Real Property Law

Court of Appeals

(5-2 decision; majority opinion by Graffeo, J; dissenting opinion by Lippman, C.J.)

In an action by plaintiff real estate consulting firm against its client and another consulting firm that subsequently used its work product for another client, plaintiff firm appealed from the Appellate Division's affirmance of Supreme Court's dismissal of the claim against the other consulting firm. The Court of Appeals affirmed, holding that mere knowledge that the plaintiff firm had produced the work product was insufficient to sustain an unjust enrichment claim.

Georgia Malone entered into a contract with its client, Center Rock, under the terms of which Malone agreed to produce due diligence materials relating to properties Center Rock might want to acquire. Center Rock agreed to keep the information confidential, and to pay Malone a commission of 1.25% of the purchase price for its services. After Malone produced the required information, and Center Rock agreed to purchase property for $70 million, Center Rock, through its principal, Ralph Rieder, asked Malone to find another buyer for the property. Malone did not find another buyer, and Center Rock cancelled the contract pursuant to a clause permitting it to terminate the contract within 25 days without penalty. Center Rock refused to pay Malone any commission. Subsequently, Rieder sold the due diligence material prepared by Malone to another real estate firm, Rosewood, for $150,000. Rosewood obtained a new buyer who paid $68.5 million for the property, and who paid Rosewood a commission of $500,000. Malone then brought this action against Center Rock, Rieder, and Rosewood, alleging unjust enrichment. Supreme Court dismissed the claims against Rieder and Rosewood, and the Appellate Division modified to reinstate the claim against Rieder. Malone appealed from the dismissal of the claim against Rosewood.

In affirming, the Court of Appeals majority held that Rosewood's awareness that Malone had produced the due diligence material was insufficient to support an unjust enrichment claim. The court could find no wrongdoing by Rosewood, because it appeared to engage in arms-length transactions with Rieder, paying Rieder $150,000 for due diligence materials without any awareness that Rieder and Center Rock had agreed to keep those materials confidential. The majority also emphasized that there was an insufficient connection between Malone and Rosewood to support an unjust enrichment claim. Chief Judge Lippman, dissenting for himself and Judge Pigott, saw no reason to require a relationship of mutual dealing to support an unjust enrichment claim, and noted that in prior cases, the court had expressly disclaimed any requirement of privity to support an unjust enrichment claim.

Condemnation Losses

Property Hackers, LLC v. Stewart Title Insurance Co.

NYLJ 6/15/12, p. 28, col. 2

AppDiv, Second Dept.

(memorandum opinion)

In an action by property owner for breach of a title insurance policy, owner appealed from Supreme Court's grant of summary judgment to title insurer. The Appellate Division affirmed, holding that losses resulting from condemnation of the property were expressly excluded from coverage.

The title insurance policy provided that protection of title against any right of eminent domain was excluded unless notice of the exercise of that right had been recorded in the public records by the date of the policy. The insurer demonstrated that in this case, the City of New York had not instituted eminent domain proceedings until after the issuance of the policy. As a result, the owner's claim fell within a property exclusion. Because a title insurer's liability to its insured is governed by the terms of the contract, the insurer was entitled to summary judgment.

Unjust Enrichment Claim

Georgia Malone & Co., Inc. v. Rieder

NYLJ 6/29/12, p. 22, col. 5

Court of Appeals

(5-2 decision; majority opinion by Graffeo, J; dissenting opinion by Lippman, C.J.)

In an action by plaintiff real estate consulting firm against its client and another consulting firm that subsequently used its work product for another client, plaintiff firm appealed from the Appellate Division's affirmance of Supreme Court's dismissal of the claim against the other consulting firm. The Court of Appeals affirmed, holding that mere knowledge that the plaintiff firm had produced the work product was insufficient to sustain an unjust enrichment claim.

Georgia Malone entered into a contract with its client, Center Rock, under the terms of which Malone agreed to produce due diligence materials relating to properties Center Rock might want to acquire. Center Rock agreed to keep the information confidential, and to pay Malone a commission of 1.25% of the purchase price for its services. After Malone produced the required information, and Center Rock agreed to purchase property for $70 million, Center Rock, through its principal, Ralph Rieder, asked Malone to find another buyer for the property. Malone did not find another buyer, and Center Rock cancelled the contract pursuant to a clause permitting it to terminate the contract within 25 days without penalty. Center Rock refused to pay Malone any commission. Subsequently, Rieder sold the due diligence material prepared by Malone to another real estate firm, Rosewood, for $150,000. Rosewood obtained a new buyer who paid $68.5 million for the property, and who paid Rosewood a commission of $500,000. Malone then brought this action against Center Rock, Rieder, and Rosewood, alleging unjust enrichment. Supreme Court dismissed the claims against Rieder and Rosewood, and the Appellate Division modified to reinstate the claim against Rieder. Malone appealed from the dismissal of the claim against Rosewood.

In affirming, the Court of Appeals majority held that Rosewood's awareness that Malone had produced the due diligence material was insufficient to support an unjust enrichment claim. The court could find no wrongdoing by Rosewood, because it appeared to engage in arms-length transactions with Rieder, paying Rieder $150,000 for due diligence materials without any awareness that Rieder and Center Rock had agreed to keep those materials confidential. The majority also emphasized that there was an insufficient connection between Malone and Rosewood to support an unjust enrichment claim. Chief Judge Lippman, dissenting for himself and Judge Pigott, saw no reason to require a relationship of mutual dealing to support an unjust enrichment claim, and noted that in prior cases, the court had expressly disclaimed any requirement of privity to support an unjust enrichment claim.

Condemnation Losses

Property Hackers, LLC v. Stewart Title Insurance Co.

NYLJ 6/15/12, p. 28, col. 2

AppDiv, Second Dept.

(memorandum opinion)

In an action by property owner for breach of a title insurance policy, owner appealed from Supreme Court's grant of summary judgment to title insurer. The Appellate Division affirmed, holding that losses resulting from condemnation of the property were expressly excluded from coverage.

The title insurance policy provided that protection of title against any right of eminent domain was excluded unless notice of the exercise of that right had been recorded in the public records by the date of the policy. The insurer demonstrated that in this case, the City of New York had not instituted eminent domain proceedings until after the issuance of the policy. As a result, the owner's claim fell within a property exclusion. Because a title insurer's liability to its insured is governed by the terms of the contract, the insurer was entitled to summary judgment.