Opinion
601050/2010.
Decided March 24, 2011.
Goetz Fitzpatrick LLP, New York, New York, By: Howard Rubin, Attorneys for the Plaintiff.
Morrison Cohen LLP, New York, New York, By: Y. David Scharf, Attorneys for the Defendants.
Defendant Extell Development Company ("Extell") has moved to dismiss the First Amended Complaint (the "Complaint") by Plaintiff Eastern Consolidated Properties, Inc. ("Eastern") in its entirety, with prejudice, pursuant to CPLR 3211(a)(1) and 3211(a)(7). Defendant seeks to dismiss the Complaint on the grounds that Plaintiff has failed to adequately plead a claim for the recovery of a real estate commission, the documentary evidence establishes that Plaintiff is not entitled to any commission and the existence of an enforceable contract bars Plaintiff's quasi-contractual claims.
Eastern originally raised a claim for an account stated. In open court on February 16, 2010, Eastern Consolidated withdrew this claim. Therefore, this claim is not addressed here. ( See Hr'g Tr. 6, February 16, 2011.)
On August 21, 2007, Eastern and Extell entered into a brokerage commission agreement (the "Commission Agreement"). (Compl. ¶ 4.) Pursuant to the Commission Agreement, Extell agreed to pay Eastern a commission of either three percent of the purchase price or $371,800 in connection with Extell's proposed purchase of the air rights to 120-126 West 25th Street, New York, New York (the "Property"). Id. The commission was due and payable at the closing of the purchase of the Property by Extell, or by (i) a nominee of Extell; (ii) an entity in which Extell was a partner, principal or joint venturer; or (iii) an assignee of Extell (collectively "related entities"). (Compl. ¶ 6). The Commission Agreement defined "closing" as the "full execution and delivery of the instrument(s) of transfer of ownership or control (e.g., without limitation, the deed) to Purchaser." (Compl. ¶ 9.)
On or about February 25, 2008, Extell, through its related entity 112-118 West 25th Street LLC, entered into a Development Rights Agreement to purchase the Property from the Norman Parties, the owner of the Property. ( See Hertz Aff. ¶¶ 11-12, Ex. C.) At the same time, two different Extell related entities and the Norman Parties entered into another agreement, the Real Estate Contract. ( See Hertz Aff. ¶ 15, Ex. D.) The Real Estate Contract provided for the transfer of three condominium units to the Norman Parties from the Extell related entities in exchange for the Property described in the Development Rights Agreement. ( See Hertz Aff. Ex. D, ¶ 3.) Finally, all of the Extell related entities and the Norman Parties entered into a Tie-In Agreement of the Development Rights Agreement and the Real Estate Contract to make certain other agreements and to provide for certain contingencies. ( See Hertz Aff. ¶ 17, Ex. E.) The transaction described by the Development Rights Agreement, Real Estate Contract and Tie-In Agreement never occurred. ( See Hertz Aff. ¶¶ 19-24; Hr'g Tr. 4, February 16, 2011.)
Plaintiff incorrectly refers to 112-118 West 25th LLC as 112-118 West 25th Street LLC; however, all documentation submitted by both parties uses the correct name for this entity.
Affidavit of Dov Hertz in Support of Extell Development Company's Motion to Dismiss the First Amended Complaint.
On or about December 17, 2009, the Sabet Group, through two related entities, purchased the Property and the physical real property from the Norman Parties. ( See Hertz Aff. ¶¶ 26-28, Exs. H-J; Hr'g Tr. 4, February 16, 2011.) The following day, 112-118 West 25th LLC, the Extell related entity, entered into a Memorandum of Development Rights Purchase and Sale Agreement with the Sabet Group's related entities to purchase the Property. ( See Hauspurg Aff. ¶ 10, Ex. A; Hr'g Tr. 26, February 16, 2011.) Thereafter, on or about January 5, 2010, 112-118 West 25th LLC, purchased the Property. (Compl. ¶ 7; Hr'g Tr. 20, February 16, 2011.) The purchase of the Property from the Sabet Group related entities closed on or about October 21, 2010. ( See Def. Reply Mem., Footnote 8; Hr'g Tr. 26, February 16, 2011.)
Affidavit of Peter Hauspurg in Opposition to Extell Development Company's Motion to Dismiss the First Amended Complaint.
Reply Memorandum of Law in Support of Defendant's Motion to Dismiss the First Amended Complaint.
Eastern alleges that it performed its obligations under the Commission Agreement by introducing Extell to the Norman Parties. (Compl. ¶ 8.) Eastern alleges this performance triggers Extell's obligation to pay the commission and that Extell's failure to do so gives rise to Eastern's claims for relief.
On a motion to dismiss pursuant to CPLR 3211(a)(7), the complaint is to be liberally construed and the facts alleged therein accepted as true. 511 West 232nd Owners Corp. v. Jennifer Realty Co., 98 NY2d 144, 152 (2002). Although the plaintiff is entitled to the benefit of all possible inferences, no such benefit exists when "allegations consist[] of bare legal conclusions as well as factual claims flatly contradicted by documentary evidence." Maas v. Cornell University, 94 NY2d 87, 91 (1999). When the motion to dismiss is made pursuant to CPLR 3211(a)(1), the motion must be granted if the documentary evidence conclusively refutes plaintiff's allegations. AG Capital Funding Partners v. State Street Bank Trust Co. , 5 NY3d 582 , 591 (2005). Finally, where the motion to dismiss specifically addresses the merits of each claim and the grounds for dismissing each claim, the motion should be treated as applying to each particular cause of action. Skillgames, LLC v. Brody , 1 AD3d 247, 252 (1st Dept. 2003).
Defendant Extell now moves to dismiss the First Amended Complaint. Extell first alleges that Eastern failed to adequately plead a claim for the recovery of a real estate commission and that documentary evidence contradicts Eastern's claim for a real estate commission. Extell also alleges that the Commission Agreement, as an enforceable and written contract, bars Eastern's quasi-contractual claims for relief.
Breach of Contract Claim
In order for a real estate broker to recover an unpaid real estate commission, the broker must allege that he or she was the "procuring cause" of the transaction. Greene v. Hellman, 51 NY2d 197, 206 (1980). In other words, the broker must demonstrate a "direct and proximate link" between the introduction and the finalization of the transaction. Id.; see also Helmsley-Spear, Inc. v. 150 Broadway NY Assocs., LP, 251 AD2d 185, 186 (1st Dept. 1998). Moreover, parties may alter a broker's entitlement to a commission by agreement. Ligget Realtor, Inc. v. Gresham, 38 AD3d 214, 214 (1st Dept. 2007) (payment of commission due at closing); see also Eastern Consol. Props. v. Adelaide Realty Corp., 261 AD2d 225, 226 (1st Dept. 1999), aff'd 95 NY2d 785 (2000) (commission due at closing not owed because no closing occurred).
Drawing all inferences from the Complaint in Eastern's favor, Eastern has sufficiently pled its cause of action that it was the "procuring cause" and earned its commission. First, Eastern alleges that it met its obligation under the Commission Agreement by introducing Extell to the Norman Parties. (Compl. ¶ 8.) Eastern then alleges, and Extell does not dispute, that 112-118 West 25th LLC, an Extell related entity, purchased or was transferred ownership of the Property. (Compl. ¶ 7; Hr'g Tr. 20, February 16, 2011.) The purchase by or transfer of ownership of the Property to 112-118 West 25th LLC would satisfy the requirement that a closing occur before payment of the commission. (Compl. ¶ 9.)
Eastern also points to the Commission Agreement. ( See Hr'g Tr. 6-7, February 16, 2011.) The caption to the Commission Agreement states that it relates to the "120-126 West 25th Street Air Rights, New York, New York (the "Property"). ( See Hertz Aff. Ex. B.) The Commission Agreement applies to the "Proposed Purchase" of the Property, which is defined as:
[I]nclud[ing], without limitation, transfer to [Extell or a related entity] of fee title, transfer of leasehold title, net lease of the Property, transfer of ownership in the entity holding title to the Property, or any other transfer of ownership or control of the Property, in each instance in part or in whole.
( See Hertz Aff. Ex. B.) The Commission Agreement further provides that Extell would pay Eastern a commission of:
[T]hree percent (3%) of the full purchase price or a flat fee of $371,800 for the Property at Closing as the brokerage commission in connection with the [purchase]. The Commission shall be due and payable at Closing, and shall not be payable in any other event.
( See Hertz Aff. Ex. B.) The Commission Agreement defines "closing" as occurring "upon the full execution and delivery of the instrument(s) of transfer of ownership or control to [Extell or a related entity]." ( See Id.) Thus, a closing, as defined in the Commission Agreement, was a necessary condition for Eastern to receive a commission. Critically, however, the Commission Agreement does not specify who the seller of the Property must be in order to trigger Eastern's right to the commission. ( See Id.; Hr'g Tr. 12, February 16, 2011.) It follows, Eastern argues, that so long as Extell or one of its related entities purchased the Property and closed on the purchase, Eastern is entitled to the commission provided for by the Commission Agreement. ( See Hr'g Tr. 16, February 16, 2011.) Eastern alleges such a transaction occurred. (Compl. ¶ 7.)
Extell relies on three pieces of documentary evidence to refute the allegations in Eastern's Complaint. First, Extell points to Paragraph Fifteen of the Development Rights Agreement, which names Eastern as the Property owner's (i.e., seller's) broker and provides that Eastern will be paid pursuant to a separate agreement with Extell (i.e., the Commission Agreement). ( See Hertz Aff. Ex C.) Second, Extell points to Paragraph Nine of the Tie-In Agreement, which states that Eastern will earn only one commission on $5,000,000, the purchase price of the Property. ( See Hertz Aff. Ex. E.) Finally, Extell points to the Eastern Deal Ticket, which Extell alleges indicates that Eastern acted as the Norman Parties' broker in the "Proposed Purchase." ( See Hertz Aff. Ex. K.) These documents, Extell argues, indicate that the Commission Agreement applied only to the purchase of the Property by Extell, or a related entity, from the Norman Parties, and that, because such a transaction did not occur, Eastern is not entitled to a commission.
Extell argued in its Memorandum of Law and at oral argument that the Court must imply a one-year duration for the Commission Agreement because it is silent at to duration. ( See Def. Mem. Law Footnote 4; Hr'g Tr. 3-4, February 16, 2011.) I am unconvinced by Extell's argument that I must imply a one-year duration and therefore do not consider this argument in my decision.
As mentioned previously, the Commission Agreement is between Extell, as the purchaser, and Eastern, as Extell's introducing broker. There are only three conditions set forth in the Commission Agreement that must be met in order for Eastern to earn its commission: (1) a purchase of the Property; (2) by Extell or a related entity; and (3) a closing of the purchase. More important is what the Commission Agreement does not do, which is to indentify a specific seller from whom Extell or a related entity must purchase the Property or prohibit Eastern from simultaneously acting as the seller's broker. It follows that the Commission Agreement is a separate agreement (between a purchaser and its broker) from any agreement to purchase the Property (between the purchaser and the seller). The documentary evidence offered by Extell does not refute the allegations made in the Complaint. The Development Rights Agreement clearly expresses that Eastern represented the Norman Parties but would be paid pursuant to a separate agreement with Extell. ( See Hertz Aff. Ex. C, ¶ 15.) The Tie-In Agreement also reflects this understanding by naming Extell as solely responsible for the commission earned by Eastern. ( See Hertz Aff. Ex. E, ¶ 9.) Finally, the Deal Ticket only provides an overview of the proposed transaction between the Norman Parties and Extell. ( See Hertz Aff. Ex. K.) These documents do not refute that an Extell related entity purchased and took ownership of the Property and do not limit the Commission Agreement only to a purchase from the Norman Parties. Rather, the documentary evidence seems to support Eastern's allegations that the conditions set forth in the Commission Agreement were met. ( See Hauspurg Aff. Ex. A.)
Therefore, Defendant's motion to dismiss Plaintiff's claim of breach of contract must be denied.
Unjust Enrichment and Quantum Meruit Claims
Plaintiffs may state inconsistent or alternative causes of action. Plant City Steel Corp. v. National Machinery Exchange, Inc., 23 NY2d 472, 477 (1969). Where the existence of a contract is in dispute or the contract does not cover the specific issue in dispute, a plaintiff will not be required to choose between breach of contract and quasi-contract theories. Curtis Props. Corp. v. Grief Cos., 236 AD2d 237, 239 (1st Dept. 1997); see also Am. Tel. Util. Consultants, Inc., v. Beth Israel Medical Center, 307 AD2d 834, 835 (1st Dept. 2003). The Court of Appeals, however, has upheld the dismissal of quasi-contract claims that are governed by a valid and enforceable written contract on the grounds that such a contract precludes recovery under a quasi-contract theory. Clark-Fitzpatrick, Inc. v. Long Island R. Co., 70 NY2d 382, 388 (1987). This reasoning has been applied to cases involving real estate brokerage commission agreements. See Parker Realty Group, Inc. v. Petigny , 14 NY3d 864 , 865 (2010) (recovery under quantum meruit inappropriate because there was an express contract on the subject of the dispute); Orenstein v. Brum , 27 AD3d 352 , 353 (1st Dept. 2006) (quantum meruit claim properly dismissed given the existence of an express contract covering the subject matter).
There is an enforceable and written contract between Eastern and Extell, the Commission Agreement, which specifies when payment of the commission is due and the amount of the commission. ( See Hertz Aff. Ex. B.) Eastern concedes such a valid and enforceable contract exists but disputes the terms and conditions related to payment of the commission. ( See Pl. Mem. Opp. Mot. to Dismiss at 15.) Therefore, Extell's motion to dismiss Eastern's claims of unjust enrichment and quantum meruit is granted.
Accordingly, it is
ORDERED that Defendant's motion to dismiss Defendant's breach of contract claim is denied.; and it is further
ORDERED that Defendant's motion to dismiss Defendant's unjust enrichment and quantum meruit is granted.