filed as amended march 22 1989.: February 23, 1989.
On Appeal from the United States District Court for the Western District of Pennsylvania, D.C. Civil Action No. 85-1093.
Stapleton and Mansmann, Circuit Judges, and Huyett, District Judge.*fn*
Appellant Mellon Bank, N.A. appeals from summary judgment entered by the district court in favor of appellees Shannon & Luchs Company ("Shannon") and Warren Montouri, Inc., in their action for a real estate commission from Mellon Bank. The primary issue we are called upon to resolve in this appeal is whether a real estate broker who conducts business in Pennsylvania solely through the efforts of an employee who is not licensed as a broker or salesperson under the Pennsylvania Real Estate Licensing and Registration Act, Pub. L. No. 15, § 9, Feb 19, 1980, 63 Pa. Stat. Ann. §§ 455.101-455.902 (Purdon Supp. 1988)[hereinafter, the Act or the 1980 Act], may maintain an action for a real estate commission.
The action arises from an aborted real estate transaction between appellant Mellon Bank and Dr. Laszlo N. Tauber. Dr. Tauber engaged appellees as real estate brokers to represent him in the transaction with Mellon. While Shannon is licensed as a real estate broker in Pennsylvania, neither Warren Montouri, Inc. nor the sole Shannon employee involved in the transaction is licensed under the Act. The district court found that Shannon could maintain a suit for a real estate commission under Pennsylvania law, despite the fact that the sole employee of Shannon involved in this transaction was not licensed under the Act, and that Warren Montouri, Inc. was entitled to share in the commission as a joint venture partner with a licensed broker. Because we find that the district court erred as a matter of law in permitting appellees to maintain the suit for a real estate commission in the circumstances of this case under the Act, we will reverse.
Appellee Shannon is a Delaware corporation located in Washington, D.C., engaged in the business of real estate brokerage. It is a licensed Pennsylvania real estate broker under the Act. Jon W. Barker is a vice-president of Shannon, employed as real estate broker and salesperson. Barker is licensed as a broker in Washington, D.C., and the state of Texas, but not Pennsylvania. Appellee Warren Montouri, Inc. ("Montouri") is a Washington, D.C. corporation, also engaged in the real estate brokerage business. Montouri is not licensed as a Pennsylvania real estate broker. Dr. Laszlo N. Tauber ("Tauber") is a real estate investor from Washington, D.C. In early 1983, Tauber engaged the real estate brokerage services of Shannon to locate potential properties for acquisition. Acting for Shannon, Barker began looking for properties for Tauber to purchase in sale-leaseback transactions. Barker eventually contacted Mellon, stating that he had a "back-up" purchaser for a building which Mellon had under agreement of sale to another party. Eventually, Barker was invited to visit with Mellon officials concerning transactions involving other real estate owned by Mellon.
On November 15, 1983, Barker met with Mellon officials in Pittsburgh and discussed a proposed transaction involving the Union Trust Building. Subsequently, on December 9, 1983, Barker wrote to Mellon outlining a proposal which included a provision for Shannon and Montouri to receive a commission of $650,000 from the proceeds of purchase monies. Further negotiations ensued and on February 7, 1984, Mellon offered to sell the building to Tauber if certain renovations would be performed by Tauber after the sale. Among other things, the letter provided that Mellon agreed to pay a real estate commission of $200,000 to Shannon and Montouri. When Tauber was unable to provide evidence of suitable financing on a timely basis to Mellon, Mellon declared the February 7 letter null and void on March 23, 1984.
After further negotiations, on April 6, 1984, Mellon telexed Tauber a proposed letter of intent for Tauber to submit to Mellon. Tauber made some minor revisions and signed the letter ("April 6 letter"). The letter set the price of the building at $8,200,000, payable with an immediate deposit of $1,000,000 and the balance upon closing. Paragraph 7 of the letter provides: "Seller agrees to pay a real estate commission of USD $200,000 to be divided equally between Shannon and Luchs and Warren Montouri. The parties will otherwise agree to save each other harmless on account of such fees." Joint Appendix at 249. Tauber wired $1 million to Mellon's account on April 9, and Mellon signed the letter as amended on April 12.
For undisclosed reasons, Mellon subsequently exercised its right under the April 6 letter to cancel unilaterally the transaction. Mellon then returned the $1 million deposit with interest to Tauber. Appellees later demanded a commission of $200,000 from Mellon for providing a ready, willing, and able purchaser for the property. Mellon refused the demand.
On May 5, 1985, Shannon and Montouri filed this action seeking the $200,000 real estate commission from Mellon claiming that Mellon breached the contract formed on April 12, 1984 by refusing to pay the real estate commission. With the essential facts undisputed, the parties filed cross motions for summary judgment. The district court concluded that the April 6 letter was an enforceable contract and that Shannon and Montouri could enforce the contract as intended third party beneficiaries. Shannon & Luchs Co. v. Mellon Bank, N.A., 690 F. Supp. 419, 422-23 (W.D.Pa. 1988). Mellon argued, as it does again on appeal, that because Barker was not licensed under the Act to transact real estate brokerage services in Pennsylvania, Shannon could not sue for a real estate commission. The district court rejected this argument, and also concluded that Montouri was entitled to sue for the commission as a joint venture partner relying on Gold & Co., Inc. v. Northeast Theater Corp., 281 Pa. Super. 69, 74-75, 421 A.2d 1151, 1153-54 (1980). Shannon & Luchs, 690 F. Supp. at 423. Based on commerce clause grounds, which the district court raised sua sponte, and its conclusion that the parties involved were "substantial and sophisticated men of affairs," the learned district judge construed the Act to permit Shannon and Montouri to maintain this suit, and granted their motion for summary judgment and denied Mellon's. Id. at 424. This appeal followed.
On appeal, Mellon challenges the district court's interpretation of the Act and whether the April 6 letter constitutes an enforceable contract. As Mellon is appealing from a final judgment, our jurisdiction is based on 28 U.S.C. § 1291 (1982). Our review of the district court's grant of summary judgment in favor of appellees is plenary. Federal Kemper Ins. Co. v. Rauscher, 807 F.2d 345, 348-49 (3rd Cir. 1986). We begin and end with an examination of the effect of the Act on the ability of Shannon and Montouri to maintain an action for real estate commissions under Pennsylvania law. Because we conclude that appellees cannot maintain a suit for real estate commissions under the Act, we do not reach the enforceability of the April 6 letter.
The Pennsylvania Real Estate Licensing and Registration Act, 63 Pa. Stat. Ann. §§ 455.101-455.902 (Purdon Supp. 1988), requires that real estate brokers and salespersons be licensed by the state's Real Estate Commission. The Act repealed the Real Estate Broker's Licensing Act of 1929, Act of May 1, 1929, Pub. L. No. 1216, § 427 (codified at 63 Pa. Stat. Ann. §§ 431-448 (Purdon))[hereinafter, the 1929 Act], repealed by 63 Pa. Stat. Ann. § 455.901 (Purdon Supp. 1988). The Act sets forth a comprehensive scheme for obtaining a license to transact the real estate brokerage business in Pennsylvania. It also sets ...