Cooperatives & Condominiums

In an action by co-op corporation for possession of a co-op apartment, and for a declaratory judgment canceling unit owner's stock, unit owner appealed from the Appellate Division's grant of summary judgment to the co-op corporation. The Court of Appeals affirmed, applying the business judgment rule to hold that the determination by the co-op board and co-op shareholders satisfied the requirement of RPAPL 711(1) that tenant's objectionable conduct be established by competent evidence.

Unit owner bought the shares associated with this apartment in 1998. He immediately began to complain about his upstairs neighbors, who had lived in their apartment for more than 20 years, accusing them of excessive noise and storage of toxic chemicals. He wrote 16 letters to the co-op in 1 month alone, but investigation by the co-op board failed to substantiate unit owner's claims. Unit owner began distributing flyers calling his neighbor a psychopath and making other apparently false statements. Unit owner also performed work in violation of house rules and would not respond to board requests for correction. He also brought four lawsuits against the upstairs neighbor, the co-op president, and the co-op management. At that point, the co-op board called a special meeting of shareholder, pursuant to the proprietary lease, which provides for termination of a tenancy because of objectionable conduct on the part of the lessee. The co-op board informed the shareholders that the purpose of the meeting was to determine whether unit owner had engaged in conduct that made the tenancy undesirable. By a vote of 2048 shares to 0, the shareholders in attendance declared unit owner's conduct objectionable and directed the board to cancel his shares and terminate his lease. The board then served a notice of termination, but unit owner remained in the apartment, causing the board to bring this action. Supreme Court denied co-op's summary judgment motion, invoking RPAPL 711(1) to hold that a co-operative may not terminate a tenancy for objectionable conduct without proving its claim to the satisfaction of a court. A divided Appellate Division reversed and granted the board's summary judgment motion, relying on the business judgment rule. Unit owner appealed.