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REICHMAN v. CREATIVE REAL ESTATE CONSULTANTS

September 7, 1979

RONALD REICHMAN, Petitioner,
v.
CREATIVE REAL ESTATE CONSULTANTS, INC., Respondent.



The opinion of the court was delivered by: CANNELLA

Motion by non-party witness Alfred Miller, Esq., to quash the deposition subpoena served upon him in connection with this litigation, is granted.

Motion by petitioner Ronald Reichman, for summary judgment vacating an arbitration award against him, is denied.

 Motion by respondent Creative Real Estate Consultants, Inc., for summary judgment confirming an arbitration award in its favor, is granted.

 This is a proceeding on an award entered in the arbitration between petitioner Ronald Reichman, a citizen of Pennsylvania, and respondent Creative Real Estate Consultants, Inc., a New York corporation.

 Jurisdiction is based on diversity of citizenship, the amount in controversy exceeding $ 10,000.

 FACTS

 The following facts are not disputed. On February 7, 1977, petitioner Ronald Reichman came to the New York City offices of respondent Creative Real Estate Consultants, Inc. ("Creative"), and met with its president, Leo Blank. Reichman was seeking financing to redeem and develop a parcel of land located in Pennsylvania. Blank agreed to act as Reichman's broker, for the purpose of obtaining the financing, and the parties entered into a written agreement, which provides, in pertinent part:

 EXCLUSIVE AGREEMENT FOR MORTGAGE FINANCING

 
AGREEMENT made this 7th day of February, 1977, at New York, New York, by and between RONALD REICHMAN, . . . (hereinafter referred to as the "Owner"), and CREATIVE REAL ESTATE CONSULTANTS, INC., . . . (hereinafter referred to as the "Broker").

 WITNESSETH:

 
WHEREAS, Owner has a right of redemption in connection with approximately 26.24 acres of real property and improvements thereon located at and along Swedsford Road, Tredyffrin Township, Cleister County, Pennsylvania, . . . (hereinafter referred to as the "Property"); and
 
WHEREAS, the Owner requires funds to redeem the Property and, thereafter, to develop the Property under a permanent plan; and
 
WHEREAS, the Owner desires to engage the Broker to obtain all the necessary and appropriate mortgage financing for redemption and development and the Broker desires to accept the engagement, solely on an exclusive basis, all as more particularly set forth herein;
 
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the Owner and the Broker agree as follows:
 
1. Exclusive Right to Arrange Mortgage Financing. The Owner hereby grants to the Broker the sole and exclusive right to arrange mortgage financing for the Property, including, if appropriate, portions or parcels of the Property, provided, however, that if Broker fails to obtain a commitment for interim financing of the Property within 45 days from the date hereof then, in such event, notwithstanding Paragraph 3 hereof, this Agreement shall be null and void.
 
2. Efforts of Broker. The Broker agrees to attempt to obtain the mortgage financing, including, without limitation, any and all interim, gap and permanent mortgage financing, and diligently to pursue such financing.
 
3. Duration of Agreement. This Agreement shall commence on the date hereof and shall continue in full force and effect until such time as (a) the Owner ceases to have any interest in or right to the Property or portions thereof (whether legal, equitable or otherwise, and whether directly or indirectly through nominees, corporate or otherwise) or (b) until permanent financing has been secured and closed for the Property and all portions thereof, whichever is earlier.
 
4. Representations of Owner. The Owner represents and warrants (a) that he has the right to redeem the Property as of the date hereof; (b) that upon redemption he will have a fee simple interest in the Property; and (c) that upon the issuance of commitments for financing acceptable to the Owner, the Owner will proceed to closing. A breach of any of these representations shall be deemed a closing within the meaning of this Agreement.
 
7. Commissions of Broker, General Rule.
 
a. The Broker shall be entitled to a commission in an amount equal to 2% Of the gross amount of all mortgage loans obtained, subject to subparagraph b;
 
b. If mortgage financing is obtained by a person other than the Broker, including the Owner, the Broker shall be entitled to a commission in an amount equal to 1% Of the gross amount of the mortgage loan;
 
c. The Broker's commission shall be due and payable upon the closing of the financing to which it pertains and the Owner agrees that the commission shall be paid at the closing of said mortgage loan and that payment shall be a condition of the closing of the loan to which it pertains. The right of the Broker to its commission at the closing and as a condition to the closing shall be specifically enforceable.
 
8. Credits to the Owner. Notwithstanding paragraph 7, with respect to the Property or any portion thereof, during the term of this Agreement:
 
a. if the Broker obtains interim financing and thereafter obtains permanent financing; or
 
b. if the Broker obtains interim financing and someone other than the Broker obtains permanent financing; or
 
c. if someone other than the Broker obtains interim financing and the Broker obtains permanent financing; or,
 
d. if someone other than the Broker obtains interim financing and also obtains permanent financing, then the commission paid by the Owner to the Broker for the interim financing shall be applied against the commission earned by the Broker on the permanent financing to reduce said commission (but not below zero).
 
10. Arbitration. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration at New York, New York, in accordance with the Commercial Arbitration Rules then obtaining of the American Arbitration Association, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.

 The agreement was executed, before a notary, by Reichman and by Blank on behalf of Creative.

 Creative did introduce Reichman to Realty Income Trust, which, on March 11, 1977, wrote to Reichman setting forth a proposal for a "sale and leaseback" that would provide approximately $ 2,000,000 for the venture. After some discussions with Reichman's Philadelphia lawyers, Realty Income Trust committed itself to a $ 2,000,000 financing plan in a letter to Reichman dated March 31, 1977. However, this financing plan was not used. According to Reichman, the conditions of the loan were too onerous. Creative maintains that the financing package did not go through because Reichman had lied to everyone, in several material respects, and could not produce $ 200,000 in cash to close the deal.

 Thereafter, Reichman, his Philadelphia lawyers (who, it appears, participated in the venture to some extent as principals), and various corporate entities, arranged financing for the purchase and development of the property or portions thereof.

 Creative believed itself entitled to a commission of $ 40,000 pursuant to the agreement of February 7, 1977, but Reichman did not agree. The dispute was brought before the American Arbitration Association, and a hearing was held in New York City, on February 15, 1978, before Alfred Miller, Esq., as arbitrator.

 Following the arbitration hearing, the Tribunal Administrator of the American Arbitration Association wrote a letter to counsel for the respective parties, on April 11, 1978, reading in part:

 
The Arbitrator has requested the Association to address the following questions to the Parties.
 
Regarding paragraph (7B) of the contract:
 
1. Was mortgage financing obtained by a person other than ...

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