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Marc Realty v. Profeta

A-5012-03T5 (N.J. Super. App. Div. 2005) (Unpublished)

BROKERS; COMMISSIONS — A provision in a commission agreement precluding the broker from advertising nonproprietary information may be deemed punitive and therefore be invalid.

A principal at a commercial real estate brokerage entered into an arrangement with a property owner in which he agreed find a tenant for the owner’s building. The broker located a tenant and the tenant subsequently entered into a lease agreement. Shortly thereafter, the broker and the owner entered into negotiations for a commissions contract for the work that the broker had performed in securing a tenant. During one of the negotiations, the broker presented the owner’s principal with an investment package regarding the sale of a nearby commercial building. The package contained a comparative lease survey which included the owner’s property. It disclosed the square footage of the building and the rent being charged to the tenant. A subsequent meeting was held at which the broker and the owner executed a revised commission contract. During the course of this meeting, the owner’s principal directed the broker’s attention to the advertising clause in the contract and told the broker that he hoped he would lose sleep over it. This clause precluded the broker from advertising or promoting any transaction that formed the basis for the commission. The owner never paid the broker a commission on the basis that the broker violated the adverting clause by distributing the information packet regarding its property to a potential purchaser. The broker sued, contending that the owner breached the contract by failing to pay the commission. The broker also charged the owner’s principal with fraudulent inducement, asserting that the principal induced him into executing the contract so he could avoid paying him the commission. The owner counterclaimed, asserting that the broker had breached the commission contract by including information about its property in its information packet. Both parties moved for summary judgment, which the lower court granted in favor of the broker, ruling that the property owner had breached the contract. The broker then voluntary dismissed its complaint against the owner’s principal. The owner appealed the lower court’s ruling asserting that the court had erred in granting summary judgment for breach of contract to the broker because a factual dispute existed. It further asserted that the lower court erred in granting attorneys’ fees to the broker for its fraudulent inducement claim because the broker voluntarily dismissed this claim.

The Appellate Division affirmed the lower court’s ruling. It found that the advertising clause in the commission contract was punitive and therefore unenforceable because it barred the broker from advertising public information regarding the owner’s property. It held that the information contained in the packet was not proprietary and as a result, the broker was free to advertise it. It further noted that the information disclosed by the broker did not result in any damage to the owner. Lastly, the Court rejected the owner’s assertion that the lower court erred in awarding attorneys’ fees to the broker for its fraudulent inducement claim since it did not succeed on this action because it was dismissed. The Court held that the broker was entitled to these fees because its breach of contract and fraudulent inducement claims were based on the same set of facts and were presented as alternative theories for recovery.

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