In the Matter of Bruce M.H. Clark, Debtor. Bruce M.H. Clark v. First City Bank

891 F.2d 111, 1989 U.S. App. LEXIS 19626, 19 Bankr. Ct. Dec. (CRR) 1875, 1989 WL 149168
CourtCourt of Appeals for the First Circuit
DecidedDecember 29, 1989
Docket89-3443
StatusPublished
Cited by14 cases

This text of 891 F.2d 111 (In the Matter of Bruce M.H. Clark, Debtor. Bruce M.H. Clark v. First City Bank) is published on Counsel Stack Legal Research, covering Court of Appeals for the First Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In the Matter of Bruce M.H. Clark, Debtor. Bruce M.H. Clark v. First City Bank, 891 F.2d 111, 1989 U.S. App. LEXIS 19626, 19 Bankr. Ct. Dec. (CRR) 1875, 1989 WL 149168 (1st Cir. 1989).

Opinion

GARZA, Circuit Judge:

Appealing the district court’s reversal of the bankruptcy court’s decision, the appellant asserts that the district court erred in finding Clark’s post-petition earnings not a part of the bankruptcy estate. Finding no error in the district court’s analysis, we AFFIRM.

1. The Facts

Bruce Clark (“Clark”) is a football player for the New Orleans Saints (“Saints”), one of the 28 member clubs of the National Football League (“NFL”). On October 20, 1988, Clark filed a petition for relief under Chapter 11 of the Bankruptcy Code, and on December 1, 1988, he converted the proceeding to one under Chapter 7. 1

At the time of the filing in bankruptcy, Clark owed sums of money to First City Bank and Pontchartrain State Bank, which form the motivation for this appeal. As of December 14, 1988, the Saints owed Clark $370,625 under his 1988-89 season contract. 2 This appeal has national implications in that the contract in question is the form contract used by all twenty-eight NFL teams and the League’s players.

On December 29, 1986, the Saints and Clark negotiated and executed three separate one year contracts for the years 1988-89, 1989-90, and 1990-91. Besides the basic NFL Player Contract, Clark bargained for and received additional addenda, to-wit:

a) incentive bonuses;
b) salary advance clause;
c) loan forgiveness;
d) one-year skill guarantee.

All three contracts contained identical attachments and were to become effective on the first day of February of each year and expire one year later. Pursuant to Paragraphs 5 and 6 of the 1988-89 contract, Clark’s salary was $575,000 payable in 16 equal weekly installments of $35,937.50 *113 each over the course of the 16-game regular season schedule. At the time of Clark’s filing of his petition, seven of the sixteen games had been played.

II.The Issue

The issue is whether the salary corresponding to the remaining nine games constitute “earnings from services performed by an individual debtor after the commencement of the case” within the meaning of Section 541(a)(6) of the Bankruptcy Code. 11 U.S.C. § 541(a)(6).

III.The History

The Bankruptcy Court, in essence, held that the skill guarantee renders inoperative the provision of the NFL Player Contract wherein the Debtor is employed as a “skilled football player” and is required to maintain a satisfactory level of skill or performance or risk termination of the contract and its attendant monetary benefits. Thus, the bankruptcy court held that the skill guarantee superseded the entire contract and all of the remaining salary was part of the bankruptcy estate under Section 541(a)(6) of the Code. As a result of this construction, the bankruptcy court held that the salary was earned immediately upon Clark passing the physical examination at the pre-season training camp.

On appeal, the United States District Court for the Eastern District of Louisiana reversed the Bankruptcy Court’s decision. 100 B.R. 317. The district court read the contract as a whole and did not hold the skill guarantee clause to control the entire contract, but merely to control the particular section concerning skill, performance and conduct. The district court held the post-petition salary was not part of the bankruptcy estate and was earned upon weekly compliance with the contract. Further, the district court held that Clark had an ongoing obligation to perform services for the Saints under the contract which were not nullified by the skill guarantee.

IV.The Analysis

In order to determine the construction of the contract in light of the addendum, a close examination of each is needed. The pertinent part of the skill guarantee is:

GUARANTEE. Despite any contrary language in this NFL Player Contract, Club agrees that for the year 1988 only it will pay Player the full salary provided in Paragraph 5, including any deferred salary applicable to this contract, despite the fact that, in Club’s judgment, Player’s skill or performance has been unsatisfactory as compared with that of other players competing for positions on Club’s roster, and Player’s contract is terminated via the NFL waiver system. [Emphasis added]
PHYSICAL CONDITION. This guarantee by Club will not become effective unless and until Player passes Club’s physical examination for the year 1988.

What fuels this dispute is a clash between the skill guarantee addendum and Section 541(a)(6) of the Bankruptcy Code, which provides:

(а) The commencement of a case under section 301, 302, or 303 of this title creates an estate. Such estate is comprised of all the following property, wherever located and by whomever held:
(б) Proceeds, product, offspring, rents, or profits of or from property of the estate, except such as are earnings from services performed by an individual debt- or after the commencement of the case. (Emphasis added).

The controlling question is when the earning took place, which can only be answered by determining the interaction of the skill guarantee with the rest of the NFL Player Contract.

As the guarantee specifically states, it only controls over contrary language in the NFL Player Contract. The only language of the NFL Player Contract that is contrary to that of the skill guarantee is the language contained in Paragraph 11, which permits a club to terminate a player’s contract for “skill or performance” reasons with no further financial obligations to the player. 3

*114 While performance of a professional football player is unquestionably a large part of his contract, there are other ongoing obligations contained within the NFL Player Contract that Clark must continue to perform. 4

Another addendum to Clark’s NFL Player Contract for the 1988-89 season, captioned “LOAN FORGIVENESS,” provides for incremental forgiveness of a $725,000 loan by the Saints to Clark over the course of the 1988-89 regular season. Clark’s entitlement to this incentive is made conditional upon his “fulfilling his contractual obligations ... by playing or being available to play for club.” For 1988, the loan forgiveness addendum calls for forgiveness of the loan at the rate of $11,328.12 for each of the 16 regular season games played by the Saints during the 1988-89 season. Forgiveness is made “upon conclusion of [the] regular season.”

Paragraph 23 of the contract specifically states that the “[c]ontract is made under and shall be governed by the laws of the State of Louisiana.” Under Louisiana law, a contract must be construed in light of the other provisions so that each is given the meaning suggested by the contract as a whole.

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891 F.2d 111, 1989 U.S. App. LEXIS 19626, 19 Bankr. Ct. Dec. (CRR) 1875, 1989 WL 149168, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-the-matter-of-bruce-mh-clark-debtor-bruce-mh-clark-v-first-city-ca1-1989.