Mishaan v. 1035 Fifth Avenue Corp.

47 Misc. 3d 930, 4 N.Y.S.3d 834
CourtNew York Supreme Court
DecidedJanuary 15, 2015
StatusPublished

This text of 47 Misc. 3d 930 (Mishaan v. 1035 Fifth Avenue Corp.) is published on Counsel Stack Legal Research, covering New York Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Mishaan v. 1035 Fifth Avenue Corp., 47 Misc. 3d 930, 4 N.Y.S.3d 834 (N.Y. Super. Ct. 2015).

Opinion

[931]*931OPINION OF THE COURT

Nancy M. Bannon, J.

I. Introduction

In this proceeding pursuant to Business Corporation Law § 619, seeking, inter alia, a judgment declaring that petitioner Richard Mishaan was duly elected as a member of the board of directors of respondent 1035 Fifth Avenue Corporation on May 13, 2014, and enjoining the respondents from acting as a duly elected board, the petitioners move by order to show cause for that relief. For the reasons set forth below, the petitioners’ application is granted in part.

II. Background

Respondent 1035 Fifth Avenue Corporation (the co-op) owns a cooperative apartment building located at 1035 Fifth Avenue in Manhattan. The co-op is governed by a board of nine directors, each director serves a three-year term and the terms are staggered, such that each year the terms of three of the nine directors expire, and the election of new directors occurs each year in May at the annual shareholders’ meeting.

Each petitioner is a unit owner and shareholder of the co-op. Petitioner Mishaan was a candidate for a director position in the May 13, 2014 board of directors election held at the co-op’s annual shareholders’ meeting and contends that he was duly elected. Petitioners Koppelman and Kunstadter are current members of the board of directors. Petitioners Abbey and Nelson are neither board members nor were candidates in the May 2014 election. The individual respondents also are each unit owners and shareholders, and respondents Rad, Green, Schmon, and Menschel are members of the board. Like Mishaan, respondents Atkinson and DiGiacomo were both candidates for director positions in the May 2014 election.

Article II, § 1 of the bylaws provides that there will be 9 to 11 directors, but the number is to be nine until increased by the board. The same section requires that directors “shall be elected at the annual meeting.” The bylaws also provide for a nomination procedure, the order of business for the annual meeting, the notice requirements and the required quorum. In regard to tallying votes, article I, § 5 of the bylaws, entitled “Voting” provides that

“[a]t each meeting of stockholders, each stockholder present in person or by proxy shall be entitled to [932]*932one vote for each share. . . . All proxies shall be in writing and shall be filed with the secretary at or previous to the time of the meeting . . . All ballots and proxies shall be voted and counted at one and the same time” (emphasis added).

Article I, § 6, entitled “Inspector of Elections,” provides for the appointment of an inspector of elections and requires him or her to “immediately” file an oath and a certificate of the results of any vote taken at the meeting of shareholders with the secretary of the corporation (emphasis added). The bylaws are silent as to the miscounting or recounting of ballots. The bylaws in article II, § 6 further provide that the annual meeting of the board of directors shall be held immediately after the annual meeting of stockholders, without notice.

On May 13, 2014, the co-op held its annual shareholders’ meeting, wherein the election of new directors was conducted. Five candidates, petitioners Mishaan and Koppelman and respondents Atkinson, DiGiacomo, and Menschel, ran for three available director positions. Respondents Atkinson and Menschel were both directors running for reelection. At the meeting, the board’s assistant secretary and appointed inspector of election, Harry Smith, an employee of the building’s managing agent, Gumley-Haft LLC, collected and counted the ballots and proxies. Thereupon, Smith announced the election of respondent Menschel and petitioners Mishaan and Koppel-man to the board, and represented to those present that he would notify Mishaan and Koppelman of their election to the board, as they were not present at the annual meeting. The annual meeting was then concluded. However, Smith did not sign the required “Certificate of Results of Corporate Election.”

Respondent Emil Rad, president of the board of directors, asked the board members to remain after the annual meeting concluded for a meeting of the board of directors, wherein the directors reappointed respondent Rad as board president and nonparty Wagner as vice-president and appointed respondent Green as treasurer. Mishaan and Koppelman were not present at the board meeting. Atkinson left after the annual meeting and was thus not present at the board meeting.

Sometime after the conclusion of the annual meeting, nonparty shareholder Martin Bell, a corporate attorney, notified Smith that he wished to review the proxies and requested that Smith save them for this purpose. Bell further notified the board president, respondent Rad, of his intention to inspect the [933]*933proxies. The next day, on May 14, 2014, during his review, Bell discovered that the proxy he had completed and timely sent to Smith on May 7, 2014 had not been counted, and notified Smith. Smith in turn consulted with the co-op’s attorney, who advised him to count Bell’s proxy before signing the certificate.

With Bell’s proxy included, the previously announced election results changed. The signed “Certificate of Results of Corporate Election” reflected the election of respondent Menschel, petitioner Koppelman, and respondent Atkinson, and not petitioner Mishaan. Smith notified the board president of the change on May 15, 2014. Smith then sent an email to board members and a letter to all shareholders on May 16, 2014 informing them of the recount and changed election result. This was three days after the election. In his letter, Smith stated that he conducted a recount of the votes, as he does in all cases, especially when the vote count is close, and in the process discovered that he had failed to include one proxy in the count, which changed the results of the election.

On May 21, 2014, the board of directors met to discuss the discrepancy between the election results announced at the annual meeting on May 13, 2014 and those announced three days later on May 16, 2014. Present at the meeting were respondents Atkinson, Green, Menschel, Rad, and Schmon, petitioners Koppelman and Kunstadter, nonparty board members Wagner and Walther, as well as Smith and the co-op’s attorney. According to the meeting minutes, Smith reported to the board that, as inspector, it was his decision to recount the votes because of the closeness of the election results. In the process of doing so, he discovered his error in inadvertently omitting a timely received proxy from the first count. Smith recounted his consultation with the co-op’s attorney and subsequent actions. The board discussed several options to address the circumstances. Ultimately, the board voted in favor of increasing the size of the board by 2 to 11 members and to appoint petitioner Mishaan and respondent DiGiacomo to fill the seats. These newly-created seats would be for terms of one year each, rather than three as provided by the bylaws. The board decided to wait until the next meeting to ratify the appointment of officers in order to enable Mishaan and DiGiacomo to be present. Subsequently, DiGiacomo accepted the one-year board position, but Mishaan declined.

On June 10, 2014 the board met. According to the meeting minutes, Rad provided the board members with updates on [934]*934various current and future projects pertaining to the building, but no action was taken on these items by the board.

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Bluebook (online)
47 Misc. 3d 930, 4 N.Y.S.3d 834, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mishaan-v-1035-fifth-avenue-corp-nysupct-2015.