Triumph Prop. Group, Ltd. v EAI Two, LLC

[*1] Triumph Prop. Group, Ltd. v EAI Two, LLC 2009 NY Slip Op 50323(U) [22 Misc 3d 1128(A)] Decided on February 25, 2009 Supreme Court, New York County Solomon, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 February 25, 2009
Supreme Court, New York County

Triumph Property Group, Ltd., Plaintiff,

against

EAI Two, LLC, Defendant.



106542/07



Plaintiff was represented by Gerard S. Strain, Esq. of Kane Kessler, P.C., 1350 Avenue of Americas, New York, NY 10019, tel no. (212) 541-6222. Defendant was represented by Paul Levinson, Esq. of McLaughlin & Stern, LLP, 260 Madison Avenue, New York, New York 10016, tel no. (212) 448-1100

Jane S. Solomon, J.

INTRODUCTION

Plaintiff Triumph Property Group Ltd. ("Triumph"), a real estate brokerage firm, sued Defendant EAI TWO, LLC ("EAI"), a vendor of a condominium unit, to recover a real estate brokerage commission. Triumph moves for summary judgment. Triumph's motion is granted for the reasons set forth below. This case stands for the proposition that a vendor that enters into a real estate contract cannot rely on a transfer-of-title contingency to avoid liability to a broker if it prevents a transfer from occurring through its own actions.

EAI was the owner of a condominium unit located at 121 West 19th Street New York, New York (the "Unit"). Max Dolgicer ("Dolgicer") is the principal of EAI. EAI retained Triumph to procure a buyer for the Unit and gave Triumph the exclusive right to solicit prospective buyers in a written brokerage agreement. Triumph sent EAI a standard form agreement, but EAI modified

it by adding language that was intended to make Triumph's commission contingent on the transfer of title. Dolgicer sent the amended agreement to Triumph as an attachment to an e-mail, in which he states: "I reviewed the sales contract and made some [modifications] which I [don't think] will be a problem. Basically, I've changed the contract so the commission is due when the closing occurs (i.e. title is transferred) as [opposed] to delivery of a contract." (E-mail from Max Dolgicer to Gene E. Dubrovin (September 25, 2006), attached as Exh. 7 to Affidavit of Max Dolgicer in Opposition to Motion for Summary Judgment ("Dolgicer Affidavit").) Shortly [*2]thereafter, Triumph and EAI executed the amended agreement, which was to expire by its terms on November 15, 2006 (the "Contract"). (Contract, attached as Exh. 10 to Dolgicer Affidavit.)

The Contract provides that EAI will pay Triumph "a commission of 5% of the sales price of The Property as set forth in the purchase and sales contract if Triumph Sells The Property and the Property Title transfers to the Buyer." (Id. § C.) The Contract also provides:

Triumph has earned the commission when I am provided with a written purchase offerthat meets the price and other conditions I have set or when the purchase and salescontract becomes a binding legal commitment on the Buyer and the Property is transferred to the Buyer. At the closing of the sale of The Property, my representative (such as my attorney) is authorized to pay Triumph the commission agreed to in Section C from the proceeds of the sale of The Property.

(Id. § E.)

With the assistance of another broker, Triumph presented a $3,050,000 offer for the Unit to EAI in December 2006. EAI accepted the offer, and a contract of sale was executed on or about January 25, 2007. Approximately one week after signing the Contract, Dolgicer informed Triumph that he did not intend to close. Dolgicer indicated that his decision was based on his "personal situation" and explained that "the price of $3,050,000 [does not] do enough for me to move me from the seller to a buyer column." (E-mail from Max Dolgicer to Gene E. Dubrovin (January 31, 2007), attached as Exh. J to Affidavit of Gene E. Dubrovin in Support of Motion for Summary Judgment ("Dubrovin Affidavit").)

In February 2007, the prospective purchasers sent Dolgicer's attorney two time-is-of-the-essence notices advising that a closing was scheduled for March 5, 2007. EAI did not appear at the closing. On March 6, 2007, the prospective purchasers sent Dolgicer's attorney a default notice. The notice advised Dolgicer that all necessary parties (except for EAI) were present at the closing. The notice reads: "[T]he Seller is hereby in default of the Contract of Sale . . . . Purchaser shall at this time seek any and all remedies in equity and law, including, but not limited to specific performance." (Letter from Tracy Almazan, Esq. to Fay Taub Stern, Esq. (Mar. 6, 2007), attached as Exh. N to Dubrovin Affidavit.)

In March 2007, EAI and the prospective purchasers settled their dispute and agreed to a mutual release upon EAI's payment of $62,500. They signed a settlement agreement (the "Settlement Agreement"), which states that it was executed "without any admission of liability or fault by either party." (Settlement Agreement, attached as Exh. 30 to Dolgicer Affidavit.) Soon thereafter, EAI attempted to revive the transaction, but the prospective purchasers chose not to proceed. In August 2007, EAI sold the Unit to someone else for $3,500,000 and compensated a new broker for procuring the purchaser.

DISCUSSION

Plaintiff argues that the terms of the Contract remained effective after the Contract formally expired because both parties continued to perform under it. Triumph contends that it is entitled to its commission (even if it was made contingent on the transfer of title) because EAI [*3]prevented the transfer from occurring by defaulting on the contract of sale.

In opposing the motion, EAI does not dispute that the terms of the Contract (including the condition regarding the transfer of title) remained in effect after the Contract formally expired in November 2006. EAI contends that Triumph is not entitled to a brokerage commission because Triumph's commission was contingent on the transfer of title and title did not pass. According to EAI, the issue of whether it defaulted on the contract of sale is irrelevant.

Alternatively, even if EAI's liability to Triumph depends on whether it defaulted, EAI argues that there is an issue of fact regarding its alleged default. It contends that it was not at fault because it attempted to revive the deal after it failed to appear at the closing.

The parties clearly intended that Triumph's commission would be contingent on the transfer of title. Indeed, that was the express purpose behind Dolgicer's modifications. The principal issue is whether Triumph is entitled to a commission even though a transfer did not occur. Under New York law, a real estate broker is entitled to a brokerage commission when it produces a purchaser who is ready, willing, and able to buy on terms acceptable to the seller. Corcoran Group, Inc. v. Morris, 107 AD2d 622, 623 (1st Dept. 1985), aff'd, 64 NY2d 1034 (1985).

But a broker's right to receive a commission may be varied by agreement and made contingent upon a condition precedent, such as the transfer of title. Id. In such cases, a broker ordinarily will not be entitled to compensation unless a transfer of title actually occurs. Bersani v. Basset, 184 AD2d 996, 997 (4th Dept. 1992) (holding that a broker who agrees to make his commission contingent on the transfer of title "bears the risk of the deal" until title is transferred). Under this rule, a seller is not responsible for a commission that was contingent on the transfer of title if the purchaser failed to consummate the sale. Dawn's Gold Realty v. Dagnese,304 AD2d 519, 520 (2nd Dept. 2003).

However, a seller cannot avoid liability for a broker's commission based on the fact that a condition precedent has not occurred when the seller is responsible for its non-performance. See Levy v. Lacey, 22 NY2d 271, 276 (1968); Stern v. Gepo Corp., 289 NY 274, 277 (1942); Cushman & Wakefield, Inc. v. Dollar Land Corp. Ltd. (U.S.), 44 AD2d 445, 449 (1st Dept. 1974), aff'd, 36 NY2d 490 (1975). Thus, a seller is liable for the payment of a commission that was contingent on the transfer of title if the seller is responsible for the failure of title to transfer.

In Stern, the contract between the seller and the broker provided for the payment of a commission "in connection with the sale, when and if consummated," of a specified parcel of property. 289 NY at 276. A closing was held, but the seller's title was rejected as unmarketable. The broker sued the seller for the brokerage commission, alleging that the sale was not consummated because of liens placed on the property due to the seller's failure to pay certain taxes and assessments. Id. at 275-77.

The seller moved for summary judgment on the ground that the condition precedent to its liability for the commission did not occur. The Court of Appeals held that the seller was not entitled to summary judgment. The Court reasoned that the allegation that "title did not close because of the vendor's neglect and refusal to discharge liens against the property is sufficient to avoid the defense of non-performance of a condition precedent under the well-established rule that one may not take advantage of a condition precedent, the performance of which he himself [*4]has rendered impossible." Id. at 277.

In Levy, the Court of Appeals reiterated the rule announced in Stern. The Court held that an agreement between a broker and a seller conditioning payment on the consummation of a sale does not "absolve the seller of the obligation of paying a commission where the sale fails of completion through the seller's own fault." 22 NY2d at 276.

In Cushman & Wakefield, Inc., the contract between the broker and the sellers provided that part of the broker's commission would be payable at the closing and the remainder would be paid thereafter. 44 AD2d at 447. The closing did not take place because a group of dissident shareholders brought an action to rescind the contract of sale on behalf of the sellers. The shareholders prevented the transfer of title from occurring by obtaining a preliminary injunction. They also elected a new Board of Directors to manage the selling entities. The new Board of Directors cancelled the contract of sale and formally repudiated it. Id.

The broker sued and moved for summary judgment. In opposition, the sellers argued that no commission was due because a transfer of title did not take place. Id. at 449. The lower court denied the broker's motion. However, the Appellate Division, First Department, in an Order that was affirmed by the Court of Appeals, reversed and granted summary judgment. It rejected the contention that the sellers were not liable for the commission because title did not transfer. The Court, citing Stern, held that the broker was entitled to receive its commission because it was "abundantly clear that title failed to close because of the sellers' refusal to go through with the contract." Id.

Summary judgment must be granted to Triumph under the holdings in the aforementioned cases. Triumph has made a prima facie showing of entitlement to summary judgment. In opposition, EAI fails to raise a genuine issue of material fact.

Shortly after signing the contract of sale, Dolgicer simply changed his mind and decided not to close. Title did not transfer because EAI failed to appear at the scheduled closing and defaulted. EAI cannot evade liability by relying on a condition precedent that it prevented from occurring; nor can it lay the fault on the prospective buyers for their subsequent refusal to make a new agreement.

EAI argues that it contractually obtained the right to avoid liability to Triumph after breaching its contract and defaulting on the transaction. However, New York law does not permit a party in EAI's position to frustrate a condition precedent and then rely on it to avoid liability to a broker.

At oral argument, EAI relied on the absence of an admission of liability by Dolgicer in the Settlement Agreement. However, the resolution of the dispute between EAI and the prospective purchasers is irrelevant to the outcome here. Triumph is entitled to its commission.

CONCLUSION

Based on the foregoing, it hereby is

ORDERED that Triumph's motion for summary judgment is granted; and it further is

ORDERED that the Clerk is directed to enter judgment in favor of Triumph and against EAI in the amount of $152,500 with interest from March 5, 2007, plus costs and disbursements as taxed by the Clerk.

Dated: February, 2009 [*5]

ENTER:

_______________ J.S.C.