Cooperatives & Condominiums

AppDiv, First Dept

(Opinion by Sullivan, J.)

In an action by condominium unit owner against a condominium board, individual board members, and the condominium's managing agent for alleged discrimination in violation of the New York City Human Rights Law, the defendants appealed from Supreme Court's denial of their motion for dismissal of the complaint. The Appellate Division reversed and granted the motion, holding that unit owner had not established that unit owners had not demonstrated any basis for displacing the protections of the business judgment rule.

The subject condominium apartment building, constructed in 1924, includes a step at the street entrance, three steps from the lobby to the passenger elevator, and five steps from the passenger elevator hallway to the freight elevator. Additional steps lead to the laundry room and to unit owner's storage area. In 2002, unit owner, who suffers from muscular dystrophy, asked if the building could be made handicap accessible. Discussions ensued over the next two years, and on June 10, 2004, the board advised unit owner that it had agreed to pursue a plan for handicap access. The plan would involve a portable wheelchair lift as an interim solution, and ultimately installation of platform lists to both elevators. The board also advised unit owner that he could swap his storage area for one that would be easily accessible, and that it would waive its rules to permit a washing machine in his apartment. The board requested that unit owner agree to the plan in writing, but unit owner refused. Although subsequent correspondence between the parties led to a stalemate, unit owner brought this action, alleging discrimination in violation of the Human Rights Law. Meanwhile, the board continued to implement its plan, installing the wheelchair lift at a cost of $13,000. By 2005, the board had adopted a new plan, and at a special meeting of unit owners, the owners agreed to impose an assessment of $130,000 to fund the plan Plaintiff unit owner did not attend the meeting or participate by proxy. Meanwhile, in this action, defendants sought summary judgment dismissing the complaint, alleging that they had acted in good faith and had exercised honest judgment in handling unit owner's request . Supreme Court denied the motion, holding that the business judgment rule is inapplicable when a board's decision is alleged to have been made on a discriminatory basis, and holding that a managing agent is liable for acts committed as agent for a disclosed principal for the agent's affirmative acts of negligence.

In reversing, the unanimous Appellate Division held that the condominium board had demonstrated that it had satisfied the business judgment rule's requirement of taking action in good faith and in the exercise of honest judgment in furtherance of the condominium's purposes. The burden then shifted to unit owner, who failed to suggest that the criteria for departure from the business judgment rule had been satisfied for any individual board member, or for the board as a whole. The court also noted that unit owner had not demonstrated any affirmative negligence by the managing agent, nor did unit owner show any discriminatory act by the managing agent. As a result, the court held that defendants were entitled to summary judgment dismissing the complaint.

Invalid Board Election Does Not Require Nullification of Board Actions

Naranjo v. Jefferson

NYLJ 11/15/06, p. 22, col. 1

Supreme Ct., N.Y. Cty

(Ling-Cohan, J.)

In an action by co-op shareholders to nullify the actions of the current co-op board, plaintiff shareholders sought a preliminary injunction restraining the board from acting as directors or exercising any of the decision-making functions of board members and, in particular restraining the board from terminating a commercial lease on the premises. The court denied the preliminary injunction, concluding that plaintiff shareholders had not demonstrated a clear right to relief, and had not demonstrated that injunctive relief was necessary to prevent irreparable harm.

In March 2004, the co-op corporation brought a holdover proceeding against commercial tenant, whose lease had expired the preceding month. The co-op corporation ob-tained a judgment of possession. In July 2006, the Appellate Division denied a stay of the warrant of eviction. Meanwhile, plaintiff shareholders attempted to assist the commercial tenant by executing a new lease to the tenant, purportedly on behalf of the co-op corporation. In October 2006, a judge denied a stay of eviction, concluding that the purported lease did not represent a binding obligation of the co-op corporation. Plaintiff shareholders then brought this action, contending that board elections held on Jan. 14, 2005 and April 26, 2006 were invalid because the shareholder meetings were not attended by a quorum of the shareholders, in violation of the co-op's rules. Plaintiff shareholders sought a preliminary injunction against action by the board (other than for emergency matters), citing potential loss of the commercial tenant as irreparable harm.

In denying the preliminary injunction, the court first emphasized that plaintiffs had waited nearly two years after the first supposedly invalid election before challenging that election. The court observed that plaintiff shareholders had offered no explanation for the delay. The court then rejected the argument that loss of the commercial tenant would constitute irreparable harm, noting first that the existing tenant's principals had been convicted of criminal offenses arising out of their assault on one of the shareholders, and second that a new tenant had been located at a higher rent. Moreover, the court noted that the initial holdover proceeding had been brought against the commercial tenant by a board whose election plaintiffs had not challenged. As a result, the court held that plaintiff shareholders had not demonstrated an entitlement to the drastic remedy of a preliminary injunction.

Unit Owner's Discrimination Complaint Barred By Business Judgment Rule

Pelton v. 77 Park Avenue Condominium

NYLJ 11/29/06, p. 18, col. 1

AppDiv, First Dept

(Opinion by Sullivan, J.)

In an action by condominium unit owner against a condominium board, individual board members, and the condominium's managing agent for alleged discrimination in violation of the New York City Human Rights Law, the defendants appealed from Supreme Court's denial of their motion for dismissal of the complaint. The Appellate Division reversed and granted the motion, holding that unit owner had not established that unit owners had not demonstrated any basis for displacing the protections of the business judgment rule.

The subject condominium apartment building, constructed in 1924, includes a step at the street entrance, three steps from the lobby to the passenger elevator, and five steps from the passenger elevator hallway to the freight elevator. Additional steps lead to the laundry room and to unit owner's storage area. In 2002, unit owner, who suffers from muscular dystrophy, asked if the building could be made handicap accessible. Discussions ensued over the next two years, and on June 10, 2004, the board advised unit owner that it had agreed to pursue a plan for handicap access. The plan would involve a portable wheelchair lift as an interim solution, and ultimately installation of platform lists to both elevators. The board also advised unit owner that he could swap his storage area for one that would be easily accessible, and that it would waive its rules to permit a washing machine in his apartment. The board requested that unit owner agree to the plan in writing, but unit owner refused. Although subsequent correspondence between the parties led to a stalemate, unit owner brought this action, alleging discrimination in violation of the Human Rights Law. Meanwhile, the board continued to implement its plan, installing the wheelchair lift at a cost of $13,000. By 2005, the board had adopted a new plan, and at a special meeting of unit owners, the owners agreed to impose an assessment of $130,000 to fund the plan Plaintiff unit owner did not attend the meeting or participate by proxy. Meanwhile, in this action, defendants sought summary judgment dismissing the complaint, alleging that they had acted in good faith and had exercised honest judgment in handling unit owner's request . Supreme Court denied the motion, holding that the business judgment rule is inapplicable when a board's decision is alleged to have been made on a discriminatory basis, and holding that a managing agent is liable for acts committed as agent for a disclosed principal for the agent's affirmative acts of negligence.

In reversing, the unanimous Appellate Division held that the condominium board had demonstrated that it had satisfied the business judgment rule's requirement of taking action in good faith and in the exercise of honest judgment in furtherance of the condominium's purposes. The burden then shifted to unit owner, who failed to suggest that the criteria for departure from the business judgment rule had been satisfied for any individual board member, or for the board as a whole. The court also noted that unit owner had not demonstrated any affirmative negligence by the managing agent, nor did unit owner show any discriminatory act by the managing agent. As a result, the court held that defendants were entitled to summary judgment dismissing the complaint.

Invalid Board Election Does Not Require Nullification of Board Actions

Naranjo v. Jefferson

NYLJ 11/15/06, p. 22, col. 1

Supreme Ct., N.Y. Cty

(Ling-Cohan, J.)

In an action by co-op shareholders to nullify the actions of the current co-op board, plaintiff shareholders sought a preliminary injunction restraining the board from acting as directors or exercising any of the decision-making functions of board members and, in particular restraining the board from terminating a commercial lease on the premises. The court denied the preliminary injunction, concluding that plaintiff shareholders had not demonstrated a clear right to relief, and had not demonstrated that injunctive relief was necessary to prevent irreparable harm.

In March 2004, the co-op corporation brought a holdover proceeding against commercial tenant, whose lease had expired the preceding month. The co-op corporation ob-tained a judgment of possession. In July 2006, the Appellate Division denied a stay of the warrant of eviction. Meanwhile, plaintiff shareholders attempted to assist the commercial tenant by executing a new lease to the tenant, purportedly on behalf of the co-op corporation. In October 2006, a judge denied a stay of eviction, concluding that the purported lease did not represent a binding obligation of the co-op corporation. Plaintiff shareholders then brought this action, contending that board elections held on Jan. 14, 2005 and April 26, 2006 were invalid because the shareholder meetings were not attended by a quorum of the shareholders, in violation of the co-op's rules. Plaintiff shareholders sought a preliminary injunction against action by the board (other than for emergency matters), citing potential loss of the commercial tenant as irreparable harm.

In denying the preliminary injunction, the court first emphasized that plaintiffs had waited nearly two years after the first supposedly invalid election before challenging that election. The court observed that plaintiff shareholders had offered no explanation for the delay. The court then rejected the argument that loss of the commercial tenant would constitute irreparable harm, noting first that the existing tenant's principals had been convicted of criminal offenses arising out of their assault on one of the shareholders, and second that a new tenant had been located at a higher rent. Moreover, the court noted that the initial holdover proceeding had been brought against the commercial tenant by a board whose election plaintiffs had not challenged. As a result, the court held that plaintiff shareholders had not demonstrated an entitlement to the drastic remedy of a preliminary injunction.