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Cornelia Sharpe Bregman v. 111 Tenants Corp

May 3, 2012

CORNELIA SHARPE BREGMAN,
PLAINTIFF-APPELLANT,
v.
111 TENANTS CORP.,
DEFENDANT-RESPONDENT.



Plaintiff appeals from an order of the Supreme Court, New York County (Joan A. Madden, J.), entered January 31, 2011, which granted defendant-owner's cross motion for summary judgment dismissing the complaint, and denied, as moot, plaintiff-shareholder's motion for leave to amend the complaint.

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

Bregman v 111 Tenants Corp.

Saxe, J., J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

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

Decided on May 3, 2012

Luis A. Gonzalez,P.J. David B. Saxe Karla Moskowitz Rolando T. Acosta Helen E. Freedman, JJ.

Index

This appeal challenges the enactment and enforcement of a resolution adopted by the board of directors of defendant, a residential cooperative corporation. The resolution prohibits the subleasing, without board approval, of a shareholder's apartment for more than two years in any four-year period, and institutes sublet fees. Plaintiff, who has owned the shares to two apartments in the building since its conversion to cooperative ownership in 1972, and who has subleased both apartments for virtually the entire time, contends that although the language of the resolution appears to apply to all shareholders, in fact she is its sole target. She also claims that in the course of purportedly enforcing the terms of this resolution, defendant and its managing agent have taken steps not justified either by the terms of that resolution or by any other authority, abusing their discretion and breaching their fiduciary duty toward her as a shareholder.

Plaintiff asserts that in 1972, when she was a tenant residing in apartment 6C at 111 East 75th Street, then a rent-controlled residential apartment building, the owners of the building sought to convert it to cooperative ownership. She states that because they had received an insufficient number of subscriptions to qualify for the conversion, a man named Paul Green, a principal of the group of investors that owned the building, approached her and asked her to purchase not only the apartment in which she then resided, but also another unit, penthouse apartment 10A. Recognizing that she would need to sublease at least one and possibly both of those apartments, she claims that she obtained an agreement giving her "full, unconditional and perpetual sublet rights to both Apartments" before agreeing to purchase them. With that assurance, she says, she purchased both cooperative apartments.

However, plaintiff's professed understanding that she would have "full, unconditional and perpetual sublet rights" is not reflected in any of the formal documents that she signed. The proprietary leases executed by plaintiff contain an explicit provision requiring board authorization for subletting: "[T]he Lessee shall not sublet the whole or any part of the apartment or renew or extend any previously authorized sublease, unless consent thereto shall have been duly authorized by a resolution of the Directors . . . Any consent to subletting may be subject to such conditions as the Directors . . . may impose. There shall be no limitation on the right of Directors . . . to grant or withhold consent, for any reason or for no reason, to a subletting."

Indeed, a document signed by plaintiff, by Paul Green for the owners and by Stanley Weller for the sponsor, in connection with plaintiff's purchase of the two apartments, specifically addressed plaintiff's circumstances, and fails to support plaintiff's claim of unfettered sublet rights. That document, bearing the date of April 14, 1972, acknowledges that plaintiff "shall be permitted to sublet her apartments provided the consent of the Board . . . is obtained" (emphasis added), and further provides that "[t]he owners will use their best efforts to have the Board . . . not unreasonably withhold their consent to subletting by [plaintiff]." But it does not contain a provision altering or diminishing in any way the board's right to grant or withhold its consent.

An exchange of correspondence from that time indicates that the terms of the foregoing document were negotiated, and that the owners explicitly rejected proposed language that would have required that the board of directors not unreasonably withhold its consent to plaintiff's subletting her apartments. First, a letter from the owners to the sponsor's cooperative coordinator, dated May 1, 1972, recited that it was returning plaintiff's checks and her attorney's letter, and explained that since the proprietary leases did not provide that board consent may not be unreasonably withheld, and since the owners could not bind the future board of directors, the owners would not agree to the inclusion of language providing that the Board's consent "shall not unreasonably be withheld." The letter added that "[t]he only thing we can do is to have the owners agree that if they are members of the Board they will not unreasonably withhold their consent." A second letter, dated June 1, 1972, from the sponsor's cooperative coordinator to plaintiff's attorney, confirmed plaintiff's purchase of the apartments, and documented that plaintiff's lawyer had agreed to the final form of the agreement in which the phrase "which consent shall not unreasonably be withheld" was deleted, and added instead was the language, "the owners will use their best efforts to have the Board of Directors not unreasonably withhold their consent to subletting by [plaintiff]."

As a result of this negotiation, the final signed document, purportedly dated April 14, 1972, did not contain any language promising that the board would not unreasonably withhold its consent to sublets, let alone any language that plaintiff would have an unfettered right to sublease the apartments she was purchasing. It merely recited that the owners would "use their best efforts to ...


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