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remained in the corporation's stock book, undelivered, the provision that the "entire stock shall be held by the stockholders” was not complied with. To this argument the court replied that “it is not essential that a stockholder should be in physical possession of the certificate": a statement fully sustained by the doctrines of the law of corporations.

Next the tenant contended that the owner's retention of part of the stock when the corporation was first organized was a circumstance establishing non-compliance with the law, even though this stock was subsequently, and prior to the suit, distributed among several tenant owners who purchased their apartments after the organization. This argument was likewise held untenable, upon the ground that so long as the co-operative corporation was perfected in its organization as the law required prior to the time of bringing the proceedings, the law was satisfied.

A more troublesome contention, that the law requires all apartments to have been leased to stockholders on September 27, 1920, when the statute took effect, was likewise found unjustifiable, the court stating:

"I do not think it was the intention of the legislature to limit the organization of co-operative organizations such as the plaintiff to those whose plans had been perfected prior to the enactment of the statute. It seems to me that the intention was to permit a party who had purchased a home, whether it be an entire house or whether it be only an apartment in a house, to secure possession of it, irrespective of the time when he became the purchaser, whether it be before or after the enactment of the statute under consideration. The only limitation in this statute in this respect would seem to be as to the date when the tenancy must commence; the statute providing that it shall begin 'immediately upon the termination of any tenancy of the apartments or flats leased by them existing on the date when this subdivision takes effect.'

The final point the tenant raised was as to the form of the co-operative leases, which provided for a straight term of eight years, with the right to the tenant thereafter to renew upon similar terms. The tenant claimed this lease failed to show that the stockholders intended “permanent occupancy” of their apartments. The court held that

“it is true that this does not provide for a perpetual lease; but, according to what I believe to be the proper interpretation of the word 'permanent,' absolute perpetuity is not essential."

To what extent it is requisite for the co-operative stockholders actually to hold their stock in order to comply with the statute is a question that has also arisen in a recent unreported case, an appeal from which is now pending in the courts.89 In this case the tenant stockholders were only required to pay a deposit on their purchase of stock in the co-operative corporation, an agreement providing for their payment of the balance in instalments. The stock certificates were issued to the tenant, endorsed by him and transferred back to the corporation to hold as collateral security for the payment of the unpaid balance of the purchase price. The amounts paid on account were frequently only small fractions of the alleged purchase price. There was testimony that if the payments were not made as agreed, the corporation was to be entitled to the possession of the rooms. Under these circumstances, the court held there was sufficient evidence of bad faith, or perhaps of lack of good faith, to dismiss the proceedings to recover possession of the premises.

It has been held in one case that the fact that the alleged co-operative owner brings the proceeding in his own name,

89 East 100th Street Corporation v. Wonisky, et al., Mun. Court, 6th Dist., Marks, J., April, 1921, unreported.

instead of its being brought in the name of the co-operative corporation, is a badge of fraud, indicating that the alleged co-operative corporation is not a bona fide organization.90 There were in this case, however, several other grounds, stronger than the foregoing, for dismissal of the proceedings. Two apartments in the building were vacant; several stockholders held two apartments each; one stockholder was a corporation, not an individual, and it held stock and leases for three apartments; one apartment was entirely outside of the co-operative plan, no stock being issued to cover it. Under all these circumstances, it was quite clear that the apartments were not all leased to stockholders "for their own personal, exclusive and permanent occupancy” as the statute requires, and there was ample indication of the bad faith of the entire scheme.

Another case has raised the interesting question whether the other stockholding tenants necessarily lose their rights to recover posession if one who is already in occupancy decides to move to other quarters and let his apartment out for a profit, thereby ceasing to use it for his “own personal, exclusive and permanent occupancy.' The court held that there is sufficient compliance with the statute if at its inception the co-operative plan was devised and executed in good faith. The fact that one stockholder tenant later, by fraud or otherwise, relinquishes his previous intentions and decides not to occupy his apartment personally, cannot, the court held, debar others who in good faith purchased their rights to apartments from recovering possession of them.91


90 Ravitz v. Simetz (App. Term, 1st Dept.), 115 Misc. 406, 188 N. Y. Supp. 402.

91 Spencer Apartments, Inc., v. Scott (Mun. Court, 7th Dist., Eder, J.), reported in N. Y. Law Journal, December 8, 1920, page 813.

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While the law requires in these cases "a corporation formed under a co-operative ownership plan,” without requiring any particular form of such plan, so long as the other provisions of the statute are complied with, it has been held that the law contemplates a stock corporation, and that a corporation formed under the membership corporations law of New York State, as a sort of co-operative housing venture, cannot bring itself within the terms of the statute.92 The corporation in this case engaged in the buying or building of dwellings and financing the acquisition thereof by its members, who, when the requisite payments were made, became owners of the dwellings or of apartments therein. The court held that this was a praiseworthy enterprise, but that from a reading of the statute it was apparent that

"the corporation must be a stock corporation and must have stockholders who hold the stock in proportion to the number of rooms occupied or to be occupied by them. The building is not to be owned by the individual stockholders, but is to be leased to them. The title must remain in the corporation."

It would seem that on completion of his payments and the making of the transfer in such a case as this, the owner, where he acquires record title, might maintain a proceeding under the second class of exceptions mentioned in the statute, permitting recovery of property by owners requiring possession thereof in good faith for personal occupancy of themselves and their families.

A knotty problem which will doubtlessly arise under this section of the law is the meaning to be attached to its

92 Finnish Home Making Association, Inc., v. Snider (Mun. Court, 7th Dist., Spiegelberg, J.), not yet reported; decided February 14, 1921, and affirmed by the Appellate Term without opinion May 17, 1921.

concluding words: that the leases to the stockholders are to “begin immediately upon the termination of any tenancy of the apartments or flats leased by them existing on the date when this subdivision takes effect."

This subdivision first took effect, as part of the Code of Civil Procedure,93 on September 27, 1920. Do the last words quoted mean that if a lease were made after that date, to one not a stockholder, and subsequently a cooperative plan was devised, the statute would not avail to help the co-operative stockholders?

The subdivision was re-enacted as part of the Civil Practice Act,94 which becomes effective as law on October 1, 1921. The wording remains identical: that the leases shall begin upon the termination of tenancies "existing on the date when this subdivision takes effect." There would thus appear to be at least two sets of tenancies upon the expiration of which co-operative owners may secure possession of their apartments: tenancies "existing” September 27,

' 1920, and tenancies "existing" October 1, 1921.

To construe this somewhat involved provision in advance of a judicial determination of its meaning would clearly be to indulge in speculation. The authors content themselves with a presentation of the problem.


We have thus outlined the law as it stands as to summary proceedings to recover dwelling property from tenants holding over without leases. Some procedural and technical matters under this general topic require now to be discussed. The question has been raised whether such a dispossess

93 Section 2231, subd. 1-a. 94 Section 1410, subd. l-a.

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