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R. J. Brunelli & Company, Inc. v. JAMM Realty Corporation

A-2388-03T1 (N.J. Super App. Div. 2006) (Unpublished)

BROKERS; COMMISSIONS; DAMAGES—Even where a broker cannot recover a commission under a particular brokerage agreement, the broker may still be entitled to damages on a quantum meruit basis.

A developer (corporation) executed contracts to purchase four contiguous tracts of real estate for the purpose of developing a shopping center. The purchase price was $5,385,000. Prior to closing, the developer signed a brokerage agreement with the real estate agent and a development advisor to find retail tenants for the shopping center. The commissions under the brokerage agreement were to be split, with 25% payable to the development advisor and 75% payable to the real estate agent. Instead of finding multiple retail tenants, the real estate agent found one large tenant to occupy the entire shopping center. However, this company wanted to purchase the property rather than lease it. The developer and the retailer executed a contract for the sale of the real estate. Under this contract, the retailer was to pay the original owners of the 4 contiguous lots the purchase price as contained in their contracts with the developer, as well as an additional $2,615,000 “assignment fee” payable to the developer. The retailer’s total purchase price was $8,000,000. At closing, the original land owners executed deeds conveying their interests directly to the retailer, not to the developer. The retailer paid the developer the assignment fee and also paid the purchase price for the four contiguous lots. The original landowners paid a commission to the real estate agent based on the $5,385,000 purchase price paid by the retailer to the original landowners.

Believing the brokerage agreement did not apply to the sale of the shopping center and only entitled the real estate agent and the development advisor to commissions if they found “tenants,” the developer offered the real estate broker and the development advisor commissions based on the assignment fee. Claiming each transaction was a separate deal and that they were entitled to commissions on each deal, the real estate broker and the development advisor wanted their commissions based on the total $8,000,000 purchase price paid by the retailer. The real estate agent and the development advisor sued. The development advisor settled with the developer before trial.

Rejecting the non-binding ruling of an arbitrator, the developer moved for a trial de novo, and thereafter moved for summary judgment. The real estate agent cross-moved for summary judgment. In denying the developer’s motion for summary judgment, the lower court ruled that the amount upon which the real estate agent’s commissions should be based was an unresolved factual issue. The lower court granted partial summary judgment to the real estate agent on liability pursuant to principles of quantum meruit. A defense expert testified at trial that because the original land owners had already paid a commission to the real estate agent based on the $5,385,000 paid to them by the retailer for the purchase of the land, it would be outside the scope of customary real estate practice for the real estate agent to receive duplicate commissions on that portion of the $8,000,000 already paid by the retailer. The expert witness continued by stating the real estate agent would ordinarily be entitled to a commission on the remaining $2,615,000 assignment fee, and that if the real estate agent and the developer had intended for their agreement to address the possibility that the real estate agent would earn a commission for finding a party interested in buying the property and not merely leasing space in it, then it would have been customary for their agreement to specifically state so. The jury found that the real estate agent could not recover under the brokerage agreement, but was nonetheless entitled to commissions as damages in quantum meruit. A judgment was entered against the developer and one of its principals. The lower court granted the developer’s post-verdict motion to reduce the award by the amount of the settlement previously paid to the development advisor. Both parties appealed.

In the appeal, the developer argued the lower court permitted the real estate agent to recover a double commission by allowing a commission on the full $8,000,000 even though the original land owners already paid a commission to the real estate agent based on the $5,385,000 purchase price paid by the retailer. The Appellate Division rejected this argument. While holding that, as a general principal, issues of contract interpretation and construction are matters of law subject to de novo review, the Court also held that when a lower court finds that the meaning of a contract is uncertain or ambiguous and must rely on parole evidence for clarity, the meaning of the contract becomes an issue of fact for a jury to decide. According to the Appellate Division, the jury decided this issue by rejecting the real estate broker’s claim that it was entitled to another commission under the brokerage agreement, but nonetheless awarded damages in quantum meruit. Finding the agreement between the developer and the real estate agent to be far from clear, and thus properly presented to the jury for consideration of the facts, the Court found no error by the lower court’s denial of the developer’s summary judgment motion.

The developer further argued that it should be the only liable party. The Court agreed and vacated the judgment against one of its principals. It held that the corporate veil may be pierced to prevent the corporation from being used as a shield to pervert justice, perpetuate fraud, commit a crime or otherwise evade the law. However, the party seeking to pierce the corporate veil has the burden of proving that the court should disregard the corporate entity. At trial, the real estate agent presented no evidence suggesting that the principal was using the developer company as a means to perpetuate a fraud. The real estate agent also failed to present any evidence indicating that the principal was the reason why the parties failed to negotiate a commission for the retailer’s acquisition of the property. Further, the record did not indicate that the real estate agent ever considered that it was dealing with the principal in his personal capacity instead as a representative of the developer corporation. Finding a dearth of facts to support a judgment against the principal, the Court vacated that portion of the judgment.

The developer further claimed that the lower court erred by denying its motion for judgment after presentation of the real estate agent’s case because the real estate agent did not present expert testimony to establish the value of his quantum meruit claim. The Court held that expert witnesses are not necessary to establish value of a quantum meruit claim, and that the real estate broker was free to present evidence of any kind to establish the value of his services. The denial of the developer’s motion for judgment is affirmed.

Lastly, the developer appealed the jury’s calculation of the damages in quantum meruit. It claimed the lower court should have reduced the award by the percentage that would have been the development advisor’s share. The real estate agent claimed that once the jury decided to award damages in quantum meruit, all the jury had to consider was the value of the real estate agent’s work. While holding that a judge has the authority pursuant to statute to may modify damages in a tort case, the Appellate Division found no such authority exists to modify a jury’s award of damages in a contract case. In all cases, the lower court may modify a jury’s award of damages if, in viewing the evidence in a light most favorable to the non-moving party, the “continued viability of the judgment would constitute a manifest denial of justice.” That means the jury’s award must be so disproportionate as to shock the conscience and convince the judge the award is manifestly unjust. The Appellate Division found that the judge in this case made no findings as to the unjust nature of the jury’s award, and thus vacated the credit reflecting the settlement with the development advisor.

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