Resources Investment Corp. v. Reliance Group, Inc., 45 N.Y.2d 970 (1978)
A finder’s fee agreement requiring prior written consent before approaching third parties is enforceable, and failure to obtain such consent, especially after the potential purchaser was initially rejected, bars recovery of the fee, absent any additional services rendered.
Summary
Resources Investment Corp. sued Reliance Group, Inc. for a finder’s fee related to the sale of Reliance’s subsidiary. The agreement required Resources to obtain Reliance’s prior written consent before approaching potential buyers. Resources claimed it had provided the buyer’s name before the agreement, but Reliance withheld consent. The New York Court of Appeals held that Reliance was not liable for the finder’s fee because Resources failed to obtain the required consent after the agreement was signed and did not perform any additional services beyond providing the initial name. The court emphasized the importance of upholding the explicit terms of the contract and rejected the argument that Reliance could arbitrarily avoid paying the commission. Resources’ prior actions did not constitute valid waiver or substantial performance.
Facts
Resources Investment Corp. (“Resources”) and Reliance Group, Inc. (“Reliance”) entered into a letter agreement regarding the potential sale of Reliance’s subsidiary, Disclosure Incorporated.
The agreement stipulated that Resources would receive a commission for services related to the sale.
A key provision required Resources to obtain Reliance’s prior written consent before approaching any third parties regarding a potential sale. Reliance retained sole discretion to withhold consent.
Resources claimed it had already given Reliance the name of the company that ultimately purchased Disclosure before the agreement was signed.
Reliance had withheld its consent for Resources to approach this particular company and never gave consent thereafter.
Procedural History
Resources sued Reliance for the finder’s fee in the trial court.
Reliance moved for summary judgment, which was initially denied.
The Appellate Division reversed, granting summary judgment to Reliance.
Resources appealed to the New York Court of Appeals.
Issue(s)
Whether Resources is entitled to a finder’s fee under the agreement when it failed to obtain Reliance’s prior written consent before approaching the ultimate purchaser, as required by the express terms of the agreement.
Holding
No, because the agreement explicitly required Resources to obtain prior written consent, which it failed to do after the agreement was in place; and because Resources did not perform any other services after the agreement was executed, simply furnishing the name of the potential buyer was insufficient to trigger liability for a finder’s fee. Furthermore, there was no valid waiver or substantial performance.
Court’s Reasoning
The court emphasized the importance of adhering to the clear and unambiguous terms of the agreement. The provision requiring prior written consent was a condition precedent to Reliance’s liability for a finder’s fee.
The court rejected Resources’ argument that Reliance could avoid paying the commission by arbitrarily withholding consent. The court noted that Resources signed the agreement knowing that consent for the ultimate purchaser had already been withheld. This indicated that something more than merely furnishing a name was required for Resources to earn the fee.
The agreement stated the commission was “in complete satisfaction of and as payment for any and all services rendered by Resources… whether as finder, broker, originator, consultant or otherwise.” This language indicated that Resources was obligated to do more than simply provide a name.
The court dismissed Resources’ argument of prior waiver, stating that “the concept of prior waiver is legally anomalous.” By entering into the agreement with the consent requirement, Resources waived any rights it may have acquired by revealing the name prior to the agreement.
The court also rejected Resources’ claim of substantial performance. The court cited the amendment to paragraph 10 of subdivision a of section 5-701 of the General Obligations Law, intended to prevent such arguments from circumventing the Statute of Frauds.
The court concluded that there was no issue of fact to be decided and affirmed the Appellate Division’s grant of summary judgment to Reliance.