SUING YOUR CO-OP ... ATTORNEY FEES, P.2

 

 

The Silvermans cross-moved for summary judgment, dismissing the co-op's third counterclaim alleging that the Silvermans fraudulently induced the co-op into entering the subject lease and alteration agreement. The co-op maintained that at the time the Silvermans entered into these contracts, they falsely represented that they would abide by the terms of the agreements concerning renovations to the apartment. The court decided that the fraudulent inducement claim should be dismissed as redundant, being similar to the first counterclaim alleging breach of contract.

Even if the cause of action were sufficiently stated, the court concluded that the Silvermans had submitted proof by affidavit that at the time they entered into the agreements, they did not intend to install a doorway between the two rooms and that that idea only came to them after they began renovations. Since the co-op had not submitted any evidence refuting this proof, it failed to meet its burden of showing that there was any issue of fact as to the Silvermans' intent.

The court was not swayed by the co-op's argument that there existed circumstantial evidence showing that the Silvermans always had intended to construct the doorway. The fact that the large hole was made in the wall the day after the Silvermans signed the lease does not lead to the conclusion that they falsely misrepresented their intentions, particularly in light of the fact that the air conditioner installer had instructed the Silvermans to make a large opening to facilitate placement of the equipment.

The court rejected the co-op's claim that the cross-motion was premature and concluded that additional discovery could lead to facts which would defeat the motion. The court stated that the case had been litigated both in the Supreme Court and on appeal for almost three years now and hundreds of thousands of dollars in attorneys' fees had already been spent. The co-op's claim that a receipt for lumber and the location of a missing carpenter might lead to proof showing the Silvermans' fraud was entirely speculative. Finally, even if the co-op could establish fraud, the court found that it had failed to offer any proof showing that it had relied on the alleged misrepresentation when it entered into the lease.

Accordingly, it was ordered that the co-op's motion for summary judgment on liability on the second counterclaim for attorneys' fees was granted, and the court would hold a trial on the amount and reasonableness of the attorneys' fees.

This was initially an action brought by a shareholder against the co-op that was unsuccessful. As a result of the shareholder's failure, the co-op sought to have the shareholder reimburse the co-op for its legal expenses as provided in the proprietary lease. The co-op succeeded and the case should be a warning to a shareholder who sues his or her co-op that, if the shareholder does not prevail, there is a good chance that he or she may end up paying the legal fees both for the shareholder and the co-op. Such fees may be quite substantial.

 

Richard Siegler is a partner in the New York City law firm of Stroock & Stroock & Lavan.

Adapted from Habitat November 2006. For the complete article and more, join our Archive >>