Opinion
96519/03.
Decided May 17, 2004.
Novick, Edelstein, Lubell, Reisman, Wasserman, Leventhal, PC, by Eileen Kenny, Esq., for Petitioner.
Christopher Mack, pro se, for Respondent.
Petitioner 1045 Anderson Avenue HDFC, an apartment corporation ("HDFC"), seeks $85,000 in past due maintenance charges. The subject premises located at 1045 Anderson Avenue, in Bronx County, was acquired by the petitioner from the City of New York through the Tenant Interim Lease Program ("TIL"). Respondent Christopher Mack, the petitioner's former building manager and treasurer, is a shareholder who resides at Apartment 6F. The respondent maintains that he owes no arrears because all maintenance charges were waived by the board of directors in exchange for his additional services as the building superintendent from 1985 through 2003.
TESTIMONY
At trial, the petitioner's witnesses gave consistent testimony, whereas the respondent's witnesses often contradicted his defense. Bernard Benjamin and respondent Christopher Mack became shareholders when the building was converted to cooperative status in 1985. (Pet. Exhibit 1, 4.) Mr. Benjamin, who currently serves as the HDFC's vice-president, testified that maintenance charges are based on the number of rooms in a given apartment, which means that the shareholders in each apartment line pay the same monthly maintenance. Mr. Benjamin, who has resided in Apartment 1F for approximately 40 years, and Mr. Mack, who resides in Apartment 6F, live in the same apartment line. According to Mr. Benjamin, the maintenance for the F line was $304 in 1986 and $504 in 2001. Mr. Benjamin identified Mr. Mack as the petitioner's former building manager and Mr. St. Clare as the building superintendent. Mr. Mack created and maintained the HDFC's records in his capacity as building manager, and stored these records in the petitioner's basement office at the premises.
Miguel Nuñez testified that he became the petitioner's building manager in September 2003. The witness testified that he searched through the HDFC records stored in the basement to compile a rent history for Apartment 6F. (Pet. Exhibit 2.) Although he located records for other apartments, Mr. Nuñez found no payment records for Apartment 6F. Mr. Nuñez computed that $85,000 is owed in arrears by calculating the monthly maintenance charges paid by other shareholders living in the F line since 1985.
Allandra McCray testified that she has resided in Apartment 4C for 27 years. According to the witness, Mr. Mack collected maintenance charges for the HDFC but never washed floors, removed garbage or swept outside the building. Ms. McCray identified Mr. Mack as the building manager and St. Clare Gumbs as the building superintendent.
Although Thelma Pointdexter, the shareholder who resides in Apartment 4F, was called to the stand by the respondent to testify on his behalf, she testified that the respondent was never the building superintendent. Floors were mopped and garbage was removed by St. Clare Gumbs. Ms. Pointdexter, who became a shareholder in 1985, declared that she never voted to excuse Mr. Mack from paying maintenance.
Respondent's witness Ruby Gilliard similarly testified that, although Mr. Mack collected maintenance charges each month, he never repaired her apartment or did electrical work. Ms. Gilliard has lived in Apartment 6D since approximately 1959.
Ethel Smith, a shareholder who has resided in Apartment 1C for the past 25 years, at first testified that Mr. Mack had painted her apartment, repaired her ceiling and adjusted her window balances. During cross-examination, however, Ms. Smith testified that the respondent hired other persons to do repairs, although he sometimes changed her window balances. Upon further interrogation, the respondent's witness verified that Mr. Mack was never the building superintendent and identified Mr. St. Clare as the person who removed garbage, swept and did odd jobs at the building from 1985-2003.
St. Clare Gumbs, the respondent's fourth witness, began working for the respondent in 1987. Mr. Gumbs made boiler repairs, mopped, swept, removed garbage, and did the plumbing and "other custodian jobs" at the premises while Mr. Mack did most of the electrical work and repaired windows. Mr. Gumbs never received free rent or maintenance in exchange for his work at the premises. He pays $420 in maintenance charges each month for Apartment 6H, where he has lived since 1991. Mr. Gumbs was discharged in October 2003 by the new board of directors.
George Jones testified that he paid his maintenance charges to the respondent until recently when the new board of directors took over. Mr. Jones has lived in Apartment 2F for approximately 33 years. He verified that the respondent was a member of the petitioner's board of directors from the inception of the apartment corporation in 1985 until 2003. During that time, Mr. Mack replaced a kitchen window and "did a lot of work" in the witness's apartment. When questioned further, Mr. Jones admitted that these repairs were either done by St. Clare Gumbs or workers hired by the respondent, although Mr. Mack had once installed a kitchen window. Mr. Gumbs also removed garbage, mopped and swept the building.
Two of the respondent's sons live in Apartment 3F at the premises. Christopher Mack, Jr., testified that he did superintendent's work at the premises, sometimes under his father's supervision and sometimes alone. Elijah Mack, who testified that he also did superintendent's work at the premises, stated that his father was in charge of maintenance at the building until the new management took over.
Respondent Christopher Mack took the stand and testified that he became a member of the board of directors in 1985. He introduced into evidence the shareholder's certificate and proprietary lease issued to him upon his purchase of the shares to Apartment 6F. (Resp. Exhibit A-B.) According to Mr. Mack, the board of directors never required him to pay maintenance charges because free living quarters were included in his compensation package in exchange for his service as the full-time building manager, building superintendent and head of building security. The respondent introduced several repair course certificates into evidence to establish that he was qualified to perform repair work in the building, including a 1998 electrical repair certificate (Resp. Exhibit C), a 1996 boiler maintenance certificate (Resp. Exhibit D) and a 1997 oil burner certificate (Resp. Exhibit G). He is not a licensed electrician. Mr. Mack testified that he used his corporate name Christopher Enterprises, Inc. when he managed buildings, prepared taxes, collected rents and maintenance, and issued receipts to shareholders at the subject premises. (Resp. Exhibits 7 A-H.)
Under cross-examination, Mr. Mack's defenses crumbled. When asked to evaluate the credibility of his own witnesses, Mr. Mack called them "untruthful." Mr. Mack acknowledged that he was paid by the board of directors for his work as building manager. He admitted that there is nothing in writing to verify his claim that his apartment maintenance was waived by the board. He further conceded that shareholders were never informed that his maintenance charges were waived. Surprisingly, Mr. Mack described several full-time positions that he held while concurrently working for the petitioner. In this respect, the respondent testified that he worked full-time doing tax preparation work during the tax season, full-time as the manager of 234 Bradhurst in Manhattan, and full-time assisting an auto insurance broker.
Brenda Smith, the petitioner's sole rebuttal witness, became a shareholder in 1998 and a member of the board of directors and its treasurer on 9/18/03. Whenever she informed the respondent that her apartment needed repairs, St. Clare Gumbs did the repair work. According to Ms. Smith, the new board extended an offer to Mr. Gumbs to remain as the building superintendent, which he declined. The respondent offered no rebuttal.
DISCUSSION
An apartment corporation is governed by the decisions of a board of directors elected by the shareholders. (Levandusky v. One Fifth Avenue, 75 NY2d 530, 536.) The rights and responsibilities of the shareholders and the apartment corporation are defined by the certificate of incorporation, the bylaws and the proprietary lease, which must be read together. ( Fe Bland v. Two Trees Mgt Co, 66 NY2d 556, 563.) According to Business Corporation Law § 501, once an apartment corporation issues the number of shares set forth in its certificate of incorporation, each share is equal to every other share of the same class.
Although Business Corporation Law § 501(a) permits a certificate of incorporation to provide for several classes of shares possessing different rights and preferences, the statute does not authorize a board of directors to enact bylaws that create preferences among shareholders who own the same class and series of shares. ( See Mullins v. 510 E 86th St Owners Corp, 126 Misc2d 758, 759 [Civ Ct, New York County 1984, Lehner, J.].) Changes in maintenance charges are accordingly fixed and determined on an equal per-share or per-room basis or, alternatively, as an equal percentage of the maintenance charges. (Business Corporation Law § 501[c].) Under the statutory scheme applicable here, respondent Christopher Mack is required to pay the same maintenance charges paid by every other shareholder who owns the same class and series of shares to an F line apartment.
The proprietary lease signed by the cooperative corporation and a shareholder is a valid contract that is enforced according to its terms. ( Brickman v. Brickman Estate at the Point, Inc, ___ AD3d ___, 2004 NY Slip Op 02699 (2d Dept, April 12, 2004].) Because a proprietary lease is a contract for the leasing of the subject premises for a period longer than one year, any oral agreement to amend the proprietary lease is void under the statute of frauds. (General Obligations Law § 5-703; Jones v. Fordham Hill Owners Corp, 225 AD2d 465 [1st Dept 1996].)
In Jones v. Fordham Hill Owners Corp, the proprietary lessee of Apartment 8-3E in the Fordham Hills cooperative complex purchased the shares to Apartment 4-9G, a second apartment. According to the terms of the proprietary leases for the two apartments, and the proprietary leases for all other shareholders in the complex, maintenance payments were due on the first day of each month in an amount proportional to the number of shares that were owned. After the proprietary lessee failed to pay maintenance for Apartment 4-9G, he was served with a notice to terminate the proprietary lease for the second apartment. Mr. Jones responded by filing an action for declaratory and injunctive relief. In it, he alleged that the former chairperson of the board of directors orally agreed to waive the maintenance payments for the second apartment until such time as the plaintiff's shares to the first apartment were sold. Upon the defendant's default, the plaintiff was granted a preliminary injunction in Supreme Court enjoining Fordham Hill from terminating the proprietary lease to the second apartment. The apartment corporation, which thereafter succeeded in partially vacating its default, lost its motion for summary judgment, and appealed the adverse ruling.
On appeal, the First Department rejected the premise that an oral agreement can relieve a proprietary lessee from paying financial obligations that other shareholders in the same class are required to pay. Fordham Hill's motion for summary judgment was granted on the grounds that the purported oral agreement violated the Business Corporation Law, the Statute of Frauds and the parol evidence rule. ( See Business Corporation Law § 501[a, c]; General Obligations Law § 5-703.)
The respondent, like the proprietary lessee in Fordham Hill, is required to pay maintenance charges for his cooperative apartment on the first day of each month pursuant to the terms of his proprietary lease. (Pet. Exhibit 1 at 1.[a].) Nothing in writing waived Mr. Mack's obligation to pay maintenance pursuant to the terms of his proprietary lease. Although the respondent created and maintained the apartment corporation's records from 1985 to 2003, and served as its treasurer, he produced nothing to corroborate his claim that his maintenance was waived. After carefully considering the testimony and documentation presented at trial, this Court determines that there was never any oral agreement to waive the respondent's maintenance. An oral waiver would have been inconsequential in any event.
The respondent's claim that he served as the building superintendent was a red herring. Several of the respondent's own witnesses testified that the he was never the building superintendent. The Court notes that, despite Mr. Mack's vigorous contention that he received free maintenance because of his additional service as the full-time building superintendent, he also engaged in many substantial pursuits including the management of other properties, seasonal employment as a tax preparer and full-time work assisting an auto insurance broker. Significantly, St. Clare Gumbs, the real building superintendent, was never provided with free rent or maintenance.
CONCLUSION
After carefully weighing the credible testimony and evidence, the Court determines that the petitioner established its prima facie case and met its burden of proof by a preponderance of the evidence. The respondent's laches defense is rejected on the ground that he has unclean hands. As the treasurer and building manager, the respondent controlled the petitioner's financial records from the inception of the apartment corporation in 1985 until 2003 but never informed the shareholders that he had waived his own maintenance payments. For this reason, the Court finds that the underlying nonpayment proceeding was timely commenced in 2003 when the new board of directors learned of the respondent's unauthorized windfall. The HDFC now seeks $85,000 in arrears owed since 1985. The recovery of maintenance arrears owed under the contractual terms of the proprietary lease is circumscribed, however, by the six year statute of limitations. (CPLR § 213.) After reviewing the unrebutted rent history (Pet. Exhibit 2) and the credible testimony of the petitioner's witnesses, the Court determines that the respondent owes $34,280 in maintenance charges as follows. Credit is given for $504.00 paid in the Resolution Part on 12/08/03.
1998 7 months × $392 $ 2744 1999 12 months × $474 5688 2000 12 months × $474 5688 2001 12 months × $504 6048 2002 12 months × $504 6048 2003 11 months × $504 5544 2004 5 months × $504 2520
Total $34,280
While it may seem unorthodox in a summary proceeding to award a possessory judgment that spans a period of six years, the unusual facts presented here demonstrate a pattern of deception and deceit calculated to defraud the petitioner apartment corporation and its shareholders. The Court notes that the HDFC is comprised of low-income former tenants who purchased the premises through the City's Tenant Interim Lease Program. Many of these shareholders are elders. Because of the statute of limitations, their hapless apartment corporation will receive a judgment that is less than half of what the respondent actually owes. Inasmuch as the respondent-shareholder violated his legal and fiduciary responsibilities by engaging in an ongoing course of conduct calculated to disguise his failure to pay maintenance charges for the past nineteen years, equity demands that the petitioner be awarded a possessory judgment in the full amount available under the law.
A final judgment in the amount of $34,280 is awarded to the petitioner. Issuance of the warrant of eviction is stayed 5 days after service of a copy of this decision and order upon the respondent with notice of entry.
This constitutes the decision and order of the Court.