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Morpheus Capital Advisors LLC v. UBS AG - 23 N.Y.3d 528

Rule:

The distinction between an exclusive agency and an exclusive right to sell is well established. The general rule is that where an exclusive right of sale is given a broker, the principal cannot make a sale herself without becoming liable for the commissions. But where the contract is merely to make the broker the sole agent, the principal may make a sale herself without the broker's aid, if such sale is made in good faith and to some purchaser not procured by the broker.

Facts:

Plaintiff Morpheus Capital Advisors LLC (Morpheus or broker) entered into an agreement with defendant UBS Real Estate Securities, Inc. (UBS or Owner), which stated that Morpheus would serve as "financial advisor and investment banker in the proposed sale" of certain student loan assets owned by UBS. Although the assets had a significantly large face value, the parties agreed that the assets had devalued considerably. Morpheus filed an action against defendant Owner for breach of contract and breach of covenant of good faith and fair dealing, which the trial court dismissed with prejudice. The appellate division modified the dismissal order and directed that the dismissal of the complaint against defendant UBS be without prejudice. Defendant Owner sought further appellate review.

Issue:

Did the financial brokerage agreement give a broker the right to a commission when the Owner transferred certain distressed assets to a fund as part of bailout?

Answer:

No

Conclusion:

As the parties' financial brokerage agreement gave the Broker a standard exclusive agency regarding the sale of assets, rather than an exclusive right to sell, the Broker was not entitled to a commission when the assets Owner transferred certain distressed student loan assets to a fund created by a bank as part of a bailout. There was no breach of contract by the Owner because it had no duty to wait in the absence of language in the parties' agreement that expressly varied the parties' rights under the exclusive agency, and the bailout did not trigger the Owner's obligation to pay the commission. The Court dismissed the Broker's complaint with prejudice.

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