AUBURN HOUSING AUTHORITY, ET AL v. THE STATE OF NEW YORK, #2003-028-574, Claim
No. 100815, Motion Nos. M-64662, CM-64755
AUBURN HOUSING AUTHORITY, ELMIRA HOUSING AUTHORITY, FULTON HOUSING AUTHORITY, GLENS FALLS HOUSING AUTHORITY, KINGSTON HOUSING AUTHORITY, LITTLE FALLS HOUSING AUTHORITY, NORTH TONAWANDA HOUSING AUTHORITY, PLATTSBURGH HOUSING AUTHORITY, POUGHKEEPSIE HOUSING AUTHORITY, ROCKVILLE CENTRE HOUSING AUTHORITY, SALAMANCA HOUSING AUTHORITY, TONAWANDA HOUSING AUTHORITY and WATERTOWN HOUSING AUTHORITY
AUBURN HOUSING AUTHORITY, ET AL
Footnote (claimant name)
THE STATE OF NEW YORK
Footnote (defendant name)
RICHARD E. SISE
HARRIS, CHESWORTH & O'BRIEN BY: Eugene Welch, Esq.
HON. ELIOT SPITZER, ATTORNEY GENERAL
BY: Michele M.Walls, Esq.Assistant Attorney General
October 24, 2003
See also (multicaptioned
The following papers were read on the parties' motions for summary
1) Notice of Motion and Supporting Affidavits of Eugene Welch, Esq., (Welch
Affidavit) with annexed Exhibits A-C and James A. Mirando (Mirando
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
with annexed Exhibits A-B, and Claimants' Memorandum of Law in
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
9) Letter from Assistant Attorney General Michael C. Rizzo, Esq. dated
10) Letter from Eugene Welch, Esq.
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
. 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
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,
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
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
. 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
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
October 24, 2003
HON. RICHARD E. SISE
Judge of the Court of Claims
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.
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
, ¶ 19).
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).