DKNJ REAL ESTATE AND APPRAISAL, LLC v. REUSSI CAPITAL LIMITED LIABILITY COMPANY
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SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2316-19
DKNJ REAL ESTATE
AND APPRAISAL, LLC,
and DIANE TRUGMAN,
Plaintiffs-Appellants,
v.
REUSSI CAPITAL LIMITED
LIABILITY COMPANY,
d/b/a REUSSI CAPITAL, LLC,
501 LAKE TERRACE, LLC,
and PETER SIEGEL,
Defendants-Respondents.
__________________________
Submitted January 13, 2021 – Decided February 10, 2021
Before Judges Rose and Firko.
On appeal from the Superior Court of New Jersey, Law
Division, Monmouth County, Docket No. L-1986-19.
Stephen A. Gravatt, attorney for appellants.
Fox Rothschild, LLP, attorneys for respondents
(Andrew J. Karas, on the brief).
PER CURIAM
Plaintiffs DKNJ Real Estate and Appraisal, LLC (DKNJ) and Diane
Trugman1 appeal from the February 3, 2020 order entered by the Law Division
judge granting summary judgment to defendants Reussi Capital Limited
Liability Company d/b/a Reussi Capital, LLC, 501 Lake Terr, LLC, and Peter
Siegel. The judge denied plaintiffs the right to a real estate broker's commission
from defendants because plaintiffs failed to comply with the strict requirements
of the statute of frauds, N.J.S.A. 25:1-16. Additionally, the judge determined
that plaintiffs' failure to comply with the statute of frauds prevented recovery on
breach of contract, quantum meruit, and tortious interference with contractual
relations and that plaintiffs were not the efficient procuring cause of the sale.
We affirm.
I.
We derive the following facts from the motion record viewed in the light
most favorable to plaintiffs. Templo Fuente De Vida Corp. v. Nat'l Union Fire
Ins. Co. of Pittsburgh, 224 N.J. 189, 199 (2016). In April of 2018, Trugman, a
licensed New Jersey real estate broker, acting on behalf of DKNJ, contacted
1
We refer to DKNJ and Trugman as plaintiffs and plaintiff throughout this
opinion.
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Siegel to inquire whether his company was interested in purchasing 501-511
Lake Terrace (Lake Terrace property), a residential apartment complex in
Bradley Beach. Siegel is a managing member of Reussi Capital, LLC. The Lake
Terrace property "was not listed [for sale] . . . on the Multiple Listing Service
. . . nor with any other real estate broker." On May 4, 2018, defendants submitted
a written offer to Trugman to purchase the Lake Terrace property. In May 2018,
Siegel sent Trugman a text message stating, "and if I can make it work, I will
pay you [sic] fee directly?"
On July 12, 2018, Trugman sent defendants a proposed broker
commission agreement setting forth a proposed commission of two percent of
the purchase price. Defendants never signed the July 12, 2018 agreement. The
next day, July 13, 2018, defendant sent Trugman a counter commission
agreement proposing a flat commission fee of $100,000 in the event the total
purchase price did not exceed five million dollars. This agreement was signed
by defendants but not by Trugman or anyone on behalf of DKNJ.
On July 14, 2018, Trugman sent a text message to Siegel stating she
"would appreciate [the commission agreement] stating [two] percent of [the]
price and not a dollar amount." Two days later on July 16, 2018, Trugman sent
Siegel an email asserting that she could not agree to the July 13, 2018 counter
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commission agreement. In response, on July 18, 2018, Siegel sent Trugman an
email stating:
You brought the buyer and seller together. Thank you.
The rest of the negotiations and the work are to be done
by me unless I need something more from you . . . . The
seller doesn't want to engage with you, nor do I want
you engaging with the seller . . . Yes you brought me
this opportunity . . . so that is valuable . . . .
On July 20, 2018, Trugman sent Siegel an email asking him to send her a
commission agreement that was not contingent on the purchase price in which
she has no input. On July 30, 2018, Trugman sent defendant an email stating,
"I will not contact [seller] again, but I do need you to produce a reasonable
commission agreement." On August 3, 2018, Trugman sent Siegel an email
stating, "I will need to be notified when the transaction closes and obtain closing
documents from you . . . so that I can assess the amount of commission due
pursuant to our agreement for you to pay my commission on the above-
referenced properties."
On August 30, 2018, plaintiffs' attorney sent Siegel a letter asking him to
confirm whether he intends to pay Trugman a commission. On November 30,
2018, defendants' attorney sent a letter to plaintiffs' attorney stating that no
commission agreement existed between the parties that would warrant payment.
On February 8, 2019, plaintiffs' attorney sent a letter inquiring about the
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commission payment. In response, on February 14, 2019, defendants' attorney
sent a letter stating Trugman "has no claim for commission in connection with
a transaction between the parties." In February 2019, Siegel closed title on the
purchase of the Lake Terrace property.
On June 5, 2019, plaintiffs filed a complaint against defendants and an
amended complaint on July 19, 2019, alleging breach of contract, quantum
meruit, and tortious interference with prospective economic advantage. On
October 15, 2019, in lieu of filing an answer, defendants moved to dismiss for
failure to state a claim under Rule 4:6-2(e).
Trugman submitted a certification in opposition to defendants' motion to
dismiss. On December 6, 2019, the judge denied defendants' motion to dismiss
and converted the motion to one for summary judgment since plaintiffs relied
on facts outside of their pleadings in their opposing papers. R. 4:6-2. The judge
issued a schedule for supplemental briefing.
On January 24, 2020, the judge conducted oral argument on defendants'
motion. Defendants' counsel argued the undisputed facts demonstrated there
was no enforceable agreement between the parties, and Trugman's rejection of
the July 13, 2018 counteroffer evidenced a lack of a meeting of the minds
regarding the commission rate in contravention of the statute of frauds.
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Plaintiffs' attorney, in turn, argued the statute of frauds was satisfied her e
because defendants were aware of their obligation to pay a commission to
plaintiffs. Because defendants drafted their own commission agreement,
plaintiffs' attorney contended "this is not a situation in which a principal is being
treated unfairly by a broker who's trying to get a commission where there's no
written agreement."
Plaintiffs' attorney maintained there was an agreement as to the
commission rate because two percent of the purchase price sought by plaintiffs
equates to $100,000, the flat rate offered in defendants' counter agreement.
Further, plaintiffs' attorney argued that plaintiffs only rejected defendants'
counter agreement insofar as it included a "term that the properties sell for five
million or less." By virtue of Trugman's conduct, plaintiffs' attorney claimed
the counter agreement was ratified because she performed all of her duties
thereunder.
Following oral argument, the judge rendered a decision on the record. The
judge concluded that since there was no signed commission agreement because
no agreement was reached on all material terms, and the requirements of
N.J.S.A. 25:1-16(d) were not satisfied, plaintiffs were not entitled to a real estate
commission from defendants on breach of contract grounds. The judge further
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determined that failure to comply with the statute of frauds precluded a quantum
meruit or tortious interference with contract claim. In making her factual
findings, the judge highlighted, "[t]here were ample opportunities in the
communications between the parties in this case for . . . plaintiff to comply with
the statute[] at a very minimum to send a confirming letter . . . ."
The judge concluded the emails between the parties violated the statute of
frauds as "there was no meeting of the minds." Citing C & J Colonial Realty v.
Poughkeepsie Savings Bank, 355 N.J. Super. 444, 473 (App. Div. 2002)
(holding strict compliance with the statute of frauds is essential for a broker to
recover a commission for the sale of real estate), the judge granted defendants'
motion to dismiss the amended complaint with prejudice. Further, the judge
found "there was no 'duly executed' real estate broker commission agreement."
In addressing plaintiffs' quantum meruit and tortious interference with
contract claims, the judge found that a broker who fails to comply with the
statute of frauds cannot obtain relief under these causes of action, citing
Coldwell Banker v. Blancke P.W. L.L.C., 368 N.J. Super. 382 (App. Div. 2004)
and McCann v. Biss, 65 N.J. 301 (1974). A memorializing order was entered
on February 3, 2020.
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Plaintiffs filed a notice of appeal. Thereafter, on March 11, 2020, the
judge filed a written amplification of her decision pursuant to Rule 2:5-1(b). In
her amplification letter, the judge focused on the "reasons why [she] found that
plaintiff[s] failed to provide compelling facts that would warrant an award on
quantum meruit grounds." Citing our Supreme Court's decisions in Weichert
Co. Realtors, Ltd. v. Ryan, 128 N.J. 427 (1992), McCann, 65 N.J. at 301, and
Coldwell Banker, 368 N.J. Super. at 382, the judge found "upon a review of the
facts, including the exchange of communications between the parties, . . . that
plaintiff was not the efficient and procuring cause of the sale." Although the
judge acknowledged that Trugman brought defendants and the seller together,
the judge noted, "that is all that [Trugman] appears to have done." In contrast,
the judge emphasized the matter under review is distinguishable from Weichert
and Coldwell Banker where there was "substantial evidence that the plaintiffs
procured the sales."
On appeal, plaintiffs only challenge dismissal of their quantum meruit
count and raise the following arguments: (1) plaintiffs satisfied the elements
required to obtain quantum meruit relief as an equitable remedy; (2) the judge's
decision constitutes harmful error and produced an unjust result; (3) the judge's
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finding that Trugman was not the procuring efficient cause of the sale was
harmful error; and (4) the judge erred in not ordering discovery.
II.
We review the 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 review 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., 142 N.J. 520, 540 (1995).
"In applying that standard, a court properly grants summary judgment 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).
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Because the judge granted summary judgment to defendants, we must consider
the facts in a light most favorable to plaintiffs as the non-moving parties.
Further, in construing the meaning of a statute or the common law, "our
review is de novo." Nicholas, 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).
The relevant sections of the statute of frauds, N.J.S.A. 25:1-16, are as
follows:
b. Except as provided in subsection d. of this section,
a real estate broker who acts as agent or broker on
behalf of a principal for the transfer of an interest in
real estate . . . is entitled to a commission 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.
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d. A broker who acts pursuant to 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.
[N.J.S.A. 24:1-16.]
The statute of frauds must be strictly complied with. McCann, 65 N.J. at
309-10. See also Ellsworth Dobbs, Inc. v. Johnson, 50 N.J. 528, 552-53 (1967)
(stating that "lawmakers long ago amended the statute of frauds so as to deny
brokers the right to commission on a sale of real property unless their authority
from the owner to find a purchaser is given in writing"). Accordingly, under
section b of N.J.S.A. 24:1-16, the real estate broker (Trugman) must have the
"writing signed by the principal" (Siegel). Because the writing was not signed
by both parties, section b is not satisfied.
Based on the parties' submissions, the judge determined that no agreement
was established between the parties. One of the key elements necessary to an
agreement is the amount of the commission. Here, the judge rightfully
concluded the amount of the commission was never agreed to by the parties.
"The amount of compensation . . . is an essential term of any contract."
MDC Inv. Prop., L.L.C. v. Marando, 44 F. Supp. 2d 693, 698-99 (D.N.J. 1999);
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see also Weichert, 128 N.J. at 441 (where the Supreme Court held that the
defendant's "implied promise to pay a commission is unenforceable because of
the parties' failure to agree on the amount of the commission"). Because a
determination of whether the price was agreed to between the parties is a factual
determination, great deference must be given to the trial court's finding. Rova
Farms Resorts, Inc. v. Inv. Ins. Co. of Am., 65 N.J. 474, 501 (1974).
Plaintiffs argue that they satisfied the elements for acquiring quantum
merit relief. In support of their contention, plaintiffs cite the Supreme Court's
decision in Weichert, 128 N.J. at 427 and our decision in Coldwell Banker, 368 N.J. Super. at 382.
In Weichert, the plaintiff-broker informed the defendant-buyer about an
available property. 128 N.J. at 430. The plaintiff-broker presented the
defendant-buyer with a commission agreement, but the defendant-buyer did not
sign it. Id. at 431. Over the next few months, the parties continued to discuss
the commission agreement. Id. at 431-33. Before a commission agreement was
reached, the defendant-buyer closed on the property. Id. at 433. Thereafter, the
defendant-buyer refused to pay commission to the plaintiff-broker. Ibid. The
plaintiff-broker brought an action against the defendant-buyer for breach of
contract or alternatively quantum meruit. Id. at 434. In modifying our decision,
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the Court held there was no enforceable agreement between the parties, id. at
438-39, but the defendant-buyer could recover in quantum meruit, id. at 441.
In Coldwell Banker, the plaintiffs-brokers procured a lessee for the
defendant-lessor. 368 N.J. Super. at 384-85. During the negotiation of the lease
agreement, the plaintiffs-brokers and the defendant-lessor orally agreed to a
brokerage commission agreement, which the plaintiffs-brokers then codified in
a letter they faxed to the defendant-lessor. Id. at 385. However, by the time the
lease agreement was signed, there still was no signed brokerage commission
agreement between the parties. Id. at 386-87. We concluded there was an
unenforceable agreement between the parties as the faxed letter did not comply
with the statute of frauds, N.J.S.A. 25:1-16. Id. at 391. Nevertheless, we held
the plaintiffs-brokers were "entitled to pursue recovery on a quantum meruit
basis." Id. at 398.
In order to obtain relief on a quantum meruit basis, "a plaintiff must
establish: (1) the performance of services in good faith, (2) the acceptance of
the services by the person to whom they are rendered, (3) an expectation of
compensation therefor, and (4) the reasonable value of the services." Coldwell
Banker, 368 N.J. Super. at 401 (citations omitted). Trugman argues she
performed in good faith as she had prior dealings with Siegel. And, she provided
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him with helpful and necessary information about the Lake Terrace property so
he would be properly prepared to negotiate. Trugman also notes defendants
accepted her services, as evidenced by their communications regarding the Lake
Terrace property.
Furthermore, plaintiff asserts these communications also demonstrate that
there was an expectation of compensation. For example, plaintiff points to the
text message Siegel sent her which stated, "I will pay you [sic] fee directly?"
Moreover, Trugman contends the commission value she sought was
"reasonable." Consequently, Trugman argues that as a result of her efforts,
defendants were able to purchase the Lake Terrace property for a lower price,
and, plaintiffs are therefore entitled to equitable relief. We disagree.
As plaintiffs failed to comply with the statute of frauds, they are barred
from seeking equitable relief. See McCann, 65 N.J. at 310 ("a broker, who may
not recover commissions from a seller directly by reason of the statute of frauds,
may not accomplish the same result indirectly by a claim against the seller for
[quantum meruit]"). And, plaintiffs' reliance on Weichert and Coldwell Banker
is misguided as both cases are distinguishable from the matter under review.
In Weichert, our Court held a buyer liable to pay quantum meruit
compensation to a broker, where the two did not form an enforceable agreement;
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but, the version of the statute of frauds at the time required a writing only when
the seller was responsible for the commission, and did not bar oral agreements
between a buyer and a broker. 128 N.J. at 441 (referencing N.J.S.A. 25:1-9,
repealed by L. 1995, c. 360, § 9, eff. Jan. 5, 1996). Thus, an award of quantum
meruit in that case did not violate the policy of the statute of frauds then in
effect. However, the 1996 revision of the statute of frauds requires a signed
writing when a broker seeks a commission from a "principal" as distinct from
only a seller, expanding the reach of the statute to commissions sought from
buyers, sellers, or owners. L. 1995, c. 360, § 7.
In Coldwell Banker, our Court remanded for a determination of
compensation on a quantum meruit basis, where the plaintiffs had served as a
broker in procuring a tenant for a commercial lease; a draft of the lease prepared
by the landlord and tenant explicitly stated the plaintiffs had negotiated the
transaction and the landlord would be responsible for broker's fees; there was
substantial evidence the plaintiffs had provided valuable services that had
enriched the defendant; it was undisputed that the defendant accepted those
services; and there was evidence the parties all expected the plaintiffs would be
compensated in some amount for their services. 368 N.J. Super. at 385-88.
However, unlike the present matter, the plaintiffs in Coldwell Banker attempted
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to comply with N.J.S.A. 25:1-16 by forwarding a written confirmation of an oral
agreement, though they failed to comply with the requirements of subsection (e)
mandating service in person or via registered or certified mail. Id. at 391.
In any event, the statute of frauds bars plaintiffs' claim for finder services.
The statute applies to commission claims by a "real estate broker," who is
defined as "a licensed real estate broker or other person performing the services
of a real estate agent or broker." N.J.S.A. 25:1-16(b), (a). The Court has held
that even the limited activity of introducing a potential buyer and seller of real
estate, without participating in the parties' negotiation of price and terms—in
other words, the work of a "finder"—is the activity of a real estate broker.
Corson v. Keane, 4 N.J. 221, 227-28 (1950) (denying claim for finder's fee by
an unlicensed real estate broker). See also, Sammarone v. Bovino, 395 N.J.
Super. 132, 140 (App. Div. 2007) (stating that the act of introducing two parties
to explore interest in purchasing a tract of land is an action "traditionally deemed
the activit[y] of a broker").
Here, the judge acknowledged "the apparent harshness of the outcome,"
but found "the facts here [did not] compel[] an award on quantum meruit."
Moreover, the judge pointed out that the parties' prior dealings did not "vitiate
the purpose and requirements of the statute [of frauds]." Indeed, the judge aptly
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noted "[p]laintiff's failure to comply with the [s]tatute of [f]rauds created the
very situation the [s]tatute is designed to avoid; fraud, incompetence,
misinterpretation, sharp or unconscionable practices by real estate brokers."
Casting a claim for a broker's commission as a claim in quantum meruit is an
"attempt to evade the statute which [will] not be countenanced." McCann, 65 N.J. at 309.
After a thorough review of the record, we are satisfied that there was
sufficient credible evidence to support the judge's determination that there was
no meeting of the minds, no signed writing between the parties, and the
commission amount was never agreed to, leaving an essential term open. We
are equally satisfied that plaintiffs' failure to comply with the strict requirements
of the statute of frauds precludes recovery on a quantum meruit theory.
III.
We next consider the principles of contract law that address when a broker
is entitled to a commission. Specifically, in this instance, the judge rejected
plaintiffs' claims after determining that Trugman was not the efficient procuring
cause of the sale. The efficient procuring cause doctrine, sometimes referred to
as the efficient "producing" cause doctrine, is a tool case law developed to
ensure equitable results when a contract does not otherwise expressly specify
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the conditions precedent to earning a commission. See DeBenedictis v.
Gerechoff, 134 N.J. Super. 238, 242 (App. Div. 1975) and First N.J. Corp. v.
Van Syckle, 37 N.J. Super. 469, 472 (App. Div. 1955) (articulating the rule that
a broker is the efficient procuring cause of a transaction if he or she "caused a
person to negotiate with defendant and that person purchased the stock and paid
the price without a substantial break in the ensuing negotiations"). The basic
application of the doctrine is
in the absence of some qualifying or oppugnant
expression in the contract of employment, a broker who
is duly engaged earns his commission when he procures
for the owner a purchaser ready, able, and willing to
comply with the terms specified in the authority thus
conferred, or with other or different terms which,
however, are satisfactory to the owner.
[George H. Beckmann, Inc. v. (Zinke's) Rainbow's End,
Inc., 40 N.J. Super. 193, 196 (App. Div. 1956) (citing
Marschalk v. Weber, 11 N.J. Super. 16, 21 (App. Div.
1950)).]
Accordingly, our courts have applied the doctrine "to permit a broker to recover
a commission upon a sale made [even] after [the] expiration of an exclusive . . .
brokerage contract." Leadership Real Estate, Inc. v. Harper, 271 N.J. Super.
152, 171 (Law Div. 1993).
When the doctrine applies, a "broker must prove that he or she caused
[the] customer to negotiate with the seller and that the transaction is later
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consummated through direct negotiations between the seller and the broker's
customer, even though the seller accepts terms different from those expressed in
the listing agreement . . . ." Ibid. The mere act of introducing a buyer to the
property is not enough to constitute an efficient procuring cause of the sale. See
C.B. Snyder Realty, Inc. v. BMW of N. Am., Inc., 233 N.J. Super. 65, 81 (App.
Div. 1989) ("[I]t is clear that plaintiff introduced [the defendant] to the property.
However, that does not suffice to establish plaintiff's claim to a commission.").
Here, as the judge found, plaintiffs did not satisfy the requirements of the
efficient procuring cause doctrine given the rate and amount of commission were
indeterminate and never reduced to a writing signed by both parties. The judge
was correct in her analysis, and we discern no basis to disturb her decision.
In light of our decision on the legal issues discussed, we need not address
plaintiffs' argument that the judge should have sua sponte ordered discovery as
to Siegel's credibility and whether plaintiffs were the efficient procuring c ause
of the sale.
Affirmed.
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