Bishop Estates, Inc. v. Murphy

• Decision Date: 16 January 1964
• Citation: 246 N.Y.S.2d 73,41 Misc.2d 719
• Parties: BISHOP ESTATES, INC., Plaintiff, v. Edward P. MURPHY and 'Jane' Murphy, Defendants.
• Court: New York District Court

Page 73

246 N.Y.S.2d 73

41 Misc.2d 719

BISHOP ESTATES, INC., Plaintiff, v. Edward P. MURPHY and 'Jane' Murphy, Defendants.

District Court of Hicksville, Fourth District, Nassau County.

Jan. 16, 1964.

Melvin S. Popper, Syosset, for plaintiff.

James M. Fitzsimons, New York City, for defendants.

BERNARD TOMSON, Judge.

In this action the plaintiff alleges that he was engaged as a broker to sell certain premises and the defendants 'agreed to pay plaintiff a commission upon such sale.' The complaint further alleges that the plaintiff procured a buyer, ready, willing and able to purchase the premises 'upon the terms and conditions set forth by defendants,' that the defendants refused to sell the premises and 'refused to pay plaintiff its lawful commission,' all to the plaintiff's damage in the sum of $1,000. The answer alleges:

(1) A general denial;

(2) Failure to procure a buyer ready, willing and able;

(3) Failure to procure a buyer who 'reached a meeting of the minds concerning the purchase of the defendants' premises upon the terms and conditions set forth by the defendants.'

Neither the pleading nor the proof render applicable Express Realty Co. v. Zinn, 39 Misc.2d 733, 241 N.Y.S.2d 954. In that case, the complaint alleged in substance that the plaintiffs sought to recover on a 'net listing.' Not only is there no such pleading here, but also reference to plaintiffs' Exhibit 3 in evidence would demonstrate clearly that the gross selling price proposed was $21,000.00, the seller to receive $20,000.00 and the broker's commission, therefore, was to be $1,000.00. This does not fall within the category of a 'net listing' prohibited by Chap. V, Sub. Ch. D, Part 175, Sec. 175.19 of the official compilation of Codes, Rules and Regulations promulgated by the Secretary of State (19 NYCRR 175.19) pursuant to Sec. 91, formerly Sec. 20-a of the Executive Law. Section 91 reads as follows:

' § 91. Rules

'Subject to and in conformity with the provisions of the constitution and laws of the state, the secretary of state may adopt and promulgate such rules which shall regulate and control the exercise of the powers of the department of state and the performance of the duties of officers, agents and other employees thereof.'

It is questionable whether Section 91, which gives the Secretary of State power to adopt and promulgate rules to 'regulate and control the exercise of the powers of the department of state * * *' authorizes the adoption of 'regulations affecting brokers and salesmen.' The specific grant of power to adopt such regulations is not found in the Real Property Law, Article 12-A, which inter alia empowers the Department of State to license real estate brokers, prohibits certain actions by them or their salesmen, and provides for hearings on complaints and for the procedure to be followed with respect to 'Violations' (Sec. 442-e). Section 91 of the Executive Law apparently permits the adoption of rules and regulations by the Secretary of State to regulate and control the exercise of such powers as are found (with respect to real estate brokers) in Article 12-A, Real Property Law. Section 441-c of the Real Property Law headed 'Revocation and Suspension of Licenses' limits the specific grounds for revocation or suspension to a 'material misstatement in the application for such license', 'fraud or fraudulent practices', 'Dishonest or misleading advertising,' or 'Untrustworthiness or incompetency.'

The 'Regulations Affecting Brokers and Salesmen,' (Pt. 175) in addition to prohibiting 'net listing' contracts, interdicts co-mingling of money, requires disclosure of the broker's interest and generally governs a broker's activities. It would appear that, although a violation of the regulations would constitute grounds for action in a revocation of suspension proceeding, it cannot be said that the failure to conform to the regulations would render void or 'illegal' a brokerage contract. It is difficult, in addition, to reach the conclusion that Section 175.19 ever was intended to prohibit the 'listing' in this case. From the inception of the relationship between plaintiff and defendants, there was always disclosure and understanding as to the gross selling price sought by the seller. The use of the word 'net,' in view of all the circumstances, may have been unfortunate, but clearly it was for the purpose of showing only that the broker was willing to accept a reduced commission.

Section 175.19 therefore did not render the brokerage agreement, if there was one, 'illegal.' However, even if it did constitute under proper pleading a valid defense, it is not available unless it was affirmatively pleaded.

CPLR § 3018(b) reads: 'Affirmative defenses. A party shall plead all matters which if not pleaded would be likely to take the adverse party by surprise or would raise issues of fact not appearing on the face of a prior pleading such as * * * facts showing illegality either by statute or common law.' The section is derived from N.Y. Civil Practice Act, § 242. See sixth report to the legislature by the Senate Finance Committee relative to the revision of the Civil Practice Act, Legislative Document (1962, No. 8) and see 3 Weinstein-Korn-Miller, N.Y.Civ.Prac. § 3018.13 et seq.)

Section 242, C.P.A. required that the defense of illegality be affirmatively pleaded to be available. See also Brearton v. DeWitt, 252 N.Y. 495, 500, 170 N.E. 119, 120, where the Court said:

'The presumption is that contracts are legal until it appears upon their face or by pleading that they are illegal. The illegality of a contract, unless it does appear upon the face of the complaint, is a defense to be pleaded. Civil Practice Act [par.], § 242; Milbank v. Jones, 127 N.Y. 370, 28 N.E. 31, 24 Am.St.Rep. 454; Connelly [Donnelly] v. Bauder, 217 App.Div. 59, 216 N.Y.S. 437.'

See also Dodge v. Richmond, 5 A.D.2d 593, 173 N.Y.S.2d 786; Seckendorff v. Halsey, Stuart & Co., Inc., 229 App.Div. 318, 241...