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
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
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
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.
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.
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)
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
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.