Baker v. Latham Sparrowbush Associates

Decision Date06 December 1995
Docket NumberNo. 1585,D,1585
Citation72 F.3d 246
PartiesGloria BAKER, Plaintiff-Appellant, v. LATHAM SPARROWBUSH ASSOCIATES and Aaron Kozak, Defendants-Appellees. ocket 94-9130.
CourtU.S. Court of Appeals — Second Circuit

Leon C. Baker, Boca Raton, FL, Arthur R. Miller, Cambridge, MA, for Plaintiff-Appellant.

Michael S. Feldberg, New York City, Ira Mark Bloom, Albany Law School, Albany, NY, (Steven D. Gorelick, Schulte Roth &amp Before: VAN GRAAFEILAND, JACOBS and CABRANES, Circuit Judges.

Zabel, New York City, of counsel), for Defendants-Appellees.

VAN GRAAFEILAND, Circuit Judge:

Gloria Baker (hereafter "Gloria") appeals from a judgment of the United States District Court for the Southern District of New York (Motley, J.) which dismissed her action against Latham Sparrowbush Associates ("LSA") and Aaron Kozak.

The appeal hopefully is the final episode of an unduly lengthy and complicated litigation process involving an apartment complex known as Sparrowbush Apartments, located in Albany County, New York, and owned by LSA. LSA is a limited partnership; Aaron Kozak is its general partner. In 1968, LSA leased Sparrowbush to Shaker Estates, Inc. The lease was executed on August 28, 1968. In an apparent attempt to avoid violating the rule against perpetuities contained in section 9-1.1 of New York's Estates, Powers and Trusts Law, the written lease provided that the term of the leasehold was twenty-one years, with options for two renewals. However, the lease provided further that the term would commence on the date of its execution and end on August 31, 1989, twenty-one years and three days later. This presents an interesting question concerning the possible application of the rule against perpetuities, which, as will hereinafter appear, we are not required to answer. The lease also provided that LSA might terminate the tenancy on sixty days' notice with a payment to the tenant of $350,000.

On December 31, 1973, Cohoes Industrial Terminal ("CIT") purchased Shaker Estates' interest in the leasehold. At this point a brief description of CIT is appropriate for the light it will shed on the tortuous history of this decade-old litigation. CIT is a corporation wholly owned by Leon Baker (hereafter "Leon"). Leon is the corporation's president and attorney. Gloria, Leon's wife, is the corporation's secretary, and Leon is also her attorney. Prior to this litigation, the corporation had existed for more than twenty years without a corporate meeting. Accountable to no one except perhaps Gloria, Leon is, in effect, the corporation.

On December 26, 1984, LSA notified CIT that it was exercising its option to terminate the lease. The next day, Leon sent a letter to LSA acknowledging receipt of the notice but disputing the validity of the termination clause. In January 1985, Leon sued LSA on behalf of Gloria in New York Supreme Court, Westchester County, requesting a declaration, among other things, that the termination clause violated New York's rule against perpetuities. Because the judgment demanded in Leon's action would affect the "possession, use or enjoyment" of real property located in Albany County, his action was brought in the wrong county. N.Y.Civ.Prac. L. & R. 507 (McKinney 1994); see Moschera & Catalano, Inc. v. Advanced Structures Corp., 104 A.D.2d 306, 478 N.Y.S.2d 641 (1984) (mem.); Spellman Food Servs., Inc. v. Partrick, 90 A.D.2d 791, 455 N.Y.S.2d 398 (1982) (mem.).

On February 13, 1985, while the Westchester County action was pending, LSA sued CIT in New York Supreme Court, Albany County, seeking specific performance of the termination clause. LSA served CIT by delivering two copies of the summons and complaint to the Secretary of State pursuant to New York Business Corporation Law Sec. 306. Because CIT had not complied with its statutory duty to keep its current address on file with the New York Secretary of State's Office, it did not receive the copies of the summons and complaint that the Secretary of State mailed to CIT's former address. However, it is undisputed that, prior to the expiration of CIT's time to answer, Leon, its president and attorney, did receive copies of the summons and complaint in the Albany County action, when they were attached as an exhibit to LSA's motion to dismiss in the Westchester County action. By this time, Leon should have known that his suit was in the wrong county, and he should have either appeared in the Albany County action or sought consolidation of the two actions. Instead, he did no more than discuss various alleged deficiencies in the Albany County complaint, which LSA had included in its Westchester County motion papers. Leon On April 30, 1985, the Westchester court dismissed the action before it on the ground that Gloria, who was not a party to the lease, lacked standing. The court rejected her argument that CIT was merely her "nominee," stating that there was no credible evidence in the record to support this allegation. Baker v. Latham Sparrowbush Assocs., Index No. 1699-85 (N.Y.Sup.Ct. Apr. 30, 1985), aff'd, 129 A.D.2d 667, 514 N.Y.S.2d 426 (mem.), appeal denied, 70 N.Y.2d 606, 519 N.Y.S.2d 1030, 514 N.E.2d 388 (1987).

subsequently conceded that he made a mistake in withholding service of an answer in the Albany County action, in the belief that the service of the summons and complaint in that action was defective. In any event, CIT failed to appear in the Albany County action, and on April 19, 1985, LSA secured a default judgment directing CIT to deliver possession to LSA in return for LSA's payment of $350,000.

On May 21, 1985, the Albany County court denied CIT's motion to vacate the default judgment on the ground that Leon's supporting affidavit was deficient because it was executed by Leon as CIT's counsel rather than as a CIT officer. On appeal, the Appellate Division, Third Department, found no fault with the affidavit, because, it said, Leon had personal knowledge of the facts alleged. Latham Sparrowbush Assocs. v. Cohoes Indus. Terminal, Inc., 114 A.D.2d 584, 494 N.Y.S.2d 195 (1985). The appellate court nonetheless affirmed the denial of the motion to vacate, albeit on different grounds. It held that failure to keep a current address on file with the Secretary of State was not a reasonable excuse for a corporation seeking to vacate a default judgment under Rule 5015 of New York's Civil Practice Law and Rules. In support of its decision to affirm, the Third Department found that "defense counsel actually received a copy of the summons and complaint ... together with an affidavit of service, before the time to answer had expired." Id. In February 1986, the New York Court of Appeals denied leave to appeal. 67 N.Y.2d 736, 500 N.Y.S.2d 100, 490 N.E.2d 1226 (1986) (mem.). In March 1986, the Albany court appointed a post-judgment receiver for the apartment property.

On April 28, 1986, CIT filed a Chapter 11 petition in the United States Bankruptcy Court for the Southern District of New York, and a United States Trustee was appointed to oversee the reorganization. This begat an extended series of bankruptcy actions in the Southern District of New York. See, e.g., 62 B.R. 369, 65 B.R. 918, 69 B.R. 717, 70 B.R. 214, 75 B.R. 147, 78 B.R. 681, 103 B.R. 474, 103 B.R. 480. An examination of these decisions discloses that, whenever the claims Gloria now asserts were made, they were rejected. Thus, following the Chapter 11 filing, LSA moved to lift the automatic bankruptcy stay so that it could obtain possession of Sparrowbush. In re Cohoes Indus. Terminal, Inc., 62 B.R. 369, 371 (Bankr.S.D.N.Y.), aff'd, 70 B.R. 214 (S.D.N.Y.1986), aff'd, 831 F.2d 283 (2d Cir.1987). CIT cross-moved to have LSA and the post-judgment receiver in the Albany County action held in contempt for violating the automatic stay by attempting to enforce the state court judgment. Id. CIT argued that the state judgment was unenforceable because it was procured through a deficient notice. Separately, Gloria moved for an order directing the transfer of legal title to the leasehold from CIT to herself. She asserted ownership based on an alleged oral agreement in which CIT was designated as her "nominee."

The bankruptcy court granted LSA's motion. It rejected CIT's attack on the default judgment, because, it said, "the questions of jurisdiction and due process were litigated in the state where it was held that [CIT] had actual notice in time to defend." Id. at 376. The court also held that, because CIT's leasehold interest was terminated prior to the Chapter 11 filing, the automatic bankruptcy stay did not apply. Id. at 377. Consequently, the court allowed LSA to reacquire possession of Sparrowbush in exchange for a $350,000 payment to CIT. The bankruptcy court also denied CIT's motion for contempt sanctions and Gloria's motion for a title transfer. Id. at 377-78, 378-80.

The district court affirmed each of the bankruptcy court's holdings. It noted that "[t]he questions of jurisdiction and due process were thoroughly litigated" in the New York proceedings, which "conclusively determined Under 11 U.S.C. Sec. 362 filing a petition in bankruptcy acts as a stay of actions "to obtain possession of property of the estate...." We agree with the Bankruptcy and District Courts that the leasehold was not "property of the estate" at the time of filing because the Debtor's property interest in the leasehold had terminated prior to filing. The plain language of the lease provided that the lease ceased and ended 60 days after LSA exercised the option. The state court held that this clause was valid and it is clear that the Debtor's interest in the lease expired on February 25, 1985. The leasehold thus was not "property of the estate" at the time of filing.

                that [CIT] had actual notice of the Albany County action terminating its rights under the lease."  70 B.R. at 219.   It was in this posture that the case came to this Court.  On September 18, 1987, we affirmed in an
...

To continue reading

Request your trial
69 cases
  • Jordan v. Cnty. of Chemung
    • United States
    • U.S. District Court — Western District of New York
    • 5 Septiembre 2017
    ...of the pendency of the action and affords an opportunity to respond, the due process clause is not offended." Baker v. Latham Sparrowbush Assocs., 72 F.3d 246, 254 (2d Cir. 1995). In determining the sufficiency of a hearing, courts address:First, the private interest that will be affected b......
  • Chevron Corp.. v. Donziger, 11 Civ. 0691(LAK).
    • United States
    • U.S. District Court — Southern District of New York
    • 7 Marzo 2011
    ...of the pendency of the action and affords an opportunity to respond, the due process clause is not offended.” Baker v. Latham Sparrowbush Assocs., 72 F.3d 246, 254 (2d Cir.1995) (citations omitted). 334. The Declaratory Judgment Act does not confer federal question jurisdiction under 28 U.S......
  • Michelo v. Nat'l Collegiate Student Loan Trust 2007-2
    • United States
    • U.S. District Court — Southern District of New York
    • 11 Octubre 2019
    ...a default judgment precludes claims that could have been brought in the action resulting in default. See Baker v. Latham Sparrowbush Assocs., 72 F.3d 246, 255-56 (2d Cir. 1995) ("Inasmuch as the state court default judgment is valid, it is res judicata as to all claims and counterclaims tha......
  • Nelson v. Ulster County
    • United States
    • U.S. District Court — Northern District of New York
    • 26 Marzo 2010
    ...of the pendency of the action and affords an opportunity to respond, the due process clause is not offended.” Baker v. Latham Sparrowbush Assocs., 72 F.3d 246, 254 (2d Cir.1995) (citations omitted). Accordingly, “[a]ctual notice is an affirmative defense to a procedural due process claim” w......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT