DAY REALTY CORP. v. Chera

• Decision Date: 10 July 2003
• Parties: JOSEPH P. DAY REALTY CORP., Appellant,<BR>v.<BR>CHARLES CHERA et al., Respondents.
• Court: New York Supreme Court — Appellate Division

308 A.D.2d 148

762 N.Y.S.2d 373

JOSEPH P. DAY REALTY CORP., Appellant,

v.CHARLES CHERA et al., Respondents.

GONZALEZ, J.

July 10, 2003.

Amos Weinberg, Great Neck, for appellant.

Lawrence G. Soicher, New York City, for respondents.

SAXE, J.P., SULLIVAN, ELLERIN and LERNER, JJ., concur.

OPINION OF THE COURT

GONZALEZ, J.

A real estate broker who acts as the procuring cause on a commercial lease, and whose labors and expectation of compensation are expressly acknowledged by the parties to the lease, may recover its commission from either the lessor or lessee under the theory of implied contract of employment. The precise issue we must decide is whether the lessor in this case was entitled to summary judgment dismissal of the broker's complaint on the ground that no implied contract existed as a matter of law. As we conclude that the lessor failed to meet its burden in this respect, we modify to reinstate the broker's complaint.

Plaintiff Joseph P. Day Realty Corp. (plaintiff), a licensed real estate broker, commenced the instant action against defendants Charles and Steven Chera, and S.C.C. 181st Street L.L.C. (defendants), to recover a brokerage commission in connection with a lease executed between defendants as lessor and nonparty Beth Israel Medical Center (BI) as lessee. Significantly, plaintiff does not allege in its complaint that it had an express agreement with defendants to perform brokerage services for them. Instead, plaintiff alleges that defendants "requested of plaintiff to communicate with [BI] towards consummation of the lease" and that they "consented to plaintiff's efforts to secure a lease agreement with [BI]." Plaintiff's complaint further alleged that it introduced BI and defendants; that it "participated in all the critical negotiations towards the * * * lease"; that it procured BI as a tenant for defendants; that defendants agreed on how plaintiff's commission would be calculated; and that plaintiff has demanded its commission and defendants have refused to pay.

Plaintiff moved for summary judgment, arguing that it was entitled to judgment as a matter of law as a third-party beneficiary of article 69 of the lease agreement between defendants and BI. Article 69, titled "BROKER," reads as follows:

"Tenant covenants, warrants and represents that Tenant did not engage or otherwise obtain the benefit of the services of any broker or finder instrumental in consummating this Lease except Joseph P. Day Realty Corp. (the `Broker') and that no conversations or negotiations were had by Tenant with any broker or finders except Joseph P. Day Realty Corp. concerning the renting of the Premises. Tenant agrees to hold Landlord harmless against any claims for a brokerage commission or consultation fees arising out of any conversations or negotiations had by Tenant with any broker or finders except Joseph P. Day Realty Corp. Landlord agrees to hold Tenant harmless against any claims for a brokerage commission or consultation fees arising out of any conversations or negotiations had by Landlord with any broker or finders with respect to this Lease and the renting of the Premises to Tenant, including Joseph P. Day Realty Corp."

The record shows that in a January 15, 1999 letter to defendants, plaintiff's vice-president stated that he had been "authorized to submit an offer to you on behalf of Beth Israel Medical Center" for a term of 10 years, with a five-year option, with rent beginning at $200,000 per year and escalating at 3% per annum. The letter also stated: "This offer is subject to Joseph P. Day Realty Corp. receiving one full commission consisting of six (6%) of the first year's rent, five (5%) percent of the second year's rent and three (3%) of each subsequent year[`s] rent." Plaintiff submitted an additional letter written to defendants' attorney, dated February 8, 1999, setting forth "the basic terms of the lease between Charles Chera and Beth Israel Medical Center"—a 15-year term, rent beginning at $200,000 per year with 2% escalations—terms which were ultimately adopted into the final lease. This February 8 letter also included plaintiff's statement that BI's offer was "subject to" plaintiff receiving its full commission.

Plaintiff's vice-president, Robert Oliver, also submitted an affidavit in which he averred that he arranged a conference call in September 1998 with defendants and their attorney and told them of BI's interest in leasing space in their building; that defendant Charles Chera discussed with Oliver the rent he was looking for and approved his proceeding with BI as a prospective tenant; that Oliver showed the premises to several BI representatives; that he showed Chera other buildings to measure their value against his building; that he participated in negotiations with the parties on a weekly basis, culminating in the February 8, 1999 offer letter; and that in June 1999, he attended a meeting between defendants, their attorney and the BI representatives in which all disputes over the lease terms were resolved.

Defendants opposed the motion and also cross-moved for summary judgment. Defendants argued that there was never any brokerage agreement obligating them to pay plaintiff's commission; that plaintiff was at all times representing BI, not them; that plaintiff was not the procuring cause of the lease; that the lease deviated materially from the offer conveyed in plaintiff's February 8, 1999 letter; and that plaintiff was not entitled to a commission since BI eventually defaulted on the lease. In addition, defendants argued that plaintiff's summary judgment motion should be denied on the ground that it had repeatedly failed to provide discovery or appear for depositions.

In an oral decision dictated into the record, the IAS court denied plaintiff's motion and granted defendants' cross motion for summary judgment dismissing the complaint. The court found that plaintiff had failed to adduce any evidence showing an oral or written agreement obligating defendants to pay plaintiff a brokerage commission. The court rejected plaintiff's argument that article 69 of the lease demonstrated such an obligation, finding instead that it merely constituted an indemnity agreement protecting both parties from claims of other brokers. Lastly, the court found no evidence that plaintiff negotiated the materials terms of the lease.

On appeal, plaintiff argues that summary judgment should not have been awarded to defendants since they acknowledged in the lease that plaintiff was acting as broker and they accepted the benefits of plaintiff's services in procuring a lessee for their premises. Based on these facts, plaintiff claims that it is entitled to a commission from defendants under a theory of implied contract, or as a third-party beneficiary of article 69 of the lease between defendants and BI. As we conclude that defendants have failed to demonstrate as a matter of law that no implied contract arose from their acceptance of the benefits of plaintiff's services, we modify to deny defendants' cross motion and reinstate the complaint.

In order for a broker to be entitled to a commission for services rendered, the broker must plead and prove a contract of employment, either express or implied, with the defendant (see Greene v Hellman, 51 NY2d 197, 205-206 [1980]; Sibbald v Bethlehem Iron Co., 83 NY 378, 380 [1881]). As the Court of Appeals stated in Sibbald (83 NY at 380): "[T]he contract of employment may be established either by proof of an express and original agreement that the services should be rendered, or by facts showing, in the absence of such express agreement, a conscious appropriation of the labors of the broker." Indeed, "the contract may be established in some cases `by the mere acceptance of the labors of a broker'" (id.).

The IAS court correctly concluded that plaintiff failed to provide any evidence of an express agreement by defendants obligating them to pay plaintiff's brokerage commission. Tellingly, plaintiff's own complaint is couched in terms indicating that defendants merely acquiesced in accepting plaintiff's services (defendants "consented to plaintiff's efforts to secure a lease agreement"), rather than demonstrating that they actually agreed to pay for such services. Moreover, plaintiff does not point to a single writing signed or authored by defendants evidencing its contention that defendants agreed to pay their commission.

We also agree with the IAS court's conclusion that plaintiff has failed to establish as a matter of law that it was an intended third-party beneficiary of article 69 of the lease executed by defendants and BI. Where a contract of sale or lease agreement admits the broker's performance of services and includes an express promise by the seller to pay the broker's commission, the broker is entitled to summary judgment on its claim for a commission as a third-party beneficiary of the contract or lease (see Helmsley-Spear, Inc. v New York Blood Ctr., 257 AD2d 64, 67 [1999]; Ambrose Mar-Elia Co. v Dinstein, 151 AD2d 416, 418 [1989], lv denied 74 NY2d 615 [1989]; William B. May Co. v Monaco Assoc., 80 AD2d 798, 799 [1981]; Ficor, Inc. v National Kinney Corp., 67 AD2d 659, 659-660 [1979]).

Although the language in article 69 of the instant lease is similar to that involved in the contracts or leases in the above-cited cases, there is one important distinction: here there is no express admission by the lessor (defendants) obligating them to pay the broker's commission (cf., Helmsley-Spear, Inc. v New York Blood Ctr., 257 AD2d at 66 ["Seller shall pay any brokerage commission in accordance with Seller's agreement with the Broker"]; Ambrose Mar-Elia Co. v Dinstein, 151 AD2d at 418 ["sellers agree to pay the commission in accordance with separate agreement" (emphasis omitted)]). Thus, since there is no admission by defendants obligating them to pay, and because the obvious purpose of the indemnity provisions in the lease is to benefit the parties to the...