40 W. 67TH ST. v. Pullman

• Decision Date: 23 May 2002
• Citation: 742 N.Y.S.2d 264,296 A.D.2d 120
• Parties: 40 WEST 67TH STREET, Appellant,<BR>v.<BR>DAVID PULLMAN, Respondent.
• Court: New York Supreme Court — Appellate Division

296 A.D.2d 120

742 N.Y.S.2d 264

40 WEST 67TH STREET, Appellant,

v.DAVID PULLMAN, Respondent.

MAZZARELLI, J.P.

May 23, 2002.

John T. Van Der Tuin of counsel (Balber Pickard Battistoni Maldonado & Van Der Tuin, PC, attorneys), for appellant.

Steven Altman of counsel (Ziegler, Ziegler & Altman LLP, attorneys), for respondent.

SULLIVAN and FRIEDMAN, JJ., concur with MAZZARELLI, J.P.; SAXE and WALLACH, JJ., dissent in a separate opinion by SAXE, J.

OPINION OF THE COURT

MAZZARELLI, J.P.

In October 1998, defendant David Pullman bought a co-op apartment at 40 W. 67th Street. Plaintiff corporation owns the building, which contains 38 apartment units. Appurtenant to the proprietary lease for his apartment (7B), defendant holds 80 shares of capital stock in plaintiff corporation. Article III (first) (f) of each tenant's lease provides that the co-op may terminate a tenancy on 30 days' notice if a lessee is found to be undesirable because of "objectionable" conduct. This requires a vote of at least two thirds of the shareholders of the corporation, at a duly called meeting. At issue on appeal is the termination of Mr. Pullman's lease.

Soon after Pullman moved into his apartment, he began to make numerous requests to change the building's facilities or services. According to the affidavit of the building's managing agent, Pullman requested that the lobby mailboxes be replaced, that video camera security be installed in the building, and that 24-hour door attendants be hired. The managing agent also stated that each of Pullman's requests was considered by the board, and deemed inadvisable, for architectural, technical, financial, or other substantive reasons. Pullman also repeatedly complained and threatened to sue the co-op's managing agent and the co-op board's president for failure to abate a claimed noise problem emanating from apartment 8B, directly above Pullman. Apartment 8B had been leased for more than 20 years by a retired college professor and his wife. In the month of October 1999 alone, Pullman sent at least 16 written complaints to the co-op's managing agent about noise from this apartment.

He said that there was banging in the middle of the night from machines that were used in a commercial book binding business. Pullman also complained of a blasting stereo or television. The co-op board investigated Pullman's complaints, which it found to be unsubstantiated. Upon examination of apartment 8B, the members of the co-op board did not find a television or stereo. They also found no evidence that these tenants were involved in a book binding business or any other commercial enterprise. In an affidavit in a related action, Pullman stated that the prior lessees of his apartment had complained about the noise from apartment 8B. This was shown to be false. The former tenants of apartment 7B submitted an affidavit in one of the related lawsuits denying Pullman's assertions, and stating that in the over 40 years that they occupied the apartment, they never heard unreasonable or excessive noise coming from apartment 8B. Tension between Pullman and the apartment 8B tenants continued to build, and Pullman was apparently assaulted by the husband in an elevator. This resulted in criminal charges against the husband, which were ultimately adjourned in contemplation of dismissal.

In the year 2000, Pullman instituted four lawsuits against his upstairs neighbors and the co-op and its management. The first lawsuit was brought against the apartment 8B tenants. It is still pending and seeks money damages for the nuisance allegedly created by the noise, and for injuries resulting from the husband's assault on defendant. The second lawsuit, also against the upstairs tenants and still pending, seeks injunctive relief in the form of an order to compel them to control the noise from their apartment. The third pending action is against the co-op president. It alleges a breach of fiduciary duty for not acting to stop the upstairs tenants' alleged transgressions. The fourth action, also still continuing, was instituted against the co-op and its managing agent. It alleges a breach of lease and violation of the warranty of habitability for failing to address the noise problem. Pullman attempted to commence two other actions against the various defendants by order to show cause. However, the IAS court refused to sign the orders when presented with them.

Pullman also circulated leaflets to the other co-op shareholders. One of these, entitled "ATTACK CRIME," detailed the assault by the upstairs tenant and urged the shareholders to evict him, stating that he "has the makings of a psychopath in our midst." Another leaflet urged the ouster of the president of the co-op board for a conflict of interest. During this same period, the co-op board sent Pullman a letter stating that he was not in compliance with the terms of his lease. The letter informed Pullman that he had already violated a number of the terms of the proprietary lease by renovating his kitchen, installing soundproofing inside his windows, and employing a construction worker on a Saturday. The letter requested that Pullman either install carpeting in his bedrooms, or submit a waiver of the carpeting requirement to the board signed by his downstairs neighbors. Pullman ignored the board's requests that he "furnish a list of all renovations and redecorating to [his] apartment" from the date of his purchase of shares, and he refused to allow an inspection of his apartment.

On June 27, 2000, the shareholders held a special meeting pursuant to article I, section 1 of the corporation's bylaws. The purpose of the meeting was to determine whether Pullman's tenancy in the building was "objectionable." Pullman was notified of the meeting, but did not attend. After discussion of the issues, a supermajority, the holders of 75% of the outstanding shares in the co-op, voted in favor of a resolution detailing how Pullman's continued tenancy was objectionable, and directing the Board to terminate Pullman's proprietary lease. The vote was 2,048 shares in favor of termination, 0 opposed, and 542 shares not present and not voting. The Board delivered the notice of termination to Pullman, dated July 7, 2000, and effective August 31, 2000. Pullman ignored the notice and continued to reside in the apartment after its effective date.

In October 2000, plaintiff brought this action. The amended complaint contains five causes of action. The first and second seek ejectment and possession of the apartment. The second cause of action specifically alleges that Pullman's tenancy is "objectionable." The third cause of action is for a declaratory judgment canceling Pullman's stock. The fourth cause of action prays for a money judgment for use and occupancy from September 1, 2000. The fifth cause of action seeks reasonable attorneys' fees and costs of the litigation.

Pullman moved to dismiss the complaint for failure to state a claim (CPLR 3211 [a] [1], [7]). In opposition, plaintiff sought summary judgment pursuant to CPLR 3211 (c). The court dismissed plaintiff's first claim, denied dismissal of the remainder of the complaint, and denied plaintiff's motion for summary judgment. The court reasoned that under RPAPL 711 (1), it was the province of the court, not the co-op board, to determine whether a tenancy should be terminated based upon "objectionable" conduct. It found numerous disputed factual issues surrounding the termination of Pullman's tenancy which would require a trial. The motion court also determined that among the issues to be tried was the question of whether the eviction was retaliatory, as proscribed by Real Property Law § 223-b.

We reject Pullman's argument, adopted by the dissent, that RPAPL 711(1) requires judicial scrutiny of the basis for this tenant's ejectment. This case is governed by the holding of the Court of Appeals in Matter of Levandusky v One Fifth Ave. Apt. Corp. (75 NY2d 530, 537-538), which applied the "business judgment rule" to explicitly "prohibit[] judicial inquiry into actions of corporate directors `taken in good faith and in the exercise of honest judgment in the lawful and legitimate furtherance of corporate purposes.' (Auerbach v Bennett, 47 NY2d 619, 629, supra.)" Levandusky generally prohibits judicial scrutiny of the actions of the board of directors, and its holding insulates the determination of this co-op board from judicial review. The board's action here was premised upon the unanimous vote of a supermajority of the shareholders at a duly called meeting. It terminated the defendant's lease for breach of a provision requiring that shareholders not engage in "objectionable conduct," inimical to the welfare of the cooperative community.

The dissent argues that the Levandusky rule should not apply in this case because the defendant-tenant faces the loss of his home. However, the defendant, as did all the other shareholders, agreed to just such a sanction when he purchased shares in a cooperative. By doing so, Pullman voluntarily "agree[d] to submit to the decisionmaking authority of [the] cooperative board" (Levandusky, supra at 536). Prior to his purchase, Pullman was aware of the restrictions on his behavior and limitations on the ownership of his shares, and, nonetheless chose to buy his apartment. Pursuant to the Court of Appeals holding in Levandusky, "would-be apartment owners must generally acquiesce [to] a governing board[`s] * * * significant[] restrict[ion] [of] the bundle of rights a property owner normally enjoys" (id.). Any other result would undermine the purpose of this unique form of shareholder-lease, in which the paramount interest of the board of directors is the welfare of the "entire community of residents in an environment managed by the board for the common benefit" (id. at 537).

In Levandusky, a cooperative tenant sought to renovate his kitchen. The proposed renovation necessitated the realignment of a steam riser in the kitchen, and the...