No. 93-3013.United States Court of Appeals, Fifth Circuit.
October 27, 1993.
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David J. Messina, Paul J. Ory, Taylor, Porter, Brooks Phillips, New Orleans, LA.
Cary DesRoches, Robert M. Steeg, Steeg O’Connor, New Orleans, LA, for Matherne Assoc.
Robyn J. Spalter, Edward M. Heller, Bronfin, Heller, New Orleans, LA, for Bingler.
Appeal from the United States District Court for the Eastern District of Louisiana.
Before WIENER and EMILIO M. GARZA, Circuit Judges and LITTLE[*]
District Judge.
LITTLE, District Judge:
[1] The petitioner, Oxford Management, Inc. (“Oxford”), filed for bankruptcy under Chapter 11 of the Bankruptcy Code. Thereafter, the appellees, Katherine A. Bingler (“Bingler”) and J. Louis MatherneAssociates (“Matherne”), each brought suit against Oxford to collect monies owed from the lease of commercial office space. The bankruptcy court found that each appellee was entitled to its fee and ordered the funds harbored in an escrow account. The order was affirmed on appeal by the United States District Court following consolidation of the two separate proceedings. The petitioner now appeals the district court’s ruling, asserting that the order was erroneous as a matter of law because the fees or commissions are the property of the Bankruptcy estate and may only be disbursed in accordance with the provisions, of the Bankruptcy Code. Because we find that the bankruptcy court abused its discretion under 11 U.S.C. § 105(a) when it required the appellant to pay the appellees their claims, we reverse.
I.
[2] Oxford Management, Inc.[1] is a broker which provides commercial leasing services. In February 1983, Oxford and appellee Bingler entered into a contract whereby Bingler agreed to act as an independent contractor and bring to Oxford commercial leases. On December 6, 1984, Oxford entered into a rental agreement with Fidinam U.S.A., Inc. (“Fidinam”) in which Oxford agreed to furnish commercial leasing services to Fidinam relative to the Place St. Charles office project in New Orleans, which Fidinam owned. Bingler and Oxford agreed that Bingler would be the leasing specialist to the project.
Oxford and
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Matherne agreed that Matherne’s commission would be governed by the Oxford/Fidinam rental agreement and would equal 4% of the total net rent of the Plauche Maselli lease. As with Bingler, Oxford was to pay Matherne its commission upon receipt of the money from Fidinam.[3]
[5] This method of payment was in operation until July 1990, at which time Oxford discontinued payments to the appellees despite the fact that Fidinam continued to sent the entire 6% commission to Oxford. On November 2, 1990, Oxford filed for bankruptcy under Chapter 11 of the Bankruptcy Code. The appellees then filed separate complaints for injunctive relief, declaratory relief and turnover of funds, and motions for temporary restraining orders and injunctive relief. [6] The bankruptcy court reviewed the contracts between Oxford and Fidinam, Oxford and Bingler, and Oxford and Matherne and denied the appellees’ motions on the grounds that the appellees had a debtor-creditor relationship with the appellant and, as such, ruled that the commissions belonged to Oxford. Nonetheless, the court employed its equitable powers under 11 U.S.C. § 105(a) to order the appellant to comply with the appellee’s demands for payment.[4] [7] Oxford appealed the decision to the district court. The district court affirmed the bankruptcy court’s order compelling Oxford to pay the appellees the commissions and agreed with the bankruptcy court’s use of its equity powers under 11 U.S.C. § 105(a) to implement the order. [8] Oxford then filed this appeal, challenging whether the bankruptcy court erred in ordering Oxford to pay to appellees post-petition funds in satisfaction of obligations that arose by pre-petition agreement, and whether the bankruptcy court abused its equity powers under 11 U.S.C. § 105(a) in ordering the payments. II.
[9] A bankruptcy court’s findings of fact are subject to the clearly erroneous standard of review. In re Young, 995 F.2d 547, 548 (5th Cir. 1993). This court will strictly apply this standard when the district court has affirmed the bankruptcy court’s findings and will reverse only when this court is left with “the definite and firm conviction that a mistake has been made.” Id. Conclusions of law are reviewed de novo Id.; see also In re Allison, 960 F.2d 481, 483 (5th Cir. 1992).
A.
[10] The appellant objects to the bankruptcy court’s determination that post-petition funds be used to satisfy the appellees claims. The appellant argues that the court, having determined that Oxford and the appellees have a debtor-creditor relationship, erroneously used its, equitable powers under 11 U.S.C. § 105(a) to compel payment. We agree with the appellant and hold that the bankruptcy court abused its discretion in the application of this statute.
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section permits bankruptcy courts to issue injunctions. But, the powers, granted by that statute must be exercised in a manner that is consistent with the Bankruptcy Code. See United States, v. Sutton, 786 F.2d 1305, 1308 (5th Cir. 1986); In re Texas Consumer Finance Corp., 480 F.2d 1261, 1265 (5th Cir. 1973). The “statute does not authorize the bankruptcy courts to create substantive rights that are otherwise unavailable under applicable law, or constitute a roving commission to do equity.”United States v. Sutton, 786 F.2d at 1308.
[12] The bankruptcy court concluded that the commissions are part of the bankruptcy estate and that the appellees have the status of general unsecured creditors. At the same time, the court decided that Oxford “owed” the appellees their commissions and that equity necessitated payment. We observe, however, that the Bankruptcy Act did not give bankruptcy courts the authority to grant compensation of post-petition funds except as provided by the Bankruptcy Code. Matter of Hammers, 988 F.2d 32, 34 n. 1 (5th Cir. 1993). Neither the appellees nor the bankruptcy court cited a specific provision of the Code that would allow the payment of post-petition funds to satisfy pre-petition claims. By commanding payment, the bankruptcy court elevated the status of the appellees above that of the other general unsecured creditors and deviated from the pro rata scheme of distribution envisioned by the Code. See 11 U.S.C. § 726(b) (Law.Co-op. 1987). This order effectuated an impermissible substantive alteration of the Code’s provisions. For this reason, we find that the bankruptcy court was in error when it used its equity powers to command the payment of the appellees’ commissions. B.
[13] Having concluded that the bankruptcy court acted beyond the equitable powers granted by section 105(a), we now turn to whether the bankruptcy court was correct in concluding that the commissions were part of the bankruptcy estate. Oxford renews its assertion that the bankruptcy court properly found that the funds are part of the debtor’s estate. Bingler and Matherne, on the other hand, advance numerous arguments in support of the position that the pre-petition agreements rendered the appellees the equitable owners of the funds. In other words, the bankruptcy court’s conclusion was correct, but for the wrong reasons.
(5th Cir. 1993). [15] The appellant argues that the terms of the contracts between the parties explicitly created a debtor-creditor relationship. The contract between Oxford and Fidinam provides that the whole 6% commission is to be paid directly to Oxford, with Oxford then obligated to pay the appellees their shares. Since Bingler and Matherne were not parties to the contract between Oxford and Fidinam, they could not directly receive their payments from Fidinam but were dependent upon Oxford for payment pursuant to the terms of their respective agreements with Oxford. The bankruptcy court interpreted these contracts to mean that the commissions paid to Oxford by Fidinam were
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Oxford’s property, and that while Oxford had an obligation to pay the appellees under separate and distinct contracts, the relationship between the parties was that of debtor and creditor. We agree with these conclusions and concur in the judgment that the appellees’ claims arose pre-petition,[7] that the funds are part of the debtor’s estate, and the relationship between the appellant and the appellees is that of debtor-creditor.
1.
[16] The appellees advance several arguments in opposition to these conclusions, the first of which is based on a constructive trust theory. The appellees maintain that under Louisiana law governing real estate licenses, a scheme was created that forms the basis of an equitable interest of trust. See La.Rev. Stat.Ann. §§ 37:1430-1468 (West 1989
Supp. 1993). For instance, § 37:1446(B) requires associate brokers to receive commissions through the sponsoring broker, in this case Oxford. Moreover, § 37:1455(A)(5) permits a broker to be censured or to have his license revoked for “failure to remit money coming into his possession belonging to others.” The appellees maintain that since direct receipt of the commissions is made impossible by this scheme, and since sanctions for failure to remit are permitted by the statute, the commissions received by the sponsoring broker, in this case Oxford, are meant to “pass-through” the sponsoring broker to the associate brokers, Bingler and Matherne. As such, Oxford merely holds the funds in trust for the associate brokers.
“Additionally, where the recipient of the funds can by agreement use them as his own and commingle them with his own monies, a debtor-creditor relationship exists, not a trust.”[9] In our case, the commissions remitted by Fidinam to Oxford were placed in Oxford’s general operating account and commingled with Oxford’s other funds. No agreement existed which prohibited Oxford from using the funds for other purposes. Therefore, the appellees argument in favor of the creation of a trust is insupportable. [18] The appellees also suggest that a constructive trust was created, and they rely on section 541(d) of the Bankruptcy Code and its legislative history for support of that proposition. The appellees assert that section 541(d) recognizes that some property ostensibly owned by the debtor in possession is not the property of the debtor’s estates.[10]
Further, they direct our attention to the
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section’s legislative history, which includes an example of property that is held in constructive trust for the true owners.[11] The appellees also note that although Louisiana law does not recognize constructive trusts, the concept is an equitable one and is applicable in situations such as this one, where funds are “earmarked” for a specific creditor.
[19] While it is true that the Bankruptcy Code recognizes situations in which some property ostensibly owned by the debtor is not the property of the debtor’s estate, the examples raised by the appellees are inapplicable here. First, section 541(d) refers to secondary mortgages, not commissions. Second, Louisiana does not recognize constructive trusts. See In re Emerald Oil Co., 807 F.2d 1234, 1238 (5th Cir. 1987). Section 541 defines those interests of the debtor that are transferable to the debtor’s estate, but it leaves to state law the task of defining the extent of the debtor’s interests.[12] Therefore, while the legislative history mentions the possibility of a constructive trust under certain circumstances, the final resolution is made by nonbankruptcy law. In our case, that law is Louisiana law. Additionally, we reject the appellees’ contention that the funds were “earmarked” for them. Rather, the funds were placed in an escrow account by the bankruptcy court pending resolution of the case. This account was later terminated. Finally, the appellees’ reliance on section 541’s legislative history is misplaced. It is well established that where a statute is unambiguous, reference to legislative history is unnecessary. See, e.g., Barnhill v. Johnson, 503 U.S. ___, ___, 112 S.Ct. 1386, 1391, 118 L.Ed.2d 39 (1992) (“[A]ppeals to statutory history are well-taken only to resolve `statutory ambiguity.'”); Toibb v. Radloff, 501 U.S. ___, ___, 111 S.Ct. 2197, 2200, 115 L.Ed.2d 145 (1991).2.
[20] The appellees’ next argument is that the contractual arrangement between the parties created an agency relationship. Specifically, the appellees allege that Oxford, by collecting the commissions on the appellees’ behalf, acted as their agent. Under Louisiana law, an agency relationship is created either by express appointment of a mandatory under Civil Code Article 1985 or by implied appointment arising from apparent authority. Civil Code Article 2985 (West 1979); see also Richard A. Cheramie Enterprises, Inc. v. Mt. Airy Refining Co., 708 F.2d 156 (5th Cir. 1983). An agency relationship is created by implication “when, from the nature of the principal’s business and the position of the agent within that business, the agent is deemed to have permission from the principal to undertake certain acts. . . .” AAA Tire Export, Inc. v. Big Chief Truck Lines, Inc., 385 So.2d 426, 429 (La.App. 1980). In other words, implied agency involves permission to act, even though permission is not explicitly established orally or in writing. Id. An implied agency is frequently established by the conduct and communication of the parties and the circumstances of the particular case. Busby v. Walker, 84 So.2d 304
(La.App. 1955).
(La.App. 1970). The appellees fail to establish that an express appointment of Oxford as a mandatary was contemplated by the agreements between the parties. The unambiguous language of the contracts between Oxford and the appellees provides that Oxford agreed to pay the outside broker a commission. Again, this is language of indebtedness that cannot a creditor-debtor relationship. In so far as the record does not support the finding that an implied appointment
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was intended by the parties, we decline to create a relationship between the parties that they themselves did not intend.
3.
[22] Third, the appellees maintain that the agreements between the parties created a contract of deposit. Specifically, the appellees assert that Oxford, upon receipt of the commissions from Fidinam, became the depositary of the appellees’ 4% commissions. La.Civ. Code Ann. art. 2926 defines “deposit” as “an act by which a person receives the property of another, binding himself to preserve it and return it in kind.” A deposit is a nominate contract created by mutual consent of the parties, whether express or implied. La.Civ. Code Ann. Arts. 2932-2933 (West 1979). The main requisites for the creation of a depositor-depositary relationship are “the mutual consent of the parties and the delivery of the property.”Harper v. Brown Root, Inc., 391 So.2d 1170, 1172 (La. 1980). See also
Michael H. Rubin, Bailment Deposit in Louisiana, 35 La.L.Rev. 825, 828 (1975).
4.
[24] Finally, the appellees suggest that they are entitled to their commissions as third party beneficiaries of the brokerage commission agreement between Oxford and Fidinam. La.Civ. Code Ann. arts. 1978-1982 (West 1993) govern third-party beneficiary contracts, or stipulation pour autrui. Article 1978 provides that “[a] contracting party may stipulate a benefit for a third person called a third party beneficiary.” A third party beneficiary contract is created when the party entitled to receive the benefit, the promisee, instructs the promisor to confer the benefit upon a third party, and the promisor then agrees to do so. Wagner Truax Co. v. Barnett Enterprises, Inc., 447 So.2d 1255 (La.App. 1984) see also Miller v. Pick, 467 So.2d 74 (La.App.), writ denied, 472 So.2d 36
(La. 1985).
III.
[26] For the foregoing reasons, we conclude that the bankruptcy court erred in ordering the appellant to pay to the appellees post-petition funds in satisfaction of pre-petition obligations. Accordingly, the bankruptcy court’s order, as affirmed by the district court, is REVERSED. This matter is REMANDED to the bankruptcy court for further administration not inconsistent with this opinion.
at 541-77.
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