New York State Court of Claims

New York State Court of Claims

AUBURN HOUSING AUTHORITY, ET AL v. THE STATE OF NEW YORK, #2003-028-574, Claim No. 100815, Motion Nos. M-64662, CM-64755


Case Information

Claimant short name:
Footnote (claimant name) :

Footnote (defendant name) :

Third-party claimant(s):

Third-party defendant(s):

Claim number(s):
Motion number(s):
Cross-motion number(s):
Claimant's attorney:
Defendant's attorney:
BY: Michele M.Walls, Esq.Assistant Attorney General
Third-party defendant's attorney:

Signature date:
October 24, 2003

Official citation:

Appellate results:

See also (multicaptioned case)


The following papers were read on the parties' motions for summary judgment:

1) Notice of Motion and Supporting Affidavits of Eugene Welch, Esq., (Welch Affidavit) with annexed Exhibits A-C and James A. Mirando (Mirando Affidavit)

with annexed Exhibits A-D, and Claimants' Memorandum of Law;

2) Notice of Cross-Motion and Supporting/Opposition Affidavits of Assistant Attorney General Michele M. Walls, Esq. (Walls Affidavit) and Marcia P. Hirsch, Esq. (Hirsch Affidavit) with annexed Exhibits A-F, and Defendant's Memorandum of Law;

3) Affidavit in Opposition/Reply of James A. Mirando (Mirando Reply)

with annexed Exhibits A-B, and Claimants' Memorandum of Law in Opposition;

4) Defendant's Reply Memorandum of Law;

5) Claimants' Sur-Reply Memorandum of Law;

6) Defendant's Sur-Reply Memorandum of Law;

7) Letter from Eugene Welch, Esq. dated 5/9/02

8) Letter from Assistant Attorney General Michele M. Walls, Esq. dated 5/13/02

9) Letter from Assistant Attorney General Michael C. Rizzo, Esq. dated 10/30/02

10) Letter from Eugene Welch, Esq.[1] Dated 11/11/02

The Claim, consisting of ten causes of action, is brought by Claimants alleging that the Defendant breached contracts existing between the parties when the Defendant reduced the amount of the subsidy Defendant paid to Claimants for fiscal year 1997-1998 (FY98) and fiscal year 1998-1999 (FY99). The parties have each moved for summary judgment and the submissions have been thorough and an extensive record has been created for resolution of these motions.

The following facts are not in dispute. Claimant is a municipal housing authority incorporated pursuant to the Public Housing Law (PHL) of New York State[2]. The parties entered into Loan and Subsidy Agreements in 1942 and 1968 (Mirando Affidavit, Exhibits A and B, respectively) which were subsequently consolidated (id. Exhibt C; collectively referred to as "the Contracts").[3] The Contracts, authorized by Article XVIII, §2 of the New York State Constitution and PHL §73, provided for a loan from the Defendant to the housing authority for the construction of dwelling units. Upon completion of the project, the State was to provide the housing authority with a revised amortization schedule reflecting the net amount of the loan, with repayment to be spread over a 50 year term. Pursuant to the Contracts, the State was obligated to pay a subsidy to the housing authority as follows:
Subject to the limitations of Sections 73 and 74 of the Act [Public Housing Law], the State hereby agrees to pay each year to the Authority periodic subsidies as deemed necessary by the Commissioner in an amount not exceeding an amount equal to the largest annual interest charge on funds borrowed from the State to finance this Project, plus one (1%) per centum of the Project cost as determined by the Commissioner...

(Walls Affidavit, Exhibit D, § 401 and Exhibit E, § 301).

Beginning with FY98, and again in FY99, the Claimant received a subsidy in an amount sufficient to pay their loans from the State (this amount is referred to as "debt service" [Mirando Affidavit, ¶ 26] or "bond payments" [id. and Welch Affidavit, ¶ 26] or "principal and interest" [Hirsch Affidavit, ¶ 3]). The FY98 and FY 99 subsidy payments were not the "maximum" (Hirsch Affidavit, ¶ 4) or "full" (Mirando Affidavit ¶ 17) subsidy permitted by the Contracts.

In both fiscal years, the Executive Budget, which was submitted to the Legislature in January of each year, recommended that the subsidies be limited to the debt service portion and that any excess be eliminated (see Mirando Affidavit, Exhibit D [FY98] and Welch Affidavit, Exhibit C [FY99]). The Legislature thereafter appropriated funds sufficient to pay a subsidy equal to the debt service. The amount appropriated in each fiscal year resulted in a subsidy payment to Claimant which was approximately one half of the maximum allowable subsidy (see, Walls Affidavit ¶¶ 14 and 15).

Claimant asserts the failure to pay the full or maximum subsidy, the submission of the Executive Budget without a request for the maximum or full subsidy, the failure of the Commissioner to consider the impact of subsidy reduction on the "low-rent character" of the projects and the payment of additional subsidies to other housing authorities constitute either breach of the Contracts or breach of the implied covenant of good faith and fair dealing (see Welch Affidaivt, ¶ 7).

Defendant counters by asserting that there is no requirement that the Claimant receive the maximum subsidy (Walls Affidavit, ¶ 11), the Division of Housing and Community Renewal (DHCR) performed all of its obligations under the contract based upon the Legislature's appropriation (id.¶ 16), the State enjoys a qualified immunity on budget request (id.18) and the low rent character of the project has not been adversely affected by the appropriation (id. ¶ 20).

The rule governing summary judgment is well established: The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case (Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853), and such showing must be made "by producing evidentiary proof in admissible form" (Zuckerman v City of New York, 49 NY2d 557, 562). "[R]egardless of the sufficiency of the opposing papers", in the absence of admissible evidence sufficient to preclude any material issue of fact, summary judgment is unavailable (Ayotte v Gervasio, 81 NY2d 1062, 1063, quoting Alvarez v Prospect Hosp., 68 NY2d 320, 324). The Court's function is to determine if an issue exists. In doing so, the Court must examine the proof in a light most favorable to the party opposing the motion.

In New York City Housing Authority v State of New York, Ct Cl, Nadel, J., Claim No. 98802, UID #2001-014-505, January 25, 2001, rev'd 294 AD2d 105, lv denied 98 NY2d 611, a case factually analogous to the instant claim, the New York City Housing Authority brought a breach of contract claim, when, the Executive Budget submitted to the Legislature, and subsequently approved by the Legislature, contained an appropriation request in excess of $20 million dollars for FY97-98, but still over $11 million dollars less than the maximum permissible subsidy under the contractual agreement. The motion court, upon reviewing the law of executory clauses involving the State, found summary judgment inappropriate, framing the issue as follows:
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.

(New York City Housing Authority v State of New York
, Ct Cl, Nadel, J., Claim No. 98802, UID #2001-014-505, January 25, 2001) and found that neither position was established on the record before it (id.). The Appellate Division reversed, and dismissed the claim, holding that the payment of subsidies under the contract, which was subject to the limitations of PHL § 73, rendered the actions of the executive and legislative branches in appropriating a lesser amount not actionable (New York City Housing Authority v State of New York, 294 AD2d 105 lv denied 98 NY2d 611).

This Court is persuaded by the reasoning of the Appellate Division that the appropriation of the lesser amount is not actionable. The submission of the Executive Budget did not preclude the Legislature from appropriating a greater amount of money, as it appears to have done with respect to certain housing authorities (see Mirando Affidavit, Exhibit D). Moreover, the Contracts, contrary to Claimant's assertions, do not contain provisions which would require that a maximum or full subsidy be paid by the State[4]. The omission of such a requirement in the Contracts, and the fact budgeted funds were distributed, distinguishes Green Island Construction Corp v State of New York, 99 AD2d 330, upon which Claimant relies, from the instant facts. As such, Claimant does not state a cause of action for breach of contract, nor can Claimant establish a breach of contract based upon the level of funds appropriated.

Claimant's further argument that there is a breach of the covenant of good faith and fair dealing likewise must fail. Again, this claim is premised upon Claimant's position, rejected by the Court, that the at-issue contract language required the Executive Budget to request the maximum subsidy each and every year. The Court also rejects Claimant's argument that NYC Housing Auth. did not address a cause of action for breach of the implied covenant. While the cause of action may not have been specifically pleaded (see Welch Letter, November 11, 2002), the motion court specifically raised the issue of "good faith" when it stated "proof of such may ultimately affect the outcome of this claim" (New York City Housing Authority v State of New York, Ct Cl, Nadel, J., Claim No. 98802, UID #2001-014-505, January 25, 2001) and the Appellate Division made clear the bar established by the budgetary process.

Based upon the foregoing, the Claimants' motion for summary judgment is denied and the Defendant's cross-motion for summary judgment dismissing the Claim is granted.

October 24, 2003
Albany, New York

Judge of the Court of Claims

[2] For purposes of this motion, and given the identity of the legal and factual issues raised by all Claimants, the parties and the Court agreed to use the contract documents between the Elmira Housing Authority and the Defendant to decide the instant motion.
[3] The Contracts were also submitted by the Defendant (see Walls Affidavit, Exhibits C, E and F), whose submission included an amended contract (id. at Exhibit D; see also Hirsch Affidavit, ¶ 19).
[4] In this Court's view, Claimant's arguments which would require the Court to review the impact of the subsidy on the "low-rent character" of the project would not be subject to the jurisdiction of this Court (see, Safety Group No. 194--New York State Sheet Metal Roofing & Air Conditioning Contractors Ass'n, Inc. v State of New York, 298 AD2d 785). This argument was apparently advanced, and rejected, in an Article 78 proceeding which sought to attack the appropriation to Auburn Housing Authority (see Hirsch Affidavit, ¶ 6).