Distinctive Ventures LLC v Cooper Advisory Servs., Inc.

[*1] Distinctive Ventures LLC v Cooper Advisory Servs., Inc. 2009 NY Slip Op 50172(U) [22 Misc 3d 1118(A)] Decided on January 26, 2009 Supreme Court, Nassau County Austin, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 January 26, 2009
Supreme Court, Nassau County

Distinctive Ventures LLC, Plaintiff,

against

Cooper Advisory Services, Inc., Defendant.



11601-08



COUNSEL FOR PLAINTIFF

Theodore S. Steingut, Esq.

One Whitehall Street - 17th Floor

New York, New York 10004

COUNSEL FOR DEFENDANT

Steven L. Leavitt & Assoc. P.C.

Two Hillside Avenue, Bldg F

Williston Park, New York 11596

Leonard B. Austin, J.

Plaintiff, Distinctive Ventures LLC, moves for an order pursuant to CPLR 3212 granting [*2]it summary judgment on the claims advanced in its complaint and dismissing the counterclaims of Defendant, Cooper Advisory Services, Inc.

Defendant, Cooper Advisory Services, Inc., cross-moves for an order pursuant to CPLR 3212(c) granting it partial summary judgment dismissing Plaintiff's first cause of action.

BACKGROUND

In this action, Plaintiff, Distinctive Ventures LLC ("Distinctive"), the owner of the development known as "Panoramic Project," seeks the return of $186,000 in commissions which it advanced to its broker, Defendant, Cooper Advisory Services, Inc. ("Cooper"), maintaining that it was never earned. Distinctive also seeks a declaration regarding Cooper's entitlement to commissions on two sales which, although they never closed, Distinctive has sought to retain the purchasers' deposits in a separate proceeding.

In response, Cooper seeks to retain the commissions Distinctive advanced to it as "non-refundable," as well as to recover commissions on sales that were procured by it and/or sales that failed to close.

Distinctive alleges that it purchased and developed the Panoramic Resorts and Villas in Montauk, New York in 2007. On June 1, 2007, it entered into an exclusive real estate brokerage agreement ("Agreement") with Cooper for the sale of units there. By its terms, the agreement terminated on January 7, 2008, or automatically upon the sale of the last unit. In addition, pursuant to the terms of the Agreement, Distinctive could terminate it upon ten days written notice to Cooper if the project was abandoned or suspended or if Cooper committed gross negligence, fraud, willful misconduct or any material breach of the agreement, provided that Cooper had five days notice to cure any such breach. Cooper could terminate the Agreement on 30 days written notice to Distinctive or if Distinctive failed to pay a commission when due. The Agreement was amended in September 2007 to reflect advancements of commissions by Distinctive to Cooper.

Distinctive alleges that, pursuant to their Agreement, Cooper was only entitled to a full commission when a sale closed unless the sale failed to close by reason of Distinctive's fault, in which case Cooper would still be entitled to its full commission. Distinctive further alleges that pursuant to their agreement, if a sale failed to close by reason of a purchaser's default, Cooper would be entitled to a percentage of the liquidated damages collected by Distinctive.

Distinctive alleges that it advanced $350,000 in commissions to Cooper and that only one purchaser introduced by Cooper closed during the term of their agreement. According to Distinctive, Cooper was entitled to a commission of $164,000. Distinctive acknowledges, however, that Cooper also procured two other purchasers who defaulted on their contractual obligations and that it has sought to recover liquidated damages from those buyers.

In its first cause of action, Distinctive seeks to recover $186,000 as overpaid commissions. In its second cause of action, Distinctive seeks a declaration that Cooper is entitled to only four percent of the liquidated damages collected by Distinctive on failed sales which were procured by Cooper.

In its answer, Cooper alleges that it is a very experienced real estate broker and that it agreed to commit the substantial resources and time which were necessary to create a market for Panoramic Projects' units on condition that it earned non-refundable commissions upon contract regardless of whether a sale actually closed. Cooper alleges that, pursuant to their Agreement, it committed full-time personnel to develop and sell Panoramic Project's units and that Distinctive [*3]reneged on their Agreement and attempted to terminate it on or about January 6, 2008. Cooper alleges that, as of that date, it had procured purchasers for seven units contractually entitling it to a minimum of $800,000 in commissions.

Owing to Distinctive's errors, omissions and misconduct, the delayed development of Panoramic Project negatively affected both the marketability and the sale of the units. In fact, Cooper alleges that Distinctive's errors, omissions and misconduct actually caused sales not to close. Cooper additionally alleges that it continued to render services to Distinctive, at its behest, after Cooper attempted to terminate their Agreement. Accordingly, Cooper seeks commissions on sales which were entered into during the six months following Distinctive's alleged termination of their Agreement.

Cooper's first counterclaim, sounding in breach of contract, alleges that by breaching their Agreement and impeding the development of the project, Distinctive prevented it from realizing its full potential in closing sales and earning commissions. As a result, Cooper claims that it is entitled to full commissions on all sales contracts entered into, regardless of whether a closing occurred.

In its second counterclaim, Cooper alleges that pursuant to the Rider, it was entitled to receive $50,000 every 30 days, which Distinctive failed to pay.

In the third counterclaim, sounding in unjust enrichment, alleges that Cooper is entitled to a minimum of $800,000 in unpaid commissions pursuant to its Agreement with Distinctive.

The fourth counterclaim, also sounding in unjust enrichment, Cooper alleges that Cooper was actually the broker on the sale by which Distinctive acquired the property on which the Panoramic Project is situated; that it was entitled to a commission in excess of $800,000 on that sale; and, that at Distinctive's urging, it waived $800,000 of that commission in exchange for Distinctive's agreement to hire it as the exclusive broker for the Panoramic Project. Cooper again alleges that, through errors, omissions, commissions and deliberate misconduct, Distinctive caused closings to fail and concomitantly prevented it from fully realizing all of its commissions in the minimum amount of $6 million on sales of Panoramic Project's units. It alleges that it is against principles of equity and good conscience to allow Distinctive to retain those commissions.

Cooper, in its fifth counterclaim seeks to specifically recover the commission it forfeited in connection with Distinctive's purchase of the Panoramic Project property. This claim is based upon Distinctive having prevented Cooper from recouping those funds via the realization of commissions on sales of Panoramic Project's units by terminating its Agreement.

In its sixth counterclaim, sounding in quantum meruit, Cooper seeks to recover for services it provided for the benefit of Distinctive in efforts to establish a market for Panoramic Project's units.

Distinctive seeks summary judgment on its claims as well as summary judgment dismissing Cooper's counterclaims. Cooper seeks summary judgment dismissing Distinctive's first cause of action.

DISCUSSION

"On a motion for summary judgment pursuant to CPLR 3212, the proponent must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact." Sheppard-Mobley v. King, 10 AD3d 70, 74 (2nd Dept. 2004), aff'd. as mod., 4 NY3d 627 (2005), citing Alvarez v. Prospect Hosp., 68 NY2d 320, 324 (1986); and Winegrad v. New York Univ. Med. Ctr., 64 NY2d 851, 853 (1985). [*4]"Failure to make such prima facie showing requires a denial of the motion, regardless of the sufficiency of the opposing papers." Sheppard-Mobley v. King, supra, at 74; Alvarez v. Prospect Hosp., supra; Winegrad v. New York Univ. Med. Ctr., supra.

Once the movant's burden is met, the burden shifts to the opposing party to establish the existence of a material issue of fact. Alvarez v. Prospect Hosp., supra at 324. The evidence presented by the opponent of summary judgment must be accepted as true and they must be given the benefit of every reasonable inference. See, Demishick v. Community Housing Management Corp., 34 AD3d 518, 521 (2nd Dept. 2006), citing Secof v. Greens Condominium, 158 AD2d 591 (2nd Dept. 1990).

A.First Cause of Action

In support of its motion, Distinctive alleges that it advanced $350,000 to Cooper; that Cooper procured three buyers before Distinctive terminated their Agreement but only one sale closed thereby entitling Cooper to only $164,000 in commissions; and, that the remaining two sales are the subject of proceedings to determine Distinctive's entitlement to retain the down payments and concomitantly, Cooper's right to a percentage of liquidated damages. Distinctive alleges that while the parties' Agreement provided that Cooper had a right to commissions on sales contracts entered up to six months following the termination of their agreement if Cooper had dealt with the buyer in connection with the Project. Cooper was required to provide Distinctive with a list of said prospective purchasers, which it never did. Distinctive alleges that it repeatedly requested repayment of the advanced commissions by Cooper but Cooper has refused.

The parties' Agreement at ¶ 2(b) provided that Cooper "shall receive a one time, non-refundable advance of $50,000 from DV [Distinctive Ventures] upon signing this agreement. Said sum shall be reimbursed to DV as a deduction from the first brokerage commission payable to Cooper from the first sale at the closing" (emphasis added). In addition, the Rider to their Agreement, dated September 2007, provides that: (1) Cooper had been paid $150,000 to date which "advances shall be governed by the terms and conditions of the initial contract Paragraph 2(b)"; (2) Cooper would be paid an additional $50,000 on September 24, 2007 "as an advance and will be governed by the same terms and conditions of the initial contract Paragraph 2(b)"; and, (3) Cooper would be paid an additional $50,000 every thirty days thereafter "as an advance and will be governed by the same terms and conditions of the initial Paragraph 2(b)."

The parties' Agreement also provided that Distinctive was to pay Cooper 4% of the gross sales price of each unit at closing if there is no co-broker and 2.5% of the gross sales price each to both Cooper and the co-broker, if there was one. As for sales which failed to close, the agreement provided:

In the event a signed contract is terminated due to the default by the seller thereunder, DV shall nevertheless remain obligated to pay commissions with respect to such transaction at the rates set forth above. In the event a signed contract is terminated due to the default by the purchaser thereunder, DV shall pay commissions with respect to such transaction at the rates set forth above based on the liquidated damages if any, collected by seller pursuant to such contract, payment to be made to Cooper only when and if DV receives payment.

When the meaning of a contact is plain and clear, the agreement is not to be subverted by straining to find an ambiguity, but is to be enforced according to its terms Evans v. Famous [*5]Music Corp., 1 NY3d 452, 458 (2004); Greenfield v. Philles Records, Inc., 98 NY2d 562, 566 (2002); (Uribe v. Merchants Bank of NY, 91 NY2d 336, 341 [1998]; W.W.W. Assoc. v. Giancontieri, 77 NY2d 157, 162 [1990]) and without resort to extrinsic evidence. Master-Built Constr. Co., Inc. v. Thorne, 22 AD3d 535, 535 (2nd Dept. 2005). While the advancements of commissions may be offset against commissions earned, "non-refundable" means that Distinctive cannot recover the advances. See, TBS Enterprises v. Dime Savings Bank of New York, 55 AD2d 910, 911 (2nd Dept. 1977), aff'd, 45 NY2d 859 (1978). See also, Spindel v. Shor & Associates, 297 AD2d 244 (1st Dept. 2002); and Scavenger, Inc. v. GT Interative Software Corp., 289 AD2d 58, 59 (1st Dept. 2001). Here, the "non-refundable" advance of $50,000 was to be applied against the commissions earned by Cooper. However, there is a triable issue of fact as to whether the balance of the commissions advanced should be offset by the post-termination sales as claimed by Cooper. Thus, neither party is entitled to summary judgment at this juncture.

B.Second Cause of Action

As for Distinctive's second cause of action, it has established and it is hereby declared, that pursuant to the parties' agreement, Cooper is entitled to 4% of the liquidated damages procured by Distinctive if a sale failed to close on account of the purchaser's default and its full commission if a sale failed to close owing to Distinctive's fault. Thus, Distinctive's motion for summary judgment shall be granted.

C.Cooper's Counterclaims

1.First Counterclaim

Contrary to Distinctive's allegations, pursuant to their Agreement, Cooper is entitled to a full commission on sales which did not close by reason of Distinctive's fault. Whether Distinctive caused sales to fail to close clearly presents issues of fact. Cooper's failure to provide a list of prospective purchasers is not fatal to its claims for commissions on those sales. The Agreement is silent as to when such list was required to be produced. Distinctive's motion to dismiss Cooper's first counterclaim must be denied.

2.Second Counterclaim

As for Cooper's second counterclaim, again, pursuant to their agreement, Cooper was entitled to monthly advances under the terms of the Agreement with Distinctive. Whether Distinctive fulfilled that contractual obligation also presents an issue of fact. The motion to dismiss the second counterclaim must be denied.

3.Third and Fourth Counterclaims

"[T]o prevail on a claim of unjust enrichment, a Plaintiff must establish that the Defendant benefitted at the Plaintiff's expense and that equity and good conscience require restitution." Whitman Group Realty, Inc. v. Galano, 41 AD3d 590, 593 (2nd Dept. 2007), citing Kaye v. Grossman, 202 F.3d 611, 615-616 (2nd Cir. 2000); and City of Syracuse v. R.A.C. Holding, 258 AD2d 905, 906 (1999). However, "[r]ecovery for unjust enrichment is barred by a valid and enforceable contract." Whitman Group Realty, Inc. v. Galano, supra, citing Samiento v. World Yacht Inc., 38 AD3d 328, 329 (1st Dept. 2007); Singer Asset Financial Co.,LLC. v. Melvin, 33 AD3d 355 (1st Dept. 2006); and Start v. City of New York, 31 AD3d 530, 531 (2nd Dept. 2006). The third and fourth counterclaims sounding in unjust enrichment are duplicative of the first counterclaim sounding in beach of contact. The motion to dismiss then shall be granted.

4.Fifth Counterclaim

Cooper's claim for loss of commission in the sale of the Panoramic Project property to Distinctive is not a dispute governed by the subject Agreement. Thus, a claim of unjust [*6]enrichment may be advanced. Loheac v. Children's Corner Learning Center, 51 AD3d 476 (1st Dept. 2008); citing American Tel. & Util. Consultants v. Beth Israel Med. Ctr., 307 AD2d 834 (1st Dept. 2003).

Distinctive has not demonstrated that the merger clause in the parties' Agreement incorporates the alleged commission agreement between the parties whereby Cooper sacrificed a portion of its commission on the sale of the Panoramic Project to Distinctive in exchange for becoming the exclusive broker for Distinctive on its sale of Panoramic Project's units. In any event, "general merger clauses are ineffective to include parole evidence of fraud in the inducement." LaBarbera v. Marino, 192 AD2d 697 (2nd Dept. 1993). See, Sabo v. Delman, 3 NY2d 155, 162 (1957); WIT Holding

Corp. v. Klein, 282 AD2d 527 (2nd Dept. 2001). Distinctive's motion to dismiss the fifth counterclaim is must be denied.

5.Sixth Counterclaim

Issues of fact exist as to what, if any, services were rendered by Cooper following the alleged termination of the parties' Agreement. While Distinctive maintains it is not obligated to pay for those services pursuant to the Agreement, Cooper may recover for those services in quantum meruit. Loheac v. Children's Corner Learning Center, supra citing American Tel. & Util. Consultants v. Beth Israel Med. Ctr., supra. Distinctive's motion to dismiss the sixth counterclaim must be denied.

Accordingly, it is,

ORDERED, that Plaintiff's motion for summary judgment on its complaint is denied with regard to the first cause of action and granted with regard to the second cause of action; and it is further,

ORDERED, that Defendant's motion to dismiss the first cause of action is denied; and it is further,

ORDERED, that Plaintiff's motion for summary judgment dismissing the counterclaims is granted with regard to the third and fourth counterclaims which are hereby dismissed and denied as to the remaining counterclaims; and it is further,

ORDERED, that counsel for the parties shall appear for a status conference on February 27, 2009 at 9:30 a.m.

This constitutes the decision and Order of the Court.

Dated: Mineola, NY_____________________________

January 26, 2009Hon. LEONARD B. AUSTIN, J.S.C.