Timeless Realty Corp. v Connecticut Diversified Holdings LLC

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[*1] Timeless Realty Corp. v Connecticut Diversified Holdings LLC 2006 NY Slip Op 50607(U) [11 Misc 3d 1078(A)] Decided on March 28, 2006 Supreme Court, Kings County Demarest, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on March 28, 2006
Supreme Court, Kings County

Timeless Realty Corp., Plaintiff,

against

Connecticut Diversified Holdings LLC et ano., Defendants.



9667/05

Carolyn E. Demarest, J.

Upon the foregoing papers in this action by plaintiff Timeless Realty Corp. (plaintiff) for an injunction, reformation of contract, and specific performance, defendants Connecticut Diversified Holdings LLC (Connecticut) and 2300 Cropsey Avenue LLC (Cropsey) (collectively, defendants) move for summary judgment dismissing plaintiff's complaint as against them, and for an order, pursuant to CPLR 6501, cancelling the notice of pendency filed by plaintiff. In the alternative, defendants' motion seeks an order, pursuant to CPLR 2221, for leave to renew and reargue their prior motion under CPLR 6501 to cancel the notice of pendency filed by plaintiff, and, upon such renewal and reargument, an order granting their prior motion and cancelling the notice of pendency. Plaintiff cross-moves for an order: (1) pursuant to CPLR 3025 (b), granting it leave to amend its complaint, (2) pursuant to CPLR 3211 (b), dismissing defendants' first affirmative defense, (3) pursuant to CPLR article 62, granting it an order of attachment securing the amount of $5 million and directing the Sheriff of Kings County to levy upon the premises located at 2300 Cropsey Avenue, in Brooklyn, New York, (4) pursuant to CPLR 3124, compelling defendants to respond to its First Combined Discovery Demands dated September 5, 2005 and to appear for an examination under oath, (5) pursuant to CPLR 2004, extending its time to file a note of issue/certificate of readiness, and (6) pursuant to 22 NYCRR 130-1.1, imposing sanctions and counsel fees on defendants and their attorneys.

Plaintiff has been a licensed real estate broker since May 12, 2000. Alexander Gurevich (Gurevich) (a partner in the law firm representing defendants) and Gennady Kiselman (Kiselman) are the principal owners of Connecticut, a limited liability company formed on June [*2]20, 2000. On October 22, 2002, Kiselman approached plaintiff to negotiate the purchase of the premises located at 2300 Cropsey Avenue, in Brooklyn, New York. At that time, Kiselman allegedly represented to plaintiff that his company intended to convert the 2300 Cropsey Avenue premises into condominium units, and that the re-sale of these condominium units would bring in approximately $100 million. On that date, Kiselman executed a listing agreement, listing plaintiff as the realtor with respect to "any real estate transaction like sale or rent entire building or apartments, offices 2300 Cropsey Avenue, Brooklyn, NY 11214." Kiselman allegedly executed this agreement as the representative of Connecticut (whose name is printed beneath Kiselman's signature).[FN1]

The listing agreement provided that the undersigned owner (Connecticut) "agree[d] to pay [plaintiff] a commission of 5% of the sales price in the event that the property or any portion thereof [wa]s sold or exchanged by [Connecticut, plaintiff], or by any other person or broker during the term of this contract." The listing agreement further provided that Connecticut "[wa]s not to employ any other broker for the purposes above stated during the term of this Contract or to personally sell [the property] or rent all or part thereof." The listing agreement also stated that "[t]his agreement may not be changed orally."

Kiselman, on behalf of Connecticut, as the buyer, also executed a brokerage agreement, which is dated October 24, 2002. This agreement provided that plaintiff, as the selling broker, was entitled to a commission in the amount of $650,000 for services rendered with respect to the purchase of the 2300 Cropsey Avenue premises pursuant to a contract between the purchaser and the seller dated December 25, 2002. An offer to purchase the 2300 Cropsey Avenue premises by Connecticut dated October 24, 2002 for the purchase price of $6 million and accepted by Heritage Institute Lev Avoth (Heritage), the owner of the premises, sets forth that the parties had agreed that plaintiff brought about the sale and that Connecticut would pay the full commission to plaintiff, as the broker. A contract of sale dated November 8, 2002 for the 2300 Cropsey Avenue premises was executed by Heritage, as the seller, and by Connecticut, as the purchaser. In paragraph 15.1 of that contract, plaintiff was designated as the broker in connection with the sale to Connecticut. Paragraph 15.2 of that contract stated that Connecticut agreed to employ plaintiff "pursuant to the separate agreement executed prior to this date."

By Articles of Organization dated March 14, 2003, Cropsey was formed as a limited liability company. Gurevich and Kiselman are also the principal owners of Cropsey. On June 27, 2003, Connecticut wired the brokerage commission payment to plaintiff. Thereafter, Connecticut assigned to Cropsey its rights in the November 8, 2002 contract of sale between it and Heritage. By deed dated October 8, 2003, the Heritage, as the seller, conveyed the 2300 Cropsey Avenue premises to Cropsey, as the buyer. On the same date, Cropsey obtained a building loan mortgage in the amount of $4,885,000. In paragraph 4.24 thereof, Cropsey stated that it would convert the premises to condominium ownership.

On May 28, 2004, Gurevich faxed to plaintiff a proposed lay-out of the future building, and, on June 24, 2004, he faxed to plaintiff an amended proposed lay-out of the future building. From October 22, 2002 to August 25, 2004, however, no prospect was brought to Cropsey by plaintiff. Plaintiff does not deny that it did not bring about any transaction involving the 2300 Cropsey Avenue premises or negotiate any prospective transaction.

By letter dated August 25, 2004 from defendants' attorneys, plaintiff was advised that there was no agreement between Cropsey and it, and that the listing agreement executed on October 22, 2003 between it and Kiselman had expired. The letter also noted that there were unauthorized additions made by plaintiff to that agreement (i.e., the execution by Connecticut). The letter further stated that the agreement was null and void "because since October 22, 2002, no activity was generated by a broker: not a single offer ha[d] been presented, no marketing [*3]materials [had been] prepared and no advertising in any recognizable media had been placed." The letter additionally stated that due to plaintiff's "lack of performance in connection with [its] obligations," defendants had concluded that plaintiff "ha[d] no expertise, abilities, staffing and/or desire to complete the task [it was] claiming to have been hired to perform."

On November 18, 2004 (nearly three months following the date of this letter), Cropsey entered into a listing agreement with Massey Knakal Realty Services (Massey), employing it as its broker, and granting it the exclusive right to sell, net lease, or otherwise dispose of all or any portion of the 2300 Cropsey Avenue premises. Massey has listed the property for sale at an asking price of $24 million, describing the proposed building and its use as a luxury condominium residence. The building has not yet been approved for conversion to condominium ownership by the New York State Department of Law, pursuant to General Business Law § 352-e.

On March 31, 2005, plaintiff filed this action against defendants. Plaintiff's complaint asserts four causes of action. Plaintiff's first cause of action seeks an injunction enjoining Cropsey from listing the 2300 Cropsey Avenue premises with any other real estate broker or contracting for the sale of such premises. Plaintiff's second cause of action alleges that in order to induce plaintiff to enter into the listing agreement, Connecticut falsely represented to it that it would convert the 2300 Cropsey Avenue premises into a luxury condominium building resulting in sales of condominium units at $100 million. Plaintiff further alleges that it relied on this representation in entering into this agreement, that Connecticut never intended to convert the premises, and that Connecticut intended to take advantage of it. It alleges that Connecticut failed to convert the premises and retained another real estate broker to sell the premises. Plaintiff seeks reformation of the agreement to reflect the initial agreement between the parties and to set its commissions at $5 million. Plaintiff's third cause of action alleges that on October 22, 2002, Connecticut was an agent of Cropsey, and that Connecticut concealed the existence of its principal, Cropsey, from it. Plaintiff similarly seeks reformation of the listing agreement on this basis. Plaintiff's fourth cause of action seeks a judgment directing Cropsey, as the principal of Connecticut, to specifically perform its obligations under the agreement.

On February 25, 2005, plaintiff filed a notice of pendency against the 2300 Cropsey Avenue premises. Defendants interposed their answer to the complaint on May 26, 2005, asserting four affirmative defenses. The first affirmative defense alleges that plaintiff's claims are barred by the Statute of Frauds. On August 10, 2005, a preliminary conference order provided for the exchange of discovery and required plaintiff's note of issue to be filed by November 30, 2005. By decision and order dated August 25, 2005, this court denied a motion by defendants to cancel the notice of pendency. In doing so, the court did not reach the merits of the underlying action. Plaintiff served its First Combined Discovery Demands on September 5, 2006 and, by stipulation dated September 26, 2005, extended defendants' time to respond to this demand to October 17, 2005. Such stipulation also adjourned the depositions to November 4, 2005.

On October 7, 2005, defendants brought the instant motion for summary judgment dismissing plaintiff's complaint as against them and for an order cancelling the notice of pendency. Plaintiff, in response, seeks to amend its complaint to add two additional causes of action and to dismiss defendants' first affirmative defense of the Statute of Frauds. Plaintiff also seeks, by its cross motion, to attach $5 million, claiming that these are the damages (i.e., 5% of the anticipated $100 million in sales of the condominium units) to which it is entitled. Plaintiff's cross motion additionally seeks the relief of an order compelling defendants to respond to its discovery demands as well as an order extending its time to file its note of issue based upon its need to conduct discovery. In addition, plaintiff requests sanctions against defendants, claiming that their instant motion is frivolous.

In addressing defendants' motion, a perusal of the listing agreement at issue reflects, on its face, that it was for no definite term. It is well settled that "where an employment is for an indefinite term, it is presumed to be a hiring at will which may be freely terminated by either [*4]party at any time for any reason or even for no reason" (Murphy v American Home Prods. Corp., 58 NY2d 293, 300 [1983]; see also Horn v New York Times, 100 NY2d 85, 96 [2003]; Sabetay v Sterling Drug, 69 NY2d 329, 333 [1987]).

Thus, it has been specifically held with respect to brokerage agreements that " the right of the principal to terminate [the broker's] authority is absolute and unrestricted, except only that [it] may not do it in bad faith, and as a mere device to escape the payment of the broker's commissions'" (Aegis Prop. Servs. Corp. v Hotel Empire Corp., 106 AD2d 66, 72 [1985], quoting Sibbald v Bethlehem Iron Co., 83 NY 378, 384-385 [1881]; see also Friedman Drew Corp. v MC Holdings Partners, 172 AD2d 384, 385 [1991]). In this regard, it is noted that the duty undertaken and the obligation assumed by a broker " as a condition of its right to demand commissions is to bring the buyer and seller to an agreement'" (Aegis Prop. Servs. Corp., 106 AD2d at 71, quoting Sibbald, 83 NY at 381). Consequently, a right to commissions only accrues where the broker brings the minds of a buyer and seller to an agreement (Aegis Prop. Servs. Corp., 106 AD2d at 71). "Thus, if in the midst of negotiations instituted by the broker, and which were plainly and evidently approaching success, the seller should revoke the authority of the broker, with the view of concluding the bargain without [its] aid, and avoiding the payment of commissions about to be earned, it might well be said that the due performance of [its] obligation by the broker was purposely prevented by the principal" (id.; see also Goodman v Marcol, Inc., 261 NY 188, 191-192 [1933]).

Here, however, plaintiff has not shown that defendants terminated negotiations in bad faith to prevent it from fulfilling its undertaking (compare Trylon Ralty Corp. v Di Martini, 40 AD2d 1029, 1030 [1972], affd 34 NY2d 899 [1974]). Plaintiff does not allege that it devoted any of its time or labor to effect any agreement between a buyer and the seller. The only efforts alleged by plaintiff were those with respect to Connecticut's purchase of the 2300 Cropsey Avenue premises for which it was paid its commission. At the time defendants terminated the agreement with plaintiff, defendants were not seeking to escape the payment of any further commissions to plaintiff, but, rather, elected to terminate plaintiff with a view towards their own interests. They had an absolute right before any bargain was made and while no negotiations were ongoing to revoke plaintiff's authority to act as their broker (see Aegis Prop. Servs. Corp., 106 AD2d at 72).

Thus, since the parties' agreement constituted a contract at will, it was terminable at the pleasure of either party upon reasonable notice (see Horn, 100 NY2d at 96; Sabetay, 69 NY2d at 333; Murphy, 58 NY2d at 300). Defendants, by their attorneys' letter dated August 25, 2004, gave plaintiff reasonable notice of its termination (see Landow-Luzier Co. v Grey, 34 Misc 2d 1061, 1065-1066 [1962]; see also Creative Foods Corp. v Chef Francisco, Inc., 92 AD2d 462, 462 [1983]; Bailey v S.S. Stafford, Inc., 178 App Div 811, 815 [1917]).

Plaintiff, however, in opposition to defendants' motion, points out that in the absence of a specified date of termination of a contract, a reasonable duration is implied (see Landow-Luzier Co., 34 Misc 2d at 1065). It asserts that since defendants' offering plan of conversion had not yet been accepted by the New York State Department of Law for filing, it could not begin offering the 2300 Cropsey Avenue premises for sale. It argues that, therefore, it was not given a reasonable time in which to sell the premises and that defendants, consequently, had no right to terminate its services.

Plaintiff's argument must be rejected. As noted above, the listing agreement was executed on October 22, 2002, almost two years before defendants' August 25, 2004 termination of plaintiff's services. Therefore, a substantial and reasonable time had passed since the parties' entry into the listing agreement. As set forth above, the purpose for which plaintiff was to act as broker referred only to "any real estate transaction like sale or rent entire building or apartments, offices, 2300 Cropsey Ave." It was thus vague and indefinite. The listing agreement did not specifically mention conversion of the subject premises into luxury condominium units and did not contractually obligate defendants to undertake such conversion.

Therefore, defendants could not be legally required to convert the 2300 Cropsey Avenue [*5]premises to condominium ownership just so that plaintiff could derive a commission. Defendants were under no duty or obligation to proceed with this conversion or to retain plaintiff's brokerage services indefinitely while contemplating such a conversion plan. Rather, defendants were at liberty and absolutely free to terminate their relationship with plaintiff prior to any efforts or negotiations being undertaken by it (see Sibbald, 83 NY at 384-385; Aegis Prop. Servs. Corp., 106 AD2d at 72).

Consequently, plaintiff is not entitled to any injunctive relief preventing defendants from using another broker or requiring Cropsey to specifically perform any obligations under the listing agreement. Plaintiff's claim that it was wrongfully discharged does not constitute a cognizable basis for specific performance or for the recovery of money damages (see Murphy, 58 NY2d at 300; Columbia Terrace Dev. Corp. v Brown, 153 AD2d 832, 835 [1989]). Defendants cannot be compelled to specifically perform an agreement validly terminated (see Columbia Terrace Dev. Corp., 153 AD2d at 835). Therefore, summary judgment dismissing plaintiff's first and fourth causes of action is required (see CPLR 3212 [b]).

Plaintiff's second and third causes of action, which seek reformation of the listing agreement, are predicated on its allegations that Connecticut made certain false and fraudulent representations extraneous to the written listing agreement that it would convert the 2300 Cropsey premises into a luxury condominium building, resulting in sales of condominium in the amount units in the amount of $100 million. It alleges that Connecticut made these representation to induce it to enter into the listing agreement, and that it relied upon this representation in entering into the agreement. Plaintiff argues that the listing agreement should be reformed to reflect these representations. It also seeks reformation to the listing agreement to bind Cropsey, who did not sign the agreement, based on its allegation that Cropsey was Connecticut's principal and that this fact was hidden from it.

Plaintiff's argument is rejected. "A fraud claim is not sufficiently stated where it alleges that a defendant did not intend to perform a contract with a plaintiff when [it] made it" (Gordon v De Laurentis Corp., 141 AD2d 435, 436 [1988]). "To sufficiently allege fraud in the inducement, the cause of action must allege "a representation of present fact, not of future intent" . . . collateral to, but which was the inducement of the contract'" (Sandra Greer Real Estate v Johansen Organization, 182 AD2d 468, 469 [1992], quoting Deerfield Communications Corp. v Chesebrough-Ponds, Inc., 68 NY2d 954, 956 [1986]).

Here, plaintiff merely alleges a misrepresentation of Connecticut's future intention to convert the property to condominium ownership; this does not constitute a viable fraud claim (see Gordon, 141 AD2d at 436). As previously noted, Connecticut was not contractually required to convert the property to condominium ownership in order for plaintiff to have a opportunity to earn a broker's commission. Moreover, plaintiff does not explain how it suffered any detriment in relying upon Connecticut's representation.

Furthermore, plaintiff cannot alter or rewrite the written listing agreement by adding Cropsey as a party to such agreement. The listing agreement expressly provided that it could not be changed orally. The Statute of Frauds, therefore, constitutes a defense to plaintiff's claim, and plaintiff's cross motion insofar as it seeks dismissal of this affirmative defense must be denied (see General Obligations Law § 15-301 [1]; Williams Real Estate Co. v Ann Taylor, Inc., 251 AD2d 230, 231 [1998]).

Moreover, Cropsey, which did not execute the listing agreement, is a separate entity from Connecticut. Indeed, Cropsey was not even in existence at the time of the execution of the listing agreement. Thus, Cropsey had no contractual relationship with plaintiff and could not have made any representations to it at the time of plaintiff's entry into the agreement.

In any event, defendants' plan to convert the building to condominium ownership has no effect on defendants' right to terminate the listing agreement at will (see Columbia Terrace Dev. Corp., 153 AD2d at 835). "[W]hile parties can by agreement limit the employer's otherwise unfettered right to discharge an at-will employee," there are no such limitations contained in the listing agreement (id.). Any alleged verbal representations or assurances by defendants cannot [*6]form a basis for affirmative relief to plaintiff (see id.). Thus, summary judgment dismissing plaintiff's second and third causes of action is mandated (see CPLR 3212 [b]).

Plaintiff, in its cross motion, seeks leave to amend its complaint, pursuant to CPLR 3025 (b), to add a fifth and a sixth cause of action. Plaintiff's proposed fifth cause of action alleges that on or before October 7, 2005, Connecticut repudiated and anticipatorily breached the agreement between them. Plaintiff asserts that as a result of this breach, it is entitled to damages of not less than $5 million. Plaintiff's proposed sixth cause of action alleges that Cropsey is a continuation of Connecticut and that Connecticut transferred its equitable ownership in the 2300 Cropsey Avenue premises to escape liability to it under the listing agreement. Plaintiff alleges that Cropsey repudiated and anticipatorily breached the contract between it and Connecticut and seeks at least $5 million in damages from Cropsey.

While leave to amend a pleading, pursuant to CPLR 3025 (b), should generally be freely granted absent prejudice or surprise resulting from the delay, such leave must be denied where the proposed amendment is palpably lacking in merit (see AYW Networks, Inc. v Teleport Communications Group, 309 AD2d 724, 725 [2003]; Monteiro v R.D. Werner Co., 301 AD2d 636, 637 [2203]; Leszczynski v Kelly & McGlynn, 281 AD2d 519, 520 [2001]; McKiernan v McKiernan, 207 AD2d 825, 825 [1994]). Plaintiff's claim of an anticipatory breach by defendants plainly lacks merit. The concept of an anticipatory breach simply relates to a party's wrongful renouncement of its obligations under a contract, permitting the other party to sue for the breach (see Rachmani Corp. v 9 East 96th St. Apt. Corp., 211 AD2d 262, 266 [1995]).

Here, no viable breach of contract claim is alleged by plaintiff. Plaintiff has not shown that defendants discharged it for a dishonest or illegitimate purpose, or in bad faith. Plaintiff's opposition papers do not reveal any factual basis for its contention that its discharge represented a bad faith attempt to deprive it of its potential commission (see Aegis Prop. Servs. Corp., 106 AD2d at 68). Plaintiff's speculative inferences are far too tenuous and insubstantial to give rise to any triable issue of fact (see id. at 68-69). Consequently, plaintiff's cross motion, insofar as it seeks leave to amend its complaint, must be denied.

Since the court finds that summary judgment dismissing plaintiff's complaint is warranted (see CPLR 3212 [b]), plaintiff's cross motion, insofar as it seeks an order granting it an attachment, compelling defendants to comply with its discovery demands, extending its time to file a note of issue, and granting it sanctions against defendants, must be denied as moot. In addition, due to the dismissal of plaintiff's complaint, cancellation of the notice of pendency filed by plaintiff is warranted (see Freidus v Sardelli, 192 AD2d 578, 580 [1993]).

Accordingly, defendants' motion for summary judgment dismissing plaintiff's complaint as against them and for an order, pursuant to CPLR 6501, cancelling the notice of pendency filed by plaintiff, is granted. In light of this disposition, defendants' alternative motion for leave to renew and reargue their prior motion is rendered moot. Plaintiff's cross motion is denied in its entirety.

This constitutes the decision, order, and judgment of the court.

E N T E R,

J. S. C.



. [*7]

Footnotes

Footnote 1: This is denied by Connecticut. However, for purposes of their motion, defendants assume the truth of the facts alleged by plaintiff.



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