WEST 20TH ST TENANTS CORP v. DEZER PROPERTIES LLC (2024)

Order, Supreme Court, New York County (Suzanne Adams, J.), entered on or about February 6, 2024, which denied plaintiff's motion for summary judgment in its favor and to dismiss defendant's first, third, and fourth counterclaims, unanimously reversed, on the law, with costs, the motion granted, and the matter remanded for a hearing on damages and attorneys' fees.

Supreme Court should have granted summary judgment as to liability in plaintiff's favor on its cause of action for breach of contract (the first cause of action), which alleged that defendant failed to pay assessments, and on its related cause of action for attorneys' fees (the second cause of action).  Defendant, as successor to the original sponsor and the holder of unsold shares, is bound by the terms of the original offering plan, bylaws, and form proprietary lease.  In the context of shares in a cooperative corporation, “[t]he leasehold and the shareholding are inseparable” (State Tax Commn. v. Shor, 43 N.Y.2d 151, 154, 400 N.Y.S.2d 805, 371 N.E.2d 523 [1977]).  Therefore, there is no question of fact as to whether defendant is bound by the terms of the cooperative's form proprietary lease even though an executed copy could not be located (see Kralik v. 239 E. 79th St. Owners Corp., 5 N.Y.3d 54, 59, 799 N.Y.S.2d 433, 832 N.E.2d 707 [2005]).

Although in general, “failure to produce [a] contract ․ constitutes a defect in its prima facie showing requiring denial of its motion for summary judgment regardless of the sufficiency of [the] opposing papers” (Colbourn v. ISS Intern. Serv. Sys., Inc., 304 A.D.2d 369, 369, 757 N.Y.S.2d 291 [1st Dept. 2003]), the offering plan and form proprietary lease in the record provide the relevant terms governing the parties' rights and obligations.  Under these facts, the allegation that no proprietary lease was ever executed is insufficient to create a question of fact.

The doctrine of res judicata also bars defendant from raising a question of fact as to its liability for the disputed assessments, and from asserting its counterclaims, which seek a refund of the assessments (first counterclaim) and recovery of its attorneys' fees (fourth counterclaim).  At a previous trial in a nonpayment proceeding between these parties, Civil Court determined that the holder of unsold shares is bound to pay its proportionate share of the building-wide and common area costs as is any other shareholder, and the Appellate Term affirmed that determination (6 W. 20th St. Tenants Corp. v. Dezertzov, 71 Misc.3d 1226[A], 2021 N.Y. Slip Op. 50505[U], *12, 2021 WL 2197667 [Civ. Ct., N.Y. County 2021], affd 75 Misc.3d 135[A], 2022 WL 2312286 [App. Term 1st Dept. 2022]).  Thus, the Civil Court trial already addressed defendant's general denial of its obligation to pay the assessment, its unsupported factual assertion that assessments paid for work were actually related to the interior of other apartments, and the issues raised in the counterclaims.  The question of whether defendant is required to pay the disputed assessments has therefore been conclusively litigated and decided against defendant (see In re Hunter, 4 N.Y.3d 260, 269, 794 N.Y.S.2d 286, 827 N.E.2d 269 [2005];  O'Brien v. City of Syracuse, 54 N.Y.2d 353, 357, 445 N.Y.S.2d 687, 429 N.E.2d 1158 [1981]).  Furthermore, there is no merit to defendant's assertion that res judicata does not apply to the dismissal of its counterclaim in the nonpayment proceeding after trial merely because the decision did not state that the dismissal was “with prejudice” (see Plaza PH2001 LLC v. Plaza Residential Owner LP, 98 A.D.3d 89, 98, 947 N.Y.S.2d 498 [1st Dept. 2012]).

The counterclaim seeking reformation of the offering plan, bylaws, and proprietary lease to state that defendant does not have an obligation to pay the assessments relating to the conversion of the building from commercial to residential use (third counterclaim) should have been dismissed as time-barred.  Defendant has not demonstrated that CPLR 203(d) would allow it to assert a claim to reform contractual obligations that its predecessor drafted more than 40 years ago (see 182 Franklin St. Holding Corp. v. Franklin Pierrepont Assoc., 217 A.D.2d 508, 509, 630 N.Y.S.2d 64 [1st Dept. 1995]).