Schoenmann v. Patel et al

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re 	) Bankruptcy Case
) No. 09-31941DM
ROBERT G. QUINTERO, dba 	)
CONTINENTAL REALTY SERVICES, 	) Chapter 7
)
Debtor. 	)
___________________________________)
E. LYNN SCHOENMANN, 	) Adversary Proceeding
) No. 10-3019DM
Plaintiff, 	)
)
v. 	)
)
PARIMAL BHUPENDRA PATEL, 	)
BHUPENDRA B. PATEL, RITA PARASNIS, )
individually and collectively doing)
business under the fictitious name )
of BPR Properties, Inc., 	)
)
Defendants. 	)
___________________________________)
MEMORANDUM DECISION FOLLOWING
TRIAL TO RECOVER COMMISSION
I. 	Introduction
On September 13, 2010, the court conducted a trial in this
matter. 	Plaintiff, E. Lynn Schoenmann, Trustee (“Trustee”),
appeared and was represented by Dennis D. Davis, Esq., one of her
attorneys. 	Defendants appeared and were represented by Patricia
G. Rosenberg, Esq., one of their attorneys. 	After the evidence
was presented and oral argument made, the court requested further
Signed and Filed: October 31, 2010
________________________________________
DENNIS MONTALI
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
November 01, 2010
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 10-03019 Doc# 16 Filed: 10/31/10 Entered: 11/01/10 14:39:10 Page 1 of 7

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1 The following discussion constitutes the court's findings
of fact and conclusions of law. 	Fed. R. Bankr. P. 7052(a).
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briefing on one discrete matter. 	Thereafter, the matter stood
ready for decision.
For the reasons stated below, the court will reject the
Trustee’s contentions and enter judgment in favor of defendants.
II. 	Facts 1
Robert G. Quintero, dba Continental Realty Services
(“Debtor”), is a real estate broker. 	Defendant Parimal Bhupendra
Patel (“Perry”) is well-educated in hotel operations and
management, has extensive experience in various aspects of
managing and acquiring hotel properties, and is involved in
various family businesses, including one known as BPR Properties,
Inc. (“BPR”), with his father, Bhupendra B. Patel (“BB”) and his
sister, Rita Parasnis (“Rita”).
BB is the principal of the various business activities among
himself, Perry, Rita and other family members. 	In fact, he
appears to be more like the patriarch of the family, directing the
affairs of the businesses and making all final decisions on such
matters as property acquisition and financing. 	Perry does not
make crucial decisions without consulting his father.
In August, 2006, Perry contacted Debtor about acquiring hotel
properties in the San Francisco bay area. 	Because Debtor was not
willing to disclose to Perry or BPR the particulars of any hotel
property that might appeal to them without appropriate contractual
protection of his own interests, he submitted to Perry, and Perry
promptly executed, a Confidentiality and Non-Circumvention
Agreement (“Agreement”) dated August 21, 2006.
Case: 10-03019 Doc# 16 Filed: 10/31/10 Entered: 11/01/10 14:39:10 Page 2 of 7

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At trial Perry testified that he did not read the Agreement.
Even if Perry did not read the Agreement (which is doubtful), he
initialed every page. 	Further, based upon his intelligence,
education, and experience, he clearly was able to understand the
document; whether or not he actually read it is of no consequence.
The Agreement referred generally (without names and
addresses) to two hotel properties on the San Francisco peninsula
and referenced other properties that would be disclosed upon
request. 	It was Debtor’s intention at all times to make
information about hotel properties available to Perry and BPR on a
confidential basis, and clearly anticipated serving as a selling
agent for BPR if and when it chose to purchase any property
disclosed by Debtor if he could not act as listing agent for any
seller. 	He was not a listing agent with reference to any hotel
property that he planned to disclose to Perry at the time he
prepared and signed the Agreement.
The critical language of the Agreement that determines the
outcome of this dispute is found in paragraph 4, entitled Non-
Circumvention. 	That paragraph provides, in part:
[BPR] agrees that it shall not submit offers, compete, or
interfere in the negotiations, contact the sellers, their
agents, representatives or officers, or purchase the property
or properties without the [Debtor’s] prior knowledge and
written approval and [BPR’s] agreement, if necessary to pay a
2% brokerage fee unless a formal partnership or other
agreement has been reached by the parties to form a
partnership or other arrangement for the properties’
acquisition. (Emphasis added.)
Debtor hoped to obtain a listing agreement for any hotel
Perry might have been interested in and testified that the quoted
language was necessary in case he did not obtain such a listing
agreement and thus obtain a listing agent’s commission upon any
Case: 10-03019 Doc# 16 Filed: 10/31/10 Entered: 11/01/10 14:39:10 Page 3 of 7

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sale.
Perry did not disclose the existence of the Agreement to BB
or Rita after he executed it. 	Three days after execution,
however, Debtor provided Perry with information concerning the
availability of the Shattuck Hotel (“Hotel”) in Berkeley,
California. 	Perry expressed interest in the Hotel, asked Debtor
to arrange an inspection, and then indicated that he intended to
make an offer on it. 	Debtor arranged with the general manager of
the Hotel for Perry to visit and make a site inspection; instead
Perry posed as a guest and visited the Hotel on his own.
After inspecting the Hotel, Perry asked for and Debtor
prepared a Letter of Intent regarding purchase of the Hotel for
$14,700,000 and payment of a 2% commission by the seller to
Debtor.
The Letter of Intent was not signed, and when Perry disclosed
to BB that the Hotel was available, BB informed Perry immediately
that he had been dealing with another person and family friend,
Bipin, who was acting as an intermediary with the owner of the
Hotel (“Kakkar”). 	Perry terminated his discussions with Debtor
and later, in April, 2007, BPR acquired 	Hotel for $13,750,000.
In connection with BPR’s acquisition of Hotel, Kakkar paid the
Bipin a “finder’s fee” of $200,000.
Debtor filed Chapter 7 on July 13, 2009. 	On February 5,
2009, Trustee sued Perry, BB and Rita to recover a commission in
the sum of $275,000 in accordance with paragraph 4 of the
Agreement. 	According to the Trustee’s Trial Brief, BPR agreed to
pay a 2% brokerage fee to Debtor if it circumvented Debtor and
dealt directly with sellers of properties covered by the Agreement
Case: 10-03019 Doc# 16 Filed: 10/31/10 Entered: 11/01/10 14:39:10 Page 4 of 7

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without Debtor’s prior knowledge and written approval.
III. 	Discussion
Defendants raise several defenses, including that the
Agreement is vague and ambiguous, and thus enforceable; that there
was no breach of the Agreement; that paragraph 4 of the Agreement
is an unenforceable, invalid penalty; and that Debtor was not the
procuring cause of BPR’s acquisition of the Hotel.
Because defendants asserted for the first time in their Trial
Brief that portions of the Agreement constituted an invalid
penalty, Trustee maintained that such an affirmative defense had
been waived because it had not been raised in an answer to the
complaint defendants filed. 	Both sides briefed the issue after
trial.
While there is no question that BPR did not comply with
Paragraph 4 of the Agreement when it submitted the offer to Kakkar
and thereafter acquired the Hotel, the ambiguous provisions of
that Agreement must be construed against Debtor as the drafting
party, and therefore, against Trustee. 	There was no listing
agreement, and therefore Debtor’s only source of remuneration was
an agreement to pay a 2% brokerage fee. 	But there was no such
agreement. 	It is fundamental law, and no citation is needed, that
an agreement to agree is unenforceable and while it may well be
that Debtor intended to obtain 2% of any selling price from the
buyers of any disclosed property if Debtor could not obtain a
listing agreement and thus be paid a traditional listing agent
commission, the ambiguity in the language and the clear indication
that there needed to be an agreement (there was none) before
defendants could be obligated to pay Debtor anything, is fatal to
Case: 10-03019 Doc# 16 Filed: 10/31/10 Entered: 11/01/10 14:39:10 Page 5 of 7

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Trustee’s case.
Defendants are correct in pointing out that the absence of
such an agreement, coupled with the lack of precision as to what
the “brokerage” fee would be calculated upon constitutes the
omission of an essential element, thus rendering the Agreement
unenforceable.
Based upon this conclusion, the court does not need to reach
the questions of whether Debtor provide anything of value to the
defendants; whether there was a breach of the Agreement; or
whether the Agreement includes an enforceable penalty.
Perry knew what he was getting into when he signed the
Agreement. 	Once he learned of BB’s involvement with Bipin and
interest in the Hotel he was in a difficult position vis-a-vis
Debtor because he had signed the Agreement. 	He had no choice but
to carry out his father’s instructions and terminate his dealings
with Debtor. 	Had BB not been dealing with Bipin it seems
reasonable to presume that BPR would have continued to work with
Debtor and acquired the Hotel, resulting in either payment to
Debtor of a listing commission by Kakkar, or execution of some
sort of agreement that would have produced a commission for
debtor.
That sort of speculation, however, is not enough to bind
defendants to an agreement to agree. 	Plain and simple, the
Trustee has tried to make “a silk purse out of a sow’s ear”,
relying on sloppy, inartful and imprecise language. 	Unfortunately
for the Trustee and the estate, the quoted language is not enough
and defendants are entitled to judgment in their favor.
IV. 	Conclusion
Case: 10-03019 Doc# 16 Filed: 10/31/10 Entered: 11/01/10 14:39:10 Page 6 of 7

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Counsel for defendants is to submit a form of judgment in
favor of all defendants for the reasons set forth in this
Memorandum Decision, and awarding them their costs.
**END OF MEMORANDUM DECISION**
Case: 10-03019 Doc# 16 Filed: 10/31/10 Entered: 11/01/10 14:39:10 Page 7 of 7