.martin L. Goozman, Trustee-appellant, v. Campbell's Moving Company, Incorporated, Appellee, 936 F.2d 567 (4th Cir. 1991)

The facts of this case, as found by the bankruptcy court and accepted by the district court, are as follows: M.B.I. Business Centers, Inc. ("MBI") was a retailer of consumer computer equipment with 25 retail stores at various locations in the Eastern states. On September 18, 1987, it filed a voluntary petition under chapter 11 of the bankruptcy code. The cases were converted to chapter 7 on December 18, 1987, and defendant Martin Goozman was appointed trustee.

After his appointment as trustee, Goozman hired several of MBI's former employees to assist with the liquidation of MBI's remaining assets. Two of those former employees, Robert Katchmar and his assistant Christine Taylor, were hired to run MBI's main warehouse in Chantilly, Virginia. Their employment was authorized by the bankruptcy court on December 30, 1987.

The conversion to chapter 7 presented the trustee with the question of how to liquidate the remaining assets in order to render the greatest return for the creditors. There were two options: to have a sale or auction at each of the individual locations, or to have one large sale or auction at the main warehouse in Chantilly.

Katchmar was approached by Ralph Kresge, president of a company named PR Logistics, who offered the moving services of his company to help with the liquidation. To prepare an estimate for the cost of the move, Kresge reviewed the inventory lists for the various stores.¹  He made a proposal based upon an estimate of 2,000 pounds per store. Relying on household goods tariffs, Ralph Kresge's brother, Paul Kresge, arrived at a cost to move the inventory of $39.25 per 100 pounds. On December 29, 1987, Ralph Kresge submitted an offer to the trustee to move the goods for $785.00 per store for a grand total of $19,625. No mention was made of the $39.25 per 100 pound calculation.

A cap for the cost of the move was set at $20,000; that cap was later revised to $25,000 at the request of the secured creditors. The proposal was forwarded to Ralph Kresge and he signed it on January 14, 1988. The contract was accompanied by a declaration which stated that PR Logistics was a duly bonded mover. The declaration was signed by Ralph Kresge on January 10, 1988. On January 14, 1988, the court authorized the employment of PR Logistics.

At the time that Ralph Kresge signed the declaration, PR Logistics was not licensed as a broker for transportation nor holder of a certificate or permit as a motor carrier as required by 49 U.S.C. § 10921. Nonetheless, PR Logistics brokered the move. Paul Kresge called Richard Dameron of Denver Moving and Storage Company, Inc. ("Denver Moving") regarding the project, but Dameron declined to handle the move. However, on January 13, 1988, Dameron called Joseph Campbell of plaintiff Campbell's Moving Company, Inc. ("Campbell's"). Dameron and Campbell had a longstanding reciprocal relationship as United Van Lines agents. Campbell initially agreed to do the move for $600 per store based upon the (inaccurately) estimated amount of materials that had to be moved.

Campbell knew within a day or so of January 13, 1988, that the moves were being done for a bankruptcy trustee. Furthermore, Campbell's conclusion that he was hired by the bankruptcy trustee was a result of a phone conversation in which Kresge represented himself as a representative of the trustee. Dameron, however, understood that PR Logistics was to pay Campbell's because he and Campbell had made the arrangements with PR Logistics. Mr. Campbell does not consider that his company was hired by PR Logistics or by Denver Moving. In any event, Campbell's was not directly hired by the trustee.

As the move commenced, it became obvious that the initial cost estimate was far lower than the actual cost of the move. Upon learning this fact, Campbell called Dameron demanding payment per his tariff rate. Dameron relayed this message to Kresge, who assented to the demand. Thereafter, Dameron was no longer involved.

Ralph Kresge was concerned that the amount of material to be shipped exceeded his estimate of 2,000 pounds per store. He therefore contacted and subsequently met with the trustee, Katchmar and Wendelin Lipp, one of the trustee's attorneys, to discuss what actually had to be moved. During this meeting, Kresge assured the trustee and his employees that the cost of the move would not exceed the $25,000 cap, at least not without prior notification. At that time, the trustee was unaware of the $39.25 per 100 pound weight calculation and, furthermore, he was unaware that PR Logistics was not physically doing the move but had instead brokered the operation.

Meanwhile, Campbell's continued to move the assets. By February 11, 1988, Campbell's had incurred $100,000 worth of moving expenses and Campbell began to worry about payment. He called the trustee's office and spoke with Wendelin Lipp, seeking assurance of payment. Lipp told Campbell that the trustee had not hired Campbell's; that the estate would not pay Campbell's; and that Campbell's should seek payment from PR Logistics. She also warned Campbell against seizing the assets in order to ensure payment.

Lipp then called Ralph Kresge of PR Logistics, who assured her that Campbell's was "his problem" and that the cost of the move would not exceed the $25,000 upon which they had originally agreed. Campbell's continued the move and subsequently billed the trustee's office.

The move was massive. Over 300,000 pounds of materials were moved. The trustee sold the goods which were transported to the warehouse and those that were already there for $2,850,000. Following the move, Campbell's sent an invoice to the trustee dated March 3, 1988, for $110,329.26. That price was based upon a discount of 25% off the tariff rate. Later, Campbell's sent another invoice, also dated March 3, 1988, for $149,968.41 for an administrative expense. That price did not include the 25% discount. Subsequently, Campbell's amended its application and now asks for $208,378.50. This figure includes interest and expenses incurred during the pendency of the bankruptcy proceedings.

The bankruptcy court held that Campbell's was entitled to payment for the value of its services to the bankruptcy estate, which the court placed at $100,000. The bankruptcy court declined to award interest, stating that interest on administrative expenses "is available in only the most unusual circumstances, which are not present here."

The district court reversed the bankruptcy court in part, and held that Campbell's was entitled to only $25,000 as an administrative expense.

The district court first held that Title 11, not Title 49 (which prohibits carriers from charging less than their filed rates) was controlling, reasoning that " [i]f a carrier were permitted to enforce its tariff against a debtor, the priority of equality of distribution to creditors would be frustrated."

The court further held that the carrier was not a "professional person" whose employment required approval of the bankruptcy court.

The court stated that in order to qualify as an administrative expense, the expense must: 1) be actual and necessary; and 2) have benefited the estate and not have been incurred primarily in the interest of the claimant.

The court held:

The move, if it had cost $25,000, would have been beneficial to the estate. However, a move which cost in excess of $100,000 could only be considered detrimental and an expense which was incurred primarily in the interest of the claimant. Patch Graphics, 58 B.R. at 745 [Bkrtcy.W.D. Wis. 1986]. Accordingly, the $100,000 moving expenses do not qualify as an administrative [expense] under section 503(b) (a)....

... Katchmar and the other MBI employees were agents of the trustee. However, it is significant that the bills of lading were not filled out when signed. Katchmar and the other employees believed that the move would cost a flat fee of $25,000. The fact that the bills of lading were blank substantiated that understanding. Moreover, although Katchmar knew that Campbell's was working with PR Logistics on the move, he was never informed that Campbell's was working under a different agreement than the one originally signed with PR Logistics.

Campbell's services were authorized through agency principles. Indeed, the work Campbell's performed benefited the estate in the same way that PR Logistics' services would have benefited the estate. Therefore, the only solution to this dispute is that the estate should compensate Campbell's for the work performed pursuant to the terms of the agreement signed by PR Logistics. Campbell's is hereby granted the sum of $25,000 for services performed as an administrative expense....

... The terms of that agreement governed the operation of the move from the outset, and cannot be changed in the interim based upon unauthorized acts committed by Ralph Kresge and PR Logistics."

District Court Opinion at 8-12 (footnotes omitted).

We agree with the reasoning and conclusions set forth in the opinion of the district court, and do not believe it necessary to repeat them here.

A few salient facts are worth reiterating, however. Campbell's never contracted with, nor even spoke to, the bankruptcy trustee directly, nor did Campbell's ever inform the trustee or his employees that Campbell's would demand payment of its tariff rate. Furthermore, Campbell's never sought nor obtained the advance approval of the bankruptcy court.

Campbell's failed to take the steps necessary to insure payment of its tariff rate. Campbell's is not now entitled to an order compelling the trustee to pay more than eight times the price he agreed to pay for the transportation of the assets of the bankruptcy estate.

The decision of the district court is hereby

AFFIRMED.

WIDENER, Circuit Judge, concurs in the result.