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Weinreb v. 37 Apartments Corp.

Supreme Court of New York, First Department

May 10, 2012

Robert Weinreb, et al., Plaintiffs-Respondents,
v.
37 Apartments Corp., Defendant, Nellie Caruso, et al., Defendants-Appellants.

Defendants appeal from an order of the Supreme Court, New York County (Carol R. Edmead, J.), entered August 10, 2011, which, insofar as appealed from, denied defendants Nellie Caruso, Claudia Green, Philip Milldrum and Jonathan Morris's motion to dismiss, as against them, the fourth cause of action, for a permanent injunction.

Wolf Haldenstein Adler Freeman & Herz LLP, New York (Steven David Sladkus, Eric B. Levine and Jared E. Paioff of counsel), for appellants.

Gallet Dryer & Berkey, LLP, New York (David L. Berkey and Adam M. Felsenstein of counsel), for respondents.

David B. Saxe, J.P., John W. Sweeny, Jr., Dianne T. Renwick, Leland G. DeGrassel, Rosalyn H. Richter, JJ.

OPINION

SAXE, J.P.

This appeal concerns the parameters for allowing a shareholder of a cooperative corporation to name as defendants, in an action against the corporation, individual members of the corporation's board of directors.

On September 27, 2005, plaintiffs Robert and Champa Weinreb purchased the penthouse apartment in the residential cooperative at 37 Riverside Drive, in Manhattan. They claim that although defendants were aware that the apartment required major renovations to make it habitable, and had assured plaintiffs before the purchase that their renovation plans would be given prompt consideration, defendants have unreasonably withheld their approval for plaintiffs' planned renovations of the apartment, in violation of the provision of the proprietary lease stating that the consent of the lessor "shall not be unreasonably withheld." According to plaintiffs, in October 2005, they and the board agreed that plaintiffs would first submit a general alteration plan to the board, then seek approval from the Landmarks Preservation Commission (LPC), and thereafter submit a detailed plan to the board for its approval. In preparation for the submission to the LPC, plaintiffs retained an architect, a structural engineer, and a mechanical engineer. In July 2006, the Community Board 7 Preservation Committee approved the plan, and in September 2006, the full board of Community Board 7 approved it.

According to plaintiffs, defendant Nellie Caruso, the board's president, refused to sign their application to the LPC for nearly seven months, without providing any reason. In February 2007, the LPC approved the plan.

In April 2007, plaintiffs submitted the detailed plans for the renovations to the board. In June 2007, according to plaintiffs, the cooperative advised them that it would not approve the plan because it needed to retain its own experts to assess the plan's structural integrity, at plaintiffs' expense. Although the board retained such experts, plaintiffs allege that it "substantially delayed" the review process by withholding information from those experts, and then requiring, on three separate occasions, that additional experts be retained. Plaintiffs also claim that the experts required multiple additional submissions of information from plaintiffs such that the board did not vote on the alteration plans until June 6, 2008. Apparently, because of that delay, the LPC had to reapprove the plans and assign a new examiner, and according to plaintiffs, the board refused to sign the reapplication.

In August 2008, the board rejected plaintiffs' plans, asserting safety reasons. By January 15, 2009, the board's experts approved the safety and mechanical plans, but one week later, the board allegedly "raised four completely new issues with the mechanical plans." In February 2009, the board "listed 14 new issues with [the] renovation plans, " and plaintiffs claim that, by April 2009, the board's architect was satisfied with the manner in which those problems were addressed, but the board required plaintiffs to pay a construction consultant to assess the issues. In September 2009, this consultant furnished the board with a report of his assessment, and by letter dated September 25, 2009, notified plaintiffs of the risks that needed to be addressed, and asked plaintiffs for the pertinent plans.

By e-mail dated February 25, 2010, the board notified plaintiffs that it would not approve the plans, and cited multiple reasons for not doing so; plaintiffs responded, asking for the reports upon which the board's decision was based. The board also notified plaintiffs that if any building occupant "experience[s] undue inconvenience as a result of [the] renovation, " plaintiffs would be responsible for temporary housing costs "not to exceed $1, 000 per night."

In July 2010, plaintiffs submitted revised plans to the board, followed by submission of revised plans in September 2010, followed by a letter in support from plaintiff's structural engineer. On November 8, 2010, the board, again, rejected the plans.

In March 2011, plaintiffs commenced this action alleging four causes of action: (1) breach of proprietary lease as against the cooperative; (2) attorneys' fees under Real Property Law § 234; (3) breach of fiduciary duty by the cooperative as well as four of the nine board members: Nellie Caruso, Claudia Green, Philip Milldrum, and Jonathan Morris (individual defendants); and (4) a permanent injunction requiring the cooperative and the board to approve the alterations and sign such documents as required to effectuate the same, and prohibiting all defendants from interfering with the alterations. Plaintiffs allege that the cooperative, the board and its members have unreasonably withheld consent to alterations of the subject cooperative apartment.

There is no challenge to the propriety of the claim against the cooperative corporation based on its allegedly unreasonable withholding of consent. The only challenge was by the individual defendants, who moved, pre-answer, to dismiss the only claims seeking relief against them, the third and fourth causes of action, pursuant to CPLR 3211(a)(1) and (7), and 3016(b). Supreme Court granted the motion to the extent of dismissing the breach of fiduciary duty claim as against them, but denied the motion insofar as it pertained to the fourth cause of action, for an injunction. The ...


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