APPELLATE DIVISION HOLDS THAT ONE WHO IS NOT A LICENSED REAL ESTATE BROKER MAY NEVERTHELESS RECOVER A COMMISSION FROM A BUYER WHO HE INTRODUCED TO A SELLER WHERE ISSUES OF ESTOPPEL ARISE OUT OF THE CONDUCT OF THE BUYER WHO INDUCED THE INTRODUCTION THROUGH PROMISES OF PAYMENT OF THE COMMISSION.

On July 23, 2007, the Appellate Division of the Superior Court of New Jersey issued a major decision holding that a person not licensed as a real estate broker pursuant to N.J.S.A. 45:15-3, may nevertheless receive a commission in a situation where the Buyer purchased property procured by a non-licensed party based upon promises from the Buyer of payment of a commission. Upon consummation of the sale, Buyer refused to pay a commission to the non-licensed party invoking N.J.S.A. 45:15-3. The Appellate Division ruled that under such circumstances, a non-licensed party could recover commissions notwithstanding the provisions of N.J.SA. 45:15-3 where the conduct of the Buyer estopped the Buyer from denying the payment of commissions.

The case came before the Appellate Division from an appeal by plaintiff, Dennis M. Sammarone, from the trial court's rejection of its argument that the defendant, James J. Bovino, et al. should be estopped from relying on N.J.S.A. 45:15-3, noting that estoppel cannot render valid an agreement that is void as against public policy or prohibited by law. The trial court's ruling to dismiss the complaint for failure to state a cause of action was consistent with prior rulings of the New Jersey courts in connection with claims asserted by non-licensed persons for commissions in connection with real estate transactions.

Nevertheless, the Appellate Division reversed the trial court's decision and remanded the case to the trial court for further findings of fact in connection with the issue of estoppel as applied to Bovino, et al. Clearly the facts of this case limit the scope of the court's holding. Indeed the court stated:

"We stress the limited nature of our holding. We have not determined that plaintiff is entitled to prevail. We have only concluded that he is at this point entitled to continue to assert his claim. It may well be that he will be unable to establish sufficient facts to prove his claim. At this juncture, we decline to deprive him of the opportunity to try to do so."

In this case Bovino was both an experienced real estate developer and familiar with litigation. The plaintiff, Sammarone, had no such background. In fact, plaintiff had a close professional and personal relationship with the owner of the property in question, Leona Helmsley who was the president and chief executive officer of the Helmsley Organization. Bovino learned of this relationship and reached out to the plaintiff to ask him to speak to Mrs. Helmsley in connection with Bovino's interest in purchasing the Helmsley tract. The plaintiff made the introduction and ultimately Bovino purchased the property.

Bovino was familiar with the requirements of the real estate broker's statute, having previously successfully invoked N.J.S.A. 45:15-3 to defeat a claim for commissions. In addition it appears that plaintiff and defendant discussed at their initial meeting that plaintiff was not a broker. Bovino allegedly used that fact to offer him three (3%) percent commission instead of a higher one which would have been normal in this situation.

The Appellate Division stated that it was not clear how the act's purpose of protecting the public against unscrupulous and dishonest persons would be furthered by dismissing plaintiff's claim if it developed that Bovino intended to rely on the statute from the outset and wrongfully induced the plaintiff to set up the meeting with Mrs. Helmsley for the personal benefit of Bovino, never intending to pay the plaintiff any consideration.

The Appellate Division cited to D'Egidio Landscaping v. Apicella, 337 N.J. Super. 252 (App. Div. 2001), stating that the holding in D'Egidio represented a better approach, at least at this stage of the litigation, rather than dismissing the complaint. That case held that a party who by his own conduct induces an alleged wrongdoing should not benefit as a result of it.

Nevertheless, this is a case of first impression in New Jersey. Sellers and purchasers should be cautious in retaining the services of unlicensed persons in connection with procuring purchasers or sellers respecting real estate transactions. Under circumstances such as these, they may be liable for the payment of a commission.

The ultimate determination of this case will be fact sensitive and subject to plaintiff's proofs at the time of trial. We will keep you updated as events warrant.

If you have any questions with regard to the above case, please do not hesitate to contact Arnold D. Litt, Esq. at 201-342-6000 or 201-498-8520; or alitt@hertenburstein.com.

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Real Estate

August, 1 2007