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LaCorte Agency, LLC v. C&L Developers, Inc.

A-0442-07T3 (N.J. Super. App. Div. 2008) (Unpublished)

CONTRACTS; LIS PENDENS — When an agreement provides only that money be posted as security for the discharge and replacement of a lis pendens, if the lis pendens is discharged, the money must be returned and cannot be held as security to satisfy any ultimate judgment on the merits.

A developer, who built eight homes, entered into an exclusive listing agreement with a real estate broker. Seven homes were sold by the broker. It received commissions for all. Four years later, the developer entered into a listing agreement with a different broker for the marketing and sale of the remaining house. The last house went under contract and title closed with the original business not receiving a commission. The first broker then filed a lis pendens and a complaint, alleging a breach of contract. The developer filed a counterclaim against the first broker.

Ultimately, the litigating parties entered into an agreement for the discharge of the lis pendens in consideration for a portion of the proceeds of the sale of the property to be held in escrow, pending litigation concerning the entitlement to the commission. The agreement provided that the escrow would terminate upon payment of any settlement or judgment or pursuant to an order of a court. During the course of litigation, other parties were added, and all claims against the first broker were dismissed. The lower court also instructed the first broker to discharge its lis pendens, but later denied the developer’s motion for the release of the escrow funds. The developer filed for leave to appeal on the issue of the denial to release the escrow funds.

The Appellate Division held that the intention of the agreement between the business and the developer was not meant to satisfy any ultimate judgment on the merits; instead, it was intended only as security for the discharge and replacement of the lis pendens. As such, it held that when the order to dismiss the lis pendens was granted by the lower court, the agreement’s purpose had been made moot. The Court observed that the complaint against the first broker had been dismissed in its entirety and the lis pendens had been discharged. Therefore, it found that the lower court erred when it refused to release the escrowed funds. Accordingly, the Court reversed the lower court order and remanded the matter for the entry of an order releasing the escrow deposit to the developer.


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