Running v Fifth & Bergen Hous. Dev. Fund Corp.

[*1] Running v Fifth & Bergen Hous. Dev. Fund Corp. 2005 NY Slip Op 51973(U) [10 Misc 3d 1055(A)] Decided on September 13, 2005 Supreme Court, Kings County Johnson, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 September 13, 2005
Supreme Court, Kings County

Taana Running et al., Plaintiffs,

against

Fifth and Bergen Housing Development Fund Corporation et al., Defendants.



384/05

Diana A. Johnson, J.

Upon the foregoing papers, plaintiffs Taana Running (Running), Kiane Zawadi (Zawadi), Adrienne Hayes (Hayes) and Norman Buntaine (Buntaine) move by order to show cause as shareholders of defendant Fifth and Bergen Housing Development Fund Corporation (Fifth and Bergen) for an order: (1) voiding the sale for $250 of the shares and the proprietary lease for Apartment 2W to defendant Julia Owen and for Apartment 2E to defendant Peter Hamon, (2) surcharging the defendant directors of Fifth and Bergen -Robert Hamon, David Allen (Allen) and Doanda Wheeler (Wheeler)-for the legal fees and expenses of voiding said sales; (3) directing the defendant directors to account to the corporation for their handling of its financial affairs from June 2002 to date and directing that defendant directors Wheeler and Allen pay past due maintenance to Fifth and Bergen "for which they wrongfully got the board to agree to a credit"; (4) directing the defendant directors to issue keys to plaintiffs for the common areas, [*2]including the basement, backyard and community space at 429 A Bergen Street/43-45 Fifth Avenue in Brooklyn; and (5) appointing a temporary receiver to operate the subject building owned by Fifth and Bergen.

Background

This is a shareholder derivative action seeking, among other things, to void the sale of certain shares of the cooperative housing corporation, Fifth and Bergen, to defendants Julia Owen (Owen) and Peter Hamon. On January 6, 2005, Justice Mark I. Partnow granted a temporary restraining order staying and restraining Fifth and Bergen, Robert Hamon, Allen, Wheeler and Peter Hamon from taking possession of apartment 2E, from renting any of the commercial units in the Fifth and Bergen building, and from using the funds of Fifth and Bergen to pay their legal fees in this action.

Plaintiff's Motion

In their motion, plaintiffs, who are shareholders of the housing corporation, claim that the subject building was essentially given to them as a cooperative building and was fully renovated by the New York City Department of Housing Preservation and Development (HPD) in order to provide affordable housing. Plaintiffs assert that the defendant directors seek to transfer ownership of Apartment 2W to Julia Owen, the mother of an adjoining property owner, and of Apartment 2E to Peter Hamon, the brother of board president Robert Hamon, for much less than the fair market value, i.e., $250 per apartment.

In support of their motion, plaintiffs submit a copy of their summons and verified complaint, as well as the affidavit of plaintiff Running. In her affidavit, Running confirms that the building had been owned by the City of New York, but that after she and Zawadi, Hayes, Buntaine, Robert Hamon, Allen and Wheeler demonstrated their ability to manage the building, the City, through HPD, formed Fifth and Bergen. The City had Fifth and Bergen sell the shares to the parties for $250 each and then funded a renovation of the building so that it became nine apartment units and four storefront units. Running alleges that the Board of Directors of the corporation failed to follow the mandates of the corporation's bylaws or the terms of the proprietary lease regarding the sale of the unsold shares to Apartments 2E and 2W. She contends that the shareholders were always told that the Board planned on renting the apartments and that they never voted on any plan to sell the shares representing those units. Running states that while defendant Owen has occupied Apartment 2W since late June 2004, defendant Peter Hamon has not taken occupancy since Running has had possession of Apartment 2E. She

states that she was granted the right to Apartment 2N due to construction mistakes in Apartment 2E that rendered Apartment 2E much smaller than expected. However, she claims that the need for immediate relief is premised on her concern that Peter Hamon will occupy that apartment once she vacates it and then plaintiffs will be unable to evict him. Running adds that she has received conflicting information from defendant Wheeler showing, on the one hand, that Apartment 2E was leased with a rent of $580 per month, but, on the other hand, according to a September 23, 2004 affidavit, that the shares for Apartment 2E were sold. Running argues that, in view of the self-dealing of the defendant board members, neither she nor the other plaintiffs can trust them to rent the available commercial units at fair amounts. She asks that the court appoint a temporary receiver to ensure that the building is run on a sound fiscal basis until the issues in this action are resolved.

[*3] Defendant Robert Hamon's Opposition

Defendant Robert Hamon, President of Fifth and Bergen, argues that Running does not have standing to pursue this case since she owes rent arrears. He claims that Julia Owens is a legitimate tenant since the corporation's Tenant Association followed HPD procedures in assigning Apartment 2W to her as a shareholder/lessee and that she qualifies for her lease since she has shown that she has a low income. Robert Hamon maintains that, with the court's permission, Fifth and Bergen has been able to rent Apartment 2E and the commercial units 1S and 1N, thereby easing Fifth and Bergen's

difficult financial situation. However, since additional expenses have arisen, Robert Hamon asserts that they need to rent a third commercial unit in order to remain financially viable. Therefore, he asks that the restraining order be rescinded to allow defendants to lease the third commercial unit at 45 Fifth Avenue.

In addition, Robert Hamon contends that Running has improperly interfered with the business of commercial unit 1S by entering the store and instructing the lessee as to how to fix his floors and other matters. He alleges that Running placed a banner outside her window that hangs over commercial units 1S and 1N in violation of the House Rules and her lease. He requests that the court order plaintiffs to cease interfering with the running of the corporation and to direct Running to remove the subject banner.

Robert Hamon opposes plaintiffs' request that Allen and Wheeler's maintenance write-off be rescinded as the write-off was voted on and passed by a majority of the members of the corporation. He states that, as a result of this lawsuit, the shareholders have not been able to hold an election and he asks that the court direct that an election not take place until 30 days after resolution of this case.

Defendant Fifth and Bergen's Opposition

In opposition to the motion, Fifth and Bergen submits a July 27, 2004 notarized letter from Peter Hamon as proof that he relinquished all claims to apartment 2E by returning the stock certificate to Fifth and Bergen. Thus, the corporation contends that there is no longer an issue of voiding the stock certificate and proprietary lease in his

name. However, with respect to the issuance of a stock certificate and execution of a proprietary lease for apartment 2W to defendant Julia Owen, Fifth and Bergen proffers Wheeler's affidavit and relevant exhibits to show that this was done in full compliance with the corporation's by-laws. Moreover, Fifth and Bergen urges that the issue surrounding the sale of the stock certificate and issuance of a proprietary lease to Owen is the central issue in the instant action and should not be summarily resolved.

Concerning the issue of an accounting of the corporation's financial affairs from June 2002 to date, Fifth and Bergen contends that on May 19, 2005, plaintiffs, their attorney, defendants Wheeler (as Secretary), Allen (as Treasurer) and counsel for Fifth and Bergen, attended a meeting where Fifth and Bergen provided plaintiffs' counsel with photocopies of the 2003 ledger and bank statements from January 7 to February 4, 2005, February 5 to March 4, 2004, and April 7 to May 5, 2005, along with deposit slips and canceled checks for these same periods. Thus, it maintains that plaintiffs have been afforded the accounting they seek. Fifth and Bergen also states that keys to the common areas have been furnished as per plaintiffs' request and it submits a May 19, 2005 receipt signed by plaintiffs' counsel for four sets of keys.

Regarding plaintiffs' request that defendant directors Wheeler and Allen reimburse the corporation for past due maintenance, Fifth and Bergen submits a copy of the minutes of the [*4]Tenants' Association meeting held on April 28, 2004[FN1]. It points out that a motion which called for Allen and Wheeler to each be given a write-off of $1,600 was unanimously approved by all present, although plaintiff Buntaine changed his mind at the last minute and decided to abstain from the vote. Thus, Fifth and Bergen maintains that the vote to grant Allen and Wheeler a rent maintenance write-off was not wrongful.

Fifth and Bergen further claims that Apartment 2E is occupied at a market rent by tenants who are not a party to this action and that two of the three commercial spaces have been leased at market value. It refers to this court's April 28, 2005 order which amended the temporary restraining order to allow Fifth and Bergen to use corporate funds to pay counsel to defend this action. It also asserts that, while the temporary restraining order has been in effect, the parties reached an agreement on the two commercial tenants currently occupying the premises. Counsel for Fifth and Bergen affirms that the court so ordered a stipulation modifying the temporary restraining order so as to allow the rental of the second commercial unit to proceed and he attaches a computer-generated Case Inquiry printout as evidence thereof. Fifth and Bergen argues that, notwithstanding the dispute regarding the sale of Apartment 2W, it should not be restrained from entering into a commercial lease, at market value, for the remaining commercial space. It contends that the by-laws do not require shareholder ratification of commercial leases and that, if the temporary restraining order is not modified in this regard, plaintiffs' continued vetoes of prospective tenants will cause Fifth and Bergen to suffer loss of desperately needed income. Finally, it argues that those portions of the temporary restraining order which are neither rendered moot nor previously modified should be vacated.

Discussion

Plaintiffs' request for an order voiding the sale of the shares representing Apartment 2E to defendant Peter Hamon is denied as moot in view of his letter to the corporation indicating his return of the certificate of shares to the subject apartment and in view of the July 14, 2005 agreement between the parties. Since the evidence, including the July 14, 2005 agreement between the parties, reflects that four sets of keys were delivered to plaintiffs' counsel, that part of the motion which seeks an order directing defendants to issue keys to plaintiffs is also denied as moot. The request for an accounting from June 2002 to date is similarly denied based upon the July 14, 2005 agreement. Plaintiffs' request that defendant directors Wheeler and Allen pay past due maintenance to Fifth and Bergen is denied in view of the evidence that the write-off was unanimously approved at the April 28, 2004 meeting of the Tenants' Association.

The only open issues upon which the parties cannot agree, as stated in the July 14, 2005 so ordered agreement, are: (1) whether the sale of the unsold shares to Julia Owen was proper under the bylaws and proprietary lease; (2) whether Julia Owen was a bona fide purchaser for value; (3) whether the director defendants should be surcharged for the sale to Julia Owen; and (4) whether the temporary restraining order should remain in effect as to the rental of the third commercial unit. [*5]

Regarding the issues of whether the sale of the unsold shares to Julia Owen was proper and approved by the Board and shareholders and whether she was a bona fide

purchaser for value, questions of fact exist which are best reserved for trial. Doanda Wheeler's September 23, 2004 affidavit and exhibits reflect that a May 20, 2004 notice concerning the extension of the vacant apartment application deadline to June 6, 2004 was sent to all tenant/shareholders by first class mail, with copies placed under the doors of all of the shareholders' apartments. Wheeler swears that Owen's undated application was received before the deadline. A May 22, 2004 notice was sent to the Board to review the vacant apartment applications. Following the Board meeting, a June 10, 2004 shareholders meeting was scheduled at which time Owens' application was to be approved. While Wheeler states in her affidavit that Owen's application was approved by a majority vote at the June 10, 2004 meeting and she provides a list of attendees at that meeting, she fails to substantiate her assertion with any proof that the meeting occurred, that the shareholders voted on the issue at the meeting and that Owen's application was approved by a majority vote. Moreover, while Wheeler annexes a copy of Owen's application which indicates that her only income is $587 per month from Social Security, defendants have not shown that she earns "no more than 165% of the median income of the standard metropolitan statistical area as determined from time to time by the Department of Housing and Urban Development (HUD)." (Fifth and Bergen Certificate of Incorporation, sec. X (A); Bylaws, Art. XIII, Sec. 2), nor is there any proof of the amount Owen paid for her shares. Thus, issues of fact exist as whether the sale to Owen was proper and whether she was a bona fide purchaser for value. Such issues must be determined at trial. The issue of whether the defendant directors should be surcharged for the legal fees and expenses of voiding the apartment sale to Owen is premature and

likewise reserved for trial.

Regarding the issue of whether a temporary restraining order should remain in effect as to the rental of the third commercial space, a temporary restraining order may be granted pending a hearing for preliminary injunction (CPLR 6301). Here, the court granted the temporary restraining order and a hearing with respect to extension of the temporary injunction, i.e., for a preliminary injunction, has been held.

To be entitled to a preliminary injunction, the movant must show: (1) the likelihood of ultimate success on the merits, (2) that irreparable injury will result without a preliminary injunction, and (3) that a balancing of the equities favors the movant's position (JDOC Constr., LLC v Balabanow, 306 AD2d 318 [2003]; Laro Maintenance Corp. v Culkin, 255 AD2d 560 [1998]). Further, preliminary injunctive relief is a drastic remedy that will not be granted unless the movant establishes a clear right thereto under the law and demonstrates a clear right to relief that is plain from the undisputed facts (Hoeffner v John R. Frank, Inc., 302 AD2d 428 [2003]). Thus, a preliminary injunction should not be granted where there are issues of fact (see Livas v Mitzner, 303 AD2d 381 [2003]; see Lincoln Plaza Tenants Corp. V MDS Properties, 169 AD2d 509 [1991]; Hartford v Resorts Int'l, Inc., 43 AD2d 828 [1974]).

Here, plaintiffs have failed to substantiate their likelihood of ultimate success on the merits, that irreparable injury will result without a preliminary injunction, and that a balancing of equities favors them. On the other hand, defendants have shown that the corporation's precarious financial situation would be eased by the rental of the third commercial unit. The motion to extend the temporary restraining order by a preliminary [*6]

injunction as to the third commercial space is, therefore, denied.

Robert Hamon has made several requests in his affidavit in his opposition papers; however, a request for affirmative relief in opposing papers cannot be granted in the absence of a notice of cross motion (see Walsh v Ben Riley's Arrowhead Inn, Inc., 2 AD2d 714 [1956]; Helfand v Mass. Bonding & Ins. Co., 197 App. Div. 759 [1921]. The court is mindful that defendant Hamon is appearing pro se. Nevertheless, it is well settled that a litigant appearing pro se acquires no greater right than any other litigant and such appearance may not be used to deprive his or her adversaries of the same rights enjoyed by other opposing parties (see Davis v Mutual of Omaha Ins. Co., 167 AD2d 714 [1990]; Roundtree v Singh, 143 AD2d 995 [1988]). Hence, the relief requested by Robert Hamon is, in all respects, denied.

The foregoing constitutes the decision and order of this court.

E N T E R,

J. S. C. Footnotes

Footnote 1:The minutes of the April 28, 2004 meeting reflect that the following members of the Tenant Association were present: Robert Hamon (President), Doanda Wheeler (Secretary), David Allen (Treasurer and Vice-President in Charge of Maintenance), Adrienne Hayes (Vice-President), Tana Running, Kiane Zawade, and Norman Buntaine. While Fifth and Bergen states that it annexes the "List of Tenants Present" for the April 24, 2004 meeting, no such list was appended to the court's copy of its papers.