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

Decided: May 17, 1982.

KAZMER-STANDISH CONSULTANTS, INC., PLAINTIFF-APPELLANT,
v.
SCHOEFFEL INSTRUMENTS CORPORATION AND KRATOS, INC., DEFENDANTS-RESPONDENTS. J. PAUL STENDER, FERDINAND G. STENDER, JR. AND TEMPLE LUMBER COMPANY, INC., PLAINTIFFS, V. PERMA CLAD INDUSTRIES, INC., AND EUGENE SARAFIN, DEFENDANTS. VICTOR HENRY ASSOCIATES, INC., A NEW JERSEY CORPORATION, PLAINTIFF-RESPONDENT, V. PERMA-CLAD PRODUCTS, A DIVISION OF TEMPLE LUMBER COMPANY, INC., TEMPLE LUMBER COMPANY, INC., A NEW JERSEY CORPORATION, J. PAUL STENDER, DEFENDANTS, AND EUGENE E. SARAFIN, RICHARD H. STIPE, RAYMOND W. MILLER AND PERMA-CLAD INDUSTRIES, INC., A NEW JERSEY CORPORATION, DEFENDANTS-APPELLANTS



On certification to the Superior Court, Appellate Division, whose opinion is reported at 177 N.J. Super. 412 (1981) (A-32, Kazmer-Standish, Inc. v. Schoeffel Instruments Corporation). On certification to the Superior Court, Appellate Division (A-39, J. Paul Stender v. Perma Clad Industries, Inc.)

For reversal and remandment in Kazmer-Standish and affirmance in Perma-Clad -- Justices Pashman, Clifford, Schreiber, Handler, Pollock and O'Hern. Opposed -- None. The opinion of the Court was delivered by Pollock, J.

Pollock

The issue in these cases is whether a broker who does not have a license to sell real estate may recover any commission from the sale of an ongoing business that includes an interest in real estate. In Kazmer-Standish Consultants, Inc. v. Schoeffel Instrument Corp., 177 N.J. Super. 412 (1981), certif. granted, 87 N.J. 361 (1981), one part of the Appellate Division affirmed the summary judgment denying the broker a commission. In an unreported decision in Stender v. Perma-Clad Industries, Inc., another part of the Appellate Division affirmed a judgment awarding a commission to the broker on the part of the sale attributable to personalty. Originally we denied Perma-Clad's petition for certification, 87 N.J. 343 (1981), but after granting certification in Kazmer-Standish, we rescinded the denial and granted certification. 87 N.J. 361 (1981).

We hold that a business broker is not included within the definition of "real estate broker" or "real estate salesman" under the real estate brokers' act. N.J.S.A. 45:15-3. We hold further that a broker in the sale of an ongoing business may recover a commission for the part of the sale attributable to personalty. Accordingly, we reverse the summary judgment for defendants in Kazmer-Standish and affirm the judgment for the plaintiff in Perma-Clad.

In the first case, Kazmer-Standish is an Ohio business broker not licensed to sell real estate in New Jersey. Schoeffel was a

New Jersey corporation engaged in the manufacture and sale of scientific instruments in Westwood, New Jersey. Kratos is a California corporation that purchased the assets and real estate of Schoeffel in 1977 for $2.7 million. Although the sales agreement did not separately value the realty, the deed stated that the consideration was $375,000.

Kazmer-Standish alleged it introduced Kratos to Schoeffel and brought suit to collect a $100,000 commission on the sale. In their motion for summary judgment, defendants claimed that the real estate brokers act, N.J.S.A. 45:15-1 to -29.5, bars recovery of a commission from the sale of real estate unless the person seeking the commission was a licensed real estate broker. N.J.S.A. 45:15-3. Relying on the statute, the trial court granted summary judgment for defendants.

In the second case, Victor Henry Associates, Inc. (VHA), a business broker not licensed to sell real estate in New Jersey, entered into a written agreement with Perma-Clad Products, a division of Temple Lumber Co., Inc., to act as the exclusive sales agent for the sale of the assets of Perma-Clad. The agreement, signed in September 1975, listed the business for $460,000 and provided for a 10% commission for VHA, but did not mention any real estate. In February 1976, the original agreement was amended by a letter agreement that valued the business at $305,709 and the real estate at $260,000. VHA further prepared a business analysis abstract that listed and assigned separate values to both the business and real estate assets.

Although VHA put potential buyers in touch with Perma-Clad's owners, the sellers and buyers negotiated independently for the sale of Perma-Clad. They circumvented VHA and reached an agreement for the sale of the business and the lease of the real estate with an option to purchase. The buyers urged the sellers to abrogate their agreement with VHA. Ultimately the buyers, incorporated as Perma-Clad Industries, Inc., agreed to indemnify sellers for any commission due VHA in return for a reduction in the purchase price.

The parties never informed VHA of the sale. When VHA learned of the sale from another client, it sued to recover a $24,300 commission (10% of the $243,000 purchase price for the business) and punitive damages for malicious interference with its contractual rights. At the close of the case, the trial court directed a verdict for VHA for the $24,300 commission and allowed the punitive damage issue to go to the jury, which rendered a verdict of $2,500 in favor of plaintiff.

Here, the question is whether business brokers should be treated like real estate brokers under the real estate brokers' act. The purpose of that act is to protect consumers by excluding "undesirable, unscrupulous and dishonest persons . . . from the real estate business." Statement to Assembly Bill 143 (1921). The act defines "real estate broker" to include any "person, firm or corporation who . . . assists or directs in . . . the negotiation or closing of any transaction which does or is contemplated to result in the sale . . . of any real estate . . . ." N.J.S.A. 45:15-3. Unless licensed, brokers may not bring an action in the courts to recover a real estate commission. Id. Other sections of the act are ...


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