Jeff Ross v. John Fitzgerald, et al
Judge Douglas P. Woodlock: MEMORANDUM AND ORDER entered AFFIRMING Bankruptcy Court. (Woodlock, Douglas)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
IN RE INTERNATIONAL
GOSPEL PARTY BOOSTING JESUS
CIVIL ACTION NO.
ON APPEAL FROM BANKRUPTCY NO.
MEMORANDUM AND ORDER
August 10, 2012
Jeff Ross appeals from the January 24, 2012 decision of the
United States Bankruptcy Court denying his requested “co-broker”
commission payment for real estate he purchased from a bankruptcy
For the reasons below, I affirm the Bankruptcy Court’s
In 2010, International Gospel Party Boosting Jesus Groups,
Inc. filed for chapter 11 bankruptcy and the Bankruptcy Court
appointed a trustee.
On January 14, 2011, the Trustee filed an
application to appoint Cabot & Company as real estate brokers for
the sale of 554 Massachusetts Avenue, Boston, Massachusetts.
application stated that Cabot would split any commission it
earned with a co-broker or agent of the buyer, if one was used.
The facts are not in dispute in this appeal. The following
recitation comes largely from the Bankruptcy Court’s January 24,
2012 Memorandum of Decision concerning Ross’s motion for
reconsideration. See In re Int’l Gospel Party Boosting Jesus
Groups, Inc., 464 B.R. 78 (Bankr. D. Mass. 2012).
The Bankruptcy Court approved the retention of Cabot on February
1, 2011, but conditioned any fee to be paid to Cabot on an
application to the Bankruptcy Court and an order approving the
On April 13, 2011, the Trustee moved for an order
authorizing the sale of 554 Massachusetts Avenue to Robert
Alessandro for $1,135,000 with a $56,750 broker’s fee.
purchase and sale agreement attached to the Trustee’s filing
stated, in part, that:
Seller shall pay to Cabot and Company (“Broker”) a
broker’s commission equal to five percent (5%) percent
[sic] of the Purchase Price as of the Closing Date in
connection with the sale transaction contemplated
hereby to be divided equally between the Broker and
________ (“Co-Broker”), which commission shall only be
due in the event this transaction closes in accordance
with terms hereof and the full consideration is paid
and the Broker’s commission is approved by the United
States Bankruptcy Court for the District of
Massachusetts in case no. 10-19012. Purchaser and
Seller represent to each other that the Purchaser and
Seller have not been contacted by or dealt with any
broker, finder or intermediary of any kind in
connection with the transaction contemplated hereby
other than Broker and Co-Broker.
(strikethroughs in original).
On the same day, the Trustee filed
a Notice of Intended Private Sale (the “Sale Notice”) of the
property, which stated that “[h]igher offers must be on the same
terms and conditions provided in the purchase and sale agreement,
other than the purchase price.”
The purchase and sale agreement
referenced in the Sale Notice was the agreement involved in the
potential sale of the property to Alessandro.
On May 23, 2011, Jeff Ross, a licensed real estate broker
looking to relocate to the area, filed a notice with the
Bankruptcy Court that he offered $1,186,000 for the property.
Ross’s counteroffer represented it was “in conformance with the
[Sale Notice],” but it included a purchase and sale agreement
which was not identical to the purchase and sale agreement
attached to the Trustee’s filing because it re-instated the
stricken language above:
Seller shall pay to Cabot and Company (“Broker”) a
broker’s commission equal to five percent (5%) of the
Purchase Price as of the Closing Date in connection
with the sale transaction contemplated hereby to be
divided equally between the Broker and Jeff Ross (“CoBroker”), which commission shall only be due in the
event this transaction closes in accordance with terms
hereof and the full consideration is paid and the
Broker's commission is approved by the United States
Bankruptcy Court for the District of Massachusetts in
case no. 10-19012. Purchaser and Seller represent to
each other that the Purchaser and Seller have not been
contacted by or dealt with any broker, finder or
intermediary of any kind in connection with the
transaction contemplated hereby other than Broker and
After a hearing the next day, Ross increased his offer to
$1,326,001 and was declared the winner over two other bids
(Allesandro’s in the amount of $1,226,000, and a bid from Neelon
Properties LLC in the amount of $1,185,000).
On June 9, 2011,
the sale was approved by the Bankruptcy Court.
On June 21, 2011, Cabot filed an application for a broker’s
fee of $66,300.05, or 5% of the $1,326,001 sale price, with the
Its application disclosed that “pursuant to a
co-broker arrangement with Jeff Ross, any commission received
will be divided with Jeff Ross, with Cabot & Company receiving
50% of the total and Jeff Ross receiving 50%,” or $33,150.33.
The Bankruptcy Court held a hearing on September 6, 2011 on
After the hearing, it granted Cabot’s
application, but limited Cabot’s fee to $33,150.33, and denied
the application as to any allowance for Ross.
Ross filed a
motion for reconsideration on September 16, 2011.
Court denied Ross’s motion on January 24, 2012, and issued a
memorandum explaining its decision.
In its memorandum, the Bankruptcy Court gave three reasons
why Ross’s co-broker commission was properly denied.
Bankruptcy Court noted that Ross’s assertion that he had
adequately disclosed his co-broker status was “disingenuous.”
“Although the Ross Counteroffer represented that it was ‘in
conformance with the [Sale Notice],’ and, therefore, ‘on the same
terms and conditions provided in the [original purchase and sale
agreement],’ this was not true” because, as noted above, Ross reinstated the stricken portions of the broker’s fee section of the
In re Int’l Gospel Party Boosting Jesus Groups, Inc.,
464 B.R. 78, 81 (Bankr. D. Mass. 2012).
Second, the Bankruptcy
Court noted that the Sale Order, in which it allowed the sale of
the property to Ross, explicitly defined the Purchase and Sale
Agreement that it was approving as the initial Purchase and Sale
Agreement, not the one that Ross edited and attached to his
Id. at 84.
Finally, the Bankruptcy Court held
that the proposed division of Cabot’s broker’s fee and payment to
Ross could not be characterized as a co-broker’s commission,
because Ross was not acting as a buyer’s broker in the
transaction but was instead acting as principal.
was authorized by [the Bankruptcy] Court’s allowance of its
Employment Application to share its commission with a broker[,i]t
was not authorized to share its commission with a buyer.
former is a co-brokerage.
The latter is akin to a kickback.”
Id. at 85.
Ross appealed to this court.
STANDARD OF REVIEW
When reviewing a bankruptcy court’s order under 28 U.S.C.
§ 158, I review legal conclusions de novo and factual findings
for clear error.
In re Redondo Const. Corp., 678 F.3d 115, 120-
21 (1st. Cir. 2012).
“[C]onsiderable deference” is given to the
bankruptcy court’s “factual determinations and discretionary
judgments . . . involved in calculating and fashioning
appropriate fee awards.”
In re DN Assocs., 3 F.3d 512, 515 (1st
The Bankruptcy Court’s findings of fact, therefore,
are not to be set aside if they are “supportable on any
reasonable view of the record.”
In re Carp, 340 F.3d 15, 22 (1st
Ross argues that because he performed the work of a broker
in the transaction and his co-broker status was fully disclosed
to the participants, the Bankruptcy Court’s denial of the
requested broker’s fee must be reversed.
Under 11 U.S.C. § 328, the trustee “may employ or authorize
the employment of a professional person . . . on any reasonable
terms and conditions of employment.”
such terms and conditions, the [Bankruptcy C]ourt may allow
compensation different from the compensation provided under such
terms and conditions after the conclusion of such employment, if
such terms and conditions prove to have been improvident in light
of developments not capable of being anticipated at the time of
the fixing of such terms and conditions.”
11 U.S.C. § 328(a).
Under section 330, the Bankruptcy Court has the explicit power to
“award compensation that is less than the amount of compensation
that is requested” in an application from a professional working
for the trustee, and is prohibited from allowing “compensation
for  unnecessary duplication of services; or  services that
were not . . . reasonably likely to benefit the debtor’s estate;
or  necessary to the administration of the case.”
11 U.S.C. §§
330(a)(2) & (4).
Consistent with these statutory provisions, numerous clauses
in the various purchase and sale agreements and other documents
involved in the bankruptcy sale made clear that the amount of the
broker’s fee would be determined upon application to the
Indeed, even the modified purchase and sale
agreement that Ross submitted with his counteroffer acknowledged
that the Bankruptcy Court had the ultimate say on the broker’s
commission to be paid after the sale.
Ross argues that he performed the work of a buyer’s broker
in this transaction, claiming that “he researched available
properties and located the property on his own, performed his own
market analysis of the value of the property, and went so far as
to perform all of the functions typically performed by any real
estate broker to effect a real estate closing, such as performing
all the work necessary himself to obtain a certificate of
compliance with smoke detector regulations (“6D Certificate”).”
All these activities, even arranging for the smoke detector
certificate, are things every prospective purchaser of a home may
find himself undertaking when without a broker.
Thus, I must
determine whether the Bankruptcy Court erred in its implicit
finding that Ross did not earn a broker’s fee as he was merely a
The Bankruptcy Court’s finding that Ross was acting as a
principal in this transaction is supported by the evidence and is
undisputed by Ross, who only claims that he was simultaneously
acting as his own broker.
As the Bankruptcy Court observed, Ross
was not acting as a broker, but instead as a principal; “[a]
broker is one who acts as an agent for another:
The most important determining factor of what constitutes
a ‘broker’ is whether the party is dealing for itself or
for another. A broker . . . does not deal on its own
account. Two preliminary requirements must be met for a
finding that an individual is acting as a broker: (1) the
person is acting for compensation; and (2) the person is
acting on behalf of someone else.”
464 B.R. at 85 (quoting BLACK’S LAW DICTIONARY 219 (9th ed. 2009)
(quoting 12 AM. JUR. 2d Brokers § 1 (1997))).
Implicit in the Bankruptcy Court’s finding, that Ross was
acting as a principal, is a further finding that any other
services Ross provided in his “co-broker” capacity were neither
necessary to the administration of, nor beneficial to the estate.
That circumstance, in turn, gives rise under section 330 to the
Bankruptcy Court’s power to adjust the broker’s fees to be paid
in the sale, and to eliminate Ross’s share of those fees.
decision to do so here was not erroneous.
For the reason set forth above, I AFFIRM the Bankruptcy
/s/ Douglas P. Woodlock
DOUGLAS P. WOODLOCK
UNITED STATES DISTRICT JUDGE