Opinion
No. 566501
December 29, 2003
MEMORANDUM OF DECISION ON MOTIONS TO STRIKE # 101, #103, #104 AND #106
Whether the motions to strike the three-count complaint should be granted. Since the plaintiff has failed to allege that the listing agreement complies with the statutory requirements for a broker to recover a commission fee, the motions to strike the complaint in its entirety are granted.
FACTS
The plaintiff, Tyler E. Lyman Inc. (Lyman), a Connecticut corporation filed a three-count complaint to collect a commission in accordance with a real estate listing agreement entered into with the following defendants: 19 Thames Street Partnership (the partnership); Helen Langfield; Louise Chesler; Jonathan E. Sanders; Ellen Sanders Nirenstein; Joanna Langfield Rose; Alfred Agrin; SYBS, Inc.; Calema 1 L.L.C.; Stanley Bergman, Trustee for Harry Elion Trust FBO; Stanley Bergman, Trustee for Elion Langfield Trust; and Jeffrey Nirenstein, Trustee for Esther B. Smithline Trust. Count one alleges a breach of the listing agreement; count two incorporates paragraphs one though fourteen of count one and alleges a breach of the covenant of good faith and fair dealing; and count three incorporates paragraphs one through sixteen of the second count and alleges unjust enrichment.
The following facts have been alleged in the complaint. On November 14, 1996, Lyman and the partnership entered into a listing agreement to procure a customer to lease the multi-storied office building owned by the partnership and located at 1-19 Thames Street (premises) in Groton, Connecticut. Pursuant to the listing agreement, Lyman would receive a ten percent commission of the gross rent for any original term with a five percent option for renewal of any additional lease term. On February 12, 1997, Lyman found a tenant for the property, and, as a result, the partnership and Proto-Power entered into a five-year lease agreement with an option to renew for an additional five years. As an additional condition, the partnership required a "Guaranty of Lease Agreement" to be executed by the parent corporation of Proto-Power. For five years until January 2002, the partnership paid the requisite commission to Lyman.
On January 31, 2002, Proto-Power terminated its lease. On February 17, 2002, the partnership procured a tenant, Excel Energy, and executed a lease with it. The partnership voided the obligation to pay Lyman a renewal commission. The tenant/occupant of the building, however, continued to be Proto-Power, and not Excel Energy.
Proto-Power is a wholly owned subsidiary of Utility Engineering which, in turn, is a wholly owned subsidiary of Excel Energy.
In count one, Lyman claims that the partnership has breached the listing agreement, and, therefore, it is entitled to a five percent commission of gross rent amounting to $22,000 per year for a five-year period. In count two, Lyman asserts that the partnership entered directly into the lease agreement with Excel Energy to avoid paying renewal commissions, a breach of the implied covenant of good faith and fair dealing. In count three, Lyman contends that the partnership has been unjustly enriched by retaining the commission.
The partnership on September 2, 2003, filed a motion to strike the three-count complaint and a memorandum of law in support of the motion. On September 10, 2003, Lyman filed a memorandum of law in opposition. The matter was heard on the short calendar on September 29, 2003.
In addition to the partnership, all the defendants filed identical motions to strike accompanied by memoranda of law. On August 26, 2003, the defendants Joanne Rose, Helen Langfield, and Stanley Bergman filed their motion (#101); on August 29, 2003, the defendants Louise Chesler, Jonathan Sanders, Ellen Sanders Nirenstein, SYBS and Jeffrey Nirenstein filed their motion (# 104); and on September 10, 2003, the defendant Calema 1, L.L.C. filed its motion (#106).
DISCUSSION
"The purpose of a motion to strike is to contest . . . the legal sufficiency of the allegations of any complaint . . . to state a claim upon which relief can be granted . . . A motion to strike challenges the legal sufficiency of a pleading, and, consequently, requires no factual findings by the trial court." (Citations omitted; internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). The motion is "properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged." (Internal quotation marks omitted.) Id. "It is fundamental that in determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted." (Internal quotation marks omitted.) Gazo v. Stamford, 255 Conn. 245, 260, 765 A.2d 505 (2001). "The court must construe the facts in the complaint most favorably to the plaintiff." (Internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 580, 693 A.2d 293 (1997). "[I]f facts provable in the complaint would support a cause of action, the motion to strike must be denied." (Internal quotation marks omitted.) Bhinder v. Sun Co., 263 Conn. 358, 366, 819 A.2d 822 (2003).
In its motion to strike, the partnership contends that the listing agreement is void because it fails to comply with the requirements of General Statutes § 20-325a(b), thus prohibiting Lyman from maintaining an action to recover the real estate commission. The partnership argues that the listing agreement was not in effect at the time Lyman allegedly rendered real estate services upon which it seeks to recover the renewal commission. It further argues that, on the basis of case law, Lyman cannot recover a commission fee under the theory of quantum meruit. In response, Lyman counters that the arguments raised by the partnership are more appropriately addressed in a motion for summary judgment, rather than a motion to strike. As to counts one and two, Lyman maintains that the elements for breach of contract and breach of good faith and fair dealing have been sufficiently pleaded to state a cause of action for which relief can be granted. Additionally, Lyman argues that count three is not a claim for quantum meruit, but has been brought under a theory of unjust enrichment, which also has been adequately pleaded.
Section 20-325a, in relevant part, states:
(b) No person, licensed under the provisions of this chapter, shall commence or bring any action with respect to any acts done or services rendered after October 1, 1995 . . . unless the acts or services were rendered pursuant to a contract or authorization from the person for whom the acts were done or services rendered. To satisfy the requirements of this subsection any contract or authorization shall: (1) Be in writing, (2) contain the names and addresses of the real estate broker performing the services and the name of the person or persons for whom the acts were done or services rendered, (3) show the date on which such contract was entered into or such authorization given, (4) contain the conditions of such contract or authorization, (5) be signed by the real estate broker or the real estate broker's authorized agent, . . . and (7) be signed by the person or persons for whom the acts were done or services rendered or by an agent authorized to act on behalf of such person or persons, pursuant to a written document executed in the manner provided for conveyances in section 47-5 . . .
To test the legal sufficiency of a complaint seeking a broker's commission, "the proper procedural mechanism addressing whether § 20-325a(b) was satisfied would . . . be a motion to strike under Practice Book § 152 [now § 10-39]." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 524, 815 A.2d 1188 (2003).
"The right of a [real estate agency or] brokerage firm to recover a commission depends upon the terms of its employment contract with the seller. To be enforceable, this employment contract, often called a listing contract, must be in writing and must contain the information enumerated in General Statutes § 20-325a." Revere Real Estate, Inc. v. Cerato, 186 Conn. 74, 77, 438 A.2d 1202 (1982).
See footnote 3.
"General Statutes § 20-325a(a) requires that, in order to bring an action for a broker's commission, the plaintiff must (1) be licensed and (2) have been licensed at the time that services were rendered." CMG Realty Of Conn. v. Colonade One, 36 Conn. App. 653, 662, 653 A.2d 207 (1995). Section 20-325a(b) contains "seven subsections. It is true that subsection c of § 20-325a states that nothing in the statute shall prevent recovery of a commission for any services rendered if the broker has substantially complied with subdivisions (2) to (6) inclusive, of subsection (b) . . . and it would be inequitable to deny such recovery. But this subsection was passed in 1994 and does not address subdivision (1) (contract or authorization commission to be in writing) and subdivision (7) (the contract of authorization must be signed by the person for whom the services are to be rendered). Thus, as to the requirements of subdivisions (1) and (7) of subsection (b) of the statute, the language of pre-1994 cases applies which held that: `It is well established that the requirements of § 20-325a(b) are mandatory rather than permissive and that the statute is to be strictly construed.'" Id. (quoting Ralph v. Nettleton, 50 Conn. App. 640, 647, 718 A.2d 509 (1998)). "Connecticut courts have consistently held that when a listing agreement between a broker and a seller does not fully comply with these statutory requirements, the broker's action for commission is precluded." Boline v. Albert, 23 Conn. App. 688, 690-91, 583 A.2d 945 (1991). If "no listing agreement was in effect when the plaintiff's services were rendered, the plaintiff is statutorily barred from recovering a commission. A broker who does not follow the mandate of the statute does so at his peril." (Internal quotation marks omitted.) New England Investment Properties, Inc. v. Spire Realty Development Corp., 31 Conn. App. 682, 686, 626 A.2d 1316 (1993).
The partnership maintains that the listing agreement is invalid, and, therefore, unenforceable because in counts one and two of the complaint, Lyman has not alleged that "[it] is a licensed real estate broker," that the agreement was "signed by an owner of the property" and that it includes "the term[s] of the listing agreement," all of which are in violation of §§ 20-325a(a), (b)(4) and (5). To bring an action to recover a commission the complaint must allege not only the elements of a contract but also that it has complied with the statutory requirements of § 20-325a. "The key elements of a breach of contract action are: (1) the formation of an agreement; (2) performance by one party; (3) breach of the agreement by the other party and (4) damages." Ouellette v. Embry Neusner, Superior Court, judicial district of New London, Docket No. 556457 (June 28, 2002, Hurley, J.T.R.) ( 32 Conn. L. Rptr. 418). "This case does not turn on whether there was a valid agreement under ordinary principles of contract law. This case turns on whether a statute, which the legislature had the unquestioned authority to pass has been complied with." Taylor v. Carbee, Superior Court, judicial district of New London, Docket No. 551241 (June 12, 2000, Corradino, J.) ( 27 Conn. L. Rptr. 433). "This statute expressly prohibits the bringing of an action for a real estate commission unless the services were rendered pursuant to a written contract (i.e., a listing agreement)." Currie v. Marano, 13 Conn. App. 527, 530, 537 A.2d 1036, cert. denied, 207 Conn. 809, 541 A.2d 1238 (1988).
Section 20-325a states: "(a) No person who is not licensed under the provisions of this chapter, and who was not so licensed at the time the person performed the acts or rendered the services for which recovery is sought shall commence or bring any action in any court of this state, after October 1, 1971, to recover any commission, compensation or other payment with respect to any act done or service rendered by the person, the doing or rendering of which is prohibited under the provisions of this chapter except by persons duly licensed under this chapter."
In the present case, Lyman has adequately pleaded the elements for breach of contract but not that the listing agreement is in compliance with § 20-325a. That section will not be a bar to recovery if the broker has complied with it and properly pleaded such in the complaint. Lyman, however, has not pleaded that it is a licensed broker, that the listing agreement was signed by the partnership as owner of the premises and included the terms of the listing agreement. The facts alleged are insufficient in count one to withstand a motion to strike.
In count two, Lyman argues that the partnership has breached the covenant of good faith and fair dealing implied in each contract. "It is axiomatic that the . . . duty of good faith and fair dealing is a covenant implied into a contract or a contractual relationship . . . [E]very contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement . . . In accordance with these authorities, the existence of a contract between the parties is a necessary antecedent to any claim of breach of the duty of good faith and fair dealing." (Citations omitted; internal quotation marks omitted.) Macomber v. Travelers Property Casualty Corp., 261 Conn. 620, 638, 804 A.2d 180 (2002). Where as in the present case, there is a faulty express listing agreement, there cannot be a claim for good faith and fair dealing, and, therefore, as to count two, the motion to strike is granted.
In count three of the present action, Lyman is seeking to recover its commission pursuant to a theory of unjust enrichment. General Statutes § 20-325a(c). "It is well established that a broker deprived of compensation for his services in the absence of a [listing] contract complying with the detailed requirements of § 20-325a . . . is precluded from suing for [compensation] . . . This also applies to creative alternative causes of action designed to recover the fee by end running § 20-325a, such as unjust enrichment . . . claims." Hunter v. Johnson, Superior Court, judicial district of Hartford-New Britain at New Britain, Docket No. CV 97 0478552 (August 22, 1997, Graham, J.) ( 20 Conn. L. Rptr. 356). "Thus, licensed real estate brokers who have failed to produce evidence of written brokerage agreements which comply with statutes such as 20-325a(b) have been precluded from recovering in quantum meruit." Currie v. Marano, supra, 530. "[T]o allow the plaintiff to recover under these theories would nullify 20-325a and emasculate the state's real estate sales licensing system." (Internal quotation marks omitted.) McCutcheon Burr v. Berman, 218 Conn. 512, 530, 590 A.2d 438 (1991). "In effect, the legislature has declared as a matter of public policy that brokerage agreements such as this shall not be enforceable unless the requirements of § 20-325a(b) and its subdivisions . . . are complied with." In other words, the legislature has said apart from the requirements in the law established to determine whether there has been contract formation, agreements for brokerage commissions will not be enforced in the courts, unless, for example, the owner of property signs the listing agreement." Taylor v. Carbee, supra, Superior Court, Docket No. 551241.
"[Q]uantum meruit [is a form] of equitable remedy restitution by which a plaintiff may recover the benefit conferred on a defendant in situations where no express contract has been entered into by the parties." (Internal quotation marks omitted.). Biller Associates v. Rte. 156 Realty Co., 52 Conn. App. 18, 30, 725 A.2d 398 (1999), aff'd., 252 Conn. 400, 746 A.2d 785 (2000).
If the listing agreement should prove faulty, namely that it is not in compliance with 20-325a, the broker is precluded from recovering under alternative theories of quantum meruit or unjust enrichment. See McCutcheon Burr v. Berman, supra, 530. Because Lyman's claim is based on a listing agreement, which requires pleading compliance with the requirements of § 20-325a, it is precluded from recovering a commission under a theory of unjust enrichment. The motion to strike count three is granted.
For the foregoing reasons, all four motions to strike counts one, two and three are granted.
D. MICHAEL HURLEY, JUDGE TRIAL REFEREE.