Commercial Division Blog
Posted: August 5, 2022 / Written by: Jeffrey M. Eilender, Samuel L. Butt, Seth D. Allen, Joshua Wurtzel, Hillary S. Zilz / Category Commercial Division Justices
Attorney’s Fees in Default Judgment Not Appropriate Where Condominium By-Laws Are Not Explicit
On May 4, 2022, Justice Chan of the New York County Commercial Division issued a decision in Board of Mgrs. of the 207-209 E. 120th St. Condominium v. Dougan, 2022 NY Slip Op 31491(U) holding that where a condominium’s bylaws did not explicitly state that attorneys’ fees were collectible when the Board of Managers was successful in litigation arising out of the governing agreements and laws, the Board of Managers was not entitled to collection of such fees, stating:
"Under the general rule, attorney's fees are incidents of litigation and a prevailing party may not collect them from the loser unless an award is authorized by agreement between [*6] the parties, statute or court rule (Hooper Assocs., Ltd. v AGS Computs., Inc., 74 NY2d 487, 491, 548 N.E.2d 903, 549 N.Y.S.2d 365 [internal citations omitted]; see also Hunt v. Sharp, 85 NY2d 883, 885, 649 N.E.2d 1201, 626 N.Y.S.2d 57 ["[U]nder the 'American rule,' to which [New York] State adheres ... the prevailing litigant ordinarily cannot collect its reasonable attorney's fees from its unsuccessful opponents"]). Moreover, since New York follows the common law rule disfavoring an award of attorney's fees to the [**4] prevailing party in litigation, a party's entitlement to attorney's fees should be narrowly construed (Gottlieb v Kenneth D. Laub & Co., Inc., 82 NY2d 457, 464, 626 N.E.2d 29, 605 N.Y.S.2d 213 ). At issue here is whether the provisions relied on by the Board in the Condominium's By-Laws provide a sufficient basis for requiring Dougan to pay the attorney's fees and litigation expenses incurred by the Condominium in this action. In this regard, the court notes that "[t]he bylaws of [a condominium] and its declaration of covenants, restrictions, easements, and liens . . . are contracts [between unit owners and the condominium] and, thus, are governed by the principles of contract interpretation" ( Weiss v Bretton Woods Condo. II, 151 AD3d 905, 906, 58 N.Y.S.3d 61 [2d Dept 2017] [internal citations omitted]; see also Bd. of Mgrs. of the 28 Cliff St. Condo. v. Maguire, 191 AD3d 25, 29, 136 N.Y.S.3d 254 [1st Dept 2020 ["The condominium bylaws are in essence, an agreement among all of the individual unit owners.."] [internal citation and quotation omitted]). Furthermore, bylaws of a condominium which [*7] provide for the payment of attorney's fees have been enforced by New York courts (see Bd. of Mgrs. of the Peregrine Tower Condo. v NYC 2014 LLC, 194 AD3d 403, 404, 143 N.Y.S.3d 199 [1st Dept 2021]; Glenridge Mews Condo. v Kavi, 90 A.D.3d 604, 605, 933 N.Y.S.2d 730 [2d Dept 2011]).
At the same time, courts only permit recovery of attorney's fees and expenses arising out of litigation involving condominiums where the right to such recovery is specifically stipulated by the Condominium's bylaws (Bd. of Mgrs. of the 25th Charles St. Condo. V Seligson, 126 AD3d 547, 548, 4 N.Y.S.3d 40 [1st Dept 2015] [vacating award of attorney's fees awarded to residential unit owner where bylaws provided for recovery of attorney's fees only by condominium board]; Bd. of Managers of Fishkill Woods Condo. v Gottlieb, 184 AD3d 785, 790-91, 126 N.Y.S.3d 749 [2d Dept 2020] [holding that the Board is entitled to attorney's fees solely in connection with the causes of action and counterclaims for recovery of the unpaid fine imposed on the appellants as specifically stipulated in the bylaws]).
Here, the provisions of the Condominium's By-Laws relied on by the Board, do not refer to attorney's fees or expenses, and therefore cannot be said to indicate an intent to require the unit owner pay the Condominium's attorney's fees and other expenses of litigation arising out of breach of the Governing Documents or the violation of governmental laws, rules or regulations. Specifically, in the event of a breach by the unit owner of the Governing Documents, Article VI Section 10(a) of the By Laws gives the Condominium [*8] the right to enter a unit upon reasonable notice and to "summarily abate and remove at the expense of the defaulting Unit Owner the structure, thing or condition" at issue. However, while this section can be read to require the unit owner to pay the expenses incurred by the Condominium in remedying the condition resulting from the unit owner's breach, such as the cost of removing a structure or eliminating a condition, it evinces no intent to impose liability on the unit owner for attorney's fees and expenses incurred in litigation. As for Article VI, section 10(b), this section permits the Condominium to bring legal proceedings to enjoin, remedy or abate a breach, but is silent as to any obligation of the unit owner to pay the expenses or attorney's fees incurred in such proceedings. Additionally, although Section 12(d) requires a unit owner who is responsible for violations of government laws, regulations and requirements related to the property to pay the expense of eliminating such violations, it cannot be read as mandating the payment of attorney's fees and other litigation expenses (compare Bd. of Managers of the Peregrine Tower Condo. v. NYC 2014 LLC, 194 AD3d at 403, 404 [affirming the award of attorney's fees to plaintiff condominium where bylaws permitted condominium to address violations of [*9] the bylaws via "'appropriate legal proceedings,'... and to abate 'the continuance of any breach at the expense (including attorney's fees) of the breaching Unit Owner"] [emphasis added]).
As the provisions relied on by the Board cannot be construed to constitute an exception to the general rule precluding the recovery of legal fees to the prevailing party, the Board's motion for a default judgment on the sixth cause of action for legal fees and expenses must be denied (see also Horwitz v 1025 Fifth Ave. Inc., 34 AD3d 248, 249, 825 N.Y.S.2d 5 [1st Dept 2006]["a provision in an agreement allowing the recovery of attorney's fees that are incidents of litigation should be strictly construed"] [internal citations and quotation omitted]).
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