To be Argued by: TRACY PETERSON New York County Clerk’s Index No. 157316/14
New York Supreme Court Appellate Division—First Department
J. ARMAND MUSEY, Plaintiff-Appellant, – against – 425 EAST 86 APARTMENTS CORP., DOUGLAS ELLIMAN PROPERTY MANAGEMENT, FRANK CHANEY, PATRICIA CARBON, DAVID MUNVES, MICHAEL CONSIDINE, SUZANNE KEANE a/k/a Suzanne Julig, JENNIFER KRUEGER, GEORGE GREENBERG, ALEXANDER SHAPIRO and LESLIE SPITALNICK, Defendants-Respondents.
BRIEF FOR DEFENDANTS-RESPONDENTS 425 EAST 86 APARTMENTS CORP., DOUGLAS ELLIMAN PROPERTY MANAGEMENT, FRANK CHANEY, PATRICIA CARBON, DAVID MUNVES, MICHAEL CONSIDINE, SUZANNE KEANE A/K/A SUZANNE JULIG, JENNIFER KRUEGER, ALEXANDER SHAPIRO AND LESLIE SPITALNICK
BRAVERMAN GREENSPUN, P.C. Attorneys for Defendants-Respondents 425 East 86 Apartments Corp., Douglas Elliman Property Management, Frank Chaney, Patricia Carbon, David Munves, Michael Considine, Suzanne Keane a/k/a Suzanne Julig, Jennifer Krueger, Alexander Shapiro and Leslie Spitalnick 110 East 42nd Street, 17th Floor New York, New York 10017 (212) 682-2900 [email protected]
PRINTED ON RECYCLED PAPER
TABLE OF CONTENTS
TABLE OF AUTHORITIES ...... iv
Preliminary Statement ...... 1
Questions Presented ...... 4
Counter-Statement of the Case ...... 6
A. Factual Background ...... 6
i. The Parties ...... 6
ii. The “Terrace” ...... 7
iii. The Roof Rules ...... 9
B. Procedural Background ...... 13
ARGUMENT ...... 16
POINT I - THE LOWER COURT CORRECTLY DISMISSED APPELLANT’S CHALLENGE TO THE ROOF RULES AS BEING TIME-BARRED ...... 16
A. Appellant’s Challenge to the Roof Rules Was Subject to the Four-Month Statute of Limitations Applicable to Article 78 Proceedings ...... 16
B. Appellant’s Claims Accrued Well Over Fourth Months Prior to the Commencement of This Lawsuit ...... 19
i. Appellant Admitted That His Claim Accrued on July 27, 2013, Nearly a Year Prior to Commencement of this Action ...... 19
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ii. Appellant’s Complaints About the Roof Rules Did Not Toll the Running of the Four-Month Statute of Limitations ...... 20
C. Equitable Estoppel Does Not Apply to Toll the Applicable Statute of Limitations ...... 25
POINT II - APPELLANT’S FURTHER ARGUMENTS OPPOSING THE STATUTE OF LIMITATIONS BAR ARE IMPROPERLY RAISED FOR THE FIRST TIME ON APPEAL AND IN ANY EVENT, ARE MISPLACED AND UNAVAILING ...... 28
A. Appellant’s Arguments Are Improperly Raised for the First Time on Appeal ...... 29
B. There is No Dispute Concerning Exclusive Use ...... 30
C. Appellant’s Newly-Raised Arguments Are Meritless ...... 30
POINT III - PLAINTIFF’S RELIANCE ON THE SHAPIRO DECISION IS MISPLACED ...... 34
POINT IV - APPELLANT’S CLAIMS COULD HAVE BEEN DISMISSED ON MYRIAD ALTERNATIVE GROUNDS ...... 36
A. The Allegations Are Insufficient to State Claims for Breach of Fiduciary Duty or Fraud by the Individual Board Member Respondents ...... 37
B. Appellant’s Breach of Fiduciary Duty Claim is Meritless ...... 39
C. Appellant’s Fraud Claim is Meritless ...... 43
D. Appellant Is Not Entitled to the Declaratory Relief Sought ...... 47
E. Appellant’s Breach of Contract Claim is Without Merit ...... 52
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POINT V - LEAVE TO AMEND THE COMPLAINT WAS PROPERLY DENIED ...... 56
POINT VI - THE MOTION TO QUASH WAS PROPERLY GRANTED ...... 61
CONCLUSION ...... 66
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TABLE OF AUTHORITIES
Cases
82 Retail LLC v. Eighty Two Condominium, 117 A.D.3d 587 (1st Dep’t 2014) ...... 38
198 Avenue B Associates v. Bee Corp., 155 A.D.2d 273 (1st Dep’t 1989) ...... 46
252 West 30th Street Realty Corp. v. Biderman, 165 A.D.2d 759 (1st Dep’t 1990) ...... 24
767 Third Ave. LLC v. Greble & Finger, LLP, 8 A.D.3d 75 (1st Dep’t 2004) ...... 53
Allen v. Murray House Owners Corp., 174 A.D.2d 400 (1st Dep’t 1991) ...... 43
Atlantic Aviation Investment LLC v. Varig Logistica, S.A., 73 A.D.3d 467 (1st Dep’t 2010) ...... 29
Barrett v. Freifeld, 64 A.D.3d 736 (2d Dep’t 2009) ...... 45
Bonar v. Shaffer, 140 A.D.2d 153 (1st Dep’t 1988) ...... 24
Buttitta v. Greenwich House Cooperative Apts., Inc., 11 A.D.3d 250 (1st Dep’t 2004) ...... 17
Chanin v. Machcinski, 139 A.D.3d 490 (1st Dep’t 2016) ...... 36
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Chiarella v. United States, 445 U.S. 222 (1980)...... 45
Citi Mgmt. Group, Ltd. v. Highbridge House Ogden, LLC, 21 Misc.3d 1123(A) (N.Y. Sup. Ct. Bronx Co. 2005) ...... 45
Close-Barzin v. Christie’s, Inc., 51 A.D.3d 444 (1st Dep’t 2008) ...... 26-27
Crucen v. Leary, 55 A.D.3d 510 (1st Dep’t 2008) ...... 56
Cusack v. Greenberg Traurig, LLP, 109 A.D.3d 747 (1st Dep’t 2013) ...... 56
D’Alessandro v. Carro, 123 A.D.3d 1 (1st Dep’t 2014) ...... 15
Dembeck v. 220 Central Park South, 33 A.D.3d 491 (1st Dep’t 2006) ...... 45
Dobbins v. Riverview Equities Corp., 64 A.D.3d 404 (1st Dep’t 2009) ...... 17
Dweck v. Oppenheimer & Co., 30 A.D.3d 163 (1st Dep’t 2006) ...... 59
FNF Touring LLC v. Transform America Corp., 111 A.D.3d 401 (1st Dep’t 2013) ...... 44-45
Goonewardena v. Hunter College, 40 A.D.3d 443 (1st Dep’t 2007) ...... 23-24
Gordon v. Nationwide Mut. Ins. Co., 30 N.Y.2d 427 (1972) ...... 42-43
Haron v. Azoulay, 132 A.D.3d 475 (1st Dep’t 2015) ...... 63
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Herriott v. 206 West 121st Street, 2017 WL 446901 (N.Y. Sup. Ct. N.Y. Co., Feb. 2, 2017) ...... 17
Hixon v. 12-14 East 64th Owners Corp., 107 A.D.3d 546 (1st Dep’t 2013) ...... 38
In re Morgenthau, 73 A.D.3d 415 (1st Dep’t 2010) ...... 65
Jackson v. Westminster House Owners Inc., 2004 WL 5487453 (N.Y. Sup. Ct., N.Y. Co. Apr. 8, 2004) ...... 55
Jana L. v. West 129th Street Realty Corp., 22 A.D.3d 274 (1st Dep’t 2005) ...... 46
Kainer v. Christie’s Inc., 141 A.D.3d 442 (1st Dep’t 2016) ...... 25
Kalisch-Jarcho, Inc. v. New York, 72 N.Y.2d 727 (1988) ...... 59
Kan v. New York City Envir. Control Bd., 262 A.D.2d 135 (1st Dep’t 1999) ...... 18, 24
Katz v. Third Colony Corp., 101 A.D.3d 652 (1st Dep’t 2012) ...... 16-17
Kitchen v. Crotona Park West Housing Dev. Fund. Corp., 145 A.D.3d 521 (1st Dep’t 2016) ...... 15
Lemle v. Lemle, 92 A.D.3d 494 (1st Dep’t 2012) ...... 58
Levandusky v. One Fifth Ave. Apt. Corp., 75 N.Y.2d 530 (1990) ...... 40-41, 50
Lichtenstein v. Wilkie Farr & Gallagher LLP, 120 A.D.3d 1095 (1st Dep’t 2014) ...... 41
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Maio v. New York City Civil Serv. Comm’n, 176 A.D.2d 526 (1st Dep’t 1991) ...... 24
Meimeteas v. Carter Ledyard & Milbrun LLP, 105 A.D.3d 643 (1st Dep’t 2013) ...... 56
Menkes v. Beth Abraham Servs., 89 A.D.3d 647 (1st Dep’t 2011) ...... 63
Messner v. 112 East 83rd Street Tenants Corp., 42 A.D.3d 356 (1st Dep’t 2007) ...... 45
Mosaic Caribe, Ltd. v. AllSettled Group, Inc., 117 A.D.3d 421 (1st Dep’t 2014) ...... 56
New York City Educational Constr. Fund v. Verizon New York Inc., 114 A.D.3d 529 (1st Dep’t 2014) ...... 53
Nickerson v. Volt Delta Resources, Inc., 211 A.D.2d 512 (1st Dep’t 1995) ...... 36
Pahlad v. Brustman, 33 A.D.3d 518 (1st Dep’t 2006) ...... 27
Park West Mgmt. Corp. v. Mitchell, 47 N.Y.2d 316 (1979) ...... 54, 60
Pelton v. 77 Park Ave. Condo., 38 A.D.3d 1 (1st Dep’t 2006) ...... 43
Raykowski v. New York City Dep’t of Transp., 259 A.D.2d 367 (1st Dep’t 1999) ...... 24
Recovery Consultants, Inc. v. Shih-Hsieh, 141 A.D.2d 272 (1st Dep’t 1988) ...... 29-30
Regini v. Board of Managers of Loft Space Condo., 107 A.D.3d 496 (1st Dep’t 2013) ...... 58
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Reuters Limited v. Dow Jones Telerate, Inc., 231 A.D.2d 337 (1st Dep’t 1997) ...... 65
Schorr v. Schorr, 113 A.D.3d 490 (1st Dep’t 2014) ...... 63
Shapiro v. 350 E. 78th St. Tenants Corp., 85 A.D.3d 601 (1st Dep’t 2011) ...... 15, 34-36
Seigel v. The Dakota, Inc., 144 A.D.3d 555 (1st Dep’t 2016) ...... 15, 26
Silver v. Murray House, 126 A.D.3d 655 (1st Dep’t 2015) ...... 56
Solow v. Wellner, 86 N.Y.2d 582 (1995) ...... 54, 55
Soto v. Clerk of the Supreme Court, 299 A.D.2d 155 (1st Dep’t 2002) ...... 32
Spinale v. 10 West 66th Street Corp., 291 A.D.2d 234 (1st Dep’t 2002) ...... 43
Travelers Indemnity Co. of Ill. v. CDL Hotels USA, Inc., 322 F. Supp.2d 482 (S.D.N.Y. 2004) ...... 45
Valyrakis v. 346 West 48th Street Housing Dev. Fund Corp., 2016 WL 6070818 (N.Y. Sup. Ct., N.Y. Co., Oct. 13, 2016) ...... 17-18
Villanova Estates, Inc. v. Fieldston Prop. Owners Ass’n, Inc., 23 A.D.3d 160 (1st Dep’t 2005) ...... 17
Woods v. 126 Riverside Drive Corp., 64 A.D.3d 422 (1st Dep’t 2009) ...... 45, 46
Zumpano v. Quinn, 6 N.Y.3d 666 (2006) ...... 25
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Statutes and Rules
N.Y. C.P.L.R. §217(1) ...... 18
N.Y. C.P.L.R. §3101(a)(4) ...... 62
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Preliminary Statement
This appeal was filed on behalf of the shareholder-proprietary lessee of one of two penthouse apartments in a 74-unit cooperative apartment building located on Manhattan’s Upper East Side. At the time of the plaintiff-appellant’s purchase of the penthouse apartment, the roof space immediately outside the apartment – referred to by the plaintiff-appellant as the “terrace” – was inaccessible due to the space being utilized as a staging area for ongoing façade work. Despite being unable to inspect the “terrace” prior to purchase, the plaintiff-appellant opted to purchase the apartment, “as is,” and without conducting due diligence regarding the condition of and regulation of use of the “terrace.”
The proprietary lease for the apartment into which the plaintiff- appellant freely entered allows the cooperative’s board of directors to adopt rules and regulations – which become part and parcel of the lease – addressing the plaintiff-appellant’s use of the “terrace.” Such rules were adopted in July 2013, which the plaintiff-appellant challenged in a plenary proceeding commenced a year later.
At the heart of the matter is the plaintiff-appellant’s contention that the rules enacted in July 2013 improperly shifted onto him the financial
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responsibility for installing over the building’s roof membrane a surface suitable for putting the “terrace” to use for the exclusive benefit of the plaintiff-appellant and his partner, who lives in the penthouse with him. The plaintiff-appellant likewise takes issue with being required to indemnify the cooperative for any damage that the roof membrane may suffer as a result of his use of the “terrace.” The plaintiff-appellant appears to be under the impression that the cost of his exclusive use of the “terrace” should be borne by all shareholders in the cooperative, even though no other shareholder benefits from such an expense.
Based primarily on the foregoing, the plaintiff-appellant asserted four claims against the cooperative corporation, its managing agent and nine individuals who had, at certain points in time, served as members of the cooperative’s board of directors. The lower Court dismissed the action as asserted against all parties other than the cooperative corporation and as to that entity, dismissed all but a portion of one claim addressing who is responsible for replacing three doors leading from the penthouse apartment to the “terrace.”
This appeal addresses the dismissal of the plaintiff-appellant’s claims, as well as the denial of his motion for reargument, denial of his motion for
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leave to amend his complaint and the grant of the cooperative corporation’s motion to quash subpoenae issued to two non-parties as a means of embarking on a “fishing expedition” to bring other and further litigation against the cooperative corporation and its representatives.
As is addressed at length herein, the lower Court’s challenged determinations should be left untouched; the plaintiff-appellant has demonstrated no basis for overturning either of the two lower Court decisions that are the subject of this appeal.
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Questions Presented
1. Did the lower Court correctly determine that Appellant’s claims challenging rules enacted by the Board in July 2013 are time-barred, having been raised almost a year later, well outside the four-month statute of limitations applicable to Article 78 proceedings?
Yes.
2. Should the dismissal of Appellant’s claims be affirmed on the alternative grounds that (a) the individually-named Respondents are not alleged to have been engaged in any action(s) subjecting them to liability under a fraud or breach of fiduciary duty theory; (b) the breach of fiduciary duty claim is otherwise meritless; (c) the fraud claim is otherwise meritless;
(d) Appellant is not entitled to the declaratory relief sought; and (e) the breach of contract claim is meritless?
Yes.
3. Did the lower Court correctly determine that Appellant’s proposed amended complaint was devoid of merit?
Yes.
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4. Did the lower Court correctly quash the non-party subpoenae on the grounds that none of the material or information sought “has any bearing on the issues remaining in this action”?
Yes.
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Counter-Statement of the Case
A. Factual Background
i. The Parties
The plaintiff-appellant, J. Armand Musey (“Appellant”), is the owner of the shares and holder of the proprietary lease (the “Lease”) appurtenant to
Penthouse A (the “Apartment”) in the cooperative apartment building (the
“Building”) located at 425 East 86th Street, in Manhattan (R. 58, 60).
Appellant occupies the Apartment, along with his partner, Margaret Janicek
(“Janicek”), who is not party to this action (R. 59, 62).
Respondent, 425 East 86 Apartments Corp. (the “Co-op”), is the owner of the Building and its co-defendant, Douglas Elliman Property
Management (“DEPM”), is the managing agent for the Co-op (R. 138, 202).
Defendants-Respondents, Frank Chaney, Patricia Carbon, David
Munves, Michael Considine, Suzanne Keane a/k/a Suzanne Julig, Jennifer
Krueger, Alexander Shapiro and Leslie Spitalnick (collectively the
“Individual Board Member Respondents”), have been members of the board of directors of the Co-op (the “Board”) at various points in time (R. 57-58).1
1 Co-defendant, George Greenberg (“Greenberg”), also has been a member of the Board (R. 57). Greenberg is represented by separate counsel and this brief is not submitted on his behalf.
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There are no allegations in the Complaint setting forth any conduct in which any of these respondents specifically engaged or actions they failed to undertake; all acts and omissions complained of are acts or omissions by the
Board qua Board, which entity is not named as a party to this action (R. 56-
72).
ii. The “Terrace”
Central to this lawsuit is the roof area immediately outside the
Apartment, which is referred to by Appellant as the “terrace.” At the time that Appellant contracted to purchase the Apartment in December 2012, he did not inspect the “terrace,” although he had the absolute right to do so (R.
58, 145). The purchase agreement for the Apartment is explicit that
Appellant was purchasing the Apartment “as is” and that Appellant had
“inspected or waived inspection of the Unit” (R. 145). Appellant therefore expressly agreed to the purchase with the associated “terrace” in its unknown condition.
In this regard, it ought to be noted that Appellant is a former investment banker and holds a MBA and JD from prestigious graduate schools (R. 135). Certainly, there can be no dispute that he has the acumen
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to have understood what he was doing when he agreed to purchase the
Apartment “as is,” notwithstanding his not having inspected the “terrace.”
Further, while Appellant contends that the “terrace” was an important part of his decision to purchase the Apartment, Appellant admits that he undertook no due diligence to confirm that the “terrace” could be used by him, exclusively, for any purpose he desired, at the Co-op’s sole cost and expense (R. 224). Appellant did not inquire about this space prior to entering into the purchase agreement, at the Board interview prior to closing on the purchase (or at any other time) (id.). Rather, Appellant vaguely alleges that he “reasonably relied” on unspecified information in documents provided by the “broker who sold the [A]partment” (who is neither a party to this action nor an agent of the any of the defendants), as well as other non- specific “information [he] evaluated” prior to purchase (R. 60).
After Appellant closed on his purchase of the Apartment, despite having told the Board at the pre-purchase interview that the only alterations he intended to make to the Apartment were minor changes in the nature of painting, etc., Appellant submitted an extensive alteration package for Co-op approval (R. 61, 140, 169, 206, 208, 216). Such proposed alterations
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included alterations to the “terrace” in the form of “[i]nstallation of terrace pavers and cedar pergola” (R. 140, 169).
Once the Board became aware that Appellant wanted to make alterations to the “terrace,” it expedited a project it had been working on to update its rules pertaining to the use of this space (R. 184-85, 192-94). As explained in an email from the Board to Appellant on July 8, 2013, “had [the
Board] anticipated that the new penthouse owner would want to do something with the adjacent roof that [the prior owner] never did, [it] would have paid more attention to developing new standards well before
[Appellant] submitted [his roof alteration] application” (R. 192). These new rules pertaining to the roof area were adopted on July 23, 2013 (the “Roof
Rules”) and applied to the owners of both penthouse apartments (R. 62 at
¶24, R. 124-27, 184 at ¶7).
iii. The Roof Rules
In addition to the fact that the Co-op’s roof rules had not been reviewed or updated in twenty-four years, the impetus for updating the rules was that for the previous three years, New York City had experienced several high-wind weather events, including tornados in Brooklyn and
Queens in 2010 and two “100-year” storms two years in a row – Tropical
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Storm Irene in 2011 and Hurricane Sandy in 2012 (R. 184). The Board was concerned that in the likely event of another such high-wind event, the Co- op would be liable for damage or injury resulting from objects being blown off the roof of the Building (id.).
In order to assist the Board in updating the roof rules, the Board asked
DEPM for samples of roof-top rules used by other buildings it managed (see id. at ¶6). DEPM provided the Board with approximately a dozen samples, which the Board used as templates for drafting its new rules (see id.).
Also by the way of context, in 2011, the Board had replaced the roof membrane on the front half of the Building (i.e., that portion of the Building where the Apartment is located), with a new membrane comparable to the one it was replacing (R. 140). The prior owner/occupant of the Apartment –
Elaine Kaufman – did not install any decking or other covering over this membrane (or the membrane in place prior to 2011) or otherwise “improve” the “terrace” to render it hospitable for entertainment purposes (R. 140 at
¶15, R. 203). In fact, Ms. Kaufman did not use this space at all (other than opening a door from the Apartment leading to the roof to let in fresh air) (R.
203 at ¶6).
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In 1990, the owner of the only other penthouse-level apartment in the
Building – co-defendant, Greenberg – at his own expense, had installed thick rubber tiles on the portion of the roof-top adjacent to his apartment, which served to protect the roof membrane and allow him to use the space as a terrace without damaging the underlying roof (R. 140-41 at ¶¶ 16-17, R.
170-73, R. 186 at ¶¶ 12-13). The alteration agreement signed by Greenberg in connection with this installation required him to “assume all responsibility for the weather-tightness of any installation affecting exterior walls or roofs and the waterproofing of any portion of the Building structure directly or indirectly affected by the Alterations . . . ,” and to “indemnify and hold harmless [the Co-op], the Managing Agent and the tenants and occupants in the Building, against any claim for damage to persons or property suffered as a result of the Alterations . . .” (R. 170-71 at ¶¶ 2, 6).
The Roof Rules adopted in July 2013 incorporated the concept of the foregoing indemnification and hold harmless provisions (R. 124).
Although there are thirty provisions comprising the Roof Rules,
Appellant challenges only three of them: 4, 5 and 21. Mostly, Appellant does not like that he must bear the expense of installing a protective covering over the roof membrane that is sufficient for the purposes
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Appellant wishes to use the outdoor space, and that he must indemnify the
Co-op for any direct or indirect damage caused to the roof membrane (R. 62 at ¶24).
Based on the foregoing, Appellant originally asserted four causes of action: (a) breach of fiduciary duty by the Individual Board Member
Respondents by virtue of their having adopted the Roof Rules and by allegedly treating him differently with respect thereto than they are treating
Greenberg (R. 64-65); (b) fraud by the Individual Board Member
Respondents based upon their purported failure – prior to Appellant’s purchase of the Apartment – to advise him about the “terrace” and the (at that point, non-existent) Roof Rules (R. 66-67); (c) a request for a declaration that paragraphs 4, 5 and 21 of the Roof Rules are null and void and that the Co-op must make the roof “habitable” by installing “a protective barrier,” as well as a non-specific “flooring surface over the [roof] membrane enabling it to withstand ordinary expected use,” and replacing the exterior doors to the Apartment (R. 67-69); and (d) breach of contract by
DEPM and the Co-op by virtue of their allegedly having breached unspecified provisions of the Lease (R. 70-71).
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B. Procedural Background
After issue was joined, on November 4, 2014, the Co-op, DEPM and each of the Individual Board Member Respondents moved to dismiss the
Complaint pursuant to N.Y. C.P.L.R. Rules 3211(a) and/or 3212 (R. 49-51).
On January 15, 2015, Appellant cross-moved for partial summary judgment, pursuant to N.Y. C.P.L.R. Rule 3212 on his third and fourth causes of action only, as well as for dismissal of “defendants’ affirmative defenses” (R. 220-
21). On February 1, 2015, Greenberg also moved to dismiss the Complaint pursuant to N.Y. C.P.L.R. Rules 3211(a) and/or 3212 (R. 331-32).
Oral argument on the foregoing motions was held on February 10,
2015. Thereafter, by Decision and Order dated July 16, 2015 (the “2015
D&O”), the lower Court granted the motion by DEPM and the Individual
Board Member Respondents in its entirety, and also dismissed the
Complaint as asserted against the Co-op but for that portion of the third cause of action seeking a declaration that three doors leading from the
Apartment to “the terrace” are to be maintained by the Co-op and that portion of the fourth cause of action asserting that the Co-op had violated
Appellant’s right to quiet enjoyment of the “terrace” (R. 11-21).
Greenberg’s motion was granted and Appellant’s motion was denied (id.).
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Thereafter, Appellant filed a notice of appeal of the 2015 D&O on
August 19, 2015 and the Co-op filed a notice of cross-appeal on that same date (R. 4-10).2
Also on August 19, 2015, Appellant filed a motion to reargue the
2015 D&O and for leave to file an amended complaint (R. 431-32). The Co- op opposed Appellant’s motion and also cross-moved for reargument, specifically for the purpose of reviewing the lower Court’s determination not to grant summary judgment in the Co-op’s favor on the fourth cause of action (R. 658-59).
Separately, on August 21, 2015, the Co-op moved by order to show cause to quash subpoenae issued by Appellant to Shavelson, Neuman &
Company, LLP (“Shavelson”), the accounting firm that prepared the Co-op’s financial audits, and to Standard Waterproofing Corp. (“Standard”), which company had performed waterproofing and parapet work to the Co-op’s building (R. 668-82).
By Decision and Order dated January 30, 2017, the lower Court resolved the cross-motions to reargue, Appellant’s motion for leave to amend and the Co-op’s motion to quash (the “2017 D&O”) (R. 31-46). The
2 The Co-op has determined not to pursue its cross-appeal.
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lower Court denied Appellant’s motions to reargue and for leave to amend and granted the Co-op’s motion to reargue (and upon reargument, granted it summary judgment on the remainder of fourth cause of action) and its motion to quash. On February 28, 2017, Appellant filed a notice of appeal of the 2017 D&O (R. 29-30).
Appellant perfected his appeals of the 2015 D&O and the 2017 D&O on March 20, 2017, prior motions having been granted by this Court to extend the time to perfect the appeal of the 2015 D&O.3
3 To the extent that Appellant seeks to appeal that portion of the 2017 D&O which denied his motion to reargue, appeal from the denial of a reargument motion is not permitted. See Kitchen v. Crotona Park West Housing Dev. Fund. Corp., 145 A.D.3d 521, 521 (1st Dep’t 2016); Seigel v. The Dakota, Inc., 144 A.D.3d 555, 556 (1st Dep’t 2016); D’Alessandro v. Carro, 123 A.D.3d 1, 3, 7 (1st Dep’t 2014). Appellant’s attempt to sidestep this rule by arguing that an appeal of a denial of reargument is permitted where the merits are addressed, is unavailing. See Applt.’s Br. at p. 46. The lower Court did not address the merits of Appellant’s motion, but rather explained how it did not misapprehend any fact or claim or the import of Shapiro v. 350 E. 78th St. Tenants Corp., 85 A.D.3d 601 (1st Dep’t 2011) (R. 36-39).
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ARGUMENT
POINT I
THE LOWER COURT CORRECTLY DISMISSED APPELLANT’S CHALLENGE TO THE ROOF RULES AS BEING TIME-BARRED
A. Appellant’s Challenge to the Roof Rules Was Subject to the Four-Month Statute of Limitations Applicable to Article 78 Proceedings
The lower Court properly found that “the instant plenary action is not the proper vehicle to challenge the actions of the Board, and the commencement of an article 78 proceeding is time-barred” (R. 17). As a result, the lower Court properly dismissed the first two causes of action, as well as portions of the third cause of action, each of which challenged the
Board’s adoption of the Roof Rules.
The lower Court’s decision is amply supported. Where, as here, a cooperative shareholder challenges board action, such challenge is to be made in the form of an Article 78 proceeding. See Katz v. Third Colony
Corp., 101 A.D.3d 652, 653 (1st Dep’t 2012) (affirming dismissal of complaint against cooperative apartment corporation challenging bylaw and lease amendment on the grounds that the challenge was time-barred as it was not brought as an Article 78 proceeding within the 4-month statute of
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limitations); Dobbins v. Riverview Equities Corp., 64 A.D.3d 404, 404 (1st
Dep’t 2009) (shareholder’s challenge to cooperative corporation’s policy as violative of proprietary lease provision dismissed as time-barred); Villanova
Estates, Inc. v. Fieldston Prop. Owners Ass’n, Inc., 23 A.D.3d 160, 162 (1st
Dep’t 2005) (dismissing breach of contract claim against homeowners’ association premised upon the alleged failure to abide by the bylaws because such claim “should have been brought as an article 78 proceeding”);4
Buttitta v. Greenwich House Cooperative Apts., Inc., 11 A.D.3d 250, 251
(1st Dep’t 2004) (dismissing as time-barred, claims against cooperative housing corporation); Herriott v. 206 West 121st Street, 2017 WL 446901,
*2 (N.Y. Sup. Ct. N.Y. Co., Feb. 2, 2017) (“any allegations that the Co-op was acting ‘in violation of its own governing documents,’ are subject to ‘the four-month statute of limitations associated with Article 78 proceeding[s]’”)
(emphasis in original; internal citation omitted); Valyrakis v. 346 West 48th
Street Housing Dev. Fund Corp., 2016 WL 6070818, *4 (N.Y. Sup. Ct.,
N.Y. Co., Oct. 13, 2016) (“[a] proceeding challenging an action taken by a
4 Appellant argues that Villanova actually supports his position. See Applt.’s Br. at p. 24. Appellant is mistaken. Contrary to Appellant’s assertion that the Villanova decision stands for the proposition that “[o]nly allegations that the defendant acted beyond the powers granted to them in the cooperative’s bylaws are subject to Article 78 statute of limitations,” Applt.’s Br. at p. 24, nowhere in that decision does the Court so limit the scope of Article 78 proceedings.
{00545612;2} 17
cooperative corporation must be commenced within four months after the corporation’s ‘determination to be reviewed becomes final and binding . . .
.’”) (internal citation omitted).
Appellant does not cite a single decision stating otherwise. The authority relied upon for the proposition that his challenge to the Board’s enactment of the Roof Rules was not required to be brought as an Article 78 proceeding is entirely inapposite. See Pl.’s Br. at p. 20. None of the decisions concern challenges to rules enacted by an apartment cooperative corporation’s board of directors.
Accordingly, it is clear that Appellant’s challenge to the Roof Rules was required to have been brought as an Article 78 proceeding.
Such an Article 78 proceeding must have been commenced within four months from the date that the Roof Rules became final and binding.
See Kan v. New York City Envir. Control Bd., 262 A.D.2d 135, 135 (1st
Dep’t 1999); N.Y. C.P.L.R. §217(1). Appellant’s claims challenging the propriety of the Roof Rules accrued on July 27, 2013 – i.e., the date that
Appellant admits these rules were provided to him (R. 62). Because
Appellant commenced this action a year thereafter, on July 25, 2014, it is time-barred.
{00545612;2} 18
B. Appellant’s Claims Accrued Well Over Fourth Months Prior to the Commencement of This Lawsuit
Although Appellant goes to great lengths to persuade the Court that his claim did not accrue until July 8, 2014 and therefore, was brought within the requisite four-month period, his position is belied by his own admissions and by the record.
i. Appellant Admitted That His Claim Accrued on July 27, 2013, Nearly a Year Prior to Commencement of this Action
In the Complaint, Appellant was express that his challenge is to the
“Standards For Roof Terraces,” dated July 23, 2013 (the “Roof Rules”),
which were provided to him on July 27, 2013 (R. 62 at ¶24, R. 64 at ¶36, R.
68 at ¶¶ 53-54, R. 69 at ¶¶ 59-60, R. 71; see also R. 650 at ¶10). The
Complaint contains no allegation that the Roof Rules were not final or binding on July 27, 2013.5
5 Appellant notably offers no support for his spurious assertion on appeal that “the record is replete with evidence” that the Roof Rules he received on July 27, 2013 were in “proposed” form and “were being developed, amended and negotiated for a full year after the draft was circulated for comment.” Applt.’s Br. at p. 28. Rather, the record demonstrates that the Roof Rules received by Appellant on July 27, 2013 were “adopted by the [B]oard” on July 23, 2013 and had “been reviewed and signed off by the [Board’s] attorneys (R. 200). In fact, Appellant admits that on July 27, 2013, his partner, Janicek, was told that “the Board Members unanimously adopted the [Roof Rules] . . .” (R. 228 at ¶14). Further, on July 30, 2013, an email was sent to Appellant stating that the Roof Rules “have been unanimously approved by the Board and your neighbors in PH-B have also been advised that they must adhere to these standards” (R. 263).
{00545612;2} 19
ii. Appellant’s Complaints About the Roof Rules Did Not Toll the Running of the Four-Month Statute of Limitations
It was only after the Respondents moved for dismissal of the
Complaint on the grounds that Appellant’s challenge to the Roof Rules was time-barred that Appellant changed his mind and (and theory of the case) and decided that the Roof Rules were not “final and binding” at the time he received them on July 27, 2013. After the dismissal motion was filed,
Appellant decided that the Roof Rules were not “final and binding” until
July 14, 2014, when Appellant’s “attorneys received a letter from the Co- op’s counsel” which Appellant characterized as stating that “the Board was no longer willing to meet with [Appellant] to discuss modifying the Roof[]
Rules” (R. 233).6 In essence, Appellant contends that because the parties were discussing the Roof Rules during the year that elapsed between their adoption and Appellant’s commencement of this action, they were not
“final” until such discussions allegedly came to a conclusion in July 2014.
6 Appellant also took the contradictory position that the Roof Rules never had been finalized (R. 234, 538-40). Had that been the case, Appellant’s challenge thereto would not have been ripe.
{00545612;2} 20
The letter (email, actually) relied upon by Appellant in this regard does not state what Appellant claims it says (R. 286).7 The referenced email states that “the board will not meet with Mr. Musey again” and makes no reference to the Roof Rules having been anything other than final prior to that point in time (R. 286). The email explicitly reiterates that the issue of responsibility for covering the roof membrane “is not open to negotiation or compromise” (id.).
To give some context to Appellant’s argument, after the Roof Rules were adopted on July 23, 2013 and provided to Appellant on July 27, 2013,
Appellant registered his general dissatisfaction with same. Thereafter, on
September 19, 2013, the Board advised Appellant that it was “willing to discuss the [Roof Rules] to explain the reasons for, clarify and/or make minor adjustments to address specific terms [Appellant] believe[d] prevent[ed] [him] from making use of the terrace, [and that it did] not at th[a]t time see any reason for a wholesale redraft of [the Roof Rules]” (R.
266). This offer to meet did not include a notification that the Roof Rules were not final and binding (see id.).
7 Appellant’s mischaracterization of this email is consistent with his mischaracterization of other communications.
{00545612;2} 21
The offer to meet “to discuss [Appellant’s] specific concerns” about the Roof Rules – without any indication that the Roof Rules were not final and binding in the interim – was again extended on November 26, 2013 (R.
269). At this time, the Board had not received any “indication from
[Appellant] as to which specific [rules he] believe[]d [were] problematic and how/why” (R. 266).
Appellant clearly understood that the Roof Rules were in full and force and effect, as evidenced by his decision in October 2013 to voluntarily withdraw his previously-submitted proposal to renovate the “terrace” (R. 62 at ¶27).
Appellant finally responded to the Co-op’s offers to meet on
December 10, 2013 (R. 270-72). In that December 10, 2013 email, with regard to the Roof Rules, Appellant wrote:
If the Board[‘s] . . . position is unchanged on these issues, we don’t have anything to discuss (R. 271).
Such statement also clearly demonstrates that Appellant was not under the impression that the Roof Rules were anything but “final and binding,” at least by that date (which still was more than four months prior to the commencement of this action).
{00545612;2} 22
After the parties finally met on February 2, 2014 – more than four months after the Roof Rules were adopted in July 2013 (R. 274, 299) – in accordance with the Lease provision that allows the Board to “prescribe”
“from time to time” regulations concerning the use of the “terrace,” the Roof
Rules were slightly modified (R. 88). The three provisions contained in the
Roof Rules about which Appellant complains in this lawsuit – 4, 5 and 21 – were not at all altered in that February 2014 revision; they remain in the same form as originally adopted in July 2013 (R. 308, 311-12; compare R.
124-127 with R. 315-318 ). When the February 2014 Roof Rules were transmitted to Appellant on February 28, 2014, the Co-op advised Appellant expressly that no further changes thereto were anticipated (R. 309, 310).
While Appellant may have undertaken further efforts to convince the
Board to make additional revisions to the Roof Rules, at no time did the
Board indicate that such requests would be considered.
Appellant’s attempts – throughout the period dating from his July 27,
2013 receipt of the Roof Rules to July 2014 – to persuade the Board that the
Roof Rules should be rescinded or revised did not toll or extend the statute of limitations period. See Goonewardena v. Hunter College, 40 A.D.3d 443,
443-44 (1st Dep’t 2007) (“The failure to proceed within four months required
{00545612;2} 23
dismissal, notwithstanding petitioner’s ongoing correspondence with CUNY regarding his medical documentation as a request for reconsideration. Such a request does not toll the four month statute of limitations . . . even when an agency takes it under review or negotiates with a petitioner over modification of the administrative determination.”); Kan, 262 A.D.2d at 135
(affirming dismissal of Article 78 proceeding as being time-barred);
Raykowski v. New York City Dep’t of Transp., 259 A.D.2d 367, 367 (1st
Dep’t 1999) (same); Maio v. New York City Civil Serv. Comm’n, 176
A.D.2d 526, 526 (1st Dep’t 1991) (same); 252 West 30th Street Realty Corp. v. Biderman, 165 A.D.2d 759, 759-60 (1st Dep’t 1990) (“Petitioner’s communications subsequent to the September 9, 1988 denial merely constituted requests for reconsideration which could not serve to toll or revive the statute of limitations.”); Bonar v. Shaffer, 140 A.D.2d 153, 156
(1st Dep’t 1988) (“correspondence and negotiations between the parties following the Secretary of State’s determination did not operate to toll or revive the Statute of Limitations.”).
There is no question that the Roof Rules were final and Appellant was bound to adhere to them in July 2013. Any discussions had between
Appellant and the Board thereafter were simply that: discussions. There was
{00545612;2} 24
no formal review process for Appellant to pursue short of judicial review, which he voluntarily opted not to pursue for one year.
As the lower Court correctly held, Appellant’s challenge to the adoption of the Roof Rules is barred by the four-month statute of limitations applicable to Article 78 proceedings and that statute of limitations accrued on July 27, 2013.
C. Equitable Estoppel Does Not Apply to Toll the Applicable Statute of Limitations
Neither is Appellant’s equitable tolling argument availing. All that
Appellant musters in this regard is that he “provided [unspecified] factual evidence concerning the Board’s repeated communications with [him] concerning the applicability of the Roof/Terrace Rules . . . .” Pl.’s Br. at p.
34.
For equitable estoppel to apply, Appellant must have been “‘induced by fraud, misrepresentations or deception to refrain from filing a timely action.’” Zumpano v. Quinn, 6 N.Y.3d 666, 674 (2006) (rejecting equitable estoppel argument) (internal citations omitted); Kainer v. Christie’s Inc., 141
A.D.3d 442, 444 (1st Dep’t 2016) (rejecting equitable estoppel argument).
However, Appellant has not demonstrated that any such fraud, misrepresentation or deception prevented him from timely commencing this
{00545612;2} 25
action. As discussed at length above, at no time did any of the Respondents promise Appellant that amendments to the challenged Roof Rules would be made; in fact, it was not even until February 2014 – i.e., after the four-month statute of limitations already had run – that Appellant even told the Board how he believed himself to be aggrieved by the Roof Rules.
Further, Appellant does not – as he cannot – contend that: (1) the
Board ever advised him that the Roof Rules were not binding in July 2013; or (2) he asked the Board to enter into a tolling agreement and that it dragged its feet or promised to do so and then did not; or even (3) he advised any of the Respondents that he intended to timely file a summons with notice to stop the limitations clock from running, but that any of the
Respondents acted to fraudulently prevent him from doing so. See Seigel,
144 A.D.3d at 556 (“Nor does the doctrine of equitable estoppel apply to bar the assertion of the statute of limitations defense, since Appellant failed to allege that specific subsequent acts by defendant kept him from timely bringing suit.”).
To the contrary, Appellant admits that he was aggrieved as of July 27,
2013, but that he voluntarily did nothing to preserve his judicial remedies and waited until a full year later to commence this lawsuit. See Close-
{00545612;2} 26
Barzin v. Christie’s, Inc., 51 A.D.3d 444, 444 (1st Dep’t 2008) (affirming dismissal of action as being time-barred and declining to apply the equitable estoppel where the allegations in the complaint “demonstrate that [the plaintiff] had all the information necessary to commence an action . . . well within the limitations period.”).
Having failed to demonstrate any fraud that lulled him into forgoing his rights or that he did not have at his disposal in July 2013 all the facts needed to challenge the Roof Rules, Appellant has not demonstrated entitlement to the “extraordinary remedy” of equitable estoppel. Pahlad v.
Brustman, 33 A.D.3d 518, 519-20 (1st Dep’t 2006) (affirming denial of application of equitable estoppel to toll statute of limitations).
* * *
There is no question that the lower Court properly dismissed
Appellant’s challenge to the Roof Rules as being time-barred.
{00545612;2} 27
POINT II
APPELLANT’S FURTHER ARGUMENTS OPPOSING THE STATUTE OF LIMITATIONS BAR ARE IMPROPERLY RAISED FOR THE FIRST TIME ON APPEAL AND IN ANY EVENT, ARE MISPLACED AND UNAVAILING
In connection with this appeal, Appellant goes to great lengths to re- characterize his claims, raising new (meritless) arguments that were not raised below, in an effort to revitalize his plainly time-barred challenge to the Roof Rules.
It is unclear whether it is intentional or not, but on appeal, Appellant conflates the dismissal of his challenge to the Roof Rules on grounds that such challenge was time-barred, with the dismissal of his other claims. On appeal, Appellant seems to argue that the lower Court erroneously dismissed all of his claims on statute of limitations grounds. Appellant contends that his claims are in the nature of deprivation of property rights, Aplt.’s Br. at pp. 5, 8, and are about the Co-op failing to allow him exclusive use and quiet enjoyment of the roof space immediately outside the Apartment, Aplt.’s Br. at pp. 18, 21-23, which claims are not in the nature of Article 78 proceedings.
{00545612;2} 28
A. Appellant’s Arguments Are Improperly Raised for the First Time on Appeal
As an initial matter, these arguments were not raised below in opposition to the Co-op’s motion to dismiss on statute of limitations grounds
(R. 534-40). Rather, in opposition to Respondents’ motion to dismiss on statute of limitations grounds, Appellant asserted only three arguments: (a) his claims were that the “the defendants” violated the terms of the Lease, which document is not a “governing document” of the Co-op and therefore, the violation of same “is not reviewable in an Article 78 proceeding,” and rather, the claim is purely breach of contract, subject to a six-year statute of limitations; (b) the doctrine of equitable estoppel precluded the defendants’ assertion of a statute of limitations defense; and (c) the challenged Roof
Rules have never been finalized (R. 534-40).
Appellant cannot now be heard to argue that the lower Court erred in declining to treat this as a dispute concerning property rights, subject to a 6- year statute of limitations, when such argument was not raised below and thereby preserved for appeal. See Atlantic Aviation Investment LLC v.
Varig Logistica, S.A., 73 A.D.3d 467, 468 (1st Dep’t 2010) (declining to address an issue “raised for the first time on appeal.”); Recovery
Consultants, Inc. v. Shih-Hsieh, 141 A.D.2d 272, 276 (1st Dep’t 1988)
{00545612;2} 29
(“Nor, obviously, may a party argue on appeal a theory never presented to the court of original jurisdiction.”).
B. There is No Dispute Concerning Exclusive Use
In addition, while Appellant devotes many pages of his brief to the question of his exclusive use of the “terrace,” exclusive use was not in dispute in connection with the statute of limitations defense, and more importantly, the issue of exclusive use does not impact the fact that
Appellant’s challenge is to the Roof Rules, which challenge was required to be brought within four months of their enactment.
C. Appellant’s Newly-Raised Arguments Are Meritless
Even if Appellant’s new arguments could be considered on appeal – which they cannot – they are without merit.
First, as is plain, the lower Court did not “consistently [or] dismissively mischaracterize the nature of [Appellant’s] grievance as ones required to be brought under Article 78.” Aplt.’s Br. at 22. As discussed hereinabove, the lower Court only dismissed his first and second causes of action – i.e., for breach of fiduciary duty and fraud, respectively (R. 64-67) – and that portion of the third cause of action seeking a declaration that certain of the Roof Rules were null and void, on the ground that Appellant’s
{00545612;2} 30
challenge to the enactment of the Roof Rules was required to be made in the context of an Article 78 proceeding commenced within four months of their enactment. (R. 17). The lower Court understood that the third and fourth causes of action sought relief under a breach of contract theory, but dismissed those claims after concluding that the Co-op did not breach any obligation owed to Appellant, not because these two claims were time- barred (R. 19, 39).
Second, Appellant argues that “where provisions of a proprietary lease are in conflict with subsequently propounded Co-op rules, the terms of the lease prevail.” Aplt.’s Br. at p. 25. However, Appellant declines to point to any provision in the Lease wherein it states that it is the Co-op’s responsibility to install a protective covering over the roof membrane (for the sole purpose of allowing the penthouse shareholder, exclusively, to use such space as a private terrace).
In fact, even before the Roof Rules were adopted, Appellant recognized that it would be his responsibility to install a protective surface over the roof membrane (R. 169, 193). In a July 3, 2013 email to Frank
Chaney, Appellant asked if his roof space renovation proposal could be broken down into “two parts” to allow him to “get proper decking to protect
{00545612;2} 31
the terrace roofing ASAP after the waterproofers leave” (R. 193). Plainly, there is no conflict between any Lease provision and any Roof Rule.
Third, Appellant makes the odd argument that even if his claims were time-barred, the lower Court should have nevertheless determined them on their merits because they are “meritorious.” Aplt.’s Br. at p. 34. However,
“dismissal on statute of limitations grounds is ‘equivalent to a final disposition on the merits.’” Soto v. Clerk of the Supreme Court, 299 A.D.2d
155, 156 (1st Dep’t 2002) (internal citation omitted).
In this regard, Appellant argues that through the Roof Rules, the
Board impermissibly attempted to: (a) eliminate Appellant’s exclusive use of the roof space immediately outside the Apartment, in violation of paragraph
7 of the Lease; (b) interfere with Appellant’s quiet enjoyment of this outdoor space, in violation of paragraph 10 of the Lease; and (c) amend paragraph 25 of the Lease by taking away the Co-op’s responsibility to restore the roof space to its “proper and usual condition.” Aplt.’s Br at pp. 36-37.
However, there can be no legitimate dispute that per paragraph 7 of the Lease, the Board is expressly authorized to regulate Appellant’s use of the roof space, which it has done by adopting the Roof Rules (R. 88; see also
{00545612;2} 32
R. 90 at ¶13). Appellant has not demonstrated that any of the Roof Rules preclude him from using this space, exclusively.
Paragraph 10 of the Lease allows a lessee such as Appellant to
“quietly have, hold and enjoy the apartment” if the lessee “pay[s] the rent and perform[s] the covenants and compl[ies] with the conditions on the part of the Lessee to be performed” as set forth in the Lease (R. 89) (emphasis supplied). Paragraph 10 does not address the outdoor space and moreover, the only thing preventing Appellant from enjoying this space is his voluntary refusal to abide by the Roof Rule requiring him to protect the roof membrane.
Paragraph 25 of the Lease requires the Co-op to restore “the apartment and storage space to its proper and usual condition at [the Co- op’s] expense if [the Co-op makes] repairs” that are the Co-op’s obligation to make (R. 99). However, as addressed more fully at POINT III herein, the roof space immediately outside the Apartment has the same covering over it as it had prior to the membrane replacement in 2011 and prior to the parapet and pointing work occurring thereafter.
* * *
{00545612;2} 33
None of Appellant’s newly-raised arguments have any merit, and there exists no basis for re-instating any of his claims.
POINT III
PLAINTIFF’S RELIANCE ON THE SHAPIRO DECISION IS MISPLACED
Appellant is of the view that this Court’s decision in Shapiro v. 350 E.
78th St. Tenants Corp., 85 A.D.3d 601 (1st Dep’t 2011) is controlling and mandates that all his claims survive. However, the lower Court properly declined to agree with Appellant that Shapiro requires a finding here that the
Co-op is required to provide Appellant with a “habitable” terrace. The lower
Court was correct to conclude that Appellant’s “reliance on Shapiro . . . is misplaced” (R. 38-39).
In Shapiro, unlike here, the plaintiff penthouse owner had installed wooden decking on the roof and placed furniture and plantings thereon. See
Shapiro, 85 A.D.3d at 602. The foregoing improvements had to be removed in order to allow for inspection and repair of leaks. See id. There, the lower
Court issued an injunction requiring the defendant cooperative corporation
“to make such repairs as may be necessary to restore the plaintiff’s use of the roof,” – i.e., to make such repairs that were necessary to render it structurally sound. Id. at pp. 602-03. There was no house rule in effect in
{00545612;2} 34
Shapiro that required the lessee to install a protective barrier over the roof
membrane.
There is no contention by Appellant here that the roof space
immediately outside the Apartment is not structurally sound. Neither is
there any evidence that its current condition deviates in any way from the
condition it was in prior to the replacement of the roof membrane in 2011 or
prior to the time it was used as a staging area for pointing and parapet work
in 2013-14.8 Certainly, unlike in Shapiro, Appellant does not – as he cannot
8 In support of his contention that the “terrace” surface previously had been sufficient for furniture and plantings to be placed thereon, Appellant relies on an undated, unauthenticated document he contends is an article from Architectural Digest, in which the prior owner of the Apartment – Elaine Kaufman – is quoted as stating that she “was looking for something with a terrace” when she was apartment-shopping (R. 243). Also in support of this contention are: (a) photos purportedly taken by Appellant in February 2015 – i.e., after the membrane was replaced in 2011 and after the parapet and pointing work was completed (R. 398-406); and (b) hearsay testimony from Appellant’s lawyer that he had spoken with “a person who had worked with Ms. Kaufman for many years,” and that this individual had told him that “at one [unspecified] point, decking, furniture and landscaping” had been on this roof space (R. 357-58). This inadmissible evidence, in addition to failing to demonstrate that the current roof surface is in any way different from what existed at any other prior point in time, is undermined by: (a) Appellant’s admission that prior to his purchase of the Apartment, he did not inspect the “terrace,” thereby conceding that he has no personal knowledge as to its pre-purchase condition (R. 58 at ¶13, R. 222 at ¶2); (b) the testimony of the Co-op’s managing agent, Kaswaree Narine, as to her first-hand knowledge that the roof membrane was replaced in 2011 with a membrane “comparable to the membrane that had been in place prior thereto, over which no decking nor other material had been placed by the prior owner/occupant of PH- A . . . , the Co-op or anyone else,” (R. 140 at ¶¶ 14-15); and (c) the testimony of the Co- op’s other property manager, Karel DeBoer, concerning his first-hand knowledge that the roof space at issue had, since he started working on behalf of the Co-op in 2008, never been “improved so as to invite or enable comfortable use thereof” and that no “decking or other surface” had ever been installed over the roof membrane (R. 202-03 at ¶¶ 1-6).
{00545612;2} 35
– contend that he had ever previously used the roof space as a terrace or that he removed improvements he had installed thereon at the Co-op’s request or even that the Co-op had in any way prevented him from installing anything on the roof in order to allow him to use the area as an entertainment terrace.
To the contrary, also unlike the plaintiff in Shapiro, Appellant voluntarily withdrew his proposal to renovate the “terrace,” which proposal included installing “terrace pavers” (R. 62 at ¶27, R. 140, 169). The Shapiro case is not controlling here.
POINT IV
APPELLANT’S CLAIMS COULD HAVE BEEN DISMISSED ON MYRIAD ALTERNATIVE GROUNDS
In the unlikely event that this Court concludes that the lower Court erred in dismissing any of Appellant’s claims for the reasons set forth in the
2015 D&O or the 2017 D&O, the dismissal of these claims may be affirmed on a number of alternative bases raised by Respondents below but not addressed by the lower Court. See Chanin v. Machcinki, 139 A.D.3d 490,
491 (1st Dep’t 2016) (“this Court can affirm on alternative bases argued to, but not reached by, the motion court.”); Nickerson v. Volt Delta Resources,
Inc., 211 A.D.2d 512, 512 (1st Dep’t 1995) (affirming grant of dismissal motion on alternative grounds).
{00545612;2} 36
A. The Allegations Are Insufficient to State Claims for Breach of Fiduciary Duty or Fraud by the Individual Board Member Respondents
The first and second causes of action – for breach of fiduciary duty and fraud, respectively – were asserted against the Individual Board Member
Respondents, individually (R. 64-67). Appellant broadly accused these parties, as a group, of “breach[ing] their fiduciary duty by unanimously voting to pass the [Roof Rules] in 2013” (R. 65) and by failing to advise
Appellant of the impending Roof Rules and the condition of the “terrace”
(R. 66-67).
As the lower Court correctly found, “only individual Board members are named as defendants, not the Board itself, yet the actions complained of were collectively undertaken by the Board” (R. 16). The lower Court further correctly held that “[g]enerally, ‘individual directors and officers may not be subject to liability absent the allegation that they committed separate tortious acts’ [and accordingly, n]one of the individual Board members are liable here under any cognizable theory” (id.).
The foregoing is not challenged on this appeal and as a result, this holding stands and the first and second causes of action cannot be reinstated.
{00545612;2} 37
Moreover, the lower Court’s holding that the Individual Board
Member Respondents cannot be held liable for the actions/inactions alleged here is amply supported by prior holdings of this Court. Where, as here, claims of wrongdoing by individual board members stem from a purported breach of the lease, there can be no personal liability absent allegations of individual tortious conduct. See 82 Retail LLC v. Eighty Two
Condominium, 117 A.D.3d 587, 589 (1st Dep’t 2014) (affirming dismissal of all claims asserted against individual members of condominium board of managers); Hixon v. 12-14 East 64th Owners Corp., 107 A.D.3d 546, 547-48
(1st Dep’t 2013) (affirming dismissal of breach of fiduciary duty claims asserted against individual board members). Because Appellant has not asserted any individualized tortious conduct on the part of any of the
Individual Board Member Respondents, they cannot be held liable under any legal theory asserted.
Moreover, Patricia Carbon, Suzanne Keane and Leslie Spitalnick were not even members of the Board at the time the events supporting the fraud claim occurred (R. 209-14) and Ms. Spitalnick and Jennifer Kreuger were not on the Board at the time the Roof Rules were enacted (R. 213-16).
Appellant did not dispute these facts below or appeal the lower Court’s
{00545612;2} 38
finding that “Keane, Carbon, and Spitalnick would be dismissed from the instant action, because it is undisputed that they were not on the Board” during the relevant time period (R. 16).
B. Appellant’s Breach of Fiduciary Duty Claim is Meritless
Appellant premises liability under this theory on the allegations that:
(a) the Board members adopted the Roof Rules, “shifting responsibility for maintaining the terrace from [the Co-op] to [Appellant];” (b) “[b]y transferring responsibility of maintaining the terrace to [Appellant], the
Board Members have engaged in self-dealing because such transfer has the effect of reducing their individual financial responsibility as shareholders . . .
.’” and (c) these individuals have “treat[ed Appellant differently than the other penthouse owner . . .” (R. 64, 65). However, the first basis for liability is undercut by the fact that Board is expressly empowered to enact the Roof
Rules (R. 88) and the other two premises have no factual validity and neither theory successfully abrogates the business judgment rule, which precludes judicial review of the Board’s decision to implement new rules for the use of the roof space.
At the outset, the underlying basis of this claim – i.e., that the Board somehow “shifted” responsibility for maintenance of the “terrace” from the
{00545612;2} 39
Co-op to Appellant – is fundamentally flawed. Nowhere in the Co-op’s governing documents does it state that the Co-op is responsible for maintaining any portion of the roof above the roof membrane, including whatever flooring and/or other materials may be used to transform such space into a “terrace.”
Rather, pursuant to the express terms of the Lease, a shareholder is responsible for any damage his equipment – in this case, whatever materials used to transform the space into an entertainment terrace – may cause to the
Building (R. 95 at ¶18(c)). There is nothing in the challenged rules that
“shift” responsibility from the Co-op to the shareholder, Appellant’s unique understanding of the Co-op’s governing documents notwithstanding.
Moreover, the record demonstrates that the Co-op has always required the penthouse shareholders to maintain the roof area above the membrane
(R. 140-41, 170-73).
Further, it cannot be disputed that the business judgment rule applies to decisions made by boards of directors of cooperative apartment corporations such as the Co-op. See Levandusky v. One Fifth Ave. Apt.
Corp., 75 N.Y.2d 530, 537 (1990). This rule “prohibits judicial inquiry into actions of corporate directors ‘taken in good faith and in the exercise of
{00545612;2} 40
honest judgment in the lawful and legitimate furtherance of corporate purposes.’” Levandusky, 75 N.Y.2d at 537-38 (internal citation omitted).
The Building has 74 apartments, owned or co-owned by approximately 103 shareholders (R. 139 at ¶3), each of whom benefits proportionately from any reduction in the Co-op’s collective financial obligations. There is nothing unique in the benefit that would accrue to the
Individual Board Member Respondents. See Lichtenstein v. Wilkie Farr &
Gallagher LLP, 120 A.D.3d 1095, 1098 (1st Dep’t 2014) (“The business judgment rule . . . protects . . . directors who are disinterested, meaning they do not, for example, stand to gain any personal financial benefit in the sense of self-dealing ‘as opposed to a benefit which devolves upon the corporation or all stockholders generally.’”).
Accepting as true for the purpose of this argument only that the Roof
Rules shift the cost of maintaining the “terrace” from the Co-op to Appellant
– which they do not – each and every shareholder in the Co-op, who otherwise would share in the cost of such maintenance, without being able to use this space, benefits from this rule. It is altogether reasonable to require
Appellant to maintain a space to which he has exclusive use. The Roof
Rules do not require him to maintain the roof (i.e., the roof membrane and
{00545612;2} 41
below), but only the portion above the roof membrane, which space he wishes to have and enjoy to the exclusion of all other shareholders.
To the extent that this claim is premised upon the theory that the
Individual Board Member Respondents treated Greenberg differently than they treated Appellant by “allowing” him to violate the Roof Rules, this simply is not the case. Unlike Appellant, Greenberg already had built out the roof area immediately outside his apartment, at his own expense, and did so in such a way that protects the roof membrane (R. 141at ¶17, R. 186 at
¶13, R. 170-73). To the extent that any portion of Greenberg’s terrace as it existed in July 2013 was not in compliance with the Roof Rules, the Board advised Greenberg that he must adhere to the Roof Rules and it is working with Greenberg on a timetable by which this roof space must be in compliance (R. 186 at ¶¶ 14-17, R. 199, 200).
Finally, the Board consulted with various professionals, including its managing agent, its building engineer and its attorneys, in crafting the Roof
Rules (R. 184 at ¶7). Accordingly, in this regard, too, it is demonstrated that, as a matter of law, the Board’s enactment of same is protected by the business judgment rule. See Gordon v. Nationwide Mut. Ins. Co., 30
N.Y.2d 427, 433 (1972) (“It would be an extraordinary result to hold
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[defendants liable] . . . because it acts on advice of counsel . . . .”); Pelton v.
77 Park Ave. Condo., 38 A.D.3d 1, 9 (1st Dep’t 2006) (“the board, in reliance upon the professional advice of its architect and counsel, satisfied the business judgment rule’s requirement of taking action in good faith and in the exercise of honest judgment in the lawful and legitimate furtherance of the condominium’s purposes.”); Spinale v. 10 West 66th Street Corp., 291
A.D.2d 234, 235 (1st Dep’t 2002) (“the board’s action was shielded by the business judgment rule based upon its reliance on the advice of counsel.”);
Allen v. Murray House Owners Corp., 174 A.D.2d 400, 404-05 (1st Dep’t
1991) (“Plaintiffs’ attempt to avoid the unambiguous holding of
[Levandusky] by endeavoring to establish bad faith . . . was refuted by the clear evidence that . . . defendants acted in reliance upon the advice of counsel.”).
There simply is no basis for Appellant’s breach of fiduciary duty claim and the lower Court could have dismissed it on that basis, as well.
C. Appellant’s Fraud Claim is Meritless
Appellant’s second cause of action – sounding in fraud – is premised upon the theory that the Individual Board Member Respondents failed to disclose to Appellant – before his purchase of the Apartment – that “the
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terrace was being repaired in such a manner as to render it unusable, and that the lack of access to the roof via a usable terrace and lack of safety barriers on the roof would likewise leave the roof unusable, and that the [Roof]
Rules were being drafted and would be implemented in the near future . . .”
(R. 66 at ¶43). This claim, however, is fatally problematic for at least three reasons.
First, as set forth in the Complaint, Appellant entered into the purchase agreement on December 13, 2012 prior to the January 24, 2013
Board interview at which the allegedly fraudulent conduct occurred (R. 58 at
¶13, R. 59 at ¶14). Accordingly, his determination to purchase could not have been based on anything that occurred at the Board interview.
Second, this claim is predicated on a false premise. The roof membrane was replaced in 2011 with a membrane similar to what had been in place previously (R. 140). None of the work being undertaken 2013 was to the roof membrane or otherwise left the “terrace” in a condition worse off than it was prior to the waterproofing and parapet work being undertaken.
Third, “‘[a]bsent a confidential or fiduciary relationship, there is no duty to disclose, and [a defendant’s] mere silence . . . does not constitute . . . a fraud.’” FNF Touring LLC v. Transform America Corp., 111 A.D.3d 401,
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402 (1st Dep’t 2013) (internal citation omitted). Here, the parties were not in a fiduciary relationship prior to Appellant’s becoming a shareholder. See
Messner v. 112 East 83rd Street Tenants Corp., 42 A.D.3d 356, 357 (1st
Dep’t 2007) (“Plaintiff [cooperative shareholder] does not have a cause of action for fraud based on the co-op’s alleged failure to disclose [information about the terrace area appurtenant to the apartment], since the parties were not in a fiduciary relationship prior to the sale of the apartment . . . .”);
Dembeck v. 220 Central Park South, 33 A.D.3d 491, 492 (1st Dep’t 2006)
(unanimously affirming dismissal of fraud claim). None of the Individual
Board Member Respondents owed Appellant a fiduciary duty in connection with Appellant’s decision to purchase the Apartment. See Woods v. 126
Riverside Drive Corp., 64 A.D.3d 422, 423 (1st Dep’t 2009).9
9 Below, Appellant argued that the “special facts doctrine” applied, but he failed to cite to any authority that this doctrine applied to the circumstances at bar (R. 549-51). For example, Appellant relied upon the dissent in Chiarella v. United States, 445 U.S. 222, 248 (1980), an insider trading case. Moreover, the majority of the Chiarella Court determined that the defendants there had no duty to disclose. See id. at 232-35. The “special facts doctrine” was also found not to apply in Travelers Indemnity Co. of Ill. v. CDL Hotels USA, Inc., 322 F. Supp.2d 482, 498-500 (S.D.N.Y. 2004), a case involving an insurance coverage dispute. Although the “special facts doctrine” was found to apply in Barrett v. Freifeld, 64 A.D.3d 736 (2d Dep’t 2009) and Citi Mgmt. Group, Ltd. v. Highbridge House Ogden, LLC, 21 Misc.3d 1123(A) (N.Y. Sup. Ct. Bronx Co. Aug. 3, 2005), neither of those cases addressed the duty owed by members of a cooperative’s board to a prospective purchaser of a cooperative apartment.
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Moreover, here, Appellant chose to buy the Apartment “as is,” knowing that he had not inspected the “terrace” (R. 58 at ¶13). In the purchase agreement for the Apartment, he expressly warranted that he had
“inspected or waived inspection of the Unit, the Personalty and the Included
Interests and shall take same ‘as is,” as of the date of this Contract, except for reasonable wear and tear” (R. 145 at ¶7, R. 148 at ¶21, R. 152 at ¶52).
“Where a party has the means of discovering, by the exercise of ordinary intelligence, the true nature of the transaction it is about to enter into, it must make use of those means or it cannot be heard to complain that it was induced to enter into the transaction by misrepresentation.” Woods, 64
A.D.3d at 423; see also Jana L. v. West 129th Street Realty Corp., 22
A.D.3d 274, 278 (1st Dep’t 2005); 198 Avenue B Associates v. Bee Corp.,
155 A.D.2d 273, 274-75 (1st Dep’t 1989).
It was incumbent upon Appellant to exercise reasonable diligence in ascertaining the physical condition of the “terrace” and to inquire whether such space could be used for the purpose he intended to use it, at the Co-op’s expense. In opposition to the Respondents’ dismissal motion, Appellant and his partner, Janicek admitted that they made no such inquiry (R. 224 at ¶4,
R. 298 at ¶3). Appellant does not contend that the Individual Board Member
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Respondents told him that no new roof rules would be forthcoming or that the Co-op historically had been responsible for installing a protective surface over the roof membrane or that anyone omitted material facts in response to any inquiry from him about same prior to his decision to enter into the purchase agreement.
Appellant did not state a fraud claim and his second cause of action could have been dismissed on that basis, as well.
D. Appellant Is Not Entitled to the Declaratory Relief Sought
In connection with his third cause of action, Appellant sought declarations: (a) that paragraphs 4, 5 and 21 of the Roof Rules are null and void (R. 68 at ¶ 54, R. 69 at ¶60); and (b) directing the Co-op to “take all actions required to make the terrace habitable, including, but not limited to, the installation of a flooring surface over the terrace membrane enabling it to withstand ordinary expected use” (R. 68 at ¶56); (c) directing the Co-op to
“take all actions required to make the roof habitable including, but not limited to, installation of a protective barrier meeting the safe and legal minimum height requirements for safe use” (R. 69 at ¶61); and (d) directing the Co-op to “replace the exterior doors to the Unit” (id. at ¶63).
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As noted at Point I hereinabove, the requested declarations concerning the validity of any provision of the Roof Rules cannot be obtained because the time within which to seek such relief has long since passed. Neither can
Appellant demonstrate that he is otherwise entitled to any of the additional requested relief.
First, even if the time during which Appellant could have asserted a legal challenge to the Roof Rules had not long-since expired – which it most certainly has – paragraphs 4, 5 and 21 were enacted pursuant to the express power afforded to the Board in the Lease and in furtherance of the legitimate interests of all shareholders in the Co-op (R. 88). The Lease itself is clear and direct that while Appellant may have the right to use and enjoy the disputed space, he may do so only pursuant to the regulations and approvals of the Co-op (id.).
Second, the Roof Rules were enacted in the legitimate exercise of the
Board’s reasonable business judgment.
Paragraph 4 requires that “[t]he roof membrane shall be protected at all times from foot traffic, planters, deck covering, furniture and/or other objects” (R. 124).
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Paragraph 5 requires Appellant to execute an agreement “accepting full responsibility for and indemnifying the [Co-op] against the cost of repairing any and all damage to the underlying roof membrane and any damage to the public areas and/or apartment(s) below” caused, directly or indirectly, by Appellant’s use or improper maintenance of the roof space
(id.).
Paragraph 21 prohibits the enclosure of portion of the roof space (R.
126).
Paragraphs 4 and 5 were modeled on similar language contained in the various forms of alteration agreement the Co-op has used over the past
25 years and therefore, were not new requirements (R. 187 at ¶21, R. 170 at
¶2, R. 170-71 at ¶4). These paragraphs are directed toward ensuring that all other 102 shareholders in the Co-op are not held hostage by Appellant in the sense of their having to be held financially responsible for Appellant’s misuse of the roof space such that the protective membrane (which safeguards the roof of the entire Building, and thereby, each and every apartment below the roof level that could be impacted by damage thereto) is compromised, resulting in damage. It should go without saying that it is very comfortably within the Board’s business judgment to enact such rules
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which inure to the benefit of all shareholders, rather than allowing each shareholder in the Co-op to be financially subject to the whim and whimsy of one shareholder and his desired use of space that directly impacts common Co-op property (in this case, the roof proper). As so eloquently said by the Court of Appeals,
[A]greement to submit to the decisionmaking authority of a cooperative board is voluntary in the sense that submission to governmental authority is not; there is always the freedom not to purchase the apartment. The stability offered by community control, through a board, has its own economic and social benefits, and purchase of a cooperative apartment represents a voluntary choice to cede certain of the privileges of single ownership to a governing body, often made up of fellow tenants who volunteer their time, without compensation. The board, in return, takes on the burden of managing the property for the benefit of the proprietary lessees. As one court observed: “Every man may justly consider his home his castle and himself as the king thereof; nonetheless his sovereign fiat to use his property as he pleases must yield, at least in degree, where ownership is common or cooperation with others. The benefits of condominium living and ownership demand no less.”
Levandusky, 75 N.Y.2d at 536-37 (internal citation omitted). Appellant, however, appears to be under the mistaken impression that he is not only the king of his castle, but of the entirety of the Co-op, such that each shareholder
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therein must be beholden to his wants and desires, no matter how detrimental the same may be to all other shareholders’ interests in their collective investment in the Building.
With regard to Roof Rule 21, this provision was included for the reason that the Building, which was built prior to the enactment of the current zoning regulations, contains more floor area than the current regulations allow (R. 187 at ¶22). Under the zoning rules applicable to non- complying buildings, in which such excess floor area is “grandfathered in” as an existing non-compliance and may remain, the degree of such existing non-compliance may not be increased (id.). The enclosure of any portion of the Building’s roof would create additional floor area, thereby increasing the degree of the Building’s non-compliance, which could result in the Co-op being issued a violation and/or being subject to fines (id.). Accordingly, this provision was adopted in the legitimate exercise of the Board’s authority, within its reasonable business judgment.
Appellant cannot demonstrate entitlement to a declaration that paragraphs 4, 5 or 21 of the Roof Rules are null and void.
Third, Appellant seeks a declaration requiring the installation of an unspecified “flooring surface” over the roof membrane which would enable
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the “terrace” to withstand unspecified “ordinary expected use,” claiming that the “terrace” is not otherwise “habitable” (R. 68 at ¶56). In effect, Appellant seeks this declaration on the theory that the Co-op must act in keeping with the statutory warranty of habitability. However, as is discussed more fully in the next subsection, the warranty of habitability does not apply to terraces of penthouse apartments. Moreover, there is nothing barring Appellant from using the “terrace” other than his own lack of willingness to abide by the
Co-op’s rules with respect thereto.
Fourth, Appellant’s request for the installation of a “protective barrier meeting the safe and legal minimum height requirements for safe use,” is a red herring. A new parapet wall was erected in June 2013 which meets current requirements of New York City Building Code (R. 142, 178-82,
218).
Ultimately, Appellant offered no basis for obtaining any of the declaratory relief denied to him by the lower Court.
E. Appellant’s Breach of Contract Claim is Without Merit
Appellant’s fourth cause of action – sounding in breach of contract – was asserted against the Co-op and DEPM and premised upon the contention that these two entities are contractually obliged (by the Lease) to provide
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Appellant with a habitable roof and terrace which he can quietly and exclusively enjoy (R. 70-71).
As an initial matter, no such claim may be asserted against DEPM, which is not a party to the Lease (R. 83). The lower Court agreed, holding that DEPM “is dismissed from this action, because it is not a party to th[e
Lease], and it is not liable in its role as a managing agent” (R. 20).
Appellant does not challenge this holding on appeal.
With respect to the Co-op, the fourth cause of action could have been dismissed on the ground that as a matter of law, no valid breach of contract claim is stated unless the pleading sets forth the provision(s) of the agreement at issue that were purportedly breached. See New York City
Educational Constr. Fund v. Verizon New York Inc., 114 A.D.3d 529, 531
(1st Dep’t 2014); 767 Third Ave. LLC v. Greble & Finger, LLP, 8 A.D.3d
75, 75 (1st Dep’t 2004). Nowhere in the Complaint was any specific contractual provision identified has having allegedly been breached; rather, it states that the Lease, at some unspecified paragraph, “provides that
[Appellant] is entitled to the exclusive quiet enjoyment of the terrace and roof” (R. 70 at ¶69).
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To the extent that the Lease provision that Appellant contends was breached is the implied warranty of habitability as set forth in New York
Real Property Law (“RPL”) §235-b (R. 70 at ¶68), such warranty addresses
“the Legislature’s concern that tenants be provided with premises suitable for residential habitation, in other words, living quarters having ‘those essential functions which a residence is expected to provide.’” Solow v.
Wellner, 86 N.Y.2d 582, 589 (1995) (quoting Park West Mgmt. Corp. v.
Mitchell, 47 N.Y.2d 316, 328 (1979)) (emphasis supplied). This implied warranty “protects against conditions that . . . constitute deficiencies that prevent the premises from serving their intended function of residential occupation.” Id. (emphasis supplied). Pursuant to this implied warranty, a lessor such as the Co-op “is not required to ensure that the premises are in perfect or even aesthetically pleasing condition,” but it warrants that “there are no conditions that materially affect the health and safety of tenants” and that it is providing the tenant with “essential functions which a residence is expected to provide.” Park West Mgmt. Corp., 47 N.Y.2d at 328 (emphasis supplied). Appellant, however, has not been deprived of the essential functions of what the Apartment is expected to provide. Frankly, he has not been deprived of the essential functions of what a “terrace” may be expected
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to provide. There is in place a roof membrane over which, upon review and approval by the Board, Appellant may install decking or other flooring material. The implied warranty is meant to address “an objective, standard for essential functions,” not those to which a shareholder-tenant in a high- end penthouse subjectively believes himself to be entitled. Solow, 86
N.Y.2d at 589.
The implied warranty of habitability simply is not intended to extend to terrace space. See Jackson v. Westminster House Owners Inc., 2004 WL
5487453 (N.Y. Sup. Ct., N.Y. Co. Apr. 8, 2004) (“Plaintiffs’ assertion that they could not enjoy the use of their terrace as guaranteed under the proprietary lease does not fall within the parameters of a claim for breach of the warranty of habitability.”).
Moreover, the only thing allegedly rendering this roof space
“uninhabitable” is the lack of a protective surface over the roof membrane
(R. 70 at ¶70). As set forth clearly in the Roof Rules, responsibility for installation of maintenance of such a surface lies with Appellant, not the Co- op (R. 124).
Appellant’s breach of contract claim could have been dismissed for its lack of merit.
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POINT V
LEAVE TO AMEND THE COMPLAINT WAS PROPERLY DENIED
The lower Court correctly denied Appellant’s motion for leave to amend his complaint on the ground that each of the claims asserted therein were without merit such that amendment would be futile (R. 40-43). The law is clear that where a proposed amendment would be futile, leave to amend is properly denied. See Silver v. Murray House, 126 A.D.3d 655,
656 (1st Dep’t 2015) (reversing grant of motion for leave to amend because the proposed amendment “lacks merit”); Mosaic Caribe, Ltd. v. AllSettled
Group, Inc., 117 A.D.3d 421, 422-23 (1st Dep’t 2014) (“[t]he court applied the correct standard in reviewing [the] motion for leave to amend the complaint. The court correctly noted that if the proposed amendments are totally devoid of merit and legally insufficient, leave to amend should be denied.”); Cusack v. Greenberg Traurig, LLP, 109 A.D.3d 747, 749 (1st
Dep’t 2013) (affirming grant of dismissal motion and denial of cross-motion for leave to amend); Meimeteas v. Carter Ledyard & Milbrun LLP, 105
A.D.3d 643, 643 (1st Dep’t 2013) (same); Crucen v. Leary, 55 A.D.3d 510,
512 (1st Dep’t 2008) (same).
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The lower Court painstakingly examined each of the claims asserted in the proposed amended pleading and reached the correct conclusion that none of them had any merit (R. 40-43).
First, the lower Court correctly concluded that the first cause of action asserted in the proposed amended complaint is barred by the law of the case doctrine (R. 41). Specifically, by that proposed cause of action, Appellant alleged that “[b]y failing and refusing to install an appropriate surface on the terrace, thus denying Appellant his right to a terrace usable for its intended purpose, Defendant has breached the Proprietary Lease” (R. 443 at ¶33).
The lower Court previously had dismissed Appellant’s challenge to the Roof
Rules, thereby allowing them to remain in place (R. 17, 19). Because the
Roof Rules (which are part and parcel of the Lease) require Appellant, and not the Co-op, to “install an appropriate surface on the terrace,” any claim that the Co-op breached any portion of the Lease by not installing a protective surface over the roof membrane is utterly without merit.
Second, the lower Court correctly determined that the same rationale applies to the proposed second and third causes of action, which seek equitable relief in the form of an order requiring the Co-op to install a
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protective surface over the roof membrane (R. 42, 444-445 at ¶¶ 40, 48).10
The lower Court also correctly held that the portion of the proposed second cause of action “concerning financial responsibility for replacement of the exterior doors present triable issues . . . , were not dismissed . . . , and remain part of this action,” such that the proposed amended is “duplicative” and unnecessary (R. 42).
The lower Court also concluded, correctly, that the requested equitable relief “serves no practical or useful purpose, inasmuch as monetary relief would” suffice and that where, as here, Appellant “has a remedy at law, extraordinary equitable relief in the form of a declaration or an injunction will not be granted” (R. 43).
The law is clear that where a plaintiff has an adequate remedy at law, equitable relief is inappropriate. See Regini v. Board of Managers of Loft
Space Condo., 107 A.D.3d 496, 497 (1st Dep’t 2013) (reversing denial of motion to dismiss claim for injunctive relief where the plaintiff had an adequate remedy at law); Lemle v. Lemle, 92 A.D.3d 494, 500 (1st Dep’t
2012) (affirming dismissal of cause of action seeking injunctive relief);
10 To the extent that Appellant also seeks a declaration that “the terrace appurtenant to the Unit is for Appellant’s exclusive use,” (R. 444 at ¶40), there is no dispute that he is entitled to such exclusive use; the dispute has been whether Appellant “owns” such space (R. 266-67, R. 666). Accordingly, there is no justiciable claim regarding exclusive use.
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Dweck v. Oppenheimer & Co., 30 A.D.3d 163, 163 (1st Dep’t 2006)
(affirming motion to dismiss declaratory judgment cause of action where, inter alia, the plaintiff had an adequate remedy at law in the form of money damages).11
Appellant has an adequate remedy at law. He can, for example, install whatever surface over the roof membrane he believes to be necessary to allow him to use the space “for its intended purpose” and also can
“maintain” the three terrace doors (R. 444) and then seek monetary reimbursement from the Co-op therefor under a breach of contract theory.
The “harm” that Appellant contends he is suffering – i.e., loss of use of the roof space immediately outside the Apartment – can be remedied by
Appellant himself. Certainly, Appellant cannot – and does not even try to – demonstrate that no legal remedy is available to him such that he must resort to the “extraordinary” remedy of equitable relief.12
11 The authority relied upon by Appellant in support of his contention that “a declaratory judgment action may be ‘an appropriate vehicle for settling justiciable disputes as to contract rights and obligations,’” Applt.’s Br. at p. 42, actually supports Respondents’ position that the proposed equitable relief claims are meritless. In Kalisch-Jarcho, Inc. v. New York, 72 N.Y.2d 727, 732 (1988), the Court of Appeal “conclude[d] that the Appellate Division abused its discretion by affirming declaratory judgment.”
12 Appellant asserts the legal proposition that “where a contract right has a value that cannot be accurately be quantified, it may properly be the basis for injunctive relief.” Applt.’s Br. p. 42. However, he does not articulate what contractual right he may have
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Third, the lower Court also correctly found that the proposed fourth
cause of action for breach of the implied warranty of habitability is
“palpably without merit” because Appellant “does not allege that his health
or safety has been materially adversely impacted” (R. 43). This proposed
cause of action for breach of the warranty of habitability is premised upon the allegation that “the terrace[] is currently uninhabitable because
Defendant’s installation of an improper surface has rendered the terrace unusable to be used as is,” (R. 445 at ¶50). As addressed at length at Point
IV.E. hereinabove, the warranty of habitability does not apply to terrace
spaces or to any portion of the property that does not encompass “essential
functions which a residence is expected to provide.” Park West Mgmt.
Corp., 47 N.Y.2d at 328 (emphasis supplied).13
that is not quantifiable. Certainly, he can quantify what it will cost to install a surface over the roof membrane and to maintain the three doors.
13 Appellant argues that he did allege health and safety concerns, as they relate to “the height of the parapets on the roof, and the risk of slippage given the current roof surfacing material . . .” and refers to pages 229, 232, 233 and 235 of the Record on Appeal in support. Applt.’s Br. at p. 43. These pages of the Record on Appeal contain an affidavit from Appellant submitted in connection with the cross-motions for summary judgment and do not address any concerns of “slippage” (R. 222-36). No reference is made to any allegations contained in the proposed amended complaint or in any affidavit submitted in support of that proposed amended pleading. Moreover, the proposed fourth cause of action does not seek redress in relation to any deficiency in the height of the roof parapets (R. 445-456) and in any event, the Co-op’s engineer has testified that the parapet wall around the main roof is Code-complaint (R. 218) and that to the extent that
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Appellant has offered no legal authority demonstrating that the conditions of which he complains fall within the ambit of the warranty of habitability and as a result, he has not demonstrated that the lower Court erred in denying him leave to assert this claim.
* * *
Appellant has failed to demonstrate that the lower Court erred in denying him leave to amend his Complaint to assert plainly non-meritorious claims. Amendment would have been futile.
POINT VI
THE MOTION TO QUASH WAS PROPERLY GRANTED
The lower Court properly granted the Co-op’s motion to quash the two non-party subpoenae issued to Shavelson and to Standard (R. 44-45).
At the time that the subpoenae were issued to Shavelson and Standard on August 5, 2015, the only issues that remained to be litigated were: (a) who is responsible for maintaining the Apartment’s three “terrace” doors;
(b) the ownership of the “terrace;” and (c) whether the Co-op breached the
Lease by failing to provide Appellant with quiet enjoyment of “terrace” (R.
19, 20-21).
Appellant contends that the roof over the Apartment is not Code-compliant, such claim also is meritless (R. 329).
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The documents and information sought via these subpoenae, however, were not limited to these narrow issues. The subpoenae sought documents related to the Co-op’s financial audits from January 1, 2012 to present, unspecified contracts that may have been entered into by the Co-op with another party that is owned or controlled by a relative of a Board member and materials concerning work performed by Standard from January 1, 2010 to present, including payment therefor (R. 677-80).
These subpoenae, in addition to being overbroad and improper by virtue of the fact that they sought information utterly irrelevant to what remained to be litigated, were also facially improper, as they did not include notice advising Shavelson or Standard why the disclosure was sought, as is required under N.Y. C.P.L.R. §3101(a)(4) (R. 677-80).
Accordingly, on August 17, 2015, the Co-op demanded that the subpoenae be withdrawn (R. 681), to which no response was received (R.
673). Thereafter, on August 21, 2015, the Co-op e-filed a proposed order to show cause and supporting papers seeking to quash the subpoenae (R. 670-
82). With the benefit of those papers, Appellant served amended subpoenae
(R. 685). The amended subpoenae also sought documents related to the Co- op’s financial audits from January 1, 2012 to present and materials
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concerning work performed by Standard from January 1, 2010 to present, including payment therefor (R. 694-95, 705).
As the lower Court correctly stated, a motion to quash a subpoena may be granted when the subpoena is “overbroad,” “seeks material and information irrelevant to the action” and where the “the party issuing the subpoena failed to demonstrate that the information sought from the nonparty could not be obtained from the parties” (R. 44). See Haron v.
Azoulay, 132 A.D.3d 475, 475 (1st Dep’t 2015) (affirming grant of motion to quash discovery requests from nonparties due to their overbreadth and utter irrelevancy); Schorr v. Schorr, 113 A.D.3d 490, 491 (1st Dep’t 2014)
(affirming grant of motion to quash non-party subpoenae where the issuer
“failed to show that he could not obtain the information sought in the course of depositions of Appellant or other sources”); Menkes v. Beth Abraham
Servs., 89 A.D.3d 647 (1st Dep’t 2011) (same).
As is evident, none of the requested information relates at all to the questions of whether the Co-op or Appellant is responsible for the maintenance of the terrace doors, who “owns” the “terrace” or whether the
Co-op breached the Lease by allegedly failing to provide Appellant with quiet enjoyment of the “terrace.”
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The best Appellant musters to demonstrate otherwise is the
(inaccurate) statement that “Standard was engaged by [the Co-op] to perform work on the roof of the building, including Appellant’s
Roof/Terrace,” which work is in some unspecified way “relevant to
Appellant’s claim for replacement of the Roof/Terrace doors” and “may also demonstrate a pattern of misconduct.” Pl’s Br. at p. 49. This argument is unavailing for a host of reasons:
First, Standard was engaged to perform “façade repointing and replacing lintels and window sills” as well as “window restoration at all facades and a parapet reconstruction,” which work Appellant cannot tie to the legal issue of whether the Co-op or Appellant is responsible for the terrace doors (R. 416). Certainly, Appellant does not argue that Standard did anything to cause these doors to be damaged or to create any other condition requiring their replacement.
Second, Appellant does not explain how the “bills submitted by
[Standard] to the Co-op,” or the payments Standard received from the Co-op
“for all work performed on the Building” (R. 705) pertain to his “claim for replacement of the Roof/Terrace doors.” Plainly, they do not. Because “it is clear that everything sought [by the subpoena] must meet the relevancy
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standard,” and Appellant admits that at least a portion of the Standard subpoena seeks materials utterly irrelevant to the pending litigation, the
Standard subpoena was properly quashed. Reuters Limited v. Dow Jones
Telerate, Inc., 231 A.D.2d 337 (1st Dep’t 1997) (reversing grant of motion to compel compliance with subpoena).
Third, Appellant has no pending claim against the Co-op (or any party) concerning “misconduct” of any kind. By arguing that the information sought by the Standard subpoena “may also demonstrate a pattern of misconduct,” Appellant is admitting that the issuance of the subpoenae is, in effect, meant to be fishing expedition, which is not permitted. See Reuters, Ltd., 231 A.D.2d at 342 (a subpoena may not “be used as a tool of harassment or for the proverbial ‘fishing expedition’ to ascertain the existence of evidence”). “It is simply not enough that the proponent [of the subpoena] merely hopes or suspects that relevant information will develop.” In re Morgenthau, 73 A.D.3d 415, 419 (1st Dep’t
2010) (affirming grant of motion to quash subpoena).
Finally, Appellant’s argument in no way demonstrates how the lower
Court erred in quashing the Shavelson subpoena. His silence implies agreement that this subpoena was properly quashed.
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Appellant has offered no basis for this Court to reverse the lower
Court's determination to quash the Standard and Shavelson subpoenae.
CONCLUSION
Based on the foregoing, Respondents respectfully request that this
Court affirm the 2015 D&O (as modified upon reargument) and the 2017
D&O and order such other and further relief it deems to be appropriate.
Dated: New York, New York April 18, 2017 Respectfully submitted,
BRAVERMAN GREENSPU~f'C,
By: If rac Atterheys fi es ondents 110 East 42nd Street, 17th Floor New York, New York 10017 (212) 682 -2900
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I hereby certify pursuant to 22 NYCRR §600.1 0 that the foregoing brief was prepared on a computer using MicrosoftWord.
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Name of typeface: Times New Roman Point size: 14 Line spacing: Double
Word Count. The total number of words in this brief, inclusive of point headings and footnotes and exclusive of pages containing the table of contents, table of authorities, proof of service, and this Statement is 13,814.
Dated: New York, New York April 18,2017
BRAVERMAN GREENSPUN, P.C. By: Tracy Peterson, Esq. Attorneys for Respondents 110 East 42nd Street, 17th Floor New York, New York 10017 (212) 682 -2900
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