THE BOARD OF MANAGERS OF LIDO BEACH TOWERS CONDOMINIUM, SUING ON BEHALF OF THE UNIT OWNERS, Plaintiffs,
v.
BERNARD GARTENLAUB, Defendant.
015217/09.
Supreme Court, Nassau County.
Decided April 8, 2010.
Tara A. Tighe, Esq., Stark & Stark, 5 Penn Plaza, Ste. 1966, New York, NY 10001, Attorney for Plaintiff.
DANIEL PALMIERI, J.
That branch of the motion by the plaintiff pursuant to CPLR 3212 for summary judgment on its complaint is granted to the extent that judgment may be had on its first cause of action in the amount of $90,135.49, with attorney's fees as may be awarded at an inquest, to be held under the terms of this order. Should plaintiff elect to waive such fees, judgment on notice to defendant may be submitted to the Court, for the amount stated. That branch of the motion that is for summary judgment dismissing the defendant's counterclaim is granted and the counterclaim is dismissed.
This is a dispute between the plaintiff Board of Managers ("Board") of a condominium and a unit owner regarding past-due common charges and assessments. The plaintiff moves for summary judgment, and to dismiss all affirmative defenses and a counterclaim.
At the outset, the plaintiff has provided proof, and the defendant pro se does not dispute, the correctness of the figures presented regarding the amounts owed and not paid by the defendant (which include interest and "legal" charges) as a contractual obligation under the by-laws. Accordingly, if the plaintiff is correct about the lack of meritorious defenses, it would be entitled to judgment in the amount sought on its first cause of action. Cf., Board of Managers of National Plaza Condomimium I v Astoria Plaza, LLC,40 A.D.3d 564, 565-566 (2d Dept. 2007). The Court notes that because interest is included in the total amount sought, and interest beyond what is represented in plaintiff's records is not sought by the plaintiff, no additional interest will be awarded here,.
The defendant's defenses are based on his allegations that construction/repair work on the building was grossly mishandled, that the Board did not obtain proper approval of a construction budget before proceeding or continuing with the work, and that his unit has numerous uncorrected problems associated with the construction. He also alleges in his counterclaim that he has been frustrated by the Board and its employees in his attempt to sell his unit.
As indicated below, a purchaser of a unit in a condominium enters into a binding relationship with every other unit owner by both contract and statute. One of the elements of that relationship is the obligation to pay common charges irrespective of any disputes that the individual unit owner has with another unit owner, the board of managers or third parties acting on behalf of the board. Real Property Law §339-e(2) defines common charges as each unit's proportionate share of the common expenses in accordance with the common interest. Common expenses are defined as (a) expenses of operation of the property and (b) all sums designated common expenses by or pursuant to statute, the declaration or by-laws. Real Property Law §339-e(4).
The statutory scheme requires that all unit owners comply with the by-laws, rules, regulations, resolutions and decisions adopted pursuant thereto. Real Property Law §339-j. Pursuant to §4 and §5 of the Lido Beach Towers Condominium by-laws, all units owners are obligated to pay common charges assessed by the board of managers as well as additional common charges or special assessments. In the event of default, unit owners are obligated under § 6 to pay interest, attorneys' fees and expenses incurred by the Board in collecting such charges.
The obligations of a unit owner to pay common charges and special assessments cannot be avoided (Real Property Law §339-x), and are, for the most part, absolute. Board of Mangers of First Ave. Condominium v Shandel,143 Misc.2d 1084, 1087 (NY City Civ. Ct. 1989). When a unit owner challenges an action by a condominium board of managers, the court will apply the business judgment rule. Levandusky v One Fifth Ave. Apartment Corp.,75 N.Y.2d 530, 539 (1990); Helmer v Comito, 61AD3d 635, 636 (2d Dept. 2009); Acevedo v Town N Country Condominium, Section I, Bd. of Managers,51 A.D.3d 603, 604 (2d Dept. 2008). Under the business judgment rule, the inquiry is limited to whether the board acted within the scope of its authority under the by-laws (a necessary threshold inquiry) and whether the action was taken in good faith to further a legitimate interest of the condominium. Perlbinder v Board of Mangers of 411 East 53rd Street Condominium,65 A.D.3d 985, 989 (1st Dept. 2009). Absent a showing of fraud, self-dealing or unconscionability, the court therefore will conduct only this narrow review, and will not inquire as to the wisdom or soundness of the business judgment. Schoninger v Yardarm Beach Homeowners Ass'n, Inc.134 A.D.2d 1, 10 (2nd Dept. 1987). Stated somewhat differently, unless a resident challenging a board's actions is able to demonstrate a breach of the board's duty to act in good faith within the scope of its authority, judicial review of the board's actions is not available. Renauto v Board of Directors of Valimar Homeowners Ass'n., Inc.,5 Misc.3d 247, 258 (NY Sup. 2004), affd23 A.D.3d 564 (2d Dept. 2005).
Accordingly, the deferential standard that is the hallmark of the business judgment rule (40 W. 67th St. Corp. v Pullman,100 N.Y.2d 147, 154-155 [2003]), requires courts to exercise restraint and to defer to good faith decisions made by boards in business settings. Id.,. at 153; Pelton v 77 Park Ave. Condominium,38 A.D.3d 1, 8 (1st Dept. 2006). To trigger further judicial scrutiny, an aggrieved unit owner must show that the board acted (1) outside the scope of its authority, (2) in a way that did not legitimately further the corporate purpose or (3) in bad faith. 40 W. 67th St. Corp. v Pullman, supra at 155.
In accord with the foregoing law, a unit owner cannot withhold payment of common charges and assessments in derogation of the condominium by-laws based on defective conditions in his unit or in the common areas, or because of a disagreement with actions lawfully taken by the board of managers. Frisch v Bellmarc Management, Inc.,190 A.D.2d 383, 389 (1st Dept. 1993).
In view of the foregoing law, the Court finds that the plaintiff has made out its prima facie case for judgment based upon its submissions, which evidence charges and assessments made according to the condominium's by laws, and the defendant's failure to pay. Further, the plaintiff has shown that the affirmative defenses found in the defendant's pro se answer all lack merit.
The first defense is a claim that the Court does not have jurisdiction, and that no cause of action is stated. If the jurisdictional defense refers to the subject matter jurisdiction of this Court, it is plainly wrong. See NY Const Art 6 § 7; Judiciary Law § 140-b. If it refers to lack of jurisdiction over the person, the defense has been waived. CPLR 3211(e) [failure to raise want of personal jurisdiction waived if no motion made within 60 days of service of answer raising the defense]. Further, a cause of action for the common charges and assessments exists under the Real Property Law sections cited above and under the plaintiff's by-laws.
The second defense is the equitable defense of laches, which is based on a plaintiff's delay in asserting rights. This does not apply to an action at law brought within the applicable statute of limitations. Republic Ins. Co. Real Development Co.,161 A.D.2d 189 (1st Dept. 1990). The third defense of unclean hands, also an equitable defense, cannot be utilized in an action at law which is strictly for money damages. Manshion Joho Ctr. Co., Ltd. v Manshion Joho Ctr., Inc.,24 A.D.3d 189 (1st Dept. 2005).
The fourth defense sounds in breach of the warranty of habitability, which has no application to condominium owners. Frisch v Bellmarc Management, Inc.,190 A.D.2d 383, supra. The fifth alleges harassment, but no such civil claim exists in New York and thus cannot be used against a creditor seeking money damages. See, General Motors Acc. Corp. v Desbiens,213 A.D.2d 886 (3d Dept. 1995). The sixth defense, in essence that of "other action pending" (CPLR 3211(a)[4]), references an action in this County which the electronic records of the Clerk reveals is a foreclosure against defendant by a lender, which does not involve the same parties or claims. See generally, Siegel, New York Practice § 262 (4th Ed).
Accordingly, the burden shifts to the defendant to submit proof that issues of fact exist meriting a trial. See generally, GTF Marketing, Inc. v Colonial Aluminum Sales, Inc.,66 N.Y.2d 965 (1985); Zuckerman v City of New York,49 N.Y.2d 557 (1980).
This has not been accomplished. There is no response which might serve to indicate that any of the affirmative defenses have merit. However, this does not end the inquiry because a court can deny summary judgment even on an unpleaded defense, if the court finds that such a defense exists and no prejudice will flow to the plaintiff. Sheils v County of Fulton,14 A.D.3d 919, 921 (3d Dept. 2005).
In his response to the motion, the defendant makes the claim that "the directors made their decisions in gross violation of good faith for purposes other than those of the entity; beyond the scope of the board's authority; and in bad faith." Gartenlaub Aff. ¶ 2. However, even reading the factual allegations made in support of this statement generously, as the Court is obliged to do as it comes from the opponent of the summary judgment motion (see, Nicklas v Tedlen Realty Corp.,305 A.D.2d 385 [2d Dept. 2003]; Rizzo v. Lincoln Diner Corp.,215 A.D.2d 546 [2d Dept. 1995]), there are no allegations, let alone proof, that would permit an inquiry beyond what is permitted under the business judgment rule.
Defendant alleges that there were significant increases to the budget required to fix the problems with the building, and that unit owners were billed for large assessments to cover the cost, but he also acknowledges in his statement that the "condo owners voted to authorize the Board to come up with a proposed budget of up to approximately $15 million." He further alleges that at a later meeting, "the board had the owners vote on some procedural matter enabling them to come up with an official budget which would then be put before the owners. That never occurred, yet the money was spent. The Board spent extra millions all the while acting [sic] a secretive non fiduciary fashion which led to another additional assessment on top of the special assessment." Gartenlaub Aff., ¶ 2.
However, the defendant's opposing affidavit presents nothing indicating that the assessments themselves were not authorized under the by-laws, and as noted above the defendant admits to two votes by the owners in favor of large expenditures so that the construction work could go forward/be completed. This amounts to an implicit acknowledgment of the Board's general authority to act, and thus to impose the common charges and assessments at issue. Board of Mgrs. of Madison Med. Bldg. Condominium v Rama,249 A.D.2d 140 (1st Dept. 1998).
The only issue raised that might overcome the business judgment rule has to do with defendant's assertion that a construction budget that was to "be put before the owners" for a vote but never was. However, there is nothing presented to the effect that the Board was obligated to do so by the by-laws before an assessment could be imposed. Further, this does not address the carrying charges at all. Pursuant to the legal authority cited above, the business judgment rule would apply and end the inquiry here unless an evidentiary showing could be made that the budget process and assessments were outside the scope of the Board's authority, or did not legitimately further the corporate purpose, or were undertaken in bad faith. 40 W. 67th St. Corp. v Pullman,100 N.Y.2d 147, 155, supra. Because there is no proof that the assessments themselves were unauthorized, and a legitimate purpose is evident — to complete the work on the building — the legal sufficiency of the defendant's response on this motion essentially rests on allegations of bad faith.
This, in turn, is based on the complaints of overspending and mismanagement of the construction project, and of failing to keep the owners apprised of the same, together with a failure to address the problems of this defendant's own unit. If these allegations are true the Board arguably performed poorly, or was arrogant, but they do not amount to factual allegations of fraud or self-dealing that would permit the Court to bypass the business judgment rule. Schoninger v Yardarm Beach Homeowners Ass'n, Inc.134 A.D.2d 1, 10, supra. In sum, given the inability of the defendant to demonstrate the Board's lack of authority to impose the assessments and common charges at issue, his contentions amount to no more than strenuous disagreements with actions taken by the Board, and such disagreements are not enough to avoid payment of common charges and assessments. Frisch v Bellmarc Management, Inc.,190 A.D.2d 383, supra.
The defendant asks for discovery, in effect a resort to CPLR 3212(f), but this requires some showing that such discovery may lead to facts that would serve as a basis for defeating the motion. However, no more is offered than what is describe above, and the mere hope that something more might be found is an insufficient basis for denying the present motion. Companion Life Ins. Co. v All State Abstract Corp.,35 A.D.3d 519, 521 (2d Dept. 2006).
Finally, the counterclaim must be dismissed. It alleges interference with defendant's attempt to sell his unit, but there is no legal theory expressed in support, and even if one could label this claim as one sounding in tortious interference with prospective business relations or economic advantage, it would still fail. There is no proof that the plaintiff's actions as described by defendant (not providing financial information on the building to prospective buyers, failing to correct problems in the defendant's unit) amounted to a crime or independent tort, or was done for the sole purpose of inflicting intentional harm on the defendant. Manti's Transp., Inc. v C.T. Lines, Inc.,68 A.D.3d 937 (2d Dept. 2009). In any event, by way of a one-paragraph submission labeled "Additional item" the defendant has stated that a contract for sale of his apartment was executed prior to the final submission of this motion. Accordingly, the counterclaim is dismissed.
The plaintiff is entitled to attorney's fees pursuant to section 6 of the by-laws. An assessment of reasonable fees shall be made at an inquest, as set forth herein. The Court notes that the charges against the defendant indicated in the statement submitted by the plaintiff contain a line for "legal" charges as well, which will need to be explained at the inquest so as to not constitute a double recovery.
Subject to the approval of the Justice there presiding and provided a Note of Issue has been filed at least 10 days prior thereto, this matter is referred to the Calendar Control Part (CCP) for an inquest on May 10, 2010, at 9:30 A.M.
A copy of this order shall be served on the Calendar Clerk and accompany the Note of Issue when filed. The failure to file a Note of Issue or appear as directed may be deemed an abandonment of the claims giving rise to the hearing.
The directive with respect to an inquest is subject to the right of the Justice presiding in CCP to refer the matter to a Justice, Judicial Hearing Officer or a Court Attorney/Referee as he or she deems appropriate.
This shall constitute the Decision and Order of this Court.
Footnotes
1. The Court notes a defect in the form of the jurat; there is no recitation that defendant was sworn. However, there has been no objection from the plaintiff, and the Court will consider it because an "Additional item" on a separate page was submitted, whose number follows in sequence from the initial statement, and a separate jurat at the end of that "Additional item" contains language that the statement was sworn.
2. It should be noted that this Court previously had found that another unit owner had made assertions of self-dealing and the invalidity of two votes imposing assessments in 2007 and 2009, among other items, on application to amend his answer. Summary judgment was denied to the Board in that case. Board of Mgrs. Of Lido Beach Towers Condominium v Berenger, Index no. 15216/2009, Sup Ct Nassau County, March 25, 2010 (U). However, the defendant here has not made those factual assertions. Further, the fact that the plaintiff was denied summary judgment against Berenger does not act as an estoppel against the Board in the present action. See, Neighborhood Partnership Housing Dev. Fund v Blakel Constr. Corp.,34 A.D.3d 303 (1st Dept. 2006).