>Daily Development for Thursday, August 14, 2008
>by: Patrick A. Randolph, Jr.
>Elmer F. Pierson Professor of Law
>UMKC School of Law
>Of Counsel: Husch Blackwell Sanders
>Kansas City, Missouri
>dirt@umkc.edu
>
>BROKERS; COMMISSION; ESTOPPEL:  When a property owner induces an unlicensed individual to enter into a brokerage agreement thinking that the unlicensed individual will not be able to collect a commission for lack of a license, the owner will not be permitted to benefit from such wrongful behavior and may be liable to pay an otherwise uncollectible commission. 

>
>Sammarone v. Bovino, 395 N.J. Super. 132, 928 A.2d 140 (App. Div. 2007). 
>
>A man sought to enforce an oral contract with real estate developers, pursuant to which the developers promised him compensation for introducing them to the owner of a valuable property they wished to purchase.  The real estate developers moved to dismiss the claim.  They claimed that since the man was not a licensed real estate broker, he was not entitled to sue for a commission. 

>
>The developers relied on the Real Estate Brokers and Salesman Act,  N.J.S.A. 45:15-1 to -42, which prohibits unlicensed persons from acting as a broker and does not allow unlicensed brokers to sue for commissions.  The lower court, relying on the statute, dismissed the complaint. 

>
>The "broker" appealed, and the Appellate Division reversed.  It noted that a motion to dismiss a complaint for failure to state a claim should only be granted in the "rarest of instances" if, after an in depth examination and with liberality, no cause of action can be gleaned from the facts.  In reviewing the claim, the Court noted that the purpose behind the Real Estate Brokers and Salesman Act is to protect consumers by excluding dishonest and unscrupulous people from the real estate business.  The Court also noted, however,  that the New Jersey Supreme Court has declined to permit sophisticated real estate professionals from using the statute as a sword, when the statute was intended to be a shield to protect consumers. 

>
>In this case, the Court noted that the developers were sophisticated real estate developers who, years before this agreement, were involved in litigation with an unlicensed broker.  In that case, the developers were able to defeat the broker's claim for a commission on the basis that the broker was not licensed.  Here he developers, who had been frustrated in earlier attempts to buy the property, used the "broker" as a way to meet with the seller and eventually buy the property.  They were not previously able to meet with the seller to negotiate a sale and used the "broker" to make inroads with the seller. The developers negotiated a commission agreement of three percent of the purchase price, as opposed to a higher commission, specifically because the person was not a broker and a letter from the "broker" acknowledged that fact.

>
>In essence, the Court found that the developers entered into the agreement with the knowledge that they had previously defeated a claim from an unlicensed broker.  According to the Court, the developers induced the man to enter into a brokerage agreement thinking that he could not collect since he was unlicensed.  Thus, it found that they should not benefit from their wrongful behavior.  The Court did not determine if the "broker" could ultimately prevail, only that his claim should not have been dismissed.

>
>Compare:  Exit A Plus Realty v. Zuniga, 395 N.J. Super. 655, 930 A.2d 491 (App. Div. 2007) , reported under this heading.  (A broker's violation of a statute or regulation that would authorize the Real Estate Commission to place the broker on probation, suspend or revoke license or to otherwise cause penalties, does not automatically deprive the broker of its commission, because it makes the commission agreement voidable, but not necessarily void. )

>
>Editor’s Comment: Apparently New Jersey would not have recognized a fee for an unlicensed “finder,” or else this guy got too involved in the deal to make an argument that he was a finder.  Other jurisdictions have “single deal” exemptions.  Apparently that wouldn’t fly in New Jersey also.  There are many examples of courts awarding quantum meruit to avoid injustice where a deal that  commission deal that is otherwise unenforceable for such reasons as the Statute of Frauds has resulted in a benefit to sellers.

>
>But the problem with quantum meruit in this case is the public policy behind the licensure statutes, which often are held to prevail over equitable considerations.  Although we didn’t get to the final litigation in this case, the court here appears to be saying that the policy is not so strong in New Jersey as to let real estate sharpies beat up on innocents.  (We don’t know the real facts - only the allegations, so we don’t know who’s sharp and who’s innocent here.)

>
>The Reporter for this item was Ira Meislick of the New Jersey Bar.
>
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