On Appeal from the United States District Court for the Western District of Pennsylvania (Pittsburgh), D.C. Civil No. 87-01570.
Stapleton, Greenberg and Garth, Circuit Judges.
The question we must answer on this appeal is: does Pennsylvania permit the enforcement of an otherwise valid business brokerage contract which results in the sale of all the stock of a corporation, a part of whose assets consist of land, where the broker is not a licensed real estate broker? Our answer to that question is that such a contract may be enforced. Thus, we reverse the district court's judgment in favor of the defendant-appellee Owens-Illinois and remand the case to the district court for further proceedings.
This action by the plaintiff-appellant Gruber invokes our diversity jurisdiction. Because we sit here in diversity, we are guided by Pennsylvania law in an area where the Supreme Court of Pennsylvania has not yet spoken. We are called upon to predict the position the high court of Pennsylvania would take if this matter were before it.
Irving Gruber is a business finder-broker --someone who brings together purchasers and sellers of businesses. In March 1986 Gruber and Owens-Illinois entered into a written contract by which Gruber was employed to find a purchaser of Owens-Illinois's wholly-owned subsidiary, Smith Glass Co. ("Smith Glass"), a Pennsylvania corporation. The agreement employed Gruber "on a non-exclusive basis, to find a purchaser for the stock or assets" of Smith Glass (emphasis added). Upon the completion of a sale, which ultimately took the form of a sale of stock only, Gruber, if the sale or transfer was indeed made "directly or indirectly to or through" a prospect he provided, would receive a commission. Calculated on the basis of the price ultimately paid by the buyers of Smith's stock, that commission would amount to approximately $125,000.
Gruber did find a potential buyer for Smith Glass, Mortek Technical Services, Ltd. Gruber introduced the principals of the two corporations to each other; facilitated meetings; conducted a tour of the plant for Mortek representatives; arranged for Mortek to be provided with financial statements, asset appraisals, and the like. Through its officers, including one Nicholas Hrkman, Mortek in late July of 1986 submitted a letter of intent to purchase Smith Glass. Mortek was, however, unable to obtain the necessary financing, and it was compelled to terminate its letter of intent shortly thereafter.
Following the failure of Mortek's financing efforts, Hrkman advised a client for whom he had rendered accounting services in a capacity unrelated to his functions at Mortek, that Smith Glass was available for purchase. That client, Michael Carlow, evinced substantial interest in the company. Hrkman, in turn, supplied Carlow with Mortek's business and marketing plans-- produced in the context of Mortek's previously contemplated purchase of Smith Glass. Carlow's interest grew, and toward the end of October 1986 Hrkman accompanied Carlow on a tour of the Smith Glass plant. Shortly thereafter, Carlow, purchased all of the stock of the company. In acquiring 100% of Smith Glass's stock, of course, Carlow obtained control over all of Smith Glass's assets, including all its real estate, i.e., its plant.
Owens-Illinois refused to pay Gruber the agreed-upon commission fee to which Gruber claimed to be entitled. Owens-Illinois contended that Gruber did not in fact broker the sale that ultimately took place and that, since the assets transferred in the sale included real estate but Gruber is not a registered licensed real estate broker, Gruber was barred by Pennsylvania law from attempting to collect any commission that might be due him.
Gruber thereupon commenced an action against Owens-Illinois in state court, which Owens-Illinois removed to the district court for the Western District of Pennsylvania. 28 U.S.C. § 1441. Both parties stipulated to the facts material to the summary judgment motion by Owens-Illinois that we review here.*fn1 The district court granted summary judgment to Owens-Illinois, holding that the Pennsylvania Real Estate Licensing and Registration Act, 63 P.S. § 455.201 and § 455.302 (Purdon 1988) (the "Licensing Act") precluded Gruber from enforcing his agreement for a commission. We hold that under Pennsylvania law, as we believe it would be construed by the Supreme Court of Pennsylvania, the district court erred in granting summary judgment to Owens-Illinois. Thus, we hold that the Pennsylvania Supreme Court, interpreting the Real Estate Licensing and Registration Act, would find that the Act poses no bar to Gruber's recovery should it otherwise be merited.
The Pennsylvania Real Estate Licensing and Registration Act, 63 P.S. § 455.101 et seq. (Purdon 1988), in the interests of the consuming public,*fn2 bars all actions to recover commissions brought by unlicensed real estate brokers. Section 455.302 reads:
No action or suit shall be instituted, nor recovery be had, in any court of this Commonwealth by any person or compensation for any act done or service rendered, the doing or rendering of which is prohibited under the provisions of this act by a person other than a licensed broker, salesperson, limited broker, limited salesperson, builder-owner salesperson or rental listing referral agent, unless such person was duly licensed and registered hereunder as broker or salesperson at the time of offering to perform any such act or service or procuring any promise or contract for the payment of compensation for any such contemplated act or service.
The statute, § 455.201 defines "broker" as one who:
(1) negotiates with or aids any person in locating or obtaining for purchase, lease or acquisition of interest in any real estate;
(2) negotiates the listing, sale, purchase, exchange, lease, time share and similarly designated interests, financing or option for any real estate;
(3) manages or appraises any real estate;
(4) represents himself as a real estate consultant, counsellor, house finder;
(5) undertakes to promote the sale, exchange, purchase or rental of real estate: provided, however, that this provision shall not include any person whose main business is that of advertising, promotion or public relations or
(6) attempts to perform any of the above acts.
As previously noted, the question before us is simply whether these statutes should be read to exclude Gruber from bringing suit ...