Sheridan Ct. Mews Assoc. v MDR Assoc., LLC.

[*1] Sheridan Ct. Mews Assoc. v MDR Assoc., LLC. 2018 NY Slip Op 50862(U) Decided on June 1, 2018 Supreme Court, Bronx County Brigantti, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 1, 2018
Supreme Court, Bronx County

Sheridan Court Mews Associates, Plaintiff,

against

MDR Associates, LLC., Defendant.



25850/2017E



Attorney for Defendant MDR: Robinson Brog Leinwand Greene Genovise & Gluck P.C.

(Sheldon Eisenberger, Esq. and Ellot Hahn, Esq.)

Attorney for Plaintiff: Kaufmann Gildin & Robbins, LLP.

(Daniel Gilden, Esq. and Kevin M. Shelley, Esq.)
Mary Ann Brigantti, J.

The following papers numbered 1 to 6 read on the below motion noticed on December 5, 2017 and duly submitted on the Part IA15 Motion calendar of January 2, 2018:

Papers Submitted/Numbered

Pl.'s Notice of Motion, Exhibits, Memo. of Law. 1,2,3

MDR's Memo. of Law in Opp., Exhibits 4,5

Pl.'s Memo. of Law in Reply 6

Upon the foregoing papers, the plaintiff Sheridan Court Mews Associates, L.P. ("Plaintiff" or "Sheridan") moves for an order pursuant to CPLR 3212, granting it summary judgment on its First, Second, Third, Fourth, and Fifth Causes of Action in the Complaint. Defendant MDR Associates LLC. ("MDR") opposes the motion.

I. Background

Sheridan is a limited partnership whose ownership, operation and management is governed by a Limited Partnership Agreement (the "Agreement"). According to this Agreement, Sheridan has two groups of partners, each owning 50% of the partnership interest: the "SSF Group" and the "United Group." Defendant Matco Enterprises, Inc. ("Matco"), part of the United Group, is a General Partner holding a 20% partnership interest. Defendant Matthew Gallagher ("Gallagher"), also part of the United Group, is a Limited Partner holding a 5% partnership interest. On or about November 27, 1989, Sheridan acquired real property in the [*2]Bronx, New York, Block 2455, Lot 53, commonly described as 215 East 164th Street, Bronx, New York (the "Property").

On or about May 11, 2016, at the request of MDR, defendant Gallagher executed a document entitled "Declaration of Restrictions" (the "Declaration"). MDR then caused the Declaration to be filed with the Office of the City Register of the City of New York on or about May 18, 2016. The Declaration was made and signed by Matco, by Gallagher, as its President, Secretary, Treasurer, and Sole Shareholder; (2) the United Group, by Gallagher, as representative of the United Group; (3) Gallagher, as a limited partner of Sheridan; and (4) by Gallagher, individually. The declaration refers to the above-listed signatory collectively and individually as the "Declarant."

The Declaration states, in pertinent part:

"The Declarant shall not take any action, nor consent in any way to sell, mortgage, assign, lease, convey, transfer, encumber, pledge, hypothecate, accept any benefit, or otherwise take any action nor consent in any way to any action in (a) Matco, or (b) any of the Shares of Matco, or (c) in the Limited Partnership [Sheridan] or any of its interests therein (d) any of the parcels comprising the Property [215 East 164th Street Bronx NY Block 2455, Lot 53], nor in its interest in any of the parcels, without the written consent of MDR Associates, LLC.... Should any of the aforementioned actions be taken, or consent provided for such actions, it shall be null and void and of no force and effect."

The Declaration is not signed by a representative of Sheridan, and the restrictions contained therein are of unlimited duration and are not contingent upon the existence of any debt or obligation from Gallagher and/or Matco to MDR. Plaintiff alleges that, pursuant to the Agreement, unanimous consent of Sheridan's "Management Committee" is required in order to sell, transfer, or otherwise encumber the Property or to transfer, sell, or assign any partnership interest. Plaintiff alleges that Gallagher and Matco did not seek or obtain such consent before executing the Declaration, that Gallagher was not authorized to execute the Declaration on behalf of Sheridan, and Gallagher, in fact, did not execute the Declaration on behalf of Sheridan.

Plaintiff thus commenced this declaratory judgment action seeking, in short, an order declaring that the Declaration is void and of no legal effect as against Sheridan. Plaintiff now seeks summary judgment on its first five causes of action.

Plaintiff's First Cause of Action asserts that the Declaration is of no legal effect against Sheridan or the Property because it was not executed by a duly authorized representative of Sheridan, and therefore pursuant to the Statute of Frauds, and because the Declaration encumbers the Property in violation of the terms of the Agreement, Sheridan cannot be bound by the Declaration. Plaintiff also seeks an order declaring that the Declaration did not effectively transfer any of the rights and interest regarding Sheridan from Matco and/or Gallagher to MDR. According to the Agreement, a partner cannot transfer any interest without prior written consent of Sheridan's Management Committee, which was not done (Agreement, Article VIII).

Plaintiff's Second and Third Causes of Action seek a declaration that the Declaration is void because it violates the Rule against Perpetuities under EPTL §9-1.1(a) and (b), and also violates the common law rule against unreasonable restraints on alienation. Plaintiff contends [*3]that the Declaration's plain words make it clear that the consent requirement is a suspension of the absolute power of alienation, which lasts forever, in violation of either the suspension of alienation rule (EPTL §9-1.1[a]) or the rule against remote vesting (EPTL §9-1.1[b]). Since the Declaration effectively prohibits transferability of the Property without any time limit, Sheridan contends that it also runs afoul of the common law rule prohibiting unreasonable restraints on alienation.

Plaintiff's Fourth and Fifth Causes of Action seek to quiet title to the Property pursuant to Article 15 of the RPAPL and under principles of equity. Plaintiff argues that the Declaration constitutes an unlawful cloud on the Property which prevents the transfer of title without MDR's consent. Because the Declaration is void and unenforceable as against Sheridan, Sheridan/Plaintiff is entitled to an order barring MDR from any claim or interest in the Property based upon the Declaration, and an order declaring inter alia that Sheridan is the sole lawful owner of the Property free and clear of the Declaration.

Each of Plaintiff's five causes of action also seek an order directing the Office of the City Register of the City of New York to cancel and discharge of record the Declaration.

In opposition to the motion, MDR's managing member David Roseberg alleges that the Declaration "affects Declarant's interest in Sheridan, but it was not intended in any way to affect or bind Sheridan." Mr. Rosenberg states that the Declaration was executed by Gallagher in consideration for value given to him by MDR, and it requires Gallagher to obtain MDR's consent before exercising any rights the Declarant has in Sheridan or the Property. He further states that, at all times, MDR understood that the terms of the Declaration gave it a right to restrict the interests of Declarant in Sheridan, but not a right to restrict Sheridan or Sheridan's legal ownership interest in the Premises. MDR filed the Declaration with the City Register "in order to put the world on notice that certain restrictions applied to Declarant's interest (i.e., Gallagher's direct and indirect interests) in Sheridan. Mr. Rosenberg alleges that MDR did not file the Declaration as a lien on the Property and MDR is not asserting such a claim against the Property.

MDR argues in its memorandum of law that the Declaration is not binding on Sheridan, and does not affect Sheridan's legal rights with respect to the Property. By the plain language of the document, the Declaration only affects Gallagher's direct or indirect interest in Matco, the shares of Matco, Sheridan, or any parcels comprising the Property, and restricts the transfer of these interests without written consent of MDR. MDR asserts that the Declaration does not bind Sheridan, and thus this motion should be denied because there is no justiciable controversy to this point. MDR further contends that the Declaration does not constitute a transfer of Gallagher/Matco's Sheridan-related interests to MDR, and in fact it seeks to prohibit Declarant from engaging in any transfer without MDR's consent. MDR thus argues that Sheridan has failed to establish that "the Declaration is null and void on the grounds that it constitutes a prohibited transfer of partnership interests." Finally, MDR asserts that the Declaration does not violate the Rule against Perpetuities' prohibition against suspension of power of alienation, because the Declarant is not absolutely restricted from transferring its interest in the Property. In fact, the Declaration allows Sheridan and MDR to act together and convey a fee absolute in the Property.

Plaintiff has submitted a memorandum of law in reply. Plaintiff's contentions therein are addressed infra, if necessary.

II. Standard of Review

To be entitled to the "drastic" remedy of summary judgment, the moving party "must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact from the case." (Winegrad v. New York University Medical Center, 64 NY2d 851 [1985]; Sillman v. Twentieth Century-Fox Film Corp., 3 NY2d 395 [1957]). The failure to make such prima facie showing requires denial of the motion, regardless of the sufficiency of any opposing papers. (Id., see also Alvarez v. Prospect Hosp., 68 NY2d 320, 324 [1986]). Facts must be viewed in the light most favorable to the non-moving party (Sosa v. 46th Street Development LLC., 101 AD3d 490 [1st Dept. 2012]). Once a movant meets his initial burden, the burden shifts to the opponent, who must then produce sufficient evidence, also in admissible form, to establish the existence of a triable issue of fact (Zuckerman v. City of New York, 49 NY2d 557 [1980]). When deciding a summary judgment motion the role of the Court is to make determinations as to the existence of bonafide issues of fact and not to delve into or resolve issues of credibility (Vega v. Restani Constr. Corp., 18 NY3d 499 [2012]). If the trial judge is unsure whether a triable issue of fact exists, or can reasonably conclude that fact is arguable, the motion must be denied. (Bush v. Saint Claire's Hospital, 82 NY2d 738 [1993]).

III. Discussion

Plaintiff here established its prima facie entitlement to summary judgment. Regarding the First Cause of Action, it is not disputed that the Declaration is not binding and has no legal effect with respect to Sheridan, who did not execute the document. In opposition, MDR does not dispute any of the material facts set forth in Plaintiff's motion papers. As noted in Plaintiff's reply, MDR concedes that (1) the Declaration does not affect Sheridan's legal rights with respect to the Property; (2) that the Declaration was only intended to affect, and only affects, the interests of Gallagher and Matco with respect to their interests in Sheridan (and not with respect to any interest in the Property, since they have no such interest); (3) that the Declaration was not intended to, and does not, effectuate a transfer of Gallagher or Matco's interest in Sheridan to MDR; and (4) that the filing of the Declaration with the City Register was not intended to establish a lien or otherwise affect Sheridan's title to the Property. However, these concessions do not eliminate any justiciable controversy needed for a declaratory judgment, because notwithstanding MDR's expressed intent not to affect Sheridan's title to the Property, the Declaration has placed an actual cloud on the title, thus rendering the Property inalienable. Angelo Dellacarpini, an attorney from title insurance agency Judicial Title Insurance Agency LLC. ("Judicial Title"), stated in an affidavit that the Declaration is considered an encumbrance against the Property and without its removal from the record, Judicial Title would not be able to provide title insurance free of said encumbrance to a bona fide purchaser of the Property, and it is unlikely that any title company would provide title insurance free of any exception for the Declaration. MDR does not dispute these contentions in opposition. Therefore, MDR's unsubstantiated assertion that the Declaration does not bind or affect Sheridan or its title to the Property, is without merit. Plaintiff is therefore entitled to summary judgment on its First Cause [*4]of Action, and a declaration that: the Declaration is void and of no legal effect with respect to Sheridan or the Property, because it was not executed by a duly authorized representative of Sheridan. The Office of the City Register of the City of New York shall be directed to cancel and discharge of record the Declaration.

On the issue of the purported transfer of Gallagher/Matco's Sheridan interest, MDR asserts that "[t]he Declaration clearly does not constitute a transfer of any interests" (MDR Memo. of Law at p. 6). Nevertheless, Sheridan is entitled to a declaration as such because "[t]he general purpose of the declaratory judgment is to serve some practical end in quieting or stabilizing an uncertain or disputed jural relation either as to present or prospective obligations" (see James v. Alderton Dock Yards, 256 NY 298, 305 [1931]). Plaintiff is thus granted summary judgment on this issue, and it is declared that the Declaration did not effectively transfer any rights or interests regarding Sheridan from Matco and/or Gallagher to MDR, and that Sheridan does not need MDR's consent to sell the Property. The Court notes that Sheridan is not seeking a determination that the Declaration is null and void for all purposes — but only null and void and without legal effect "with regard to Sheridan and its ownership of and right to do as it pleases with the Property" (Sheridan Reply Memo. of Law, at Page. 6).

Regarding the Second and Third Causes of Action, MDR only contends that the Declaration does not violate the Rule against Perpetuities' prohibition against the suspension of alienation (EPTL §9-1.1[a]). Even assuming arguendo that MDR is correct, MDR fails to address Sheridan's additional contentions that the Declaration violates the Rule's prohibition against remote vesting (EPTL §9-1.1[b]), and the common law rule against unreasonable restraints on alienation. EPTL §9-1.1(b) states that "[n]o estate in property shall be valid unless it must vest, if at all, not later than twenty-one years after one or more lives in being at the creation of the estate and any period of gestation involved." In this case, the Declaration requiring MDR's consent before Gallagher/Metco (partners of Sheridan) is permitted to do anything with the Property may be considered an "option" or future interest of MDR in the Property, and that portion of the Declaration is void because it is of unlimited duration (see Buffalo Seminary v. McCarthy, 86 AD2d 435 [4th Dept. 1982], aff'd, 58 NY2d 867 [1983]). Furthermore, under the more flexible common law rule against unreasonable restraints on alienation, the Declaration - which imposes no time restrictions on MDR's potential future interest in the Property, and hinders the future disposition of the property - is unreasonable as a matter of law (see generally Symphony Space Inc. v. Pergola Properties, Inc., 88 NY2d 466 [1996]; Wilderstein & Co., Inc. v. Wallis, 79 NY2d 641 [1992]). Plaintiff is therefore entitled to summary judgment with respect to its Second and Third Causes of Action.

MDR fails to substantively oppose Sheridan's entitlement to summary judgment with respect to its Fourth and Fifth Causes of Action — seeking to quiet title either under Article 15 or under principles of equity. In order to maintain an equitable quite title action, "a plaintiff must allege actual or constructive possession of the property and the existence of a removable 'cloud' on the property, which is an apparent title, such as in a deed or other instrument, that is actually invalid or inoperative" (see Acocella v. Bank of New York Mellon, 127 AD3d 891, 893 [2nd Dept. 2015], quoting Barberan v. Nationpoint, 706 F. Supp. 2d 408, 418 [S.D.NY]; RPAPL §1515). Sheridan, here, has alleged and established its ownership of the Property, and that fact that the Declaration constitutes an actual cloud on title, notwithstanding MDR's contentions otherwise. [*5]Because, as noted supra, the Declaration cannot bind Sheridan or the Property at issue, Sheridan is entitled to summary judgment on its Fourth and Fifth Causes of Action and a declaration that MDR and all persons claiming under it or any of them be forever barred from any claim to an estate or interest in the Property based upon the Declaration; that Sheridan is the sole lawful owner and is vested with title and fee to the Property, free and clear of the Declaration, subject to any properly recorded mortgages or other liens against the Property, and an order directing the Office of the City Register of the City of New York to cancel and discharge of record the Declaration.

IV. Conclusion

Accordingly, it is hereby

ORDERED, that Plaintiff's motion for summary judgment on its First, Second, Third, Fourth, and Fifth Causes of Action is granted.

Settle order on notice to all parties.

Dated: June 1, 2018

_________________________________

Hon. Mary Ann Brigantti, J.S.C.