Darnet Realty Associates, LLC v. 136 East 56th Street Owners, Inc.

153 F.3d 21, 1998 U.S. App. LEXIS 18625
CourtCourt of Appeals for the Second Circuit
DecidedAugust 12, 1998
DocketDocket Nos. 97-9077 (L), 97-9437(CON)
StatusPublished
Cited by14 cases

This text of 153 F.3d 21 (Darnet Realty Associates, LLC v. 136 East 56th Street 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
Darnet Realty Associates, LLC v. 136 East 56th Street Owners, Inc., 153 F.3d 21, 1998 U.S. App. LEXIS 18625 (2d Cir. 1998).

Opinion

SHADUR, Senior District Judge:

Darnet Realty Associates (“Associates”) and its successor Darnet Realty Associates, LLC (“Associates LLC”) (collectively “Dar-net”) 1 appeal from judgments entered on July 29, 1997 and October 28, 1997 in the United States District Court for the Southern District of New York that (1) granted summary judgment in favor of 136 East 56th Street Owners, Inc. (“Owners,” treated as a singular noun) under Fed.R.Civ.P. (“Rule”) 56 on that part of Owners’ claim that asserted it had properly terminated the garage portion of its lease to Darnet pursuant to Section 3607 of the Condominium and Cooperative Conversion Protection and Abuse Relief Act (the “Act,” 15 U.S.C. §§ 3601-36162), (2) denied Darnet’s cross-motion for summary judgment as to termination of the garage portion of the lease and (3) awarded [23]*23Owners $50,941.10 in attorneys’ fees under Section 3611. For the reasons set forth below we (1) reverse the district court insofar as it granted Owners’ Rule 56 motion and denied Darnet’s Rule 56 motion, (2) reverse the award of attorneys’ fees to Owners and (3) remand for consideration of whether-Dar-net should be awarded attorneys’ fees.

Standard of Review

We review the grant of a motion for summary judgment de novo, using the same standard applied by the district court (Catlin v. Sobol, 93 F.3d 1112, 1116 (2d Cir.1996)). Familiar Rule 56 principles impose on a party seeking summary judgment the burden of establishing the lack of a genuine issue of material fact (Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). For that purpose we must draw all inferences’ in favor of the non-moving party, but “mere eonclusory allegations, speculation or conjecture will not avail a party resisting summary judgment” (Cifarelli v. Village of Babylon, 93 F.3d 47, 51 (2d Cir.1996)).

Where as here cross-motions for summary judgment are involved, it is necessary to adopt a Janus-like dual perspective that sometimes forces a denial of both motions. In this instance, however, the differing perspectives on the parties’ respective Rule 56 motions point to the same outcome: Darnet prevails on each motion.

Facts

136 East 56th Street is an apartment complex in Manhattan that comprises 149 residential apartments, an underground parking garage and a number of retail stores. In 1980 Darnet, then a partnership that owned the entire complex, decided to convert the 149 residential apartments into a cooperative. Accordingly, Darnet incorporated Owners in 1980 and filed an offering plan with the New York State Attorney General on July 24, 1981. Under the plan shares of stock in Owners were offered for sale along with leases to the residential apartments. On the April 16, 1982 closing date Owners took fee simple title to the property and entered into a Master Commercial Lease (the “Lease”) with Darnet covering the retail stores, parking garage and ancillary cellar space. At that time Darnet controlled at least 80% of Owners’ stock. Under the Lease Darnet was demised the leased premises for a 20-year term at an annual rent of $250,000, with options to renew the Lease for two additional' 15-year periods at respective annual rents of $275,000 and $300,000.

Darnet, which still held a substantial portion of Owners’ stock (always more than 25%) because the stock had not been sold to cooperative purchasers, maintained control of the board of directors of Owners (“Board”) until 1988. At. that time five of Board’s seven members were elected by shareholders unrelated to Darnet, though Darnet’s ownership interest continued to exceed 25%. Dar-net never regained a voting majority of Board after that point, but Asher B. Dann (“Dann”), a Darnet partner, served as Owners’ President' until November 2, 1995. Other, facts bearing on whether Darnet might be said to have retained “special developer control” (a statutory concept) will be fleshed out in greater detail in the later substantive discussion.

On July 12, 1995 Associates took advantage of New York’s newly enacted Limited Liability Company Act and transformed itself into Associates LLC. All partners in Associates transferred and assigned their partnership interests to Associates LLC in exchange for membership in the new legal entity. As a consequence, Associates LLC acquired all partnership interests in Associates and became its successor in interest.

On May 16, 1996 the owners of more than two-thirds of Owners’ units not controlled by Darnet voted at their annual meeting to terminate the Lease to the fullest extent permitted by Section 3607. On May 31, 1996 Owners mailed two notices of termination, assertedly pursuant to Section 3607,. that Darnet received in early June. By their terms, one notice said that it terminated the Lease in its entirety while the second said that it terminated only the “garage portion” of the Lease. Each notice said that it would be effective on August 31,1996.

[24]*24On November 30, 1996 Darnet sold its entire interest in Owners, but not its control over the parking garage and retail stores, to an unrelated entity, 56 Realty Co. (“56 Realty”). That sale marked the first time that Darnet had less than 25% ownership of Owners’ shares (or Owners’ units).

On August 2,1996 Darnet filed a complaint against Owners seeking (1) a judgment declaring the purported termination invalid, (2) an injunction against future attempts to terminate the Lease and (3) attorneys’ fees. Owners countered by filing its own action against Darnet seeking a judgment declaring its termination valid and asking for an award of attorneys’ fees.3 Those two actions were then consolidated by the district court.

Owners and Darnet promptly filed cross-motions for summary judgment in both suits. On January 30, 1997 the district court issued an opinion that granted Owners’ motions in large part. It rejected Darnet’s arguments that Owners’ termination notices were not timely under Section 3607(b) and that Owners could not terminate the garage portion of the Lease because the garage was not “property serving” the owners as required by Section 3607(a). Consequently the district court held that Owners’ termination of the garage portion of the Lease was valid — although the court granted Darnet’s Rule 56 motions to the extent that it ruled that Owners could terminate only the garage portion of the Lease, not the entire Lease.

As the Lease did not apportion Darnet’s rent payments between the garage and the retail stores, the district court held an evi-dentiary hearing to determine the relative value of each portion of the Lease. On July 24, 1997 the district court entered judgment determining that the garage portion represented 21.57% of the value of the Lease and reduced Darnet’s rent payments accordingly.

Both Owners and Darnet then moved for awards of attorneys’ fees and expenses under Section 3611.

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United States Court of Appeals, Second Circuit
153 F.3d 21 (Second Circuit, 1998)

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Bluebook (online)
153 F.3d 21, 1998 U.S. App. LEXIS 18625, Counsel Stack Legal Research, https://law.counselstack.com/opinion/darnet-realty-associates-llc-v-136-east-56th-street-owners-inc-ca2-1998.