CSB, INC. v. Cradle of Democracy Broadcasting Co.
| Decision Date | 02 September 1982 |
| Docket Number | Civ. A. No. 82-0218-R. |
| Citation | 547 F. Supp. 106 |
| Parties | CSB, INC., d/b/a Carolina Media Brokers v. CRADLE OF DEMOCRACY BROADCASTING COMPANY, INC., Karas Broadcasting Company and Oldric J. LaBell, Jr. |
| Court | U.S. District Court — Eastern District of Virginia |
Ernest C. Vaughan, Jr., B. Randolph Boyd, Richmond, Va., for plaintiff.
Oldric J. LaBell, Jr., Newport News, Va., pro se and for defendants.
This is a diversity action to collect a broker's commission for the sale of a radio station in York County, Virginia. Before the Court is plaintiff's motion for partial summary judgment filed on 16 July 1982 against defendant Cradle of Democracy Broadcasting Company, Inc., with respect to Count I of its complaint alleging the breach of a business listing agreement between plaintiff and defendant. The parties by stipulation previously dismissed defendant Karas Broadcasting; the plaintiff acknowledges defendant LaBell's lack of liability in this particular count.
On 27 February 1981 the plaintiff, CSB, Inc., entered into a listing agreement with defendant, Cradle of Democracy Broadcasting Company, Inc., (hereinafter C.O.D.). By the terms of the agreement C.O.D. engaged the plaintiff to obtain a purchaser for its business, radio station WYVA, for which C.O.D. agreed to pay plaintiff a commission of 5% of the gross sales price received for the station.
From the factual stipulations in the record it is clear that on or about the time this listing agreement was made plaintiff knew that defendant held its tower site and studio under leaseholds, that the tower site lease contained an option to purchase, and that defendant was behind in its rent payments under both leases. Plaintiff also knew from prior experience that the right to occupy the studio, transmitter, and tower site is a very important part of a radio station transaction.
On 1 April 1981 the plaintiff informed Stan Karas, the principal of the ultimate purchaser of WYVA, that the station was for sale and furnished him with all relevant information including copies of the leases. Karas' group and C.O.D. executed a letter agreement on 10 April 1981 for the purchase and sale of station assets, conditioned upon the assignment of the leases for the studio and tower site. The plaintiff was not involved in subsequent negotiations, between buyer and seller nor was plaintiff involved in the transfer of the leaseholds. Buyer and seller negotiated and entered into a sales contract on 17 August 1981. Because of C.O.D.'s prior defaults in lease payments and other considerations, the buyer ultimately executed new lease agreements for both the studio and tower site directly with the lessors. The new studio lease agreement omitted the option to purchase provision of the original lease.
The sale of the radio station was closed on 29 December 1981 with disbursement of proceeds postponed until 2 February 1982. The accepted gross sales price of WYVA was $475,000, 5 percent of which is $23,750. There is no dispute about the amount of the commission, if any be due. Defendant C.O.D. refuses to pay plaintiff its commission because plaintiff was not licensed as a real estate broker in the State of Virginia at the time the commission was earned.
Pursuant to the Court's pretrial order, plaintiff and defendant filed stipulations of facts and exhibits to be used in ruling upon Count I of plaintiff's complaint. Plaintiff filed its motion for summary judgment based upon those facts and exhibits on 16 July 1982, defendant responded on 27 July 1982, and plaintiff rebutted on 2 August 1982. The motion is now ripe for decision.
The question before the Court is whether plaintiff is barred from recovering its commission because it was not a licensed real estate broker in Virginia. The Virginia real estate license statute makes it "unlawful for any person ... to act as a real estate broker ... without a license issued by the Virginia Real Estate Commission." Va. Code § 54-749 (1982). The Code of Virginia defines a real estate broker as:
Any person, ... who, for a compensation or a valuable consideration sells or offers for sale, buys or offers to buy, or negotiates the purchase or sale or exchange of real estate, ... or who leases or offers to lease, or rents or offers for rent, any real estate or the improvements thereon for others, as a whole or partial vocation.
In Virginia the doing of just one of the enumerated acts in the above quoted statute constitutes one a real estate broker. Va. Code § 54-732 (1982).
The Court believes that a broker who arranges the sale of a Virginia business as a going concern, which sale involves the transfer of leaseholds, is not a broker of real estate under Virginia law. The defendant cites numerous cases from other jurisdictions where the transfer of a lease as part of the sale of a going business precludes the unlicensed broker from recovering its commission. See e.g., Doran v. Imeson Aviation, 419 F.Supp. 586 (D.Wyo. 1976); De Metre v. Savas, 93 Ohio App. 367, 113 N.E.2d 902 (1953); Cohen v. Scola, 13 N.J.Super. 472, 80 A.2d 643 (1951); Bierman v. Barthelmeus, 24 N.J.Misc. 35, 45 A.2d 820 (1946). In every one of these cases the court interpreted the state real estate broker's licensing statute to apply to the sale of a going business involving leaseholds. But in every one of these cases the applicable statute specifically defined a leasehold as real estate. The Virginia statute does not.
The Code of Virginia defines real estate "to include lands, tenements and hereditaments and all rights and appurtenances thereto and interests therein, other than a chattel interest." Va.Code § 1-13.12 (1979). The Virginia Supreme Court directly addressed this section in County of Prince William v. Thomason Park, 197 Va. 861, 91 S.E.2d 441 (1956), in which the Court ruled that "a chattel real or leasehold is intangible personal property and not real property ..." Id. at 867, 91 S.E.2d at 446. The Virginia Court recently affirmed this rule in Burns v. Equitable Associates, 220 Va. 1020, 265 S.E.2d 737 (1980), where the Court said Id. at 1029, 265 S.E.2d at 742. There is no statutory modification of this common law rule, therefore, in Virginia leasehold interests are not considered to be real estate.
Thus Virginia's real estate broker's licensing statute does not affect the plaintiff because he did not offer for sale or negotiate the purchase or sale of "real estate." Va.Code § 54-730 (1982). Neither did the plaintiff act as one who "leases or offers to lease, or rents or offers for rent, any real estate ...." Id. The original leases were already executed at the time the plaintiff brought the buyer and seller together. The new or amended leases resulted from negotiations between the buyer, the seller, and the various lessors, negotiations in which the plaintiff was not involved.
Even if Virginia were to characterize the assignment of the leases involved as the transfer of real estate, the impact of the leases was too insignificant to invoke the Virginia real estate broker statute. The Fifth Circuit in a similar case, Hughes v. Chapman, 272 F.2d 193 (5th Cir. 1959), found that an unlicensed media broker who sold a radio station situated on land leased to the seller was not subject to the requirements of Florida's real estate broker's statute; a statute unlike Virginia's in that it defines real estate to include leaseholds. Id. at 194. Even under that statute and despite the fact that the sale of the business included the transfer of a lease, the Fifth Circuit allowed the broker to recover his commission, saying that "the procurement of the assignment of the lease was only incidental to the sale of the radio station franchise and equipment." Id. at 195.
The Fifth Circuit relied on New York law as expressed in Weingast v. Rialto Pastry Shop, Inc., 243 N.Y. 113, 152 N.E. 693 (1926), where the court differentiated between a broker in the business of buying and selling leases or interests in real...
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DSP Acquisition, LLC v. Free Lance-Star Publ'g Co. of Fredericksburg (In re Free Lance-Star Publ'g Co. of Fredericksburg)
...evidenced by its attempts to procure deeds of trust on the Tower Parcels, DSP now disagrees. It cites to CSB, Inc. v. Cradle of Democracy Broad Co., 547 F.Supp. 106 (E.D. Va. 1982) for the proposition that the Towers are personal property and are therefore covered by the Security Agreement ......
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