R.J. BRUNELLI & COMPANY, INC. v. JAMM REALTY CORPORATION, et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2388-03T12388-03T1

R.J. BRUNELLI & COMPANY,

INC.,

Plaintiff-Respondent/

Cross-Appellant,

and

LEVIN MANAGEMENT

CORPORATION,

Plaintiff,

v.

JAMM REALTY CORPORATION,

SCHENKMAN/KUSHNER HOLMDEL,

LLC, S/K HOLMDEL LLC and

EUGENE SCHENKMAN,

Defendants-Appellants/

Cross-Respondents.

__________________________________________________

 

Argued: March 7, 2005 - Decided March 10, 2006

Before Judges A. A. Rodr guez, Weissbard and Hoens.

On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, L-1722-01.

Michael M. Rosenbaum argued the cause for appellants/cross-respondents (Budd, Larner, attorneys; Mr. Rosenbaum, on the brief).

Harold Goldman argued the cause for respondent/cross-appellant (Ansell, Zaro, Grimm & Aaron, attorneys; Mr. Goldman, of counsel and on the brief).

PER CURIAM

JAMM Realty Corporation (JAMM), contracted to purchase contiguous tracts of real property in Holmdel from four landowners in order to develop a shopping center. The aggregate of the purchase prices was $5,385,000. Eugene Schenkman and Murray Kushner are principals of JAMM. They intended to form a corporation, to be called Schenkman/Kushner Holmdel, LLC (S/K), when the project had tenants for the shopping center. The corporation was never formed. R.J. Brunelli & Company, Inc. (Brunelli) acted as the broker for the acquisition of the four lots. Richard J. Brunelli is the principal of Brunelli.

After the contracts to purchase had been executed, but before the transaction closed, S/K executed an exclusive Brokerage Agreement to find retail tenants for the shopping center with Brunelli, by its principal, Richard J. Brunelli, and Levin Management Corporation (Levin), as the development advisor. The Brokerage Agreement provided that Levin was to receive twenty-five percent of any commissions and Brunelli the other seventy-five percent. However, no such tenants were found.

JAMM then decided to seek one large retailer to occupy the entire property. Brunelli found Lowe's Home Centers, Inc. (Lowe's). However, Lowe's decided to purchase rather than lease the property. Therefore, JAMM executed "an agreement to sell and purchase real estate" with Lowe's. Lowe's was to purchase the lots for a total payment of $8 million, of which $5,385,000 was to be paid to the landowners and $2,615,000 to JAMM. On the closing date, each of the landowners executed deeds conveying their interest directly to Lowe's. JAMM did not take title to any of the properties. JAMM simply received the $2,615,000, which JAMM characterizes as an "assignment fee". Brunelli received commissions from each landowner.

In the Lowe's/JAMM contract, each party represented that it had dealt with Brunelli and with no other broker. JAMM agreed to "pay all fees and commissions payable to R.J. Brunelli & Co., Inc." JAMM offered to pay Brunelli and Levin a commission based on the assignment fee. This was not acceptable. Brunelli and Levin sought a $400,000 commission from JAMM pursuant to the Brokerage Agreement. This amount is five percent of the $8 million paid by Lowe's. Brunelli and Levin, took the position that the JAMM/Lowe's transaction was separate from the sale by the landowners and that they were entitled to a commission on each transaction. JAMM refused to pay such a commission, asserting that the Brokerage Agreement applied only to finding tenants, not to the JAMM/Lowe's transaction, which was a resale of the entire property.

Brunelli and Levin sued JAMM and S/K. The complaint alleged entitlement to a five percent commission pursuant to the Brokerage Agreement. Levin settled for $50,000 before trial. JAMM and S/K (collectively "defendants"), answered and denied that the Brokerage Agreement applied to a sale of the real property. Their position was that the Brokerage Agreement covered only leases and sales of "pad sites."

The parties participated in non-binding arbitration pursuant to Rule 4:21A-1. Defendants rejected the arbitrator's award and moved for a trial de novo pursuant to Rule 4:21A-6.

Defendants moved for summary judgment and made the following arguments: (1) that Brunelli was not entitled to a commission pursuant to the Brokerage Agreement; and (2) that Brunelli was entitled to a commission pursuant to quantum meruit principles based on the assignment fee. Brunelli cross-moved for summary judgment. The judge denied defendants' motion, ruling that the base amount for calculating the commission was a factual issue. The judge granted partial summary judgment to Brunelli on liability pursuant to the doctrine of quantum meruit. Prior to jury selection, the judge granted Brunelli's motion to substitute Eugene Schenkman as a John Doe defendant and denied defendants' motion to limit liability for quantum meruit recovery to JAMM.

Richard J. Brunelli testified that five percent was a standard commission rate for the sale of unimproved land. He did not know how much of its own funds JAMM had invested in the property, but he nonetheless believed that JAMM had earned a "spectacular" return on the property, far beyond the ten to twenty percent that developers typically sought.

At the close of Brunelli's case, defendants moved for judgment. The judge denied the motion. The judge also rejected defendants' contention that Brunelli, by not providing any expert testimony, failed to establish the industry custom for commissions in this type of transaction.

Over Brunelli's objection, the judge allowed David T. Houston, Jr., a member of the Society of Office and Industrial Realtors and a licensed real estate broker, to testify as an expert for defendants. Houston noted that Brunelli received a $261,750 commission from the landowners based on the $5,385,000 paid to them by Lowe's. Therefore, Brunelli had already received a commission on a portion of the $8 million purchase price. He opined that it would not be customary or reasonable for Brunelli to receive duplicate commissions on a portion of the amount paid by Lowe's. He opined that Brunelli was entitled to a five-percent commission on the $2,615,000 assignment fee. He reasoned that Brunelli was not entitled to more because it "did not achieve two sales," or "create a lease with Lowe's" in addition to a sale of the property.

Houston also opined that the Brokerage Agreement contemplated only a partial sale of the property in lieu of a lease, and, if the parties had anticipated a sale of the entire property, they would have made a specific commission arrangement for such an event.

The jury returned a verdict finding that Brunelli could not recover under the Brokerage Agreement, but awarded Brunelli quantum meruit damages in the amount of $392,250. Defendants moved, post-verdict, for a twenty-five percent reduction of the award in light of the settlement with Levin. The judge denied the motion, but granted an "equitable" $50,000 credit to defendants, representing the amount paid to Levin in the settlement.

Defendants moved for counsel fees pursuant to the Brokerage Agreement, arguing that they was entitled to them because it had prevailed on the Brokerage Agreement issue. The judge denied the application because Brunelli had been the prevailing party in light of the ultimate result.

Brunelli also moved for counsel fees because defendants had rejected the arbitrator's award and requested a trial de novo. The judge denied Brunelli's motion, noting that the arbitration had not been pursuant to the New Jersey Alternative Procedure for Dispute Resolution Act, N.J.S.A. 2A:23-1 to -30, nor the Arbitration Act, N.J.S.A. 2A 24:-1 to -11, but was held pursuant to R. 4:21A-1, which limits counsel fees to $750. R. 4:21A-6(c)(3). Moreover, the judge found that Brunelli was not entitled to counsel fees because it did not prevail on the Brokerage Agreement issue. The judge entered a final judgment in the amount of $395,931.67, which included pre-judgment interest in the amount of $53,681.87 and a $50,000 reduction due to the Levin settlement. This appeal follows.

Measurement of Commission

Defendants contend that the judge erred by failing to find, either on their motion for summary judgment or in their motion for judgment, that Brunelli's commission should be calculated based on the assignment fee rather than on the total consideration paid by Lowe's. Defendants also argue that the judge permitted a double recovery by allowing a commission on Lowe's $8 million contract price after Brunelli had already accrued commissions from the landowners on a portion of that amount. We disagree.

It is a general principle of contract law that the "[i]nterpretation and construction of a contract is a matter of law for the court subject to de novo review." Fastenberg v. Prudential Ins. Co. of Am., 309 N.J. Super. 415, 420 (App. Div. 1998). Whether a contractual provision is clear or ambiguous is also a question of law for the court to decide. Cooper River Plaza E. v. Briad Group, 359 N.J. Super. 518, 528 (App. Div. 2003); Nester v. O'Donnell, 301 N.J. Super. 198, 210 (App. Div. 1997). However, when a trial court finds that the meaning of a contractual provision is uncertain or ambiguous and thus depends upon parole evidence to construe it, the meaning is to be determined by a jury. Michaels v. Brookchester, Inc., 26 N.J. 379, 387 (1958); Great Atl. & Pac. Tea Co. v. Checchio, 335 N.J. Super. 495, 502 (App. Div. 2000).

Here, both sides presented the jury with a different scenario. Brunelli argued that there were two separate transactions, and that it was entitled to a commission on each. The first transaction was the sale of the lots by the landowners, for which Brunelli received a commission. Second, Brunelli contracted to find tenants for the shopping center. Through its efforts, Brunelli (and Levin) brought Lowe's and JAMM together. Brunelli is entitled to a commission for that effort, despite the fact that instead of a lease, the transaction became a sale to Lowe's.

JAMM argued that there was only one transaction, a sale by the landowner to Lowe's for $8 million. Therefore, JAMM contends, Brunelli was entitled to one commission calculated on the $8 million purchase price, but because Brunelli already received a commission from the landowners on a portion of the consideration, it was entitled to a commission from JAMM calculated only on the assignment fee.

It was up to the jury, not the judge, to resolve this factual dispute. Michaels, supra, 26 N.J. at 307. The jury rejected Brunelli's argument that the Brokerage Agreement controlled its entitlement to a commission. However, the jury found that Brunelli was entitled to a commission based on quantum meruit principles. From the verdict, it would appear that the jury agreed with Brunelli that there were two transactions, i.e, a sale to JAMM by the landowners and sale by JAMM to Lowe's. The jury awarded quantum meruit damages that approximate 4.9 percent of $8 million.

We find no error in the judge's decision to deny defendants' summary judgment motion "to limit the measurement of [Brunelli's] commission to the assignment price". The agreement of the parties regarding a commission was far from clear. If the judge had granted JAMM's motion, he would have impermissibly accepted JAMM's characterization of the transaction. This was not the judge's province.

Liability of S/K and Schenkman

Defendants contend that the judge erred by not making JAMM the only party liable on the judgment. We agree and vacate the judgment against S/K and Schenkman.

New Jersey courts may pierce the corporate veil "to prevent an independent corporation from being used to defeat the ends of justice, to perpetrate a fraud, to accomplish a crime, or otherwise to evade the law." Tung v. Brian Park Homes, Inc., 287 N.J. Super. 232, 239-40 (App. Div. 1996). A party who seeks "an exception to the fundamental principle that a corporation is a separate entity from its principal" has the burden "of proving that the court should disregard the corporate entity." Ibid.

Here, the judgment is based on a quantum meruit evaluation of the JAMM/Lowe's transaction. S/K was not a party to a contract with Lowe's. There was no evidence to suggest a separate cause of action, such as fraud or fraudulent conveyance of JAMM's assets, against the other defendants. The allegations in the complaint against S/K were that it had participated "in an attempt to avoid the contractual obligations of JAMM" and engaged in "an unlawful attempt to shield JAMM and its assets" from Brunelli's claim. However, there was no evidence presented to this effect.

Kushner testified that S/K was never formed. Brunelli has not presented any evidence to suggest otherwise. The only evidence presented regarding S/K was that it was a party to the Brokerage Agreement. However, that contract never became operational because no leases were signed. The jury so found. Therefore, there is no basis for holding S/K liable on the judgment.

There is also no basis for holding Schenkman personally liable for JAMM's obligations. Brunelli presented its case without attempting to show how Schenkman, as an individual, might have used JAMM's corporate form to perpetrate a fraud or injustice. Brunelli did not prove that any conduct by Schenkman was the reason why the parties failed to negotiate a commission for Lowe's acquisition of the property. Neither did Brunelli suggest that it considered itself to be dealing with Schenkman in his personal capacity rather than as the representative of JAMM's corporate interests. Therefore, the judgment against S/K and Schenkman must be vacated.

Expert Testimony on Quantum Meruit Damages

Defendants contend that the judge erred in denying their motion for judgment because Brunelli failed to prove the value of its quantum meruit claim. They argue that Brunelli was required to present expert testimony on the customary commission for transactions similar to the one between JAMM and Lowe's, and that Brunelli presented no such testimony. We disagree with that contention.

Defendants rely on Weichert Co. Realtor's v. Ryan, 128 N.J. 427 (1992), for the proposition that Brunelli was required to present expert testimony. In Weichert, a broker contacted a developer about certain property. Id. at 430-31. The broker noted his commission fee, but the parties did not sign a commission agreement, and yet continued to pursue the property. Id. at 431. The trial court found that the parties had agreed on a certain commission amount. The Supreme Court held that receipt of services by the offeree, without objection to the offer's essential terms, may be considered a manifest assent to the terms. Id. at 436. However, if "the parties' words and actions are insufficient to manifest an intention to agree to the proffered terms," equity may still afford a recovery under quantum meruit. Id. at 436-37. The performing party could "recoup the reasonable value of services rendered," under such a theory. On remand, the Supreme Court gave the following instruction: "[t]he commission amount should be determined on the basis of proofs tending to show the reasonable value of [the broker's] services, including evidence of customary broker's fees for similar transactions." Id. at 441. The opinion did not require the use of expert testimony to prove a customary fee.

In Coldwell Banker Commerical/Feist & Feist Realty v. Blancke P.W., 368 N.J. Super. 382 (App. Div. 2004), we extended the Weichert principles by holding that even if the statute of frauds applies and there is no commission agreement sufficient to satisfy it, the broker may nonetheless pursue a quantum meruit claim when there is "substantial" evidence that the broker provided a valuable service that enriched the seller. Id. at 400-02. This opinion similarly did not require the use of expert testimony as the exclusive method of proving a customary commission.

The decisions in Weichert and Coldwell Banker, do not, as a matter of law, bar Brunelli from relying on other proofs to establish the nature or value of the services for which it sought quantum meruit damages. As for the general competence of Richard J. Brunelli to testify on those subjects, defendants' expert acknowledged that Richard J. Brunelli had far more personal experience than himself with brokerage work and commissions in relation to retail developments like the one at issue.

We find no error in the judge's denial of defendants' motion for judgment at the close of Brunelli's case based on lack of expert testimony on the amount of a quantum meruit commission. Moreover, we conclude that the jury's verdict on damages is supported by competent evidence. McDonald v. Mianecki, 159 N.J. Super. 1, 25 (App. Div. 1978), aff'd, 79 N.J. 275 (1979).

The $50,000 Credit

Defendants contend that the judge erred by failing to cap the verdict at the $300,000 figure to which Brunelli reduced its contractual claim after defendants settled with Levin. In the alternative, defendants argue that the court erred by failing to reduce the judgment by the percentage that would have been Levin's contractual share of the verdict. Conversely, Brunelli claims on cross-appeal that the judge erred by reducing the damages award. Brunelli argues that once quantum meruit became the sole avenue for recovery, the Brokerage Agreement and any conditions it might impose became irrelevant. All the jury had to consider was the value of services that Brunelli alone rendered in connection with Lowe's purchase of the property. We agree with Brunelli's position.

From our analysis of controlling authority we conclude that the judge had no authority to award the $50,000 "equitable credit" in derogation of the jury's verdict. After a diligent search, we found no authority directly permitting the modification or molding of a verdict on a contractual claim merely to reflect a settlement. Although such modification may occur in tort case, we found no basis for extending the principle to contract cases.

Trial courts have the authority to modify a judgment in order to avoid a clear "miscarriage of justice under the law." Baxter v. Fairmont Food Co., 74 N.J. 588, 597-98 (1977). This is the same standard as for granting a motion pursuant to R. 4:49-1 for a new trial. Courts are not to modify a judgment lightly:

The judgment of the initial factfinder then, whether it be a jury, as here, or a judge as in a non-jury case is entitled to very considerable respect. It should not be overthrown except upon the basis of a carefully reasoned and factually supported (and articulated) determination, after canvassing the record and weighing the evidence, that the continued viability of the judgment would constitute a manifest denial of justice.

[Id. at 597-98 (citations omitted).]

On the specific question of modifying the jury's judgment on damages, the Court cautioned that "a trial judge should not interfere with the quantum of damages assessed by a jury unless it is so disproportionate to the injury and resulting disability shown as to shock his conscience and to convince him that to sustain the award would be manifestly unjust." Id. at 596. In Mahoney v. Podolnick, 168 N.J. 202, 229-30 (2001), the Court explained that "a court should set aside a jury verdict only if it determines that the award is inadequate or excessive by viewing the evidence in the light most favorable to the non-moving party." The same standards apply to an appellate court's determination of whether modification of the verdict was justified. Baxter, supra, 74 N.J. at 596.

The authority to mold a tort verdict to reflect settlements is statutory. N.J.S.A. 2A:15-5.2 mandates that a jury allocate liability among all the alleged tortfeasors. The Supreme Court has construed the statute as requiring the jury to "assess the negligence of [the remaining] defendant as well as of the non-settling defendant." Kiss v. Jacob, 138 N.J. 278, 283 (1994).

The authority to mold a tort verdict to reflect collateral payments is also statutory. There is a requirement pursuant to N.J.S.A. 2A:15-97 to account for "collateral-source" payments that the plaintiff has received. The statute superseded the common-law collateral-source rule. Kiss, supra, 138 N.J. at 281. The statute, like the common-law rule that it replaced, applies only in tort cases. Perreira v. Redinger, 169 N.J. 399, 406-10 (2001).

Thus, the miscarriage of justice standard set by Baxter, supra, 74 at 597-98, must be satisfied before a judge can modify a jury's verdict. The judge did not so find here. In fact, there is no evidence in the record to support such a finding.

Counsel Fees

In N. Bergen Rex Transp. v. Trailer Leasing Co., 158 N.J. 561, 569 (1999), the Supreme Court observed that "New Jersey has a strong policy disfavoring shifting of attorneys' fees." Id. at 569. While parties may contract for an award of attorney fees, the court must "examine the reasonableness of the attorneys' fees awarded." Id. at 570. An award is allowed only to the prevailing party. Ibid. There is a two-pronged test for determining whether a party has prevailed. Ibid. A party must establish both that the "'lawsuit was causally related to securing the relief obtained,'" and that "'the relief granted had some basis in law.'" Id. at 570-71 (quoting Singer v. State, 95 N.J. 487, 494, cert. denied, 469 U.S. 832, 105 S. Ct. 121, 83 L. Ed. 2d 64 (1984)). If a party prevailed only in part, the court must determine "whether the expenditure of counsel's time on the entire litigation was reasonable in relation to the actual relief obtained . . . and, if not, reduce the award proportionately.'" Id. at 572 (quoting Singer, supra, 95 N.J. at 500). Accord Kellam Assocs. v. Angel Projects, 357 N.J. Super. 132, 138-40 (App. Div. 2003); Ricci v. Corp. Express of the E., 344 N.J. Super. 39, 48 (App. Div. 2001), certif. denied, 171 N.J. 42 (2002); and Davidson v. Roselle Park Soccer Fed'n, 304 N.J. Super. 352, 357 (App. Div. 1996).

Here, the judge correctly found that defendants failed to secure relief in this litigation, because their nominal victory on Brunelli's claim under the Brokerage Agreement did not avoid JAMM's liability to Brunelli. Moreover, the jury awarded higher damages than JAMM had conceded. Therefore, Brunelli prevailed and defendants cannot be awarded fees. The judge was also correct in ruling that Brunelli could only enforce a contractual provision for counsel fees, and no such provision was available because the Brokerage Agreement was inapplicable.

In summary, the judgment against S/K Holmdel, LLC, Schenkman/Kushner Holmdel, LLC and Eugene Schenkman is vacated. The judgment against JAMM is modified to vacate the $50,000 credit in favor of Jamm. As modified, the judgment is affirmed.

 
Affirmed in part and reversed in part.

The complaint also named S/K Holmdel, LLC as defendant. The Broker's Agreement refers to both S/K and Schenkman/Kushner Holmdel, LLC as "owner." In this opinion, both entities are referred to as "S/K."

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A-2388-03T1

March 10, 2006