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Fox & Lazo, Inc., Realtors v. Marlton Circle Associates

A-4798-99T1 (N.J. Super. App. Div. 2001) (Unpublished)

BROKERS; COMMISSIONS; CONDEMNATION—Condemnation of property by a governmental agency is not equivalent to a sale as to require payment of a broker’s commission.

A landowner signed a listing agreement with a real estate broker to sell a parcel of property. The listing agreement established a six percent commission and a three percent sub-agent commission and expired on October 1, 1994. After the listing agreement had expired, the state transportation authority (NJDOT), in conjunction with the local municipality, developed roadway plans that necessitated the taking of the owner’s entire property. In December 1994, the listing broker sent the owner a letter stating that “our marketing plan” for the property has ended because NJDOT “has just taken the land and reduced the value.” Thereafter, in May 1995, the owner signed a change form to the listing agreement extending the term of the original listing agreement from June 1995 to June 1996. In March 1997, the NJDOT offered to acquire the property in accordance with the Eminent Domain Act for a price substantially below the initial asking price. In June 1997, the listing agent sent the owner a letter expressing the official end of the listing agreement and lowering the commission from six percent to five percent. In response, the owner sent the listing broker a letter which indicated that the listing agreement expired in June 1996 and therefore it was only responsible for paying the three percent sub-agent commission. The condemnation closing took place in July 1997. The closing statement reflected the payment of a three percent broker’s commission to the listing agent with the remaining three percent to be held in trust pending the outcome of this dispute. The listing broker sued for the remaining portion of the commission. The lower court held that the listing agent was entitled to his full commission because he was the efficient procuring cause of the sale. On appeal, the owner argued that the listing agent was not entitled to any commission because a condemnation does not constitute a “sale” of property. The owner reasoned that, absent a clause in the listing agreement dealing with condemnation or inverse condemnation, no commission was payable and the broker could only recover in quantum meruit. The Appellate Division began by recognizing that “the owner of real property becomes liable for a broker’s commission when the contract of sale is performed.” Further, in order to earn a commission, a real estate broker must be the “efficient procuring cause of the contract between the seller and the purchaser.” After reviewing the case law on the term “sale,” the Court pointed to Schwenn v. S. Goldberg & Co., 88 N.J. Super. 113 (Law Div. 1965), which held that “condemnation of property by a government entity was not equivalent to a sale as to require payment of a broker’s commission.” On this basis, the Appellate Division reversed the lower court’s holding that the listing agent was entitled to its full commission. However, the Appellate Division then examined the facts under a quasi-contract theory of recovery. Applying this principle, “courts have allowed quasi-contractual recovery for services rendered when a party confers a benefit with a reasonable expectation of payment.” This type of recovery is quantum meruit and allows the performing party to recoup the reasonable value of services rendered. Here, the Appellate Division reasoned that the listing agent was entitled to recover in quantum meruit for the reasonable value of the broker’s services (e.g., attending meetings with NJDOT and giving advice on the value of its property). Unfortunately for the broker, the Court also concluded that the value of the reasonable services was estimated to be the three percent already paid.

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