| Granirer v Bakery, Inc. |
| 2008 NY Slip Op 06582 [54 AD3d 269] |
| August 12, 2008 |
| Appellate Division, First Department |
| Dan Granirer et al., Appellants-Respondents, v TheBakery, Inc., et al., Respondents-Appellants. |
—[*1] Ahmuty, Demers & McManus, New York (Deborah Del Sordo of counsel), forrespondents-appellants.
Order, Supreme Court, New York County (Barbara R. Kapnick, J.), entered September 17,2007, which, in an action for, inter alia, breach of a proprietary lease and breach of the warrantyof habitability, to the extent appealed from, granted plaintiffs' motion for an abatement of theirmaintenance until the apartment is restored to a habitable condition and denied their motion todirect defendants to pay their alternate housing expenses, and granted defendants' cross motion tothe extent of dismissing the complaint as against the individual defendants, modified, on the law,the cause of action for breach of fiduciary duty dismissed as against the corporate defendant, andotherwise affirmed, without costs.
While triable factual issues exist as to the cooperative defendant's failure to make therequired repairs and whether plaintiff denied it access to the apartment, the evidence that theapartment cannot be safely inhabited in its present condition supports a 100% abatement ofplaintiffs' maintenance, as authorized by their proprietary lease. We reject defendants' contentionthat plaintiffs' abatement should not include their contribution to the cooperative's tax andmortgage obligations.
Also, as a matter of simple contract interpretation, the abatement should include theseincidents of plaintiffs' ownership of shares in the cooperative. Paragraph 4 (b) of the proprietarylease appurtenant to plaintiffs' apartment provides for an abatement of "rent." Under paragraph 1(a) "rent" or "maintenance" is a fixed proportion of the lessor's "cash requirements." Paragraph 1(c) defines "cash requirements" as: "the estimated amount in cash which the Directors shall fromtime to time in their judgment determine to be necessary or proper for (1) the operation,maintenance, care, alteration and improvement of the corporate property during the year orportion of the year for which such determination is made; (2) the creation of such reserve forcontingencies as they may deem proper; and (3) the payment of all obligations, liabilities orexpenses incurred or to be incurred, after giving consideration to (i) income expected to bereceived during such period (other than rent from proprietary lessees), and (ii) cash on handwhich the Directors in its [sic] discretion may choose to apply." [*2]The above definition is broad enough to encompass taxes andmortgage payments. The parties to this detailed and carefully crafted proprietary lease could haveexcluded these incidents of ownership from the abatement provision of paragraph 4 (b) had theychosen to do so.
Paragraph 4 (b) of the proprietary lease provides: "In case the damage resulting from fireor other cause shall be so extensive as to render the apartment partly or wholly untenantable, or ifthe means of access thereto shall be destroyed, the rent hereunder shall proportionately abateuntil the apartment shall again be rendered wholly tenantable or the means of access restored; butif said damage shall be caused by the act or negligence of the Lessee or the agents, employees,guests or members of the family of the Lessee or any occupant of the apartment, such rental shallabate only to the extent of the rental value insurance, if any, collected by Lessor with respect tothe apartment" (emphasis added).
In Suarez v Rivercross Tenants' Corp. (107 Misc 2d 135 [1981]), the Appellate Term,First Department, opined that: "A proprietary lessee is entitled to the statutory protection [of thewarranty of habitability] as well as the noninvesting, ordinary tenant. While there is thus createdthe anomalous situation that one who is essentially an owner (by virtue of his purchase of shares)is in a sense suing himself, the situation is not vastly different from any stockholder who hasoccasion to sue the corporation of which he is a pro rata owner by purchase of stock" (at 139).
One commentator, in impliedly stating that tax and mortgage obligations fall within theparameters of maintenance abatements delineated in proprietary leases, observed that:"Maintenance fee abatements by cooperative owners can be far more detrimental than abatementsby condominium owners. The cooperative maintenance fee is not only used to maintain thecommon elements, but also to pay the underlying mortgage on the property and its taxes.Furthermore, if the cooperative corporation goes insolvent, the property is foreclosed upon, andthe shareholders' proprietary leases are rendered void. Even with such grave consequenceshanging in the balance, however, our legal system demands that the decision to take suchpotentially drastic action should be left to the aggrieved party" (Christopher S. Brennan, Note,The Next Step in the Evolution of the Implied Warranty of Habitability: Applying theWarranty to Condominiums, 67 Fordham L Rev 3041, 3069 [1999] [footnotes omitted]).
In sum, we are aware of no authority, nor is any proffered by defendants, stating that theabatement clearly provided for in the lease does not include plaintiffs' pro rata share of thecooperative's tax and mortgage responsibilities. Further, the court properly declined to compelthe cooperative to pay for plaintiffs' alternate living expenses without regard to insurancereimbursement or maintenance abatement and absent a hearing thereon (cf. Ogust v 451Broome St. Corp., 285 AD2d 412, 414 [2001]).
Plaintiffs properly pleaded a cause of action for breach of the covenant of quiet enjoyment byalleging a constructive eviction, i.e., that the conditions in their home, attributable [*3]to the cooperative's failure to make the necessary repairs, compelledthem to move out (see Barash v Pennsylvania Term. Real Estate Corp., 26 NY2d 77, 83[1970]).
Contrary to plaintiffs' contention, the complaint does not allege any individual wrongdoingby the individual defendants, who are members of the cooperative's board of directors, separateand apart from their collective actions taken on behalf of the cooperative (see Pelton v 77 Park Ave.Condominium, 38 AD3d 1, 10 [2006]).
The cause of action for breach of fiduciary duty should have been dismissed as against thecooperative, as well as the individual defendants, because it is merely duplicative of the cause ofaction for breach of the proprietary lease (see Andejo Corp. v South St. Seaport Ltd. Partnership, 40 AD3d407, 408 [2007]). Concur—Saxe, J.P., Nardelli and DeGrasse, JJ.
Catterson and McGuire, JJ., concur in part and dissent in part in a separate memorandum byMcGuire, J., as follows: I disagree with the majority in one respect, namely, its conclusion thatplaintiffs' abatement should include their contribution to the cooperative's tax and mortgageobligations. Paragraph 4 (b) of the proprietary lease does not purport to address this specificissue. Rather, it provides for a "proportiona[l] abate[ment]" of rent if, among other things,damage to the apartment is so extensive as to render it "partly or wholly untenantable." To besure, it is possible to read paragraph 4 (b) to provide for a 100% abatement when the apartmenthas been rendered wholly untenantable. But that reading certainly is not compelled by thelanguage of paragraph 4 (b).
In my view, the more sensible reading of the lease and paragraph 4 (b) is that plaintiffsshould not be relieved of their obligation to pay that portion of the maintenance that reflectstaxes, mortgage costs and other incidents of ownership. If plaintiffs ultimately prevail in thisaction and are awarded damages for all costs they incurred in securing alternative housing andthe apartment is restored to its prior condition, plaintiffs of course will continue to own theshares relating to the apartment. Thus, to relieve plaintiffs of any obligation to pay taxes,mortgage costs and other incidents of ownership would confer a windfall on them and inflict anunjustified penalty on all other shareholders, including shareholders who are utterly innocent ofany wrongdoing relating to the "untenantable" condition of plaintiffs' apartment. Under themajority's interpretation of paragraph 4 (b), all shareholders would pay not only their own shareof their incidents of ownership but would subsidize on a pro rata basis plaintiffs' share.
I believe the majority's interpretation of paragraph 4 (b) is at odds with the principle ofconstruction requiring a court to give the "construction most equitable to both parties instead ofthe construction which will give one of them an unfair and unreasonable advantage over the[*4]other" (Metropolitan Life Ins. Co. v Noble LowndesIntl., 84 NY2d 430, 438 [1994] [internal quotation marks omitted]). [See 2007 NYSlip Op 32868(U).]