Vrg Corporation v. Gkn Realty Corp

641 A.2d 519 (1994)

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Nature of the Case

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Facts

P entered into an Exclusive Agency to Lease Agreement ('Agreement') with Golden Reef Corporation ('Golden Reef'), a New Jersey corporation, and Perlman Enterprises, Inc., a Florida corporation authorized to do business in New Jersey, to assist in the development of the Heather Croft Square Shopping Center ('shopping center') in the town of Northfield, New Jersey. The agreement granted P an exclusive agency to procure tenants for the shopping center. P's commission was to be six percent of each monthly rental payment received from the tenants that it procured. Paragraph five provided for the payment of $250,000.00 as an advance on commissions, which was then to be credited against monthly rents at the rate of six percent. P also agreed to remove a provision from the original draft agreement that would ensure an accelerated payment of all commissions due from the proceeds of any sale of the property. In addition, the agreement bound the successors and assigns of the parties. P calculated that the $250,000.00 advance, credited against the six percent commissions from the monthly rentals, would have been exhausted and payment based on the monthly rents would have commenced in March 1992. Golden Reef, on February 22, 1989, entered into a contract to sell the shopping center to D for $9,800,000.00. P made sure D was aware of the ongoing commission obligation. D then amended the original contract of sale with Golden Reef. Although the initial contract made no reference to any potential liability for commissions owed to P, the amended contract included an indemnification provision, which stated that Golden Reef was to be responsible for payment of the broker's commissions. Golden Reef never made payment to P. On July 11, 1989, P filed a complaint against Golden Reef and D to recover its commissions. Golden Reef then filed a Chapter 11 bankruptcy petition, effectively foreclosing P's claim for commissions against it. P sought an equitable lien on the rental receipts of D. The trial court concluded that there was no intention by D or Golden Reef that the rental payments serve as security for the payment of P's rental commissions. The Appellate Division disagreed, believing that Golden Reef, as well as P, had the intent necessary to create the equitable lien: it was the rental monies that both parties intended to be the source of payment once the advance was exhausted.