LEORA DUBROVSKY REALTY GROUP, LLC / v. RON TEDESCO

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3490-10T2

LEORA DUBROVSKY REALTY

GROUP, LLC,

Plaintiff/Third-Party

Defendant-Appellant,

v.

RON TEDESCO, a/k/a RONALD TEDESCO,

and RANDS, LLC,

Defendants/Third-Party

Plaintiffs-Respondents.

________________________________

ArguedMarch 26, 2012 Decided April17, 2012

Before Judges A. A. Rodr guez, Sabatino, and Ashrafi.

On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-5313-08.

Elias L. Schneider argued the cause for appellant.

Ronald Tedesco, respondent, argued the cause pro se.

Respondent RandS, LLC, has not filed a brief.

PER CURIAM

This case involves a real estate broker's claims for commissions. After a bench trial, the judge dismissed the complaint of plaintiff, Leora Dubrovsky Realty Group, LLC, and entered judgment in favor of defendants Ron Tedesco ("Tedesco") and RandS, LLC ("the LLC"). We affirm.

I.

The pertinent facts are as follows. Leora Dubrovsky and her husband Richard Dubrovsky operate plaintiff, a real estate agency in Manalapan. Mr. Dubrovsky is the company's broker of record, and Mrs. Dubrovsky is the company's owner. Tedesco is a businessman. He and another businessman, Steve Young,1 founded the LLC at some point before the events that gave rise to this litigation. According to Tedesco's testimony, Young eventually withdrew from the LLC, and Tedesco became its sole operating officer.

The parties' dispute concerns a residential property in Manalapan, which was owned by the LLC and which defendants wished to sell. On April 2, 2008, plaintiff entered into a listing agreement to serve as the seller's agent for the property. The agreement was signed by Tedesco and by Mrs. Dubrovsky. Paragraph 1 of the listing agreement specified that it would expire on October 31, 2008. Paragraphs 4, 5, and 6 of the agreement contain the following additional relevant terms:

[Paragraph 4]: If, before the expiration date [October 31, 2008] the real estate and/or business is sold or exchanged, regardless of who effects such sale or exchange (including the owner), the [o]wner shall pay a commission of 6% of the sale price, due and payable at the time the sale or exchange takes place. In the event of an exchange, the listing price shall be considered the sale price.

[Paragraph 5]: If, before the expiration date [October 31, 2008] the real estate and/or business is leased/rented, regardless of who effects such lease/rental (including the owner), the owner agrees to pay a commission of -2 on each installment of rent or one month[']s rent for each year of the lease/rental. If the tenancy continues beyond the term of the original lease/rental the owner agrees to pay a commission on all such renewals or extensions as set forth above. If, during the terms of tenancy, the tenant purchases the real estate and/or business, a commission of - of the sale price shall be paid by the owner.

[Paragraph 6]: If the real estate and/or business is sold, leased or exchanged within a period of 180 days from the expiration of this listing or any extension thereof to a buyer introduced to the property during the term of this listing agreement, the [o]wner shall pay to the listing broker the commission set forth above. However, the [o]wner shall not be obligated to pay such commission if a valid listing agreement is entered into during the term of this protection period with another licensed real estate broker, and the sale, lease, or exchange of the property is made during the term of this protection period.

[Emphasis added.]

About a month after the listing period commenced, Tedesco and a potential buyer, Laura Mercandetti, entered into a contract on May 3, 2008, in which Mercandetti agreed to purchase the property for $715,000. Plaintiff is designated in the contract as the "listing broker." The buyer and seller agreed that the closing was to occur on or before June 13, 2008.

As it turned out, defendants were unable to obtain a certificate of occupancy ("CO") for the property before the June 13, 2008 closing deadline. Apparently, the LLC had to reapply to the municipality for a CO, as well as certain variances and permits, because the developer's agreement for the property had expired. Those municipal approvals were contingent upon, among other things, defendants addressing certain environmental concerns.

More specifically, on June 5, 2008 while the Mercandetti purchase was still pending the municipality's zoning board of adjustment granted defendants' requests, on the condition that defendants obtain a "no further action" letter from the New Jersey Department of Environmental Protection ("NJDEP") relating to soil remediation. Although a local construction code official testified at trial that he could have issued a CO for the premises in the absence of a "no further action" letter from NJDEP if defendants had executed a "hold harmless" agreement, the official conceded that no such agreement had been drafted at that time.

Tedesco testified that on June 18, 2008 he signed a contract with Brinkerhoff Environmental Services for the completion of soil testing in order to obtain the required NJDEP "no further action" letter. Tedesco further testified that he received a notice of deficiency from the NJDEP on September 2, 2008, stating that the soil on one of the lots was tainted, apparently due to circumstances beyond defendants' control. In light of these developments, on September 25, 2008, the municipal planning board issued a resolution waiving the requirement that a "no further action" letter be obtained as a condition of issuing a CO for the property. Defendants ultimately obtained the CO on October 31, 2008, which also happened to be the last day of the listing agreement.

Because no CO had been issued for the property before the June 13, 2008 deadline in the purchase contract, counsel for Mercandetti and defendants mutually agreed on June 16, 2008 to terminate the contract. At that point, there were still about four-and-a-half months left on the listing agreement. The hoped-for sale to Mercandetti was never revived, and she apparently purchased a different residence.

Neither plaintiff nor Tedesco secured another buyer for the premises, and the listing agreement expired on October 31, 2008.

The following day, November 1, 2008, Tedesco signed an agreement with Angelo Geraci3 and his wife, in which they agreed to rent the property from the LLC for $2000 per month. The lease term was for one year, through October 31, 2009, and the lease gave the Geracis a right of first refusal to buy the property.

Tedesco testified that the Geracis had expressed an interest in the property in 2007 before it was listed with plaintiff. Tedesco described those initial 2007 discussions as "idle banter," noting that "the numbers [for the transaction] were out of [the Geracis'] reach."

The Geracis ultimately purchased the property on December 14, 2009 for $643,000, significantly less than the $715,000 contract price with Mercandetti. Tedesco was listed on the Geracis' mortgage apparently because of problems with the Geracis' financing.

In November 2008, plaintiff filed a complaint against both Tedesco and the LLC. Plaintiff ultimately claimed in its lawsuit that defendants owed it three separate commissions pursuant to the listing agreement. In particular, plaintiff claimed that defendants owed it (1) a 6% commission of $42,9004 on the aborted Mercandetti purchase; (2) a further commission on the Geraci rental; and (3) another commission on the December 2009 purchase by the Geracis. Plaintiff also claimed that defendants had engaged in consumer fraud by depriving it of the commissions.

Tedesco and the LLC, both of whom were then represented by counsel, filed a joint answer denying liability. Defendants also filed a counterclaim against plaintiff and a third-party complaint against Mrs. Dubrovsky individually on various grounds, including breach of contract, breach of fiduciary duty, tortious interference with contractual relations, and defamation. Defendants further asserted that plaintiff's lawsuit was frivolous.

Shortly before trial, a substitution of attorney form was filed, in which defense counsel withdrew from the case and "Ronald Tedesco, Pro se" was identified as the "superceding attorney." It is undisputed that Tedesco is not a lawyer.

When the parties appeared for a bench trial in the Law Division in January 2011, the court noted that Tedesco was not an attorney and that no attorney was present for the LLC. Plaintiff's counsel presented the court with case law confirming that Rule 1:21-1(c) prohibits a business entity, other than a sole proprietorship, from appearing in court without representation and that any judgment that might be issued in favor of the unrepresented corporation would be "voidable" at plaintiff's option.

The judge did not immediately issue a ruling on plaintiff's contentions regarding the LLC's representation, but instead reserved decision on the question and decided to entertain the proofs in the meantime. The trial proceeded for two days, with Mr. and Mrs. Dubrovsky and the local construction code official testifying for plaintiff and Tedesco testifying for the defense. At the close of the proofs, the judge dismissed the counterclaim and third-party complaint for lack of evidence or argument.

Upon considering the evidence, the trial judge concluded that plaintiff failed to satisfy its burden of persuasion on any of its claims. In particular, the judge concluded that plaintiff had not earned a commission on the proposed Mercandetti sale, which was never consummated, because the CO and the NJDEP's no-action-letter were reasonably not procured until after the purchaser's deadline. On this point, the judge noted that it was not until September 25, 2008, "at the earliest," when the planning board waived the "no-further-action" letter requirement, that Tedesco could have received the CO. The judge elaborated:

[t]he bottom line is that for the [commission] period the certificate of occupancy was not issued and could not have been issued[,] and I'm satisfied that the defendant did nothing to thwart the effort to get the certificate of occupancy.

And, therefore, because I don't find that Mr. Tedesco intentionally failed to attempt to get the certificate of occupancy, I cannot find that the plaintiff is entitled to a commission on the lost contract for the . . . Mercandetti closing.

Further, the judge factually determined that plaintiff did not introduce the Geracis to the property and also that Tedesco did not bring the Geracis to the property during the term of the listing agreement. Consequently, the judge concluded that plaintiff had not earned a commission for either the rental or the sale of the premises to the Geracis.

One month later, in a bench ruling on plaintiff's motion for reconsideration, the judge further considered whether plaintiff would be entitled to any relief solely against the LLC because it had not been represented by an attorney at the trial. The judge reasoned that there would be no reason to enter a default in plaintiff's favor against the LLC on that basis because the proofs by plaintiff that were found unavailing against Tedesco would logically lead to the same adverse result on the merits against the LLC.

Plaintiff now appeals. With respect to the dismissal of its claims against Tedesco, plaintiff contends that the trial judge misapplied the law governing real estate commissions and misconceived the proofs. In particular, plaintiff argues that the judge erred in (1) assuming that plaintiff had an obligation to advise the property owner of a right to list exclusions from a potential commission; (2) denying multiple commissions; (3) failing to acknowledge a broker's right to a rental commission where the seller produces a tenant and to receive a commission when that tenant is given a contractual right of first refusal and thereafter purchases the property; (4) failing to enforce a seller's liability for a commission when the seller is at fault for failing to complete the transaction with a buyer identified by the broker; (5) misinterpreting the role of a broker in the sale of a property; and (6) misapplying the "efficient producing cause" doctrine. Plaintiff further argues that its right to earn a commission on the sale to the Geracis was vested when the Geracis allegedly started to move into the premises during the listing period. Plaintiff asserts that, where such possession occurs during the listing period and a tenant is in continuous contact with the seller, an ensuing sale to that tenant, even on terms different from the listing agreement, entitles the broker to a commission. Plaintiff therefore seeks reversal of the judgment against Tedesco, as a signer of the listing agreement, and an award of multiple commissions against him individually.

With respect to the unrepresented LLC, plaintiff contends that the judge erred in declining to enter default in its favor and in not allowing it to proceed to a proof hearing against the LLC. Plaintiff criticizes the judge for not resolving the representation issue at the outset of the trial and, in effect, permitting Tedesco to participate in the trial with an ambiguous status. Stressing the strong public policies embodied in Rule 1:21-1(c), plaintiff maintains that it has an unwaivable right to have the court void the judgment dismissing its claims against the LLC.

II.

A.

We first consider plaintiff's various substantive arguments alleging entitlement to commissions. Having fully considered these arguments in light of the trial court's factual findings, the contract terms, and the applicable law, we affirm the dismissal of plaintiff's claims, substantially for the reasons set forth in the trial court's bench opinion dated January 25, 2011.

The listing agreement only entitled plaintiff, as the seller's agent, to a commission if the real estate were sold or exchanged "before the [agreement's] expiration date," which was October 31, 2008. No such sale or exchange took place before that date. The trial judge had a reasonable basis, supported by substantial credible evidence in the record, to conclude that the seller was not at fault for failing to obtain a CO and a "no further action" letter from the NJDEP before the Mercandetti transaction fell through. There is insufficient proof of "improper or frustrating conduct" on the seller's part to require the seller to pay a commission in spite of Mercandetti's ultimate decision to walk away from the property after the June 13, 2008 closing date was not achieved. Cf. Ellsworth Dobbs, Inc. v. Johnson, 50 N.J. 528, 547-48 (1967). Indeed, we note that the seller would presumably have had an economic motive to try to salvage the Mercandetti transaction because her purchase price of $715,000, even subtracting a commission of $42,900 (i.e., a net figure of $672,100), exceeded the $643,000 ultimate sale price to the Geracis.

We likewise sustain the trial court's denial of a commission on the Geraci lease and on the Geraci purchase. Both of those transactions post-dated the operative period under the listing agreement. We defer to the trial court's credibility-based findings, which were supported by the documentary evidence and the testimony of the principals, that Tedesco did not bring the Geracis to the property during the term of the listing agreement. See Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 483-84 (1974). Plaintiff's argument relating to whether the seller should have listed the Geracis as an exclusion to the listing agreement is inconsequential because the Geracis did not lease or buy the property until after the listing agreement had expired. Although Mrs. Dubrovsky contended that the property was occupied by the Geracis prior to the agreement's expiration, the judge reasonably did not adopt that contention given that "no summonses or violations were issued for anyone living [on the property] without a [CO.]"

The balance of plaintiff's substantive contentions lack sufficient merit to warrant discussion. See R. 2:11-3(e)(1)(E).

B.

We turn to the issues associated with the LLC's lack of representation by an attorney during the trial. Subject to exceptions that are inapplicable here, Rule 1:21-1(c) clearly provides that "an entity, however formed and for whatever purpose, other than a sole proprietorship shall neither appear nor file any paper in any action in any court of this State except through an attorney authorized to practice in this State." Corporate entities must be represented in court by an authorized attorney. See Globe Media Grp., LLC v. Cisneros, 403 N.J. Super. 574, 577 (App. Div. 2008); Olympic Indus. Park v. P.L., Inc., 208 N.J. Super. 577, 580-81 (App. Div.), certif. denied, 104 N.J. 453 (1986). Such mandatory representation for the LLC was not present here as soon as defense counsel withdrew from the case.

We agree with plaintiff that the trial judge should have made a specific ruling preventing the LLC's interests from being advocated or defended by Tedesco, a non-attorney, before the trial commenced, rather than adopting a "wait-and-see" approach. That said, we discern no reason to alter the final judgment dismissing plaintiff's claims against the LLC.

As plaintiff's counsel acknowledged at oral argument on the appeal, if the decision were vacated, plaintiff would rely upon essentially the same evidence against the LLC as that which it relied upon in the trial against Tedesco. We recognize that, as a general proposition, if a business entity appears in court unrepresented, a judgment entered in that entity's favor "is voidable at the election of the adverse party without a showing of a material irregularity in the trial proceeding or that the judgment was otherwise erroneously entered." Globe Media Grp., LLC, supra, 403 N.J. Super. at 577. However, there is no reason to carry out such an exercise here and void the judgment in the LLC's favor because the evidence against the LLC would be insufficient for the same reason that it was insufficient against Tedesco.

The fundamental point is that, given the trial court's unreversed factual findings and conclusions of law, plaintiff did not earn a commission. There is no reason to remand the matter, vacate the judgment against the LLC, enter default against it, but then dismiss the complaint against the LLC for lack of proof. The claims for commissions have already been litigated on the merits and should not be relitigated as to the same facts. See Olivieri v. Y.M.F. Carpet, Inc., 186 N.J. 511, 521-22 (2006) (discussing principles of issue preclusion, which bar the relitigation of issues that have already been decided on the merits).

1 The capital "S" in "RandS" apparently referred to the first initial of Mr. Young's first name.

2 Rather than specifying a number, the parties inserted a dash ("-") in two spaces of the form agreement concerning commissions payable in a lease/rental situation.

3 According to Tedesco, he met Mr. Geraci in the mid 1980s, and they became business partners in the 1990s. Tedesco is the godfather to one of the Geracis' children.

4 At oral argument before us, plaintiff's counsel conceded that the buyer's agent would have ordinarily been entitled to half of the commission, making plaintiff's net commission on the sale only $21,450.