Frymer v. Bell

• Decision Date: 14 February 1984
• Parties: Elyse FRYMER, Coleman Blumfield and Ranita Blumfield, Plaintiffs-Appellants, v. Richard BELL, Richard Giordano, Jenny Kline, individually and as members of the Board of Directors of 107 West Apartment Corporation and 107 West Apartment Corporation, Defendants-Respondents.
• Court: New York Supreme Court — Appellate Division

Page 622

472 N.Y.S.2d 622

99 A.D.2d 91

Elyse FRYMER, Coleman Blumfield and Ranita Blumfield, Plaintiffs-Appellants, v. Richard BELL, Richard Giordano, Jenny Kline, individually and as members of the Board of Directors of 107

West Apartment Corporation and 107 West

Apartment Corporation,

Defendants-Respondents.

Supreme Court, Appellate Division,

First Department.

Feb. 14, 1984.

Reid L. Ashinoff, New York City, of counsel (Samuel Goldman, New York City, with him on the brief, Wilner, Ross, d'Incelli, Goldman & Ashinoff, New York City, attorneys), for plaintiffs-appellants.

Karen Shatzkin, New York City, of counsel (Kornstein, Meister & Veisz, New York City, attorneys), for defendants-respondents.

Before SANDLER, J.P., and BLOOM, FEIN, MILONAS and KASSAL, JJ.

FEIN, Justice.

Plaintiff, Elyse Frymer, a tenant of long standing at 245 West 107th Street in Manhattan, exercised her option to purchase a proprietary lease for her apartment in connection with the building's plan for cooperative conversion. In addition, after private negotiation with a long-standing fellow tenant, Mrs. Kutt, Frymer sought to purchase Kutt's proprietary lease so that the Kutt apartment could be used by Frymer's grandchildren. This latter transaction is at issue here.

The terms of the agreement between the two tenants were that Frymer would pay Kutt the $16,099.68 insider's purchase price, including the $1,000 down payment, plus $3,000. On April 4, 1980 these tenants signed a form contract prepared by Frymer's attorney, memorializing this agreement, which basically conformed with a handwritten binder signed by Kutt five weeks earlier.

The cooperative conversion plan became effective on April 15, at which time Kutt assigned her proprietary lease to Frymer in accordance with the terms of their contract. The closing took place notwithstanding a clause subjecting performance of this contract to approval by the cooperative corporation's directors or shareholders. Approval could not be obtained at the time of the closing because the cooperative did not get around to electing a Board of Directors and holding its first meeting until May 20, five weeks after the closing and the effective date of the cooperative conversion.

Ten months later, on March 31, 1981, the Board disapproved the transfer of the apartment from Kutt to Frymer. The record reveals that even though Board members had confidentially informed Frymer that approval would be forthcoming, the five-member Board unanimously disapproved because Frymer had failed to remit to the corporation a "transfer tax" on "resale" of shares in the cooperative, in the nature of an "additional fee", somewhat in excess of $8,000. Although the evidence is to the contrary, a majority of the Board asserted that even if this illegal tax had been paid, they would have disapproved Frymer's purchase because of illegal subletting to her grandchildren, delay in submitting the application, and unauthorized alterations to the premises.

In this action for specific performance and declaratory and injunctive relief to preserve Frymer's rights in the former Kutt apartment, Trial Term ruled that the Board's decision, "regardless of how illogical or irrational", must be upheld insofar as it is not proscribed by law. Trial Term properly found the Board's calculation of the transfer tax to be inconsistent with the terms of the cooperative conversion offering plan, as amended, and thus illegal. The plan provided for this "additional fee" to be based upon 20% of the difference (after deduction for commissions and expenses) between

"the price set forth in the subscription agreement executed by the seller upon his original acquisition of the shares and proprietary lease to be transferred and the resale price set forth in the executed contract of sale between such seller and the purchaser".

The price actually paid by Kutt for the original acquisition of the proprietary lease under the terms of the subscription agreement was $3,000 less than her resale price to Frymer. Thus, the "additional fee" should have been no more than 20% of that profit margin, or $600. Moreover, under the terms of the offering plan, this amount should have been paid by Kutt, the seller. Instead, without any authority for doing so, the Board set the transfer tax as 20% of the difference between the prospectus price and the "market value" of the apartment, which it arbitrarily fixed at 3.75 times the prospectus price. There was no competent evidence of "market value", and there was no lawful basis for its use. The Board's calculation would require an additional fee of $8,854.82, an illegal exaction. Trial Term was correct in finding no basis in fact for such an assessment.

However, Trial Term found the balance of the Board's decision, grounded on "other reasons, whether valid or not, ... whether rational or not," to be sufficient on which to base rejection of the application. Among these reasons were that Frymer had proceeded to make repairs to the apartment in question without strictly complying with the rules of the building's construction committee, and that she had sublet the premises to her grandchildren without prior approval of the Board.

As to the repairs, the chairman of the construction committee conceded in testimony that these were not major alterations such as would require written prior approval under the guidelines. Those guidelines specify that for "minor alterations" no formal application or review by the Board would be necessary. The Board's only interest in such repairs might be to require the tenant to submit "a standard form releasing the Board from any legal responsibility for the consequences of the alteration." The trial judge made it clear during trial that defendants simply had not made out a case that Frymer had failed to comply with the rules and guidelines on alterations. On the record it is plain that no violation of these guidelines was proved and thus this could not have been a valid reason for denying the application for the transfer.

To the extent that the trial court relied upon this as one of the grounds for disapproval, the court's conclusion is without sufficient basis in the record. The court's comments on the trial so indicate. Any such finding is plainly against the weight of the evidence.

The court found, as a fact, amply supported by the record, that the Board members knew of the need for the repairs plaintiff contemplated and that she was actually engaged in making such repairs to the apartment, that she was paying maintenance on that apartment, that Kutt had moved out and that Frymer had arranged to purchase the interest of Kutt in the apartment. Approval of this was indicated by Board members. The court further found that at no time was Frymer advised by any member of the Board that she ran the risk of having the Board disapprove her application and that therefore she was incurring expenditures she was making on repairs at her own risk.

The record demonstrates Frymer was assured there was no problem respecting approval, and that only when she refused to pay the illegal tax was approval withheld.

The trial court concluded that the Board could reject the application unless it was equitably estopped from doing so on the basis of its own conduct. However, the court ruled that Frymer could not avail herself of equitable estoppel because she...