BRAUN ASSOCIATES, LLC, V. MADISON THIRD BUILDING COMPANIES, LLC

(Sup. Ct. NY 5/16/05)

We represented: Defendant Madison Third Building Companies, LLC

Charles Edwards Ramos, J.S.C.:

DECISION and ORDER Plaintiff Braun Associates, LLC ("Braun") moves for an in limine order pursuant to Rule 29 of the Commercial Division Rules, denying defendant/third-party plaintiff Madison Third Building Companies, LLC ("Madison") the right, at the hearing or trial to determine damages in this action, to present to the trier of fact evidence, or to comment as to the monetary and non-monetary performance of the tenant and third-party defendant, Fox Hall Realty Law Offices, Inc. ("Fox Hall") under the lease.

Background

Braun is a New York firm providing real estate brokerage services. Madison is owner of the building located at 805 Third Avenue, New York, New York (the "Building"). Fox Hall was a former tenant of the Building. In 1992, Braun successfully brokered a ten-year lease between Madison and Fox Hall for rental of the sixth floor of the Building. When Fox Hall's lease was set to expire, Fox Hall engaged Braun as exclusive broker to either extend or renew its lease. The letter agreement further provided that Braun would look only to the Madison for payment of its brokerage commission. Between June, 2001 and 2002, Braun negotiated the renewal of the Madison-Fox Hall lease.

In December of 2002, Madison and Fox Hall executed an amendment to the ten-year lease ("Lease Amendment"), extending the lease until 2013. Contained in the Lease Amendment is a provision relating to payment of commission. The provision states that Fox Hall and Madison acknowledge the brokerage services provided by Braun and Madison's managing agent, Cohen, in procurement of the lease renewal. Further, the provision states that Madison, as landlord, would pay Braun and Cohen their commission due and owing for the procurement.

Shortly after the Lease Agreement was executed, Braun sent an invoice to Madison for payment of the commission; Madison did not make payment. Braun instituted this action seeking $315,487.50 based on the commission rates it alleges was previously agreed to with Madison.

In 2004, Braun moved for summary judgment against Madison. Madison opposed the motion, and cross-moved for summary judgment against Braun. The court granted partial summary judgment in favor of Braun as to the issue of liability, while dismissing Madison's counterclaim. In so holding, the court determined that Braun had established its claim for the brokerage commission as a matter of law. Assessment of damages is the remaining issue to be determined. Braun presently moves the court for an in limine order to preclude evidence relating to Fox Hall's alleged default under the Lease Amendment.

Discussion

The First Department recently reaffirmed the "well-settled" common law principle that a broker fully performs her job and irrevocably earns her commission upon the signing of the lease. Srour v Dwelling Quest Corp., 11 AD3d 36, 38 (1^st Dept 2004). In Kaplon-Belo, the tenant defaulted on its lease and was subsequently evicted. In a later action by the broker to recover commission for procurement of the lease, the court held that the tenant's subsequent default had no bearing on the broker's right to collect commission for procuring the lease because commission was earned when the broker produced a tenant who was ready, willing and able to enter into a lease acceptable to the terms of the lessor. Kaplon-Belo Associates v Farrelly, 221 AD2d 321, 321 (2nd Dept 1995).

However, the parties to a brokerage agreement may condition payment of commission on the happening of certain other events, such as when title passes, Srour, 11 AD3d at 39, or upon tenants' actual payment of rent. Madison argues that it was the "clear understanding of the parties" that a condition precedent to payment of Braun's commission was Fox Hall's actual payment of rent. This payment arrangement was evidenced by a brokerage agreement allegedly executed by Madison and George Braun, then of the brokerage firm Cushman & Wakefield, Inc., when the first Fox Hall lease was signed in 1992. Madison submits the affidavit of David Nevins, Senior Vice-President of Cohen Brothers Realty, Madison's managing agent, who attests to the "clear understanding" between the parties regarding the conditional payment arrangement. Braun denies the existence of such an arrangement, arguing that damages be calculated according to what is fair, reasonable and customary commission in the brokerage community.

Madison urges the court not to preclude evidence of Fox Hall's alleged default because it is relevant to the assessment of damages. Further, Madison distinguishes the above cited cases on the ground that the courts premised their holdings on the existence of written brokerage agreements which unambiguously establish a broker's entitlement to commission, in contrast to this case, where no written agreement exists, and Braun is pursuing a quantum meruit theory.

Although Braun is entitled to recover the reasonable value of his brokerage services, Bierman v Barbieri, 124 Misc 157, 158 (1^st Dept 1924), which is usually determined based on the customary rate in the community at the time the services were rendered, Kaplon-Belo, 258 AD2d at 622, the parties may submit evidence of conversations, negotiations and agreements made prior to and contemporaneously to the Lease Amendment for the purpose of determining the intention of the parties as to how commission was to be calculated. Winston v Mezzanine Invs., L.P., 170 Misc2d 241, 250 (Sup Ct New York County 1996); See also 67 Wall Street Co. v Franklin National Bank, 37 NY2d 245, 248-249 (1975) (parol evidence of communications and agreements made prior to or contemporaneous with the execution of a written lease is generally admissible to explain ambiguities contained therein. Madison's allegations that a condition precedent to payment of commission was the clear understanding of the parties should be addressed at the hearing on assessment of damages. Evidence of events that occurred after execution of the Lease Amendment, including evidence relating to Fox Hall's alleged default and subsequent eviction by Madison, can be relevant to the assessment of Braun's damages to the extent testimony is offered at trial

Accordingly,

It is so Ordered that the motion for an in limine order is denied.

Dated: May 16, 2005

J.S.C.