Opinion
2731/10.
Decided October 19, 2010.
Jay Viders, Esq., Carle Place, New York, Attorney for Plaintiff.
David Tobias, Tobias Law Firm P.C., New York, NY, Peter Kessler, Esq., Spector, Gadon Rosen, P.C., Philadelphia, PA, Attorneys for Defendants.
In this action brought by plaintiffs Terra CRG, LLC (Terra), Ofer Cohen, Reuven Kahane and Daniel "Mickey" Taillard against defendants Namik Marke, 240/242 Franklin Avenue, LLC (Franklin), Colonial Court Apartments, LLC (Colonial), Howard Matheson and Steven Matheson d/b/a/ The Grand Marketplace, alleging, inter alia, breach of contract, unjust enrichment and tortious interference with contract, defendants move to dismiss the complaint pursuant to CPLR 3211 (a) (5) and (7).
BACKGROUND
This action arises out of a brokerage agreement for the sale of commercial real property serving as the site of a large indoor flea market named The Grand Marketplace, located at 4340 Route 130 North, Willingboro, New Jersey (the Property), and represents the second lawsuit arising out of the same series of transactions. The prior action was commenced under index No. 116179/08 in New York County by plaintiffs Terra, Kahane, and H. Stephen Kirschner, a real estate broker licensed in New York, against the same defendants in the instant action ( see Terra CRG, LLC v Marke, Sup Ct, New York County, Aug. 27, 2009, Gammerman, J., index No. 116179/08). The complaints in both actions allege that plaintiff Terra, a real estate brokerage licensed in New York, entered into an Exclusive Right To Sell Agreement (the Brokerage Agreement), dated April 1, 2008 but executed on May 13, 2008, with Marke, Franklin and Colonial, the owners and operators of the Property as well as The Grand Marketplace (the Owner Defendants). Under the terms of the Brokerage Agreement, the Owner Defendants agreed to grant Terra the "exclusive right, as broker and as agent of [the Owner Defendants], to sell all or any portion of the Property." The Owner Defendants were to pay Terra a commission equal to 2.5% of the purchase price of the Property, which would not be due "unless and until settlement ha[d] occurred, or the closing of escrow, or if there [was] no settlement or escrow, then upon recordation of the deed which convey[ed] title to the Property" (Exhibit 4 to Opp.)
The complaint in the New York County action alleged, upon information and belief, that defendants Howard and Steven Matheson, South African nationals who owned a large flea market in South Africa, either purchased the Property or acquired an ownership interest in the LLC Owner Defendants. Plaintiffs in that action claimed that Terra introduced the Mathesons as potential purchasers to the Owner Defendants through the assistance of Kahane, an attorney licensed in New York, and Kirschner, thus entitling Terra to the 2.5% commission provided in the Brokerage Agreement. In the New York County action, plaintiffs' first cause of action sought damages, claiming that the Owner Defendants had breached the Brokerage Agreement and owed Terra a commission of $625,000, 2.5% of the alleged purchase price. In their second cause of action, plaintiffs also sought damages from the Mathesons for tortiously interfering with the Brokerage Agreement. On August 27, 2009, Justice Ira Gammerman of the New York County Supreme Court issued a decision and order dismissing the complaint in that action pursuant to CPLR 3211 (a) (7) for failure to state a cause of action. Justice Grammerman found that no breach of the Brokerage Agreement had been stated because plaintiffs had failed to allege that "the Mathesons have purchased the Property, or that any of the events triggering an obligation on the part of the Owner Defendants to pay plaintiffs a commission ha[d] taken place" ( Terra CRG, LLC v Marke, NY County, index No. 116179/08 at p. 3).
The instant action was commenced on February 1, 2010. The complaint in this action adds Cohen, the managing member of Terra and a licensed New York real estate broker, to the caption as a plaintiff, and replaces Kirschner, a plaintiff in the New York County action, with Taillard, who allegedly acted as Kahane's partner in locating the Mathesons. The complaint includes additional allegations not contained in the New York County complaint, including the allegation that, in order to secure a buyer for the Property, Cohen discussed with Kahane the possibility of Kahane purchasing the Property jointly with plaintiff Taillard, who would act as Kahane's partner in the purchase. The complaint further alleges that Taillard contacted the Mathesons and suggested that they either join the partnership with Taillard and Kahane or purchase the Property themselves.
Kahane and Taillard ultimately did not purchase the Property. Instead, the complaint alleges that Kahane agreed to act as a sales consultant for the Owner Defendants and obtained a letter from Marke, dated May 30, 2008 which provided that the Owner Defendants would pay Kahane a $200,000 consulting fee in the event that the Mathesons purchased the Property (the Consulting Fee Letter). The plaintiffs claim that on or about June 7, 2008, upon information and belief, the Mathesons bypassed the plaintiffs and submitted an offer to purchase the Property directly to the Owner Defendants. Plaintiffs allege that, in spite of the Mathesons and Marke's representations to the contrary, the Mathesons effectively purchased the Property from the Owner Defendants for approximately $25,000,000, on or about September 8, 2008, by purchasing membership interests in the LLC Owner Defendants instead of purchasing the Property outright, thus avoiding the commission and the consultation fee. Plaintiffs cite, as proof that the Mathesons now own the Property, the website of The Grand Marketplace, which lists Howard Matheson as the general manager, and email communications from the Mathesons acknowledging ownership of The Grand Marketplace.
The complaint in the instant action contains similar causes of action to the two causes of action in the New York County complaint, but adds eight additional causes of action, and does not explicitly identify the legal causes of action upon which plaintiffs seek to recover.
ANALYSIS
Defendants move, pursuant to CPLR 3211 (a) (5), to dismiss the complaint on the basis of res judicata and collateral estoppel, arguing that plaintiffs should not be permitted to re-litigate the dispute as Justice Gammerman has already issued a final decision on the merits. The Second Department as held that "[r]es judicata bars future litigation between the same parties, or those in privity with the parties, of a cause of action arising out of the same transaction or series of transactions as a cause of action that was either raised or could have been raised in a prior proceeding" ( Ciancimino v Town of East Hampton 266 AD2d 331 [2d Dept 1999], quoting Evergreen Bank v Dashnaw, 246 AD2d 814 [3d Dept 1998]). The prior action must have been brought to a final conclusion on the merits. Sullivan v Nimmagadda , 63 AD3d 908 , 909 [2d Dept 2009]. There is only "limited preclusive effect" if the prior action is dismissed for failure to state a cause of action ( id.). A dismissal based upon "insufficient plead[ing]" is not on the merits and does not bar the claims from being asserted in a new action ( Viafax Corp. v Citicorp Leasing, Inc. , 54 AD3d 846 , 849 [2d Dept 2008]).
The instant action is not barred by the doctrine of res judicata or the doctrine of collateral estoppel because "the dismissal of the prior action did not involve a determination on the merits and the issues were not actually litigated therein" ( Tortura v Sullivan Papain Block McGrath Cannavo, P.C. , 41 AD3d 584 [2d Dept 2007]) [internal quotation marks omitted]. Justice Gammerman's decision granting defendants' motion to dismiss pursuant to CPLR 3211 (a) (7) was issued before an answer had been served, before discovery had begun and before any litigation of the claims had actually occurred. Further, his decision was based upon the finding that the plaintiffs inadequately alleged facts necessary to state a cognizable cause of action against the Owner Defendants for breach of contract or against the Mathesons for tortious interference with contract. His decision did not, contrary to the defendants' claims, make a formal finding as to whether a breach of the Brokerage Agreement actually occurred. Rather, Justice Gammerman made a limited finding that, in the complaint before him, plaintiffs did not make the allegations necessary to adequately state a claim for breach of contract, writing that he "need not also discuss defendants' other arguments in support of their motion." Because Justice Gammerman did not issue a final decision on the merits, defendants' motion to dismiss the complaint pursuant to CPLR 3211 (a) (5) is denied.
In the alternative, defendants have moved, pursuant to CPLR 3211 (a) (7) to dismiss the complaint for failure to state a cause of action. When evaluating a motion to dismiss pursuant to CPLR 3211 (a) (7), the court must construe the pleading liberally, "accepting all the facts alleged in the complaint to be true and according the plaintiff the benefit of every possible favorable inference" ( Jacobs v Macy's East, Inc., 262 AD2d 607, 608 [2d Dept 1999]; Leon v Martinez, 84 NY2d 83). The court will deny the motion "if from the pleadings' four corners, factual allegations are discerned which taken together manifest any cause of action cognizable at law" ( 511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d 144, 152 [internal quotation marks omitted]). "The test on a motion to dismiss for insufficiency of the pleadings is not whether the plaintiff has artfully drafted the complaint but whether, deeming the complaint to allege whatever can be reasonably implied from its statements, a cause of action can be sustained" ( Pepler v Coyne , 33 AD3d 434 , 435 [1st Dept 2006] citing Stendig, Inc. v Thom Rock Realty Co., 163 AD2d 46, 48, [1st Dept 1990]; see also Feinberg v Bache Halsey Stuart, 61 AD2d 135, 137-138, [1st Dept 1978]).
As a threshold matter, it is noted that the complaint fails to explicitly name the causes of action upon which plaintiffs seek to recover. The failure to plead specific causes of action does not require outright dismissal of the complaint for failure to state a cause of action as New York courts have found that "[i]t is enough . . . that a pleader state the facts making out a cause of action, and it matters not whether he [or she] gives a name to the cause of action at all or even that he [or she] gives it a wrong name" ( Johnson ex rel. Fredo v Verona Oil, Inc., 36 AD3d 991, 993 [3d Dept 2007] citing Van Gaasbeck v Webatuck Cent. School Dist. No. 1, 21 NY2d 239, 245; see also CPLR 3013 ("[s]tatements in a pleading shall be sufficiently particular to give the court and parties notice of the transactions, occurrences, or series of transactions or occurrences, intended to be proved and the material elements of each cause of action or defense"); CPLR 3014 ("separate causes of action or defenses shall be separately stated and numbered and may be stated regardless of consistency)). Each cause of action, however, must be examined independently to determine whether a cause of action or legally cognizable legal theory can be reasonably implied from the allegations within the complaint.
The first cause of action appears to allege that the Owner Defendants have breached the Brokerage Agreement, and plaintiff Terra is thereby entitled to recover the commission, believed to be $625,000. Judge Gammerman previously dismissed a similar breach of contract claim in the New York County Action, finding that, in spite of plaintiffs' allegation that the Property was sold and plaintiff Terra was thus entitled to a commission, plaintiffs failed to adequately plead that a triggering event occurred under section 2 of the Brokerage Agreement. As was the case with the New York County action, the plaintiffs have failed to adequately plead that a triggering event occurred under section 2 of the Brokerage Agreement, which requires as a condition precedent to payment of the commission, that a settlement, the closing of escrow or the recordation of a deed has taken place. Plaintiffs' argument, that their entitlement to the commission was triggered by the sale to the Mathesons of membership interests in the two LLC Owner Defendants and the transfer of The Grand Marketplace (and not by the transfer of deed to the Property), must be rejected as it directly contradicts the plain meaning of the Brokerage Agreement which provides for the payment of the commission only upon the occurrence of a triggering event relating to title to the "premises," defined therein as "4340 Route 130 North, Willingboro, NJ." In fact, the complaint fails to contain any allegation as to the ownership of the real property, but contains only claims relating to the business known as The Grand Marketplace.
Similarly, plaintiffs have not sufficiently alleged that the Owner Defendants have breached their obligations under the Consulting Fee Letter to Kahane. The sixth cause of action and the seventh cause of action, together, also appear to set forth a breach of contract claim relating to the Consulting Fee Letter, alleging that "[b]y producing the Mathesons to purchase The Grand Marketplace, plaintiff Kahane earned his consulting fee of $200,000, as provided in his [Consulting Fee Letter] dated May 30, 2008" and "[t]he attempted subterfuge of the defendants Matheson and the [Owner Defendants] to structure the sale of The Grand Marketplace as a sale of the LLC, as opposed to the realty, to avoid the plaintiffs' Consulting fee, is an unavailing attempt to promote form over substance." The plaintiffs have not pleaded that the Owner Defendants breached the Consulting Fee Letter as the letter provides that Kahane is only entitled to his consulting fee in the event that Howard Matheson and/or his assignees and partners purchase the Property. The Consulting Fee Letter specifically provides 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 you at closing." It is insufficient for plaintiffs to merely plead that Kahane is entitled to the consulting fee for the sale of the Property now that the Mathesons allegedly manage and own The Grand Marketplace. Because plaintiffs have failed to adequately plead that a breach of the Brokerage Agreement or the Consulting Fee Letter occurred, defendants' motion to dismiss the first cause of action, alleging breach of the Brokerage Agreement, and the sixth and seventh causes of action, alleging breach of the Consulting Fee Letter, is granted.
It is noted that, although these causes of action seek recovery for plaintiff Taillard, he was not a party to the Consulting Fee Letter and appears to have no standing to enforce it.
Alternatively, defendants have argued that even if plaintiffs had adequately stated a cause of action for breach of contract, plaintiffs can not recover under the Brokerage Agreement because Terra and Cohen are licensed real estate brokers in New York only and not in New Jersey. The defendants further contend that, because the property is located in New Jersey, New Jersey's law, which bars unlicensed real estate brokers from recovering their commissions in New Jersey courts, controls. Thus, according to the defendants, because the Brokerage Agreement is not a valid and enforceable contract under New Jersey law, the plaintiffs are thereby prohibited from recovering a commission from the sale of a New Jersey property under the Brokerage Agreement.
Plaintiffs argue that Terra, a licensed New York broker, is entitled to recover its commission because New York law controls as the plaintiffs and the Owner Defendants are both located in New York. Alternatively, plaintiffs contend that, even if New Jersey law does control and New Jersey courts are closed to them, Terra is still entitled to recover its commission in New York courts.
Plaintiffs are correct that, under New York law, Terra, as a licensed New York real estate broker, would be able to recover its commission in a New York court, provided it can demonstrate a sufficient nexus to New York ( Winokur v Prudential Ins. Co., 1993 WL 525627 at *2 [SD NY 1993]). However, their contention that plaintiff Terra could still recover its commission even under New Jersey law is rejected. Plaintiffs point to Rosenberg Rosenberg, P.C. v Hoffman, 195 AD2d 343 (1st Dept 1993), which held that, although New Jersey courts are closed to brokers not licensed in that state, such brokers may be able to recover in New York, given New York's interest in "seeing that its licensed brokers are compensated on contracts arising from initial contacts in New York and made in New York for obtaining financing from whatever source." The facts of Rosenberg are distinguishable, however, from the facts at bar. In Rosenberg, the plaintiff, a law firm and New York licensed real estate broker, retained specifically to secure financing in connection with the purchase of property in New Jersey, was seeking to recover a commission for securing a loan commitment from a bank to purchase the property and was not seeking to recover a commission for securing a buyer. Plaintiff in Rosenberg succeeded in obtaining financing through a New York source and closed in New York. Thus, the First Department in Rosenberg, applied New York, not New Jersey, law but noted that New Jersey law does not definitively prohibit unlicensed brokers from recovering commissions in other forums. While the New Jersey court may not have expressly addressed this issue ( see Rosenberg Rosenberg, P.C. v Hoffman, 195 AD2d 343 [1st Dept 1993], quoting Rosenberg Rosenberg v Hoffman, NJ Super Ct [App Div 1989] at 6, n 2 ("In view of our decision that the New Jersey courts are closed to plaintiff, we need not advance an opinion whether plaintiff's remedies are foreclosed in other forums")), the application of New Jersey law by New York courts suggests otherwise. "Both New York and New Jersey preclude real estate brokers from bringing actions for the collection of brokerage commissions in their courts without alleging and proving that such brokers were duly licensed at the time that the cause of action arose" ( Equis Corp. v Mack-Cali Realty Corp. , 6 AD3d 264 , 266 [1st Dept 2004]; see also Real Property Law § 442-d; NJ Stat Ann § 45:15-3). "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. v Berman, 174 AD2d 436 [1st Dept 1991]). Thus, the First Department has held that, if New Jersey law were to be applied by a New York court, a broker unlicensed in New Jersey would still be unable to recover its commission in New York:
[P]laintiffs may not circumvent the New Jersey licensing statute by merely filing suit in another jurisdiction, such as New York, since "the bar of the Jersey statute requiring licensed actors in land brokerage transactions does not merely serve to close the doors' of the Jersey courts (so that a suit in a separate jurisdiction such as New York could be maintained); rather it operates to extinguish the commission claim of the unlicensed plaintiff so that he cannot pursue his action anywhere (citation omitted)" ( id., quoting Collins Tuttle Company v Colgate-Palmolive Co., 114 Misc 2d 728, 729 [Sup Ct, New York County 1982]).
Accordingly, if New Jersey law controls, plaintiff Terra is barred from enforcing the terms of the Brokerage Agreement relating to real property in New Jersey.
To determine which state law controls, the Second Department has set forth a "center of gravity" or "grouping of contacts" choice of law theory, under which, in accordance with Matter of Allstate [Stolarz-N.J. Mfrs. Ins. Co.], 81 NY2d 219, 226, courts "must consider the spectrum of significant contacts with the transaction in dispute. This approach requires traditional choice of law factors to be given heavy weight. In addition, the policies underlying conflicting laws in a contract dispute may also be considered in instances where they are readily identifiable and reflect strong governmental concerns" ( Madison Realty, Inc. v Neiss, 253 AD2d 482, 483 [2d Dept 1998] [internal quotation marks and citations omitted]; see also Klein v Antebi , 15 Misc 3d 901 [Sup Ct, Kings County 2007], affd 53 AD3d 529 [2d Dept 2008]). In the instant action, this court is unable to resolve the choice of law question at this time as it lacks sufficient evidence to adequately apply the "center of gravity" or "grouping of contacts" principles. Although heavy weight is typically given to the situs of the property ( TDH-Berkshire Inc. v Korff , 33 AD3d 437 , 438 [1st Dept 2006]), plaintiffs claim that the bulk of the negotiations and services rendered took place in New York and plaintiff Terra, as well as defendants Marke and Franklin, are based in New York, which could suggest that New York has the dominant interest in applying its own law.
The fourth cause of action states that "[b]y fraudulently conspiring to deny plaintiff Terra of its rightfully-earned commission, the defendants Matheson tortiously interfered with the [Brokerage Agreement] between plaintiff Terra and the [Owner Defendants]." Although the cause of action is not labeled as such, plaintiffs appear to be alleging a tortious interference with contract claim. "A claim of tortious interference with contract requires proof of (1) the existence of a valid contract between plaintiff and a third party; (2) the defendant's knowledge of that contract; (3)the defendants's intentional procuring of the breach; and (4) damages'" ( Is. Rehabilitative Serv. Corp. v Maimonides Med. Ctr., 10 Misc 3d 1108(A), 2008 WL 786507 at *8 [Sup Ct, Kings County 2008] quoting Foster v Churchill, 87 NY2d 744, 749-750). Plaintiffs must sufficiently allege that a breach of contract occurred ( see Lama Holding Co. v Smith Barney Inc., 88 NY2d 413; NBT Bancorp v Fleet/Norstar Fin. Group, 87 NY2d 614 ("Ever since tortious interference with contractual relations made its first cautious appearance in the New York Reports . . . our Court has repeatedly linked availability of the remedy with a breach of contract.")). Here, because this court has found that plaintiffs have failed to adequately allege that a breach of the Brokerage Agreement occurred, they are unable to sustain a claim of tortious interference with contract. Thus, plaintiffs' fourth cause of action, for tortious interference with the Brokerage Agreement against the Mathesons, is dismissed.
The second and eighth causes of action both allege that plaintiffs are entitled to a quantum meruit award. Ordinarily, "a party may not recover in quantum meruit or unjust enrichment where the parties have entered into a contract that governs the subject matter"( Cox v NAP Const. Co., Inc. , 10 NY3d 592 , 607; see also Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382, 388). 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., Assocs., 187 AD2d 225, 228 [1st Dept 1993]; see also Hochman v LaRea , 14 AD3d 653 , 655 [2d Dept]; Zuccarini v Ziff-Davis Media, Inc., 306 AD2d 404, 405 [2d Dept 2003]). Here, plaintiffs Terra and Kahane entered into contracts governing the terms under which they would be compensated should they secure a purchaser of the Property for the Owner Defendants. However, no contracts are alleged to exist governing the terms under which plaintiffs Terra and Kahane may be compensated for securing a purchaser of the business, The Grand Marketplace, for the Owner Defendants. Because plaintiffs' quantum meruit claims stem from their belief that they performed services meriting compensation and the existing contracts do not necessarily cover the dispute, plaintiffs have adequately stated claims for recovery in quantum meruit.
If New Jersey law were ultimately found to control, plaintiff Terra would be barred from recovering its brokerage commission under, not only the Brokerage Agreement, but also under any equitable theory ( see Weston Funding Corp. v Lafayette Towers, Inc., 550 F.2d 710, 715-716 [2d Cir 1977] (New York and New Jersey statutory law precluding recovery of commission applies to breach of contract and quantum meruit claims); see also Coldwell Banker Mid Plaza Real Estate Inc. v Guindi, 23 Misc 3d 1132A, 2009 Slip Op 51043U at *13 [Sup Ct, Kings County 2009] ("Unlicensed persons cannot evade the licensing requirements by invoking equitable remedies to recover in tort rather than in contract")).
The third cause of action states that the defendants "consciously and tortiously entered into a deliberate course of fraud and misrepresentation" and cites specific misrepresentations made by Marke and Howard Matheson. The cause of action further alleges that the defendants "wrongfully conspired with one another in an effort to deprive the plaintiff Terra of its duly earned commission" and that "defendants will have been unjustly enriched" unless they pay Terra its commission. Similarly, the ninth cause of action states that "defendants consciously and tortiously entered into a deliberate course of fraud and misrepresentation" and "wrongfully conspired with one another in an effort to deprive the plaintiff Kahane of his Consulting Fee" and that "defendants will have been unjustly enriched" unless they pay Kahane his consulting fee. Both of these causes of action attempt to state multiple separate causes of action, alleging, inter alia, "fraud," "conspiracy" and "unjust enrichment" in a confusing manner, in contravention of CPLR 3014, which provides that "separate causes of action or defenses shall be separately stated and numbered." Moreover, the pleading does not comport with CPLR 3013. The third and ninth causes of action, as they are currently plead, do not sufficiently give defendants notice of "the material elements of each cause of action" and defendants "cannot reasonably be required to frame a response to the complaint in its present state" ( Aetna Cas. Sur. Co. v Merchants Mut. Ins. Co., 84 AD2d 736). For the sake of clarity, to assist in the litigation of the action, the third and ninth causes of action are dismissed without prejudice, with leave for the plaintiffs to replead within 30 days of the date hereof in accordance with the requirements of CPLR 3013 and 3014.
The fifth and tenth causes of action, which seek punitive or exemplary damages, cannot withstand a motion to dismiss because a claim for punitive damages can not be plead as an independent and separate cause of action ( see Kovacs v Briarcliffe School Inc., 208 AD2d 686, 687 [2d Dept 1994]).
CONCLUSION
For the reasons stated herein, defendants' motion to dismiss, pursuant to CPLR 3211 [a], [7], is granted in part and denied in part. The motion is denied as to the second and eighth causes of action alleging claims for quantum meruit. The third and ninth causes of action are dismissed without prejudice with leave for plaintiffs to file an amended complaint in compliance with this decision within 30 days of the date hereof. The first, fourth, fifth, sixth, seventh and tenth causes of action are dismissed in their entirety.
This constitutes the decision, order and judgement of the court.