Optimal Spaces, Inc. v 5 Hanover LLC

[*1] Optimal Spaces, Inc. v 5 Hanover LLC 2013 NY Slip Op 51171(U) Decided on July 12, 2013 Supreme Court, New York County Jaffe, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 July 12, 2013
Supreme Court, New York County

Optimal Spaces, Inc., Plaintiff,

against

5 Hanover LLC, Defendant.



109784/09



For plaintiff:

Ian L. Blant, Esq.

Law Offices of Ian L. Blant

276 Fifth Ave., Ste. 405

New York, NY 10001

212-684-7920

For defendant:

Eugene A. Gaer, Esq.

60 E. 42nd St., Ste. 4600

New York, NY 10165

212-949-9696

Barbara Jaffe, J.

By notice of motion dated August 2, 2012, defendant moves pursuant to CPLR 3212 for an order summarily dismissing the complaint against it. Plaintiff opposes.

I. PERTINENT BACKGROUND

The following facts are undisputed:

In or about January 2009, plaintiff's principal, Stephen P. Sunderland, introduced Children's Place West, LLC (tenant) to 5 Hanover LLC. (Affidavit of Stephen P. Sunderland, dated Oct. 12, 2013 [Sunderland Aff.]). Through plaintiff, tenant and defendant corresponded regarding tenant's interest in defendant's commercial space. (Id., Exh. B).

On February 3, 2009, plaintiff sent defendant's broker Cushman & Wakefield, Inc. (C & W) a lease counteroffer which provided that as to the broker's fee, "one full commission [would be] payable to [plaintiff] per the attached rate sheet." (Id., Exh. A).

On February 26, 2009, C & W sent plaintiff a counterproposal that provided that it would "not be binding until a lease agreement [was] mutually executed and exchanged by [defendant] and Tenant," and that defendant would "pay [plaintiff] one full commission pursuant [*2]to a separate agreement." (Affidavit of Todd Korren, dated Aug. 2, 2012, Exh. F). A separate commission agreement was never executed by the parties. (Id.).

Thereafter, tenant and defendant drafted and exchanged numerous lease agreements. (Sunderland Aff.). On May 9, 2009, tenant sent defendant a letter stating that defendant's inability to have "the premises ready for a September or October opening" and other economic concerns led Tenant to reconsider the agreed base rent. (Affirmation of Eugene A. Gaer, Esq., dated Aug. 2, 2012, Exh. G). Tenant proposed a modified arrangement, but negotiations unraveled between the parties shortly thereafter, and no lease agreement was ever finalized and/or executed. (Id.).

II. ANALYSIS

Under New York common law, a broker earns his commission when he procures a tenant ready, willing, and able to lease the property on the owner's terms. (Tanenbaum v Boehm, 202 NY 293, 299 [1911]; Eastern Consol. Props. v Lucas, 285 AD2d 421, 422 [1st Dept 2001]). If the broker's efforts are rendered futile by the landlord's actions, the "broker does not lose his commission." (Tanenbaum, 202 NY at 300).

Despite the common law rule permitting a broker to recover its fee even if an underlying agreement is not consummated, unambiguous agreements that provide for the denial of a commission if the underlying transaction does not close are enforced. (See eg Graff v Billet, 64 NY2d 899, 901-02 [1985] [commission agreement entitled broker to "earn a commission for selling the parcel as, if and when title passes, except for willful default on the part of the seller'"]; Liggett Realtors, Inc. v Gresham, 38 AD3d 214 [1st Dept 2007] ["the brokerage agreement unambiguously provided for payment of the commission [at] the closing of sale of the apartment'"]; Corcoran Group, Inc. v Morris, 107 AD2d 622 [1st Dept 1985], affd 64 NY2d 1034 [brokerage agreement provided that commission amount "shall be payable only if, as, and when title actually closes"]; Wm. A. White & Sons v La Touraine-Bickford's Foods, Inc., 50 AD2d 547 [1st Dept 1975], affd 40 NY2d 1039 [1976] [overturning jury verdict and finding that parties agreed that "commission payable to [the broker] . . . [was] payable on the closing of title"]).

However, even if a commission is expressly conditioned upon the closing of a transaction, and the condition is not performed, "the seller will nevertheless be liable if he is responsible for the failure to perform the condition." (Lane-Real Estate Dept. Store, Inc. v Lawlet Corp., 28 NY2d 36 [1971]; see also A.J. Clarke Real Estate Corp. v Meyers, 27 AD3d 230 [1st Dept 2006] [even if parties' oral agreement required actual sale to take place before broker's commission was earned, such condition was consistent with general principle that broker's commission is deemed earned when ready, willing, and able buyer is produced who agrees to sellers' terms of sale]).

Here, while the only condition set forth for payment of plaintiff's commission in defendant's counterproposal was the execution of a separate commission agreement, the counterproposal also provides that nothing therein, including its agreement to pay a commission upon the signing of a separate agreement, would be binding until a lease was executed. Thus, there is no merit to plaintiff's contention that its commission was not conditioned upon the execution of a lease. [*3]

However, as the parties dispute whether all material terms had been agreed upon when negotiations ceased between tenant and defendant and the reason why negotiations ended, there remain unresolved factual issues precluding summary judgment. (See Dagar Group, Ltd. v South Hills Mall, LLC, 12 AD3d 552 [2d Dept 2004] [plaintiff raised triable issue as to whether sellers were responsible for failure of condition that precluded commission]; Linda M. Kick Assocs., Ltd. v McDonald Equities, Inc., 155 AD2d 281 [1st Dept 1989] [as prospective purchaser agreed to all of owner's terms, owner could not refuse to pay broker's commission because the contract was not finalized due only to owner's decision not to proceed with sale]; compare Eastern Consol. Props., Inc. v Morris Golick Living Trust, 83 AD3d 534 [1st Dept 2011] [1st Dept 2011] [broker failed to establish entitlement to commission; deal was subject to signing of contract of sale and parties' correspondence indicated no meeting of minds on all essential terms of sale, and no evidence that owners deliberately attempted to destroy potential transaction to avoid paying commission]).

Moreover, the fact that no separate brokerage agreement was signed by the parties is not dispositive. (See eg Comvest Consulting, Inc. v W.R.S.B. Dev. Co., LLC, 266 AD2d 890 [4th Dept 1999] [even though parties did not enter into brokerage commission agreement, broker is entitled to receive commission in reasonable amount for bringing together parties in transaction; it was undisputed that broker procured sellers for transactions at issue and court rejected defendant's argument that it did not have to pay commission as there was no agreement or understanding with broker as to commission]; Curtis Props. Corp. v Greif Cos., 212 AD2d 259 [1st Dept 1995] [broker entitled to recover commission in quantum meruit in absence of implicit or explicit agreement for commission]).

III. CONCLUSION

Accordingly, it is hereby

ORDERED, that defendant's motion for summary judgment is denied.

ENTER:

Barbara Jaffe, JSC

DATED:July 12, 2013

New York, New York