Opinion
06-29-2011
IMG International Marketing Group, Inc., Plaintiff, v. SDS William Street, LLC, Defendants.
For Plaintiff: Di Santo, LLP By: Ignatius Grande, Esq. For Defendants: No Appearance
For Plaintiff:
Di Santo, LLP
By: Ignatius Grande, Esq.
For Defendants:
No Appearance
Paul G. Feinman, J.
Papers considered in review of thus motion:E-Filing Document Number
Summons and Complaint001
Notice of Motion003
Affirmation of Ignatius Grande and Attached Exhibits004
Affidavit of Tomas Hoffman006
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PAUL G. FEINMAN, J.:
Plaintiff IMG International Marketing Group, Inc. moves pursuant to CPLR 3215 for a default judgment against defendant SDS William Street, LLC. For the reasons provided below, plaintiff's motion, although unopposed, is denied.
Background
This is an action by plaintiff IMG International Marketing Group, Inc. (IMG) against SDS William Street, LLC (SDS) for breach of an alleged agreement. Under this agreement, IMG was to introduce SDS to potential purchasers of condominium units at a proposed real estate development, known as the William Beaver House Condominium, in exchange for a commission representing a percentage of the purchase price. According to the complaint, IMG is a Florida corporation, with its principal place of business in Miami, Florida where it is a licensed real estate broker. Defendant SDS is a limited liability company organized under the laws of the state of Delaware, and registered and authorized to do business in the State of New York, and maintains its principal place of business at 260 Madison Avenue, New York, New York (Doc. 1 ¶ 5). SDS is the sponsor of a real estate development at 15 William Street in New York, New York, known as the William Beaver House. The complaint further alleges SDS approached IMG requesting that IMG serve as a "consultant" in connection with SDS's efforts to find prospective purchasers for condominium units at the William Beaver House (id. at ¶ 6). Thereafter, the parties allegedly entered into an agreement under which SDS promised to pay IMG a commission of 5% of the purchase price for each unit sold to a purchaser introduced to SDS by IMG (id. at ¶ 7). SDS was to pay IMG one-third of the commission upon the purchaser's signing of a purchase agreement with SDS, while the remaining two-thirds would be paid at the closing of each unit (id. at ¶ 8). Although the complaint alleges IMG introduced SDS to "no less than 12 [p]urchasers" (id. at ¶ 9), it only contains specific allegations naming the purchasers of units 12C, 17D, 22C, 28F, 39C and 42A (id. at ¶¶ 10 - 21). In total, IMG claims that it is owed $235,321.20 from SDS for payments owed under the agreement. No evidence that this agreement was ever put into writing has been provided. Based on these alleged facts, the complaint asserts the following causes of action: (1) breach of contract; (2) breach of oral contract; (3) promissory estoppel; (4) quantum meruit; and (5) unjust enrichment.
Unless otherwise noted, all references are made to the document's NYSCEF e-filing document number.
Analysis
A motion for a default judgment against a non-appearing party must comply with the requirements set forth in CPLR 3215. Under CPLR 3215 (f), the moving party must provide the following proof: (1) proof of service of the summons and complaint; (2) proof of the claim; and (3) proof of default.
IMG has provided adequate proof of service. CPLR 308 (3) allows service to be effected "by delivering the summons within the state to the agent for service of the person to be served as designated under rule 318." CPLR 318 permits a person, corporation or partnership to designate a person "as an agent for service in a writing, executed and acknowledged in the same manner as a deed, with the consent of the agent endorsed thereon." The affirmation of SDS's attorney, Ignatius Grande, Esq., states that service of the summons and complaint were made upon SDS by serving SDS's authorized agent for the service of process, National Registered Agent, Inc. (Doc. 4 at 2). This service is confirmed by the affidavit of service of SDS's process server, Pietro Lanzoni, dated December 21, 2010 (Doc. 2). Therefore, IMG has sufficiently provided proof of service.
Proof of default may be provided by an affidavit of the plaintiff's lawyer (Siegel, NY Prac § 295, at 498 [5th ed]). Here, the affirmation of Ignatius Grande, Esq. states that SDS did not assert an answer or otherwise request any extension of time to do so before January 14, 2011, when SDS's response was due. Accordingly, IMG has satisfied the "proof of default" requirement of CPLR 3215 (f).
Proof of claim under CPLR 3215 (f) generally requires plaintiff to submit an affidavit attesting to the claim, including any amount due on it (Siegel, Practice Commentaries, McKinney's Cons Laws of NY, C3215:16). "When the defendant defaults, all the factual allegations of the complaint, and the reasonable inferences to be drawn from them, are considered admitted insofar as they relate to liability" (1-21 Weinstein-Korn-Miller, CPLR Manual § 21.09). Nonetheless, "some proof of liability is ... required to satisfy the court as to the prima facie validity of ... uncontested causes of action" (Manhattan Telecom Corp. v H & A Locksmith, Inc., 2011 NY Slip Op 2539, *1 [1st Dept, March 31, 2011], citing Feffer v Malpeso, 210 AD2d 60, 61 [1st Dept 1994]). "The standard of proof is not stringent, amounting only to some firsthand confirmation of the facts" (Feffer, 210 AD2d at 61; see also Giordano v Berisha, 45 AD3d 416, 417 [1st Dept 2007] [denial of motion for default judgment where moving party failed to include underlying contract and assignment, and assignor's affidavit did not provide the particulars of the contract]). While the default may resolve all liability questions against the defendant, plaintiff's legal conclusions with respect to damages are not deemed admitted and are reserved for the court's determination (1-21 Weinstein-Korn-Miller, CPLR Manual § 21.09).
Here, IMG submits the Affidavit of Tomas Hoffman, president of IMG International Marketing Group, Inc., who claims to have "personal and firsthand knowledge of the contents of the present affidavit" (Doc. 6 ¶ 2). Hoffman's affidavit repeats the basic allegations of the complaint, and verifies that the contents of the complaint are true (id. a ¶ 9). While the factual allegations found in the complaint, and verified by Hoffman's affidavit, are deemed admitted, the court must nonetheless examine whether these facts give rise to the causes of action asserted.
IMG's first and second causes of action are duplicative, as they both rely on an alleged agreement between the parties. However, IMG offers no proof that this agreement was ever reduced to writing, possibly raising statute of frauds issues. In these circumstances, whether the oral agreement may be enforced by the court depends, in part, on the "quality and quantity of services" to be performed under its terms and a determination of whether IMG should be considered a finder or a real estate broker (see Northeast Gen. Corp. v Wellington Advertising, 82 NY2d 158, 162-163 [1993]). A "finder is not a broker, although they perform some related functions" (id. at 163). 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 provides that same introduction task, the broker must ordinarily also bring the parties to an agreement" (id.; see also RPL § 440 [1] [defines a "real estate broker"]). In other words, "[f]inders find potential buyers or sellers, stimulate interest and bring parties together, while brokers bring the parties to an agreement on particular terms" (Futersak v Perl, 27 Misc 3d 897, 902-903 [Sup Ct, Nassau County 2010]).
The distinction between a finder and broker is important for a number of reasons. First, a real estate brokers must be licensed in New York in order to bring an action to recover real estate broker commissions (RPL § 440-a; RPL § 442-d). In contrast, a finder of real estate does not have to be licensed (Boyd, Practice Insights, NY CLS, RPL § 440-a). Further, New York's statute of frauds, General Obligations Law § 5-701 (a) (10), "applies to finders and their agreements to provide finding services, which means that finders must memorialize their agreements to find in writing to be enforceable" (Futersak, 27 Misc 3d at 904). GOL § 5-701 (a) states, in relevant part,
"[e]very agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith, or by his lawful agent if such agreement, promise or undertaking .... (10) Is a contract to pay compensation for services rendered ... in negotiating the purchase, sale, exchange, renting or leasing of any real estate or interest therein.... Negotiating' includes procuring an introduction to a party to the transaction or assisting in the negotiation or consummation of the transaction. This provision shall apply to a contract implied in fact or in law to pay reasonable compensation but shall not apply to a contract to pay compensation to a ...duly licensed real estate broker or real estate salesman"
Thus, unlike finders, a real estate broker is explicitly exempted from the statute of frauds' writing requirement when contracting to provide brokerage services.
Here, the complaint alleges an oral agreement under which SDS would pay IMG "a real estate broker commission by [d]efendants in exchange for [IMG]'s services in locating Purchasers interested in purchasing units at the Beaver House" (Doc. 1 ¶ 33). If a purchaser introduced to SDS by IMG ultimately purchased a condominium, IMG would be entitled to a commission equal to 5 % of the purchase price, one-third of which was paid when the buyer signed the purchase agreement, while other two-thirds was to be paid to IMG once the buyer closed on the condominium. The complaint does not specify what role, if any, IMG played after the introduction was made, or whether another real estate broker helped the purchaser to negotiate the terms of its purchase.
Overall, the quality and quantity of services allegedly rendered suggest that IMG functioned as a finder, notwithstanding IMG's characterization of its fee as a "real estate broker commission" (Doc. 1 ¶ 38; see also Northeast Gen. Corp., 82 NY2d at 162-163). IMG was simply "to introduce and bring the parties together, without any obligation or power to negotiate the transaction, in order to earn the finder's fee" (Futersak, 27 Misc 3d at 902-903). The oral agreement, as alleged in the complaint, did not require any further action by IMG after the introduction. As a finder, IMG's agreement with SDS would fall within the clear language of the statute of frauds. However, IMG has offered no evidence of any writing that would satisfy the statute's requirements, rendering the agreement void and unenforceable.
It is possible to construe the parties' alleged agreement as creating a role greater than that of a finder, by conditioning two-thirds of IMG's commission on the closing of the transaction for the purchase of a condominium unit. As a real estate broker, IMG could not commence or maintain an action to recover commissions for brokerage services rendered in New York because the complaint only alleges that IMG is licensed in Florida, not New York (see RPL § 440-a, 442-d; see also NFS Services, Inc. v West 73rd Street Associates, 102 AD2d 388 [1st Dept 1984] [broker licensed in New Jersey but not in New York barred from action for commissions]). Accordingly, IMG has not provided sufficient proof of claim with respect to the first and second causes of action and the motion for a default judgment must be denied as to those claims.
The third cause of action sounds in promissory estoppel. The doctrine of equitable estoppel may preclude a party from asserting the statute of frauds as a defense. However, in New York, promissory estoppel is reserved for a limited class of cases where it would be "unconscionable not to enforce th[e] agreement" (Richter v Zabinsky, 257 AD2d 397, 398-399 [1st Dept 1999]; see also Carvel Corp. v Nicolini, 144 AD2d 611, 612 [2d Dept 1988] [doctrine properly reserved for "that limited class of actions where the result of enforcing the contract would be so egregious as to render unconscionable the [s]tatute of [f]rauds"). To succeed on a promissory estoppel claim, plaintiff must establish three elements: (1) a clear and unambiguous promise; (2) reasonable and foreseeable reliance by the party to whom the promise is made; and (3) an unconscionable injury sustained in reliance on that promise (Braddock v Braddock, 60 AD3d 84, 95 [1st Dept 2009]). "As to the third element, other than in the most exceptional cases, courts have consistently held that lost fees ... constitute insufficient injury to invoke the doctrine of promissory estoppel ..." (Sugerman v MCY Music World, Inc., 158 F.Supp.2d 316, 325 [SDNY 2001] [applying New York law]). Furthermore, a promissory estoppel claim will not succeed in absence of a duty independent of the agreement where it is merely duplicative of plaintiff's breach of contract claim (see Celle v Barclays Bank P.L.C., 48 AD3d 301, 303 [1st Dept 2008]).
Here, in connection with its promissory estoppel claim, the complaint alleges even in absence of a "binding oral contract" pursuant to which wherein IMG would be paid a "real estate broker commission" by SDS in exchange for IMG's services, "then, in the alternative," SDS "promised to compensate Plaintiff for Plaintiff's services in referring its clients and business contacts to Defendant as Purchasers of units at the Beaver House" (Doc. 1 ¶ 38). In reliance on that promise, IMG "assisted" SDS "in locating" purchasers (id. at ¶ 39). "As a result of Plaintiff's reliance on Defendant's promise and as a further result of Defendant's breach of its agreement with Plaintiff, Plaintiff has suffered damages in the amount of $235,321.20, plus applicable pre-judgment interest thereon from October 2009" (id. at ¶ 40).
The allegations pled in support of IMG's third cause of action for promissory estoppel are duplicative of IMG's breach of contract claims. No duty independent to the agreement is alleged (see Celle, 48 AD3d at 303). Moreover, a promise "to compensate for [IMG's] services in referring its clients and business contacts to [SDS] as Purchasers of units at the Beaver House" is not "clear and unambiguous" so as to create "reasonable and foreseeable reliance" by IMG (see Braddock, 60 AD3d at 95). In any case, in absence of some proof of unusual circumstances warranting estoppel, IMG should not be able to circumvent the clear language of GOL § 5-701 (a) (10). Accordingly, the proof of claim offered by IMG in support of its third cause of action is insufficient to support its application for a default judgment.
The forth and fifth causes of action, quantum meruit and unjust enrichment, are "in this context, essentially identical claims, and both are claims under a contract implied ... in law to pay reasonable compensation'" (Snyder v Bronfman, 13 NY3d 504, 509 [2009] [finding that the "implied in fact or in law" language of GOL § 5-701 (a) was added to the statute in 1964 to make clear that the statute of frauds applies to quantum meruit claims]). A party may not circumvent the statute of frauds by repleading an already barred breach of contract claim as a claim for unjust enrichment (see Four Star Capital Corp. v Nynex Corp., 183 FRD 91, 108 [SDNY 1997] [interpreting GOL § 5-701 (a) (10)]. The unjust enrichment claim must fail because it is a claim for reasonable compensation for services rendered in negotiating the purchase of real estate, which includes "procuring an introduction to a party to the transaction" (GOL § 5-701 [a] [10]). As such, it "falls within the ambit of the statute of frauds" (MP Innovations v Atlantic Horizon Intl., Inc., 72 AD3d 571, 572 [1st Dept 2010]). Therefore, IMG has not provided sufficient proof as to these claims.
IMG fails to provide proof of its claim as required by CPLR 3215 (f), and therefore its motion for a default judgment against SDS in the amount of $235,321.20 must be denied. There is not sufficient proof of IMG's claims and alleged damages. While the standard applied by the in evaluating a party's proof of claim is not stringent, "some proof of liability is ... required to satisfy the court as to the prima facie validity of ... uncontested causes of action" (Manhattan Telecom Corp., 2011 NY Slip Op 2539 at *1).
Accordingly, it is
ORDERED that plaintiff IMG International Marketing Group, Inc.'s motion for a default judgment against SDS William Street, LLC is denied.
This constitutes the decision and order of the court.
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New York, New YorkJ.S.C.