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State v. Arnold Constable Corp.

Decided: January 13, 1976.

STATE OF NEW JERSEY, BY GEORGE F. KUGLER, JR., ATTORNEY GENERAL OF NEW JERSEY, AND BY FRANK M. PAPALE, JR., DIRECTOR OF THE DIVISION OF PURCHASE AND PROPERTY OF THE DEPARTMENT OF THE TREASURY OF THE STATE OF NEW JERSEY, AND BY WILLIAM E. MARFUGGI, TREASURER OF THE STATE OF NEW JERSEY, PLAINTIFFS-APPELLANTS,
v.
ARNOLD CONSTABLE CORPORATION, A CORPORATION OF THE STATE OF DELAWARE, PITMAN REALTY, INC., A CORPORATION OF THE STATE OF NEW JERSEY, REALTY ASSOCIATES COMPANY, A PARTNERSHIP CONSISTING OF WILLIAM B. COLSEY, III, AND BRUCE A. MAHON, BRUCE A. MAHON, INDIVIDUALLY, AND AS A PARTNER OF REALTY ASSOCIATES COMPANY, WILLIAM B. COLSEY, III, INDIVIDUALLY, AND AS A PARTNER OF REALTY ASSOCIATES COMPANY, AND PRUDENTIAL INSURANCE COMPANY OF AMERICA, DEFENDANTS-RESPONDENTS



Matthews, Lora and Morgan.

Per Curiam

[138 NJSuper Page 553] The State instituted this action against defendants, alleging that defendants Arnold Constable and Pitman Realty, lessors, had breached a warranty contained in paragraph 19 of their lease with the State for premises at 209-219 East State Street, Trenton. The State alleged that Arnold Constable and Pitman Realty entered into an agreement with defendants Mahon, Colsey and Realty Associates which was contingent on the latters' success in leasing the premises and which required Constable and Pitman to pay them 10% of the State's rental payments if a lease were executed. The State claimed that this agreement and the payments made pursuant to it breached the state lease because

Mahon, Colsey and Realty Associates Company were not paid for services as bona fide brokers on behalf of Arnold Constable and Pitman Realty to negotiate the state lease. The State seeks the return of all amounts paid by Arnold Constable and Pitman Realty to Mahon, Colsey and Realty Associates and reformation of the lease to reduce the State's rental obligation.

The facts which are largely based on depositions, affidavits and exhibits provided to the trial judge on the motion for summary judgment are as follows: Arnold Constable has a leasehold interest in real property located at and commonly known as 209-219 East State Street, Trenton. The property is improved with a commercial building. It had leased a portion of the building to the State for office facilities in 1958 and it continued to lease the same portion of the building to the State under a lease executed in 1967.

Subsequent to the execution of the 1967 lease Arnold Constable made a business decision to phase out its retail business in Trenton and to convert the East State Street building to a better economic use. To that end it engaged the services of Alfred Weissman of the firm of Weissman-Winoker Real Estate, Inc., 501 Fifth Avenue, New York City. Weissman was engaged primarily to lease the property but Arnold Constable would apparently have been willing to sell its leasehold interest if a buyer became available. Weissman had also been engaged to rent portions of Arnold Constable's Manhasset and Hempstead stores. It was agreed with Weissman that he would receive a commission of 6% of the rental income over the term of the lease if he were to rent the Trenton property, and if he had to engage another broker to consummate a deal to lease the property, Weissman would receive a half commission of 3% and the retained broker would be paid a full 6% commission.

Subsequent to the agreement between Weissman and Arnold Constable, Weissman made continuous efforts to lease the building. He circularized other brokers offering them the opportunity to rent and receive a commission and

he contacted what he thought would be potential tenants such as the State, the telephone company and computer schools, among other potential users.

Sometime during early 1969 Merwin Bayer, the president of Arnold Constable, went to Trenton with Weissman to meet with the Director of the Division of Purchase and Property, Sullivan, to discuss a proposed lease with the State. During the meeting which took place in the director's office in the State House, Sullivan expressed some interest and indicated that there was a need for space. He brought State Supervisor Schumacher into the meeting and introduced him to Bayer and Weissman.

After the initial meeting of Bayer, Sullivan and Weissman, Bayer did not attend subsequent meetings in Trenton to discuss the lease proposal since Arnold Constable was relying on Weissman for this purpose. Weissman proceeded to work directly with not only officials in the Treasury Department responsible for leasing, but also with officials of the Division of Motor Vehicles, the Department of Institutions and Agencies and the Department of Insurance, all of which were looking for additional or new office space.

During the time that Weissman was representing Arnold Constable in attempting to interest the State in leasing that premises, the State was seriously considering a lease of the Rider College building on State Street in Trenton for about $4.25 or $4.35 a square foot, for the Department of Insurance. That department was also one of the agencies which was being considered for a possible move into the Arnold Constable building by Director Myers (Sullivan's successor) if the State were to lease that building.

Defendants Mahon and Colsey were two of the four owners of the Rider College building. Mahon met with Director Myers, State Supervisor Schumacher and Budget Director Wechsler regarding his proposal to lease the Rider building to the State at a suggested price of approximately $4.50 a square foot. Negotiations which approached agreement were terminated, however, when a newspaper printed a story

that Treasurer McCrane knew Mahon who was involved in the Rider College transaction.

On March 19, 1970 Director Myers sent a memorandum to Treasurer McCrane regarding the Arnold Constable premises. Myers said, in part:

Recent Legislation has now left us with two separate Departments -- the Department of Insurance and the Department of Banking. It has been decided to relocate the Department of Insurance to the Arnold Constable Building. We are considering relocating the Department of Banking to 36 West State Street.

The available space at Arnold Constable has been inspected by Commissioner Clifford, Deputy Commissioner Shumake, Assistant Commissioner Papps and myself, and it is found to be suitable for this operation. We are ...


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