Published in the March 2020 edition of Queens Bar Bulletin, Editor’s Note, by Paul E. Kerson.
As cooperative and condominium apartment houses continue to be built in Queens County, disputes between their Boards of Directors and their apartment owners have become increasingly common.
However, a Co-op Board or Condominium Board, though governed by the New York Business Corporation Law (BCL) is much more similar to a village, town, or city government than it is to a business corporation.
This bit of judicial philosophy was set forth by former Chief Judge Judith Kaye of the New York State Court of Appeals in Levandusky v. One Fifth Ave. Apartment Corp., 75 N.Y. 2d 530, 554 N.Y.S. 2d 807 (1990).
In Levandusky v. One Fifth Ave. Apartment Corp., Chief Judge Kaye gave us all the following guidance: “As Courts and commentators have noted, the cooperative or condominium association is a quasi-government – “a democratic sub society of necessity” (Hidden Harbour Estates v. Norman, 309 So.2d 180, 182 [Fla.Dist. Ct.App]). The proprietary lessees or condominium owners consent to be governed, in certain respects, by the decisions of a board. Like a municipal government, such governing boards are responsible for running the day-to-day affairs of the cooperative and to that end, often have broad powers in areas that range from financial decision making to promulgating regulations regarding pets and parking spaces (see generally Note, Promulgation and Enforcement of House Rules, 48 St. John’s L.Rev. 1132 ). Authority to approve or disapprove structural alterations, as in this case, is commonly given to the governing board. (See, Siegler, Apartment Alterations, N.Y.L.J., May 4, 1988, at 1, col 1.” (Emphasis added)
A careful reading of Justice Kaye’s philosophy on this subject was revealed in a bitter struggle on a Queens County Co-op Board some years ago where my law firm represented the tenant-shareholder. In Co-op Board v. Smith and Jones, we represented Ms. Smith and Ms. Jones, former members of the Co-op Board. (The names have been changed to protect the privacy of the litigants).
Its seems that after Ms. Smith and Ms. Jones had completed their terms as members of the Co-op Board, they complained to the new members of the Board of Directors that the apartment house was inadequately maintained and that the superintendent was not doing his job. Ms. Smith and Ms. Jones also complained that the finances of the Co-op Board were in disarray and adequate accounting procedures were not being followed.
The new Co-op Board, headed by the new president, Mr. Maniac, then filed a Summons and Complaint against Ms. Smith and Ms. Jones in the name of the Co-op Board with the following causes of action:
Replevin. The Co-op Board sought repossession of “numerous financially sensitive and privileged documents of the corporation” that Ms. Smith and Ms. Jones allegedly kept after their term on the Co-op Board had expired. The fact of the matter was that the Co-op Board continued to maintain all of its own records all of the time.
Conversion. The Co-op Board claimed that Ms. Smith and Ms. Jones, the former members of the Board wrongfully converted the documents.
Conspiracy. The Co-op Board took the position that Ms. Smith and Ms. Jones were part of a conspiracy to deprive the Co-op Board of its “sensitive documents”.
Prima Facie Tort. The Co-op Board claimed that Ms. Smith and Ms. Jones’ failure to return these “sensitive documents has caused substantial harm” to the Co-op Board in its daily operations.
Punitive Damages. The Co-op Board wanted punitive damages against Ms. Smith and Ms. Jones, its former members and its neighbors in the same apartment house.
In their Ad damnum Clause the Co-op Board requested $500,000 from Ms. Smith and Ms. Jones, its former members and its continued neighbors in the very same apartment house.
Years later it is easy to chuckle over this kind of dispute. But while it was going on Ms. Smith and Ms. Jones felt very threatened in their own home. Ultimately, after two years of litigation in our home court, the Queens County Supreme Court in Jamaica, New York reason prevailed and Mr. Manaic’s lawyers were able to convince him to withdraw the Co-op Board’s Complaint.
Accomplishing this objective on behalf of Ms. Smith and Ms. Jones required numerous Court appearances for Motion practice seeking to dismiss the Complaint. We of course submitted an Affidavit of our clients. We were also able to obtain an Affidavit from a different member of the Co-op Board, Ms. Blue, who testified that the entire litigation was wrongful, and that the Co-op Board never was missing any of its records.
We were also able to obtain an Affidavit from the former Treasurer of the Co-op Board Mr. Auditor, who stated that he made a Motion at a Board meeting of the Co-op Board to have the Complaint dropped, but this Motion was never entertained and not put to a vote.
Throughout the two years we litigated this case, we were in continual contact with our adversaries, Mr. Reasonable and Ms. Peacemaker. We were finally able to convince them that the Co-op Board’s Complaint should be dropped.
Lesson: The lesson in all of this is as follows: Living together in crowded apartment houses is never an easy task. When there is a commercial landlord, he or she rules as if he or she were an Absolute Monarch. However, once a Coop Board or Condominium Board has been established, we now have democracy between neighbors. A Cooperative or Condominium apartment house is much more like a suburban village or town then it is like a rental building in the City of New York. In suburban villages and towns, there are politics and personalities and elections and the democratic way of life prevails.
Despite the experience of this type of case as listed above, Co-op and Condominium Boards are a much better way to live than the rental apartment buildings where owner is King or Queen. On a Co-op Board or a Condominium Board members are elected to pass rules much like legislation that governs the lives of their neighbors.
Chief Judge Kaye has instructed us in Levandusky v. One Fifth Ave. Apartment Corp., cited above, that a Coop Board or a Condominium association “is a quasi-government – a little democratic sub society of necessity.” For this piece of judicial philosophy, Judge Kaye quoted from an opinion of the Florida District Court of Appeals, Hidden Harbour Estates v. Norman cited above. Chief Judge Kaye went on to instruct us that a Co-op Board or Condominium Association is “like a municipal government, such governing Boards are responsible for running the day-to day affairs of the cooperative and to that end, have broad powers …”
This is all worthwhile remembering when approaching a case of this type. The lawyer involved on either side is not dealing with the ordinary business corporation whatsoever at all. Even though the New York Business Corporation Law (BCL) may technically govern, one is now deep in the subject of local politics.
In New York City terms, dealing with the Co-op Board is much more similar to dealing with a Community Board or with the New York City Council itself. However, because New York City is so large and contains five counties within it, the distance between a citizen and his or her local government is very far indeed. A New York City resident views the City Council as similar to the State Legislature or the United States Congress itself.
Not so inside of a Cooperative apartment house Board or Condominium Association. With Co-op and Condominium Boards, we are dealing with a very similar situation as to a suburban Village Board or Town Board. The politics of who supports whom and why must be taken into consideration. There are factions that are similar to political parties on a Co-op Board or Condominium Board that must be dealt with.
The entire mindset in a Co-op Board or Condominium conflict situation must be different. In rental apartment houses, a fight between neighbors and/or with the superintendent and/or with the landlord may wind up in the police station. On a Co-op Board, it is we members of the Bar and our Court system who must resolve the dispute. As wise lawyers have always said: “The more lawyers you have, the less police officers you need.” This is never more true than in the Co-op Board or Condominium Board case. Upon reflection, it is clear that the Court system is a far better place to resolve disputes between neighbors than the police station.