Summary
holding that an individual homeowner had standing to sue the association for amending its budget and raising monthly dues, to the homeowner's detriment, in violation of the association's declaration and bylaws
Summary of this case from Welsh v. McNeilOpinion
2012-11-29
In the Matter of John ST. DENIS, Respondent, v. QUEENSBURY BAYBRIDGE HOMEOWNERS ASSOCIATION, INC., Appellant.
Hodgson Russ, LLP, Albany (Noreen DeWire Grimmick of counsel), for appellant. John St. Denis, Queensbury, respondent pro se.
Hodgson Russ, LLP, Albany (Noreen DeWire Grimmick of counsel), for appellant. John St. Denis, Queensbury, respondent pro se.
Before: ROSE, J.P., SPAIN, MALONE JR., GARRY and EGAN JR., JJ.
SPAIN, J.
Appeal from an order of the Supreme Court (Muller, J.), entered July 27, 2011 in Warren County, which, among other things, converted an application, brought pursuant to CPLR article 78, into a plenary action and dismissed the second cause of action.
Petitioner is a property owner in the Town of Queensbury, Warren County and a member of respondent, a domestic, not-for-profit corporation that is governed by its Declaration of Covenants, Restrictions, Easements, Charges and Liens (hereinafter declaration) and its bylaws. Petitioner commenced this proceeding alleging five claims against respondent, only one of which remains pending;
namely, that respondent's July 2009 amendment to its 2009 budget and subsequent increase in monthly dues violated its declaration. Supreme Court denied respondent's motion to dismiss the claim, finding that petitioner had standing, and converted the proceeding into a plenary action. Respondent appeals, and we now affirm.
At a preliminary conference, petitioner withdrew his first and third claims against respondent and, after reviewing the submissions of the parties, Supreme Court dismissed his second claim for want of standing. In his brief, petitioner acknowledges that he has now also withdrawn his fourth claim.
Respondent asserts that Supreme Court erred in finding that petitioner had standing to challenge respondent's amendment to its annual budget and subsequent increase in monthly dues. Specifically, respondent asserts that the claim is derivative, brought on behalf of the corporation and, as such, must comply with N–PCL 623(a), which requires a member to be joined by enough other members or shareholders of the corporation such that the number of petitioners amounts to at least 5% of the total number of shareholders of the corporation ( seeN–PCL 623[a]; Clark v. Trois, 21 A.D.3d 439, 440, 801 N.Y.S.2d 330 [2005],lv. dismissed and denied6 N.Y.3d 829, 813 N.Y.S.2d 708, 846 N.E.2d 1218 [2006] ). It is undisputed that petitioner does not represent 5% of respondent's members.
We agree with Supreme Court that petitioner has standing to assert this claim in his individual capacity. Respondent's declaration specifically provides that petitioner, or “any [o]wner[,] shall have the right to enforce, by any proceeding at law or in equity, all restrictions, conditions, covenants, reservations, liens and charges no [sic] or hereafter imposed by the provisions of this [d]eclaration.” The Not–For–Profit Corporation Law creates limited standing for shareholders—that they would not otherwise have—to bring derivative actions; it does not operate to take away individual standing derived from other sources ( see generally Caprer v. Nussbaum, 36 A.D.3d 176, 182–184, 825 N.Y.S.2d 55 [2006] ). Here, the declaration recognizes petitioner's standing to enforce his rights under the declaration and, here, petitioner alleges that when, in July 2009, respondent amended its budget and raised fees mid-year, it violated the declaration. Unlike a situation where an individual member seeks to redress some wrong to, and on behalf of, a corporation ( compare Tae Hwa Yoon v. New York Hahn Wolee Church, Inc., 56 A.D.3d 752, 753–754, 755, 870 N.Y.S.2d 42 [2008] [claim for misappropriation of corporate funds]; Clark v. Trois, 21 A.D.3d at 440, 801 N.Y.S.2d 330 [same]; Bernbach v. Bonnie Briar Country Club, 144 A.D.2d 610, 610, 534 N.Y.S.2d 695 [1988] [claim for misconduct by corporation's board resulting in harm to corporation], lv. dismissed74 N.Y.2d 715, 543 N.Y.S.2d 401, 541 N.E.2d 430 [1989] ), here, petitioner alleges—as an individual stakeholder—that respondent's board of directors has violated its declaration to the detriment of its individual members. Although judicial review of respondent's exercise of authority with respect to assessing fees is limited,
its individual members are authorized to challenge actions allegedly taken in contravention of its declaration or bylaws ( see Yusin v. Saddle Lakes Home Owners Assn., Inc., 73 A.D.3d 1168, 1171–1172, 902 N.Y.S.2d 139 [2010] [individual member challenged leash law imposed by board of homeowners' association]; Levine v. Greene, 57 A.D.3d at 628, 871 N.Y.S.2d 187 [individual member challenged budget]; Forest Hills Gardens Corp. v. West Side Tennis Club, 23 A.D.3d 338, 340, 806 N.Y.S.2d 591 [2005] [member challenged imposition of maintenance fees] ).
“[A]bsent 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 corporation” ( Levine v. Greene, 57 A.D.3d 627, 628, 871 N.Y.S.2d 187 [2008] [internal quotations and citation omitted]; see Matter of Levandusky v. One Fifth Ave. Apt. Corp., 75 N.Y.2d 530, 542, 554 N.Y.S.2d 807, 553 N.E.2d 1317 [1990] ).
Finally, as petitioner has standing to bring suit against respondent, we discern no abuse of discretion in Supreme Court's decision to convert the proceeding to a plenary action ( seeCPLR 103[c]; Matter of Aydin v. Commissioner of Taxation & Fin., 81 A.D.3d 1203, 1205 n. 1, 917 N.Y.S.2d 427 [2011];Hodges v. Beattie, 68 A.D.3d 1597, 1598, 893 N.Y.S.2d 289 [2009] ).
ORDERED that the order is affirmed, with costs.