Before Judges Havey, Newman and Fall. On appeal from the Superior Court of New Jersey, Law Division, Essex County, L-10574-01.
The opinion of the court was delivered by: Newman, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
This appeal concerns a real estate broker's commission on a lease of commercial property. The trial court entered a judgment of $630,000 in favor of plaintiffs, the real estate brokers. We reverse, concluding that plaintiffs failed to comply with the statute of frauds, N.J.S.A. 25:1-16, to secure an enforceable agreement to pay a real estate commission and remand for plaintiffs to pursue recovery on a quantum meruit basis.
The relevant facts may be summarized as follows. Adam Glickman was a commercial real estate broker of more than twenty years experience and was with plaintiff Coldwell Banker Commercial/Feist & Feist Realty Corp. Jay Cadigan, manager for Manheim Auctions, told Glickman that Manheim was seeking another location for the business. Manheim was also known as ADT Automotive. Manheim required a location near the ports, with access to the New Jersey Turnpike, and ninety or a hundred acres to park thousands of cars.
Glickman called his long-time friend and fellow broker, Jack Kennedy of plaintiff Resource Realty of Central Jersey, because Kennedy had more experience with industrial land. Cadigan told Glickman and Kennedy that he was interested in a particular property that had just been sold at auction. Cadigan told Glickman the name of the broker. Glickman learned that the property had been purchased by defendant Blancke, and that the leasing agent was John Westerhold. Westerhold and Mickey Palin owned the property under the name Blancke P.W., L.L.C. which stood for"Palin/Westerhold." Either Glickman or Kennedy called Westerhold and arranged for Cadigan to tour the property in May 2001.
Over the next several weeks, the brokers and Cadigan met again twice with Westerhold to discuss possible engineering and maintenance aspects of the property. After the third meeting, in"late June," Glickman said that he told Westerhold, as the leasing agent for defendant, that"the real estate brokerage commission for the two firms is to be a total of five percent" and that they"expect to be paid on any lease extensions and renewals, et cetera." According to Glickman, Westerhold"said he understood and he was in agreement." Immediately afterwards, Glickman sent Kennedy at Resource Realty a letter by facsimile transmission (fax) and"hard copy" stating that the two firms would split the commission equally. A"[d]ay or two or three" later, on June 26, 2001, Glickman sent Westerhold the following letter:
Thanks for your time yesterday so that Jack Kennedy and I could introduce you to Brad Burke and Charles McClung of Manheim Auctions at the above referenced property.
As you and I agreed to on the phone today, should Manheim Auction lease the building and/or the land, COLDWELL BANKER COMMERCIAL FEIST & FEIST REALTY CORP. shall be entitled to a Real Estate Brokerage Commission of five (5%) percent of the gross aggregate rental. This shall apply to any renewals, extensions, revisions, options or taking of additional space as well as leasing or purchasing other property from Palin Enterprises. In the event of a sale, the commission due is to be five (5%) percent of the sales price.
In his deposition, Glickman stated that he sent this letter by"[h]ard copy and fax." Westerhold admitted that he received this letter, and that he did not respond in writing.
On July 19, 2001, Glickman sent the following letter to Westerhold:
Jay Cadigan of Manheim Auto Sales called me this morning to update me.
As we both know, there have been a number of face to face meetings with executives of Manheim as well as the parent company, CoX Communications. We have been coordinating this matter since May 30, 2001 with various parties.
There have been phone conversations between the prospective tenant and the Brokers (Resource Realty of NJ and COLDWELL BANKER COMMERCIAL FEIST & FEIST REALTY CORP.) as well as direct conversations with you. As we agreed on the phone this morning, the ownership will not sign a lease before a Brokerage Commission Agreement is signed with COLDWELL BANKER COMMERCIAL FEIST & FEIST REALTY CORP. and Resource Realty of NJ. Of course, the Brokers will be given copies of any executed lease.
The bottom of the letter had an"Agreed to and Accepted" signature line. Glickman never received an executed response.
Westerhold testified in a deposition that he repeatedly told"the brokers" in response that Blancke would not agree to any commission arrangement"until we knew what the terms of the transaction were going to be and who the entity was and what the financial statements of the tenant were." He said it was the company's practice not to enter into a commission agreement "until a lease is done," because until the lease was"signed" they did not know its terms or the financial condition of the lessee, which he considered"material information needed to enter into a commission agreement."
In "late July" Westerhold gave the brokers an original draft of the lease. The lease stated:
The Landlord and Tenant mutually represent to each other that Coldwell Banker Commercial/Feist Realty Corp[.] and Resource Realty of New Jersey, negotiated and consummated the within transaction and that neither party dealt with any other broker in connection with the within Lease, it being understood and agreed that the Landlord shall be responsible, at its sole cost and expense, to pay the real estate brokerage in connection with this Lease transaction. Landlord agrees to indemnify, defend and save harmless Tenant in connection with the claims of any real estate brokers claiming commissions in connection with the within transaction and claiming authority from the Landlord. Tenant agrees to indemnify, defend and save harmless Landlord in connection with claims of any real estate brokers claiming commissions in connection with the within transaction and claiming authority from the Tenant.
Glickman testified that when he received the draft he thought "okay, there's time to... get the brokerage agreement" because "[t]he deal still has a ways to go" and the parties still were "not together on the numbers." Glickman and Kennedy said that the brokers played no role in negotiating the lease and structuring the business aspects. He said they were"told to stay away."
When asked why he never sent a commission agreement after speaking to Westerhold in June, Glickman replied,"I was lax."
Glickman learned that the lease was executed on October 1, 2001. Several days later, Glickman and Kennedy met with Palin and Westerhold. Palin"did not want to talk about the real estate brokerage commission." A second and third meeting followed shortly thereafter, and Glickman brought a commission agreement to these meetings. It is unclear whether the specific terms of the agreement were discussed. Palin offered a commission of $300,000"over a period of time," which Glickman rejected.
On October 9, 2001, Glickman and Kennedy sent by hand delivery the following letter to Palin and Westerhold:
We are glad that we were able to assist you in pulling together a long term, net lease with subject tenant on your property in Linden.
At John's recommendation, we deferred submitting our real estate brokerage agreement. We did not object to that approach, based upon the assurance that as brokers we would receive a full real estate brokerage commission.
We were comforted by several events -- the naming of our respective firms as the real estate brokers of record in the lease (article 41, page 37) and the five percent (5%) letter sent by Adam Glickman following a discussion about commission dated June 26, 2001.
We are submitting for your review and consideration a commission agreement, covering those terms and conditions ordinarily used in such transactions, which would have been resolved prior to lease execution, had we been afforded an opportunity to do so. We feel that this should be a baseline for our agreement, protecting our position.
Notably, the lease is for an initial term of twelve (12) years with a base, net contractual value of: $12,600,000.00
The lease includes a provision wherein the rentals from years five (5) through twelve (12) will be increased annually by the consumer price index (CPI) which can not be calculated at this time but if it amounts to two and one half percent (2 ½%) per year it adds over one million dollars to the lease value.
The ten (10) year renewal starting out in the year 2013 could provide another thirteen (13) million dollars to the value - i.e. an agreement in the twenty-five (25) million dollar range (all projections on the conservative side).
Naturally, we are as anxious as you are to reach satisfactory resolution of this matter. Thank you for your ...