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HDFC Cooperative Barred From Asserting that Tenant is Not Owner Despite Lack of Stock Certificate and Executed Proprietary Lease & Ordered to Issue Shares and Lease

Recently, after a non-jury trial, the Court in Terry v 241 West 111th Street, HDFC, NYLJ April 8, 2013 (Sup, NY Engoron, J, April 1, 2013):

(A) declared plaintiff was the rightful and lawful holder of the shares and the proprietary lessee of cooperative apartment 53 located at 241 West 11th Street, New York;

(B) ordered defendant, the apartment corporation, to issue plaintiff a share certificate and proprietary lease, both executed by defendant, for the apartment within 90 days; and

(C) dismissed any pending action or proceeding seeking to evict plaintiff on the basis that he is not the shareholder and lessee of the subject apartment.

The Court found that plaintiff moved into the apartment in 1982 prior to the building's conversion to a cooperative; that in 1984 or 1985, he purchased the apartment by paying the $250 fee to an agent of the corporation; that he was elected to the Board of Directors, a position reserved for shareholders only, and served as Secretary for ten years. Based on the foregoing, the Court determined that plaintiff had held himself out as a shareholder, and the other board members and officers treated him as one.

The Court also found as facts that plaintiff indeed had purchased his shares, although he could not produce a stock certificate or a fully executed proprietary lease. As supporting evidence, plaintiff submitted an "Agreement to Purchase" signed by the then president of the apartment corporation and himself; the Offering Plan and a signed copy of the proprietary lease. He stated that the corporation never returned a fully executed copy of the lease to him.

In opposition, defendant apartment corporation argued, inter alia, that the statute of limitations had run and that plaintiff was one or two months late in his rent in 1984 or 1985 when he allegedly purchased his apartment, pointing out that being current on the payment of the rent was a pre-condition or prerequisite to the right to purchase.

In rejecting both of defendant apartment corporation's arguments, the Court noted that the statute of limitations on plaintiff's right to compel the issuance of stock certificate and proprietary lease only begins to run when plaintiff suffers some legally cognizable harm. Accordingly, the Court found that the applicable statute could not have begun to run in 1984 or 1985 when plaintiff alleged to have purchased his apartment, since he was treated as a shareholder-owner, but only at the earliest in 2005 after the apartment corporation asked plaintiff for proof of his status as an owner, and more likely in 2011 when the apartment corporation sought to evict plaintiff.

As to defendant apartment corporation's contention that plaintiff was one or two months late in the payment of his rent, the Court found that the purpose of the rule prohibiting purchases of apartments from tenants who were late in paying rent was not to allow the eviction almost 30 years later.

Interestingly, the Court also opined that even if it had not found in favor of plaintiff on the facts, "the Court would had found that defendant had waived any technical objection to plaintiff's ownership, and is estopped from arguing that he is not a shareholder" based on the doctrine of laches.

Serge Joseph