UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 97-50109
In the Matter of: AL COPELAND ENTERPRISES, INCORPORATED,
Debtor.
LOUISIANA FIRST FINANCIAL GROUP, INCORPORATED,
Plaintiff-Appellant,
versus
AL COPELAND ENTERPRISES, INCORPORATED,
Defendant-Appellee.
Appeal from the United States District Court
For the Western District of Texas
(A-96-CA-113)
June 9, 1998
Before POLITZ, Chief Judge, BENAVIDES and PARKER, Circuit Judges.
POLITZ, Chief Judge:*
Louisiana First Financial Group, Inc. (LFFG) appeals an adverse summary
judgment by the bankruptcy court, dismissing its claim for commissions based on
*
Pursuant to 5TH CIR. R. 47.5, the Court has determined that this opinion should
not be published and is not precedent except under the limited circumstances set forth in
5TH CIR. R. 47.5.4.
a contract with Al Copeland Enterprises, Inc. (ACE). On the first appeal we
remanded to the bankruptcy court to determine if the burden of proof announced
in In Re Hinkley1 had been followed. On remand, after imposing the proper,
respective burdens, the bankruptcy court granted ACE’s motion for summary
judgment. The district court affirmed. Concluding that LFFG raised no issue of
material fact as to its ultimate burden under Hinkley, we now affirm the district
court’s affirmance of the bankruptcy court’s ruling.
BACKGROUND
In 1988, LFFG, a mortgage broker, contracted to provide $18.2 million in
mortgage financing for ACE. The contract provided in part that LFFG would
receive a one percent commission on the total amount of financing arranged,
contingent on the monies actually being funded. ACE would also be obligated to
pay the commitment fee if ACE executed a written acceptance of the financing and
later decided against consummating the transaction.
The agreement thereafter was modified several times as ACE’s financial
needs changed. Ultimately, the contract was amended to provide that LFFG would
work with Merrill Lynch in obtaining $120 million in mortgage financing for ACE,
and the two of them would split a four percent commission if the monies were
1
58 B.R. 339 (Bankr. S.D. Tex. 1986), aff’d, 875 F.2d 859 (5th Cir. 1989).
2
actually funded, or if ACE executed a written acceptance of the financing
arrangement.
As efforts to obtain the necessary funding began in earnest, it became
apparent that ACE’s debts would have to be restructured before any new financing
could be obtained. LFFG worked with ACE to find a company to do the
restructuring, ultimately securing Pru Bache for the task. In return for its efforts,
LFFG contends that it was to be paid a 1% commission on any refinancing done in
connection with the restructure. The parties also anticipated that mortgage
financing would be a part of the overall restructuring and that LFFG would get a
commission of 2%, its half of the 4% commission it was to share with Merrill
Lynch. In an apparent attempt to circumvent LFFG’s commissions, ACE
terminated its relationship with LFFG and selected First Boston rather than Pru
Bache for the restructuring. First Boston was not successful in restructuring ACE
and ACE filed a Chapter 11 petition in bankruptcy in April 1991.
LFFG filed suit in state court to recover its commissions, alleging ACE’s
breach of contract, claiming $2.4 million, which included the 2% commission of
the $120 million in mortgage financing and $2.5 million as its commission on the
3
debt restructuring.2 Following ACE’s bankruptcy filing, LFFG filed its proof of
claim therein. In its initial hearing, the bankruptcy court found that ACE had
breached its contract with LFFG in bad faith by selecting First Boston, in lieu of
Pru Bache, to avoid paying LFFG’s commissions. Under La. Civ. Code art. 1772,3
the court held that the suspensive condition (that monies be actually funded) was
deemed fulfilled and awarded LFFG $2.4 million. The claim for commissions on
the debt restructure was dismissed. The district court affirmed the bankruptcy
court. On appeal, however, we remanded to the bankruptcy court for clarification
of the placement of the Hinkley burden of proof. On remand the bankruptcy court
properly placed the Hinkley burden and awarded summary judgment in favor of
ACE. LFFG appealed to the district court which affirmed the bankruptcy court.
The instant appeal timely followed.
ANALYSIS
A proof of claim executed and filed in accordance with the Bankruptcy Rules
2
The $2.5 million claim represents 1% of $250 million. LFFG contends that $250
million in non mortgage financing would have been necessary in the restructuring of
ACE. This amount represents the difference in ACE’s outstanding debts in 1990 less the
$120 million in mortgage financing that was to be funded.
3
Article 1772 provides, “A condition is regarded as fulfilled when it is not
fulfilled because of the fault of a party with an interest contrary to the fulfillment.”
La.Civ. Code art. 1772.
4
constitutes prima facie evidence of the validity and amount of the claim. 4 One
objecting to a claim has the burden of presenting a substantial factual basis to
overcome that prima facie validity of the proof of claim. Once the debtor has met
this burden, the claimant must then prove its claim under the relevant substantive
law.5
LFFG filed an amended proof of claim for its commissions under the contract
with Ace. Although no financing was actually procured, and the voluntary
restructure of Ace did not take place, LFFG contended that it was entitled to the
commissions because under Article 1772 the suspensive condition was deemed
fulfilled by virtue of Ace’s bad faith breach.6 To rebut LFFG’s prima facie proof
of claim Ace countered that it had not received and LFFG would not have been
able to procure any mortgage financing for ACE. At that point it became
incumbent on LFFG to prove the validity of its claim under Louisiana law. LFFG
submitted that the mere breach of the contract was sufficient under Louisiana law
to invoke the presumption of Article 1772, asserting that the suspensive condition
4
Bank.R.3001(f). See also, Hinkley, 89 B.R. 608; In Re Simmons 765 F.2d
547 (5th Cir. 1985).
5
Hinkley, 89 B.R. 608.
6
The bankruptcy court found that ACE had breached the contract with LFFG in
bad faith. This finding was affirmed on appeal and is not an issue in this appeal.
5
would be considered fulfilled because LFFG was prevented from actually fulfilling
the condition by Ace’s bad faith breach. Article 1772 requires more, however, than
a mere showing of Ace’s bad faith breach -- LFFG must prove that but for the
breach the condition would have been fulfilled.7 In the instant case LFFG has not
offered any evidence to prove that it would have procured lenders for Ace who
would have provided the mortgage financing, or that Pru Bache would have been
successful in its attempt to restructure Ace. LFFG contends that its very
engagement of Pru Bache, a company who had been successful in many similar
debt restructures, was sufficient evidence of its ability to fulfill the suspensive
condition. Pru Bache, however, was not a lender ready, willing, and able to
advance the funds to Ace. Pru Bache, much like LFFG, was to locate lenders and
assist in the restructuring of Ace. The record contains nothing beyond mere
speculation supporting the proposition that either LFFG or Pru Bache would have
in fact been able to locate willing lenders or that a successful restructuring of this
company would have occurred.
The judgment of the district court affirming the bankruptcy court is
AFFIRMED.
7
Stevens v. Tynes, 357 So.2d 7 (La. App.), cert. denied, 357 So.2d 1152 (La.
1978).
6