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DEFOREST INVESTMENT CO., LLC v. CUSHMAN & WAKEFIELD OF NEW JERSEY, INC., A-3467-09T2. (2012)

Court: Superior Court of New Jersey Number: innjco20120112292 Visitors: 12
Filed: Jan. 12, 2012
Latest Update: Jan. 12, 2012
Summary: NOT FOR PUBLICATION PER CURIAM. This dispute involves the timing of payment of a real estate commission owed by the seller, plaintiff DeForest Investment Co., LLC (DeForest), to its commercial real estate broker, defendant Cushman & Wakefield of New Jersey, Inc., (Cushman). DeForest appeals from three Law Division orders. The first and second orders, entered on March 26, 2010, denied DeForest's summary judgment motion for a declaration that it was obligated only to pay the commission in instal
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NOT FOR PUBLICATION

PER CURIAM.

This dispute involves the timing of payment of a real estate commission owed by the seller, plaintiff DeForest Investment Co., LLC (DeForest), to its commercial real estate broker, defendant Cushman & Wakefield of New Jersey, Inc., (Cushman). DeForest appeals from three Law Division orders. The first and second orders, entered on March 26, 2010, denied DeForest's summary judgment motion for a declaration that it was obligated only to pay the commission in installments, and granted Cushman's summary judgment motion on its counterclaim seeking payment of its commission in a lump sum. The third order, entered on May 24, 2010, awarded Cushman contractual attorneys' fees and costs. We affirm.

I.

In November 2007, DeForest and Cushman entered into an "Exclusive Sales Agency Contract" (the Agency Contract) in which DeForest appointed Cushman its sole agent and granted to Cushman the exclusive right to sell property DeForest owned in East Hanover, New Jersey (the Property). Before signing the Agency Contract, the parties exchanged drafts. The parties agreed that Cushman's commission would be three and one-half percent of the total sales price, but did not agree immediately about how the sales price would be computed or when the commission would be paid. Cushman submitted to DeForest a proposal which included the following "Time of Payment" and "Computation of Sales Price" clauses:

TIME OF PAYMENT The commission shall be earned, due and payable in full at the time of the closing or transfer of title to the property and not otherwise except, in the case of an installment purchase contract, in which case, the commission shall be earned, due and payable in full at the time of the execution and delivery of the installment purchase contract by and between the seller and the purchaser. [ ] COMPUTATION OF SALES PRICE The commission shall be computed in accordance with the above rates based upon the total sales price, which shall include any mortgages, loans or other obligations of the seller which may be assumed by the purchaser or which the purchaser takes title "subject to", any purchase money loans or mortgages taken back by the seller, the sales price of any fixtures or other personal property sold by separate agreement between the seller and purchaser as part of the overall sale of the real property, and the current market value of any other real or personal property transferred from the purchaser to the seller as part of the sale.

DeForest responded with a counter-proposal that included the following changes:

TIME OF PAYMENT The commission shall be earned, due and payable in full at the time DeForest... receives payment from the Seller1 for the Property. at the time of the closing or transfer of title to the property and not otherwise, except, In the case of an installment purchase contract, [Cushman] will earn a portion of its commission with each payment received by the Seller. For example, in the event of an installment sale which calls for ten equal payments, [Cushman] will earn one tenth[] of its total commission simultaneous with DeForest[`s]... receipt of each equal payment. in which case, the commission shall be earned, due and payable in full at the time of the execution and delivery of the installment purchase contract by and between the seller and the purchaser.

DeForest's counter-proposal also included a change in the manner in which the sales price would be computed. DeForest proposed, among other things, to decrease the total sales price by the "cost... of any insurance policy or environmental remediation that is a condition to, or a necessary prerequisite to the sale of the Property"; and to delete from Cushman's "Computation of Sales Price" clause the inclusion of "any mortgages, loans or other obligations of the seller which may be assumed by the purchaser or which the purchaser takes title `subject to', [and] any purchase money loans or mortgages taken back by the seller."

The relevant clauses in the Agency Contract executed by the parties provided:

TIME OF PAYMENT The commission shall be earned, due and payable in full at the time DeForest... receives payment from the Seller for the Property. In the case of an installment purchase contract, [Cushman] will earn a portion of its commission with each payment received by the Seller. For example, in the event of an installment sale which calls for ten equal payments, [Cushman] will earn one tenth of its total commission simultaneous with DeForest[`s]... receipt of each equal payment. [ ] COMPUTATION OF SALES PRICE The commission shall be computed in accordance with the above rates based upon the total sales price which shall include any mortgages, loans or other obligations of the seller which may be assumed by the purchaser or which the purchaser takes title "subject to", any purchase money loans or mortgages taken back by the seller, the sales price of any fixtures or other personal property sold by separate agreement between the seller and purchaser as part of the overall sale of the real property, and the current market value of any other real or personal property transferred from the purchaser to the seller as part of the sale. The total sales price or commission due hereunder shall not be increased or decreased based upon the value, if any, assigned to the existing lease on the Property. The total sales price shall be decreased by the cost to DeForest of any insurance policy or environmental remediation that is a condition to, or a prerequisite to the sale of the Property.

Cushman produced a buyer for the property. On August 18, 2008, DeForest and Commerce Park Investors II, L.L.C. (Commerce) executed a "Contract for Sale of Real Estate" (the Real Estate Contract) in which Commerce agreed to purchase the property for $12,500,000. The Real Estate Contract required Commerce to deposit $350,000 and pay the balance of the purchase price at closing. Four days later, on August 22, 2008, DeForest and Cushman executed an addendum to the Agency Contract, which provided that DeForest would escrow $1,000,000 for environmental issues and that Cushman would be paid a commission based upon the $11,500,000 received by DeForest at closing.

Meanwhile, DeForest and Commerce negotiated an addendum to the Real Estate Contract because Commerce could not pay the cash balance due at closing. During the negotiations, Commerce offered to have DeForest retain title to the property while Commerce made installment payments. DeForest rejected that offer, and on February 10, 2009, DeForest and Commerce revised the Real Estate Contract by executing an addendum that provided in part:

At the Closing, Buyer shall pay cash to the Buyer [sic] in an amount equal to the difference between $2.5 million and the amount of the Deposit, subject to closing adjustments. The Deposit shall be released to the Seller at Closing. The Seller shall not be paid in cash for the balance of the Purchase Price, but shall receive a promise from the Buyer to pay the Seller in the form of a Note... to be executed at closing.

DeForest subsequently attempted to renegotiate the Agency Contract to provide that Cushman would receive percentages of its commission as DeForest received monthly cash payments from Commerce on the purchase money mortgage. Cushman refused to modify the Agency Contract.

At the closing on February 10, 2009, DeForest transferred title of the Property to Commerce subject to the purchase money mortgage, but refused to pay Cushman its full commission on the $11,500,000 (the $12,500,000 sales price less the $1,000,000 environmental escrow). DeForest claimed that the transaction with Commerce was an installment sale and therefore Cushman was not entitled to a commission on the money due under Commerce's note until the note matured.

On March 4, 2009, DeForest filed a declaratory judgment action seeking a declaration that the balance of Cushman's commission was payable when the purchase money mortgage note matured. Cushman counterclaimed and sought a declaration that its commission was due when DeForest received payment, regardless of the form of payment.

The parties filed cross-motions for summary judgment. On March 26, 2010, the trial court granted Cushman's summary judgment motion and entered judgment in Cushman's favor for a commission of $402,500 (three and one-half percent of $11,500,000).

The trial court found that the "Computation of Sales Price" and "Time of Payment" clauses in the Agency Contract were unambiguous. The court determined that the clauses "[e]ssentially ... stand for the proposition that when [DeForest] divested itself of either all its interest or a portion of it, at that point [Cushman] was to be paid." The court explained, "if it's an installment sale, they retain title over time and the commission is paid over time, as the land is being transferred."

On May 24, 2010, the trial court granted Cushman's application for counsel fees, relying on a provision in the Agency Contract that provided if "either party shall commence litigation against the other party to enforce its rights under [the Agency Contract], the party prevailing in such litigation shall be entitled to recover from the other party the costs and expenses (including attorneys' fees) thereby incurred." The court declined to award pre-judgment interest.

II.

DeForest first contends that because the parties agreed in the Agency Contract that Cushman's commission would be paid when DeForest received payment, rather than at closing or transfer of title as had been proposed during negotiations, the trial court erred in its decision. DeForest also contends that the term "receives payment," in the context of the Agency Contract, means actual payment of money rather than a promise to pay. DeForest maintains that the example in the Agency Contract of an installment sale is illustrative of the commission being paid upon receipt of cash payments by DeForest. Finally, DeForest argues that if the Agency Contract is ambiguous, this matter should be remanded to the trial court for a hearing.

Cushman responds that the meaning of the Agency Contract is clear and the trial court correctly determined the term "payment" is not limited to receipt of cash or money, but includes whatever DeForest received as consideration for conveying the property to Commerce.

We begin with our standard of review and the well-known principles of contract construction. A trial court will grant summary judgment to the moving party "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c); see also Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 523 (1995). When reviewing summary judgment orders, we employ the same standard that governs trial courts. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J.Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998).

The "[i]nterpretation and construction of a contract is a matter of law for the court subject to de novo review." Fastenberg v. Prudential Ins. Co. of Am., 309 N.J.Super. 415, 420 (App. Div. 1998). When a court construes a contract, its "role is to consider what is `written in the context of the circumstances' at the time of drafting and to apply `a rational meaning in keeping with the expressed general purpose.'" Sachau v. Sachau, 206 N.J. 1, 5-6 (2011) (quoting Atl. N. Airlines, Inc. v. Schwimmer, 12 N.J. 293, 302 (1953)). In addition to the contractual language and "the circumstances leading up to the formation of the contract," courts may also consider "custom, usage, and the interpretation placed on the disputed provision by the parties' conduct." Kearny PBA Local # 21 v. Town of Kearny, 81 N.J. 208, 221 (1979).

If the "terms of a contract are clear, the court must enforce them as written." E. Brunswick Sewerage Auth. v. E. Mill Assocs., Inc., 365 N.J.Super. 120, 125 (App. Div. 2004). It is not the court's function "to make a better contract for... the parties." Kampf v. Franklin Life Ins. Co., 33 N.J. 36, 43 (1960); see also E. Brunswick, supra, 365 N.J. Super. at 125. However, a "court will, if possible, give effect to all parts of the instrument, and an interpretation which gives a reasonable meaning to all its provisions will be preferred to one which leaves a portion of the writing useless or inexplicable." Maryland Cas. Co. v. Hansen-Jensen, Inc., 15 N.J.Super. 20, 27 (App. Div. 1951). Accordingly, the court may determine that those terms the parties excluded from the contract were intentionally excluded. Gabel v. Manetto, 177 N.J.Super. 460, 464 (App. Div. 1981) ("An affirmative expression ordinarily implies a negation of any other alternative. Expressio unius est exclusio alterius."), certif. dismissed, 91 N.J. 270 (1982).

Our scope of review includes deciding whether a term is clear or ambiguous. Nester v. O'Donnell, 301 N.J.Super. 198, 210 (App. Div. 1997). "If the terms of the contract are susceptible to at least two reasonable alternative interpretations, an ambiguity exists." Chubb Custom Ins. Co. v. Prudential Ins. Co. of Am., 195 N.J. 231, 238 (2008). Nonetheless, in deciding whether contract terms are ambiguous, "[t]he court should examine the document as a whole and the court should not torture the language of [a contract] to create ambiguity." Schor v. FMS Fin. Corp., 357 N.J.Super. 185, 191 (App. Div. 2002) (internal quotation marks and citations omitted).

"If contract terms are unspecific or vague, extrinsic evidence may be used to shed light on the mutual understanding of the parties." Hall v. Bd. of Educ., 125 N.J. 299, 305 (1991). On the other hand, "[a]bsent ambiguity, the intention of the parties is to be ascertained by the language of the contract." CSFB 2001-CP-4 Princeton Park Corporate Ctr., LLC v. SB Rental I, LLC, 410 N.J.Super. 114, 120 (App. Div. 2009).

With these principles in mind, we disagree with DeForest's contention that Cushman is not entitled to its commission until DeForest receives payments from Commerce on the note.

The Agency Contract specifies that Cushman's commission will be computed "based upon the total sales price which shall include any... purchase money loans or mortgages taken back by the Seller[.]" The Agency Contract also specifies that Cushman's commission "shall be earned, due and payable in full at the time DeForest... receives payment from the Seller for the Property." (Emphasis added). That clause does not suggest that the "payment" DeForest "receives" must be in the form of cash, and DeForest does not argue that payment by means of a promissory note to close a commercial real estate transaction is unacceptable or not customary. When considered in the context of the entire Agency Contract, the term payment is unambiguous.

Our interpretation of the Agency Contract is in accordance with the longstanding legal principle that

the broker earns his commission when (a) he produces a purchaser ready, willing and able to buy on the terms fixed by the owner, (b) the purchaser enters into a binding contract with the owner to do so, and (c) the purchaser completes the transaction by closing the title in accordance with the provisions of the contract. [Ellsworth Dobbs, Inc. v. Johnson, 50 N.J. 528, 551 (1967).]

At closing, DeForest divested itself of title to the Property and received in exchange cash, a promissory note secured by a mortgage, and an unconditional personal guarantee; precisely what it had ultimately bargained for with Commerce. DeForest conveyed title and "received payment," though not entirely in cash, and Cushman's commission was therefore "payable in full."

DeForest could have negotiated a clause providing that in all instances in which it did not receive full payment of the purchase price in cash at closing, Cushman would receive partial payments toward its commission only as DeForest received cash payments from Commerce. Instead, the Agency Contract provided that Cushman would receive its commission in installment payments only "in the case of an installment purchase contract."

DeForest's reliance on Joyce v. Stafford, 72 N.J.Super. 596 (Law Div. 1962), aff'd o.b., 78 N.J.Super. 256 (App. Div. 1963) is misplaced. The broker in Joyce agreed that its commission would not be due at closing, but instead would be due on "the gross amount of money received, as received[.]" Id. at 602. Unlike the present case, the agreement in Joyce explicitly conditioned payment of the commission on the seller's receipt of money, and specified that the broker's commission would be due when money was received and as it was received. Here, the Agency Contract did not specify that Cushman's commission was due when money was received. Instead, the Agency Contract stated that the commission was due when payment was received.

Accepting DeForest's interpretation of the Agency Contract would require a strained interpretation of its terms and would result in a better contract for DeForest than the one it negotiated with Cushman. Courts will not make a better contract for the parties. Kampf, supra, 33 N.J. at 43.

DeForest also contends the trial court erred in awarding Cushman attorneys' fees and costs. DeForest does not dispute that paragraph nine of the Agency Contract provided that in the event either party commenced litigation, the prevailing party would be entitled to costs and expenses, including attorneys' fees. Rather, DeForest argues that Cushman's fee application violated the procedural requirement of Rule 4:42-9(d) and the substantive requirements of Rule 4:42-9(b). We are not persuaded by Cushman's arguments.

Rule 4:42-9(d) states that an "allowance of fees made on the determination of a matter shall be included in the judgment or order stating the determination." To comply with the rule's language, a final judgment should not be submitted to the court by a prevailing party until that party has filed a fee application. See Ricci v. Corporate Express of the E., Inc., 344 N.J.Super. 39, 48 (App. Div. 2001), certif. denied, 171 N.J. 42 (2002). Nonetheless, we recognize that motions, including summary judgment motions, see Rule 1:6-1, must be accompanied by a proposed form of order. R. 1:6-2. We also recognize that "no application for attorney's fees [can be] made until the trial judge determine[s] which party [will] prevail." Ricci, supra, 344 N.J. Super. at 48. Obviously, an attorney cannot submit a completed fee application with a proposed summary judgment order when the attorney does not know how much time will be spent on an action between the date a motion is filed and the date it is decided.

For those and other reasons, we have interpreted Rule 4:42-9(d) to require that a fee application be made no later than the time for filing a motion to alter or amend a judgment under Rule 4:49-2. Ricci, supra, 344 N.J. Super. at 48. Rule 4:49-2 presently requires that such a motion be filed "not later than 20 days after service of the judgment" upon all parties. In this case, Cushman filed its fee application within twenty days of the court's filing of the summary judgment order. The order granting summary judgment to Cushman was signed and filed on March 26, 2010. Cushman's application for fees and costs was dated April 9, 2010.2 Accordingly, we reject DeForest's argument that the fee application was untimely.

Finally, DeForest argues that Cushman's fee application did not comply with Rule 4:42-9(b), which states that a fee application shall "be supported by an affidavit of services addressing the factors enumerated by [Rule of Professional Conduct (RPC)] 1.5(a)."3 The trial judge rejected that argument, explaining:

The Court notes that this matter had proceeded from complaint through discovery, through mediation and depositions to the point of substantive motions and decisions. The Court finds that the hourly rate submitted given the level of experience and the total hours provided are reasonable and necessary, In [entering judgment against the plaintiff], the Court acknowledges that the Affidavit of Services was not in full compliance with R. 4:42-9(d). It does, however, find that the information provided to the Court substantially complies with said Rule, as well as RPC 1.5[(a)] and provided a sufficient basis for the Court to view the reasonableness and necessity of the fees.

Although the affidavits Cushman submitted in support of its fee application did not explicitly address the factors listed in RPC 1.5(a), the trial judge determined that Cushman substantially complied with that rule. The documents Cushman submitted in support of the application enabled the trial judge to evaluate those factors and the reasonableness of the fee. For example, "the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly," RPC 1.5(a)(1), were evident from the detailed, itemized billing records submitted by Cushman and from the summary judgment motion record and oral argument. "[T]he amount involved and the results obtained," RPC 1.5(a)(4), were also evident from those records.

DeForest does not dispute on appeal, and apparently did not dispute in the proceedings before the trial judge, either the reasonableness of the hourly rates charged by Cushman's attorneys or the time spent on the matters itemized in the billing records. More significantly, DeForest does not attempt to point out which of the eight factors enumerated in RPC 1.5 are not implicitly addressed in Cushman's fee application. Under those circumstances, we find no error in the trial judge's fee and cost award to Cushman.

Having said that, we emphasize that the better practice is to include explicit references to the RPC 1.5 factors in an affidavit supporting a fee application. Doing so avoids the risk that a fee award will be reversed for non-compliance with Rule 4:42-9(b).

Affirmed.

FootNotes


1. The parties do not dispute that the use of the term "Seller" was a typographical error and that the term "Buyer" was understood.
2. In the procedural history section of its appeal brief, DeForest does not dispute that Cushman's fee application was filed "on or about April 9, 2010." Cushman states in its appeal brief that it filed its application on April 12, 2009. Under either circumstance, Cushman filed the fee application within the required twenty-day period.
3. RPC 1.5(a) lists eight factors to be evaluated in determining the reasonableness of a fee: (1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; (2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer; (3) the fee customarily charged in the locality for similar legal services; (4) the amount involved and the results obtained; (5) the time limitations imposed by the client or by the circumstances; (6) the nature and length of the professional relationship with the client; (7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and (8) whether the fee is fixed or contingent.
Source:  Leagle

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