Wong v. Board of Mgrs. of One Sunset Park Condominium

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Wong v Board of Mgrs. of One Sunset Park Condominium 2024 NY Slip Op 33308(U) September 20, 2024 Supreme Court, Kings County Docket Number: Index No. 516926/20 Judge: Kerry J. Ward Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication.

FILED: KINGS COUNTY CLERK 09/20/2024 03:44 PM INDEX NO. 516926/2020 NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 09/20/2024

AtanIAS Tenn, Part 9 ofthe Supreme Court of the State of New York, held in ancl for the County of Kings, at the Coul'thouse, at Civic Center, Brooklyn, New York, on the 201h day of September; 2024. PR ESE NT:

HON. KERRY J. WARD, Justice. .- - - - -·- - -.- - - - - - - - - - - . , - - - -·- - ,. -·- - - - -. - - -·-X WILSON WONG, JQSHUALEE,DOROTHEA LEE; JIN XrA HUANG, JJE SHANLl, MEI-CHAU KWOK, BlLLY HUM, LARRYROTHCHILD, JJAYUAN PENG, }IAN LIN L!, XlPING CHEN, PETERGJBSQN, LORRY WALL GIBSON, MINN EA T..,JN, JONA THAN RINEHART, JOHN BENS0N,MAXPLYSHEVSKY, SUI T!NGCA0, HONGPEtCAO, PE!ZHULUO, PATRICK COL!v[AN, XUEFANG NI, Muxr AN w ANG, GERALD MEYER, DAVID AKEY, Cl·lELSEA SMITH, DORIS RENATE KIMBROUGH, JANETMATTHEWS - DERRICO, ELEANOR WHITNEY,. ROBERT GERTLER, VIVIAN PERRILLA, ANNA ZHENG, MENG Li WANG,KE YONG WANG, BIN BIN CHENG, JODIE CHENG, HIV MENG CHENG, HE ZHU·CHEN, SHUYU ZHENG,

Plaintiffs,

-.against - Index No. 516926/20

BOARD OP MANAGERS OFONE SUNSET PARK CONDOMINIU!vi,

Defendant. - - - - -·- - - - - - - - - - - -.- -.- -. - - - - - - - - - - - - ~ - - -X

The following e,.filed papers read herein: NYSCEF Doc Nos.

Notice of Motion/Order to Show Cause/ Petition/Cross Motion and · · Affidavit~ (Affirmations) _ _ _ _ _ _ __ 114-131 135-.136. 138-157. 1.59-177 Opposing Affida,iits (Affirmations) _ _ __ 135-136. 138-154. 156-157, 159-177

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Condominium's r,y-laws, entitled "Liability of the Condominium Board," specifically

provides, in relevant part, that:

'"[tJhe members of the Condominium Board shall have no liability to the Unit Owtlers Jo,· errors ofjudgment, negligence, or otherwise, except that each member of the Condominium Board shall be liable thereto for his own. bad faith or willful misconduct. .. .'' (NYSCEF Doc No, 122 at § 2.20 [A] [ emphasis added]).

Thus, there is no ground to add Meshoh and Zhen as party defendants beca11se there is no

allegations that those particular board meh1bcrs acted in bad faith.

(2)

The Condominium's Summary Judgment Motion

Summary judgment is a drastic remedy that deprives a litigant of his or her day in

court and should, thus, only be employed when there is no doubt as fo the absence of triable

issues of material fact (Kolivas v Kii·chofl, 14 AD3d 493 [2d Dept. 2005]; See also Ai?dre

v Pomeroy, 35 NY2d 361,364 [1974]). ''The proponent ofa motion for summaryjudgment

must make a prima facie showing of entitlement tojudgment~ as a matter of law, tendering

sufficient evidence to demonstrate the absence of any material issues of facf' (Manicone v

City of New York, 75 AD3d 535,537 [2d Dept 201 OJ, quoting Alvarez v Prospect Hosp.,

68 NY2d 320, 324 [1986]; see also Zuckerman v City of New York, 49 NY2d 557, 562

[1980]; Winegrad v Nei,v York Univ. Med Ctr., 64 NY2d 851, 853 [1985]). If it is

determined that the movant has made a prima facie showing of entitlement to srnmnary

judgment, ''the burden shifts to the opposing party to produce evidentiary proof in

admissiblefonn sufficient to establish the existence of material issues of fact which require 20

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a trial oftheaction'' (Garnham &Han Real listateBrokersv Oppenheimer, 148AD2d493

[2d Dept. 1989]).

Where, as· here; owners of a condominium unit challenge an action by the

condominium's board ofdirectors, the court must apply the business judgment rule. The

Second Department has held that "[t]he business judgment rule .. , prohibits judicial

irtquiiy into the actions of the board as long as the board acts for the purpose of the

condominium, within its authority arid in good faith'" (Acevedo v Town 'N Countiy

Condominium, Section. I, Bd. of Mgrs., 5 I AD3d 603, 603 [2d Dept. 2008] [holding that

condominiµm board "'met its prima facie burden by establishing that it acted in good faith,

within its authority, andforthc benefit of the condominium, when it retained an insurance

broker to procure insurance suffitientto cover full replacement of the buildings ... "]). The

Second Department has further held that:

"the court's inquiry is limited to whether the board acted within the scope of its authority under the bylaws (a necessary threshold· inquiry) and whether the action was taken in good faith to further a legitimate interest of the condornl11ium. Absent a showing of fraud, self-dealing or unconscionability, the court's inquiry is so limited and it will notinquire as to the wisdom or soundness of the business decision" (1812 Quentin Road, LLC v 1812 Quentin Road Condomihium Ltd, 94 AD3d 1070, 1072 (2012] [internal quotation marks orrtitted]).

Here, Section 5 A (A) of the Condominiunt's by-laws entitled ''Insurance''

provides, in relevailt part, that

''(tJhe Condominium Board shall obtain, and shalLntaintain in fuII force and effect, fire insurance policies with all risk extended coverage . . . insuring the Building (includbig all Units, bathroom and kitchen· fixtures, hut not including 21

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appliances or any furniture, furnishings, decorations, belong;ngs, or otherpersonal property supplied or installed by Unit Owners or the tenants of Unit Owners) and covering the interi;:sts ofthe·Condominium, the Condominium Board, all of the Unit Owners and all Permitted Mortgagees, as their interests.may appear ....·, (NYSCEF Doc No. 198).

Section 5.4 (C) provides that "the coverage shall be in an amount equal to not less than

eighty (80%) percent ofthcJull replacement cost of the Building .. ."' (id). Section 5.4 (E)

provides that "'Unit Owners shall be required to carry liability insurance in such amounts

as the Condominium Board shall reasonably require" and "may carry other insurance for

their own benefit .. ."' (id}. Section 5.5 {B} provides that in the event of a casualty the

Condominium is only responsible to restore:

"the portion(s) of the I3uilding (including all Units and the bathroom andkitchenfixtures installed therein on the date of recording the Decla,•ation [in 2009J and all service rrtachinery contained therein, but not including appliances or any furniture, furnishings, decorations, beJongings, or other personalproperty supplied or installed by either Unit Owners or the tenants ofUnit Owners) affected by such Casualty Loss ... " (id] [emphasis added]).

Thus, according to the express terms of the Condominium's by-laws, in 2018, the

Condominium's board was required to procure insurance coverage equal to 80% of the

"full replacementcost of the Building'' (id. at§ SA [CJ).

While the Condominium demonstrated that Klausner, the Condominium Board's

former pr~sident,. initially obtained $8.2 million in fire inst1rance coverage for the Buildin$

after consulting with the Condominium's attorney tmd i1isurance broker in December 2013,

there is no evidence in the record reflecting that the CondomirtiuJn Board consulted with

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anyone regarding the adequacy of such insurance coverage when Klausner subsequently

renewed the same insurance policy annually. Indeed, other than the December 2013 email

chain, the CondominiumBoard fails to submit any evidence demonstrating how its board

"periodically determined" that the insurance coverage was sufficient, especially in 2018,

the relevant policy period in effect at the time of the April 2019 fire. Thus, on this . .

insllfficient record, it is impossible to determine the threshold issue of whether the

Condominium Board acted within the scope of its authority under the bylaws in 2018.

Without any evidence of the Condominium Board's 2018 determination, there is no prima

facie showingthat the Condominium Board renewed its policy in 2018 in good faith and

to further a legitimate interest of the Condominium. Consequently. there are issues of fact

as to whether the Condominium Board's 20 I8 determination regarding the sufficiency of

its fire insurance cnverage is beyond judicial scrutiny under the busiiless judgment rule.

These factual issues preclude summary judgment regarding the claims set forth in the

original and the proposed amended complaint.

Furthermore, the record contains conflicting conclusions by the Condominium

Board's experts; Zimmerman (NYSCEF Doc No. 2) and Guzowski (NYSCEF Doc No.

l 18}i regarding the replacement cost of the Building, both of which conflict with the Fire

Damage Appraisal Report of Fire & Restoration LLC, which was obtained by the

Condominium Board's public adjuster (NYSCEF Doc No. 163)3, independently

wananting denial of the Condominium's summary judgment motion. Indeed, Plaintiffs are

3 The court notes that said appraisal indicated that the replaceme11t costs of the Property was approximately $ J7;300,000. . . 23

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entitled to discovery regarding these expert reports 1 'and whether the board sought expert

guidance ii¹ 2018 when renewing the same policy that had been in place for five years,

since 2013. Accordingly, it is hereby

ORDER,ED that the Condominium Board's summary judgmentmotion (mot. seq.

two) is denied without prejudice and with leave to renew after the conclusion of all

discovery; and it is further

ORDERED that Plaintiffs' cross-motion :for leave to amend the complaint (Inot.

seq. three) is only granted to the extent that leave to amend the complaint is granted and

the proposed mnended complaint (NYSCEFDoc No. 152) is deemed to be accepted with

the exceptions of the following allegations regarding Aaron Meshon and Zhen Liang Li

(id. at I and 1117, 4t 82~85, 89 and91); and it is further

ORDERED that the amended complaint (excluding all references to proposed

individual defendants Mesh on and Zhang) shall be served upon the new party defendants,

Paul Klausner, Leroy Shepherd and Mark N. Fessel, and shall also be e-filed within 30

days of service ofthis decision and order with notice ofentry thereof.

This constitutes the decision and order of the court.

ENTER,

A. l S. C.

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Footnotes

[1] of 24 [* 1] Upon the foregoing papers, defendant Board of Managers of Orte Sunset Park Condominium (Condominiu m Board) moves (in motion sequence [mot. seq.] two) for an order, pursuant to CPLR.3212, granting it summary judgment dismissingt hb complaint (NYSCEF Doc No. 1.14). Plaintiffs Wilson Wong, Joshua Lee, Dorothea Lee, Jin Xia Huang, Jie Shan Li, Mei-Chau Kwok, Billy Hum, Larry Rothchild, Jiayuan Peng,Jian Lin Li, Xi Ping Chen, Peter Gibson, Lorry Wall Gibsot1, Minnca Lin; Jonathan Rinehart, John Benson, Max Plyshevsky,_ Sui Ting Cao, llongpei Cao, Peizhu Luo, Patrick Colman, Xuefang Ni, Muxian Wang,Geral dMeyer, David Akey, ChelseaSmit h, Doris Renate Kimbrough, Janet Matthews,.Derrico, Elenor Whitney, Robert Gertler, Vivian Perrill a, Anna Zheng, Meng Li Wang, Kc Yong Wang, Bin Bin Cheng, Jodie Cheng, lliu Ming Cheng, He Zhu Chen and Shuyu Zheng (collectively, Plaintiffs or UnitOwners ) cross.,.move (in mot. seq. three) for an order: (l) granting them leave to ame11d the complaint, pursuant to CPLR 3025 (b ); (2) adding Paul Klausner, Leroy Shepherd, Aaron Meshon, Zhen LiangLi, and MarkN. Fessel as party defendants; pursuant to CPLR 1003; and (3) granting Plaintiffs leave to serve the sutnmons and the amended complaint upon the new defendants, pursuant to CPLR 1003 (NYSCEF Doc No. 155). Background Plaintitis arcunit ownetsofthe ·condominiu m building loc_atedat 702•44 th Strectin Brooklyn (Building), On April 3, 2019, there was a substantial fire in the Building which required removal of all occupants from their apartment~. There were fifty.,four (54) 2

[2] of 24 [* 2] apartments in the Building and the structure was declared unsafe for habitation by the City ofNewYork. On September 10., 2020, several ofthe Unit Owners commenced this action against the Condominium Boatdby filing a summons anda complaint seeking "to recover damages resulting from [the] Board's failure to procure the proper amount of fire insurance for the Condominium" (NYSCEF Doc No. 1 at,i 1). The complaint alleges that "[t]he Board was required to comply with the By-Laws and, accordingly, pursuant to Section 5.4 {C) of the By-Laws, the Board was required to maintain fire insurance equal to 'not less than' 80% ofthe full replacement cost of the building" (id. at ,i 2). Allegedly, "[t]he Board failed to comply with these obligations ..." and "upon information and belief, obtained insurance coverage of $13.7 million'' although "the replacement value of the building is $25,200,000.00 to $26,880,000.00" (id. at 1if 3-4}. The complaint alleges that ''the Condominium should have had fire insurance equal to at least $20,160,000.00, representing 80'1/o ofthe replacement value of the building (80% of $25,200,000.00)" (id. at~ 4). The Unit Owners seek dainages "equal to the insurance shortfall of at least $6,460,000.00 ($20, 160,000-$13,700,000} .. :; (id. at ,r 5). In support ofthe>alleged replacement value of the Building,·the·complaint annexes, as Exhibit A, the September 19, 2019 report issued by the Condominium Board ;s architect, Howard. L. Zimmerman Architects, P. C. (Zimmennan Report)· (NYSCEF Doc No. 2). The complaintrefotcnces the ZimmennanReport and alleg;esthat: "(t]hc Zimmerman Report concluded that restoration and replacement of architectural elements is requited in all ,., .)

[3] of 24 [* 3] resident_ial units and i_t1 -.all common space throughout· the building. ~'The Zinimerinan Report calculated that average n(;!W construction costs in the Greater·New York City area in the past year for a new 51,300 square foot plus finished cellar building ·of similar construction quality ·and c01'1.figutation is expected to be $25,200,000.00 to $26,880,000.0Q" (Nt"SCEF Doc No. l at ~,i 48~49), The complaint asserts a single cause of action against the Condorriinium Board fotbreach of the Condominium's by-laws= by failing to obtain sufficient. _fire insµrance··-coverage_ in -2018 to.replace the entire Building ha_s~d on the restoration costs in the Zimmerinan Report (id at ,'if 54-58). 01i November 12, 2020, the Cohdominiunt Board answered the complaint, denied the 1naterial allegations. therein aitd asserted. that '"the Condominimn- carried s1Jf'ficierit insurance as required. .by the Condominium Act and the Condorninium By Laws" (NYSCEF Doc No. 5 at il 51). The Condominiuin Board also asserted affirmative defenses, including ( l) Plafr1tiffs lack stahding to maiiltain this action in their individual-:capadties, an.d (2} '~_defenda;nt a¢ted i11 good faith,_ in q:nnplian·c,f with- the Condominium Act, the Condominium By Laws arid in reliance upon. its professionals jn obtaining the reqµisite fire insurance coverage for the Building" and thus "'[t]he complaint is barred by the Business Judgment Rule?·' {id. at ,i,r 60. 64-66). Afli.;:r issue-was join~d, discovery ensued. 4

[4] of 24 [* 4] Tlte Co,zdo,ninium Board's Sl.fmmary_.Judgn,_ent MotiQn On April 4, 2023, prior to the completion of discovery artd befotc•the. taking of any party depositions 1 the Condominium Board moved for suinmaryjudgment dismissing the complaint (NYSCEF Doc No. ·114). The Cond"c:uninium.Boar.d submits. an affidavit (ro.m Letoy Shepherd (Shepherd), the current president of the Condominilnn's board and the Condominium's custodian of records; who attests that the Building was converted to condominiurri ownetsliip pursuant to atr April 6, 2009 Declaration and annexes a copy of the Condon1irtiuitfs by-,laws (NYSCEF Doc No. 117 at , 4 ). -Shephci"d asserts. that the Condominium;s summary judgment motion is b::ised on documents that establish that the Board, together with its jnsurartcc broker and an attorn-ey '1 ... conducted dµe dili:gerice [in 2013"] prior to obtaiil,inginsura nte coverage· for fire. and c;:isualty loss"· (id. at ~!11 6-11). Shepherd submits a December 2013 "email chain -that establishes that Klausner [the former president of the Board] sought guidance in determining the amounhjf Property Insurance coverage necessary to insure the Building :and whether and to what extent [the Condomini U:m] wa$ requited to provide .-coveritge-- for the inclividual units" (id. at ~I 7). The Decernber 20 l3 email chain reflects that the Condominium's insurance brnker opined that ''[t]he best answer to interior valuations can be ascertained in the ·concfo docuinents. and, generally speaking; condos have extremely lfrnited restoration responsibilities within µnits;' (NYSCEF Doc N(): 128). The. Condominium's attorney 1,11s0 11dvised that: "[a]ccording to Article 5j ofthe bylaws should there be a casualty the condo wi_ll rebu.ild the units and bathroom and 5

[5] of 24 [* 5] kitchen fixtures that are installed on the date the declaration was recorded [in April 2009]. Article 5.4 states what the condo's insurance covers. Nothing else is covered. I think yo11 should provide your agent with a copy of the bylaws snhe can revi cw· it hims-elf' (id.). Shepherd avers that, based on the due diligence conducted/'in 2013, [the Condominium] purchased Property Insurance for the Building in the amount of $8,200,000.00 and periodically detern1ined that th€! same amount 1i1as sufficient coverage through 2018" (NYSCEF Doc No. 117 at~· 12 [emphasis added]}. Notably. otherthan the December 2013 email chain, the Condominium Board: fails to submit any other evidence demonstrating how the Condominium Board ''periodically determined" that its insurance coverage was sufficient, particularfv in 2018, the policy period in effect at the time ofthe 2019fire. The Condominium Board submits an at1irmatio11 from Theresa Racht (Racht); the Condominium's general counsel wh(l was retained at the time of the fire and was ·'appointed inspector to conduct the vote of the unit owners on January 14, 2020, whether to restore the Building ... '' 1 (NYSCEF Doc No. 116 at ,-i~ 3 and 4). Racht affirms that "[t]he vote was conducted as a result of the Board's determination that more than 75% of the Building was destroyed or materially damaged'' based on the Zimmerman Report (id. at~~ 5-6). Raehl affirms that "the vote to resMre [the Building] was defeated since only 1 Section S.5 (D) otthe Ct:mdominitun's by~laws provides, in relevant pa!'t: "[i ]f either 75 % or 1nore of the Bui !ding is destroyed or substantially damaged by fire or other casuaity . , . the [restoration] Work shall not be performed uniess Unit Owners owning 75% in coi11mo11 iriterest of the Units ·shall pass a resolution to proceed with the same ... ;'' (NY SCEF Doc No. 122 at §·5. 5 fD) }. 0

[6] of 24 [* 6] 27;55% of the unit owners, voting the percentage of their common interests; voted to restore the Building when a vote of more than 75% of the percentage ofcon1inon interests was needed to restore, based on the voting results duly recorded by me as inspector of election ... '' (id at17). When Racht received inquiries from unitowners aboutthc cost of restoration, she sent out a letter to all unit owners explaining that: ··[w]hilethe Condominium has broad authority under Article 5 of the By-Laws to oversee any restoration work l'equired after a casualty loss, the language does not shift the financial obligationforthe interiorofthe·w1itfrom the·unitowner to the Condomiiziitm, and in fact, the special assessment provisions relating to casualty loss reaffirms the obligations of the unit owners to pay for the work'' (id. at 1 8 [emphasis added]; see also NYSCEFDoc No. 13 0 [letter to unit owners]). The .Condoniinium Board also submits an expert affidavit from Matthew J. Guzowski (Guzowski), a real estate appraiser, who opines that the replacement value of the Building, exclusive of the residential units, the foundation and the land 1 was $7 :5 million as of the date of the April 20 l9 fire, and is currently $JO million (NYSCBF Doc No. 118 at ~ 11). Notably, Guzowski's affidavit does not mention or even address the Zimn1crman Report, which the Condomini11m Board allegedly provided to Unit Owners regarding the replacement cost of the Building, The Condominium Board submits a memorandum of Jaw arguing, as a threshold issue, that "plaintiffs lack standing to assert the claims contained in their complaint. si11ce the allegations primarily address an injury to the common area and elements1 ' (NYSCEF . . Doc No. 132 at 8). The Condominium Board further argues that summary judgrrtertt is warranted because "plaintiffs cannot demonstrate. that the amount. of Property Insurance 7

[7] of 24 [* 7] coverage for the Building was inadequate, even assuming the complaint's sufficier1cy, simply because the plaintiffs do not allege that [the Condominiutri Board] acted in bad faith in purchasing Property Insurance in 2013 and when it renewed the same policy that was in place at the time a/the firil" (id. at 9 [etrtphasis added]). The Condominium Board asserts that "[i]n any event, the documentary evidence demonstrates [that the Condominium Board] acted in good faith in carrying out its contractual obligations to the unit owners when it purchased Property Insurance in 2013 and annually thereafter" {id at 11 [e1nphasis added]). The Condominium Board notes that Section 5. 5 {C) of the Condominium's by-I aws ''provide that the Bu ii ding must be, insured in an amount ofnot less than 80% of its replacement cost ... " {id. at 13}. The Condominium Board argues that the evidence: (i.e., Guzowski's expe1t appraisal of the Building), proves that "the value of the Building pdor to the fire on April 3, 2019, which included the Building structure; common ateas and elerrtents, but not the foundation , , and land, the individual units or depreciationL] was $7,500,000.00, lessthanthe coverage amountof$8,200,000.00 in2019 and more than 80% of the current value fm the Building, which, according to the appraisal is, $10,000,000.00'" (id at 13-14). The Condmninium Board asserts that it owed no duty to Plaintiffs to purchase property insurance for their benefit, since the By-Laws provide that unit owners shall carry their own insurance (id. at 14-15). Finally, the Condominium Board asserts thc1t: "[w]hile we maintain that resolution of this suminaryjudgment motion is essentiaily orte of contract interpretation, the 8

[8] of 24 [* 8] 'business judgment rule·' also precludes this court from looking behind [the Condominium Board~s] decision in purchasing and renewing Property Insurance for the Building, unless the ·plaintiffs can demonstrate ihat. the Board <1:tted Jn bad faith, engaged in self-d~aling ot other iniscond:uct at the tirne".:(id at 16\ The Condominium Board argues that the record establishes a rational basis for tbe Condominium Board's· purchase- ofinsurance·.cov erage of $8.2 million atler consultation -With its .attorney and insurance broker in December 2013 ( id. at 18-20.), Plaintiffs' Opposition and Cross~Mo{imlto Amend the Complaint Plaintiffs, in opposition, ·c,1ssert that: ·'the Boar.d's motion .should be denied because: (i). it is prematti.re since the parties ate in the preliminary stages of discovery and have not c.onducte.d party -depositicms, (ii) the iJoard fails-to establish primafacie its dc"ienses, (iii}cciinpeting expert reports and appraisals in the record concerning the Condominiµ111 Bµilding's 'replatement cost' raise issues of material fc:1ct ,vartantihg a trial, and (iv) facts·, necessary to oppose the motion lie exdusively iri the Boal'd;s possession arid ir(the-possession of rtonparties. under the Buard's control" (NYSCEF. Doc No. 136 at~ 3). Speciiically, Plaintiffs' counsel :asseits that the Condominium Board i&· not entitled -to summary judgment because the Condo1ni)1ium Board's responses to Plaintiffs' .disclosui•e failed to identify Guzowskias anexpert, reiied exclusively on the Zimmerman Report :and failed fo produce ariy documentation regarding the Condominium Board's det~rrnination to renew the insurance polic)' subsequent to 2(113 (id. .at ii, 1.5.: 17) .. Counsel affinns that no disclosure took place from October 7, 202 l through the date of the Condominium Board's surmnaryjudgin ent motion on Ap6} 4, 2023, because the parties 9

[9] of 24 [* 9] stipulated to stay discovery until the related paliition action (Shepherd v Wong et aL, Kings County index No. 508641/20} was fully resolved (id. at ,-i,-i I 9-22} Plaintifis' counsel explains that, rather than await a detennination in the partition action, as the parties contemplated in their stipulation, the Condominium Board precipitously moved for summary judgment when limited discovery has been exchanged and no depositions had been taken. For these reasons, counsel asse11s that the Condominiwn Board's premature sum111aryjudgment motion should be denied, pursuant to CPLR 3212 (i), so that Plaintiffs cart obtain essential document discovery and depositions from the current and former presidents of the Condominium's Board, Shepherd and Klausner, the Condominium Board's previously undisclosed expert appraiser, Guzowski, and others "involved in the . . applications, underwriting, placement, and renewal of Dejendcn1t'.~ fire insutance policy [in 2018] and the investigation, processing. valuation and coverage determinations .. ," (id. at~! 37 [emphasis added]). Counsel asserts thatsuch discovery is essential to opposing . . the Condominium Board's summary judgment motion, including Shepherd's unsubstantiated affidavit testimony that "the Board 'periodically determined; $8,200,000 would be sufficient coverage for the Building when it renewed the policy for 2019"' (id. at ir,i 24-25). Plaintiffs note that the Condominium Board "did not produce any Board meeting minutes,· insurance· application materials, or pertinent correspomlence relating to. the initial procurement or any renewal of the deficient $8,200,Q0O policy" in response to Plaintiffs' outstanding discovery requests (NYSCEF Doc No. 158 at 2). 10

[10] of 24 [* 10] Plaintifis.submit an affidavit from Peter Gibson (Gibson), one .o.fthe Plaintiff Unit Owners, whoattests that he received the Zimmerinan Report fro1il the Condoniirtium Board as part of the September 24, 2019 meetiiig materials sent to all ·unit Owi1ers ·with a notice _advising that: ''[t]he primary purpose. of this meeting is to review the Building AssessmentRepo rt pr~pared by Howard.Zi111inermait Architects. Please review the report which is included in this email. Zimmerman was hired by the Board to generate a detailed report as to the damage-and current condition-of the building, as well a~ the estinwted costs to restore tl1e building to its pt~_,;.fite coi1dition, to assist a11 of us- .in important up·coming decisions" (NYSCEF ·ooc No. i3S- at iJ, 9-10 [e1nphasis added]). Gibson recounts that Unit Owners were thereafter provided with a worksheet to calculate the ec,ono.mic option of"restoration and were adv.is~d by .the Co.ndorniniurn Board that the Zimmer1nan Re.port should be- Used as. an estimate of the restoration cost (id. .at.,, 14-16). Gibson asserts that: .~[d]espite the Unit Owners' past reliance on [the Zimmerman I-lep011L the Board now claims, usinga new ·expert', that the replacement cost of ·the Building was somehow only $7,500,000 whep the fire occurred,. which is more than $16,000.000 less_ than the $24~ 782,866 figure we relied on when w~ d¢cided whether- to vote to restore the Building"·' (id. at ,-i 24). Gibso11 asserts· that the· Condoiniri.ium Board's summary judgment motion .should bede;nied because ""[a] hearing is needed to .r~solve the discrepanGte;; betw'een tbe expert. tepott~;'"'' regarding•the_resto_ration cost of th!! B11i}ding_ (id at 125). 1I

[11] of 24 [* 11] Plaintiffs also cross-move for leave to amend the complaint to: (1} assert the first cause of action for breach of contract as. a derivative claim on behalfofall Unit Owners regarding the Condominim11 Board; s breach of its insurance obligations under the By-Laws for restoration of the common eletnents of the Building; (2) add a second cause ofaction for breach of fiduciary duty against Klausner, Shepherd, Aaron Meshon (Meshoti), Zhen Liang Li (Zhen) and Mark N. Fessel {Fessel), the Board members who obtained the allegedly deficient insurance coverage, derivatively on behalf of all lJ nit Owners; and (3) add a third cause of action for breach of contract directly against the boardmemb ers who obtained the allegedly deficient insurance coverage (NYSCEF Doc No. 153 [redlined proposed amended complaint]). Regarding the proffered breach of fiduciary duty claim, -the proposed amended . . . complaint alleges that the Condominium Board's 2018 decision to renew the Building's insurance was tainted by the economic.self-interest of board members Klausner and Fessel, who were alleged principals and/or affiliates of the Cortdominiurn·'s sponsor, 4401 Sunset Holdings, which then owned 18 unsold units at the Building and was responsible for approximately 33.33% of the common expenses (NYSCEF Doc No. 153 at~[~ 73-77), The proposed arnended complaint alleges that the Condominiu m Board, under Klausner's control, obtained insufficient insurance coverage in order to minimize the sponsor's corresponding common charge obligation, and thereby prioritized the sponsor 1 s economic interest over the Condominiu m's insurance coverage needs (id. at 1174-80). 12

[12] of 24 [* 12] The proposed amended complaint also asserts a breach of fiduciary claim against the other members of the Condominiu m's board (Shepherd, Meshon, Fessel, and Zhen) based on their allegecl failure to both inform themselves of the Building's insurance coverage needs and to provide Unit Owners with information about the Condominiu m's insurance coverage (id at~~ 83.,84), In support of Plaintiffs\ cross-motion to amend, Plaintiffs' counsel asserts that: "(i) leave to amend is freely granted; particularly when [] it is sought in the early stages of discovery and before depositions have heen conducted; (ii) the proposed amended complaint asserts meritorious causes of action and cures the any alleged standing defect in the Odginal Complaint; and (iii) in the interests of justice, Plaintiffs' claims should be resolved on their merits" (NYSCEF Doc No. 136 at ii 4 ). The Condominium Board's Reply and Opposition to. Plaintiffs'·c ross-Motion The Condominiu m Board, in reply, submits a memorandum oflaw arguing that the documentary evidence "establishes that [it] consulted with its professionals when it purchased the property insurance in 2013 and acted in goodfaith when it renewed the policy in2018" (NYSCEF Doc No. 189 at I [emphasis added]). The Condominim nBoard ''reiterates" that '·even if the Board initially purchased insurance that was inadequate far the purposes intended in 2013, that decision was made in good faith and in cons.ultation with its professionals" (id. at I I. [emphasis add~d]). Regarding Plaintiffs' opposition based on their need for outstanding discovery, pursuant to CPLR 3212 (t), the Condominium Board. asserts that: 13

[13] of 24 [* 13] ·"[t]here is .... no-. claint in the ,Gibson affidavit that the B.oard and/or its meillbers. acted in-bad faith or engaged in self-dealing in violation of the By-Laws, or that further dfr,:r;oveiy will uncover .any such_. evidence in the face of 'th~ cte·ar -and unequivocal documentation that Klausnel" communicated with the Board's p,rofessionals [in 2013] before purchasing . . insurance for th.e·-.Condominh11n'' (id at 15 Jel'npha.sis added]). The Co11do1nirtium Board fi.niher asserts that the Gibson affid:avit fails to explain how additionald,scovery mightreveai facts within the Board's exclµsive k11mvledge and control regarding -~the Board members~ state of in.ind when. they renewed the 2018 property -insurance poHcy" (id.) . ..Notably, the Condominium Board does not ment1ot1, or even address, the conflicting expert opinions it obtained regarding the cost to restore the Building in the. Z immennan Report and Guzowski 's expert affidavit. The Condominium Board opposes Plain.tiffs' c.ross~motj"ori for leave to amend the complaint by generally al"guing that the proposed .amended complaint is "palpably insufficient'" and "devoid of ntetit" (id. at 2} The Condominium Board argues that Plaintiffs' new claitn against the individual Board members seeking monetary damage~ for breach-of their fiduciary duties owed to the Unit Ow1wrs-is barre.cl by the thre¢-yearstatute -oflimitations (id. at 3..) .. The C.o.ndomjnii1111 B.oard asserts that "[t]he ~tatute of limitations in this. action accrued in 2013 when the Board originaily purchased the property insurance for coverage in the atnount of $8,200,000.00'~ (id at 4) .. Altematively, the Condominium Board.argues: that 'le]ven assuming the accrual da.te was.June 2, .2018, the .etJective date. of the.: renewal policy that was in pla~e on_ April 3, 2019, the date of the fire .... the cross~ motion was filed on July 19, 2021, rnorethan four years t"peteaftcr ..." (id). 14

[14] of 24 [* 14] The Condominium Board fu1iher argues that the Unit Owners' proposed claim for breach of fiduciary duty should be rejected because it is ''duplicative'~ of the Unit Owners' claim for breach ofthe Condominium's by-laws (id. at 5). The Condominium Board also argues that "ls]ince the original complaint; which sounded in contract, did not give notice of the transactions to be proved for breach of fidt1ciary duty, a tort, the court must deriy pennission to amend the complaint[,]" pursuant to CPLR 203 (f) (id. at 6). Finally; the Condominium Board asse11s that the second cause of action in the proposed amended complaint for breach of fiduciary duty should be rejected because it "lacks particularity" and the supporting allegations were made "upon infonnation and belief' (id. at 8~9). Plaintiffs' Reply Plaintiffs, in reply and in further support of their ctoss-motion; argue that the Condominium.Board's opposition "does not contend the timing of Plaintiffs' motion would cause prej udicc or surprise to any Defendant named [there]in ... or that granting Plaintiffs' motion would unduly delay this proceeding, still in the early stages of discovery" (NYSCEF Doc No. 191 at2}. Plaintiffs argue that "[t]he proposed amendment [adding a. derivative claim] cures any alleged standing defect as to Plaintiffs' breach of contract claim in the Original Complainf' (id.). .. . Regarding Plaintiffs' proposed breach of fiduciary duty claim, Plaintiffs asseii that it is not duplicative of their claims for breach of the Condominium's by-laws because "[e]venif a cause ofaction concerns some ofthesarne undetlying conduct as the breach of contract cause ofaction 1 if the allegations concern a breach of a duty that is independent of 15

[15] of 24 [* 15] ihe contract, they are ilot subject to__ dismissal as duplicative'' (id. at 3). Plaintiffs also dispute ihata breach offiduciary duty claim is time-barred because: ~'Defendant fails to establish when Plaintiffs' claims accrued, applies the wrong statute of limitations to Plaintiffs' derivative claim, and there.remains an openquestion-of fac.t as to whether Plaintiffs' claim against e_ach Defendant have been tolled under the fiduch,uy tolling doctrine" (id. at 4). Plaintiffs argue that their proposedbreach offiduciarycluty claim did not accrue for statute ofliinitations purposes until damages were sustained at the tfrne-·ofthe fire in April 2019 (id. at 5)-. Plaintiffs further contend that the by-laws ""imposed an on_g:oing requirement that the Board annually obtain adequate insuranc;e for the Condominium~, and thus; "[ e]ach renewal of the '.2013 policy; m1d each Defendant's breach with respect to the2018 renewal, is. a q:ew; overt l;lct that is independently actionable ..... " (id.). Plaintiffs assett that the Condomi_niu:m •s. reliance oh the three...year statute ofUmitations "ignorcs--Cour.t of Appeals precedent . thatasix[-]year statute oflirnitations applies to a11 derivative claims[,]" pursuant . to CPLR 213 (7),-regardless of whether money damages are sought (id. at 6} Discussion Plaint(ffs'Cross-Motion toAmend CPLR J0.25 (b )· provid·es; that leave to amend a pleading •~shall b.e freely given~• and the -d~termination regarding the an1end11ient of a ple&ding i~ committed to the.-court •s sound· discretion (Edenwald Conh< Co., Inc. v CityofNew York, 60 NY2d 957 [1983]). Generally, "leave should be given whcte the amendment is neither palpably insufficient nor patently 16

[16] of 24 [* 16] devoid of merit, and the delay in seeking amendment docs not prejudice or surptisc the . . opposing party" (US Bank; NA. vPrimiano, 140AD3d 857 [2dDept.2016]}. Here, delay is not an issue_. since this case is in its early stages of discovery and there is no apparent prejudice from amendments at this juncture which:, based on the same facts 1 seek to correct a purported standing issue raised by the Condo111inium Board by adding a derivative ·claim, adding a timely 2 breach of fiduciary duty claim against Klausner and Fessel a.long with the addition of Shepherd as a necessary party as he is the current 1 president of the Condominium's board. The Second Department has held that''[ a]n unincorporated association such as the Condominimn has 'no legal existence separate and apart from its individual membersrn and therefore, by commencing .an action against the president of the Board of the Condominium, the plaintiff has joined the entire Condominium Board as a defendant {Pasqual v Rustic Woods Homeowners Ass'n, Inc., 134 AD3d 1006, 1006-1007 [2015]- . [citations omitted]). In so holding, the Second Department relied on General Associations Law § 13, which provides that: "[a ]rt action or special proceeding may be maintained, against the president or treasuret of such an association, to recover any prope11y, or upon any cause of action, for or upon which the pJaintiffinay maintain such an action orspecial proceeding, . . against all the associates, by reason of their interest or ownership, or clai111 of ownership therein, eitherjoint1y or in common, or their liability therefor, .cithetjointly or severally'' (emphasis added). 2 CPLR 21 3 (7) sets forth a six~year. statute of Iimhati ons foe :derivative claims, .such as the breach of fiduciary duty .claim asserted here. In any event, defense.cot1nscl conceded durin,g oralargument thatthc proposed.claini is not time-barred. 17

[17] of 24 [* 17] Thus, Shepherd, the current president of the Condominium Board, is not only a proper party, buthe is a necessary party to this action against defendant. To state a claim for breach of fiduciary duty a complaint must allege: (l) the existence of a fiduciaty relationship; (2) misconduct bythe defendant(s), and (3) damages . . directly caused by defendants' misconduct ( Village a/Kiryas Joel v County ofOrange, 144 AD3d 895, 898 [2d Dept 2016]). The Second Department has long held that a condominiurn board "is by definition in a fiduciary relationship with the unit owners" because: "a fiduciary is one who transacts business, or who handles money or property,, which s nothis own or for his own benefit, but for the ben~fit ofanother person, as to whom he s1.ands in a relation implying and necessitating great confidence and trust on the one part and a high degree of good faith on the other part" (Ed Of Managers ofFairways at N. Hills Condominium v Fairway at N Hills, 193 AD2d 322, 325 (2d Dept 1993] [internal quotation marks and citations omitted]). A condominium board may rebut allegations that it breached its fiduciary duty and demonstrate its entitlement to dismissal of thecause of action by establishing that it acted in good faith, within its authority, and for the benefit of the condominium (see Skouras v Victoria Hall Condominiztm, 73 AD3d 902, 903 [2d Dept 2010] quoting Schoninger v Yardarm Beach Homeowners' Assn., 134 AD2d 1, 10 [2d . . Dept 1987]; Levine v Greene, . . .

[57] AD3d 627, 628 [2d Dept 2008]). ''A violation of bylaws is akin to a breach of contract" (Pasqual v Rustic Woods Homeow,zers Ass 'n. Inc., 134 AD3d 1003, 1005 [2d Dept. 2015]). To state a claim for 18 18 of 24 [* 18] breach of a condominium's by-laws, the pleading must allege: "(l) the existence of a co11tract, (2Jthe plaintiffs performance pursuant to the contract, (3) the defendant's breach ofits contractualobHgatiohs, and (4) damages resulting frotn the breach" (Kollatz v kOS Bldg Group; LLC, 188 ADJd 1175, 1177 [2d Dept 2020] [internal quotation marks and . . citations omitted]). '''[T]hc same conduct which constitutes a breach of a contractual obligation may also constitute the breach of a duty arising out ofthe contract relationship which is independent of the contract itself" (Hamlet at Willow Cr. Dev. Co., LLC y Northeast Land Dev. Coip., 64 AD3d 85, 112-113 [2d Dept 2009L quoting Dfrne Sav. Bank a/New York FSB v Skrelja, 227 AD2d 372, 3472 [2d Dept 1996]). ''Where it does, a contracting party may be charged with a separate tmi liability arising from a breach of a duty dh;tinct from, or in addition to, the breach of contract" (Hamlet at Willow Cr. Dev, Co., LLC, 64 AD3d at 113 [internal quotation nmtks and citations omitted]}. Here, upon review of the proposed amended complaint adding derivative claims for breach of fiduciary duty and breach ofthe by-laws, leave to amend is granted to the extent that Klausner, the president of the Condominium Board in 2018 who made the determination to renew the same insurance coverage in place. since 2013, may be added as a party defendant along ,,,ith Fessel, both of whom wete allegedly affiliated with the sponsor and allegedly compromised the Unit Owners' best interests in breach of their fiduciary duties. Plaintiffs; however; failed to demonstrate any basis. to add the other Condominium Board rnet:nbers as party defendants. Indeed, Section 2.20 (A) of the 19 19 of 24 [* 19]