Graff v. Billet, 31 N.Y.2d 170 (1972)
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A broker is entitled to a commission when they procure a buyer ready, willing, and able to purchase property on the terms set by the seller, unless a valid agreement states otherwise; however, such an agreement is unenforceable if the seller acted in bad faith to avoid completing the sale.
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Summary
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Graff, a real estate broker, sued Billet to recover a commission, claiming he found a buyer for Billet’s property. Billet argued Graff agreed in writing that no commission was due unless a sale contract was signed and the sale completed. Graff alleged Billet acted in bad faith by changing the sale terms after Graff secured a buyer. The Court of Appeals held that summary judgment for Billet was inappropriate because there was a question of fact as to whether Billet acted in bad faith in changing the terms of the sale after inducing the broker to sign an agreement conditioning the commission on the completion of the sale.
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Facts
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Graff, a licensed real estate broker, was hired by Billet to sell property for $300,000 ($85,000 cash, $215,000 purchase-money first mortgage). Graff found a buyer willing to purchase under those terms on August 30, 1960. On September 2, before presenting the sale contract, Billet had Graff sign a brokerage agreement stating no commission was earned until the contract was signed, the deed delivered, and the full price paid. After the agreement was signed, Billet presented a contract with different terms: $300,000 total, $85,000 cash, but subject to an existing $85,000 first mortgage and a $130,000 purchase-money second mortgage, instead of a single $215,000 first mortgage. The buyer refused the altered terms. The sale fell through, and Billet refused to pay Graff. Billet later sold the property through another broker.
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Procedural History
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Graff sued Billet in quantum meruit to recover the commission. The trial court (Special Term) denied Billet’s motion for summary judgment. The Appellate Division reversed, granting summary judgment to Billet. Graff appealed to the New York Court of Appeals.
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Issue(s)
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Whether the written brokerage agreement, which conditioned the broker’s commission on the signing of a contract of sale and the completion of the sale, is enforceable when there is a question of fact as to whether the property owner acted in bad faith by changing the terms of the sale after the broker procured a ready, willing, and able buyer.
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Holding
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No, because if the property owner acted in bad faith by changing the terms of the sale with the intent to avoid completing the sale after inducing the broker to sign the brokerage agreement, the agreement is unenforceable and the broker may be entitled to their commission.
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Court’s Reasoning
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The court acknowledged that brokerage agreements requiring a signed contract for a commission are generally valid, citing Heller & Henretig v. 3620-168th St., Inc., 302 N.Y. 326 (1951). However, such agreements are unenforceable if the owner acted in bad faith or fraudulently obtained the agreement. The key question was whether Billet acted in bad faith when he had Graff sign the brokerage agreement. If Graff procured a buyer ready, willing, and able to buy on Billet’s original terms, Graff earned his commission unless a contrary agreement existed. The court reasoned that if Billet changed the sale terms with the