Fed. R. Bankr. P. 3001; Objection to Claim
Cliftondale Oaks, LLC v. Metro Brokers, Inc., No. 04-95161 (Bankr. N.D. Ga. February 2006)(Drake)
Debtor, in the business of owning, developing and selling residential property, entered into an Exclusive Right to Sell Listing Agreement with a real estate broker prior to filing its Chapter 11 bankruptcy petition. Subsequent to the filing of bankruptcy, Debtor was unable to develop the property and sold the real property to another developer. The debtor did not list the broker as a creditor, and the Chapter 11 plan stated that all executory contracts not expressly assumed were deemed rejected. The broker filed a claim for $96,000, approximately 6% of the price at which the property was sold (the rate specified in the Listing Agreement) and the debtor objected.
The court determined over objection that the Listing Agreement was valid and that the broker fulfilled its obligations, and thus there was no pre-petition breach of the unexpired, executory contract. The Agreement was also deemed rejected pursuant to the terms of the plan and, therefore, it would be considered breached by the debtor immediately prior to the filing of debtor’s bankruptcy petition. Looking to Georgia law, the court determined that the broker was entitled to the amount it would have earned under the Listing Agreement. The debtor’s argument that the Agreement contemplated a commission only on developed lots, and not in a bulk sale of the property, was not supported by the language of the Agreement. Therefore, the objection to the broker’s claim was denied.