Original Filed
March 18, 1999
	
	
UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF CALIFORNIA

In re		
No.95-34447DDM
Chapter 7

CENTURY 21 HERD AND CO. REALTORS,
INC., a California Corporation,
Debtor.
___________________________________/
ROBERT M. DAMIR, Chapter 7 Trustee,
Plaintiff,
A.P. No. 97-3498DM
vs.
MELANIE HILDEBRAND, NIEL 	
HILDEBRAND, CHARLES COLLIVER, 
CENTURY 21 ALLIANCE, A California
Corporation, and 
DOES 1 through 20, inclusive,				
Defendants.
__________________________________/

MEMORANDUM DECISION

I. INTRODUCTION

Trial in this matter was held on March 8 and 9, 1999.
Plaintiff appeared and was represented by Michael B. Bassi, Esq.
and Dena M. Roche, Esq,; defendants appeared and were represented
by James S. Mori, Esq.

As more particularly explained below, the court will award
judgment to plaintiff, Robert M. Damir, the Chapter 7 Trustee
("Trustee"), against defendant Hilfasco, Inc. ("Alliance")⁽¹⁾ [2] in the
amount of $26,508.78; against Niel Hildebrand in the sum of
$4,000; and against Melanie Hildebrand and Niel Hildebrand jointly
and severally, in the sum of $17,391.66. Charles Colliver is
entitled to judgment in his favor.

II. DISCUSSION⁽²⁾ [3]

Century 21 Herd and Co. Realtors, Inc. ("Herd") is the debtor
in this Chapter 7 case, having filed a voluntary petition in this
court on November 28, 1995. Its three corporate shareholders and
its officers are defendants Melanie Hildebrand, Niel Hildebrand
and Charles Colliver (collectively the "Individual Defendants").

Herd did business as a licensed real estate sales brokerage
in Daly City, California. Melanie Hildebrand and Niel Hildebrand
have been affiliated with Herd since shortly after its formation
in the early 1980's. Charles Colliver became affiliated with it
in 1990 or 1991. Each of the Individual Defendants is a licensed
California real estate broker.

The Individual Defendants, as well as several licensed real
estate sales agents, served as independent contractors to Herd.
More specifically, Melanie Hildebrand and Niel Hildebrand were
parties to personal service contracts (Exs. 140 and 141,
respectively) (the "personal service contracts"). Those personal
service contracts reaffirm that Melanie and Niel Hildebrand were
not employees of Herd but rather were independent contractors.
This is consistent with how real estate offices frequently conduct
their business.

Faced with cash flow problems and increasing debt, including
rent, professional fees and exposure to litigation, the Individual
Defendants decided to terminate Herd's business effective April
15, 1995. At that time Herd had at least ten listings with
property owners appointing Herd the listing agent to sell those
properties (the "Herd Listings"). Herd was also broker of record
on two sales agreements whereby it was the selling agent, acting
on behalf of buyers of the two properties (the "Herd Sales").⁽³⁾ [4]

Although Herd appeared as broker of record, either by way of
the listing agreement or the subsequent sales contracts in the
Herd Listings and the Herd Sales, when the escrows closed after
Herd had terminated its active business, commissions were paid to
Alliance. Trustee seeks recovery from Alliance of the "company
dollar," that is, the amount of commissions he contends were
earned by Herd after payment of franchise fees, advertising fees,
and commission "splits" to individual licensed real estate agents
handling the particular Herd Sales.

The court is satisfied from the expert testimony of Leo
Saunders that the Herd Listings and the Herd Sales had value to
Herd. Further evidence that Herd itself had a record of treating
its listings as assets of value as is reflected in litigation
previously brought against Zonia and Fernando Fasquelle, who had
formerly been principals of Alliance. Paragraphs 6 and 7 of the
personal service contracts are also consistent with the notion
that listings were owned by Herd (rather than the individual
broker) and had value.

Escrows on the Herd Listings and the Herd Sales closed after
Herd terminated its business activity, and as noted above, the
commissions were paid to Alliance. Except with respect to 38
Holloway Avenue, San Francisco, California, defendants did not
present any evidence that Alliance or the Individual Defendants
contributed any effort to bring about the consummation of the
subject transactions. On the 38 Holloway Avenue sale, Alliance
did provide valuable services after April 15, 1995, and therefore
its obligation to Herd will be reduced to a reasonable referral
fee. Thus, there was no consideration flowing to Herd, and
Alliance was the fraudulent transferee of the "company dollar" for
these twelve transactions.⁽⁴⁾ [5]

Mr. Saunders opines that in each of the foregoing instances,
Herd should have either received all of the company dollar or a
25% referral fee based upon the gross commission paid to Alliance.
Trustee has not provided the court with any analysis as to which
of the two figures would be appropriate, even though in some
instances the company dollar is less than the referral fee and in
some instances it is larger. However, consistent with the fact
that Alliance took these twelve contractual opportunities from
Herd and did not pay for them, the imposition of referral fee is
inappropriate and the court will award the Trustee judgment for
the company dollar transferred in fraud of creditors, except as to
38 Holloway Avenue. Thus, judgment will be entered against
Alliance in the sum of $14,658.61 based upon the transactions
involving the following properties and amounts retained by it:

Real Property	Company Dollar
282 Sunshine Dr. Pacifica, CA	$ 2,299.08
48 Oakmont Dr. Daly City, CA	$ 634.57
36 Shasta Ln. Pacifica, CA	$ 500.00
38 Holloway Ave. San Francisco, CA	$ 1,110.00 (25% referral fee on gross commission)
66 Colby St. San Francisco, CA	$ 2,292.64
110 N. Mayfair Daly City, CA	$ 1,127.00
8 Dunsmuir St. San Francisco, CA	$ 2,178.99
323 El Dorado Daly City, CA	$ 500.00
35 Vista Ct. So. San Francisco, CA	$ 2,190.75
205 Mariposa Ave. Daly City, CA	$ 377.16
3925 Savannah Ct. So. San Francisco, CA	$ 779.60
3924 Geddes Ct. So. San Francisco, CA	$ 668.82 $14,658.61

A separate set of transactions challenged by Trustee include
sales similar to the Herd Listings and Herd Sales. In these
twenty transactions (reduced to eighteen during trial) (the
"Alliance Sales"),⁽⁵⁾ [6] after Herd closed its doors listing agreements
or sales contracts were signed by a broker or agent purporting to
act on behalf of Alliance. The agreements and contracts were
signed before May 18, or 19, 1995, the earliest date on which the
Trustee argues that the particular real estate professional's
license was transferred on the records of the California
Department of Real Estate ("DRE"). For the Alliance Sales the
Trustee contends, his expert Mr. Saunders opines, and the court
agrees, that a real estate sales person (licensed as an agent but
not as a broker) cannot act for any real estate agency other than
the one with which that sales person's license is "hung," meaning
the office in which the sales person is licensed to do business
according to the DRE. Defendants contend that the critical date
is the date the licensee physically transferred the license from
one office to another, and thus any listing agreements or sales
contracts signed after April 15, belong solely to Alliance.

The law is very uncertain here and the vagueness or lack of
applicable regulations must necessarily give way to practical
considerations. Absent any clear indication for the DRE,
California courts, or California law, Mr. Saunders' expert
testimony, unrebutted by any convincing testimony from defendants,
will be accepted. He opines that in practice a 25% referral fee
on the gross commission paid to Alliance would be an appropriate
compensation to Herd. However, the Trustee's theory of the case
is that Alliance is liable as a fraudulent transferee, not on the
basis of an implied contract or referral fee. Thus, the award in
his favor will be limited to the lesser of the "company dollar" or
25% of the gross commission paid. Further, as to the property at
701-703 Prospect Avenue, San Mateo, California, Melanie Hildebrand
was paid voluntarily by seller after expiration of the listing
agreement. It would be inappropriate, therefore, to charge
Alliance with any liability for this sale.

Judgment will be entered against Alliance in the additional
sum of $11,850.17 based upon the Alliance Sales involving the
following properties and the amounts shown:

Real Property Sold	Lesser of Company Dollar or Referral Fee
282 Sunshine Dr. Pacifica, CA	$ 1,313.76
48 Oakmont Dr. Daly City, CA	$ 634.57
534 Arch St. San Francisco, CA	$ 1,345.00
163 East Vista Daly City, CA	$ 1,247.50
1826 32nd Ave. San Francisco, CA	$ 338.47
1404 Eddington Ln. Daly City, CA	$ 1,218.75
340 Justin Dr. San Francisco, CA	$ 634.34
4949A Harrington San Francisco, CA	$ 445.31
1024 Gilman Dr. Colma, CA	$ 500.00
310 Victoria San Francisco, CA	$ 415.23
382 Imperial Way #7 Daly City, CA	$ 547.92
171 Wilits Dr. Daly City, CA	$ 246.77
1451 Madrone Way San Pablo, CA	$ 94.30
1831 46th Ave. San Francisco, CA	$ 632.96
2270 Sloat Blvd. San Francisco, CA	$ 837.01
650 Paris St. San Francisco, CA	$ 776.58
325 Santa Barbara St. Daly City, CA	$ 621.70 $11,850.17

* * * * *

Trustee also contends that each of the Individual Defendants
is liable because of the personal service contracts signed by
Melanie Hildebrand and Niel Hildebrand, or the so-called
"assessment" policy that binds Charles Colliver. The evidence is
inadequate for the court to find that such an assessment policy
was agreed to by any of the Individual Defendants. Voluntary
contributions made by any of the three shareholders at times when
Herd needed funds do not rise to the level of a legal obligation
to pay money when the debts of Herd could not be satisfied. Thus,
Charles Colliver is not liable for any assessment now on account
of any personal service contract or otherwise.

Melanie Hildebrand and Niel Hildebrand each signed personal
service contracts that obligate them to pay their share of office
overhead expenses, including office rent, clerical and bookkeeping
expense, utilities and telephone. Since the Trustee has not
offered evidence of actual claims on file, the court must rely on
the schedules of unsecured priority and nonpriority debt (Ex. 163-11 to 163-14). Those scheduled claims that fall within the
general overhead category include taxes and obligations for goods
and service to various parties, as follows:

Creditor	Amount
Lee Buffington San Mateo County Tax Collector	$ 1,266.00
Century 21 NAF	$ 375.00
Century 21 San Francisco	$ 680.00
Dataquick	$ 188.04
First National Bank	$ 553.68
Liccardo, Rossi, et al.	$ 575.00
Steven L. Pollok	$ 5,463.28
She, Labaugh, et al.	$ 195.66
Henry Trim	$ 225.00
Westlake Development Corp.	$ 7,870.00
	$17,391.66

Excluded from the foregoing are scheduled obligations to
Thomas Finnegan Realtor, Inc. for $36,150.76 and Taber for $5,500.
Those claims arise from litigation against Herd and fall outside
of general office overhead. There is no proof that Melanie
Hildebrand or Niel Hildebrand agreed to pay these obligations of
Herd.

Trustee contends that the individual defendants should be
liable for their respective shares of $63,493.98, their
"Principals Take-Home Dollar" is set forth in Exhibit 3. To reach
this result would be grossly unfair. First, in each instance the
Individual Defendants acted as listing or selling agent and were
entitled to their commission for the services they rendered.
Stated otherwise, but for their services as listing or selling
agent, there would have been no commission in the first place.

That being said, Melanie Hildebrand and Niel Hildebrand must
be held accountable for their share of overhead and expenses.
Their retention of 100% of the actual office commission earned by
Herd (less only a $200 transaction fee in some instances) is
grossly unfair to creditors, violates the spirit and the letter of
the personal service contracts, constitutes a fraud on creditors
and a breach of fiduciary duty by these two corporate officers in
the face of Herd's insolvency. Trustee is entitled to judgment
against Niel Hildebrand and Melanie Hildebrand, jointly and
severally, in the amount of $17,391.66 as set forth above.

* * * * *

Finally, Trustee contends that the Individual Defendants must
return to the estate excessive management fees they were paid in
the weeks prior to Herd's closing its doors. Specifically,
Charles Colliver received $2,500, Melanie Hildebrand received
$6,000 and Niel Hildebrand received $4,000 and Trustee, without
specific proof, wants the court to order a refund of all of those
fees that are "excessive."

The evidence establishes that Melanie Hildebrand and Charles
Colliver serviced in a management capacity with Herd until it
closed and were entitled to be paid their management fees. The
court cannot say that those fees were either unearned or
excessive. At worst payment may have been on account of
antecedent debt, but the Trustee did not cast his action as a
preference action. His attempt to recover from those individuals
on a fraudulent transfer theory must fail because their management
services were of reasonably equivalent value to the amount paid
for them.

Niel Hildebrand did not perform management services for Herd
in 1995, nor is there any evidence that he was owed any deferred
management fees. Thus the payment to him of $4,000 within days of
Herd's cessation of business constituted fraudulent transfers and
Trustee may have judgment against him for $4,000.

* * * * *

The Trustee has asked that the defendants be held liable for
actual fraud under 11 U.S.C. § 548(a)(1), but no proof has been
offered to carry Trustee's burden. The court's oral granting of
defendants Fed.R.Bankr.P. 7052(c) motion during trial need not be
discussed further here. The Trustee also seeks punitive damages
but has not provided any evidence to justify such an award.

III. DISPOSITION

Within twenty (20) days from the date of service of this
Memorandum Decision, counsel for Trustee should submit a form of
judgment against defendants (together with the Trustee's costs) consistent with the foregoing. Counsel for Trustee should comply with B.L.R. 9022-1 and 9022-2.

Dated: March __, 1999
______________________________
Dennis Montali
United States Bankruptcy Judge

1. The caption names Hilfasco, Inc. as "Century 21 Alliance." It is undisputed that the correct corporate name is Hilfasco, Inc.
and its d/b/a is Century 21 Alliance.

2. The following discussion constitutes the court's findings of fact and conclusions of law. Fed. R. Bankr. P. 7052(a).

3. The locations of the properties and other relevant data concerning the respective transactions, the dates the listing
agreements were signed, the dates the applicable sales contracts were signed, the dates escrow closed, etc. are set forth in
plaintiff's Exhibit 1.

4. Defendants have not contested that at the time of the transfer of the Herd listings and the contractual rights evidenced by the Herd Sales that Herd was insolvent. Further, there is no dispute
that the taking over of these rights were "transfers" for purposes of 11 U.S.C. § 548.

5. The locations of the properties and other relevant data concerning the respective transactions, the dates the listing agreements were signed, the dates the applicable sales contracts
were signed, the dates escrow closed, etc., are set forth in plaintiff's Exhi