Summary
In Bernheim v 136 E. 64th St. Corp. (128 A.D.2d 434, 435), this court held that a cooperative corporation board of directors' rejection of a prospective purchaser will be held subject to scrutiny where "one or more members of the board was involved for personal profit in an attempt for arrangements for a sale to others".
Summary of this case from Matter of Boisson v. 4 East Housing Corp.Opinion
March 17, 1987
Appeal from the Supreme Court, New York County (Harold Baer, Jr., J.).
While, in general, the board of directors of a cooperative can withhold consent to the transfer of shares and the assignment of a proprietary lease (Weisner v. 791 Park Ave. Corp., 6 N.Y.2d 426), there must be good-faith action and without discriminatory practice. (See, Hinds, When a Co-op Board Rejects a Buyer, New York Times, Sunday Real Estate Section, Nov. 2, 1986.)
Here, an estate, through its executor, prior to the conversion to a cooperative, negotiated an agreement with the next-door neighbors, the plaintiffs herein, for the sale of the forthcoming proprietary lease and shares of stock, contingent, of course, on the actual conversion. Thereafter, the estate purchased, bringing into effect the aforesaid transaction, and the plaintiffs applied for approval of the sale to them of the said next-door apartment. In the interim, they are paying the maintenance. Although, seemingly, the necessary letters of recommendation, financial statements and so on, showing the qualifications of the plaintiffs, were satisfactory, they were rejected. It is contended that one or more of the members of the board attempted to purchase below market and then to arrange the sale of the apartment to a third party. Inasmuch as the plaintiffs were already cooperators, for them to be rejected, there would have to be some overriding rational, reasonable basis, such as a desire to avoid the apartment being acquired for investment or resale rather than for residence. However, it is shown here that the plaintiffs need the additional space for living purposes.
If one or more members of the board was involved for personal profit in an attempt for arrangements for a sale to others, there could be a question of good-faith rejection. (See, Fe Bland v Two Trees Mgt. Co., 66 N.Y.2d 556, 565.) The members of the board of directors have a duty to their cooperators to make determinations unencumbered by purposes other than the best interests of the people they represent. (Demas v. 325 W. End Ave. Corp., 127 A.D.2d 476; cf., Meinhard v. Salmon, 249 N.Y. 458.)
Concur — Kupferman, J.P., Ross, Milonas and Rosenberger, JJ.