Cooperatives & Condominiums

Pledgee Not Entitled to Co-Op Shares

Consolidated Resources, LLC v. 210-220-230 Owners Corp.

NYLJ 2/23/09, p. 32, col. 3

AppDiv, Second Dept.

(memorandum opinion)

In a declaratory judgment action by pledgee of a proprietary lease and shares of co-op corporation, the co-op corporation appealed from the Supreme Court's denial of its summary judgment motion. The Appellate Division reversed and declared that pledgee was not the owner of the disputed stock or the holder of the proprietary lease because the pledge violated the terms of the proprietary lease.

The Offering Plan for the subject co-operative provides that a holder of unsold shares may sublet the subject apartment and assign the proprietary lease without obtaining the approval of the co-op board or 65% of the holders of the shares of the cooperative. The proprietary lease, however, provides that a pledgee or transferee of pledged security shall not be entitled to have the shares transferred on the books of the co-op corporation unless the consent of the co-op corporation has been obtained in accordance with other provisions of the proprietary lease. Those other provisions require either approval of the pledge by the co-op board or a vote of 65% of the shares of the co-op corporation. In this case, one of the original purchasers of a unit pledged the proprietary lease and shares as security ' without obtaining the approval of the co-op board ' and then defaulted on the loan. She subsequently attempted to assign her lease and shares. The pledgee then sought to have the co-op corporation issue a new proprietary lease and shares to it, but the co-op corporation refused. When pledgee brought this declaratory judgment action, the Supreme Court denied the co-op corporation's summary judgment motion, and the co-op appealed.

In reversing, the Appellate Division relied on the provision in the proprietary lease, and concluded that in light of that provision, which limits the obligation of a co-op corporation to transfer shares on its books, the pledgee was not entitled to have the co-op corporation transfer shares on its books even if the original purchaser was a holder of unsold shares. As a result, the co-op corporation was entitled to summary judgment.

Pledgee Not Entitled to Co-Op Shares

Consolidated Resources, LLC v. 210-220-230 Owners Corp.

NYLJ 2/23/09, p. 32, col. 3

AppDiv, Second Dept.

(memorandum opinion)

In a declaratory judgment action by pledgee of a proprietary lease and shares of co-op corporation, the co-op corporation appealed from the Supreme Court's denial of its summary judgment motion. The Appellate Division reversed and declared that pledgee was not the owner of the disputed stock or the holder of the proprietary lease because the pledge violated the terms of the proprietary lease.

The Offering Plan for the subject co-operative provides that a holder of unsold shares may sublet the subject apartment and assign the proprietary lease without obtaining the approval of the co-op board or 65% of the holders of the shares of the cooperative. The proprietary lease, however, provides that a pledgee or transferee of pledged security shall not be entitled to have the shares transferred on the books of the co-op corporation unless the consent of the co-op corporation has been obtained in accordance with other provisions of the proprietary lease. Those other provisions require either approval of the pledge by the co-op board or a vote of 65% of the shares of the co-op corporation. In this case, one of the original purchasers of a unit pledged the proprietary lease and shares as security ' without obtaining the approval of the co-op board ' and then defaulted on the loan. She subsequently attempted to assign her lease and shares. The pledgee then sought to have the co-op corporation issue a new proprietary lease and shares to it, but the co-op corporation refused. When pledgee brought this declaratory judgment action, the Supreme Court denied the co-op corporation's summary judgment motion, and the co-op appealed.

In reversing, the Appellate Division relied on the provision in the proprietary lease, and concluded that in light of that provision, which limits the obligation of a co-op corporation to transfer shares on its books, the pledgee was not entitled to have the co-op corporation transfer shares on its books even if the original purchaser was a holder of unsold shares. As a result, the co-op corporation was entitled to summary judgment.