Cooperatives & Condominiums

Tortious Interference By Condo Board President

Nicosia v. Board of Managers of The Weber House Condominium

NYLJ 10/19/10, p. 26., col. 1

AppDiv, First Dept.

(3-2 decision; memorandum opinion; dissenting memorandum by McGuire, J.)

In an action by condominium contract vendee for breach of contract, fraud, tortious interference with contract, and tortious interference with prospective advantage, contract vendee appealed from Supreme Court's dismissal of the complaint. The Appellate Division modified to reinstate the complaint against contract vendor, and the tortious interference with contract claim, but affirmed the dismissal with respect to the other claims.

Contract vendee contracted to purchase the subject condominium unit from Axminster, the owner of the unit. The contract was conditioned on waiver by the condominium board of its right of first refusal over the unit. The complaint in this case alleges that the president of the condominium board represented to Axminster that the board was exercising its right of first refusal when, in fact, the board president had concocted the scheme to have KESY, an entity he controlled, purchase the unit from Axminster. The complaint sought to recover from the board, the board president, and KESY, for fraud, for tortious interference with contract, and for tortious interference with prospective advantage. Supreme Court dismissed the complaint.

In modifying, the Appellate Division held that the tortious interference with contract claims should not have been dismissed, because contract vendee had adequately alleged the existence of a contract, knowledge of the contract by defendants, and intentional interference by improperly purporting to exercise a right of first refusal. The court, however, held that Supreme Court had properly dismissed the fraud claim, because contract vendee had not adequately pleaded reliance on any misrepresentation, and dismissed the tortious interference with prospective advantage claim because in light of the contract, there was no prospective business relationship.

Justice McGuire, dissenting, concluded that the inference that contract vendee relied to his detriment on the representation that the board had exercised the right of first refusal was a reasonable one to which he was entitled. He emphasized that it was reasonable to assume that contract vendee did not take steps to enforce his contractual rights because he credited the board president's representation that the board had exercised its first refusal right. Justice McGuire also noted that if Axminster did not breach the contract (because it reasonably believed the right of first refusal had been properly exercised), contract vendee's claim for tortious interference with contract might fail, and argued that contract vendee should therefore have a right to allege tortious interference with prospective advantage.

Option to Purchase Condo Unit Does Not Violate Rule Against Perpetuities

Rozina v. Casa 74th Development LLC

NYLJ 9/16/10, Supreme Ct., N.Y. Cty.

(Friedman, J.)

In purchasers' action to rescind an option agreement to purchase a condominium unit, seller moved for summary judgment. The court granted seller's motion, rejecting purchaser's argument that the option violated the Rule Against Perpetuities.

In 2007, purchasers entered into an option agreement to buy a to-be-constructed condominium unit for $4,284,750. Purchasers paid a down payment of $840,000. The option agreement requires sponsor to give purchasers no less than 30 days' notice of a closing date, and requires purchasers to exercise their option on the closing date. The agreement dos not contain an express deadline for service of a notice of closing. Seller scheduled a closing for Dec. 12, 2008, and purchasers failed to appear. Purchasers then brought this action, seeking return of their deposit. They argued that the option agreement was unenforceable because it contained no limitation on the time during which the option might vest, thus violating the Rule Against Perpetuities (EPTL section 9-1.1).

In rejecting purchasers' argument, the court held that because the option was required to be exercised by the closing date, duration for the exercise of the option was not unlimited, and the option did not violate the Rule Against Perpetuities. Moreover, the court concluded that even if the exercised of the option did depend on a contingency, the court held that EPTL section 9-1.3 would save the option from invalidity because it was clear that the sponsor intended the contingency to occur within 21 years of the agreement's execution. As a result, the agreement was enforceable. The court also rejected purchaser's argument that seller was not ready to tender performance on the closing date, noting the absence of any evidence to substantiate that allegation.

Tortious Interference By Condo Board President

Nicosia v. Board of Managers of The Weber House Condominium

NYLJ 10/19/10, p. 26., col. 1

AppDiv, First Dept.

(3-2 decision; memorandum opinion; dissenting memorandum by McGuire, J.)

In an action by condominium contract vendee for breach of contract, fraud, tortious interference with contract, and tortious interference with prospective advantage, contract vendee appealed from Supreme Court's dismissal of the complaint. The Appellate Division modified to reinstate the complaint against contract vendor, and the tortious interference with contract claim, but affirmed the dismissal with respect to the other claims.

Contract vendee contracted to purchase the subject condominium unit from Axminster, the owner of the unit. The contract was conditioned on waiver by the condominium board of its right of first refusal over the unit. The complaint in this case alleges that the president of the condominium board represented to Axminster that the board was exercising its right of first refusal when, in fact, the board president had concocted the scheme to have KESY, an entity he controlled, purchase the unit from Axminster. The complaint sought to recover from the board, the board president, and KESY, for fraud, for tortious interference with contract, and for tortious interference with prospective advantage. Supreme Court dismissed the complaint.

In modifying, the Appellate Division held that the tortious interference with contract claims should not have been dismissed, because contract vendee had adequately alleged the existence of a contract, knowledge of the contract by defendants, and intentional interference by improperly purporting to exercise a right of first refusal. The court, however, held that Supreme Court had properly dismissed the fraud claim, because contract vendee had not adequately pleaded reliance on any misrepresentation, and dismissed the tortious interference with prospective advantage claim because in light of the contract, there was no prospective business relationship.

Justice McGuire, dissenting, concluded that the inference that contract vendee relied to his detriment on the representation that the board had exercised the right of first refusal was a reasonable one to which he was entitled. He emphasized that it was reasonable to assume that contract vendee did not take steps to enforce his contractual rights because he credited the board president's representation that the board had exercised its first refusal right. Justice McGuire also noted that if Axminster did not breach the contract (because it reasonably believed the right of first refusal had been properly exercised), contract vendee's claim for tortious interference with contract might fail, and argued that contract vendee should therefore have a right to allege tortious interference with prospective advantage.

Option to Purchase Condo Unit Does Not Violate Rule Against Perpetuities

Rozina v. Casa 74th Development LLC

NYLJ 9/16/10, Supreme Ct., N.Y. Cty.

(Friedman, J.)

In purchasers' action to rescind an option agreement to purchase a condominium unit, seller moved for summary judgment. The court granted seller's motion, rejecting purchaser's argument that the option violated the Rule Against Perpetuities.

In 2007, purchasers entered into an option agreement to buy a to-be-constructed condominium unit for $4,284,750. Purchasers paid a down payment of $840,000. The option agreement requires sponsor to give purchasers no less than 30 days' notice of a closing date, and requires purchasers to exercise their option on the closing date. The agreement dos not contain an express deadline for service of a notice of closing. Seller scheduled a closing for Dec. 12, 2008, and purchasers failed to appear. Purchasers then brought this action, seeking return of their deposit. They argued that the option agreement was unenforceable because it contained no limitation on the time during which the option might vest, thus violating the Rule Against Perpetuities (EPTL section 9-1.1).

In rejecting purchasers' argument, the court held that because the option was required to be exercised by the closing date, duration for the exercise of the option was not unlimited, and the option did not violate the Rule Against Perpetuities. Moreover, the court concluded that even if the exercised of the option did depend on a contingency, the court held that EPTL section 9-1.3 would save the option from invalidity because it was clear that the sponsor intended the contingency to occur within 21 years of the agreement's execution. As a result, the agreement was enforceable. The court also rejected purchaser's argument that seller was not ready to tender performance on the closing date, noting the absence of any evidence to substantiate that allegation.