Summary
In Kenney, the plaintiff, not a licensed real estate broker, sued for a commission to which he claimed he was contractually entitled by virtue of having produced a would-be purchaser of a dairy; because the dairy's assets included some real estate, listed together with other dairy assets in the commission agreement as "property, building, equipment, fixtures, e," the suit was held by the Passaic County Circuit Court to be barred by § 45:15-3; in a one-sentence per curiam, the Court of Errors and Appeals affirmed.
Summary of this case from Cooney v. RitterOpinion
Argued October 25, 1932 —
Decided January 23, 1933.
Chapter 141 of the laws of 1921 ( Pamph. L., p. 370) requires all real estate brokers to be licensed; therefore, one who was an unlicensed broker cannot recover a commission under a written agreement calling for such payment, where the subject-matter of the sale included real estate, as well as personal property, good will, c., of a going concern.
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 Railroad Co. v. United Lead Co., 102 N.J.L. 545 , and Wright v. Kroydon Co., 9 N.J. Mis. R. 287.
"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 and Cream Company, under a written agreement, whereby a commission of five 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, c.'
"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.L. 509 .
"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 37, require real estate brokers to be licensed. Section 2 of this act, as amended by laws of 1931, chapter 159, page 300, defines a real estate broker, and the laws of 1931, chapter 286, page 720, amended section 1 of the original act to provide: 'Any single act, transaction or sale shall constitute engaging in business within the meaning of the 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.L. 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 anywise 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, supra.
"In the case of Wensley v. Godby, 101 N.J.L. 325 , 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 [ Pamph. L., 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, c., 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.L. 158, 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, 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., supra.
"The New York statute, however, which is section 440 of the Real Property law, 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 attempts to negotiate a loan secured or to be secured by a mortgage or other encumbrance 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 of 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 sale 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. Rialty Pastry Shop, Inc., supra.
"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. 412. This case, which is similar to the case before me, involved an attempt by brokers, one of whom was unlicensed, to recover commission for the sale of a going meat business, including both real estate and personal property, stock in trade and fixtures. The only difference between the Payne case and the case at bar is that one is a meat business and the other a milk business. The Wisconsin statute forbade a person to act in the real estate business temporarily or otherwise, without first securing a license. The trial court sustained defendants' demurrer and denied a recovery because it did not appear from the complaint that plaintiffs were licensed real estate brokers.
"The Wisconsin Supreme Court, in affirming the decision, said:
"'It appears that the plaintiff Payne was a resident of the State of Minnesota and had no real estate broker's license. The contract is upon its face a joint contract made by Payne and Krema with the defendants. The statute relating to real estate brokers is very broad. It defines a real estate broker as follows:
"'Any person, firm or corporation, not excluded by subsection (3) of this section [which relates mainly to receivers, trustees,c.], who for another, and for commission, money or other thing of value (a) sells, exchanges, buys or rents, or offers or attempts to negotiate a sale, exchange, purchase or rental of an interest or estate in real estate * * *.'
"The prohibitory language is as follows:
"'On and after January 1st, 1920, no person, firm or corporation shall engage in or follow the business or occupation of, or advertise or hold himself or itself out as, or shall act temporarily or otherwise as a real estate broker or real estate salesman in this state, without first procuring a license therefor, as provided in this section.'
"'Under the terms of this law there can be no question but that the plaintiff Payne was prohibited from contracting to render services as a real estate broker. It appears that Krema had a real estate broker's license. While a licensed real estate broker is permitted to employ agents who are designated real estate salesmen, the law does not authorize a partner to engage in the real estate business unless he joins in the application. The contract is joint and, if invalid as to the one plaintiff, Payne, it must be held invalid in toto. While the statute is drastic, we cannot say that it is so unreasonable as to be void. The evil aimed at was very great. Citizens of this state were being defrauded in large amounts through the activities of so-called real estate brokers, many of whom were not citizens of this state, and who came here for the purpose of exploiting its people. We are forced to the conclusion that the plaintiffs cannot recover upon this contract. De Wit v. Lander, 72 Wis. 120; 39 N.W. Rep. 349; 3 Williston on Contracts 3072, ¶ 1766; 12 L.R.A. ( N.S.) 575, note.
"'It is urged that the contract was executed; that the plaintiffs had performed the agreements therein contained by them to be performed; and that, if the contract be held void as to real estate, the plaintiffs are entitled to recover at least their commission upon the appraisal value of the personal property * * *. The contract is an entire one, and is not severable. Sexta v. Ontonagon Valley Land Co., 148 Wis. 186; 134 N.W. Rep. 341; 4 Page Cont., § 2089, note 7, cases, also 5 Page Cont., § 2995, note 5, cases.' No recovery was allowed in this case.
"On the question of the contract being an entire one, our courts in New Jersey determined in the case of Kent v. Phenix Art Metal Co., 69 N.J.L. 532 (at p. 537):
"'The view of the matter was undoubtedly correct so far as respects the claim of the plaintiff for a recovery upon the alleged contract. In 1 Pars. Cont. [ Book 2, 5 th ed.], ch. 1, p. 455, § 11, it is said: "Where the consideration is entire and incapable of severance, then it must be wholly good or wholly bad. If the agreement be entire, and not in writing, and a part of it relate to a matter which, by the statute of frauds, should be promised in writing, such part being void avoids the whole contract." And in 3 Pars. Cont. [ Part 2, 5 th ed.], ch. 5, p. 17, it is said: "If a contract be in its nature entire, and in one part it satisfies the statute and in others does not, then it is altogether void."'
"'The circumstances of this case render it clear that the contract was indivisible and the contract an entire one.' Kent v. Phenix Art Metal Co., supra.
"This was an action to recover broker's commissions on an oral agreement to sell real and personal property.
"Outside of New York, the only case in which the Weingast case, supra, has apparently been cited is a California case. Nittler v. Continental Casualty Co. (1923), 271 Pac. Rep. 555. In this case the California District Court of Appeal, consisting of three judges, while purporting to distinguish the Weingast case, in effect refused to follow it. This appears from the following statement of facts which show that the provisions of the New York and California statutes on the point in question are similar. A rehearing was denied by the District Court of Appeal in 272 Pac. Rep. 309, and on December 24th, 1928, a hearing was denied by the California Supreme Court, thereby making the decision the opinion of the highest court in the state. In this case an unlicensed broker sold a gasoline station, store and chicken farm, all on leased premises, and arranged an assignment of the lease (the term of which was not stated) to the purchasers. The question was whether this was transaction requiring a real estate broker's license. The California act (section 2 of the Real Estate Brokers' act as amended in 1925, Deering's General Laws, act 112), defined a real estate broker as "a person * * * who, for a compensation, sells or offers for sale * * * or negotiates the * * * sale * * * of real estate or negotiates the sale * * * or exchange of leases * * *. The court said:
"'From the facts in the record and the findings of the trial court it appears that the transaction in dispute consisted of the sale of personal property located upon real estate and of the negotiation for and exchange of the lease of the real property upon which such personalty was located. The transaction, therefore, under the facts and findings, comes directly within the terms of section 2 of the Real Estate Brokers' act defining a "real estate broker" as one who "leases, or offers to lease, or negotiates the sale, purchase or exchange of leases." The question which is presented on this appeal is whether the sale of personal property, to which the sale or exchange of a lease of the realty upon which the personal property is located is an incident, is to be treated solely as a sale of personal property and not within the Real Estate Brokers' act. This is the contention of the appellant and in support of the argument he cites Weingast v. Rialto Pastry Shop, Inc., supra; 152 N.E. Rep. 693.'
"The California court then quoted the New York statute involved in the Weingast case. It is clear that the California and New York statutes both require a license of a broker negotiating the transfer of a lease. The only difference is that the California act uses the words 'negotiates the sale of leases,' while the New York act uses the language 'negotiates a sale of an interest in real estate.' The California court then said, in regard to the Weingast decision:
"'The court held that this language did not include one who made a specialty of procuring purchasers for restaurants, stores and like going concerns where a lease simply goes with the place as a part of the good will.'
"Despite the Weingast case the California court held that this was a case within the provision of the act requiring a real estate broker's license.
"It is true that prior to the enactment of the 1931 amendment, the Supreme Court of New Jersey held that a single isolated transaction did not come within the purview of the statute. I am of the opinion, however, that as the law now stands, the contract being an entire one, a single sale is unlawful. The sale in this case was unlawful and prohibited by statute.
"In view of the fact that determinations in this case are against the plaintiff and the rule provides for a decision by the court in accordance with the findings, I am of the opinion that the complaint of the plaintiff should be struck out. It is so ordered."
For the appellant, Reuben H. Reiffin and Cole Morrill ( David L. Cole, of counsel).
For the respondents, Harry Nadell ( Arthur T. Vanderbilt, of counsel).
The judgment under review will be affirmed, for the reasons given in the opinion filed in the Passaic County Circuit Court by Judge Mackay.
For affirmance — THE CHANCELLOR, TRENCHARD, PARKER, LLOYD, CASE, HEHER, KAYS, HETFIELD, WELLS, JJ. 9.
For reversal — BODINE, DONGES, BROGAN, KERNEY, JJ. 4.