The opinion of the court was delivered by: DUSEN
This action is one for commissions allegedly due under an oral contract of exclusive agency whereby plaintiff was engaged to find a purchaser of the stock or assets of defendant corporation.
The suit, which was originally instituted in the Court of Common Pleas of Philadelphia County, was removed to this court under 28 U.S.C.A. § 1446. The individual defendants, Sarkes and Mary M. Tarzian, filed Motions to Quash the Sheriff's Return of Service as to them (Documents Nos. 3, 4, 6, 7), which motions were granted D.C., 167 F.Supp. 172 (Documents Nos. 9 and 10). After some discovery procedures had been completed, the corporate defendant, Sarkes Tarzian, Inc., moved for summary judgment under F.R.Civ.P. 56, 28 U.S.C.A. (Document No. 14). This motion, presently before the court, is based on defenses of the Statute of Frauds (Burns' Ind.Stat.Ann. 33-104), the Pennsylvania Brokers Act (63 P.S. §§ 432, 436 & 446), and non-fulfillment by plaintiff of the conditions of the contract which would entitle him to compensation. The facts before the court on this motion are summarized below.
Sarkes Tarzian, Inc., an Indiana corporation, is in the business of manufacturing and selling television parts and operating certain radio and television broadcasting stations. Mr. Sarkes Tarzian, the majority stockholder in this family corporation, orally employed plaintiff as exclusive agent to find a purchaser of the stock, assets or combination of stock and assets of the corporation in August 1956.
The selling price was to be $ 12,000,000 or its equivalent in other property and plaintiff was promised a fair and reasonable commission. The assets of the corporation included some improved real estate situate in Indiana (see Exhibit A attached to Complaint, Document No. 1, valuing land and buildings at $ 2,200,000 without including machinery and equipment of 1.5 million). Written correspondence followed the oral contract.
Plaintiff produced a purchaser ready and willing to enter into an arrangement for the transfer of the business on or about February 9, 1957. The offer was communicated to Mr. Sarkes Tarzian on or about that date, but was subsequently rejected by him on February 28, 1957, due to alleged non-conformance with the terms of the offer to sell (see Exhibit B, attached to Complaint, Document No. 1). Plaintiff's claim is for fair and reasonable commission for his services in producing the above-mentioned purchaser, even though the sale was not consummated.
I. Authority of Mr. Tarzian to act for the defendant corporation
The Complaint alleges that Mr. Tarzian, acting for himself and as agent for the other individual defendant and defendant corporation, employed plaintiff to find a purchaser for the business, either through a sale of stock or assets of defendant corporation, a combination thereof, or other arrangement (Complaint, Document No. 1, par. 7).
The record discloses no authorization from the corporation to Mr. Tarzian relative to this matter. No copies of minutes have been produced which show that the Board of Directors appointed Mr. Tarzian their agent for the sale of the assets of the business or gave him authority to employ another to negotiate for such a sale. Affidavits of members of the Board of Directors of the corporate defendant indicate that no such authority was ever given (see Document No. 19). Mr. Tarzian's office as President of the corporation did not enable him to act as its agent in this matter without other authorization.
The defendant corporation could not have given Mr. Tarzian authority to act as its agent if a sale of the stock were contemplated since Mr. Tarzian, his wife and children owned all of the outstanding corporate shares (N.T. 17 of Document No. 17). The corporation, not being the owner of the shares which would be sold, would have no standing to authorize anyone to negotiate for sale of them. Therefore, even if records of defendant corporation had disclosed that Mr. Tarzian was appointed agent to negotiate a possible sale, such appointment could only have authorized a sale of the assets as far as the corporate defendant was concerned. Plaintiff has argued that 'the proposed sale was one of stock, primarily and preferably (see Complaint Par. 7 and Deposition Pages 28 and 161)' (plaintiff's Brief, p. 6, Document No. 23). It is clear that Mr. Tarzian was not, and could not have been, acting on behalf of the corporation insofar as he employed Mr. Schoettle to sell the stock of the company.
The corporate defendant claims that the alleged oral contract is not enforceable since the corporation assets included considerable improved real estate. Since Indiana is the place of contracting, its Statute of Frauds is applicable. Linn v. Employers Reinsurance Corporation, 1958, 392 Pa. 58, 61, 139 A.2d 638. Under that law, a contract for commissions for procuring a purchaser of real estate must be in writing. Burns' Ind.Stat.Ann. 33-104.
This statute has been strictly enforced by the Indiana courts and contains the language quoted in footnote 2 below. If a contract to pay commissions for the sale of land does not fix the amount of compensation to be paid, the courts have found the contract non-enforceable
under this section of the Statute of Frauds, there can be no recovery under a quantum meruit theory.
Therefore, insofar as the contract is considered one for the sale of assets (as it must be insofar as defendant corporation is concerned) which include real estate,
this action is barred by the Statute of Frauds.
III. Pennsylvania Brokers Act
The plaintiff is not licensed to act as a real estate broker in Pennsylvania. Defendant corporation argues that this fact bars him from maintaining any action for commissions in this court.
Under Pennsylvania law, real estate brokers must be licensed and an unlicensed broker cannot recover commissions for acting as a broker as that term is defined by law. See 63 P.S. §§ 432(a), 436, 446. This Act must be considered by a Federal Court sitting in ...