Real Property Law

AppDiv, Second Dept.

(3-1 decision; memorandum opinion; dissenting memorandum by Hinds-Radix, J.)

In an action to recover a brokerage commission, broker appealed from Supreme Court's grant of seller's summary judgment motion and denying broker's summary judgment motion. The Appellate Division modified to deny seller's summary judgment motion, concluding that broker had raised questions of fact about whether it generated a chain of circumstances that led to the sale.

Seller listed the subject property with Mary Nuccio Realty, on a multiple listing basis, at a price of $799,000. In April 2001, Talk of the Town's broker showed the property to one of the ultimate purchasers. After discussion with the other purchaser, the purchasers asked Talk of the Town's broker to submit an offer of $699,000. One of the purchasers testified that Talk of the Town's broker indicated that the price was too low and that he would not submit the offer; sellers also contend that the offer was never communicated to them. The broker, however, asserts that he did communicate the offer, and that it was rejected. About a month later, in June, purchasers approached another broker, who conveyed an offer of $715,000, and, on June 9, purchaser ultimately agreed to purchase the property for $730,000. Talk of the Town brought this action for a commission, and Supreme Court granted summary judgment to sellers.

In modifying, the Appellate Division noted that the issue was whether Talk of the Town generated a chain of circumstances that proximately led to the sale. Here, the majority noted both that there was dispute about whether Talk of the Town communicated the initial offer to seller, about whether the offer was a credible offer in light of the ultimate sale price, and about whether the buyers rebuffed the Talk of the Town broker's subsequent attempts to continue negotiations. As a result, the majority concluded that summary judgment was unwarranted.

Justice Hinds-Radix, dissenting, concluded that the Talk of the Town broker case did nothing more than call purchasers' attention to the property, and obtain an offer less than the asking price or the ultimate sale price. That, the dissent concluded indicated at best an indirect and remote link to the sale, warranting summary judgment for seller.

COMMENT

Although a real estate broker is not entitled to a commission merely for introducing the property to the ultimate purchaser, a broker who does not participate in negotiations may nevertheless be entitled to commissions if he shows that he created an amicable atmosphere for negotiations that ultimately resulted in a sale. In Hagedorn v. Elwyn 229 A.D.2d 654, the Third Department upheld the award of a commission to a broker who did not participate in hammering out the details of the sale because the brokers frequently communicated with the seller, continued to answer questions about the property, and even referred the buyer to an attorney who would help secure financing. The defendant sellers had created an open listing agreement for their property, offering a 5% commission to whoever procured the sale. Two brokers found a potential buyer who did not strike a deal with the seller until six months later, pursuant to a contract reciting that no person had acted as a broker and that no commissions were due. The court emphasized the broker's persistence in pursuing the seller, and his provision of information that led to consummation of the sale. By contrast, in Getreu v. Lebowitz, 162 A.D.2d 585, the court awarded summary judgment dismissing the complaint of a broker who had done nothing more than call the property to the attention of the buyer. The Second Department emphasized that the broker had never arranged nor attempted to arrange for a meeting between buyer and the seller, didn't show the property to the buyer, and did no negotiating on the buyer's behalf.

When a broker has introduced the space to the prospective buyer and participated in negotiations, but a different broker has facilitated the final agreement between the parties, some but not all courts have held that the seller is entitled to summary judgment dismissing the claim of the initiating broker. Thus, in Dagar Group v. Hannaford Bros. Co., 295 A.D.2d 554 the Second Department denied summary judgment to a tenant seeking to assign its lease when the plaintiff broker introduced the prospective new tenant to the retail space, gave him a tour, and provided proprietary lease information, but the new tenant negotiated its lease through landlord's exclusive brokers. Conversely, in Mollyann, Inc. v. Demetriades, 206 A.D.2d 415, the Second Department granted summary judgment to sellers on a claim by plaintiff broker who had contacts with the sellers with respect to the property, showed the prospective buyers the property, and submitted a bid to the sellers. The court emphasized that the parties had consummated a different deal through a different broker, and concluded that the plaintiff broker “was not the direct and proximate link” between the parties and the ultimate sale.

Mortgagee Priority

Emigrant Mortgage Co. v. Biggio

NYLJ 10/4/13, p. 29, col. 4

AppDiv, Second Dept.

(memorandum opinion)

In a mortgage foreclosure action, third mortgagee appealed from Supreme Court's order releasing surplus funds to husband mortgagor. The Appellate Division affirmed, holding that third mortgagee knew or should have known that mortgagor wife was under a restraining order preventing her from encumbering her interest in the property.

Husband and wife jointly owned the marital home. During divorce proceedings, the matrimonial court issued a restraining order preventing either party from transferring marital property except in the ordinary course of business or for day-to-day living expenses. The wife nevertheless encumbered the home with a third mortgage.

Third mortgagee's lawyer knew of the restraining order at the time the mortgage was executed. During the pendency of the divorce proceedings, first mortgagee brought this foreclosure proceeding, and the home was sold, yielding $490,000 in surplus funds. Second mortgagee, third mortgagee and the husband all asserted claims to the funds. Meanwhile, in the matrimonial action, a referee determined that the wife had used proceeds from the third mortgage loan for her individual benefit, and ordered that any surplus funds remaining after satisfying the second mortgage should belong to the husband. Husband then moved in the foreclosure action to have the county treasurer release surplus funds to him in the sum of 282,644.47. Third mortgagee objected, but the foreclosure court granted husband's motion. Third mortgagee appealed.

In affirming, the Appellate Division indicated that third mortgagee had a prima facie entitlement to a share of the surplus funds, but held that the matrimonial court had authority to determine that the husband was entitled to the surplus funds as part of the equitable distribution of the marital property. Because the wife executed the mortgage in violation of the restraining order, and third mortgagee's lawyer knew of should have known of the order, third mortgagee's interest was limited to the interest the wife had ' and interest the matrimonial court had divested. As a result, the husband was entitled to the surplus funds.

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Broker Commission

Talk of the Town Realty v. Genever

NYLJ 9/27/13, p. 26, col. 2

AppDiv, Second Dept.

(3-1 decision; memorandum opinion; dissenting memorandum by Hinds-Radix, J.)

In an action to recover a brokerage commission, broker appealed from Supreme Court's grant of seller's summary judgment motion and denying broker's summary judgment motion. The Appellate Division modified to deny seller's summary judgment motion, concluding that broker had raised questions of fact about whether it generated a chain of circumstances that led to the sale.

Seller listed the subject property with Mary Nuccio Realty, on a multiple listing basis, at a price of $799,000. In April 2001, Talk of the Town's broker showed the property to one of the ultimate purchasers. After discussion with the other purchaser, the purchasers asked Talk of the Town's broker to submit an offer of $699,000. One of the purchasers testified that Talk of the Town's broker indicated that the price was too low and that he would not submit the offer; sellers also contend that the offer was never communicated to them. The broker, however, asserts that he did communicate the offer, and that it was rejected. About a month later, in June, purchasers approached another broker, who conveyed an offer of $715,000, and, on June 9, purchaser ultimately agreed to purchase the property for $730,000. Talk of the Town brought this action for a commission, and Supreme Court granted summary judgment to sellers.

In modifying, the Appellate Division noted that the issue was whether Talk of the Town generated a chain of circumstances that proximately led to the sale. Here, the majority noted both that there was dispute about whether Talk of the Town communicated the initial offer to seller, about whether the offer was a credible offer in light of the ultimate sale price, and about whether the buyers rebuffed the Talk of the Town broker's subsequent attempts to continue negotiations. As a result, the majority concluded that summary judgment was unwarranted.

Justice Hinds-Radix, dissenting, concluded that the Talk of the Town broker case did nothing more than call purchasers' attention to the property, and obtain an offer less than the asking price or the ultimate sale price. That, the dissent concluded indicated at best an indirect and remote link to the sale, warranting summary judgment for seller.

COMMENT

Although a real estate broker is not entitled to a commission merely for introducing the property to the ultimate purchaser, a broker who does not participate in negotiations may nevertheless be entitled to commissions if he shows that he created an amicable atmosphere for negotiations that ultimately resulted in a sale. In Hagedorn v. Elwyn 229 A.D.2d 654, the Third Department upheld the award of a commission to a broker who did not participate in hammering out the details of the sale because the brokers frequently communicated with the seller, continued to answer questions about the property, and even referred the buyer to an attorney who would help secure financing. The defendant sellers had created an open listing agreement for their property, offering a 5% commission to whoever procured the sale. Two brokers found a potential buyer who did not strike a deal with the seller until six months later, pursuant to a contract reciting that no person had acted as a broker and that no commissions were due. The court emphasized the broker's persistence in pursuing the seller, and his provision of information that led to consummation of the sale. By contrast, in Getreu v. Lebowitz, 162 A.D.2d 585, the court awarded summary judgment dismissing the complaint of a broker who had done nothing more than call the property to the attention of the buyer. The Second Department emphasized that the broker had never arranged nor attempted to arrange for a meeting between buyer and the seller, didn't show the property to the buyer, and did no negotiating on the buyer's behalf.

When a broker has introduced the space to the prospective buyer and participated in negotiations, but a different broker has facilitated the final agreement between the parties, some but not all courts have held that the seller is entitled to summary judgment dismissing the claim of the initiating broker. Thus, in Dagar Group v. Hannaford Bros. Co., 295 A.D.2d 554 the Second Department denied summary judgment to a tenant seeking to assign its lease when the plaintiff broker introduced the prospective new tenant to the retail space, gave him a tour, and provided proprietary lease information, but the new tenant negotiated its lease through landlord's exclusive brokers. Conversely, in Mollyann, Inc. v. Demetriades, 206 A.D.2d 415, the Second Department granted summary judgment to sellers on a claim by plaintiff broker who had contacts with the sellers with respect to the property, showed the prospective buyers the property, and submitted a bid to the sellers. The court emphasized that the parties had consummated a different deal through a different broker, and concluded that the plaintiff broker “was not the direct and proximate link” between the parties and the ultimate sale.

Mortgagee Priority

Emigrant Mortgage Co. v. Biggio

NYLJ 10/4/13, p. 29, col. 4

AppDiv, Second Dept.

(memorandum opinion)

In a mortgage foreclosure action, third mortgagee appealed from Supreme Court's order releasing surplus funds to husband mortgagor. The Appellate Division affirmed, holding that third mortgagee knew or should have known that mortgagor wife was under a restraining order preventing her from encumbering her interest in the property.

Husband and wife jointly owned the marital home. During divorce proceedings, the matrimonial court issued a restraining order preventing either party from transferring marital property except in the ordinary course of business or for day-to-day living expenses. The wife nevertheless encumbered the home with a third mortgage.

Third mortgagee's lawyer knew of the restraining order at the time the mortgage was executed. During the pendency of the divorce proceedings, first mortgagee brought this foreclosure proceeding, and the home was sold, yielding $490,000 in surplus funds. Second mortgagee, third mortgagee and the husband all asserted claims to the funds. Meanwhile, in the matrimonial action, a referee determined that the wife had used proceeds from the third mortgage loan for her individual benefit, and ordered that any surplus funds remaining after satisfying the second mortgage should belong to the husband. Husband then moved in the foreclosure action to have the county treasurer release surplus funds to him in the sum of 282,644.47. Third mortgagee objected, but the foreclosure court granted husband's motion. Third mortgagee appealed.

In affirming, the Appellate Division indicated that third mortgagee had a prima facie entitlement to a share of the surplus funds, but held that the matrimonial court had authority to determine that the husband was entitled to the surplus funds as part of the equitable distribution of the marital property. Because the wife executed the mortgage in violation of the restraining order, and third mortgagee's lawyer knew of should have known of the order, third mortgagee's interest was limited to the interest the wife had ' and interest the matrimonial court had divested. As a result, the husband was entitled to the surplus funds.

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