Opinion
104900/08.
Decided August 26, 2010.
IRA M. PERLMAN, ESQ., ROSLYN, NEW YORK, Firm.
BORAH GOLDSTEIN ALTSCHULER/ANO by Myron Altschuler, NEW YORK, NEW YORK, ATTORNEY FOR THE DEFENDANT.
Defendants move for summary judgment dismissing the complaint and for sanctions. Alternatively, defendants move for an order striking the complaint due to an alleged failure to provide discovery.
The court notes that, in the interest of justice, subsequent to the filing of the within motion, this court has been actively trying to settle this case with the parties.
Defendant 270 St. Nicholas Avenue Housing Development Fund Corporation (HDFC) is the owner and landlord of the premises located at 270 St. Nicholas Avenue, New York, New York. Defendant Harlem Restoration Project (HRP) is the managing agent for HDFC and has been so since the premises was transferred to HDFC in October 1992. Prior to that time, HRP was recruited by plaintiff 270 St. Nicholas Avenue Tenant's Association (TA) to assist the then tenants with problems concerning the prior owner, J.V.S. Holding Corporation's neglect of the premises. Defendant Dorothy Vaughn (Vaughn) is a tenant of the premises, and for some time prior to the transfer of the premises to HDFC and for a period thereafter, she was the president of TA. Recently, she volunteered with HRP's not-for-profit organization activities, although she was never an employee of HRP. The other plaintiffs are tenants of the premises.
In the early 1980's, TA requested HRP's assistance and engaged HRP to manage the premises based on the prior owner's neglect of the premises. In 1987, Marie Runyon, who was the executive director of HRP, was appointed by the Civil Court, New York County, to be a 7-A Administrator of the premises.
At the request of HRP, Community Service Society (CSS), an independent not-for-profit organization, became involved with the premises to assist with property renovations and transfer of title in accordance with the Department of Housing Preservation and Development's (HPD) Ownership Transfer Program (OTP). The OTP suggested that the prior owner either (a) transfer the premises to a not-for-profit housing organization; or (b) transfer the premises to a tenant-created cooperative if the majority of the tenants in occupancy at that time sought such and the tenants took the appropriate affirmative actions. CCS initially held meetings with the tenants and HRP concerning the possibility of the tenants forming a housing cooperative. At that time, a majority did not support the concept of a cooperative. CCS then suggested that HRP manage the premises and facilitate the ownership of the premises under the name of HDFC. Pursuant to a letter dated September 29, 1992, from HRP to the tenants, HDFC was formed for the purpose of taking title to the premises. In October 1992, HDFC purchased the premises via a deed and the 7-A Administrator was discharged by court order.
Plaintiffs commenced this action for specific performance, declaratory judgment, unjust enrichment and breach of fiduciary duty. The complaint alleges ongoing efforts on the part of plaintiffs to convert the premises to a cooperative. Plaintiffs claimed to have informed HRP and HDFC in 2001, 2005 and 2008 of their interest in cooperative conversion. Until 2008, plaintiffs state that they were led to believe that HRP and HDFC were willing to support and assist them in their efforts. They accuse Vaughn, in her position at the TA, of breaching her fiduciary duty to the tenants by collaborating with the other defendants. They see this lawsuit as the only way of compelling the conversion, having exhausted all other alternatives.
Prior to the completion of discovery, defendants have moved for summary judgment dismissing the complaint on statute of limitations and lack of standing grounds. They contend that the deed to the premises was promptly recorded in 1992, providing all tenants with notice that the premises had been transferred, and that HDFC notified the tenants of the prospective transfer by letter dated September 29, 1992. Moreover, after the premises was transferred, the tenants entered into lease and /or renewal agreements with HDFC.
It is defendants' argument that the causes of action in the complaint accrued at the time of transfer of title of the premises, which is sixteen years prior to the commencement of this suit. According to defendants, plaintiffs failed to commenced this action within ten years after the premises was transferred. They state that actions for the transfer of real property or to set aside a deed are governed by the ten-year statute of limitations in CPLR 212. They also state that claims for breach of fiduciary duty, fraud and unjust enrichment are governed by the six-year statute of limitations in CPLR 213. Defendants contend that all the causes of action in the complaint are time-barred and judgment must be granted.
Defendants also state that they are entitled to summary judgment because plaintiffs lack standing to bring this action. There allegedly was no agreement or contract between the parties, nor was there a duty, requirement or obligation owed by any of the defendants to any of the plaintiffs. Defendants assert that plaintiffs failed to produce any contract or document demonstrating that they were third-party beneficiaries to a specific agreement. Defendants aver that various individual tenants lack standing because they were not tenants at the time of the transfer of title.
Defendants claim that an award of costs, including reasonable attorneys' fees and sanctions, pursuant to 22 NYCRR 130-1.1, is appropriate in this case. They consider this action to be frivolous because it is lacking in merit and has been unduly costly to them.
In the event that defendants' motion is not granted, then defendants seek an order striking the complaint on the ground that plaintiffs intentionally and willfully continue to fail to comply with discovery for over a year, and failed to comply with the court's September 4, 2009 Order directing plaintiffs to comply with discovery within 30 days (i.e. by October 4, 2009).
In opposing the motion, plaintiffs dispute the allegation that the action accrued on the date of the transfer of title. According to plaintiff, the pursuit of cooperative conversion was not bound by the date title was transferred, and conversion could have occurred at any subsequent period. Plaintiffs refer to section 3 of HDFC's Certificate of Incorporation which provides in part that HDFC is authorized to "convey title to the building at 270 St. Nicholas Avenue to a tenant cooperative which will operate the building as a low income cooperative housing project formed under Article XI of the Private Housing Finance Law and either the Not-for-Profit Corporation Law or the Business Corporation Law (or their successor laws)." Exh. 21, Affirmation in Opposition (emphasis supplied).
Plaintiffs argue that, since the transfer of title, defendants have made various representations that HDFC was willing to bring about a conversion. Plaintiffs submit copies of various petitions, dated 2001, 2005 and 2008, which contain the signatures of tenants representing that they are interested in converting the premises to a cooperative. Plaintiffs contend that the statute of limitations did not run until May 2008, when defendants answered the complaint, because it was not until that time that defendants allegedly refused to convert the premises to a cooperative.
If this court finds that the defense of statute of limitations applies to their action, plaintiffs argue that defendants are equitably estopped from asserting the defense. Plaintiffs claim that they were induced by defendants back in 2005 not to commence an action to compel the cooperative conversion. In that time, defendants allegedly sent plaintiffs correspondence assuring plaintiffs that the process of conversion was continuing.
Since plaintiffs claim to have a meritorious action, they reject the imposition of costs and sanctions. Plaintiffs state that, although they have not complied with some of the discovery demands, they assert that some of the documents sought by defendants are not relevant. They also assert that defendants have not complied with plaintiffs' discovery demands.
In reply, defendants aver that the Certificate of Incorporation does not confer an obligation on them to convert the premises to a cooperative and does not provide plaintiffs with standing to sue them. Defendants state that plaintiffs failed to annex any documents alleging or demonstrating a promise on defendants' part to convert the premises. According to defendants, plaintiffs should have performed their due diligence when the premises was transferred in 1992.
As such, defendants argue that plaintiffs' claims are barred by the statute of limitations.
"Statutes of limitations represent the balance struck by the Legislature between the competing concerns of plaintiffs in being afforded reasonable time to bring their claims and defendants in not having to resist stale claims." Depczynski v Adsco/Farrar Trefts, 84 NY2d 593, 597 (1994). "Statutes of limitations begin to run when the cause of action accrues." Britt v Legal Aid Society, Inc., 95 NY2d 443, 446 (2000).
In this case, the action concerns plaintiff-tenants exercising their option to convert the premises to a cooperative under their control. Defendants contend that plaintiffs' option terminated upon the transfer of title to HDFC in 1992, and that plaintiffs have no right to demand HDFC to exercise its authority pursuant to its Certificate of Incorporation. However, the Certificate of Incorporation of defendant HDFC, a not for profit corporation, plainly contemplates a continuing "option", which did not terminate upon transfer of title to HDFC in 1992, in that section 3 of the Certificate of Incorporation indicates that HDFC is authorized "to convey title [of the subject building] to a tenant cooperative which will operate the building as a low income cooperation housing project. . .". Plaintiffs' submitted affidavits indicate that HDFC did encourage plaintiffs, at least as early as 2001, to organize a procedure to bring about a conversion. (See Affidavit of Nichet Miller-Robinson ¶ 18-27). Attempts at conversion also allegedly took place in 2005 and 2008.
The court notes that this provision was not required by Private Housing Finance Law § 573, which is applicable to Housing Development Fund Corporations such as HDFC.
The statute of limitations would begin to run upon HDFC's refusal to authorize a cooperative conversion, as this is when the cause of action accrued. See Britt v. Legal Aid Society, 95 NY2d at 446. Based upon the evidence submitted, it is not clear when the refusal occurred. "Summary judgment is a drastic remedy which should not be granted if there is a material or triable issue of fact presented." DuLuc v Resnick, 224 AD2d 210, 211 (1st Dept 1996). The determination of the time when plaintiffs' claims accrued is an issue of fact, precluding summary judgment at this time.
Further, standing to sue requires a showing of "injury in fact, distinct from that of the general public". Committee to Preserve Brighton Beach Manhattan Beach, Inc. v Planning Commission of City of New York, 259 AD2d 26, 31-2 (1st Dept 1999). Here, plaintiffs, have shown themselves to have suffered an injury in fact, namely the deprivation of their alleged right to have a tenant-controlled cooperative, distinct from the general public.
Moreover, the court notes that defendant HDFC is a not-for-profit, incorporated pursuant to the Private Housing Finance Law (PHFL), Article XI, entitled Housing Development Fund Companies (a/k/a Housing Development Fund corporations). In enacting Article XI, the legislature sought to ameliorate the "seriously inadequate supply of safe and sanctuary dwelling accommodations within the financial reach of families and persons of low income". § 571. As indicated previously, PHFL § 573 did not mandate that defendant HDFC's Certificate of Incorporation include a section that provided for the possibility that defendant might "convey title" to a "tenant cooperative which will operate the building as a low income corporation housing project"; such inclusion would seemingly indicate that defendant potentially contemplated this as an eventuality. (See § 3 of Defendant's Certificate of Incorporation, Exh. 21, Affidavit in Opposition).
§ 573(3) of the PHFL states, in relevant part: "[t]he certificate of incorporation of any such corporation shall. . .provide: a. that the company has been organized exclusively to develop a housing project for persons of low income; b. that all income and earnings of the corporation shall be used exclusively for corporate purposes, and that no part of the net income or net earnings of the corporation shall inure to the benefit or profit of any private individual, firm, corporation or association. . .".
As there is merit in the nature of this action, the court shall not consider the imposition of sanctions or costs on plaintiffs or their counsel.
Defendants seek alternative relief against plaintiffs due to plaintiffs' alleged failure to comply with discovery demands, namely a default judgment pursuant to CPLR 3126. Plaintiffs have provided responses to defendants' demand for the inspection of documents, as well as responses to defendant's demands for the names of witnesses and a bill of particulars. In reply, defendants argue that plaintiffs' responses are inadequate and insufficient.
On December 9, 2009, the parties appeared before this court, and an order was issued with respect to the discovery issues; any current discovery issues shall be presented to the Special Referee assigned to supervise the remainder of discovery in this case, as indicated below.
The court notes that the request for judicial intervention was filed in this case on or about July 9, 2009, and over one year has passed, exceeding the court system's standards and goals; thus, the court has issued a 90-day notice below.
Accordingly, it is
ORDERED that defendants' motion for summary judgment is denied; and it is further
ORDERED that defendants' motion to strike the complaint is denied; and it is further
ORDERED that the issue of monitoring discovery and resolving any and all future discovery disputes, as well as to supervise settlement negotiations, are respectfully referred to a Special Referee in accordance with CPLR § 3104; and it is further
ORDERED that, within 10 days of entry of this order, plaintiff shall serve a copy of this order with notice of entry upon defendant/s, as well as upon the Special Referee Clerk (Room 119M) for the placement of this matter on the Referee's calendar; it is further
ORDERED that all parties shall appear before this Court for a compliance/status conference, at 10 o'clock a.m., on October 1, 2010, (such date may be adjourned by the parties, on consent, by letter to the court, updating the court as to the status of discovery as supervised by the Special Referee), at 10 o'clock a.m., 60 Centre Street, Room 428, New York, NY; and it is further
ORDERED that the time to file a note of issue is extended to October 15, 2010; and it is further
ORDERED THAT THE FAILURE TO FILE A NOTE OF ISSUE WITHIN 90-DAYS HEREOF WILL RESULT IN THE DISMISSAL OF THIS CASE; a courtesy copy of the note of issue shall be served upon the Part 36 Clerk, upon filing; and it is further
ORDERED that within 30 days of entry of this order, plaintiffs shall serve a copy upon defendant, with notice of entry.