Development

AppDiv, Second Dept.

(memorandum opinion)

In a breach of contract action by a homeowners association against the development's original sponsor and a successor sponsor, the association appealed from Supreme Court's denial of its summary judgment motion and grant of a portion of defendants' summary judgment motion. The Appellate Division affirmed, holding that original sponsor and its successor had raised questions of fact about the association's main claim, and that the agreement between the successor sponsor and the association barred the association's contention that defendants' counterclaim constituted an impermissible SLAPP suit.

In the 1980s, original sponsor set out to develop an age-restricted condominium community. After completing four phases of the development, sponsor formed the homeowners association. In 1997, successor sponsor acquired the right to build additional units pursuant to an approved 1987 site plan. In 1997, successor sponsor entered into an agreement with the association specifying the way in which successor sponsor's liability for maintenance would be calculated and also providing that the association would not interfere with successor sponsor's ability to develop the rest of the community in accordance with the 1987 site plan. The agreement also bound successor sponsor to build two tennis courts once it transferred title to its 60th unit. The maintenance calculation was based in part on the association's actual budget deficiency.

In 2001, successor sponsor applied for a building permit to build additional units originally approved in the 1987 site plan. Members of the association opposed the plan, and the zoning board of appeals (ZBA) ultimately denied the permit application, concluding that the variance granted the original sponsor had expired. The ZBA's denial was ultimately overturned in court. Before the ZBA made its determination the association brought this action contending that the successor sponsor had breached its contract by failing to make the deficiency contribution required by the 1997 agreement and by failing to build the tennis courts. Successor sponsor counterclaimed, alleging that the association had breached the non-interference clause in the 1997 agreement. Supreme Court denied the association's summary judgment motion on the deficiency claims, and also denied the association's summary judgment motion seeking dismissal of sponsor's counterclaim based on the non-interference clause. The association appealed.

In affirming, the Appellate Division held that successor sponsor raised questions of fact about whether the association violated the covenant of good faith and fair dealing by making repairs and not increasing per-unit assessments, thus generating a substantial deficit that, under the terms of the agreement, would be borne in large measure by successor sponsor. The court held that because the business judgment rule only insulates association boards from challenges to good-faith decisions, the rule was not applicable to successor sponsor's claim that the association had acted in bad faith. The court also noted that the sponsor had raised questions of fact about whether its efforts to build the tennis courts had been thwarted by the association's bad-faith opposition to their permit applications. Finally, the court turned to the successor sponsor's counterclaim alleging that the association had violated the non-interference clause by opposing successor sponsor's building permit application. the court held that the 1997 agreement's non-interference provision constituted a specific waiver of the association's right to oppose the sponsor's application, even though the provision did not explicitly mention Civil Rights Law section 76-a, which prohibits SLAPP suits. As a result, the association was not entitled to summary judgment dismissing the counterclaim.

COMMENT

Civil Rights Law 76-a(2), the anti-SLAPP statute, precludes recovery of damages in an action brought by a permit applicant against a permit opponent unless the applicant can show, by clear and convincing evidence, that the opponent's statements were made with knowledge of their falsity or with reckless disregard of whether the statements were false. In Southampton Day Camp Realty, LLC v. Gormon, 990 N.Y.S.2d 30, the Second Department awarded summary judgment to neighbors in a defamation action brought by plaintiff landowner alleging that the neighbors had defamed the landowner when they circulated a flyer contending that landowner did not care about and had lied about the environmental impact of the landowner's proposed development. The court relied in part on CPLR 3212(h), which requires a court to grant summary judgment dismissing an anti-SLAPP claim unless the party responding to the summary judgment motion demonstrates that the action has a substantial basis in fact or law

The anti-SLAPP statute does not bar a claim for damages when the defendant has waived its right to object to an applicant's project, either by express language of waiver or by other language that signals a relinquishment of the right to object. In Related Properties, Inc. v. Town Bd. of Town/Vill. of Harrison, 802 N.Y.S.2d 221 the Second Department held that the defendant environmental group was not entitled to dismissal of an action brought by applicant for site plan approval because questions of fact remained about whether the environmental group had waived its right to object to the application. In settlement of a 1984 dispute over a prior site plan application, the environmental group had agreed to a settlement requiring the group “to consent to, or join in” applications” necessary to accomplish the agreements and objectives set forth in this Stipulation,”and to cooperate with the other parties to the stipulation in “defending and upholding” its validity. When landowner sought approval for a new site plan in 2000, neighbors objected, prompting an action by landowner seeking both damages and injunctive relief. The Second Department held that Supreme Court had properly denied neighbors' motion to dismiss landowner's claim, concluding that questions of fact remained about whether the 2000 application conformed to the 1984 application. Only if the new application conformed to the earlier one would the settlement stipulation bar landowner's action for damages.

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