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106 N. Broadway, LLC v. Lawrence

Supreme Court, Westchester County
Mar 15, 2018
58 Misc. 3d 1231 (N.Y. Sup. Ct. 2018)

Opinion

57543/2017

03-15-2018

106 N. BROADWAY, LLC, Plaintiff, v. Houlihan LAWRENCE, Patricia Flood, Individually and as Agent of Houlihan Lawrence, and Hilary Chenel Levy, Individually and as Agent of Houlihan Lawrence, Defendants.

For Plaintiff: Law Office of Garvey Cushner & Associates, PLLC, 50 Main Street, Suite 390, White Plains, NY 10606, 914–946–2200, by Lawrence A. Garvey, Esq., Brittany C. Patane, Esq. For Defendant Hilary Levy: Clifford L. Davis, Esq., 202 Mamaroneck Avenue, Third Floor, White Plains, NY 10601, 914–761–1003 For Defendants Houlihan Lawrence and Patricia Flood : Jones Morrison, LLP, 670 White Plains Rd., Penthouse, Scarsdale, NY 10583, 914–472–2300, by Stephen J. Jones, Esq.


For Plaintiff: Law Office of Garvey Cushner & Associates, PLLC, 50 Main Street, Suite 390, White Plains, NY 10606, 914–946–2200, by Lawrence A. Garvey, Esq., Brittany C. Patane, Esq.

For Defendant Hilary Levy: Clifford L. Davis, Esq., 202 Mamaroneck Avenue, Third Floor, White Plains, NY 10601, 914–761–1003

For Defendants Houlihan Lawrence and Patricia Flood : Jones Morrison, LLP, 670 White Plains Rd., Penthouse, Scarsdale, NY 10583, 914–472–2300, by Stephen J. Jones, Esq.

Terry J. Ruderman, J.

The following papers were considered on the motion by defendant Hilary Levy, sued here as Hilary Chenel Levy, to dismiss the amended complaint as against her pursuant to CPLR 3211(a)(1) and (a)(7) (motion sequence 3), and the motion by defendant Houlihan/Lawrence, Inc., sued here as Houlihan Lawrence, and defendant Patricia Flood, to dismiss the amended complaint as against them pursuant to CPLR 3211(a)(1) and (a)(7) (motion sequence 4).

Papers—Sequence 3 Numbered

Notice of Motion, Affirmation, Exhibits A–B, and Memorandum of Law 1

Affirmation in Opposition, Exhibit A, and Memorandum of Law 2

Reply Affirmation, Exhibits C–D, and Reply Memorandum of Law 3

—Sequence 4

Notice of Motion, Affirmation, Exhibits A–B, and Memorandum of Law 4

Affirmation in Opposition, Exhibit A, and Memorandum of Law 5

Reply Memorandum of Law 6

These motions require this Court to consider the nature and extent of the fiduciary duty owed by a real estate brokerage firm and its agents when it agrees to act as a seller's listing agent. Plaintiff is the owner of a parcel of commercial real estate located at 88—106 North Broadway in Irvington, New York. On January 17, 2014, plaintiff entered into an Exclusive Right to Sell/Rent Agreement with defendant Houlihan Lawrence, for a six-month period. The agreement specified that "[a]ll Houlihan Lawrence agents with the exception of Thomas LaPerch, Elizabeth Hargraves and Steven Salmone are to be considered outside brokers." On August 27, 2014, plaintiff entered into a Land Purchase Agreement with Shelter Island Development, LLC, for the expressed purpose of developing a senior living community on the property. The Land Purchase Agreement expressly stated that Elizabeth Hargraves of Houlihan Lawrence was the broker who was acting on behalf of the seller.

The Land Purchase Agreement was subject to specified contingencies, such as zoning and development approvals. Some members of the local community opposed the contemplated senior living community, apparently due to concerns regarding an influx of senior citizens in the village. Plaintiff alleges that defendants Patricia Flood and Hilary Levy, who were at the time both licensed real estate agents with Houlihan Lawrence, took action to actively oppose and interfere with the Shelter Island Development deal. According to the complaint, the purchaser determined that it would be unable to obtain the required approval, and terminated the Land Purchase Agreement; the termination letter dated April 21, 2016, stating that the purchaser was unable to obtain the Development Approvals, is annexed to the complaint.

Hilary Levy states that she is incorrectly sued herein as Hilary Chenel Levy and incorrectly referred to in the complaint as "Chenel."

Plaintiff asserts causes of action for negligent violation of the standard of care required of real estate professionals to act in good faith in the best interests of the client; breach of fiduciary duty; breach of contract and the covenant of good faith and fair dealing; and tortious interference.

In their respective motions to dismiss, Flood and Levy, contend that there is no principal/agent relationship between either of them and plaintiff; that they have no duty toward plaintiff; that even assuming they "injected" themselves into the transaction as plaintiff contends, they did not thereby acquire a duty toward plaintiff; and that the contract and tortious interference claims cannot be maintained. Houlihan Lawrence does not deny that it had a duty toward plaintiff, but contends that nothing in the allegations can establish that it breached such duty as it had, in tort or under the contract.

Analysis

Negligence and Breach of Fiduciary Duty

"On a motion to dismiss the complaint pursuant to CPLR 3211 (a) (7) for failure to state a cause of action, the court must afford the pleading a liberal construction, accept all facts as alleged in the pleading to be true, accord the plaintiff the benefit of every possible inference, and determine only whether the facts as alleged fit within any cognizable legal theory" ( Breytman v. Olinville Realty, LLC , 54 AD3d 703, 703–704 [2d Dept 2008] ).

Plaintiff's first and second causes of action rely on the contention that defendants owed plaintiff a duty. The complaint's allegations, which must be accepted as true for these purposes, assert that although Levy was not listed as a Houlihan Lawrence agent on the sale of plaintiff's property, she was nevertheless involved in plaintiff's sale transaction in that she initially approached plaintiff to volunteer the information that the Village Board would not approve the development's zoning proposal, and suggested that plaintiff terminate the contingent contract and place the property back on the market, because she believed there were other potential purchasers interested in the property. Plaintiff alleges that Levy was acting in her own self-interest when she offered assistance and attempted to place the property on the market to show to her own prospective buyers, and to attract new buyers. The amended complaint further asserts that Levy used her position and influence with the Village Board to convince the Board to deny the zoning application. She also allegedly approached community members with false or misleading information concerning the planned development to spark public outcry and sway the board into denying the application.

As against Flood, the amended complaint further alleges that she and other Houlihan Lawrence agents obstructed the sale of the property to Shelter Development in response to complaints from the owner of an adjacent property ("Neighbor A"), who had used Houlihan Lawrence as his broker when he purchased his property. Neighbor A said he had been assured by Houlihan Lawrence that plaintiff's property was not suitable for the type of development intended by Shelter Development's proposal. When Neighbor A learned that the Village was considering Shelter Development's zoning proposal, he threatened Houlihan Lawrence with litigation for misrepresenting the allowable use of plaintiff's neighboring property, prompting Houlihan Lawrence agents to take steps to obstruct the sale.

Plaintiff's complaint further asserts that Flood had a personal interest in interfering with the sale to Shelter Development, both through the possibility that one of her own client-buyers could purchase the property, and in that the relationship between herself as an agent of Houlihan Lawrence and the neighboring property owners could be "salvaged." Plaintiff asserts that Flood therefore became very vocal in her opposition to the zoning proposal at public events and meetings, disseminated false information concerning the contingent sale, and tried to convince plaintiff to rescind the contract and place the property back on the market, threatening to "take further action" upon plaintiff's refusal.

"To establish a prima facie case of negligence, a plaintiff must establish the existence of a duty owed by a defendant to the plaintiff, a breach of that duty, and that such breach was a proximate cause of injury to the plaintiff" ( Alvino v. Lin , 300 AD2d 421, 421 [2d Dept 2002] ).

To the extent plaintiff relies on the duty arising out of the listing agreement, contractual duties may not be converted into the basis for a negligence claim by alleging a lack of due care in the performance of the contract (see Board of Mgrs. of 100 Congress Condominium v. SDS Congress, LLC , 152 AD3d 478 [2d Dept 2017] ; Encore Lake Grove Homeowners Assn., Inc. v. Cashin Assoc., P.C. , 111 AD3d 881, 883 [2d Dept 2013] ).

The only other duty on which plaintiff may rely is a real estate broker's fiduciary duty owed to a client. "[I]t is well settled that a real estate broker is a fiduciary with a duty of loyalty and an obligation to act in the best interests of the principal" ( Dubbs v. Stribling & Assocs. , 96 NY2d 337, 340 [2001] ). "Where a broker's interests or loyalties are divided due to a personal stake in the transaction or representation of multiple parties, the broker must disclose to the principal the nature and extent of the broker's interest in the transaction or the material facts illuminating the broker's divided loyalties" (id. ).

However, when a real estate brokerage firm is made up of many individual agents, the duty owed by the agent who represents the client does not apply to those other agents of the brokerage firm who had no involvement in the brokerage's dealings with the client (see Rivkin v. Century 21 Teran Realty LLC , 10 NY3d 344, 356 [2008] ). In Rivkin , competing buyers for the same property were each represented by different agents of the same brokerage firm, and the unsuccessful buyer sued the brokerage firm and each of the participating brokers for breach of fiduciary duty. The Court of Appeals held that the grant of summary judgment to the defendants was proper, because there is "a distinction between the fiduciary duty owed by the buyer's individual agent and that owed by the agent's firm," and the plaintiff's individual agent had not breached his duty toward the plaintiff ( Rivkin v. Century 21 Teran Realty LLC , 10 NY3d 344, 356 [2008] ).

More specifically, the Court reasoned that:

"practical considerations cause us to draw a distinction between the fiduciary duty owed by the buyer's individual agent and that owed by the agent's firm. An individual buyer's agent acting on behalf of multiple clients bidding on the same property cannot negotiate an optimal purchase price for all of them. The buyers' interests conflict; the agent's representation is inevitably compromised. But two buyer's agents simply affiliated with the same real estate brokerage firm and acting on behalf of different buyers bidding on the same property generally do not present comparable risks. There is no incentive for these agents to represent their clients less than zealously , consistent with their fiduciary duties under Real Property Law § 443 (4) (a) and common law: they only earn commissions for sales to their own clients. As a result, in this situation the agents have every reason to negotiate in their clients' best interest" (id. at 356).

The Court went on to explain that

"real estate licensees are commonly affiliated with megabrokerage firms featuring multiple licensees and offices. Indeed, NYSAR avows that numerous brokerage firms in New York have more than 100 or 200—and, in three cases, more than 1,000—affiliated licensees. Would-be buyers are very well aware that they are competing with other potential buyers, including those represented by other agents affiliated with the firm that they have retained. As we noted in Sonnenschein [v. Douglas Elliman–Gibbons & Ives , 96 NY2d 369 (2001) ] when discussing seller's agents, ‘[u]nless a broker and principal specifically agree otherwise , a broker cannot be expected to decline a prospective purchaser's request to see another property listed for sale with that broker’ ( 96 NY2d at 376 [emphasis added] ). As a corollary, unless a real estate brokerage firm and principal specifically agree otherwise, the firm is not obligated to insure that its affiliated licensees forgo making offers on behalf of other buyers for property on which the principal has already bid" ( Rivkin v. Century 21 Teran Realty , 10 NY3d at 356–357 ).

Plaintiff characterizes Rivkin as limited to situations where two buyers' agents are affiliated with the same brokerage firm but acting on behalf of different buyers with opposing interests. However, the concerns and policies underlying Rivkin are not that narrow; as the Court of Appeals said in Douglas Elliman LLC v. Tretter (20 NY3d 875 [2012] ), regarding a litigant's proposed interpretation of the ruling in Sonnenschein , "a narrow interpretation runs counter to the thrust of the decision, which sought to formulate a rule consistent with the nature and fundamental requirements of the real estate marketplace in New York" ( Douglas Elliman v. Tretter , 20 NY3d at 879, quoting Sonnenschein , 96 NY2d at 376, and citing Rivkin, 10 NY3d at 356–357 ). Indeed, the concerns and policies underlying Rivkin are broad enough to directly apply to the present circumstances. "Unless [the] real estate brokerage firm and [the] principal specifically agree otherwise" (Rivkin , supra ), where a seller engages a brokerage firm, the firm is not obligated to insure that its affiliated agents—other than those directly representing the client—forgo acting on behalf of other property owners or other purchasers, or, indeed, in their own perceived self-interest as individuals or brokers.

Since here, the agreement specifically stated that "[a]ll Houlihan Lawrence agents with the exception of Thomas LaPerch, Elizabeth Hargraves and Steven Salmone are to be considered outside brokers," plaintiff is not entitled to expect that any other Houlihan Lawrence brokers had a fiduciary duty toward it. Indeed, as "outside brokers," they had no greater obligation than any broker with a different brokerage firm would have toward plaintiff.

Plaintiff protests that it is not arguing that every individual agent of Houlihan Lawrence owed it a duty, but only that Flood and Levy owed it a duty based on "their involvement in the transaction." However, the behavior that plaintiff characterizes as involvement in the transaction, such as trying to convince plaintiff to cancel the contract and entertain other offers from their own clients, does not constitute involvement in the transaction so as to create a fiduciary duty that did not otherwise exist. Similarly, the allegations that Flood and Levy spoke or acted in opposition to the proposed sale and/or the zoning proposal neither created nor violated any fiduciary duty by those brokerage agents who were not explicitly representing the seller. Nor may any actions taken by Flood and Levy in their own perceived personal interest, when they did not owe any fiduciary duty to plaintiff, be attributed to Houlihan Lawrence for purposes of alleging a violation of its fiduciary duty.

Plaintiff also argues that the lack of a brokerage agreement between itself and Levy or Floor does not preclude a fiduciary relationship, because such a relationship may arise based on "statements, promises and conduct," relying on the miscited and inapposite AHA Sales, Inc. v. Creative Bath Products, Inc. (58 AD3d 6 [2d Dept 2008] ). It is true that "fiduciary liability is not dependent solely upon an agreement or contractual relation between the fiduciary and the beneficiary[,] but results from the relation" ( EBC I, Inc. v. Goldman Sachs & Co. , 5 NY3d 11, 20 [2005] [quoting Restatement (Second) of Torts § 874, Comment b [internal quotation marks omitted] ). However, plaintiff has not successfully supported the claim that such a relationship was created here between plaintiff and Levy or Flood, by allegations of specific statements, promises or conduct; indeed, it relies on the same conduct to create a fiduciary duty as it does to establish a breach of that claimed duty.

As to plaintiff's assertion that Houlihan Lawrence itself may be charged with a breach of its fiduciary duty, any such violation must be based on conduct of one of its agents who had a duty toward plaintiff. Since none of the allegations support a violation of any fiduciary duty toward plaintiff by any of Houlihan Lawrence's agents, the brokerage firm itself may not be liable for a breach of duty.

Even when the allegations of the complaint are accepted as true, the complaint fails to state a cause of action against Levy, Flood and Houlihan Lawrence for negligence or breach of fiduciary duty.

Breach of Contract

Defendants correctly observe that the complaint fails to identify a particular provision of the contract between plaintiff and Houlihan Lawrence that defendants allegedly breached, and that in any event neither Levy nor Flood was a party to that contract. To the extent plaintiff is pleading a violation of the covenant of good faith and fair dealing against Houlihan Lawrence alone, the brokerage firm is bound by that covenant as a party to the listing agreement, requiring that it refrain from doing anything that will have the effect of destroying or injuring the rights of the other party to the contract to receive its benefits ( Dalton v. Educational Testing Serv. , 87 NY2d 384, 389 [1995] ). Houlihan Lawrence fulfilled the listing agreement by procuring a purchaser, albeit a conditional one; to the extent plaintiff contends that affiliated agents of the brokerage other than those directly representing plaintiff placed the interests of plaintiff's neighbors ahead of plaintiff's interest, the brokerage firm cannot be found to have breached its contractual obligations.

Tortious Interference

"Tortious interference with contract requires the existence of a valid contract between the plaintiff and a third party, defendant's knowledge of that contract, defendant's intentional procurement of the third-party's breach of the contract without justification, actual breach of the contract, and damages resulting therefrom" ( Lama Holding Co. v. Smith Barney Inc. , 88 NY2d 413, 424 [1996] ). Neither Levy nor Flood had a relationship with the proposed purchaser, Shelter Development, and the allegations that they took steps to discourage or prevent the approval of the zoning application are not the equivalent of steps to procure Shelter Development's breach of the contract; indeed, it is not alleged that Shelter Development breached the contract, but rather, that it terminated the contract pursuant to the contract's terms.

A claim for tortious interference with prospective business relations does not require a breach of an existing contract, but the party asserting the claim must meet a "more culpable conduct" standard ( NBT Bancorp. v. Fleet/Norstar Fin. Group , 87 NY2d 614, 621 [1996] ). This standard is met where the interference with prospective business relations was accomplished by wrongful means or where the offending party acted for the sole purpose of harming the other party (see Carvel Corp. v. Noonan , 3 NY3d 182, 190 [2004] ). " ‘Wrongful means’ include physical violence, fraud or misrepresentation, civil suits and criminal prosecutions, and some degrees of economic pressure" ( Guard–Life Corp. v. Parker Hardware Mfg. Corp. , 50 NY2d 183, 191 [1980] [citation omitted]; and see Law Offs. of Ira H. Leibowitz v. Landmark Ventures, Inc. , 131 AD3d 583, 585–586 [2d Dept 2015] ).

Plaintiff relies on the purchaser-seller relationship between itself and Shelter Development, and defendants' actions in speaking out against the zoning proposal to constitute the necessary interference. However, even assuming that the other elements of the tort were satisfied, plaintiff's allegations, even read liberally, do not establish that any interference was accomplished by wrongful means or with the sole purpose of harming plaintiff. The allegation that Houlihan Lawrence and its agents refused to re-list plaintiff's property after the Shelter Development was terminated fails to satisfy that element of the tort.

Levy's submission consisting of the minutes of the Town Board's April 18, 2016 meeting, for the purpose of establishing that the purchaser's termination of the contract was not due to defendants' alleged efforts to cause the rejection of the zoning proposal, because in fact the Board did not vote to reject the proposal, was improperly submitted with Levy's reply papers, and as such may not be relied on as grounds for dismissal. Moreover, that document is not of the sort that conclusively establishes the claimed fact as a matter of law, and therefore would not be a proper basis for a motion pursuant to CPLR 3211(a)(1) (see Graphic Arts Mut. Ins. Co. v. Pine Bush Cent. Sch. Dist. , ––– AD3d ––––, 2018 NY Slip Op 01565 [2d Dept 2018] ).

Accordingly, it is hereby

ORDERED that the motions to dismiss are granted.

This Constitutes the Decision and Order of the Court.


Summaries of

106 N. Broadway, LLC v. Lawrence

Supreme Court, Westchester County
Mar 15, 2018
58 Misc. 3d 1231 (N.Y. Sup. Ct. 2018)
Case details for

106 N. Broadway, LLC v. Lawrence

Case Details

Full title:106 N. Broadway, LLC, Plaintiff, v. Houlihan Lawrence, PATRICIA FLOOD…

Court:Supreme Court, Westchester County

Date published: Mar 15, 2018

Citations

58 Misc. 3d 1231 (N.Y. Sup. Ct. 2018)
2018 N.Y. Slip Op. 50329
98 N.Y.S.3d 501