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Kazmer-Standish Consultants Inc. v. Schoeffel Instrument Corp.

Decided: February 19, 1981.


On appeal from the Superior Court of New Jersey, Law Division, Bergen County.

Botter, King and McElroy. The opinion of the court was delivered by King, J.A.D.


[177 NJSuper Page 413] Plaintiff Kazmer-Standish Consultants, Inc. (Kazmer), a Cleveland, Ohio, company, styles itself as "management consultants on mergers and acquisitions." It brought an action in the Law Division against Schoeffel Instrument Corporation, a Westwood, New Jersey manufacturer of scientific instruments, and Kratos, Inc., a California conglomerate, to collect a $100,000 business broker's or finder's fee. Plaintiff alleged that its

services were highly instrumental in bringing Schoeffel and Kratos together for a December 1977 sale of Schoeffel's entire assets to Kratos for $2.7 million. This acquisition of assets by Kratos included the transfer of real estate, the Schoeffel plant in Westwood. At the closing the real property was transferred to Kratos by a full warranty deed, reciting a consideration of $375,000, about 14% of the entire transaction.

Defendants moved for summary judgment on the ground that plaintiff was not a New Jersey real estate broker and thus was barred from recovering any commission on a transaction involving, to any extent, the sale of real estate in this State. The Law Division judge agreed with defendants and granted the motion. Our Real Estate Broker's Act states, in pertinent part:

No person shall engage either directly or indirectly in the business of a real estate broker or salesman, temporarily or otherwise, and no person shall advertise or represent himself as being authorized to act as a real estate broker or salesman, or to engage in any of the activities described in section 45:15-3 of the Revised Statutes, without being licensed so to do as hereinafter provided. [ N.J.S.A. 45:15-1]

Any single act, transaction or sale shall constitute engaging in business within the meaning of this article. [ N.J.S.A. 45:15-2]

No person, firm, partnership, association or corporation shall bring or maintain any action in the courts of this State for the collection of compensation for the performance of any of the acts mentioned in this article without alleging and proving that he was a duly licensed real estate broker at the time the alleged cause of action arose. [ N.J.S.A. 45:15-3]

An unbroken line of New Jersey cases, beginning with Kenney v. Paterson Milk & Cream Co. , 110 N.J.L. 141 (E. & A. 1933) (9-4 decision), supports the Law Division judge's ruling that plaintiff is barred from recovery as a matter of law by these provisions of the Real Estate Broker's Act. In Kenney plaintiff provided defendant with a ready, willing and able buyer for defendant's dairy business pursuant to a written brokerage agreement. The broker agreement listed all the dairy's assets, including the real property, improvements and fixtures thereon. The value of the real estate was admittedly about one-third of the sale price. Our then highest court held that the transaction was not divisible or severable and the

unlicensed plaintiff could recover no commissions, even on the portion of the transaction unrelated to real estate. The holding in Kenney has been followed consistently over the years with no signs of erosion. See Kaplan v. Meranus , 136 N.J.L. 425 (Sup.Ct.1948), aff'd 1 N.J. 219 (1948); Corson v. Keane , 4 N.J. 221 (1950); Cohen v. Scola , 13 N.J. Super. 472 (App.Div.1951); Tanenbaum v. Sylvan Builders, Inc. , 50 N.J. Super. 342 (App.Div.1958), aff'd 29 N.J. 63 (1959); Kaufman, Inc. v. American Machine & Foundry Co. , 102 N.J. Super. 1 (App.Div.1968), aff'd 54 N.J. 239 (1969).

Kenney has spawned the nationwide majority rule which "has consistently held that if any real estate at all is involved in the transaction, the business broker must be licensed under the appropriate real estate licensing code" before any commission may be collected. Green, "The Business Broker and the Oklahoma Real Estate Licensing Code," 12 Tulsa L.Rev. 398, 404 (1976). The minority, or New York rule, "holds that where the central or dominant feature of a transaction is the sale of a business as a going concern rather than the transfer of real estate, the business broker need not be licensed as a real estate broker" to collect a commission. Id. at 399. See Weingast v. Rialto Pastry Shop, Inc. , 243 N.Y. 113, 152 N.E. 693 (Ct.App.1926). The Kenney court was aware of the Weingast decision but explicitly rejected its rationale. 110 N.J.L. at 144-146.

The competing merits of the so-called New Jersey and New York rules are ably analyzed in the Tulsa Law Review article, and the respective authorities are exhaustively collected in Annotation, "Necessity of Having Real Estate Broker's License in Order to Recover Commission As Affected by Fact That Business Sold Includes Real Property," 82 A.L.R. 3d 1139 (1978). See, also, Thomas v. Jarvis , 213 Kan. 671, 518 P. 2d 532, 82 A.L.R. 3d 1130 (Sup.Ct.1974) (adopting New Jersey rule). As the Tulsa Law Review article points up, the precise wording of a ...

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