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C. B. Snyder Realty Co. v. Sherrill-Noonan Inc.

decided: November 14, 1958.


Author: Mclaughlin

Before GOODRICH, McLAUGHLIN and STALEY, Circuit Judges.

McLAUGHLIN, Circuit Judge.

This case is essentially two cases by reason of the permissive counterclaim interposed by the defendant in the original action. Jurisdiction is based on diversity of citizenship.


In 1953 Sherrill-Noonan, a Pennsylvania corporation, defendant-appellant, owned some real estate in Exmore, Virginia, which it desired to sell. It engaged C. B. Snyder Realty Company, a New Jersey corporation and plaintiff-appellee, to find a buyer, agreeing to pay a 2 1/2% commission on the sale price should a buyer be produced. Snyder presented a buyer to Sherrill-Noonan in New York to whom the sale was ultimately made. Dispute over whether certain conditions had been subsequently attached to the earning of the commission was resolved against Sherrill-Noonan at a jury trial wherein a verdict for $8,250 with interest was returned for Snyder.

Sherrill-Noonan appeals from the trial court's refusal to enter a dismissal at the close of the plaintiff's case under Rule 41(b), F.R.Civ.P., 28 U.S.C.A., and from the refusal to set aside the verdict and enter judgment for it under Rule 50(b), F.R.Civ.P., thereby presenting the question of whether the Pennsylvania Real Estate Broker's License Act prevents recovery.

It can be seen from the relevant portion of the Act appearing in the margin*fn1 that it is expressed in terms which require it to be applied by the Pennsylvania courts whenever they are the forum for an action for broker's commissions. The statute affects the availability of remedy and can consequently be said to be procedural. Goodrich on Conflict of Laws, § 77. Indeed, if the statute were construed to affect the establishment of contractual relationships or to affect the right to assert a claim upon the breach of a right or duty already conferred by contract, the statute would not be applicable here at all. In each of those situations, where the contract involved has been entered in one state and is to be performed in another, it is not entirely clear whether the Pennsylvania conflict of laws rule would apply the law of the place of contracting or of the place of performance. See Linn v. Employers Reinsurance Corp., 1958, 392 Pa. 58, 139 A.2d 638; Musser v. Stauffer, 1899, 192 Pa. 398, 43 A. 1018. But see Burnett v. Pennsylvania R. Co., 1896, 176 Pa. 45, 34 A. 972.It is clear, however, that where the place of contracting and of performance are the same, the law of that place will be applied. See, In re McCurdy's Estate, 1931, 303 Pa. 453, 154 A. 707; Rumsey v. New York & Pennsylvania R. Co., 1902, 203 Pa. 579, 53 A. 495. Here the places of contracting and of performance were both New York. Consequently it is the law of New York which determines the rights of the parties as distinguished from the remedies once such rights exist. See Goodrich, supra.

In order to avoid the possibility of divergent results turning on whether the action was brought in a federal or a state court, a federal court in a diversity action must apply that law of its state which would prevent recovery otherwise available. See e.g., Guaranty Trust Co. of N.Y. v. York, 1945, 326 U.S. 99, 65 S. Ct. 1464, 89 L. Ed. 2079.

Turning to a close consideration of 63 P.S. § 446, supra, it is plain that recovery is not barred if the plaintiff corporation is licensed as a broker under the Act, nor is recovery barred even if the corporation is not licensed so long as the actions or service for which recovery is sought are not actions prohibited by the Act. There is plain evidence in the record that the corporate plaintiff was licensed in Pennsylvania after the usual form in which brokers' licenses were issued to corporations. Furthermore, the only pertinent prohibition we find in the Act is in § 12, 63 P.S. § 442, as amended. That reads:

"Any person, copartnership, association, or corporation, who shall * * * engage in or carry on the business, or act in the capacity of a real estate broker, or a real estate salesman, within this Commonwealth, without a license * * * or shall employ any person as a real estate salesman, to whom a license as a real estate salesman has not been issued * * * shall be deemed guilty of a misdemeanor * * *."

Although the statute explicitly prohibits nothing, it is clear that the proscription of the acts mentioned amounts to a prohibition. But if Snyder did not perform any of its broker's activity in Pennsylvania in connection with the transaction on which recovery is now sought, it did nothing prohibited by the Act. The evidence is quite clear that the activity occurred in New York and possibly New Jersey. And even if some of the activity had occurred in Pennsylvania, it is irrelevant whether or not the agent who actually represented Snyder Company was licensed in Pennsylvania because, though employment of an unlicensed salesman may be prohibited by § 442, the employment is not the act upon which recovery is sought. The language of § 446 requires that the very act for which compensation is sought be the one prohibited. For these reasons the Pennsylvania Real Estate Broker's License Act is not a bar to Snyder's recovery in this case.

We need not stop to explore whether the license laws of New York might not have given Snyder any right against Sherrill-Noonan after the latter failed to pay a commission for the production of a buyer; this was an affirmative defense which the defendant was required to plead under Rule 8(c), F.R.Civ.P. The failure to plead and offer proof on this phase of the case constituted a waiver of whatever defense might possibly have been available under the New York statutes.

Sherrill-Noonan complains also of admission to evidence of a letter written by its attorney to Snyder which Sherrill-Noonan claims was unauthorized; being unauthorized it could not, according to the argument, have been a vicarious admission which despite being hearsay would then have been admissible. But the letter actually was placed into evidence after earlier objections of a different nature were withdrawn; this new objection could not thereafter be "reinstated" as Sherrill-Noonan's trial counsel attempted to do.Such a procedure would utterly confound the orderly conduct of a trial in its attempt to ascertain the facts of a transaction or of an occurrence. The point is without merit.

Sherrill-Noonan's last point in this case is that the court erred in failing to instruct the jury that they had a choice of returning a verdict of either $5,000, plus interest or of $8,250, plus interest. This objection is not open to Sherill-Noonan since it failed to comply with Rule 51, F.R.Civ.P., by raising the point before the jury retired. But even if objection had been timely made, the record demonstrates that the trial judge was correct in intentionally ...

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