Terra CRG, LLC v Marke

[*1] Terra CRG, LLC v Marke 2012 NY Slip Op 50521(U) Decided on March 22, 2012 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 22, 2012
Supreme Court, Kings County

Terra CRG, LLC; Ofer Cohen; Reuven Kahane; and Daniel "Mickey" Taillard, Plaintiffs,

against

Namik Marke; 240/242 Franklin Avenue, LLC; Colonial Court Apartments, LLC; Howard Matheson and Steven Matheson, d/b/a The Grand Marketplace, Defendants.



2731/10



Attorney for plaintiffs:

Jay R. Viders, Esq.

368 Veterans Memorial Highway, Suite 7

Commack, NY 11725

Attorney for defendants:

Peter N. Kessler, Esq.

Spector, Gadon & Rosen, P.C.

Seven Penn Center, 7th Floor

1635 Market Street

Philadephia, PA 19103

Carolyn E. Demarest, J.

The following papers numbered 1 to 4 read on this motion:Papers Numbered

Notice of Motion/Supporting Affirmation/Supporting Affidavit1

Opposing Memorandum of Law2 [*2]

Reply Affirmation/Statement of Material Facts3

Counter-Statement of Material Facts4

Plaintiff Reuven Kahane moves, pursuant to CPLR 3212, for an order granting summary judgement on the fifth and sixth causes of action in plaintiffs' amended complaint, alleging, respectively, breach of contract and unjust enrichment, against defendants Namik Marke, 240/242 Franklin Avenue, LLC ("Franklin"), and Colonial Court Apartments, LLC ("Colonial") (collectively, the "Owner Defendants"). In opposition, the Owner Defendants contend that the contract in dispute is an illegal real estate brokerage agreement and, therefore, Kahane is not entitled to its enforcement. The Owner Defendants also argue that the conditions in the contract have not been triggered and thus there has been no breach; that, because there is a valid contract governing the dispute, Kahane may not recover for unjust enrichment; and that plaintiff's claims are improper as against defendants Marke and Franklin. The Owner defendants request that the Court dismiss Kahane's fifth and sixth causes of action or, alternatively, deny his motion for summary judgment.

BACKGROUND

This action arose from the purported sale of real estate located at 4340 Route 130, North Willingboro, New Jersey (the "Property"), which serves as the site of the Grand Marketplace indoor flea market ("GM"). Marke formerly owned and operated GM through three limited liability companies—Franklin and Colonial, which own 60% and 40% of the Property, respectively, as tenants in common, and Grand Marketplace Management, LLC ("GM Management"), which manages the flea market—all of which he was the sole member. In May 2008, Marke entered into an exclusive brokerage agreement with plaintiffs Ofer Cohen, a Brooklyn real estate broker, and Terra CRG, LLC ("Terra"), a commercial real estate agency of which Cohen served and continues to serve as managing member, to sell the Property, for a commission equal to 2.5% of the purchase price (the "Brokerage Agreement"). Upon hearing, from New York real estate agent H. Steven Kirschner, that the Property was for sale, Kahane, a New York attorney specializing in real estate,[FN1] asked plaintiff Daniel "Mickey" Taillard if he was interested in jointly purchasing the Property and if he knew of any other potential partners. Taillard, who is a U.S. resident and citizen of South Africa, suggested they contact Howard Matheson and Steven Matheson (collectively, the "Mathesons"), who together owned and operated the Panorama, one of the largest flea markets in South Africa.

Plaintiffs allege that Kahane and Taillard decided not to purchase the Property and that, instead, Marke retained Kahane as a consultant in connection with the sale of the Property to Howard Matheson, as evidenced by a two-sentence letter that Marke sent him, dated May 30, 2008 (the "Consulting Agreement"). The letter states that, "in the event Mr. Howard Matheson of South Africa and/or his assignees and partners purchase the [Property], a consulting fee equal to $200,000 will be paid to [Kahane] at closing" and that the fee is "not a broker fee and will not be paid out of the Broker's commission." Marke did not indicate whether he signed the letter on behalf of himself or one of his LLCs, although he included a heading that reads "240/242 Franklin Avenue, LLC & [*3]Colonial Court Apartments, LLC." Kahane maintains that the Consulting Agreement is entirely separate from the Brokerage Agreement and does not require a real estate license to enforce.

Plaintiffs claim that the Mathesons purchased the Property by acquiring the LLCs that own GM, in an attempt to avoid paying the broker and consulting fees. On June 12, 2008, the Mathesons created Panorama Fleamarket LLC ("PFM"), a New Jersey limited liability company, issuing 50% of the shares to Howard Matherson and 50% to Steven Matheson.[FN2] On July 25, 2008, PFM entered into a membership interest purchase agreement with Marke to acquire 100% of the shares of Colonial, for $1,800,000,[FN3] and GM Management, for $200,000. The Mathesons also retained an option to purchase either Franklin or the remaining 60% interest in the Property for $6,320,000, which has since expired. On the same day that PFM signed the purchase agreement, Franklin and Colonial signed an exclusive property management agreement with GM Management. Closing occurred on September 11, 2008.

As evidence of the alleged transactions, Kahane produced a letter of intent, dated June 20, 2008, from the Mathesons to Marke, detailing the terms and structure. Kahane further produced, among other documents, PFM's certificate of formation and list of members, showing that the Mathesons each obtained 50% ownership; a due diligence letter between the parties' attorneys; the membership purchase agreement between Marke and PFM for Colonial and GM Management; and the exclusive property management agreement between Franklin, Colonial, and GM Management. To prove that closing occurred, Kahane provided a closing checklist and signed copies of Marke's assignment of Colonial to PFM and his resignation as managing member of Colonial and GM Management.

This is the second action based upon the purported sale of the Property. The first, which Terra, Kahane, and Kirschner brought in New York County for breach of the Brokerage Agreement, was dismissed by the Supreme Court, pursuant to CPLR 3211 (a) (7), as the court found that the plaintiffs failed to allege that the Mathesons had purchased the Property "or that any of the events triggering an obligation on the part of the Owner Defendants to pay plaintiffs a commission" had occurred (Terra CRG, LLC v Marke, Sup Ct, NY County, Gammerman, J., Aug. 27, 2009, index No. 116179/08, at 3). Plaintiffs commenced this action on February 1, 2010, with a complaint that was similar to that in the New York County action, but which added Cohen as a plaintiff, replaced Kirschner with Taillard, and included additional allegations. Plaintiff's original complaint in the instant action alleged, inter alia, breach of contract, unjust enrichment, and tortuous interference with contract. On October 19, 2010, upon motion by defendants to dismiss pursuant to CPLR 3211 (a) (7), the Court dismissed plaintiffs' entire complaint with the exception of the second and eighth causes of action, seeking a quantum meruit award in connection with work performed pursuant to [*4]the Brokerage Agreement and the Consulting Agreement, respectively (Terra CRG, LLC v Marke, 29 Misc 3d 1212[A], 2010 NY Slip Op 51800[U]). Plaintiffs served an amended complaint on November 17, 2010, which included the additional allegation that the Owner Defendants and the Mathesons held a secret closing on September 1, 2008 and specifically referenced the section of the Brokerage Agreement under which the Owner Defendants were obligated to refer all purchase offers to Terra. Defendants moved to dismiss the amended complaint, and, on March 21, 2011, the Court denied defendants' motion (Terra CRG, LLC v Marke, 2011 NY Slip Op 50406[U]).

In this motion, Kahane seeks summary judgment against the Owner Defendants on the fifth cause of action, for breach of the Consulting Agreement, and the sixth cause of action, for unjust enrichment, in plaintiffs' amended complaint. Kahane argues that, while the Mathesons did not purchase the Property directly, their transactions with the Owner Defendants were substantively identical to purchasing the Property and thus triggered an obligation for the Owner Defendants to pay him a consulting fee of $200,000. In the alternative, Kahane alleges that he procured a purchaser for the Property without receiving a fee and that, accordingly, the Owner Defendants were unjustly enriched, at his expense, in the amount of $200,000. The Owner Defendants assert that the Consulting Agreement is, in essence, a real estate brokerage contract and that, because Kahane has not alleged that he is or ever was a licensed real estate broker in New Jersey or New York, Kahane may not collect a fee. The Owner Defendants argue that the Court should dismiss the fifth and six causes of action or, alternatively, deny Kahane's motion because, "[a]t best," the Consulting Agreement is ambiguous and there are triable issues of fact. Specifically, the Owner Defendants contend that the Consulting Agreement was not breached because Howard Matheson never purchased the Property directly and because, even indirectly, he only purchased 40% of the Property. The Owner Defendants also claim that Marke signed the Consulting Agreement on behalf of Franklin and Colonial, not in an individual capacity, and that, because neither Howard Matheson nor PFM purchased Franklin, the only proper defendant for Kahane's breach of contract claim is Colonial. Moreover, the Owner defendants insist that Kahane may not recover for unjust enrichment because there is a contract governing the dispute. Lastly, the Owner Defendants claim that, because "the parties have barely commenced discovery" and plaintiffs "have failed to produce a single document or even a single written response," the Court should, pursuant to CPLR 3212 (f), either deny or postpone consideration of Kahane's motion.

DISCUSSION

Kahane moves, pursuant to CPLR 3212, for summary judgment on the fifth cause of action, for breach of contract, and the sixth cause of action, for unjust enrichment. Upon a motion for summary judgment, the movant has the initial burden to produce affidavits and other documentary evidence sufficient to "warrant the court as a matter of law in directing judgment in [its] favor" (CPLR 3212 [b]; see Friends of Animals, Inc. v Associated Fur Mfrs., Inc., 46 NY2d 1065, 1067 [1979]). Once a party establishes proof of its claims or defenses and its legal entitlement to judgement, the burden shifts to the opposing party to "show facts sufficient to require a trial of any issue of fact" (CPLR 3212 [b]; see Friends of Animals, 46 NY2d at 1067). "If it shall appear that any party other than the moving party is entitled to a summary judgment, the court may grant such judgment without the necessity of a cross-motion" (CPLR 3212 [b]). While summary judgment is appropriate "when there is no genuine issue" of material fact, because "it deprives the litigant of his day in court it is considered a drastic remedy which should only be employed when there is no doubt [*5]as to the absence of triable issues" (Andre v Pomeroy, 35 NY2d 361, 364 [1974]; see Phillips v Joseph Kantor & Co., 31 NY2d 307, 311 [1972]).

Kahane claims that his entitlement to relief under the Consulting Agreement is "incontrovertibly established by the Defendants' own documents." As a threshold matter, the Owner Defendants contend that the Consulting Agreement is a real estate brokerage contract and that, because Kahane has never alleged that he is or at any time was a licensed real estate broker, he is not entitled to a fee. Under Real Property Law § 440-a, no person or business entity may, without a license, engage in practice as a "real estate broker," as defined in § 440 (1) as:

[A]ny person, firm, limited liability company or corporation, who, for another and for a fee, commission or other valuable consideration, lists for sale, sells, at auction or otherwise, exchanges, buys or rents, or offers or attempts to negotiate a sale, at auction or otherwise, exchange, purchase or rental of an estate or interest in real estate, or collects or offers or attempts to collect rent for the use of real estate, or negotiates or offers or attempts to negotiate, a loan secured or to be secured by a mortgage, other than a residential mortgage loan, as defined in section five hundred ninety of the banking law, or other incumbrance upon or transfer of real estate, or is engaged in the business of a tenant relocator, or who, notwithstanding any other provision of law, performs any of the above stated functions with respect to the resale of condominium property originally sold pursuant to the provisions of the general business law governing real estate syndication offerings. Kahane does not allege that, in his capacity as "consultant," he engaged in any of the activities that the Legislature has reserved for licensed real estate brokers. Instead, Kahane appears to be seeking a fee for his services as a finder. The Court of Appeals has held that, "although they perform some related functions," there is a difference between a finder and a broker in the "quality and quantity of services rendered" (Northeast Gen. Corp. v Wellington Adv., Inc., 82 NY2d 158, 162-63 [1993]). "The finder is required to introduce and bring the parties together, without any obligation or power to negotiate the transaction, in order to earn the finder's fee. While a broker performs that same introduction task, the broker must ordinarily also bring the parties to an agreement." (Id. [internal citation omitted]; see also Ames v Ideal Cement Co., 37 Misc 2d 883, 887 [Sup Ct NY County 1962] [holding that, in the absence of evidence that a party participated in negotiations, it will be characterized as a finder and not a broker, even if it "rendered some incidental and preliminary services prior to the actual negotiations conducted by the principals themselves"]).

Under New York law, the role that Kahane purportedly served was that of a finder rather than a broker. The Owner Defendants do not argue that Kahane was involved in negotiations, but merely contend that the Consulting Agreement is "an agreement for brokerage services in connection with the procurement of a buyer for a certain piece of real estate located in New Jersey." Kahane alleges that the purchase and sale took place in secret, without his involvement. The Owner Defendants offer no evidence to the contrary. Moreover, the Consulting Agreement expressly states that the parties did not intend to establish a broker-principal relationship. The second paragraph states that "this consulting fee is not a broker fee and will not be paid out of the Broker's commission as outlined in a separate Executive Listing Agreement." In fact, since Terra and Cohen had the exclusive right to sell the Property, the Owner Defendants' retaining of Kahane as a broker would have constituted a breach of the Brokerage Agreement. Therefore, applying New York law as defined by the Court of Appeals in Northeast General Corp., upon the evidence presented, the Consulting Agreement is not an illegal brokerage contract. [*6]

The New Jersey Legislature has given a more expansive definition to the term "real estate broker," in that it includes the individuals and entities that solicit or secure potential purchasers. NJSA § 45:15-3 defines "real estate broker," as

[A] person, firm or corporation who, for a fee, commission or other valuable consideration, or by reason of a promise or reasonable expectation thereof, lists for sale, sells, exchanges, buys or rents, or offers or attempts to negotiate a sale, exchange, purchase or rental of real estate or an interest therein, or collects or offers or attempts to collect rent for the use of real estate or solicits for prospective purchasers or assists or directs in the procuring of prospects or the negotiation or closing of any transaction which does or is contemplated to result in the sale, exchange, leasing, renting or auctioning of any real estate or negotiates, or offers or attempts or agrees to negotiate a loan secured or to be secured by mortgage or other encumbrance upon or transfer of any real estate for others, or any person who, for pecuniary gain or expectation of pecuniary gain conducts a public or private competitive sale of lands or any interest in lands (emphasis added).

NJSA § 45:15-3 further holds that an individual or business entity may not "bring or maintain any action in the courts of [New Jersey] for the collection of compensation" for service as a real estate broker, as defined in the statute, "without alleging and proving that he was a duly licensed real estate broker at the time the alleged cause of action arose." Although NJSA § 45:15-3 only expressly prohibits actions for recovery of illegal broker's fees in New Jersey courts, a plaintiff may not "circumvent the New Jersey licencing statute" by filing suit in New York (Interglobal Realty Corp. v Am. Std. Inc., 174 AD2d 436, 437 [1st Dept 1991]).

Under New Jersey law, Kahane would be prohibited from enforcing the Consulting Agreement. Although the parties explicitly characterized Kahane's compensation as "not a broker fee," he requests relief based upon his performance of a service that, under New Jersey law, only licensed real estate brokers may perform (see Baron & Co. v Bank of New Jersey, 504 F Supp 1199, 1206 [DNJ 1981] [holding that the plaintiff, despite having alleged to be merely a "finder," was actually providing illegal brokerage services under the New Jersey statute because it solicited offers and agreed to "produce a purchaser to meet the seller's price"]). Therefore, the Court must hold that the Consulting Agreement is an unenforceable brokerage contract if New Jersey's licensing requirement applies.

"New Jersey's licensing provisions are triggered when a real estate broker performs a single act within New Jersey in connection with the rendering of brokerage services" (Interglobal Realty Corp., 174 AD2d at 436, citing Tanenbaum v Sylvan Builders, Inc., 29 NJ 63, 71, 148 A2d 176, 181 [1959]; see NJSA§ 45:15-2). Contrary to the Owner Defendants' argument, Kahane does not acknowledge performing any activities within the state of New Jersey in connection with the sale of the Property, nor does he, in his affidavit, describe where or how his contacts with the Mathesons occurred.[FN4] Kahane is seeking to collect a finder's fee for his role in procuring two citizens of South Africa, who appear, from Kahane's affidavit, to have still been residing in South Africa at the time that Kahane and Taillard contacted them to inquire about their interest in GM, to purchase real [*7]estate.[FN5] While it is highly relevant that the Property is located in New Jersey (see TDH-Berkshire Inc. v Korff, 33 AD3d 437, 438 [1st Dept 2006] ["[A]mong the traditional factors in a choice-of-law analysis involving a property transaction, the heaviest weight is given to the location of the property being transferred"]), to trigger the licensing requirement, a broker must actually perform a service that is in some way physically connected to New Jersey (see, e.g., Tanenbaum, 29 NJ at 71, 148 A2d at 181 [stating that an example of a "single act" within New Jersey is "arranging for a prospective buyer to inspect the property"]; TDH-Berkshire Inc., 33 AD3d at 438 [plaintiff admitted that "over 100 meetings were held at the property site" in New Jersey]; Equis Corp. v Mack-Cali Realty Corp., 6 AD3d 264, 267 [1st Dept 2004] [plaintiff "arrang[ed] and attend[ed] the meeting between the defendants in Jersey City"]; Interglobal Realty Corp., 174 AD2d 436, 436 ["[P]laintiff Berman escorted a potential buyer on an inspection tour of the New Jersey property"]). Therefore, without evidence from the Owner Defendants that Kahane performed services physically connected to New Jersey pursuant to the Consulting Agreement, the Court cannot conclusively determine whether to dismiss Kahane's cause of action upon these grounds.

However, the Owner Defendants are correct in their argument that, even under New York law, Kahane has not made a prima facie case upon which he is entitled to summary judgment. "The fundamental, neutral precept of contract interpretation is that agreements are construed in accord with the parties' intent" (Willsey v. Gjuraj, 65 AD3d 1228, 1229-30 [2d Dept 2009], quoting Franklin Apt. Assoc., Inc. v Westbrook Tenants Corp., 43 AD3d 860, 861 [2d Dept 2007]). "When the terms of a written contract are clear and unambiguous, the intent of the parties must be found within the four corners of the contract, giving practical interpretation to the language employed and the parties' reasonable expectations" (Franklin Apt. Assoc., 43 AD3d at 861). When, on the other hand, "the language of a contract is ambiguous, its construction presents a question of fact that may not be resolved by the court on a motion for summary judgment" (Shadlich v Rongrant Assoc., LLC, 66 AD3d 759, 760 [2 Dept 2009]).

In the circumstances presented, the Consulting Agreement is not "clear and unambiguous." It merely states that Kahane is entitled to compensation if "Mr. Howard Matheson of South Africa and/or his assignees and partners purchase the [Property]." The Court cannot discern the reasonable expectations of the parties from the four corners of the written contract alone where the relevant facts [*8]have not been fully established and the condition precedent has not been clearly defined. While the Mathesons' acquisition of Colonial through PFM, their wholly owned LLC, effectuated a transfer of 40% ownership in the Property, which would satisfy the condition that a purchase occur, the Consulting Agreement does not address whether Kahane is entitled to a fee if Howard Matheson only purchases part of the Property. There is no unequivocal evidence showing that the parties intended that Kahane receive a fee in the event that Howard Matheson purchases a minority interest.

The Owner Defendants also correctly note that it is unclear which parties are bound by the Consulting Agreement. The contract bears only Marke's signature, and while it contains a heading mentioning Franklin and Colonial, there is no way to tell, from the written document alone, whether Marke signed it on behalf of himself and/or either of the two LLCs. This presents an ambiguity as to which of the Owner Defendants is liable if the Consulting Agreement was in fact triggered. Therefore, the Court may not grant Kahane summary judgment on the fifth cause of action in the amended complaint. However, as the Owner Defendants have not proven that they are entitled to summary judgment either, their request that the Court dismiss plaintiff's cause of action for breach of the Consulting Agreement must be denied.

Kahane also moves for summary judgement on the sixth cause of action in his amended complaint, for unjust enrichment. Kahane alleges that the Owner Defendants were unjustly enriched as his expense because he secured the Mathesons to purchase the Property for several million dollars. The Owner defendants maintain that Kahane may not recover for unjust enrichment because the subject matter is governed by a contract. "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" (Clark-Fitzpatrick, Inc. v Long Is. R. Co., 70 NY2d 382, 388 [1987]). However, "where there is a bona fide dispute as to the existence of a contract or where the contract does not cover the dispute in issue, plaintiff may proceed upon a theory of quantum meruit and will not be required to elect his or her remedies" (Joseph Sternberg, Inc. v Walber 36th St. Assoc., 187 AD2d 225, 228 [1st Dept 1993]). As the Court has noted, Kahane has not conclusively demonstrated that the Consulting Agreement has been triggered by the transactions between the Mathesons and the Owner Defendants. Thus, there is still a genuine dispute as to whether a valid contract governed the transactions. Accordingly, Kahane's motion for summary judgment on the sixth cause of action in the amended complaint must also be denied. Because the Owner Defendants have also not proven that the Consulting Agreement is applicable, and, to the contrary, argue that it is inapplicable, the Court may not, at this time, dismiss plaintiffs' sixth cause of action.

CONCLUSION

Kahane's motion, pursuant to CPLR 3212, for summary judgment on the fifth and sixth causes of action in plaintiffs' amended complaint is denied in its entirety. The Owner Defendants' request that the Court dismiss Kahane's fifth and sixth causes of action is also denied. The parties are directed to complete discovery. A compliance conference is scheduled for April 25, 2012.

The foregoing constitutes the decision and order of the Court.

E N T E R :

HON. CAROLYN E. DEMAREST, J.S.C. Footnotes

Footnote 1: In their memorandum of law, the Owner Defendants suggest, without providing any direct evidence, that Kahane may have "permitted his law license to become delinquent."

Footnote 2: Steven Matheson decided to remain in South Africa to Manage the Panorama. Howard moved with his family to New Jersey to manage GM and is now the sole managing member of PFM.

Footnote 3: As the Property was encumbered by a $15,000,000 mortgage, PFM assumed $6,000,000 of the mortgage debt by acquiring Colonial's 40% interest. Kahane has provided documentation showing that Republic National Bank added Howard Matheson and Steven Matheson as guarantors of the mortgage (and then later removed Steven Matheson after he decided to remain in South Africa).

Footnote 4: Kahane does, however, mention Howard Matheson's intent to "fly to the United States" to "look into" the Property.

Footnote 5: In their Memorandum of Law in Opposition, the Owner Defendants point out that the negotiations and sale of the Property predominantly took place in New Jersey and that Cohen admitted to being present in New Jersey to show the Property to a different prospective purchaser that Kahane introduced to him. They also claim that the Consulting Agreement was signed in New Jersey, but there is no indication from the written document that this is true. None of these acts directly relate to Kahane's services in procuring a purchaser for the Property, and thus they are not at all dispositive in any event. It is significant that the Owner Defendants have not submitted any affidavit in opposition to Kahane's motion but rely exclusively on a legal argument unsupported by any competent evidence.

However, if Kahane had personally arranged for the Mathesons to inspect the Property, it would constitute a "single act" under the New Jersey statute (see Tanenbaum, 29 NJ at 71, 148 A2d at 181). Neither Kahane nor the Owner Defendants make this assertion or present evidence to suggest such arrangement.