For reversal -- Chief Justice Hughes and Justices Mountain, Sullivan, Pashman, Clifford, Schreiber and Handler. For affirmance -- None. The opinion of the court was delivered by Schreiber, J. Sullivan and Handler, J.J., concurring in the result.
[73 NJ Page 594] Rothman Realty Corp., a licensed real estate broker, sued the contract purchasers of a home, Barton and Debra Bereck, husband and wife, to recover damages
due to loss of a real estate commission when the buyers refused to consummate the transaction. The trial court, sitting without a jury, entered a judgment for the defendants. The Appellate Division reversed and remanded for the entry of judgment in the amount of $5400 (the amount of the lost commission) plus interest. 140 N.J. Super. 72 (1976). We granted the defendants' petition for certification. 71 N.J. 519 (1976).
In December 1971, the defendants sought the assistance of the plaintiff realtor in locating a suitable home. The plaintiff's efforts were successful and on February 21, 1972, Barton and Debra Bereck entered into an agreement prepared by the plaintiff broker. The contract which was on a form supplied by the plaintiff was with John Lombardo and Benedetta Lombardo, husband and wife, and covered the purchase of a home then under construction at 76 Alpine Court, Demarest, New Jersey. The contract recited that the sellers "recognize[d] Rothman Realty Corp. as the agent negotiating this agreement and [agreed] to pay said agent for services rendered for consummating this sale, an earned commission of four (4)% of the total sales price, same to be due and payable upon closing of title, to be paid out of the proceeds of the sale."
The defendants deposited $14,000 with the broker which was subsequently transferred to the sellers. These funds were to be credited against the purchase price of $135,000. The $121,000 balance was to be satisfied from two sources. The plaintiff broker was to arrange for the procurement of a 30 year purchase money mortgage of $60,000 and the defendants were to produce additional equity in the amount of $61,000. The plaintiff prepared a mortgage loan application, which required information concerning the defendants' financial status. It was obvious from the financial statement that the $61,000 had to be derived from liquidation of assets such as stock.
The plaintiff obtained the necessary mortgage commitment from the Fort Lee Savings and Loan Association on
April 15, 1972. The defendants, contemplating the acquisition of their new home, paid for and installed an alarm system, paid for certain carpentry and landscaping, and hired an interior decorator. The sellers, by letter dated April 10, 1972, attempted to fix May 1 as a closing date. The closing was postponed when the seller, John Lombardo, fell ill and had to be hospitalized. In a letter dated May 2, 1972, the attorney for the seller made time of the essence in setting May 16, 1972 as the closing date.
It was shortly thereafter that a financial calamity occurred. Mr. Bereck's primary asset consisted of approximately 5600 shares of common stock of Faraday Lab, a security which traded on the New York over-the-counter market. He had contemplated selling some of that stock to meet the balance of the cash requirements due at the closing. On Friday, May 5, 1972, news which had serious adverse consequences upon the Faraday Lab stock appeared in Barron's, a financial newspaper. On Monday, May 8, 1972, the stock abruptly dropped 16 points from 25 to 9 and the market value of Bereck's shares depreciated in value from $135,000 to $50,400, an amount substantially less than the $61,000 needed to close.
On May 16, 1972, Mr. Bereck and his attorney appeared at the time and place set for the closing. The buyers bared their financial plight, explaining that it was economically impossible to finalize the transaction. The parties agreed that, if the Berecks' financial status changed and if the transaction were reinstated, the deposit, less carrying charges of the sellers, would be credited toward the purchase price. The defendants' attorney wrote the sellers on May 22, 1972:
It was also discussed that if Mr. Bereck re-established a relationship with you, that after giving him credit for a deposit, you would also honor your agreement to pay a commission to Mr. Rothman as broker.
Mr. Bereck has advised me that he is truly sorry that he cannot close title to the premises because of financial circumstances and for reasons beyond his control which reached such a point that he could not continue with this transaction.
At the same time the defendants' attorney wrote to the ...