Williams & Co. v. Collins, Tuttle & Co.

• Decision Date: 01 July 1958
• Citation: 6 A.D.2d 302,176 N.Y.S.2d 99
• Parties: WILLIAMS & CO., Inc., Plaintiff-Appellant, v. COLLINS, TUTTLE AND COMPANY; Collins, Tuttle & Company, Inc.; Arthur Collins; Wylie F. L. Tuttle, Jr.; Cushman & Wakefield, Inc.; Charles E. Griffin; Madison-59th Street Corp., and Emil Mogul Co., Inc., Defendants-Respondents.
• Court: New York Supreme Court — Appellate Division

Page 99

176 N.Y.S.2d 99

6 A.D.2d 302

WILLIAMS & CO., Inc., Plaintiff-Appellant, v. COLLINS, TUTTLE AND COMPANY; Collins, Tuttle & Company Inc.; Arthur Collins; Wylie F. L. Tuttle, Jr.; Cushman &amp Wakefield, Inc.; Charles E. Griffin; Madison-59th Street Corp., and Emil Mogul Co., Inc., Defendants-Respondents.

Supreme Court, Appellate Division, First Department.

July 1, 1958.

Sol Neil Corbin, New York City, of counsel (Frederick F. Greenman and Louis W. Goodkind, New York City, with him on the brief. Greenman, Shea & Zimet, New York City, attorneys), for plaintiff-appellant.

Bernard Sobol, New York City, of counsel (Hilliard L. Bernstein and Philip Feldman, New York City, with him on the brief. Conboy, Hewitt, O'Brien & Boardman, New York City, for defendant-respondent Madison-59th Street Corp.

Pindyck & Bernstein, New York City, for defendant-respondent Emil Mogul Co., Inc.

Reich, Spitzer & Feldman, New York City, for defendants-respondents Collins, Tuttle and Co., Collins, Tuttle & Company, Inc., Arthur Collins and Wylie F. L. Tuttle, Jr.)

William M. Kufeld, New York City, of counsel (Sydney A. Luria, New York City, with him on the brief. Carb, Luria, Glassner & Cook, New York City, attorneys), for defendants-respondents Cushman & Wakefield, Inc. and Charles E. Griffin.

Before BREITEL, J. J. P., and RABIN, FRANK, VALENTE and STEVENS, JJ. BREITEL, Justice Presiding.

Plaintiff broker sues for loss of its commissions and under penal statutes for penal sums consequent upon an alleged tortious scheme effected by the several defendants--owner of a building, the rental agent of the building, a second broker, a tenant, and a number of individuals associated in various capacities as principals or officers of the partnership and corporations involved as defendants. By five separate orders the amended complaint, consisting of three causes of action, was dismissed.

The orders dismissing the first cause of action for insufficiency should be reversed, and the motion denied. The order dismissing the second and third causes of action should be affirmed.

The allegations of the amended complaint are taken as true, for purposes of the motions and the appeal, although it is reasonable to assume that the principal allegations were and will be vigorously denied.

The ultimate issue in this case is whether a broker, in order to recover a loss of commissions sustained through intentional tortious interference with its opportunity to earn those commissions must, in addition to establishing the basic elements of the tort, also establish by pleading allegation that it would have closed on the same or a substantially similar contract to that ultimately made with the prospect. In applying the principle the question then is whether the negotiations with the prospect must have reached virtual consummation; or whether it is sufficient that it would have concluded the contract although the negotiations fell short of consummation only because of the tortious interference. Not involved is what plaintiff must prove in order to estabish its damage. The test for that has been well settled in the courts of this State, and the test is undisputed, at least in this Court. Plaintiff must establish that it 'would have received the contract' which it sought to obtain at the behest of its principal. Injected into the case is the view that in real estate brokerage cases, because of the prevalence of false claims for commissions, actions should be throttled at the outset, before there has been even an opportunity for pretrial discovery, unless the broker's pleading establishes in particular, and even evidentiary detail, the circumstances identifying the contract which it claims it would have received with the contract ultimately made with the prospect.

The essence of the first cause of action is briefly stated. The rental agent ¹ for the owners' office building solicited real estate brokers generally for tenants. Plaintiff, the first broker, obtained a prospective tenant, an advertising agency, which wished to lease a full floor. Although at first the owner and rental agent found that tenant acceptable for the leasing of a full floor, and said so, they subsequently falsely stated to plaintiff broker that the tenant was not acceptable because it would be objectionable to another tenant, also an advertising agency. This false statement was part of a plan to obtain a kick-back of commissions, which aggregated $25,075.

Pursuant to the plan, the rental agent arranged with the second broker, who was knowing and compliant, to supplant the first broker and act as broker between the same tenant and owner to complete the deal. The negotiations were brought to a conclusion by the participants in the plan; the lease signed; the second broker paid off the owners and rental agent and various principals thereof; and to sweeten the deal for the 'kick-backing' second broker, the tenant paid them part of their 'loss' ($10,000). Everyone got what he wanted, except the first broker, who had brought the prospect to the participants in the plan, only to be frozen out intentionally.

The pleading explains that this plan was conceived, and then executed in concert by all the defendants, because the first broker did not offer to kick back on the sizeable commissions involved. Such kickbacks would have been a violation of the statutes (Real Property Law, §§ 442, 442-a, 442-e). Plaintiff's position, then, is that it has suffered an intentional injury because of an illegal design to effect a kickback of commissions and by misrepresentation as to tenant's acceptability. Because of such illegal design and the fraudulent means used, it is urged that defendants' conduct was not privileged.

The questions involved are as simple as the plan conceived and executed by defendants.

The first question is whether this case falls within the principle that a broker may not be deprived of his commissions by substituting another broker before final consummation or execution of the contract between the principals, by fraudulent means, or unless he kicks back a part of the commissions (Keviczky v. Lorber, 290 N.Y. 297, 49 N.E.2d 146, 146 A.L.R. 1410; Horn v. Isbrandtsen Co., 4 A.D.2d 855, 167 N.Y.S.2d 427). In the Keviczky case the tortious acts occurred on the eve of the consummation of the contract between the principals. In the Horn case, as in this case, the planners saw to it that the first broker was eased out while the negotiations appeared inchoate although the potential was definite.

The second question is whether, a first broker, frozen out by fraudulent means and a concerted design to obtain a kickback in commissions, must allege in his complaint, not only the ultimate fact that he would have earned his commissions save for the tortious conduct of defendants, but must also specify in exact detail, the circumstances which would prove, on a trial, that his success was otherwise inevitable.

It would seem that the answer to both questions should favor plaintiff's position. The courts have long passed beyond the immunizing of scheming wrongdoers merely because the latter were farsighted and fleetfooted enough to avoid obvious categorical liability for harm intended and inflicted (cf. e. g., Rice v. Manley, 66 N.Y. 82; Ultramares Corp. v. Touche, 255 N.Y. 170, 174 N.E. 441, 74 A.L.R. 1139; Union Car Advertising Co. v. Collier, 263 N.Y. 386, 189 N.E. 463; Advance Music Corp. v. American Tobacco Co., 296 N.Y. 79, 70 N.E.2d 401; Duane Jones Co., Inc., v. Burke, 306 N.Y. 172, 117 N.E.2d 237; Rampell, Inc., v. Hyster Co., 3 N.Y.2d 369, 165 N.Y.S.2d 475).

Thus, in the Keviczky case, supra, the Court of Appeals imposed no limitation on the general principle when it quoted:

"[An attempt to injure, or] [a]n injury to a person's business by procuring others not to deal with him, or by getting away his customers, if unlawful means are employed such as fraud or intimidation, or if done without justifiable cause, is an actionable wrong." 290 N.Y. at page 306, 49 N.E.2d at page 150, quoting from 2 Cooley, Torts, 4th ed. § 230.

See, also 9 A.L.R.2d 288.

Where liability is to be imposed for preventing one from making a particular contract, the courts have required more than a showing of qualified probability that the contract would have been completed but for the tortious interference. As a consequence plaintiff must allege at least that 'it would have received' the contract. But it is a distortion of the rule to require that the negotiations for the prospective contract reach the conclusive stage. It is sufficient that the allegations and proof entitle plaintiff to submit the issue of damage to the jury. Such right arises from allegation and proof that the negotiations would have been concluded, not that they were concluded for all practical purposes.

So, in the Union Car case, it was said:

'A cause of action has also been recognized where a party would have received a contract but for the malicious, fraudulent, and deceitful acts of a third party, such, for instance, as materially lying about him. Morgan v. Andrews, 107 Mich. 33, 64 N.W. 869; Debnam v. Simonson, 124 Md. 354, 92 A. 782; Skene v. Carayanis, 103 Conn. 708, 131 A. 497; Lewis v. Bloede, 4 Cir., 202 F. 7; Nims on Unfair Competition and Trade-Marks [3d Ed.], § 176, p. 484; May v. Wood, 172 Mass. 11, at page 14, 51 N.E. 191. There must be some certainty that the plaintiff would have gotten the contract but for the fraud. This cannot be left to surmise of speculation.

The courts rightfull extended the arm of the law to reach one who deliberately interfered with an executed contract (Lumley v. Gye, 2 E. & B. 216), since which time they have gone a step further and mulcted in damages him who does the same thing to one who would have received such a contract but for the illegal interference. (See above cases.) The courts will be a little slow in permitting juries to speculate upon what a competitor had reason to...