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Schultz v. 400 Cooperative Corp.

January 08, 2002

CAROL SCHULTZ, ET AL., PLAINTIFFS-RESPONDENTS,
v.
400 COOPERATIVE CORPORATION, ETC., DEFENDANT-APPELLANT.



Eugene Nardelli, J.P., Angela M. Mazzarelli, Richard T. Andrias, Betty Weinberg Ellerin, Israel Rubin, JJ.

The opinion of the court was delivered by: Rubin, J.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

(*1)

Defendant appeals from an order of the Supreme Court, New York County (Alice Schlesinger, J.), entered October 19, 2000, which, inter alia, granted plaintiffs' motion for summary judgment to the extent of declaring the proper share allocation for their cooperative unit to be 200 shares, and which denied defendant's cross motion for summary judgment dismissing the complaint.

This dispute concerns the valuation of a cooperative apartment unit, as reflected by the number of shares in defendant cooperative corporation allocated to the premises. The underlying agreements were all concluded by December 1986 and did not become an obvious point of contention until 1996, when plaintiffs sought legal redress for the alleged overvaluation of their cooperative unit. Although asserted as an action for reformation of a contract, the matter was ultimately decided on the basis of discriminatory treatment of the cooperative share owners by defendant's board of directors. This issue was introduced at an improper stage of the proceedings and never should have been considered. However, it is apparent from the findings made in the order appealed from that the asserted discriminatory treatment, even if it could be established, resulted in no prejudice to plaintiffs and is, therefore, immaterial. Plaintiffs have set forth no contractual or equitable basis for the requested relief, which, in any event, is barred by the doctrine of laches, and therefore the complaint must be dismissed for failure to state a cause of action.

In September 1985, plaintiffs Carol Schultz and Joyce Haroutunian purchased directly from defendant cooperative corporation the 250 shares allocated to unit #ID, ground-floor professional office space that plaintiffs subsequently utilized for their respective psychotherapy practices. At approximately the end of that same year, plaintiffs negotiated with defendant for the elimination of a monthly "professional fee," in the amount of $300, which they were required to pay pursuant to the terms of the contract of sale. At a meeting held April 17, 1986, (*3)the board of directors approved the allocation of an additional 75 shares to unit #1D in lieu of the payment of the monthly fee. Plaintiffs continued to occupy the premises under the negotiated arrangement for the ensuing decade or more, paying maintenance charges calculated upon the allotment of 325 shares to their unit. Eventually, as the result of the increase in maintenance charges over the years, plaintiffs' total monthly expenditures for the professional unit under the negotiated arrangement surpassed the amount that would have been payable under the original allocation of 250 shares plus the monthly professional fee mandated by the contract of sale.

Pursuant to the provisions of a letter dated December 29, 1986 from the former president of the cooperative corporation, Joel Mizerik, plaintiffs communicated their election to use their unit for dwelling purposes to the board of directors. According to the complaint, they obtained a revised certificate of occupancy "at great expense" to reflect such residential use and requested that the cooperative board "effect the appropriate downward revision of share allocation relative to apartment #1D to reflect that plaintiffs would no longer use the space professionally." This request was refused.

In June 1998, plaintiffs commenced this action for declaratory and injunctive relief. (A prior action commenced in May 1996 was dismissed as premature.) In substance, the complaint claims that the original 250-share allocation was "arbitrary and improper" and the professional fee of $300 was "redundant, excessive and arbitrary." Therefore, plaintiffs suggest that the upward revision was tainted by similar impropriety. Finally, the complaint asserts that the board's refusal to decrease the allocation of shares to the unit in return for plaintiffs' discontinuance of its use for professional purposes was improper because "there is no longer any basis for allocating a premium number of shares to apartment #1D."

By way of a motion for summary judgment, plaintiffs sought a declaration reducing the shares allocated to their unit to 100 and injunctive relief, in the nature of mandamus, directing defendant to accept plaintiffs' surrender of their stock and to reissue a new stock certificate in the reduced amount. The bulk (*4)of the moving affidavit is concerned with avoiding the application of the business judgment rule, alleging unequal treatment between plaintiffs and the owner of another unit located on the first floor. Specifically, it contests the existing allocation of shares to unit #1D in view of the 220 shares allocated to unit #1F, owned by Joel Mizerik, the former president of the cooperative board. This application was opposed by defendant, which submitted a cross motion. However, beyond seeking "summary judgment pursuant to CPLR 3212," the moving papers advance no argument why its application to dismiss the ...


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