NY courts open to brokers suing for NJ commissions

Real Estate Weekly, August 11, 1993 by Lois Weiss

A New York broker who was prevented from suing for a commission in New Jersey can sue in New York an Appellate Division court ruled last month.

A lower court judge had previously decided the broker could not sue in New York, despite an Appellate Division Jersey court saying he could.

The new ruling reverses a recent trend of decisions that significantly restricted a New York real estate broker's ability to earn a commission on a transaction involving out-of-state property, said Jay J. Gurfein, a partner in Gurfein & Graubard. Gurfein represented the broker in the New York State court portions of the case titled Rosenberg & Rosenberg, P. C. vs. David Hoffman and Maplewood Tower Limited Partnership.

Up until a couple of years ago, a broker who performed his services in New York could sue for commissions in New York no matter where the property was located, explained Gurfein. "Every state has to give full faith and credit to the acts of the sister state," he said.

The lower court decision in this case, among others, had countered that notion.

In 1986, the New York attorney and mortgage broker Gerald Rosenberg had been approached by a client to obtain a mortgage on a New Jersey property. After numerous meetings in his New York office, as well as calls to New York financial institutions, Rosenberg accompanied a New York bank's inspector on a site visit two times. Papers agreeing to the commission were signed by Rosenberg in New York and sent to and signed by the client in New Jersey.

At closing, Rosenberg received a portion of the fee based on the initial funding of the loan commitment. The defendant said he would pay him the rest later. The borrower did not use any additional funds and eventually sold the property to parties who agreed to pay the remaining commission.

When the plaintiff broker did not receive the balance of the commission even though he was not licensed as broker in New Jersey, Gurfein said he made the mistake of suing in that state. The lower court there declined jurisdiction because he was not licensed in New Jersey and also extinguished his claim.

A New Jersey Appellate Court declined to follow a Federal decision that would have prevented the broker's law suit from proceeding elsewhere. The judges noted in a footnote that since New Jersey courts were "closed to plaintiff," they did not need to "advance an opinion" as whether Rosenberg's remedies were foreclosed in another forum.

This allowed Rosenberg the ability to sue in New York, where the action should have been commenced from the outset, noted Gurfein.

The New York Supreme Court judge, however, decided he had already had his day in court and would not hear the case. "She ignored the part where the Jersey judge said he could sue in New York," Gurfein added.

Gurfein said they had to appeal because the state of the law was left so that no one could sue if they set foot in another state where they were not licensed.

The Appellate Division agreed, finding New York had a significant interest in protecting brokers on transactions which originated in New York and had other significant contacts with New York. "They found collateral estoppel and res judicata could not apply to bar Rosenberg's action," Gurfein explained.

The Appellate Division has now given the broker leave to sue in New York. Although Gurfein said they may win or lose in that case, what matters is that brokers can once again sue in New York for their interstate commissions.

"The decision gives brokers the ability to work on multi-state transactions so long as New York remains the 'center of gravity' for the work done on the transaction," he added.

Most owners would update the equipment upon vacancy even though they could obtain the same rent without the improvements, McCulloch note. "There is a lot of competition now that the co-op units have become destabilized."

The guidelines affect about 30,000 apartments, including co-ops with tenants in place in 18 municipalities that have adopted the Emergency Tenant Protection Act.