Frank Lovece in Board Operations on May 31, 2013
Robert Pabst ran the tax-preparation business Tax Quick LLC out of Apartment 3R in this self-managed, prewar brownstone loft building between Park and Madison Avenues, where there are two apartments per floor and the fifth-story penthouse comes with a roof deck. In September 2010, he pled guilty to fraudulently inflating freelancers' deductions from 2002 to 2004 and taking a percentage of their tax refunds. The U.S. Attorney prosecuting the case said Pabst cost the government between $1 million and $2.5 million in tax revenue. He was sentenced to three years in prison followed by a year of supervised release.
While he was away, Jeisohn Fiala, who has been a hairstylist for Fox News and covered the fashion world with an online show called Snaps with Jeisohn Fiala, lived in the apartment. On the initial court date for 2638 Tenants Corp. v. Pabst he appeared on behalf of Pabst as the shareholder's "attorney in fact." Is that a fact? Keep reading.
The $10,000 Question
At this initial hearing, $8,479.08 was submitted toward arrears and Fiala agreed to pay maintenance plus a 10 percent sublet fee for the duration of the case's proceedings. On Nov. 21, 2012, Fiala and the co-op board agreed to a settlement, with Fiala signing "as attorney in fact" on behalf of himself and Pabst. Fiala said he had vacated the apartment in October, with all maintenance payments up-to-date. Here's where it gets interesting.
As Judge Sabrina B. Kraus wrote, Fiala "agreed as Respondent's [i.e. Pabst] attorney in fact that Respondent would pay $8,500 in attorneys' fees…. In the event of a default, Petitioner [i.e. the co-op board] reserved the right to an additional $1,500 in attorneys' fees as well as additional fees incurred as a result of the default." So Fiala put Pabst on the hook for potentially $10,000 or more.
Three things there: First, Fiala wasn't an attorney and not authorized to represent Pabst. Second, as Pabst said when he was released from prison and appeared before the court this past March, Fiala hadn't told him any of this. And third, the co-op board, after the unaware Pabst had made no payment, made a motion to take over the apartment but didn't include an "affidavit of service" — meaning it had no proof that Pabst had ever been served with papers in the case. Which is odd, since where he was, he wasn't going anywhere.
There's more. After Pabst was released from prison and appeared in person before the court on March 26, he said that ever since he got out, the co-op board had rejected his three attempts at paying.
The board's attorney, Yoram Silagy of Vernon & Ginsburg, did not return a Habitat call requesting comment.
Pabst, quite naturally, asked that the stipulation that he pay attorneys' fees be vacated, since neither the board nor Fiala — who wasn't even authorized to enter into it — had told him anything about it. The board, evidently thinking neither of those teensy details mattered, moved that the stipulation be enforced.
Kraus, in her April 4 decision, wrote that a tenant (in this case a proprietary-lease shareholder) in these kinds of cases "may either appear in person or through an attorney. There is no third option. …[I]t is unlawful for a person who asserts he is an attorney in fact to represent another in a proceeding. This constitutes the unlawful practice of law without a license." Whoops.
She threw out the stipulation, noting the board had "assert[ed] a claim for termination of tenancy based on failure to pay maintenance as a conditional limitation" — a legal term meaning an outcome based upon a particular thing happening — "which is not permitted under New York law." In other words, if a board wants to take over the shares of a co-op apartment, it has to go through the whole regular judiciary process.
As for the alleged illegal sublet, she wrote, "it has undisputedly been cured" and the board could not evict Pabst for that. However, she said, the board was entitled to pursue it at trial — i.e., go through the whole regular judiciary process.
What's the lesson for boards? First, make sure the guy in the snappy suit who says he's a lawyer is really a lawyer. And second, if you're going to serve papers, make sure to serve papers. Both of which seem like having to advise that, "When you go to the courthouse, make sure to actually go to the courthouse."
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