Opinion
042221/06.
Decided May 5, 2008.
Robert Melamed, Esq., Brooklyn, NY, Appearing for claimant.
Bruce Caputo, Esq., New York, NY, Appearing for defendant.
Plaintiff sues for a real estate brokerage commission in the amount of $21,600. A bench trial was held before me on March 25, 2008. Tomer Hatuka testified for plaintiff. Defendant called Gennadiy Balukher and Ted Chen.
I. FACTS
At the end of November 2005, Hatuka, a licensed real estate salesperson with plaintiff, a licensed real estate broker, noticed a vacant commercial property on the ground floor of 250 Lafayette Street. On December 2 he requested information about the property from the owner and was told by Lucia Chen, who identified herself as defendant's representative, that the monthly rent for the property was $8,900. Hatuka brought his client, Yuri Sokolov, a principal of Dax USA Furniture, Inc. (Dax USA), to look at the space.
By facsimile transmission of the same day, Hatuka presented defendant with an offer, "authorized by our clients Dax use [sic] furniture, inc' affiliated with Wieder, Ltd.," seeking to rent the 1,750-square-foot space as a furniture showroom on the following terms: a five-year lease at a monthly rent of $7,500, with three months of free rent, a three-month security deposit, a three percent annual increase, and "1 Full Commission [to] be paid upon Execution to Skyline Group, Inc." ( Id.).
On December 5, 2005, in response to Lucia's request for information about Dax USA and its financial circumstances, Hatuka transmitted to defendant "The Business Plan of Dax USA Furniture Inc." (Plan). (Pl. Exh. 2). Sokolov and Michael Sudit are listed as principals in the Plan. As of December 2005, Dax USA operated one store in Brooklyn and was the exclusive distributor of furniture produced by Israeli manufacturer Wieder Experts for Beds and Mattresses Ltd. (Wieder). The Plan reflects Dax USA's significant liabilities and minimal assets. ( Id.).
Although Hatuka testified without dispute that one or two weeks later, when he spoke to Ms. Chen, the terms he had transmitted "seemed acceptable" to her, her son and associate Ted Chen testified that he would never have rented the space to a new company for $7,500 a month or for five years, would not have given three months' free rent, and that he needed no brokerage services to rent the space. Soon thereafter, Sokolov changed his mind. A few months later, Hatuka discovered that the space was leased to Wieder. Hatuka called Sokolov who told him he was the tenant.
From January 2005 to June 2005, Gennadiy Balukher, a resident of Staten Island, was in the construction business. Due to some surgery he underwent, he decided to enter the retail furniture business and in November 2005, he began looking to rent space. Having seen that the ground floor commercial space at 250 Lafayette Street was vacant, Balukher called defendant and learned from Ms. Chen that the monthly rent was $15,000. As the space was too large for him, Balukher looked at other spaces but returned there in January 2006 when Ms. Chen agreed to rent him 800 square feet at $6,500 per month.
On January 25, 2006, Balukher filed a certificate of incorporation for Dax NY Furniture, Inc. (Dax NY) which he wholly owns (Def. Exhs. A, D), and opened a bank account near his accountant's office in Brooklyn, depositing into it the $130,000 proceeds from the sale of his Florida home. One of his suppliers was Dax USA, located on MacDonald Avenue in Brooklyn, not far from his bank.
Ted Chen testified that given his inability to rent the space at the end of 2005, defendant agreed to divide it and lease 40 percent of it to Dax NY. He never inquired into the relationship between Dax USA and Dax NY but learned that Dax USA supplied furniture to Dax NY.
By lease dated January 26, 2006, defendant rented 800 square feet of the space to Dax NY at a monthly rent of $6,500 for the first year and $6,825 for the second year. (Pl. Exh. 3). The security deposit was three months' rent. Paragraph 3(b) of the lease provides that the tenant is responsible for brokerage fees. Balukher signed and guaranteed the lease. Although Solokov's and Sudit's names appear on it as guarantors, they never signed it. Balukher first testified that he did not ask them to guaranty it and then testified that they had refused to guaranty it. He also denied that they had ever paid his debts or guaranteed anything for him, that any of his proceeds were paid to Dax USA or to defendant, or that he ever worked for Dax USA. Balukher and Chen each disclaimed responsibility for the appearance of Sokolov's and Sudit's names on the lease, although Chen testified that he usually seeks suppliers as guarantors. Chen denied having entered into any agreement with Balukher with regard to this case. Balukher stopped doing business in March 2007 and has been unemployed for the last two months.
II. PLEADINGS
In its complaint, plaintiff alleges that it "successfully located and brought to defendant a tenant who was ready, willing and able to rent the premises at a price and upon terms which defendant offered and which acceptance was made known to defendant," and that, thereafter, defendant entered into a lease with the party it had produced. It thus maintains that it is entitled to a commission in the amount of $21,600, or a judgment for quantum meruit.
In its answer, defendant denies having entered into any agreement with plaintiff for the payment of brokerage fees, receiving any services from plaintiff, and meeting with plaintiff. It also observes that as the lease provides that the tenant pay the brokerage fee, it may not be held liable for it.
III. ANALYSIS
Entitlement to a real estate brokerage commission for the lease of real property requires proof, in pertinent part, that the broker had a contract, express or implied, with the party to be charged, and was the procuring cause of the sale. ( Friedland Realty Inc. v Piazza, 273 AD2d 351 [2d Dept 2000]). Plaintiff maintains that by virtue of defendant's acceptance of the December 2 offer on behalf of Dax USA and the lease with Dax NY, an entity legally indistinguishable from Dax USA, defendant is liable to it for the commission referenced in the December 2 offer.
I first consider whether plaintiff proved that it had a contract, express or implied, with defendant. "To create a binding contract, there must be a manifestation of mutual assent sufficiently definite to assure that the parties are truly in agreement with respect to all material terms." (22 NY Jur 2d, Contracts § 29 [2008]). "Unless a person has conducted himself or herself in such a manner that his or her assent may fairly be inferred, he or she has not contracted." ( Id.).
The only evidence of an express agreement between plaintiff and defendant is Hatuka's testimony that one or two weeks after he submitted the offer, Lucia Chen told him that the terms "seemed acceptable." That the terms may have seemed acceptable to Ms. Chen on some unspecified occasion, absent any further manifestation of acceptance, such as a proposed lease or further significant contact between the parties, constitutes an insufficient basis for concluding that defendant entered into a contract with plaintiff. Moreover, Ted Chen's testimony that he would have rejected the offer is bolstered by the far more favorable terms initially communicated to plaintiff by Lucia Chen and subsequently agreed upon pursuant to the lease, and Dax USA's shaky finances would have put off any reasonable vendor. I thus find that plaintiff failed to establish, by a preponderance of the credible evidence, that there was an express agreement between the parties.
Absent an express agreement, employment as a broker may be inferred where the property owner accepts the "voluntary" services of a broker which are rendered with an expectation of payment, and the owner is aware of such an expectation. (11 NY Jur 2d, § 113). However, "if a broker, without a previous request, brings a customer to a vendor, and the latter, without further acceptance of the broker's services, takes the customer, the broker is not entitled to compensation." ( Id.; Julien J. Studley, Inc. v New York News Inc., 122 AD3d 633, 635 [1st Dept 1986], affd 70 NY2d 628). "A mere volunteer without authority is not entitled to a commission merely because he or she has inquired about the price that an owner asks for the property, and then sends a person to the [owner] who consents to take [the property]." ( Id.).
In Studley, the plaintiff-broker submitted a written offer to the defendant-vendor on behalf of a prospective purchaser containing a provision that it was subject to a commission and advised the purchaser during the ensuing negotiations. It thus argued that its employment with the defendants was implied in fact as it had rendered them services with the expectation that they would pay its commission. As the plaintiff consistently alleged that it had submitted the offer on the purchaser's behalf, the court found that the evidence reflected the plaintiff's understanding that it was acting as the purchaser's agent and that therefore, "vis-a-vis defendants, plaintiff was . . . a mere volunteer'" ( 122 AD2d at 635), and thus held that the plaintiff's expectation of payment of its commission by the defendants was unwarranted.
Here, even if defendant had accepted the December 2 offer, Hatuka represented himself in it as Dax USA's agent, and although the offer provides for a commission, it does not specify who is responsible for paying it. These circumstances demonstrate that plaintiff was merely a volunteer with no reasonable expectation of receiving a commission from defendant, and that defendant reasonably expected that plaintiff's client, Dax USA, would pay the commission. (11 NY Jur 2d, § 113[owner cannot be enticed into liability for commissions against his or her own will]; 11 NY Jur 2d, § 116 [if owner of property is justified in presuming that broker is representing prospective purchaser, no promise by owner to pay broker for its services is implied]; see Studley, 122 AD2d 633, 635). I thus find that plaintiff failed to prove, by a preponderance of the credible evidence, that there was an implied contract between the parties.
For all of these reasons, I find that there was no contract or agreement between the parties.
Even if there had been a contract between the parties, plaintiff was still obliged to prove that it was the procuring cause of the lease between defendant and Dax NY. (11 NY Jur 2d, § 117). "If a broker opens negotiations between the parties but then abandons them after failing to bring the prospective buyer to the seller's terms, the seller is not liable for a commission even if he or she then sells to the same prospective buyer." ( Id.). A broker is not the procuring cause of a sale where the broker's only effort as to the prospective purchaser consists of bringing the property to the attention of the purchaser and showing it to him or her, introducing him or her to the seller, or initiating negotiations with the purchaser. ( Id.).
Here, plaintiff showed the property to Sokolov and submitted an offer and financial information to defendant on his behalf. The offer, even if accepted, was abandoned by plaintiff when Sokolov declined to go forward with it. Thus, even assuming that Dax NY and Dax USA were the same entity, Sokolov's withdrawal of the offer marked an end of the negotiations, thus precluding a finding that plaintiff was the procuring cause of the lease between defendant and Dax NY. (11 NY Jur 2d, § 166 [2008] [if negotiations between parties brought together by broker are unproductive and parties in good faith withdraw and abandon proposed agreement, subsequent renewal of negotiations and completion of agreement does not entitle broker to commission as he or she was not procuring cause of agreement]; § 167 [if broker has been unsuccessful in or has abandoned efforts to negotiate agreement between customer and principal, he or she will not be entitled to commission if principal, acting in good faith and without fraudulent intent to deprive broker of compensation for his or her efforts, subsequently concludes transaction with same customer]).
If, however, the transaction fails to close due to the principal's last minute, bad faith attempt to eliminate a brokerage commission as a "mere device" to escape paying it, the broker will be entitled to the commission. ( Friedland Realty, 273 AD2d 351-352). Here, plaintiff endeavored to prove that defendant aided and abetted in a scheme designed to deprive it of a commission. While the facts strongly suggest that Sokolov withdrew the December 2 in order to continue the negotiations through Dax NY, an entity which appears to have been created solely to deprive plaintiff of a commission, in order to hold defendant liable for Solokov's and Balukher's conduct, plaintiff was obliged at least to establish that defendant was aware of it. ( See Intl. Strategies Group, Ltd. v ABN Amro Bank N.V., 49 AD3d 474 [1st Dept 2008] [court correctly applied actual knowledge standard in deciding on sufficiency of allegations of cause of action for aiding and abetting fraud]; Lieberman v Worden, NYLJ, Aug. 6, 1998, at 22, col 6 [Sup Ct, New York County] [to state claim for aiding and abetting, plaintiff must allege existence of wrongful conduct by primary wrongdoer, knowledge of wrongful conduct by alleged aider and abettor, and substantial assistance of alleged aider and abettor in wrongdoing]; cf Friedland Realty, 273 AD2d 351 [lessor directly attempted to eliminate broker's commission as mere device to escape paying commission]).
Although plaintiff sufficiently demonstrated that defendant was aware that two entities named Dax were interested in the space and that the names of Dax USA's principals appear in the Dax NY lease, an identity of principals, in and of itself, does not prove that the two entities are legally indistinguishable ( Joseph Kali Corp. v A. Goldner, Inc., 49 AD3d 397 [1st Dept 2008] [those seeking to pierce corporate veil bear heavy burden of showing that corporation dominated as to transaction attacked and that such domination was instrument of fraud or otherwise resulted in wrongful or inequitable consequences]), and there was no evidence that Chen knew or had reason to know any of the other facts that make it likely that Dax NY was created solely to deprive plaintiff of a commission. That defendant may have derived some indirect benefit from the scheme does not bridge the evidentiary gap. (See 60A NY Jur 2d, Fraud and Deceit § 249 [2008] [although fraud may be established by circumstantial evidence, circumstances must be clear and convincing and lead logically and irresistibly to a finding of fraud; facts and circumstances shown must be such that fraud may be legitimately inferred]; § 241 [fraud will not be inferred unless evidence is unequivocal and conclusion is inescapable]). The circumstances presented here markedly differ from those set forth in Century 21 Lewis n Clark v Wang, 2003 WL 21436351, 2003 NY Slip Op 50899(U) (App Term 1st Dept) where, inter alia, the seller was liable for the commission under the lease.
In sum, plaintiff's evidence of defendant's role in the alleged scheme depends on inferences which do not establish with sufficient certainty that defendant was aware of and shared Solokov's intent to continue the aborted negotiations through Dax NY. Thus, the evidence is legally and factually insufficient to establish that defendant had reason to believe that Dax NY was created solely to relieve it of any obligation to pay plaintiff a commission.
For all of these reasons, judgment is granted defendant and the complaint is dismissed. The clerk is directed to enter judgment accordingly. This constitutes the decision and order of the court.