Opinion
DOCKET NO. A-1338-13T1
03-09-2016
THE REAL ESTATE COMPANY, LLC and GLENN WORRELL, Plaintiffs-Appellants/Cross-Respondents, v. PREMIER DEVELOPMENT GROUP, LLC PREMIER DEVELOPMENT GROUP AT BRIELLE, LLC, and MARIO MONELLO, Defendants-Respondents/Cross-Appellants, and THE MONELLO GROUP, LLC, THE MONELLO GROUP AT ALLENWOOD, LLC, THE MONELLO GROUP AT PENNBROOKE, LLC, and THE MONELLO GROUP AT EQUESTRIAN MANOR, LLC, Defendants-Respondents, and PREMIER DEVELOPMENT GROUP AT SEA GIRT, LLC, ROBERT PETILLO, DIANE TURTON REALTORS, and JANE RUOCCO, Defendants.
Joseph C. Lane, attorney for appellants/cross-respondents. Mark R. Aikins, LLC, attorneys for respondents/cross-appellants (Robert C. Pierce, of counsel and on the brief). Robert A. Conforti, attorney for respondents (Mr. Conforti, on the brief; Jeff Thakker, of counsel).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Fuentes, Koblitz and Gilson. On appeal from Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-866-07. Joseph C. Lane, attorney for appellants/cross-respondents. Mark R. Aikins, LLC, attorneys for respondents/cross-appellants (Robert C. Pierce, of counsel and on the brief). Robert A. Conforti, attorney for respondents (Mr. Conforti, on the brief; Jeff Thakker, of counsel). PER CURIAM
In this litigation, plaintiffs Glenn Worrell and The Real Estate Company, LLC (TREC) sought damages for nonpayment of brokerage commissions for work provided to defendants Premier Development Group, LLC (PDG), Premier Development Group at Brielle, LLC (PDGBrielle) (both collectively the Premier Defendants), and Mario Monello, as well as Premier Development Group at Sea Girt, LLC (PDGSG) and defendants The Monello Group, LLC (MG), The Monello Group at Allenwood, LLC (MGAllenwood), The Monello Group at Pennbrooke, LLC, (MGPennbrooke) and The Monello Group at Equestrian Manor, LLC (MGEquestrian Manor) (collectively Monello Defendants). After an eleven-day trial, the jury awarded plaintiffs $162,995 for their breach of contract claims, as well as $171,000 for their quantum meruit claims.
All claims against PDGSG were subsequently dismissed and are not part of this appeal. Settlement was reached with defendants Robert Petillo, Diane Turton Realtors and Jane Ruocco. --------
Plaintiffs appeal the trial court's denial of a mid-trial motion to amend the pleadings to include a claim for successor liability, pursuant to Rule 4:9-2. Plaintiffs also appeal the denial of their motion for judgment notwithstanding the verdict after the jury determined that there was no cause of action on their claim to pierce the corporate veil against Mario Monello. The Premier Defendants cross-appeal from the trial court's decision to allow the jury to hear a charge on quantum meruit claims relating to the broker's services. We affirm the appeal and reverse on the cross-appeal, remanding to vacate the judgment for $171,000 on plaintiffs' quantum meruit claims.
The trial testimony reveals the following facts. Worrell is a licensed real estate broker who formed TREC in 1997. In 2001, Robert Petillo and Monello formed PDG, and formed PDGBrielle the following year. Worrell testified that, beginning in 1993, he and Petillo entered into several agreements, establishing a relationship in which Worrell would serve as a real estate broker to assist Petillo in purchasing various undeveloped lots. According to Worrell, a typical commission agreement would provide TREC with a 5% commission on the purchase price. After TREC was formed, Petillo used TREC to sell subdivided properties, and paid TREC a flat fee commission of $2500 plus 2.5% of the sales price.
The Roschen Property
Monello testified that PDG was created to take title to certain property in Wall Township (the Roschen Property). According to Petillo, Monello brought the Roschen Property to Petillo's attention after seeing it in the New York Times. A March 2001 letter of intent from Petillo addressed to Worrell requested that an offer to purchase the Roschen Property be made on behalf of PDG. The letter stated that the parties were aware that TREC represented PDG and it would be compensated by the buyer under a separate agreement. Petillo testified that the letter was a standard form developed by himself, Worrell and Worrell's wife.
In May 2001, PDG entered into an agreement to purchase the Roschen Property. The agreement stated that PDG had a separate agreement with TREC for compensation related to the purchase, and that the seller would be held harmless for any obligation to TREC. In 2006, PDG closed on the Roschen property. Worrell testified that he was intimately involved in facilitating the purchase, as did other witnesses from Wall.
TREC retained an attorney to secure a commission on the purchase. The attorney testified that he sent an invoice requesting a commission of $127,500, but no commission was ever paid. Worrell testified that he believed the reference to a separate agreement in the letter of intent entitled TREC to five percent of the purchase price as a commission. However, he acknowledged that TREC did not have a separate written agreement.
The Mariner's Bend Property
The February 2002 letter of intent instructing Worrell to make an offer for the Mariner's Bend property also provided that TREC would be compensated by separate agreement. In August 2002, PDG purchased the property. Worrell testified that Petillo told him that PDG could not pay the commission owed at the time of closing, and the deal for the property would not go through unless TREC accepted deferred payments. According to Worrell, he deferred the $180,000 commission and entered into an agreement to be repaid through the sale of individual units. No written document memorializing this agreement was provided. Worrell stated that TREC had been paid $60,000 and was still owed $120,000. Petillo testified to the contrary, stating that TREC had been paid $107,000 pursuant to the various Multiple Listing Service (MLS) listings for units sold between 2003 and 2004, but these commissions had nothing to do with any commissions purportedly owed on the purchase of the Mariner's Bend property.
The validity of the listing agreement for the sale of the Mariner's Bend units was hotly disputed by the parties. Worrell stated that TREC was initially given an Exclusive Right to Sell Agreement for several units at Mariner's Bend. Worrell testified that the agreement was renewed continuously until September 1, 2005, specifically referencing an agreement that was effective from September 1, 2004 to 2005. The agreement contained a clause stating that a commission would be paid to TREC after the expiration of the agreement if, within 180 days of the expiration, a unit was sold, leased or exchanged to a buyer introduced by TREC during the term identified in the agreement. An exception to this clause stated that the protection period would not apply if the owner entered into a valid listing agreement with another broker during that time.
Petillo testified that he never intended to grant TREC an exclusive right to sell for the September 1, 2004 to 2005 time period. Petillo stated that he had never seen the agreement prior to his deposition.
Worrell explained that he did not list the agreement with the MLS because the units at Mariner's Bend were not single family homes. An employee with the Monmouth County MLS, testified at her deposition that the document was not a valid exclusive listing agreement as it did not contain specific property addresses, lacked an expiration date, omitted the name of the seller and a date for the signature, and the "Waiver of Broker Cooperation" was invalid because as it did not contain the owner's signature.
An employee of TREC testified that she spoke with Petillo about extending the agreement beyond September 1, 2005, and that he responded by asking her whether she trusted him, insisting that he had always paid her in the past. Petillo testified that, after PDG purchased the Mariner's Bend property, TREC was given an exclusive listing for the sale of the units. Petillo explained that the units did not sell at that point and, after a year, the listings were put on the MLS. According to Petillo, once the units were listed on the MLS, they began to sell. On those sales, TREC received a three percent commission and the broker who brought the purchaser received a two percent commission.
In September 2005, PDGBrielle entered into a contract of sale with Dawn Contracting (Dawn) to sell the remaining units at Mariner's Bend. Jane Ruocco, a former employee of TREC who left in January 2005 to work for Diane Turton Realtors, testified that Petillo asked her to show the Mariner's Bend property to Dawn, which she did as early as July 2005. Ruocco stated that she had previously shown the Mariner's Bend property to Dawn in March 2005 to see the quality of PDG construction due to Dawn's interest in purchasing other PDG properties. The attorney who represented Dawn in the purchase had no knowledge of a listing agreement between TREC and the Premier Defendants.
On January 28, 2006, PDGBrielle entered into a five-day Exclusive Right to Sell Agreement with Diane Turton Realty and Ruocco. On January 30, 2006, PDGBrielle closed on the sale of the remaining units at Mariner's Bend to Dawn for a purchase price of $2,850,000.
The Sale of Unit 3 to Monello
On October 1, 2004, the deed for the purchase of unit 3 at Mariner's Bend was recorded. The date on that deed was July 30, 2004, and Worrell testified that he had an exclusive listing agreement with PDG at that time. Worrell also testified that a "master office exclusive agreement for Mariner's Bend Condo" entitled TREC to five percent for any sale from February 20 to August 20, 2004. Petillo testified that he was unsure if unit 3 was ever listed with TREC. Petillo testified that he had explained to Worrell that the unit was being purchased as an investment and that they did not intend on paying a commission.
The Transfer of Properties from the Premier Defendants to the
Monello Defendants.
Petillo testified that in late 2006, PDG was in financial trouble and the company was attempting to sell assets to alleviate debt. Petillo explained that he stopped using TREC's services at that time because he was seeking a more established real estate firm. Petillo stated that in early 2007 he had begun to discuss the financial situation of PDG with Monello. At some point, PDG could not pay its creditors and Monello had to contribute his own funds to pay back certain debts.
Monello testified that, although PDG had initially considered obtaining traditional lending for many of its business ventures, Monello himself would occasionally compete to serve as the senior lender to PDG on several projects. He held purchase-money mortgages for several of the properties owned by PDG. Monello was the mortgagee for the Allenwood tract, the Roschen Property, and the Pennbrooke tract. The mortgages were modified in a note and mortgage modification agreement recorded on May 15, 2007. The agreement is dated March 20, 2007; however, according to Worrell, Monello and Petillo had agreed to the terms as early as February 28, 2007, which was less than two weeks after TREC had filed its first complaint against the Premier Defendants and Monello.
On November 16, 2007, a letter from the attorney for PDG stated that the mortgage on the Allenwood property was in default, and the mortgages on the Roschen and Pennbrooke would soon follow. The letter memorialized that the parties had discussed a resolution wherein PDG would provide Monello with a deed in lieu of foreclosure for the three properties. The letter stated that Petillo and Monello had agreed to these terms and, additionally, that Petillo would retain ownership at PDG. According to Monello, at that time the parties had discussed foreclosure of the property as a possibility. Monello testified that PDG considered other options as well, such as bankruptcy or a capital call. He testified further that the decision was made to avoid bankruptcy, and they instead chose to pay off certain creditors. Monello explained that, as the senior lender to PDG, he secured the capital he had previously extended to the company. Further, he noted that the properties were "fully impaired" in that they would not raise enough proceeds to cover the debt owed if sold on the market.
Monello and Petillo both testified that Monello was eventually made the managing member and Petillo relinquished that position, but remained a member of PDG. Subsequently, in 2008, deeds in lieu of foreclosure were given to Monello on the Allenwood, Roschen, and Pennbrooke properties. Monello testified that he was aware of the TREC lawsuit at the time that he received the deeds. The deeds were apparently signed by Monello as the managing member of PDG.
TREC's complaint alleges that in 2008 Monello created the Monello Defendants and transferred the properties in April 2009: the Allenwood property to MGAllenwood; the Pennbrooke property to MGPennbrooke; and an Equestrian Manor property to MGEquestrianManor.
I
TREC argues that the trial court erred in denying its application to amend the pleadings to add a claim for successor liability, to conform to the proofs at trial pursuant to Rule 4:9-2, and the court should have granted a new trial for the same reasons. Rule 4:9-2 states:
[w]hen issues not raised by the pleadings and pretrial order are tried by consent or without the objection of the parties, they shall be treated in all respects as if they had been raised in the pleadings and pretrial order. Such amendment of the pleadings and pretrial order as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure so to amend shall not affect the result of the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings and pretrial order, the court may allow the pleadings and pretrial order to be amended and shall do so freely when the presentation of the merits of the action will be thereby subserved and the objecting party fails to satisfy the court that the admission of such evidence would be prejudicial in maintaining the action or defense upon the merits.The Rule generally "requires that motions for leave to amend be granted liberally." Kernan v. One Wash. Park Urban Renewal Assocs., 154 N.J. 437, 456 (1998). "The determination of a motion to amend a pleading is generally left to the sound discretion of the trial court . . . ." Franklin Med. Assocs. v. Newark Pub. Sch., 362 N.J. Super. 494, 506 (App. Div. 2003). That "exercise of discretion will not be disturbed on appeal, unless it constitutes a 'clear abuse of discretion.'" Ibid. (quoting Salitan v. Magnus, 28 N.J. 20, 26 (1958)).
The court must balance whether "undue delay or prejudice will result from the amendment" against the "need to seek justice." Adron, Inc. v. Home Ins. Co., 292 N.J. Super. 463, 475-76 (App. Div. 1996) (first quoting Tomaszewski v. McKeon Ford, Inc., 240 N.J. Super. 404, 411 (App. Div. 1990)). Significant discretion is afforded to the trial court in denying motions in the interests of justice. Franklin Med. Assocs., supra, 362 N.J. Super. at 506.
With regard to successor liability, it is "well-established that where one company sells or otherwise transfers all of its assets to another company, the transferee of those assets is not ordinarily liable for the debts of the transferor company, including those arising out of the transferor's tortious conduct." Woodrick v. Jack J. Burke Real Estate, Inc., 306 N.J. Super. 61, 72-73 (App. Div. 1997) (citing Ramirez v. Amsted Industries, Inc., 86 N.J. 332, 340 (1981)), certif. granted sub nom., Woodrick v. Fox & Lazo, Inc., Realtors, 153 N.J. 214, appeal dismissed, 157 N.J. 537 (1998). Successor liability can be established under four recognized exceptions:
where (1) the purchasing corporation expressly or impliedly agrees to assume such debts and liabilities; (2) the transaction amounts to a consolidation or merger of the seller and purchaser; (3) the purchasing corporation is merely a continuation of the selling corporation; or (4) the transaction is entered into fraudulently in order to escape responsibility for such debts and liabilities.
[Id. at 73 (citing Ramirez, supra, 86 N.J. at 340).]
Here, the motion to amend the pleadings to introduce successor liability was first broached well after trial had already began. At that time, TREC sought to introduce several deeds to demonstrate that the Monello Defendants were liable under a theory of successor liability. TREC argued that a liberal reading of the pleadings referencing the fraudulent transfers would satisfy the requirements needed to plead a cause of action for successor liability. The trial court found that TREC had made several requests for various jury charges and that successor liability was not one of them, and noted that defendants represented they had never seen the deeds prior to that moment at trial. When TREC formally moved to amend the pleadings to conform to the proofs, the trial court denied that motion and sustained the objection to the admission of the deeds.
Following the close of proofs, TREC renewed its motion to amend the complaint to include successor liability in conformance with the evidence presented at trial. The trial court again denied the motion, finding that TREC's "eleventh-hour" motion to amend was unduly prejudicial to defendants. After the verdict, TREC moved for a new trial on the issue of successor liability, which was also denied by the trial court.
TREC's complaint was in its third iteration by the time of trial. The trial court noted that TREC had numerous occasions in which it could have placed the defendants on notice of a claim for successor liability rather than waiting until the middle of trial. The trial court's determination that defendants would be unduly prejudiced by this late additional amendment is not an abuse of discretion.
Further, TREC's cause of action for successor liability is without support in the record. Monello had the right to foreclose on the properties as there is no dispute that Monello had valid mortgages on the properties predating this legal action and PDG had defaulted on the required payments for the mortgages. Also, the causes of action for fraudulent conveyance were dismissed, and TREC has not appealed that dismissal. Thus, the record lacks evidence of any fraudulent intent on the part of Monello. See Id. at 73; N.J.S.A. 25:2-26.
Defendant also suggests that the "transfers" of the properties should be treated as a de facto merger. The November 2007 resolution between PDG and Monello specifically stated that Monello would not assume the debts of PDG. See Woodrick, supra, 306 N.J. Super. at 76. Further, no evidence was presented to demonstrate that Monello took the properties in order to continue the business of PDG, or that Petillo had any involvement with the Monello Defendants. Id. at 73-74, 76-77. The lack of support for successor liability underscores the trial court's reasonableness in denying plaintiffs' mid-trial motion to add a claim for successor liability.
II
TREC argues that the trial court erred in denying its motion for judgment notwithstanding the verdict as to the count seeking to pierce the corporate veil against Monello. TREC's sole theory is that reversal is necessary because the trial court failed to articulate factual findings supporting its denial.
A jury verdict should only be set aside by the trial judge when it clearly and convincingly appears there was a miscarriage of justice. R. 2:10-1; State v. Sims, 65 N.J. 359, 373-74 (1974); Dolson v. Anastasia, 55 N.J. 2, 7 (1969). Our review of the trial court's determination is limited, and we should give due regard to its assessment of witness credibility based on its opportunity to have heard live witness testimony and to have gained a "feel for the case." Sims, supra, 65 N.J. at 374.
Here, following a recitation of the applicable law governing its review, the trial court stated:
I cannot find that the jury's consideration and due deliberation of the evidence was so mistaken, and the Court cannot find that the verdict was so contrary to the weight of the evidence, that it must invariably give rise to the inescapable conclusion that the jury had abrogated its responsibility of being, impartial, unbiased and open minded.
"[T]he party seeking an exception to the fundamental principle that a corporation is a separate entity from its principal bears the burden of proving that the court should disregard the corporate entity." Verni ex rel. Burstein v. Harry M. Stevens, Inc., 387 N.J. Super. 160, 199 (App. Div. 2006) (alteration in original) (quoting Tung v. Briant Park Homes, Inc., 287 N.J. Super. 232, 240 (App. Div. 1996)), certifs. denied, 189 N.J. 429 (2007). Although courts have the power to pierce the corporate veil, such action should only be taken "to prevent an independent corporation from being used to defeat the ends of justice, to perpetrate a fraud, to accomplish a crime, or otherwise to evade the law." Tung, supra, 287 N.J. Super. at 239.
Evidence was presented that Monello was not involved in the daily operations of PDG. Further, as previously discussed, the counts of fraudulent transfer against Monello were dismissed. The trial court did not err in determining that the jury's verdict against piercing the corporate veil did not represent a clear and convincing miscarriage of justice.
III
In its cross-appeal, the Premier Defendants argue that the trial court erred in allowing the jury to consider awarding plaintiffs damages based upon equitable theories of liability. At the close of TREC's proof and again at the end of trial, the Premier Defendants moved for judgment pursuant to Rule 4:40-1. A party may move at trial for involuntary dismissal of the action
on the ground that upon the facts and upon the law the plaintiff has shown no right to relief. Whether the action is tried with or without a jury, such motion shall be denied if the evidence, together with the legitimate inferences therefrom, could sustain a judgment in plaintiff's favor.
[R. 4:37-2(b).]
"[I]f, accepting as true all the evidence which supports the position of the party defending against the motion and according him [or her] the benefit of all inferences which can reasonably and legitimately be deduced therefrom, reasonable minds could differ, the motion must be denied . . . ." Estate of Roach v. TRW, Inc., 164 N.J. 598, 612 (2000) (first alteration in original) (quoting Sons of Thunder, Inc. v. Borden, Inc., 148 N.J. 396, 415 (1997)). "An appellate court applies this standard when reviewing a trial court's denial of a Rule 4:37-2(b) motion for involuntary dismissal." Hitesman v. Bridgeway, Inc., 218 N.J. 8, 26 (2014). We review the legal determinations of the trial court de novo, as "[a] trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference." Ibid. (quoting Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)).
Pursuant to the Statute of Frauds,
a real estate broker who acts as agent or broker on behalf of a principal for the transfer of an interest in real estate, including lease interests for less than three years, is entitled to a commission only if before or after the transfer the authority of the broker is given or recognized in a writing signed by the principal or the principal's authorized agent, and the writing states either the amount or the rate of commission.The statute allows for an exception to the rule based upon an oral agreement only in certain circumstances. Specifically,
[N.J.S.A. 25:1-16(b).]
[a] broker who acts pursuant to an oral agreement is entitled to a commission only if:
(1) within five days after making the oral agreement and before the transfer or sale, the broker serves the principal with a written notice which states that its terms are those of the prior oral agreement including the rate or amount of commission to be paid; and
(2) before the principal serves the broker with a written rejection of the oral agreement, the broker
either effects the transfer or sale, or, in good faith, enters negotiations with a prospective party who later effects the transfer or sale.
"Strict compliance with the statute of frauds is essential for a broker to recover a commission for the sale of real estate." C&J Colonial Realty v. Poughkeepsie Sav. Bank, 355 N.J. Super. 444, 473 (App. Div. 2002), certif. denied, 176 N.J. 73 (2003). Importantly, "[t]he statute[] of frauds [is] designed 'to protect the public from fraud, incompetence, misinterpretation, sharp or unconscionable practice.'" Coldwell Banker Commercial/Feist & Feist Realty Corp. v. Blancke P.W. L.L.C., 368 N.J. Super. 382, 392 (App. Div. 2004) (quoting Ellsworth Dobbs, Inc. v. Johnson, 50 N.J. 528, 553 (1967)). The statute mandates that a writing specify a specific amount or rate of commission, and agreements that merely specify that a "reasonable commission" be paid are "antithetical to the specific language and purpose of the statute"; allowing such agreements to serve as the basis for a commission would "render[] that portion of the statute meaningless and would be a violation of basic statutory construction." C&J Colonial Realty, supra, 355 N.J. Super. at 474. In Coldwell Banker we reiterated the Supreme Court's holding in McCann v. Biss, 65 N.J. 301, 310 (1974), that "a broker who fails to comply with the statute of frauds may not circumvent the statute by seeking recovery against the seller on a tortious interference or quantum meruit theory." Coldwell Banker Commercial/Feist & Feist Realty Corp., supra, 368 N.J. Super. at 398.
[Id. at 25:1-16(d).]
Here, the jury awarded quantum meruit damages on two separate transactions, the purchase of the Roschen Property and the purchase of Mariner's Bend. In denying the Premier Defendants' motion at the close of TREC's proof, the trial court noted that New Jersey courts had allowed brokers seeking real estate commissions to proceed on a quantum meruit theory for unjust enrichment based on technical non-compliance with the statute of frauds.
In Coldwell Banker, we allowed a claim of quantum meruit to reach the jury in an action for broker commissions. Id. at 402. However, in that case, the allowance was based entirely on the fact that the noncompliance with the statute of frauds was a "technical violation." Ibid. In Coldwell Banker, the notice provided to the defendant properly stated the percentage of commission due, but was improperly sent by fax in contravention of the statute. Id. at 385, 389-90; see N.J.S.A. 25:1-16 ("The notices provided for in [the statute] shall be served either personally, or by registered or certified mail, at the last known address of the person to be served.").
Here, the facts are clearly inapposite as there was not a technical noncompliance but rather a complete noncompliance. There was no separate agreement stating the amount of commission owed to plaintiffs on the purchase of the Roschen Property or Mariner's Bend, and the trial court dismissed the counts based upon a breach of contract. There is no dispute that TREC failed to comply with N.J.S.A. 25:1-16(d). Any award of damages on the basis of quantum meruit would undermine the Statute of Frauds. Although this is an unforgiving result, Worrell was an experienced real estate broker and business person, in a position to know that commission agreements must be in writing.
All other issues raised by the parties are without sufficient merit to require discussion in a written opinion. R. 2:11-3(e)(1)(E).
Affirmed in part, and reversed in part, and remanded to correct the judgment to remove the $172,000 award for equitable relief. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION