Carmagnola v. Hann

• Decision Date: 12 June 1989
• Citation: 233 N.J.Super. 547,559 A.2d 478
• Parties: Anthony CARMAGNOLA and Theresa Carmagnola, Plaintiffs, and New Jersey Real Estate Commission, Plaintiff-Intervenor and Appellant, v. Russell J. HANN and Sandra Hann, Defendants-Third-Party Plaintiffs and Respondents, v. Henry D'ALLESANDRO, Third-Party Defendant.
• Court: New Jersey Superior Court — Appellate Division

Page 547

233 N.J.Super. 547

559 A.2d 478

Anthony CARMAGNOLA and Theresa Carmagnola, Plaintiffs, and New Jersey Real Estate Commission, Plaintiff-Intervenor and Appellant, v. Russell J. HANN and Sandra Hann, Defendants-Third-Party Plaintiffs and Respondents, v. Henry D'ALLESANDRO, Third-Party Defendant.

Superior Court of New Jersey Appellate Division.

Argued April 24, 1989.

Decided June 12, 1989.

Sarah T. Darrow, Deputy Atty. Gen., for appellant New Jersey Real Estate Com'n (Peter N. Perretti, Jr., Atty. Gen.; Mary C. Jacobson, Deputy Atty. Gen., of counsel; Sarah T. Darrow, on the brief)

Michael A. Casale for respondents (Michael A. Casale, Bloomfield, on the brief).

Hogan and Palace, Hackensack, filed a brief on behalf of amicus curiae Northwest Bergen Bd. of Realtors, Inc.

Before Judges COLEMAN and D'ANNUNZIO.

The opinion of the court was delivered by

D'ANNUNZIO, J.A.D.

At issue is the validity of a regulation adopted by the New Jersey Real Estate Commission (Commission) requiring all licensee-prepared contracts subject to attorney review to contain an "Agreement to Honor" (ATH). The ATH purports to prohibit the seller of real property from showing the property or considering other offers during the three day attorney review period. The ATH also prohibits the buyer from submitting offers on other properties during the review period.

Pursuant to leave granted, the Commission, plaintiff-intervenor, appeals the grant of summary judgment in favor of defendants, Russell and Sandra Hann (Hann). The material facts are not in dispute. Hann and plaintiffs, Anthony and Theresa Carmagnola (Carmagnola), executed a contract for the sale of Hann's residence. The contract was on a realtor's form and contained the attorney review clause approved by our Supreme Court in New Jersey State Bar Ass'n v. New Jersey Ass'n of Realtor Bds., 93 N.J. 470, 461 A.2d 1112 (1983), mod The issue has its genesis in an action commenced by the New Jersey State Bar Association for injunctive relief and a declaratory judgment that the preparation of form contracts for the sale of real property by realtors ² constitutes the unauthorized practice of law. The Bar Association's action was settled by the entry of a consent judgment, subject to approval by the New Jersey Supreme Court. New Jersey State Bar Ass'n v. New Jersey Realty Bds. Ass'n. 186 N.J.Super. 391, 452 A.2d 1323 (Ch.Div.1982).

94 N.J. 449, 467 A.2d 577 (1983). During the three day attorney review period the Hanns continued to show their residence, accepted a higher offer and, through their attorney, rejected the Carmagnola contract. Carmagnola commenced this action for specific performance. ¹

The Supreme Court approved the consent judgment with some modifications in New Jersey State Bar Ass'n v. New Jersey Ass'n, of Realtor Bds., supra. The final judgment authorizes realtors licensed by the Commission to prepare contracts for the sale of certain residential real estate but requires every contract to contain the following language at the top of the first page:

THIS IS A LEGALLY BINDING CONTRACT THAT WILL BECOME FINAL WITHIN THREE BUSINESS DAYS. DURING THIS PERIOD YOU MAY CHOOSE TO CONSULT AN ATTORNEY WHO CAN REVIEW AND CANCEL THE CONTRACT. SEE SECTION ON ATTORNEY REVIEW FOR DETAILS.

The contract must contain language establishing a three day attorney review period and authorizing an attorney for the buyer or the seller to review and disapprove the contract.

In Levison v. Weintraub, 215 N.J.Super. 273, 521 A.2d 909 (App.Div.1987), certif. den., 107 N.J. 650, 527 A.2d 470, (1987), we held that there was no Thus, the attorney review clause renders enforceability of realtor-drawn contracts illusory, at least during the three day review period. Consequently, though they had signed realtor contracts, sellers and buyers were free to make other deals during the review period. The Commission perceived this freedom to be unacceptable and responded with the Agreement to Honor adopted as N.J.A.C. 11:5-1.16(h). The regulation provides:

enforceable contract because the sellers' attorney's disapproval occurred within the three day review period though another attorney had executed the contract on behalf of the sellers as their attorney-in-fact. In Levison, we also approved the Chancery Division's ruling in Trenta v. Gay, 191 N.J.Super. 617, 468 A.2d 737 (Ch.Div.1983), that the attorney review clause permits either party's attorney to reject a contract within three days for any reason and without a duty to explain the disapproval.

(h) All licensee-prepared contracts and leases which, pursuant to (g) above are required to contain an Attorney Review provision as set forth therein, shall contain in the paragraph which numerically next follows the paragraph containing the Attorney Review provision, or in a Rider to which reference is made in the paragraph which immediately follows the Attorney Review provision, the following language, which shall be modified for leases in accordance with (h)1 below:

AGREEMENT TO HONOR

It is hereby agreed and understood by both buyer and seller that:

1. The seller agrees not to permit showings of the property and not to consider any other offers to purchase this property during the three day attorney review period, and any extension of time for attorney review that is agreed to by the parties or their attorneys.

If during the attorney review period either party's attorney disapproves this agreement by filing a Notice of Disapproval as described in the contract, the property will again be offered for sale and any deposit monies previously paid will be returned to the buyer immediately.

2. The seller directs their broker and all sub-agents not to show this property to other prospective purchasers and not to present additional offers to purchase the subject...