Case Name: Williams & Co., Inc., Appellant, v. Collins Tuttle and Company et al., Respondents
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1958-07-01
Citations: 6 A.D.2d 302
Docket Number: 
Parties: Williams & Co., Inc., Appellant, v. Collins Tuttle and Company et al., Respondents.
Judges: 
Reporter: Appellate Division Reports
Volume: 6
Pages: 302–316

Head Matter:
Williams & Co., Inc., Appellant, v. Collins Tuttle and Company et al., Respondents.
First Department,
July 1, 1958.
Sol Neil Corbin of counsel (Frederick F. Greenman and Louis W. Goodkind, with him on the brief; Greenman, Shea & Zimet, attorneys), for appellant.
Bernard Sobol of counsel (Hilliard L. Bernstein and Philip Feldman, with him on the brief; Conboy, Hewitt, O’Brien & Boardman, attorneys for Madison-59th Street Corp.; Pindyck & Bernstein, attorneys for Emil Mogul Co., Inc.; Reich, Spitzer & Feldman, attorneys for Collins Tuttle and Company and others), for Collins Tuttle and Company and others, respondents.
William M. Kufeld of counsel (Sydney A. Luria with him on the brief; Carb, Luria, Glassner & Cook, attorneys), for Cushman & Wakefield, Inc., and another, respondents.

Opinion:
Breitel, J. P.
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 establish 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 for the owner's 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 the 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 kickback 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 kickback 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; Horn v. Isbrandtsen Co., 4 A D 2d 855). In the Kevicsky 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; Union Car Advertising Co. v. Collier, 263 N. Y. 386; Advance Music Corp. v. American Tobacco Co., 296 N. Y. 79; Duane Jones Co. v. Burke, 306 N. Y. 172; A. S. Rampell, Inc. v. Hyster Co., 3 N Y 2d 369).
Thus, in the Keviczky case. (290 N. Y. 297, 306, suyra) 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.' " (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 negotia tions would have been concluded, not that they were concluded for all practical purposes.
So, in the Union Car case (263 N. Y. 386, 401, supra), 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; Debnam v. Simonson, 124 Md. 354; Skene v. Carayanis, 103 Conn. 708; Lewis v. Bloede, 202 Fed. Rep. 7; Nims on Unfair Competition and Trade-Marks [3d ed.], § 176; May v. Wood, 172 Mass. 11, p. 14.) There must be some certainty that the plaintiff would have gotten the contract but for the fraud. This cannot be left to surmise or speculation. The courts rightfully 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 toould 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 expect or might reasonably suppose would happen. The expressions ' reasonable expectation ' or ' reasonably certain ' may not be as precise as ' would have received,' and we think the latter words are preferable. While not finding reversible error in this part of the charge to the jury, yet we call attention to this phraseology in order that there may be no misunderstanding in the future." (Emphasis in original.) (For collected relevant cases, see 99 A. L. R. 20-21; but see, also, Portman v. Burack, 265 App. Div. 959, affd. 290 N. Y. 686; Newberry & Co. v. Warnecke & Co., 267 App. Div. 418, affd. 293 N. Y. 698.)
The " would have received the contract " test is a stringent one. It involves a higher standard of proof than what lawyers call mere probabilities, although logicians and jurists have recognized that all that is within the possible is a matter of probabilities. It is even a more stringent test than ' reasonably certain" or ' reasonable expectation ", both of which expressions were rejected in the Union Car case (supra). But stringent as the test is, it should not be equated with a requirement that the negotiations must have been all but concluded before interference may create actionable liability.
Turning now to the second question, the issue is whether plaintiff is bound to plead in exact detail the circumstances which, on a trial, would prove that its success would have been inevitable but for the tortious acts of defendants. The day never existed in our jurisprudence when the courts required plaintiff not only to state a cause of action but also establish in the pleading that he could prove it. With rich development in pretrial discovery it becomes even more important that issues not be resolved on pleadings alone, but rather by evidence adduced "upon trial (or, at least, oh motion which exposes the evidence).
True, plaintiff will have to prove that the alleged tortious interference (namely, the fraudulent misrepresentation, the design for kickbacks, and the concerted action) caused the loss of commissions. Indeed, it must show that it lost commissions and not merely a wishful dream of commissions. In this connection the proof as to the stage reached in the negotiations with the tenant will be material, and even critical. But, again, there is no arbitrary dividing line which demarks one stage of negotiations from another which, as a matter of law, must be reached before damages can be proven.
There is nothing special about real estate brokerage which suggests or requires that protection be denied because the intentional injury is inflicted by means which anticipate, rather than await, future development of pending negotiations. If the intent and predatory scheming of defendants were deliberate and effective enough to exploit the first broker's efforts, short of consummation, and were so designed, the necessary link of causation and incidence of damage may be supplied and liability for such purposeful and effective interference imposed. Thus it was that this court sustained the complaint in Spitzer v. Sachar (4 A D 2d 53) and distinguished Portman v. Burack (supra) and Newberry & Co. v. Warnecke & Co. (supra). This too was the principle applied in Horn v. Isbrandtsen Co. (4 A D 2d 855, supra).
It is to be stressed that the Keviczky case (290 N. Y. 297, supra) was determined after trial. It is because it was after trial that details of proof were considered in evaluating the.sufficiency of the evidence to satisfy both the pleading and the applicable substantive rule of law. So too, the Union Car case (263 N. Y. 386, supra) was a determination after trial, and the concern was primarily with the proper charge to a jury in resolving issues of fact. Neither case involved pleading requirements. Nevertheless, both in this case and in the Horn case, as already pointed out, the pleadings express the ultimate fact required to invoke the very rule expressed in the Union Gar case and applied in the Keviczky case. Thus the detailed mat ters of proof at the trial further considered in the Keviczky case should not and were not intended to be imposed as refinements of pleading. Moreover, this court required no more in the Horn case.
Thus, it is not true that the complaint in the Keviczky case rested upon the closing of a transaction upon the same terms and conditions reached, in the prior negotiations. There was no such allegation. The Keviczky complaint alleged generally that " defendant Lorber negotiated for the purchase of said premises with the defendant Drydock and agreed upon all the terms and conditions thereof '. There were no details or other facts about the terms. These were later supplied in the bill of particulars. Nor did the complaint contain any allegation that Lorber ultimately took the premises on the same or similar conditions to those negotiated by Keviczky. Actually, insofar as the trial proof .is concerned, there was a variation in the terms and conditions between the consummated contract and the tortiously frustrated negotiations. Moreover, Keviczky never learned the correct details of the consummated transactions until examinations before trial had been conducted. All of this is crucial to the question of pleading in this case in which there is yet to be any pretrial examination or bill of particulars.
Turning to the Horn case, while there are allegations of an exclusive agency, it is made clear in the complaint that the exclusive agency had long terminated before the procuring of the defendant purchaser. More important, there was no allegation in the Horn complaint that the terms of sale arranged by plaintiff were substantially similar to those upon which the transaction was consummated. Bather, there was careful avoidance of any such assertion and in its place only the allegation, referring to third parties never identified, ' that the terms of sale were substantially similar to offers of proposed purchases by others submitted by plaintiff to the defendants '. To stress a comparison of the terms of the prior negotiations with the terms of the ultimate sale is to confuse persuasive matters of proof with essential elements of the cause of action. Conceivably, as in the Keviczky case, there may be a variation in the terms, but the court may find the variation insubstantial or immaterial, and the interference, no less intentional, destructive, and therefore actionable.
In the Horn case (supra), so recently decided by this court, the complaint alleged: " Upon information and belief, that plaintiff would have completed a successful negotiation of a sale had not the defendants by their acts as aforesaid prevented the continuation of the negotiations and the consummation of the transaction '.
Here, the allegation is: " [I]f the plaintiff had not been prevented from continuing to act as broker in the said negotiation up to the time of execution of the aforesaid lease, it would have earned and become entitled to a commission ". Thus, in both cases the tortious interference occurred while the negotiations were still pending but evidently with sufficient promise of conclusion to entice the predatory scheme. There, as here, defendants argued that plaintiff's failure to allege virtual agreement before the acts of interference occurred required dismissal of the complaint. That contention this court abruptly rejected, saying: " The complaint sufficiently alleges and the plaintiff should be given an opportunity to prove that he would have completed the successful negotiations and the sale had not defendants prevented him from doing so by their tortious conduct ". In so holding this court did no more than apply the principle and the language of the Union Car case (supra), the very authority that grounded the conclusion of the Court of Appeals in the Keviczky case.
In addition to the principles already discussed, there are two other aspects of the present case that bear vitally upon whatever privilege defendants might have to inflict incidental harm upon another as they engage in their own activities. First, it was the defendants, owner and rental agent for the property, who activated plaintiff in its endeavors to find a tenant and effectuate a lease. Implied in such solicitation is the condition that they will not intentionally interfere with plaintiff's efforts. In other words, good faith is always implied in such an undertaking (cf. Patterson v. Meyerhofer, 204 N. Y. 96, 101; Wood v. Duff-Gordon, 222 N. Y. 88, 90-91). Thus, it is true that the owner and the rental agent could have discharged the first broker at any time, or used another broker, provided they did so without dishonest or illegitimate purpose. But when they discharge it, use another broker, or seek to bring about the termination of its activities, by fraud or by illegal design to procure the kickback of commissions, liability may attach.
Another aspect of the case, which is quite material, relates to the second and third causes of action in the amended complaint. The court is agreed that they should remain dismissed as insufficient. These causes of action purport to derive from the statutes making the kickback of commissions in real estate transactions illegal, and indeed, even criminal. Neither Special Term nor this court believes the kickbacks here involved are legal, but it is held that plaintiff is not a party aggrieved within the meaning of the statute, as presently worded, providing civil penalties. (Real Property Law, § 442, 442-a, 442-e.) Nevertheless, the illegal design has significant bearing on the wrong alleged in the first cause of action and, particularly, on whether defendants' interference with plaintiff's prospective commissions was privileged or not.
Accordingly, the orders granting the motions to dismiss the first cause of action should be reversed, on the law, and the motions denied, with costs to plaintiff-appellant; and the order granting the motions to dismiss the second and third causes of action should be affirmed, with costs to defendants-respondents Cushman & Wakefield, Inc. and Charles E. Griffin.
Rental Agent:
Defendants Collins and Tuttle, and the corporation and partnership bearing their combined names.
Owner:
Defendant Madison-59th Street Corp.
Tenant:
Defendant Emil Mogul Co., Inc.
First broker:
Plaintiff Williams & Co., Inc.
Second broker:
Defendants Cushman & Wakefield, Inc. and Griffin, vice-pres. and salesman of the defendant corporation.