Cromwell Associates v. Oliver Cromwell Owners, Inc.

941 F.2d 107, 1991 U.S. App. LEXIS 17684, 1991 WL 139871
CourtCourt of Appeals for the Second Circuit
DecidedJuly 31, 1991
DocketNo. 388, Docket 89-7582
StatusPublished
Cited by17 cases

This text of 941 F.2d 107 (Cromwell Associates v. Oliver Cromwell Owners, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cromwell Associates v. Oliver Cromwell Owners, Inc., 941 F.2d 107, 1991 U.S. App. LEXIS 17684, 1991 WL 139871 (2d Cir. 1991).

Opinion

MAHONEY, Circuit Judge:

This is an appeal by defendant-appellant Oliver Cromwell Owners, Inc. (the “Cooperative”) from an amended judgment of the United States District Court for the Southern District of New York, John M. Cannel-la, Judge, that granted plaintiff-appellee Cromwell Associates (“Associates”) partial summary judgment declaring that the Cooperative’s notice of termination of a lease agreement was invalid. The district court ruled that the Cooperative was not authorized to terminate the lease by 15 U.S.C. § 3607 (1988). See Cromwell Assocs. v. Oliver Cromwell Owners, Inc., 705 F.Supp. 116 (S.D.N.Y.1988).

We affirm.

Background

On June 22, 1984, Oliver Cromwell Holding Co. (“Holding Co.”) conveyed to the Cooperative title to premises located at 12 West 72nd Street in Manhattan, thereby converting a former rental apartment hotel to a cooperative. As part of the conversion transaction, the Cooperative leased portions of the premises to additional counter[109]*109claim defendant 12 West 72nd Street Corp. (“12 West Corp.”). 12 West Corp. then assigned its interest in the lease (the “master lease”) to Associates. The partners of Holding Co. were shareholders of 12 West Corp., and are partners of Associates. Holding Co. designated the officers and directors of the Cooperative who directed its affairs at the time when the master lease was executed on behalf of the Cooperative.

The master lease covers space on the basement, ground floor, and residential floors of the building used as: (1) a seafood restaurant; (2) a pharmacy; (3) a doctors’ office; (4) a ground floor office; (5) closets on each floor for linen and cleaning supplies; (6) a linen room in the cellar; and (7) a store room in the cellar. The restaurant, pharmacy, and doctors’ office have been sublet. The office is used by Holding Co. and Associates to store records and hold occasional meetings. The closets, linen room, and store room are used by Associates to provide laundry service to the rent-stabilized tenants who chose not to purchase shares of the Cooperative following the conversion. Associates claims, and the Cooperative does not dispute, that no laundry service is provided to any shareholder of the Cooperative.

The master lease allows Associates to use the leased space for any lawful purpose that is not “obnoxious, hazardous or immoral.” The master lease is for an initial term of twenty years, and Associates has options to extend the term for four additional twenty-year periods. Annual rent starts at fifty thousand dollars, and increases by five percent every five years. Additional rent may be charged to the extent that yearly service costs and taxes attributable to the leased premises exceed the base rental for any year. Associates is entitled to assign and sublet.

On February 2, 1987, the Cooperative notified Associates and 12 West Corp. that “by a vote of the owners of the shares allocated to more than two-thirds of the units other than the units owned by the developer,” the Cooperative elected to terminate the master lease effective May 3, 1987. The Cooperative claimed to act pursuant to 15 U.S.C. § 3607 (1988),1 a provision of the Condominium and Cooperative Abuse Relief Act of 1980 (the “Act”).

Associates then instituted this action seeking, inter alia, a declaratory judgment that the Cooperative’s termination of the lease was not valid under section 3607. The United States District Court for the Southern District of New York, John M. Cannella, Judge, granted Associates’ motion for summary judgment on that issue on the authority of West 14th Street Commercial Corp. v. 5 West 14th Owners Corp., 815 F.2d 188 (2d Cir.), cert. denied, 484 U.S. 850, 871, 108 S.Ct. 151, 200, 98 L.Ed.2d 850, 871 (1987). The district court [110]*110ruled that the restaurant, pharmacy, and doctors’ offices were not “property serving the ... cooperative unit owners” within the meaning of subsection 3607(a)(1), see 705 F.Supp. at 118; declined to address “prospective uses of the leased spaces,” see id. at 118-19; and declined to consider the terminability of the master lease as to the balance of the leased spaces in view of the Cooperative’s election to terminate the entire master lease, see id. at 119.

This appeal followed.

Discussion

In West 14th Street, we initially addressed the contention that leases are not “contracts” for purposes of section 3607 because the issue of unconscionable leases is covered exclusively by section 3608 of the Act,2 and therefore is not within the purview of section 3607. We rejected that view, relying, inter alia, upon the definition of “lease” in section 3603 of the Act3 as directed primarily at leases to a cooperative project by a developer or its affiliate, rather than leases by a developer to an affilitate where the cooperative project succeeds to the obligations of the developer, see 815 F.2d at 197 & n. 4, and upon pertinent legislative history, see id. at 197-98.

A state court opinion that addressed this question subsequently took issue with West Hth Street, contending primarily that our reading of the pertinent legislative history was flawed. See Park East Apartments, Inc. v. 233 East 86th Street Corp., 139 Misc.2d 806, 816-19, 529 N.Y.S.2d 674, 681-82 (Civ.Ct.1988), aff'd on other grounds, 143 Misc.2d 60, 543 N.Y.S.2d 610 (App. Term 1989). Nonetheless, we have since reiterated the West nth Street ruling on this issue. See 2 Tudor City Place Assocs. v. 2 Tudor City Tenants Corp., 924 F.2d 1247, 1251 (2d Cir.1991), cert. denied, — U.S. -, 112 S.Ct. 83, — L.Ed.2d - (1991) (No. 90-1954). This threshold question of statutory interpretation is therefore settled in this circuit, absent reconsideration in banc or a differing construction by the Supreme Court. See Leecan v. Lopes, 893 F.2d 1434, 1443 (2d Cir.), cert. denied, — U.S. -, 110 S.Ct. 2627, 110 L.Ed.2d 647 (1990); United States v. Salerno, 868 F.2d 524, 534 (2d Cir.), cert. denied, 491 U.S. 907, 109 S.Ct. 3192, 105 L.Ed.2d 700; — U.S. -, 110 S.Ct. 56, 107 L.Ed.2d 24 (1989); Board of Educ. of City School Dist. v. Hufstedler, 641 F.2d 68, 70 (2d Cir.1981); In re Jaylaw Drug, Inc., 621 F.2d 524, 527 (2d Cir.1980).

West nth Street also addressed the dispositive issue in this case, the construction of the provision in subsection [111]

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941 F.2d 107, 1991 U.S. App. LEXIS 17684, 1991 WL 139871, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cromwell-associates-v-oliver-cromwell-owners-inc-ca2-1991.