Jones v. Surrey Co-op. Apartments, Inc.
| Decision Date | 09 December 1999 |
| Citation | 700 N.Y.S.2d 118,263 A.D.2d 33 |
| Parties | 1999 N.Y. Slip Op. 10,341 Diane Myers JONES, Plaintiff-Respondent, v. SURREY COOPERATIVE APARTMENTS, INC., Defendant-Appellant. |
| Court | New York Supreme Court — Appellate Division |
Edith Blumberg, attorney for plaintiff-respondent.
Kenneth H. Amorello, of counsel (Schechter & Brucker, P.C., attorneys) for defendant-appellant.
JOSEPH P. SULLIVAN, J.P., EUGENE NARDELLI, RICHARD W. WALLACH, RICHARD T. ANDRIAS and JOHN T. BUCKLEY, JJ.
SULLIVAN, J.P.
At issue is a tenant shareholder's challenge to the fairness of a cooperative corporation's exercise, upon termination of her tenancy, of an option contained in the corporation's by-laws to repurchase the tenant's shares at book value. Plaintiff seeks to recover from the defendant cooperative corporation the market value of the 198 shares allocated to the apartment and a satisfaction of a monetary award in the sum of $5,375.89 obtained by the cooperative in a summary eviction proceeding.
On November 9, 1988, plaintiff, represented by counsel, purchased, for $45,000, the 198 shares allocated to the apartment in question and executed an occupancy agreement, as well as a "Purchaser's Acknowledgment and Assumption Agreement (acknowledgment agreement)", both of which, at Article 8 and paragraph 5, respectively, informed the tenant that transfer of the cooperative corporation's shares was subject to restrictions contained in the corporation's by-laws.
Insofar as is relevant, Article 3, section 9, of the by-laws, entitled, "Termination of Membership for Cause", provides, The "transfer value" is defined in Article 3, section 8(d) as the "sum" of the following:
1. The consideration (i.e. purchase price) paid for the stock by the first occupant of the unit involved as shown on the books of the [c]orporation;
2. The value, as determined by the [d]irectors of any improvements installed at the expense of the member with the prior approval of the [d]irectors, under a valuation formula which does not provide for the reimbursement in an amount in excess of the typical initial cost of the improvements; and
3. The amount of principal amortized by the [c]orporation on its mortgage indebtedness and attributable to the dwelling unit involved as paid by the member involved and previous holders of the stock representing the same apartment.
Paragraph 5 of the acknowledgment agreement provides, "Any sale of my stock in the [c]orporation will only be made by me in conformity with the by-laws of the [c]orporation or the terms of the [c]orporation's [r]esale [p]olicy as the same may, from time to time, be amended and as the same shall then be in force and effect." Similarly, Article 8 of the occupancy agreement, entitled "Transfers", provides, "Neither this agreement nor the [m]ember's right of occupancy shall be transferrable or assignable except in the same manner as may now or hereafter be provided for the transfer of membership in the [b]y-[l]aws of the [c]orporation".
On or about August 2, 1992, the corporation served plaintiff with a three-day notice based on her failure to pay maintenance and thereafter, on or about August 24, 1992, commenced a summary non-payment proceeding. After plaintiff failed to comply with a so-ordered stipulation of settlement in Civil Court, a judgment of possession and maintenance arrears in the sum of $5,375.89 was entered in the cooperative's favor. On February 19, 1993, plaintiff's occupancy agreement was terminated upon the execution of a warrant of eviction. In a subsequent March 1, 1993 order, the Civil Court found that plaintiff owed $8,037.00 in maintenance charges through March 1993, as well as other charges, including Marshal and attorney fees, for a total indebtedness of $10,282.00.
On March 15, 1993, the cooperative served plaintiff with a "Notice of Election to Exercise Option (notice of election)", informing her that, pursuant to Article 3 of the by-laws, it elected to repurchase her shares for their book value, which was subsequently determined by the cooperative's accountants as $5,149.40. The corporation offset this sum against its $5,375.89 judgment against plaintiff.
Plaintiff commenced this action on or about March 5, 1996, asserting three causes of action, all revolving around the alleged inequity and unenforceability of the repurchase option, which, specifically, she alleges, allows the cooperative to be selective and arbitrary in determining which of the departing tenants should be paid market, as opposed to book, value. She also alleges that the cooperative failed to provide adequate notice of the option, which, if exercised, would subject her to financial loss. The complaint makes no specific allegation of fraud, bad faith or self-dealing. The cooperative interposed a general denial and asserted four affirmative defenses, including, in light of plaintiff's invocation of equitable principles in her complaint, her manipulation of the court system in obtaining stays based on commitments, all dishonored, to pay maintenance arrears, as well as counterclaims.
The cooperative thereafter moved for summary judgment dismissing the complaint, submitting, in its moving papers, the affidavit of the president of the cooperative's board of directors and the acknowledgment and occupancy agreements, both executed by plaintiff, represented by counsel, at the closing when she purchased the shares to her apartment, the by-laws and notice of exercise of the repurchase option. In opposing the motion, plaintiff argued...
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