Opinion
Civil No. 00-3118-CO.
February 9, 2004
ORDER
Plaintiff brings this action for breach of contract, promissory estoppel, and quantum meruit. Plaintiff is an Oregon resident, defendant is a California resident, and the matter in controversy exceeds $75,000.00. This court has jurisdiction pursuant to 28 U.S.C. § 1332. The parties executed written consents for entry of final judgment by a Magistrate Judge. 28 U.S.C. § 636(c). Before the court is defendant's motion for summary judgment (#77).
Motion to Strike
In the reply brief, defendant moves to strike all statements by plaintiff to the effect that Wes Norton purchased the Venable property, arguing that the statements are conclusory and fail to disclose any basis for the conclusions. Defendant moves to strike other statements by plaintiff contained in plaintiff's Concise Statement of Additional Material Facts and plaintiff's revised declaration including:
Although defendant failed to comply with the requirements of the District Of Oregon's Local Rules in making this motion, the court will address the merits of the motion. See Fraser v. Goodale, 342 F.3d 1032, 1036 (9th Cir. 2003).
1) paragraph 10 of plaintiff's Concise Statement of Additional Material Facts — "Lindeman treated his corporations and their employees, including Hulsey, as extensions of himself and without regard to corporate formalities.";
2) paragraph 3 of plaintiff's revised declaration — "Mr. Lindeman controlled the company because he and Yuba trucking contributed all the funds to capitalize the company.";
3) paragraph 4 of plaintiff's revised declaration — "The primary value of the Venable properties is a source of rock for asphalt, concrete, and other uses. Mr. Norton owns a business called Rock N ready Mix, Inc. which needs sources of rock for those purposes. . . . Mr. Norton purchased the property. . . . There was a long delay in closing the deal because a flood which flooded the property and caused government regulatory agencies to require that the owner obtain certain permits.";
4) paragraph 5A of plaintiff's revised declaration — "Even though Yuba North, Inc. was owned by Lindeman personally . . . to my knowledge there was no formal or written agreement that Yuba Trucking be paid for the assets removed to Yuba North, Inc.";
5) paragraph 7 of plaintiff's revised declaration — "To my knowledge there was no formal or written agreement requiring Yuba North, Inc. to pay Yuba trucking for use of real estate and equipment."; and
6) paragraph 12 of plaintiff's revised declaration — "From my observation, Mr. Lindeman used his control of both Yuba trucking and Yuba North in such a way as their businesses were mixed and extensions of his own business interests.".
Defendant argues that these statements are conclusory, contain speculation, fail to show plaintiff is competent to testify about the matters discussed and fail to show that the statements are based on personal knowledge.
Federal Rules of Civil Procedure Rule 56(e) requires that affidavits "be made on personal knowledge", "set forth facts as would be admissible in evidence", and "show affirmatively that the affiant is competent to testify to the matters stated therein." Federal Deposit Ins. Corp. v. New Hampshire Ins. Co., 953 F.2d 478, 484 (9th Cir. 1992). Conclusory and speculative affidavits, which are not based upon personal knowledge and fail to set forth specific facts in support of an issue, are insufficient to meet the burden imposed by Rule 56(e) and to avoid summary judgment. Thornhill Pub. Co. v. Gen. Tel. Elecs. Corp., 594 F.2d 730, 738 (9th Cir. 1979). To satisfy the requirements of Rule 56(e), an affidavit must set forth specific facts that are within the affiant's personal knowledge which substantiate any statements, assertions or theories contained in the affidavit. Id.; Price v. Rochford, 947 F.2d 829, 832-833 (7th Cir. 1991). Conclusory allegations in an affidavit, which are "not backed up by statements of fact", lack probative value and cannot defeat a motion for summary judgment. Thomas v. International Business Machines, 48 F.3d 478, 485 (10th Cir. 1995); Shane v. Greyhound Lines, Inc., 868 F.2d 1057, 1061 (9th Cir. 1989).
The court finds that the statements defendant objects to are conclusory and speculative. The statements are unsupported by specific facts. See Thomas v. International Business Machines, 48 F.3d 478, 485 (10th Cir. 1995); See also Thornhill Pub. Co. v. Gen. Tel. Elecs. Corp., 594 F.2d 730, 738 (9th Cir. 1979); See also Ashwell Co. v. Transamerica Ins. Co., 407 F.2d 762, 766 (7th Cir. 1969). Therefore, defendant's motion to strike is granted.
I. FACTS
Yuba Trucking, Inc., a California corporation, was incorporated in 1969. (Second Lindeman Decl. ¶ 3). In 1997 and 1998, Mr. Lindeman owned 95% of the shares of Yuba Trucking, Inc., and the remaining 5% of the shares were owned by Kevin Cotter and Robert Shane. (Thierolf Decl. Exhibit 2 — Lindeman Depo. at 12, 43).In 1999, Mr. Lindeman sold his interest in Yuba Trucking, Inc. (Second Lindeman Decl. ¶ 4). From mid-1996 until he was moved onto the payroll of Yuba North, Inc., Mr. Hulsey was an employee of Yuba Trucking, Inc. (Lindeman Declaration ¶ 1).
Yuba North, Inc., an Oregon corporation, was incorporated on April 2, 1997. (Second Lindeman Decl. ¶ 5). Mr. Lindeman was the initial shareholder. (Id.). Mr. Hulsey was an employee of Yuba North, Inc. from 1997 through July, 1999. (Lindeman Decl. ¶ 2). Yuba North, Inc. was voluntarily dissolved on January 12, 2000. (Allen Decl. ¶ 6 Exhibit 5).
Lincoln Trust Company is a Colorado corporation, and its articles of incorporation were filed with the Colorado Department of State on April 23, 1957. (Thierolf Decl. Exhibit 4). Mr. Hulsey was never employed by the Lincoln Trust Company or by the Michael D. Lindeman IRA Rollover Account. (Thierolf Decl. Exhibit 3 — Hulsey Depo. at 7, 9, and 15).
In November of 1996, Yuba Trucking, Inc. and Floyd Venable entered into a Real Estate Lease with Obligation to Purchase the Venable property. (Allen Dec. ¶ 2 Exhibit 1). The Real Estate Lease with Obligation to Purchase required Yuba Trucking, Inc. to purchase the Venable property for $1,000,000, not later than five years from the date of the agreement. (Allen Decl. ¶ 2 Exhibit 1). Mr. Lindeman, as C.E.O. of Yuba Trucking Inc., Northern Division, signed the Real Estate Lease with Obligation to Purchase. (Dreyer Decl. Exhibit 2 at 5). At the time, the names Yuba North or Yuba North division were used by Yuba Trucking, Inc. to refer to its operations in Oregon. (Allen Decl. Exhibit 2 at 2-3).
The Venable property consists of eleven separate parcels. On January 6, 1998, Mr. Venable signed warranty deeds conveying two of the Venable parcels to Mr. Lindeman individually. At the same time, Mr. Venable signed warranty deeds conveying the nine remaining Venable parcels to the Lincoln Trust Company, fbo Michael D. Lindeman IRA Rollover Account. The deeds were recorded on January 9, 1998. (Thierolf Decl. Exhibits 5(a)-(c)). At the time Mr. Lindeman and his IRA purchased the Venable property, Mr. Lindeman believed he was going to be able to sell the property for more than $1,000,000. (Allen Decl. ¶ 3 Exhibit 2 pg. 5).
On January 13, 2000, Mr. Lindeman, as vendor, entered into a land sale contract covering two of the eleven Venable parcels with Rock N Ready Mix, Inc. as vendee. At the same time, the Lincoln Trust Company, as vendor, entered into a land sale contract covering the nine remaining Venable parcels with Rock N Ready Mix, Inc. as vendee. A memorandum of the transactions was recorded on February 29, 2000, in the official records of Jackson County, Oregon, as document No. 00-07311. (Thierolf Decl. Exhibit 6).
Rock N Ready Mix, Inc. is an Oregon corporation, for which the Oregon Secretary of State filed articles of incorporation on March 16, 1998. The Secretary of State also issued a certificate of incorporation to the effect that it is an active corporation. (Thierolf Decl. Exhibit 7).
Plaintiff claims that:
In March, . . . [1997], Hulsey attended a management meeting where Lindeman announced his intention to sell his Jackson County real estate. . . . In the course of his declarations, Lindeman announced his intention to sell the Venable property. He declared that he wanted 1.2 million for it, and he made the offer and promise that if any of the persons present could find a buyer willing to pay more than that amount, the finder could keep the excess over 1.2 million. (Complaint ¶ 5).
There was never any written agreement between plaintiff and defendant regarding a commission or finder's fee to be received upon plaintiff's finding a buyer for the Venable property. (Dreyer Decl. Exhibit 6 at 2; Lindeman Decl. ¶ 4).
At the time Mr. Lindeman made the offer, Mr. Hulsey was an employee of the Northern Division of Yuba Trucking, Inc. On April 2, 1997, when the Northern Division was incorporated as Yuba North, Inc., Mr. Hulsey went onto the Yuba North payroll. (Revised Hulsey Decl. ¶ 3).
Plaintiff claims that he "reasonably relied on the promise and proceeded to do work to find a buyer willing to pay over $1.2 million. (Complaint ¶ 6). Plaintiff did not have a real estate license. (May 17, 2001 Hulsey Affidavit ¶ 4 and ¶ 6).
In his efforts to sell the Venable property, Mr. Hulsey supplied Mr. Lindeman with a number of names of potential buyers. Mr. Lindeman was aware, in the summer of 1997, that Mr. Hulsey was working on finding a buyer. (Allen Aff. ¶ 3 Exhibit 2 pg. 4). By the summer of 1997, Mr. Hulsey had located Wes Norton and introduced him to Mr. Lindeman. (Revised Hulsey Decl. ¶ 4).
All Mr. Hulsey's real estate activities were performed in 1997, while he was on the payroll of Yuba North, Inc. (Revised Hulsey Decl. ¶ 5A). His activities were not supervised or controlled by Mr. Lindeman, and they were performed mostly outside working hours. (Revised Hulsey Decl. ¶ 4).
Plaintiff claims that in February, 2000, he brought Mr. Lindeman an offer from Wes Norton to purchase the Venable property for $1.8 million. (Complaint ¶ 7). Plaintiff also claims "[a]t the instigation and request of Lindeman, Hulsey performed substantial work which conferred a benefit on Lindeman." (Complaint ¶ 15).
Mr. Hulsey's "activities regarding the Venable property qualify as professional real estate activities." Hulsey v. Lindeman, 65 Fed. App. 633, 634 (9th Cir. 2003). His activities placed him "squarely within Oregon revised Statute § 696.020(1)." Id.
On February 15, 2001, Mr. Hulsey served "Plaintiff's First Request for Production of Documents to Defendant" seeking, "All documents by which defendant Lindeman, or any business entities controlled by him, acquired any and all interests in the Venable properties.". (Allen Decl. ¶ 5 Exhibit 4 ¶ 1). No documents were ever produced relating in any way to the transfer of the right to purchase the Venable properties from Yuba Trucking, Inc. to Yuba North, Inc. or to Mr. Lindeman or his IRA. (Allen Decl. ¶ 5).
II. LEGAL STANDARDS
Pursuant to Rule 56(c) of the Federal Rules of Civil Procedure, a moving party is entitled to summary judgment as a matter of law "if the pleadings, depositions, answer to interrogatories, and admissions on file, together with the affidavits, if any show that there is no genuine issue as to any material fact." Fed.R.Civ.P. 56(c); Bahn v. NME Hosps., Inc., 929 F.2d 1404, 1409 (9th Cir.), cert. denied, 502 U.S. 994 (1991). The moving party bears the initial burden of proof. See Rebel Oil Co. v. Atlantic Richfield Oil Co., 51 F.3d 1421,1435 (9th Cir.) cert. denied, 516 U.S. 987 (1995). The moving party meets this burden by identifying portions of the record on file which demonstrates the absence of any genuine issue of material fact. Id.
In assessing whether a party has met their burden, the court must view the evidence in the light most favorable to the nonmoving party. Allen v. City of Los Angeles, 66 F.3d 1052 (9th Cir. 1995). All reasonable inferences are drawn in favor of the nonmovant. Id. If the moving party meets their burden, the burden shifts to the opposing party to present specific facts which show there is a genuine issue for trial. Fed.R.Civ.P. 56(e); Auvil v. C.B.S. "60 Minutes", 67 F.3d 816 (9th Cir. 1995), cert. denied, 517 U.S. 1167 (1996). The nonmoving party cannot carry their burden by relying solely on the facts alleged in their pleadings. Leonard v. Clark, 12 F.3d 885, 888 (9th Cir. 1994). Instead, their response, by affidavits or as otherwise provided in Rule 56, must designate specific facts showing there is a genuine issue for trial. Id.
III. DISCUSSION
Defendant moves for summary judgment arguing that:1) plaintiff was not defendant's employee;
2) plaintiff's claim is precluded, because Wes Norton did not purchase the Venable property;
3) plaintiff cannot recover any compensation for the nine lots that were owned by Lincoln Trust Company;
4) the lack of a written agreement with defendant bars plaintiff's recovery; and
5) plaintiff's second and third claims for relief should be dismissed on the above grounds.
In response, plaintiff argues that:
1) all plaintiff's real estate activities took place while he was an employee of the owner of the real estate;
2) defendant treated the Venable contract as his own and disregarded the boundaries of his corporations;
3) defendant treated plaintiff as his own employee and disregarded the boundaries of his corporations;
4) the relationship between defendant and plaintiff was an employer/employee relationship;
5) plaintiff is not required to pierce the corporate veil to prevail — defendant was the real party in interest;
6) this is a proper case to disregard the corporate entity;
7) suing the defendant was entirely appropriate;
8) defendant is estopped to deny personal liability to pay plaintiff his commission;
9) defendant has been unjustly enriched and should be required to pay the commission;
10) Wes Norton owns Rock N ready Mix Inc. and plaintiff may correct his failure to name Rock N Ready Mix as the buyer in the Pretrial Order;
11) the Lincoln Trust Company was an instrumentality of defendant;
12) full performance and promissory estoppel avoid the statute of frauds;
13) ORS 41.580 does not apply, because plaintiff was not authorized or employed to sell or purchase real estate; and
14) ORS 696.710(1) does not apply to this case.
In reply, defendant argues that:
1) relief is precluded as a matter of law, because the seller of most of the Venable property was Lincoln Trust Company, not defendant, and the buyer of the property was Rock N Ready Mix, not Wes Norton;
2) plaintiff has failed to plead any basis for piercing the corporate veil of Yuba Trucking, Inc., Yuba North, Inc., Lincoln Trust Company, or Rock N Ready Mix, Inc.; and
3) plaintiff is barred from recovery by ORS 41.580(1)(g).
Oregon law prohibits individuals from engaging in "professional real estate activity" without a license. ORS 696.020(1). "This provision imposes an absolute bar to bringing and maintaining an action for compensation for real estate activity unless the plaintiff is a licensed real estate agent in Oregon. Fields v. Macnab, 70 Or. App. 154, 157 (1984) (citations omitted). It is undisputed that Mr. Hulsey engaged in professional real estate activity and that he was not a licensed real estate agent at the time. Therefore, he is barred from recovering any compensation for his activities, unless he qualifies for an exception to this statute.
The provisions of ORS 696.010 do not apply to "[a] nonlicensed regular full-time employee of a single owner of real estate whose activities involve the real estate of the employer and are incidental to the employee's normal, nonreal estate activities . . ." ORS 696.030(1)(a). To qualify for this exception, Mr. Hulsey must have been (1) a full-time employee of a single owner of real estate and (2) his real estate activities had to involve the real estate of his employer. In making these determinations, the court will consider the time period that Mr. Hulsey engaged in the real estate activity. See Fields, 70 Or. App. at 157 (citing Jolma v. Steinbock, 40 Or. App. 657, review denied, 287 Or. 409 (1979)).
The undisputed facts show that:
Yuba Trucking, Inc. entered into a Lease with Obligation to Purchase the Venable property. Mr. Lindeman signed that document as C.E.O. of Yuba Trucking, Inc., Northern Division. There are no documents showing that the Venable property was ever transferred from Yuba Trucking, Inc. to Yuba North, Inc. However, Mr. Lindeman loaned Yuba North, Inc. over two million dollars, and he was hoping, through the sale of the Venable property, to partially offset his loans to Yuba North, Inc. (Second Lindeman Decl. ¶ 7). Mr. Hulsey was an employee of Yuba North, Inc. at the time he engaged in his real estate activities.
Viewing the facts in the light most favorable to plaintiff, it can be inferred that Yuba North, Inc. was the owner of the Venable property at the time that plaintiff engaged in his real estate activities. Under these facts, plaintiff would qualify for the exception set forth in ORS 696.030(1)(a). The court finds that there are issues of fact regarding whether Yuba North, Inc. was the owner of the Venable property at the time plaintiff engaged in his real estate activities. Therefore, defendant's motion for summary judgment on this issue is denied.
Even if plaintiff qualifies for the above exception, plaintiff is not suing his employer, Yuba North, Inc., but Mr. Lindeman individually. Plaintiff puts forth several theories to hold defendant Lindeman individually liable for the compensation he claims:
1) Mr. Hulsey was employed by Mr. Lindeman personally;
2) when Mr. Lindeman made the offer he was the C.E.O. of Yuba Trucking, Inc. and Yuba North, Inc. — he made the offer on behalf of the corporation — the corporation was his agent — he was the principal and real party in interest; and
3) there is sufficient grounds to pierce the corporate veil and hold Mr. Lindeman personally liable.
Oregon courts have recognized the theory of "real party in interest" or agent/principal to hold one corporation responsible for the acts of another corporation. Elvalsons v. Industrial Covers, Inc., 269 Or. 441 (1974). The court recognized that an agency relationship exists when one party is acting for or representing another party. Id. at 453. An agency relationship "results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act." Larrison v. Moving Floors, Inc., 127 Or. App. 720, 723 (1994). An agency relationship may be implied from the circumstances and conduct of the parties. Id. The principal's consent and right to control the agent are essential elements of the relationship. Id.
In order to pierce the corporate veil, the plaintiff must prove that:
1) the shareholder controlled the corporation;
2) the shareholder engaged in improper conduct in exercise of control over the corporation; and the shareholder's improper conduct caused plaintiff's inability to obtain an adequate remedy from the corporation. Salem Tent Awning Co. v. Schmidt, 79 Or. App. 475, 481, review denied, 302 Or. 36 (1986). The commingling of a shareholders private affairs with the affairs of the corporation is a form of improper conduct. Id.
The undisputed facts show that Yuba Trucking, Inc. entered into a Lease with Obligation to Purchase the Venable property. Mr. Lindeman signed that document as C.E.O. of Yuba Trucking, Inc., Northern Division. There are no documents showing that the Venable property was ever transferred from Yuba Trucking, Inc. to Yuba North, Inc. or from Yuba North, Inc. to Mr. Lindeman personally or to the Lincoln Trust Company fbo Mr. Lindeman's IRA. However, there is evidence from which it could be inferred that such transfers took place, and that the corporations in questions were not compensated for the transfer of this asset.
From this evidence, an agency relationship between Mr. Lindeman and the corporations could be inferred. In addition, the court finds that control, improper conduct, and that the improper conduct caused plaintiff's inability to collect his commission could also be inferred. The court finds that there are issues of fact regarding whether there was an agency relationship and whether piercing the corporate veil is appropriate in this case. Therefore, defendant's motion for summary judgment on this ground is denied.
Defendant argues that plaintiff's claims for breach of contract, promissory estoppel, and quantum meruit are barred by the statute of frauds. In response, plaintiff argues that ORS 41.580(1)(g) does not apply because plaintiff was not employed to sell or purchase real estate and because plaintiff was not Lindeman's agent.
ORS 41.580(1)(g) provides in part that "[a]n agreement authorizing or employing an agent or broker to sell or purchase real estate for a compensation or commission . . ." is void unless it is in writing and "subscribed by the party to be charged". The undisputed facts show that plaintiff engaged in professional real estate activity to find a buyer for the Venable property. Plaintiff alleges that defendant Lindeman entered into a contract requesting plaintiff to find a buyer to the property for at least 1.2 million dollars. It is undisputed that this alleged agreement was not in writing. It is undisputed that plaintiff conducted the majority of his real estate activities outside his regular working hours and he was not subject to the control of Mr. Lindeman.
Under Oregon law, it is clear that plaintiff's claims are barred by the statute of frauds. Cf. Ehler v. Peck, 286 Or. 523 (1979). The statute does not require that the agent have the power to actually sell the property. The statute is applicable when an agent attempts to find a purchaser for the property.Ehler v. Peck, 286 Or. at 525.
It is also clear that Mr. Lindeman's control of the plaintiff's activities is not necessary to establish an agency relationship.Jensen v. Medley, 336 Or. 222 (2003). The court finds that Mr. Hulsey was acting as a special agent with the authority to find a buyer for the property for the price of at least 1.2 million dollars. See Restatement (Second) of Agency §§ 3, 14N, and 54. Defendant is entitled to summary judgment on this issue.
IV. ORDER
Based on the foregoing, it is ordered that defendant's motion for summary judgment (#77) is granted.