Fe Bland v. Breezy Point Cooperative, Inc., 66 N.Y.2d 492 (1985)
When a cooperative’s proprietary lease and by-laws contain conflicting provisions for amending the lease, both procedures must be followed to effect a valid amendment.
Summary
Fourteen members of Breezy Point Cooperative, Inc. sued the cooperative, challenging amendments to the standard proprietary lease that increased their monthly maintenance charges. The lease and the cooperative’s by-laws contained conflicting procedures for amending the lease. The cooperative followed the amendment procedure in the lease but not the stricter requirements in the by-laws. The New York Court of Appeals held that because the cooperative created the conflicting provisions, it must comply with both amendment procedures to validly amend the lease. The court annulled the amendments and enjoined their implementation.
Facts
Breezy Point Cooperative, Inc., a nonprofit cooperative, was established in 1960. Plaintiffs purchased interests in the cooperative at various times between 1960 and 1976. Initially, maintenance charges were based on the number of shares owned by each member relative to the total shares outstanding. In 1977, 1978, and 1981, the cooperative amended its standard proprietary lease to change the maintenance charge assessment to a formula based on the tax assessment of the individual member’s property and the cooperative’s operating expenses. These amendments increased the plaintiffs’ monthly charges.
Procedural History
The plaintiffs sued the cooperative and its officers and directors, challenging the validity of the lease amendments. The lower courts ruled in favor of the Cooperative. The case was appealed to the New York Court of Appeals.
Issue(s)
Whether amendments to the standard form proprietary lease are valid when the cooperative followed the amendment procedure outlined in the lease but did not comply with the more stringent requirements outlined in the cooperative’s by-laws.
Holding
Yes, because under the circumstances, to effect the desired change in the lease, there must be compliance with both the procedure contained in the by-laws and those contained in the lease. The amendments, not having been adopted as required, are annulled and defendants are enjoined from implementing them in the future.
Court’s Reasoning
The court addressed the conflict between the amendment procedures outlined in the lease and the by-laws. The lease allowed amendments with a two-thirds recommendation from the board and a majority vote at a special meeting. The by-laws required a three-quarters vote at an annual meeting, with at least 50% of the membership present. The cooperative argued the by-law provision was for member-initiated amendments, requiring greater support. The court rejected this argument, stating that if the procedures were intended as alternatives, all relevant documents would reflect both options. The court reasoned that since the Cooperative drafted the documents and created the conflict, it must comply with the stricter by-law procedure. The court emphasized that a “different procedure would not be found in each [document, prospectus, by-laws and leases].” Because the amendments did not follow both procedures, they were deemed invalid. The court effectively adopted a rule requiring strict construction against the drafter in cases of conflicting legal documents within a cooperative governance structure. Compliance with both procedures was deemed necessary to ensure the amendments’ validity.