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Trylon Realty Corp. v. Di Martini: Commission Dispute Arising Out of Property Owner's Bad Faith Withdrawl of Lease Agreement

In Trylon Realty Corp. v. Di Martini, the Supreme Court of New York, Appellate Division, addressed a broker's claims against a property owner regarding a commission on leased property. The court affirmed that the property owner, who failed to go through with the lease after receiving an informal assurance from a local zoning board and an agreement with lessee as to many essential terms, acted in bad faith and owed the broker a commission.

Trylon Realty Corp. (TRC) was hired to procure the main tenant for a proposed shopping center to be erected on land owned by Di Martini (Owner). Precise terms of the lease were left open, but the commission fee was settled. Thereafter, TRC produced Food Fair Stores as the prospective main tenant. Negotiations progressed to a point where the parties agreed, among other things, upon the size of the store, the rental per square foot, and the term of the lease. They also agreed on locating the store in front of the property, as required by the Board of Standards and Appeals of the city as a condition for granting a variance for a parking lot in the rear of the store.

After an informal assurance had been received from the board that the application would be approved as amended, Di Martini arbitrarily withdrew it. Di Martini's only explanation was that he would make it up to TRC. TRC sued Di Martini to recover its commission. The trial court found for TRC and Di Martini appealed.

The Court noted that Di Martini sought to avoid liability on the theory that when he withdrew his application there had been no complete meeting of the minds, because many important points remained to be discussed and settled. The court noted that there was not a complete accord between the principals, but "the law is well settled that a party may not take advantage of his own wrong in terminating negotiations in bad faith to prevent plaintiff from fulfilling his undertaking." (Citing Goodman v. Marcol, Inc., 261 N.Y. 188, 184 N.E. 755 (1933); Westhill Exports v. Pope, 12 N.Y.2d 491, 191 N.E.2d 447, 240 N.Y.S.2d 961 (1963)). The appellate division also noted that in McWilliams v. Mulgrew, 204 Misc. 561, 118 N.Y.S.2d 422 (Mun. Ct.), aff'd., 205 Misc. 90, 129 N.Y.S.2d 301 (Sup. Ct. 1953), the superior court held that where additional terms remain to be agreed upon, a defendant who is sued for a commission cannot complain where it was her own act which prevented the natural progress of the transaction.

The Court distinguished the case from Kaelin v. Warner, 27 N.Y.2d, 267 N.E.2d 86, 318 N.Y.S.2d 294 (1971), where there was no evidence to justify bad faith on the part of the seller. The court noted that Di Martini's arbitrary and capricious actions contrasted markedly with those of the seller in Kaelin. The court also noted that although this deal might have foundered on a genuine disagreement between the parties, in which case there would have been no liability, here it was the seller's actions that prevented any possibility of finalizing an agreement.

The concurring opinion stated "plaintiff earned its brokerage commission because there had been a meeting of the minds upon the essential terms of the lease before Di Martini withdrew the variance application arbitrarily and in bad faith."

Trylon Realty Corp. v. Di Martini, 40 A.D.2d 1029, 338 N.Y.S.2d 945 (1972), aff’d 34 N.Y.2d 899, 316 N.E.2d 718, 359 N.Y.S.2d 284 (1974).