New York State Court of Claims

New York State Court of Claims

NYC HOUSING AUTHORITY v. THE STATE OF NEW YORK, #2001-014-505, Claim No. 98802, Motion Nos. M-60265, CM-60692, M-61711


Synopsis


Motion and cross motion for Summary Judgment are denied. Neither party has produced proof sufficient to satisfy its burden on a critical issue of fact, namely: whether the appropriation at issue resulted from the ordinary budget process, or from an improper act or omission by the State.

Case Information

UID:
2001-014-505
Claimant(s):
NEW YORK CITY HOUSING AUTHORITY
Claimant short name:
NYC HOUSING AUTHORITY
Footnote (claimant name) :

Defendant(s):
THE STATE OF NEW YORK
Footnote (defendant name) :
The Court of Claims does not have jurisdiction over individuals (see, Smith v State of New York, 72 AD2d 937, 938), nor does it have jurisdiction over New York State officials distinct from the State of New York (see, Court of Claims Act §9). Thus, the Court has amended the caption to delete named defendants George Pataki as Governor of the State of New York and Joseph Lynch as Acting Commissioner of the New York State Division of Housing and Community Renewal.
Third-party claimant(s):

Third-party defendant(s):

Claim number(s):
98802
Motion number(s):
M-60265, CM-60692
Cross-motion number(s):
M-61711
Judge:
S. Michael Nadel
Claimant's attorney:
Jeffrey Schanback, General CounselBy: Sonya M. Kaloyanides
Defendant's attorney:
Eliot Spitzer, Attorney General
By: Cornelia Mogor and Michele M. Walls, Assistant Attorneys General
Third-party defendant's attorney:

Signature date:
January 25, 2001
City:
New York
Comments:

Official citation:

Appellate results:

See also (multicaptioned case)



Decision

The following papers were read on the defendant's motion for summary judgment dismissing the claim (Motion No. M-60265) and on the claimant's cross-motion seeking permission to amend the claim and for summary judgment (Cross-Motion No. CM-60692): Notice of Motion, Affidavit in Support and Exhibits annexed; Notice of Cross-Motion, Affidavit in Support and Exhibits annexed, Affirmation in Support and Exhibits annexed, Memorandum of Law; Reply Affidavit in Support of Defendant's Motion and in Opposition to Claimant's Cross-Motion and Exhibits annexed; Reply Affidavit in Support of Claimant's Cross-Motion and in Opposition to Defendant's Motion and Exhibits annexed, Memorandum of Law; Affidavit of Roy Sinclair (for Claimant) and Exhibits annexed; Affidavit of Catherine Johnson (for Defendant) and Exhibits annexed; Supplemental Affirmation in Further Support of Claimant's Cross-Motion and Exhibits annexed, Memorandum of Law; second Supplemental Affirmation in Further Support of Claimant's Cross-Motion and Exhibits annexed, Memorandum of Law; Excerpts of Budget Documents for Fiscal Years 1996-1997, 1997-1998, 1998-1999 and 1999-2000, submitted by counsel for the defendant; Volumes I and III of the Division of Housing and Community Renewal's All Funds Budget Request for Fiscal Year 1997-1998. The following papers were read on the claimant's motion for permission to file a late claim (Motion No. M-61711): Notice of Motion, Affirmation in Support and Exhibits annexed, Memorandum of Law; Affirmation in Opposition and Exhibits annexed; Reply letter-brief and Exhibits annexed


Pursuant to a long standing contractual agreement providing for annual payments, embodied in what is described in the submissions as the Consolidated Contract for Loan and Subsidy, the defendant paid the claimant $20,390,317 during the State's 1997-1998 Fiscal Year. The claimant, in this claim for breach of contract, contends that the defendant was obligated to pay it $31,506,357.48, the amount it was paid during the prior Fiscal Year.

Both sides acknowledge that the contractual agreement is subject to the provisions of §73 of the Public Housing Law, which limit the amount the defendant is obligated to pay to no more than the amount appropriated; both sides also agree that the amount appropriated for FY97-98 was $20,390,317, which was the amount requested in the Executive Budget submitted to the Legislature.[1] See, Constitution, Article 7, §§ 2, 3.

Upon the foregoing facts, which are not in dispute, the defendant seeks summary judgment dismissing the claim, on the ground that the defendant paid the claimant the amount which was appropriated. The claimant cross-moves for summary judgment on the ground that the fact that the Executive Budget submitted to the Legislature did not request $31,506,357.48, which the defendant agrees is the maximum amount payable pursuant to the contractual agreement, constitutes a breach of the contract. Inferentially, it is clear that the claimant does not disagree that had the Executive Budget submitted to the Legislature requested $31,506,357.48, appropriation by the Legislature of the lesser amount would not constitute a breach of the contract.

Despite an extensive record on these motions, neither party has produced proof sufficient to satisfy its burden on a motion for summary judgment. Alvarez v Prospect Hospital, 68 NY2d 320, 324. A critical issue of fact remains unresolved, precluding summary judgment for either party.

The ultimate issue upon which the instant claim turns is discussed in a series of cases involving so-called executory clauses: contractual provisions, such as the one involved in this claim (based upon Public Housing Law §73), which limit the State's obligation under a contract to no more than the amount appropriated for the purpose. Starling Realty Corp. v State of New York, 286 NY 272; Drislane v State of New York, 7 AD2d 141; Adson Industries, Inc. v State of New York, 28 AD2d 1183; Amarnick v State of New York, 84 Misc 2d 112, affirmed, 52 AD2d 1007; Green Island Contracting Corp. v State of New York, 117 Misc 2d 435, affirmed, 99 AD2d 330, appeal denied, 66 NY2d 605; Forelli v State of New York, 179 AD2d 394.

The legal principle consistently applied in these cases is that the State's obligation under a contract may be limited to the amount appropriated when the appropriation results from the ordinary budget process, but not when it results from an improper act or omission by the State.

Based upon those cases, therefore, in order for the defendant to prevail it must be established that the amount appropriated resulted from the ordinary budget process; in order for the claimant to prevail it must be established that the amount appropriated resulted from an improper act or omission by the defendant, namely: the failure to include the higher amount in the Executive Budget.

Neither position is established on the record before the Court, which is devoid of any evidence of the circumstances which resulted in the lesser amount being requested in the Executive Budget[2] (cf., Starling v State of New York, supra, at 278, wherein the Court of Appeals relied upon "a finding by the Court of Claims" that the failure to request an appropriation was made "in good faith and for good and sufficient reasons . . ."), although the higher amount appears to have been requested by the State's Division of Housing and Community Renewal (the State agency to which the funds are appropriated for payment to the claimant) at the inception of the budget process for FY97-98. See, page 98 of Volume I of the Division of Housing and Community Renewal's All Funds Budget Request for Fiscal Year 1997-1998. Exhibits 4 through 7 annexed to Notice of Cross Motion/Affirmation in Support do not provide such evidence; they address the purported consequences of requesting the lesser amount. The Affidavit of Catherine Johnson, Director of Budget and Finance Services of New York State Division of Housing and Community Renewal does not provide such evidence; it transmits excerpts from Executive and Legislative Budget documents which do not provide such evidence. The agreement of counsel that the lesser amount was the amount necessary to cover debt service as distinguished from operations, and the argument of counsel that such resulted from a "policy" formulated by the defendant, does not provide such evidence. CPLR 3212(b).

The apparent position of both sides that such evidence is unnecessary, the claimant arguing that the mere failure to request the higher amount in the Executive Budget, regardless of how that determination was made, constitutes a breach of the contractual agreement, and the defendant arguing that there is no breach simply because the amount was requested by the agency (although not in the Executive Budget) and was not appropriated by the Legislature, is inconsistent with controlling case law. See, e.g., Adson, Amarnick, Forelli, supra, in which determination of the issue was based upon analysis of the circumstances surrounding the failure to request an appropriation.

Moreover, the claimant has not cited any provision in the contract (or in statute, or in Article 7 of the Constitution) which requires that a request for the appropriation at issue must be included in the Executive Budget. The basis of the claimant's position is that the defendant was not acting in good faith when it did not include the higher amount in the Executive Budget. While proof of such may ultimately affect the outcome of this claim, "[c]ertainly, a party's good faith, which necessitates examination of a state of mind, is not an issue which is readily determinable on a motion for summary judgment [citations omitted]." Coan v Chapin, 156 AD2d 318, 319.

The claimant's argument that the failure to request the higher amount in the Executive Budget somehow deprived the Legislature of the ability to appropriate that amount is unsupported by legal authority.[3] Indeed, it appears from the record before the Court that the Legislature did in fact appropriate additional amounts for five public housing authorities other than the claimant (see, footnote 2, supra). Constitution, Article 7, §4.

Although the defendant has not demonstrated any prejudice which might result from granting that portion of the claimant's cross-motion which seeks to amend the claim to add allegations concerning the amounts paid to it during the Fiscal Years 1998-1999 and 1999-2000, it appears that the date of the accrual of each of these subsequent claims is the end of the relevant Fiscal Year: March 31. Because the timeliness of the service and filing of a claim in this Court is of jurisdictional import (Court of Claims Act §§ 10, 11), it is more appropriate to consider claimant's application (Motion No. M-61711) seeking permission to file a late claim alleging a breach of contract in connection with the defendant's payment under the contract for Fiscal Year 1998-1999,[4] particularly since the claimant's cross-motion to amend the claim was served and filed more than six months after the end of that Fiscal Year. See, Court of Claims Act §10(4).

Upon consideration of the factors set forth in Court of Claims Act §10(6) (Bay Terrace Cooperative Section IV, Inc. v New York State Employees' Retirement System Policemen's and Firemen's Retirement System, 55 NY2d 979), the application is granted. According to the claimant's submission, the delay in filing a claim is due to its belief that it could amend Claim No. 98802 concerning FY97-98, to allege a breach of the contract for FY98-99. As such, the delay is not excusable. Matter of E.K. v State of New York, 235 AD2d 540, 541, lv to app den 89 NY2d 815; Sevillia v State of New York, 91 AD2d 792. It is clear that, based upon the filing and service of Claim No. 98802 concerning FY97-98, the State had notice of the essential facts constituting the claim for FY98-99, as well as an opportunity to investigate the circumstances underlying it, and that the failure to file a timely claim or notice of intention with respect to FY98-99 has not resulted in substantial prejudice to the State. It may be that the claimant has an alternate remedy, by way of an Article 78 proceeding, which it is pursuing (at least with respect to FY97-98), in Supreme Court.

Insofar as the allegations in the proposed claim concerning the appropriation for FY98-99 are essentially the same as those in Claim No. 98802 concerning the prior Fiscal Year, and based upon the foregoing discussion of the issues presented by that claim, the proposed claim has the appearance of merit for the purposes of Court of Claims Act §10(6).

Accordingly, the defendant's motion (Motion No. M-60265) is denied; the claimant's cross-motion (Cross Motion No. CM-60692) is denied; the claimant's application for permission to file a late claim (Motion No. M-61711) is granted. It is therefore,

ORDERED, that claimant's application for permission to file a late claim against the State of New York is granted; claimant shall file the proposed claim in accordance with the provisions of Court of Claims Act §§ 11 and 11-a and Rule 206.5 of the Uniform Rules for the Court of Claims, and serve it, in accordance with the provisions of Court of Claims Act §11, either personally or by certified mail return receipt requested, upon the Attorney General, within 45 days of the date of the filing of this Order.

A conference for the purpose of scheduling the completion of any outstanding discovery on the instant claim, Claim No. 102376 and on the claim to be filed, is hereby scheduled for March 2, 2001 at 11:00 AM.


January 25, 2001
New York, New York

HON. S. MICHAEL NADEL
Judge of the Court of Claims


[1]The actual amount appropriated, and the amount requested in the Executive Budget, are larger than the amounts stated, supra. The actual amounts were intended to fund payments pursuant to contractual agreements with a number of public housing authorities throughout the State, of which the claimant is one. For the sake of clarity, only the amounts intended for the claimant have been used.

[2]The State's annual budget process commences in accordance with the provisions of section 1 of Article 7 of the State Constitution: "For the preparation of the budget, the head of each department of state government, except the legislature and judiciary, shall furnish the governor such estimates and information in such form and at such times as he may require, copies of which shall forthwith be furnished to the appropriate committees of the legislature. The governor shall hold hearings thereon at which he may require the attendance of heads of departments and their subordinates. Designated representatives of such committees shall be entitled to attend the hearings and to make inquiry concerning any part thereof." There is no reason to believe that the foregoing procedure was not followed for FY97-98. The amount requested in the Executive Budget was determined at its conclusion; yet each party's submission ignores it.


[3]Not only is the Legislature involved in the process which precedes the submission of the Executive Budget (Constitution, Article 7, §1, supra), it is "the duty of the heads of departments when requested by either house of the legislature or an appropriate committee thereof, to appear and be heard in respect to the budget during the consideration thereof, and to answer inquiries relevant thereto." Constitution, Article 7, §3.
[4]The claimant has served and filed a claim (Claim No. 102376) concerning the amount paid to it during FY99-00. A review of the defendant's Verified Answer to that claim indicates that it has not raised an objection or defense based upon timeliness or the manner of service as required by Court of Claims Act §11(c).