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Herten, Burstein, Sheridan, Cevasco,
Bottinelli, Litt, Toskos & Harz, LLC
REPORT FROM COUNSEL
WINTER ISSUE, 2007/2008
NON-LICENSED REAL ESTATE BROKER CAN
RECEIVE COMMISSION
By Arnold D. Litt, Esq.
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.
For further information on
this case or any other real estate, or real estate litigation
matter, please contact Arnold D. Litt, Esq. or Jason T. Shafron,
Esq.
THE MURKY WATERS OF WETLANDS
PROTECTION
It has been over a year since a
splintered United States Supreme Court issued a decision on the
scope of the federal government's jurisdiction under the Clean Water
Act to regulate wetlands. In that time, confusion has reigned as
lower courts have interpreted the decision. The Act, now 35 years
old, prohibits dumping certain pollutants into the "waters of the
United States," which are defined as "navigable waters." Property
owners of isolated wetlands have the "murky" task of determining
whether their property is protected or not.
The question before the Court was
whether wetlands into which fill material was deposited were
"navigable waters." The Court set forth a confusing standard to
guide the analysis. On the one hand, it said that the term
"navigable waters" includes only relatively permanent, standing, or
flowing bodies of water, not intermittent or ephemeral flows of
water, and that only those wetlands with a continuous surface
connection to such waters are covered by the Clean Water Act. At the
same time, it said that wetlands may be protected by the Act if they
have a "significant nexus" to navigable waters or could "affect the
chemical, physical and biological integrity of other covered
waters." Lower courts have been split as to which standard to apply.
In an effort to clarify, the
Environmental Protection Agency and the U.S. Army Corps of Engineers
have published a Guidance that identifies those waters over which
the two agencies will assert jurisdiction categorically and on a
case-by-case basis. (Go to www.epa.gov.) Essentially, the agencies
have not picked one of the competing standards from the Supreme
Court over another, but instead will use both of them.
There definitely will be assertion of
Clean Water Act authority over wetlands that abut tributaries that
come within the "relatively permanent" standard. This refers to
tributaries that typically flow year-round or that have continuous
flow at least seasonally. Wetlands adjacent to waters not fitting in
the "relatively permanent" category will be assessed on a
case-by-case basis, using the "significant nexus" test. Perhaps
eager to make some kind of pronouncement that is unequivocal, the
authors of the Guidance also state that Clean Water Act authority
will not be stretched so far as to cover swales, gullies, and
ditches that drain only uplands and do not carry a relatively
permanent flow of water.
For more information on
wetlands regulations or any other land use issues, please contact
Nilufer O. DeScherer, Esq.
SMALL BUSINESS--MAINTAINING A SAFE
WORKPLACE
In theory, and often in practice, the
safety of the workplace is a top priority for any business. But
while large companies may have personnel devoted exclusively to the
subject, safety is but one of many responsibilities for the owners
of small businesses. In some cases, the matter of keeping workers
safe slips down the list of priorities. There to make sure the issue
is not neglected is the federal Occupational Safety and Health
Administration (OSHA).
OSHA has written very detailed
standards for maintaining workers' safety. It also has an expansive
mandate to enforce those standards and the various provisions of the
Occupational Safety and Health Act. Removing dangerous conditions is
only common sense from any point of view, including
employer-employee relations and a calculation based solely on
dollars and cents.
The first step for any small employer
is to be informed and educated as to workplace dangers, not all of
which may be obvious. OSHA maintains an extensive website
(www.osha.gov) that includes information that is especially
pertinent to small businesses and guidance about specific threats to
safety. Insurance companies provide another good source of
information, since these companies have a vested interest in
enhancing workplace safety and thereby minimizing insurance claims.
While exotic threats such as anthrax
or Legionnaires' disease capture headlines, the leading causes of
serious workplace injuries are more ordinary. They include
overexertion, such as excessive lifting, pushing, pulling, holding,
carrying, or throwing an object; falls on the same level (as
distinct from falls from a height); and "bodily reaction," which
covers injuries from bending, climbing, slipping, or tripping
without falling. Regular inspections and repairs, not to mention a
vigilant workforce, can head off many such injuries.
Apart from monetary penalties that may
follow an OSHA investigation, many billions of dollars each year are
paid by employers in medical costs, wage payments, and insurance
claims management as a result of workplace injuries. Small
businesses get some breaks from OSHA, in the form of smaller
monetary penalties and some exemptions from recordkeeping
requirements for employers with 10 or fewer employees. Still, given
their smaller financial reserves, small businesses, in particular,
are well advised to live by the truism that an ounce of prevention
is worth a pound of cure.
For more information on OSHA or other
workplace related matters, please contact Steven B. Harz, Esq. or
Daniel C. Ritson, Esq.
LLC OWNER LIABLE FOR EMPLOYMENT TAXES
Sean was the sole owner of an
accounting firm that was set up as a limited liability company (LLC)
under state law. When the firm went out of business, it had not paid
any payroll taxes for the preceding 18 months. Perhaps thinking that
an accounting business, of all things, should have stayed current in
its payment of payroll taxes, the IRS went after Sean personally for
the $65,000 in unpaid taxes. A federal court upheld a judgment
against him.
The authority of the government to
look to the business owner in his personal capacity for satisfaction
of the tax liability went back to the formation of the business.
Treasury Regulations allow an individual who is the only owner of an
LLC to elect to have the business classified as either an
"association" or a "sole proprietorship." In the former situation,
the entity is treated like a corporation. In the latter case, which
had been selected by Sean, the business is not considered an entity
separate from the owner.
Sean challenged the tax assessment
against him, but to no avail. The court rejected his argument that
the Regulation imposing liability on him as an individual was
invalid because the legislation itself, the Internal Revenue Code,
does not expressly authorize imposing personal liability on the sole
owner of an LLC. The Regulations, like many others issued by the
Treasury Department, are intended as a means to "fill in the gaps"
left by the Internal Revenue Code.
Notwithstanding the ultimately onerous
effect on Sean of his earlier selection under the Regulations, they
are not arbitrary, capricious, or unreasonable. When he checked the
box on a form choosing treatment of his company as a sole
proprietorship, he effectively agreed to be liable for the company's
debts, but he also had benefited by avoiding the double
taxation--once at the corporate level and once as an individual
shareholder--that comes with treatment as a corporation.
For more information, please
contact Richard J. Contant, Esq. or Louis C. Tomasella, Esq.
NEWS FROM HERTENBURSTEIN.COM
* Arnold D. Litt was
honored by the North Jersey Friendship House for his dedication and
service over the last two years, as the out-going Director of the
Board of Trustees. He has been a member of the Board of Trustees
since 1995 and will continue on in that capacity. The organization's
stated mission includes the improvement of the quality of life of
adults with psychiatric history by helping them achieve an optimum
level of independent functioning in the community including job
skills training. Friendship House is staffed with doctors,
psychologists, social workers and an array of job trainers to help
in transitioning these adults to independent living in the
community. In addition, Friendship House is involved in programs to
assist adults with Autism. The Autism programs will be expanding as
public awareness and financial support increases.
* Brady Michael Hand
was born to Carolyn and Michael Hand on May 9, 2007.
* Christopher James Wallace
was born to Laura and Christopher Wallace on August 3, 2007.
* Michael Lubin has
been appointed by the Supreme Court as Vice-Chair of the District
IIB Ethics Committee.
* Six Herten Burstein Clients
named to NJ BIZ's Top 50 List of Fastest Growing Companies in New
Jersey:
Herten Burstein congratulates six of
its clients for being recognized among the Garden State's 50 Fastest
Growing Companies. The rising stars that are being recognized by
NJBIZ are eTeam, Inc., First Tek Technologies, Inc., NETPIXEL, INC.,
US Tech Solutions, Inc., Vedicsoft and Vision Systems Group, Inc.
These companies are all engaged in various areas of the rapidly
growing computer services, consulting and IT technology sector.
Herten Burstein is pleased that it has been able to assist in the
success of these six rapidly growing companies by providing quality
and effective legal services that meet all of their diverse needs.
For over twenty years, Herten Burstein
has represented a wide range of corporate clients. From the small,
closely-held business to the Fortune 500 company, Herten Burstein is
equipped to advise on the full spectrum of issues, which include
corporate and transactional, labor and employment, litigation, real
estate services and related areas. In addition to representing
corporate clients, the firm also advises their executives, company
personnel and other individuals in the areas of estate and tax
planning, trusts and probate matters.
Congratulations to eTeam, Inc., First
Tek Technologies, Inc., NETPIXEL, INC., US Tech Solutions, Inc.,
Vedicsoft and Vision Systems Group, Inc. for the recognition of
their achievements. Herten Burstein wishes these and all of the
companies it represents continued success.
* $1.3 Million Dollar "Sick
House" Verdict:
After a trial that lasted more than 4
weeks, on October 30, 2007 a Bergen County Jury rendered a verdict
against the Board of Directors of 2077 Tenants Corporation and
against its building management, CM3 Management Corporation in
excess of $1.3 million dollars.
The eight member jury determined that
the Board of Directors of the building known as the Pembroke on
Center Avenue in Fort Lee, as well as their building manager, were
negligent in failing to repair roof leaks in the penthouse apartment
in the cooperative.
The owners of the apartment, H. Nathan
Yagoda and Myrna Yagoda had complained for more than 5 years that
the roof was leaking and water was coming into four rooms of their
apartment. They were forced to move from the penthouse due to
extensive microbial contamination from mold, bacteria and fungi
growth.
The verdict was molded by Superior
Court Judge Robert C. Wilson to require the Pembroke to purchase the
contaminated unit from the Yagodas for more than one million
dollars.
In addition, the Yagodas were each
awarded fifty thousand dollars for physical impairment and loss of
enjoyment of life caused by exposure to toxic substances.
The jury also determined that the
Yagodas were entitled to a return of their maintenance fees because
of breach of the proprietary lease by the Board. They were awarded
money damages to cover the cost to repair, replace or clean personal
property which was damaged by mold and leaking water.
The Yagodas were represented by a team
of attorneys from Herten Burstein. The team was lead by New Jersey
Supreme Court Certified Civil Trial Attorney Terry Paul Bottinelli,
partner Patrick Papalia and Senior Counsel, Jason T. Shafron.
Please contact Terry Paul
Bottinelli, Patrick Papalia or Jason T. Shafron if you
would like more information on co-op-related issues, and exposure to
toxic substances.
* Andrew T. Fede
published an article that appears in the October 2007 edition of the
New Jersey Lawyer Magazine, a publication of the New Jersey State
Bar Association. The article is titled "The Clock is Ticking: Why
the Courts or the Legislature Should Prohibit Adverse Possession and
Easement by Prescription Claims in Municipal Land." It discusses the
precedent-setting case, Devins vs. Borough of Bogota. That case was
decided in 1991, the year before Mr. Fede's first term as Bogota's
Borough attorney. In the article, Mr. Fede explains the views of
those who contend that the decision does not advance the public
interest because it could lead to the transfer of public land to
private parties without the payment to the public of the market
value of the property.
* Andrew T. Fede has
earned the designation of Diplomate in New Jersey Local Government
Law, which was awarded to him in September 2007 by Rutgers, The
State University of New Jersey and The New Jersey Institute of Local
Government Attorneys. To attain the diplomate designation,
applicants are required to complete six courses in local government
law given by Rutgers and the Institute and 12 hours of related
continuing education credits. Mr. Fede has represented several area
municipalities and land use boards.
QUOTABLE
"A lie can travel halfway around
the world while the truth is putting on its shoes."
Mark Twain
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