Associate Attorney
New York’s Appellate Division, Second Department, holds coop auction bidder in default for missing the board application deadline
The Appellate Division, Second Department, reversed a six-figure judgment that held a Brooklyn co-op liable for enforcing its own auction terms and awarded the Woods Lonergan client its attorneys’ fees against a bidder who never completed his board application.
In Druzhinsky v. Trump Village Section 4, Inc., 2026 WL 2590030 (2d Dep’t Sept. 2, 2026), a unanimous four-justice panel held the bidder, not the cooperative, in default. The terms of sale required a complete board application within five days of the auction, and the bidder never delivered one. As the court put it, the cooperative:
demonstrated, prima facie, that the plaintiff defaulted on his obligation to submit a complete application package within five days of the auction sale, as required under the terms of sale.
In June 2022, the cooperative sold a defaulting shareholder’s shares and proprietary lease at a nonjudicial foreclosure auction. The winning bidder signed the terms of sale, which gave him five days to submit a complete board application. He emailed a partial package the next day. The co-op’s transfer agent replied that the package lacked required authorizations and financial documents and was “not deemed submitted.” The bidder still had three days to complete the application but let the deadline pass. The board declared him in default and sold the apartment to another buyer.
The bidder sued for breach of contract, arguing that his partial package met his obligation under the terms of sale. The court rejected that argument:
[H]is submission of an incomplete application package did notsatisfy his obligation since ‘a fair and reasonable interpretation’ of the terms of sale required the plaintiff to submit a complete application package.
The court reversed on the law, denied the bidder’s motion for summary judgment, and granted the cooperative’s cross-motion for summary judgment dismissing the complaint. The Second Department also granted summary judgment on the cooperative’s counterclaim for attorneys’ fees under the fee-shifting provision in the terms of sale:
Since the defendant is the prevailing party in the action, it was entitled under the terms of sale to recover its reasonable attorneys’ fees.
A hearing in Supreme Court, Kings County, will set the amount of the fee award. The court also awarded the cooperative its costs on the appeal.
The decision reverses an October 2024 Kings County ruling granting the bidder summary judgment, and the six-figure judgment entered against the cooperative in January 2025. Earlier in the case, the co-op’s defense failed at the pleading stage because it relied in part on emails, which do not qualify as documentary evidence on that kind of motion. On a full summary judgment record, the defense prevailed.
What the Decision Means for Co-op Boards
The decision shows that New York courts will enforce co-op auction terms of sale as written. A firm deadline for a complete application is a real condition of the sale, and a clear fee-shifting clause lets the building recover its legal costs when a defaulting bidder sues. The case demonstrates the value of an appeal: the board lost in Kings County and won in the Appellate Division.
Annie E. Causey and James F. Woods represented the cooperative on appeal, with Andreas E. Christou on a related appeal.
The outcome in Druzhinsky reflects Woods Lonergan’s more than 30 years as counsel to cooperative and condominium boards across the New York metro area. The firm’s board practice includes:
- Day-to-day governance counsel
- Annual meetings, proxies, and voting procedure
- Proprietary leases, bylaws, and house rules
- Purchase applications, transfers, and closings
- Alteration agreements and renovation approvals
- Refinancing and capital improvement financing
- Sponsor and offering plan enforcement
- Construction defect and §881 access claims
- Arrears, lien foreclosures, and lease terminations
- Defense of board decisions and fiduciary claims, including appeals
- Election challenges and board takeover defense
- Disputes with unit owners and shareholders
- Contractor, broker commission, and vendor disputes
- Property damage and claims against the City
Frequently Asked Questions
What happens if the winning bidder at a NYC co-op auction misses the board application deadline?
In a case Woods Lonergan won for a Brooklyn cooperative, the Second Department held the bidder in default. Because the bidder did not deliver a complete application within the five days the terms of sale required, the court dismissed his breach of contract claim. Woods Lonergan counsels boards through arrears, lien foreclosures, and the purchase applications that follow an auction, and defends those decisions when a bidder sues.
Does an incomplete co-op board application count as submitted?
Not under the terms of sale in this case. The court read the terms to require a complete application package, so a partial submission did not satisfy the bidder’s obligation. The record also showed that the co-op’s transfer agent told the bidder in writing that his package was not deemed submitted. Woods Lonergan advises boards on purchase applications and transfers so the record is in order before a dispute begins.
Can a New York co-op recover its attorneys’ fees when an auction bidder sues?
Yes, when the terms of sale provide for it. Here, the terms included a fee-shifting clause, and the court awarded the cooperative its reasonable attorneys’ fees as the prevailing party. A hearing will set the amount. Every legal dollar a board spends is accountable to its shareholders, and a well-drafted fee provision shifts that cost to the party who brings the claim. Woods Lonergan reviews proprietary leases, bylaws, and auction terms with that in mind.
Does a board have to close with a bidder who did not meet the terms of sale?
In this case, no. The court dismissed the bidder’s lawsuit challenging the board’s decision to declare him in default and sell the apartment to another buyer. The result turned on the specific terms of sale and the bidder’s failure to meet them. Woods Lonergan defends board decisions and handles disputes with shareholders, unit owners and purchasers, from the first demand letter through appeal.
Can a co-op board appeal a judgment against it?
Yes. The board in this case lost on summary judgment in Kings County and won a unanimous reversal in the Appellate Division, Second Department. Woods Lonergan handles appeals for co-op and condo boards, along with the trial-level work that comes before them.
Can NYC co-op board members be held personally liable for board decisions?
Generally, no. The judgment in this case ran against the cooperative, not the individual board members. New York courts apply the business judgment rule, which protects board members who act in good faith and within their authority. That protection can end when a board member takes part in fraud or knowingly lets it stand. Managing Partner James F. Woods explains how the rule, indemnification and D&O insurance protect board members in Brick Underground: Can I be held personally liable for actions taken in my capacity as board member?