John William Costello Associates, Inc. v. Standard Metals Corp.

• Court: New York Supreme Court
• Writing for the Court: GREENFIELD
• Citation: John William Costello Associates, Inc. v. Standard Metals Corp., 465 N.Y.S.2d 382, 121 Misc.2d 282 (N.Y. Sup. Ct. 1982)
• Decision Date: 02 December 1982
• Parties: JOHN WILLIAM COSTELLO ASSOCIATES, INC., Plaintiff, v. STANDARD METALS CORPORATION, Defendant.

Page 382

465 N.Y.S.2d 382

121 Misc.2d 282

JOHN WILLIAM COSTELLO ASSOCIATES, INC., Plaintiff, v. STANDARD METALS CORPORATION, Defendant.

Supreme Court, Special Term New York County, Part I.

Dec. 2, 1982.

Donald West, New York City, for plaintiff.

Windels, Marx, Davies & Ives by James P. Conroy and Yvette Harmon, New York City, of counsel, for defendant.

GREENFIELD, Justice:

Plaintiff moves to dismiss defendant's affirmative defenses and for summary judgment on its complaint. Defendant cross-moves for summary judgment.

Plaintiff, an executive search consultant, alleges that on November 17, 1979, it entered into a written contract with George E. Smith (Smith) whereby it agreed to use its best efforts to contact various companies in Smith's general line of work and to secure for him a favorable employment contract. The agreement required Smith to pay a $9,000 fee which would be returned to Smith when plaintiff was paid a 30% finder's fee from Smith's new employer.

On April 2, 1980, plaintiff contacted defendant advising it of the availability of a client for possible employment. Mr. Smith's general background and achievements were revealed but not his name. On June 2, 1980, an assistant to the president of defendant called plaintiff and indicated defendant's interest. It is averred that it was only after explanation that plaintiff expected a finder's fee equal to 30% of the first year's annual compensation paid and the acceptance of the fee arrangement was Smith's name revealed. On August 7, 1980, plaintiff wrote to the assistant to the president of defendant and reiterated its fee arrangement.

On November 19, 1980, defendant and Smith executed a written employment agreement which provided that Smith was to be employed starting January 1, 1981 and was to receive a first year's salary of $100,000 plus bonus dependent on the company's profits. On December 30, 1980, plaintiff sent defendant a statement asking for $30,000 for its partial placement fee on the $100,000 salary, and on February 11, 1981 plaintiff sent a second bill for this amount. When payment was not thereafter received, plaintiff called defendant to inquire about payment. On February 28, 1981, defendant's president wrote plaintiff denying that defendant had ever agreed to compensate plaintiff for Smith's placement.

Plaintiff then commenced this action seeking $30,000 for breach of contract and an accounting under the first cause of action and $30,000 on an account stated under the second cause of action.

Defendant answered denying the material allegations of the complaint and asserting three affirmative defenses: First, that the complaint fails to state a cause of action; Second, that the agreement is void under the Statute of Frauds (G.O.L. § 5-701); and Third that plaintiff is not entitled to a fee as it is not licensed as an employment agency pursuant to General Business Law, Article 11, §§ 170 et seq. Each of these defenses will be discussed seriatim.

It is clear that the complaint spells out claims for breach of contract (under the first cause of action) and for an account stated (under the second cause of action). On their face, either would support a judgment for the relief sought.

Defendant does not set forth under which subdivision of General Obligations Law § 5-701 it is proceeding. However, it is apparent that the only subdivision that could have any application (Hunt Personnel Ltd. v. Hemingway Transport, Inc., 105 Misc.2d 626, 432 N.Y.S.2d 585; Winston Personnel Agency Inc., v. ABCON Industries, Inc., 108 Misc.2d 695, 438 N.Y.S.2d 669) is GOL § 5-701(a)(1) which provides in pertinent part that every agreement is void, unless it or some note or memorandum thereof is in writing, and subscribed by the party to be charged if by its terms it is not to be performed within one year from its making or before the end of a lifetime.

The essence of defendant's argument here is that the alleged agreement between plaintiff and defendant with respect to the fee was made in the telephone call between plaintiff's program director and the assistant to the president of defendant on June 2, 1980. The fee allegedly agreed to was 30 percent of Smith's total compensation for the first year of his employment, but the contract of employment between Smith and defendant provided that Smith was not to commence his duties until January 1, 1981. Thus, it is argued that since the parties could not know what the exact figure of Smith's total compensation would be until more than one year after June 2, 1980, it would have to be in writing.

Defendant misapprehends the nature of the contract alleged between it and the plaintiff. Under the terms of the contract as alleged by plaintiff, plaintiff revealed the name and curriculum vitae of a prospective top-level executive to defendant in return for defendant's promise to pay the agreed upon fee if and when it actually hired the named executive (Smith). Under their alleged agreement, plaintiff fully performed when it revealed the name and defendant's obligation to pay accrued when it hired Smith. Certainly, these acts were capable of being performed, and, in fact, were performed within one year. Thus with respect to that portion of the fee allocatable to Smith's annual salary, the fact that computation of the amount of the fee might take additional time is of no moment; it is a ministerial act. Defendant's obligation, if there was an agreement, became fixed when it signed the employment contract with Smith.

Defendant contends, however, that the bonus portion of Smith's annual compensation for which a fee is sought may not be calculated within one year. The bonus portion of Smith's compensation calls for him to receive as a bonus a percentage of the net income before taxes of any business in which defendant acquires a controlling interest and which Smith brought to defendant's attention. The bonus was to be computed on a calendar year basis. Defendant, therefore, contends that as the bonus could not be calculated until early 1982, the entire agreement must be considered indivisible and in violation of the Statute of Frauds.

Defendant cites two appellate decisions as supporting this proposition. These cases are not controlling. In Raymond Babtkis Associates Inc. v. Tarazi Realty Corp., 34 A.D.2d 754, 310 N.Y.S.2d 343, the court dismissed a complaint as violative of the statute of frauds, where plaintiff, a real estate broker, had secured a tenant for defendant's premises on a 21 year lease. The broker alleged that the oral agreement provided that he was to receive a commission at the end of each year at the then Real Estate Board's recommended rate for the entire 21 year period. Payment of the commission was to accrue at the end of each year. There was a requirement under that contract that there be performance each year for 21 years, unlike the situation here where the obligation became payable within one year.

In Briefstein v. P.J. Rotondo Construction Corp., 8 A.D.2d 349, 187 N.Y.S.2d 866, the oral employment agreement provided that plaintiff was to receive 25% of the profits at the end of the year. Under normal accounting methods, profits could not, and would not, be computed until after the one year period and the profit sharing was not limited to one year. Further, the percentage was to be paid at the termination of employment. Hence, as the obligation could run well beyond one year, the complaint was dismissed as violative of the Statute of Frauds.

In this case, defendant's alleged obligation to pay plaintiff for finding a suitable executive became fixed when defendant agreed to hire him, and plaintiff in fact billed defendant for $30,000 before Smith ever started to work. The fact that the amount of any additional bonus would not be ascertainable should not defeat plaintiff's right to revover the $30,000 base it says had been agreed to. Further in this case, the amount of Smith's bonuses was directly dependent upon Smith's own activities. Thus, if Smith did not succeed in acquiring new companies, upon which the bonus was based, he would not have been entitled to any bonus, and if he died or left defendant's employ, his salary would be computed to the date of his termination. Accordingly, the underlying contract was capable of being fully performed and fully computed within one year. The calculation of the amount of the fee was similarly capable of being done within one year of being made (Shirley Polykoff Advertising, Inc. v. Houbigant, Inc., 43 N.Y.2d 921, 403 N.Y.S.2d 732, 374 N.E.2d 625).

Defendant's third affirmative defense asserts that plaintiff failed to comply with General Business Law Article 11 and therefore is not entitled to collect fees. GBL § 172 requires that "no person shall open, keep, maintain, own, operate or carry on any employment agency unless such person shall have first procured a license * * *." Plaintiff admits that it is an employment agency (GBL § 171[2] ), but asserts that the GBL provisions do not apply to it because it is based out-of-state. GBL § 170 provides that the entirety of Article 11 dealing with the regulation of employment agencies, applies only to employment agencies in the state.

Plaintiff asserts that it is an executive search consultant maintaining its sole offices in Washington, D.C., where it is incorporated. Plaintiff avers that it has approximately 20 "information offices" throughout the United States, including one in New York County. These local offices are wholly owned and operated by franchisees whose sole function is allegedly to secure prospective clients for plaintiff through advertising and to advise them of the services offered by plaintiff. The local office screens prospective...