F. T. Apts. Corp. v Barbara L.

[*1] F. T. Apts. Corp. v Barbara L. 2009 NY Slip Op 51404(U) [24 Misc 3d 1209(A)] Decided on June 17, 2009 Civil Court Of The City Of New York, New York County Hagler, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 17, 2009
Civil Court of the City of New York, New York County

F. T. Apartments Corp [FN1]., Petitioner-Landlord,

against

Barbara L., Respondent-Tenant, and "John Doe" and /or "Jane Doe," Respondents-Undertenants.



L & T - - - - - /07



Petitioner represented by: Cutler Minikes and Adelman, LLP, by Jonathan Z. Minikes, Esq., 708 Third Avenue, 17th Floor, New York, NY 10017-4201, Telephone: 212-983-1199

Respondent represented by: Goldberg, Scudieri, Lindenberg and Block, P.C., by Paul S. Block, Esq., 45 West 45th Street, Suite 1401, New York, NY 10036-4206, Telephone: 212-921-1600; and by

The Law Office of Jill Sherman, P.C., by Meryl A. Stein, Esq., 37 West 20th Street, Suite 1207, New York, NY 10011-6247, Telephone: 212-239-1943

Shlomo S. Hagler, J.

Petitioner-Landlord F. T. Apartments Corp. ("petitioner" or "Cooperative") moves for an order pursuant to CPLR § 3212, granting it summary judgment against respondent-tenant Barbara L. ("respondent") based on the termination of the proprietary lease executed in December 1984 ("Lease") due to her alleged objectionable conduct. (See Exhibit "C" to the Motion). Respondent opposes the motion and petitioner submits a reply.

Procedural History

In or about December 2007, petitioners commenced this holdover proceeding against respondent seeking possession of the cooperative apartment number 7C, located in New York County ("subject premises"). (See Exhibit "A" to the Motion). Respondent interposed an unintelligible answer to the petition. (See Exhibit "B" to the Motion).

On September 5, 2008, the Commissioner of Social Services of the City of New York initiated an Article 81 proceeding under the Mental Hygiene Law ("MHL") in Supreme Court, New York County to appoint a guardian for respondent and sought a temporary restraining order ("TRO") of this holdover proceeding. After a hearing on September 26 and November 6, 2008, this Court determined that respondent was an incapacitated person, appointed the Jewish Association for the Services for the Aged, Community Guardian Program ("JASA") as guardian of the person and property, and granted a TRO enjoining the landlord from prosecuting this holdover proceeding for sixty days after qualification of the guardian.

Factual Background

Petitioner is the landlord and lessor of a cooperative building located in New York County ("subject building"). Respondent is the long-term tenant-lessee of the cooperative apartment, number 7-C, in the subject building, and the shareholder of 157 shares allocated to her apartment.

In or about 2004, petitioner received written complaints from the shareholder who lives directly below respondent in apartment number 6-C regarding the respondent's erratic behavior, overflow of water, and noise. (See Exhibits "E" and "G" to the Motion). Instead of notifying or forwarding those complaints directly to the respondent, petitioner, through it agents,[FN2] usually only informed respondent's cousin, Dennis S., to no avail. (See Exhibits "F," "I," and "K"). On one isolated occasion, petitioner also notified respondent's brother, Bruce L., who was residing in California. (See Exhibit "I" to the Motion). In only one letter, dated July 12, 2004, actually sent to the respondent, did petitioner notify her of the allegations that she was breaching her Lease due to her "objectionable conduct." In this letter, petitioner's counsel informed respondent that the Cooperative will "reluctant[ly]" terminate her Lease under paragraph 31(f) if the "situation [*2]does not change."

Paragraph 31(f) of the Lease states as follows:

If at any time the Lessor shall determine , upon the affirmative vote of two-thirds of its then Board of Directors, at a meeting duly called for that purpose, that because of objectionable conduct on the part of the Lessee, or of a person dwelling or visiting in the apartment, repeated after written notice from Lessor, the tenancy of the lessee is undesirable. (Emphasis Added).

In the July 12, 2004 letter, petitioner's counsel stated that:

If you fail to notify Mr. [Harry] E. immediately, the Board [of Directors of the Cooperative] has indicated that it will hold a meeting for the specific purpose of terminating your tenancy at the building because it is undesirable.

(See Exhibit "I" to the Motion).

Approximately six months later in 2005, petitioner's agent sent a letter dated January 13, 2005, to Mr. S. asking him to "intervene and have her [respondent] see a professional before the coop has to incur additional legal fees." (See Exhibit "I" to the Motion). More than another year and a half passes and petitioner's agent sends Mr. S. a letter dated August 22, 2006, expressing his opinion that respondent "needs medical attention and should not be alone in the apartment." (See Exhibit "K" to the Motion). About six months later, petitioner's counsel sends Mr. S. a final letter dated February 8, 2007, reiterating his earlier letter to respondent of two and one half years ago that the "board has authorized me [counsel] to begin the process to hold her [respondent] in default of the proprietary lease" and his "immediate attention to this situation is requested." More than six months later and three years from the only time petitioner notified respondent of her alleged "objectionable conduct," the board of Ms. L.'s Cooperative held a meeting on August 30, 2007, and voted to terminate her tenancy pursuant to the terms of the Lease. (See Exhibit "D" to the Motion). Respondent was not notified in advance of this meeting. Thereafter, petitioner caused a Notice of Termination dated September 5, 2007, to be served on respondent terminating her tenancy effective September 15, 2007, based solely on paragraph 31(f) of the Lease that respondent's tenancy was undesirable and not on independent specific nuisance grounds. (See Exhibit "A" to the Motion).

Summary Judgment

The movant has the burden of proving entitlement of summary judgment. Winegrad v N.Y.U. Medical Center, 64 NY2d 851 (1985). "[T]he remedy of summary judgment is a drastic one, which should not be granted where there is any doubt as to the existence of a triable issue (Moskowitz v Garlock, 23 AD2d 943, 944) or where the issue is even arguable (Barrett v Jacobs, 255 NY 520, 522) since it serves to deprive a party of his day in court. Relief should be granted only where no genuine, triable issue of fact exists (see Werfel v Zivnostenska Banka, 287 NY 91)." Broadway 111th Street Associates v Morris, 160 AD2d 182, 185 (1st Dept 1990) (quoting Gibson v American Export Isbrandtsen Lines, 125 AD2d 65, 74 [1st Dept 1987]).

[*3]Business Judgment Rule

The Levandusky Decision

In 1990, the Court Appeals in Levandusky v One Fifth Avenue Apt. Corp., 75 NY2d 530 (1990), applied the classic corporate business judgment rule to the less traditional cooperative corporation setting. The Court of Appeals rejected the proffered "reasonableness" test (CPLR Article 78) and instead employed the business judgment rule as the standard of judicial review to shareholder challenges of cooperative board of directors decisions. It held, in a three-part test, as long as the board of directors (1) acts for the purposes of the cooperative, (2) within the scope of its authority, and (3) in good faith, the courts would not substitute their judgment for the cooperative board. 75 NY2d at 538.

The Pullman Decision

In 2003, the Court of Appeals in 40 West 67th Street v Pullman, 100 NY2d 147 (2003), expanded the business judgment rule as expressed in Levandusky to permit a cooperative, through a vote of its shareholders, to terminate a fellow shareholder's tenancy in accordance with a provision in the proprietary lease that authorized the termination of the tenancy based on objectionable conduct.

In the usual residential holdover setting, RPAPL 711 requires judicial review of "competent evidence" to demonstrate that the tenant's alleged conduct is objectionable. In the context of a cooperative, however, the "competent evidence" that forms the basis for the shareholder vote will be reviewed under the more deferential business judgment rule. In other words, the courts would defer to the shareholders' vote and findings as "competent evidence" of the tenant's objectionable conduct. Thus, the RPAPL 711 "competent evidence" standard is satisfied by the application of the business judgment rule.

To overcome this deferential standard and trigger further judicial scrutiny, the shareholder-tenant must demonstrate that the cooperative board of directors acted "(1) outside the scope of its authority, (2) in a way that did not legitimately further the corporate [cooperative] purpose or (3) in bad faith." Pullman, 100 NY2d at 155. The Court of Appeals in Pullman also noted that the shareholder-tenant had been afforded "notice and the opportunity to be heard." Id. at 156. It concluded and emphasized that when dealing with "termination, courts must exercise a heightened vigilance in examining whether the board's action meets the Levandusky test." Id. at 158.

The Weitzner Decision

In another expansion of the Levandusky test, the Appellate Division in Trump Plaza Owners , Inc. v Weitzner, 61 AD3d 480 (1st Dept 2009), held that a cooperative board of directors alone may terminate the tenancy of a shareholder-tenant based on "objectionable conduct" without a shareholder vote that had occurred in Pullman.

The facts and procedural history of Weitzner are important for understanding its holding. In Weitzner, the cooperative sent the shareholder a letter dated October 29, 2002, notifying her that she was engaging in specific objectionable conduct and if she does not cease such conduct the cooperative will terminate her tenancy pursuant to paragraph 31(f) of the lease. Thereafter, the board received a letter from a neighbor complaining about the tenant. On March 11, 2003, the board discussed the letter and voted to hold a "special meeting" of the board to vote on whether to [*4]terminate the shareholder's tenancy. The board also voted that prior to the special meeting, the board will invite the shareholder and her counsel and the complainant and his counsel to meet separately with a subcommittee of the board and its counsel to address each of their complaints.

On March 12, 2003, the board's counsel sent a letter to the shareholder's counsel requesting a meeting as soon as possible to give her an opportunity to respond to the complaints. On March 19, 2003, the shareholder's counsel responded by letter indicating that the shareholder's response to the complaints was outlined in his prior correspondence and declining the meeting with the board's subcommittee. On April 4, 2003, notice was sent to all board members of the proposed special meeting. On April 8, 2003, the board convened and adopted resolutions that the shareholder's conduct was objectionable and voted to terminate her tenancy. On April 21, 2003, the cooperative notified the shareholder of the results of the special meeting and served a notice of termination terminating her tenancy effective April 30, 2003.

On June 5, 2003, the cooperative commenced an action in Supreme Court, New York County, against the shareholder-tenant for termination of the lease, ejectment and a declaration that the cooperative could sell the shareholder's shares at an auction. The landlord then moved for a preliminary injunction enjoining the tenant from conducting certain objectionable behavior, including harassing other neighboring shareholders. The tenant moved to dismiss the action for failure to serve her with notice at the address specified in the lease. The trial court granted the cooperative a preliminary injunction barring certain conduct and dismissed, without prejudice, the above three causes of action based on improper service. Trump Plaza Owners , Inc. v Weitzner, 16 Misc 3d 1115(A) (Sup Ct, New York County 2007).

The Appellate Division affirmed the trial court, as modified, by reinstating the three causes of action holding that proper notice was sent to the tenant and remanding the matter back to the trial court to specifically set forth in the injunction the tenant's proscribed conduct and file an appropriate undertaking. Trump Plaza Owners , Inc. v Weitzner, 47 AD3d 525 (1st Dept 2008). Significantly, the Appellate Division, citing to both Levandusky and Pullman, also found that the "cooperative board acted for the purposes of the cooperative, within the scope of its authority, and in good faith." Id. at 525.

After remand, both the tenant-shareholder and cooperative moved for summary judgment. The tenant argued that the cooperative board lacked authority to terminate her tenancy because it did not hold a "special meeting" in accordance with paragraph 31(f) of the lease and the cooperative vitiated the initial notice of termination by service of a subsequent notice to cure and notice of termination. The cooperative argued that the Appellate Division already determined that its board properly acted within the business judgment rule to terminate the shareholder's tenancy. The trial court denied the tenant's motion and granted the cooperative summary judgment. Trump Plaza Owners , Inc. v Weitzner, 2008 NY Slip Op 32163(U) (Sup Ct, New York County, July 30, 2008). The Appellate Division affirmed the trial court, rejecting the shareholder's procedural arguments and reiterated its prior holding that the cooperative board properly terminated the tenancy pursuant to the expanded business judgment rule. 61 AD3d 480 (1st Dept 2009).

Issue

The novel issue to be determined herein is whether the gap of more than three years from the time petitioner provided respondent with the only direct notice of her alleged objectionable conduct [*5]to the date of notice of termination deprives respondent with appropriate "notice and opportunity to be heard" as contemplated in Pullman to satisfy the "heightened vigilance" in examining whether the board's action meets the Levandusky test.

Notices and Agency Principles

In paragraph 27 of the Lease, the Cooperative is required to send any notices or demands to the tenant-shareholder in writing and sent by registered mail or certified mail return receipt requested to the subject building. However, the shareholder may designate in writing a different address for service of notices.

Moreover, agency principles would be insufficient to create a principal-agent relationship between Barbara L., as principal, and Dennis S. and Bruce L., as agents, absent her express, implied or apparent authority. It is well settled that under most circumstances, intra-familial activity alone will not give rise to an agency relationship. Maurillo v Park Slope U-Haul, 194 AD2d 142 (2d Dept 1993).

Here, the letters that the Cooperative sent to Dennis S. in New Jersey and Bruce L. in California did not comply with the Lease's notice provision. There is no evidence on this record indicating that respondent tenant-shareholder either designated the above individuals for service of notices or created an agency relationship. Therefore, said letters cannot serve as adequate written notice of objectionable conduct pursuant to paragraph 31(f) of the Lease.

Stale Notices

Courts have determined that notices may become "stale" after the passage of sufficient time. For instance, courts have found that notices that were eighteen years old (Shaw v Castiglioni-Spalten, NYLJ, May 14, 2003, at 17, col 1 [Civ Ct, New York County]), five years old (South Shore v Olsen, NYLJ, March 14, 2001, at 20, col 3 [Civ Ct, New York County]), more than two years old (Goldstein v Simensky, NYLJ, January 13, 1989, at 21, col 2 [App Term 1st Dept]), twenty months old (Raffone v Schreiber, 18 Misc 3d 925 [Civ Ct, New York County 2008]), and even as little as eleven months old (Mau v Stapleton, 136 Misc 2d 793 [Civ Ct, Kings County 1987]), were effectively "stale" and could not be utilized as a predicate notice for the commencement of an eviction proceeding. The underlying rationale is that it would be inequitable and prejudicial to permit the usage of the allegations of a "stale" notice. As eloquently stated by Judge Fleary "[i]t was not intended that [the landlord's notice] could hang like the sword of Damocles over the head of the tenant, to be used at some future date." Colavolpe v Williams, 77 Misc 2d 430, 431 (Civ Ct, Kings County 1974).

In this case, petitioner waited more than three years from the time it provided respondent with the only direct notice of her alleged objectionable conduct to serve the notice of termination. By analogy to the above cited cases, it logically follows that petitioner's lapse of time and delay effectively negated the notice to respondent required under the Lease. Therefore, given the lapse of more than three years, petitioner's notice of alleged objectionable conduct to respondent was "stale" and ineffective.

Notice and Opportunity to be Heard

Based on Levandusky and its progeny, it is now well settled that as long as the cooperative [*6]board of directors (1) acts for the purposes of the cooperative, (2) within the scope of its authority, and (3) in good faith, the courts will not substitute their judgment for the cooperative board. Implicit in this business judgment rule, is that the cooperative must ensure at the very least that the shareholder is provided with due process prior to the termination of the proprietary lease, the termination of the tenancy, and the authorization for the cooperative to sell the shareholder's shares at an auction which ultimately negates a valuable property interest. The dichotomy of the cooperative enforcing its rights under the business judgment rule and the significant impingement on the shareholder's property interests that could culminate with an eviction and sale of the cooperative apartment led the Court of the Appeals to impose a "heightened vigilance" in examining whether the board's action meets the Levandusky test. Pullman, 100 NY2d at 158. The Court of Appeals inferred that such due process requirements are satisfied when the cooperative minimally provides the shareholder with notice and opportunity to be heard. Pullman, 100 NY2d at 156.

The facts underlying the recent Appellate Division ruling in Weitzner reflect the emphasis in guaranteeing the shareholder's fundamental due process rights. In Weitzner, prior to convening a special meeting, the board invited the shareholder, her counsel and the complainant and his counsel to meet separately with a subcommittee of the board and its counsel to investigate and address the complaints. The board's counsel immediately sent a letter to the shareholder's counsel requesting a meeting as soon as possible to give the shareholder the opportunity to respond to the complaints. The shareholder's counsel rejected the meeting and indicated that the shareholder's response to the complaints was outlined in his prior correspondence. It appears that, while the shareholder may not have a right to be present during the actual deliberations and vote of the cooperative board, she does have to be timely informed of the allegations and an opportunity to be heard to respond to the complaints.

In the instant matter, the Cooperative failed to satisfy these minimal due process requirements. Here the respondent was not timely informed of the allegations of her objectionable conduct and was not timely provided with an opportunity to be heard to respond to the complaints prior to or at the special meeting.

Conclusion

Accordingly, petitioner's motion for summary judgment is denied. This matter shall be placed on the integrated Civil Court Part I and Supreme Court Part 25 calendar for a conference on July 21, 2009, at 2:30 p.m.

The foregoing constitutes the decision and order of this Court. Courtesy copies of this decision and order have been sent to counsel for the parties.

Dated:New York, New York

June 17, 2009Hon. Shlomo S. Hagler, J.S.C [FN3].

Footnotes

Footnote 1:Given the nature of the allegations and to preserve the privacy of respondent, the names of petitioner and its agents as well as respondent and her relatives have been edited for publication.

Footnote 2:These letters were invariably sent by Harvey E., who identifies himself as the registered managing agent for petitioner in his supporting affidavit sworn to on July 31, 2008. This is belied by the petitioner in its own verified petition that alleges that a different individual, David E. is the registered managing agent. In addition, it is corroborated and evidenced from petitioner's Exhibit "I" to the Motion, a New York City Department of Housing and Preservation ("HPD") complaint number 2652927, that David E., and not Harvey E., appears to be the registered managing agent.

Footnote 3:This Court wishes to acknowledge the assistance of Mr. Evan Lyman, a student intern from New York Law School, in the research and preparation of this decision.