Kelly Sanborn, Trustee of The 428 Lafayette, LLC Realty Trust et al. v. 428 Lafayette, LLC et al.

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This is case 2015 zero one four three. Kelly Sanborn, trustee of the four twenty eight Lafayette, LLC, real Realty Trust at all versus 4 28 Lafayette, LLC, etal and Andrew Tropi versus 4 28 Lafayette, LLC Etal. So who's the appellant? Excuse me. Who is the appellant? I am, your Honor. Okay. Then would you like to proceed? May I please the court? My name is Paul Eckrin. I represent the appellant. I'm glad to know I got the right first answer. Right. Uh, the issue in this case is, is, uh, whether about 3 56, chapter 3 56 B uh, controls the, the voting in a condominium or whether RSA 2 92 voluntary corporations, uh, supersedes it. Uh, you don't have to really, uh, say which is superior, although it's obvious that 3 56 is superior. But, uh, the court below got the, the basic question, uh, wrong. Uh, when the court said that in voluntary corporations, each member has one vote, if the court and the court cited, uh, 2 92, uh, uh, six P Roman, uh, for that, for that proposition. But if you look at 2 92 6 p Roman three, it says just the opposite. It says that members shall have no voting rights except as specifically provided in the articles of the bylaws the articles don't provide for. And the bylaws are the bylaws of the condominium. Uh, Mr. McKen? Yes. Can you clarify something in the record for me, which is, was your client a member of the condominium when the voluntary corporation was established? And how did that come to be? Uh, uh, no, he wasn't the, uh, the original Declarant incorporated the association as, as is allowed under the bylaws and the bylaws specifically say when that occurs, the bylaws of the condominium shall be the bylaws of the corporation. Uh, the original declarant, uh, uh, was foreclosed, uh, and, uh, uh, the appellant purchased the units at a foreclosure sale. So when he purchased the units, he knew there was already a voluntary corporation in place at That time. That, that's, that's correct. Can I just ask you this? So the legal, the legal issue is in the face of the provision, in the original condominium documents as I have it, it says, the association may incorporate as a voluntary corporation, and these bylaws serve as the bylaws of said corporation. That Correct. And in the bylaws, it says, each unit shall be entitled to one vote. Correct. So the legal issue is following incorporation. Does that provision, is that provision still live or is there something in thus corporation statute that trumps it? Uh, I mean, that's the legal question, right? Um, I, I agree. And the, the trial court really didn't specify what in the, the corporation statute says that, um, only there's o there's one vote per mem member, right? Yes. Uh, So that's, isn't that the legal issue that drives this Case, this case? It certainly is. And, and it's, it's, it's a very basic question. What happened was, uh, the court below a misread the statute, uh, providing for r rights, voting rights for members, the statute at which I've just quoted says that in a voluntary corporation, the members will have no voting rights, except as provided in the articles are the bylaws in these bylaws, which are taken over from the condominium, uh, they provide, that units have votes. Wait. So, okay. So let me ask you the question. Is there something about the, the condominium bylaws that would, uh, conflict with the overall corporation statute? In other words, no. Is there something that would, um, um, obviate the power of the corporation statute? If a group of people said, well, we're gonna have votes by unit member instead of members in the corporation, is there something that would undermine the corporate statute? There is nothing in that arrangement. There is nothing, your Honor, these two statutes are consistent, not inconsistent, that the, the corporations. But you agree, you agree that condo law is just not relevant to this case? What's relevant is the, the, the, um, the bylaws of the original condominium association says if we incorporate, then, uh, the, these will be the bylaws of the new corporation. So all we have to do is all we have to do the legal question is, are those bylaws legit under the corporate statute? They are. Uh, it's very simple. Uh, 3 56 B uh, uh, says it, uh, in that, uh, the voting is by units and not by members. Now, 2 92 says, there are no voting rights for members unless allowed in the bylaws or the articles of incorporation. The articles don't allow it. And you go to the bylaws, which are the bylaws of the condominium, and they provide for voting by units, not by members, so that there are no member voting either under 2 92 or 3 56. Can I just Ask you, how do you swear, How do you swear that with 2 92 6 B Roman four notwithstanding any provision of the articles or bylaws to the contrary, each individual board member and each member of a voluntary corporation entitled to vote, shall be entitled to no more than one vote? Uh, it says each individual board member and each member the I don't, I, I, I, I can't answer that. Uh, fair enough. Uh, fair enough. Uh, but three above it. Uh, So can I just ask you this, Mr. McCarrick, if, if we accept the thing I'm not quite sure I understand, I guess, is this, if we accept the trial court's decision, that means that the man, that this is perpetual, in other words, this isn't, this isn't simply that there's been board members elected on a sort of one member one vote, those board member, that that remains in effect forever. So that somebody that owns, in the case of your client, owns a majority of the units, is permanently disabled, so to speak, from, from exercising, uh, uh, his powers, uh, becau, uh, based on the number of units he owns. Uh, absolutely. And, and, and, uh, I would say 3 56 p is I substantial when it comes to condominiums, because 3 56 P seven says you can't have a condominium without following, uh, this statute. And this statute provides for two methods of voting, one by percentage of undivided interest in the common area. Was there, was there ever anything in the, is there anything in the record at all that suggests that when the people who originally formed this corpora, this voluntary corporation, when they did that, that they understood that, that, I mean, if, if, if we accept the trial court decision, that they understood that, that what they were doing was sort of saying, you know, however many members we have now in terms of individuals, as opposed to how many, uh, units each member may own, uh, we're, we're, we're sort of giving up the, the rights that to vote on the, based on the number of units? Well, they, they probably felt that by giving, uh, uh, voting rights to units and not members, uh, they, they, they were in the clear. And I suggest that there are hundreds, uh, if not more, uh, throughout the state in the same situation. It's a very common option to, uh, incorporate under 2 92. But the, the, the condominium statute makes it clear. And the bylaws here, which you look to for voting rights under section three of six, under 2 92, uh, they provide that the voting shall be by units and not members. Is it, is It your position that, um, under the corporation statute that, and the bylaws that the, um, owners are, are not empowered to deviate from the condominium statutes? So even if they, I mean, what you're saying here is that the bylaws carried over when it became a voluntary corporation, and therefore they're bound by that. But okay, let's assume that, and then they had a meeting and said, oh, okay, well, we've got these rights under the condominium statute, but we think it's more fair to do it just, uh, by members, not by units. I don't know. Are you saying they have the power to do that or not? Or do you, are you saying we have to get to that? Uh, they, they, they, They theoretically, uh, could amend the bylaws by two third vote Isn't Isn't that what the trial court said? Uh, no. There was no amendment to The bylaws. No, no. But didn't the trial court mention that they they could change it, they could change the structure? Uh, I believe the court did say that, uh, but they didn't. And, and, uh, what they're saying is that in effect, uh, uh, four or five units controlled the condominium out of 14 when they were each provided under the bylaws a, uh, equal interest in the condominium. Uh, I Suppose so. So, I'm sorry. So are you saying that you can never have a method of voting for a condominium that differs from the two methods that are laid out in the condominium statute or, or not? Are you Well, if, if, if I own nine uh, units, I don't think I'd vote to give up. Well, I understand that, but there's a difference between what's prudent and what's lawful. Well, sometimes I don't think that you get there in this case, I think if, uh, if, if, If you just follow the, the pathway that the, that each unit has a vote and that the bylaws are the bylaws of the voluntary corporation, there's nothing to say that, uh, that that shouldn't happen in the law. And, uh, what you'll do is, uh, turn all units into voluntary associations, which this doesn't apply to, are real corporations, which it doesn't apply to. Uh, and it would, in this case just force the unit, unit, the owner of the nine units to, uh, have separate entities, own each unit so that each owner of each unit could vote. I mean, it's just doesn't make sense. And, and I don't think the law is intended not, not to make sense. So Sense what you're, what you're saying is that if we, if, if we uphold the trial court's decision, what your client will do is he'll find, he'll find nine relatives, um, uh, that are friendly to him, and he'll, and he'll in some fashion, convey each of the units to the, to one of them. And then they'll all say, okay, now we're, now we're separate individuals or, Uh, to, or something like, or to an LLC or a corporation Or something like that. Sure, yeah. That, that's what would he'd be forced to do. But Fair consideration would've to be paid that isn't that Unlikely? No. You can give, give things away. No law against that, unless It's a fraudulent conveyance to, to Gain, wouldn't control of a corporation. It, uh, uh, he could create an LLC and transfer title to the LLC. You're not telling me that that's not allowed. You'll have to Go back to Mr. Anderson for that answer. Thank you. Thank you. I didn't get to the second issue, but we'll Take it as submitted on the briefs. I, Good morning. May it please the court. My name is Doug McDonald. I represent Kelly Sanborn Etal the Appell. Mr. McDonald, have you and Mr. Tropi Divided your time with Ms. Mackinac? Yes, your Honor. Thank you. Uh, I will be presenting for 10 minutes. An attorney Tropi will be presenting for five minutes. Fine, thank you. Since your time is limited, yes. Can you address what seems to me to be the controlling legal issue, assuming that the bylaws in the condominium association become the bylaws of the corporation? Is there something in the corporate corporation statute that prohibits these condominium bylaws from having effect? You understand my question? I believe I do. Um, the corporate statute 2 92 4 says that once you submit the articles of agreement, you become a corporation. It says the signers thereof become a corporation. Then we move to the issue that I think, uh, was presented with respect to 2 92 6 B, which gets to the voting issue, which I think is at the heart of the issue with respect to the bylaws conflicting with the corporate statute. And with respect to 2 96, I mean, 2 92 6 B three, um, attorney Ecker was establishing that that somehow conflicts with Subpart four. In my view, it doesn't. But, you know, can I just ask you, doesn't this seem, you know, it, it may be that the, that the 2 92 voluntary corporations is, is in some sense this isn't a kind of an exact fit for condominiums, but it it does strike me. I mean, uh, are we really to accept that when the, when the, when the people who had the condominium and, and people, you know, the, and the, that the voting rights were determined on the units that, that what they were doing, they were sort of knowingly deciding that they were just gonna give up tho those rights by, by forming this voluntary corporation. That seems to me to be pretty unlikely to, to read that intent in, doesn't it, that that somebody who owns nine units is, or, or whatever is saying, oh, that's fine. You know, I'm gonna, I'm just giving up my votes. I there's nothing in the record. I mean, we don't have anything from the original declarant. It would be speculation for me to assume what they Were, but, but I mean, isn't it, what, what would be the, what would be the logical reason that somebody would do that? Well, Here's why. In many cases, people incorporate, it's a more efficient way of governing, and the corporate statute specifically provides for a limitation of liability for the officers and directors, which the corporation, I mean, the condo statute does not. So I'm not sure what was going through the minds of the folks who decided to incorporate. Now, again, this is a declarant, this isn't this group of owners, this is back in 2007. It was, it was placed in condo in 2006, 2007. They incorporate, uh, Mr. Robert doesn't own until 20. But You know what, lemme just ask you this. If the statute, do I understand correctly that there was something in the condo statute, um, that says that you can incorporate that the, that the correct. Right. So given the structure of the condo statute, which basically sort of says one, one vote per unit, and it specifically mentions the, uh, being able to incorporate, I mean, it, it, it strikes me that, that the, that it would be strange if the, if the one of the implications from incorporation was to completely sort of undermine someone's voting, someone's voting ability without the statute saying, without the condo statute saying something about that. Well, there are a couple of things I think I'd say to that. First of all, I think it would be a strange legal conclusion to say you can incorporate and then disregard the corporate statute altogether. Well, that's, that brings me us back to the essential question. Judge Anderson never said these bylaws are prohibited under the voluntary corporation statute, but he certainly implied it in his decision, it seems to me. So you, I would like you to point us to the provision in the statute, which essentially says you can't do votes by units, you have to do it by individual members And your reference to statute, just for clarification, as to the corporate statute, correct. Right. Okay. So I was about to, um, discuss earlier 2 92 B six, uh, provision three and four. Subpart three and four were what we were talking about. Um, Subpart three, very simply if you read it, uh, indicates that there may be more than one membership. There may be more than one class, One class rather membership By a superior owner or a multiple unit owner. Could be, could create his own class, correct. Of voting stock and out vote another class. But it, well, it would seem that you read the second sentence, it says, members shall have no voting rights, except those provided in the bylaws. The articles may fix the term of membership. So I think that what subpar three is getting at is classes of membership. And you can have a class that's non-voting. That's what it says. However, subpar four reigns it in and says, if you're gonna have voting for those classes, you're limited to one vote and you're limited to one vote, whether you're a member of the board of directors or a member of the corporation. And that's very clearly stated in Subpart four. And it doesn't click, uh, conflict with Subpart three. And and that is not withstanding any provision of the articles or bylaws to the contract. Correct. So when you move back to the bylaws and you have this statement that's inconsistent with the corporate law, then I haven't seen a case where the bylaws trump corporate law, the law should prevail. So you say it's ju just, this is just a, a pure legal question. We look at these bylaws and say they are inconsistent with the statute, and therefore they cannot trump the statute. The bylaws cannot bylaws trump the statute. And another piece of, uh, evidence that's important when looking at the way the corporation was set up is Article three of the bylaws provides the powers of the association to act. When you look at article second of the articles of agreement, it basically takes all of the powers that were reserved in the association and shifts them to the corporation. So now you have a corporation that's governed by the corporate statute, one member, one vote, one director, one vote, and they have all of the obligations to do all of the things that are necessary to operate and maintain the corporation. So with respect to Judge Anderson's, uh, decision, it was well supported by the facts. There was never a question that there was a board of directors, everyone was in agreement on that. It's undisputed. They were operating with the board of directors. And the one issue that was at issue was this voting issue. And I think it's very clear that the bylaws conflict with the corporate statute on the voting issue and the voting, uh, as provided in the voluntary corporation statute shall Correct. So are the bylaws otherwise completely valid in effect, but for this single provision, There was nothing in dispute in the bylaws with respect to this litigation other than, so, uh, that voting, so presumably they Got the bylaws continue on. They're, they're the ones that were originally, uh, with the condo and then they got transferred to the voluntary corporation, and they live on, in full force, in effect, no one's challenged them, but for this narrow issue, is that right? That Would Yes, that's correct. That's the issue for The legal. Can I just ask you, is there, is there some, does, does the corporate statute define what what member means? In other words? I, I guess what I'm wondering is, is it possible that in light of the, in light of the condominium statute and the bylaws for this condominium member could be interpreted to mean the unit that, that that's the member. I don't bel Well, that issue wasn't raised, uh, frankly. Uh, and I think that the common understanding of member and how, uh, judge Anderson dealt with, uh, that consideration in his, particularly his motion, his order on the motion to reconsider was that one member was one person. So if there's common ownership, that person is the member. And respectfully, he said, you know, when Mr. Robert purchased these units at foreclosure, he either knew or should have known had he done his due diligence, that 2 92 could apply and this would be the situation. Thank you. Thank you. Mr. Tropi. May it please the court. My name is Andrew Tropi and I represent myself in a pro se capacity. Um, I'd like to just start my, um, argument with just two sentences out of the record. We have an anonymous knit wit putting notes on one of my customer's cars. We have two handicapped parking spaces and the rest uncovered spaces belong for the exclusive use of units 1 0 1 and 1 0 2. Those are the words, the appellant that were found by the court and admitted during the testimony. And that has been the consistent position of the legal argument essentially throughout the trial court court proceedings for over a year that all of the commercial parking were for both units. That position was pressed on the motions that we filed on the motion to reconsider that there are 14 spaces, all of which are limited common areas for both units. There is no exclusive parking. We have a full evidentiary hearing on the issue. He does not prevail. Let me ask you this. You have deeded parking. Yes, sir. Seems beyond question to the trial court, and I can't see any question that you own those six spaces, right? Yes ma'am. Why then do you care whether or not Mr. Rob owns the other spaces? Because What I purchased, what I went out and negotiated and purchased was exclusive use to six of the 14 spaces. Mm-Hmm. I still have common use to the other two spaces because that's what I went out into the market and purchased. So you, you would say that your interest is that there are times when your business needs more than six spaces? There are times when that occurs. Okay. And to be completely candid with Your Honor, it is seldom an issue because there is plenty of parking except for the conduct of the appellant, which is well documented. If your honors look at the Appellate's Appendant at 67 and the note that he left, the reason I'm in front of you, I want to be a good neighbor. There is plenty of parking, but I am dealing with an individual that the record well supports in his own words, who's essentially subletting to his tenants. The commercial parking, there is no question the parking lot is for the exclusive use of the two commercial tenants. There is also no question that the appellant has chosen to lease out those spaces to his tenants and threatened other condo owners that if they park in these spaces, they're going to be towed. We're talking about the total of 14, is that right? Correct, sir. So you, the six that you negotiated for, and then there are eight others. Correct. And that's the, the ownership interest, that's what we're talking about, those other eight, right? Correct, sir. And and the other eight, you're saying some of them have been leased out? Sure. If you look at according to be a, um, exclusive right to use. Yeah. And I think that sort of puts a, a really a common under like why are we here? What's going on? And it is a complete, in my view, abuse of the process. My deed is explicit. What it gives me, my deed also includes, I have all the rights and benefits of what's dec what's in the declaration And the other deed. The other commercial deed does not specifically reference any parking spaces. The record is un unclear because the appellant has never submitted his deed. But clearly it stands to reason that my deed, because of exclusive language, sort of opted out of what was the, sort of the baseline which gave me additional exclusive parking. What is clear is that Robs didn't come forward with any evidence that he has the exclusive right to the eight Judge. There is not a single fact that has been submitted that would support the argument that he has purchased or at any time thought he had any interest to exclusive parking, which is why I have requested in part of my pleading is this court to consider relief under Superior Court Rule 23. There is no fact, there is no legal argument that he has or thought he had this, these parking privileges. You say that morphed over time, that position, that Wasn't a position. It is diametrically opposed to the position that was taken. When did he first take this position? Were he took that approximately eight months after Judge McHugh ruled on a motion to reconsider, which required me to file essentially a, a, a exhibit because the president of the condominium association at the time would altercate and prevent me from enforcing the court order. If you look at the, what I had to do, I had to get a court order to put up parking signs for these six spaces because the appellant in his capacity as the president prevented me from effectuating enforcement just to those six spaces. I mean, there is a point that I'm asking this court to look at the entire record and consider other remedies because there is no support for the position. You would say this was bad faith? Absolutely. It's Bad faith. And Judge Anderson dealt with this issue on, in his motion for re ruling on the motion for reconsideration. Is that right? He, he, he gave a accurate history of the litigation regarding parking. And he ruled in your favor? He ruled in my Favor. And did you ask for, uh, attorney's fees there? I believe I did, but I'm not certain of that fact, Sir. But you didn't get them? I didn't get them. Thank you. Thank you. Case submitted. The court will take a brief recess.