Jan 31

Firm wins appeal for brokerage commission

The Appellate Division, First Department upheld the grant of summary judgment to Goetz Fitzpatrick’s client, Eastern Consolidated Properties. The case supported the right of a real estate broker to earn a commission for successfully introducing the purchaser to the owner when the commission agreement so provided. It rejected the defendant owner’s argument that the commission agreement could be construed to require the broker to be the procuring cause of the sale. Howard Rubin represented Eastern Consolidated and Douglas Gross successfully argued the First Department appeal. The case was featured in Real Estate Weekly on January 25, 2017.

Although the commission amount was $650,000 with interest, the judgment amount is now over $900,000. The defendant owner originally failed to bond the judgment, hinting that Eastern Consolidated would have difficulty enforcing the judgment. The owner had engaged in a section 1031 tax free exchange and placed the replacement properties in the title of different LLCs, which could be done because the LLCs were all 100% owned by the same individual. Through investigation, Goetz Fitzpatrick discovered that one property bought was an LLC that owned an office building in Lynbrook, New York. The identity of the properties purchased was confirmed through a subpoena served on the transfer agent. Goetz Fitzpatrick brought a fraudulent conveyance suit against the entities owning the Lynbrook building. We then won the suit, with the Supreme Court, New York County holding the 1031 exchange – which left no funds in the owner of 5 East 59th Street to pay the commission that it owed – was an intentional fraudulent conveyance. Goetz Fitzpatrick won a $25,000 attorneys’ award against the defendant transferee owners of the Lynbrook building because of this intentional fraudulent conveyance. We then served an attachment and restraining notices which tied up the Lynbrook building and a six figure bank account of the transferees. With that, the defendant former owner of 5 East 59th finally decided to bond the appeal. Consequently, Eastern Consolidated now has insurance that its judgment will be paid. Goetz Fitzpatrick associate Scott D. Simon assisted on the matter.

In another fraudulent conveyance suit, Douglas Gross, Howard Rubin, and associate Max Rubin won summary judgment allowing Goetz Fitzpatrick’s client, North Hill Funding, to seize the real estate transferred. Goetz Fitzpatrick was enforcing a judgment for North Hill based upon a judgment in a suit on a guaranty, and discovered that one of the judgment debtors had prevailed in a foreclosure of five and a quarter acres of land in Pelham Manor, New York. The judgment debtor had bid in the debt to acquire the property at the foreclosure sale but caused the referee to issue the deed in the name of a different entity. The judgment debtor claimed that by reason of a corporate reorganization, it had the right to have the new entity, which it controlled, to own the property free and clear of North Hill’s judgment. Defendants moved to dismiss and the Supreme Court allowed North Hill to cross move for summary judgment. North Hill prevailed on virtually all its causes of action, with the Court holding that the transfer violated multiple loan documents and was both a constructive and intentional fraudulent conveyance.

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