12-904-cv
Cia Naviera Financiera Aries, S.A. v. 50 Sutton Place S. Owners, Inc.


                                   UNITED STATES COURT OF APPEALS
                                       FOR THE SECOND CIRCUIT

                                                     SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY
PARTY NOT REPRESENTED BY COUNSEL.

        At a stated term of the United States Court of Appeals for the Second Circuit, held
at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New
York, on the 1st day of February, two thousand thirteen.

PRESENT: REENA RAGGI,
                 PETER W. HALL,
                 CHRISTOPHER F. DRONEY,
                                 Circuit Judges.
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CIA NAVIERA FINANCIERA ARIES, S.A., a.k.a.
COMPANIA NAVIERA FINANCIERA ARIES, S.A.,
                                 Plaintiff-Appellant,
                          v.                                              No. 12-904-cv

50 SUTTON PLACE SOUTH OWNERS, INC.
                   Defendant-Appellee,

ESTATE OF THEODORE XENAKIS, HERMAN MAX
LEIBOWITZ, ESQ., 56 West 45th Street, Suite 603, New
York, NY 10036, (212) 764-1018, Attorney for Estate of
Theodore Xenakis, MICHAEL ANASTASSIOU, as
Temporary Administrators of the Estate of Theodore
Xenakis, NICHOLAS PATOURIS, as Temporary
Administrators of the Estate of THEODORE XENAXIS,
                                 Intervenors-Defendants.*
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           *
               The Clerk of Court is directed to amend the official caption as shown above.
APPEARING FOR APPELLANT:                  RAYMOND A. CONNELL, ESQ., New York,
                                          New York.

APPEARING FOR APPELLEE:                   OSMAN DENNIS, Axelrod, Fingerhut & Dennis,
                                          New York, New York.

APPEARING FOR INTERVENORS:                HERMAN MAX LEIBOWITZ, ESQ., New York,
                                          New York.

       Appeal from a judgment of the United States District Court for the Southern District

of New York (Barbara S. Jones, Judge).

       UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND

DECREED that the judgment entered on February 27, 2012, is AFFIRMED.

       Plaintiff Cia Naviera Financiera Aries, S.A. (“Aries”), appeals from an award of

summary judgment in favor of defendant 50 Sutton Place South Owners, Inc. (“Sutton

Place”), on Aries’s claim that it is the rightful owner of 895 shares in the Sutton Place

Cooperative and the proper assignee of the lease to Apartment 6J. On de novo review, we

will affirm summary judgment only if the record, viewed in the light most favorable to the

non-moving party, reveals no genuine dispute of material fact. See Fed. R. Civ. P. 56(a);

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48 (1986); Sudler v. City of N.Y., 689

F.3d 159, 168 (2d Cir. 2012). In conducting that review here, we assume the parties’

familiarity with the facts and record of prior proceedings, which we reference only as

necessary to explain our decision to affirm.




                                               2
1.     Inter Vivos Gift

       Aries argues that the 1980 Assignments signed by Theodore Xenakis and placed in

Aries’s files constitute delivery for purposes of making an effective inter vivos gift.1 Under

New York law, which controls here, a valid inter vivos gift requires “intent on the part of a

donor to give,” “a delivery of the property given pursuant to such intent,” and “acceptance

on the part of the donee.” In re Szabo’s Estate, 10 N.Y.2d 94, 98, 217 N.Y.S.2d 593, 595

(1961). Delivery can be either physical or constructive, but must be “sufficient to divest the

donor of dominion and control over the property.” Gruen v. Gruen, 68 N.Y.2d 48, 56, 505

N.Y.S.2d 849, 854 (1986) (citing, inter alia, In re Szabo’s Estate, 10 N.Y.2d at 98–99, 217

N.Y.S.2d at 595).

       Here, even if Xenakis executed assignments and deposited them into Aries’s files,

there is no record evidence that he relinquished possession of the cooperative apartment.

Rather, during his lifetime, Xenakis “always represented that he was the owner of the

Cooperative Apartment.” J.A. 53. On June 8, 2004, he wrote Sutton Place to “make the

necessary arrangements to transfer title to my apartment to my trust.” J.A. 275 (emphasis

added). Similarly, on March 7, 2006, Xenakis’s lawyer sent a letter to Sutton Place that

identified Xenakis as the owner of Apartment 6J. An information form attached to the letter

at Xenakis’s instruction listed him as the shareholder for Apartment 6J.            Georgios



       1
         Although Aries’s stated issues on appeal concern “irrevocable assignments,”
Appellants Br. 2, nothing in the record indicates that Xenakis’s purported assignment was
irrevocable.

                                              3
Anastasakis, the current owner of Aries and purported donee, acknowledged Xenakis’s

power to transfer the apartment to other companies if he so desired. The record therefore

indicates that Xenakis retained dominion over the apartment, precluding a finding of inter

vivos gift. See In re Baum, 66 A.D.3d 412, 414, 890 N.Y.S.2d 457, 458 (1st Dep’t 2009).

       Aries’s arguments to the contrary lack merit. In addition to demonstrating that

Xenakis retained control of the apartment, the record shows no recorded transfer in Sutton

Place’s books. Cf. In re Szabo’s Estate, 10 N.Y.2d at 98, 217 N.Y.S.2d at 595 (holding that

possession by donor is extinguished when “there is a transfer of record on the stock books

of the company”); accord Abrons v. 149 Fifth Ave. Corp., 45 A.D.3d 384, 385, 845 N.Y.S.2d

299, 300 (1st Dep’t 2007). Aries concedes this fact, but argues that no recording is required

under New York law, citing Chemical National Bank of New York v. Colwell, 132 N.Y. 250

(1892). In Colwell, the Court of Appeals held that the lack of recording did not render the

party’s transfer of stock a nullity. See id. at 256. There, however, the director relinquished

all control of his shares and notified the board that he wanted “a proper transfer [to] be made

on the books of the company.” Id. at 257. This case is thus distinguishable from Colwell.

Xenakis not only did not ask Sutton Place to recognize the transfer, but also refused to inform

Sutton Place that he had assigned any interest to Aries. Thus, it cannot be said that Sutton

Place failed to record the transfer in the corporate books as in Colwell. Cf. 12 Fletcher Cyc.

Corp. § 5480 (noting that transfer that is not recorded is binding if there is “no way in which

the transferor can force the appropriate corporate officer to record the transfer”).


                                              4
       In sum, Aries adduced no evidence that Xenakis relinquished dominion and control

over the shares and proprietary lease. Cf. Chiaro v. Chiaro, 213 A.D.2d 369, 371, 623

N.Y.S. 2d 312, 314 (2d Dep’t 1995) (finding constructive transfer when, despite no actual

delivery of unit, donees “voted the unit’s stock shares at co-op board meetings . . . [and]

made expensive renovations to the unit, with the third-party defendants’ knowledge”).

Accordingly, there is no issue of material fact as to whether Xenakis made an effective inter

vivos gift of the apartment.

2.     Business Judgment Rule

       Even if Xenakis had made an effective inter vivos gift, the district court did not err

in holding that the business judgment rule shielded Sutton Place from liability. New York’s

Court of Appeals requires courts to apply the business judgment rule in evaluating challenges

to decisions made by cooperative boards. See Levandusky v. One Fifth Ave. Apartment

Corp., 75 N.Y.2d 530, 537, 554 N.Y.S.2d 807, 811 (1990); see also In re Croton River Club,

Inc., 52 F.3d 41, 44 (2d Cir. 1995) (recognizing that “the New York Court of Appeals held

that the business judgment rule informs the standard of review for the actions of cooperative

and condominium governing boards”) (citing Levandusky v. One Fifth Ave. Apartment

Corp., 75 N.Y.2d at 537, 554 N.Y.S.2d at 811). Thus, “a court should defer to a cooperative

board’s determination so long as the board acts for the purposes of the cooperative, within

the scope of its authority and in good faith.” 40 W. 67th St. v. Pullman, 100 N.Y.2d 147,

153, 760 N.Y.S.2d 745, 750 (2003).


                                             5
       Here, nothing in the record demonstrates that the board’s decision not to recognize the

purported transfer was made in “bad faith,” or was an exercise in “arbitrariness, favoritism,

discrimination or malice.” Id. at 157. Sutton Place asserts, and Aries does not dispute, that

neither Xenakis nor Aries attempted to satisfy any of the transfer provisions of the

proprietary lease or the bylaws. Moreover, Aries concedes that Sutton Place “strictly

adhere[d] to a board-created policy of recognizing only ownership of individuals” as opposed

to corporations. Appellant Br. 14. Thus, Sutton Place’s refusal to recognize the transfer

cannot be characterized as ultra vires or attributable to bad faith. See Levandusky v. One

Fifth Ave. Apartment Corp., 75 N.Y.2d at 540, 554 N.Y.S.2d at 813 (upholding application

of business judgment rule to actions of board against tenant who failed to comply with

alteration and renovation agreements).

       Insofar as Aries relies on In re Katz, 142 Misc. 2d 1073, 1077, 539 N.Y.S.2d 659, 662

(N.Y. Surr. Ct. 1989) (holding consent of cooperative board not required for valid

assignment), to argue that the business judgment rule does not apply here, that lower-court

decision cannot control in light of subsequent Court of Appeals precedent to the contrary, as

the Appellate Division has recognized. See Barbour v. Knecht, 296 A.D.2d 218, 224, 743

N.Y.S.2d 483, 488–89 (1st Dep’t 2002) (holding that business judgment rule is appropriate

standard to determine if cooperative board unreasonably withheld consent to transfer of

shares to third party); Hochman v. 35 Park W. Corp., 293 A.D.2d 650, 651, 741 N.Y.S.2d

261, 263 (2d Dep’t 2002) (upholding determination that business judgment rule shielded


                                              6
cooperative board from liability where board applied provision of proprietary lease

prohibiting assignment of lease without the written consent of board); cf. Ludwig v. 25 Plaza

Tenants Corp., 184 A.D.2d 623, 624–25, 584 N.Y.S.2d 907, 908 (2d Dep’t 1992) (holding

that business judgment rule is inapplicable where cooperative board’s actions clearly violate

express terms of proprietary lease).

       In sum, because New York’s business judgment rule shields Sutton Place from

liability, summary judgment was properly awarded in its favor. We have considered Aries’s

remaining arguments on appeal and conclude that they are without merit. Accordingly, the

judgment in favor of Sutton Place is AFFIRMED.

                                   FOR THE COURT:
                                   CATHERINE O’HAGAN WOLFE, Clerk of Court




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