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Atlantic Commercial Group, Inc. v. Dunham

303 N.J. Super. 122, 696 A.2d 85 (App. Div. 1997)

BROKERS; COMMISSIONS—A real estate broker need only be duly licensed at the time brokerage services were performed and completed, even though the broker may not have actually earned commission until closing.

A licensed real estate brokerage corporation was retained in connection with the sale of a commercial property, a marina known as “Dad’s Place.” A listing agreement was signed in June, 1988. Four months later, two licensed brokers for Broker found buyers for the marina, and a written contract of sale was executed. Closing was to occur in November, 1988, but did not take place. Instead, the buyers entered into a 5 year lease agreement with an option to purchase, by adding an addendum to the original contract of sale. Thereafter, buyers took possession and the owner paid 6% of all rent payments to the broker, as commission. By January, 1994, buyers owed over $45,000 in back rent and $12,000 in real estate taxes. At a meeting between the buyers and the owner in February, 1994, buyers pleaded with the owner not to retake possession and to give them another opportunity to purchase the marina. The owner agreed, the buyers paid all back rent and taxes, and the broker was paid its commission on the rental payments. In March, 1994, a new lease purchase agreement was entered into that did not involve a broker or contain a provision for commissions to be paid to broker. In September, 1994 buyers closed title on the marina and no commission was paid to the broker, which was not a licensed real estate broker at the time.

The broker brought suit seeking commission it claimed was due as a result of the sale. The owner claimed the broker’s action was barred based on (1) the more recent lease purchase agreement, which did not mention the broker or contain a provision for the payment of commissions, and (2) a statute that precludes any real estate broker from suing to recover commissions without alleging and proving it was a duly licensed real estate broker at the time the cause of action arose. The trial court granted owner’s motion for summary judgment, agreeing that the statute precluded a suit for commissions because the broker was unlicensed when closing occurred, which is when the cause of action arose. The broker appealed, claiming that the cause of action arose at the time it completed its brokerage services, not when closing occurred. The issue on appeal was whether the law bars an action by a broker who was licensed when services were rendered, but whose license expired by the time of actual closing.

The Appellate Division held it would be inequitable to deny a commission to the broker on these facts, and stated that a court should not just interpret a statute literally, but should also look to the legislative intent. The Court even goes so far as to say that “primary regard must be given to the fundamental purpose for which the legislation was enacted…where a literal rendering will lead to a result not in accord with the essential purpose and design of the act, the spirit of the law will control the letter.” The Court found the purpose of the law to be protection of consumers from fraudulent and incompetent people in the real estate business. The Court concluded that a real estate broker need only be duly licensed at the time the brokerage services were performed and completed, even though the broker may not have actually earned commission until closing. As long as the broker was licensed when it rendered services, it may make a valid claim for commissions regardless of when closing occurred.


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