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WEST 14TH ST. COMMER. CORP. v. 5 WEST 14TH OWNERS

January 13, 1986

WEST 14TH STREET COMMERCIAL CORP., WEST 14TH STREET GARAGE CORP. and WEST 14TH STREET LAUNDRY CORP., Plaintiffs,
v.
5 WEST 14TH OWNERS CORP., Defendant



The opinion of the court was delivered by: KNAPP

MEMORANDUM AND ORDER

WHITMAN KNAPP, D.J.

 Three separate but related corporations, West 14th Street Commercial Corporation, West 14th Street Garage Corporation and West 14th Street Laundry Corporation ("plaintiffs"), invoking our jurisdiction to interpret federal status, bring this action to enjoin defendant 5 West 14th Street Owners Corporation ("14th Street Corporation") from terminating certain contracts and leases. Now before us are cross motions for summary judgment and defendant's motion to dismiss the complaint. For reasons which follow, we grant plaintiff's motion for summary judgment. *fn1"

 The Parties

 Defendant 14th Street Corporation is the cooperative owner of a 429 unit apartment house situated on the corner of Fifth Avenue and 14th Street in Manhattan. Its stockholders include persons owning about 85 percent of the building's units who purchases shares of capital stock and received propriety leases when the building was converted to cooperative status on September 6, 1984. The occupants of the remaining units, having declined to purchase cooperative shares, remain as tenants under statutory leases protected by New York City's rent stabilization laws.

 Each of the three plaintiff corporations is party to a lease or contract with defendant dated September 6, 1984. West 14th Street Commercial Corporation has a contract which, for a specified annual payment, authorized it to lease to the public at any price it can obtain space for four stores on the building's ground floor. This lease is for a term of 20 years with an option to renew for another 20 years. West 14th Street Garage Corporation has a similar 20 year renewable lease authorizing it to operate a parking garage in the building. West 14th Street Laundry Corporation has a 15 year concession to provide and service washing machines and dryers for the use of building residents.

 The defendant and each of the plaintiff corporations were created by Parker 14th Associates ("Parker" or "sponsor"), the original owner and builder of the apartment house, for the purpose of effectuating its conversion from rental to cooperative status. *fn2"

 The Conversion

 The entire process of converting the building from rental to cooperative status lasted from the spring of 1982, when the four mentioned corporations were created, to September 6, 1984, when defendant 14th Street Corporation received title to the building and issued shares of its capital stock and proprietary leases to purchasing tenants. Conversion was effected pursuant to applicable provisions of the Martin Act, New York General Business Law §§ 352-e et seq. (McKinney 1984), which governs all cooperative conversions in New York City.

 A brief description of the Martin Act's comprehensive regulation of the conversion process will aid understanding of the facts in this case. The statute was enacted for the protection of "tenants in possession who do not desire or who are unable to purchase the units in which they reside from being coerced into vacating such units by reason of deterioration of services or otherwise into purchasing such units under the threat of immediate eviction." Legislative Findings, 1982 N.Y. Laws § 1, ch. 555. Particular protection is granted to persons sixty two years of age and older. Thus, the legislature found (Ibid.):

 that in the City of New York the position of non-purchasing tenants who are sixty-two years of age or older is particularly precarious by reason of the limited financial resources of many such persons and the physical limitations of many such persons; that preventive action by the legislature in restricting rents and evictions during the process of conversion from rental to cooperative or condominium status is imperative to assure that such conversions will not result in unjust, reasonable and oppressive rents and rental agreements affecting non- purchasing tenants especially those who are sixty-two years of age or older, and other disreptive practices affecting all tenants during the conversion process which threaten the public health, safety and general welfare....

 To address these issues, the statute provides two avenues by which an owner (such as Parker) can convert a building. The first, known as an "eviction plan", authorizes the conversion sponsor to convert the building and then cancel the leases of an force out non-purchasing tenants. At the time Parker was first comtemplating conversion, that avenue required that the sponsor, as a condition percedent to declaring the plan effective, obtain from tenants written commitments for the purchase of 35 percent of the units in the building. *fn3" The second method, called a "non-eviction plan", reduces the required number of purchase commitments to 15 percent but imposes on the sponsor the obligation to honor the lease of any tenant who does not wish to purchase but elects to continue renting. *fn4"

 The statute extends particular protections to senior citizens and disabled persons. Senior citizens are all persons over the age of 62 and their spouses. N.Y. Gen. Bus. Law § 352-eeee(1)(f). Disabled persons are those with a physical or psychological condition which prevents them from working and their spouses. § 352-eeee(1)(g). The statute mandates that any such person who elects within a given time not to purchase may not be evicted (even pursuant to an eviction plant). § 352-eeee(d)(iii). In addition, the statute continues the applicability of any governmental regulation such as rent control or rent stabilization laws in effect at the time of conversion, § 352-eeee(d)(iv), and directs that tenants who leases are not so protected may not be charged rent increases above those charged for apartments in buildings with comparable services. § 352-eeee(d)(iii). *fn5"

 Parker's original intention was to avail itself of the provisions for an "eviction plan". It thus would have been required to obtain commitments for the purchase of 35 percent of the units in the building and would have been entitled to evict those who did not buy (except, of course, non-purchasing elderly or disabled tenants).

 Upon learning of Parker's intention, the tenants immediately organized an association called the Tenants Unity Group ("Unity Group") to present Parker with a united front in the contemplated negotiations. Unity Group's purposes, set forth in its Articles of Association, were disseminate to tenants information about the conversion, to hire lawyers and expert consultants, and "to secure unified action in advancing the common interests of its members."

 Unity Group's first significant action was to persuade 65 percent of the tenants to enter into a "no-buy pledge" contract committing them to refrain from purchasing any apartment under an eviction plan. *fn6" Upon learning of this ...


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