Board of Mgrs. of Lenox Grand Condominium v DSW Lenox LLC
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Board of Mgrs. of Lenox Grand Condominium v DSW Lenox LLC 2012 NY Slip Op 33549(U) October 9, 2012 Supreme Court, New York County Docket Number: 112834/2009 Judge: Barbara R. Kapnick 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 10/10/2012 1] INDEX NO. 112834/2009 NYSCEF DOC. NO. 83 RECEIVED NYSCEF: 10/10/2012 SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PRESENT: HON. BARBARA R. K.a,.PNICK PART 09 Justice i , Index Number: 112834/2009 LENOX GRAND CONDOMINIUM INDEX N O . - - - - - VS. I MOTION DATE _ _ __ DSW LENOX LLC SEQUENCE NUMBER : 005 MOTION SEQ. NO. _ __ COMPEL The following papers, numbered 1 to _ _ , were read on this motion t o / f o r - - - - - - - - - - - - - - I No(s)._ _ _ _ __ I No(s). - - - - - - Notice of Motion/Order to Show Cause - Affidavits - Exhibits Answering Affidavits - E x h i b i t s - - - - - - - - - - - - - - - - Replying Affidavits _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ 1No(s). - - - - - - Upon the foregoing papers, it is ordered that this motion Is MOTION 18 DECID!D ACCOMPANYING ME~NORACCORDANCE WITH ANDUM DECISION fl~ w u i= ..., "' ~ 0 IC w 0:: 0:: w LL. w 0:: >- .:..:. ~ z ..J ..J 0 ~ LL UJ I- c( u w w 0:: 3> (!) w z en ~ - 0 w ..J 0:: - "' ..J c( 0 l.) LL z 0 i= ~ I0::: ~.J.S.C. 0 0 ::!!l! LL Dated: . 1. CHECK ONE: ..................................................................... 2. CHECK AS APPROPRIATE: ........................... MOTION IS: 3. CHECK IF APPROPRIATE: ................................................ 0 . .. CASE DISPOSED ~GRANTED 0 ~SETILE ORDER 0DONOTPOST DENIED . ..__ J.8.C. ~ON-FINAL DISPOSITION 0 GRANTED IN PART 0 0 OTHER SUBMIT ORDER 0 FIDUCIARY APPOINTMENT 0 REFERENCE [* 2] SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: IA PART 39 --------------------------------------x BOARD OF MANAGERS OF THE LENOX GRAND CONDOMINIUM, Plaintiff, DECISION Index No. 112834/09 Motion Seq. No. 005 -againstDSW LENOX LLC, et. al., Defendants. --------------------------------------x BARBARA R. KAPNICK, J.: In the instant motion, plaintiff Board of Managers of the Lenox Grand Condominium ("Lenox Grand" or the "Condominium") moves by Order to Show Cause for an order: (1) di re ct ing DSW commercial Lenox, units LLC and ( "DSW") , three the parking owner spaces of two at the Condominium, to make immediate payment to the Condominium in the amount of $45,281.27 for all unpaid common charges, assessments, interest, late fees and a violation charge through April 30, 2012; and (2) directing that DSW pay promptly all common charges and assessments against its Units each and every month commencing with May 2012 at the rates then in effect as adopted from time to time by the Lenox Grand Board of Managers (Unit: $157. 56/parking Comm-1 $2, 766.59, space for spaces) . 1 each Comm-2 $4, 679. 72 and of the three parking [* 3] After hearing oral argument on the record on May 3, 2012, DSW was directed, by Interim Order dated May 4, 2012, to make payment in the amount of $5,000.00 to Lenox Grand within ten (10) business days of the date of the Order to reimburse Lenox Grand for a violation charge paid to the Department of Buildings on behalf of DSW. DSW was also directed to pay monthly common charges for its two commercial units and three parking spaces, at the rates adopted by the Condominium in September 2011, beginning with the May 2012 payments and going forward pending further Order of this Court. Background Lenox Grand is a condominium association whose members own the residential, commercial and parking units in the building known as and located "Building") . at 381 Lenox Avenue, New York, New York (the The Condominium was established in 2007 by the filing of a Declaration of Condominium and By-laws. (Berthelot Aff. ~ 3.) DSW is and has been the owner of the two commercial units Comm-1 and Comm-2 and Parking Spaces 3, 4 and 5 (collectively, the "Commercial Uni ts") in the Building since 2007. Plaintiff states that upon information and belief, DSW has leased Unit Comm-2 to the Harlem Children's Zone School (the "School"). Also upon information and belief, DSW's mortgagee Country Bank receives all of the rent from the School at the rate of $19,000 per month plus 2 [* 4] the Q.IQ rata common charges allocated to Unit Comm-2. (Berthelot Aff. 'II 4.) According to plaintiff, as the owner of the Commercial Units, DSW is obligated to pay all common charges, assessments and others fees imposed thereon as long as it owns them. Beginning in September 2011, DSW failed to pay the monthly common charges and other payments due to the Condominium. After the Condominium requested payment, DSW paid only the undisputed amounts it believes to be due, which are the common charges at the old rate and no assessments on Unit Comm-1 or on the parking spaces. Country Bank has paid the common charges (but Addftionally, not the special assessments) due from DSW to the Condominium solely on Unit Comm-2. (Berthelot Aff. 'II 5.) Article address the VI, issue Sections 4 of payment and 6 of the Condominium of common charges and provide relevant part: Section 4. Payment of Common Charges. Each Unit Owner shall be obligated to pay the common charges assessed by the Board of Managers pursuant to the provisions of Section 1 of this Article VI at such time or times as the Board of Managers shall determine. The Board of Managers may also impose a reasonable late charge for late payment of common charges, which shall be added to the Unit Owner's common charges due on the first day of the following month, and which shall be a lien upon the Unit Owner's Unit if not paid. 3 By-laws in [* 5] Assessments for common charges are the personal obligation of the person owning the Unit at the time the assessment becomes due. * * * Section 6. Default in Payment of Common Charges. In the event any Unit Owner shall fail to make prompt payment of its common charges or any assessment as determined by the Board of Managers, such Unit Owner shall be obligated to pay interest at the highest legal rate on such unpaid common charges computed from the due date thereof, in addition to any late charge which may have been imposed pursuant to Section 4 of Article VI, together with all expenses, including attorneys' fees, paid or incurred by the Board of Managers or the Managing Agent in any proceeding brought to collect such unpaid common charges or assessments or in an action to foreclose the lien on such Unit arising from said unpaid common charges or assessments. The Board of Managers shall have the right and obligation to attempt to recover such common charges or assessments, together with interest thereon, and the expenses of the proceeding, including attorneys' fees, in an action to recover the same brought against such Unit Owner, or by foreclosure of the lien on such Unit granted by Section 339-z of the Real Property Law of the State of New York, in the manner provided in Section 339-aa of the Real Property Law against Units with respect to which the Sponsor or such designee is in arrears of common charges by more than thirty (30) days. A lien for non-payment of common charges granted pursuant to Section 339-z has priority over all other liens except (i) liens for taxes on the Unit in favor of any assessing unit, school district, special district, county or other taxing unit, and (ii) all sums unpaid on a first mortgage of record. Plaintiff contends that DSW has only made partial payments 4 [* 6] towards its common charges, but nothing towards special assessments, interest, late charges and a violation charge, 1 in an aggregate sum of $45,281.27, exclusive of legal fees, which are not being sought in this motion. (Berthelot Aff. ~ 8.) Further, plaintiff asserts that the increase in common charges has resulted from an increase in the Condominium's litigation expenses, which have dramatically risen due to the filing of the instant action and the defense costs associated with a derivative action that is also pending before this Court, under Index No. 652786/11. 2 Although the Condominium has replaced the Building's doormen with a security system to lower costs, plaintiff contends that this savings is not enough to cover the increase in legal expenses. Thus, effective May 1, 2012, the common charges on all of the units was increased. (Berthelot Aff. ~~ 9-11.) Discussion Plaintiff argues that the Condominium By-laws, supra at 3-4, 1 The violation charge and other payments were ostensibly made pursuant to this Court's Interim Order of May 4, 2012, but other payments remain outstanding. 2 The derivative action names individual members of the Board of Managers as defendants, whose defense costs are paid by the Condominium pursuant to the Condominium's indemnification obligations. (Berthelot Aff. ~ 9.) 5 [* 7] and New York Real Property Law ("RPLu) §§ 339-j 3 and 339-x 4 make clear that all unit owners are obligated to pay common charges as assessed by the Board of Managers. 3 RPL § 339-j provides the following: 339-j. Compliance with by-laws and rules and regulations § Each unit owner shall comply strictly with the by-laws and with rules, regulations, resolutions and decisions adopted pursuant thereto. Failure to comply with any of the same shall be ground for an action to recover sums due, for damages or injunctive relief or both maintainable by the board of managers on behalf of the unit owners or, in a proper case, by an aggrieved unit owner. In any case of flagrant or repeated violation by a unit owner, he may be required by the board of managers to give sufficient surety or sureties for his future compliance with the by-laws, rules, regulations, resolutions and decisions. Notwithstanding the foregoing provisions of this section, no action or proceeding for any relief may be maintained due to the display of a flag of the United States measuring not more than four feet by six feet. 4 RPL § 339-x provides the following: § 339-x. Waiver of use of common elements; abandonment of unit; conveyance to board of managers No unit owner may exempt himself from liability for his common charges by waiver of the use or enjoyment of any of the common elements or by abandonment of his unit. Subject to such terms and conditions as may be specified in the by-laws, any unit owner may, by conveying his unit and his common interest to the board of managers ·on behalf of all other unit owners, exempt himself from common charges thereafter accruing. 6 [* 8] Defendant ("Wolfson"), DSW argues that its principal, Stanley Wolf son entered into an Amended Purchase Agreement with the Condominium's Sponsor in lieu of rescinding the original Purchase Agreement, interests in in exchange the for Commercial certain Units provisions from Sponsor or its successors-in-interest. to protect interference from his the The relevant provision of the Amended Purchase Agreement provides: the Seller also " grants to Purchaser the right to at least one seat on the Board of Managers and an absolute right of veto on any issue concerning the Commercial Units. " 5 added). (Amended Purchase Agreement, <JI 3) (emphasis Based on this purported veto power, DSW contends that it has the right to refuse to pay the increased common charges and assessments. DSW argues that Purchase Agreement the under Condominium the is theory that bound the successor-in-interest to the Sponsor and has, by the Amended Condominium is therefore, a stepped into the shoes of the Sponsor, with respect to contractual rights and obligations. In the alternative, DSW argues that it is at least entitled to take discovery to determine the extent to which the Condominium is bound by the provisions of the Affiended Purchase Agreement. 5 The Amended Purchase Agreement is signed for "Seller" by Rosetree on Lenox LLC, and by DSW Lenox, LLC and Stanley Wolfson, Managing Member, for "Purchaser." 7 [* 9] In reply, plaintiff argues that the Amended Purchase Agreement was never disclosed to the Condominium and, in any event, matter to of law, incorporated Plaintiff plaintiff into reasons administration of the is not operative that once the principally by its bylaws, a bound documents agreements of condominium as a the is Condominium. created, condominium's affairs which are, in essence, not are the governed an agreement among all of the individual unit owners as to the manner in which the condominium will operate, and which sets forth the respective rights and obligations of unit owners, both with respect to their own units and the condominium's common elements. See RPL § 339-u. Here, since neither the Amended Purchase Agreement itself, nor the provision concerning DSW's purported veto power is even mentioned in the Condominium's By-laws, the Condominium cannot be bound. Moreover, plaintiff contends that if the Sponsor intended for the veto power provision to be binding upon the Condominium, it could have easily added such a provision to the By-laws when it drafted the same. The Sponsor failed to do so, although it did include a provision in the By-laws to provide for DSW's right to a permanent seat on the Board of Managers. 6 6 Plaintiff also notes that DSW's right to a permanent seat on the Board was also included in the Sponsor's Offering Plan, which details the rights and obligations of the unit owners and the board of managers and must be reviewed and approved by the New York State Attorney General's Office. The veto power provision, however, was not included in the Offering Plan. 8 [* 10] Based on the foregoing, plaintiff maintains that the Amended Purchase Agreement does not provide a way for DSW to circumvent its statutory and contractual obligations to pay common charges Court granted assessed by the Condominium. As to defendant the successor-in-interest permission to submit issue, sur-reply this papers and plaintiff permission to submit sur-sur-reply papers to address the issue of whether a condominium or cooperative entity can be bound by agreements entered into by its sponsor, as plaintiff asserts is the case here. Defendant DSW first argues that the law is clear that when a cooperative entity is first created and the sponsor controls the board, the cooperative entity and the Sponsor are essentially one entity and are treated as alter egos. While this may be the case, it dispute has no bearing on the instant condominium, not a cooperative entity. which involves a Furthermore, the case cited by DSW, Richards v. Estate of Kaskel, 169 AD2d 111, 115 (1st Dep't 1991), does not address the issue at hand; rather, it deals with the issue of whether a cooperative entity is a proper party to a nonpurchasing tenants' renewal lease. this argument to be without merit. 9 As such, the Court finds [* 11] Next, DSW argues that other courts have held that a condo association is a sponsor's successor-in-interest and is bound by the sponsor's contention, prior actions and agreements. To support DSW cites one New York State case entitled, this Board of Managers of the Glen at Great Kills Homeowners Ass'n v. NBM Realty Holdings, 2010 WL 2984343 (Sup. Ct., Richmond Co. which held that the homeowners association's [July 12, 2010)), possession of the subject property was not hostile for purposes of making out an adverse possession claim because the true owners of the parcel, the sponsor and later a LLC entity, was aware of and never objected to the association's use or improvement of the property. this Court finds that this case does not support However, defendant's position here. On the other hand, plaintiff argues that a condominium is not bound by private agreements of its sponsor, which were not incorporated into the offering plan or disclosed to the other unit owners. To support its argument, plaintiff cites to the case of Leonard v. Gateway II, LLC, 68 AD3d 408 (l5t affirmed the Supreme Court's dismissal of a claim by a unit owner against the Dep't 2009), breach of contract condominium because condominium was not a party to the purchase agreement, sponsor and the unit owner were parties. 10 which the only the [* 12] While this Court recognizes that Leonard does not directly address the successor-in-interest argument either, DSW has not come forward with any cases to support its position that as a matter of law, the plaintiff here is bound by the Amended Purchase Agreement that was executed between DSW and the Sponsor based on the theory that plaintiff Therefore, is based on Condominium By-laws, a the successor-in-interest language of to Sections the 4 and Sponsor. 6 of the plaintiff's Order to Show Cause is granted insofar as it seeks relief that has not already been granted by this Court's Interim Order dated May 4, 2012. SETTLE ORDER. Date: Io/ 1 , ~Kapnick 2012 J.S.C. 11
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