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PURCHASER OF UNSOLD SHARES IN A COOPERATIVE BOUND BY A STIPULATION TO WHICH PURCHASER WAS NOT A PARTY; STIPULATION RESTRICTED THE NUMBER OF BOARD MEMBERS WHO COULD BE ELECTED BY HOLDERS OF UNSOLD SHARES.

The First Department, in a full-fledged opinion by Justice Acosta, determined a purchaser of a cooperative apartment, Johnson, was bound by a pre-existing stipulation to which Johnson was not a party. The stipulation required that the holders of unsold shares in the cooperative (HUS) could elect no more than two of the five directors. Unsold shares are held by investors who do not live in the apartments:

The [relevant] documents, including Johnson’s express agreement to take subject to the provisions of the proprietary lease, which incorporated the stipulation, make clear that he was an HUS and was bound by the stipulation’s provisions, including the election restriction … .

[The holder of the unsold shares] should not be permitted to frustrate its obligations under the offering plan or stipulation by transferring its shares to puppet entities to syphon votes away from resident shareholder candidates in order to control the board well beyond the period contemplated by the Attorney General … . Indeed, there is no question that the sole purpose of [the] assign[ment of] 600 shares to Johnson just four days before the … board election was to avoid the provision that prohibited holders of unsold shares from electing more than two directors. Matter of Tiemann Place Realty, LLC v 55 Tiemann Owners Corp., 2016 NY Slip Op 04007, 1st Dept 5-24-16

CONTRACT LAW (COOPERATIVE APARTMENTS, PURCHASER OF UNSOLD SHARES IN A COOPERATIVE BOUND BY A STIPULATION TO WHICH PURCHASER WAS NOT A PARTY; STIPULATION RESTRICTED THE NUMBER OF BOARD MEMBERS WHO COULD BE ELECTED BY HOLDERS OF UNSOLD SHARES)/CORPORATION LAW (COOPERATIVE APARTMENTS, PURCHASER OF UNSOLD SHARES IN A COOPERATIVE BOUND BY A STIPULATION TO WHICH PURCHASER WAS NOT A PARTY; STIPULATION RESTRICTED THE NUMBER OF BOARD MEMBERS WHO COULD BE ELECTED BY HOLDERS OF UNSOLD SHARES)/COOPERATIVES (COOPERATIVE APARTMENTS, PURCHASER OF UNSOLD SHARES IN A COOPERATIVE BOUND BY A STIPULATION TO WHICH PURCHASER WAS NOT A PARTY; STIPULATION RESTRICTED THE NUMBER OF BOARD MEMBERS WHO COULD BE ELECTED BY HOLDERS OF UNSOLD SHARES)

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ERROR TO IMPOSE PRE-JUDGMENT INTEREST AT THE STATUTORY RATE WHEN CONTRACT PROVIDED... REVERSIBLE ERROR TO RECONSIDER THE VERDICT.