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Hovbilt, Inc. v. Lair

February 25, 2010

HOVBILT, INC., PLAINTIFF-APPELLANT,
v.
PETER LAIR AND LAIR REAL ESTATE SERVICES, INC., DEFENDANTS-RESPONDENTS.



On appeal from the Superior Court of New Jersey, Chancery Division - General Equity, Ocean County, Docket No. C-187-07.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued January 19, 2010

Before Judges Baxter, Alvarez and Coburn.

This appeal arises out of a dispute between a developer, plaintiff Hovbilt, Inc., and defendants Peter Lair and Lair Real Estate Services, Inc., concerning Lair's services as Hovbilt's confidential intermediary in the acquisition of two parcels of land. Hovbilt chose to acquire the two parcels to enhance its prospects of obtaining approval from the Jackson Township Planning Board (Board) for the creation of a 965-unit housing development. After nearly three years of stalling by Lair, during which he repeatedly evaded Hovbilt's requests to convey the two parcels to Hovbilt as the parties' oral agreement required, and after Hovbilt discovered that Lair had fraudulently transferred one of the two parcels into his own name and had encumbered it with a mortgage, Hovbilt filed suit against Lair. After the court ordered Lair to convey the two parcels to Hovbilt, the judge sua sponte permitted Lair to assert a counterclaim to obtain payment for the strawman services Lair had rendered on Hovbilt's behalf.

Finding that there was no meeting of the minds between the parties on the value of those services, the judge awarded Lair the sum of $180,000 in quantum meruit and an additional $48,074 as reimbursement for costs Lair had advanced on Hovbilt's behalf, for a total judgment of $228,074. We agree with Hovbilt that Lair's dishonest and unscrupulous conduct on the very undertaking that was the subject of the parties' agreement should have disqualified Lair from receiving the benefit of the equitable remedy of quantum meruit compensation. We thus reverse the award of $180,000 in compensation to Lair and remand for the entry of an order so providing.

I.

For forty years, plaintiff has built thousands of housing units in Monmouth and Ocean counties. From 1997 through 2005, defendant Peter Lair, acting through his real estate agency, Lair Real Estate Services, Inc., served as Hovbilt's exclusive broker for six of the company's largest residential developments. The arrangement was profitable for both parties, as Lair, by representing Hovbilt in the sale of over 700 units of new housing, had earned commissions totaling approximately $854,000 during that eight-year period.

In 2000, Hovbilt took the initial steps to develop a 645-acre parcel it owned in Jackson Township into a residential development comprised of 965 units of affordable and market-rate housing, to be known as Jackson Valley. Based upon its many years of development experience, Hovbilt recognized that its prospects of obtaining the necessary development approvals from the Board would be significantly enhanced if it volunteered to reconstruct, at its own expense, a dangerous five-way intersection.

To accomplish the reconstruction, Hovbilt needed to acquire two parcels of land, one located on Cassville Road, and the other on Perrineville Road. Hovbilt realized that if it approached the owners of those two properties in its own name, the acquisition price would be significantly increased and the owners might conceivably refuse to sell. Consequently, because of Hovbilt's longstanding relationship with Lair and the trust that Hovbilt had reposed in Lair over the years, Hovbilt asked Lair to acquire title to the Cassville and Perrineville properties in his own name, on behalf of Hovbilt, using funds advanced by Hovbilt for that purpose. Using the funds provided by Hovbilt, Lair negotiated the purchase of the two properties, paid the necessary purchase price and closing costs, and instituted a quiet title action on the Perrineville Road property with the understanding that he would hold the two properties in his name until Hovbilt requested the transfer of title to Hovbilt.

The parties recognized that because of the sensitive nature of the undertaking and the parties' previous and longstanding relationship of trust, the agreement need not be reduced to writing. As we will discuss later in this opinion, Hovbilt's and Lair's understanding of the compensation to be provided to Lair for his strawman services differed enormously; however, both sides agreed that because the Cassville Road property contained an existing house, Lair would lease the house to a tenant and use the rental payments to cover any carrying costs on the property, such as insurance and real estate taxes. Although the precise date upon which Lair would be required to convey the title of the properties to Hovbilt was not established, it was understood that at a time of Hovbilt's choosing, such conveyance would occur.

After Hovbilt obtained the numerous environmental approvals that were required for Jackson Valley, Hovbilt's vice-president and general counsel, Arthur Havighorst, sent Lair an email on September 3, 2004 asking Lair to call him "about transferring the Cassville property from [him] to Hovbilt." Havighorst asked Lair to compile a list of the expenses he incurred, including property tax and insurance, so that Havighorst could make the necessary arrangements to reimburse Lair for those expenses.

On October 27, 2005, Havighorst sent an email to Lair commenting that "[w]e need to transfer title to the properties now, so please give me some dates and times next week when we can get together to go over the course of action." Lair's email response two days later proposed a delay of the transfer. Six emails were exchanged in December 2005 discussing Hovbilt's request for the transfer of the properties and Lair's promises to prepare a list of the expenses he incurred, but Lair continued to avoid Havighorst's requests to transfer the two titles. Lair did not disclose that he had already transferred the Cassville Road property into his own name and encumbered it with a mortgage. Not until years later would Hovbilt discover that was the reason for Lair's evasive responses.

In the fall of 2006 and January 2007, Havighorst renewed his request for the transfer of the titles. Lair did not respond until February 5, 2007, when he wrote to Havighorst telling him that since the fall of 2006, he had "experienced a series of setbacks from heart problems . . . and depression from medications" he had been taking. He also told Havighorst that he had closed his real estate office and was in the process of ...


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