MARKEIM-CHALMERS, INC. VS. WILLINGBORO URBAN RENEWAL, LLC(L-3111-12, CAMDEN COUNTY AND STATEWIDE) ( 2017 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court."
Although it is posted on the internet, this opinion is binding only on the
parties in the case and its use in other cases is limited. R.1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-5469-14T3
MARKEIM-CHALMERS, INC.,
Plaintiff-Respondent/
Cross-Appellant,
v.
WILLINGBORO URBAN RENEWAL, LLC;
D&D COLLEGE PROPERTIES, LLC;
CAMPUS PROPERTIES, LLC,
HANKINS PROPERTIES, LLC; STEVEN
HANKINS; STRAYER UNIVERSITY, INC.;
and RENEWAL WILLINGBORO, LLC,
Defendants-Appellants/
Cross-Respondents.
______________________________________
Argued April 24, 2017 – Decided August 3, 2017
Before Judges Sabatino, Currier and Geiger.
On appeal from Superior Court of New Jersey,
Law Division, Camden County, Docket No. L-
3111-12.
Peter N. Milligan argued the cause for
appellants/cross-respondents.
Bruce S. Luckman argued the cause for
respondent/cross-appellant (Sherman,
Silverstein, Kohl, Rose & Podolsky, P.A.,
attorneys; Mr. Luckman, of counsel and on the
briefs).
PER CURIAM
At issue in this matter is the entitlement to a real estate
broker's commission for the lease and sublease of a commercial
building in the Township of Willingboro. On cross-motions for
summary judgment, the judge granted plaintiff Markeim-Chalmers,
Inc. ("MCI") partial summary judgment, awarding MCI a $100,000
commission arising from the ninety-nine-year lease of the
property. The judge also granted defendants, Renewal Willingboro
LLC, Inc. ("Renewal Willingboro"), Willingboro Urban Renewal, LLC
("Urban Renewal"), D&D College Properties, LLC ("D&D"), Campus
Properties, LLC ("Campus Properties"), Hankins Properties, LLC
("Hankins Properties"), Steven Hankins ("Hankins"), and Strayer
University, Inc. ("Strayer") partial summary judgment dismissing
MCI's claim for a commission on the ten-year sublease of the
property to Strayer. For the reasons that follow, we affirm in
part and reverse and remand in part.
I.
We glean the following facts from the motion record.
Defendant Renewal Willingboro and its wholly owned subsidiary
Urban Renewal developed the Willingboro Town Center in Willingboro
Township. One of their main tenants was Burlington County College,
which rented the 20,992 square foot commercial property located
at 300 Campbell Street (the "property") owned by Urban Renewal.
2 A-5469-14T3
In 2011, the college announced its intention not to renew its
lease, which would leave the office building vacant after September
2012. Urban Renewal's lender required it to find a new tenant for
the building. As a result, Urban Renewal hired several real estate
brokers, including MCI, to secure a new tenant or buyer for the
property. Over the course of the next two years, Urban Renewal
and MCI entered into several short-term agreements where MCI would
list the property in the hopes of finding either a purchaser or
tenant and, if it did, receive a broker's commission.1
In one broker agreement, the "open listing agreement,"
Renewal Willingboro agreed to pay MCI a five percent commission
if a "sale or exchange" of the property occurred before a specified
date between Urban Renewal2 and a prospective buyer that had been
"registered" by MCI with Urban Renewal. The agreement required
1
On September 15, 2010, MCI and Urban Renewal entered into an
"Exclusive Right to Lease Listing Agreement," which by its terms
expired on October 15, 2010. The agreement was extended by the
parties and subsequently terminated by mutual consent before a
tenant was found. On July 25, 2011, MCI and Urban Renewal signed
an exclusive "right to sell" agreement, which would expire on
October 15, 2011. The agreement expired without a buyer being
found or any prospective purchasers being registered by MCI.
2
Throughout the documentation in this case, Renewal Willingboro
and Urban Renewal are frequently referred to interchangeably.
Robert B. Stang and Charles Hack were the managing members of both
entities. As one entity wholly owns the other and both are
controlled by the same people, the distinction does not
substantively affect our analysis.
3 A-5469-14T3
MCI to inform Urban Renewal of prospective buyers in order to
receive a five-percent commission "in the event of a sale of
property." The agreement also stated: "if owner accepts an offer
to sell or exchange within 6 months to anyone to whom [MCI] has
registered in writing with Owner said commission shall be due and
payable as contained herein." (Emphasis added). The agreement
was not exclusive, and Urban Renewal could have authorized other
brokers to market the property.
MCI and Urban Renewal also separately entered into a "lease
commission agreement," in which Urban Renewal agreed to pay MCI a
five-percent commission if the property was leased to a
"registered" third party by a specified date. The "registered"
parties identified by MCI under the open listing agreement included
Steven Hankins and two related companies that he owned, Hankins
Properties and Campus Properties.
On December 4, 2011, MCI entered into a "Confidentiality &
Client Registration Agreement" with Strayer as a potential buyer
and provided it with confidential information about the property.
In emails later that week to Strayer's broker, Cushman and
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Wakefield of Pennsylvania, Inc. ("C&W"), MCI shared information
about the property's current tenant and potential sales prices.3
On February 2, 2012, MCI sent Stang and Urban Renewal a letter
of intent ("LOI") from Hankins and Campus Properties detailing a
proposal to buy the college building for $2 million. The LOI
noted that MCI (representing Urban Renewal) and C&W (representing
Hankins) were the brokers on the deal. The LOI expired on February
7, 2012.
Over the next few days, MCI facilitated discussions between
Urban Renewal and the Campus Properties entities, and secured
permission from Hankins to keep the LOI open "a couple of days"
past the February 7, 2012 deadline. That back-and-forth continued
for a few weeks.
On February 23, 2012, MCI – responding to an email not in the
appellate record – emailed Stang and Urban Renewal, writing:
Glad to see that things seem to be
progressing. Please try to copy me on all
correspondence with Steve Hankins on this
matter as we discussed so I can stay in the
loop. I know you prefer to negotiate with
Steve directly, but I am here to assist
however you would like.
3
During oral argument before the trial court, MCI's counsel
admitted there was no listing agreement at that point in the
chronology between MCI and Urban Renewal. He also admitted that
MCI did not register Strayer under the lease commission agreement.
5 A-5469-14T3
For reasons not clear in the appellate record, Stang rejected
Campus Properties' offer to purchase the property for $2 million.
Hankins then became involved in Strayer's interest in the property
on behalf of Urban Renewal. He certified later, "After a failed
attempt to purchase the real estate, I began to form a professional
and business relationship with the owner." Although Urban Renewal
admits that MCI introduced Hankins to it, it also independently
inquired "about hiring Hankins who would earn a developer's fee
for such work." Urban Renewal further admits to hiring Campus
Properties as a developer for the property.
Hankins wrote that he previously had a long-term relationship
with Strayer – who already was leasing office space in the property
from Burlington County College – and Hankins "abandoned my efforts
to purchase the premises, and started assisting in putting an
agreement together wherein Strayer University, Inc. would lease
the premises in question."
As MCI's listing agreement with Strayer was expiring, C&W
also signed a broker agreement with Urban Renewal to market the
property. On May 10, 2012, Stang sent C&W a commission agreement
for the property, and C&W registered Strayer with Urban Renewal
as a potential tenant. The agreement notes that no other broker
was involved with this property aside from MCI. The agreement
established a sliding scale commission for C&W of six percent of
6 A-5469-14T3
the lease price in year one to three percent of the lease price
in year three. The agreement estimated that Strayer would pay
$2.9 million in rent over ten years, with C&W receiving a
commission of approximately $137,000.
Strayer expressed interest in renting the property.
According to defendants, after the lease commission agreement with
MCI expired, Strayer indicated it would only sign a lease with
Urban Renewal if Hankins had an ownership interest in the property.
Instead of a direct sale or lease, Urban Renewal entered into a
different transaction in order to facilitate the lease of the
property to Strayer and to manage Strayer's rental.
What occurred is that in June 2012, Urban Renewal and Campus
Properties formed a new entity, D&D, a limited liability company,
with two members – Renewal Willingboro and Campus Properties, with
Renewal Willingboro owning ninety percent and Campus Properties
owning the remaining ten percent. The D&D operating agreement
noted that Campus Properties would make $96,173 in capital
contributions to D&D. Renewal Willingboro contributed $867,557,
which represented the "estimated cost of the Strayer Build Out."
Additionally, Renewal Willingboro contributed $2 million in
capital, "which the parties agree is the value of the ground lease
of the property being contributed[.]"
7 A-5469-14T3
D&D was formed to allow Renewal Willingboro to lease the
property to D&D, and for "[Steven] Hankins to oversee construction
of leasehold improvements under the Strayer Lease and the
construction of additional leasehold improvements for the 5,091
rentable square feet in the property."
On June 6, 2012, Urban Renewal entered into a ninety-nine-
year lease of the property with D&D for the nominal rent of $1.00
per year in consideration. Stang, as managing member for both
entities, signed both the landlord and tenant portions of the
lease. In turn, on June 12, 2012, D&D entered into a ten-year
sublease of the property with Strayer, commencing October 1, 2012.
The sublease specified a sliding scale for rent payments, with
Strayer paying $13,249.17 a month initially and up to $35,216.58
a month in year ten.
The sublease recognized Urban Renewal as the property owner
and Renewal Willingboro as redevelopment manager. Although
Strayer previously discussed leasing the entire building, it only
leased 15,899 square feet in the building. The ten-year sublease
with Strayer was entered into after both the open listing and
lease commission agreements had expired. MCI never received a
commission for the sublease. C&W received a $137,000 commission
as broker for the Strayer sublease.
8 A-5469-14T3
C&W, which is not a party to this litigation, served as the
broker for the ten-year sublease from D&D to Strayer, and performed
the services work as broker on that transaction. The estimated
value of the rental payments under the ten-year sublease to Strayer
was $2.9 million.
Following the lease, Flushing Bank agreed to modify Urban
Renewal's mortgage on the property on August 31, 2012. D&D agreed
to assume the mortgage, which then had a balance of nearly $3.9
million. Stang and Hack personally guaranteed it.
Plaintiff filed its complaint in July 2012. The complaint,
as later amended, asserted breach of contract against Urban Renewal
(count one); unjust enrichment against all defendants (count two);
quantum meruit against all defendants (count three); tortious
interference with contract against all defendants (count four);
breach of the implied covenant of good faith and fair dealing
against all defendants (count five); civil conspiracy against all
defendants (count six); and aiding and abetting against D&D, Campus
Properties, Hankins Properties, Strayer, and Renewal Willingboro
(count seven).
Defendants did not assert the affirmative defense of statute
of frauds in their answer. See R. 4:5-4 (prescribing that
affirmative defenses such as the statute of frauds are to be set
forth specifically and separately).
9 A-5469-14T3
In October 2013, while the litigation was pending, Campus
Properties transferred its membership interest in D&D to Renewal
Willingboro for $40,000, leaving Renewal Willingboro as the sole
remaining member and owner of D&D.
The parties filed cross-motions for summary judgment. MCI
argued that it was entitled to a commission under the open listing
agreement for the "transfer/exchange" of the property pursuant to
the ninety-nine-year lease of the property to D&D. Relying
principally on Renaissance Plaza Assocs. v. Atlantic City, 18 N.J.
Tax 342 (Tax 1998), and an unpublished appellate opinion, MCI
contended that the formation of a joint venture and the signing
of a ninety-nine-year lease triggered the right to a commission.
MCI further argued that, by previously registering Strayer with
Urban Renewal, defendants owed it a commission for the subsequent
ten-year lease signed by Strayer. MCI alternatively argued it was
entitled to damages in quantum meruit under Weichert Co. Realtors
v. Ryan, 128 N.J. 427 (1992), despite defendant's claim that it
failed to comply with the statute of frauds.
Defendants argued that MCI only had a contractual right to a
commission for the sale of the property, which did not occur, and
therefore was not entitled to a commission for the sublease to
Strayer. Defendants further argued that the relationship between
D&D and Urban Renewal was not a joint venture, and even if it
10 A-5469-14T3
were, MCI had no agreement for a commission on a joint venture,
unlike the broker in R.J. Brunelli & Co., supra. Defendants also
argued that MCI's reliance on Weichert Co. Realtors, supra, was
misplaced because the statute of frauds was amended by the
Legislature after that Supreme Court case was decided.
After considering the matter without any evidentiary hearing,
the trial court granted MCI partial summary judgment, finding that
MCI was entitled to a commission under the open listing agreement
for the ninety-nine-year lease to D&D but not for the lease to
Strayer under the lease commission agreement. The trial court
ordered all of the defendants jointly and severally liable to MCI
for the sum of $100,000 in damages.
The trial court first found that MCI was not entitled to a
commission under the lease commission agreement for the ten-year
sublease to Strayer, stating:
With respect to this matter, I do not believe
there is any entitlement to any commission on
the lease. There -- it was an argument made
that it should bootstrap back to an agreement
that was before July 25, 2011, the listing
agreement, because that spoke about leases. I
cannot find anything that says that there is
any entitlement for [MCI], in any respect,
with -- no matter how broadly I read any of
the documents within the law, that it would
entitle them to any type of commission on a
lease. Whatever was paid to Cushman &
Wakefield was paid to Cushman & Wakefield. It
is of no consequence. I do not see MCI as
having a right to a commission on the lease.
11 A-5469-14T3
The court therefore granted partial summary judgment to
defendants, dismissing MCI's claim for damages for the ten-year
sublease to Strayer.
The court reached a different result with respect to MCI's
claim for a commission on the ninety-nine-year lease to D&D. After
analyzing the open listing agreement, MCI's registration of
Strayer and the Hankins entities, and the January 4 letter from
MCI to Urban Renewal registering Hankins, Hankins Properties and
Campus Properties under the open listing agreement, the court
concluded that defendants had improperly tried to circumvent
paying a commission to MCI. The court ruled that the ninety-nine-
year lease from Urban Renewal to D&D was effectively a sale or
exchange of the property for value, which triggered the right to
a commission under the open listing agreement. The court further
elaborated:
It's obvious to the Court that the entities--
the defendant entities had an obligation to
[MCI] to pay commission on a sale or exchange,
and that they proceeded to undertake a
transaction that would otherwise potentially
not be considered to trigger a commission to
be due, and they did not accomplish that in
the eyes of this Court. The transaction, as
evidenced by the operating agreement, was a
method that they attempted to utilize to avoid
the document looking like a sale or
hypothecation of rights, or what have you, but
that's, in fact, what it did. They gave up
their right to utilize the property, and it
12 A-5469-14T3
was fairly blatant to the [c]ourt what they
were attempting to do. They were attempting
to cut out [MCI] from this agreement. For
whatever reason, it doesn't matter.
With regard to the amount of the commission to be awarded,
the court stated: "I derived the value from the operating
agreement, from the capitalization in the operating agreement."
The court calculated the commission to be five percent of the $2
million estimated value of the leased property, as listed in the
operating agreement, or $100,000.
Based on those findings, the court granted partial summary
judgment to MCI against all defendants for $100,000, with liability
imposed against them jointly, severally, and in the alternative.
Defendants now appeal the trial court's order requiring them
to pay a real estate commission to MCI for the ninety-nine-year
lease. On appeal, defendants raise the following arguments: (1)
there was no exchange of the property entitling MCI to a
commission; (2) there was no hypothecation of rights to the
property entitling MCI to a commission; (3) MCI had no right to a
commission for a lease of the property; and (4) defendants Strayer,
Campus Properties, Hankins Properties, and Hankins in particular
cannot be liable for any commission under the open listing
agreement between MCI and Urban Renewal.
13 A-5469-14T3
MCI cross-appealed the trial court's order denying its claim
for compensation for its efforts in connection with the ten-year
sublease of the property to Strayer. On appeal, MCI raises the
following arguments: (1) MCI is entitled to additional
compensation in the amount of $137,000 in connection with the
Strayer lease transaction; (2) MCI is entitled to recover
commissions, notwithstanding the statute of frauds; and (3) there
is no express contract which bars MCI's quantum meruit claims.
II.
We review the trial court's rulings under well-known
standards. Our review of a ruling on summary judgment is de novo.
"[W]e apply the same standard governing the trial court–we view
the evidence in the light most favorable to the non-moving party."
Murray v. Plainfield Rescue Squad, 210 N.J. 581, 584 (2012). "If
a review of the record reveals that 'there is no genuine issue as
to any material fact challenged and that the moving party is
entitled to a judgment or order as a matter of law,' then a court
should grant summary judgment." Nicholas v. Mynster, 213 N.J.
463, 478 (2013) (quoting R. 4:46-2(c)). We thus consider "whether
the competent evidential materials presented, when viewed in a
light most favorable to the non-moving party, are sufficient to
permit a factfinder to resolve the alleged disputed issue in favor
of the non-moving party." Brill v. Guardian Life Ins. Co. of Am.,
14 A-5469-14T3
142 N.J. 520, 540 (1995). "In applying that standard, a court
properly grants summary judgement when the evidence is so one-
sided that one party must prevail as a matter of law." Davis v.
Brickman Landscaping, Ltd., 219 N.J. 395, 406 (2014) (citation
omitted). Because the trial court granted partial summary judgment
to each party, we must consider the facts in a light most favorable
to the respective non-moving party or parties.
Further, in construing the meaning of a statute or the common
law, "our review is de novo." Nicholas, supra, 213 N.J. at 478.
"A trial court's interpretation of the law and the legal
consequences that flow from established facts are not entitled to
any special deference." Manalapan Realty, L.P. v. Twp. Comm., 140
N.J. 366, 378 (1995). Moreover, because the construction of
contract terms is likewise a question of law, see Boss v.
Hackensack Univ. Med. Ctr., 345 N.J. Super. 78, 92 (App. Div.
2001), we independently review the trial court's construction on
a de novo basis. See Morgan v. Sanford Brown Inst., 225 N.J. 289,
302-03 (2016). For instance, whether a contract term is clear or
ambiguous is a question of law. Nester v. O'Donnell, 301 N.J.
Super. 198, 210 (App. Div. 1997). A term is ambiguous if it is
"susceptible to at least two reasonable alternative
interpretations." Ibid. (citation omitted). "If contract terms
are unspecific or vague, extrinsic evidence may be used to shed
15 A-5469-14T3
light on the mutual understanding of the parties." Hall v. Bd.
of Educ. of Jefferson, 125 N.J. 299, 305 (1991); see also Conway
v. 287 Corp. Ctr. Assocs., 187 N.J. 259, 270 (2006) ("Extrinsic
evidence may be used to uncover the true meaning of contractual
terms.").
III.
We first address whether MCI is entitled to a commission
under the open listing agreement for the ninety-nine-year lease
to D&D. In order to qualify for a commission under the open
listing agreement, the lease must constitute a "sale or exchange"
of the property.
Ninety-nine-year leases are permitted in New Jersey. See
Brunswick v. Route 18 Shopping Ctr., 182 N.J. 210 (2005). Some
states still limit leases to ninety-nine years. See, e.g., Nev.
Rev. Stat. § 111.200(2) (1963); Code of Ala. § 35-4-6 (1989). New
Jersey has no such statutory limit, but it appears that the
practice of parties entering into ninety-nine-year leases has
persisted.
In City of Atlantic City v. Cynwyd Investments, 148 N.J. 55
(1997), the Court addressed the circumstances in which ninety-
nine-year lessees may be treated as fee simple owners:
In some circumstances, New Jersey courts have
held that ninety-nine-year lessees are
equivalent to fee simple owners under the common
16 A-5469-14T3
law. Lake End Corp. v. Twp. of Rockaway, 185 N.J.
Super. 248, 256 (App. Div. 1982) ("[a]s a matter
of law and fact, ninety-nine-year leaseholds are
the equivalent of a fee ownership for the
purposes of real property taxation, valuation
and assessment.") See Ric-Cic Co. v. Bassinder,
252 N.J. Super. 334 (App. Div. 1991) (granting
standing to ninety-nine-year perpetual lessee to
apply for variances under N.J.S.A. 40:55D-3 to -
4). However, in West Jersey Grove Camp
Association v. City of Vineland, 80 N.J. Super.
361 (App. Div. 1963), the court declined to
afford property tax exemptions to holders of
ninety-nine-year leases that were not renewable.
Whether a ninety-nine-year lessee should be
considered a de facto fee simple owner for
condemnation purposes constitutes an issue of
first impression. In general, the rights of the
holder of a ninety-nine-year lease depend on the
contract and the legislative intent underlying
the applicable statutory regime. Although
ninety-nine-year lessees are deemed to be
equivalent to fee simple owners for certain
purposes under the law, we decline to apply the
doctrine to condemnation.
[Id. at 72.]
In Cynwyd Investments, the Court held that the 99-year lessee did
not have pre-condemnation rights, but may participate in the
eventual condemnation trial and present noncumulative evidence of
fair value. Id. at 73.
As another illustration, in Ocean Grove Camp Meeting v.
Reeves, 79 N.J.L. 334 (Sup. Ct.), aff'd 80 N.J.L. 464 (E. & A.
1910), property was leased for ninety-nine years, "renewable" by
the lessee, "his heirs and assigns for a like term of years
forever." Id. at 335. The court deemed the rent reserved to be
17 A-5469-14T3
"grossly disproportionate to the value of the lands," and the
lessee owned the buildings and improvements. Id. at 336. Under
these circumstances, the court held that the lessee was liable for
the assessed real estate taxes. In reaching that conclusion, the
court engaged in the following analysis:
It is quite plain that an instrument demising
to one and his heirs and assigns a long term
of years in land, renewable in perpetuity,
conveys an ownership equivalent to a fee
simple, although rent may be thereby reserved.
It is very closely analogous to . . . a
conveyance in fee simple, reserving to the
grantor and his heirs a small ground rent.
The entire beneficial ownership of the land
resides as much in the lessee, in a case like
the present, as in the grantee under such a
deed reserving ground rent.
[Id. at 338-39.]
"As a matter of law and fact, 99-year leaseholds are the
equivalent of a fee ownership for the purposes of property
taxation, valuation and assessment." Lake End Corp., supra, 185
N.J. Super. at 256. Consequently, individual leaseholds may be
assessed for tax purposes as individual parcels of real property.
Id. at 257. As a result, a tenant under a 99-year lease subject
to renewal in perpetuity with an option to purchase after twenty
years is treated as a property owner, since the lease is considered
tantamount to a transfer in ownership for local property tax
purposes. Renaissance Plaza Assocs., supra, 18 N.J. Tax at 347.
18 A-5469-14T3
A tenancy for life, or for ninety-nine years or more,
qualifies the tenant to receive a tax rebate under the Homestead
Rebate Act, N.J.S.A. 54:4-3.80. Macmillan v. Taxation Div. Dir.,
180 N.J. Super. 175, 179 (App. Div. 1981). However, leases are
generally not taxable exchanges under the Internal Revenue Code.
See 26 U.S.C.A. § 1031. Moreover, a tenant's interest in a
leasehold is mortgageable as a matter of general law. 29 New
Jersey Practice, Law of Mortgages § 5.2, at 263 (Myron C.
Weinstein) (2d ed. 2001).
Unlike these precedents that arose in the context of taxation,
zoning, and condemnation matters, there is no legislative regime
involved in this action, which concerns the enforcement of a
contractual broker's commission between private parties. Even so,
related principles apply.
The lease between Urban Renewal and D&D expires after ninety-
nine years. Unlike in Ocean Grove, supra, 79 N.J.L. at 339, and
Ric-Cic Co., supra, 252 N.J. Super. at 341-42, where the ninety-
nine-year leases extended into perpetuity, no such open-ended
language appears here. The lease also does not contain a lessee
renewal option, as in Lake End Corp., supra, 185 N.J. Super. at
255-56, or an option to purchase, as in Renaissance Plaza Assocs.,
supra, 18 N.J. Tax at 346-47. Notwithstanding these factual
aspects, our case law has at times equated a ninety-nine-year
19 A-5469-14T3
lease with fee simple ownership rights, unless that designation
would be against the public interest. See Cynwyd Investments,
supra, 148 N.J. at 72-73 (condemnation proceedings). Equating
this particular leasehold interest with a fee simple estate for
purposes of considering a broker's right to a commission is not
manifestly against the public interest.
Here, the facts militate strongly in favor of considering the
lease an "exchange" under the open listing agreement. In addition
to the extreme duration of the lease, the ground lease constituted
the majority of Renewal Willingboro's capital contribution to the
formation of D&D. D&D would have had no reason to exist, but for
the lease. MCI introduced Urban Renewal to Hankins and Campus
Properties. Campus Properties held a ten percent ownership
interest in D&D. D&D was responsible for paying the real estate
taxes on the property. D&D immediately subleased the property to
Strayer.
Considering the totality of the circumstances, including the
nature of the transactions and the relationship of the parties,
the ninety-nine-year lease effectively should be treated in this
particular context like a sale or an exchange. Accordingly, we
hold that the ninety-nine-year lease between Urban Renewal and D&D
constituted a "sale or exchange" within the meaning of the open
listing agreement, thereby entitling MCI to a commission. To rule
20 A-5469-14T3
otherwise would unjustly allow Renewal Willingboro to evade
responsibility for a commission on the transaction, which appears
to have largely resulted from MCI's efforts as broker. We thus
affirm the trial court's finding of MCI's entitlement to a
commission on the lease to D&D.
IV.
We next address which parties are liable to MCI for the
commission under the open listing agreement on the ninety-nine-
year lease to D&D. The trial court held all defendants jointly
and severally liable to MCI. Defendants argue that the trial
court erred in holding Strayer, Hankins, Hankins Properties, and
Campus Properties jointly and severally liable for the commission.
We agree.
The only parties to the open listing agreement were Urban
Renewal and MCI. Strayer, Hankins, Hankins Properties, and Campus
Properties were not parties to the agreement, did not sign the
agreement, and did not guarantee its performance. Accordingly,
Strayer, Hankins, Hankins Properties, and Campus Properties did
not violate any contractual obligations and were not contractually
liable for any commission due under the agreement. Moreover, in
its amended complaint, MCI only alleged breach of contract against
Urban Renewal. Therefore, the only parties liable to MCI for the
commission on the ninety-nine-year lease are Urban Renewal and
21 A-5469-14T3
Willingboro Renewal, its parent company. Accordingly, summary
judgment should have been granted to defendants Strayer, Hankins,
Hankins Properties, and Campus Properties dismissing MCI's claim
for a commission on the ninety-nine-year lease.
Defendants further argue that the court erred in awarding a
commission in the sum of $100,000 to MCI. The court provided the
following explanation for the amount of damages it awarded to MCI:
In terms of damages, I accept the two-million-
dollar figure in the [D&D] operating agreement
as sufficient evidence of an approximation of
value for what was exchanged, and I apply the
five percent commission figure to that. It's
that simple, with respect to my findings.
Defendants argue that this calculation is flawed and lacks
appropriate support in the record. We agree.
Article VII, § 7.01 of the operating agreement sets forth the
respective capital contributions of Urban Renewal and Campus
Properties to D&D, stating:
Capital Contributions. (a) Simultaneously
with the execution of this Agreement, [Renewal
Willingboro] and [Campus Properties] shall
contribute the cash, property and services set
forth on Schedule A annexed hereto. [Campus
Properties'] initial capital contribution
shall be $96,173.00 representing ten percent
(10%) of the estimated cost of the Strayer
Build Out. [Renewal Willingboro] shall
contribute $2,000,000.00 of capital to the
Company, which the parties agree is the value
of the ground lease of the Property being
contributed by [Renewal Willingboro] to the
Partnership plus [$]867,557.00 representing
22 A-5469-14T3
ninety percent (90%) of the estimated cost of
the Strayer Build Out.
Accordingly, Renewal Willingboro contributed $2,867,000 to
D&D, representing the value of the ground lease of the property
($2 million), and ninety percent (90%) of the estimated cost of
the Strayer build-out ($867,000). Campus Properties contributed
only $96,173 to D&D, representing the remaining ten percent of the
estimated cost of the Strayer build-out. Thus, Renewal Willingboro
contributed 96.75 percent of the total capital contributions to
D&D, with Campus Properties contributing only the remaining 3.25
percent.
The operating agreement for D&D further provided that the
participation interest of Renewal Willingboro was ninety percent
and the participation interest of Campus Properties was ten
percent. Accordingly, if the value of the ground lease was $2
million, the value of Campus Properties' ownership interest in the
property would be $200,000, with Renewal Willingboro's interest
being the remaining $1,800,000. Defendants argue that if we find
that MCI is entitled to any commission, its commission should be
five percent of only $200,000, not five percent of $2 million as
computed by the trial court.
Notwithstanding the gross disparity in contribution level,
the ninety percent participation interest of Renewal Willingboro,
23 A-5469-14T3
and the fact that Willingboro Renewal was still the fee simple
owner of the property leased to D&D, the trial court awarded a
five percent commission on the entire $2 million value of the
property listed in the operating agreement.
The court reached its decision on damages without conducting
an evidentiary hearing. The court's decision did not include any
analysis or consideration of the following pertinent facts: (1)
the grossly disparate contributions of Renewal Willingboro and
Campus Properties; (2) Renewal Willingboro retaining a fee simple
ownership of the property leased to D&D; and (3) Renewal
Willingboro holding a ninety percent participation interest in
D&D, and thus transferred or exchanged only a small percentage of
the value of the property. These facts should have been considered
by the court in calculating the appropriate commission.
We recognize that no party requested an evidentiary hearing,
and that the issues were presented to the court through cross-
motions for summary judgment. Nonetheless, the damages issues
require further proceedings on remand, with a plenary hearing to
develop and determine any disputed material facts. Bruno v. Gale,
Wentworth & Dillon Realty, 371 N.J. Super. 69, 76-77 (App. Div.
2004).
We therefore vacate the damage award of $100,000 and remand
for the trial court to conduct further proceedings to determine
24 A-5469-14T3
the appropriate amount of the commission under the open listing
agreement.
V.
Finally, we address whether MCI is entitled to a commission
under the open lease commission agreement or the doctrine of
quantum meruit for the lease to Strayer. The trial court ruled
that MCI was not entitled to a commission for the Strayer lease
without specifically commenting on the equitable arguments raised
by MCI.
In its cross-appeal, MCI argues that the trial court should
have awarded it an additional $137,000 commission for the ten-year
sublease Strayer entered into with D&D for the property. MCI
concedes that it was not entitled to commission based on the open
lease agreement with Urban Renewal. Rather, it contends that the
court should have awarded a commission under either the theory of
unjust enrichment or quantum meruit. We disagree.
A real estate broker is generally entitled to receive a
commission "for the transfer of an interest in real estate, only
if before or after the transfer the authority of the broker is
given or recognized in a writing signed by the principal or the
principal's authorized agent, and the writing states either the
amount or the rate of commission." N.J.S.A. 25:1-16(b). "Transfer
or sale" in this section is defined as the "transfer of an interest
25 A-5469-14T3
in real or the purchase or sale of a business." N.J.S.A. 25:1-
16(a). "Interest in real estate" is deemed to include a lease of
real estate. N.J.S.A. 25:1-10.
Further, a broker who works under an oral agreement is
entitled to a commission only if:
1) within five days after making the oral
agreement and before the transfer or sale, the
broker serves the principal with a written
notice which states that its terms are those
of the prior oral agreement including the rate
or amount of commission to be paid; and
(2) before the principal serves the broker
with a written rejection of the oral
agreement, the broker either effects the
transfer or sale, or, in good faith, enters
negotiations with a prospective party who
later effects the transfer or sale.
[N.J.S.A. 25:1-16(d).]
The Legislature enacted this revised version of the statute
of frauds in 1995. Under the prior version, N.J.S.A. 25:1-9
stated:
No broker or real estate agent selling or
exchanging real estate for or on account of
the owner shall be entitled to any commission
for such sale or exchange, unless his
authority therefor is in writing, signed by
the owner or his authorized agent, or unless
such authority is recognized in a writing or
memorandum, signed by the owner or his
authorized agent, either before or after such
sale or exchange has been effected, and, in
either case, the rate of commission on the
dollar or the amount of the commission shall
have been stated therein.
26 A-5469-14T3
Any broker or real estate agent selling or
exchanging real estate pursuant to an oral
agreement with the owner of such real estate,
who shall actually effect such sale or
exchange before such oral agreement shall have
been repudiated or terminated by the owner in
writing as hereinafter provided, may recover
from such owner the amount of commission on
such sale or exchange, if the broker or agent
shall, within five days after the making of
the oral agreement and prior to the actual
sale or exchange of such real estate, serve
upon the owner a notice in writing, setting
forth the terms of the oral agreement and
stating the rate or amount of commission to
be paid thereunder, and if the owner shall not
have repudiated or terminated the oral
agreement prior to the actual sale or exchange
of the real estate.
[N.J.S.A. 25:1-9 (repealed L. 1995, c. 360, §
9 (eff. Jan. 5, 1996)).]
"Under both the old and new statutes, the broker can recover
a commission if within five days after the oral agreement, the
broker sends the owner a notice stating the terms of the agreement
including the commission amount or rate, and if the owner does not
repudiate or terminate the agreement prior to the actual sale of
the property." C&J Colonial Realty, Inc. v. Poughkeepsie Sav.
Bank, F.S.B., 355 N.J. Super. 444, 472 (App. Div. 2002), certif.
denied, 176 N.J. 73 (2003).
"N.J.S.A. 25:1-9, commonly referred to as the real estate
broker's statute of frauds, '. . . represents a strong statement
of public policy by the Legislature which cannot be ignored.'"
27 A-5469-14T3
R.A. Intile Realty Co., Inc. v. Raho, 259 N.J. Super. 438, 454
(Law Div. 1992) (quoting McCann v. Biss, 65 N.J. 301, 309 (1974)).
Strict compliance with the statute of frauds is "essential for a
broker to recover a commission for the sale of real estate." C&J
Colonial Realty, supra, 355 N.J. Super. at 473 (citing Tannenbaum
& Milask, Inc. v. Mazzola, 309 N.J. Super. 88, 95 (App. Div.
1997)). Without a written agreement, an oral agreement complying
with the requirements of N.J.S.A. 25:1-16(d) is the only means of
satisfying the Statute of Frauds.
MCI does not claim an oral agreement existed. Nor did MCI
send a notice to Urban Renewal pursuant to N.J.S.A. 25:1-16(d).
Instead, MCI entered into the written lease commission agreement
with Urban Renewal on September 15, 2010. The agreement expired
on February 7, 2011. D&D and Strayer entered into the ten-year
lease 486 days after the lease commission agreement expired. MCI
entered into a second lease commission agreement with Urban Renewal
on July 25, 2011, which expired on October 15, 2011. D&D and
Strayer entered into the ten-year lease 236 days after the second
lease commission agreement expired.
The open listing agreement expired on February 1, 2012, some
117 days before the lease between D&D and Strayer was entered
into. Moreover, the ten-year sublease does not constitute a "sale
28 A-5469-14T3
or exchange" or de facto "conveyance in fee" under the open listing
agreement.
"[I]n a leasing, the broker's commission is not earned until
the critical event, which ordinarily is the date the lease is
signed." Feist & Feist Realty Corp. v. Dockside Urban Renewal
Corp., 255 N.J. Super. 100, 104 (Law Div. 1992). Given the
expiration of both the open listing and lease commission agreements
before the ten-year sublease between D&D and Strayer was entered
into, MCI is not contractually entitled to a commission for the
sublease under either agreement.
We next address whether MCI is entitled to recover the
reasonable value of its services relating to the Strayer sublease
on an alternative theory of quantum meruit. Quantum meruit is a
type of "quasi-contractual recovery for services rendered when a
party confers a benefit with a reasonable expectation of payment."
Weichert, supra, 128 N.J. at 437. The doctrine allows the party
to recoup the reasonable value of services rendered. Id. at 438.
As we recently explained:
Quantum meruit is a form of quasi-contractual
recovery and is wholly unlike an express or
implied-in-fact contract in that it is imposed
by the law for the purpose of bringing about
justice without reference to the intention of
the parties. The equitable remedy is
applicable only when one party has conferred
a benefit on another, and the circumstances
29 A-5469-14T3
are such that to deny recovery would be
unjust.
[N.Y.-Conn. Dev. Corp. v. Blinds-To-Go (U.S.)
Inc., 449 N.J. Super. 542, 556 (App. Div.
2017) (citations omitted).]
Under certain circumstances, a real estate broker can recover
fees for services rendered even in the absence of an express or
implied contract. As we explained in Weichert,
a broker seeking recovery on a theory of
quantum meruit must establish that the
services were performed with an expectation
that the beneficiary would pay for them, and
under circumstances that should have put the
beneficiary on notice that the plaintiff
expected to be paid . . . Courts have allowed
brokers to recover in quantum meruit when a
principal accepts a broker's services but the
contract proves unenforceable for lack of
agreement on essential terms—for instance, the
amount of the broker's commission . . .
[t]hus, a broker who makes a sufficient
showing can recover fees for services rendered
even absent express or implied agreement
concerning the amount of the fee.
[Weichert, supra, 128 N.J. at 438 (citations
omitted).]
However, if an express contract exists, a court cannot grant
"relief regarding the same subject matter based on quantum meruit."
Kas Oriental Rugs, Inc. v. Ellman, 394 N.J. Super. 278, 286 (App.
Div.), certif. denied, 192 N.J. 74 (2007). There, the trial court
awarded a commission for sales made after the termination of the
contract on a quantum meruit basis. Id. at 288. We reversed,
30 A-5469-14T3
holding that awarding a commission after the contract terminated
was "inconsistent with the terms of [the] express contract" and
therefore invalid. Ibid.
We recently reaffirmed this principle by holding a jury cannot
award damages for quantum meruit if an express contract between
the parties existed. Blinds-To-Go, supra, 449 N.J. Super. at 557.
It has long been recognized, however, that the
existence of an express contract excludes the
awarding of relief regarding the same subject
matter based on quantum meruit. An implied
contract cannot exist when there is an express
contract about the identical subject. The
parties are bound by their agreement, and
there is no ground for implying a promise.
[Id. at 556 (internal quotation marks and
citations omitted).]
Because an express contract existed regarding the identical
subject matter, MCI cannot obtain relief based on quantum meruit.
Kas Oriental Rugs, supra, 394 N.J. Super. at 286; Blinds-To-Go,
supra, 449 N.J. Super. at 556. For example, in Moser v. Milner
Hotels, Inc., 6 N.J. 278 (1951), the Court held:
It is well settled that an express contract
excludes an implied one. An implied contract
cannot exist when there is an existing express
contract about the identical subject. The
parties are bound by their agreement, and
there is no ground for implying a promise. It
is only when the parties do not agree that the
law interposes and raises a promise. When an
express contract exists, there must be a
rescission of it before the parties will be
remitted to the contract which the law
31 A-5469-14T3
implies, in the absence of the agreement which
they made for themselves.
[Id. at 280-81 (quoting Voorhees v. Combs, 33
N.J.L. 494, 496-97 (E. & A. 1869)).]
See also Shalita v. Twp. of Washington, 270 N.J. Super. 84, 90-91
(App. Div. 1994) ("generally, the parties are bound by their
agreement and there is no ground for an additional obligation
where there is a valid unrescinded contract that governs their
rights"). "The law continues to prohibit the enforcement of an
implied contract or an implied provision that conflicts or is
inconsistent with the parties' express contract, as we held in
Moser." Kas Oriental Rugs, supra, 394 N.J. Super. at 287.
Here, the ten-year sublease to Strayer was entered into after
the lease commission agreement expired. "Since Moser militates
against the granting of a remedy based on a quantum meruit theory
that is inconsistent with the terms of an express contract," MCI
cannot obtain relief based on quantum meruit. Id. at 288.
We further note that C&W served as the broker for the ten-
year sublease from D&D to Strayer. It is undisputed that C&W
performed the services as broker on that transaction.
"'Ordinarily, a broker who has been the effective cause of a
transaction is entitled to the agreed commission[.]'" George H.
Beckman, Inc. v. Charles Reid & Sons, Inc., 44 N.J. Super. 159,
170 (App. Div. 1957) (quoting Restatement of Agency § 448(f)
32 A-5469-14T3
(1933)). "[W]here a prospective tenant is produced by the broker
and a negotiated lease results, the broker is deemed to be the
efficient procuring cause of the lease, entitled to a commission."
Feist & Feist Realty Corp., supra, 255 N.J. Super. at 104. Here,
as the trial court correctly perceived, that did not happen with
respect to MCI. MCI was not the "effective cause" of the sublease
to Strayer. For this additional reason, MCI is not entitled to a
commission under the open lease commission agreement.
For these reasons, the trial court properly granted summary
judgment to defendants dismissing MCI's claim for a commission on
the ten-year sublease to Strayer based on breach of contract or
quantum meruit. This does not end our analysis, however.
In addition to its claims for breach of contract and quantum
meruit, MCI's amended complaint also alleged legal theories of
unjust enrichment, tortious interference with contract, breach of
the implied covenant of good faith and fair dealing, aiding and
abetting, and civil conspiracy. The court's oral decision did not
discuss or analyze these additional claims. It did not set forth
factual findings and correlate them to legal conclusions as to
these additional claims. The court did not issue a written opinion
stating findings of facts and conclusions of law on these discrete
issues.
33 A-5469-14T3
"[B]oth Rule 1:7-4 and Rule 2:5-1(b), specifically state that
the court 'shall' set forth the facts and make conclusions of law
to support the order or judgment." Allstate Ins. Co. v. Fisher,
408 N.J. Super. 289, 300-01 (App. Div. 2009). These requirements
were not met here as to the discrete open issues. However, we
note that the trial court's omission may have been understandable
because the primary focus of the arguments to the motion judge
instead concerned the key contractual issues.
Rule 2:10-5 provides that "[t]he appellate court may exercise
such jurisdiction as is necessary to complete the determination
of any matter on review." However, our original factfinding
authority must be exercised sparingly and only in clear cases that
are free of doubt. Tomaino v. Burman, 364 N.J. Super. 224, 234-
35 (App. Div. 2003), certif. denied, 179 N.J. 310 (2004).
This is not a case where original jurisdiction will result
in a complete determination of the matter on review. This appeal
does not address a single, lingering issue. See Allstate, supra,
408 N.J. Super. at 302. There is no indication of a risk of
perpetual litigation, and it does not appear that the exercise of
original jurisdiction is necessary to avoid lengthy or burdensome
litigation. See id. Accordingly, we decline to exercise original
jurisdiction to determine these remaining open issues.
34 A-5469-14T3
We remand for the trial court to consider MCI's claims of
unjust enrichment, tortious interference with contract, breach of
the implied covenant of good faith and fair dealing, aiding and
abetting, and civil conspiracy. In doing so, we intimate no views
on their resolution in the first instance.
VI.
In summary, viewing the pleading in a light most favorable
to the respective nonmoving parties, we agree with the trial court
that MCI is entitled to recover a commission from Urban Renewal
and Renewal Willingboro under the open listing agreement for the
ninety-nine-year lease of the property to D&D. We also agree that
the other defendants are not liable to MCI for a commission for
that transaction. We vacate the trial court's damages calculation,
however, and remand the matter for the trial court to conduct
proceedings, with a plenary hearing if fact-finding necessitates
it, to re-determine the appropriate amount of the commission under
the open listing agreement.
We concur with the trial court that MCI is not entitled to a
commission for the ten-year sublease of the property to Strayer
based on breach of contract or quantum meruit.
Lastly, we remand the matter for proceedings to determine
MCI's additional claims of unjust enrichment, tortious
35 A-5469-14T3
interference with contract, breach of the implied covenant of good
faith and fair dealing, aiding and abetting, and civil conspiracy.
We direct the trial court to conduct a case management
conference within thirty days to plan the remand proceedings and
arrange for any additional briefing. The trial court has the
discretion to reopen discovery, to the extent that it determines
any of these unresolved issues warrant doing so.
We do not retain jurisdiction over the remanded issues. Any
party aggrieved by the trial court's post-remand rulings may seek
appellate review through a timely-filed new appeal.
Affirmed in part, reversed in part, and remanded for
proceedings consistent with this opinion. We do not retain
jurisdiction.
36 A-5469-14T3