Cooperatives & Condominiums

Part Performance Exception to Statute of Frauds Precludes Summary Judgment

Panetta v. Kelly

NYLJ 4/14/05, p. 24, col. 4

AppDiv, First Dept

(memorandum opinion)

In a breach of contract action against the allegedly nominal purchaser of a cooperative apartment, plaintiff appealed from Supreme Court's dismissal of the complaint. The Appellate Division reversed and remanded, holding that plaintiff had raised questions of fact about the applicability of the part performance exception to the statute of frauds.

Plaintiff and Kelly alleged that in 1993, they sought to purchase the subject apartment to use for business purposes. They alleged that to satisfy the co-op's requirement that apartments be owner-occupied, they arranged for the apartment to be purchased in the name of Tingo, a family friend of Kelly. Plaintiff and Kelly further alleged that they had entered into an oral agreement with Tingo that plaintiff and Kelly would pay the full purchase price and monthly maintenance charges, but that Tingo would take the income tax deductions attributable to those charges. Under the oral agreement, plaintiff and Kelly would share in any profit or loss from sale of the apartment, and sale would occur whenever either plaintiff or Kelly wanted to sell. Tingo disputed the existence of the oral agreement, but conceded that plaintiff and Kelly had made all payments associated with the apartment. When plaintiff sought to sell the apartment, Tingo refused to cooperate, triggering this breach of contract action. As a defense to the action, Tingo invoked the statute of frauds, and Supreme Court dismissed the complaint on that basis.

In reversing, the Appellate Division emphasized that the statute of frauds permits courts to compel specific performance of agreements in cases of part performance, when that performance is unequivocally referable to the agreement. In this case, the fact that plaintiff and Kelly had paid the purchase price, improved the apartment with their own funds, made all maintenance payments, and occupied the apartment for business purposes, raised questions of fact about application of the part performance exception. As a result, the Supreme Court had erred in dismissing the complaint.

Unit Owner Raises Triable Issues of Fact on Discrimination Claim

Cohen v. Seward Park Housing Corp.

NYLJ 4/27/05, p. 18, col. 1

Supreme Ct., N.Y. Cty

(Feinman, J.)

In an action by co-op unit owners against the co-op board for breach of fiduciary duty, breach of contract, and violation of the anti-discrimination provisions of New York's Executive Law, the board moved to dismiss the complaint for failure to state a claim. The court denied the board's motion with respect to the claims based on breach of fiduciary duty and violation of the Executive Law, concluding that unit owner's complaint had raised questions of fact that precluded dismissal of the complaint.

The unit owner owned three adjacent apartments in the subject building. When a fourth adjacent apartment became available in 2001, unit owner contracted to purchase the apartment for $160,000. The co-op board, however, asserted a right of first refusal, contending that the purchase price of the apartment was too low. Later that year, when the apartment remained vacant, the board president invited unit owner to submit a written offer. Unit owner submitted an offer of $190,000, but the board apparently rejected the offer without informing unit owner of the rejection. In May 2002, unit owner learned that the apartment had been sold to another buyer for $230,000. Unit owner then brought this action, contending that the board had breached its fiduciary duty, had discriminated against unit owner as an Orthodox Jew, and had breached its contract with unit owner.

The court dismissed the breach of contract claim, noting that unit owner had not articulated the provisions of any contract allegedly breached. With respect to the breach of fiduciary duty claim, however, the court held that dismissal was premature. The court rejected the board's reliance on the business judgment rule, noting that here, unit owner alleged that he had been treated differently from other unit owners, who had been permitted to purchase adjacent apartments at prices below the market price. The business judgment rule incorporates an exception for bad faith, and claims of unequal treatment are sufficient to raise inferences of bad faith. As a result, dismissal of the claim before discovery would be premature. With respect to the discrimination claim, the court held that the allegation of discrimination on the basis of religion was sufficient to withstand a motion to dismiss the complaint.

Part Performance Exception to Statute of Frauds Precludes Summary Judgment

Panetta v. Kelly

NYLJ 4/14/05, p. 24, col. 4

AppDiv, First Dept

(memorandum opinion)

In a breach of contract action against the allegedly nominal purchaser of a cooperative apartment, plaintiff appealed from Supreme Court's dismissal of the complaint. The Appellate Division reversed and remanded, holding that plaintiff had raised questions of fact about the applicability of the part performance exception to the statute of frauds.

Plaintiff and Kelly alleged that in 1993, they sought to purchase the subject apartment to use for business purposes. They alleged that to satisfy the co-op's requirement that apartments be owner-occupied, they arranged for the apartment to be purchased in the name of Tingo, a family friend of Kelly. Plaintiff and Kelly further alleged that they had entered into an oral agreement with Tingo that plaintiff and Kelly would pay the full purchase price and monthly maintenance charges, but that Tingo would take the income tax deductions attributable to those charges. Under the oral agreement, plaintiff and Kelly would share in any profit or loss from sale of the apartment, and sale would occur whenever either plaintiff or Kelly wanted to sell. Tingo disputed the existence of the oral agreement, but conceded that plaintiff and Kelly had made all payments associated with the apartment. When plaintiff sought to sell the apartment, Tingo refused to cooperate, triggering this breach of contract action. As a defense to the action, Tingo invoked the statute of frauds, and Supreme Court dismissed the complaint on that basis.

In reversing, the Appellate Division emphasized that the statute of frauds permits courts to compel specific performance of agreements in cases of part performance, when that performance is unequivocally referable to the agreement. In this case, the fact that plaintiff and Kelly had paid the purchase price, improved the apartment with their own funds, made all maintenance payments, and occupied the apartment for business purposes, raised questions of fact about application of the part performance exception. As a result, the Supreme Court had erred in dismissing the complaint.

Unit Owner Raises Triable Issues of Fact on Discrimination Claim

Cohen v. Seward Park Housing Corp.

NYLJ 4/27/05, p. 18, col. 1

Supreme Ct., N.Y. Cty

(Feinman, J.)

In an action by co-op unit owners against the co-op board for breach of fiduciary duty, breach of contract, and violation of the anti-discrimination provisions of New York's Executive Law, the board moved to dismiss the complaint for failure to state a claim. The court denied the board's motion with respect to the claims based on breach of fiduciary duty and violation of the Executive Law, concluding that unit owner's complaint had raised questions of fact that precluded dismissal of the complaint.

The unit owner owned three adjacent apartments in the subject building. When a fourth adjacent apartment became available in 2001, unit owner contracted to purchase the apartment for $160,000. The co-op board, however, asserted a right of first refusal, contending that the purchase price of the apartment was too low. Later that year, when the apartment remained vacant, the board president invited unit owner to submit a written offer. Unit owner submitted an offer of $190,000, but the board apparently rejected the offer without informing unit owner of the rejection. In May 2002, unit owner learned that the apartment had been sold to another buyer for $230,000. Unit owner then brought this action, contending that the board had breached its fiduciary duty, had discriminated against unit owner as an Orthodox Jew, and had breached its contract with unit owner.

The court dismissed the breach of contract claim, noting that unit owner had not articulated the provisions of any contract allegedly breached. With respect to the breach of fiduciary duty claim, however, the court held that dismissal was premature. The court rejected the board's reliance on the business judgment rule, noting that here, unit owner alleged that he had been treated differently from other unit owners, who had been permitted to purchase adjacent apartments at prices below the market price. The business judgment rule incorporates an exception for bad faith, and claims of unequal treatment are sufficient to raise inferences of bad faith. As a result, dismissal of the claim before discovery would be premature. With respect to the discrimination claim, the court held that the allegation of discrimination on the basis of religion was sufficient to withstand a motion to dismiss the complaint.