Cooperatives & Condominiums

Supreme Ct., N.Y. Cty.

(Mendez, J.)

In an action by co-op shareholder seeking an order directing the co-op corporation to approve the sale of her shares, the co-op corporation moved for summary judgment dismissing the complaint. The court denied the motion, holding that questions of fact about the board's self-dealing precluded summary judgment.

In 2014, shareholder, owner/lessee of unit 1D in the co-op, applied to purchase another unit within the building. The co-op board then expressed an interest in purchasing unit 1D to create a gym. When shareholder did not hear back from the co-op shareholder, she listed her unit for $499,000. Shareholder then alleged that a board member, on behalf of the board, offered her $400,000 for her unit, an offer she declined.

Shareholder then received an all-cash offer for $495,000. The purchasers applied to the board for approval, but the board declined to approve the sale because the purchase price was under market value. The managing agent indicated that the board would consider a sale price of at least $535,000. Purchasers then agreed to pay $535,000, and shareholder had the unit appraised at $525,000. When purchaser again applied for approval, the board requested a further price increase to $610,000. Shareholder then brought this action alleging breach of fiduciary duty and tortious interference with a prospective contract, and sought an order the sale of the apartment be approved. The co-op board sought summary judgment, relying on the business judgment rule.

In denying the board's summary judgment motion, the court noted that if a shareholder provides a factual basis to support a claim of self-dealing, the business judgment rule does not prevent courts from inquiring into the board's action. Here, the shareholder had raised issues of fact about whether the board had engaged in self-dealing by showing that the board had: 1) initially expressed interest in purchasing the property for $400,000; 2) then stated that a sale price of $495,000 was too low; and 3) ultimately denied a sale at $535,000, even though the board had initially asked purchaser to come back with a sale at that price.

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