Board of Managers of Lido Beach Towers Condominium v. Gamiel

Board of Managers of Lido Beach Towers Condominium v. Gamiel was a recent case where the court was required to consider the extent of a condominium board’s immunity from liability because of a bylaw provision. Also at issue was whether a rule of the condominium – that all pets must be carried in common areas – discriminated against an owner with a medical condition.

In 2001, the board of managers of Lido Beach Towers Condominium began an action against Ruchama Gamiel for prior unpaid assessments and common charges totaling $3,930. Gamiel owned and occupied apartment 5AA/6AA of the condominium as a second residence, her primary residence being in Manhattan. Gamiel then counterclaimed for damages, for breach of contract, nuisance, and negligence for an amount in excess of $100,000 as a result of a water leak condition that was alleged to have caused health problems as well as property damage.

The board moved to dismiss Gamiel’s counterclaims based upon the board’s immunity from suit pursuant to the condominium bylaws, or, in the alternative, to dismiss due to the lapsing of the statute of limitations.

In June 2002, the court was notified that the board’s insurance carrier, Legion Insurance, was in “rehabilitation/liquidation” and, as a result, all proceedings were stayed as of March 2002. The stay was finally lifted in April 2004, after multiple extensions. On May 30, 2002, while the stay was in effect and without any prior notification to the court, the parties entered into a stipulation agreement wherein Gamiel paid the board all condominium fees, assessments, and charges to date. It was agreed that the stipulation agreement was without prejudice “to Gamiel proceeding with her counterclaims . . . including but not limited to, pursuing her Motion to Amend the Counterclaims.”

In 2004, there were two key issues remaining for court determination in this motion: (a) whether the board as a collective unit was immune from suit; and (b) whether a rule requiring that pets be carried in common areas was discriminatory against an owner with a medical problem.

The court examined the bylaws and cited several prior court holdings. “The basic agreement among the unit-owners as to the manner in which the condominium shall be administered and maintained is set forth in the condominium’s bylaws. . . Since the bylaws are the vehicle by which unit-owners forego certain individual property rights and delegate them to a board of managers, it is important that the bylaws clearly spell out the limits of the board’s authority to act.” In the case at bar, the contested clause reads:

“The members of the board of managers shall not be liable to the unit-owners for any mistake of judgment, negligence, or otherwise, except for their own individual misconduct or bad faith. The unit-owners shall indemnify and hold harmless each of the members of the board of managers against all contractual liability to others arising out of contracts made by the board of managers on behalf of the Condominium unless any such contract shall have been made in bad faith or contrary to the provisions of the Declaration or of these By-laws. It is intended that the members of the board of managers shall have no personal liability with respect to any contract made by them on behalf of the Condominium.”

The board claimed that the first sentence of this clause “prohibits suits against the board of managers except for a Manager’s individual misconduct or bad faith.” Gamiel asserted that this suit sought to hold the board liable collectively for breach of contract. The court concluded that it need look no further than the text of the bylaws to resolve this issue. The subject of the first sentence was the individual members of the board. If there were no demonstrable bad faith, he, she, or they were personally immune from suit.

In the second sentence of the quoted clause, contractual liability on behalf of the condominium was recognized as a result of contracts entered into by the board. Because the bylaws excluded circumstances involving bad faith from unit-owner indemnification, the court concluded that the requirement of indemnification must be for a type of contractual liability not involving bad faith.

Clarifying the intent of the clause, the third sentence elucidated to what extent the individual members would be held personally liable for contracts entered into by them collectively acting as the board. The contractual liability not involving bad faith, from which the bylaws sought to immunize the individual members, could reasonably be the “mistake of judgment, negligence, or otherwise” foreshadowed in the first sentence of the bylaws. Furthermore, the court noted that New York courts have recognized this collective liability of boards of managers and established a standard by which to measure their actions.

It said: “[W]here a challenge is made by an individual owner to an action of a condominium board of managers, whether incorporated or not, absent claims of fraud, self-dealing, unconscionability or other misconduct, the court should apply the business judgment rule and should limit its inquiry to whether the action was authorized and whether it was taken in good faith and in furtherance of the legitimate interests of the condominium.”

When the condominium was originally organized, it appears that it was the intention of the unit-owners to enable those owners who were elected to the board to represent all unit-owners and to serve as their agent in obtaining the benefits for all of them.

The court also noted and quoted an earlier case: “As agents for the owners, they cannot be held responsible to them except for willful conduct or bad faith. For only under such circumstances would unit-owners be willing to assume responsibility without compensation in an effort to improve the lot of all unit-owners. This type of gratuitous quasi-public service should be encouraged by exoneration from personal liability rather than be discouraged by imposition of personal and individual liability.”

Therefore, individual members of the board were immunized from liability absent misconduct or bad faith. This suit did not name any member of the board personally nor are any individual board members named anywhere in either party’s papers. Gamiel’s reference was to “The board of managers of Lido Beach Towers Condominium, as the ‘Condominium.’”

The court said that Gamiel’s claims were clearly against the board as an entity rather than against any members of the board individually. The bylaws inherently recognized the existence of contractual liability on behalf of the condominium and required homeowner indemnification for any damages not the result of misconduct or bad faith. Thus, the condominium may be liable for breach of contract if the board failed to fulfill a contractual obligation to Gamiel. As the bylaws obligate each unit-owner to comply with their mandates for the good of the condominium, the condominium was likewise bound to comply as promised for the sake of each owner.

In applying the business judgment rule to this matter, the court concluded that an issue for trial remained with regard to the water leakage problem as to whether the board’s collective actions were authorized, taken in good faith, and furthered a legitimate interest of the condominium.

An additional question to be answered was whether Gamiel’s need for a dog, because of her physical condition, was so compelling that an issue of fact was created which may override a pet prohibition clause in a residential lease.

“[T]his court, and the Court of Appeals, have made it manifest that a landlord can legally enforce a lease providing for the prohibition of dogs, as a matter of law,” said the court.

The court cited Section 296(18)(2) of the state’s Executive Law: “[I]t shall be an unlawful discriminatory practice for the owner, lessee, sub-lessee, assignee, or managing agent of, or other person having the right of ownership of or possession of or the right to rent or lease housing accommodations [t]o refuse to make reasonable accommodations in rules, policies, practices, or services, when such accommodations may be necessary to afford said person with a disability equal opportunity to use and enjoy a dwelling.”

It also cited Section 292(21) of the same law: “The term ‘disability’ means (a) a physical, mental or medical impairment resulting from anatomical, physiological, genetic or neurological conditions which prevents the exercise of a normal bodily function or is demonstrable by medically accepted clinical or laboratory diagnostic techniques or (b) a record of such an impairment or (c) a condition regarded by others as such an impairment.”

The court saw no reason to exclude Gamiel from the definition of disabled. This matter did not present a claim involving the Americans with Disabilities Act. It said that “[T]he court is primarily concerned, for the purpose of this motion, with whether the no-pet clause invariably must be enforced as a matter of law or whether it can yield, upon proof of extreme circumstances.”

The court cited a prior case which found that the legislative advances protecting the disabled, which evolved after the last appellate decisions in this area, required the no-pet clause to bow upon proof of “a specific, particularized need to keep a dog, which need arises out of the handicap.” As prior case law showed, exempting a disabled person from a generally applicable regulation is a reasonable accommodation where there is a particularized showing of need for that exemption arising from the individual’s disability. “Thus, persons with disabilities are entitled to accommodations from generally applicable rules that limit their ability to enjoy the use of a dwelling on the same terms as nondisabled persons,” said the court.

The court quoted Gamiel’s position with regard to pets. Gamiel and others were grandfathered, “in that they could keep the dogs that they then had, but when those dogs died they could not be replaced.” Gamiel claimed that the board “suddenly enacted a policy whereby owners had to carry their pets in the common areas.” Gamiel was given no relief from this directive, even though the board members were well aware that Gamiel was disabled and could not possibly carry her dog.

After Gamiel’s dog died, she sought permission from the board to obtain another dog out of medical necessity. Just as her late small dog frequently alerted others when Gamiel was having a medical emergency, Gamiel continued to need such assistance. While the board gave permission to someone else with a medical necessity for a dog, Gamiel’s request was rejected out of hand. Gamiel alleged that the board discriminated against her by “denying her the same rights and privileges they grant to other owners in the building by allowing others, but not Gamiel, to have a small dog or other pet, because other owners are healthy enough to be able to carry those pets in the common area.”

This court found Gamiel’s arguments, in light of the long-term dispute between Gamiel and the board and considering the board’s directive that tenants carry their pet when traversing the common areas, sufficient to raise a question as to whether the board’s actions were discriminatory.

In conclusion, it is was held that:

(1) at trial, the board of managers would be granted immunity from suit unless Gamiel could show that the board’s actions were unauthorized, not taken in good faith nor in furtherance of a legitimate interest of the condominium; and

(2) an issue of fact remained for trial as to whether the board’s actions were discriminatory with regard to Gamiel’s dog.