Opinion
BANKRUPTCY NO.: 1-02-00592, ADVERSARY NO.: 1-02-00279A
April 25, 2003
OPINION
Drafted with the assistance of John Kelly, Law Clerk.
The background for this Opinion and Order is as follows. Defendant Outlet World was the owner of the South Valley Shopping Center (South Valley) in Virginia. Defendant Massachusetts Mutual Insurance Company (Mass Mutual) held a first mortgage against South Valley. Mass Mutual foreclosed on the property and purchased it at sheriff's sale in September, 2001, after Outlet World had defaulted on its obligations.
Outlet World employed Bobby McSherry (McSherry) as a leasing agent for South Valley. In that capacity, McSherry negotiated leases at South Valley with Payless Shoe Store (Payless) and Home Depot. In February, 2001, Payless and Home Depot signed leases with Outlet World by which McSherry was to earn commissions totaling the sum of $316,343.59, but Outlet World failed to pay.
On February 5, 2002, McSherry and his wife filed a petition under Chapter 7 of the Bankruptcy Code. On November 27, 2002, Monica L. McGhie-Lee, Trustee for their bankruptcy estate, filed this adversary proceeding against Mass Mutual and Outlet World to recover the above-described commissions. The Complaint seeks damages for breach of contract or unjust enrichment, and turnover of any such damages under 11 U.S.C. ___ 542. Mass Mutual has moved to dismiss the Trustee's Complaint in its entirety for failure to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6).
The Court must grant a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) if it determines that a Complaint does not state a valid claim upon which relief can be granted even while taking all the Complaint's factual allegations as true and drawing all reasonable inferences in the plaintiff's favor. Hishon v. King Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984). Under this standard, a claim should be dismissed if it appears beyond doubt that the claimant cannot prove any set of facts that would entitle him to relief.
Courts favor resolving each dispute on its merits over granting motions to dismiss. Scarborough v. Eubanks, 747 F.2d 871 (3d. Cir. 1984) (on motion to dismiss, doubts should be resolved in favor of reaching decision on the merits).
Generally, in federal civil cases, a claimant does not have to set out in detail the facts upon which a claim is based, but must merely provide a statement sufficient to put the opposing party on notice of the claim.Weston v. Pennsylvania, 251 F.3d 420, 428-429 (3d Cir. 2001), citing, Fed.R.Civ.P. 8; Remick v. Manfredy, 238 F.3d 248, 264 (3d Cir. 2001); Foulk v. Donjon Marine Co., 144 F.3d 252 (3d Cir. 1998). "The Federal Rules [of Civil Procedure] reject the approach that pleading is a game of skill in which one misstep by counsel may be decisive to the outcome and accept the principle that the purpose of pleading is to facilitate a proper decision on the merits."Conley v. Gibson, 355 U.S. 41, 47-48, 78 S.Ct. 99, 103, 2 L.Ed.2d 80 (1957) (citations omitted); see also, Universe Tankships, Inc. v. United States, 528 F.2d 73, 75 (3d Cir. 1975) (notice pleading, rather than fact pleading, requires a party only to "disclose adequate information as the basis of his claim for relief.").
Applying these standards to the breach of contract claim, Mass Mutual argues that, because McSherry's contract was with Outlet World and not with Mass Mutual, it will be impossible for the Trustee to prove a set of facts entitling McSherry's estate to damages from Mass Mutual on a contract theory. In response, the Trustee asserts that Mass Mutual acceded to Outlet World's contractual obligations to pay McSherry's commissions when it took an assignment of the Home Depot and Payless leases. While the Complaint does not, on its face, refer to the existence of an assignment, the decisions of the Courts in Conley andPryor make it clear that I may accept the Trustee's assertion for purposes of ruling on the instant Motion. According to the Trustee, the leases at issue each contained a provision obligating the "landlord" to pay McSherry a commission, and so when the leases were assigned to Mass Mutual, it became the landlord. Thus Mass Mutual could, according to the Trustee, accede to all of the landlord's duties as well as rights, including the duty to pay McSherry's commissions. For this reason, the Motion to dismiss the breach of contract cause of action cannot be granted.
Mass Mutual next argues that it is impossible for the Trustee to prove a set of facts allowing her to recover for unjust enrichment. The parties agree that the case is to be governed by the substantive law of Virginia. Under Virginia law, "unjust enrichment is defined as, 'the retention of a benefit conferred by another without offering compensation, in circumstances where compensation is reasonably expected.'"Poindexter v. Jolliff, No. 1974-00-1, 2001 WL 55718, at *2 (Va.Ct.App. Jan. 23, 2001) (quoting Black's Law Dictionary 1536 (7th ed. 1999)); accord Kern v. Freed Co. Inc., 299 S.E.2d 363, 365 (Va. 1983).
The Trustee asserts that she will be able to show that, under equitable principles, the circumstances of this case warrant a finding that Mass Mutual should compensate McSherry for his work. In support of this, the Trustee further asserts that Mass Mutual controlled the finances and operation of the shopping center before the foreclosure, and that McSherry was essentially working for Mass Mutual. In addition, Mass Mutual reaped the benefit of McSherry's work when Outlet World had assigned all of its leases to Mass Mutual as collateral. The Trustee asserts that the lease payments made by tenants procured by McSherry, as well as increases in the shopping center's value, all inured to Mass Mutual. Again, these assertions, if proven, may provide a basis for a finding against Mass Mutual on the Trustee's claim. Therefore, the Motion to Dismiss cannot be granted regarding the unjust enrichment claim.
Mass Mutual's next argument is that McSherry has no right to demand the commissions because he was not a licensed Virginia real estate broker. The definition of "real estate broker" is given by Va. Code Ann. § 54.1-2100:
"[R]eal estate broker" means any person or business entity . . . who, for compensation or valuable consideration (I) sells or offers for sale, buys or offers to by, or negotiates the purchase or sale or exchange of real estate . . ., or (ii) leases or offers to lease, or rents or offers for rent, any real estate or improvements thereon for others.
Va. Code Ann. ___ 54.1-2103 lists several exemptions to the licensing requirement. The persons to whom section 54.1-2103 applies need not be licensed in order to act as "real estate brokers". That section exempts:
Any person, partnership, association or corporation, or their regular employees, who as owner or lessor perform any of the acts enumerated in ___ 54.1-2100 and 54.1-2101 with reference to property owned or leased by the, where the acts are performed in the regular course of or incident to the management of the property and the investment therein;
The Trustee avers that McSherry's work in procuring the Payless and Home Depot leases were performed in the regular course of, and/or incident to, the management of South Valley, and that consequently, McSherry was exempt under section 2103(A)(1) from Virginia's real-estate licensing requirements. There appears to be no dispute that at all relevant times, McSherry was employed exclusively by Outlet World, and acted within the scope of his employment. Therefore, Mass Mutual has not proven itself entitled to judgment as a matter of law based on McSherry's lack of licensure.
Mass Mutual's final argument is that any contract under which McSherry would be owed commissions falls under Virginia's Statute of Frauds governing suits "[u]pon any agreement or contract for services to be performed in the sale of real estate by a party defined in ___ 54.1-2100 or ___ 54.1-2101." Va. Code Ann. § 11-2(7). Mass Mutual asserts that there is no evidence of a writing signed by the parties showing an intent to pay any commissions to McSherry. Again, there are at least two reasons precluding Mass Mutual's assertion from providing a basis for dismissal of any count of the Complaint. First, the Trustee avers that there is in fact a writing — the leases — and that these leases may be found to have existed between Mass Mutual and McSherry. Second, the transactions involved only the leasing, and not the sale of real estate. The plain language of Va. Code Ann. § 11-2(7) applies only to sales and therefore excludes the instant leases.
For each of the above-discussed reasons, the Motion to Dismiss cannot be sustained as to any Count of the Complaint. The Motion shall be denied.
An Order will follow.
ORDER
For those reasons indicated in the Opinion filed this dated, IT IS HEREBY ORDERED that the Motion of Defendant, Massachusetts Mutual Insurance Company, to Dismiss the Complaint filed in the above-captioned adversary proceeding is denied.