Real Estate Broker Entitled to Commission Pursuant to Exclusive Sale Listing Agreement—Broker Was Permitted to Show Buyers Other Apartments

Sellers of a cooperative apartment (co-op), had retained a broker to sell their apartment pursuant to an "exclusive listing" agreement (agreement). The agreement stated that the asking price would be $1.65 million and that the sellers would pay the broker a 6 percent commission. The broker had arranged a "photo shoot" and had prepared a floor plan and had begun to show the apartment at open houses and by appointment. A bidder had made an oral bid of $1.5 million which was acceptable to the sellers.

Thereafter, the broker met "A" at an open house in the sellers’ apartment. While the initial bidder was providing information for the co-op board, the broker showed "A" several other apartments.

After the deal with the initial purchaser fell through, the broker again showed the sellers’ apartment to "A." "A" thereafter made an offer for $1.4 million. The broker then sent the sellers a deal sheet which listed a $70,000 broker commission (5 percent of $1.4 million) and confirmed, in writing to the sellers, that the broker would accept a 5 percent commission if the co-op were sold to "A." The agreement also specified that the commission would be due and payable at closing.

The sellers thereafter signed a purchase/sale contract with "A" at the $1.4 million price. The contract listed the broker as the "broker" and stated that the sellers would be solely responsible for the commission.

A closing had occurred and $70,000 was placed in escrow. The broker then commenced the instant action for the commission. The sellers argued that the broker had breached its fiduciary duties by acting as dual agent for the buyer. Each party had moved for summary judgment.

The trial court denied both motions, concluding that there were issues of fact as to whether the broker had acted in a dual agency relationship as agent for the purchasers and the sellers. The Appellate Division modified the order by granting summary judgment to the broker. The Appellate Division found that the broker "’did not act as a dual agent’ with the concomitant ‘duty to disclose her divided loyalties and obtain the parties’ consent thereto," since the broker had signed an exclusive agency agreement with the sellers. The broker did not have a similar agreement with the buyers and had received no compensation from the buyers.

The record established that the broker had obtained the sellers’ agreement to the reduced commission if the broker could bring about an agreement between the purchaser and the sellers. Moreover, the sale/purchase agreement identified the broker as the "broker" and stated that the sellers would be responsible for paying the commission.

The court noted that "absent an agreement with the [sellers] to the contrary, [the broker] ‘owed them no duty to refrain from’ showing the buyers ‘a number of other apartments’ without the sellers’ permission or knowledge." The broker had found buyers who were ready, willing and able to purchase the co-op and the parties had signed a contract, obtained co-op board approval and a closing had occurred.

Accordingly, the court held that the broker was entitled to a commission. The court further explained that absent an agreement to the contrary, the broker did not have to "decline a prospective purchaser’s request to see another property."

The court rejected the sellers’ argument that because the parties had entered into an "exclusive sellers’ agreement," the broker was not permitted to show the buyers other apartments or, alternatively, could only show buyers apartments listed for sale by the broker, not apartments listed by other brokers. The court opined that such rule would be inconsistent with the "nature and fundamental requirements of the real estate marketplace in New York…." Additionally, the court rejected the sellers’ claim that the broker had violated the implied covenant of good faith and fair dealing. Accordingly, the court affirmed the Appellate Division order.

Douglas Elliman &c. v. Franklin Tretter, No. 184, NYLJ 1202578812501, at *1 (Ct. of App., Nov. 19, 2012), Chief Judge Lippman and Judges Ciparick, Graffeo, Read, Smith and Pigott concur.

Tax Certiorari Proceedings Dismissed—Trial Court’s Decision Was Against the Weight of the Evidence—Trial Court Should Not Have Disregarded Evidence of Most Recent Arm’s Length Sale

This case involved an appeal from an order and judgment of a trial court which had granted petitioner’s applications in three proceedings pursuant to RPTL Article 7, to reduce 2008, 2009 and 2010 tax assessments on certain real property leased by the petitioner.

The petitioner is the lessee "under a 20-year triple net lease of a free-standing retail pharmacy." A developer had purchased the parcel upon which the pharmacy is located and had built the pharmacy at a cost of $2.5 million. The property was assessed for $3.95 million for tax years 2008, 2009 and 2010.

In July 2008, the petitioner commenced the instant proceedings pursuant to Article 7 to challenge the assessment. The petitioner’s expert had valued the property at $2.1 million. The respondents’ expert valued the property at $4.03 million. The trial court had accepted the petitioner’s proof and granted the petition. The respondents appealed. The Appellate Division reversed and dismissed the proceedings.

The petitioner had proffered substantial evidence to rebut the presumption of validity. The respondents argued that the trial court had disregarded the 2005 sale "as the best indicator of value."

The Appellate Division explained that "[t]he best evidence of value…is a recent sale of the subject property between a seller under no compulsion to sell and a buyer under no compulsion to buy…." Although the petitioner argued otherwise, the court found that the August 2005 sale for $3.6 million was "an arm’s length transaction." Moreover, the price paid by the purchaser in this matter "was consistent with the value of the property as determined by respondents’ expert (subject to market trends)…." Thus, the court held that the trial court’s decision to credit the petitioner’s appraisal was "against the weight of the evidence…." Accordingly, the trial court’s order and judgment was reversed.

Matter of Rite Aid v. Otis, 514697, NYLJ 1202579887530, at *1 (App. Div., 3rd, Decided Nov. 21, 2012), before: Rose, J.P., Spain, Malone Jr., Garry and Egan Jr., JJ. Opinion by Egan, J. All concur.

Mechanics Liens Vacated—Evidence Did Not Establish That the Owner Had Affirmatively Consented to Defendant’s Work—Awareness and Acquiescence Insufficient

This decision involved appeals from a trial court order which, inter alia, had granted the plaintiff’s cross motion for summary judgment vacating the mechanics liens filed by the defendants (buyers) and from an order of that court which denied a motion by the defendants to renew and reargue. The Appellate Division affirmed.

The plaintiff entered into a contract to sell his real property to the buyers. The contract provided that the buyers would obtain the approval of certain governmental agencies for a 19-lot subdivision. The contract was contingent upon such approvals.

The buyers had hired defendants "A" and "B" (defendants) to perform certain architectural and engineering services. The defendants had filed mechanics liens against the property. The plaintiff then commenced the breach of contract action against the buyers and against the defendants, seeking to have the mechanics liens declared "invalid and discharged." The defendants had moved for summary judgment declaring as a matter of law, that the plaintiff had consented to their work and other relief. The trial court had granted the plaintiff’s cross motion for summary judgment. The defendants appealed.

A mechanics lien on real property is valid only if the property owner or the owner’s agent "requested or consented to the lienor’s services, and such consent must be shown by some affirmative act, and not merely by the owner’s acquiescence or awareness."

The plaintiff asserted that he lacked "prior knowledge of the nature of their obligations to the buyers or the services they performed, that he did not hire them or agree to their work and that, although he attended some meetings of the Town Planning Board at [buyer's request], he was not asked to review, comment on or inspect defendants’ work…." The plaintiff further testified that he "never saw plans for the buyers’ propose development, and never spoke with the buyers about their plans for obtaining the required approvals."

Additionally, the defendants acknowledged that "they never spoke with plaintiff about their work, requested his input or approval, showed him plans, informed him of the work’s progress or sought payment from him."

The court concluded that the defendants had merely demonstrated the plaintiff’s "awareness and acquiescence." However, the defendants’ claims that the plaintiff knew of and consented to their work were "wholly conclusory and unsupported by the evidence."

Thus, the court held that there were no issues of fact as to whether the plaintiff had taken "any affirmative act indicating his consent to defendants’ work." Therefore, the liens should be vacated.

Creech v. Loreto Rufa, 514777, NYLJ 1202581736200, at *1 (Sup., App. Div., 3rd, Decided Dec. 6, 2012). Before: Mercure, J.P., Lahtinen, Kavanagh, McCarthy and Garry, JJ. Opinion by Garry, J. All concur.

Scott E. Mollen is a partner at Herrick, Feinstein and an adjunct professor at St. John’s University School of Law.