Estate of Helen Del Terzo, et al., Respondents,v.33 Fifth Avenue Owners Corp., Appellant.BriefN.Y.December 14, 2016JEFFREY D. BUSS KENNETH R. JACOBS JACK J. MALLEY ANTHONY T. SIMARI THOMAS W. SMITH DOMENICK J. TAMMARO MICHAEL COPPA BRIAN D. CROSBY NANCY DURAND RYAN P. HOUCK RYAN P. KAUPELIS EMANUELA LUPU PETER A. NENADICH, JR. MATTHEW J. SMITH New York State Court of Appeals 20 Eagle Street SMITH, BUSS & JACOBS, LLP Attorneys at Law 733 YONKERS A VENUE YONKERS, NEW YORK 10704 (914) 476-0600 Fax (914) 476-0614 www.sbjlaw.com September 14, 2016 Albany, New York 12207 60 EAST 42N° STREET, SUITE 4600 NEW YORK, NEW YORK 10165 (212) 688-2400 Fax (212) 688-3058 OF COUNSEL: GERALD KAHN MICHAEL MAURO DAVID A. MENKEN MARC A. WINSTON ROBERT W. WOLPER Re: Estate of Del Terzo v. 33 Fifth Avenue Owners Corp. APL- 2016-00118 Rule 500.11 Respondents' Letter Brief To This Honorable Court: Plaintiffs-Respondents Estate of Helen Del Terzo (the "Estate"), Michael Del Terzo ("Michael") and Julius Robert Del Terzo ("Robert") (collectively, "Respondents") respectfully submit this letter in response to the appeal submitted by Appellant-Defendant 33 Fifth Avenue Owners Corp (the "Co-op) from the decision of the Appellate Division, First Department, which affirmed the decision of the New York County Supreme Court, granting Respondents motion for summary judgment on their first three causes of action and modified the trial court's decision to the extent of granting Respondents summary judgment on their fourth cause of action for attorneys' fees. Pursuant to Rule 500.11(±), Respondents specifically incorporate the arguments contained in Respondents' Brief dated August 12, 2015, and Respondents Reply Brief dated August 31, 2015, and respectfully asks this Court to consider same as if they are set forth entirely herein. The defined terms used herein are as set forth in the Appellate Division briefs. PRELIMINARY STATEMENT The Del Terzo family has resided in apartments 5C and 5D (the "Apartments") within the Co-op building for over sixty years, since 1955. Upon the passing of Helen Del Terzo, her two sons, Michael and Robert Del Terzo, inherited the shares (the "Shares") allocated to the Apartments and the related proprietary lease (the "Lease"). The Del Terzo brothers were both raised in the Apartments. Robert has resided in the Apartments for the past 12 years, after he moved back home with his family to care for his then ailing mother. Michael, a wealthy doctor, is raising his family in Lancaster, Pennsylvania, where he has established a successful medical practice. He plans to one day return to his childhood home when he is professionally able to do so. Michael and Robert inherited the Shares and Lease when Helen passed away in 2010. The Del Terzo brothers sought to effectuate their inheritance by making a 2 joint application (the Application") to transfer the Apartments from the Estate to them. The controlling provision within the Lease provides that transfers from a deceased shareholder's estate to a financially responsible family member "shall not be unreasonably withheld." The Board denied the Application. Both the Motion Court and the First Department found that the Board's stated reasons for denying the Application were unreasonable and granted summary judgment to Respondents. The Co-op asserts that the First Department's decision applied an impermissibly high standard of review to the Board's denial of the Application. However, the First Department did nothing of the sort. Rather it followed this Court's holding in Levandusky that when a reasonableness standard is at issue, courts will evaluate the merits of the board's decision; it evaluated the Board's stated reasons for denying the application; and found them to be unreasonable. The Co-op implies that this Court's decision should establish some type of precedent with respect to cooperative board decisions. Respondents respectfully disagree and submit that this Court's decision should merely hold that it was decidedly unreasonable for the Board to reject the subject transfer under the very unique circumstances of this case, which are as follows: • The Board admits that the Del Terzo Family have been good citizens in the building community for almost 60 years and never been late for even one maintenance payment; 3 • The Board admits that Michael is financially qualified, which negates the Co-op's concerns about the finances of his joint applicant (i.e., Robert); • The Board admits that it did not bother to respond to Michael's offer to guarantee Robert's financial obligations under the Lease; • The Board admits that Michael and Robert would be jointly and severally liable for all financial obligations under the terms of the Lease; • The Board complains that Michael would not reside in the Apartments in the short term, but admits that it regularly allows shareholders to sublease their apartments; • The Board's objection to Robert and Michael potentially occupying one apartment is inapplicable because the proposed transfer was of two combined apartments, SC and SD, and the Application plainly states that after the transfer only Robert would continue to reside in the Apartments along with his family; and • The Board's concern of overcrowding within the Apartments (i.e., if both Robert and Michael lived there) illogically contradicts its separate concern that Michael would not be living in the Apartments in the near future. The Co-op devotes the bulk of its submission to its claim that Robert was not financially qualified (stated repetitively in various forms); its concern that Michael would not be living in the Apartments in the near term; and its speculation that Michael and Robert might someday live together in the Apartments. However, all of these justifications are refuted by the circumstances set forth above. The Co- op' s final justification for denying the Application was that it was purportedly incomplete. But all the allegedly missing information concerned Robert's financial 4 status, which is a moot Issue given the Co-op's concessiOn that Michael IS financially qualified. Finally, the Co-op offers nothing of consequence to upset the First Department's holding that the Co-op waived its statute of limitations defense; that even if it the Co-op did not waive that defense, Respondents action was timely because the six-year statute of limitations for a breach of contract claim applies; and that Respondents are entitled to their attorneys' fees under paragraph 28 of the Lease and Section 234 of the New York Real Property Law. For all these reasons, set forth in greater detail herein, Respondents respectfully request that this Court affirm the First Department's decision THE MOTION COURT'S DECISION The Motion Court found that the Co-op's denial of the Application was unreasonable. The Court found that the Co-op's objection to Michael's plan to initially maintain his residence in Pennsylvania on the ground that it purportedly violated the Co-op's "strong preference" against nonresident owners was not reasonable because (a) "in this case, at least one of the owners -Robert - would make the Apartment his primary residence," (b) "Sticker testified that the Board had experienced no problems with the Del Terzo family living in the apartment prior to Helen's death", (c) "it appears undisputed that the family had always paid the fees charged to the Apartment on time", and (d) "the Co-op has allowed exceptions to [its] primary occupancy rule. Paragraph 15 of the proprietary lease 5 and the Coop's House Rules allow subletting for up to two years and even longer, with the consent of the Board ... (the Board President) admitted at his deposition that at least three apartments in the building have been advertised for rent in 2010 and 20 11." (R 26). In addition, the Motion Court rejected the Co-op's denial of the Application on the ground that Robert was purportedly not financially qualified, emphasizing the following underlying facts (a) "the brothers were co-applicants, and thus their finances should have beenconsidered together," (b) "the Estate [did not have] the ability to transfer the apartment to Robert alone," (c) "[t]here is no dispute that Michael met the Board's financial requirements and was willing and able to fund both brothers' obligations," and (d) "[a]s a joint lessee, Michael would have been jointly and severally liable for the maintenance and other charges on the Apartment by virtue of paragraph 43 of the proprietary lease." (R 27). Based on this analysis of the underlying facts, the Motion Court held that: "the Board acted unreasonably under Paragraph 16(b) of the Proprietary Lease in rejecting Robert and Michael's joint application. Approval of their joint application would merely formalize the living arrangements as they existed at the time of their mother's death." (!d.) Finally, the Motion Court denied Respondents' application for an attorneys' fees award under paragraph 28 of the Lease and Real Property Law§ 234. (R 27) 6 THE FIRST DEPARTMENT'S DECISION The Co-op appealed the Motion Court Decision, and Respondents appealed that portion of the Motion Court decision that denied the respondents application for an attorneys' fees award. The First Department affirmed the part of the Motion Court Decision that found that the Co-op's denial of the Application was unreasonable, and reversed the part of it that denied Respondents' application for an attorneys' fees award. The First Department identified the "central issue" before it as "whether defendant, a residential cooperative corporation, violated the proprietary lease by unreasonably withholding its consent to an assignment of the lease and shares to a member of a lessee's family." (First Department Decision p. 2). The First Department determined that the Co-op's denial of the Application because of Robert's purportedly bad finances was not reasonable: ... By failing to consider a joint application as a whole, refusing to consider Michael's offer to provide further guarantee of payment, and requiring that each co- applicant be individually financially qualified to meet the carrying expenses of the apartment, even though Michael, alone, can easily afford them, defendant unreasonably withheld its consent to the transfer. (First Department Decision pp. 6-7). With respect to the Co-op's other reasons for denying the Application, the First Department labeled them as speculative and specious based on other 7 underlying facts: Defendant's concerns about the likelihood of an overcrowded apartment are completely speculative and do not form a "reasonable" basis for defendant to deny plaintiffs' application for a transfer of the decedent's shares . . . In fact, the concern of overcrowding is completely inconsistent with the board's separate concerns that Michael will not be living in the apartment full time. This incongruity highlights the speculative, if not specious nature, of the board's reason for withholding its consent. In any event, if at some future time it actually happens that the apartment is overcrowded, the board can pursue whatever remedies it has. The board's preference for owner occupancy is not implicated by Michael's disclosure that he will not be living in the apartment, because Robert, the co-owner will be living in it, thereby serving the board's goal of owner occupancy. (First Department Decision p. 7) The 3-2 dissent opined that the Board's objection to Robert's finances, joint ownership of the Apartments, and Michael's plan to not reside in the Apartments in the near term was reasonable. (First Department Decision pp. 13-15.) 8 ARGUMENT I THE FIRST DEPARTMENT'S DECISION SHOULD BE AFFIRMED A. The First Department Correctly Applied The Reasonableness Standard Required By Paragraph 16(b) of the Lease In most instances, decisions of a cooperative board are reviewed by courts under the business judgment rule. The business judgment rule provides that a court should defer to a cooperative board's determination "so long as the board acts for the purposes of the cooperative, within the scope of its authority and in good faith." Matter of Levandusky v. One Fifth Avenue Apartment Corp., 75 N.Y.2d 530, 538, 554 N.Y.S.2d 807, 553 N.E.2d 1317 (1989). But where a provision of a proprietary lease provides that the cooperative board's consent "shall not be unreasonably withheld," the board cannot justify its refusal to provide consent simply by arguing that it exercised "business judgment" in reaching its determination. Stowe v. 19 East 88th Street, Inc., 257 A.D.2d 355, 356, 683 N.Y.S.2d 60, 61 (1st Dep't 1999). Rather, the board must specify its objections and lay them open to scrutiny before the court. !d. Here, paragraph 16 of the Lease controls the transfer of shares and proprietary leases appurtenant to apartments within the Co-op building. The different subsections of paragraph 16 set forth the different tests to be applied under the circumstances. (SeeR 35 ~ 29 101-103.) 9 Paragraph 16( c) reflects the "business judgment" standard that is applied to most transfers. It provides that "[t]here shall be no limitation ... on the rights of Directors ... to grant or withhold consent to an assignment, for any reason or for no reason, except as required by law." However, Paragraph 16(b) sets forth a specific exception to that general rule, to wit: Consents on Death of Lessee b. If the Lessee shall die, consent [by the Board of Directors] shall not be unreasonably withheld to an assignment of the lease and shares to a financially Based upon this record the First Department found [cite business judgment rule holding] Given all of this, both the First Department and the Motion Court correctly found that the business judgment rule does not apply to applications to transfer under Paragraph 16(b). (R 23-24, First Department Decision p. 5) Rather, the reasonable standard set forth in Paragraph 16(b) must be applied to review of the board's denial of the Application, and that Paragraph 16(b) grants family members of deceased shareholders preferential rights. (!d.); see also Chapman v. Two Kings Street Apartments Corp., 8 Misc.3d 1026(A) at * 5, 806 N.Y.S.2d 444, 205 WL 1961330 (Supreme Court, New York County Aug. 12, 2005) (paragraph 16(b) provides the family member "more favorable rights to acquire the apartment than an unrelated purchaser who would have to run the usual gauntlet of board approval."); Hugh Grant Gardens HDFC v. Rodriguez, 28 Misc.3d 1210(A) at* 5, 911 N.Y.S.2d 692, 2010 WL 2802683 (Supreme Court, Bronx County July 19, 10 2010) ("It is also well settled that an applicant for an assignment under a lease provision, such as the one that governs in this proceeding (i.e., paragraph 16 (b)), has more favorable rights to be approved as an assignee to the Subject Premises than an unrelated purchaser would.") B. The First Department Correctly Found That The Board's Denial of The Application Was Unreasonable In These Circumstances The Del Terzo family has lived in apartments 5C/5D (i.e. the Apartments) located at 33 Fifth Avenue, New York, New York since 1955. Michael and Robert lived in the Apartments with their parents, Dr. Julius Robert Del Terzo ("Robert Sr.) and Helen Del Terzo ("Helen"), their entire childhood. Robert Sr. died in 1988. Helen became the sole owner of the Apartments upon Robert Sr.'s death. Robert moved back into the Apartments in 2004 to take care of his aging mother, who died in 2010. Robert has continued to live in the Apartments with his wife and children. Michael, who has established a medical practice in Pennsylvania, has no plans to reside in the Apartments in the near term. (R 11, 31, 34, 35, 44). The president of the Board of Directors of the Co-op, Harry Sticker ("Sticker"), admits that the members of the Del Terzo family have been good citizens throughout the approximately 60 years they have lived in the building, and have always paid the fees charged by the Co-op on time. (R 39, 209, 210, 253). Michael and Robert inherited the lease ("Lease") and the shares ("Shares") appurtenant to the Apartments. (R 35). Paragraph 16(b) of the Lease provides that: 11 "If the Lessee shall die, consent shall not be unreasonably withheld to an assignment of the lease and shares to a financially responsible member of the Lessee's family." (R 102). Despite the terms of the Lease, the long history of family occupancy, and the clear evidence of financial responsibility of the applicants as set forth below, the Board rejected Respondents' February 2012 Application to transfer the Apartments from Helen's Estate to Michael and Robert. (R 40, 70). The Board denied the Application for four reasons. Reason 1 - The Co-op's Requirement That Robert Pass It's Financially Responsibility Test, and Robert's . Purported Inability To Support Monthly Maintenance Payments For The Apartments On His Own. The Application stated that it was based on just Michael's financial qualifications, which are beyond reproach given that he is a wealthy urologist with an income of over $500,000 a year and assets valued at $6,427,901. (R 38, 683, 684, 688-92). The Co-op admits that the Application would have passed financial evaluation if it were submitted under Michael's name only. (R 232, 233). Even though the Application revealed that Robert had assets valued at $1,540,757, $595,787 of which was liquid, Michael sought to address any questions regarding Robert's finances by offering to guarantee the monthly maintenance payments. The Co-op never responded to that offer even though it had allowed other transfer applicants to secure payments through escrow monies. (R 12 38, 39, 467, 468, 683-685, 688-692); See Filmways, Inc. v. 477 Madison Ave., Inc., 36 A.D.2d 609, 609 (1st Dep't 1971), affd, 30 N.Y.2d 597 (1972) (Where a proposed assignee that is financially secure binds itself to comply with the provisions of a lease, the landlord should be compelled to give consent to the assignment). The Co-op's focus on Robert's finances was unreasonable because under paragraph 43 of the Lease both Michael and Robert would be jointly and severally liable for maintenance payments. (R 124). Furthermore, it is virtually universal in the world ofNew York cooperatives for boards to consider joint applications by spouses even though one spouse has no income. Nor do cooperative corporations require post-nuptial agreements, negative pledges or limitations on estate planning to ensure that sufficient assets remain available to the unemployed spouse in the future. In other words, as long as one applicant is financially responsible at the time of the application (as is the case here), such joint applications are regularly approved. (R 798-99 ,-r,-r 7-11.) The Co- op did not apply that standard to the Del Terzos. Thus, the Co-op's denial of the Application from two brothers, at least one of whom the Co-op admits is financially responsible, unfairly discriminates against sibling applicants. In fact, the Co-op's shareholders would be at greater risk after a transfer to spouses, one of whom has no income, then from the subject transfer. Paragraph 16(b) ofthe Lease (R 35 ,-r 29, 102) provides that a transfer from a deceased spouse 13 to a surviving spouse does not require the Board's consent. Thus, in the event of the death of the employed spouse, the Co-op is powerless to stop a transfer to the surviving spouse even when he or she lacks any source of income. In contrast, if a deceased shareholder's estate seeks to transfer the shareholder's interest to his or her sibling, under Paragraph 16(b) the Co-op retains the right to withhold consent to that transfer if it reasonably concludes that the transferee (sibling or not) is not financially responsible. Therefore, if the joint Application had been approved (as it should have been) and Michael passed away thereafter, the Co-op would never have been worse off than if Michael had owned the Shares alone. Michael's estate (holding assets valued at over $6,000,000) would remain jointly and severally liable for the full amount of the monthly maintenance fees. Reason 2: The Co-op. had a policy against two families residing in one apartment. The Board also denied the Application due to the Co-op's purported policy against two separate families living together in one apartment. (R 225) However, it was unreasonable for the Board to apply the purported policy in this instance because the Estate sought to transfer two combined apartments (5C and 5D) to Robert and Michael. (R 47). Furthermore, the Board's claimed reasoning did not fit the facts. When Respondents submitted the Application, Respondents advised the Board that only Robert, his family and Gregory Donio, Michael and Robert's cousin, would 14 continue to reside in the Apartments because Michael was not in a position professionally to live there in the near term. (R 48, 468). Thus, the Application merely sought to maintain the status quo, and formalize the living arrangements as they existed at the time the Application was submitted. Reason 3: Michael would not be residing in the Apartments in the near future. Sticker testified that the Board rejected the Application because Michael would not be actually living in the Apartments for some period after the transfer. (R 233). If the Board actually rejected the Application for this reason, it applied a different standard to Michael than it does to Co-op shareholders who sublease their Apartments for profit. (R 48). The Co-op's House Rules allow Co-op shareholders to rent their apartments two out of every five years, and for longer periods with the Board's approval. (R 725). Sticker admitted that in recent years numerous shareholders have subleased their apartments. (R 249,250, 708-710). In other words, the Board has a policy allowing shareholders to vacate their apartments for years at a time and to profit from such absences. In contrast, Robert and Michael were prepared to pay for the privilege of owning and residing in the Apartments without subleasing any portions of them, and with no profit motive whatsoever. (R 49). Thus, the Board's policy was unreasonably applied against Michael and Robert. 15 Reason 4: The Application was purportedly missing information. The Co-op would have this Court believe that the Co-op was forced to accept a second application from Respondents because Robert wrongfully withheld his financial information from the first application that Respondents submitted on November 9, 2011 (the "November 2011 Submission"). (R37 ~ 36; 273-464.) However, that was not the case. Robert's information was not included in the November 2011 Submission because the Co-op's property manager instructed the Estate's attorney, Jayne M. Kurzman, Esq. ("Kurzman"), to submit only Michael's financial information with the Application, and to exclude Robert's information. (R37 ~ 37; 52-53;~~ 2-6.) Subsequently, the property manager notified Christine A. Kehoe ("Kehoe"), a colleague ofKurzman, that the Board required the Del Terzos to submit Robert's financial information as well as Michael's. Kehoe, in tum, notified Michael of this change. (R56, ~~ 4-5; 37, ~ 39; 56 ~ 5.) Thus, in February 2012, the Del Terzos resubmitted the Application and included Robert's financial information (the "February 2012 Submission."). (R 37-38 ~ 39; R 465-703.) Respondents submitted affidavits from Kurzman and Kehoe to the Motion Court that demonstrated these facts. (R 52-56) The Co-op did not submit an affidavit from the property manager or anybody else to rebut the evidence submitted by Kurzman and Kehoe. During his deposition, Sticker claimed that the February 2012 Submission was missing information. However, the Board didn't ask Respondents to provide 16 the allegedly missing information. (R 43~ 62; 221 Ins. 14-15) When asked at deposition why the Board didn't bother to ask the Del Terzos to provide the information, Sticker responded that the directors were simply too busy to spend more time to consider whether the Del Terzo family should be removed from the Building after 57 years. (R 44 ~ 64; 228 In 17 - 229 In 25) Finally, the information that the Co-op claimed was missing concerned only Robert's finances. Respondents' dispute the Co-op's claims regarding Robert's finances and that his information was missing. However, whether or not Robert's financial information was missing from the Application is a moot issue. Respondents disclosed that the Application was based on just Michael's financial qualifications; the Board concedes that Michael was financially qualified; and the Co-op is not at risk with respect to Robert's purportedly bad finances because Michael and Robert were jointly and severally liable for the payment of maintenance fees pursuant to the Lease. C. The Decisions Cited By The Co-op Are Inapposite Or Easily Distinguished With one exception, the decisions the Co-op cites in support of its claim that the Board's determination was reasonable are inapposite because they do not concern a provision similar to Paragraph 16(b ), which grants preferential consideration to family members of deceased shareholders as in the case here. See, e.g., Wiener v. 150 W. End Owners Corp., 298 A.D.2d 385, 751 N.Y.S.2d 227 17 (2002) (concerning a board's decision to withhold consent to a purchase because it would have given the applicant, a partner in the sponsor entity, close to 50% control of the building); Rosenthal v. One Hudson Park, Inc., 269 A.D.2d 144, 701 N.Y.S.2d 899 (2000) (held triable questions of fact existed as to whether the board properly withheld consent to the plaintiff-shareholder's request to build additions on the building roof); Moses v. Brown Harris Stevens Residential Mgmt., LLC, 279 A.D.2d 257, 720 N.Y.S.2d 1 (2001) ( dismissing claim where the cooperative rejected the shareholder's purchase application because he intended to combine the apartment with another in violation of the cooperative's stated policy); West v. 332 East Blh Owners Corp., 68 A.D.2d 499, 500, 889 N.Y.S.2d 449 (1st Dep't 2000) (court upheld the Board's denial of the plaintiff shareholders' request to construct a new bathroom in their apartment). Gleckel v. 49 W. 12 Tenants Corp., 52 A.D.3d 469, 859 N.Y.S.2d 712 (2008) concerns a proposed transfer subject to a lease provision that was identical to paragraph 16(b ). However, the decision is easily distinguished on the facts. In Gleckel, the nephew of the deceased shareholder submitted an application that did not sufficiently identify his occupation or his employer; did not clarify whether his assets were held individually by him or jointly with others; included tax returns that did not disclose his income; disclosed a small amount of assets in his name only; and disclosed that the apartment was to be purchased with a $200,000 down payment from his mother, and a $500,000 purchase money mortgage to be 18 obtained by his uncle's estate. Gleckel v. 49 West 12 Tenants Corp., No. 3709-06, 2007 WL 4217819 (Supreme Court, Nassau County Nov 13, 2007). Here, unlike in Gleckel, the Del Terzo brothers made a stellar submission that included Michael's substantial assets and his personal guarantee, which demonstrated that they are financially responsible. D. The First Department Correctly Held That Appellant Waived Its Statute of Limitations Defense The First Department correctly held that Respondents' breach of contract claims are not barred by any statute of limitations. Statute of limitations is an affirmative defense that must be asserted either in a responsive pleading or in a motion to dismiss the complaint, or else it is waived. CPLR 3211(e); see also CPLR 3211(a)(5); People v. Mills, 1 N.Y.3d 269, 274 (2003) ("New York courts have long recognized that the statute of limitations defense is not jurisdictional and can be forfeited or waived by a defendant."); Matter of Augenblick, 66 N.Y.2d 775, 777 (1985) (finding that respondents had "waived their statute of limitations defense by failing to plead it in their answer or by appropriate motion"). Appellant waived the statute of limitations defense by not asserting it in its answer or in a pre-answer motion to dismiss. Appellant filed a Verified Answer with Counterclaims, asserting six affirmative defenses, not a single one on the grounds of statute of limitations. (R 77-78.) Nor did Appellant ever make a motion seeking leave to amend its answer to add any such defense. 19 Relying on Buttitta v. Greenwich House Coop Apts., 11 A.D.3d 250 (1st Dep't 2004) and Chateau D'If Corp. v. City of New York, A.D.2d 205 (1st Dep't 1996), Appellant argues that the statute of limitations is a defense that can be considered for the first time on appeal. (Appellant's Br. at 22.) Neither case supports Appellant's erroneous assertion. In Buttitta, the defendant did not raise the statute of limitations defense for the first time on appeal, but rather had moved to dismiss the complaint "pursuant to CPLR 3211(a)(1)(5) and (7) based upon documentary evidence, failure to state a cause of action, and the statute of limitations." Buttitta v. Greenwich House Cooperative Apartments, Inc., No. 100715/03, 2003 WL 25780826, at *1 (Sup. Ct. N.Y. County Oct. 10, 2013). Unlike Appellant, the defendant in Buttitta timely asserted the statute of limitations defense in a pre-answer motion to dismiss. Nowhere in the Buttitta decision does the court state that a statute of limitations defense can be asserted for the first time on appeal. Rather, the court stated that whether the four-month statute of limitations set forth in CPLR 217 applies on a motion to dismiss based on statute of limitations is a question of law that could be addressed on appeal. Buttitta, 11 A.D.3d at 251. Similarly, Appellant mischaracterizes the First Department's decision in Chateau D'IfCorp. v. City of New York, A.D.2d 205 (1st Dep't 1996), which has nothing whatsoever to do with a statute of limitations defense. In fact, the term statute of limitations" does not appear anywhere in the decision. Nevertheless, 20 Appellant falsely claims that in Chateau D'Ifthe First Department "explained" that "the statute of limitations defense can be raised, even for the first time on appeal." (Appellant Br. at 22.) Appellant then proceeds to fabricate a legal standard that it claims the Chateau D 'If court articulated - that the statute of limitations defense can be asserted for the first time on appeal "so long as there is no showing of prejudice, i.e., no new facts are involved ... the argument appears on the face of the record ... and it involves a legal argument, not factual." (Appellant Br. at 22.) Appellant then purports to analyze the facts of this case against its fabricated legal standard, arguing that this Court should apply its belated statute of limitations defense. This made up citation speaks to the Co-op's credibility throughout this dispute. Finally, Appellant argues that the both courts below erred because they should have considered the "underlying merits" of Appellant's belated statute of limitations defense before finding that the defense had been waived. Appellant offers no legal authority in support of that proposition, and we are aware of none. Even assuming, arguendo, that Appellant had not waived its statute of limitations defense, that defense is without merit. Respondents' claims fall squarely within the six-year statute of limitations applicable to breach of contract disputes. Respondents allege that the Co-op breached paragraph 16(b) of the Lease by unreasonably withholding consent to assign the Lease and shares in the Apartments to the Del Terzo Brothers (first and second causes of action). 21 Respondents further seek a declaratory judgment that the Co-op breached the Lease (third cause of action). Finally, Respondents seek reimbursement attorneys' fees, cost and disbursements they have incurred under paragraph 28 of the Lease and Real Property Law Sec. 234 (fourth cause of action). (See R. 64-67.) Since those claims are direct breach of contract claims or are based on breach of contract, the six-year statute of limitations applies. The four-month statute of limitations under CPLR 217(1) does not apply to breach of contract claims. Yoon v. Fordham Univ., 216 A.D.2d 184, 185 (1st Dep't 1995) (reinstating faculty member's claim against university for payment of salary and other benefits that had been dismissed as time-barred because it "is a contract claim not subject to the four month period of limitation of CPLR 217."); see also SRN Corp. v. Glass, 244 A.D.2d 545, 546 (2nd Dep't 1997) (holding that "the plaintiff is not bound by the four-month statute of limitations" because "plaintiffs cause of action sounds in breach of contract."). Nor does it apply to declaratory judgment claims where the underlying claim is breach of contract. See e.g. Arkport Sta.ffUnitedv. Arkport Cent. Sch. Dist., 79 A.D.3d 1762,915 N.Y.S.2d 431,432 (4th Dep 't 201 0) (declaratory judgment action based on collective bargaining agreement "is subject to the six-year statute of limitations applicable to breach of contract actions ... rather than the four-month statute of limitations applicable to CPLR article 78 proceedings"). 22 Rather, as the decisions cited by Appellant demonstrate, courts apply the four-month statute of limitations to claim that arise from challenges to corporate operative governing documents, such and board election disputes. See, Buttitta, 11 A.D.3d at 250 (where plaintiff-shareholders sought to nullify a cooperative's bylaw); see also Cylich v. Riverbay Corp., 74 A.D.3d 646, 647, 904 N.Y.S.2d 39, 40 (1st Dep't 2010) (the First Department barred an election challenge under CPLR 217(1)). Thus, the First Department did not err in holding that Respondents' breach of contract claims are governed by a six-year statute of limitations and correctly found that Appellant waived its newly asserted statute of limitations defense. E. The First Department Did Not Err In Awarding Respondents Attorney Fees and Costs Paragraph 28 of the Lease provides that the Co-op, as lessee, is entitled to reimbursement of "attorney's fees and disbursements" incurred in "any action or proceeding based on a default by Lessee." (R. 153.) Pursuant to Section 234 of the Real Property Law, implicit in such a contractual provision is the lessee's reciprocal rights to recover attorney's fees and costs incurred "as the result of the failure of the landlord to perform any covenant or agreement on its part to be performed under the lease." RPL § 234. Respondents' claims are based on Appellant's breach of the Lease by unreasonably withholding its consent to assign the shares and the Lease to the Del Terzo Brothers. Because Respondents were 23 compelled to bring the action to enforce the Lease and to seek redress from Appellant's breach of the Lease, they are entitled to reimbursement of attorney's fees and costs. Appellant submits four arguments in opposition to Respondent's attorneys' fees claim, none of which have any merit. (Appellant's Letter pp 23-24) First, Appellant contends that Respondents do not have the right to recover their attorneys' fees under RPL § 234 because this dispute purportedly does not arise out of the Co-op's failure to perform any agreement or covenant set forth in the Lease. Contrary to the Co-op's contention, for the reasons set forth in the Motion Court Decision and First Department Decision, the Co-op did in fact breach the Lease. As those Courts held, the Co-op breached ~16(b) of the Lease by unreasonably withholding its consent to Respondents' transfer Application. Second, the Co-op claims that RPL § 234 only allows a residential tenant to recover reciprocal attorneys' fees, and bars an entity from doing so. For this proposition, the Co-op relies solely on Emily Towers Owners Corp. v. Carleton Emily Towers L.P., 170 Misc.2d 82, 649 N.Y.S.2d 996 (Civ. Ct. 1996). In that case, a holder of unsold shares - an investor entity - challenged the propriety of a cooperative's board of directors to increase its parking charges in light of an exemption provision in the proprietary lease applicable to holders of unsold shares. The Civil Court of the City of New York, Queens County denied the applied for reciprocal attorneys' fees award because the holder of unsold shares was an entity. 24 However, the Second Department subsequently modified the order by holding that the holder of unsold shares was entitled to attorneys' fees under RPL §234. Emily Towers Owners Corp. v. Carleton Emily Towers, L.P., 175 Misc.2d 283, 669 N.Y.S.2d 462 (2d Dep't 1997). In its decision, the Second Department cited to North Star Graphics, Inc. v. Spitzer, 135 A.D.2d 401, 521 N.Y.S.2d 699 in support of its holding. In North Star, the party seeking reciprocal attorneys' fees was a tenant corporation. The First Department found that the tenant corporation was entitled to attorneys' fees under RPL § 234 notwithstanding its entity status. Thus, the Co-op's claim that an entity is precluded from recovering attorneys' fees under RPL § 234 is erroneous. In addition, the claim ignores the critical fact that two of the Respondents are natural persons, one of whom resides in the Apartments, which further refutes the Co-op's meritless position. Third, the Co-op claims that Respondents should not recover their attorneys' fees because such fees cannot be awarded where a lessee seeks only a declaration of her rights. However, by their first and second causes of action, Respondents demand "a judgment ... ordering the Co-op to specifically perform its obligation to approve the transfer of the Shares and Lease from the Estate to Michael and Robert". (R 67) And within the judgment issued by the Motion Court, the court ordered the Co-op to "consent to the transfer of the shares allocated to Apartment 5C/D ... and the proprietary lease ... from plaintiff Estate of Helen Del Terzo to 25 plaintiffs Michael Del Terzo and Julius Robert Del Terzo, and take all actions that are necessary to process and complete that transfer." (R 12.) Finally, Appellant seems to argue that an appellate court cannot reverse a trial court's decision on an attorneys' fees application because such awards are initially issued in the sound discretion of the trial court judge. The one decision that Appellant cites, Duane Thomas Loft Tenants Association v. Sylvan Lawrence Co., 117 Misc.2d 360, 558 N.Y.S.2d 792 (Supreme Court, New York County 1982), merely states the basic proposition that the trial court has the discretion to grant or deny an application for attorneys' fees. It does not address in any respect the First Department's de novo analysis of Respondent's claim. In sum, Appellant's arguments for reversal of Respondents attorneys' fees award have no merit and should be rejected by this Court. CERTIFICATION OF WORD COUNT Pursuant to Rule 500.1l(m), John J. Malley, counsel for Respondents, certifies that he has verified the word count for the text of this submission by utilizing the word count software on Microsoft Word, the word-processing system used to prepare the submission, and states that the word count is 6,275. 26 CONCLUSION For the reasons set forth above, Respondents respectfully request that the Court: (a) affirm the First Department's Decision in its entirety, and (b) grant Respondents such other and further relief as the Court deems just and proper. Dated: Yonkers, New York September 14, 2016 SMITH, BUSS & JACOBS, LLP By: 27 John J. Malley, Esq. Attorneys for Respondents 733 Yonkers Avenue, Suite 200 Yonkers, New York 10704 (914) 476-0600 jmalley@sbjlaw.com