Co-op board wins case charging racial bias.
Two black owners of 27 apartments in a Madison Avenue cooperative who claimed racial bias had prevented them from obtaining ownership certificates for the apartments in their names, lost a $3.5 million verdict when a New York Appeals Court ruled that the co-op corporation had acted in good faith.
The ruling, according to attorneys, was particularly significant because it likely keeps the Murray House at 220 Madison Avenue from becoming insolvent.
In a ruling issued in June, the Appellate Division, First Department, said that the bylaws of Murray House Owners Corp. permitted it to refrain from issuing new stock certificates in the names of Winston Allen and Ruby Allen until outstanding debts on the 27 apartments had been settled. The Allens had refused to pay late charges of $2,850, and the co-op management held off issuing the new certificates requested.
Gerald Walpin, partner at the New York law firm of Rosenman & Colin, who was retained for this appeal, explained that the Appeals Court relied in part on the "business" judgment rule.
"This is a significant victory for coop and condominium boards," Walpin said. "If a board's directors act in good faith and in the interests of the coop or condominium association, the courts will not interfere with those decisions."
The Allens had purchased the 27 units, with the apparent intention of offering 25 of them for investment syndication. They claimed that the co-op board's refusal to grant new certificates in their names resulted in their inability to sell, transfer, refinance, sublet or re-rent the apartments, caused them substantial expenses and injured their business reputation and standing in the financial community.
They claimed that the failure to issue the new certificates resulted not from the unsettled outstanding debts but from "racial bias" and Winston Allen's "unwillingness to commit his proxy vote to the re-election of the incumbent board of directors, instead insisting on personally participating in shareholders' meetings."
The court also found that the racial bias allegations were "based strictly on hearsay" and that there was no evidence that the absence of new stock certificates in any way interfered with the Allens' ownership of the apartments or their ability to sell them.
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|Publication:||Real Estate Weekly|
|Date:||Jul 3, 1991|
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