Kabb Partnership v. Faye Foods, Inc. (In re Fay Foods, Inc.)

Summarized by Geoffrey Peters , Weltman, Weinberg & Reis Co., LPA
15 years 2 months ago

Citation:

(6th Circuit, Dec 31,1969)

Tag(s):

6th Circuit

Ruling:

The bankruptcy appellate panel ruled that a party's claim in which the party did not participate in the proceeding at the bankruptcy court level cannot be asserted by another party where there is no evidence that the appellant was a subrogee to the claim. The appellate panel further discussed, in the alternative, that Debtor did not establish a basis for placing a lien against the proceeds of sale or an unjust enrichment claim against KABB. The appellate panel found under Tennessee state law that there were two types of commissions which include a commission based upon a percentage of the sale price and a commission based upon the difference between the sale price and an agreed upon amount. There is no equitable lien under Tennessee state law if the commission is based upon a percentage of the sale price. In this case, Graves allegedly had a commission based upon the sublease of the property, not upon the difference between the sale price and an agreed upon amount. The appellate panel also rejected the unjust enrichment claim. In order to have an unjust enrichment claim, there must have been a benefit to a defendant, an appreciation of that benefit, and a situation where acceptance of such benefit under such circumstances would be inequitable for the putative defendant to retain the benefit without payment of the value. Here, the elements were not met. There was no evidence in the record that Graves conveyed a benefit to the sale of the property. In addition, a commission was paid to Welch Realty. KABB had no knowledge of Graves and KABB was not served with the application to employ Graves. The second issue the appellate panel considered was whether Debtor was entitled to any of the proceeds from the sale of the property. Debtor did not produce "even a mere scintilla" to show an agreement of the parties to a particular purchase price or to allow Debtor any of the proceeds of sale. The bankruptcy appellate panel affirmed the decision of the bankruptcy court.

Procedural context:

The bankruptcy appellate panel of the sixth circuit considered the appeal from the final judgment of the bankruptcy court granting summary judgment in favor of KABB Partnership.

Facts:

Debtor Faye Foods ("Debtor") leased real property from KABB Partnership ("KABB"). The lease agreement provided an option to purchase the real estate. After filing bankruptcy, Debtor filed an application to employ Dean Graves ("Graves"), a real estate broker, to sublease the real property. Debtor did not serve the application on KABB. The bankruptcy court granted the application. Graves had the exclusive right to sublease the property for six months at a commission of four percent. After the six month period expired, Debtor filed a motion to sell the real property. The motion asserted the right to purchase and provided for a commission to Welch Realty, a broker that represented the purchaser. The motion provided that the sale was in the best interest of the estate as it would satisfy the administrative lease cure claim of KABB. KABB objected to the sale. The parties agreed to the sale and transferred all claims to the proceeds of the sale. KABB filed an adversary proceeding against Debtor seeking a declaratory judgment regarding its entitlement to the proceeds of the sale. The broker Graves, hired by Debtor to sublease the property, filed a complaint to intervene in the adversary proceeding asserting that he was entitled to a four percent commission on the sale of the property. Debtor filed an answer requesting that the lien for payment of Graves' commission be imposed on the proceeds of the sale. Both Debtor and KABB filed motions for summary judgment. Graves did not file a motion or a response.

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