After Six, Inc. v. 201 East 66th Street Associates ( 1982 )

OPINION OF THE COURT

Ross, J.

This is an action seeking specific performance of a subscription agreement to purchase shares of stock pursuant to a co-operative conversion plan wherein Special Term denied plaintiffs-appellants’ motion for a preliminary injunction.

The corporate plaintiff is a Pennsylvania corporation engaged in the manufacture of tuxedos and formal wear. On October 3, 1977, the corporate plaintiff entered into a three-year lease for apartment 11E, in the subject building located at 201 East 66th Street. The leasehold expired on November 30, 1980, and since that time the corporation has remained as a month-to-month tenant. Throughout the entire occupancy, the apartment was rent stabilized and was used to house the corporation’s salesmen and executives while they were on business trips to New York.

During the term of plaintiff’s tenancy, the building was owned by defendant 20166 Tenants Corporation. The owners decided to convert the premises to co-operative ownership and pursuant thereto, on May 2,1980, an offering was presented to the tenants in the form of an eviction plan. According to the third amendment, the tenants in occupancy on the date the plan was accepted for filing had until February 19, 1981, to execute a subscription agreement in order to purchase the shares to their respective apartment at the insider’s price. The plan, however, provides in part I, that: “This offering is made only to individuals over the age of 21 years and not to corporations, partnerships, trusts, foreign governments or persons acting on behalf of such entities or to tenants having a primary residence elsewhere.” The plan goes on to provide in paragraph (i) of the section entitled “Rights of Tenants in Possession” that: “A subtenant will have no right to purchase unless approved by the tenant of record. A corporation or partnership will have no right to purchase; an individual approved by it may purchase.” Despite these warnings and on the advice of counsel, the corporate plaintiff on February 19, 1981, executed and mailed a subscription agreement to purchase apartment 11E, on its own behalf. Four days later, the proffered subscription agreement was rejected by the attorneys for the sponsors, the defendant 201 East 66th Street Associates (Associates).

Thereafter, by letter dated May 18, 1981, the corporate plaintiff designated the individual plaintiff, Harry Lebow, to purchase the apartment. The apartment corporation rejected this designation and the shares of stock allocated to the subject apartment have never been offered to Lebow. On September 21, 1981, Associates elected to terminate the corporate plaintiff’s tenancy as of October 31, 1981. The plaintiffs then commenced the instant action seeking, inter alia, specific performance of the subscription agreement; a direction to defendants to deliver to the plaintiff the shares of stock allocated to the apartment; and a preliminary and permanent injunction enjoining the defendants from conveying the shares allocated to the apartment to any person other than plaintiff. Special Term denied the relief requested. Special Term in denying the motion reasoned, inter alia, that since the individual plaintiff’s attempt to subscribe'as designee of the corporation was untimely, there is little likelihood of success on the merits. In addition, the court found that if the shares of stock are sold to a third party, the plaintiffs will not be irreparably harmed, having an adequate remedy at law. We agree with the conclusions reached by the court at Special Term and, accordingly, affirm.

The applicable section of the CPLR (6301), pursuant to which plaintiff sought a preliminary injunction, provides that “[a] preliminary injunction may be granted in any action” (emphasis supplied). The decision to grant or deny such a request lies within the sound discretion of the trial court. In the absence of unusual or compelling circumstances, this court is reluctant to disturb said determination, unless of course, it can be demonstrated that the court abused its discretion. The plaintiffs, as movants, were required to demonstrate a likelihood of ultimate success on the merits, irreparable harm and that trial equities of the situation were in their favor (Albini v Solork Assoc., 37 AD2d 835). The relief requested by plaintiff has been frequently described as a “drastic remedy”, one in which the plaintiffs must demonstrate they have a clear right to said relief. (See, e.g., Rohauer v Killiam, 37 AD2d 547.) The plaintiffs have failed to meet this burden.

The conversion plan provided that a corporate occupant was not eligible to purchase, but an individual designated by the corporation was permitted to purchase. The purchaser, whether an individual tenant in occupancy or a corporate designee, had to execute a subscription no later than February 19,1981. In addition, the third amendment to the offering plan provided that: “After expiration of said [time frame] offerees will have no further right to subscribe to purchase the shares allocated to their apartments”. In a letter dated May T8, 1981, the corporate plaintiff authorized Harry Lebow to purchase the apartment. This attempt to comply with the corporate designation clause of the offering plan was approximately 90 days late. By that time, After Six had already been divested of its right to purchase at the insider price. The notification was unquestionably not timely; therefore, the defendants were within their rights to reject said designation. Under these facts, it is clear that plaintiffs have failed to demonstrate a likelihood of ultimate success on the merits and, accordingly, a clear right to the relief has not been shown.

In addition, no irreparable harm to plaintiffs has been shown. This apartment was being utilized by the employees of the corporate plaintiff on a short-term itinerant basis. No one will lose his or her residence as is contemplated by the Rent Stabilization Law. If it is later, determined that plaintiffs should prevail, damages are readily ascertainable in an action at law. The co-operative corporation may still be willing to sell this apartment, or any other apartment in this building, at the then prevailing market price to an individual, such as Lebow. The issue, therefore, becomes at what price should Lebow purchase — the insider price or at market value. If forced to purchase at the higher price, and if the plaintiffs can prove their action at law, the measure of damages can be easily calculated; for example, the difference between what an insider would have paid and the actual price. Clearly plaintiffs have adequate protection and the injunction should not issue (Gulf & Western Corp. v New York Times Co., 81 AD2d 772).

Accordingly, the order of Supreme Court, New York County (Greenfield, J.), entered November 25, 1981, which denied plaintiffs’ motion for a preliminary injunction to bar defendants from selling or offering for sale, the shares of stock to apartment 11E, at 201 East 66th Street, to anyone other than plaintiffs, should be affirmed, with costs.