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New Jersey State Bar Association v. New Jersey Association of Realtor Boards

June 28, 1983

NEW JERSEY STATE BAR ASSOCIATION, A CORPORATION OF THE STATE OF NEW JERSEY, PLAINTIFF,
v.
NEW JERSEY ASSOCIATION OF REALTOR BOARDS, A CORPORATION OF THE STATE OF NEW JERSEY; LEWIS D. BROUNELL, T/A BROUNELL AND KRAMER; HARRY A. WILSON, JR.; VINCENT CAPOBIANCO; R. HERBERT CONNOLLY, T/A RAYMOND CONNOLLY CO.; OLIVER W. HOMER; L.D. EDWARDS AGENCY, INC., A CORPORATION OF THE STATE OF NEW JERSEY; WILLIAM W. SUMMERILL, JR., T/A THE SUMMERILL REALTY CO.; NANCY F. REYNOLDS, T/A NANCY F. REYNOLDS ASSOCIATES AND JOHN A. ROGGE, T/A WALKER-ROGGE CO., DEFENDANTS



For affirmance as modified -- Chief Justice Wilentz, and Justices Clifford, Handler and Pollock. Dissenting -- Justice Schreiber. Schreiber, J., dissenting.

DECISION AND ORDER

Modifying and Approving Consent Judgment

These proceedings are before the Court upon the joint application of the parties, New Jersey State Bar Association and New Jersey Association of Realtor Boards, who seek approval of the Final Consent Judgment entered in the Superior Court, Chancery Division, by Justice Mark A. Sullivan, retired and serving

by temporary assignment. The consent judgment was entered on May 5, 1982, pursuant to a decision issued by Justice Sullivan on April 30, 1982. 186 N.J. Super. 391. We consider this application under our constitutional powers governing the practice of law. N.J. Const. (1947) Art. VI, ยง II, par. 3; see R. 1:21 (regulation of practice of law).

The consent judgment under review, included as an appendix hereto, provides generally that licensed real estate brokers and salespersons shall be permitted to prepare certain types of residential sales and lease agreements if these agreements contain specified provisions. Further, the consent judgment contains prohibitions against such real estate brokers or salespersons engaging in the drafting, preparation or completion of any other types of residential real estate sales or lease agreements. Additional provisions of the consent judgment protect the right of a party to such authorized real estate contracts or leases to obtain attorney review of the proposed agreement and prohibit any waiver, disclaimer, relinquishment or abridgement of that right. The parties have agreed by this consent judgment that its terms and conditions shall become effective only upon the approval of this Court.

The Final Consent Judgment that we are asked to approve is the result of prolonged and difficult proceedings. The background and history are recapitulated in Justice Sullivan's opinion. 186 N.J. Super. at 392-94. This lawsuit followed upon the decision of this Court in State v. Bander, 56 N.J. 196 (1970), which left unresolved the question of whether the particular actions of a real estate broker constituted the unauthorized practice of law contrary to N.J.S.A. 2A:170-78. In this action the plaintiff initially sought a judicial order declaring that various activities of the licensed real estate brokers and salespersons constituted the unauthorized practice of law. Following joinder of issues and the commencement of trial, the parties embarked upon extensive and constructive negotiations that led

to an adjustment of their dispute. Since consensual resolution of the controversy would necessarily implicate the question of whether particular conduct would be considered by this Court to constitute the unauthorized practice of law, it was clear that Court approval would be required. Recognizing this fact, Justice Sullivan discontinued the trial and scheduled public hearings on the proposed settlement with notice to class members pursuant to R. 4:32-4, and to the bar and general public. The public hearings combined with the trial testimony and evidence served to develop an adequate record for purposes of the discharge of this Court's regulatory responsibility over the practice of law and its rule-making authority pursuant to the Constitution. It is this responsibility and authority that are invoked by the application to approve the consent judgment.

The record below supports the conclusion reached by Justice Sullivan that the settlement, as modified herein, will protect the public interest and can be approved by this Court. Justice Sullivan observed in his opinion that

[t]he basic question is how is the public interest best served. In the sale or lease of residential real property the functions of realtors and attorneys overlap. Many non-lawyers, in connection with their business activities, give advice and do things which have legal consequences. However, this does not necessarily mean that they are engaged in the unlawful practice of law. In the instant case defendants assert without contradiction that "[n]o State in the Country has prohibited Brokers from completing form contracts in connection with residential property sales." Justice Jacobs, in N.J. Bar Ass'n v. North N.J. Mtg. Assocs., 32 N.J. 430 (1960), noted that:

It is, of course, clear that the practice of law is not confined to litigation but extends to legal activities in many non-litigious fields which entail specialized knowledge and ability. [Citing cases]. Oftentimes the line between such activities and permissible business and professional activities by non-lawyers is indistinct. See Auerbacher v. Wood, 139 N.J. Eq. 599 (Ch.1947), affirmed 142 N.J. Eq. 484 (E. & A.1948). In the Auerbacher case Justice Heher noted that what constitutes the practice of law does not lend itself "to precise and all-inclusive definition" and that some fields may "in some areas" properly overlap the law. [at 437]

A realtor's function in selling (or leasing) residential real property falls into this area. The evidence at trial showed that, in New Jersey, most contracts for

the sale of residential property are originally prepared by the realtors who negotiated the sales. The proofs also showed a widespread practice among realtors of including an attorney review option clause in such contracts. The proposed settlement accommodates the interests of realtors and attorneys by allowing the realtor to consummate the contract phase of the transaction, with attorneys handling the actual transfer of title. Most importantly, however, it serves to protect the public interest by making the contract subject to prompt attorney review if either buyer or seller so desires. [186 N.J. Super. at 396].

We conclude that approval of this settlement is appropriate. The activities to be undertaken by realtors pursuant to the settlement agreement will not transgress unduly upon the practice of law. To the extent that there is an inevitable or unavoidable overlap between the realty and legal professions, the public's interest is safeguarded through the settlement's attorney review provisions and the Court's continuing supervisory control. We find significance in the fact that the settlement implicates and addresses concerns that go beyond the direct and immediate interests of the primary professional associations, who are parties to the litigation and have consented to the judgment of settlement. In addition to all interested members of the class having been advised of the proposed settlement, others have been permitted to participate in its adoption. Both the Attorney General and the Public Advocate, whose sole concerns in this matter are the protection of the public, have recognized that the public welfare can be reasonably accommodated and safeguarded through an agreement settling the matters in dispute (although each would have preferred certain additional modifications or changes). We are satisfied that questions of the interpretation, application, and general adherence to or enforcement of the settlement approved by this judgment that may arise and affect the public interest will be dealt with by the courts in the most appropriate manner under the given circumstances. This includes, of course, the further possible modification of the present accord pursuant to the exercise of the Court's constitutional rule-making authority over the practice of law.

One additional aspect of the settlement requires our attention. During the course of the public review process of the proposed Final Consent Judgment, we received comments relating to the conformance of certain aspects of the settlement to the requirements of the Plain Language Law, N.J.S.A. 56:12-1 to -13. This was a particular concern of the Public Advocate and the State Bar Association's Committee on Plain Language. It was the intent of the parties and the court to adhere to the standards of this enactment, which calls for the expression of consumer contracts in a "simple, clear, understandable and easily readable way." N.J.S.A. 56:12-2. Such compliance in this matter will give further assurance that the interests of the public will be properly served through the effectuation of the settlement. Accordingly, Paragraphs 1 and 2 of the Final Consent Judgment are modified as follows:

1. Real estate brokers and salespersons licensed by the New Jersey Real Estate Commission shall be permitted to prepare contracts for the sale of residential real estate containing one-to-four dwelling units and for the sale of vacant one-family lots in transactions in which they have a commission or fee interest, PROVIDED that every such contract shall contain conspicuously at the top of the first page the following language:

THIS IS A LEGALLY BINDING CONTRACT THAT WILL BECOME FINAL WITHIN THREE BUSINESS DAYS. DURING THIS PERIOD YOU MAY CHOOSE TO CONSULT AN ATTORNEY WHO CAN REVIEW AND CANCEL THE CONTRACT. SEE SECTION ON ATTORNEY REVIEW FOR DETAILS.

and shall also contain the following language within the text of every such contract:

ATTORNEY REVIEW:

1. Study by Attorney

The Buyer or the Seller may choose to have an attorney study this contract. If an attorney is consulted, the attorney must complete his or her review of the contract within a three-day period. This contract will be legally binding at the end of this

three-day period unless an attorney for the Buyer or the Seller reviews and disapproves of the contract.

2. Counting the Time

You count the three days from the date of delivery of the signed contract to the Buyer and the Seller. You do not count Saturdays, Sundays or legal holidays. The Buyer and the Seller may agree in writing to extend the three-day period for attorney review.

3. Notice of Disapproval

If an attorney for the Buyer or the Seller reviews and disapproves of this contract, the attorney must notify the Broker(s) and the other party named in this contract within the three-day period. Otherwise this contract will be legally binding as written. The attorney must send the notice of disapproval to the Broker(s) by certified mail, by telegram, or by delivering it personally. The telegram or certified letter will be effective upon sending. The personal delivery will be effective upon delivery to the ...


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