Real Property Law

AppDiv, Second Dept.

(memorandum opinion)

In purchaser's action for return of a down payment, purchaser appealed from Supreme Court's grant of seller's summary judgment motion. The Appellate Division affirmed, holding that purchaser had failed to demonstrate an issue of fact about whether seller had failed to deliver insurable title.

Purchaser contracted to buy an office building and parking lot in March 2007. The contract provided that purchaser was buying the property in “as is condition ' subject to all violations whether or not of record.” The contract also provided that purchaser could elect to terminate if seller was unable to convey title at closing, which was set for May 31, 2009. The contract provided that time was of the essence, and purchaser paid a $750,000 down payment. On Feb. 6, 2009, purchaser wrote to seller indicating that it was electing to terminate because it had discovered an “open” file for work performed on the building's mezzanine level in 1975. Purchaser contended that as a result, occupancy of that level was illegal, and seller could not, therefore, convey title to the premises in accordance with the contract, which called for insurable title and compliance with applicable zoning regulations. Seller nevertheless appeared at the closing, but purchaser did not. Purchaser then brought this action to recover its down payment, and Supreme Court awarded summary judgment to seller.

In affirming, the Appellate Division emphasized that the sale contract provided for retention of the down payment as liquidated damage in the event of breach, and noted that purchaser had agreed to buy the property as is. The court held that purchaser had failed to raise a triable issue of fact about whether it tendered performance and permitted the seller an opportunity to cure any alleged defect. The court emphasized that purchaser had never demanded good title, nor did it show that the alleged defect rendered title unmarketable. As a result, Supreme Court properly entered judgment for seller on its counterclaim seeking a declaration that it was entitled to retain the down payment.

Due Process Does Not Require Notice of Right to Redeem After Foreclosure Sale

Matter of Foreclosure of Tax Liens

NYLJ 2/22/12, p. 26, col. 1

Court of Appeals

(Jones, J.)

In a tax foreclosure proceeding, Orange County appealed from the Appellate Division's affirmance of Supreme Court's determination that the county had not provided adequate notice to landowners of their right to redeem property after the county had acquired title at the foreclosure sale. The Court of Appeals reversed, holding that due process only required the county to provide notice of the foreclosure action, not of the subsequent right to redeem.

Landowners acquired the subject property in 1997. Beginning in 2000, they lived in an apartment on Amity Road, and in 2002 they relocated to Sandfordville Road. In 2004, when landowners learned from their former landlord that some of their mail, including their real estate tax bills, were still going to Amity Road, they filed a change of address with the town assessor, indicating the Sandfordville Road address as their current one. Later, landowners informed the county directly of the new address. Nevertheless, the county continued to send tax bills to Amity Road. In 2006, landowners stopped paying taxes, and in 2007 the county filed a tax foreclosure proceeding. In addition to notice by publication and by posting, the county mailed notice, by certified mail, return receipt requested, to the Amity Road address. The mailing was returned “unclaimed.” Landowners defaulted in the foreclosure proceeding, resulting in a 2008 deed to the county. The county then sent landowners a certified letter to the Amity Road address, return receipt requested, informing them of the deed and giving them an opportunity to repurchase. This mailing was returned “not deliverable as addressed.” Landowners later learned about the foreclosure action and a scheduled sale of the property, and moved to stay the sale. Supreme Court held that the notice for the foreclosure action satisfied due process requirements, but the notice of a right to repurchase did not because the notation “not deliverable as addressed” put the county on notice that the address was invalid. The Appellate Division affirmed.

In reversing, the Court of Appeals noted that all parties agreed that the county had provided adequate notice for the foreclosure action. The issue was whether the county provided sufficient notice of the release option created by local law, which gives the county discretion to permit the prior owner of record to repurchase foreclosed land prior to public auction. The Court of Appeals held that the release option was a discretionary, permissive remedy made available after the county had already lawfully acquired title. The court held that the release option was a courtesy, but did not establish a property right entitled to due process protection. The court emphasized that the county legislature had to approve any sale made pursuant to the release option. As a result, the court held that the county had fulfilled its constitutional obligation by providing adequate notice of the initial foreclosure, and any deficiencies in the subsequent notice did not constitute a due process violation.

COMMENT

Though the original foreclosure notice was returned “unclaimed,” that notice was sufficient under established law. In the context of personal notice in a tax foreclosure proceeding, due process is generally satisfied by sending notice by both certified and first-class mail to the address listed on the tax rolls. If the mail is returned as “undeliverable,” suggesting that the address is not correct, then the county must then conduct a limited search for an alternative address. In Kennedy v Mossafa, 100 N.Y.2d 1, the court affirmed a grant of summary judgment to purchaser at a foreclosure sale even though the only notice sent to the landowner, was returned as “not deliverable as addressed unable to forward.” The court stated that upon realizing that the mail was “undeliverable” the county should have searched the public record for an alternative address, but appeared to limit the scope of the search to local surrogate and land recording records. However, as the prior landowner could not show that her address would have been uncovered by such a search, her claim was dismissed. Moreover, if the county provides notice both by certified and first-class mail, and only one notice is returned, the county has no duty to search further. Thus, in Harner v. County of Tioga, 5 N.Y.3d 136, the Court of Appeals dismissed a landowner's due process claim where he claimed never to have received tax foreclosure notices sent by both certified and first-class mail. Even though the certified mail was returned “unclaimed,” the fact that the first-class mail was not returned entitled the county to draw the inference that the landowner was attempting to avoid notice. Moreover, the court distinguished between the “unclaimed” designation in Harner and the post office designation in Kennedy, which more strongly suggested an erroneous address. As a result, the county had no obligation to make additional efforts to notify landowner.

If a foreclosure notice was sent to an old address because of an alleged clerical failure by the county, the burden is on the landowner to prove that he actually submitted a change of address. In Harner, the landowner claimed to have been unaware that his address was changed on the tax rolls. The court held that the landowner was responsible for maintaining a current address, and considered him to have acquiesced to the change because of his failure to verify his address after not receiving subsequent tax notices. The trial court opinion in Matter of Foreclosure of Tax Liens, 24 Misc.3d 204, makes clear that the landowner similarly failed to meet her burden because she had no proof that she had mailed a change of address form other than her affidavit, and gave no explanation for not rectifying the failure when she received no tax notices at her new address over the next several years. The Second Circuit, in Weigner v. City of New York, 852 F.2d 646, held that due process requires only notice at the start of foreclosure proceedings, not at each additional step along the way. There, the court rejected various constitutional challenges to the tax foreclosure laws, including a landowner's due process claim that the City, though it had sent notice of the foreclosure proceeding, had failed to give her notice of her mandatory right of redemption or her additional discretionary right of redemption offered on a case by case basis by the City. The Supreme Court's decision in Jones v. Flowers, 547 U.S. 220, does not undermine Weigner. In that case, the Court held that Arkansas failed to give adequate notice to a landowner of an impending tax sale and his right of redemption. Though it was unclear from the opinion, the tax sale was the only stage of the proceedings at which notice was given, because there are no tax foreclosure proceedings in Arkansas. In that state, property which is sufficiently tax delinquent is automatically forfeited to the state without notice or a hearing, after which notice of the tax sale and a right of redemption are sent to the landowner. In Miner v. Clinton County, 541 F.3d 464, decided roughly two years after Flowers, the Second Circuit reaffirmed its opinion in Weigner. A landowner claimed Real Property Tax Law ' 1131 failed to provide due process, as it did not require notice of a default judgment if there had been notice of the tax foreclosure proceeding. Without citing Jones, the court rejected that argument, concluding that due process required only notice of the initial foreclosure and not of any additional stages of the proceedings.

Purchaser Entitled to Reformation When Contract Misstates Acreage Transferred

Shufelt v. Bulfamonte

NYLJ 3/5/12, p. 22, col. 6

AppDiv, Second Dept .

(memorandum opinion)

In an action to foreclose a purchase-money mortgage, mortgagor appealed from Supreme Court's award of summary judgment to mortgagee, and from Supreme Court's dismissal of affirmative defenses and counterclaims. The Appellate Division modified to reinstate the counterclaims, holding that because the contract of sale misstated the acreage transferred to mortgagor, the latter was entitled to an adjustment of the mortgage obligation.

Purchase-money mortgagee transferred the subject property to mortgagor for $180,000. The sale contract recited a price of $1,800 per acre, reflecting the parties' understanding that the parcel conveyed consisted of 100 acres. Mortgagor paid $50,000 in cash, and purchase-money mortgagee took back a purchase-money mortgage in the amount of $13,000. Mortgagor defaulted on the note, and when purchase-money mortgagee brought this foreclosure action, mortgagor resisted on the ground that only 93.67 acres were actually transferred. Supreme Court nevertheless awarded summary judgment to purchase-money mortgagee.

In modifying, the Appellate Division first agreed with Supreme Court that a dispute about the exact amount owed pursuant to a mortgage does not preclude summary judgment on the issue of foreclosure. Here, mortgagor failed to raise a triable issue of fact about its failure to make payments owed on the mortgage. The court then held, however, that as a matter of law, the contract of sale was made on a “per-acre” basis, and that because only 93.67 acres were actually transferred, the mortgagor was entitled to an adjustment in the face amount of the mortgage to account for the shortage in acreage.

COMMENT

When an executor sale contract of sale or even an executed deed recites the acreage of land sold, either party is entitled to rescind the sale if the difference in acreage is material. To take an extreme example, the court in D'Antoni v. Goff, 52 A.D.2d 973, permitted rescission to a vendor who sold 68 acres under the mistaken belief that the land contained only 15 acres. The court held that when a mutual mistake is so substantial, there is no “meeting of the minds” and rescission is appropriate. Similarly, in Barnosky v. Peters, 49 A.D.2d 134, the court held that rescission was an appropriate remedy when the sale contract recited that the parcel contained 135 acres but the actual acreage was only 116.

On the other hand, a mistake about acreage entitles the buyer to “reform” the contract to reduce the purchase price only when the sale price was precisely calculated on a “per-acre” basis. Thus, in Barnosky, the court held that the buyer was not entitled to a reduction in sale price because negotiations for the sale were conducted for the purchase of land in bulk rather than on a per acre basis. See also Belknap v. Sealey, 14 N.Y. 143, 153 (noting that equity may make rescission available even when reformation would be unavailable). By contrast, in Paine v. Upton, 87 N.Y. 327, the court granted vendee's claim for contract reformation to reduce the purchase price when the parcel included less than 200 acres rather than the 222 acres listed in the sale contract because the pre-contract negotiations demonstrated that acreage was an essential element to the agreement. Courts in subsequent cases, however, have construed Paine narrowly, holding that reformation is not appropriate when the sale contract itself does not indicate that the price was set based on the acreage sold. See, e.g., Hunt v. Wall, 211 App.Div. 856, affd 240 N.Y. 696.

Broker Entitled to Commission Pursuant to Amended Agreement

Sioni & Partners, LLC v. Vaak Properties, LLC

NYLJ 3/5/12, p. 19, col. 1

AppDiv, First Dept.

(memorandum opinion)

In an action for a brokerage commission, seller appealed from Supreme Court's award of a commission to broker. The Appellate Division affirmed, relying on an amended commission agreement in which seller expressly acknowledged that broker was the procuring cause of the transaction.

Seller and broker entered into an exclusive right to sell agreement on June 4, 2012. The agreement authorized broker to sell the property for $6.6 million with a 3% commission, and provided that if another price were negotiated and agreed to by seller, the commission would also be negotiated. Broker then procured a buyer who made an offer of $6 million. Seller and broker then entered into an amended commission agreement in which seller acknowledged that broker was responsible for the sale of the property, and agreed to pay brokers $160,000 as compensation “if as and only when title closes.” Although seller signed the agreement, the handwritten words “subject to attorney modification & approval” appeared above seller's signature. Buyer and seller entered into a sale contract the next day. Three months later, seller's principal wrote to broker, indicating that its attorney had approved a commission of $100,000 to be paid at closing. Although the sale closed on Jan. 21, 2011, seller never paid any commission. Broker then brought this action for $160,000, and Supreme Court granted broker's summary judgment motion. Seller appealed.

In affirming, the Appellate Division rejected seller's argument that broker was not the procuring cause of the transaction because broker did not attend three face-to-face meetings between buyer and seller that took place after the amended commission agreement was executed. The court noted that the amended commission agreement had included a representation, signed by seller, that broker was responsible for the sale, and that in any event, because broker had an exclusive right to sell, broker would have been entitled to the commission even if broker had not been the procuring cause of the transaction.

Legal Malpractice Claim Against Real Estate Lawyer Affirmed

Island Properties & Equities, LLC v. Cox

NYLJ 3/9/12, p. 26, col. 2

AppDiv, Second Dept.

(memorandum opinion)

In an action for legal malpractice, lawyer appealed from Supreme Court's awards, after a non-jury trial of $14,000 to one client and $50,000 to another client for negligence in conducting real estate transactions. The Appellate Division modified to reduce one the smaller award to $12,334.76, but otherwise affirmed.

In connection with the first of the two claims, the record established that the lawyer failed to correct a motion in a foreclosure action to confirm a referee's report and for distribution of surplus funds after the foreclosure sale. Supreme Court had initially rejected the lawyer's motion, and the lawyer's failure to correct the motion prevented the client from obtaining the surplus funds. Because the evidence established that the surplus funds amounted only to $12,334.76, the Appellate Division reduced Supreme Court's award to that extent.

The Appellate Division affirmed Supreme Court's award of $50,000 on the second claim, where the evidence established that the lawyer's negligent delay in recording the client-lender's mortgage allowed the borrower to refinance a first mortgage without satisfying the client's mortgage, ultimately rendering the client's mortgage worthless.

Purchaser Fails to Raise Issue of Fact About Seller's Failure to Deliver Insurable Title

Vision Enterprises, LLC v. 111 East Shore, LLC

NYLJ 2/27/12, p. 27, col. 4

AppDiv, Second Dept.

(memorandum opinion)

In purchaser's action for return of a down payment, purchaser appealed from Supreme Court's grant of seller's summary judgment motion. The Appellate Division affirmed, holding that purchaser had failed to demonstrate an issue of fact about whether seller had failed to deliver insurable title.

Purchaser contracted to buy an office building and parking lot in March 2007. The contract provided that purchaser was buying the property in “as is condition ' subject to all violations whether or not of record.” The contract also provided that purchaser could elect to terminate if seller was unable to convey title at closing, which was set for May 31, 2009. The contract provided that time was of the essence, and purchaser paid a $750,000 down payment. On Feb. 6, 2009, purchaser wrote to seller indicating that it was electing to terminate because it had discovered an “open” file for work performed on the building's mezzanine level in 1975. Purchaser contended that as a result, occupancy of that level was illegal, and seller could not, therefore, convey title to the premises in accordance with the contract, which called for insurable title and compliance with applicable zoning regulations. Seller nevertheless appeared at the closing, but purchaser did not. Purchaser then brought this action to recover its down payment, and Supreme Court awarded summary judgment to seller.

In affirming, the Appellate Division emphasized that the sale contract provided for retention of the down payment as liquidated damage in the event of breach, and noted that purchaser had agreed to buy the property as is. The court held that purchaser had failed to raise a triable issue of fact about whether it tendered performance and permitted the seller an opportunity to cure any alleged defect. The court emphasized that purchaser had never demanded good title, nor did it show that the alleged defect rendered title unmarketable. As a result, Supreme Court properly entered judgment for seller on its counterclaim seeking a declaration that it was entitled to retain the down payment.

Due Process Does Not Require Notice of Right to Redeem After Foreclosure Sale

Matter of Foreclosure of Tax Liens

NYLJ 2/22/12, p. 26, col. 1

Court of Appeals

(Jones, J.)

In a tax foreclosure proceeding, Orange County appealed from the Appellate Division's affirmance of Supreme Court's determination that the county had not provided adequate notice to landowners of their right to redeem property after the county had acquired title at the foreclosure sale. The Court of Appeals reversed, holding that due process only required the county to provide notice of the foreclosure action, not of the subsequent right to redeem.

Landowners acquired the subject property in 1997. Beginning in 2000, they lived in an apartment on Amity Road, and in 2002 they relocated to Sandfordville Road. In 2004, when landowners learned from their former landlord that some of their mail, including their real estate tax bills, were still going to Amity Road, they filed a change of address with the town assessor, indicating the Sandfordville Road address as their current one. Later, landowners informed the county directly of the new address. Nevertheless, the county continued to send tax bills to Amity Road. In 2006, landowners stopped paying taxes, and in 2007 the county filed a tax foreclosure proceeding. In addition to notice by publication and by posting, the county mailed notice, by certified mail, return receipt requested, to the Amity Road address. The mailing was returned “unclaimed.” Landowners defaulted in the foreclosure proceeding, resulting in a 2008 deed to the county. The county then sent landowners a certified letter to the Amity Road address, return receipt requested, informing them of the deed and giving them an opportunity to repurchase. This mailing was returned “not deliverable as addressed.” Landowners later learned about the foreclosure action and a scheduled sale of the property, and moved to stay the sale. Supreme Court held that the notice for the foreclosure action satisfied due process requirements, but the notice of a right to repurchase did not because the notation “not deliverable as addressed” put the county on notice that the address was invalid. The Appellate Division affirmed.

In reversing, the Court of Appeals noted that all parties agreed that the county had provided adequate notice for the foreclosure action. The issue was whether the county provided sufficient notice of the release option created by local law, which gives the county discretion to permit the prior owner of record to repurchase foreclosed land prior to public auction. The Court of Appeals held that the release option was a discretionary, permissive remedy made available after the county had already lawfully acquired title. The court held that the release option was a courtesy, but did not establish a property right entitled to due process protection. The court emphasized that the county legislature had to approve any sale made pursuant to the release option. As a result, the court held that the county had fulfilled its constitutional obligation by providing adequate notice of the initial foreclosure, and any deficiencies in the subsequent notice did not constitute a due process violation.

COMMENT

Though the original foreclosure notice was returned “unclaimed,” that notice was sufficient under established law. In the context of personal notice in a tax foreclosure proceeding, due process is generally satisfied by sending notice by both certified and first-class mail to the address listed on the tax rolls. If the mail is returned as “undeliverable,” suggesting that the address is not correct, then the county must then conduct a limited search for an alternative address. In Kennedy v Mossafa, 100 N.Y.2d 1, the court affirmed a grant of summary judgment to purchaser at a foreclosure sale even though the only notice sent to the landowner, was returned as “not deliverable as addressed unable to forward.” The court stated that upon realizing that the mail was “undeliverable” the county should have searched the public record for an alternative address, but appeared to limit the scope of the search to local surrogate and land recording records. However, as the prior landowner could not show that her address would have been uncovered by such a search, her claim was dismissed. Moreover, if the county provides notice both by certified and first-class mail, and only one notice is returned, the county has no duty to search further. Thus, in Harner v. County of Tioga, 5 N.Y.3d 136, the Court of Appeals dismissed a landowner's due process claim where he claimed never to have received tax foreclosure notices sent by both certified and first-class mail. Even though the certified mail was returned “unclaimed,” the fact that the first-class mail was not returned entitled the county to draw the inference that the landowner was attempting to avoid notice. Moreover, the court distinguished between the “unclaimed” designation in Harner and the post office designation in Kennedy, which more strongly suggested an erroneous address. As a result, the county had no obligation to make additional efforts to notify landowner.

If a foreclosure notice was sent to an old address because of an alleged clerical failure by the county, the burden is on the landowner to prove that he actually submitted a change of address. In Harner, the landowner claimed to have been unaware that his address was changed on the tax rolls. The court held that the landowner was responsible for maintaining a current address, and considered him to have acquiesced to the change because of his failure to verify his address after not receiving subsequent tax notices. The trial court opinion in Matter of Foreclosure of Tax Liens, 24 Misc.3d 204, makes clear that the landowner similarly failed to meet her burden because she had no proof that she had mailed a change of address form other than her affidavit, and gave no explanation for not rectifying the failure when she received no tax notices at her new address over the next several years. The Second Circuit, in Weigner v. City of New York, 852 F.2d 646, held that due process requires only notice at the start of foreclosure proceedings, not at each additional step along the way. There, the court rejected various constitutional challenges to the tax foreclosure laws, including a landowner's due process claim that the City, though it had sent notice of the foreclosure proceeding, had failed to give her notice of her mandatory right of redemption or her additional discretionary right of redemption offered on a case by case basis by the City. The Supreme Court ' s decision in Jones v. Flowers, 547 U.S. 220, does not undermine Weigner. In that case, the Court held that Arkansas failed to give adequate notice to a landowner of an impending tax sale and his right of redemption. Though it was unclear from the opinion, the tax sale was the only stage of the proceedings at which notice was given, because there are no tax foreclosure proceedings in Arkansas. In that state, property which is sufficiently tax delinquent is automatically forfeited to the state without notice or a hearing, after which notice of the tax sale and a right of redemption are sent to the landowner. In Miner v. Clinton County, 541 F.3d 464, decided roughly two years after Flowers, the Second Circuit reaffirmed its opinion in Weigner. A landowner claimed Real Property Tax Law ' 1131 failed to provide due process, as it did not require notice of a default judgment if there had been notice of the tax foreclosure proceeding. Without citing Jones, the court rejected that argument, concluding that due process required only notice of the initial foreclosure and not of any additional stages of the proceedings.

Purchaser Entitled to Reformation When Contract Misstates Acreage Transferred

Shufelt v. Bulfamonte

NYLJ 3/5/12, p. 22, col. 6

AppDiv, Second Dept .

(memorandum opinion)

In an action to foreclose a purchase-money mortgage, mortgagor appealed from Supreme Court's award of summary judgment to mortgagee, and from Supreme Court's dismissal of affirmative defenses and counterclaims. The Appellate Division modified to reinstate the counterclaims, holding that because the contract of sale misstated the acreage transferred to mortgagor, the latter was entitled to an adjustment of the mortgage obligation.

Purchase-money mortgagee transferred the subject property to mortgagor for $180,000. The sale contract recited a price of $1,800 per acre, reflecting the parties' understanding that the parcel conveyed consisted of 100 acres. Mortgagor paid $50,000 in cash, and purchase-money mortgagee took back a purchase-money mortgage in the amount of $13,000. Mortgagor defaulted on the note, and when purchase-money mortgagee brought this foreclosure action, mortgagor resisted on the ground that only 93.67 acres were actually transferred. Supreme Court nevertheless awarded summary judgment to purchase-money mortgagee.

In modifying, the Appellate Division first agreed with Supreme Court that a dispute about the exact amount owed pursuant to a mortgage does not preclude summary judgment on the issue of foreclosure. Here, mortgagor failed to raise a triable issue of fact about its failure to make payments owed on the mortgage. The court then held, however, that as a matter of law, the contract of sale was made on a “per-acre” basis, and that because only 93.67 acres were actually transferred, the mortgagor was entitled to an adjustment in the face amount of the mortgage to account for the shortage in acreage.

COMMENT

When an executor sale contract of sale or even an executed deed recites the acreage of land sold, either party is entitled to rescind the sale if the difference in acreage is material. To take an extreme example, the court in D'Antoni v. Goff, 52 A.D.2d 973, permitted rescission to a vendor who sold 68 acres under the mistaken belief that the land contained only 15 acres. The court held that when a mutual mistake is so substantial, there is no “meeting of the minds” and rescission is appropriate. Similarly, in Barnosky v. Peters, 49 A.D.2d 134, the court held that rescission was an appropriate remedy when the sale contract recited that the parcel contained 135 acres but the actual acreage was only 116.

On the other hand, a mistake about acreage entitles the buyer to “reform” the contract to reduce the purchase price only when the sale price was precisely calculated on a “per-acre” basis. Thus, in Barnosky, the court held that the buyer was not entitled to a reduction in sale price because negotiations for the sale were conducted for the purchase of land in bulk rather than on a per acre basis. See also Belknap v. Sealey, 14 N.Y. 143, 153 (noting that equity may make rescission available even when reformation would be unavailable). By contrast, in Paine v. Upton, 87 N.Y. 327, the court granted vendee's claim for contract reformation to reduce the purchase price when the parcel included less than 200 acres rather than the 222 acres listed in the sale contract because the pre-contract negotiations demonstrated that acreage was an essential element to the agreement. Courts in subsequent cases, however, have construed Paine narrowly, holding that reformation is not appropriate when the sale contract itself does not indicate that the price was set based on the acreage sold. See, e.g., Hunt v. Wall, 211 App.Div. 856, affd 240 N.Y. 696.

Broker Entitled to Commission Pursuant to Amended Agreement

Sioni & Partners, LLC v. Vaak Properties, LLC

NYLJ 3/5/12, p. 19, col. 1

AppDiv, First Dept.

(memorandum opinion)

In an action for a brokerage commission, seller appealed from Supreme Court's award of a commission to broker. The Appellate Division affirmed, relying on an amended commission agreement in which seller expressly acknowledged that broker was the procuring cause of the transaction.

Seller and broker entered into an exclusive right to sell agreement on June 4, 2012. The agreement authorized broker to sell the property for $6.6 million with a 3% commission, and provided that if another price were negotiated and agreed to by seller, the commission would also be negotiated. Broker then procured a buyer who made an offer of $6 million. Seller and broker then entered into an amended commission agreement in which seller acknowledged that broker was responsible for the sale of the property, and agreed to pay brokers $160,000 as compensation “if as and only when title closes.” Although seller signed the agreement, the handwritten words “subject to attorney modification & approval” appeared above seller's signature. Buyer and seller entered into a sale contract the next day. Three months later, seller's principal wrote to broker, indicating that its attorney had approved a commission of $100,000 to be paid at closing. Although the sale closed on Jan. 21, 2011, seller never paid any commission. Broker then brought this action for $160,000, and Supreme Court granted broker's summary judgment motion. Seller appealed.

In affirming, the Appellate Division rejected seller's argument that broker was not the procuring cause of the transaction because broker did not attend three face-to-face meetings between buyer and seller that took place after the amended commission agreement was executed. The court noted that the amended commission agreement had included a representation, signed by seller, that broker was responsible for the sale, and that in any event, because broker had an exclusive right to sell, broker would have been entitled to the commission even if broker had not been the procuring cause of the transaction.

Legal Malpractice Claim Against Real Estate Lawyer Affirmed

Island Properties & Equities, LLC v. Cox

NYLJ 3/9/12, p. 26, col. 2

AppDiv, Second Dept.

(memorandum opinion)

In an action for legal malpractice, lawyer appealed from Supreme Court's awards, after a non-jury trial of $14,000 to one client and $50,000 to another client for negligence in conducting real estate transactions. The Appellate Division modified to reduce one the smaller award to $12,334.76, but otherwise affirmed.

In connection with the first of the two claims, the record established that the lawyer failed to correct a motion in a foreclosure action to confirm a referee's report and for distribution of surplus funds after the foreclosure sale. Supreme Court had initially rejected the lawyer's motion, and the lawyer's failure to correct the motion prevented the client from obtaining the surplus funds. Because the evidence established that the surplus funds amounted only to $12,334.76, the Appellate Division reduced Supreme Court's award to that extent.

The Appellate Division affirmed Supreme Court's award of $50,000 on the second claim, where the evidence established that the lawyer's negligent delay in recording the client-lender's mortgage allowed the borrower to refinance a first mortgage without satisfying the client's mortgage, ultimately rendering the client's mortgage worthless.