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Burke v. Hoffman

Decided: December 22, 1958.


On certified appeal to the Appellate Division from the Chancery Division of the Superior Court.

For reversal -- Chief Justice Weintraub, and Justices Heher, Wachenfeld, Burling, Jacobs, Francis and Proctor. For affirmance -- None. The opinion of the court was delivered by Heher, J.


The controversy here concerns rival claims to a fund of $2,450, a part of the purchase price of certain dwelling houses retained and held in escrow by the plaintiff attorneys at law awaiting a determination of the issues. The proceeding has been treated as one of interpleader, although the fund remains, by agreement of the parties at the title closing, in the possession of the plaintiffs until adjudication is had.

The claimants are the defendant appellant Hoffman and the defendant respondent Bergton; the former's claim is that the fund should be his for the reduction of mechanics' liens on the real property thus transferred at the time of its conveyance to him by the trustee in bankruptcy of Franmar Realty Co., Inc., and the latter's demand is founded on what is said to be an assignment by Franmar of sufficient of the purchase price of the given real property to satisfy brokerage commissions due Bergton for negotiating, on behalf of Franmar, the sales of the houses to Hoffman's grantees, of which more anon.

There was summary judgment awarding the fund to Bergton; and the case is here by our certification, sua sponte, of Hoffman's appeal to the Appellate Division.

On June 28, 1955 Franmar, then the owner of eight contiguous lots on Iris Court in Teaneck, New Jersey, made a written grant to Bergton of an "exclusive agency" for the sale of the several lots and the houses to be built thereon at a stipulated price, or such other price as might later be agreeable to Franmar, and agreed to pay him a commission of $350 "per house, payable at closing of title." Bergton

negotiated sales of seven of the eight houses; and the contracts of sale severally provided that the "owner/seller ["the undersigned owner" in some] of the herein described premises recognizes [the respondent] Bergton as the broker negotiating this agreement and agrees to pay and hereby assigns to him a commission as per agreement previously entered into by said parties."

In each case the vendee gave Franmar a deposit on the house when the contract of sale was delivered; and the balance of the purchase price was made payable upon the completion of the house. The Commonwealth Trust Company had issued commitments to take from the several purchasers mortgages to be guaranteed by the Veterans Administration.

Franmar proceeded with the construction work. On July 1, 1955 it mortgaged the lots to Jacob Moskow to secure $43,000; on December 28, 1955 it mortgaged the lots and other lands to Midland Park Lumber and Supply Co., Inc., to secure $26,966.73; and on December 29, 1955 it again mortgaged the lots to Underwriters Trust Co. to secure $72,000. Moskow and Midland subordinated their respective mortgages to Underwriters' mortgage. During November and December 1955 Midland filed in the office of the county clerk, as to each of the eight lots, a mechanic's notice of intention to perform labor and furnish materials; and on January 4, 1957 it filed a mechanic's lien claim as to each lot. Meantime, January 2, 1957, Underwriters brought suit to foreclose its mortgage; Moskow and Midland and the several purchasers of the eight lots were made parties defendant to the proceeding. On December 31, 1956 seven of the eight vendees recorded their contracts in the office of the county clerk. On January 21, 1957 Franmar was adjudicated a bankrupt in the United States District Court for the District of New Jersey, in an involuntary proceeding; and on June 14, 1957 Hoffman purchased from Franmar's trustee in bankruptcy his right, title and interest in all of the bankrupt's real property, including the eight lots made the subject of the several contracts of sale. The

trustee's conveyance of the lots in question to Hoffman was made subject to Underwriters' first mortgage; also Moskow's and Midland's mortgages; "eight separate mechanics' lien claims filed" by Midland, each recorded January 4, 1957 in the county clerk's office; taxes and assessments, if any; and subject also to the "rights of any purchasers * * * under contract to acquire each of the eight houses erected on the * * * eight lots * * * whether same were recorded or not recorded, or whether said contract purchasers are in or out of possession."

As indicated, Hoffman complied with demands made by the several vendees for a conveyance of their respective parcels. It is said that while Hoffman was obliged to convey to the contract purchasers, they were not under a duty to complete the purchase. Be that as it may, the closings were had under plaintiffs' professional supervision; and it was then, we are told, that Hoffman was first apprized of Bergton's claim for commissions. The plaintiffs insisted upon ...

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