The synagogue on 309 West 89th St., currently under renovation. (NYLJRick Kopstein)
A religious corporation can change its mind about moving forward with a contract to sell real property if the sale would not promote the corporation’s purpose or the interests of its members, Manhattan Supreme Court Justice Lawrence Marks has held.
The Commercial Division judge’s May 28 decision in Guberman v. Congregation Ahavath Chesed, 653177/2011, dismissed a complaint brought against an Upper West Side synagogue after it agreed in writing to sell its premises for nearly $4 million, then terminated the contract when its membership opposed the transaction.
In 2011, Congregation Ahavath Chesed decided to sell the four-story brownstone housing its synagogue on 309 West 89th St. to Josh Guberman, someone who had grown up on the block. The death of longtime Rabbi Samuel Orenstein in 2006 had led to dwindling membership and decreased donations, according to the decision.
The congregation decided for financial reasons to sell the property, entering into a written contract of sale with Guberman on July 8, 2011, which was signed by a senior member of the synagogue.
The next step would have been for the synagogue to seek and obtain court approval of its draft petition for dissolution. But more than a year later, this hadn’t occurred due to brewing disagreement over the synagogue’s charted course. In September 2012, the court noted the congregation “convened its first formally documented meeting in over a decade,” elected a board of trustees and formally voted to reject the sale.
“Ironically, the internal conflict regarding the possible sale of the Shul has energized the congregation,” Rabbi David Redisch submitted in an affidavit to the court. “The proposed sale of the Shul has led to an invigorated constituency, therefore, the membership is against the support of the sale.”
On Nov. 7, 2012, the congregation informed Guberman that since it could not obtain the requisite approval of the proposed sale from its members as required under the Religious Corporations Law that governs such transactions, the contract must be terminated.
A $3.85 million deposit was returned to Guberman plus $4,100 in accrued interest.
One week later, Guberman sued for specific performance of the contract and $1 million in damages for breach of contract.
On the specific performance claim, the issue before the judge was twofold: whether the proposed sale would promote the purpose of the congregation and the interests of its members as required under the Religious Corporations Law and the appropriate time frame in which to weigh that analysis.
Marks’ 26-page ruling largely relied on an Appellate Division, Second Department case, Church of God of Prospect Plaza v. Fourth Church of Christ, Scientist, of Brooklyn, 76 A.D.2d 712 (2nd Dept. 1980), which held that the determination of whether a proposed sale would promote the purpose of the corporation or interests of its members depends on “conditions prevailing at the time the issue is presented to the court,” not at the time of transaction.
Because the congregation eventually decided that the deal would not further its purpose or members’ interests, it could change its mind about the sale, the judge said.
“The congregation has shown that the re-energized members wish to continue worshipping at their present location, a purpose that is clearly central to the congregation’s purpose as a religious corporation,” Marks said.
The judge pointed out that Church of God, which was upheld on appeal, did not permit a religious corporation to have “an unfettered right to change its mind as to the sale of its real property after it has entered into a contract of sale but before the requisite court approval has been obtained” but that it’s a case-by-case determination.
His decision cited to a number of letters and affidavits submitted by the synagogue on its motion for summary judgment for dismissal, which argued that the congregation would have no alternative place of worship should the deal move forward.
The judge also stated that Guberman failed to present any admissible proof of a formal authorization by the congregation regarding the sale other than its informal consent in 2011.
To “ignore or override” the official September 2012 vote and order the congregation to submit a petition for dissolution, the court noted, “would be improperly substituting its own views as to the viability of the congregation for the members’ views.”
Marks also dismissed Guberman’s claim for damages, finding that he waived the right to recover damages in the case of breach in accordance with the contract.
During the course of litigation, Guberman was represented by Nachamie Spizz Cohen & Serchuk. He has now retained Stephen Meister of Meister Seelig & Fein.
Y. David Scharf of Morrison Cohen represented the congregation pro bono.
“I am not at all surprised by the decision,” Scharf said in an email. “The court did a detailed analysis of the undisputed facts and applied the law to make its determination.”