Strategic Alliance Realty, Inc. v. Allstate Insurance Company

97-514 (U.S. Dist. Ct. D. N.J. 1999) (Unpublished)
  • Opinion Date: January 25, 1999

BROKERS; STATUTE OF FRAUDS—A valid oral brokerage commission agreement does not become invalid just because a statute requiring a signed writing becomes effective after the agreement is made, but before the commission is earned.

Prior to its replacement on January 6, 1996, N.J.S. 25:1-9 provided that a real estate broker could not obtain a commission from a property owner unless a written agreement existed. Because that statute made reference only to a commission from a property owner, case law held that a broker did not have to obtain a writing from a buyer to receive a commission from that buyer. After replacement, a real estate broker is required to have a written agreement with a “principal.” Replacing “owner” with “principal” suggested that a broker must obtain a writing in order to receive a commission from a buyer. The date of the replacement of N.J.S. 25:1-9 with N.J.S. 25:1-16 became critical in this case because the broker and a property buyer may have entered into an oral agreement at a time when no statute of frauds required a writing and, in fact, the broker may have substantially performed services during that time. The actual property transfer took place after the amendment that required brokerage agreements with buyers to be in writing. The Court could not find any New Jersey cases dealing with such circumstances. Therefore, it took note of the text of Corbin on Contracts which reasoned that constitutional law protects a contract right, even though it may be only a conditional one. Under that reasoning, the statute of frauds should not be allowed by retroactive application to deprive a broker of compensation for its services. In the words of the Court, “[c]onsidering all the evidence in a light most favorable to the [broker], as this court must on a summary judgment motion, it would be manifestly unjust to allow [buyer] to knowingly enter into a contract, derive the fruit from such agreement, and then, on the enactment of a heretowith unknown law, require the [broker] to obtain a written memorial of the agreement at such a point in the relationship when [the buyer] had no further interest in doing so.”