Memorandum of Decision Re: Employment of Broker

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Decisions
IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA
In re GATTLING-HOGUE/VALLEY                                                                           No. 96-13258 DEVELOPMENT PARTNERS,        Debtor. ___________________________/
Memorandum of Decision
     Napa Valley Homes is a real estate brokerage owned by Dennis Rippey, who is also general partner of the debtor in this Chapter 11 case. The debtor seeks to employ Napa Valley Homes pursuant to section 327(a) of the Bankruptcy Code. The U.S. Trustee objects, arguing that Napa Valley Homes is not eligible to be hired under that statute because of its connection to Rippey.      Real estate brokers are professionals within the meaning of section 327(a). In re Haley, 950 F.2d 588 (9th Cir.1991). A debtor in possession may not hire a real estate broker which is an insider, because the statute requires professionals to be "disinterested persons." Section 101(14)(A) provides that a person cannot qualify as disinterested if it is an insider. In re Yuba Westgold, Inc., 157 B.R. 869 (Bkrtcy.N.D. Iowa 1993); In re Sky Valley, Inc., 135 B.R. 925, 934-36 (Bkrtcy.N.D. Ga.1992); In re Lakeside I Corp., 120 B.R. 231 (Bkrtcy.M.D.Fla. 1990).      The debtor concedes that Napa Valley Homes is an insider because it is owned by the debtor's general partner. However, it argues that the individual employees of Napa Valley Homes who are to share the commission are not insiders and may therefore be paid. This argument is not consistent with state law.      Under California law, it is the broker who is entitled to the commission. A real estate agent cannot contract in her own name, nor can she accept compensation from anyone other than the broker under whom she is licensed. Cal.Bus.&Prof.Code sec.10137; Grand v. Griesinger (1958) 160 Cal.App.2d 397. Since the debtor cannot hire the agent directly, it is of no consequence that she herself may not be an insider.1      For the foregoing reasons, the objection of the U.S. Trustee will be sustained and the debtor's motion to employ Napa Valley Homes as real estate broker will be denied. The U.S. Trustee shall submit an appropriate form of order.
Dated: May 1, 1997                                                                           _______________________                                                                                                            Alan Jaroslovsky                                                                                                            U.S. Bankruptcy Judge
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     1. The definition of "insider" under the Code is not exclusive. Papers submitted by the debtor indicate that the agent may in fact be an insider even though she has no formal relationship to Rippey. However, there is no need to delve into this