Opinion
Index No. 653550/2021
10-25-2022
Parc 56 LLC, Plaintiff, v. Board of Managers of the Parc Vendome Condominium, BRADFORD WINSTON, Defendant.
Plaintiffs by: Meister Seelig & Fein LLP. Defendants by: Lewish Brisbois Bisgaard & Smith LLP.
Unpublished Opinion
Plaintiffs by: Meister Seelig & Fein LLP.
Defendants by: Lewish Brisbois Bisgaard & Smith LLP.
Andrew Borrok, J.
The following e-filed documents, listed by NYSCEF document number (Motion 005) 222, 223, 224, 226, 227, 228, 229, 230, 231, 232, 233, 240, 241, 242, 243, 244, 246 were read on this motion to/for RENEW/REARGUE/RESETTLE/RECONSIDER.
The following e-filed documents, listed by NYSCEF document number (Motion 006) 235, 236, 237, 238, 239, 274, 275, 276, 277, 278 were read on this motion to/for STRIKE PLEADINGS.
The following e-filed documents, listed by NYSCEF document number (Motion 007) 247, 248, 249, 250, 251, 252, 268, 272, 273 were read on this motion to/for QUASH SUBPOENA, FIX CONDITIONS.
The following e-filed documents, listed by NYSCEF document number (Motion 008) 253, 254, 255, 256, 257, 258, 259, 260, 261, 262, 263, 264, 265, 266, 267, 269, 270, 271, 279, 280, 281, 282, 283, 284, 285, 286, 287, 288, 289, 290, 291 were read on this motion to/for CONTEMPT.
This case involves the latest chapter in the Board of Managers of the Parc Vendome Condominium's (the Board) over 14 year intentional and deliberate efforts to frustrate the legitimate property rights of the owner of the commercial condominium unit (the Unit) in the Parc Vendome Condominium (the Condominium), currently owned by Parc 56 LLC (the Unit Owner).
Reference is made to a Decision and Order of this Court, dated June 8, 2022 (the Prior Decision; NYSCEF Doc. No. 215). In the Prior Decision, this Court held that the Alterations Agreement (hereinafter defined) was a valid binding agreement and that the Board had acted in bad faith:
On the record before the court, the facts unequivocally demonstrate that the alteration agreement was sent by the Board of Managers of the Parc Vendome Condominium (the Board)'s managing agent to the Unit Owner on January 4, 2021 and the Unit Owner signed and returned it on January 28, 2021 (NYSCEF Doc. No. 159). The Board reviewed the plans and specifications submitted in accordance with the proposed use for the unit, which was the exact same use that the Board previously approved for the prior owner of the condominium unit owned by the Unit Owner. In fact, in connection with this use, the Board previously executed an amendment to the certificate of occupancy. The Board previously falsely told the Court that it did not know the location of the check for the alteration fee. It is now clear that the Board knew exactly where the check was and has been holding it for six years, has never made attempt to return the deposit to the prior owner and always understood that this check was to be applied to this Unit Owner's application. Among other things, additionally, the Unit Owner offered to pay other expenses and a replacement fee. The Board's attempt to argue now that its agent lacked the authority to send the alteration agreement, that the Unit Owner signed the wrong alteration agreement, that they never signed this alterations agreement (even though they clearly took substantial steps in furtherance of accepting this agreement by reviewing the plans) or that the governing documents refer to a different alterations agreement screams of bad faith. The alteration agreement that the Unit Owner received at closing was the alteration agreement that it signed and returned (NYSCEF Doc. No. 208). It does not matter that the contract documents included language that a different alterations agreement would be applicable to this unit as this was the alterations agreement that was delivered to the Unit Owner at closing. Even if the contract documents required a different alterations agreement, when the Board's managing agent sent the alteration agreement and the Board did not say a word for months, they waived their right to then come back and require a different alterations agreement.(id.).
At the time, this Court declined to award the Unit Owner summary judgment that the Board had waived the right of first refusal (the ROFR) as to the Proposed Lease (hereinafter defined) because the Court held that there were issues of fact as to whether the obligations that the Board were attempting to hoist on the Unit Owner were in fact required by the governing documents as they then falsely claimed. Now it is clear that they are not.
Indeed, on the record before this Court, it now is clear that Defendants, the Board and Bradford Winston, will stop at absolutely nothing to prevent the Unit Owner from the lawful use and enjoyment of its Unit, including deliberately and intentionally attempting to mislead this Court in at least three ways. Specifically, Defendants (i) misrepresented that they did not have the Alterations Fee (when in fact they did), (ii) misrepresented that the Unit was subject to obligations in the governing documents that required the Unit Owner to absorb certain costs and responsibilities for the work that it contemplates doing (when in fact the governing documents impose no such obligation for the work the Unit Owner contemplates doing and the Board attempted to address this very issue by purporting to offer a Proposed Eighth Amendment (which was never properly passed and implemented-something else hidden from this Court)), and (iii) breached the Board's own obligations under the Bylaws, the Parcven Alterations Agreement and the Settlement Agreement (as discussed below).
As discussed below, in 2017, the Board had attempted to pass an Eighth Amendment to the Declaration (the Proposed Eighth Amendment; NYSCEF Doc. No. 230) (which would have required unit owners requesting a change in use to absorb the costs which the Board has attempted to have the Unit Owner absorb). However, the Board failed to obtain the supermajority vote required to have the Proposed Eighth Amendment adopted-something the Board knew but never disclosed to this Court. Instead, the Board willfully and contumaciously strung the Unit Owner-and this Court-along, never exercising or waiving the ROFR as to the Proposed Lease and frivolously arguing that the Proposed Lease does not comply with the governing documents because, among other things, of its proposed change in use - the very use they previously approved in connection with a settlement of certain litigation with a prior owner of the Unit. To be clear, the Board has indicated that it would approve the change in use and sign the forms if the Unit Owner agreed to absorb the very costs contemplated by the Proposed Eighth Amendment. Upon review, and as discussed below, the only requirement in the governing documents that the Board actually relies on in taking this position is the Parcven Alterations Agreement which applies by its terms to the work contemplated by that agreement and does not apply to the work contemplated by this Unit Owner. This is clear from express terms of the documents themselves, and this the Board knew and understood. Were that not the case, the Board never would have asked the Unit Owner to execute a new alterations agreement covering these costs (having already sent them and accepted the Alterations Agreement which did not impose this obligation). Having knowingly made this wholly meritless argument to this Court to needlessly elongate these proceedings, and attempting to perpetrate a fraud on the Court, striking its pleadings are warranted.
2006 - 2012
The story begins in 2006 when 322 West 57th Owner LLC (the Sheffield Sponsor), Swig Equities, LLC (Swig Equities), and the Board entered into a letter agreement pursuant to which the Sheffield Sponsor and Swig Equities were to engage professionals to design and perform water remediation work at the Condominium. The remediation work was necessitated by water damage caused to the Unit, allegedly by the Condominium and adjoining property owners.
In 2007, Parc Vendome HClub Investors, LLC (HClub), the owner of the Unit, sued the Board over the water damage to the Unit. That lawsuit led to an arbitration between HClub, the Board, the Sheffield Sponsor, and the Board of Managers of the 322 West 57th Street Condominium (the Sheffield Condominium; the Sheffield Sponsor together with the Sheffield Condominium, hereinafter, collectively, the Sheffield Parties) where those parties agreed that the water remediation work to be performed at the Condominium would consist of work to both the exterior and interior sides of the walls of the Unit. The remediation work was to be performed by the Board and the Sheffield Parties.
In 2008, in attempt to resolve a dispute with the prior owner of the Unit, Mr. Bradford signed a PW-1 authorizing a change in use in the certificate of occupancy (NYSCEF Doc. No. 74) - the very change in use contemplated by the Unit Owner. According to Mr. Bradford, he did this pursuant to an order issued by the arbitrator in connection with the dispute with HClub (NYSCEF Doc. No. 32, ¶ 85). As discussed further below, this is evidence that Elizabeth Schrero, counsel to the Board, falsely stated that the Board was not authorized to sign a PW-1 (NYSCEF Doc. No. 72). Indeed, this is just one example of the Board's bad faith efforts to frustrate the hard-fought rights for use of the Unit in the manner contemplated by the Unit Owner. More on that below.
In the 2009 arbitration, the arbitrator issued a partial final award to establish a sequence of work to be followed by the Board and the Sheffield Sponsor in repairing the walls and work to be done by HClub to install a new mezzanine floor in the Unit which would function as a structural bracing. Despite the partial final award establishing the work sequence for the water remediation work, the arbitration dragged on. Ultimately, the prior owner lost its tenant for the Unit and was unable to pay its mortgage. HClub defaulted on its mortgage, its lender foreclosed on the Unit in March 2010, and Parcven Realty Holdings, LLC (Parcven) purchased the Unit. In other words, the very strategy the Board attempts to employ here - the Board previously successfully employed against previous owners of the Unit.
The Settlement Agreement and the HVAC Issue
In October 2012, as part of the ongoing arbitration, the Board, Parcven, and the Sheffield Parties entered into a Settlement Agreement (the Settlement Agreement; NYSCEF Doc. No. 64). Parcven executed the Settlement Agreement and agreed to be bound by its terms even though it did not participate in the arbitration.
In the Settlement Agreement, the parties acknowledged that the HVAC for the Unit was inadequate. They agreed that the owner of the Unit would both be allowed to tie into the existing system and create new penetrations for new gooseneck ducts. Additionally, and realizing that this may not be sufficient, the Board and Parcven agreed to work in good faith to come to a solution that would be satisfactory to all parties to address the HVAC issue plaguing the Unit:
Parcven represents that it believes that the heating, ventilating and air conditioning ("Existing HVAC') unit at the Building, which is a common element of the PV Condominium and currently services the PV Condominium's lobbies and some of the 57th Street retail units, may not have adequate capacity to service the Health Club Unit, based upon an assessment it obtained from an engineer and architect. Parcven and the PV Condominium agree to continue to work in good faith, together with their respective architects and engineers, in order to address the supply of adequate HVAC to the Health Club Unit, and to attempt to agree upon a reasonable solution, that is acceptable to all parties. The Board of Managers of the PV Condominium will cooperate with Parcven to arrive at a workable HVAC solution, using among other things, the existing gooseneck duct that has been in place on the roof above the Health Club Unit since prior to the conversion of the buildings to condominium ownership status, and that previously served the Former Health Club Unit, and two (2) new gooseneck ducts, to be installed (through two (2) new roof penetrations) at Parcven's cost, on the roof of the Health Club Unit. The gooseneck ducts, in the sizes and approximate locations indicated on Exhibit A annexed hereto, will serve as future intake and exhaust for a cooling system to be installed in the Health Club Unit by either Parcven or a successor owner of the Health Club Unit. In the event that the PV Condominium has an existing roof warranty, the PV Condominium will provide Parcven with its roofing company's contact information so that Parcven may retain said company to patch the area(s) on the roof surrounding the new gooseneck duct so as not to void any existing roof warranty. In the event that no roof warranty exists, Parcven shall retain a licensed contractor of its choosing to patch the area(s) on the roof surrounding the new gooseneck ducts, as necessary. Notwithstanding the foregoing, however, Parcven shall not be precluded from using any existing connected ventilation within the Health Club Unit for any other purposes(id., at ¶ 4 [emphasis added]). The parties also agreed that the Condominium would not unreasonably withhold or delay its waiver of its right of first refusal as to a proposed lease which intended to use the Unit (id., ¶ 3).
Because the parties had agreed that the Settlement Agreement would inure to the benefit of the parties and their respective successors and assigns, the Board's obligations under the Settlement Agreement inure to the benefit of the Unit Owner (id., ¶ 12).
As discussed further below, the Board has unequivocally violated the terms of the Settlement Agreement. Indeed, the Board has not met its obligation to not unreasonably withhold or delay its waiver of the ROFR for the Proposed Lease and has not worked with the Unit Owner to address the HVAC issue. Instead, and even after accepting the plans and specifications (as discussed below) many months later (and notwithstanding that they only have 30 days per the Bylaws to review the plans and specifications) the Board objected to the placement of the HVAC on the roof and told the Unit Owner that he must tie into existing hose bibs. This unquestionably breached the terms of the Settlement Agreement both because the Settlement Agreement permitted the Unit Owner to make new penetrations (into the roof and the common elements) and also because the Board expressed no reason for its objection other than that the air conditioning units would in fact be in the common elements on the unused portion of the roof. They offered no viable alternative and otherwise made zero attempt to cooperate with the Unit Owner to ensure adequate HVAC to the Unit as they were obligated to do under the Settlement Agreement.
2016-2021
Parcven Alterations Agreement, the Alterations Fee, the Alterations Agreement, the Assignment to the Unit Owner and the Plans and Specifications Parcven and the Board entered into an alterations agreement (the Parcven Alterations Agreement; NYSCEF Doc. No. 34) dated as of October 7, 2016. Pursuant to the Parcven Alteration Agreement and in order to fulfill its obligations under the Settlement Agreement, Parcven was to do work on the mezzanine floor and fireproof exposed columns, girders, and beams in the Unit (id., ¶ 1). Under the Parcven Alterations Agreement, Parcven was obligated to pay (i) for any property damage or adverse effect to the common elements of the Condominium and (ii) an alteration fee of $10,000 (the Alterations Fee) (id., ¶ 3). Parcven paid the Alterations Fee.
As discussed in the Prior Decision, it is beyond dispute that the Unit Owner told the Board to apply the Alterations Fee which was transferred to the Unit Owner and inured to its benefit pursuant to the terms and conditions of the Parcven Alterations Agreement (the Board had never returned the Alterations Fee to Parcven). In addition, and as discussed in the Prior Decision, the record establishes (x) that the deal with the Unit Owner included that the Alterations Fee would be transferred to it pursuant to the Assignment, (y) that the Unit Owner told the Board by email to apply the Alterations Fee to the alterations fee required by the Alterations Agreement and (z) to the extent of any confusion as to the location of the Alterations Fee, the Unit Owner offered to provide a replacement alterations fee.
Parcven assigned all of its rights in the Unit to the Unit Owner on October 19, 2020 (the Assignment; NYSCEF Doc. No. 166). On November 11, 2020, the Unit Owner sent a request (NYSCEF Doc. No. 66) to the Board to waive its ROFR with respect to a proposed lease that it entered into as of September 14, 2020 (NYSCEF Doc. No. 166; the Proposed Lease). The Board neither expressly exercised nor waived its ROFR and still has not expressly done so as of the date of this decision and order. Instead, the Board pocketed the Lease and frivolously claimed that the Lease did not comply with the governing documents (NYSCEF Doc. No. 67) and that, therefore, the time to exercise or waive the ROFR had not even begun to accrue.
On January 4, 2021, the Unit Owner submitted plans and specifications for the Board's review (NYSCEF Doc. No. 159). On January 11, 2021, the Board forwarded the Unit Owner's plans to its engineers, FSI, and asked them to review the plans and specifications (NYSCEF Doc. No. 160).
The Board's managing agent sent an alterations agreement to the Unit Owner, and the Unit Owner executed and returned the alterations agreement on January 28, 2021 (the Alterations Agreement; NYSCEF Doc. No. 159). As discussed in the Prior Decision, the Board immediately began their review of the plans and specifications pursuant to the Alterations Agreement. The Unit Owner requested that the Board sign a PW-1 DOB form to permit the legal use of the Unit to be changed for use as a child day care - i.e., the same form the Board had previously signed for HClub and for the same change in use.
The Board first responded to the Unit Owner's submissions on January 29, 2021, when it provided an assessment from FSI (NYSCEF Doc. No. 162). In that assessment, FSI indicated that they required additional information and clarification before construction approval could be granted (id., at 8).
On February 24, 2021, the Unit Owner responded to FSI's inquiries and provided certain additional information (NYSCEF Doc. No. 163).
FSI reviewed the Unit Owner's response and on March 10, 2021 (NYSCEF Doc. No. 68) indicated that the alterations were approved and ready for the Board's execution:
Forms for the Alt-1 'No Work' are acceptable for Board signature. Applicant should submit remaining Alt-2 applications for review(id., at 11).
On March 16, 2021, Ms. Schrero indicated to the Unit Owner that the Board was prepared to sign the PW-1 form on certain conditions, including that the Unit Owner pay or reimburse the Board for all costs and expenses that may be incurred (i.e., the very covenant that the Board tried to impose on all units pursuant to the Proposed Eighth Amendment which the Condominium rejected) and provided that the Unit Owner execute an alterations agreement in form and substance acceptable to the Board (and notwithstanding that the Unit Owner had over four months prior executed the Alterations Agreement which the Board had accepted) (NYSCEF Doc. No. 69).
The Unit Owner responded (NYSCEF Doc. No. 70) that it was prepared to pay any and all costs to the extent any such costs were required by the Condominium Declaration or Bylaws or any other agreement between the Board and a previous owner (i.e., including the Parcven Alterations Agreement) but commented that the requirement of an alterations agreement was not necessary because they had already executed and delivered the alterations agreement. The problem for the Board was of course that these costs that the Board wanted the Unit Owner to absorb pursuant to the work it contemplates doing are not covered by the Alterations Agreement (i.e., it is not the same work as the Work defined in Parcven Alterations Agreement).
Having not heard from the Board further about the Lease (i.e., 127 days after its November 11, 2020, request), on March 18, 2021, the Unit Owner again requested that the Board exercise or waive its ROFR (NYSCEF Doc. No. 71).
On April 20, 2021, Ms. Schrero sent a letter to the Unit Owner reiterating that the Board would sign the PW-1 form approving the change in use of the Unit if, among other things, the Unit Owner covered certain costs:
You and your successors and assigns, shall be solely and fully responsible, at your sole cost and expense, to obtain such additional consents in writing of parties in interest (if any) as may be required to amend the C of O to permit the HC Child Care/Class Rooms Conversion of the Unit or to authorize the Board to sign the PW-1, or to alter the Unit to construct the HC Child Care/Class Rooms Conversion of the Unit in accordance with your plans and specifications(NYSCEF Doc. No. 72, at 2-3).
Payment of all costs associated with the execution of the PW-1 was not required by the Alterations Agreement, nor was it required by the Condominium Declaration or Bylaws, and the Parcven Alterations Agreement did not apply to the work contemplated by the Unit Owner and only applied to the "Work" as such term was defined in that agreement. In other words, having realized their mistake in accepting the Alterations Agreement, the Board held up the Unit Owner in bad faith. The Court also notes that the Unit Owner could not have been responsible to get the consents necessary for the Board to have the authority to sign the PW-1. The Board had the authority and had done it before. In this letter, the Board did not address whether it was exercising or waiving the ROFR.
Eight days later, on April 28, 2021 (the April 2021 Letter; NYSCEF Doc. No. 75), and 168 days after initially receiving the Proposed Lease, the Board wrote to the Unit Owner that among other things, "the Lease does not comply with the requirements of said Article XIII and is not acceptable to the Board. Therefore, it is premature to determine whether to exercise our ROFR" (id., at 2). This unquestionably violated both the Settlement Agreement and the Condominium Declaration and Bylaws. As discussed below, the Board has only 30 business days to exercise or waive the ROFR. In other words, and as discussed below, this came well after the ROFR was deemed waived.
In the April 2021 Letter, the Board also wrote that the amended Lease Section 5.1 is inconsistent with the terms of the Parcven Alterations Agreement. The position is simply frivolous. For clarity, the Board's position was predicated on the untenable position that because the Parcven Alterations Agreement indicated that it would apply to future alterations or repairs, and because it inured to the benefit of successor and assigns, that it necessarily meant that the Unit Owner and its work (i.e., as opposed to the work contemplated by the Parcven Alterations Agreement), obligated the Unit Owner to absorb costs not otherwise covered by the Condominium Declaration and Bylaws and only agreed to as part of the Settlement Agreement and the Parcven Alterations Agreement.
These are the very costs that the Board tried to have the Condominium address in attempting (but failing) to enact and implement the Proposed Eighth Amendment.
In 2017, the Board proposed the Proposed Eighth Amendment which would have amended the Declaration to, among other things, (i) require unit owners to pay the costs and expenses incurred in maintaining, repairing, and altering the common elements and (ii) allocate and apportion to a unit owner any expense incurred by the Board as a result of a change in use of a unit (NYSCEF Doc. No. 230, at 1-2). To pass the Proposed Eighth Amendment, the governing documents required the vote of a supermajority of unit owners. As discussed above, the Board failed to obtain this supermajority and the Proposed Eighth Amendment was never adopted by the Condominium. The record is clear that the Defendants never informed the Court that the Proposed Eighth Amendment had not been enacted or implemented and concealed from the Court that the Board had in fact tried to introduce such Proposed Eighth Amendment to address this very issue.
The Board's position is further undermined by their outrageous conduct described in the Prior Decision. To wit, they sent the Unit Owner the Alterations Agreement which did not impose these obligations, accepted the Alterations Fee, reviewed the Plans and Specifications and then later demanded that the Unit Owner execute a different alterations agreement (i.e., an alterations agreement that provided for the Unit Owner to absorb the very costs contemplated by the failed Proposed Eighth Amendment and the Parcven Alterations Agreement with respect to the work contemplated by that agreement). If the Board truly believed that the terms of the Parcven Alterations Agreement were the terms that applied to the work at issue here, the Board would not have required a new alterations agreement and they certainly would never have gone through the shenanigans that they went through in trying to get the Unit Owner to execute a substitute alterations agreement, including falsely stating that they did not have, and did not have a record of, the Alterations Fee to this Court.
As discussed in the Prior Decision, the Board never made any attempt to return the Alterations Fee to the prior owner. This is prima facie evidence that they knew full well that this Alterations Fee was part of the deal in the assignment of the Unit to the Unit Owner. The fact that the Unit Owner sent emails telling the Board to apply the Alterations Fee and also offering to provide a replacement alterations fee if necessary firmly further establishes the fraud perpetrated on this Court by the Board in denying that they knew anything about it.
On April 29, 2021, the Unit Owner sent a second set of responses to the second review by FSI (NYSCEF Doc. No. 164, at 2). Having heard nothing from the Board, the Unit Owner followed up by email dated June 7, 2021, asking for an update on the April 29, 2021, email (id., at 1). This was gratuitous and without obligation as the 30 days for review of the plans and specifications had passed and the April 29, 2021, plans and specifications were deemed accepted. However, because the Unit Owner continued to respond to comments, the plans and specifications which will be the binding plans and specifications are the November 4, 2021, plans and specifications.
By email dated June 17, 2021, AKAM, the managing agent for the Board, told the Unit Owner that the alterations agreement it had submitted in five months prior was sent in error and that it had been rejected by the Board (NYSCEF Doc. No. 73) and demanded that the Unit Owner execute a substitute alterations agreement providing for the same cost allocation as the Parcven Alterations Agreement and the Proposed Eighth Amendment. As discussed above, in the Prior Decision, the Court held that the Alterations Agreement returned in January 2021 was the valid binding alterations agreement.
On September 21, 2021, the Board sent a letter to the Unit Owner's counsel stating, among other things, that it disputed the Unit Owner's representation that the Board alone was responsible to figure out the impacts of the Unit Owner's proposed plans and that the Board required certain information from the Unit Owner for Milrose Consultants (Milrose), the Board's consultant, to determine how the proposed change of use for the Unit would affect the Condominium (NYSCEF Doc. No. 112). As discussed in the Prior Decision, Milrose determined, and counsel for the Board acknowledged, that the impact would be minimal (NYSCEF Doc. No. 115, at 1).
On October 4, 2021 (NYSCEF Doc. No. 113), the Unit Owner responded by email. On October 22, 2022, the Unit Owner provided additional comments (NYSCEF Doc. No. 114) and the Board subsequently provided the report from Milrose dated October 27, 2021 (NYSCEF Doc. No. 115). On November 4, 2021, the Unit Owner responded with its revised set of plans implementing Milrose's comments and recommendations (NYSCEF Doc. No. 117). The Board provided no further comments or responses until July 21, 2022 (some 259 days later). Inasmuch as the Board only has 30 days to respond, or the plans are deemed accepted, this set of plans is the accepted set of plans and specifications to which the Board and the Condominium are bound.
In July 2022, approximately eight months later, and further highlighting the Board's bad faith, upon request for further review by the Board, FSI remarkably changed its previous position from approximately 16 months earlier (i.e., March 2021) (NYSCEF Doc. No. 241) where it had indicated that the plans were approved and recommending execution of the Alt-1 application now indicating the opposite:
We recommend against the premature filing of an Alt-1 application until all open items and issues have been resolved(id., at 2).
No explanation is given for why FSI changed its mind nearly a year and a half after its prior submission. Indeed, the only real thing which has occurred is that this Court rejected the Board's previous frivolous arguments that they were not bound by the Alterations Agreement because it was sent by their managing agent and notwithstanding that they had begun reviewing the plans and specifications based on such Alterations Agreement or its previous false assertion to this Court that it did not know the location of the Alterations Fee. Putting aside that the report is untimely because the plans and specifications were deemed accepted, it is an additional bad faith breach by the Board of the Condominium Declaration and Bylaws and the Settlement Agreement.
The Condominium Bylaws indicate that a Board shall exercise or waive its right of first refusal with respect to a proposed lease (NYSCEF Doc. No. 86, Art. XIII, § 2[c][ii]). The Board had the obligation to answer within 30 business days if it wanted to exercise its right of first refusal and lease the unit itself under the same terms (id.). The Proposed Lease was submitted on November 11, 2020
. The Board responded on December 24, 2020 (NYSCEF Doc. No. 86), i.e., on the 30th business day after the November 11, 2020, submission, to request additional information. This it was entitled to do (NYSCEF Doc. No. 86, Art. XIII, § 2[b]). The Board also indicated in the December 24, 2020, letter that it would respond to the Unit Owner's request that it waive the right of first refusal within 30 days of receiving such information. The Unit Owner sent its plans as requested on January 4, 2021. When the Unit Owner again followed up on March 18, 2021, it was not until April 28, 2021, that the Board responded. This was well more than 30 business days after the Board received the Proposed Lease (November 11, 2020) and the plans (January 4, 2021). Thus, the Board waived the ROFR as to the Proposed Lease.
The Condominium Declaration indicates that any alterations to the exterior of the Unit or any part of the common elements may be made by written consent of the Board (NYSCEF Doc. No. 86, § 18[b]). After consent is requested by mailing, the Board has thirty days to respond and failure to do so within that stipulated time means there is no objection to the proposed modification or alteration (id.). As discussed above, the Board first received the plans and specifications on January 4, 2021 and the Alterations Agreement on January 28, 2021. The latest possible date that the Board approved plans and specifications was December 4, 2021 (i.e., 30 days after they received the November 4, 2021, plans and specifications).
As discussed above, in the Prior Decision, the Court held that the Defendants acted in bad faith:
The Board's attempt to argue now that its agent lacked the authority to send the alteration agreement, that the Unit Owner signed the wrong alteration agreement, that they never signed this alterations agreement (even though they clearly took substantial steps in furtherance of accepting this agreement by reviewing the plans) or that the governing documents refer to a different alterations agreement screams of bad faith(NYSCEF Doc. No. 215, at 2).
The Court further held that the Board misrepresented the status of the check for the Alteration Fee to the Court:
The Board previously falsely told the Court that it did not know the location of the check for the alteration fee. It is now clear that the Board knew exactly where the check was and has been holding it for six years, has never made attempt to return the deposit to the prior owner and always understood that this check was to be applied to this Unit Owner's application(id.).
Based on this record, the Court now addresses the pending motions:
I. Defendants' motion for leave to reargue (Mtn. Seq. No. 005) is denied and the cross-motion to strike is granted
The Defendants move for leave to reargue the Court's findings in the Prior Decision that (i) the Board acted in bad faith, (ii) the Board falsely told the Court that it did not know the location of the check for the alteration fee and that the check was to be applied to the Unit Owner's application, and (iii) the Unit Owner need not indemnify the Board for costs, expenses, and attorneys' fees incurred with the change in use and alterations to Unit Owner's commercial unit.
A motion for leave to argue must be based on matters of law or fact allegedly overlooked or misapprehended by the Court in determining a prior motion but shall not include any matters of fact not included in the prior motion (CPLR 2221[d]). A motion for reargument may not be based on arguments different from those previously asserted (Independent Chemical Corp. v Puthanpurayil, 165 A.D.3d 578, 578 [1st Dept 2018]). Where the Court finds by clear and convincing evidence that conduct constitutes a fraud on the Court, the Court may impose sanctions, including striking pleadings (John Quealy Irrevocable Life Ins. Trust v AXA Equit. Life Ins. Co., 206 A.D.3d 580, 580 [1st Dept 2022]). Fraud on the court involves willful conduct that is deceitful and obstructionist that injects misrepresentations and false information into the judicial process so serious that it undermines the integrity of the proceedings (id.).
The Court did not misapprehend any matters of law or fact in holding that the Defendants acted in bad faith. The undisputed facts demonstrate that (i) the Unit Owner received the Alterations Agreement from the Board's managing agent when it acquired the Unit at closing, (ii) the Unit Owner signed and returned the Alterations Agreement, (iii) the Board reviewed the Unit Owner's plans and (iv) the Board had the Alterations Fee (and misrepresented the same to this Court) and that the Unit Owner had sent them emails telling them to apply the Alterations Fee. Subsequently sending out an alterations agreement (five months later) in attempt to have the Unit Owner absorb costs contemplated by the proposed and not accepted Proposed Eighth Amendment and the Parcven Alterations Agreement and representing to this Court that these costs were required by the governing documents when in fact they knew that they did not (NYSCEF Doc. No. 215, at 3; because they had tried and failed to pass the Proposed Eighth Amendment) firmly established beyond a reasonable doubt that the Board acted deceitfully and injected misrepresentations and false information into the judicial process to undermine the integrity of the proceeding so as to avoid the Court granting the Unit Owner's motion for summary judgment. This is not, as the Defendants argue, simply a determination that they were wrong as a matter of law on factual issues. It is crystal clear that the Defendants' course of conduct was for an illegitimate purpose and not for the purpose of enforcing prior binding agreements.
As discussed above, the Court also correctly determined that the Board falsely represented to the Court that it did not know the location of the check for the Alteration Fee. In his affidavit in opposition to the Unit Owner's motion for summary judgment, Mr. Winston falsely stated that neither the Board nor AKAM, the Board's managing agent, had any record of it (NYSCEF Doc. No. 109, ¶ 50). As discussed in the Prior Decision, it is now well established that AKAM in fact still holds the funds deposited by Parcven and the Unit Owner told the Board to apply the funds. The Defendants' argument that this representation was made only as a response to the Unit Owner's statement that he submitted the funds is simply unavailing. Mr. Winston failed to disclose the carry over funds from Parcven and the omission was intentionally misleading and for the purpose of trying to compel this Court to find that the Alterations Agreement was not binding. This also is established beyond a reasonable doubt.
The Court also determined that the Unit Owner need not indemnify the Board for costs, expenses and attorneys' fees incurred in connection with the change in use and alterations to the Unit. Although the Unit Owner agreed pursuant to the Alterations Agreement that he would reimburse the Board for fees, costs and expenses incurred in connection with the proposed work (NYSCEF Doc. No. 208, § 3), the Court found that those terms were not imposed on Parcven and therefore refused to impose them on the Unit Owner. This was not an overreach or an abuse of discretion. The Board's motion for leave to reargue thus must be denied to this extent.
The motion to reargue however must be granted to the extent of reconsidering the Unit Owner's motion for summary judgment-which motion must now be granted. In the Prior Decision, the Court held that it was not clear whether the requirements imposed on the Unit Owner were reflected in the lease or other documents submitted by Parcven and that, if they were not, it would be prima facie evidence that the Board acted in bad faith and breached the governing documents (NYSCEF Doc. No. 215, at 3).
The Proposed Eighth Amendment (NYSCEF Doc. No. 230), which was never passed by the requisite supermajority of unit owners, would have required the unit owners to reimburse the Board for costs incurred in connection with a change of use or manner of use of a unit (NYSCEF Doc. No. 230, at 2). Even though never enacted, this requirement nonetheless was imposed by the Board on the Unit Owner in their response to the Unit Owner's request that the Board sign a PW-1 DOB form. As discussed above, this establishes that the Board acted in bad faith and the Unit Owner's entitlement to summary judgment.
The Unit Owner's cross-motion to strike the Defendants' answer must also be granted. As discussed above, it is beyond doubt that the Board attempted to perpetrate a fraud on the Court. In their cross-motion, the Unit Owner argue that the Defendants have engaged in frivolous conduct and cause the Unit Owner to incur substantial damages and legal fees. They also argue that the Defendants have engaged in an unconscionable scheme to unfairly hamper the presentation of the Unit Owner's claims. Significantly, they argue that the Board perpetrated a fraud on the Court by arguing that they did not seek to impose new requirements on the Unit Owner that were not required under governing documents. This they argue was knowingly false because this is what the express purpose of the Proposed Eighth Amendment was and such Proposed Eight Amendment was not accepted by the unit owners. As discussed above, the cross-motion must be granted and the Defendants' answer is struck.
II. The Defendants' motion to strike (Mtn. Seq. No. 006) is denied
The Defendants also move to strike the complaint or, in the alternative, to compel the Unit Owner to produce (i) all communications with the tenant related to an extension of time or alleged termination of the lease, (ii) documents concerning or related to the Lease, (iii) all correspondence between plaintiff and tenant concerning or related to this action, (iv) all correspondence between plaintiff and Jarmel Kizel Architects and Engineers, Inc. concerning the plaintiff's planned renovations and alterations, (v) all documents concerning or related to the due diligence conducted by the plaintiff with respect to the building or Unit prior to purchase of the Unit, and (vi) all documents evidencing or supporting plaintiff's allegation that it relied on the 2008 PW-1 and Settlement Agreement in deciding to purchase the Unit. These categories of documents were previously the subject of a motion to compel, and the Court ordered in the Prior Decision "that the Unit Owner shall produce, subject to any privilege, all communications relating to any extension of time or alleged termination of the lease and all documents which the Unit Owner previously agreed to produce" (NYSCEF Doc. No. 215, at 3). Striking the complaint is not proper, and the motion is denied.
III. Ms. Schrero's motion to strike a subpoena (Mtn. Seq. No. 007) is denied
The Unit Owner served a Subpoena (NYSCEF Doc. No. 250) on Ms. Schrero, seeking testimony regarding (i) prior litigation, actions, proceedings, and/or arbitrations concerning the Unit, (ii) the circumstances surrounding the order issued by the arbitrator, (iii) the Board's approval of the change of use of the Unit to a daycare center in 2008, (iv) the May 2007 between Parc Vendome HClub Investors LLC and Bright Horizons Children's Center, Inc., (v) the September 2020 lease between the Unit Owner and TLE, (vi) the Board's waiver or exercise of its right of first refusal to sell or lease the Unit, (vii) the Settlement Agreement, (viii) communications exchanged with the Unit Owner concerning the Unit, (ix) the Unit Owner's proposed alterations to the Unit, (x) the Board's review of the proposed alterations, (xi) the form alteration agreement sent to the Unit Owner, (xii) the Board's refusal to acknowledge the enforceability of the alteration agreement (xiii) the issue of fact raised in the Prior Decision as to whether the terms or clarifications requested by the Board were reflected in the lease or other documents submitted by the prior owner or otherwise required by the Board, (xiv) the content of her affirmation, (xv) the seventh amendment to declaration of condominium, (xvi) the Proposed Eighth Amendment, (xvii) any obligations of the unit owners to the Board as they relate to the Unit, and (xviii) the Unit. Ms. Schrero argues that these requests are overbroad and either bear no relationship to the lawsuit or have been mooted by the Prior Decision. She is not correct.
The Unit Owner is entitled to discovery of all information that is material and necessary (Kapon v Koch, 23 N.Y.3d 32, 38 [2014]). This requirement is to be interpreted liberally to require disclosure of all facts bearing on the controversy that will assist in preparation for trial by sharpening the issues and reducing delay (id.). A motion to quash should be granted only where the futility of the process to uncover anything legitimate is inevitable or obvious or where the information sought is utterly irrelevant to any proper inquiry (id.).
Ms. Schrero is a material witness in this case to the Board's bad faith and their incorrect assertion that the governing documents imposed obligations. It does not matter that she represented the Board previously. These obligations and the Board's conduct is placed "at issue" and can not be shielded from discovery based on the attorney client privilege. Thus, the motion must be denied.
For completeness, however, the request for information is now moot because the Defendants' answer is struck, summary judgment is granted to the Unit Owner, and this case is disposed.
IV. The Unit Owner's motion for contempt (Mtn. Seq. No. 008) is granted
The Unit Owner moves to hold the Defendants in contempt for violating the Prior Decision. Specifically, the Unit Owner argues that the Defendants are in contempt because they have not signed and returned the "no work" PW-1 that FSI previously approved for signing pursuant to the Alterations Agreement which this Court determined in the Prior Decision was the valid enforceable Alterations Agreement. In addition, the Unit Owner argues that the most recent 2022 FSI report highlights the Board's bad faith and willful and contumacious conduct in that it now - some approximately 1.5 years later attempts to revoke its prior recommendation of approval.
Pursuant to Judiciary Law § 753, the Court has the power to punish a party for contempt of court by fine or imprisonment. To make a finding of civil contempt, the Court must determine that (i) a lawful order of the Court, expressing an unequivocal mandate, was in effect, (ii) it appears with reasonable certainty that the order has been disobeyed, (iii) the party to be held in contempt had knowledge of the order, and (iv) prejudice to the right of a party to the litigation has been demonstrated (El-Dehdan v El-Dehdan, 26 N.Y.3d 19, 29 [2015]). The movant bears the burden of demonstrating contempt by clear and convincing evidence (id.). Pursuant to Judiciary Law § 750, the purpose of criminal contempt is to vindicate the authority of the court. To establish criminal contempt, the movant need not establish prejudice to the rights of a party to the litigation, but must demonstrate willful disobedience (Rolon v Torres, 121 A.D.3d 684, 685 [2d Dept 2014]). A showing of criminal contempt must be established beyond a reasonable doubt (id.).
The motion for contempt must be granted. The Defendants have willfully and contumaciously failed to sign the PW-1 and have now attempted to fabricate new concerns including that there may be a substantial impact on the building (notwithstanding the Milrose report to the contrary) and that the HVAC may not go on the roof because it is a common element and that the Unit Owner must tie into existing hose bibs. This conduct clearly violates the Settlement Agreement, the Prior Decision which held that the Alterations Agreement was binding and that the change in use to the use previously approved could not be withheld, and also the governing documents in that more one and a half years have gone by since the previous plans and specifications were submitted to the Board and the Board has only 30 days to review such plans and specifications. Thus, the motion for contempt must be granted and the Defendants shall pay the maximum statutory amount of $250 for civil contempt.
It is hereby ORDERED that the motion for leave to renew (Mtn. Seq. No. 005) is granted to the extent that the Unit Owner is granted summary judgment; and it is further
ORDERED that the cross-motion to strike the Defendants' answer is granted and the Defendants' answer is struck; and it is further
ORDERED that the motion to strike the complaint (Mtn. Seq. No. 006) is denied; and it is further
ORDERED that the motion to quash the subpoena (Mtn. Seq. No. 007) is denied; and it is further
ORDERED that the motion for contempt (Mtn. Seq. No. 008) is granted; and it is further
ORDERED that the Defendants are hereby sanctioned by this Court in the amount of $250 and shall deposit said amount with the County Clerk, together with a copy of this order with notice of entry, for transmittal to the New York State Commissioner of Taxation and Finance; and it is further
ORDERED that written proof of the payment of this sanction shall be provided to the Clerk of Part 53 and opposing counsel within 30 days after service of a copy of this order with notice of entry; and it is further
ORDERED that, in the event that proof of payment is not provided in a timely manner, the Clerk of the Court, upon service upon him of a copy of this order with notice of entry and an affirmation or affidavit reciting the fact of such non-payment, shall enter a judgment in favor of the Commissioner and against the Defendants in the aforesaid sum; and it is further
ORDERED that such service upon the Clerk of the Court and the Clerk of the Part shall be made in accordance with the procedures set forth in the Protocol on Courthouse and County Clerk Procedures for Electronically Filed Cases (accessible at the "E-Filing" page on the court's website at the address www.nycourts.gov/supctmanh).