Decided April 9, 2010.
Leonard A. Sclafani, P.C., New York, NY, Plaintiff's Atty.
Wormser, Kiely, Galef Jacobs LLP, New York, New York, Defendants' Atty.
This is an action for a declaratory judgment, injunctive and other relief relating to plaintiffs' use of the residential condominium unit at 207 East 57th Street, New York, New York. Defendants are the condominium board (board") and its managing agent (collectively defendants"). Presently before the court is defendants' motion for an order dismissing the amended complaint based upon: documentary evidence, plaintiff having no legal capacity to sue and/or the complaint failing to state a cause of action (CPLR §§ 3211 [a], , ). Alternatively, defendants seek an order awarding them summary judgment. If either of the preceding motions are denied, defendants seek an order compelling plaintiffs to comply with their discovery demands which include depsotions.
Plaintiffs oppose the motion in all respects.
Although both defendants seek dismissal of the amended complaint, they have (separately) answered the complaint; the board has asserted counterclaims against plaintiffs, but the managing agent has not. Since issue has been joined and this motion is brought pre-note of issue, summary judgment relief is available (CPLR § 3212[a]).
The court denied plaintiffs' motion for a preliminary injunction for reasons set forth in the court's decision and order dated June 9, 2009 (prior order"). Familiarity with that prior order is presumed.
When deciding a motion to dismiss the complaint, the court must afford the pleadings a liberal construction, take the allegations of the complaint as true, and provide the plaintiff with the benefit of every possible inference ( Goshen v. Mutual Life Ins. Co. of NY, 98 NY2d 314, 326; Leon v. Martinez, 84 NY2d 83; Morone v. Morone, 50 NY2d 481; Beattie v. Brown Wood, 243 AD2d 395 [1st Dept. 1997]).
A movant seeking summary judgment in its favor must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case" ( Winegrad v. New York Univ. Med. Ctr., 64 NY2d 851, 853). The evidentiary proof tendered, however, must be in admissible form ( Friends of Animals v. Assoc. Fur Manufacturers, 46 NY2d 1065). Once met, this burden shifts to the opposing party who must then demonstrate the existence of a triable issue of fact ( Alvarez v. Prospect Hosp., 68 NY2d 320, 324; Zuckerman v. City of New York, 49 NY2d 557; Forrest v. Jewish Guild for the Blind, 309 AD2d 546 [1st Dept 2003]).
The following facts are asserted in the amended verified complaint and in the sworn affidavit plaintiffs submit to sustain the pleading and remedy any deficiencies in it ( Ackerman v. Vertical Club Corp., 94 AD2d 665 [1st Dept 1983] app dism 60 NY2d 644):
Facts and Arguments
Plaintiff 25A Place 57, LLC (25A Place") is a limited liability company. It submitted a purchase application to the board to purchase unit 25A (the unit"). The application was approved and 25A Place purchased the unit. In the purchase application, 25A Place listed its occupation as real estate investment fund" and stated that this is a corporate apartment for partners, employees and associates to use." They also disclosed in that application that no business or profession will be conducted in the apartment." Since the closing, various individuals have used the unit for short stays, usually lasting no more than a week.
25A Place alleges it has always been forthright with the board about how it expected to use the unit. According to 25A Place it is not a vacation or destination club" as has been claimed by defendants, because the only individuals who use the apartment are members of co defendant Equity Estates Fund 1, LLC (Fund 1"), the managing and sole member of 25A Place. 25A Place claims this will be proved, in part, through a letter the board wrote a letter to 25A Place shortly after it purchased the unit. In sum and substance the letter (dated November 6, 2006) states that the board knew and agreed the unit would not have one specific occupant. Furthermore, the board knew and agreed that Equity Estates Fund 1, LLC [i.e. Fund 1] by Equity Estates, LLC" was the managing and sole member of 25A Place. Thus, plaintiffs claim that not only did the board know that 25A Place itself consists of various nested limited liability companies, the board knew and expressly agreed that the various officers, directors, employees, including family members . . . business associates and guests of the Company [25A Place]" could use the apartment at any time as a company apartment, provided they notified the board in advance.
Fund 1 has numerous investor members. Each member owns a direct equity interest in Fund 1 and an indirect interest in all of its assets. According to plaintiffs, and as set forth in the sworn affidavit of Philip Mekelburg, managing member of Fund 1 (Mekelburg"), 25A Place will be liquidated by the end of 2021 and Fund 1 will distribute the net proceeds of the liquidation to Fund 1's members. Members are provided with an annual summary setting forth the appraised value of the property Fund 1 has invested in.
25A Place alleges it has dutifully provided the board with prior notice of the individuals who will be using the unit, stating the date and approximate time of their arrival. In opposition to defendants' motion, plaintiffs have provided copies of those notices and correlated them to each individual's Admission Amendment" to Fund 1's operating agreement. This document identifies the member and how much the member invested and the number of membership interests. It is defendants' position that these individuals treat condominium personnel like valets, expecting them to carry their luggage, etc.
After this action was commenced, and the court made its prior order denying plaintiffs' motion for a preliminary injunction, 25A Place conveyed title to the unit to Fund 1, ostensibly to collapse the nest" of limited liability companies. Thus, defendants argue that 25A Place no longer has standing to assert these claims, but even if it does, defendants have not barred any of the members, guests, etc., of Fund 1 from using the unit and, therefore, plaintiffs have failed to state a cause of action.
Alternatively, defendants argue that the conveyance of title was done in violation of the bylaws and for that reason, 25A Place's claims should be dismissed, since it has no members, partners, associates, etc., and therefore, its use of the apartment is in violation of the bylaws as well.
Defendants state that they served discovery demands on plaintiffs, but they have not responded to their demands. In response plaintiffs argue that the notices were for the depositions of 22 members, none of whom were served with subpoenas.
Defendants argue that plaintiffs' use of the unit is in violation of the building code not only because the individuals using the apartment are transients, but also because plaintiffs are running a business out of the unit which can only be used for residential purposes.
Whether analyzed as a motion to dismiss or for summary judgment, defendants' motion must be denied for the reasons that follow:
Where a motion to dismiss is premised upon the existence of documentary evidence, such evidence must definitively dispose of plaintiff's claims ( Bronxville Knolls Inc. v. Webster Town Center Partnership, 221 AD2d 248 [1st Dept 1995]). Although defendants extensively cite provisions of the bylaws which they contend support their defenses and form the basis of their motion based upon documentary evidence, they have not provided the court with a complete copy of the bylaws or offering plan. According to defendants, Article 6.14.1 is dispositive of plaintiff's claims against them. That provision of the bylaws states as follows:
In order to provide for congenial occupancy of the Property and for the protection of the values of the Units, each Residential Unit shall be used for residential purposes only except as otherwise herein expressly provided. A Residential Unit may be owned by an individual, corporation, partnership, limited liability company, fiduciary, limited liability company (sic) or any other entity (including but not limited to, the United States Government and any instrumentality thereof and any foreign governments and any embassy, consulate or other instrumentality thereof). A Residential Unit may only be occupied by (i) the individual Unit Owner (or member of such Unit Owner's family, guests or domestic employees), (ii) and an officer, director, shareholder or employee of such corporation (or members of such Unit Owner's family, guests or domestic employees) (iv) the fiduciary or beneficiary of such fiduciary (or members of such Unit Owner's family, guests or domestic employees), or (v) a principal or employee of such other entity (or members of such Unit Owner's family, guests, or domestic employees, as the case may be."
The individuals who have been using the unit are members or guests of Fund 1. Fund 1 is the managing and sole member of 25A Place. The interpretation that defendants urge the court to accept is that only people who are members, officers, etc., of 25A Place have the right to occupy the unit, and then only on a more long term, not transient basis. These limitations (and interpretation) is not strictly supported by the words contained in Article 6.14.1 of the condominium bylaws or the Limited Liability Company Law itself.
A limited liability company can consist of just one member or many members (LLCL § 102 [m]). Furthermore, There are no statutory qualifications for a manager. A manager may be a natural person or an entity (LLCL §§ 102[p], [w]). Thus, arguments by defendants that 25A Place has no individual" members is not legally accurate.
Without a complete copy of the bylaws, the offering plan and possibly other documents, the court cannot definitively interpret the parties' agreement or obligations one way or another. The court cannot rule out the possibility that there are ambiguities that would require the consideration of parole evidence. Thus based strictly on the language in Article 6.14.1, defendants have not proved plaintiffs have no cause of action or that defendants are entitled to summary judgment. There is no limitation in that particular provision that a member of the unit owner be a natural person."
Defendants' alternative argument, that the complaint should be dismissed because Fund 1 does not have legal capacity to sue, also fails. It is undisputed that 25A Place held title to the unit until recently and it has since transferred title to Fund 1, its managing member. Although defendants themselves acknowledge that the transfer of title is in question," they nonetheless aver (through the affirmation of their attorney, not a person with personal knowledge of the facts) that the transfer does not comply with Section 8 of the bylaws. The bylaws have not been provided, but the paraphrased provisions do not support defendants' defense. Even if it did, there are triable issues of fact whether the transfer was done properly.
Affording the pleadings a liberal construction, accepting all the allegations in the complaint as true and providing plaintiffs with the benefit of every possible inference, plaintiffs have a cause of action, even if, as defendants argue, the board is no longer prohibiting plaintiffs' members, guests, etc., from using the unit. There is still a justiciable controversy to be resolved by the court; defendants have not stipulated to a permanent injunction, consented to the declaration sought, or agreed to any of the other relief sought in the amended complaint, including breach of contract.
Since summary judgment is a drastic remedy, it should not be granted where there is any doubt as to the existence of a triable issue of fact or where the factual issue is arguable or debatable ( International Customs Assoc., Inc. v. Bristol-Meyers Squibb Co., 233 AD2d 161, 162 [1st Dept 1996]). Here, there is a factual dispute whether the board prepared, signed or agreed to the statements contained in the November 6, 2006 letter which, according to plaintiffs, shows that the board consented to 25A Place's intended use of the unit. Since the court cannot resolve issues of credibility on a motion for summary judgment, it is for the jury to weigh the evidence and draw the legitimate inferences therefrom [S.J. Capelin Assocs. v Globe Mfg. Corp., 34 NY2d 338 [1st Dept 1974]). At this point, neither side has not produced any further proof about this letter.
Other defenses asserted by arguments raised by them, including that plaintiffs have no damages, they are using the unit as a vacation destination or, that the bylaws prohibit transient use of the unit, have either not been proved or state facts that have not been resolved and are disputed.
Defendants' motion pursuant to CPLR § 3124 is defective. The notices that defendants say they sent to the plaintiffs have not provided to the court. More importantly, the motion is not supported by an affirmation of good faith. That alone is a reason to deny defendants' motion (NY Ct. Rules § 202.7; Chichilnisky v. Trustees of Columbia University in City of New York , 45 AD3d 393 [1st Dept 2007]). There is, however, no reason that the members have to be subpoenaed if they are within the plaintiffs' control. Therefore, this branch of defendants' motion is denied without prejudice.
In sum, defendants have not proved the amended complaint should be dismissed for any of the reasons provided nor have they proved they are no material triable issues of fact. Those branches of their motion are denied. The discovery branch of their motion is denied without prejudice.
The preliminary conference will be held on May 13, 2010 at 9:30 a.m. in Part 10, 60 Centre Street, Room 232.
Any relief that has not been expressly addressed is hereby denied.
This constitutes the decision and order of the court.