Skip to main content

Vanguard Property Group, Inc. v. Trocki

A-2940-07T3 (N.J. Super. App. Div. 2009) (Unpublished)

BROKERS; COMMISSIONS — Where a broker’s commission agreement clearly provides that if a buyer defaults on an installment payment obligation and does not pay its obligations in full, the broker will not receive a commission on the unpaid amounts, a court will enforce the agreement as written.

In 2004, the owner of a restaurant and marina signed a listing agreement with a broker. After the broker found a purchaser, it agreed in an amended brokerage agreement to reduce its commission. Under the sales contract, the bulk of the purchase price was to be paid to the seller with a five-year note and mortgage. The agreement to reduce commissions provided that the broker would receive monthly commission payments during the period that the purchase money mortgage payments were being made. The amended brokerage fee agreement also set forth that, at “anytime, for whatever reason the Buyer defaults and does not fulfill its obligations, [broker] is to be paid [its c]ommission on the sum that Seller has received.” The seller was to be reimbursed for any monies paid to broker in excess of the agreed-upon commission. After the purchaser bought the property, it encountered difficulties making mortgage payments and decided to resell it. In accordance with the amended brokerage agreement, the original owner stopped sending commission payments when its buyer stopped making mortgage payments. The broker then filed suit against the original owner, the new owner, and the prospective purchaser claiming fraud and breach of contract. The original owner filed counterclaims requesting a return of commission overpayments. The lower court ordered the original owner to pay the broker the full commission for the original sale of the property . It held the central question was whether the provision in the amended purchase agreement dealing with default could be interpreted as applying to any single event of default or only where the ultimate obligations due were not paid in full. The lower court held that it was “fair to say” that the original owner would “one way or another” be paid the full amount of the price stated in the sales contract. Thus, it found that there was no default that relieved the seller of its obligation to pay the broker its commission. It also ruled that the original owner was justified in reducing the commission because the property was subject to a substantial purchase money mortgage. The original owner appealed.

The Appellate Division reversed the lower court’s decision. It held that the lower court erred in construing the contract language as applied to the facts presented at trial. The Court found that the amended agreement clearly provided that if the original buyer defaulted and did not fulfill his obligations, the seller would only be required to pay the broker a commission based on the sums actually received, with the broker reimbursing the seller for any sums paid in excess of that amount. It noted that the obligations referred to in the amended agreement clearly referred to the purchase money mortgage. It held that the seller did not want to be obligated to pay a full brokerage commission if it was not going to receive any significant cash and was only given a five-year balloon mortgage. Thus, the Court concluded that the lower court had to enforce the terms of the amended agreement as written, and not substitute its own judgment for that of the contracting parties. The Court further ruled that the broker was entitled to receive commissions using the agreed-upon commission rate on any sums actually received by the seller. As a result, the broker was required to reimburse the seller for the seller’s overpayment.

66 Park Street • Montclair, New Jersey 07042
tel: 973-783-3000 • fax: 973-744-5757 •