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Argenziano v. Yaccarino

A-0235-07T1 (N.J. Super. App. Div. 2008) (Unpublished)

BROKERS; FLIPPING — Where the buyer from a property seller flips the property, but the original seller has no privity with the final buyer, neither the original contract-buyer nor the real estate broker is liable for damages based on the seller’s contention that it received less than fair-market value for the property as part of a conspiracy to defraud by the broker and the original contract-buyer.

An owner of several adjacent lots decided to sell all of them. A broker approached the owner and told him that he had an interested buyer. The owner did not sign a listing agreement; rather, he agreed that the broker would be paid a brokerage commission through any contract of sale with the interested buyer. A contract was executed. In it, the buyer’s obligation to close was contingent upon acquiring all necessary approvals. They were obtained, and closing took place. The buyer, in turn, flipped the properties, and closed on those sales the same day. The original contract prohibited assignment.

The original owner sued the broker and buyer, chiefly alleging damages for breach of contract and conspiracy to defraud. The owner alleged that it received less than fair-market value for the property, and also that the successive contracts amounted to an assignment. The lower court dismissed the complaint for failure to state a claim upon which relief could be granted.

On appeal, the Appellate Division affirmed, finding that the ultimate buyers did not acquire any rights to demand that the owner perform under the contract between the original owner and the original, flipping buyer. Therefore, the Court concluded that the original owner could not establish a breach of the anti-assignment clause or a conspiracy to defraud premised on concealment of the resale contracts. The Court pointed out that an assignment is a transfer to its assignee of the assignor’s right to demand performance from the other contracting party. In this situation, the Court found that the pleadings did not support a cause of action that the initial buyer’s contracts to transfer the property amounted to an assignment, such as to give another person a right to demand from the property owners the performance it promised to give the initial buyer.

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