LANDMARK COMMERCIAL REALTY, INC., Plaintiff-Appellee, v. DEVELOPERS DIVERSIFIED, LTD., and W & M Properties, Defendants-Appellants, 163 F.3d 389

NELSON, J., delivered the opinion of the court, in which CLAY, J., joined. BOGGS, J. (pp. 11-12), delivered a separate dissenting opinion. OPINION DAVID A. NELSON, Circuit Judge. Under Ohio Rev.Code § 4735.21, a person who performs real estate brokerage services is denied a right of action to collect compensation therefor unless the person has been licensed either as a real estate broker or, in certain situations, as a foreign real estate dealer.

The case at bar is' a diversity action brought by a Florida real estate broker to collect compensation for brokerage services performed in connection with an Ohio real estate transaction. The dispositive question on appeal is whether the plaintiff — a company that was not licensed by the State of Ohio during the relevant time period — had a right of action for collection of its commission under a promissory estoppel theory. We conclude, as a matter of Ohio law, that the plaintiff had no such right of action.

I Landmark Commercial Realty, Inc., the plaintiff herein, is a Florida corporation organized and owned by a Floridian named Robert Kurlander. Both Landmark and Mr. Kurlander have long been licensed by Florida as real estate brokers. The defendants — Ohio partnerships known as Developers Diversified, Ltd., and W & M Properties — are controlled by Clevelanders Bart Wolstein and John McGill. Through Developers, W & M, and their subsidiary companies and partnerships, Messrs.

Wol-stein and McGill are engaged in the development of shopping centers and other commercial properties in some 30 states, including Ohio and Florida. Wolstein and McGill began using Landmark’s services as early as 1982, and the business relationship continued, off and on, for the next decade. Under an agreement signed in 1984, Developers designated Landmark as its exclusive licensed real estate broker for, shopping center site locations in various Florida markets. Landmark thereafter provided brokerage services to Developers in connection with a number of Florida land transactions involving Wal-Mart Stores, Inc.

From time to time Landmark was also asked to assist Developers in Virginia, Ohio, and elsewhere. In May of 1990 Wal-Mart asked Developers to recommend potential sites for Wal-Mart stores in the Northeastern Ohio area. Developers engaged Landmark to perform this site selection work, allegedly promising compensation in an amount to be determined under the 1984 contract. Mr.

Kurlander worked on the Northeastern Ohio project for the better part of six months, and he appears to have been instrumental in persuading Wal-Mart to buy — for more than $2.4 million — 16 acres of land owned by W & M and offered for sale by Developers in Macedonia, Ohio. Wal-Mart signed a contract to buy the land in April of 1992. With Wal-Mart as an anchor, the Wolstein-McGill interests were able to build a shopping center on the adjoining 70 acres. The defendants refused, however, to pay Landmark the commission that Mr. Kurlan-der understood had been promised.

II Landmark filed a two-count complaint in federal district court in February of 1993. One count of the complaint alleged that Landmark was entitled to a commission, calculated under the 1984 agreement, of $105,-654.62. The other count alleged that Landmark was entitled to the same amount as the reasonable value of the brokerage services it had performed. The defendants took Mr. Kurlander’s deposition in November of 1993, at which time Kurlander testified that he had never been licensed as a real estate broker in the State of Ohio. Soon thereafter the defendants moved for

summary judgment on the ground that Landmark had conceded it was not a licensed Ohio real estate broker. Five days later Landmark and Mr. Kurlander received Ohio licenses as foreign real estate dealers. Citing In re Ferncrest Court Partners, Ltd., 66 F.3d 778 (6th Cir.1995), the district court denied the defendants’

summary judgment motion. (In Ferncrest, as we shall see presently, our court held that Ohio Rev.Code § 4735.20, which prohibits the splitting of real estate commissions with unlicensed persons, did not preclude a licensed Ohio broker from splitting a commission with a broker licensed only in another state.) A motion for reconsideration was also denied on the strength of Ferncrest. The case ultimately went to trial before a jury of eight. At the conclusion of Landmark’s ease in chief the defendants moved for judgment as a matter of law.

This motion was denied, as was a renewed motion for judgment at the conclusion of all the evidence. The trial court instructed the jury that the plaintiff was not entitled to recover a real estate brokerage commission as such. Pursuant to Fed.R.Civ.P. § 15(b), however, the complaint was amended to assert a promissory estoppel claim. The case was then submitted to the jury under two theories: promissory estoppel with respect to Developers and quantum meruit with respect to W & M.

The jury found for plaintiff Landmark in the amount of $105,654 on the promissory estoppel claim, and it found for Landmark in the amount of $35,000 on the quantum meru-it claim. Because Landmark was entitled to only one recovery, judgment was entered against Developers alone in the amount of $105,654. This judgment was subsequently amended to include prejudgment interest in the additional amount of $45,227. A motion for judgment n.o.v. was denied, and a timely notice of appeal followed.

Ill A The first sentence of Ohio Rev.Code § 4735.21 reads as follows: “No right of action shall accrue to any person, partnership, association, or corporation for the collection of compensation for the performance of the acts mentioned in

section 4735.01 of the Revised Code, without alleging and proving that such person, partnership, association, or corporation was licensed as a real estate broker or foreign real estate dealer.” It is uncontested that the brokerage services that were performed by Landmark, and for which Landmark sought compensation, constituted “acts mentioned in

section 4735.01____” See Ohio Rev.Code § 4735.01(A).

Section 4735.21 and its precursors have been strictly enforced against persons who, although not licensed by Ohio, have sought to recover brokerage commissions through litigation in Ohio. See Stanson, Inc. v. McDonald, 147 Ohio St. 191, 70 N.E.2d 359 (1946); Sadowsky v. Ina, 31 Ohio App.3d 246, 510 N.E.2d 837 (1986); Rispo Realty Co. v. Wisniewski, 186 N.E.2d 758 (Ohio App.1962); Maglione v. Wojno, 63 Ohio App. 223, 25 N.E.2d 946 (1939); Kramer v. Roth, 42 Ohio App. 1, 181 N.E. 277 (1932).

Further, the Ohio courts have consistently held that an unlicensed broker cannot avoid the statute’s reach by asserting equitable causes of action sounding in promissory estoppel, quantum meruit, or the like. See Stanson, 147 Ohio St. at 197, 70 N.E.2d at 362 (decided under precursor statute similar to § 4735.21); Leatherbury v. Reagan, 34 Ohio App.3d 291, 518 N.E.2d 58, 60 (1987).

Plaintiff Landmark argues that, as the holder of a Florida real estate broker’s license, it was licensed as a “foreign real estate dealer” within the meaning of Ohio Rev.Code § 4735.21 and was thus entitled to have its claims submitted to the jury. In this connection Landmark cites In re Ferncrest Court Partners, Ltd., 66 F.3d 778, 781 (6th Cir.1995), where a Missouri-licensed broker was allowed to share in a commission paid to a real estate broker licensed by Ohio. It is true, as the defendants point out, that § 4735.21 was not at issue in the Femcrest case.

Ferncrest involved the preceding section, § 4735.20, which controls the splitting of commissions. But what this court said in Femcrest was that “[sjection 4735.20 clearly provides that it prohibits only the payment of a commission to any broker not holding a license of any state. As long as the broker holds a license of some state, the broker may accept the payment of a commission” from an Ohio-licensed broker. Ferncrest, 66 F.3d at 781.

If sections 4735.20 and 4735.21 are read in pari materia, as they should be, this language from Femcrest might seem to support Landmark’s contention that the term “foreign real estate dealer,” as used in

Section 4735.21, can include a broker licensed by Florida. The operative language of the

section interpreted in Ferncrest, however, is significantly different from that of the

section in question here.

Section 4735.20, the first sentence of which is quoted in the margin, allows Ohio licensees to split real estate commissions not only with “foreign real estate dealer[s]” lie., as we shall see, foreign dealers licensed as such by Ohio), but also with “licensed foreign real estate dealer[s] of another state.” (Emphasis supplied.). Yet in the

section that governs the case at bar, § 4735.21, the legislature referred simply to persons or entities “licensed as a ... foreign real estate dealer,” omitting the key words “of another state.” The logical inference, we believe, is that a person licensed only by another state is not “licensed as a ... foreign real estate dealer” within the meaning of § 4735.21. Under Ohio Rev.Code § 4735.27, an applicant who passes a written examination, designates an agent for service of process in Ohio, and meets other statutory requirements may be licensed by Ohio to act as a foreign real estate dealer.

In referring to licensure as a “foreign real estate dealer,” we are satisfied, § 4735.21 is referring to licen-sure by the State of Ohio under § 4735.27. And Femcrest does not compel us to conclude that licensure as a real estate broker in Florida is all that Landmark needs to show in order to meet the condition prescribed by § 4735.21 for enforcing an Ohio right of action to collect compensation for the performance of brokerage services relating to Ohio real estate.

B Landmark goes on to argue that its receipt of an Ohio license as a foreign real estate dealer late in 1993 allows it to recover compensation for brokerage services performed earlier in relation to real estate situated in Ohio. There are two reasons why we find this argument unpersuasive.

In the first place, the Ohio Revised Code defines “foreign real estate dealer” as follows: “ ‘Foreign real estate dealer’ includes any person, partnership, association, or corporation, foreign or domestic, who for another ... upon the promise of receiving or collecting a fee, commission, or other valuable consideration, does or deals in any act or transaction specified or comprehended in division (

A) of this

section [defining the work of a ‘real estate broker’] with respect to foreign real estate." Ohio Rev.Code § 4735.01(H) (emphasis supplied). This

section makes it crystal clear that a foreign real estate dealer is one who engages in transactions relating to “foreign real estate.” That term is also defined: “ ‘Foreign real estate’ means real estate not situated in this state and any interest in real estate not situated in this state.” Ohio Rev.Code § 4735.01(G) (emphases supplied). “Real estate,” by contrast, includes “every interest or estate in land situated in this state.” Ohio Rev.Code § 4735.01(B) (emphasis supplied). The 16 acres of land in question here was Ohio real estate, not foreign real estate. The defendants cite Pearce, Mayer & Greer v.

Williams, 147 N.E.2d 866 (Ohio Com.Pl.1957), in which the court stated that “[t]he conclusion is inescapable that no licensed broker of any other state may maintain an action against an Ohio real estate owner.” Id. at 870. Landmark correctly points out that Pearce was decided before the provision relating to foreign real estate dealers was added to

Section 4735.21. But because the work of a foreign real estate dealer, by definition, relates to foreign real estate, the change in the statute avails Landmark nothing. The second reason why we find Landmark’s argument unpersuasive is this: Landmark’s license was obtained too late to be of any help to it in this case. Ohio law provides that “[n]o person, partnership, association, or corporation shall act as a real estate broker ... without first being licensed as provided in this chapter.” Ohio Rev.Code § 4735.02 (emphasis supplied). This

section made it unlawful for Landmark to provide brokerage services without “first being licensed,” and that fact too is dispositive of Landmark’s argument. We see no reason to reach any of the defendants’ remaining assignments of error. For the reasons already stated the judgment of the district court is REVERSED and the case is REMANDED with instructions that judgment be entered in favor of Developers as well as W & M. . Under Ohio Rev.Code § 4735.01(G), as explained in the next part of this opinion, "foreign real estate” means real estate situated outside of Ohio.

"Foreign real estate dealer” is defined in terms of an entity that provides brokerage services "with respect to foreign real estate.” Ohio Rev.Code § 4735.01(H). . Although Developers was joined by W & M in the appeal, no judgment has been entered against W & M. The latter partnership's lack of standing to appeal makes no practical difference here. . Ohio Rev.Code § 4735.20(

A) provides, in its first sentence, as follows: “No licensed real estate broker or licensed foreign real estate dealer shall pay a commission for performing any of the acts specified in

section 4735.01 of the Revised Code to any person who is not a licensed real estate broker or a licensed real estate salesperson or to any person who is not a licensed foreign real estate dealer or a licensed foreign real estate salesperson, provided that a licensed real estate broker or licensed foreign real estate dealer may pay a commission to a licensed real estate broker or licensed foreign real estate dealer of another state and may receive a commission from a licensed real estate broker or licensed foreign real estate dealer of another state.” The language is cumbersome, but the prohibition in the first part of the sentence — a prohibition against Ohio licensees splitting commissions with anyone not licensed by Ohio — is modified by the proviso, as we parse the sentence, so as to permit Ohio licensees to pay commissions to licensees of another state. .

In the case at bar, moreover, the record merely shows that Landmark and Mr. Kurlander are licensed real estate brokers "in the State of Florida." The record contains no indication that Florida ever licensed them as "foreign” real estate dealers. . It is true, as the dissenting opinion notes, that § 4735.02 does not forbid anyone to act as a "foreign real estate dealer” without first being licensed as such under

Chapter 4735. If Landmark were attempting to collect compensation for the performance of brokerage services rendered with respect to real estate not situated in Ohio, therefore, Landmark’s after-the-fact licen-sure as a foreign real estate dealer might (depending on what one's definition of "was” is) enable Landmark to allege and prove that it "was licensed as a ... foreign real estate dealer” within the contemplation of § 4735.21. Again, however, Landmark is not attempting to collect compensation for services rendered with respect to foreign real estate.

Instead, without “first being licensed as provided in [Chapter 4735],” Landmark acted as a broker with reference to Ohio real estate — and the company is now trying to collect compensation for these Ohio real estate brokerage services. If §§ 4735.02 and 4735.21 have any intelligible meaning at all, it seems to us, they bar accrual of the right of action Landmark is seeking to assert in this case.