Eastview Estates II, In re

• Decision Date: 19 July 1983
• Docket Number: No. 80-0043-M,No. SC-81-1014-HVL,No. 82-5722,82-5722,SC-81-1014-HVL,80-0043-M
• Citation: 713 F.2d 443
• Parties: In re EASTVIEW ESTATES II, Debtor. Perry T. CHRISTISON, trustee for Eastview Estates II, Appellant, v. The NORM ROSS COMPANY and Eli Perlman Realty Company, Appellees. BAPB.C.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 443

713 F.2d 443

In re EASTVIEW ESTATES II, Debtor.

Perry T. CHRISTISON, trustee for Eastview Estates II, Appellant, v. The NORM ROSS COMPANY and Eli Perlman Realty Company, Appellees.

No. 82-5722.

BAP No. SC-81-1014-HVL.

B.C. No. 80-0043-M.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 8, 1983.

Decided July 19, 1983.

Michael L. Kirby, San Diego, Cal., for appellant.

Michael Bergner, San Diego, Cal., for appellees.

Appeal from the United States Bankruptcy Appellate Panel for the Ninth Circuit.

Before CHAMBERS, FLETCHER, and NELSON, Circuit Judges.

FLETCHER, Circuit Judge:

The trustee appeals from a judgment holding that two brokers have allowable claims against the estate of the debtor for

                commissions based on services rendered in arranging the transfer of real property by the debtor.   The trustee contends that the bankruptcy court and the bankruptcy appellate panel (BAP) erred in finding an enforceable claim for commissions, because the brokers obtained no general brokerage agreement in writing, the conditions under which commissions were to become payable under the written special contract were never satisfied, and the special contract was not validly modified by subsequent oral statements.   We reverse
                

I

The appellees are the Norm Ross Company and Eli Perlman Realty Company (Brokers), two real estate brokers doing business in San Diego, California. Debtor Eastview Estates II (Estates) is a California limited partnership in which Toddner, Ltd., is the general partner. Toddner is a California limited partnership in which New Environment Research Co. (NER) is a partner. The president of NER is Raleigh A. Kirkendall (Kirkendall).

In 1975, Toddner purchased 58 acres of unimproved real property from Sweetwater Heights Investa (Sweetwater). Soon after, Toddner transferred the property to Estates, which assumed Toddner's indebtedness to Sweetwater. ¹

To meet final payments on the debt to Sweetwater that were due in late 1979, the property was put on the market in March of 1979. Kirkendall, acting on behalf of Estates, orally engaged Brokers, among other real estate agents, to find a buyer of the property at a set price ($1,254,000) and subject to certain terms. The proceeds of the sale were expected to produce sufficient cash to satisfy the Sweetwater debt. Kirkendall told Brokers that they would receive the customary commission but only when and if a sale according to the proposed terms actually closed and Estates received the proceeds. No general brokerage agreement, authorizing Brokers to sell the property, exclusive or otherwise, was reduced to writing.

By late June of 1979, Brokers had produced two offers to purchase the property, both of which ultimately proved unsuccessful. Other brokers also produced offers. The purchase agreements and escrow instructions executed as a result of each of these offers provided for the payment of commissions upon the close of escrow. Estates never paid any commissions on the basis of these offers, however, since none of the transactions closed.

Brokers obtained a third offer on June 24, 1979, from Schwerin-Xinos & Associates (Associates), a civil engineering firm doing development work in Southern California. Brokers reduced the offer to writing on Brokers' own "Real Estate Purchase Contract" form. The form contained instructions to open an escrow to close on October 1, 1979, and a statement that "[a]ll modifications ... shall be in writing signed by the parties."

Brokers then delivered the offer to Kirkendall, who, acting for Toddner, general partner of Estates, accepted the offer on behalf of Estates on June 29, 1979. After inserting a footnote initialed by Brokers, Kirkendall indicated acceptance by signing a section located at the bottom of the form, which contained a statement of acceptance and a conditional brokerage commission agreement. ² On July 6, 1979, Kirkendall Associates and Estates understood that Associates might experience difficulty in raising the down payment and might be unable to consummate the purchase contemplated in the June 1979 purchase contract. In light of this uncertainty, on July 11, 1979, Associates and Estates agreed to form a development/marketing partnership (Properties) in the event Associates was unable to raise the cash down payment. Under the partnership arrangement, Estates was to contribute the property to Properties while Associates was to contribute $10,000 in cash and developmental and marketing services. As Properties subdivided and sold the land, Estates was to receive the first $1,254,000, plus 10 percent interest on any unpaid portion of the $1,254,000. After that, all further receipts were to be split 50-50 between the partners.

                executed escrow instructions based on the terms of the real estate purchase contract of June 29, 1979 (the "June 1979 purchase contract") and the accompanying commission agreement (the "June 1979 commission agreement").   A closing date of October 1, 1979 was specified
                

After discussing the possibility of forming a partnership, Kirkendall told Brokers, upon Brokers' inquiry regarding the effect of the partnership alternative on the Brokers' commissions: "You will get paid, if I get paid." The written amendment to the escrow instructions executed on July 12, 1979, to reflect the discussions regarding the partnership option did not provide for the payment of commissions in the event the property was transferred to Properties rather than sold for cash to Associates.

Despite the optional partnership agreement, both Associates and Estates sought to close the deal pursuant to the June 1979 purchase contract. During the summer and early fall of 1979, Kirkendall told Associates repeatedly that Estates needed cash and urged Associates to find additional investors so the cash sale transaction could be completed as originally planned.

Associates was unable to pay the cash to close the sale under the June 1979 purchase contract. Thus, on October 1, 1979, Associates and Estates entered into partnership. Since Kirkendall did not want record title in Properties until Associates had completed its promised marketing and development work, Kirkendall did not then, or at any subsequent time, transfer title to Properties. Instead of receiving $340,000 in cash and a promissory note for $900,000 under the June 1979 purchase contract, Estates received only certain rights under the partnership. Without cash, Estates could not pay Sweetwater; Sweetwater commenced foreclosure; Estates filed for bankruptcy.

In early January of 1980, five months after the Estates-Associates partnership was formed, Brokers presented Estates--not Properties--with two new offers from third parties to purchase the property. Each offer explicitly provided for brokerage commissions to Brokers if the sale were completed. Neither of these transactions was consummated.

The following October, after another broker had arranged a sale of the property to Addland Enterprises, Inc. (Addland), the bankruptcy court entered an order confirming sale of the property by Estates to Addland for $1.9 million. The order also confirmed an award of commissions on the sale to the broker who had presented the Addland offer. Three weeks later, in early November of 1980, Brokers (Norm Ross Company and Eli Perlman Realty Company) each filed "priority" claims for commissions against the estate in bankruptcy, relying on the June 1979 commission agreement contained in the June 1979 purchase contract between Estates and Associates.

On February 9, 1981, the bankruptcy court entered an order declaring that Brokers had allowable claims against the estate. The court concluded that the June 1979 commission agreement, as modified by oral promises by Estates, constituted an enforceable commission contract based on Brokers' services in procuring Associates, which, through the Properties partnership, became a purchaser of a one-half interest in the property. The court determined the amount of each of the claims (Ross' and Perlman's) to be $18,060, based on three percent of half of the value of the transferred property ($1,204,000). ³

On appeal, the BAP affirmed the bankruptcy court on the allowability of the claims, but doubled the size of each, concluding that Estates had conveyed its entire interest in the property to the partnership entity. The trustee now takes this further appeal.

II

We begin by examining our jurisdiction over this appeal taken from the decision of the BAP, an appellate body created pursuant to section 405(c)(2) of the Bankruptcy Reform Act of 1978 (the Reform Act) and the rules of this court. See Pub.L. No. 95-598, § 405(c)(2), 92 Stat. 2549, 2685 (1978).

On June 28, 1982, the Supreme Court rendered its decision in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., holding that "the broad grant of jurisdiction to the bankruptcy courts contained in § 241(a) [of the Reform Act] is unconstitutional." --- U.S. ----, 102 S.Ct. 2858, 2880, 73 L.Ed.2d 598 (plurality opinion). The majority stated that since the grant of authority challenged in Marathon was not severable from the remaining grant of authority in section 241(a), no purported exercise of judicial authority by a bankruptcy court under section 241(a) was valid. Id. 102 S.Ct. at 2880 n. 40 (plurality opinion); id. 102 S.Ct. at 2882 (Rehnquist, J., concurring). The majority explicitly limited its holding to prospective effect, however, id. 102 S.Ct. at 2880 (plurality opinion); id. 102 S.Ct. at 2882 (Rehnquist, J., concurring), and stayed its judgment until October 4, 1982, id. The Court later extended the stay until December 24, 1982. --- U.S. ----, 103 S.Ct. 199, 200, 74 L.Ed.2d 160 (1982).

In this case, the bankruptcy court entered its order on February 8, 1981. The BAP entered its original order on February 23, 1982 and a new order modifying its earlier decision on June 23, 1982, five days before the Marathon decision and well before the...