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Barthel v. Town of Hurley: Broker's Representation Agreement Declared Void

A New York appellate court has considered whether a real estate broker's agreement to represent clients in real estate tax reduction hearings was an unenforceable contract because the agreement involved the broker's controlling of the clients' litigation.

Real estate broker Andrew Peck ("Broker") entered into agreements ("Agreements") with a number of property owners ("Owners") to represent the Owners before the Town of Hurley's property tax assessment board ("Board") in order to seek reduction of the Owners' property taxes. The Agreements involved 104 parcels of land, some of which were owned by the Broker. The Agreements stated that the Owners would only pay a fee if the Broker was able to successfully reduce the individual Owners' property taxes, with the payment to be based on a percentage on the amount of tax reduction obtained for each owner. The Agreements also provided that the Broker would serve as the Owners' representative in "all proceedings commenced or to be commenced in [court]...for review of the assessment."

Following the Board's dismissal of the tax assessment petitions filed by the Broker, the Broker retained an attorney to commence judicial review proceedings of the Board's actions. All of the petitions for review were consolidated into one action by the trial court, and the trial court dismissed the proceedings filed on behalf of the owners because the Broker's actions constituted champterous conduct. The court did allow the Broker's appeal of his own tax assessment to proceed. The Broker appealed.

The New York Supreme Court, Appellate Division, affirmed the ruling of the trial court. The court first considered whether the Broker's conduct violated the state's laws against champtery. "Champtery" is defined as behavior where a third party enters into an agreement with a litigant where the third party agrees to pursue litigant's claims in court in exchange for a portion of any judgment that the litigant receives.

The court found that the agreement for the Broker to represent the Owners' interests before the Board did not constitute champtery, as this agreement did not involved the filing of a lawsuit and the Broker was authorized to represent the Owners' interests before the Board. However, the court agreed with the trial court that the Agreements were legally void because the Broker could not agree to seek judicial relief on behalf of the Owners, as that constituted champtery. It did not matter that the Broker had retained an attorney to commence the proceedings, since the Broker had hired the attorney and thus controlled the course of the litigation.

The court also affirmed the trial court's allowing the Broker's lawsuit to proceed, finding that the Broker could certainly hire an attorney to seek review of his own petition's denial. Thus, the rulings of the trial court were affirmed.

Barthel v. Town of Hurley, 739 N.Y.S.2d 771 (N.Y. App. Div. 2002).