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Co-op wins judgment, and legal fees.

When a New York co-op board appealed a Civil Court decision in a summary proceeding case, it not only won at the Appellate Term, but was awarded almost $40,000 in legal fees incurred over the course of the trial, at both the Civil and Appellate Courts.

Early in 1988, the co-op board of a Mitchell-Lama cooperative residence on Roosevelt Island, in New York City, became aware that shareholders within the residence were in possession of a pet dog, in direct violation of their proprietary lease, as well as Roosevelt Island regulations. After several months of negotiations and correspondence between the co-op board and the shareholders, the board was ultimately forced to start a summary proceeding for eviction against the shareholders. At Civil Court, however, the proceeding was dismissed, as the co-op board was found to have waived the 90 day provision of the Administrative Code of the city of New York, which directs landlords to commence summary proceedings within 90 days of discovering a tenant violating his or her lease.

The co-op board appealed, and at the Appellate Term, the Civil Court was reversed. A final judgment in favor of the co-op was entered and the warrant of eviction was stayed for ten days. The Appellate Term held that the 90-day period within which the summary proceeding had to be commenced was suspended in light of the ongoing, good faith settlement negotiations between the representatives of the co-op board and the shareholders. The co-op thereafter moved to restore the case to the calendar for a hearing on legal fees. In the shareholders' lease, a provision clearly stated that in the event of a successful summary proceeding, the shareholder would be liable for any legal expenses incurred by the co-op. The proprietary lease read in part:

"If the lessee shall at any time be in default hereunder and the lessor shall incur any expense ... instituting any action or proceeding based on such default ... the expense thereof to the lessor, including reasonable attorneys' fees and disbursements, shall be paid by the lessee to the lessor, on demand, as additional rent."

At Civil Court, the shareholders contended that the issue had already been decided, and that the co-op was not entitled to any reimbursement of fees under the principle of res judicata. The shareholders specifically reminded the Court that when the co-op's initial claim was dismissed, no fees were awarded to the opposite side (namely the shareholders). In addition, the shareholders pointed out that when the Appellate Term reversal made no mention of legal fees, no objection was raised from the co-op's side.

In representing the co-op, attorneys from the firm of Finkelstein, Borah, Schwartz, Altschuler & Goldstein, P.C. quickly pointed to precedent which showed that only when there was a failure to make a claim for reimbursement of fees in the initial summary proceeding could there be a "splitting of a cause of action, which is prohibited." A splitting of a cause of action implies that different claims by a given party arising out of the same set of facts have not been litigated within the same case. A prohibition of this is meant to prevent confusion and a general clogging of the system. Both claims had been made in the initial proceeding, so the present claim by the co-op was entirely within the limits of the law.

In commenting on the case, FBSA & G partner Lester J. Figueroa stated "the Appellate Term reversal in this case is of extreme importance as it clearly establishes that the three month provision of the Administrative Code need not be so literally applied while the parties are engaged in legitimate settlement efforts." The proceeding was indeed brought more than 90 days after the discovery of the unlawful pet at the premises by the co-op's representatives, but it was brought immediately after the ongoing settlement negotiations over the pet terminated. The testimony clearly showed that throughout the interim negotiations, the shareholders had not been misled or prejudiced in any way.

Figueroa did go on to say, however, that "landlords must not interpret this decision to mean that they may lightly allow the 90 day period of the Administrative Code to expire. All settlement negotiations must be in good faith and legitimate, and should be in writing wherever possible. Finally, the action must be started immediately upon collapse of the settlement negotiations."

With regard to the awarding of legal fees, the Civil Court accepted the co-op's argument, that it was entitled to reimbursement of fees in a case where the lease violation by the shareholder was evident and absolute.

Lester J. Figueroa, Esq. and Paul N. Gruber, Esq. successfully represented the co-op board in this action.
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Title Annotation:Review and Forecast, Section IV; Roosevelt Island, New York housing cooperative wins case over lease violation and costs
Publication:Real Estate Weekly
Date:Jun 24, 1992
Words:780
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