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Howard Wein, William Farkas, and Jeffery Realty, Inc., A Corporation v. Lacey Town Square

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


June 6, 2012

HOWARD WEIN, WILLIAM FARKAS, AND JEFFERY REALTY, INC., A CORPORATION OF THE STATE OF NEW JERSEY, PLAINTIFFS-APPELLANTS,
v.
LACEY TOWN SQUARE, L.L.C., A LIMITED LIABILITY COMPANY OF THE STATE OF NEW JERSEY, DEFENDANT, AND LAUREL BOULEVARD ASSOCIATES, L.L.C., DEFENDANTS-RESPONDENTS, AND BRIAN TREMATORE, DEFENDANT/THIRD-PARTY PLAINTIFF-RESPONDENT,
v.
JACK MORRIS, INDIVIDUALLY AND AS OWNER OF EDGEWOOD PROPERTIES, INC., THIRD-PARTY DEFENDANTS.

On appeal from Superior Court of New Jersey, Law Division, Morris County, Docket No. L-2504-08.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued January 24, 2012

Before Judges Messano, Yannotti and Espinosa.

Plaintiffs Howard Wein (Wein), William Farkas (Farkas) and Jeffrey Realty, Inc. (JR) appeal from orders entered by the Law Division granting summary judgment in favor of defendants Brian Trematore (Trematore) and Laurel Boulevard Associates, L.L.C. (LBA). For the reasons that follow, we affirm in part, reverse in part, and remand for further proceedings.

I.

Trematore was the owner of a piece of commercial real property in Lacey Township, New Jersey, upon which he planned to develop a shopping center. On May 30, 2000, Trematore entered into an exclusive listing agreement with JR to find tenants for the proposed development. The listing agreement required Trematore to pay JR "a commission equal [to] five . . . percent of the gross aggregate lease rental value (less [real estate] [t]axes, [i]nsurance, and [common area maintenance charges]) for the initial term of [any] lease, and any and all options and renewals[,] if during the term of the agreement[:] a. All or any portion of the [property] [wa]s leased."

The listing agreement included the following provisions:

3. DURATION: This agreement will become effective upon acceptance by [Trematore] and will continue in full force and effect for a period of six (6) months from the date provided herein. After the initial six (6) month term, this agreement will automatically renew and continue on a month to month basis indefinitely thereafter, unless and until either party terminates same by written notice to the other not less than thirty (30) days prior to the intended termination date.

7. UPON TERMINATION: In the event this agreement is terminated by either party consistent with the requirement of paragraph [three] hereunder, the terms of this [listing] agreement shall continue to apply for one year from the effective date of termination to any and all prospective tenants/purchasers which [JR] introduced to the property during the terms of the agreement and/or any person or entity with whom the owner negotiated during the agreement.

The listing agreement also stated that any commissions due must be paid "in three . . . equal installments, commencing upon receipt of [the] first month[']s rent," with the remaining payments due six and twelve months thereafter.

On June 12, 2000, Trematore incorporated Lacey Town Square, L.L.C. (LTS), and on July 11, 2001, that entity entered into a lease agreement with CVS Laurel River, L.L.C. (CVS Laurel River). CVS Laurel River agreed to lease a building that LTS intended to construct on the property.

The initial term of the lease was for twenty-two years, which would commence upon delivery of the premises. The annual fixed rent for the initial term was $179,520. The lease indicates that the business address for CVS Laurel River was One CVS Drive, Woonsocket, Rhode Island. Moreover, CVS Caremark Corporation, Inc. (CVS Caremark) is identified as guarantor under the lease. Peter F. Pecoraio signed the lease on behalf of CVS Laurel River.

In addition, Section 40 of Part II of the lease agreement stated that the parties represented that they had no dealings or conversations with any real estate broker in connection with the negotiation and execution of this Lease, other than the Broker(s) named in Section 23 of Part I. Landlord and Tenant each agree to defend, indemnify and hold harmless the other against all liabilities arising from any claim of any other real estate brokers, including cost of counsel fees, resulting from their respective acts. Landlord warrants and agrees that it shall be solely responsible for any and all brokerage commissions owing to said Broker(s), as a result of the negotiation and execution of this lease.

Wein of JR was identified as the broker in Section 23 of Part I of the lease.

The lease additionally provided that CVS Laurel River could terminate the agreement if the owner did not deliver the premises by April 1, 2003. LTS did not deliver the premises by that date. On April 29, 2004, CVS Laurel River agreed to extend the delivery date to November 1, 2004. LTS did not deliver the premises by that date, but CVS Laurel River did not exercise its right to terminate.

On December 22, 2004, LTS entered into a joint venture agreement with Edgewood Properties, Inc. (Edgewood) "for the purpose of owning, developing, improving, selling, leasing and managing the [p]roperty as a mixed use development in accordance with applicable zoning and land use regulations . . . ." The joint venture agreement stated that Trematore owned the property and acknowledged that portions of the property had been leased to certain commercial tenants. Trematore signed the agreement as managing member of LTS, and Jack Morris (Morris) signed the agreement as President of Edgewood.

Among other things, the joint venture agreement provided that Edgewood would "have a seventy-five percent . . . membership interest in the joint venture entity, and Trematore [would] have a twenty-five percent . . . membership interest." The joint venture agreement further provided that, upon its execution, Trematore would prepare and record a deed transferring ownership of the property to the joint venture entity.

The joint venture agreement additionally provided that Edgewood would pay Trematore $4,425,000. in consideration for "entering . . . and becoming a member of the joint venture[.]" About $1,000,000. of that amount would be paid to Trematore "as partial reimbursement for [the] capital contributions [he] made in connection with the acquisition and development of the [p]roperty." Edgewood agreed to pay Trematore the balance of the consideration "upon issuance of a [c]ertificate of [o]ccupancy . . . for the CVS Pharmacy to be constructed" on the premises.

In addition, Section 8(b) of the joint venture agreement stated that Edgewood would "be responsible for overseeing the development of the [p]roperty . . . ." Moreover, Section 8(b) stated in part that, "[t]he joint venture shall be responsible to pay the costs and expenses associated with trailers, wages for supervisors, realtor's commissions, and other costs of on site development and construction of the [p]roperty." (Emphasis added).

By letter dated December 27, 2004, LTS advised Farkas that it was terminating the listing agreement. The joint venture entity, Laurel Boulevard Associates (LBA), was incorporated on January 3, 2005. Although the record is unclear as to whether LTS had any interest in LBA, on June 29, 2005, Trematore and LTS assigned their twenty-five percent membership interest in the joint venture to an entity called JSM at Laurel Blvd., L.L.C. (JSM).

On May 11, 2007, LBA signed a declaration stating that the lease between LTS and CVS Laurel River was terminated and a new lease for the space had been executed by LBA and New Jersey CVS Pharmacy, L.L.C. (NJCVS). The declaration stated that NJCVS was the "successor by merger" to CVS Laurel River.

The lease between LBA and NJCVS is dated June 26, 2007. Peter F. Pecoraio signed the lease for NJCVS. NJCVS is identified in the lease as the tenant, with a business address at One CVS Drive, Woonsocket, Rhode Island. CVS Caremark is identified as the guarantor. The initial term of the lease is twenty-five years, with an option to renew for five additional periods of five years each. The annual fixed rent for the initial term is $244,800.

II.

On August 25, 2008, plaintiffs filed a complaint in the Law Division naming LTS, Trematore and LBA as defendants. Plaintiffs asserted claims for recovery of the brokerage commission due pursuant to the listing agreement. Plaintiffs also asserted claims for unjust enrichment, quasi-contract or quantum meruit, and fraud. LTS and LBA filed answers, and Trematore filed an answer and third-party complaint naming Morris and Edgewood as third-party defendants, seeking damages arising from a separate transaction. It appears that, at some point after the complaint was filed, plaintiffs' claims against LTS were resolved.

On December 23, 2009, Trematore filed a motion for summary judgment, which plaintiffs opposed. The trial court considered the motion on April 30, 2010, and placed its decision on the record on May 21, 2010. The court stated that Trematore did not dispute that plaintiffs, through their efforts procured CVS as a ready, willing and able potential tenant who was capable of leasing property on the terms sought by the defendant. Yet, the question is, how can [Trematore] be responsible when he no longer owns the property, and when he had no involvement in the negotiation of the new lease.

The Court agrees with . . . Trematore, that under those circumstances, he can no longer be responsible. Thus, even assuming that the subsequent lease between [LBA] and CVS is merely a replacement lease, Trematore no longer had any ownership interest in [LBA], was never the landlord of CVS, and never received rent from CVS.

As such, the plaintiffs' recourse is against the entity who assumed the obligations under the original lease.

Since Trematore never received any rental payments from either CVS entity, the plaintiffs cannot collect commissions from him, and must look to the entity that is actually reaping the benefit of the lease for its commissions.

Additionally, the Court finds no basis for an equitable claim by the plaintiffs against . . . Trematore, for the very same reasons that . . . Trematore no longer had an interest in the subject property, and never received any rent from CVS, regardless of which CVS entity was the tenant. There can be no equitable claim against Trematore.

Even if CVS Laurel River and NJCVS are viewed as one CVS entity, the defendant is not personally liable for the commission, having divested himself of all equity ownership in the property by June 29, 2005. And CVS did not become a rent paying tenant until years later.

The court also concluded that plaintiffs could not pursue a claim against Trematore for a commission on the basis of unjust enrichment. The court entered an order dated May 21, 2010, granting Trematore's motion for summary judgment.

Thereafter, LBA filed a motion for summary judgment, which plaintiffs opposed. The court considered the motion on September 16, 2010, and placed its decision on the record on that date.

The court stated that plaintiffs were not entitled to a commission under the listing agreement because they were not the efficient producing cause of the lease between LBA and NJCVS. The court noted that while LTS and CVS Laurel River entered into a lease for the premises, the CVS Laurel River lease was never consummated and the lease with NJCVS "commenced long after the termination of the exclusive listing [agreement] in 2004."

The court said that a broker's introduction of a property owner to a potential tenant was "not enough" to establish entitlement to a commission, and LBA was not liable for the commission because there was "a substantial break" between the plaintiffs' introduction of the potential lessee to the owner and the execution of the NJCVS lease. The court also found that LBA had never expressly agreed to assume the obligation to pay the broker's commission.

The court entered an order dated September 16, 2010, granting LBA's motion for summary judgment. Plaintiffs thereafter filed a motion seeking reconsideration of that order. The court entered an order dated November 19, 2010, denying plaintiffs' reconsideration motion. This appeal followed.

III.

Plaintiffs argue that the trial court erred by granting summary judgment in favor of LBA. We agree.

When reviewing the grant of summary judgment, we apply the same standard the trial court applies when considering the motion. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). Therefore, we must determine whether the record before the trial court indicates "that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c). In making this determination, we must view the evidence "in the light most favorable to the non-moving party[.]" Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).

As we have explained, plaintiffs seek to recover a broker's commission allegedly due under the exclusive listing agreement. To prevail on such a claim, plaintiffs must establish that they were the "'efficient producing cause' in bringing about the [lease.]" Fry v. Doyle, 167 N.J. Super. 486, 493-94 (App. Div. 1979) (quoting DeBenedictis v. Gerechoff, 134 N.J. Super. 238, 242 (App. Div. 1975)).

To meet this burden, a plaintiff must show that its efforts caused the owner to negotiate with a potential tenant, who was produced by the broker. Ibid. (quoting DeBenedictis, supra, 134 N.J. Super. at 242). A plaintiff also must show that the tenant was ready, able and willing to perform, and that the transaction was thereafter "consummated without a substantial break in the ensuing negotiations." Ibid. (quoting DeBenedictis, supra, 134 N.J. Super. at 242).

In this case, the trial court determined that LBA was not liable for the commission because plaintiffs failed to present sufficient evidence to raise a genuine issue as to whether their efforts were an efficient producing cause of the NJCVS lease. We do not agree.

It is undisputed that plaintiffs' efforts were the efficient producing cause of the CVS Laurel River lease. Indeed, the lease identifies Wein and JR as the brokers for that agreement. Moreover, under Section 40 of the lease, LTS agreed that it was "solely responsible for any and all brokerage commissions owing to [the] Broker(s), as a result of the negotiation and execution of this [l]ease."

The property was subsequently transferred, subject to the lease, to LBA pursuant to the joint venture agreement. In 2007, the CVS Laurel River lease was terminated and LBA entered into a new lease with NJCVS. In our view, this evidence raises a genuine issue of material fact as to whether plaintiffs' efforts were the efficient producing cause not only of the CVS Laurel River lease, but also of the NJCVS lease.

Indeed, a reasonable fact finder could conclude that the NJCVS lease was merely a continuation of the lease between LTS and CVS Laurel River. Both leases were with CVS entities. The document terminating the CVS Laurel River lease stated that the property had been leased to NJCVS, an entity identified as the "successor by merger" to CVS Laurel River.

In addition, both CVS leases were executed by Peter F. Pecoraio; the business addresses for the CVS entities were the same; and CVS Caremark is the guarantor of the lessees' obligations under both agreements. Moreover, both leases provided that the leased premises would be constructed in accordance with the CVS Prototype Construction Specifications, dated July 5, 2000.

The trial court also determined that LBA was not liable because it had never agreed to assume the obligation to pay the commission. Again, we disagree.

In our view, a reasonable fact finder could conclude that LBA had agreed to assume the obligation for any broker's commission that might be owed to plaintiffs under the listing agreement. The joint venture agreement stated, among other things, that the property had been leased to commercial tenants, and those leases were provided to Edgewood for its review, including the CVS Laurel River lease. In that lease, LTS had expressly agreed to pay the broker's commission. JR and Wein were identified as the brokers in the lease. In addition, Section 8(b) of the joint venture agreement stated that "[t]he joint venture shall be responsible to pay the costs and expenses associated with trailers, wages for supervisors, realtor's commissions, and other costs of on-site development and construction of the [p]roperty." (Emphasis added).

The trial court said that Section 8(b) did not require LBA to pay any commission that might be due to plaintiffs. The trial court correctly noted that there is no reference in Section 8(b) to any particular broker or commission. However, as we stated previously, JR and Wein were identified as the brokers in the CVS Laurel River lease, and LTS had expressly agreed to assume the obligations for the broker's commission. The property was transferred to the joint venture entity, subject to the lease, which was acknowledged in the joint venture agreement.

In light of this evidence, a fact finder could reasonably determine that the term "realtor's commissions" in Section 8(b) of the joint venture agreement includes the commissions on the leases of property transferred to the joint venture entity, as well as any leases that the joint venture entity might enter thereafter. A reasonable fact finder could therefore conclude that LBA had agreed to assume liability for any commission due to plaintiffs pursuant to the listing agreement.

Our conclusion is supported by Pagano Company v. 48 S. Franklin Tpk., LLC, 198 N.J. 107 (2009). In that case, a real estate broker entered into an agreement with the owner of commercial property, giving it the right to procure tenants to lease space and negotiate the terms of the lease. Id. at 109-10. The broker procured three tenants for the property. Id. at 111.

The owner later entered into an agreement to sell the property to the defendant, and in that agreement, the defendant accepted the assignment of the leases. Id. at 110-11. Each lease identified the broker and stated that the broker had negotiated with the lessee in bringing about the lease. Id. at 112. The leases also stated that the lessor would be obligated to pay the broker's commissions. Ibid. After acquiring title, the defendant did not pay the commissions. Ibid.

In the ensuing litigation, the broker claimed that the new owner was liable for the commissions. Ibid. The Supreme Court noted that in determining whether a party affirmatively assumed an obligation, the court must consider "all of the facts and circumstances surrounding the assignment and, in particular, the documentary record." Id. at 109. An agreement to assume a broker's commission is a personal obligation, but it may take several forms. Id. at 116.

One of those forms is an express promise by the assignee to pay the commission but that is not the only form. Ibid. The Court concluded that the assignment and the provisions of the underlying leases were sufficient to establish an affirmative assumption of the obligation to pay the commission. Id. at 118-19.

We are convinced that a similar conclusion could be reached in this case. In our view, the terms of the CVS Laurel River lease, and the assignment of the property to LBA, which was subject to that lease, provides a sufficient factual basis for the conclusion that LBA had agreed to pay any broker commission that might be due to plaintiffs pursuant to the listing agreement.

Thus, LBA may be liable to plaintiffs for the commission if plaintiffs were the efficient producing cause of the NJCVS lease. LBA's liability therefore turns upon whether the NJCVS lease was a continuation of the lease with CVS Laurel River and whether it agreed to pay any commission that might be due under the listing agreement.

Because plaintiffs presented sufficient evidence to raise a genuine issue as to whether the NJCVS lease was a continuation of the CVS Laurel River lease and whether LBA agreed to assume liability for any commission owed to plaintiffs under the listing agreement, summary judgment should not have been granted.

Accordingly, we reverse the trial court's order granting summary judgment in favor of LBA.

IV.

Plaintiffs also argue that the trial court erred by granting summary judgment to Trematore. Again, we agree.

Here, the trial court concluded that Trematore could not be liable to plaintiffs because, even if the NJCVS lease was a continuation of the CVS Laurel River lease, Trematore did not have an ownership interest in the property when NJCVS began to make rental payments. The court determined that, under the circumstances, plaintiffs' recourse was against the entity "that is actually reaping the benefit of the lease . . . ." We do not agree with the court's analysis.

As we have explained, Trematore signed the listing agreement, thereby personally assuming the obligation to pay plaintiffs any commission that might be due under the terms of that agreement. The CVS Laurel River lease was executed while the listing agreement was in effect. Trematore could be liable for the commission if a fact finder determines that the NJCVS lease was a continuation of the CVS Laurel River lease, and plaintiffs' efforts were the efficient producing cause of the NJCVS lease.

Although Trematore was not the owner of the property when the NJCVS lease was consummated, and although he did not receive any of the rental payments, those facts would not relieve Trematore of potential liability for any commission owed under the terms of the listing agreement. If the NJCVS lease was a continuation of the CVS Laurel River lease, Trematore became liable for the commission when the lease with CVS Laurel River was executed and NJCVS began to make its rental payments.

We note that there is no indication in this record that plaintiffs ever agreed to relieve Trematore of liability under the listing agreement. LTS may have assumed liability for the broker's commission in the CVS Laurel River lease and LBA may have assumed liability for the commission under the joint venture agreement. Even so, those assumptions of liability would not be binding upon plaintiffs and would not relieve Trematore of liability for the commission under the terms of the listing agreement.

Plaintiffs additionally argue that the trial court erred by dismissing their equitable claims against Trematore. Plaintiffs contend that they may recover against Trematore on the basis of quasi-contract or quantum meruit, even if Trematore is not liable for the commission pursuant to the listing agreement.

In support of this argument, plaintiffs rely upon Weichert Co. Realtors v. Ryan, 128 N.J. 427 (1992). In that case, Weichert alleged that the defendants were liable for brokerage services provided by its employee. Id. at 430. The property owner told the Weichert employee that he wanted to sell the property, with the sales commission to be paid by the buyer. Ibid.

Weichert's employee contacted the defendants and informed them "that he knew of a property [they] might be interested in purchasing[,]" but the purchaser would have to pay a ten percent commission. Id. at 430-31. Weichert's employee then provided services regarding the property, but the defendants never signed a contract agreeing to pay the fee. Id. at 431-32. The property was sold to the defendants but they did not pay the Weichert employee for his services. Id. at 432.

Weichert brought suit against the defendants seeking recovery on the basis of an alleged oral agreement or, in the alternative, on the basis of quantum meruit. Id. at 434. The Supreme Court held that there was insufficient evidence to establish that the parties had mutually manifested assent to the essential terms of the agreement. Id. at 438-39.

The Court noted, however, that quasi-contractual recovery was warranted based on the equitable principle "'that a person shall not be allowed to enrich himself unjustly at the expense of another.'" Id. at 437 (quoting Callano v. Oakwood Park Homes Corp., 91 N.J. Super. 105, 108 (App. Div. 1966)). Courts have applied this principle and have allowed quasi-contractual recovery for services rendered "when a party confers a benefit with a reasonable expectation of payment." Ibid. This type of recovery, which is known as quantum meruit, "entitles the performing party to recoup the reasonable value of services rendered." Id. at 437-38.

We are satisfied that the trial court correctly determined that plaintiffs could not recover against Trematore on the basis of quasi-contract or quantum meruit. In Weichert, the parties had not entered into a binding agremeent for the payment of the commission. Under those circumstances, quasi-contractual recovery was allowed. By contrast, in this case, there was a binding agreement, under which plaintiffs provided services and those services brought about the lease between LTS and CVS Laurel River.

Plaintiffs may have had a reasonable expectation of payment for the commission, but their expectations were defined and limited by the terms of the listing agreement. Suffice it to say, if plaintiffs are not entitled to payment under the listing agreement, they are not entitled to recover against Trematore on the basis of quasi-contract or quantum meruit.

Plaintiffs further maintain that the trial court erred by finding they could not recover against Trematore on the basis of unjust enrichment. Plaintiffs note that, while Trematore did not receive any rental payments under the CVS leases, he received substantial payments for his interest in the property and the joint venture.

Plaintiffs therefore claim that Trematore has been unjustly enriched by their efforts with regard to the CVS leases and they can recover a portion of the monies Trematore received for his interest in the property and the joint venture. We are convinced, however, that plaintiffs failed to present sufficient evidence to support their claim against Trematore for unjust enrichment.

Plaintiffs have produced no evidence establishing that the monies Trematore received for his interest in the property and the joint venture were attributable in part to their efforts regarding the CVS Laurel River lease. Indeed, Trematore might have received the same amount, regardless of whether the property was leased to CVS. In short, plaintiffs did not present sufficient evidence to raise a genuine issue as to whether Trematore was unjustly enriched by the services they provided to him.

Thus, Trematore could be liable for the commission if plaintiffs were the efficient producing cause of the NJCVS lease. His liability, therefore, depends on whether that lease was a continuation of the CVS Laurel River lease. Because plaintiffs presented sufficient evidence to raise a genuine issue as to that material fact, summary judgment should not have been granted.

Accordingly, we reverse the grant of summary judgment to Trematore on plaintiffs' claim for the commission allegedly due under the listing agreement and affirm the grant of summary judgment on the claims for quasi-contractual or quantum meruit and for unjust enrichment.

Affirmed in part, reversed in part and remanded for further proceedings in accordance with this opinion. We do not retain jurisdiction.

20120606

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