Ellsworth Dobbs, Inc. v. Johnson

• Decision Date: 27 September 1966
• Docket Number: No. A--639,A--639
• Parties: ELLSWORTH DOBBS, INC., a New Jersey Corporation, Plaintiff-Respondent, v. John R. JOHNSON and Adelaide P. Johnson, his wife, Defendants-Appellants and Third-Party Plaintiffs, v. Joseph IARUSSI, Third-Party Defendant, Defendant-Appellant.
• Court: New Jersey Superior Court — Appellate Division

Page 271

92 N.J.Super. 271

223 A.2d 199

ELLSWORTH DOBBS, INC., a New Jersey Corporation, Plaintiff-Respondent, v. John R. JOHNSON and Adelaide P. Johnson, his wife, Defendants-Appellants and Third-Party Plaintiffs, v. Joseph IARUSSI, Third-Party Defendant, Defendant-Appellant.

No. A--639.

Superior Court of New Jersey, Appellate Division.

Argued Dec. 13, 1965.

Decided Sept. 27, 1966.

Lee A. Holley, Orange, for defendants-appellants (Holley & Kroner, Orange, attorneys).

Thomas L. Morrissey, Newark, for plaintiff-respondent (Carpenter, Bennett & Morrissey, Newark, attorneys, John C. Heavey, Jr., Newark, on the brief).

Before Judges GOLDMANN, FOLEY and COLLESTER.

The opinion of the court was delivered by

COLLESTER, J.A.D.

This is an appeal by defendants John R. Johnson and Adelaide Johnson from a judgment in the amount of $15,000, plus interest, entered upon a directed verdict by the court below as to their liability to plaintiff Ellsworth Dobbs, Inc. (Dobbs) for a real estate commission, and a jury verdict as to the amount thereof. Defendant Joseph Iarussi appeals from a jury verdict of $15,000, plus interest, in favor of plaintiff for breach of an implied contract.

Dobbs, a real estate broker, was authorized by the Johnsons to act as an agent in the sale of their 144-acre farm property in Bernards Township. The broker was approached by Iarussi, a builder of one-family houses, who was seeking development sites. Through Dobbs' efforts, the Johnsons entered into a contract of sale with Iarussi on May 1, 1961. The agreed sales price was $250,000. $10,000 was to be paid on execution of the agreement; the balance to be paid at closing of title on September 1, 1961 by execution of a purchase money mortgage in the amount of $240,000. The contract further provided that the mortgage would contain a clause whereby each lot would be released from the mortgage lien upon payment of $2,500 by Iarussi and that the purchaser would be entitled to a credit of four lot releases for the original $10,000 deposit on the contract.

Four days later the parties executed an addendum altering the terms of payment by providing for a downpayment of $1,500, a payment of $1,000 on June 1, and a payment of $10,000 at the closing when a purchase money mortgage for the remaining $237,500 would be executed.

The contract contained the following provisions for payment of a real estate commission of $15,000 to plaintiff:

'The commission hereinafter mentioned shall be payable as follows: $5,000.00 when sellers shall have received a total of $25,000.00 on account of the above purchase price ($10,000.00 herewith and $15,000.00 on account of the principal sum of the above mentioned purchase money note and mortgage); an additional $5,000.00 when an additional $25,000.00 shall have been paid on account of the principal sum of purchase money note and mortgage; and the remaining $5,000.00 when an additional $25,000.00 shall have been paid on account of the principal sum of said purchase money note and mortgage. The entire commission of $15,000.00 shall become immediately due and payable upon any sale or assignment by sellers of said purchase money note and mortgage.

And the Seller hereby agrees to pay Ellsworth Dobbs, Inc. a commission of Six (6) % On the purchase price aforesaid, said commission to be said in consideration of services rendered in consummating this sale; said commission to become due and payable as above mentioned.'

Iarussi made the first two payments totaling $2,500 to the Johnsons. However, on September 1, 1961, title did not close because Iarussi lacked the necessary financial backing. The Johnsons agreed to extend the closing date on condition that Iarussi pay interest on the purchase price and taxes from September 1 until the actual closing date.

On January 30, 1962 the Johnsons sought a reduction in the amount of the real estate commission called for in the contract. By letter dated January 31 Theodore Fleming, plaintiff corporation's vice-president, agreed to reduce the commission from $15,000 to $10,000. The reason for the execution of the agreement and the binding effect thereof is disputed. Fleming claims the reduction was agreed to on condition that the Johnsons would compromise their claims for interest and taxes with Iarussi and close the title promptly and that the Johnsons did not comply with this condition. The Johnsons claim the reduction was agreed to upon their agreement to send a time of the essence letter to Iarussi--a condition which they fulfilled.

On February 9, 1962 the Johnsons' attorney sent Iarussi a letter making time of the essence and setting February 20 as the closing date. It included a claim for $7,912 due for interest and taxes from September 1, 1961. On February 20 Iarussi appeared prepared to pay $10,000, but the Johnsons refused to convey unless the accrued interest and taxes were paid. This dispute not being resolved, title was not closed.

Immediately following the abortive closing Iarussi instituted suit against the Johnsons for specific performance of the contract. The Johnsons filed an answer and counterclaim seeking specific performance and a judgment for accrued interest and taxes. They then moved for summary judgment. The Chancery judge granted partial summary judgment ordering Iarussi to close title and pay the purchase price on May 15 and transferring the Johnsons' damage claims to the Law Division.

On May 15 Iarussi again lacked financial backing and could not close. As a result the Johnsons and Iarussi executed an agreement in which (1) they mutually released each other from all obligations under the contract of sale and the Chancery Division's judgment, (2) Iarussi agreed to indemnify the Johnsons for any claims for commission brought by Dobbs, and (3) the Johnsons agreed to repay the $2,500 paid by Iarussi as deposits on the contract when, as and if, the premises were sold and they received $25,000 on account of the purchase price.

Thereafter Dobbs brought suit against the Johnsons for the broker's commission which it contended had been earned. The Johnsons filed an answer denying liability, contending that the commission was conditional, and that plaintiff had failed to produce a ready, willing and able buyer. The Johnsons counterclaimed for $250 allegedly due for deferring the closing date for one month at plaintiff's request, and for $3,000 in legal expenses allegedly assumed by Dobbs to induce them to enter into a contract with Iarussi. The Johnsons also brought a third-party action against Iarussi on the indemnification agreement. Thereafter, Dobbs added a count to its complaint in which it sued Iarussi to recover damages based on the breach of an implied agreement to consumate his contract to purchase the property from the Johnsons under which Dobbs would earn a commission.

At the outset of the trial Iarussi (who was liable under the indemnification agreement for any judgment obtained by plaintiff against the Johnsons) was permitted to amend his contentions in the pretrial order to assert that (1) the real estate commission was contingent upon the receipt of certain payments of part of the purchase price by the buyer, and (2) plaintiff forfeited rights to a commission by breach of its fiduciary duty owed to the Johnsons.

Iarussi then moved for a judgment of dismissal as a matter of law, based on plaintiff's opening statement and the pleadings, contending that the Johnsons' agreement to pay a commission was contingent upon the closing of title and receipt of the payments on account of the purchase price called for by the contract--a contingency which had not taken place. The trial judge denied the motion and ruled as a matter of law that (1) Dobbs' commission was earned on May 4, 1961 when the contract of sale was executed, although payment was deferred, and (2) even if the agreement to pay a commission was contingent, the action of the Johnsons in executing the release to Iarussi prevented fulfillment of the purported contingency and rendered the Johnsons liable for the commission.

The trial judge thereafter excluded evidence offered to show that it was never the intent or understanding of any of the parties that the commission would be earned when the contract of sale was executed and that it was contingent upon the title closing and payments of a portion of the purchase price.

Upon completion of the trial the court dismissed the Johnsons' counterclaim for lack of proof of damages. The only two issues submitted to the jury were (1) whether the broker received consideration for reducing the commission from $15,000 to $10,000, and (2) whether Iarussi was obligated to Dobbs uner an implied contract. Following verdicts of $15,000 against them, defendants appealed.

I

We consider first the appeal from plaintiff's judgment against the Johnsons for $15,000 for the brokerage commission and dismissal of the Johnsons' counterclaim.

The primary issue to be decided is whether the trial judge was correct in (1) ruling that the commission clause unambiguously stated that the commission was earned when the contract was signed, and (2) barring testimony relating to the surrounding circumstances of the parties and their intentions as to when the commission would be earned.

Our cases hold that, in the absence of a special agreement, an authorized broker is entitled to a commission when he produces a buyer able and willing to buy on the seller's terms and the seller enters into a binding contract with the buyer, even though the buyer eventually proves to be financially unable to perform. Richard v. Falleti, 13 N.J.Super. 534, 536, 81 A.2d 17 (App.Div.1951). However, the broker and seller may, by the use of appropriate language, condition the broker's right to a commission upon a future happening, such as the actual transfer of title.

Defendants argue that the language of the commission agreement clearly indicated that it was conditional, and the contingencies not having...