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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: October 21, 2018

Claim for Commission on Real Estate Purchase Dismissed: Plaintiff Did Not Establish That He Was the Procuring Cause of the Transaction

On October 2, 2018, Justice Sherwood of the New York County Commercial Division issued a decision in Vasiliu v. Miller, 2018 NY Slip Op. 32487(U), dismissing a claim for a commission, holding that the plaintiff was not the procuring cause of the transaction, explaining:

Although as a general principle, a real estate broker will be deemed to have earned his commission when he or she produces a buyer who is ready, willing and able to purchase at the terms set by the seller a broker does not earn a commission merely by calling the property to the attention of the buyer. Although a broker need not have been the dominant force in the conduct of the ensuing negotiations or in the completion of the sale the broker must be the procuring cause of the transaction, meaning that there must be a direct and proximate link, as distinguished from one that is indirect and remote, between the bare introduction by the broker and the consummation of the transaction. Although other departments have held that if a broker does not participate in the negotiations, he must at least show that he created an amicable atmosphere from which negotiations that proximately led to the sale went forward, in SPRE Realty (119 AD3d at 99) the First Department declined to employ this standard, stating that the direct and proximate link standard articulated in Greene (51 NY2d 197) determines whether a broker is a procuring cause. The court in SPRE Realty went on to clarify that this standard requires something beyond a broker’s mere creation of an amicable atmosphere or an amicable frame of mind that might have led to the ultimate transaction” but that at the same time, a broker need not negotiate the transaction’s final terms or be present at the closing.

Plaintiffs claim for a commission is based solely on his allegations that he conveyed the non-public information about the availability of the Premises for sale at $140,000,000 to Steven Wu and organized a walk-through of the Premises, which plaintiff apparently did not himself attend. Subsequently, and without any further involvement from plaintiff, Mitchell Place and Seller arrived at the purchase price of $137,500,000. Such allegations establish no more than that plaintiff initially called the property to the attention of the ultimate purchaser. As Mitchell Place additionally notes, the fact that these parties negotiated a different price, without plaintiffs involvement, further shows plaintiff was not the procuring cause of the sale because he did not bring together the minds of the buyer and seller. Furthermore, as discussed above, these facts fall short of those that were held to be insufficient as a matter of law in both Briggs (88 AD2d at 779) and Byrne, Bowman & Forshay, Inc. (11 Misc 2d 587).

Plaintiffs contention that there is an issue of fact regarding whether defendants terminated its activities in bad faith and as a mere device to escape the payment of the commission fails as well as there is no allegation that defendants terminated plaintiffs activities or otherwise acted in bad faith to prevent plaintiff from becoming the procuring cause of the transaction. As was the case in SPRE Realty, this line of authority speaks to instances in which a buyer or seller abandons negotiations or terminates activities for a period of time to artificially remove the direct and proximate link. The SAC contains no such allegations.

Accordingly, the claims for unpaid commissions must be dismissed on the grounds that plaintiff has not alleged facts sufficient to show that he was the procuring cause of the ultimate transaction. For the same reason, the cause of action for unjust enrichment must be dismissed as well.

(Internal quotations and citations omitted) (emphasis added).

We frequently litigate disputes over the purchase and sale of commercial property. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you are involved in a dispute regarding a commercial real estate transaction.

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