Douglas Real Estate Management Corp. v. Montgomery Ward & Co.

3 A.D.2d 146, 159 N.Y.S.2d 81, 1957 N.Y. App. Div. LEXIS 6616

This text of 3 A.D.2d 146 (Douglas Real Estate Management Corp. v. Montgomery Ward & Co.) is published on Counsel Stack Legal Research, covering Appellate Division of the Supreme Court of the State of New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Douglas Real Estate Management Corp. v. Montgomery Ward & Co., 3 A.D.2d 146, 159 N.Y.S.2d 81, 1957 N.Y. App. Div. LEXIS 6616 (N.Y. Ct. App. 1957).

Opinions

Gibson, J.

Defendant appeals from a judgment recovered by plaintiff for real estate brokerage commissions upon a lease to the State of New York of space in a building in the city of Albany.

Defendant was itself the lessee of the entire building’ under a lease for a term of 15 years, executed in 1947. At that time the State occupied 105,892 square feet of space in the building under leases expiring April 30, 1951, which the owner assigned to defendant, and defendant occupied, and continued to occupy, the remaining 74,209 square feet.

After acquiring its leasehold interest, defendant employed plaintiff as managing agent of the building, under a written management agreement. In addition to management generally, the agreement provided for the services and compensation of plaintiff in negotiating leases of space in the building.

[148]*148In 1949, approximately two years before its leases were to expire, the State advised defendant that because of the nature of the State unemployment insurance work conducted on the premises and the absence of comparable facilities elsewhere in Albany, notice of approximately 18 months would be required if the State were to vacate the premises. Under authority from defendant, plaintiff thereupon commenced negotiations with representatives of the State for a lease of all the space in the building. "When these efforts failed, representatives of plaintiff, defendant and the State attempted to negotiate a new lease of the space then occupied by the State. These negotiations proceeded to a point where defendant drafted and submitted to the State a lease for a five-year term at an increased rental. It is clear that the proposed lease as drawn by defendant was acceptable, except for a clause providing for cancellation on 30 days’ notice in the event of default on the part of the State. This clause the State rejected and thereupon, by letter of February 6, 1951, defendant inquired of plaintiff whether the State would accept a forfeiture clause similar to that rejected except for a period somewhat greater than 30 days. In response to this inquiry, a representative of the State advised plaintiff as to the reason for the State’s position, by letter written March 6, 1951 at Albany, but by letter of March 5,1951, written at Chicago, defendant notified the State that possession of the premises would be required on April 30,1951. A copy of this letter was sent to plaintiff and, on March 22, 1951, following a telephone conversation with plaintiff, the defendant in a telegram to plaintiff reiterated its position. On March 26, 1951, defendant gave notice to plaintiff of the termination of the management agreement as of April 30, 1951.

The State failed to vacate and litigation in various forms ensued and had not been finally determined in January, 1953, some 20 months later, when defendant and the State, dealing directly, commenced negotiations to resolve their controversies and finally, on May 12,1953, entered into a new lease, retroactive to May 1,1951. The rent payable under the new lease was very substantially higher than that which plaintiff had tentatively negotiated previously. The lease, however, contained no forfeiture clause such as defendant had previously insisted upon. It is upon the rental payments provided for by the new lease that plaintiff has recovered commissions. The Official Referee found, in substance, that the plaintiff had performed under the agreement by obtaining the State’s acceptance of the material” terms of defendant’s proposal and, further, that defendant’s insistence on the inclusion of a forfeiture clause 'in [149]*149the lease was ‘ unreasonable ’ ’, presumably because such a clause would be ineffective in any event to enforce the eviction of the State. It was further found that defendant’s demand for possession was “a tactical maneuver ” designed to better defendant’s position while negotiating a higher rental.

The construction of the management agreement previously alluded to is necessary to determine whether plaintiff’s recovery may be sustained.

The agreement provided, in paragraph “ Second ”, that plaintiff would negotiate leases, and renewals of leases, of space in the building, when and on such terms and conditions as defendant might direct or approve, it being further stipulated that no commitment should be made with respect to any lease or modification of any lease, and that no such lease or modification should be binding upon defendant until executed by one or more of its officers.

The agreement in paragraph “ Sixth ” stipulated the rates of compensation to be paid plaintiff for, among other things, negotiating leases and renewals and provided, further, that if, during the term of the management agreement, negotiations for space in the buildings were begun at defendant’s specific written request but the lease not consummated until after the expiration of the agreement, the defendant should nevertheless pay the plaintiff in accordance with the rates thereinbefore specified, 11 exactly as if this agreement were in force at the time of the consummation of the lease ”, but that defendant should not be liable for such payment unless the lease or renewal so negotiated should be executed by one or more of defendant’s officers.

Paragraph “ Seventh ” concludes the agreement and relates primarily to its duration, its optional termination by either party and the status of plaintiff following any termination, and includes the provision: 1 ‘ but upon and after any termination of this agreement, Lessee [defendant] shall continue to recognize Manager [plaintiff] as broker in any negotiations then pending at the specific written request of the Lessee and shall pay to the Manager, upon the consummation thereof, the compensation provided for herein.” (Emphasis supplied.)

It will be seen that there thus exists a variance as between paragraphs “ Sixth” and “ Seventh” which the factual situation here brings into sharp focus. Paragraph “Seventh” allows brokerage commissions in the event of the consummation, after termination of the agreement, of negotiations ‘ ‘ then pending ”. No such limitation appears in paragraph ‘1 Sixth ’ ’ which provides, in substance, for payment of commissions if negotiations are begun during the term of the agreement and con[150]*150suxnmated thereafter. In our view of the facts, authorized negotiations were begun during the term of the agreement, were discontinued before the term had ended and a lease, claimed by plaintiff to evidence the consummation of the earlier negotiations, was executed after termination of the agreement. If the lease did consummate plaintiff’s negotiations with the State, the literal requirements of paragraph ‘ ‘ Sixth ’ ’ were met. If the provisions of paragraph ‘1 Seventh ’ ’ constitute the test, however, plaintiff must fail for we consider that upon the “ termination of this agreement ” no negotiations were “then pending ”, and we are unable to adopt plaintiff’s theory that the date of such termination was the date of defendant’s notice thereof, at which time some negotiations, whether or not authorized, were in progress. The management agreement provided that it should continue until March 31, 1951 “ and, if not then terminated by either party giving to the other thirty (30) days prior notice in writing, shall continue from month to month until terminated by either party at any time by the giving of thirty (30) days prior notice in writing ’ ’.

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Bluebook (online)
3 A.D.2d 146, 159 N.Y.S.2d 81, 1957 N.Y. App. Div. LEXIS 6616, Counsel Stack Legal Research, https://law.counselstack.com/opinion/douglas-real-estate-management-corp-v-montgomery-ward-co-nyappdiv-1957.