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A real estate broker does not breach any fiduciary duty to a seller by showing other sellers’ apartments to prospective buyers, a divided panel of the New York Appellate Division, First Department, ruled Thursday. The four-justice panel ruled that the Douglas Elliman-Gibbons & Ives real estate brokerage firm did not have to make up a $30,000 price decline that the plaintiffs said was caused when the brokers sold a second apartment to a prospective buyer who had been interested in their home. In Sonnenschein v. Douglas Elliman-Gibbons & Ives, 822-823-824, the plaintiffs were seeking to sell their apartment and entered into an agency relationship with Douglas Elliman-Gibbons & Ives. One of the brokers with the Douglas Elliman firm told the plaintiffs that a potential buyer had shown interest in the apartment, and that the buyer was willing to pay $820,000. An oral agreement was reached to sell the apartment, but no papers were signed. In the meantime, a second Douglas Elliman broker showed the prospective buyers a second apartment in the same building. The apartment was larger than the plaintiffs’ and it had a better view. The buyers negotiated an agreement with the owners of the second apartment to buy it for $838,000. The plaintiffs’ apartment later sold for $790,000, and they sued Douglas Elliman, charging that its breach of fiduciary duty and a duty of loyalty cost them $30,000 on the purchase price and $22,000 in added mortgage and maintenance costs while waiting to find a new buyer. Justice Edward Lehner in the Manhattan Supreme Court denied summary judgment to the brokerage, and a jury found Douglas Elliman liable for breaches of duties owed to the plaintiffs. However, the appeals court majority said that it would be “unworkable” to impose a rule barring brokers from showing other properties to potential buyers during oral negotiations between the seller and the buyer. Moreover, the court said in an opinion by Justice Ernst H. Rosenberger, “[i]t has long been the common-law rule that a real estate broker can represent more than one seller … at a time, and can show multiple properties to the same buyer, without breaching its fiduciary duty.” The appeals court said that summary judgment should have been granted to the Douglas Elliman brokerage because “plaintiffs’ theory of liability is flawed.” DISSENT FINDS DUTY But Justice Peter Tom, writing in dissent, said that at some point before there is a written contract, negotiations could have matured to the point where there could be a duty not to show properties of other sellers to the buyer. Justice Tom said that the case had to be remanded to trial court to determine whether the facts warranted the imposition of a fiduciary duty not to show new properties of other sellers. The majority said it did not want to announce an unenforceable rule that brokers must stop showing apartments to prospective buyers once negotiations had progressed to a certain point. Such a rule, the justices said, “would render it impossible for brokers to do business.” Real estate negotiations, Justice Rosenberger reasoned, are “often characterized by a series of tentative oral agreements between the parties.” But all parties are free to decide against the deal until the agreement is reduced to writing. “It would be unfair to hold that such an oral agreement imposes greater burdens on the broker than on either of the parties,” Justice Rosenberger wrote. “[T]he buyer would be free to find another seller, but the broker would not be free to suggest any alternative properties on [its] list.” But Justice Tom said in dissent that the facts of a case may warrant the finding of a fiduciary duty to the seller. He said he would have remanded the case to Manhattan Supreme Court for further fact-finding. “I am not persuaded that the absence of a written sales contract is significant,” Justice Tom wrote. “There was an agreement, albeit not yet enforceable. In fact, defendant’s own conduct, broadly speaking, interfered with the finalization of the sales contract.” Joining Justice Rosenberger in the majority were Justices Milton L. Williams and Angela M. Mazzarelli. Donald A. Hopper of the Hopper Law Firm represented the sellers in the case. Bettina B. Plevan of Proskauer Rose represented the defendant, Douglas Elliman-Gibbons & Ives.

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