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Mill Run Assoc. v. Locke Prop. Co., Inc.: Seller Not Bound by Broker's Alleged Statements

A federal court has considered whether a listing broker's statements to a potential buyer could revive an agreement between the buyer and seller that the potential buyer had previously terminated.

In 2001, Mill Run Associates ("Seller") agreed to sell a parcel of land to Locke Property Company, Inc. ("Locke"). The purchase agreement provided a sixty day review period for Locke, during which Locke had the right to cancel the transaction and receive back its deposit. Part of the reason for the review period was that Locke needed to obtain a permit from the local municipality before it could purchase the property ("Permit").

By mutual agreement, the parties extended the review period four separate times. Near the expiration of the fourth extension, Locke's attorney sent a letter to the Seller informing them that they were terminating the purchase contract. The Seller returned Locke's deposit. Locke claims that after the Seller returned Locke's deposit, the Seller's broker, John Crampsie of Summit Management ("Broker"), encouraged Locke to continue its efforts to obtain the Permit, stating the deal would be reinstated if Locke obtained the Permit.

The Seller placed the property back on the market after receiving Locke's termination letter. On June 5, 2002, the Seller entered into a Letter of Intent with First Industrial for First Industrial's purchase of the property. On that same day, the town issued the Permit to Locke. Locke contacted the Seller as well as First Industrial, claiming it had the power to purchase the property. Locke also filed a notice of lis pendens, further encumbering the title for the property.

The Seller eventually filed a lawsuit, seeking an injunction preventing Locke from interfering with the Seller's efforts to market the property and removal of the lis pendens notice; a judicial declaration that Locke had no ownership interest in the property; and damages for Locke's interference with the contract between the Seller and First Industrial. Locke filed a counterclaim against the Seller, claiming that it had a contract with the Seller for purchase of the property and seeking performance of the contract as well as damages. The trial court dismissed some of the allegations in the counterclaim and following the completion of discovery, both parties filed motions with the court seeking judgment in their favor.

The United States District Court, Eastern District of Pennsylvania, ruled in favor of the Seller on the counterclaim, leaving for trial the issue of whether Locke interfered with the contract between the Seller and First Industrial. The basis for Locke's counterclaim was the Broker's statements following Locke's termination notice. Based on these alleged statements, Locke argued that the Seller was bound by the Broker's statements and so the purchase agreement between the parties was reinstated once Locke obtained the Permit. The Seller argued that the Pennsylvania's Statute of Frauds barred oral statements from creating a contract for the sale of land.

The court determined the Locke's unequivocal written termination notice revealed its intention to cancel the agreement between it and the Seller. The court found there was no written communications memorializing the alleged representation by the Broker nor any evidence that the Seller had any knowledge of such a statement being made. Thus, the court ruled that the Statute of Frauds barred the alleged oral contract between the parties and so the court dismissed all of the remaining allegations in the counterclaim.

Turning to the Seller's lawsuit, the court entered a judicial declaration that Locke had no right or title to the property; that lis pendens notice should be stricken; and finally, the court issued an injunction barring Locke from interfering in any future property negotiations. The only remaining issue for trial was whether Locke intentionally interfered with the contract negotiations between the Seller and First Industrial. The court said this issue would proceed to trial.

Mill Run Assoc. v. Locke Prop. Co., Inc., No. Civ. A. 02-8042, 2003 WL 22232620 (E.D. Pa. Sept. 22, 2003). [This is a citation to a Westlaw document. Westlaw is a subscription, online legal research service. If an official reporter citation should become available for this case, the citation will be updated to reflect this information].