## Facts

- A property owner authorized a real estate broker to procure a purchaser on specified sale terms, without disclosing any unusual title limitations.
- The property was subject to an old deed restriction limiting certain “offensive” uses and providing for a reversionary interest if the restriction was violated.
- The broker produced a buyer who agreed to the owner’s terms, and the parties executed a contract of sale.
- Near closing, the buyer discovered the restriction and reverter clause through a title search and refused to accept title, asserting the title was unmarketable due to the risk of forfeiture.
- The owner asserted she was unaware of the restriction and did not cure the title objection.
- The broker sued for its commission, alleging it had produced a purchaser ready, willing, and able to buy on the authorized terms and that the failure to close resulted solely from the seller’s title defect.
- The trial court awarded the broker a commission; the Appellate Division reversed; the broker appealed to the New York Court of Appeals.

## Issues

1. Whether a broker earns a commission by producing a purchaser who contracts on the owner’s stated terms when the sale fails because the purchaser, in good faith, refuses unmarketable title due to a restrictive covenant and reversionary interest.
2. Whether the seller’s ignorance of an encumbrance affecting marketability shifts the risk of the failed closing from the seller to the broker.

## Decision

- The Court of Appeals reversed the Appellate Division and held the broker was entitled to its commission.
- The broker performed by producing a purchaser ready, willing, and able to buy on the owner’s terms, as shown by execution of a binding contract.
- The purchaser’s refusal to close was justified because the restriction and reverter created a substantial cloud and risk of forfeiture, rendering the title unmarketable.
- The failure of the transaction was attributable to the seller’s inability to convey marketable title, not to any default by the broker or bad faith by the purchaser.
- The seller’s lack of knowledge of the encumbrance did not affect the broker’s right to compensation.

## Legal Principles

- A real estate broker earns a commission when the broker produces a purchaser ready, willing, and able to buy on the owner’s stated terms and the owner enters into an enforceable contract with that purchaser.
- A broker’s earned commission is not defeated because the sale does not close due to the seller’s defective or unmarketable title.
- A restrictive covenant coupled with a reversionary interest that exposes the purchaser to a real risk of forfeiture may render title unmarketable and justify a purchaser’s refusal to perform.
- The risk that the seller cannot convey marketable title rests on the seller, and the seller’s ignorance of a title defect does not shift that risk to the broker.

## Conclusion

The court held that the broker’s commission was earned upon producing a contracting purchaser on the authorized terms, and the broker remained entitled to payment even though the closing failed because an undisclosed restrictive covenant and reverter clause made the seller’s title unmarketable and the purchaser refused in good faith to accept it.


Van Vliet & Place, Inc. v. Gaines, 249 N.Y. 106, 162 N.E. 600 (N.Y. 1928)