Opinion
Submitted April 29, 1983
Decided June 7, 1983
Appeal from the Appellate Division of the Supreme Court in the First Judicial Department, NATHANIEL T. HELLMAN, J.
Joel M. Miller and Frederick A. Wool for appellant. Mark Kalik for Michael Spitalnik, respondent.
Andrew M. Bernstein for Roberta Springer, respondent.
Although neither of two cotenants in occupancy of a rent-stabilized apartment, where each asserts the right to do so, may exercise an individual right to subscribe to the co-operative shares allocated to their apartment on conversion, they may jointly execute an agreement for such subscription. In the circumstances disclosed in this record it was not error for the Appellate Division to permit the submission of such a joint agreement after the expiration of the normal discount period.
Plaintiff Spitalnik and defendant Springer jointly occupied apartment 11F at 140 Riverside Drive in the City of New York as rent-stabilized cotenants, pursuant to a lease executed by both of them with appellant landlord. When the apartment building became subject to conversion to co-operative ownership, differences arose between the tenants. Each asserted an exclusive right to purchase the co-operative shares allocated to apartment 11F, in furtherance of which each signed a separate subscription agreement. The present litigation ensued in which each tenant sought a declaration of his or her entitlement to subscribe to these shares and of the landlord's obligation to accept his or her individual subscription agreement. After a nonjury trial, Supreme Court dismissed the claim of each tenant, holding that they had coequal rights to execute the subscription agreement and that the landlord was not required to deal with either tenant individually but was entitled to receive a joint subscription. The rejection of the separate claims of the individual tenants, however, was expressly made "without prejudice to any further application that may hereafter be made jointly by plaintiff Spitalnik and defendant Springer to exercise any such right that may exist."
On appeal by plaintiff, the Appellate Division agreed that the individual tenants had no separate rights to subscribe to the co-operative shares, but held that it was error for Supreme Court to have left open for future determination whether plaintiff and defendant could still file a joint agreement to subscribe. The appellate court then proceeded to hold that the two tenants did have a right to file a joint agreement to subscribe and directed that such a joint agreement could be filed within 30 days from the date of entry of its order. The court rejected any argument that the tenants had no substantive right to file a joint subscription and any procedural contention that, even if there were such a substantive right, the time for its exercise had expired.
At the outset we observe that following the nonjury trial in this action the Appellate Division had all the authority to determine the issues which the Supreme Court had had. On the landlord's appeal to us we address the two issues determined by the Appellate Division, neither of which had been addressed by Supreme Court. We first conclude that there was no error in the determination that, although the two tenants with whom the landlord had executed a joint lease had no individual rights to subscribe, they did have the right to file a joint subscription agreement. Indeed, the landlord advances no substantial argument that in effect no right existed to file a subscription agreement with respect to the shares allocated to apartment 11F — i.e., that the two tenants, the only persons to whom such rights could conceivably accrue, could not exercise the right either separately or jointly.
No appeal has been taken by either tenant from the determination that neither had an individual right of subscription or that to subscribe a joint agreement was required.
As to the remaining issue, the Appellate Division held that, in the equities of the situation and absent any showing of prejudice to the landlord attributable to the delay, the time for filing a joint subscription agreement (which originally expired at the end of the initial 90-day discount period in February, 1980, but was thereafter extended by agreement for an additional, second 30-day discount period in July, 1980) should be extended to 30 days from the date of entry of the order of the Appellate Division. Again, we find no error of law in this determination.
The landlord makes no contention that the courts have no legal authority to extend the time to subscribe. It is its contention that it was "improper" to have done so in this instance because of the "absolute dearth of `equitable considerations' that would justify such" relief. In support of this position it argues only that the tenants should not now be allowed to subscribe to the shares allocated to apartment 11F for an amount far less than their market value. This same advantage would admittedly have been available to the tenants during the two designated discount periods; indeed this was a major ingredient of the conversion plan. The price differential alone, therefore, provides no basis for rejecting the joint subscription of the tenants as untimely. The landlord advances no other claim of prejudice and thus no claim of prejudice attributable to the delay in time of filing. Had the court not extended the time for filing the landlord would have received a windfall.
Indeed, relying on First Nat. Stores v Yellowstone Shopping Center ( 21 N.Y.2d 630), the landlord emphasizes the quotation from that case at page 637 where we declared that "in a proper case, a court has the fullest liberty in molding its decree to the necessities of the occasion. But, it cannot grant equitable relief if there is no acceptable basis for doing so."
For the reasons stated, the order of the Appellate Division should be modified, with costs, by affirming the substantive determination of that court but extending the time for joint exercise of the right to subscribe to 30 days following the date of entry of the order of our court.
Defendant, Michael Spitalnik, brought this declaratory judgment action against his co-tenant, defendant Roberta Springer, and the landlord of their apartment, defendant Orsid Realty Company, as agent for Normandy Associates. He seeks a declaration of the respective rights of the cotenants to purchase shares in the co-operative apartment building owned by the landlord. The apartment was first leased to Spitalnik and Springer as cotenants in 1976 for a term of two years. The term was subsequently continued to 1980. At the time of leasing the apartment, the tenants intended to marry and their purpose, as Ms. Springer testified, was not only to live together first but to make a good investment, i.e., to obtain a preferential price for the apartment if it should "go co-op". The romance soured before the investment opportunity ripened and Ms. Springer left the apartment in January, 1979. Later that year, the landlord did decide to convert the property to co-operative ownership and it offered Mr. Spitalnik and Ms. Springer the right, as cotenants, to buy apartment 11F at a preferential price if they exercised the option within 90 days. If the tenants failed to exercise the option within that period, the landlord was free to sell the shares publicly. The option period was later extended and did not formally end until August, 1980. Both Mr. Spitalnik and Ms. Springer submitted offers to the landlord accompanied by the required down payments but each insisted on purchasing the shares in his or her name alone. The landlord tried to adjust the situation with the parties and with their lawyers, suggesting that they buy the shares jointly and adjust their differences later. Inasmuch as both cotenants had the option to purchase the shares, however, the landlord refused to accept any offer unless both joined in it. Understandably, if the tenants could not resolve their problems, it saw no reason why it should choose between them and expose itself to the delay and expense of possible future litigation. With the situation in this posture, both Mr. Spitalnik and Ms. Springer opted to stand on their individual offers and the option period expired without either of them making any effort to stay its expiration or to resolve their legal dispute. On these facts, Trial Term correctly found for the landlord adding somewhat gratuitously that the cotenants could exercise jointly whatever rights they might have. Of course, they then had no legal rights to exercise the option because the option had expired.
Both the Appellate Division and the majority of this court have determined that the equities require that the tenants obtain judicial relief. I have difficulty identifying any equities in favor of the tenants, but even if I could and assuming the cotenants are now prepared to accept the option, I do not believe the court should extend the terms of a private offer to sell some three and a half years after it has expired. I, therefore, dissent and vote to modify by striking that part of the order of the Appellate Division which extended the option period an additional 30 days.
Insofar as the equities are concerned, there is no evidence that the landlord failed to comply with any provisions of the Rent Stabilization Law or Code or that it has been guilty of any deception, overreaching or misconduct. Indeed, all 12 Judges in the three separate courts which have considered this matter have now held that the landlord properly refused to accept the separate offers submitted by the parties and none of the courts has found it wanting in any obligation to the tenants required to effect this preferential sale. The cotenants' relief is premised solely on the lack of prejudice to the landlord. I do not believe that lack of prejudice is grounds for relief but, like the landlord no doubt, I view the issue of prejudice somewhat differently; without legal or moral fault on its part, it has been delayed in the business of converting this substantial building during the three years of expense and uncertainty connected with this litigation. This loss of time and money while the landlord proved beyond doubt that its actions were legally correct would seem to be prejudice enough.
Under the circumstances of statutory compliance by the landlord, this action should be judged by common-law rules. The pertinent governing rule is that time is of the essence in option contracts whether the action is at law or in equity (see 6 Williston, Contracts [3d ed], § 853). Unless the offer to sell is accepted within the time specified, the option expires by its own terms ( Waterman v Banks, 144 U.S. 394; Warner-Quinlan Co. v Smith, 134 Misc. 649, affd 229 App. Div. 814, affd 255 N.Y. 582; and see Restatement, Contracts 2d, § 41). That rule prohibits a court from enlarging an option or resurrecting it three years after it has expired, nor do I know why it should do so after these tenants have been stubbornly indifferent to the legal consequences of their actions.
Chief Judge COOKE and Judges JASEN, WACHTLER and MEYER concur with Judge JONES; Judge SIMONS dissents and votes to modify by striking that part of the order of the Appellate Division which extended the option period an additional 30 days, in a separate opinion.
Order modified, with costs to respondents, in accordance with the opinion herein and, as so modified, affirmed.