Caprer v. Nussbaum

• Citation: 2006 NY Slip Op 07443,825 N.Y.S.2d 55,36 A.D.3d 176
• Decision Date: 17 October 2006
• Docket Number: 2004-02694.
• Parties: FLORENTA CAPRER et al., Appellants, v. RICHARD NUSSBAUM et al., Respondents.
• Court: New York Supreme Court Appellate Division

36 A.D.3d 176

825 N.Y.S.2d 55

2006 NY Slip Op 07443

FLORENTA CAPRER et al., Appellants, v. RICHARD NUSSBAUM et al., Respondents.

2004-02694.

Appellate Division of the Supreme Court of the State of New York, Second Department.

October 17, 2006.

Shelley Thompson, Sunnyside, for appellants.

Silverman Perlstein & Acampora, LLP, New York City (Robert J. Ansell of counsel), for Richard Nussbaum and others, respondents.

Perez, Furey & Varvaro, Uniondale (Keith J. Frank of counsel), for Michael Kondrat, respondent.

OPINION OF THE COURT

SPOLZINO, J.

This appeal presents several significant issues of apparent first impression with respect to the relationship between condominium unit owners, on the one hand, and the sponsor and other parties involved in the conversion and operation of the condominium, on the other. It requires that we decide, principally, three questions:

(1) Does the owner of a condominium unit have standing to sue to recover damages for a wrong to the condominium, either individually, based upon the alleged harm to his or her individual interest in the common elements and finances of the condominium, or derivatively, on behalf of the condominium?

(2) Does the managing agent of the condominium or its accountant owe a fiduciary duty to the owners of the condominium units?

(3) May a unit owner bring an action against the condominium's accountant for professional negligence in connection with the accounting services provided to the condominium?

In addition, we must determine whether the Supreme Court correctly dismissed the plaintiffs' claims sounding in breach of contract, fraud, and tortious interference with prospective economic advantage.

Background

These issues arise in the context of an action brought by the owners of several units in the Royal Kent Condominium (hereinafter the condominium), which is located in Sunnyside, Queens. In 1987 the building, which had previously been composed of rental units owned by the defendant Morjay Realty Corporation (hereinafter the owner), was converted into a condominium pursuant to a conversion sponsored by the defendant Morjay Realty Company, LLC (hereinafter the sponsor). The defendants Richard Nussbaum and Eric Nussbaum (hereinafter the Nussbaums) are the principals of the sponsor.

Upon the conversion, the Nussbaums became members of the condominium's board of managers, as did the defendant Michael Kondrat, who was a nonresident unit owner. (The Nussbaums and Kondrat, when referred to together, will hereinafter be identified as the board-member defendants. Where appropriate, the board-member defendants, together with the owner and the sponsor, will hereinafter be referred to collectively as the condominium defendants.) The Nussbaums also allegedly own and operate the defendants Nussbaum Management Corporation, Nussbaum Realty Corporation, and DHN Management, Inc. (hereinafter collectively referred to as the managing agent defendants), each of which has acted as the managing agent of the condominium at various times since the conversion. The defendants Nussbaum Realty Company, LLC, and Nussbaum Associates Company, LLC (hereinafter collectively referred to as the unrelated Nussbaum entities) are other entities allegedly owned and controlled by the Nussbaums. The defendant Gould, and the firm in which he is a principal—the defendant Glickman & Gould, LLP (hereinafter collectively referred to as the accountants)—performed accounting services for the condominium.

Of the nine causes of action, six are brought individually by the plaintiffs and three are brought derivatively on behalf of the condominium. Individually, the plaintiffs allege causes of action sounding in breach of contract, tortious interference with prospective economic advantage, fraud, and breach of fiduciary duty. As against the accountants, the plaintiffs individually allege intentional, negligent, or reckless failure to report the condominium's financial status accurately, as well as fraud. Derivatively, on behalf of the condominium, the plaintiffs assert causes of action against the condominium defendants alleging breach of fiduciary duty, against the condominium defendants and managing agent defendants alleging waste and gross mismanagement of condominium property, and against the accountants alleging professional negligence.

When one of the plaintiffs, Florenta Caprer, moved for a preliminary injunction to, among other things, prohibit the defendants from spending condominium funds for other than certain purposes during the pendency of this action, all of the defendants collectively cross-moved for summary judgment dismissing the amended complaint. The Supreme Court denied the motion for injunctive relief and granted the cross motion for summary judgment in most respects, allowing to stand only so much of the first cause of action as alleged a breach of contract by the sponsor and so much of the fourth cause of action as alleged a breach of fiduciary duty by the board-member defendants. All of the remaining causes of action asserted in the complaint were dismissed. The plaintiffs appeal from so much of the order as granted, in part, the defendants' cross motion for summary judgment.

Capacity and Standing to Sue

The cross motion for summary judgment first asserted that the plaintiffs were without capacity and standing to bring this action. Although related, these are distinct concepts (see Silver v Pataki, 96 NY2d 532, 537 [2001]). Capacity "is a threshold question involving the authority of a litigant to present a grievance for judicial review" (Matter of Town of Riverhead v New York State Bd. of Real Prop. Servs., 5 NY3d 36, 41; see Community Bd. 7 of Borough of Manhattan v Schaffer, 84 NY2d 148, 155 [1994]). Standing to sue requires an interest in the claim at issue in the lawsuit that the law will recognize as a sufficient predicate for determining the issue at the litigant's request (see New York State Assn. of Nurse Anesthetists v Novello, 2 NY3d 207, 211 [2004]). "Without both capacity and standing, a party lacks authority to sue" (Matter of Graziano v County of Albany, 3 NY3d 475, 479 [2004]).

Because the plaintiffs here are natural persons, there is no doubt that they have capacity to sue and be sued as individuals. Hence, the relevant inquiry with respect to the claims they assert individually is whether their status in relation to each asserted claim permits them to present some or all of their grievances for judicial review. The issue in that regard is, therefore, one of standing. By contrast, the ability of the plaintiffs to assert claims derivatively, i.e., as persons acting on behalf of the condominium as a result of their respective interests in the common elements, depends upon whether the plaintiffs have "authority to sue" on that basis (Silver v Pataki, supra at 537). The issue in that regard is thus one of capacity.

A. Standing to Assert Individual Claims

A plaintiff generally has standing only to assert claims on behalf of himself or herself. Although there are situations in which representative or organizational standing is permitted (see CPLR 1004; Rudder v Pataki, 93 NY2d 273, 278 [1999]; Matter of Dairylea Coop. v Walkley, 38 NY2d 6, 9 [1975]), one does not, as a general rule, have standing to assert claims on behalf of another (see Society of Plastics Indus. v County of Suffolk, 77 NY2d 761, 773 [1991]; Matter of Hebel v West, 25 AD3d 172, 175 [2005]). As explained by the Court of Appeals:

"Whether a person seeking relief is a proper party to request an adjudication is an aspect of justiciability which, when challenged, must be considered at the outset of any litigation (Matter of Dairylea Coop. v Walkley, 38 NY2d 6, 9). Standing is a threshold determination, resting in part on policy considerations, that a person should be allowed access to the courts to adjudicate the merits of a particular dispute that satisfies the other justiciability criteria (see, Comment, Standing of Third Parties to Challenge Administrative Agency Actions, 76 Cal L Rev 1061, 1067-1068 [1988]; see also, Warth v Seldin, 422 US 490, 498)" (Society of Plastics Indus. v County of Suffolk, supra at 769).

The Court of Appeals has defined the standard by which standing is measured, explaining that a plaintiff, in order to have standing in a particular dispute, must demonstrate an injury in fact that falls within the relevant zone of interests sought to be protected by law (see Matter of Fritz v Huntington Hosp., 39 NY2d 339, 346 [1976]). Specifically, this familiar two-part test requires a plaintiff first to establish that he or she will actually be harmed by the challenged action, and that the injury is more than conjectural. Second, the injury a plaintiff asserts must fall within the zone of interests or concerns sought to be promoted or protected by the statutory provision or recognized common-law relationship pursuant to which a defendant has acted (see New York State Assn. of Nurse Anesthetists v Novello, supra at 211; Mahoney v Pataki, 98 NY2d 45, 52 [2002]; Society of Plastics Indus. v County of Suffolk, 77 NY2d 761, 773 [1991]; Matter of Colella v Board of Assessors of County of Nassau, 95 NY2d 401, 409-410 [2000]; Gifford v Guilderland Lodge, No. 2480, B.P.O.E., 272 AD2d 721, 723 [2000]).

The individual claims asserted by the plaintiffs here arise out of the plaintiffs' interest in the common elements of the condominium. Condominium ownership is a hybrid form of real property, created by statute (see Real Property Law art 9-B [§ 339-d et seq.] [hereinafter the Condominium Act]). Pursuant to the Condominium Act, each owner holds a real property interest in his or her unit and its appurtenances (see Real Property Law § 339-g), which consists of an exclusive possessory interest in the unit (see Real Property Law § 339-h) and an undivided interest in the common elements of the condominium (see Real Property Law § 339-i; Murphy v State of New York, 14 AD3d 127, 132-133 [20...