Case Notes in
Fraud
Category
- Access
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- Yellowstone Injunction
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First published: Jun 2022
Trump Village Section 4, Inc. v VilenskyAlthough the issues of whether a co-op can sue when a prospective buyer makes misrepresentations on a purchase application have not been finally resolved — and courts will continue to hear motions in such cases — it is interesting that the trial court and then an appellate court allowed a cooperative to bring a fraud action in this case. It is not uncommon for an applicant to claim he will move in and instead install an adult child in the apartment or use it as an investment by subleasing the apartment. In the past, boards have had little recourse. Certainly the cooperative might bring an action that the shareholder has violated the lease, but after curing, the violations could continue. Still, the possibility of winning damages in a fraud claim makes it imperative to follow such disputes to their legal conclusion.
Read full articleFirst published: Mar 2014
Jeffrey Sardis, Lauren Sardis and JAS Holding Corp. v. Sofia Frankel and Michael FrankelWhy are we using this “Case Notes” column to discuss fraudulent transactions under the debtor and creditor law? Unfortunately, we have lately seen several cases where condominium unit-owners attempted to transfer their units to avoid paying creditors. In this instance, the creditor was a third party. In many instances, however, the creditor is the condominium’s board of managers. Based on anecdotal evidence only, it appears that the number of unit-owner defaults has increased substantially since 2008. Boards – the liens of which are third in priority to taxes and valid first mortgages – are finding themselves embroiled in foreclosures and, often as a sale is imminent, unit-owner bankruptcies. Some unit-owners, however, try to avoid those litigations and instead – owing money (whether before or after judgment) – transfer their apartment to a relative or friend, typically without the “purchaser” paying the monies owed to the condominium. Because the transfer of a condo (unlike a co-op) can, and occasionally does, take place without the knowledge of the condominium, a board should determine whether to try to void the transfer, as the plaintiffs did. One interesting aspect of this case concerns the mortgage secured by the condominium unit. It appears from the decision that Ms. Frankel had a mortgage. There is no indication that the mortgagee was paid, or that it had agreed to allow title to pass to the son (or, for that matter, that it was ever advised of the transfer). Based on most every mortgage document we have seen, such a transfer typically would constitute a default under the mortgage documents, which would have allowed the mortgagee to foreclose. This case is important because the appellate court covering Manhattan and the Bronx gives guidance as to what is required under the debtor and creditor law to sustain a conveyance. It informs us how courts will interpret and apply the “good faith” requirement and circumstances under which one who conveys the property simply can’t meet the burden.
Read full articleFirst published: Apr 2012
Grubin v. The Gotham CondominiumThis case reminds us that when making a motion to dismiss the complaint – as opposed to a motion for summary judgment – courts will adhere to and enforce the rule that provides that, if the facts asserted in the complaint set forth any theory of law, the complaint will not be dismissed. The court does not determine any facts; it merely looks to whether there is enough information in the complaint that, if ultimately proven to be true, would sustain a recognizable legal theory. While the plaintiffs here were able to make such a demonstration with respect to all claims against the board and the managing agent, they could not do so as to most of the individual board members. When suing a board member, an apartment owner must allege – with specific details – why the actions of the board member, if proven to be true, would subject that person to individual liability. As this court explained and as we have seen, cooperative and condominium board members are volunteers who serve with no remuneration. It would be untenable to subject them to personal liability and exposure merely because they serve on a board or take action as a board member. That is why it is necessary for a plaintiff to allege (and ultimately demonstrate) that the board member’s conduct was separate from his actions as a board member and that such action is tortious.Without such a rule, we submit, it would be virtually impossible to convince any apartment owner to serve on a board. This rule is most important in a case such as this, where plaintiffs are seeking punitive damages. In New York, the law is clear that if punitive damages are assessed against an individual, the board member cannot be indemnified or reimbursed by the cooperative or condominium or the board’s insurance carrier. Thus, if a board member is ultimately determined to be liable for punitive damages, the board member would be solely responsible to pay those damages to a plaintiff.
Read full article