Loch Sheldrake Beach & Tennis Inc. v. Akulich

• Decision Date: 07 July 2016
• Citation: 2016 N.Y. Slip Op. 05422,141 A.D.3d 809,36 N.Y.S.3d 525
• Parties: LOCH SHELDRAKE BEACH AND TENNIS INC., Appellant, v. Helen AKULICH, Respondent.
• Court: New York Supreme Court — Appellate Division

141 A.D.3d 809

36 N.Y.S.3d 525

2016 N.Y. Slip Op. 05422

LOCH SHELDRAKE BEACH AND TENNIS INC., Appellant,

v.Helen AKULICH, Respondent.

Supreme Court, Appellate Division, Third Department, New York.

July 7, 2016.

Drew, Davidoff & Edwards, Monticello (Alexander J. Wulwick, New York City, of counsel), for appellant.

Lisa Ornest, New York City, for respondent.

Before: GARRY, J.P., EGAN JR., LYNCH, DEVINE and MULVEY, JJ.

MULVEY

, J.

Appeal from an order of the Supreme Court (LaBuda, J.), entered October 28, 2015 in Sullivan County, which, among other things, denied plaintiff's cross motion for, among other things, summary judgment.

Plaintiff is a domestic business corporation that manages a private, seasonal bungalow community in the Town of Fallsburg, Sullivan County. Defendant is a shareholder of plaintiff and an occupant of one of the bungalows pursuant to a proprietary lease. The lease requires plaintiff's approval prior to any structural additions or alterations to a bungalow. Defendant, without seeking permission from plaintiff, extended her deck during the community's off-season. After defendant refused to remove the deck extension, plaintiff commenced this action seeking a declaratory judgment that the deck extension was in violation of plaintiff's rules and regulations, a permanent injunction directing removal of the extension and counsel fees pursuant to plaintiff's proprietary lease. Defendant answered and, among other things, set forth counterclaims for discrimination, intentional infliction of emotional distress and defamation.

Following discovery, defendant moved for leave to amend her answer to add breach of fiduciary duty as an additional counterclaim and for permission to join Carol Stock, a shareholder and occupant of one of the bungalows, as a defendant on the counterclaims or, in the alternative, to join Stock as a third-party defendant. Plaintiff cross-moved for summary judgment and dismissal of defendant's counterclaims. Supreme Court granted defendant's motion to amend her answer and to serve a third-party complaint on Stock and denied plaintiff's cross motion without prejudice, concluding that a determination on such cross motion would be premature. Plaintiff appeals.

We agree with plaintiff that Supreme Court erred in granting defendant leave to amend her answer to add breach of fiduciary duty as an additional counterclaim. Leave to amend a pleading “should be freely granted in the absence of prejudice or surprise resulting from the delay except in situations where the proposed amendment is wholly devoid of merit” (Edwards & Zuck, P.C. v. Cappelli Enters., Inc., 124 A.D.3d 181, 183, 999 N.Y.S.2d 565 [2014]

[internal quotation marks and citation omitted]; see CPLR 3025[b] ; see also

Ferran v. Williams, 281 A.D.2d 819, 820–821, 722 N.Y.S.2d 307 [2001], lv. dismissed 97 N.Y.2d 653, 737 N.Y.S.2d 53, 762 N.E.2d 931 [2001] ; Konrad v. 136 E. 64th St. Corp., 246 A.D.2d 324, 325, 667 N.Y.S.2d 354 [1998] ). To prevail on a breach of fiduciary duty claim, the cause of action must allege the existence of a fiduciary relationship, misconduct by the individual board members and damages directly caused by a board member's misconduct (see

Parekh v. Cain, 96 A.D.3d 812, 816, 948 N.Y.S.2d 72 [2012] ; Konrad v. 136 E. 64th St. Corp., 246 A.D.2d at 326, 667 N.Y.S.2d 354 ), and it must be pleaded with the requisite specificity under CPLR 3016(h) (see

Theaprin Pharms., Inc. v. Conway, 137 A.D.3d 1254, 1255, 29 N.Y.S.3d 401 [2016] ). Defendant's proposed breach of fiduciary duty counterclaim states: “Plaintiff's enforcement of the cooperative by-laws is inconsistent. This malfeasance and nonfeasance includes but is not limited to enforcement of the [bylaws],” rules governing board and shareholder meetings, and rules regarding shareholder construction projects, and that “inconsistent enforcement has led to this vindictive action against [her] and wasteful expenditures of cooperative income.” Defendant's proposed counterclaim is insufficient as a matter of law because she acknowledges that plaintiff—presumably via its board—was acting in its corporate capacity and she does not ascribe independent tortious conduct to any individual director (see Hoppe v. Board of Directors of 51–78 Owners Corp., 49 A.D.3d 477, 477, 854 N.Y.S.2d 689 [2008]

; Kravtsov v. Thwaites Terrace House Owners Corp., 267 A.D.2d 154, 155, 700 N.Y.S.2d 177 [1999] ). Even assuming that she has been singled out for harmful treatment, that treatment is not per se inconsistent with the board's role in furthering its interests (see

Matter of Levandusky v. One Fifth Ave. Apt. Corp., 75 N.Y.2d 530, 537–538, 554 N.Y.S.2d 807, 553 N.E.2d 1317 [1990] ; Consumers Union of U.S., Inc. v. State of New York, 5 N.Y.3d 327, 360, 806 N.Y.S.2d 99, 840 N.E.2d 68 [2005] ).

Next, Supreme Court should have denied defendant's motion for leave to serve a third-party complaint on Stock. CPLR 1007

provides that “a defendant may proceed against a person not a party who is or may be liable to that defendant for all or part of the plaintiff's claim against that defendant” (see

Sunbelt Rentals, Inc. v. Tempest Windows, Inc., 94 A.D.3d 1088, 1089, 943 N.Y.S.2d 197 [2012] ). The precept is that “the liability sought to be imposed upon a third-party defendant must arise from or be conditioned upon the liability asserted against the third-party plaintiff in the main action” (Zurich Ins. Co. v. White, 129 A.D.2d 388, 391, 518 N.Y.S.2d 469 [1987]

[internal quotation marks, emphasis and citation omitted] ). Here, defendant acknowledges that Stock was not a board member during the relevant time period, but attempts to hold Stock liable because Stock allegedly complained about defendant's deck extension to the local building department and to plaintiff. This allegation wholly fails to state a basis for third-party liability against Stock arising out of the claims asserted by plaintiff against defendant (see generally

Qosina Corp. v. C & N Packaging, Inc., 96 A.D.3d 1032, 1034, 948 N.Y.S.2d 308 [2012] ; Rausch v. Garland, 88 A.D.2d 1021, 1022, 451 N.Y.S.2d 913 [1982] ).

Turning to that part of plaintiff's cross motion seeking summary judgment, a moving party is entitled to summary judgment where there are no triable issues of fact and where that party makes a prima facie showing that it is entitled to a favorable determination as a matter of law (see CPLR 3212

[b]; William J. Jenack Estate Appraisers & Auctioneers, Inc. v. Rabizadeh, 22 N.Y.3d 470, 475, 982 N.Y.S.2d 813, 5 N.E.3d 976 [2013] ; Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 324, 508 N.Y.S.2d 923, 501 N.E.2d 572 [1986] ; Andre v. Pomeroy, 35 N.Y.2d 361, 364, 362 N.Y.S.2d 131, 320 N.E.2d 853 [1974] ). The decisions and actions of a residential cooperative board are reviewed under the business judgment rule, “[s]o long as the board acts for the purposes of the cooperative, within the scope of its authority and in good faith” (Matter of Levandusky v. One Fifth Ave. Apt. Corp., 75 N.Y.2d at 537–538, 554 N.Y.S.2d 807, 553 N.E.2d 1317; see

40 W. 67th St. v. Pullman, 100 N.Y.2d 147, 153–154, 760 N.Y.S.2d 745, 790 N.E.2d 1174 [2003] ; Walden Woods Homeowners' Assn. v. Friedman, 36 A.D.3d 691, 692, 828 N.Y.S.2d 188 [2007] ).

In order for plaintiff to succeed on its cause of action for a declaratory judgment and issuance of a permanent injunction to require defendant to remove her deck extension, plaintiff must demonstrate that the deck extension was unauthorized in violation of the parties' previous agreement, and that the action by plaintiff was authorized, made in good faith and in furtherance of its legitimate interests (see Walden Woods Homeowners' Assn. v. Friedman, 36 A.D.3d at 692, 828 N.Y.S.2d 188

; Matter of Renauto v. Board of Directors of Valimar Homeowners Assn., Inc., 23 A.D.3d 564, 564, 806 N.Y.S.2d 656 [2005] ; Hidden Ridge At Kutsher's Country Club Homeowner's Assn. v. Chasin, 289 A.D.2d 652, 654, 734 N.Y.S.2d 292 [2001] ; see generally

40 W. 67th St. v. Pullman, 100 N.Y.2d at 155–157, 760 N.Y.S.2d 745, 790 N.E.2d 1174 ). To that end, plaintiff submitted, among other things, its proprietary lease, which states that a shareholder “shall not, without the written consent of [plaintiff], make any structural additions to or alterations in the premises.” Additionally submitted were excerpts from plaintiff's shareholder's handbook, which refers to deck alterations as “large scale” projects and states that shareholders “must get permission from the board before beginning any exterior alterations and additions, including but not limited to: room/deck additions ... [or] new decks.” Indeed, it was within plaintiff's scope of authority (via its board) to approve such renovations pursuant to its proprietary lease and shareholder's handbook since plaintiff's board has an obligation “to promote the health, happiness, and peace of mind of the majority of the unit owners” (Hidden Ridge At Kutsher's Country Club Homeowner's Assn. v. Chasin, 289 A.D.2d at 654, 734 N.Y.S.2d 292

[internal quotation marks and citation omitted] ), and the record demonstrates that plaintiff's community values uniformity and that plaintiff's legal action is in furtherance of that goal (see

Matter of Levandusky v. One Fifth Ave. Apt. Corp., 75 N.Y.2d at 538, 554 N.Y.S.2d 807, 553 N.E.2d 1317; Martino v. Board of Mgrs. of Heron Pointe on Beach Condominium, 6 A.D.3d 505, 506, 774 N.Y.S.2d 422 [2004] ). There is no dispute that defendant extended her deck by approximately three feet without first obtaining the requisite approval from plaintiff and then refused plaintiff's request to remove the offending portion of her deck.

As plaintiff established its entitlement to summary judgment, the burden then shifted to defendant to submit evidence in admissible form showing the existence of any material issue of fact (see Forest Hills Gardens Corp. v. Evan, 12 A.D.3d 563, 564, 786 N.Y.S.2d 70 [2004]

; see generally

O'Brien v. Couch, 124 A.D.3d 975, 976, 1 N.Y.S.3d 485 [201...