Opinion
300594TSN/07.
Decided on February 28, 2008.
Robert T. Anker, Esq., New York, NY, Attorney for plaintiff, Andrew Weigel, Edward M. Cuddy, III, Snow Becker Krauss P.C., New York, NY, Attorney for all defendants.
Plaintiff commenced this action to recover the two percent flip tax he paid when he sold his cooperative apartment. He has brought the present motion for summary judgment on his claim to recover the flip tax and defendants have a brought across motion for summary judgment to dismiss the action. The motions are consolidated for disposition. For the reasons stated below, the defendants' cross motion for summary judgment dismissing the action is granted and plaintiff's motion for summary judgment is denied.
The relevant facts are as follows. Plaintiff was a resident shareholder of the defendant cooperative for over seventeen years. He purchased the apartment in 1988 and was a member and officer of the board from 1990 to 2004. He sold his apartment in September 2005. At the time he sold the apartment, he paid the two percent transfer tax in the amount of $25,000. He now seeks to recover the transfer fee that he paid on the ground that the board of directors improperly imposed the flip tax without proper authority.
There have been a number of court decisions which have addressed the circumstances under which a cooperative can impose a flip tax. ( Fe Bland v Two Trees Management Co., 66 NY2d 556; Quirin v 123 Apartment Corp., 126 AD2d 99 [1st Dept 1987]; Mogelescu v 255 West 98th Street Owners Corp., 135 AD2d 32 [1st Dept 1988]; 1326 Apartments Corporation v Barbosa, 147 Misc 2d 264 [Civ. Ct. NY Co. 1990]). In Fe Bland, the Court of Appeals set forth the circumstances under which a transfer fee may be adopted. The court stated:
The relationship between the shareholder/ lessees of a cooperative corporation and the corporation is determined by the certificate of corporation, the corporation's bylaws and the proprietary lease under which a particular apartment is occupied, subject, of course to applicable statutory and decisional law. Inseparably joined, neither the corporate or the leasehold attributes of the relationship can be viewed in isolation from one another (citations omitted). Even as to such normally corporate matters as the authority of the board of directors, therefore, it is not just the bylaws that are determinative; the relevant provisions of the related documents must be read together.
In interpreting Fe Bland, the First Department has held that a transfer fee may validly be adopted by the corporation as long as it "conforms to the proprietary lease and is authorized by the bylaws or the proprietary lease." ( Quirin, 126 AD2d at 102). The court specifically held in Quirin that the transfer tax was validly imposed pursuant to the provision in the bylaws which provided that the bylaws may be amended by approval of a majority of the shareholders or two thirds of the members of the board of directors where the proprietary lease and the certificate of incorporation did not specifically exclude the collection of a flip tax. ( Id.) In Mogulescu, the First Department once again held that a flip tax could be imposed by the cooperative even though there was no specific authority for a transfer fee in the proprietary lease as long as the proprietary lease does not exclude the imposition of a transfer tax. ( 135 AD2d at 35; See also 1326 Apartments Corporation, 147 Misc 2d at 268 (cooperative may impose flip tax by amending bylaws even though proprietary lease is silent as to imposition of a flip tax).
In the instant case, this court finds that the defendant cooperative has submitted documentary evidence establishing that the cooperative properly imposed a 1% transfer fee in 1985 by a two thirds vote of the shareholders amending the cooperative bylaws and that the cooperative properly increased the transfer tax to 2% in 2005 by a unanimous resolution of the board in accordance with Article XII of the cooperative's bylaws. As in all of the foregoing cases, the proprietary lease and certificate of incorporation do not exclude the collection of a transfer fee and are silent on this issue. Moreover, the offering plan contained in Article XII of the bylaws permit the bylaws to be amended, enlarged or diminished in two separate ways:
(A) at any shareholders' meeting by vote of shareholders owning two-thirds of the amount of the outstanding shares, represented in person or by proxy, provided that the proposed amendment or the substance thereof shall have been inserted in the notice of meeting or that all of the shareholders be present in person or by proxy, or (b) at any meeting of the Board of Directors by a majority vote, provided that the proposed amendment or the substance thereof shall have been inserted in the notice of meeting or that all of the directors are present in person. . . .
In 1985, the cooperative properly amended the bylaws to impose a transfer fee pursuant to Article XII of the bylaws. It prepared a notice of special meeting which stated that the purpose of the meeting was to vote on the proposed transfer fee amendment. It then held a meeting at which the shareholders voted in favor of the proposed transfer fee amendment by a vote greater than the two thirds required to amend the bylaws pursuant to Article XII.
In July 2003, the board of directors of the cooperative passed a resolution increasing the transfer fee from 1% to 2%. In May of 2004, there was an annual meeting of the shareholders at which the shareholders were informed that the board of directors had increased the transfer fee to 2%. The board of directors then decided that the vote to increase the transfer fee to 2% may not have complied with Article XII of the bylaws relating to amendments of the bylaws because all of the directors were not present in person. As a result, all seven members of the board met in June 2005 and again unanimously voted to amend the bylaws to increase the transfer fee from 1% to 2% in accordance with the provisions of the bylaws.
Based on this court's finding that the cooperative properly amended its bylaws to impose both the one percent and the two percent transfer fee, there is no basis for plaintiff's action to recover the transfer fee he paid to the cooperative. As a result, defendants' motion for summary judgment dismissing this action is granted in its entirety and the action is dismissed.