Court Opinion

ID: 6054761
Source: CourtListenerOpinion
Date Created: 2022-01-13 15:18:41.212389+00
Date Added: 2024-06-11T08:51:46.110115
License: Public Domain

Tom, J.
(dissenting). Since a broker “ ‘cannot act as agent for both seller and purchaser of property in a real estate transaction’ ” (Trylon Realty v Roth, 187 AD2d 715, 716), the central issues in this case are whether the defendant realty company, a co-broker rather than the listing broker, represented plaintiffs, the seller, or the prospective buyers, and thus what fiduciary duties, if any, were owed to any of the parties.
During the summer of 1990, plaintiffs listed their Manhattan condominium apartment for sale with Phyllis Koch Real Estate (Koch) for a discounted 5% commission. Plaintiff Irving *250Sonnenschein was a real estate attorney. Testimony indicates that plaintiffs and the listing broker expected that a cooperating broker would receive half (i.e., 2.5%) of the listing broker’s commission. However, Koch remained the exclusive broker. The contact agent for Koch was Florence Schulman. Defendant Douglas Elliman-Gibbons & Ives (Douglas Elliman), as a cooperating broker, showed the apartment to Dr. and Mrs. Tam through its agent, Suzanne Turkewitz. Turkewitz, for defendant, informed Schulman, for Koch, that she could produce the Tams as prospective buyers for plaintiffs’ apartment. The Tams’ offer, communicated by Turkewitz through Schulman to plaintiffs, was for $820,000, down from the asking price of $975,000. Plaintiff Irving Sonnenschein testified that on December 21, 1990, Schulman, for Koch, communicated the offer to him, from Turkewitz, and that Turkewitz then followed up with a call to him. However, Turkewitz indicated that defendant realty company demanded a 4% rather than a mere 2.5%, commission. He agreed to the terms. Turkewitz called plaintiff and was assured that the transaction was proceeding.
Also on December 21, plaintiff drafted and faxed to defendant realtor a brokerage agreement, which stated in pertinent part:
“This refers to the prospective buyer (Dr. and Mrs. Tam) whom we [Douglas Elliman] have brought to the broker with whom you listed this apartment [Koch] * * *
“In the event that a contract is signed and exchanged between you [the Sonnenscheins] and our prospective buyer [the Tams], and closing takes place pursuant to such contract, we are to receive at closing 4% of the sale price. If the contract is not signed for any reason whatever, or if the contract is signed but the transaction does not close for any reason whatever (except the Seller’s refusal to close notwithstanding that closing should take place pursuant to the contract and that the buyer is ready and able to do so) we [Douglas Elliman] are not to be entitled to any payment of any compensation.”
Gina Modiano, as senior vice-president of Douglas Elliman, signed the agreement and faxed it back to plaintiffs the same day. Plaintiffs then prepared three copies of a contract of sale and forwarded them to the Tams’ attorney. The attorneys for the Tams informed plaintiffs that the contracts were acceptable and would be signed. However, the contracts were not signed and the transaction was never consummated. The Tams purchased the Roderick apartment in plaintiffs’ building for a higher sales price through another agent in defendant realty company.
*251Defendant Patricia Cliff was a senior vice-president at Douglas Elliman. Pursuant to a written agreement dated August 3, 1989, Cliff had the exclusive listing for the sale of the Rodericks’ apartment, which she defined as acting as the exclusive agent for the seller. The Rodericks’ apartment was located on the 36th floor of the same building as plaintiffs’ apartment (plaintiffs were on the 37th floor). Although the original asking price was $1,395,000, this was reduced thereafter so that by the fall of 1990, the asking price was $995,000. Arlene Wander, an agent with Sulzberger-Rolfe, another realtor, had been representing the Tams during 1990. Sulzberger-Rolfe was acquired by defendant in October 1990, and Wander referred the Tams to Cliff.
Cliff showed the Tams the Roderick apartment around or just before December 15, 1990 — about the same time that Turkewitz was showing them plaintiffs’ apartment. During the holiday season, the price for the Roderick apartment was negotiated down to $838,300. Cliff recalled the parties came to an agreement at some point between Christmas and New Year’s Day. When presented with a computer printout, she verified that the offer was accepted on December 27, 1990. The Tams and Rodericks entered a written contract on December 27, 1990.
Plaintiff’s communications in connection with the sale extended over the Christmas holidays. Turkewitz was traveling on vacation during this period of time. Aside from an associate at the firm who could handle details of the sale in Turkewitz’s absence, she discussed it with no one else, and particularly not Patricia Cliff, at defendant realty firm. When plaintiff returned to his office after New Year’s, though, he was informed by an upset Turkewitz that another agent in defendant’s office had sold the Tams another apartment. Turkewitz recalled that around this time, she asked plaintiffs to reduce their price to be competitive with another apartment the Tams were interested in.
Cliff denied knowing of plaintiffs, emphatically denied having been informed by the Tams of their competing offer in the same building, and recalled that, since they spoke mostly in Chinese, she had had little actual conversation with them. She recalled only generally that Wander, representing the Tams, indicated that there was some urgency to the matter, to which Cliff responded while on vacation. However, she was sure that Wander had not mentioned the Tams’ bid on plaintiffs’ apartment. It is correct that there is neither testimony nor documen*252tation in the record contrary to Cliffs testimony. However, this case was largely built on inference.
Plaintiffs contend that Cliff, having access to the same computer information as would any other employee, and possibly having direct personal knowledge of the deal with plaintiffs in the same building as the Rodericks, and knowing that they had a very motivated buyer, used plaintiffs’ deal to leverage the Rodericks into reducing the price. The benefit to defendant Douglas Elliman was a higher commission rate and a higher base price against which that rate would be applied.
Plaintiffs ultimately sold their apartment on July 8, 1991 for $790,000, $30,000 less than the amount agreed upon with the Tams. Plaintiffs commenced this action, alleging that a principal-agent relationship had existed between them and defendant Douglas Elliman concerning the sale of plaintiffs’ apartment, and that defendants had breached that fiduciary duty in order to yield a higher commission by inducing the Tams to renege on their agreement with plaintiffs and to purchase the Roderick apartment.
Defendants moved for summary judgment to dismiss the complaint on the ground that they did not owe plaintiffs any fiduciary duty, since they were merely cooperating brokers that represented the buyers and not the seller.
The IAS Court (Emily Goodman, J.) denied defendants’ motion and held that Douglas Elliman had acted as plaintiffs’ agent, and therefore owed them a fiduciary duty. The court made its finding, in part, on the fact that Douglas Elliman signed a commission agreement with plaintiffs without disclosing that it was acting as the buyers’ agent. Nevertheless, the court denied summary judgment to plaintiffs, since there were factual issues concerning Douglas Elliman’s knowledge and intent.
Thereafter, a jury trial was conducted before Justice Edward Lehner on the sole question presented: whether “defendants knowingly and intentionally acted to sabotage the proposed sale of the Sonnenshein apartment to the Tams.” The jury returned a unanimous verdict in favor of plaintiffs. Defendants’ motion to set aside the verdict was denied. Defendants appeal.
Generally, the question whether a fiduciary relationship exists is fact specific to each particular case. Courts consider whether there are written agreements between the parties, and evaluate the parties’ ongoing conduct, including whether one party reposed confidence in the other or relied on its *253superior expertise or knowledge (Wiener v Lazara Freres & Co., 241 AD2d 114, 122). A real estate broker may be in a fiduciary relationship with its client. If so, the broker has an affirmative duty not to act for another party whose interests are adverse to the principal without the principal’s consent, after full disclosure of the relevant facts (Trylon Realty v Roth, supra).
In the case at bar, in denying the defendants’ pretrial motion for summary judgment, Justice Goodman found that the facts and circumstances of this case established that defendant realty company represented the plaintiff sellers. To make that finding as a matter of law prior to a formal fact finding was, on this record, error. Although the finding is not binding on us, nevertheless, it narrowed the scope of the trial. The issue whether defendant had knowingly and intentionally interfered with the sale was then presented to the jury, which found such conduct. However, a jury first should have reached the question whether the broker owed a fiduciary obligation to plaintiffs before reaching the question whether that obligation was breached. On this basis, I would reverse and remand for trial on all factual issues.
The documentation in this case does not affirmatively dispose of the factual issue of whether defendant acted as agent for the sellers or buyers. Rather, surprisingly for persons experienced in this field (as noted, one plaintiff is a real estate attorney), it is equivocal. But from the absence of written disclosure to the seller that the defendant was representing the buyer, in tandem with other evidence from which the jury could validly draw inferences, discussed below, the jury could have rationally concluded that defendant owed a fiduciary duty to plaintiffs and that defendant breached that duty.
I share the majority’s concern that these facts ought not be construed to create a broad principle of law that brokers are precluded from showing multiple properties to multiple parties, conduct which is essentially the life blood of that trade. However, the peculiar facts and circumstances of this case do raise a factual issue more fundamental than some of the concerns expressed by the majority: whether defendant acted as the sellers’ (i.e., plaintiffs’) broker, or acted for the buyers. The motion court, in denying defendant’s motion for summary judgment, went beyond a mere finding that this factual issue precluded summary judgment, and affirmatively found that defendant was the plaintiff sellers’ agent. The motion court’s finding essentially removed from the jury what should have been a central dispute of fact for jury determination.
*254The motion court and the majority both find significance in the fact that an oral agreement for the sale of plaintiffs’ apartment had not yet been reduced to writing, although they reach different conclusions from that fact. The majority concludes that the Statute of Frauds barred the enforcement of the verbal agreement for sale of the apartment, and that hence there was no contract for the defendant to interfere with. However, insofar as is relevant to the issue whether there was a brokerage agreement making defendant plaintiffs’ agent, I am not persuaded that the absence of a written sale contract is significant. There was an agreement, albeit not yet enforceable. In fact, defendant’s own conduct, broadly speaking, interfered with the finalization of the sale contract. If the evidence was dispositive that defendant acted as the sellers’ agent in that transaction, defendant could hardly claim that its own misconduct in preventing finalization of the real estate contract relieved it of its obligation to deal honestly with plaintiffs. However, again, the flaw in this case is that the premise — that defendant acted as sellers’ broker — is not established but for Justice Goodman’s finding, and the issue should have been submitted to the jury.
Justice Goodman and the majority herein focus on the December 21,1990 agreement which memorialized the terms of the fee agreement between the parties but draw different conclusions. The letter agreement is curious in some regards, which helps to explain the ambiguity that is at the root of this case. Although plaintiff is a real estate lawyer, which should factor to some extent into how we evaluate what was understood as between plaintiffs and defendants, nevertheless, defendant, through its senior vice-president, drafted the agreement. We should impose the standard rules of construction regarding contracts containing ambiguities. Moreover, plaintiff Irving Sonnenschein, in his affidavit in opposition to defendant’s summary judgment motion, emphatically argued that the mere existence of the brokerage agreement, with him paying defendant directly, converted defendant into his own broker. In the first paragraph, the letter refers to “the prospective buyer (Dr. and Mrs. Tam) whom we have brought to the broker with whom you listed this apartment” (italics added). The reasonable implication, if only these words are utilized, is that defendant might have been acting as the buyer’s agent. However, the point is never made explicit and certainly no disclosure in any regard is made. In the next paragraph the defendant’s *255vice-president memorializes that upon closing, it would receive the 4% commission. Hence, as was indicated at trial, the Koch agency would receive 1% of the 5% total commission. No reference is made here or elsewhere to co-brokering, leaving unclear as far as documentation is concerned whether the defendant realty company acted as the seller’s broker.
A policy statement by the Real Estate Board of New York, included with the record, indicates that the nature of the agency relationship varies among cases, but that a cooperating broker bringing a buyer to a seller’s broker generally acts as the buyer’s agent. The same documentation indicates that disclosure of some kind should be provided. The policy statement, though, was issued several years after these events, apparently in response to conflicts arising in multifaceted real estate deals, and, in the final analysis, does not constitute a legally binding statement. Nevertheless, it provides some possible guidance as to what was expected in the trade. Turkewitz has never stated that she was working only on the Tams’ behalf, but no clear evidence indicates that she was working directly as plaintiffs’ agent. The motion court focused on the existence of a brokerage agreement between plaintiffs and defendant, and the absence of any disclosure therein that Turkewitz was acting as the buyer’s agent, to conclude that defendant was the seller’s agent on plaintiffs’ deal. Moreover, the motion court was persuaded that the existence of the sale agreement, albeit oral, prevented defendant or its agents from inducing one party to that agreement — the Tams — to breach it in a manner that benefitted defendant realty company.
When Justice Lehner submitted the case to the jury, he indicated to counsel that “I will follow what Judge Goodman said the issue is and prepare a verdict on that,” that is, whether defendant intentionally sabotaged plaintiffs’ agreement with the Tams. However, as noted, the critical flaw in this case is that her finding is not of a type compelled by documentary evidence or uncontradicted sworn statements, and it should have been presented to the jury. Only then would it have been appropriate to address the point upon which the majority focuses.
Williams and Mazzarelli, JJ., concur with Rosenberger, J. P.; Tom, J., dissents'in a separate opinion.
Judgment, Supreme Court, New York County, entered March 18, 1999, reversed, on the law, without costs, defendants’ motion for summary judgment granted and the complaint *256dismissed. Appeal from orders, Supreme Court, New York County, entered November 20, 1998 and on or about March 12, 1999, dismissed, without costs.