Memorandum of Decision Re: Prepetition Real Estate Commissions

IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA
In re CORNELIUS R. OOSTERBAAN,                                                 No. 93-10251      Debtor. ___________________________/ JEFFRY LOCKE, Trustee,      Plaintiff,    v.                                                                                                   A.P. No. 93-1199 RE/MAX OF SOUTHERN MARIN, et al.,      Defendants. ______________________________/
Memorandum of Decision
     Prior to his Chapter 7 filing, debtor Cornelius Oosterbaan was a real estate salesman employed by defendant Re/Max of Southern Marin, a real estate broker. In this adversary proceeding, plaintiff Jeffry Locke, the Chapter 7 trustee, seeks to establish that a real estate commission paid to Oosterbaan by Re/Max after the bankruptcy was earned prepetition and therefore belongs to the bankruptcy estate.      On May 26, 1992, defendant Mary Morgan, Inc. entered into a listing agreement with Re/Max whereby Re/Max was given the exclusive right to sell Morgan's real property. Re/Max introduced Morgan to Motels of San Francisco, Inc.; on November 8, 1992 those parties signed a nonbinding letter of intent for the purchase and sale of Morgan's property. After a period of negotiation during which the deal was "on-again, off-again," Morgan and Motels of San Francisco signed a binding contract on April 23, 1993. In the meantime, on February 2, 1993, Oosterbaan had filed his bankruptcy petition. The issue now before the court is whether the $42,000.00 paid to Oosterbaan at the close of escrow on May 21, 1993, belonged to the bankruptcy estate.      In reaching its decision, the court first notes that Oosterbaan was a salesman, not a broker. As such, he was the employee of his broker and had no claim to a commission except through his broker. California Business & Professions Code section 10137. The issue is therefore when Oosterbaan was entitled to be paid by his broker. Any arguments about being entitled to payment after producing a ready, willing and able buyer miss the point; they address the broker's rights, not those of his employees.      The contract between Oosterbaan and Re/Max provided, in pertinent part:            [A]ll commissions will be received by Broker;            Salesperson's share share of commissions, however,shall            be payable to Salesperson immediately upon collection or            as soon thereafter as practicable.            In no event shall Broker be personally liable            to Salesperson for Salesperson's share of commissions            not collected, nor shall Salesperson be entitled to any            advance or payment from Broker upon future commissions.
     Pursuant to section 541(a) of the Bankruptcy Code, the Bankruptcy estate is vested only with those rights the debtor had as of the commencement of the case. Under the employment contract, Oosterbaan had no rights on that date.      As a general rule, postpetition commissions are property of the estate if they are the result of prepetition work. See, e.g., In re Bluman, 125 B.R. 359, 365 (Bkrtcy.E.D.N.Y.1991); In re Froid, 109 B.R. 481, 483 (Bkrtcy.M.D.Fla.1989). However, in all reported cases the court has found where postpetition commissions were held to belong to the estate, both the act and the contractual right to the commission had occurred before the bankruptcy.      In this case, while the act of introducing buyer and seller had taken place before bankruptcy nothing which gave right to a commission had occurred before the bankruptcy. The listing itself gave Oosterbaan no rights. The nonbinding letters of intent gave Oosterbaan no rights. Only the close of escrow gave Oosterbaan any rights, pursuant to his employment agreement. However, even the signing of a binding agreement was postpetition. As of the day of filing, Oosterbaan had no legal or equitable rights, only a hope that the parties would reach an agreement which would eventually result in a commission for him. Such a hope is not enough for the estate to claim a right to the commission.      For the foregoing reasons, the court will enter a judgment declaring that the trustee has no right, title or interest in the commission. The court notes that this ruling is in accord with the only reported case dealing with the rights of a real estate salesperson, In re Zahneis, 78 B.R. 504 (Bkrtcy.S.D.Ohio 1987). In Zahneis, the court held that the commissions did not belong to the estate even though both the listing and the sale had occurred prepetition, with only the close of escrow happening after the filing. Here, the sale was postpetition as well as the close of escrow.      Despite the pleadings of the parties, this is not an action on a contract and nobody is entitled to attorneys' fees. Defendants shall recover their costs, if any.      This memorandum constitutes the court's findings and conclusions pursuant to FRCP 52(a) and FRBP 7052. Counsel for Oosterbaan shall submit an appropriate form of judgment forthwith.
Dated: May 11, 1994                                                                                                   _______________________                                                                                                                                                    Alan Jaroslovsky                                                                                                                                                    U.S. Bankruptcy