Lucas v. Gulf & Western Industries, Inc.

• Decision Date: 01 December 1981
• Docket Number: Nos. 81-1169,81-1377,s. 81-1169
• Citation: 666 F.2d 800
• Court: U.S. Court of Appeals — Third Circuit
• Parties: Mary M. LUCAS, Executrix of the Estate of Robert F. Lucas, Plaintiff-Appellant and Cross-Appellee, v. GULF & WESTERN INDUSTRIES, INC., a corporation and Amax, Inc., a corporation, Defendants-Appellees, v. NORANDA MINES, LIMITED, a corporation, Defendant-Appellee and Cross-Appellant.

Page 800

666 F.2d 800

Mary M. LUCAS, Executrix of the Estate of Robert F. Lucas, Plaintiff-Appellant and Cross-Appellee, v. GULF & WESTERN INDUSTRIES, INC., a corporation and Amax, Inc., a corporation, Defendants-Appellees, v. NORANDA MINES, LIMITED, a corporation, Defendant-Appellee

and Cross-Appellant.

Nos. 81-1169, 81-1377.

United States Court of Appeals Third Circuit.

Argued Oct. 13, 1981.

Decided Dec. 1, 1981.

Dominick A. Mazzagetti (argued), Bennett, Hueston, Mueller & Mazzagetti, Florham Park, N. J., for Mary M. Lucas Executrix of the Estate of Robert P. Lucas.

Stephen R. Knox (argued), Clyde A. Szuch, Pitney, Hardin & Kipp, Morristown, N. J., for Gulf & Western Industries, Inc.

Michael D. Freeborn (argued), Eugene H. Ruark, Rooks, Pitts, Fullagar & Poust, Chicago, Ill., Frank J. Miele, Riker, Danzig, Scherer & Hyland, Morristown, N. J., for Noranda Mines Limited.

Anthony Limitone, Jr., Morristown, N. J. (argued), for Amax, Inc.

Before HUNTER, ROSENN and WEIS, Circuit Judges.

OPINION OF THE COURT

WEIS, Circuit Judge.

The principal question in this case is whether a New Jersey broker may receive a commission for the sale of mineral interests located in Florida. The district court granted summary judgment for the defendants, finding that the broker's agreement was void because he was not registered under the Florida Real Estate License Law. As we read the statute, it applies only to real estate brokerage or sales activity conducted within Florida. Since there is no evidence that the broker performed any services in that state, we vacate the judgment.

A subsidiary issue is the amenability of a Canadian corporation to service under New Jersey's long-arm statute based on the activities of its wholly-owned American subsidiaries. Because the record is insufficient to determine the operational relationships between the various corporate entities and the situs of their activities, we remand for further proceedings.

Mary M. Lucas, widow of Robert P. Lucas and executrix of his estate, brought this suit against defendants Gulf & Western Industries, Noranda Mines Limited and AMAX Inc. in the New Jersey Superior Court, alleging breach of contract and tortious interference with contract. She claimed her husband had earned a brokerage commission under an agreement with Gulf & Western to find a purchaser for its share of a phosphate property in Florida. AMAX removed the case to the United States District Court for New Jersey. After some discovery, the district court granted the defendants' motion for summary judgment, holding the contract with Gulf & Western void and unenforceable as a matter of Florida law. The court also denied Noranda's motion to dismiss based upon lack of personal jurisdiction.

Robert P. Lucas was a geologist who, in May 1977, wrote from the office in his New Jersey home to a division of Gulf & Western in Bethlehem, Pennsylvania. In the letter, he offered his services as a broker to secure a purchaser for Gulf & Western's share of a joint venture phosphate operation in DeSoto County, Florida. Lucas enclosed a contract form reciting that he would be entitled to a commission if a sale of Gulf & Western's "mineral interests" resulted from his efforts.

One month later, Gulf & Western's associate counsel in Bethlehem responded with a draft of an agreement which he had prepared. This document, which referred to Lucas as "Broker," stated that he had represented himself as having "potential clients who may be interested in acquiring G & W's forty-nine percent (49%) interest in a phosphate rock property ... in DeSoto County, Florida." Gulf & Western agreed to pay Lucas a $150,000 commission if a sale resulted from his efforts within one year after the expiration of the contract's 180 day life. (Later, the parties agreed to extend the contract for an additional 90 days.) There was also a proviso that the agreement was to be governed by the laws of Florida. Lucas promptly signed the Gulf & Western draft and returned it to Bethlehem, where Gulf & Western executed the agreement. Thereafter, Lucas contacted a number of prospective purchasers and actively worked on the matter until his death in January 1978.

In May 1979, Gulf & Western sold its interest in the Florida property to its co-venturer in the project, Noranda Phosphate, Inc., a wholly-owned subsidiary of Noranda, Inc. Some months later, Noranda, Inc. conveyed all the Phosphate stock to its parent, defendant Noranda Mines Ltd., which in turn transferred the Phosphate shares to AMAX as part of an exchange of subsidiaries.

The defendants deny that the sale of Gulf & Western's interest resulted from Lucas' brokerage activities but the district court did not reach the merits of that controversy. Instead, summary judgment for the defendants was granted on the basis of Florida's Real Estate License Law, which invalidates agreements to pay commissions to unregistered brokers.

Defendant Noranda Mines Ltd., a Canadian corporation, also moved for dismissal on the additional ground that it was not subject to jurisdiction under New Jersey's long-arm statute because it did not do business in the state. It appears that Noranda Mines owns all of the stock of Noranda, Inc., a Delaware corporation, and Noranda, Inc., in turn, owned 100% of the stock of Noranda Phosphate and Noranda Metal Industries, Inc., two other Delaware corporations. Noranda Mines admits that at one time Noranda Metal did transact business in New Jersey, but defendant asserts that Metal's activity there ceased in 1977 and that its Certificate of Authority in the state lapsed in December 1979. In any event, it is alleged that Noranda Metal had no connection with the phosphate transactions. The complaint in this case was filed in February 1980.

In his bench opinion, the district judge stated that Lucas had dealings "... with an outfit called Noranda. Which Noranda it was is open to serious question." Since he believed that Noranda Mines of Canada had been "... present in New Jersey through subsidiaries or a subsidiary," there was a factual basis for invoking the long-arm statute and therefore the motion for dismissal was denied.

Plaintiff has appealed from the entry of summary judgment and Noranda Mines Ltd. has cross-appealed from the order denying its motion.

I

We turn first to the entry of summary judgment based on the Real Estate License Law. The parties accept the district court's determination that Florida law governs. We therefore follow the same course. ¹

At the time the events in this case occurred, the Florida statute read in pertinent part:

"(2) Every person who shall, in this state, for another, and for a compensation or valuable consideration ... offer, attempt or agree to ... negotiate the sale, exchange, purchase or rental of any real property, or any interest in or concerning the same, including mineral rights ...; and every person who shall take any part in the procuring of sellers, purchasers.... or who shall direct or assist in the procuring of prospects....; each and every such person shall be deemed and held to be a 'real estate broker' or a 'real estate salesman'...."

Fla.Stat.Ann. § 475.01 (West Supp.1978). A complementary provision stated:

"No contract for a commission or compensation for any act or service enumerated in subsection (2) of § 475.01 shall be valid unless the broker or salesman shall have complied with this chapter in regard to registration ...."

Fla.Stat.Ann. § 475.41 (West Supp.1978).

Gulf & Western contends that the statute made the brokerage agreement invalid and unenforceable. Plaintiff asserts that because it drew up the contract and benefited by it, Gulf & Western should be estopped from denying validity. The district court rejected plaintiff's argument on the ground that accepting it would, in effect, nullify the Florida statute. In view of our disposition of the case, we need not meet the estoppel contention.

We begin with the observation of the United States Court of Appeals for the Fifth Circuit that the Real Estate License Law is "highly penal, and therefore to be strictly construed." Hughes v. Chapman, 272 F.2d 193, 196 (5th Cir. 1959). The Florida Supreme Court has not construed the statute in any context relevant to the issues before us, but the state district courts of appeal have applied it instructively in somewhat related circumstances. After acknowledging the Hughes v. Chapman rule of restrictive interpretation, Florida's Third District Court of Appeal went on to say: "In addition, the purpose of the Real Estate Licensing Act is to protect the public from being forced to deal with dishonest or unscrupulous real estate operators, rather than to permit one party to gain unconscionable advantage by avoiding a just obligation which he has contracted to pay." Geneva Investment, Ltd. v. Trafalgar Developers, Ltd., 274 So.2d 581, 583-584 (Fla.App.1973), cert. disch. 285 So.2d 593 (Fla.1973), appeal after remand, 305 So.2d 274 (Fla.App.1974).

We give great weight to the language of § 475.01(2) itself. By choosing to define a real estate broker as "(e)very person who shall, in this state," agree to perform certain activities in connection with real estate transactions, the legislature appropriately chose to regulate only those individuals who perform their activities within the state. The Real Estate License Law was not intended to reach persons who render brokerage services outside of Florida.

This interpretation is consistent with the Florida appellate opinions. In Pokress v. Tisch Florida Properties, Inc., 153 So.2d 346 (Fla.App.1963), a Florida broker who had utilized the services of out-of-state brokers to solicit purchasers in their respective states sued to recover his commission. The trial court dismissed the suit on the theory that the Real Estate License Law required all of the brokers to be registered in Florida where the land was located. On appeal, the court concluded that the statute did not bar the claim...