New Jersey State Bar Ass'n v. New Jersey Ass'n of Realtor Boards

• Decision Date: 30 April 1982
• Citation: 452 A.2d 1323,186 N.J.Super. 391
• Parties: NEW JERSEY STATE BAR ASSOCIATION, Plaintiff, v. NEW JERSEY ASSOCIATION OF REALTOR BOARDS et al., Defendants.
• Court: New Jersey Superior Court

Page 391

186 N.J.Super. 391

452 A.2d 1323

NEW JERSEY STATE BAR ASSOCIATION, Plaintiff, v. NEW JERSEY ASSOCIATION OF REALTOR BOARDS et al., Defendants.

Superior Court of New Jersey, Chancery Division Monmouth County.

Decided April 30, 1982.

George B. Gelman, Newark, for plaintiff (Rosen, Gelman & Weiss, P.C., Newark, attorneys; Jill E. Haley, Newark, on the brief).

Arthur M. Greenbaum, Woodbridge, for defendants (Greenbaum, Greenbaum, Rowe & Smith, Woodbridge, attorneys; Bennet D. Zurofsky, Newark, on the brief).

SULLIVAN, J. (retired and temporarily assigned on recall).

This litigation stems from State v. Bander, 56 N.J. 196, 265 A.2d 671 (1970). In that case defendant, a licensed real estate broker who had negotiated the sale of certain real property between a buyer and seller, was charged with the disorderly person offense of having engaged in the unlawful practice of law, N.J.S.A. 2A:170-78, when he prepared a form contract for sale of the property and submitted it to the buyer and seller for their signatures.

While the New Jersey Supreme Court held that defendant's conduct was not a disorderly person offense under N.J.S.A. 2A:170-79, the court, because of an inadequate trial record, reserved the question of whether defendant's acts amounted to the unauthorized practice of law. The court suggested that an answer might be obtained in a separate suit for an injunction against the type of acts undertaken by defendant or for a declaratory judgment. Acting on the suggestion, the New Jersey State Bar Association filed the present action against licensed realtors as a class seeking a declaratory judgment and injunctive relief. In essence, the complaint sought a ruling that the preparation of contracts for the sale of real estate or leases thereof by licensed real estate brokers or salespersons constituted the unlawful practice of law, even though the broker or salesperson had negotiated the sale or lease.

Following the joinder of issue, the Bar Association and the principal defendant, New Jersey Association of Realtor Boards, held extensive discussions concerning the possibility of adjusting the matter. Terms of a tentative settlement were worked out and accepted by both associations. The agreement proposed a court rule which would have created a standing Supreme Court committee of five attorneys and five realtors to administer the preparation and utilization of standard form contracts pertaining to the sale of one- to four-family homes, building lots and residential leases. Such forms could then be used in the preparation of a contract or lease by the realtor who had negotiated the sale or lease of residential property. The settlement made no provision for the inclusion of an attorney review option clause in either the contract or lease.

The proposed settlement was submitted to the Supreme Court and a public hearing held thereon. At the hearing representatives of several bar associations appeared and opposed the proposed settlement. Apparently the voluble opposition by the local bar caused plaintiff to have second thoughts about the terms of the settlement. In any event, it subsequently withdrew its approval of the settlement and asked that the matter go to trial on the merits.

In August 1981 the Supreme Court by order remanded the case for trial and transferred venue to the Superior Court, Chancery Division, Monmouth County. The suit was then certified as a class action and notice given to all members of the class pursuant to R. 4:32-1 et seq. A second pretrial order was entered and actual trial commenced on March 22, 1982. On the third day of trial, and after considerable testimony and documentary evidence had been presented, counsel for the two associations notified the court that new terms of a settlement had been discussed and were being submitted to their respective boards of trustees for approval. Basically, the new settlement would allow realtors who had negotiated sales of one- to four-family properties and vacant one-family lots, to prepare the contracts of sale, provided an attorney review option clause was included in each contract, and conspicuous notice of the option placed at the head of each contract. It also provided that realtors who negotiated leases of residential property for terms "not in excess of one year" would be allowed to prepare such leases without the inclusion of a notice of and an attorney review clause option. The settlement eliminated the previous recommendation that the Supreme Court establish a standing bipartisan committee of attorneys and realtors to prepare standardized forms of contracts and leases. Both associations, through their respective boards of trustees, approved the new settlement.

Upon submission of the proposed settlement for court approval, an order was entered for a public hearing on published notice to members of the class pursuant to R. 4:32-4, and to members of the bar and the public. The hearing was scheduled for 10 a.m. Monday, April 26, 1982 at the courthouse in Freehold. Several communications were received from individual attorneys. A few opposed the settlement in its entirety as not being in the public interest or as permitting the unlawful practice of law by lay persons. Other letters suggested changes in certain terms of the settlement. At the public hearing one attorney and two county bar associations (Monmouth and Bergen, through representatives) appeared and, while not opposing the settlement, suggested changes in some of its terms.

In essence, the terms of the proposed settlement provide that licensed realtors shall be permitted to prepare contracts for the sale of residential real estate containing one to four dwelling units and for the sale of vacant one-family lots in transactions in which they have a commission or fee interest, provided each contract contains a clause making it subject to review by an attorney for the buyer or seller within three business days. If neither buyer nor seller exercises the right to have an attorney review the...