Opinion
Index No. 156486/2016 Motion Seq. Nos. 017 018 NYSCEF Doc. No. 587
10-25-2023
GERALDINE ANDREAS, CHRISTOPHER DARK, GERALDINE ANDREAS A/K/A GERI ANDREAS AND CHRISTOPHER DARK A/K/A CHRISTOPHER J.L. DARK AS A SHAREHOLDERS OF 186 TENANTS CORP., Plaintiff, v. JUSTINE CUSHING, 186 TENANTS CORP., Defendant.
Unpublished Opinion
MOTION DATE 07/26/2023, 07/26/2023
DECISION + ORDER ON MOTION
RICHARD LATIN, J.S.C.
The following e-filed documents, listed by NYSCEF document number (Motion 017) 459, 460, 461, 462, 481, 494, 496, 498, 505, 506, 507, 508, 509, 514, 515, 517, 524, 525, 526, 527, 554, 556, 558, 559, 560, 561, 562, 563 were read on this motion to/for JUDGMENT - SUMMARY.
The following e-filed documents, listed by NYSCEF document number (Motion 018) 464, 465, 466, 467, 468, 469, 470, 471, 472, 473, 474, 475, 476, 477, 478, 479, 480, 482, 495, 497, 499, 510, 516, 518, 528, 529, 555, 557 were read on this motion to/for JUDGMENT - SUMMARY.
The following motions have been consolidated for disposition and are determined as follow:
In Motion Sequence No. 017, defendants move for an order granting defendant 186 Tenants Corp. (Corp.) summary judgment dismissing the second cause of action in the Amended Verified Complaint for breach of contract; and granting individual defendants summary judgment dismissing the ninth cause of action in the Amended Verified Complaint, plaintiffs' shareholders' derivative claim for waste and mismanagement.
In Motion Sequence No. 018, defendant Corp. moves for an order granting Corp. summary judgment dismissing the first cause of action in the Amended Verified Complaint for property damage/negligence; and for an order granting summary judgment dismissing the fourth cause of action for property damage/negligence against defendants Angela Fry Garcia_and Carlos Garcia (the Garcias) on the issue of liability.
The amended complaint alleges as follows: Corp. is the owner of the cooperative apartment building located at 186 East 75th Street, New York, New York. The shareholders are plaintiffs Christopher Dark (Dark) and Geraldine Andreas (Andreas), the owners of Unit 1; defendants Justine Cushing (Cushing)1, the owner of Unit 2; the Garcias, the owners of Unit 3; and Christopher O'Neil (O'Neil), the owner of Unit 4. Plaintiffs are parties to a proprietary lease for Unit 1, which occupies the entire first floor and most of the basement of the building. Plaintiffs have 24 allocated shares in Corp.
In 2016, plaintiffs commenced this action against defendants alleging that a water leak emanating from Cushing's radiator in Unit 2 had caused consequential water damage to Unit 1. The leak allegedly occurred in 2015, at which time plaintiffs stopped paying their monthly maintenance until repairs were made. The complaint not only alleged that Corp. and shareholders Cushing, the Garcias and O'Neil were negligent in creating property damage to Unit 1, but alleged that Corp. breached its lease with plaintiffs with regard to the property damage and in failing to remedy the situation. Plaintiffs also brought a derivative suit on behalf of Corp. against Cushing, the Garcias and O'Neil as directors/officers of Corp, for alleged acts of waste and mismanagement.
In March 2017, plaintiffs reached a partial settlement with Cushing after Cushing's insurance carrier issued a check for $900,000 to plaintiffs as payment for the water damage in Unit 1. Plaintiffs maintain their derivative suit as well as claims against the other defendants, including Corp.
MOTION SEQUENCE NO. 017
In the second cause of action in the amended complaint, plaintiffs allege that the Corp. is contractually obligated to keep the building in good repair. While the proprietary lease was in full force and effect, Unit 1 sustained severe and extensive water damage as a result of Corp.'s alleged failure to comply with the terms of said proprietary lease. Plaintiffs define this as a breach of contract by Corp.
Defendants move for summary judgment dismissing this cause of action on the ground that Corp. did not violate the terms of the proprietary lease. Article I, First of the lease provides that plaintiffs, as the Lessees of the building, shall give Corp., as the Lessor, prompt notice of any damage or accident in their Unit requiring repairs to be made. Defendants contend that plaintiffs failed to give Corp. prompt or any notice of any defective condition in Unit 1 so that Corp. could have been able to make any repairs to the extent that it was Corp.'s responsibility. Defendants submit deposition testimony from Andreas, who was the President of the Corp. at the time of the leakage. In her testimony, Andreas asserts that she did not notify the Board of Directors about the water leaks. She was initially notified by a former tenant of the building that there was a strange smell coming from Unit 1, which is when she first discovered the leaks. Andreas does not recall when the leaks took place, or whether she spoke to other tenants about the leaks or the damage. She does not recall addressing the Board about the damage.
Defendants refer to Article II, Seventh of the proprietary lease, which expressly states that the Lessee shall keep the interior of the apartment and all the plumbing belonging there in good repair. Article II, Fifteenth provides that the Lessor shall not be responsible for any failure, interruption or curtailment of Lessee's services unless it has acted in a negligent manner. Defendants argue that plaintiffs were primarily responsible for repairing and maintaining the condition of their apartment. According to defendants, the evidence indicates that plaintiffs are negligent in making the necessary repairs to Unit 1. The failure to repair has exacerbated the damage. Defendants contend that despite receiving settlement funds which would be used to make extensive repairs, plaintiffs have failed to make such repairs. Thus, defendants argue that the breach of contract cause of action should be dismissed due to plaintiffs' failure to make repairs pursuant to the proprietary lease.
Defendants also seek dismissal to prevent a double recovery. Plaintiffs settled with Cushing a few years ago over the water damage caused by Cushing's radiator leak. This action was partially discontinued against Cushing with prejudice, including all claims, crossclaims, counterclaims and third-party claims. The settlement funds, amounting to $900,000, came from Cushing's insurance carrier and were to be used for repairs in Unit 1. Defendants argue that this amount is a sufficient payment for plaintiffs' damages and that any additional relief sought would result in a double recovery, which is unwarranted.
In opposition to the motion, plaintiffs argue that the $900,000 settlement payment was only a partial one, and that the resultant damage to Unit 1 at this time amounts to over $3 million. Thus, plaintiffs reject the double recovery argument.
Plaintiffs argue that Corp. had adequate notice and knowledge of the leaks and damage prior to the commencement of this action. Plaintiffs submit an expert report in which the expert concludes that water leaks into Unit 1 remain active. The report indicates that the leaks arise in common areas of the building and travel through the common areas of the building. Plaintiffs contend that under the proprietary lease, Corp. as Lessor is responsible for maintaining the common areas and failed to make the required repairs.
In reply, defendants argue that plaintiffs' counsel submitted the affirmation despite lacking personal knowledge of the facts of this case. They deny ever receiving from Andreas or any other person the expert report which concluded that leaks traveled through common areas of the building. They deny receiving prompt notice of the leaks. They contend that Cushing's radiator was subsequently repaired and this was acknowledged by Andreas.
Defendants argue that plaintiffs' failure to make repairs may have been the result of their being absent from the premises most of the year due to their business schedules. Nevertheless, they claim that plaintiffs' failure to make repairs for a number of years has exacerbated the damage through no fault of Corp.
"It is axiomatic that summary judgment is a drastic remedy and should not be granted where there is any doubt as to the existence of factual issues" (Birnbaum v Hyman, 43 A.D.3d 374, 375 [1st Dept 2007]). "The substantive law governing a case dictates what facts are material, and '[o] nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment [citation omitted]'"(People v Grasso, 50 A.D.3d 535, 545 [1st Dept 2008]). "To prevail on a summary judgment motion, the moving party must provide evidentiary proof in admissible form sufficient to warrant the direction of summary judgment in his or her favor [citation omitted]" (Kershaw v Hospital for Special Services, 114 A.D.3d 75, 81 [1st Dept 2013]). "Once this burden is met, the burden shifts to the opposing party to submit proof in admissible form sufficient to create a question of fact requiring a trial" (Id. at 82).
To plead a cause of action for breach of contract, plaintiff usually must allege that: (1) a contract exists; (2) plaintiff performed in accordance with the contract; (3) defendant breached the contract; and (4) defendant's breach resulted in damages (see 34-06 73, LLC v Seneca Ins. Co., 39 N.Y.3d 44, 49 [2022]).
Defendants argue that plaintiffs actually breached the proprietary lease by failing to perform in accordance with its terms. They cite three pertinent provisions in the proprietary lease in their motion as follows, in part:
Article I, First The Lessor shall keep in good repair the building's foundations, sidewalks, walls, supports, beams, roofs, gutters, fences, cellars, chimneys, entrances, street and court doorways, main halls, stairways, pumps, tanks, pipes, electric conduits and all plumbing and apparatus intended for the general service of the building.. It being agreed that the Lessee shall give the Lessor prompt notice of an accident or defect known to the Lessee and requiring repairs be made, and all such repair shall be at the expense of the lessor, unless the same shall have been rendered necessary by the act or neglect or carelessness of the Lessee, or any of the family, guests, employees or undertenants of Lessee, in which case, the expense is to be borne by the Lessee ... (NYSCEF Doc. No. 480 [Proprietary Lease] p.3).
Article II, Seventh The Lessee shall keep the interior of the apartment and all plumbing belonging therein in good repair and the Lessor shall not be held amendable for any repairs in or to the same except as specifically provided... . (id. at p.9)
Article II, Fifteen The Lessor shall not be liable for any failure, interruption or curtailment of heat, water supply, electric current or other service to be supplied by the Lessor hereunder, or for injury or damage to person or property caused by the elements or by another tenant or person in the building, or resulting from steam, gas, electricity, water, rain or snow which may leak or flow from any part of the building or from any of its pipes, drains, conduits, radiators, boilers, tanks, appliances or equipment, unless caused by or due to the negligence of the Lessor. (id. at p.12).
Defendants argue that plaintiffs failed to give Corp. prompt notice of the leakage problem in Unit 1. They also argue that plaintiffs were primarily responsible for repairs to the Unit and failed to maintain their apartment for years. Defendants contend that Corp. could only be liable pursuant to the proprietary lease if it acted negligently. Defendants are moving separately to dismiss the negligence cause of action brought against Corp.
Defendants submit the deposition testimony of Andreas, who apparently remembered very little about the leak from Cushing's radiator that effected the space in Unit 1 or how she handled the matter with Corp. She was the President at that time, but her memory recalled very little significant information. Andreas mentioned that a former tenant and officer of Corp. notified her of the leakage from Cushing's radiator in 2015. This would indicate that Corp. was aware of the problem. However, plaintiffs allege that there were subsequent leaks that effected their apartment. In her deposition, Andreas does not recall notifying Corp. of those leaks. Furthermore, she states that she could not talk to the Board of Directors about it. In opposition, plaintiffs submit an affirmation from their counsel. He affirms that Corp. was given prompt notice of the leakage and that Andreas provided expert reports to the Board of Directors about the severity of the situation. However, in reply, defendants deny receiving or knowing of these documents and contend that an attorney's affirmation lacks personal knowledge of events in this case.
After examining the evidence, the Court finds that Corp. had notice of the initial leaks which occurred in 2015, but it is unclear that Corp. was aware of subsequent leaks. Defendants deny that Corp. had notice and Andreas' deposition testimony indicates no recollection of her giving notice. As President of Corp. at the time, she actually asserts that she could not notify the Board without explaining why.
Defendants deny Corp. receiving expert reports about the damage to the building. The proprietary lease sets out plaintiffs' responsibility to repair and maintain their apartment. It is unclear why plaintiffs did not make repairs all this time. The affirmation from plaintiffs' counsel on its own is insufficient evidence in opposing a summary judgment motion (see Adam v Cutner &Rathkopf, 230 A.D.2d 234, 237 [1st Dept 1997]). The inclusion of a report, which is an insurance adjustment report on Unit 1 provided by plaintiffs' insurance carrier, and limited deposition testimony from Cushing, does not establish notice.
The Court finds that defendants are entitled to summary judgment and the second cause of action, breach of contract, brought against Corp. is dismissed.
The remainder of this motion concerns the ninth cause of action in the amended complaint, a derivative suit against the non-corporate defendants. Plaintiffs allege that these defendants have acted against the interests of Corp. regarding the water damage, which not only affects Unit 1 but common areas of the building. Despite knowledge of the situation, these defendants have failed to remedy this major damage, which has led to serious financial problems. Plaintiffs accuse said defendants of committing acts of waste and mismanagement against Corp. Plaintiffs seek an injunction enjoining defendants from continuing their acts of waste and an accounting, claiming no adequate remedy in law.
The defendants subject to this suit seek summary judgment dismissing the action, arguing that there is no evidence of misconduct or mismanagement on their part; that whatever misconduct exists, it is the result of plaintiffs' activities over the years; that they did not benefit from any wrongdoing on their part; and that a derivative suit would not be in the best interest of Corp.
Defendants refer to Andreas' deposition testimony, where she explained her role as President of Corp., unable to recall the meetings she held with the Board of Directors, including any discussions involving the water damage. Defendants dispute the allegation that they maintained complete control of Corp. in their capacity as officers when Andreas was the President. They contend that plaintiffs have attempted to minimize Andreas' authority as President during that period.
Defendants argue that since 2015, plaintiffs have failed to pay monthly maintenance charges and other fees due to the water damage in their apartment. They contend this alone has been the main factor in the financial problems that Corp. has been experiencing. They refer to prior orders from this Court where it was declared that plaintiffs had no right to withhold maintenance payments. Orders dated September 27, 2020 and December 7, 2021 ordered plaintiffs to pay maintenance to Corp. Moreover, defendants claim not to have been personally enriched from the present financial situation.
Defendants argue that the derivative suit is not in the best interest of Corp. According to them, plaintiff have not proven that the water damage in their apartment has extended to other parts of the building, making the situation more than a personal suit affecting them.
In opposition, plaintiffs argues that defendants had been informed that the water leakage had extended beyond Unit 1, involving the roof, air shaft and other common areas of the building. This indicates that the derivative suit concerned more than damage to plaintiffs' apartment. Plaintiffs contend that defendant made up a majority factor which controlled Corp., a factor that failed to render proper books and records, and failed to respond to the reports of water damage.
Plaintiffs state that defendants previously brought a motion to dismiss the derivative suit, which was denied by the Court. Plaintiffs argue that defendants have no new arguments in favor of dismissal.
Plaintiffs also seek reverse summary judgment on their derivative suit cause of action, arguing that the Court has the discretion to grant summary judgment to any party.
In reply, defendants argue that plaintiffs' attempted "cross motion" for summary judgment is presently time-barred.
Defendants argue that they are moving for dismissal under summary judgment, which is based on an entirely different standard than a motion to dismiss for failure to state a cause of action. Defendants also deny receiving expert reports from plaintiffs. They refer to a notice from Andreas as President, informing tenants that the building was in a deplorable condition, while annexing a report, a 2018 Inspection Report from Corp.'s insurance carrier, which provided the opposite conclusion regarding the building's current condition. Defendants also argue that their decision making is protected by the Business Judgment Rule.
Defendants have subsequently submitted an affirmation arguing that plaintiffs presently lack standing to bring this derivative suit because they are no longer shareholders of Corp. Their shares are now in the possession of J.P. Morgan Chase. In response, plaintiffs argue that the sale of their shares was not voluntary, which they contend affects the issue of standing. They claim that they can bring a directors' derivative suit, as they are on notice as being directors of Corp. The Court finds that to continue this derivative suit, plaintiffs must maintain their shareholder status throughout the pendency of this action (see Independent Investor Protection League v Time, Inc., 50 N.Y.2d 259 [1980]). The Court will grant defendants summary judgment dismissing the ninth cause of action.
MOTION SEQUENCE NO. 018
The first cause of action in the amended complaint alleges that Corp. is liable for negligence regarding the leakage of the radiator in Unit 2. Plaintiffs allege that Corp. had actual and constructive notice of the leakage at the time of the incident and failed to make appropriate repairs which led to extensive water damage in plaintiffs' Unit 1. According to plaintiffs, the damage exists to the present time and despite a $900,000 settlement with Cushing, who occupied Unit 2 during the leakage, they are owed more money in damages.
Defendants move for summary judgment dismissal on the grounds that (1) plaintiffs failed to give Corp. prompt notice of the leakage; and (2) plaintiffs have settled this incident with Cushing and there is no need to continue this claim.
Defendants rely on Andreas' deposition testimony, as they did in the previous motion. Andreas testified that, as President of Corp., she did not know whether or when she notified the Board of Directors about water damage. Defendants also submit deposition testimony from O'Neil and Cushing, who testified about not knowing of plaintiffs' lawsuit over the water damage.
Defendants argue that the settlement between plaintiffs and Cushing provides proof that the issue has been resolved in plaintiffs' favor.
In opposition, plaintiffs offer similar evidence as was submitted in the previous motion. Plaintiff's counsel submits his affirmation in opposition. He argues that there is no double recovery involved, that defendants sought dismissal of this cause of action, along with the fourth cause of action, which was denied by the Court, and that plaintiffs, not defendants, are entitled to summary judgment.
In reply, defendants argue that plaintiffs are time-barred from seeking the granting of summary judgment. They contend that their moving for summary judgment is subject to a different standard than moving for dismissal based on failure to state a cause of action based on documentary evidence. Accordingly, summary judgment involves examining the entire record and reaching a substantive conclusion.
In order to prove negligence, a plaintiff must demonstrate that a defendant either created or had actual or constructive notice of an allegedly dangerous condition (see Gordon v American Museum of Natural History, 67 N.Y.2d 836, 837-838 [1986]).
The Court finds an issue as to notice, the extent of Corp.'s prior notice of the leakage and the resultant water damage. Therefore, the first cause of action shall not be dismissed.
The fourth cause of action is brought against the Garcias, the occupants of Unit 3. Plaintiffs allege that the Garcias negligently installed an air conditioner in Unit 3, which leaked into Unit 1 and caused extensive water damage. The Garcias are alleged to have had actual and constructive notice of the leakage and failed to make repairs.
Defendants move for summary judgment dismissing this cause of action because the Garcias had no notice of a leakage in their air conditioner and never made use of that particular air conditioner at the time plaintiffs alleged a leakage. Defendants submit deposition testimony of the Garcias discussing the state of the air conditioner. The Garcias purchased Unit 3, which was above directly above Unit 2, in January 2016, and moved in on August 30, 2016. They assert that they never used the air conditioner and the areas near the air conditioner were always dry.
In opposition, plaintiffs argue that the Garcias had notice of the leakage and that defendants previously moved for dismissal of this cause of action and was unsuccessful.
The Court finds that defendants are entitled to summary judgment on this cause of action. It appears that no evidence was submitted that Garcias had actual or constructive notice of any leakage. The argument that a leak traveled from Unit 3, causing damage to Unit 1, without causing any damage to Unit 2, which was directly below Unit 3, defies the laws of nature. As for the prior refusal to dismiss this cause of action, the Court has searched the record, unlike the earlier motion to dismiss, and find that defendants has made out a case for summary judgment regarding the Garcias' liability.
Accordingly, it is
ORDERED that defendants' motion for summary judgment to dismiss the second and ninth causes of action of the amended complaint (Motion sequence no. 017) is granted; and it is further
ORDERED that defendants' motion for summary judgment to dismiss the first and fourth causes of action (Motion sequence no. 018) is granted as to the fourth cause of action; and it is further
ORDERED that the Clerk is directed to enter judgment accordingly; and it is further
ORDERED that defendants Olivia H. Sabine, Carlos and Alice Fry Garcia and Christopher O'Neil are dismissed from this action; and it is further
ORDERED that the remainder of this action shall continue.