Khawaja, H. v. Re/Max Central

J-A24045-16
2016 PA Super 261HUMERA KHAWAJA IN THE SUPERIOR COURT OF
PENNSYLVANIA
Appellant
v.
RE/MAX CENTRAL
Appellee No. 3776 EDA 2015
Appeal from the Order Entered November 20, 2015
In the Court of Common Pleas of Lehigh County
Civil Division at No(s): 2015-C-1511
BEFORE: BOWES, J., OTT, J., and SOLANO, J.
OPINION BY SOLANO, J.: FILED NOVEMBER 23, 2016
Appellant Humera Khawaja appeals from an order entered on
November 20, 2015, that sustained the preliminary objections of Appellee
RE/MAX Central and dismissed Khawaja’s complaint. We affirm in part,
reverse in part, and remand.
According to her complaint,1 Khawaja is a licensed real estate agent
who entered into a one-year Agreement on January 19, 2015, to act as an
independent contractor with RE/MAX, a licensed real estate broker. Compl.
at 2 ¶ 8; Agreement (Compl., Ex. “A”). Pursuant to the Agreement, RE/MAX
would provide Khawaja with office space, administrative support, and other
1
Because this case was decided on preliminary objections, we rely on the
facts as alleged in the complaint, including its exhibits. See Albert v. Erie
Ins. Exch., 65 A.3d 923, 928 (Pa. Super. 2013) (“In an appeal from an
order granting preliminary objections in the nature of a demurrer we accept
as true all well-pleaded material facts in the complaint, as well as all
reasonable inferences deducible therefrom”).
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services. Compl. at 3 ¶ 10. In exchange, Khawaja worked on a “100%
commission concept,” in which 30% of Khawaja’s commissions would be
withheld by RE/MAX to pay for support and services up to a total of $17,163.
Compl. at 2-3 ¶¶ 4, 11; Agreement (Compl., Ex. “A”) ¶¶ 8,11. After that
amount was satisfied, Khawaja would receive 100% of any further
commissions she earned. Compl. at 2 ¶ 7.
The applicable terms governing this arrangement are set forth in
Paragraphs 8(A) and 11(A) of the Agreement, which read:
8. COMMISSIONS
A. All commissions payable to Contractor will be collected by
RE/MAX and transmitted with 30% retained by RE/MAX
and 70% to Contractor. Contractor is responsible for 1%
Broker Service Fee. Commissions are earned at time of
Agreement of Sale but not collected until settlement.
Independent Contractor Agreement in force at the time of
Agreement of Sale is how commission splits will be
disbursed.
...
11. CONTRACTOR FEES
...
A. Contractor agrees to allow RE/MAX to withhold 30 percent
(30%) from Contractor’s commission income to
compensate RE/MAX $17,163.00 (yearly amount) as a
Fixed & Administrative Expense Fee during the term of this
Agreement. These Fixed Expenses are for an office
expense of $831.25 per month and administrative fee of
$599.00 per month. This monthly figure shall be for a
one-year period according to the terms of the contract. All
income in excess of the Fixed Expense Fee shall be paid to
the Contractor for the duration of this one (1) year
contract, subject to Paragraphs 12 [“Late Charges”] and
14 [“Termination”] of this Agreement.
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Agreement (Compl., Ex. “A”) at 5-6 ¶¶ 8(A), 11(A).
RE/MAX terminated its Agreement with Khawaja on April 22, 2015.
Compl. at 4 ¶ 20.2 At that time, Khawaja had several pending listings of
properties with RE/MAX. Id. at ¶ 21. Some of the listings had closed prior
to the filing of this lawsuit, and some listings remained open at the time the
suit was filed. Trial Court Opinion, 3/1/16, at 1-2. Paragraph 14 of the
Agreement governs payments to real estate agents for transactions pending
at the time the Agreement is terminated:
14. TERMINATION
...
D. Transactions Pending
In the event the Contractor terminates and any
transaction(s) pending require(s) further work normally
rendered by the Contractor, RE/MAX may at its sole
discretion make arrangements with the Contractor to
perform the required work, or Broker may assign an agent
to complete the transaction. Direct out-of-pocket
expenses incurred by RE/MAX and a twenty percent (20%)
referral fee for the manager completing the work shall be
deducted from terminated Contractor’s commission(s).
E. Commissions Received After Termination
After notice by either party of intent to terminate this
Agreement, should RE/MAX receive any sales commissions
as a result of transactions initiated by Contractor, subject
to Sub-paragraph “D” above, they shall be applied, in
total, first to the payment of late charges, then to interest,
then to any outstanding balance owed RE/MAX, and, if
any, the remainder shall be paid to the Contractor.
2
Both parties agree that RE/MAX terminated the Agreement. See Compl. at
4 ¶ 20; Prelim. Objections at 2 ¶ 7. Although Khawaja claims she was
terminated without cause, and RE/MAX claims that she was terminated for
cause, that issue is not relevant here. See Trial Court Opinion, 3/1/16, at 2.
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Agreement (Compl., Ex. “A”) at 9 ¶14(D)-(E). Khawaja alleges that RE/MAX
received commissions after she was terminated and, in violation of the
Agreement, failed to pay those commissions to Khawaja. Compl. at 4-5 ¶¶
21, 23, 27-28.
On May 11, 2015, Khawaja commenced this action to recover the
unpaid commissions. Her complaint alleged breach of contract and unjust
enrichment.3 On May 22, 2015 and June 2, 2015, RE/MAX issued checks to
Khawaja for commissions to which it agreed Khawaja was entitled under the
Agreement. It withheld from the commissions the 20% “referral fee”
referenced in Paragraph 14(D) of the Agreement. See Prelim. Objections ¶¶
27-28 & Exs. “A,” “B.” On June 9, 2015, RE/MAX filed preliminary objections
in the nature of a demurrer that asserted that Khawaja was entitled to no
additional payments.
On July 10, 2015, the trial court entered an order directing the parties
“to establish and create any facts of record necessary to the disposition of
the Preliminary Objections” and scheduling argument on the preliminary
objections for September 4, 2015. On the date scheduled for argument,
each party filed affidavits. RE/MAX submitted an affidavit by its principal,
Thomas Skiffington, that was dated August 6, 2015, and stated that RE/MAX
had paid Khawaja “all commissions due and owing” under the Agreement for
3
Her complaint also included a count requesting equitable relief. The trial
court dismissed that count, and Khawaja does not appeal that part of the
trial court’s decision.
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transactions that closed after her termination. Skiffington Aff., 8/6/15, ¶ 7.
He attached a spreadsheet showing deductions that RE/MAX made from
those commissions, including deduction of the 20% “referral fee.” Id. ¶¶ 8-
9 & Ex. “A.” Khawaja submitted her own affidavit listing properties for which
she claimed commissions still were due and owed to her and stating her
disagreement with Mr. Skiffington’s assertions. She claimed RE/MAX owes
her $26,982.86. Khawaja Aff., 9/4/15, ¶¶ 7-9 & Exs. “A” & “B.”
The trial court sustained RE/MAX’s preliminary objections in an order
dated November 20, 2015. In its order, the trial court stated:
Plaintiff is correct that Section 14D of the Independent
Contractor Agreement does not apply in this instance because
Plaintiff was terminated by RE/MAX Central; Plaintiff did not
terminate the contract. After a thorough reading of the
Independent Contractor Agreement, we find Defendant RE/MAX
Central’s generous interpretation of the contract to Plaintiff’s
benefit. Plaintiff failed to set forth a cause of action indicating
she is entitled to more.
Trial Court Order, 11/20/15, at 1-2 n.1. This appeal followed.
In her brief, Khawaja raises the following four issues:
1. Did The Lower Court Err By Granting [RE/MAX’s] Demurrer
After Expressly Finding [RE/MAX’s] Sole Defense To
[Khawaja]’s Complaint Was Unfounded?
2. Did The Lower Court Err By Entering Final Judgment On
[RE/MAX’s] Demurrer Where It Was Evident That The Claimed
Deficiency Could Have Been Cured By Permitting An
Amendment To [Khawaja]’s Complaint?
3. Did The Lower Court Err By Dismissing [Khawaja]’s Unjust
Enrichment Claim Because A Breach Of Contract Claim Was
Asserted In The Alternative?
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4. Did The Lower Court Err By Expressly Acknowledging That It
Committed Error, But Then Disregarded It?
Khawaja’s Brief at 4.
On March 16, 2016, the trial court filed an opinion pursuant to
Appellate Rule 1925. Focusing on Khawaja’s claim that she was entitled to
commissions due on listings that closed after she was terminated, the court
reviewed the competing affidavits and found that Khawaja did not include in
her submissions the closing dates for the properties to which she claimed
commissions and therefore had failed to provide “necessary elements for
determining the amounts due pursuant to Paragraph 8 of the Agreement.”
Trial Court Opinion, 3/16/16, at 4. Accordingly, the court said, “the facts
asserted by [RE/MAX] “essentially remained unrefuted.” Id.
The court then lamented its consideration of the affidavits, stating that
it was “in error” to receive them because preliminary objections should be
decided only on the pleadings. Trial Court Opinion, 3/16/16, at 4. “By
submitting affidavits,” the court said,” both counsel invited the consideration
of matters which would have been more properly addressed by a motion for
summary judgment.” Id. The court said that because defense counsel did
not object to consideration of the affidavits, RE/MAX had waived this error.
Id.
The court then stated the following holding on the breach of contract
claim:
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We conclude the following: Paragraph 8 of the Agreement
is the only paragraph which applies to Plaintiff’s right of
recovery. Therefore, to the extent that the complaint alleges
contractual rights of recovery in excess of Paragraph 8, the
demurrer is sustained. Our order should have allowed the case
to proceed on Count I, and to that extent we were in error.
However, we point out that the error was prompted by the
Defendant’s complicity in submitting an affidavit and in failing to
object to the court’s consideration of same.
Trial Court Opinion, 3/16/16, at 4-5. In later pages of its opinion, the court
said it had properly dismissed Khawaja’s claim for unjust enrichment
because Khawaja had pleaded an entitlement to the commissions under an
express contract and an unjust enrichment claim is incompatible with such a
contract claim. Id. at 5-6 (citing, e.g., Villoresi v. Femminella, 856 A.2d
78, 84 (Pa. Super. 2004)).
Our standard of review is as follows:
Our standard of review of an order of the trial court overruling or
granting preliminary objections is to determine whether the trial
court committed an error of law. When considering the
appropriateness of a ruling on preliminary objections, the
appellate court must apply the same standard as the trial court.
Preliminary objections in the nature of a demurrer test the legal
sufficiency of the complaint. When considering preliminary
objections, all material facts set forth in the challenged pleadings
are admitted as true, as well as all inferences reasonably
deducible therefrom. Preliminary objections which seek the
dismissal of a cause of action should be sustained only in cases
in which it is clear and free from doubt that the pleader will be
unable to prove facts legally sufficient to establish the right to
relief. If any doubt exists as to whether a demurrer should be
sustained, it should be resolved in favor of overruling the
preliminary objections.
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Perelman v. Perelman, 125 A.3d 1259, 1263 (Pa. Super. 2015), appeal
denied, 141 A.3d 435 (Pa. 2016) (internal citations and quotation marks
omitted).
Breach of Contract
With respect to her first issue, Khawaja contends that the trial court’s
order dismissing her breach of contract claim contains erroneous logic that
wrongly permits RE/MAX to withhold $26,982.86 of her earned commissions.
Khawaja’s Brief at 15-16. Khawaja claims that RE/MAX already has withheld
the full $17,163 in expense fees to which it is entitled under Paragraph
11(A) of the Agreement and that she therefore should be paid 100% of the
commissions earned on listings that closed after her termination, pursuant
Paragraph 14(E) of the Agreement. RE/MAX responds that it has paid
Khawaja all of the commissions to which she is entitled and that any money
it has retained consists mainly of the 20% “referral fee” authorized under
Paragraph 14(D) of the Agreement. RE/MAX’s Brief at 10.
The trial court’s November 20, 2015 order held that Paragraph 14(D)
did not permit RE/MAX to withhold referral fees because Paragraph 14(D)
applies only to cases in which the real estate agent — here, plaintiff Khawaja
— terminates the Agreement, and not to terminations by RE/MAX. As the
court emphasized, “Plaintiff did not terminate the contract.” Trial Court
Order, 11/20/15, at 1 n.1. But the trial court nevertheless held that the
case should be dismissed because RE/MAX’s “generous interpretation of the
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contract [is] to Plaintiff’s benefit” and Khawaja failed to state a claim to
entitlement to more than RE/MAX had already paid her. Id. at 2 n.1. The
court did not further explain this reasoning, and in its Rule 1925 opinion, it
apparently stepped back from this second part of its order. The Rule 1925
opinion states that Paragraph 8 “is the only paragraph which applies to
[Khawaja’s] recovery,” thus apparently adhering to the court’s original view
that Paragraph 14(D) is inapplicable; then, the opinion adds that the court’s
failure to allow Khawaja to proceed on her breach of contract claim was “in
error.” Trial Court Opinion, 3/16/16, at 4.
We interpret all of this to mean that the trial court concluded the
following: RE/MAX’s defense based on Paragraph 14(D) is without merit;
Khawaja’s contract claim therefore is not subject to dismissal on the basis of
that Paragraph 14(D) defense; and, contrary to what the court initially said
in its November 20, 2015 order, Khawaja is entitled to proceed on her
contract claim for recovery of damages under the remainder of the
Agreement. With this understanding of the trial court’s decision, we agree,
and we therefore reverse and remand to correct the error in the November
20, 2015 order that was recognized by the trial court.
First, we agree that Paragraph 14(D) of the Agreement does not give
RE/MAX a right to retain 20% of the commissions as a “referral fee.” The
paragraph reads:
In the event the Contractor terminates and any
transaction(s) pending require(s) work normally rendered by the
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Contractor, RE/MAX may at its sole discretion make
arrangements with the Contractor to perform the required work,
or Broker may assign an agent to complete the transaction.
Direct out-of-pocket expenses incurred by RE/MAX and a twenty
percent (20%) referral fee for the manager completing the work
shall be deducted from terminated Contractor's commission(s).
Agreement (Compl., Ex. “A”) at 9 ¶ 14(D) (emphasis added). 4 When
interpreting a contract, “[t]o discern the parties’ intent, the court must give
effect to clear and unambiguous terms without reference to matters outside
the contract.” Anchel v. Shea, 762 A.2d 346, 352 (Pa. Super. 2000)
(internal citations and quotation marks omitted). By its plain terms,
Paragraph 14(D) applies only “[i]n the event the Contractor terminates” the
Agreement. The definition of “Contractor” is set forth at the very beginning
of the Agreement:
THIS AGREEMENT made and entered into this 19th day of
January, 2015, and effective date February 1, 2015 by and
between RE/MAX Central (hereinafter called “RE/MAX”) . . . and
Humera Khawaja (hereinafter called “CONTRACTOR”) . . . .
Agreement (Compl., Ex. “A”) at 1. Clearly, then, the reference in Paragraph
14(D) to “the Contractor” is to Khawaja, and the paragraph applies only if
Khawaja terminates the Agreement. The parties agree that RE/MAX
terminated the Agreement, not Khawaja. Compl. at 4 ¶ 20; Prelim.
Objections, at 2 ¶ 7. Therefore, Paragraph 14(D) is inapplicable, and
RE/MAX has no right to claim a “referral fee” under it.
4
We have found no reported decisions interpreting this provision.
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RE/MAX argues that this interpretation is incorrect because the
sentence setting forth its right to a referral fee (the final sentence of
Paragraph 14(D)) states that “a twenty percent (20%) referral fee for the
manager completing the work shall be deducted from terminated
Contractor's commission(s).” Agreement (Compl., Ex. “A”) at 9 ¶ 14(D)
(emphasis added). RE/MAX contends that the phrase “terminated
Contractor” refers to any terminated contractor, regardless of whether the
Agreement was terminated by the contractor or by RE/MAX. RE/MAX’s Brief
at 10-11. We disagree.
We interpret provisions of a contract in light of the context in which
they appear. Reilly v. City Deposit Bank & Trust Co., 185 A. 620, 623
(Pa. 1936) (in interpreting contracts, that sense of words used should be
adopted which best harmonizes with context and promotes in the fullest
manner the objects of the parties). Paragraph 14(D) is a single paragraph
addressing what happens to pending transactions when a real estate agent
terminates the Agreement. It authorizes RE/MAX to arrange for the agent to
continue working on the listing or to assign another agent to complete the
transaction, and it then provides for RE/MAX to be paid its expenses
resulting from the agent’s termination of the Agreement and for payment of
a referral fee relating to the hiring of a new manager to complete the
transaction. There is no indication in Paragraph 14(D) that the references in
its last sentence to payment of expenses and a referral fee have a broader
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application than the rest of the paragraph, which relates only to terminations
by an agent (“the Contractor”).5 Indeed, the Agreement’s succeeding
paragraph, 14(E), lists the categories of payments (late charges, interest,
and outstanding balances) that are to be subtracted from commissions when
there is “notice by either party of intent to terminate this Agreement.”
See Agreement (Compl., Ex. “A”) at 9 ¶ 14(E) (emphasis added). Referral
fees are not in that list.
Because Paragraph 14(D) provides no defense to Khawaja’s claim for
breach of contract, it provides no ground for dismissal of that claim. 6 The
trial court’s Rule 1925 opinion recognized this fact, stating that the court’s
dismissal was “in error.” Trial Court Opinion, 3/16/16, at 4. We agree, and
5
RE/MAX contends that the “referral fee” provision merely “memorializes”
the idea that, once a second agent is assigned to complete the transaction,
that agent and the original agent will share compensation, and RE/MAX
suggests that the 20% fee is intended to allocate commissions between the
two agents. See RE/MAX’s Brief at 10. But a separate provision of the
Agreement, Paragraph 8(C), provides for shared commissions. It states:
In the event that two or more Contractors participate in a
transaction, the commission shall be divided between the
participating contractors according to the agreement between
them or by arbitration.
Because this provision already provides for allocation of the commissions,
Paragraph 14(D) has no role to play in that task.
6
Although we agree that Paragraph 14(D) is inapplicable, we do not
necessarily agree with the trial court’s statement that “Paragraph 8 of the
Agreement is the only paragraph that applies to Plaintiff’s right of recovery.”
Trial Court Opinion, 3/16/16, at 4. As our opinion notes, several other
paragraphs of the Agreement may be implicated here, and we take no
position on whether or how they may apply.
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we therefore reverse and remand for further proceedings on Counts I and III
of the complaint alleging breach of contract.
Our disposition makes it unnecessary to reach Khawaja’s second and
fourth issues. Khawaja’s second issue relates to the trial court’s failure to
permit her to amend her complaint to add any averments necessary to make
her contract claim viable. Because we have held that the contract claim as
originally pleaded was viable and should have been permitted to proceed,
that issue is moot.
Khawaja’s fourth issue relates to the trial court’s discussion of its
professed error in considering the parties affidavits in connection with the
preliminary objections. The trial court was correct that it should have
resolved the preliminary objections without reference to the affidavits. See
Kilmer v. Sposito, --- A.3d ----, 2016 PA Super 141, at *2 (Pa. Super.
2016). Consideration of materials extraneous to the complaint would have
been appropriate on a motion for summary judgment, but the trial court was
not presented with a summary judgment motion here. Although the trial
court commented about deficiencies in in the proof provided by the
affidavits, see Trial Court Opinion, 3/16/16, at 4, the court did not base its
dismissal of the action on any of the extraneous information provided by the
parties. As we now reverse the dismissal on other grounds, the trial court’s
consideration of the affidavits provides no basis for any appellate action.
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Unjust Enrichment
Khawaja’s remaining issue is whether the trial court erred in
dismissing her count alleging unjust enrichment. The trial court recognized
that a plaintiff may plead alternative theories of recovery in a complaint, but
it held that, because Khawaja acknowledged the undisputed fact that she
entered into a written Agreement with RE/MAX, there could be no basis for
an unjust enrichment claim. We agree. A cause of action for unjust
enrichment may arise only when there is no express contract between the
parties. Villoresi, 856 A.2d at 84. Here, in light of the written Agreement,
Khawaja’s claim of unjust enrichment cannot stand.
Although Khawaja contends that the trial court misapplied this rule of
law, she presents no authority to support her assertion. A claim sounding in
breach of contract may be pleaded alternatively with a claim of unjust
enrichment if the claims are raised in separate counts of a complaint. Lugo
v. Farmers Pride, Inc., 967 A.2d 963, 970 (Pa. Super. 2009). However,
the fact remains that “[a] cause of action for unjust enrichment arises only
when a transaction is not subject to a written or express contract,”
Northeast Fence & Iron Works, Inc. v. Murphy Quigley Co., 933 A.2d
664, 669 (Pa. Super. 2007). Khawaja argues that the trial court’s rejection
of her claim based on the Agreement meant that her unjust enrichment
claim should have been permitted to proceed. Khawaja’s Brief at 22-23.
But because we have reversed the dismissal of Khawaja’s contract claim,
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this argument no longer has any force. Khawaja’s complaint alleged unjust
enrichment in her second count, which incorporated by reference the facts
pled in Count I, her breach of contract count. See Compl. at 6. Her unjust
enrichment count thus averred the existence and terms of the signed
Agreement. Because a claim for unjust enrichment cannot stand when there
is an express contract and because Khawaja’s allegations in this regard are
based on the terms of such a contract, we affirm the trial court’s dismissal of
Khawaja’s unjust enrichment claim.
In sum, we reverse the trial court’s dismissal of Counts I and III of
Khawaja’s complaint, alleging breach of contract; reinstate those claims; and
remand for further proceedings with respect to them. We affirm the trial
court’s dismissal of Count II of the complaint, alleging unjust enrichment.
Case remanded. Panel jurisdiction relinquished.
Judge Bowes joins the opinion.
Judge Ott concurs in the result.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/23/2016
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