2004 Bowery Partners, LLC v E.G. W. 37th LLC
Annotate this CaseDecided on June 30, 2011
Supreme Court, New York County
2004 Bowery Partners, LLC, Plaintiff,
against
E.G. West 37th LLC, JACOB KLEIN, DANIEL WINSCHUH, MASSEY KNAKAL, ROBERT KNAKAL, AND JEFFREY HEBGEMAN, Defendants.
DUMANN REALTY, LLC, Plaintiff, -against-
against
MASSEY KNAKAL, Defendant.
113810/10
For Plaintiffs:
Sarno & DeFelice, LLC
235 West 23rd St., 5th Floor
New York, NY 10011
For Defendants:
Steven Landy & Associates, PLLC
270 Madison Avenue, Suite 1400
New York, NY 10016
Bernard J. Fried, J.
Both of these actions arise out of the failed attempt of 2004 Bowery Partners, LLC (Bowery Partners) to acquire several parcels of real property located in Manhattan, known as 431 West 37th Street, 430½ West 38th Street, and 433-439 West 37th Street (the Properties). In 2004 Bowery Partners, LLC v E.G. West 37 LLC, et al.,Index No. 113810/10 (The Bowery Partners Action), plaintiff Bowery Partners asserts causes of action against E.G. West 37 LLC (West), the owner and seller of the Properties, and Massey Knakal Realty of Manhattan, LLC, incorrectly sued as Massey Knakal (Massey Knakal), West's broker, and several individuals connected to West and Massey [*2]Knakal. Although Bowery Partners made an offer through Massey Knakal to purchase the Properties from West for $21,000,000, the subsequent contract negotiations failed, Bowery Partners rejected the proposed contract, and West entered into a contract to sell the Properties to a third party.
In Dumann Realty LLC v Massey Knakal, Index No. 113473/10 (the Dumann Realty Action), plaintiff Dumann Realty LLC (Dumann Realty), Bowery Partners' real estate broker, sues Massey Knakal, the listing agent for the Properties, seeking to recover a co-brokerage commission with respect to the Properties.
The motions in each separate action are consolidated herein for disposition only. In the Bowery Partners Action, in Motion Sequence No. 001, defendants Massey Knakal, Jacob Klein, Daniel Winschuh, Robert Knakal and Jonathan Hageman, incorrectly sued as Jeffrey Hebgeman, move, pursuant to CPLR 3211 (a) (1), (3), (5) and (7), for an order dismissing the complaint. Defendants also move for an order sanctioning Bowery Partners and its counsel for the commencement and continued prosecution of an allegedly frivolous action. In Motion Sequence No. 002, West also moves for dismissal of the complaint.
In the Dumann Realty Action, defendant Massey Knakal moves, pursuant to CPLR 3211 (a) (1), (7) and (8), for an order dismissing the complaint.
As set forth below, the motions to dismiss are granted, and the complaints in both actions are dismissed.
West is a limited liability company which owned the Properties and engaged Massey Knakal, a licensed real estate brokerage business, to market and promote the sale of the Properties. Pursuant to a written listing agreement with Massey Knakal (the Listing Agreement), West agreed to pay Massey Knakal a variable commission based upon the gross sales price of the Properties, upon closing, if Massey Knakal procured a purchaser who took title to the Properties (Listing Agreement, ¶ 5 ["The commission shall be due and payable only as, if, and when title passes"] [Aff. of Steven Landy, Exh B]). The Listing Agreement also provides that "[i]n the event that a sale of the Property shall be effected by another licensed real estate broker," Massey Knakal will compensate the outside broker with half of its commission (id., ¶ 6).
As part of its efforts in marketing the Properties, Massey Knakal showed the Properties to Richard Du (Du), a broker with Dumann Realty, Bowery Partners' real estate broker. Du told Massey Knakal that he represented a group of investors interested in acquiring the Properties. Du is the sole member of both Bowery Partners and Dumann (Bowery Partners Complaint, ¶¶ 13-14).
As a result of Massey Knakal's efforts in showing the Properties to Du, Bowery Partners offered to purchase the Properties for $21,000,000. When Bowery Partners first made its offer to Massey Knakal, Hageman, Massey Knakal's sales team manager, told Du by e-mail dated September 1, 2010, that Massey Knakal was "in the midst of negotiating" a contract with a third party, and that West would not accept an offer from Bowery Partners unless it was on the same non-monetary terms of the third-party's offer, namely "10% deposit, 60-90 day closing and all due diligence done prior to contract execution" (see Landy Aff., Exh C).
On September 15, 2010, Hageman sent Du an e-mail confirming the terms of Bowery Partners' offer to purchase the Properties for $21,000,000, to pay a 10% deposit, to close by the end of the year, and to complete all due diligence before signing a contract. Hageman also asked Du to prepare a transaction memorandum reflecting these terms (see Landy Aff., Exh D). Massey Knakal agreed to split its commission "50/50" with Dumann Realty if Bowery Partners ended up acquiring [*3]the Properties (see Dumann Realty Complaint, Exh A).
On September 16, 2010, Du prepared and circulated a term sheet which apparently misstated several material terms of the offer he discussed with Massey Knakal. Despite West's insistence on requiring a purchaser to complete due diligence before executing a contract and that there be no contingencies in its sales contract, the term sheet Du prepared called for both contingencies and a due diligence period (see Landy Aff., Exh E).
Because the terms set forth in Du's term sheet were unacceptable to West and did not conform to the offer he made to Massey Knakal, Massey Knakal prepared and circulated a memorandum (the Memorandum) setting forth the terms upon which West would be prepared to send a draft contract to Bowery Partners. The Memorandum, dated September 16, 2010, specifically stated that "no offer shall be deemed acceptable' unless and until such time as a contract of sale is executed, the contract deposit is received, and a countersigned copy of the contract is returned to you" (see id., Exh F).
On September 21, 2010, Goodwin Proctor LLP, West's attorneys, drafted and sent a proposed agreement (the Proposed Agreement) (see id., Exh H) to Ronald Sarno (Sarno), Bowery Partners' attorney, for his review. On September 23, 2010, David Wagner, a Goodwin Proctor attorney, e-mailed Sarno to ask when he could expect to receive Sarno's comments on the Proposed Agreement. Sarno replied the following day that he would not have comments until the next week (see id., Exh I).
In the weeks following the circulation of the Proposed Agreement, Massey Knakal repeatedly contacted Du to see if Bowery Partners was prepared to sign the Proposed Agreement and move forward with the transaction. On September 28, 2010, Hageman wrote to Du to find out why Sarno had still not provided any comments on the Proposed Agreement. Hageman wrote a second e-mail on September 29, 2010, urging Du to move forward with the deal. Du replied by accusing Massey Knakal of being difficult, and of harassing him. In the same e-mail, Du insisted that Bowery Partners needed more time before making a final, binding decision with respect to the Properties (see id., Exh J).
On October 5, 2010, Du wrote to Hageman and Knakal, rejecting the Proposed Agreement. That same day, Sarno wrote to Goodwin Proctor, rejecting the Proposed Agreement on Bowery Partners' behalf, and attaching a list of five clauses which he found objectionable, including standard waiver and insurance obligation clauses, as well as limitations on warranties, violations and liability (see id., Exh L).
West asserts that it concluded that further negotiations with Bowery Partners would be futile, and subsequently signed a contract with a third party to sell the Properties for less than Bowery Partners originally offered to pay. It is undisputed that Massey Knakal had no involvement in procuring an offer from the eventual purchaser of the Properties.
It is also undisputed that Bowery Partners never submitted executed copies of the Proposed Agreement, or the required 10% deposit. Indeed, Bowery Partners does not allege that it was ready, willing and able to purchase the Properties.
In the Bowery Partners complaint, Bowery Partners alleges four causes of action. The first three causes of action are for breach of promise, breach of the implied covenant of good faith and fair dealing, and breach of contract. The fourth cause of action seeks damages from Massey Knakal [*4]for violation of its duties as a real estate agent to a third party — Bowery Partners.
The Dumann Realty complaint also contains four causes of action — breach of contract, breach of promise, common-law fair dealing, and unjust enrichment.
Although on a motion to dismiss a complaint pursuant to CPLR 3211 (a) (7), "the pleading is to be afforded a liberal construction," and "the facts as alleged in the complaint [are presumed] as true" (Leon v Martinez, 84 NY2d 83, 87 [1994]; see also Rovello v Orofino Realty Co., 40 NY2d 633 [1976]), " factual claims [that are] either inherently incredible or flatly contradicted by documentary evidence are not entitled to such consideration'" (Mark Hampton, Inc. v Bergreen, 173 AD2d 220, 220 [1st Dept 1991] [citation omitted], lv denied 80 NY2d 788 [1992]; see also Morgenthow & Latham v Bank of NY Co., 305 AD2d 74 [1st Dept], lv denied 100 NY2d 512 [2003]).
In order to prevail on a motion to dismiss based upon documentary evidence pursuant to CPLR 3211 (a) (1), the movant must demonstrate that the documentary evidence conclusively refutes the plaintiff's claims (AG Capital Funding Partners, L.P. v State St. Bank & Trust Co., 5 NY3d 582 [2005]). "Factual allegations presumed to be true on a motion pursuant to CPLR 3211 may properly be negated by affidavits and documentary evidence" (Wilhelmina Models, Inc. v Fleisher, 19 AD3d 267, 269 [1st Dept 2005]). A motion to dismiss under CPLR 3211 (a) (1) will be granted where plaintiff's claim is contradicted by the documentary evidence (see e.g. CIBC Bank & Trust Co. [Cayman] Ltd. v Credit Lyonnais, 270 AD2d 138 [1st Dept 2000]; see also Rivietz v Wolohojian, 38 AD3d 301 [1st Dept 2007]).
All of the claims contained in the Bowery Partners and Dumann Realty complaints are legally deficient on their face, and/or are contradicted by clear documentary evidence. Accordingly, defendants' motions to dismiss the complaints are granted.
Bowery Partners Action
1.Breach of Promise and Breach of Contract
The first and third causes of action for breach of promise and breach of contract each require, as one of their elements, that a binding contract exist between Bowery Partners and West for the sale of the Properties. Documentary evidence conclusively demonstrates that no such agreement exists.
Under New York law, a contract for the sale of an interest in real property must be in writing. The statute of frauds, General Obligations Law (GOL) § 5-703 (1), provides that:
An estate or interest in real property ... cannot be created, granted, assigned, surrendered or declared, unless ... by a deed or conveyance in writing, subscribed by the person creating, granting, assigning, surrendering or declaring the same ... .
GOL § 5-703 (2) further provides that:
A contract ... for the sale, of any real property or an interest therein, is void unless the contract or some note or memorandum thereof, expressing the consideration, is in writing, subscribed by the party to be charged, or by his lawful agent thereunto authorized by writing.
Thus, in order to satisfy the statute of frauds, there must be a writing subscribed by West setting forth the details of the transaction. Bowery Partners has failed to produce, or even allege, any [*5]writing that satisfies the statute of frauds. Indeed, documentary evidence in the form of correspondence and e-mails between the parties establishes that negotiations between the parties failed, that Bowery Partners rejected the Proposed Agreement, and that the parties never executed a written agreement.
The only writing that Bowery Partners refers to is the Memorandum, which outlines the terms upon which contract negotiations were to proceed. However, pursuant to its express terms, the Memorandum was not a contract for the purchase of real property, but rather, expressly contemplated, and was subject to, the execution of a contract (see Memorandum, at 1 ["no offer shall be deemed acceptable' unless and until such time as a contract of sale is executed, the contract deposit is received, and a countersigned copy of the contract is returned to you"]).
Thus, there is no binding purchase agreement because the parties expressed their intention not be bound until the Proposed Agreement was fully executed. " It is well settled that, if the parties to an agreement do not intend it to be binding upon them until it is reduced to writing and signed by both of them, they are not bound and may not be held liable until it has been written out and signed'" (Jordan Panel Sys. Corp. v Turner Constr. Co., 45 AD3d 165, 166 [1st Dept 2007], quoting Scheck v Francis, 26 NY2d 466, 469-470 [1970]).
For instance, in RAJ Acquisition Corp. v Atamanuk (272 AD2d 164 [1st Dept 2000]), the Court held that the statute of frauds was a bar to the formation of a contract where, as here, the agreement relied upon by the plaintiff "revealed that the parties had not intended to be bound until a further formal contract was negotiated and executed" (id. at 164; see also Yenom Corp. v 155 Wooster St. Inc., 23 AD3d 259 [1st Dept 2005], lv denied 6 NY3d 708 [2006] [dismissing complaint where documentary evidence established that the parties did not intend to be bound until the defendants executed and delivered a fully executed copy of the contract to the plaintiff]).
Documentary evidence conclusively demonstrates that West would not be bound to transfer the Properties to Bowery Partners unless and until it executed the Proposed Agreement. Specifically, the Memorandum provided that West would not be bound to transfer the Properties until the Proposed Agreement was signed by Bowery Partners, delivered to West along with a $2,100,000 down payment, signed by West, and returned to Bowery Partners. Bowery Partners does not, and cannot, allege that it ever took any of the preceding steps. As such, no agreement was ever formed, and Bowery Partners has no claim for breach of promise or breach of contract against any of the defendants.
In opposition to the motion, Bowery Partners argues that its expenditures for an investment advisor, an architect, an attorney to perform due diligence, a "building and design service," and a comparative sales analysis constitute partial performance, thus removing the alleged agreement from the statute of frauds. However, the Court in RAJ rejected a similar argument:
Nor was the purported agreement removed from the Statute by virtue of plaintiffs' actions in obtaining a mortgage commitment and ordering a title report since those acts were not unequivocally referable' to the agreement, "but rather can be explained as preliminary steps which contemplate the future formulation of an agreement"
(272 AD2d at 165 [internal citations omitted]; see also Francesconi v Nutter, 125 AD2d 363 [2d Dept 1986]).
Likewise here, Bowery Partners' actions are merely "preliminary steps which contemplate [*6]the future formulation of an agreement," and thus, Bowery Partners' unilateral conduct is insufficient to create a contract or serve as part performance and avoid the statute of frauds.
Moreover, to the extent that Bowery Partners claims that the unexecuted Proposed Agreement should be enforced on the basis of promissory estoppel because of the foregoing expenditures, this claim fails because its reliance, if any, was unreasonable, as defendants never expressed an intention to be bound until the Proposed Agreement was fully executed (see Spier v Southgate Owners Corp., 39 AD3d 277 [1st Dept 2007]).
Bowery Partners also alleges that it was promised a period of time before contract execution in which it was entitled to perform due diligence, and have its attorney review the Proposed Agreement. Bowery Partners further alleges that it was never warned that West was negotiating with other potential purchasers, or that West would enter into a contract with a third party after Bowery Partners rejected the Proposed Agreement. Bowery Partners is essentially suggesting that, at some period during oral negotiations, Massey Knakal became precluded from showing the Properties to other prospective purchasers. In Sonnenschein v Douglas Elliman-Gibbons & Ives, 274 AD2d 244 [1st Dept 2000], affd 96 NY2d 369 [2001]), the Court observed that:
Real estate negotiations are often characterized by a series of tentative oral agreements between the parties. The parties are nonetheless free to decide against entering into the sale, until the final terms are reduced to writing. The very purpose of the Statute of Frauds, as applied to real estate sales, is to distinguish these provisional agreements to agree' from the final, binding contract
(id. at 248-249). The Court of Appeals affirmed the dismissal of the complaint against the defendant broker because, inter alia, the documentary evidence "clearly contemplated that the parties were free to decline to enter into a contract" (96 NY2d at 376). Likewise, here, the cause of action for breach of promise must also be dismissed because, until the Proposed Agreement was fully executed, West was free to sell the Properties to another party, and Massey Knakal was free to negotiate with others on behalf of West.
Accordingly, the first and third causes of action for breach of contract and breach of promise are dismissed.
2.Breach of the Implied Covenant of Good Faith and Fair Dealing
The third cause of action for breach of the covenant of good faith and fair dealing must be dismissed, as New York courts do not recognize breach of the implied duty of good faith and fair dealing as a claim distinct from breach of contract. Under New York law, there is no separate cause of action for breach of the implied duty of good faith and fair dealing because it " is merely a breach of the underlying contract'" (Commerce and Indus. Ins. Co. v U.S. Bank Natl. Assn., 2008 WL 4178474, * 3 [SD NY 2008] [citation omitted]; see also TeeVee Toons, Inc. v Prudential Sec. Credit Corp., L.L.C., 8 AD3d 134, 134 [1st Dept 2004] [affirming dismissal of claim for breach of the implied covenant of good faith because it was "redundant" of breach of contract claim]; Triton Partners LLC v Prudential Sec. Inc., 301 AD2d 411, 411 [1st Dept 2003] [same]). As such, this cause of action is "duplicative of the [underlying] cause of action for breach of contract," and must be dismissed (New York Univ. v Continental Ins. Co., 87 NY2d 308, 320 [1995]).
3.Violation of Massey Knakal's Responsbility to Bowery Partners [*7]
In its fourth cause of action for "violation of a real estate broker's agent responsibility to a third party (the plaintiff)," Bowery Partners alleges that it expected Massey Knakal to be fair and honest, but that Massey Knakal, Robert Knakal and Hageman "engaged in misrepresentation and nondisclosure of material facts," thereby causing Bowery Partners to "los[e] this deal and the anticipated profits thereof," as well as out-of-pocket expenses and good will (Complaint, ¶¶ 90-91). Though poorly worded, this cause of action appears to be, in essence, a claim that Massey Knakal had a fiduciary duty to advise Bowery Partners that West was preparing to sell the Properties to a third party, and that it violated that duty. The fourth cause of action must be dismissed because no such duty exists.
It is well-settled that a real estate broker owes a fiduciary duty to its principal (Dubbs v Stribling & Assocs., 96 NY2d 337 [2001]). Here, Massey Knakal represented West, and owed West a fiduciary duty to act in its best interests in procuring a purchaser. However, Massey Knakal owed no such corresponding duty to Bowery Partners.
It is also well-established that a seller's broker owes no duty of loyalty or care to a potential buyer. For instance, in Stambovsky v Ackley (169 AD2d 254 [1st Dept 1991]), the purchaser of a home brought an action against the seller and the seller's broker after the buyer learned the property was reputed to be haunted. The Court affirmed the lower court's dismissal of the cause of action against the seller's broker, holding that the "real estate broker, as agent for the seller" was "under no duty to disclose to a potential buyer" information about the property's reputation (id. at 256; see also Daly v Kochanowicz, 67 AD3d 78, 97-98 [2d Dept 2009] [holding that the plaintiff, the purchaser of real estate "failed to state a cause of action against [the seller's broker] to recover damages for breach of fiduciary duty" because "[t]he complaint does not allege that those defendants owed a fiduciary duty to the plaintiff, and any such allegation would be insupportable"]).
In addition, the Legislature has enacted a new law, Real Property Law § 443 (4) (a), which codifies the principle that a seller's broker has a fiduciary duty of "undivided loyalty" to the seller, and that a "seller's agent does not represent the interests of the buyer."Accordingly, the fourth cause of action must be dismissed.
4.Defendants' Motion for Sanctions
The imposition of sanctions is not appropriate here, as there is no indication that this action is completely frivolous and without merit (see Grossman v Pendant Realty Corp., 221 AD2d 240 [1st Dept 1995], lv dismissed 88 NY2d 919 [1996]; North American Van Lines, Inc. v American Intl. Cos., 11 Misc 3d 1076[A], 2006 NY Slip Op 50576[U] [Sup Ct, NY County 2006], affd 38 AD3d 450 [1st Dept 2007]).
The Dumann Realty Action
1.Breach of Contract
In its first cause of action for breach of contract, Dumann Realty alleges that it had a "commission agreement" (the Commission Agreement) with Massey Knakal, pursuant to which the parties agreed to split the commission for the Properties "50/50," i.e., "$21 million dollars with 2 percent as commission is $420,000 dollars" with [e]ach of us getting $210,000 dollars at the closing" (9/15/10 e-mail from Du to Hageman [Complaint, Exh A]). Dumann Realty alleges that it "fully performed its requirements under the commission agreement" (Dumann Realty Complaint, ¶ 23), but that Massey Knakal "execut[ed] a competing agreement with another purchaser of the Property" [*8](id., ¶ 24), and that Massy Knakal breached the Commission Agreement by "using another purchaser instead of the one identified by Dumann" (id., ¶ 25).
Under the common law, a broker earns a commission by procuring a buyer who is ready, willing and able to take title on the seller's terms, regardless of whether the sale is actually consummated (B.P. Vance Real Estate v Tamir, 42 AD3d 343 [1st Dept 2007]). "However, parties to a brokerage agreement are free to add whatever conditions they may wish to their agreement, including a condition that the contract of sale actually be consummated before the broker is deemed to have earned his commission'" (id. at 344, quoting Levy v Lacey, 22 NY2d 271, 274 [1968]). Here, the Listing Agreement specifically provided that Massey Knakal would only receive its commission "as, if, and when the title passes." Thus, the Listing Agreement is enforceable to the extent that it requires title to pass before a commission is due.
The breach of contract cause of action must be dismissed because documentary evidence conclusively demonstrates that Bowery Partners never took title to the Properties. Because title never passed to Bowery Partners, Massey Knakal was not entitled to a brokerage commission, and thus, a fortiori, Dumann Realty was not entitled to a co-brokerage commission.
Moreover, Dumann Realty's claim that it "fully performed" under the Commission Agreement, a necessary element to its cause of action for breach of contract, is refuted by documentary evidence which demonstrates that Bowery Partners rejected the Proposed Agreement. The Commission Agreement contained an implied condition precedent that Bowery Partners must actually purchase the Properties before a co-brokerage commission became due, because the Listing Agreement between Massey Knakal and West provided that Massey Knakal would earn and receive its commission "only as, if, and when title passes."
" Before liability can arise on a promise qualified by conditions expressed or implied in fact, those conditions must be fulfilled'" (William T. Bell Assocs., LLP v Pyramid Brokerage Co., Inc., 281 AD2d 943, 943 [4th Dept 2001], quoting 22 NY Jur 2d Contracts, § 324, at 422 [holding that a co-broker is not entitled to split commission where primary broker is not paid]). Because the Listing Agreement with West provided that Massey Knakal would be paid only when titled passed, Massey Knakal did not earn a commission from West based upon Bowery Partners' offer. Thus, Dumann Realty cannot recover a co-brokerage commission from Massey Knakal where Massey Knakal, the listing broker, itself received no commission.
This cause of action must also be dismissed because Dumann Realty does not meet the legal standard for proving its entitlement to a co-brokerage commission. To earn a commission, a broker must prove that he or she had a contract, either express or implied, with the party to be charged with paying the commission, and that he or she was the procuring cause of the sale (Sutton & Edwards, Inc. v 68-60 Austin St. Realty Corp., 70 AD3d 810 [2d Dept 2010]; Marciano v Ran Oil Co. East, LLC, 63 AD3d 1118 [2d Dept 2009]; Joseph P. Day Realty Corp. v Chera, 308 AD2d 148 [1st Dept 2003]). For a broker to prove that it was the procuring cause of the sale, "there must be a direct and proximate link, as distinguished from one that is indirect and remote, between the bare introduction and the consummation" (Greene v Hellman, 51 NY2d 197, 206 [1980]). Based upon documentary evidence and the allegations set forth in the complaint, it is clear that Dumann Realty was not the procuring cause of the sale of the Properties.
The documentary evidence reveals that the Properties were sold to a third party, not to Bowery Partners. Dumann Realty had no involvement in the sale of the Properties to the third party, [*9]and, therefore, could not have been the procuring cause of the sale. Indeed, Dumann Realty does not allege that it had any role in procuring the actual purchaser of the Properties, or that it was the procuring cause of the sale of the Properties.
Furthermore, Dumann Realty is not entitled to a co-brokerage commission because Bowery Partners was never ready, willing and able to purchase the Properties on West's terms. "Generally, a broker will have earned its commission when it produces a buyer who is ready, willing and able to enter into a contract on the seller's terms" (Devine Real Estate, Inc. v Brennan, 42 AD3d 646, 647 [3d Dept 2007]). Dumann Realty does not allege that Bowery Partners was ready, willing and able to purchase the Properties. In addition, the documentary evidence, in the form of e-mails between Du and Hageman, reveals that Bowery Partners was not a ready, willing and able purchaser. The fact that Bowery Partners repeatedly delayed executing the Proposed Agreement, and eventually rejected the Proposed Agreement, necessarily means that it was not ready, willing and able to purchase the Properties on West's terms (see e.g. Reza Namazi Real Estate Corp. v Johnson, 243 AD2d 396 [1st Dept 1997] [dismissing broker's complaint because parties to transaction did not agree on contract terms]).
Additionally, "[m]ere agreement as to price on a proposed sale of real property does not constitute a meeting of the minds of buyer and seller so as to entitle the real estate broker to a commission" (Taibi v American Banknote Co., 135 AD2d 810, 811 [2d Dept 1987], appeal denied 72 NY2d 803 [1988]). Thus, the fact that Bowery Partners and West initially agreed on a price, but never reached a meeting of the minds as to other essential terms in the Proposed Agreement, means that Dumann Realty is not entitled to a co-brokerage commission from Massey Knakal.
Accordingly, Dumann Realty's cause of action for breach of contract must be dismissed.
Common-Law Fair Dealing
Dumann Realty's second cause of action is for "common law fair dealing." Dumann Realty alleges that Massey Knakal "made it impossible for Dumann to make this commission" (Dumann Realty Complaint, ¶ 28), and that Massey Knakal breached the implied covenants of good faith and fair dealing "because it actively and knowingly breached the [Commission] Agreement" (id., ¶ 30). As previously discussed, this cause of action is duplicative of the underlying breach of contract cause of action and, as such, must be dismissed.
Breach of Promise
In its third cause of action for breach of promise, Dumann Realty alleges that Massey Knakal "promised to permit Dumann a period [of] time for due diligence, prior to the execution of the Purchase Agreement" (Dumann Realty Complaint, ¶ 34). This cause of action must be dismissed because the allegations upon which it is based are refuted by documentary evidence, and because enforcement of the alleged oral promise is barred by the statute of frauds.
The alleged "promise" referred to is that Dumann Realty would have some unspecified amount of time to perform due diligence. However, Dumann Realty lacks standing to assert a cause of action for breach of such promise because the alleged promise, even if made, would not have been made to Dumann Realty, but to Bowery Partners, the prospective purchaser.
Dumann Realty further alleges that Massey Knakal breached its alleged promise by "executing a Purchase Agreement with a new buyer" (id., ¶ 35), and not "inform[ing] Dumann that [*10]there was a competing buyer" (id.). These allegations defy common sense. Massey Knakal does not own the Properties, so it could not have executed a contract of sale. Moreover, the allegation that Massey Knakal breached its supposed promise by not informing Dumann Realty that there were other interested parties is refuted by documentary evidence in the form of e-mails between Du and Hageman, which reveal that Massey Knakal informed Dumann Realty at the outset that it was in the midst of negotiating with other parties.
Finally, although this cause of action is inartfully pleaded, Dumann Realty appears to be alleging that either (1) Bowery Partners was promised an option to purchase the Properties until it concluded its due diligence; or (2) Bowery Partners was promised a right of first refusal to purchase the Properties. Regardless of how the alleged promise is characterized, these allegations are insufficient as a matter of law because such "promises" are subject to the statute of frauds.
"Because an option to purchase an interest in real property is in effect a conditional contract for a future conveyance of land, a contract that creates such an option is within the Statute of Frauds" and "must be in writing to be valid under the Statute" (Kaplan v Lippman, 75 NY2d 320, 325 [1990]). Similarly "[a] right of first refusal is subject to the statute of frauds" (McCormick v Bechtol, 68 AD3d 1376, 1378 [3d Dept 2009], lv denied 15 NY3d 701 [2010] [affirming dismissal of breach of contract action because unwritten right of first refusal did not satisfy statute of frauds). Accordingly, as the alleged promise is not evidenced by a writing, its enforcement is barred by the statute of frauds, and the third cause of action must dismissed.
Unjust Enrichment
In its fourth cause of action, Dumann Realty alleges that Massey Knakal was "unjustly enriched by not paying plaintiff according to the terms of the shared commission agreement" (Dumann Realty Complaint, ¶ 34). This claim is foreclosed, however, by the existence of the Commission Agreement.
Under New York law, the existence of a written contract covering the particular subject matter of the claims asserted precludes recovery in quasi contract (Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382, 388 [1987] ["The existence of a valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery in quasi contract for events arising out of the same subject matter"]; see also Goldstein v CIBC World Mkts. Corp., 6 AD3d 295, 296 [1st Dept 2004] ["A claim for unjust enrichment, or quasi contract, may not be maintained where a contract exists between the parties covering the same subject matter"]).
Dumann Realty asserts that the Commission Agreement is such a contract, and thus, this written contract bars its unjust enrichment claim here (see e.g. Sheiffer v Shenkman Capital Mgt., 291 AD2d 295, 295 [1st Dept 2002] ["the existence of a valid and enforceable written contract governing the disputed subject matter precludes plaintiffs from recovering in quantum meruit"]; Scavenger, Inc. v GT Interactive Software Corp., 289 AD2d 58, 59 [1st Dept 2001] ["since the matters here in dispute are governed by an express contract, defendant's counterclaim for unjust enrichment was properly found untenable"]).
I have considered the remaining arguments, and I find them to be without merit.
Accordingly, it is [*11]
ORDERED that in 2004 Bowery Partners, LLC v E.G. West 37 LLC, et al.,Index No. 113810/10, the motion of defendants Massey Knakal, Jacob Klein, Daniel Winschuh, Robert Knakal and Jonathan Hageman to dismiss the complaint herein (Motion Sequence No. 001) is granted, and the complaint is dismissed in its entirety as against said defendants, with costs and disbursements to said defendants as taxed by the Clerk of the Court, and the Clerk is directed to enter judgment accordingly in favor of said defendants; and it is further
ORDERED that in 2004 Bowery Partners, LLC v E.G. West 37 LLC, et al.,Index No. 113810/10, the motion of defendant E.G. West 37 LLC to dismiss the complaint herein (Motion Sequence No. 002) is granted, and the complaint is dismissed in its entirety as against said defendant, with costs and disbursements to said defendant as taxed by the Clerk of the Court, and the Clerk is directed to enter judgment accordingly in favor of said defendant; and it is further
ORDERED that in Dumann Realty LLC v Massey Knakal, Index No. 113473/10, the motion to dismiss is granted and the complaint is dismissed; and it is further
ORDERED that the Clerk is directed to enter judgment accordingly.
Dated: _____________
ENTER:
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J.S.C.
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