Bittens v Board of Mgrs. of the Octavia Condominium

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Bittens v Board of Mgrs. of the Octavia Condominium 2013 NY Slip Op 33218(U) December 17, 2013 Sup Ct, NY County Docket Number: 653026/2012 Judge: Joan M. Kenney Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various state and local government websites. These include the New York State Unified Court System's E-Courts Service, and the Bronx County Clerk's office. This opinion is uncorrected and not selected for official publication. [*FILED: NEW YORK COUNTY CLERK 12/19/2013 1] INDEX NO. 653026/2012 NYSCEF DOC. NO. 167 ... , SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY ~ / RECEIVED NYSCEF: 12/19/2013 ' PRESENT: JOAN M; KENNEY PARTL ~ Justice I I Index Number: 653026/2012 BITTENS, ANDREW B vs BOARD OF MANAGERS OF THE Sequence Number: 001 l___suMMAR~JUDGEMENT I No(s). I No(s). INo(s). 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KENNEY I J.: This action arises out of a failed real estate transaction between plaintiff Andrew Bittens and nonparty seller, whereby plaintiff alleges that the defendant The Board of Managers of the Octavia Condominium (Board) right of first refusal. acted improperly in exercising its Defendant Joseph T. Wong moves, pursuant to CPLR 3212, for an order dismissing the ~omplaint as against him. Plaintiff cross-moves, pursuant to CPLR 3r26, for an order striking Wong and defendant 320 57th Street, LLC's answer, along with an order precluding these defendants from offering any evidence in their defense. Plaintiff also cross-moves, pursuant to CPLR 3212 (b) and (e), to strike Wong and 320 57th Street, LLC's affirmative defenses and seeks partial summary on his first cause of action as against only Wong and 320 57th Street, LLC, and requests a money judgment in the amount of no less than $240,000.00, and a hearing to measure further damages. Defendants Board of Managersi Michael Lam (Lam), Walter [* 3] Epstein (Epstein), Michael Bouffard, Leslie Wackerman, Allen Foster Tennant, DeGidio Maxwell-Kates, (DeGidio) summary Michael Bogart (b), judgment to (Bogart) and David Con?o-defendants) (collectively, pursuant to CPLR 3212 grant Inc., request, that the court search the record and all Defendant defendants. 320 57th Street, LLC, represented by Wong's attorney, seeks the same relief. BACKGROUND AND FACTUAL ALLEGATIONS In June 2012, plaintiff became aware of a condominium unit (Unit) being privately offered for sale at the Octavia Condominium, which is located at 216-218 East Street, 47th New York, NY. Plaintiff, a lawyer who is representing himself in this action, is a partner at a real estate litigation firm. The seller of the Unit (Seller), entitled Elizabeth Atwood or 216 East 47 LLC, is a client at plaintiff's law firm. a contract with Seller On July 6, 2012, plaintiff entered into to purchase the Unit for $300,000. Plaintiff states that he "intended to reside in the Unit as primary residence.ff Wong's exhibit A, I co~plaint, ~ 31. [my] A closing date was s.cheduled for July 31, 2012. Pursuant to the Seller, the contr~ct prospective sale (the Contract) between plaintiff and was subject to a right of first refusal whereby the Board could purchase the Unit in accordance with the Condominium's bylaws. The Contract states the followingr in pertinent part, "[i]f so provided in the Declaration or By-Laws, this sale is subject to and conditioned upon the waiver of a right -2- [* 4] of first refusal to purchase the Unit held by the Condominium and exercisable by the Board." Plaintiff's exhibit BB, exhibit A, '8. Pursuant to the Contract, the Seller had the obligation to inform the Board of the contemplated sale. If the Board decided to exercise its right of first refusal, pursuant to the Contract, the Seller was to refund plaintiff the down payment and the Contract "shall be deemed cancelled and of no further force or effect and neither party shall have any further rights against, or obligation or liabilities to, the other by reason of this contract." Board had 20 days to exercise its right of first would be waived. Section 10 in the " Contract Id. The refusal or it sets forth the understanding that the purchaser has examined the declaration and the bylaws of the Condominium, or has waived such an examination. Evidently, purchase, affect when the Board found out about the prospective it was concerned how the below-market price sale would the other uni ts President of the Board, in the bui.lding. Epstein, who is the during his testimony estimated the fair market value of the apartment to be between $500,000 and $700,000. Epstein testified that the adverse implications of the sale included "that the valuation of everyone's units would be adversely affected by having a purchase at that price." exhibit B, Epstein tr at 133. Condo-defendants' As such, the Board wanted to buy the Unit and then proceed with a "quick flip of that unit," for the best interests of the condominium. -3- [* 5] According to the bylaws, Board or its "designee." the Unit may be purchased by the The Board may levy an assessment against each unit owner to purchase the Unit or finance the Unit, in its ., discretion. Article 8.6 of the byl~ws states the following: "The purchase of any Unit :by the Board or its designee, on behalf of all Unit owners, may be made from the funds deposited in the capital and/or expense accounts of the Board. If the funds in such accounts are insufficient to effectuate any such purchase, ·the Board may levy an assessment against each Unit Owner, in proportion to his respective Common Interest, as a Common Charge, and/or the Board may, in its discretion, finance the acquisition of such Unit; " Plaintiff's exhibit II at 36. After it heard about the prospective sale, the Board held a The Board did not have special meeting to discuss the options. enough money in its reserve funds for the purchase and it did not want to levy an assessment against the unit However, owners. according to the Condo-defendants, the Board did not have enough time, due to the right of first refusal time constraints, to secure After the Board reached out to a traditional loan from a bank. several people, Wong advised the Boaid that he could assist with a loan in a short time frame and guarantee the Board a minimum return. A meeting was held on July 18, 2012 to discuss the right of first refusal with respect to the Unit. The Board voted to exercise its right of first refusal, and designated Wong or an LLC -4- [* 6] formed by Wong, The minutes of the meeting to be its designee. provide that the Board would enter into a joint venture agreement with Wong or an LLC formed by Wong. financed and purchased the Unit. Condominium would split Wong would be the designee who Then, after re-sale, Wong and the the profits, but the receive no less than $100,000 on any re-iale. On July 25, 2012, Condominium would Exhibit MM. the Board entered into an agreement with Wong or an LLC formed by Wong (Designee Agreement). The agreement specifically was between the Board and "Joseph T. Wong, Esq. or an LLC to be formed, ,, ('Wong'), with an address at 1- Lafayette Street Plaintiff's exhibit A. The agreement set forth what was discussed at the Board meeting and emphasized, in caps, that the Condominium was to receive no less than $100,000 of the re-sale of the Unit. The agreement noted that "Wong shall essentially step into the shoes of the Board and pay any ¢and all costs, fees and taxes due by or from the Board in its exercise of its right of first refusal." Plaintiff's exhibit A at 1. The agreement also emphasized that the Board was acting as agent for its unit owners. Epstein testified that the financing agreement arranged with Wong and the Board was not in violation of the bylaws. Epstein testified that it was acceptable and authorized within the bylaws for Wong or his entity to receive the money. He further stated "[w]e are permitted to engage in financing transactions for the benefit of the condominium unit holders. -5- And in that regard, we [* 7] have to exercise proper judgment as ,a board as to what would be a responsible transaction for the benefit of the holders." Epstein tr at 55. By letter dated July 25, the Board wanted to purchase the Unit. 2012, exercise its the Seller was informed that right of first The letter stated the following, refusal and in pertinent part: "Please be advised that pursuant to Article 8 of the Bylaws of the Octavia Condominium, the Board of Managers hereby exercises its right of first refusal to purchase Unit 22A at 216 East 47tn Street, New York, New York, upon the' same terms and conditions as set forth in the Contract of Sale dated July 6, 2012 between 216 East 47 LLC and Andrew B. Bittens. "We are eager to close on the transaction so upon your receipt of this letter, kindly contact our counsel to set up the Closing of Sale to the Unit." Plaintiff's exhibit BB, exhibit B. One decision. day later, plaintiff was informed about the Board's On July 31, 2012, Bogart, who ;was counsel to the Board for this transaction, emailed the Seller's lawyer, "[w]e will take title in the name Lafayette Street . of 320 ,, 57tn Street LLC c/o Joseph Wong, 100 Condo-defendants' exhibit K at 1. 1 Lam, a member of the Board, is also a member of 320 57tn Street LLC. Apparently the Board was unaware that Lam was a 10% owner in 32 O 5 7tn Street, LLC until after this action commenced. Lam himself Bogart is in-house counsel for defendant Maxwell-Kates, Inc., which is the managing agent for the Octavia Condominium. -6- [* 8] was unaware that he was listed as 10% owner of the entity that did the purchasing. Epstein stated that, although he wished that he knew of Lam's interest prior to the sale of the Unit, it would not have changed his judgment on the transaction. The Condo-defendants further advise that section 2.13 of the bylaws permits the Board to contract with a Board member, "except in cases of bad faith of willful any misconduct, incurring Plaintiff's exhibit II at 9. liability for self-dealing." Lam informed the Board that he had no economic interest in the transaction. According to defendants, 320 57th Street, LLC's title company would not provide title insurance until the Board waived its right of first refusal prior to closing . . Wong's and 320 57th Street, LLC' s exhibit 12. DeGidio, secretary of the Board of Managers, testified that this was a "normal document that we would sign for a closing," either for the attorneys or the title companies. Condo-defendants' exhibit D, DeGidio tr at 69. As such, on August 10, 2012, issued the Board's DeGidio, as Secretary to the Board, waiver and release of the Board's right of first refusal with respect to the sale of the Unit on the terms and conditions set forth in an offer by 320 ~7th Street, LLC. The title report lists 320 57th Street, LLC as the purchaser and the proposed insured, and provides all of Wong's contact information. On that same date, the Unit was sold from the Seller to 320 57th Street, LLC for $300, 000, plus -7- some additional small fee [* 9] adjustments. On December 20, 2012, as promised in the Designee Agreement, 320 57th Street, $540,000. LLC re-sold the Unit to other purchasers for The Condominium then received a check for $112,086.00, payable to the Octavia Condominium, which represented 50% of the profits from the sale. The funds were for the benefit of all the unit owners, and no board members received any funds from this transaction. Wong or his entity received the other 50%, pursuant to the Designee Agreement. Plaintiff then· commenced this action against the defendants, claiming that the Board had no right to exercise its right of first refusal to "usurp Plaintiff's contract for the benefit of Defendant 320 57th Street, LLC." Complaint, 'JI 48. Plaintiff's first cause of action is for tortious interference with contract. In this cause of action, plaintiff argues that he entered into a valid contract with the Seller and that defendant improperly and tortiously interfered with the contract by purporting to exercise a right of first refusal and then failing to consummate the sale. Plaintiff believes that the apartment is worth $800,000 and that he has suffered financial harm as a result of defendants' alleged malicious actions. Plaintiff's second cause of action is for fraud. He alleges that he was advised that Seller would be selling the Unit to the Condominium. He states that he relied on the information received -8- [* 10] that the Condominium would be purchasing the Unit. Had he known that the Board would waive its right to first refusal and that 320 5 7th street LLC would be purchasing the Unit, he would have made sure to consummate his contract with the Seller. Plaintiff claims in his third cause of action that defendants intentionally inflicted harm on plaintiff with their actions. In his fourth cause of action, plaintiff seeks to have his application fee refunded to him, arguing that his application was not properly reviewed. He states that he should receive his processing fee back since defendants conducted a sham process. Plaintiff requests a declaration of the respective rights of the parties in his fifth cause of action. In his sixth cause of action, plaintiff is seeking a return of his financial records which he delivered to defendants in support of his purchase application. Plaintiff claims that, by exercising its right to first refusal and then waiving its rights, the Board violated the bylaws. As such, he argues that the notice to exercise the right of first refusal was nullified. He further maintains that the Board violated the bylaws, alleging that it did not purchase the Unit for the benefit of all the owners. Plaintiff claims that the individual members of the Board were able to profit from this transaction, in 'violation of the bylaws. He contends that the designation -9- of 320 57th Street LLC as a [* 11] designee was an improper attempt to allow an insider to profit from the sale. He summarizes: "Upon information and belief, the Board of Managers and its individual members, along with their attorneys and ma,naging agent, concocted a scheme to tortiously interfere with Plaintiff and Seller's contract and defraud Plaintiff whereby it would represent that it was purchasing the unit on behalf of all unit owners and then on the day of the closing waive that right in favor of a third party, 32 0 5 7th Street, LLC." Complaint, <JI 53. Wong brought a motion complaint as against evidence controverts him. for summary Wong plaintiff's judgment dismissing the argues that allegations, the and documentary that the complaint should be dismissed as against him and 320 57th Street, LLC. Plaintiff brings a cross motion for summary judgment, seeking to strike Wong and 320 57th Street LLC's answer and their affirmative defenses, and also seeking partial summary judgment on his first cause of action against Wong and 320 West 57th LLC and also a money judgment as against those parties. The Condo-defendants do not bring a motion or cross motion for summary judgment. Instead they request that the court search the record and dismiss the complaint as against them, arguing that the Board exercised a proper right of first refusal in accordance with the bylaws. -10- [* 12] DISCUSSION I. Summary Judgment: "The proponent of a motion for summary judgment must demonstrate that there are no material issues of fact in dispute, and that is ~t entitled to as judg~ent a matter of law." ;1 Dallas-Stephenson v citing Winegrad v (1985). 39 AD3d 303, Waisman, New York Univ. Med. 306 Ctr., (1st 64 Dept NY2d 2007), 851, 853 Upon proffer of evidence establishing a prima facie case by the movant, "the party opposing a motion for summary judgment bears the burden of 'produc[ing] evidentiary proof in admissible form sufficient to require a trial of: material questions of. fact.'" People v Grasso, v City of New 50 AD3d 535, 545 (l8t' Dept 2008), quoting Zuckerman York, 49 NY2d 557, · 562 (1980). CPLR 3212 (b) provides, "If it shall appear that any paity other than the moving party is entitled to a summary judgment, the court may grant such judgment without the necessity of a cross-motion." Tortious Interference With A Contract: To successfully interference with a plead a contract, existence of a valid contract, contract, (3) defendants' cause of plaintiff action must ( 2) :·defendants' intentional Apply~ng prove: tortious "(1) the knowledge of the interference contract and a resulting breach, and (4) damages. v United Reprographics, for with the Avant Graphics 252 AD2d 462, 463 (1st Dept 1998). the law to the case at hand, plaintiff's claim for -11- [* 13] tortious interference with a contract fails as a matter of law. the present situation, speci~ically plaintiff Seller breached the contract at issue, himself and the Seller. denied that In the which is the one between He testified that the Seller, who was also represented by a senior partner in plaintiff's law firm, in no way breached the contract with him and that the Seller was a "victim" like he was, just without damages. Condo-defendants' exhibit A, Plaintiff's tr at 172. 2 Moreover, plaintiff cannot establish damages. down payment was returned to him. Plaintiff's He testified that he intended to live in the Unit "indefinitely," and that he had not planned on how long he would reside in the Unit. Plaintiff's tr at 80. 3 As such, plaintiff is alleging some future hypothetical sale as a basis for his loss. 4 As explained in Maruki, Inc. v Lefrak Fifth Ave. Corp. (161 AD2d 264, 267 [1st Dept 1990]), "damages for the prospective consequences of tortious injury cannot be recovered when so highly 2 The court notes plaintiff's attempt to alter his testimony after receiving the defendants' opposition papers to allege that he is now claiming that there was an unintended breach by the Seller. Regardless of what plaintiff claims, the Seller did not breach the Contract. The court notes plaintiff's attempt to alter his testimony after receiving the defendants' opposition papers. He changed his testimony to "a year or two until I sold the unit" rationalizing that he misunderstood the question. 4 Plaintiff's use of White v Farrell (20 NY3d 487 (2013]), in which the Court discusses the damages available to the seller when there was a breach of the contract by the buyer, does not bolster his argument. -12- [* 14] See also Fruition, Inc. v Rhoda Lee, Inc., speculative." 124, 125 (l3t Dept 2003) 1 AD3d ("The damages for which a party may recover for a breach of contract are such as ordinarily and naturally flow from the non-performance. They must be proximate and certain, or capable of certain ascertainment, and not remote, speculative or contingent [internal quotation marks and citation omitted]"). Despite the lack of breach by the Seller, and lack of damages, plaintiff keeps reiterating that, al though the Seller did not breach the Contract, the defendant; interfered in such contract with a tortious act. Plaintiff alleges that the Board failed to !; properly exercise its right of first refusal and, in fact, did not legally exercise it at all, since it was waived on the date of the :~ closing. However, as set forth below, the Board did not commit a tortious act. The Contract between plaintiff and Seller advised plaintiff that his sale was conditioned on the Condominium's right of first refusal in the manner provided for in the bylaws. The bylaws state that the Board could either purchase the Unit itself or assign a designee for that purpose. was 320 5 7th Street, LLC, Wong, or,. an LLC formed by Wong, which became that designee. The Board unanimously voted that the designee, or 320 57th Street, LLC would finance and facilitate the exercise of the right of first refusal by purchasing it and then reselling it for the benefit of the unit owners. The Board believed that if the Unit were sold to plaintiff -13- [* 15] and then not quickly resold, the other units in the building would be devalued, market value. since the plaintiff's purchase price was well below Pursuant to the designee a~reement, the Condominium received a check for half of the proceeds of the sale after 320 57th Street, LLC re-sold the Unit. Prior to the closing, the Board was required to sign a waiver of the right of first refusal as a condition for 320 57th Street, LLC to receive title insurance. a "ministerial" act, done The Condo-defendants entitle this solely in :order to obtain title insurance, which 320 57th Street, LLC needed in order to comply with the Designee Agreement. 320 57th Street, Agreement, refusal. which LLC, set The designee and purchaser still remained pursuant forth the to the ·July details of 25, the 2012 right Designee of first As defendants stated, the Board had to do this in order to carry out the Designee Agreement and to protect its investment. There is no indication that the Board failed to comply with the bylaws in furtherance of exercising the right of first refusal in all aspects, including who provided the financing and who became the designee. In any event, plaintiff does not have standing to allege a claim of tortious interference of a contract grounded in the Board's alleged non-compliance with i . ts bylaws. 5 As set forth in Soho Bazaar v Board of Mgrs. of Soho Intl. Arts Condominium (266 The court notes that plaintiff reiterates that he does not wish to enforce the bylaws but is se~king a determination that the defendants' actions were not authorized by the bylaws. -14- [* 16] AD2d 65, 65 plaintiff [1st Dept 1999]), a case cited by Condo-defendants, a who is a "mere challenge condominium bylaws. contract vendee" lacks standing to The Court in Soho Bazaar summarized with the following: "Although the two units in question have been sold, the issues raised on this appeal, involving plaintiff's claims as a contract vendee of those units, are not moot inasmuch as there remains pending an action by plaintiff for money dama~es allegedly sustained by it as a consequence of defendant condominium's allegedly wrongful purchase of the units pursuant to a right of first refusal provision in its favor contained in the condominium by-laws. Turning to the merits, plaintiff, a mere contract vendee, lacks standing to enforce the condominium by-laws. We would also note that the board's actions were taken in good faith to further a legitimate interest of the condominium corporation, especially when consideration is given to the corporation's start-up financial status." Id. Accordingly, taking all of the arguments above, plaintiff has not raised a triable issue of fact with respect to his claim for tortious interference with a contract, and his cross motion for partial summary judgment is denied. Although Wong was the only defendant who moved for summary judgment, judgment, "a motion for summary irrespective of by whom it is made, even on appeal, to search the empowers a court, record and award judgment where appropriate [internal quotation marks and citation omitted]." Adv. v Fox Group, 2 AD3d 173, 174 (1st Dept 2003). -15- DCA Since there are [* 17] ' no triable issues of fact with respect to tortious interference with a contract, all of the defendants are granted summary judgment dismissing this cause of action. Fraud: states Plaintiff defendants that material made misrepresentations of fact when they delivered the July 25, notice to exercise the right of first ref~sal to him. 2012 He claims to 11 have relied on the Board's representation~ that the Condominium was purchasing the Unit in accordance with the bylaws for the benefit of all unit owners. Plaintiff reiterates that he suffered damages of $500,000.00 no less than as a result of this alleged misrepresentation. The elements of a fraud claim require a plaintiff to establish the following: knowledge of "(1) its a material misrepresentation of a falsity, (3) intent justifiable reliance and ( 5) damages." the Weber House Condominium, to induce fact, (2) reliance, (4) Nicosia v Board of Mg rs. of 77 AD3d 455, 456 (1st Dept 2010). There was no false or material misrepresentation by the Board when, after learning about the proposed sale between plaintiff and Seller, it informed the Seller's lawyer that it would be exercising its right of first refusal. 6 The Board, acting as an agent of its 6 The Seller's lawyer, who works in plaintiff's firm, advised plaintiff that the Board had elected to exercise its right of first refusal and delivered a copy of the notice to exercise right of first refusal to him. -16- [* 18] unit owners, purchased the Unit through a designee, 320 57th Street, LLC. "[T]he damages incurred by reason of the fraudulent conduct Pope ~ Saget, must be actual pecuniary losses." (l5t Dept 2006). As previously indicated, 29 AD3d 437, plaintiff 441 cannot establish that he suffered damages. Therefore, as a matter of law, plaintiff's fail claim for fraud must and· all defendants are granted summary judgment dismissing this cause of action. Prima Facie Tort: "Plaintiff support a failed cause of to plead facts that for prima f acie action are sufficient tort because to the allegations do not establish that defendants' purportedly tortious conduct was motivated by an otherwise lawful act performed with the intent to injure citation omitted] . " or with 'disinterested malevolence' [internal Princes Point, LLC v AKRF Eng' g, P. C., 588, 589 (1st Dept 2012). 94 AD3d The defendants have shown that the Board was. motivated to purchase the Unit for the benefit of all the unit owners, not by disinterested malevolence. As such, all defendants are granted summary judgment dismissing this cause of action. Return of Application Fee: Plaintiff alleges that he is entitled to return of his application fee to purchase the apartment since his application was allegedly not properly reviewed. ·Plaintiff has not created a triable issue of fact with respect to the entitlement of the return -17- [* 19] of his fee. application conversion of his As application fee cause of action for dismissed as against all this such is defendants. Declaratory Judgment: As a result of this decision the c9mplaint is dismissed as against all defendants and plaintiff 'is not entitled to a declaratory judgment. Return of Records: Plaintiff's request for a return of the records provided in conjunction with his application to purchase the apartment is denied. Plaintiffs' Cross Motion: As a moot, result of this decision, since all defendants dismissing the complaint. have plaintiffs' been granted cross motion is summary judgment This cross motion is denied. The court has considered plaintiff's other contentions and finds them without merit. Accordingly, it is hereby ORDERED that the motion of defendant Joseph T. Wong to dismiss the complaint herein is granted and the complaint is dismissed in its entirety against said defendant, with costs and disbursements to said defendants as taxed by the Clerk. of the Court; and it is further -18- [* 20] ORDERED that, after searching the record pursuant to CPLR 3212 (b), summary defendants judgment The Board dismissing of the Managers of complaint the Octavia Michael Lam, Walter Epstein, Michael Bouffard, Allen Foster Tennant, Maxwell-Kates, is granted to Condominium, Leslie Wackerman, Inc., Michael Bogart, David DeGidio, and 320 57th Street, LLC, and the complaint is dismissed in its entirety disbursements to against said defendants, said defendants as with costs and taxed by the Clerk of the Court; and it is further ORDERED that the cross motion of Andrew Bittens is denied in its entirety; and it is further ORDERED that the Clerk is ~irected accordingly in favor of said defendants. December 17, 2013 -19- to enter judgment

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