United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
January 20, 2006
FOR THE FIFTH CIRCUIT Charles R. Fulbruge III
Clerk
No. 05-30426
In the Matter Of: JAZZLAND, INC.
Debtor
RICHARD NOBLE, Disbursing Agent for Jazzland, Inc.
Appellant,
versus
FEDERAL INSURANCE CO.,
Appellee.
Appeal from the United States District Court for
the Eastern District of Louisiana, New Orleans
(USDC No. 2:04-CV-467)
_________________________________________________________
Before REAVLEY, DAVIS and WIENER, Circuit Judges.
PER CURIAM:*
Disbursing agent for former theme park developer and Chapter 11 debtor,
Jazzland, Inc. (“Jazzland”), appeals summary judgment in an adversary proceeding
*
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 R. 47.5, the Court has determined that this opinion should not be
published and is not precedent except under the limited circumstances set forth in 5TH CIR.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.
granting the right to funds in a construction retainage account to Federal Insurance
(“Federal”), as assignee of creditor/contractor Broadmoor, L.L.C. (“Broadmoor”), rather
than to debtor’s estate. Reviewing the record de novo and applying the same standards as
applied by the bankruptcy court, we affirm for the following reasons:
1. In the context of contract interpretation under Louisiana law, only when
there is a choice of reasonable interpretations of the contract is there a
material fact issue concerning the parties' intent that would preclude
summary judgment. Amoco Prod. Co. v. Texas Meridian Res. Exploration
Inc., 180 F.3d 664, 669 (5th Cir. 1999). There is only one reasonable
construction of the retainage account provision in the credit agreement
between Jazzland and its project lender, Southtrust Bank: that this
provision established a retainage account for the purpose of holding funds
earned by Broadmoor, under the construction contracts between it and
Jazzland, pending final payment of those funds to Broadmoor upon
successful completion of the project. The credit agreement defines
retainage by reference to the “Construction Contract” and keys the terms of
the retainage account to the “Construction Contract.” The “Construction
Contract” is expressly defined under the credit agreement as the
construction contracts between Jazzland and Broadmoor.
2. As evidenced by Jazzland’s draw requests and by the certified substantial
completion of the project in May of 2000, the retainage was earned by and
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due to Broadmoor prior to Jazzland’s bankruptcy filing in February of
2002. See LA. REV. STAT. 9:4822(H)(2) (providing that a certificate of
substantial completion is equivalent to acceptance); see also State of
Louisiana v. Laconco, Inc., 430 So.2d 1376, 1382 (La. Ct. App. 1st
Cir.1983) (holding that, under Louisiana law, a contractor is entitled to the
contract price, which includes retainage, upon substantial completion of the
project). The funds in the retainage account do not belong to Jazzland’s
estate.
2. We are satisfied that, while the mechanics of the credit agreement provided
for release of the retainage to Jazzland rather than to Broadmoor upon
completion of the project, Jazzland’s only position as to those funds was to
serve as a conduit to pay the money over to Broadmoor upon satisfaction of
all contractual conditions. The retainage account, comprising segregated
loan proceeds identifiable as a percentage withheld from each draw request,
was set aside and earmarked for eventual disbursal to the construction
contractor. See Coral Petroleum, Inc. v. Banque Paribas-London, 797 F.2d
1351, 1356 (5th Cir. 1986) (holding that loan proceeds that were earmarked
for disbursement for only a designated purpose were not property of a
debtor’s estate). Beyond its role as a delivery vehicle, Jazzland had no
interest in the retainage at the time it petitioned for bankruptcy and these
funds were properly excluded from the estate. See, e.g, In re Searex Energy
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Serv., Inc., 131 Fed.Appx. 449 (5th Cir. 2005) (affirming the bankruptcy
court’s finding that marine building project funds’ passage through debtor’s
account did not make them property of the estate); T.& B. Scottsdale
Contractors, Inc. v. United States, 866 F.2d 1372, 1376 (11th Cir. 1989)
(holding that funds placed by a contractor in an account of the debtor
subcontractor for payment of the debtor’s materialmen were not property of
the subcontractor’s bankruptcy estate); In re Bank of New England Corp.,
165 B.R. 972, 977 (Bankr. D. Mass. 1994) (holding that funds in an
advertising account collected by a parent company from subsidiaries and
paid to an advertising firm were not property of the company’s estate
because a “straight pass-through” of the funds occurred).
AFFIRMED.
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