October 20, 2008
HORROW SPORTS VENTURES, LLC, PLAINTIFF-APPELLANT,
ANSCHUTZ ENTERTAINMENT GROUP, INC.; RED BULL NEW YORK, INC. A/K/A NEW YORK RED BULLS AND F/K/A METROSTARS; ANSCHUTZ NJ SOCCER STADIUM, INC.; AND RED BULL STADIUM, LLC, DEFENDANTS-RESPONDENTS.
On appeal from Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-180-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued: September 10, 2008
Before Judges Parrillo and Lihotz.
This controversy requires review of the scope of the Real Estate Brokers and Salespersons Act (Act), N.J.S.A. 45:15-1 to -29.5. Plaintiff, Horrow Sports Ventures, LLC (HSV), a Delaware limited liability company, filed an action to enforce an alleged contractual obligation for payment of a "success premium" due when funds were secured to construct a soccer stadium. The Law Division granted summary judgment and dismissed plaintiff's complaint, relying on N.J.S.A. 45:15-3, which prohibits actions for commissions by unlicensed real estate brokers. Plaintiff maintains it "did not act as a real estate broker in any way" and the success premium was not a real estate commission. Thus, in dismissing his complaint, the court read the statute too expansively. We disagree and affirm.
These are the facts, giving plaintiff the benefit of all reasonable factual inferences, as alleged in the complaint. F.G. v. MacDonell, 150 N.J. 550, 556 (1997). HSV is a "prominent sports management compan[y] . . . [that] provides consulting, planning, and negotiating services regarding the development of major sports and entertainment facilities to professional sports teams" and "is particularly expert in the area of public/private financing for sports stadiums." The Empire Soccer Club, L.P. (Empire), which is owned by Metromedia Company (MC), operated a soccer team known as the MetroStars. Empire contacted Richard Horrow (Horrow), HSV's Chief Executive Officer, to locate construction financing, as well as a physical site for a soccer stadium in the New York/New Jersey area.
The parties executed a "Facility Development Agreement" on August 2, 2000. Plaintiff characterized its obligation this way: "to identify a location and formulate a public-private financing concept for a stadium." The relevant portions of the initial three-year contract describing HSV services stated:
a. Horrow agrees to provide strategic advice and a written development and action plan to support the development, site selection and financing of up to two facilities in the New York metropolitan area, which is defined to included New York City and its surrounding suburban region in Westchester, Nassau and Suffolk counties, Northern New Jersey, southern Connecticut and eastern Pennsylvania . . . . This shall include, but not be limited to, identifying and, as requested by Empire Soccer, negotiating directly with the appropriate governmental officials at the state, municipal, county and local levels, community and public interest groups, sports clubs and authorities, etc., and identifying and, as requested by Empire Soccer, negotiating directly with the appropriate technical experts, financial analysts, underwriters, architects and engineers, construction contractors, facility management groups, parking/traffic /transportation consultants and real estate development professionals, all to support the selection of sites and financing for the development of the Facility or Facilities.
b. Horrow agrees to solicit, identify, review and present site selection alternatives for the Facilities and to present at least four alternative site selections to Empire Soccer within three months of the signing of this Agreement. These proposed sites shall be consistent with the cost, stadium size, territory, transportation and financing criteria set forth herein;
c. Horrow agrees to prepare a facility financing plan acceptable to Empire Soccer that will maximize all available public revenue sources and that will support the development by Empire Soccer of a Facility at the site or sites it selects. In connection therewith, Horrow will also help Empire Soccer secure a commitment for financing for one or more of the Facilities by preparing the appropriate financial and business documentation and by preparing such other materials as may be needed and requested by Empire Soccer to secure said commitment.
In exchange for these services, Empire agreed to compensate HSV at a monthly rate of $8,500 and to pay approved expenses. Additionally, [u]pon the issuance of a written commitment of construction financing for a Facility or Facilities that has been arranged through the efforts of Horrow pursuant to the terms and conditions of this Agreement, Horrow will receive a "success premium" that will constitute two percent (2%) of the value of the total amount of public assistance that has been committed to the Facility or Facilities, if and only if the financing that has been arranged consists of non-recourse funding, grants or interest-free financing. If the financing that has been arranged consists of recourse funding, the success fee will constitute 1% of the amount financed.
In November 2001, Anschutz New York Soccer, Inc. (ANYSI), a subsidiary of Anschutz Entertainment Group (AEG), acquired Empire and became the owner and operator of the MetroStars. HSV was assured ANYSI would honor Empire's agreement obligations and continued its performance under the agreement.*fn1
In early 2002, a preliminary proposal was formulated for a stadium in Harrison. Generally, the plan provided that Harrison or a redevelopment agency would buy the site within the Harrison development area and the HCIA would acquire the land and construct a stadium. The HCIA would lease the constructed stadium to the MetroStars on an annual basis. A necessary precondition for HCIA to finance the project was State approval of the development area as a "Sports Entertainment District," which never materialized. Defendants concede HSV assisted in the negotiations with the Hudson County Improvement Authority (HCIA) and the Town of Harrison (Harrison) during 2001 and 2002.
Other development proposals were presented, however, negotiations "collapsed" in November of 2002. For more than three years HSV received payment for its services of $8,500 per month plus $60,000 in costs and expenses.
In December of 2002, AEG decided not to renew the association with HSV, following the contract's termination. Despite that fact, however, during August through November 2003, HSV contends it continued to guide defendants in the effort to obtain funding from Hudson County and Harrison partly because HSV believed a success premium would be paid "once financing ha[d] been committed." HSV argues it relied on defendants' "statements and actions that [HSV] would be paid the 'success premium' even if a commitment of public financing was issued after the consulting period [ended]."
In March 2006, Red Bull New York, Inc. (RBNY) purchased ANYSI and renamed the soccer team the New York Red Bulls. Red Bull Stadium, LLC (RBS) was formed to focus efforts on obtaining a stadium for the team.
In May 2006, defendants obtained a written commitment for non-recourse financing to acquire property in Harrison for use as a stadium construction site. The Harrison Redevelopment Agency (HRA) acquired, by eminent domain, 12.34 acres in the Harrison Redevelopment Area. After HRA cleared the site, HCIA was to sign a ground lease to sublet the realty to RBS for an annual rental and a contribution toward environmental remediation. RBS would construct and own the soccer stadium. No public financing was included for the actual stadium construction.
At this time, HCIA undertook the construction of a second project, that is, a public commuter parking facility near the Harrison PATH station, which was proximate to the proposed stadium. The facility's main goal was to provide parking for commuters utilizing the PATH train, with a secondary function to provide parking for stadium patrons. HCIA intended to issue bonds to fund this project.
Plaintiff's suit sought payment of the contractual "success premium" under the theory that "[t]he decision to focus on Harrison was a result of [Horrow's] work, pursuant to the amended agreement. The deal that the Defendant[s] finalized with Harrison in May 2006 directly evolved out of the proposal under discussion in 2002-2003."
Prior to completion of discovery, defendants filed for summary judgment, arguing the payment of a success premium to plaintiff was precluded by N.J.S.A. 45:15-3. Judge Bariso concluded the transaction, as defined in the Facilities Development Agreement, dealt with real estate, listed a variety of services including "identifying, reviewing and site selection alternatives for the facilities" and included "lease language," making application of N.J.S.A. 45:15-3 unmistakable.
Judge Bariso next determined whether equitable estoppel prevented the statute's preclusive effect, as we had concluded in Sammarone v. Bovino, 395 N.J. Super. 132, 139 (App. Div.), certif. denied, 193 N.J. 275 (2007). In this regard, Judge Bariso stated:
I tend to agree with the defendant, unfortunately, that SAMMARONE does seem to rely upon the knowledge of [the defendant] and that the language [is] not to be used as a sword seems to rely upon that fact. While I am concerned about an implied covenant of good faith performance and fair dealing, there is nothing before me to indicate that the defendant had knowledge that the plaintiff was not licensed and . . . that the statute would apply. I think there is sufficient certifications before me and there has been no indication that discovery would be necessary . . . .
So based upon what has been in front of me and for the reasons set forth on the record, I find that SAMMARONE does not give me the leeway necessary to deny this motion . . . I don't believe that that's my role to expand upon that. I do believe it's a very narrow holding.
Plaintiff appeals from the order that dismissed its complaint, arguing the statute is inapplicable to this matter. Although, plaintiff agrees it provided negotiating services, it differentiates its conduct, arguing the statute applies to the negotiation of the specific transaction, that is the lease, sublease, or land acquisition. Plaintiff maintains its role was not to introduce a buyer to a seller or request monies contingent on the sale or lease of realty. Instead, its role was to initiate "complex lobbying negotiations," which merely included collaboration with public officials to develop their mind-set to finance a stadium construction project. Consistent with this position, plaintiff urges the motion judge's reading of the statute as overbroad. Plaintiff maintains the statute is designed to prevent an unlicensed person from acting like a real estate broker and the preclusive bar of the law should not be invoked merely because one aides or "negotiates" to create a transaction "contemplated to result in the sale, exchange, leasing, renting or auctioning any real estate."
The Act requires any person who "either directly or indirectly" engages "in the business of a real estate broker" to be licensed. N.J.S.A. 45:15-1. A "real estate broker" is defined as: a person, firm or corporation who, for a fee, commission or other valuable consideration, or by reason of a promise or reasonable expectation thereof, lists for sale, sells, exchanges, buys or rents or offers or attempts to negotiate a sale, exchange, purchase or rental of real estate or an interest therein, or collects or offers or attempts to collect rent for the use of real estate or solicits for prospective purchasers or assists or directs in the procuring of prospects or the negotiation or closing of any transaction which does or is contemplated to result in the sale, exchange, leasing, renting or auctioning of any real estate or negotiates, or offers or attempts or agrees to negotiate a loan secured or to be secured by mortgage or other encumbrance upon or transfer of any real estate for others, or any person who, for pecuniary gain or expectation of pecuniary gain conducts a public or private competitive sale of lands or any interest in lands. [N.J.S.A. 45:15-3.]
Additionally, "[a]ny single act, transaction or sale shall constitute engaging in business within the meaning" of the statute. N.J.S.A. 45:15-2. Finally,
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.
In Corson v. Keane, 4 N.J. 221, 225 (1950), the Supreme Court accepted a broad interpretation of the word "negotiate" as used in the Act. The plaintiff, an architect, sought payment bottomed on defendant's oral promise to pay $500 if the plaintiff put the defendant in touch with a party who would provide additional financing for a motel construction project. Id. at 224. The plaintiff argued his actions fell outside the statute. Ibid. The Court disagreed and concluded the services under the agreement fell within the purview of the statute. Id. at 227.
"The essential feature of a broker's employment is to bring the parties together in an amicable frame of mind, with an attitude toward each other and toward the transaction in hand which permits their working out the terms of their agreement. They may reach that agreement, without his aid or interference. Indeed, in a transaction of any magnitude, the terms would never be settled beforehand or negotiated finally by the broker.
This does not mean that the broker has not negotiated the transaction.
If the statute does not apply to such a situation, then it is a toothless enactment." [Id. at 225-226 (quoting Baird v. Krancer, 246 N.Y.S. 85 (1930).]
Guided by Corson, we reject plaintiff's characterization of his proposed efforts and his contentions of the statute's inapplicability. Here, plaintiff's intermediary role, as expressed in the "Facility Development Agreement," and as described by Horrow, provided the explicit type of "negotiation" included within N.J.S.A. 45:15-3. Plaintiff's absence from participation in the details of the deal, as eventually struck, does not affect this result.
We conclude plaintiff's actions were designed to "assist . . . in the procuring of prospects or the negotiation . . . of any transaction which does or is contemplated to result in the . . . leasing . . . of any real estate . . . ." N.J.S.A. 45:15-3. Such an interpretation is consistent with the "broad manner" employed "when considering whether the activities in question can fairly be deemed to be the activities of a broker." Sammarone, supra, 395 N.J. Super. at 139.
We reject plaintiff's suggestion that the statute applies solely to consumer transactions. There is no support for this contention. See Corson, supra, 4 N.J. at 227 (statute bars fee to architect in motel construction); Kazmer-Standish Consultants, Inc. v. Schoeffel Instruments Corp., 89 N.J. 286, 293 (1982) (business broker's commission limited to value attributed to personality as commission of realty precluded by N.J.S.A. 45:15-3).
Thus, we conclude the activity contemplated and performed by plaintiff is that of a "real estate broker" as defined by a the statute. Receipt of compensation for said services requires licensure.
Plaintiff alternatively asserts defendants' alleged wrongdoing prevents denial of remuneration for services requested and provided. Relying on our decision in Sammerone, supra, plaintiff argues defendants' knowledge that plaintiff was unlicensed should not "'convert the statute from a shield to protect the public into a sword.'" 395 N.J. Super. at 142 (quoting Tobias v. Comco/America, Inc., 96 N.J. 173, 182 (1984)).
Plaintiff's argument is without merit as Sammorone is inapposite. Our holding in Sammorone, supra, was very limited and based upon the unique facts presented in the case. 395 N.J. Super. at 143. In that matter, we allowed additional discovery. We were persuaded the plaintiff should be allowed to determine whether the defendant, from the outset, was armed with the specific understanding of the statute's preclusive effect and induced the plaintiff's services knowing he was not licensed. Ibid. "In reaching that conclusion we said that 'one who induces the alleged wrongdoing should not benefit as a result of it.'" Ibid. (quoting Joe D'Egidio Landscaping v. Apicella, 337 N.J. Super. 252, 257 (App. Div. 2001)).
No facts suggest similar wrongful conduct in the instant matter or that defendants were aware of the statute's bar to compensation when plaintiff's services were engaged. Apparently, the litigation educated the parties.
Turning to the application of estoppel, in general, "to establish equitable estoppel, [a] plaintiff must show that [a] defendant engaged in conduct, either intentionally or under circumstances that induced reliance, and that plaintiff acted or changed [his] position to [his] detriment." Knorr v. Smeal, 178 N.J. 169, 178 (2003). However, we cannot ignore the clear fact that the Act is a regulatory measure, which represents "the strong public policy of our State[,]" Tanenbaum v. Sylvan Builders, Inc., 29 N.J. 63, 71 (1959), and overrides application of general common law principles. In reaching that conclusion, we refer to the Court's statement:
In our judgment, however, the legislative objective in closing the courts to the unlicensed broker was to establish a policy so strong that neither the contract nor the unlawful efforts made in its pursuit could provide the basis of pecuniary benefit to [the plaintiff] even in tort claims of the character alleged in this proceeding.
[Id. at 71-72.]
Because plaintiff's fee, which was directly related to the success of the series of transactions culminating in defendants' lease of a soccer stadium, was dependent on services provided by a real estate broker, his claim is barred. Defendants prevail as a matter of law and the trial court's grant of summary judgment was warranted. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 536 (1995).