Kenney v. Patersonmilk & Cream Co., Inc.

• Decision Date: 23 January 1933
• Docket Number: No. 70.,70.
• Citation: 164 A. 274
• Parties: KENNEY v. PATERSONMILK & CREAM CO., Inc., et al.
• Court: New Jersey Supreme Court

164 A. 274

KENNEY

v. PATERSONMILK & CREAM CO., Inc., et al.

No. 70.

Court of Errors and Appeals of New Jersey.

Jan. 23, 1933.

Appeal from Circuit Court, Passaic County.

Action by Thomas H. Kenney against the Paterson Milk & Cream Company, Incorporated, and others. Motion by defendants to determine a point of law raised by the pleading before trial.

Plaintiff's complaint struck out.

On appeal from a judgment of the Passaic county circuit court, entered upon order of Judge Mackay, who filed the following opinion:

Defendant moves for the determination of a point of law raised by the pleading before trial under Supreme Court rule 40. This rule has been invoked in other cases in which judgment was entered for defendant. Lehigh Valley R. R. Co. v. United Lead Co., 102 N. J. Law, 545, 133 A. 290, and Wright v. Kroydon Co., 9 N. J. Misc. Rep. 287, 154 A. 195. The facts, briefly, are as follows: Plaintiff alleges procuring a customer ready, able, and willing to purchase lands, buildings, equipment and assets, together with the good will and the business as a going concern, of the Paterson Milk & Cream Company, under a written agreement, whereby a commission of 5 per cent. of purchase was to be paid. Said commission amounts to $37,500.

Defendant submits that the plaintiff is not a licensed real estate broker, and that the property consists in large part in real estate. The plaintiff, in his reply, denies that a large part of the property sold is real estate, but admits that some portion of the property to be sold was real estate, perhaps to the value of one-third of the entire transaction, or maybe less, and further admits that plaintiff did not have a real estate broker's license.

A copy of the agreement for commission is attached to the complaint specifically stating that the property to be sold consists of "property, building, equipment, fixtures, etc."

The allegation that the property consists in large part in real estate is immaterial in view of the wording of the act that it shall be unlawful for a person to attempt to negotiate a sale of an interest in real estate without a license. The denial of an immaterial allegation does not raise an issue. Maxwell v. Staulcup, 103 N. J. Law, 509, 138 A. 201.

Plaintiff claims his business is not buying and selling real estate, and that this is the only transaction he ever participated in or consummated.

The Laws of 1921, chapter 141, page 370 (Comp. St. Supp. § *20—1 et seq.), require real estate brokers to be licensed. Section 2 of this act, as amended by Laws of 1931, chapter 159, page 300 (Comp. St. Supp. § *26—2) defines a real estate broker, and the Laws of 1931, chapter 286, page 720 (Comp. St. Supp. § *26—1), amended section 1 of the original act to provide: "Any single act, transaction or sale shall constitute engaging in business within the meaning of this act."

The questions to be determined are: (1) Is this regulatory legislation; (2) is a single act unlawful where a business is sold consisting of real estate and personal property, one-third or less of the value of which is real estate, prevent a recovery by the plaintiff?

In the case of Ruckman v. Bergholz, 37 N. J. Law, 437, Chancellor Runyon, speaking for the Court of Errors and Appeals said:

"Nor was there error in the charge in respect to the plaintiff's right to recover, notwithstanding he had taken out no license as a real estate agent under the internal revenue law of the United States. The judge might properly have gone further than he did in this direction. He charged that from the evidence, the plaintiff was not within the provisions of that act, and, therefore, could not be affected by them. It is insisted that he should have left it to the jury to determine whether the plaintiff was a real estate agent or not. But that was a matter of no importance, for if he were such and had not taken out a license, that fact could not in any wise have affected his right to recover. The question in such cases is, whether the statute was intended as a protection or merely as a fiscal expedient; whether the legislature intended to prohibit the act unless done by a qualified person, or merely that every person who did it should pay a license fee. If the latter, the act is not illegal. Cope v. Rowlands, 2 M. & W. 149; Smith v. Mawhood, 14 M. & W. 452; Taylor v. Crowland Gas and Coke Co., 10 Exch. 293.

"The internal revenue law prescribed no qualification for a real estate agent. Any one who should have taken out the requisite license would have been authorized ipso facto, so far as that law was concerned, to carry on the business without respect to his qualifications. It did not undertake to declare any act done by an unlicensed person acting as a real estate agent, invalid. Its sole object in requiring a license in such case was to raise revenue." Ruckman v. Bergholz, 37 N. J. Law, 437.

In the case of Wensley v. Godby, 101 N. J. Law, 325, 128 A. 590, Mr. Justice Lloyd holds the Real Estate Brokers' Act to be regulative in the following language: "The licensing of real estate brokers seems to have been a common practice in the various states, in some for purposes of revenue only; in others as a matter of regulation under the police power. Our own Act of 1921, chapter 141 [Pamph. Law p. 370], seems to contemplate a regulation of the business presumably under the police power of the state. Its title is 'An act to define, regulate and license real estate brokers,' etc., and in its first section makes it 'unlawful for any person * * * to engage, either directly or indirectly, in the business of a real estate broker * * * without first obtaining a license' under the act."

This case was quoted with approval in Waring v. Jobs, 104 N. J. Law, 158, 138 A. 889, by the Court of Errors and Appeals. The act in question therefore is regulatory, and not merely for the purpose of raising revenue.

The second point: Is a single act or transaction unlawful under the facts in this case so as to prevent recovery? In the case of Weingast v. Rialto Pastry Shop, Inc., 243 N. Y. 113, 152 N. E. 693, 694, the Court of Appeals held that the essence of the transaction was the sale of a business as a going concern, and, even though an interest in real estate was involved, the broker did not require a license to negotiate the transaction. The court said: "We do not think this provision broad enough to cover, or was intended to cover, every transaction in which an interest in real estate may be part of the subject of transfer. It does not apply to one who exercises the calling of selling or exchanging businesses as going concerns although, as part of the good will, such sales may include the lease of a store or building."

The sale in the Weingast Case, included the store, the lease, the good will, tables, and everything that went with the place. The lease had about six years longer to run, and, of course, was considered of value to the purchaser. The restaurant or pastry shop had to be carried on in some store building or appropriate structure. Tenure for a definite period adds to the value of the good will of the restaurant or eating house where customers may come because of the locality as well as the proprietorship. Weingast testified that the main thing in a restaurant or any other business is the lease, i. e., the place where the business is being conducted. The lease, however, formed but one element in the value of this eating house as a going concern. Weingast v. Rialto Pastry Shop, Inc., 243 N. Y. 113, 152 N. E. 693.

The New York statute, however which is section 440 of the Real Property Law (Consol. Laws, c. 50), reads as follows: "Whenever used in this article 'real estate broker' means any person, firm or corporation, who, for another and for a fee, commission or other valuable consideration, lists for sale, sells, exchanges, buys or rents, or offers or attempts to negotiate a sale, exchange, purchase or rental of an estate or interest in real estate, or collects or offers or attempts to collect rent for the use of real estate, or negotiates, or offers or attempts to negotiate, a loan secured or to be secured by a mortgage or other incumbrance upon or transfer of real estate."

The Court of Appeals of New York in the Weingast Case, said: "We do not think this provision broad enough to cover, or was intended to cover, every transaction in which an interest in real estate may be part of the subject of transfer. It does not apply to one who exercises the calling of selling or exchanging businesses as going concerns although, as part of the good will, such sales may include the lease of a store or building. One who makes a specialty of procuring purchasers for restaurants, drug stores, grocery stores, and the like as going concerns, where a lease simply goes with the place as a part of the good will, does not become, within this law, a real estate broker. As failure to procure a license is made a crime, the statute must not be extended by implication." Weingast v. Rialto Pastry Shop, Inc., 243 N. Y. 113, 152 N. E. 603, 694.

The statute above mentioned appears to differ from the New Jersey statute as amended in 1931, in that nothing is said about a single sale or transaction being unlawful. The violation of the law in New York State is a misdemeanor. In New Jersey, I believe it provides for a penalty.

The New York Court of Appeals too seems to agree that the assignment of a lease, while an interest in real estate, was only such an interest as necessitated the transfer for the purpose of carrying on the business. In the case at bar, the agreement provided not only for the assignment of leases, but for the transfer of actual title to all real estate.

A statute similar to ours was construed in the recent case of Payne v. Volkman, 183 Wis....