Royal York Owners Corp. v Royal York Assoc., L.P.

[*1] Royal York Owners Corp. v Royal York Assoc., L.P. 2005 NY Slip Op 50889(U) Decided on June 9, 2005 Supreme Court, New York County Ramos, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on June 9, 2005
Supreme Court, New York County

Royal York Owners Corp. and THE BOARD OF MANAGERS OF THE ROYAL YORK CONDOMINIUM, Plaintiffs,

against

Royal York Associates, L.P., Defendant.



600269/04

Charles Edward Ramos, J.

Two motions are consolidated for disposition. This action concerns a dispute about which owners in a condominium, the residential owners or the commercial garage owner, should pay to replace the underground garage roof. In motion sequence number 001, plaintiffs, representing the residential owners, move for summary judgment. Defendant, successor sponsor of the condominium and owner of the commercial garage, cross-moves for summary judgment dismissing the complaint, and for sanctions against plaintiffs. In motion sequence number 002, plaintiffs move to supplement the record on these motions.

The residential part of the condominium consists of two 12-story buildings, 55 feet apart. A courtyard connects the two buildings. The garage is a two-level parking facility beneath the buildings. The garage extends underground from one residential building to the courtyard to the other residential building. It is alleged that approximately 60% of the garage lies below the residential buildings and that 40% lies below the courtyard. As described by defendant, the courtyard boasts a paved walkway, trees, shrubs, grass, a gazebo, and a fountain (Hoppe Affidavit, ¶ 17).

As a result of becoming owner of the unsold apartments and the garage unit, defendant filed an amended Offering Plan in February 1995. The Offering Plan describes the garage roof as a special risk (Offering Plan, at 8), and incorporates an engineering report noting that the garage roof would need replacement within 10 years (Offering Plan, Ex. K at 8).

In 2002, an engineering firm determined that the garage roof beneath the courtyard needed replacing. The engineers also recommended an elaborate courtyard beautification project. Although neither side states so explicitly, it appears that the garage roof must be accessed from above, so that replacing the roof entails demolishing the courtyard. The engineers' report itemizes the steps needed to change the garage roof and to refurbish the courtyard. The estimated cost of the two projects is $1.1 million, out of which at least $200,000 is for the roof replacement. How much of the remaining cost will apply to the roof is not clear from the report. The parties' disagreement centers on whether the garage roof is a common element of the condominium, belonging to all the owners, or whether it belongs solely to defendant. If the garage roof is a common element, plaintiffs must pay 98% of the cost of its replacement, and defendant 2%. If the garage roof belongs to the garage, defendant must pay that entire cost.

Article 9-B of the Real Property Law (RPL), known as the Condominium Act (the Act), regulates the ownership of condominiums. A condominium governs itself by its own Declaration and Bylaws (RPL §§ 339-e [7]; 339-u). Each owner in a condominium owns his or her separate unit and a share of the common elements, that is, the parts of the condominium owned by all of the owners (RPL §§ 339-h; 339-i [1]). Common expenses are the expenses of operating the entire property (RPL § 339-e [4] [a]). Common profits are the revenues from the common elements minus the common expenses (RPL § 339-e [6]). Condominium finances may be [*2]arranged so that each owner pays common expenses and receives common profits, according to his or her proportional ownership in the common elements (RPL § 339-m). Alternatively, expenses and profits may be allocated according to the special use of particular units or common areas by particular unit owners (id.).

According to the Declaration in this case, the residential units own 95% of the common elements of the condominium, and the garage unit 5% (Art. 6.2). The residential units are responsible for 98% of the cost of repairing and maintaining the common elements, while the garage unit is responsible for 2% (Art. 16.1 [a]). Both the Declaration and the Bylaws define common profits in the same manner as the Act, but neither the Declaration nor the Bylaws states how any profits should be allocated (Declaration, Art. 23.11; Bylaws, Art. XIII [10]).

Defendant argues that the garage roof is a common element, which means that plaintiffs are responsible for 98% of the cost of replacement. Plaintiffs argue that the garage roof belongs solely to the garage, which means that defendant is responsible for all the cost of replacement. Plaintiffs further allege that the courtyard, which belongs to the residential units, receives no support from the garage roof underneath, and that they receive no profits or other sort of benefits from the garage. Consequently, it is inequitable to require them to pay for the garage roof. Plaintiffs' first cause of action seeks a declaratory judgment that the garage roof is part of the garage unit. The second cause of action seeks a declaratory judgment that the garage roof is not a common element. The third cause of action alleges that, in the event that the court decides that the garage roof is a common element: 1) such a finding violates the Act, so the Declaration should be reformed to comply with the Act; or 2) plaintiffs should be awarded damages based on unjust enrichment, because plaintiffs will have to pay 98% of the cost of repairing the garage roof, while defendant reaps all of the benefit.

Plaintiffs move for summary judgment on their entire complaint. Defendant cross-moves to dismiss the complaint on summary judgment grounds, pursuant to CPLR 3212, and for failing to state a cause of action, pursuant to CPLR 3211 (a) (7), and cross-moves for sanctions against plaintiffs, on the ground of bringing a frivolous complaint, pursuant to 22 NYCRR 130-1.1. The demand for sanctions is defendant's only counterclaim.

The proponent of a motion for summary judgment must make a showing of entitlement to judgment as a matter of law, offering enough evidence to demonstrate the lack of any material issues of fact (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]). "Failure to make such prima facie showing requires a denial of the motion, regardless of the sufficiency of the opposing papers" (id.). To be entitled to summary judgment, plaintiffs must show that the garage roof belongs only to the garage, while defendant must show that the garage roof is a common element that belongs to all condominium owners. Each side contends that the Declaration and the Act support its position.

As a threshold matter, defendant argues that the complaint is time-barred. The Declaration was originally promulgated on December 1, 1988, and filed in 1990. The amended Offering Plan was filed in 1995. Plaintiffs commenced this action on January 28, 2004.

The statute of limitations applicable to declaratory judgment actions depends upon the claim out of which the request for a judgment arises (Solnick v Whalen, 49 NY2d 224, 229 [1980]). If the court determines that the underlying dispute can or could be resolved through a form of action or proceeding for which a specific limitations period is statutorily provided, that limitations period governs the declaratory judgment action (Matter of Save the Pine Bush, Inc. v City of Albany, 70 NY2d 193, 202 [1987]). If no specific limitations period is identified, the declaratory judgment action is governed by the six-year period in CPLR 213 (1) (Solnick, 49 NY2d at 229-330).

Plaintiffs contend that the Declaration supports their position that the garage roof belongs to the garage, and that defendant has violated or is about to violate, the Declaration. The Declaration itself provides that all unit owners must comply with its terms (Art. 14.1). As a breach of contract claim could resolve the dispute between the parties, the court finds that plaintiffs' declaratory judgment claims are analogous to contract causes of action. Six years is [*3]the limitations period for breach of contract claims (CPLR 213 [2]).

A cause of action does not accrue until an injury is suffered (Vigilant Ins. Co. of Am. v Housing Auth. of City of El Paso, Tex., 87 NY2d 36, 43 [1995]). A contract cause of action accrues when one party commits a breach (Squeri v Moriches Assoc., Inc., 307 AD2d 260, 261 [2d Dept 2003]), or when one party commits an anticipatory breach, whereupon the other party may treat the entire contract as broken and may sue immediately for the breach (Computer Possibilities Unlimited, Inc. v Mobil Oil Corp., 301 AD2d 70, 77 [1st Dept 2002]). Here, any breach or anticipatory breach occurred after the 2002 determination to replace the garage roof. Therefore, plaintiffs' declaratory judgment claims are not time-barred, provided, of course, that defendant breached the Declaration.

Plaintiffs argue that, if the Declaration or Bylaws defines the garage roof as a common element, such definition violates the Act. As a matter of public policy, there is no statute of limitations on a claim that a contract violates a statute. All contracts are made subject to any law prescribing their effect, or the conditions to be observed in their performance (Matter of Estate of Havemeyer, 17 NY2d 216, 219 [1966]; see also Abiele Contr., Inc. v New York City School Constr. Auth., 91 NY2d 1, 9 [1997]). By its very nature, the requirement that contracts comply with the law must be ongoing and permanent. Condominium declarations and rules must comply with the Act (see Zack v 3000 East Ave. Condominium Assn., 306 AD2d 846, 848 [4th Dept 2003]; Board of Mgrs. of Europa Condominium v Orenstein, 281 AD2d 354, 356 [1st Dept 2001]). In addition, the Bylaws provide that, if any of their provisions do not comply with the Act, the Act controls (Art. XIV [4]), and the Declaration provides that the unit owners must obey the Bylaws (Art. 14.1).

Turning now to plaintiffs' request for reformation of the Declaration, that remedy is usually employed to bring a written contract into conformity with the parties' actual agreement, where the writing is inaccurate due to mistake (Ribacoff v Chubb Group of Ins. Cos., 2 AD3d 153, 154 [1st Dept 2003]). The court rewrites the agreement so as to reflect the parties' actual intentions (id.). The statute of limitations for reformation based on mistake is six years, and the cause of action accrues immediately upon the instrument becoming effective (CPLR 213 [6]; Federal Deposit Ins. Corp. v Five Star Mgt., Inc., 258 AD2d 15, 20 [1st Dept 1999]; National Amusements, Inc. v South Bronx Dev. Corp., 253 AD2d 358, 358-359 [1st Dept 1998]). Plaintiffs allege that any mistake in the Declaration was present when it was written. An injury caused by a mistake in the Declaration accrued when it was filed, which is when it became effective (see Schoninger v Yardarm Beach Homeowners Assn., Inc., 134 AD2d 1, 6 [2d Dept 1987]), more than six years before this case commenced.

The Declaration may not be reformed based on the parties' mistake. However, since an instrument may be reformed to comply with a statute (American Mtge. Banking, Ltd. v Canestro, 201 AD2d 407, 407 [1st Dept 1994]), reformation may be available to correct any part of the Declaration that violates a statute. Because plaintiffs' claim that the Declaration violates the Act is not time-barred, the remedy to correct any such violation is also not time-barred.

Unjust enrichment occurs where one party is not adequately compensated for the benefit it bestows on another party (Wiener v Lazard Freres & Co., 241 AD2d 114, 119 [1st Dept 1998]). The limitations period for unjust enrichment is six years (CPLR 213 [2]; Natimir Rest. Supply, Ltd. v London 62 Co., 140 AD2d 261, 262 [1st Dept 1988]). A claim for unjust enrichment starts to run from the occurrence of the wrongful act giving rise to a duty of restitution (Kaufman v Cohen, 307 AD2d 113, 127 [1st Dept 2003]). The wrongful act alleged here is defining the garage roof as a common element in the Declaration.

The claim for unjust enrichment is time-barred. In addition, a party cannot maintain a claim for unjust enrichment while there is an express contract covering the same subject matter (see Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382, 388-389 [1987]). As the Declaration and Bylaws govern the parties' conduct regarding the condominium, plaintiffs have no claim for unjust enrichment.

Discussion now turns to the definition of common elements. Under the Act, unless the [*4]Declaration states otherwise, common elements include: (a) The land on which the building is located; (b) The foundations, columns, girders, beams, supports, main walls, roofs, halls, corridors, lobbies, stairs, stairways, fire escapes, and entrances and exits of the building; ... (g) Such facilities as may be designated as common elements in the declaration; and (h) All other parts of the property necessary or convenient to its existence, maintenance and safety, or normally in common use

(RPL § 339-e [3]).

Under the Act, a building is a "multi-unit building or buildings, or a group of buildings whether or not attached to each other, comprising a part of the property" (RPL § 339-e [1]). The dictionary defines a building as a "structure with walls and a roof, esp. a permanent structure" (Black's Law Dictionary [Westlaw 8th ed 2004]).

As described in the Declaration, the garage is a building (Art. 4.3). It has walls and a roof and is a permanent structure. The Act defines a roof on a building as a common element. Therefore, the Act allows a garage roof to be described as a common element.

The Declaration states that the condominium premises "consist of two residential apartment buildings ('Buildings') and appurtenant facilities, including but not limited to two garages and a common open courtyard" (Art III). (The Declaration occasionally refers to two garages, one appertaining to each residential building.) It further provides that "'Building' means the buildings located at" two named addresses (Art. 23.6). The engineer's report incorporated with the 1995 Offering Plan clearly indicates that the addresses include the garage (Offering Plan, Ex. K, at 5, 7).

In the Declaration, common elements are those which serve or benefit or are necessary or convenient for the entire condominium (Art. 6.1 [a] [19]). The common elements consist of the entire premises minus the residential and garage units (Art. 6.1 [a]). Specifically, the "roofs on the Buildings" are common elements, "provided" that the soil and ground covering situated above the garage roof, that is, the courtyard, "shall be deemed part of the Residential Unit" (Art. 6.1 [a] [18]). (As used in the Declaration, the term, "Residential Unit," refers to both residential buildings).

The Declaration does so deem. The residential unit consists of the "soil and ground covering, including plantings and other landscaping, gazebo and improvements, situated above the garage roof" (Art. 4.2 [d]). It further consists of a "portion of the cellar of the Buildings" and "all floors of the Buildings above the cellar floor thereof, exclusive of the Garage Unit" (Art. 4.1 [a], [b]). The garage unit "consists of the cellar floor of each of the Buildings on which a parking garage facility currently operates" (Art. 4.3 [a]). Both the residential and garage units include all installations "which exclusively serve or benefit or are necessary for the existence, maintenance, operation or safety of the" respective unit (Art. 4.2 [c] [vii]; 4.3 [a] [iv]).

The tax lot map of the condominium states that the garage roof is a common element. The Bylaws provide that the "roof on the Building" is a common element (Art. XIII [7]). The Bylaws also provide that the condominium consists of the land and "the building and improvements constructed thereon (the 'Building')" (Art. I [1]). This description includes the garage.

From the foregoing, it is obvious that the Declaration, the Bylaws, as well as the Offering Plan define the garage roof as a common element.

Plaintiffs state that they are not challenging the allocation of 95% of common elements to the residential units, but only the definition of the garage roof as a common element. Therefore, the allocation of common elements under RPL § 339-i (1) is not a topic for discussion. The next issue is whether, as plaintiffs maintain, this definition violates the Act. Plaintiffs also contend that the Act is violated by allocating 98% of the cost of maintaining the common elements to the residential units, while those units receive none of the profits that derive from the common elements. [*5]

According to plaintiffs, the garage roof exclusively serves the garage, and provides no support to the courtyard above it. Consequently, defining the garage roof as a common element violates the Act's description of a common element as something necessary or convenient to the existence, maintenance, and safety of the entire property (RPL § 339-e [3] [h]). As stated above, however, the Act expressly allows condominium declarations to define common elements differently from the Act (RPL § 339-e [3]). Even if plaintiffs are right that the garage roof does not benefit the residential units, the garage roof may nevertheless be properly defined as a common element.

RPL § 339-i (4) provides that, although each unit owner may use the common elements, without hindering the use of or encroaching upon the rights of other unit owners, the Declaration may nonetheless provide for one or more units to enjoy "substantially exclusive advantages in a part or parts of the common elements." In addition, RPL § 339-ii provides that the Act must be liberally construed.

Contracts are assumed to be legal and enforceable (Island Cash Register, Inc. v Data Term. Sys., Inc., 244 AD2d 117, 120 [1st Dept 1998]). The burden of proof rests with the party alleging illegality (id.). Given the above, plaintiffs do not succeed in showing that defining the garage roof as a common element violates the Act.

Plaintiffs urge this court to adopt the holding in Rego Park Gardens Owners, Inc. v Rego Park Gardens Assoc. (191 AD2d 623 [2d Dept 1993]), where the condominium declaration designated garage roofs as common elements. The plaintiffs objected to that designation, on the ground that the garage roofs exclusively served the garage units, which were solely owned by the sponsors, and provided minimal or no benefit to the residential units. The Court stated that "[a]lthough Real Property Law § 339-e (3) provides that roofs may be included as common elements, the designation of common areas in a condominium/cooperative must be 'tailored to conform to the physical layout of the premises'" (id. at 625, quoting Goldsmith, Practice Commentaries, McKinney's Cons Laws of NY, Book 49, Real Property Law, at 557). The Court ruled that plaintiffs would be afforded the opportunity to prove that the designation of the garage roofs did not comport with the physical layout of the property (id.).

The case of Rego provides no information about the language in the declaration or bylaws, or the physical layout of the condominium. On the other hand, such information is available in this case, where the Declaration clearly provides that the garage roof is a common element. In addition, plaintiffs here do not succeed in showing that the designation of the garage roof as a common area fails to conform to the physical layout of the premises. Therefore, this case may be distinguished from Rego.

Turning now to the allocation of profits and expenses, the Declaration provides that plaintiffs must pay for 98% of the cost of maintaining and repairing common elements (Art. 16.1 [a]). There is no provision for plaintiffs receiving any profits from the common elements. RPL § 339-m states that the common profits of the property must be distributed among, and the common expenses must be charged to, the unit owners according to their respective common interests. Alternatively, profits and expenses may be "specially allocated ... based on special or exclusive use or availability or exclusive control of particular units or common areas by particular unit owners" (RPL § 339-m).

The distribution of expenses does not jibe with the distribution of common elements. In addition, the Declaration does not include any reference to whether the alternative means of distribution was used. Plaintiffs show that they have a cause of action regarding the alleged impropriety of the residential units paying for 98% of the cost of maintaining the common elements, while owning 95% of the common elements (Art. 16.1 [a]; Art. 6.2). However, plaintiffs are not entitled to summary judgment on this question, because they do not show which method of distributing profits and expenses should have been employed. While the current distribution of profits and expenses is wrong according to the first method in RPL § 339-m, it could be correct under the alternative method.

Plaintiffs' motion for summary judgment is denied. Defendant's motion to dismiss the [*6]complaint is granted, except as regards the allocation of profits and expenses. Therefore, the first and second causes of action are dismissed. As plaintiffs' claims are not frivolous, defendant's motion for sanctions based on 22 NYCRR 130-1.1 is denied.

Plaintiffs move to supplement the record with citations to the Declaration in order to respond to allegedly misleading statements that defendant made during oral argument. The motion is denied as unnecessary, as defendant has submitted the Declaration and other documents as part of its motion, enabling the court to look up the citations for itself.

In conclusion, it is

ORDERED that plaintiffs' motions sequence numbers 001 for summary judgment, and 002 to supplement the record, are denied; and it is further

ORDERED that defendant's cross motion for dismissal is denied as to the third cause of action and as to sanctions against plaintiffs, and is granted as to the first and second causes of action, which are hereby dismissed.

Dated: June 9, 2005

_________________________

J.S.C.

Counsel are hereby directed to obtain an accurate copy of this Court's opinion from the record room and not to rely on decisions obtained from the internet which have been altered in the scanning process.