Georgia Malone & Co. v. Rieder

86 A.D.3d 406, 926 N.Y.2d 494

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: July 7, 2011
• Status: Published

Opinions

Plaintiff Georgia Malone & Company, Inc. (MaloneCo) is a licensed real estate brokerage and consulting firm that provides its clients with information with respect to the purchase and sale of properties not yet on the market. MaloneCo and defendant CenterRock Realty, LLC, by its managing member, Ralph Rieder (Ralph), entered into a confidentiality agreement in November 2007. That agreement pertained to CenterRock’s potential purchase of a group of buildings in Midtown Manhattan and required CenterRock to treat all information provided to it by MaloneCo as confidential. In addition, the agreement also required Center-Rock to pay MaloneCo a commission fee of 1.25% of the sale price of the property. The agreement was signed by “Ralph Rieder of CenterRock Realty LLC” and MaloneCo. The purchaser is defined as “CenterRock Co” and its affiliates, and the signature line denotes CenterRock Realty as the “company,” with Ralph Rieder as the “contact name.”

After the agreement was signed, MaloneCo provided Center-Rock, Ralph, Elie Rieder (Elie), an officer of CenterRock, and defendant-respondent Kenneth Gliedman, an attorney for CenterRock, with confidential information concerning financial projections, due diligence materials, and other information and advice relating to all aspects of the subject property and potential transaction. In December 2007, CenterRock entered into a contract of sale with the property owners to purchase the property for $70,000,000. CenterRock had a 25-day period to perform due diligence investigations, during which time it could terminate the deal without penalty. The property owners agreed to extend the due diligence period an additional 21 days, to January 25, 2008. During the due diligence period, MaloneCo continued to collect, create and provide CenterRock, Ralph, and Elie with confidential information regarding the property. On January 25, 2008, the final day of the due diligence period, CenterRock terminated the transaction.

MaloneCo alleges that it provided valuable, confidential information to CenterRock, Ralph, and Elie, who then sold the information to defendants-respondents Rosewood Realty Group Inc., a fellow brokerage firm, and Aaron Jungreis, a broker at Rosewood, for $150,000. MaloneCo further contends that from about November 2007 through January 2008, Ralph continually affirmed CenterRock’s interest in completing the transaction. The complaint specifically alleges that Ralph sent an e-mail to MaloneCo stating that he and Elie were working together to complete the transaction. However, during this time Ralph allegedly delayed the negotiations and tender of the down payment in order to provide himself, CenterRock, and Elie with more time to secure an equity partner to participate in the transaction. It is further alleged that shortly after CenterRock terminated the contract, Elie sold MaloneCo’s confidential information to Rosewood and Jungreis.

MaloneCo also contends that Rosewood and Jungreis then provided this information to its client, who in turn purchased the property resulting in a sizeable commission for Rosewood and Jungreis.¹ According to the complaint, Ralph and Elie benefitted, separate and apart from any benefit to Center-Rock, by profiting from the ultimate sale of the property, in addition to the $150,000 received for selling the confidential information. MaloneCo further alleges that Gliedman was the attorney for both CenterRock and the ultimate purchaser of the subject property, with his only benefit being collection of his fees. Defendant-respondent Fieldstone Properties, LLC (FSP), a corporation in which Ralph and Elie are officers, also is alleged to have unjustly benefitted from MaloneCo’s work product.

MaloneCo commenced this action alleging breach of contract, breach of confidentiality, quantum meruit, and unjust enrichment against Ralph Rieder individually, and unjust enrichment against the remaining defendants-respondents. Defendants-respondents moved to dismiss the complaint for failure to state a cause of action and the court granted the motions in their entirety.

The motion court properly dismissed the contract claims against Ralph, individually.² It is well established that officers or agents of a company are not personally liable on a contract if they do not purport to bind themselves individually (PNC Capital Recovery v Mechanical Parking Sys., 283 AD2d 268, 270 [2001], Iv dismissed 96 NY2d 937 [2001], appeal dismissed 98 NY2d 763 [2002]; see also Salzman Sign Co. v Beck, 10 NY2d 63, 67 [1961]). Ralph is listed only as the “contact” and Center-Rock is listed as tire “company” on the signature block of the agreement. The agreement specifically states it is between “Ralph Rieder of CenterRock” and MaloneCo. Indeed, Ralph only signed the contract once, rather than signing twice, which is the general practice when an individual wishes to be personally bound (Salzman Sign Co., 10 NY2d at 67).

The unjust enrichment claim against Ralph and Elie, in their individual capacities, should not have been dismissed. Unjust enrichment is a quasi contract theory of recovery, and “is an obligation imposed by equity to prevent injustice, in the absence of an actual agreement between the parties concerned” (IDT Corp. v Morgan Stanley Dean Witter & Co., 12 NY3d 132, 142 [2009]). The plaintiff must show that the other party was enriched, at plaintiffs expense, and that “it is against equity and good conscience to permit [the other party] to retain what is sought to be recovered” (Mandarin Trading Ltd. v Wildenstein, 16 NY3d 173, 182 [2011] [internal quotation marks and citation omitted]). Further, although privity is not required for an unjust enrichment claim (Sperry v Crompton Corp., 8 NY3d 204, 215 [2007]), a claim will not be supported unless there is a connection or relationship between the parties that could have caused reliance or inducement on the plaintiffs part (Mandarin Trading, 16 NY3d at 182).

Prior cases from this Court and the other Departments have held that an unjust enrichment claim can only be sustained if the services were performed at the defendant’s behest (Ehrlich v Froehlich, 72 AD3d 1010, 1011 [2010]; Seneca Pipe & Paving Co., Inc. v South Seneca Cent. School Dist., 63 AD3d 1556 [2009]; Joan Hansen & Co. v Everlast World’s Boxing Headquarters Corp., 296 AD2d 103, 108 [2002]; Kagan v K-Tel Entertainment, 172 AD2d 375, 376 [1991]). The Court of Appeals in Mandarin Trading held that the plaintiff was unable to establish an unjust enrichment claim where the “pleadings failed to indicate a relationship between the parties that could have caused reliance or inducement” (Mandarin Trading, 16 NY3d at 182). The Court did not discuss the “behest” language in Kagan and its progeny. However, there was no reason for the Court to do so because there was no claim of a contract between the plaintiff and the defendant, nor was there a claim of any direct contact such that the plaintiff could have acted at the defendant’s behest. In any event, even under the language of Mandarin Trading, the unjust enrichment claim survives against Elie and Ralph.

MaloneCo contends that Ralph personally affirmed his, CenterRock’s, and Elie’s interest in completing the transaction and assured MaloneCo that it would receive its commission, even if the deal was not completed. Based on these assurances, MaloneCo continued to collect and provide Ralph, Elie, and CenterRock with the confidential information. Thus, MaloneCo has sufficiently pleaded that there was direct contact and a relationship with Ralph and Elie that could have caused reliance or inducement (cf. Mandarin Trading, 16 NY3d at 182-183).

In contrast, no such allegations exist as to FSR Gliedman, Rosewood, and Jungreis. MaloneCo dealt solely with Center-Rock, Ralph, and Elie. It is not enough, as the dissent suggests, that CenterRock, Ralph, and Elie had a connection with the remaining defendants-respondents. MaloneCo does not allege that it relied upon any statements or actions of FSR Gliedman, Rosewood or Jungreis, that those defendants acted in any way to induce MaloneCo to provide the confidential information, in the first instance, to CenterRock, Ralph, and Elie, or even that those defendants knew MaloneCo had not been paid. It also is not sufficient, as the dissent contends, to merely show that FSR Gliedman, Rosewood and Jungreis were aware of MaloneCo’s existence. A mere awareness standard would result in liability for anyone who simply knew of the plaintiff’s existence. Similarly, the dissent also incorrectly contends that an unjust enrichment claim can exist solely because defendants may have profited, in one form or another, from plaintiffs work. Such a broad reading improperly expands the claim of unjust enrichment, absent any contention that defendants induced plaintiff to do the work. It is this lack of reliance or inducement that is fatal to the unjust enrichment claim against the third parties, and not merely the lack of behest language, as the dissent suggests in its opening paragraph.

Contrary to the dissent’s suggestion, we see no contradiction between our holding and the language of the Court of Appeals in Mandarin Trading, nor do we see any internal inconsistency in the Court of Appeals’ opinion. That case noted that an unjust enrichment claim was deficient without an allegation of a relationship that caused reliance or inducement. The brief reference to one party’s “awareness” of the other party’s existence in Mandarin Trading was used simply to highlight the fact that, in that case, the two parties had no connection whatsoever and thus their relationship was “too attenuated” (Mandarin Trading, 16 NY3d at 182). It was not intended, as the dissent suggests, to create an entirely new pleading rule, overruling existing Appellate Division precedent. The dissent’s response to Kagan and its progeny is to announce that those cases were overruled by the Court of Appeals in Sperry and Mandarin Trading. The holding in Sperry stated that privity is not required (8 NY3d at 215), a principle which is not in dispute here. However, the dissent fails to adequately explain why the Court of Appeals, in either case, would have overruled controlling precedent from this Department, as well as the other Departments, without a clear indication that it was doing so.³

Finally, the dissent continues to maintain, despite the clear language to the contrary in this opinion, that we are requiring privity. Requiring plaintiff to plead facts from which it can be inferred that there was a relationship that involved reliance or inducement is not the same as requiring privity. We are not, as the dissent contends, applying too high a standard for a CPLR 3211 motion. Nor are we requiring plaintiff to plead the minutia of its unjust enrichment claim. Rather, we are properly requiring MaloneCo to plead facts that are within its knowledge, and from which a relationship that caused reliance or inducement could be inferred.

To the extent that MaloneCo asserts an action in quantum meruit against Ralph individually, it was properly dismissed. In order to establish a quantum meruit claim, plaintiff must show “the performance of services in good faith, acceptance of the services by the person to whom they are rendered, an expectation of compensation therefor, and the reasonable value of the services” (Freedman v Pearlman, 271 AD2d 301, 304 [2000]). Here, there is no allegation that the services performed by MaloneCo were requested by Ralph or performed on his individual behalf.

Denial of MaloneCo’s motion to renew also was proper as it did not submit any new material demonstrating Ralph Rieder’s intent to be personally bound under the contract (see CPLR 2221 [e] [2]). Concur — Friedman, Catterson and Richter, JJ.

1 . The complaint does not allege that Rosewood and Jungreis knew that MaloneCo had not been compensated by CenterRock or the Rieders.

2 . The motion court denied CenterRock’s motion to dismiss in its entirety and CenterRock is not a party to this appeal.

3 . The dissent’s contention that we are requiring the Court of Appeals to name every case it is overturning is a misreading of this majority opinion. It is worth noting that neither the briefs filed in the Court of Appeals in Mandarin Trading, nor the opinion itself focuses on the precedents we are citing here, and thus we adhere to our position that Mandarin Trading did not necessarily overrule those cases. In any event, the difference between our view and that of the dissent turns on the interpretation of a few sentences in Mandarin Trading, which ultimately resulted in dismissal of the unjust enrichment claim.