Dorothee Senich, Plaintiff, v. 406 WEST STREET CORP

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Supreme Court, Appellate Division, First Department, New York.

John C. RYFUN, Plaintiff-Appellant, Dorothee Senich, Plaintiff, v. 406 WEST 46th STREET CORP., et al., Defendants-Respondents.

Decided: August 01, 2002

WILLIAMS, P.J., BUCKLEY, SULLIVAN, and ELLERIN, JJ. C. Jaye Berger, for Plaintiff-Appellant. Eileen O'Toole, for Defendants-Respondents.

Order, Supreme Court, New York County (Barbara Kapnick, J.), entered on or about October 4, 2001, which, insofar as appealed from as limited by the briefs, upon reargument, denied plaintiff's motion for summary judgment, granted defendants' cross motion for summary judgment, thus effectively vacating the court's previous declaration that the shares and proprietary lease previously issued to plaintiff for apartment 2C at 406 West 46th Street remained in full force and effect, unanimously reversed, on the law, without costs, plaintiff's motion granted, defendants' cross motion denied, and the matter remanded for further proceedings.

This matter allegedly arose as a result of a long-running dispute over unpaid maintenance fees and neglected repairs, and of plaintiff John Ryfun's purported transfer in 1993 of the proprietary lease and the cooperative shares for apartment 2C at 406 West 46th Street to his sister, plaintiff/occupant Dorothee Ryfun Senich, who subsequently lost the lease and the stock certificate.   As part of a 1996 stipulation settling an action she brought in Civil Court seeking a maintenance reduction for lack of repairs, she and the cooperative agreed that a new stock certificate would issue upon delivery of an indemnity agreement for the lost certificate;  however, the indemnity was never delivered.

In 1999, the cooperative was still in possession of the ownership documents and, in response to the aforementioned dispute with the Ryfuns over maintenance fees and repairs, the cooperative's board of directors, at a special meeting, amended the cooperative's proprietary leases to create a new security interest in the cooperative shares in the event of unpaid maintenance fees.   The lease amendment permitted, among other things, the termination of the lease and the cancellation of shares in the shareholder's name and their reissuance to a transferee.   Upon notice to John Ryfun by registered mail dated January 20, 1999, to which he did not respond, the cooperative purported to exercise its security interest by terminating plaintiffs' lease and canceling their shares and reissuing them to itself, then commenced a holdover proceeding against plaintiff Dorothee Ryfun Senich.

While we find that the cooperative's board of directors acted in accordance with its by-laws in holding the special meeting and amending the proprietary lease, we also find that they improperly exercised the security interest.   The retention of the collateral for the Ryfun apartment not only failed to comport with, inter alia, the notice, accounting and foreclosure sale requirements of former UCC 9-504(2) and (3)(current version at UCC 9-610-16 [2001] ), the statutory provisions then governing disposition of collateral after default, but it also took undue advantage of the happenstance that, at the time, the cooperative was in physical possession of the Ryfun stock certificate.   The latter circumstance was strictly the result of the pending reissuance of a new stock certificate;  the shares were not being held as security for a debt.   Thus, the cooperative was not in the position of a former UCC 9-505(2) “secured party in possession” (current version at UCC 9-620 [2001] ).   Moreover, the cooperative's conduct also failed to comport with plaintiffs' rights under various provisions of the Real Property Law and the Real Property Actions and Proceedings Law (see, e.g., RPL § 235-b;  RPAPL 751, 753;  61 East 72nd Street Corp. v. Zimberg, 161 A.D.2d 542, 556 N.Y.S.2d 46).