DICKMAN BUSINESS BROKERS v. ADVANCED METAL PROCESSING

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3146-05T23146-05T2

DICKMAN BUSINESS BROKERS,

Plaintiff-Respondent,

v.

ADVANCED METAL PROCESSING,

INC., a New Jersey Corporation,

Defendant-Appellant.

_____________________________________________________________

 

Argued December 12, 2006 - Decided January 17, 2007

Before Judges Kestin, Payne and Graves.

On appeal from Superior Court of New Jersey,

Law Division, Morris County, Docket No.

L-2140-04.

Peter R. Bray argued the cause for appellant

(Bray, Chiocca & Miller, attorneys; Mr. Bray,

on the brief).

Walter A. Risi argued the cause for respondent

(Plick & Risi, attorneys; Mr. Risi, on the

brief).

PER CURIAM

Defendant Advanced Metal Processing, Inc. (Advanced), through its President, William Green (Green), entered into an exclusive listing agreement with plaintiff, Dickman Business Brokers (DBB), for the sale of its business. The listing price was $250,000, and the listing agreement provided that upon the sale of the business plaintiff would receive a commission of ten percent of the purchase price or $10,000, whichever was greater. The listing agreement, which expired on July 1, 2003, contained the following provisions:

The undersigned agrees to pay DBB a commission in the event said business and/or property is sold, exchanged, leased, conveyed or disposed of by any other person, corporation, or broker including the undersigned during the term of this agreement or after the expiration date set forth herein-above, if said transaction is consummated with a person, firm or corporation to whom the property was submitted by DBB or anyone else including the undersigned during the term hereof.

. . . .

The undersigned agrees to refer to DBB all inquiries regarding the lease, exchange, or purchase of said business and/or property whether from real estate brokers, prospective purchasers, or prospective tenants and all negotiations shall be through you the listing broker.

DBB did not produce a buyer prior to the expiration of the listing agreement on July 1, 2003, and the listing agreement was not renewed. Several months later, a DBB salesperson telephoned Advanced to see if Green might be interested in relisting at a lower sales price, and the telephone call was answered by Moreng Metal Products (MMP). Upon further investigation, plaintiff learned that Advanced had sold assets to MMP in June 2003, and Green had entered into an employment contract with MMP on June 18, 2003, which was effective June 30, 2003. Plaintiff alleged in its complaint that it was entitled to a commission in accordance with the listing agreement between the parties.

During a two-day bench trial, Green admitted that when he signed the listing agreement with DBB, he "needed about $200,000 to . . . . wrap up all the debt and be clean." He also acknowledged that, in May and June 2003, he discussed his desire to dispose of his business with one of his customers, James Moreng, the President of MMP. Those discussions resulted in a written agreement on June 18, 2003. Green memorialized the agreement in a three-page letter, which was accepted and approved by James Moreng, on behalf of MMP. The agreement between Green and MMP provided as follows:

1. Advanced Metal Processing, Inc. ("AMP") will cease to operate or exist and [Green] will endeavor to bring its customers and the ability to service those customers to MMP effective June 30, 2003. . . .

2. [Green] shall be paid by MMP for the aforementioned customer group based upon the gross sales generated by his efforts and collected by MMP. MMP shall pay to WDG through an entity which [Green] will assign his interest to, 25% of the gross proceeds collected for the first three years and 20% for the final two years of this agreement from customers contained on the customer list for the total term of five years. . . .

3. Sales which are included in the determination of gross sales are only those sales which were previously provided by AMP and only to the customers on the list, i.e., painting services, silk screening, screen fabrication, assembly of parts, and directly related services for the foregoing. Services not previously provided by AMP or to customers not on the customer list shall result in a commission being paid to [Green] at the MMP commission rate of 5%. . . .

4. MMP shall purchase from AMP the Ford van at the "blue book" retail value as determined from a reputable automobile dealer. Payment for the van shall be due at the time of the transfer of title.

5. MMP intends to offer employment to several former AMP employees and these employees are anticipated to be "at will" employees who will be retained based solely upon their performance at MMP. . . .

6. MMP to provide [Green] full family medical benefits as equal to MMP executives.

7. All AMP paint inventory, shop supplies (tape, hooks, bars, paint trucks, etc.), tables, spray equipment (excluding compressors), electro-static paint equipment, miscellaneous small tools (drills, automatic paper dispenser, etc.) shall become the property of MMP for a payment of $1,000.00 due on June 30, 2003.

8. This employment agreement shall begin June 30, 2003 and MMP shall provide its truck and personnel to expeditiously assist the effecting the physical move of equipment and other items from Bloomfield, N.J. to MMP prior to that date.

9. AMP [o]ffice equipment (computer, printer, copier and fax machine) are not subject to this agreement and may be disposed of by AMP principals.

10. [Green] will use his best efforts to the intentions and purposes of this agreement, as will the principals of MMP, to assure that the customers who [Green] brings to MMP are fairly serviced and maintained. . . .

11. This agreement represents an employment agreement for [Green]. No liabilities, including trade accounts, bank obligations, federal or state tax obligations, or any responsibility for items arising in or from the course of operating AMP shall accrue to MMP; the principals of AMP acknowledge their responsibility for all such items and shall hold MMP harmless from any such claims.

During the trial, Green was asked whether he understood that the "transaction" with MMP "was covered by the listing with Dickman," and he testified:

You know, to be totally honest with you, I had reached the point where I had not even considered what was . . . covered by the Dickman thing 'cause I had not heard from them in over two months and frankly, we're trying to run a business and trying to save ourselves, whatever, and I never even gave consideration about what was going on with Dickman anymore because frankly, they were not giving any consideration to me. I mean, I couldn't get a response. And so the answer is I know it now but I'll be honest with you now, I didn't worry about it then.

The trial court found in favor of plaintiff. In a written decision dated December 1, 2005, Judge Langlois found that Green had "subverted" the listing agreement "for his own benefit," and she determined that the appropriate measure of damages was the full commission specified in the exclusive listing agreement. The trial court's decision included the following:

Advanced freely entered this broker's agreement with DBB and is therefore obligated under the contract for its commission. Mr. Green is an experienced businessman and lawyer. In January 2003, he wanted to sell Advanced and, with full understanding of the broker's commission and exclusivity provisions, signed all documentation on behalf of Advanced.

The contract specifically obligated payment of the commission "in the event [Advanced] is sold, exchanged, leased, conveyed or disposed of" by Mr. Green "if said transaction is consummated with a person, firm or corporation to whom the property was submitted by [Mr. Green] during the term hereof." Advanced then breached this agreement that all inquiries about the "purchase of said business" shall be through DBB exclusively until July 1, 2003.

The [c]ourt concludes that Mr. Green "disposed of" Advanced to Moreng Metals within the meaning of the contract. While Mr. Green carefully avoided a direct "purchase" of Advanced by Moreng Metals, he disposed of some assets by sale to Moreng; he transferred all customers, jobs, contracts to Moreng; he released Moreng from liabilities; he had almost all of the employees hired by Moreng. The phone number of Advanced was transferred to Moreng Metals. Mr. Green was paid by Moreng, as plaintiff calculates, a commission from June 2003, as revised in March 2004, of well over $200,000.

. . . .

Mr. Green's transaction was, in effect, sale of Advanced not as a going concern, but of its parts. That is not what he wanted to do in January 2003 because, as he acknowledged, the price for the sum is greater than for the parts. His calculation of the price for Advanced, as a going business, was $250,000. He knew sales - $400,000; he knew expenses - $250,000; he knew the value of the inventory and equipment - $70,000. He later crafted the demise of Advanced without regard to these very calculations, and for his own benefit.

. . . .

William Green subverted this contract. He never called to cancel the listing. He acted to "save himself" and get out of Advanced "somehow." He admitted he "didn't even worry about" the contract. He proceeded to negotiate directly with Moreng Metals in May and June 2003. This was a clear, intentional breach of contract with DBB.

. . . .

The court therefore holds Advanced to its obligation to pay "a commission of 10% (percent) of the purchase price or $10,000, whichever is greater." Because Mr. Green valued Advanced at $250,000 as a going concern, he should be held to the price he would have accepted for the purchase of Advanced - $250,000. The commission owed is $25,000.

On appeal, defendant presents the following arguments:

POINT I

IT IS ERROR TO CONCLUDE THAT A SALE OF SOME ASSETS IS THE FUNCTIONAL EQUIVALENT OF A SALE OF A BUSINESS AS A GOING CONCERN.

POINT II

IT IS ERROR TO CONCLUDE THAT A LISTING BROKER IS ENTITLED TO A COMMISSION BASED UPON THE LISTING, OR SO-CALLED, ASKING PRICE FOR A BUSINESS.

POINT III

A BROKER, WHO PERFORMS NO MEANINGFUL SERVICES DURING THE PENDENCY OF [AN] EXCLUSIVE RIGHT TO SELL AGREEMENT MUST BE DEEMED TO HAVE BREACHED ITS OBLIGATIONS AND TO HAVE FORFEITED ANY RIGHT TO COMMISSIONS.

After reviewing the record and applicable law in light of the issues presented, we conclude that defendant's contentions are without sufficient merit to warrant extended discussion in a written opinion. R. 2:11-3(e)(1)(E). The trial court's findings are firmly supported by substantial credible evidence in the record, and its legal conclusions predicated on those findings are sound. R. 2:11-3(e)(1)(A). Accordingly, we affirm the judgment entered in favor of plaintiff substantially for the reasons expressed by Judge Langlois in her comprehensive written decision on December 1, 2005. We add only these brief comments.

Green testified that he purchased Advanced in 1991, and he operated it until June 30, 2003. He explained that Advanced was a job shop:

It's important to understand what a job shop is. A job shop is exactly what the name implies. You take a job from a sheetmetal house or a construction house, whatever it might be, and we basically finished it. 99.99 percent of the time it was painting. Sometimes we'd also silkscreen on it. We had a lot of contracts with various different customers that we built up over the years and basically we applied it as was testified yesterday with spray guns and then baked in an oven.

In a confidential statement that he prepared when he signed the listing agreement, Green stated that the business inventory was valued at $20,000, its equipment was valued at $50,000, and the business had annual sales of $400,000. Pursuant to his initial agreement with MMP, Green was to receive a 25% commission on the gross proceeds collected from his customer list for the first three years, and a 20% commission the next two years. He was also entitled to a 5% commission on sales to new customers. This changed on March 16, 2004, however, when it was agreed that Green was to receive a guaranteed monthly commission in the amount of $10,000. Moreover, as a result of Green's agreement with MMP, Advanced ceased its operations and Green acknowledged that he paid various business debts from "[a]ccounts receivables that we collected."

The record fully supports the trial court's determination that Green was a sophisticated businessman who knew what his business was worth when he listed it for sale, and he deliberately and intentionally attempted to avoid his contractual obligation to plaintiff. In its reply brief, defendant concedes that its appeal "does not challenge the trial judge's factual findings," and we are satisfied that the trial court did not misapply the law when it determined that plaintiff was entitled to a commission in the amount of $25,000. See Island Realty v. Bibbo, 329 N.J. Super. 528, 533-34 (App. Div.) (noting that "in respect of a listing agreement, absent specific provisions to the contrary, the seller is liable for a commission if the property is sold to any non-excepted buyer during the listing term"), certif. denied, 165 N.J. 487 (2000); Kislak Co., Inc. v. Geldzahler, 210 N.J. Super. 255, 267 (Law Div. 1985) (stating that "[t]he appropriate measure of damages for breach of a term requiring referral of all inquiries to the listing broker . . . is the stipulated commission in that agreement").

Affirmed.

 

 

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A-3146-05T2

January 17, 2007