Eliot Spitzer and an Elite Co-op Board Fight Over a Ditch

On a coveted stretch of Fifth Avenue, steps away from Central Park, the shareholders of an Upper East Side cooperative are fighting for an unusual prize: the ownership of a grimy concrete ditch behind their luxury apartment building.

The roughly 350-square-foot plot is at the center of a lawsuit filed on Friday in New York State Supreme Court that pits the millionaire residents of 980 Fifth Avenue against the real estate mogul and former governor of New York, Eliot Spitzer, who owns an adjacent rental tower.

Nominally, the suit is about a trivial sliver of land behind two lavish apartment buildings near East 79th Street. But the outcome of the case could decide more serious business — when and how Mr. Spitzer can proceed with plans to demolish his building and erect a high-end condo tower in its place, lawyers and land-use consultants said.

The case could also dredge up memories of Mr. Spitzer’s past as New York attorney general: In 2003, he investigated the man who heads the co-op board of 980 Fifth Avenue for his involvement in a mutual fund trading scandal.

In its lawsuit, the co-op board is arguing that it should be the rightful owner of the pit through a doctrine called adverse possession, in which a party can make a legal claim to a property after 10 continuous years of undisputed use. While the property is legally owned by Mr. Spitzer’s neighboring rental building, 985 Fifth Avenue, the co-op claims that it has routinely and openly used the roughly six-foot-deep niche to store construction supplies and has never been asked to stop.

“I don’t believe there’s ever been an adverse possession case filed with these stakes, by people of this stature,” said Adam Leitman Bailey, a lawyer representing the co-op.

“All we’re interested in is to claim our plot of land that we have a right to own,” he said. The co-op board declined to discuss the lawsuit.

Mr. Spitzer is unconvinced. “This lawsuit is frivolous, and should be an embarrassment to the board,” he said, but declined to discuss their motives. “It should be beneath their dignity.”

Mr. Spitzer said he has also granted the co-op permission to store bricks on the disputed space. “It’s stupid,” he said. “It’s like you let your neighbor park his car in your driveway for two weeks and they say, oh, by the way, I own your house.”

Adverse possession claims are rare in Manhattan, where every square foot of property is valuable, said Luise Barrack, the head of the litigation department at Rosenberg and Estis, a large real estate law firm. In nearly 40 years, she said she has only dealt with one such case. Ms. Barrack did not review the lawsuit, but said it could achieve at least one thing: delays. Given the slowdown in the courts since the pandemic, she said, “it will be in litigation for a while.”

Residents of the 25-story, 1960s-era co-op building include Pier Luigi Loro Piana, the Italian billionaire and heir to the Loro Piana fashion company, who bought a three-bedroom apartment in 2014 for $11.3 million. He did not respond to requests for comment. Nedenia Rumbough, the granddaughter of Marjorie Merriweather Post, a business tycoon, bought a four-bedroom apartment in 2019 for $8 million, according to public records. Reached by phone, Ms. Rumbough declined to comment.

Mr. Spitzer resigned as governor of New York in 2008 after revelations that he had been a client of a prostitution ring. After an unsuccessful run for New York City Comptroller in 2013, he assumed the family real estate business founded by his father, Bernard.

The suit comes after Mr. Spitzer’s firm, Spitzer Enterprises, filed plans in November to demolish the existing 46-unit rental building at the adjacent 985 Fifth Avenue and replace it with a 19-story luxury condo tower with about 25 units. (While the new condo will have fewer apartments than the existing rental building, the majority of renters who will be displaced are far from typical. Available units last year rented from $14,000 to $29,500 a month, according to StreetEasy.)

George Janes, a land-use consultant and urban planner, said the lawsuit could achieve less obvious goals for the co-op board: disrupting Mr. Spitzer’s development plans.

Depriving Mr. Spitzer of the 350-square-foot property that abuts his site could have an outsize effect on his construction plans, because the pit was likely used in the zoning calculations to determine important considerations, such as the total size of the project and where windows can be placed.

The legal dispute could also complicate efforts to secure financing for the project, Mr. Janes said. “Lenders are risk averse and they don’t like to deal with buildings with a legal cloud.”

Mr. Spitzer said he does not “speculate on ridiculous legal outcomes.”

The main players in the dispute have a history of legal clashes. According to New York State Department of State records, the chief executive of the entity that controls the co-op is Stephen Treadway, formerly the chief executive of Pimco Advisors Fund Management, which Mr. Spitzer investigated as attorney general in a wide-reaching mutual fund trading scandal. As a result of Mr. Spitzer’s investigation in 2003, Mr. Treadway was charged with fraud by the Securities and Exchange Commission the next year and agreed to settle the case in 2006 by paying a $572,000 fine.

Mr. Treadway did not immediately respond to requests for comment.

Susan Beachy contributed research.