Fischer v. Ohm, 83 N.Y.2d 955 (1994)
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New York General Obligations Law § 5-531, which limits brokerage fees for procuring loans, applies to loans made to corporations even when a corporate guarantor secures its guarantee with a mortgage on real property.
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Summary
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Fischer, a finder, sued Ohm’s estate to recover a brokerage fee for arranging a loan for Panasian Communications, Inc. The loan was guaranteed by other corporations controlled by the Ohms, one of which secured its guarantee with a mortgage. The defendants argued that General Obligations Law § 5-531 limited the allowable brokerage fee to a fraction of what was agreed upon. The court held that the statutory limit applied because the primary loan to Panasian was not secured by real estate, and the statute doesn’t exempt corporate borrowers. The finder’s fee, exceeding the statutory limit, was deemed unenforceable.
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Facts
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Walter Fischer entered into a written agreement with Peter Ohm to procure a $1.6 million loan for Peter Ohm, Andrew Ohm, or any of their companies, including Panasian Communications, Inc., in exchange for a $300,000 finder’s fee.r
Fischer successfully procured a $1.75 million loan for Panasian from Chase Manhattan Bank to finance Panasian’s acquisition of a television station.r
The loan was guaranteed by several corporations controlled by the Ohms, including Pako Realty, Inc.r
Pako Realty granted a mortgage to Chase on real property as security for its guarantee.r
Fischer was paid only $37,000 of the agreed-upon finder’s fee and subsequently sued to recover the remaining balance.r
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Procedural History
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Fischer sued the estate of Peter Ohm and other related entities to recover the balance of the finder’s fee.r
The defendants asserted a counterclaim, arguing that General Obligations Law § 5-531 limited the brokerage fee and that Fischer owed them a refund.r
Supreme Court granted summary judgment for Fischer but limited his recovery under the brokerage agreement, applying General Obligations Law § 5-531.r
The Appellate Division affirmed the Supreme Court’s decision.r
The Appellate Division granted Fischer’s motion for leave to appeal to the Court of Appeals and certified a question.r
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Issue(s)
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1. Whether General Obligations Law § 5-531 applies to a brokerage agreement where the loan procured was for a corporation and where one of the corporate guarantors secured its guarantee with a mortgage on real property.r
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Holding
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1. No, because the loan to Panasian, the primary obligor, was not secured by any interest in real property. General Obligations Law § 5-531 applies to loans made to corporations and does not contain an exception for loans to corporations secured by a mortgage from a guarantor.r
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Court’s Reasoning
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The court reasoned that General Obligations Law § 5-531(1) explicitly limits brokerage fees except for