In Re: Otis Lain and Estella Lain

Filing 10

ORDER REMANDING CASE TO BANKRUPTCY COURT. Signed by Judge Lance M Africk. (copy: Trustee, Bk Judge, Bk Ct)(car, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA

IN RE:

CIVIL ACTION

OTIS LAIN AND ESTELLA LAIN

No. 11-771
SECTION I

ORDER AND REASONS
Before the Court is an appeal of a judgment of the U.S. Bankruptcy Court filed by
appellant, Ronald J. Hof, trustee for the bankrupt estate of Otis Lain and Estella Lain (the
“Lains”). Appellee, Latter & Blum, Inc. (“Latter & Blum”), has filed a response. For the
following reasons, the matter is REMANDED to the U.S. Bankruptcy Court for further
articulation of its reasoning.

BACKGROUND
The parties do not dispute the facts underlying the issues before the Court. In 2007,
Latter & Blum and the Lains entered into a contract which granted Latter & Blum the right to act
as the Lains’ exclusive agent for the sale of property located at 2800 Old Spanish Trail in Slidell,
LA (the “property”).1 The contract guaranteed Latter & Blum a commission of six percent of the
sale price of the property in the event that it or any other party negotiated the sale of the property

1

2:10-ap-1080 Doc. No. 23, Exhibit 2.

within the term of the contract.2 The property was eventually sold independently by the Lains
during the term of the contract without the knowledge of Latter & Blum.3
On January 13, 2009, the Lains filed a voluntary petition for bankruptcy pursuant to
Chapter 7 of Title 11, United States Code.4 On March 30, 2009, Latter & Blum filed a proof of
claim in the Lains’ Chapter 7 case in the amount of $46,920.00 for their commission on the sale
of the property. After a proceeding held before the U.S. Bankruptcy Court, the U.S. Bankruptcy
Court found that Latter & Blum were indeed entitled to $46,920.00 in commission arising out of
the contract.5 In addition, the U.S. Bankruptcy Court ruled that Latter & Blum was entitled to a
special privilege for the commission pursuant to LSA-R.S. 9:2781.1.6 The U.S. Bankruptcy
Court also awarded attorney’s fees in favor of Latter & Blum in the amount of $7,001.60.7
On appeal, appellant no longer disputes that Latter & Blum is entitled to the commission
based on a contractual duty; rather, appellant disputes the U.S. Bankruptcy Court’s ruling that
Latter & Blum is entitled to a special privilege for the commission pursuant to LSA-R.S.
9:2781.1 and the award of attorney’s fees.

LAW AND ANALYSIS
Pursuant to 28 U.S.C. § 158(a)(1), which states that “the District Courts of the United
States shall have jurisdiction to hear appeals … from interlocutory orders and decrees, of

2

Id.
2:10-ap-1080 Doc. No. 25.
4
2:09-bk-10085 Doc. No. 1.
5
2:10-ap-1080 Doc. No. 25, p.43.
6
Id. at p.45. LSA-R.S. 9:2781.1 states that “[a] special privilege affecting the interest of the person with whom he
has contracted is hereby granted to a licensed real estate broker for the amount of his commission on all commercial
real estate for which he negotiates the sale….” LSA-R.S. 9:2781.1.A. Further, the statute requires the filing of
notice of broker privilege up to five days prior to the sale in the parish in which the property is located and that
notice also be given to the purchaser by certified mail up to five days prior to the date of the sale. LSA-R.S.
9:2781.1.C.
7
R. Doc. No. 1-1, p.2.
3

bankruptcy judges entered in cases and proceedings referred to the bankruptcy judges…,” this
Court has jurisdiction to hear this bankruptcy appeal. 28 U.S.C. § 158(a)(1); see also In re
Crescent City Capital Dev. Corp., No. 96-3173, 1997 WL 90976, at *1 (E.D. La. Feb. 28, 1997).
The District Court “may affirm, modify or reverse a bankruptcy court’s judgment, order or
decree or remand with instructions for further proceedings.” Bankr. R. 8013.
Federal Rule of Bankruptcy 7052, which cites Federal Rule of Civil Procedure 52,
requires that in adversary proceedings, the bankruptcy court must “find the facts specially and
state its conclusions of law separately.” See Bankr. R. 7052; Fed. R. Civ. P. 52(a). If the court
has failed to provide this necessary information, the appellate court has “little opportunity for
effective review” and remand for further articulation of the lower court’s reasoning is
appropriate. See Myers v. Gulf Oil Corp., 731 F.2d 281, 284 (5th Cir. 1984) (remand appropriate
where lower court’s reasoning is vague or simply left unsaid); Thule Drilling ASA v. Schimberg,
290 Fed. Appx. 745, 747 (5th Cir. 2008) (remand appropriate where the appellate court was
“uncertain about the rationale for the [lower] court’s decision”); Preferred Mut. Ins. Co. v.
Dumas, 905 F.2d 1538 (6th Cir. 1990) (the appellate court “cannot perform a de novo review of
the trial court’s application of the law…unless we are advised what the court’s reasoning was
and how the…statute was applied to the facts found.”).
Appellant raises three issues on appeal.8 First, appellant argues that Louisiana law
requires a strict interpretation of statutes granting special privilege and, therefore, because LSAR.S. 9:2781.1.C specifies that the privilege applies to the party who negotiates the sale, Latter &
Blum is not entitled to the privilege since it did not negotiate the sale. Second, appellant argues
that Latter & Blum did not perfect its broker’s privilege because it did not provide notification to
the purchaser five days prior to the sale, as required by LSA-R.S. 9:2781.1.C. Third, appellant
8

R. Doc. No. 1, p.1.

argues that Latter & Blum is not entitled to attorney’s fees because it is an unsecured creditor in
the bankruptcy proceeding.
Ruling that Latter & Blum was entitled to the special privilege, the U.S. Bankruptcy
Court noted that the contract granted Latter & Blum exclusive negotiating rights. Presumably,
the U.S. Bankruptcy Court concluded that because Latter & Blum was contractually given the
exclusive right to both market and negotiate a sale, it qualified as the negotiating party for the
purposes of LSA-R.S. 9:2781.1. However, other than ordering that “they have a privilege,” the
U.S. Bankruptcy Court did not provide any explanation for its ruling that Latter & Blum fulfilled
the requirements for a special privilege set forth in LSA-R.S. 9:2781.1.
The Court finds that the judgment of the U.S. Bankruptcy Court is inadequate for review
because the U.S. Bankruptcy Court did not state its reasoning for its determination that Latter &
Blum fulfilled the “negotiation” and “notification” requirements of LSA-R.S. 8:2781.1. In
addition, the U.S. Bankruptcy Court did not specify on what basis it was awarding attorney’s
fees. The Court remands this matter to the U.S. Bankruptcy Court so that the U.S. Bankruptcy
Court may provide an explanation of its reasoning on the following issues:
1. Can the contract’s designation of Latter & Blum as having exclusive negotiation
rights be construed to mean that it has negotiated the sale for the purposes of LSAR.S. 9:2781.1.A?
2. How should the court interpret the requirement of LSA-R.S. 9:2781.1.C in a situation
where the party claiming a special privilege was not aware of the sale of the property
and, therefore, could not notify the purchaser?
3. Was Latter & Blum awarded attorney’s fees on a contractual or statutory basis?

CONCLUSION
For the reasons stated above,
IT IS ORDERED that this matter is REMANDED to the U.S. Bankruptcy Court for the
Eastern District of Louisiana for further explanation of its reasoning for its legal conclusions on
the aforementioned issues.
New Orleans, Louisiana, July 28, 2011.

___________________________________
LANCE M. AFRICK
UNITED STATES DISTRICT JUDGE