Kun, In re

• Decision Date: 27 February 1989
• Docket Number: No. 87-15050,87-15050
• Citation: 868 F.2d 1069
• Parties: In re Paul KUN, aka Pal Kun, Debtor. James L. HODGE and Sue P. Hodge, aka Oma Suzanne Hodge, husband and wife, Appellants, v. Paul KUN, aka Pal Kun, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1069

868 F.2d 1069

In re Paul KUN, aka Pal Kun, Debtor James L. HODGE and Sue P. Hodge, aka Oma Suzanne Hodge husband and wife, Appellants, v. Paul KUN, aka Pal Kun, Appellee.

No. 87-15050.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Dec. 14, 1988.

Decided Feb. 27, 1989.

Philip L. Latish, Levy, Sherwood, Klein & Dudley, P.A., Phoenix, Ariz., for appellants.

Henry Jacobowitz, Kaplan, Jacobowitz, Byrnes, Rosier & Hendricks, P.A., Phoenix, Ariz., for appellee.

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

Before HUG, FLETCHER and BOOCHEVER, Circuit Judges.

FLETCHER, Circuit Judge:

This case involves a written contract executed by James Hodge ("Hodge") and Paul Kun ("Kun") in 1979. The bankruptcy court held that the contract is enforceable and awarded damages and attorney's fees. The Bankruptcy Appellate Panel (BAP) held that Hodge has no rights under the contract and reversed the judgment awarding damages and attorney's fees. We affirm in part, reverse in part, and remand.

I

In 1976, Hodge acted as a real estate salesman in the sale of four properties in Phoenix, Arizona to Kun: the Arizona Ambassador Hotel; the Camelback Village Apartments; the Eastern Arms/Western Arms Apartments; and the Tempe Bel Air Apartments.

During the sale of the Arizona Ambassador Hotel and the Camelback Village Properties, Hodge was employed as a real estate salesman at Coldwell Banker in Phoenix. In March of 1976, Kun and Hodge incorporated AAA Realty. Hodge effectively resigned from Coldwell Banker on July 16, 1976, when he transferred his license to AAA. Hodge was associated with AAA Realty when he assisted Kun in the purchase of the Eastern Arms/Western Arms and Tempe Bel Air Apartments. Hodge has never claimed that he was acting as a broker during the purchase of any of the four properties. Hodge apparently managed all four properties for Kun until March of 1978.

According to Hodge, Kun and Hodge entered into a "Real Estate Agreement" on January 23, 1979. The agreement provided that:

This agreement shall be between James L. Hodge, hereinafter referred to as "Broker" and Paul Kun, hereinafter referred to as "Principal" and shall pertain to real estate purchased by Principal as a result of the efforts and assistance of Broker.

In lieu of real estate sales commissions earned by Broker at time of purchase and deferred by mutual agreement, Principal agrees to pay Broker the sum equal to three (3) percent of the selling price of the properties listed below, such payment to be made at close of escrow. Should properties be traded, exchanged, or in any other way be disposed of by Principal, the sum equal to three (3) percent of the appraisal value of the property shall be paid to Broker, such payment to be made at close of escrow.

The agreement then lists the four properties discussed above.

On August 29, 1980 Hodge filed the "REAL ESTATE AGREEMENT" with the Maricopa County Recorder. The document was recorded against the four properties.

Kun filed for bankruptcy on July 1, 1981. Hodge filed an adversary proceeding on October 15, 1982, against Kun as debtor for the allowance of Hodge's claim as an unsecured creditor, and later filed an Amended Proof of Claim seeking 3% of the selling price of the four properties.

Kun answered and counterclaimed. Kun's amended answer denied that Kun signed the Real Estate Agreement and his counterclaim against Hodge alleged breach of fiduciary duty, constructive fraud, actual fraud, and slander of title. Kun also sought to have the Real Estate Agreement rescinded, and declared void and unenforceable.

Following five years of litigation and a two week trial, the bankruptcy court found that Hodge and Kun freely and voluntarily entered into the 1979 contract; that Arizona's real estate statutes do not render the contract unenforceable; and that Kun's counterclaims and defenses constituted harassment and were groundless, and not made in good faith. The court also awarded $100,000 in attorneys' fees to Hodge.

The BAP affirmed the bankruptcy court's finding that Hodge and Kun freely and voluntarily entered into the 1979 agreement. ¹ The BAP also held that the contract was unenforceable under Arizona's real estate statutes and reversed the award of attorneys' fees. We have jurisdiction pursuant to 28 U.S.C. Sec. 158(d).

II

The decision of the BAP is reviewed de novo. We evaluate the bankruptcy court's findings of fact under the clearly erroneous standard and review its conclusions of law de novo. In Re Windmill Farms, Inc., 841 F.2d 1467, 1469 (9th Cir.1988). Because we confront issues not yet decided by the Arizona Supreme Court, we must determine the result that court would reach if it were deciding this case. See Torres v. Goodyear Tire & Rubber, 857 F.2d 1293, 1295 (9th Cir.1988).

III

Hodge argues that the BAP erred in holding that Arizona Revised Statutes (ARS) Sec. 32-2155 renders the 1979 contract unenforceable. Section 32-2155 states that a real estate salesman may receive commissions only from brokers: "[a] broker shall employ and pay only legally licensed salesmen and a salesman shall accept employment and compensation as such only from legally licensed brokers." Hodge argues that a real estate salesman always is permitted to sue a principal for a commission under ARS Sec. 32-2152, which states that "[a]n action for the collection of compensation may be maintained in the courts of the state by any broker or salesman." Hodge also argues that, even if Sec. 32-2155 bars a salesman from receiving commissions from a principal in some cases, it does not render the 1979 contract unenforceable because Kun was an experienced real estate investor, Hodge had left AAA realty and Coldwell Banker by 1979, and Kun contracted to pay Hodge a percentage of the sales price of the four properties only because Hodge had helped to manage them.

A fundamental principle of statutory construction is that "[i]nterpretive constructions [of statutes] which would render some words surplusage ... are to be avoided." Pacific Mutual Life Insurance Co. v. American Guaranty Life Insurance Co., 722 F.2d 1498, 1500 (9th Cir.1984). Under Hodge's reading of Sec. 32-2152, a salesman can always sue the principal for a commission. We cannot accept this construction of Sec. 32-2151, as it would render Sec. 32-2155's express limitation on the sources of a salesman's compensation nugatory. See Schoene v. Hickam, 397 S.W.2d 596, 603 (Mo.1965) (employing this reasoning in holding that ARS Sec. 32-2152 does not authorize an Arizona real estate salesman to sue a principal for a commission).

Nor are we convinced by Hodge's arguments that Sec. 32-2155 is inapplicable in cases where the party promising to pay the commission is an experienced real estate investor or the party promised the commission has left the employ of the broker involved in the sale. "[T]he starting point for interpreting a statute is the language of the statute itself. Absent a clearly expressed legislative intention to the contrary, that language must ordinarily be regarded as conclusive." Consumer Product Safety Commission v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S.Ct. 2051, 2056, 64 L.Ed.2d 766 (1980). Section 32-2155 flatly prohibits real estate salesmen from accepting commissions from anyone but brokers; it contains no exceptions. Moreover, " 'there seems little doubt that the legislative intent [of Arizona's real estate statutes] is to furnish protection to the public by strict ... requirements.' " Schlicht v. Curtin, 117 Ariz. 30, 570 P.2d 801, 803 (App.1977) (citation omitted).

We also reject Hodge's argument that the purpose of the 1979 contract was to compensate Hodge for his services as a property manager, rather than for his services as a real estate salesman. Hodge's own pleadings in the bankruptcy court expressly state that the 1979 contract was merely a memorialization of Kun's oral promise to pay Hodge commissions on the four properties when they were sold. In the pretrial order, which contained a statement of the contested issues of fact in the case as agreed upon by the parties, Hodge contended that

Defendant orally agreed to pay Plaintiff for his efforts in connection with the acquisition by Defendant of the properties identified in the Real Estate Agreement upon the sale of those properties. This oral agreement subsequently was reduced to writing in the Real Estate Agreement dated January 22, 1979, which was signed by the Plaintiff and Defendant before a Notary Public employed by Transamerica Title Insurance Company.

The wording of the 1979 contract confirms that it refers to Hodge's services as a real estate salesman, rather than to his services as a property manager. The contract refers to Hodge as a "Broker" and Kun as a "Principal," and states that it pertains to "real estate purchased by Principal as a result of the efforts and assistance of Broker." The contract does not mention Hodge's services as a property manager.

IV

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