Strax vs Murray Hill Mews Owners Corp.

In Strax vs Murray Hill Mews Owners Corp., an appellate court made it clear that a co-op board member could not collect a brokerage commission for services to the co-op even without a clear and specific engagement to provide such services to the co-op.

In 1987, while serving as a member of the board of directors of the defendant co-op, Lisa Strax, the plaintiff attorney, and several other board members attended a bankruptcy auction of commercial restaurant space in the co-op’s building. She submitted a winning bid on co-op’s behalf, and then procured a prospective tenant for the commercial premises. The $91,000 real estate commission was paid by the co-op to Hampton Management, the building’s managing agent, in accordance with the governing management agreement. When Strax objected, Hampton agreed to share the commission equally with her.

Strax brought suit to recover the 50 percent commission retained by Hampton, as well as legal fees for her services in connection with submitting the winning bid and procuring the new tenant. At the initial jury trial held in 1993, the court dismissed plaintiffs Strax’s claim based upon an unpled defense of accord and satisfaction purportedly stemming from her acceptance of Hampton’s offer of half the commission. On a prior appeal, the court, by order entered December 6, 1995, reversed the dismissal order, reinstated the complaint, and directed a new trial, framing the relevant issues as whether “the services rendered by plaintiff in connection with the purchase and re-renting of the commercial space were [part of] her duties as a director and whether the services were assented to or ratified by defendant’s directorate.”

Following a five-day bench trial, the court resolved each of the framed issues in the co-op’s favor and dismissed the complaint. In a thoughtfully written decision, the court, pointed to, among other factors, the plaintiff’s own acknowledgment on cross-examination that at least some of her actions in connection with the brokerage deal were taken at her “own risk” in the “hope of acting as a broker,” expressly found that any brokerage services or legal work undertaken by Strax were rendered “in her capacity as a director and volunteer…in accordance with her fiduciary duties toward the board and cooperative.”

The court further found that “[a]t no time did the [defendant’s] board of directors assent or ratify any decision by [the board president] to approve a commission,” citing the absence of any board minutes or other credible showing of concerted board action on the matter. Underlying the trial court’s factual findings was its explicit assessment of Strax as a witness who was not “particularly credible or forthright” and its conclusion, based in part on plaintiffs “demeanor,” that her “current trial testimony appeared calculated to meet the demands” of the court’s decision on the prior appeal.

The ruling was based on the court’s favorable evaluation of the credibility of the testimony offered on the issue by defendant’s witness, Maidenbaum (a board member). It also stated skepticism over how the plaintiff’s recollection of the meetings had become “clearer” during the retrial begun in December 2000 than it was at her 1990 deposition when she could not recall “anything that was said about [her] commission” at the meetings. The court did not believe Strax’s statement that individual board members may have known of her “hope” to receive a brokerage commission at the time that the underlying lease transaction was consummated.

Inasmuch as the trial court explicitly and appropriately rejected Strax’s newly formed remembrance of the 1987 board meetings, there was no record support for a finding that her participation in the lease transaction was bargained for or ratified by the co-op, and not as the trial court reasonably found, gratuitously rendered by Strax in furtherance of her fiduciary duties as a director. To the extent that Strax argued that the court’s resolution of this issue was against the weight of the evidence, the court concluded that the argument lacked merit since it could not be said that the evidence bearing on the issue so preponderated in favor of plaintiff that the verdict could not be reached on any fair interpretation of the evidence.

The trial court’s detailed findings that Strax acted as a volunteer in her capacity as a director and without valid authorization to serve as an independent broker. The court quoted a prior case when it was held that: “It is the general rule that a director, assuming office as such without any agreement as to compensation, is presumed to render his official services gratuitously” and no basis was shown on the cold of the case record to disturb the trial court’s fact and credibility-laden determination that Strax had failed to overcome that presumption at the full and fair (re)trial of this long-pending litigation.

There was a dissent to the decision which argued that the issue on the appeal was whether the terms of the written commission agreement signed by the president of the co-op’s board of directors was ratified by the board’s decision to consummate the lease transaction procured by Strax. Since the dissenter found that the terms of the written commission agreement were so ratified and this justice would have reversed and granted judgment to Strax for $45,955.67. The dissenting opinion concluded that since the co-op received and accepted the benefit of Strax’s work and acknowledged the value by paying the commission to the managing agent who did not broker the lease transaction, it should have paid Strax the commission that she had earned.