Court Opinion

ID: 3028405
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:40:32.259217+00
Date Added: 2024-06-11T12:46:35.910205
License: Public Domain

United States Court of Appeals
                               FOR THE EIGHTH CIRCUIT

                                         ___________

                                         No. 01-2758
                                         ___________

In re: Janet Lynn Parsons,                    *
                                              *
               Debtor,                        *
----------------------------------            *
Janet Lynn Parsons,                           *
                                              *
               Appellant,                     *
                                              * Appeal from the United States
       v.                                     * Bankruptcy Appellate Panel
                                              * for the Eighth Circuit
Union Planters Bank;                          *
                                              *
Fred C. Moon,                                 *
                                              *
               Appellee.                      *
                                         ___________

                              Submitted: December 27, 2001

                                     Filed: February 11, 2002
                                          ___________

Before McMILLIAN, MORRIS SHEPPARD ARNOLD, and BYE, Circuit Judges.
                          ___________

McMILLIAN, Circuit Judge.
        Janet Lynn Parsons appeals from the final order entered by the Bankruptcy
Appellate Panel (BAP), affirming the bankruptcy court’s1 findings that real estate
commissions paid to her after her bankruptcy filing belonged to the bankruptcy estate,
and that she was entitled to exempt from the estate as wages only 9.7% of the
commissions. For reversal, Parsons argues (1) the post-petition services she rendered
were indispensable to the closing of the subject real estate contracts, and thus the
resulting commissions should have been excluded under 11 U.S.C. § 541(a)(6); (2)
if the commissions were not excludable under § 541(a)(6), they were entirely exempt
under Mo. Rev. Stat. § 525.030 (2000) because they were all paid after the
bankruptcy filing; and (3) even if the commissions were subject to garnishment under
§ 525.030 and thus were not entirely exempt, 75% of them--not 9.7%--should have
been exempt. For the reasons discussed below, we affirm the judgment of the
bankruptcy appellate panel.

      At the relevant time, Parsons was an independent contractor with Re/Max.
Pursuant to an agreement, Re/Max received a 5% broker-service fee for each sales
contract that Parsons or her real estate team negotiated. The fee was deducted from
each earned commission at the time it was paid; Re/Max also retained from
commission checks any sums past due for other services, such as administrative
expenses, fees, and insurance. Parsons used most of her commission checks to pay
business expenses. She netted $4,946 monthly.

       When Parsons filed for bankruptcy, she had fifteen sales contracts for which
she had not yet been paid a commission. These contracts generated $61,884 in sales
commissions, but because Parsons owed Re/Max $22,992, Re/Max paid her the
difference, $38,892, post-petition. Parsons claimed as exempt on her bankruptcy
schedule 75% of the $38,892. The fifteen contracts were all signed prior to the

      1
       The Honorable Arthur B. Federman, Chief Judge, United States Bankruptcy
Court for the Western District of Missouri.
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bankruptcy filing, and all but two were closed after the filing. Parsons and her team
worked hard to ensure that all sales closed by scheduling inspections, applying for
title work, ensuring that buyers were qualified, and negotiating contract changes
between buyers and sellers. According to Parsons, if the team had not performed
these post-contract functions, half of the sales would not have closed. Under the
listing agreement Parsons used, if a broker produced a buyer who was ready, willing,
and able to purchase the property on the listed terms or other terms acceptable to the
owner, or if the owner sold the property to anyone while the listing agreement was
in effect, then the owner would pay the broker at closing either a negotiated fee or 7%
of the sale price.

       The bankruptcy trustee and Parsons disputed whether the $38,892 was property
of the bankruptcy estate or was exempt as wages. The bankruptcy court found that
the sales commissions were earned pre-petition and thus were property of the estate.
The court also found that Parsons was not entitled to exempt 75% of the commissions
paid to her agency (as she contended she was entitled to do under Missouri’s
garnishment statute), because she had not personally performed all of the services that
resulted in the commissions. Instead, the court allowed her to exempt $4,946 of the
commissions, as that figure represented how she had valued her average monthly
services on her bankruptcy schedules. The BAP affirmed, and this appeal ensued.

      We review the bankruptcy court’s factual findings for clear error and its
conclusions of law de novo. See In re Papio Keno Club, Inc., 262 F.3d 725, 728-29
(8th Cir. 2001). Whether property is included in the bankruptcy estate is a question
of law. See In re Cent. Ark. Broad. Co., 68 F.3d 213, 214 (8th Cir. 1995) (per
curiam).

       We first agree with the bankruptcy court that the commissions were earned pre-
petition and thus were property of the bankruptcy estate. Property of the bankruptcy
estate includes “all legal or equitable interests of the debtor in property as of the

                                          -3-
commencement of the case.” See 11 U.S.C. § 541(a)(1). In Missouri, a broker earns
her commission when she produces a buyer who is ready, willing, and able to buy on
terms specified by the seller, whether or not the sale is completed; the parties may
vary the seller’s duty to pay the commission by express agreement within the listing
contract. See Dark v. MRO Mid-Atlantic Corp., 876 S.W.2d 714, 716 (Mo. Ct. App.
1994). Here, the fifteen subject contracts were all signed prior to the bankruptcy
filing, and there was no evidence that either the relevant listing agreements or the
sales contracts made payment of the commissions contingent on closing or on the
realtor’s continued provision of services after procuring a buyer. See In re Tully, 202
B.R. 481, 483-84 (B.A.P. 9th Cir. 1996) (where commission was earned when broker
located ready, willing, and able buyer, commission was pre-petition earning even
though closing took place post-petition).

       Next, we reject Parsons’s argument that her post-petition services rendered the
commissions excludable from the bankruptcy estate under § 541(a)(6) (earnings from
services performed by individual debtor after commencement of bankruptcy case are
excluded). Parsons failed to present evidence that the contract terms were altered by
post-petition events so as to alter her protectable interest in receiving the
commissions. Cf. In re Brandon, 184 B.R. 157, 159-60 (Bankr. N.D. Fla. 1995)
(addenda to real estate contracts did not destroy original contract that was accepted
by sellers pre-petition and that gave rise to debtors’ right to commission). We find
inapposite the cases Parsons cites in support of her theory, for in those cases the
debtor’s receipt of commissions was contingent upon the debtor’s continuing
obligation to perform services post-petition. See Sharp v. Dery, 253 B.R. 204, 208
(Bankr. E.D. Mich. 2000); In re Zahneis, 78 B.R. 504, 505-06 (Bankr. S.D. Ohio
1987); In re Hodgson, 54 B.R. 688, 690 (Bankr. W.D. Wis. 1985).

     Parsons also argues that, because the commissions had not actually been paid
when she filed for bankruptcy, the commissions were not subject to garnishment

                                          -4-
under Mo. Rev. Stat. § 525.030 (and thus were exempt from the bankruptcy estate).2
We disagree. Section 525.030 includes, as earnings subject to garnishment, wages or
earnings owing to the garnishee. Because the fifteen contracts were signed pre-
petition, Parsons had a legally protectable interest at that time in receiving the
commissions. Cf. In re Jess, 169 F.3d 1204, 1208 (9th Cir. 1999) (lawyer had interest
in contingency fee because of pre-petition work on case; interest thus was property
of estate under 11 U.S.C. § 541(a)(1)).

       Finally, we cannot find fault with the bankruptcy court’s exemption of 9.7%
of the commissions as compensation for Parsons’s post-petition personal services,
given Parsons’s lack of evidence showing that a different percentage was attributable
to her personal services. See Gerry Elson Agency, Inc. v. Muck, 509 S.W.2d 750,
753 (Mo. Ct. App. 1974) (sole criteria for determining whether earnings exemption
applies is whether earnings represent compensation for personal services).

      Accordingly, we affirm the judgment of the bankruptcy appellate panel.

      A true copy.

             Attest:

                     CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

      2
        Under federal and state law, the Missouri garnishment statute provides a basis
for exempting property from the bankruptcy estate. See 11 U.S.C. § 522; Mo. Rev.
Stat. § 513.427 (2000).
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