Strategic Alliance Realty, Inc. v. Allstate Life Insurance Company

97-514 (U.S. Dist. Ct. D. N.J. 1997) (Unpublished)
  • Opinion Date: October 1, 1997

FORECLOSURE; BROKERS—A buyer introduced to a property by a broker eventually bought the property at a foreclosure sale. The broker claimed a commission from the (foreclosing) seller based upon efforts by the broker to put together the sale before the foreclosure. The Court allowed the broker to prove that it was entitled to quantum meruit damages from the buyer (not the seller) and that the buyer and seller conspired to deprive the broker of its commission.

An insurance company owned land to be sold at a foreclosure sale. The company met with a realtor about marketing the property. The realtor delivered a detailed marketing plan, including a commission provision, and later offered the property for sale, all without objection from the insurance company. Three weeks later, the insurance company sent the realtor a letter claiming there was no contract between them and that the company did not agree to the commission provision. However, the realtor had already begun negotiations for the possible purchase of the property by one of its clients. The broker’s client eventually purchased the land at the foreclosure sale. The realtor claimed it was the efficient procuring cause of the purchase of the property and therefore should have received the agreed upon commission from either the insurance company or the purchaser. All defendants moved for summary judgment.

The United States District Court first stated that for a real estate broker to receive commission, it must have a valid contract, which may be implied-in-fact if an offeree manifests assent to the terms of an offer. Implied manifestation may arise when an offeree does not object to essential terms and passively accepts the benefit of an offeror’s performance. Recovery under quantum meruit requires proof that services were performed with an expectation of payment and under circumstances that should have put the beneficiary of the services on notice of the broker’s expectation of payment. In real estate cases, courts have allowed brokers to recover under quantum meruit when a principal accepts a broker’s services, even where the contract was unenforceable due to lack of agreement on essential terms such as commission. As long as a broker demonstrates an expectation of payment and the beneficiary should have been on notice that the broker expected to be paid, the broker may recover the reasonable value of services rendered. Related to quantum meruit is the “efficient procuring cause” doctrine, which is also invoked to permit brokers to recover commission when a sale is made. Under this doctrine, a broker must show that it caused its customer to negotiate with the seller, with no break in the negotiations, and that the sale was eventually consummated. However, statutory law prohibits real estate brokers from collecting a commission in a transaction while at the same time being paid to represent the other party in a different capacity. The broker in this case argued it was making alternative claims for relief and that it was to receive commission one of two ways: either the insurance company would transfer its interest to the broker’s client and pay the commission, or the broker’s client would purchase the property at the foreclosure sale and pay the commission. The District Court concluded that the broker’s allegations were insufficient to state a claim for relief against the insurance company for breach of contract or quantum meruit. However, the broker did have a sufficient claim against the buyer in quantum meruit, because the facts supported an inference that it was the efficient procuring cause of the sale. The Court also held there were sufficient facts to allow the broker to prove that the insurance company and the purchaser conducted negotiations on their own to keep the broker from obtaining a commission, thereby conspiring to interfere with the brokers reasonable expectation of payment for its services.