New York State Court of Claims

New York State Court of Claims

TRUMP v. STATE OF NEW YORK, #2009-015-186, Claim No. 115001, Motion No. M-75976


Synopsis


Claim alleging breach of contract and unjust enrichment was dismissed pursuant to CPLR 3211 (1) 7. Claim failed to set forth the terms of the contract which were allegedly violated and no facts were alleged which would permit the inference that the implied covenant of good faith and fair dealings was violated.

Case Information

UID:
2009-015-186
Claimant(s):
TRUMP ON THE OCEAN, LLC
Claimant short name:
TRUMP
Footnote (claimant name) :

Defendant(s):
STATE OF NEW YORK
Footnote (defendant name) :

Third-party claimant(s):

Third-party defendant(s):

Claim number(s):
115001
Motion number(s):
M-75976
Cross-motion number(s):

Judge:
FRANCIS T. COLLINS
Claimant’s attorney:
Jaspan Schlesinger, LLPBy: Steven R. Schlesinger, Esquire
Defendant’s attorney:
Honorable Andrew M. Cuomo, Attorney General
By: Michele M. Walls, EsquireAssistant Attorney General
Third-party defendant’s attorney:

Signature date:
July 14, 2009
City:
Saratoga Springs
Comments:

Official citation:

Appellate results:

See also (multicaptioned case)



Decision

Defendant moves for dismissal of the instant Claim pursuant to CPLR 3211 (a) (2), (7) and (8) on the grounds that the Claim fails to satisfy the pleading requirements of Court of Claims Act § 11 (b) and fails to state a cause of action. Paragraph 3 of the Claim states, in part, the following:
"This claim arises from the acts or omissions of the defendant. Details of said acts or omissions are more fully set forth in the Complaint annexed hereto as Exhibit "A", which is incorporated herein by reference. This action is brought against the State of New York based upon the State's conduct, acting through its Office of Parks, Recreation and Historic Preservation and other State agencies based upon a lease between claimant and the State entitled "Development and Operation of a New Boardwalk Restaurant at Jones Beach State Park, Wantagh, New York, Lease #X000682" (the "Lease"). The State has unreasonably delayed claimant in its performance of the Lease causing claimant to suffer damages in the form of lost profits, increased design costs and increased construction costs . . . "

The Claim sets forth an accrual date of March 4, 2008 “at the latest” and incorporates by reference a detailed Complaint consisting of 122 paragraphs (defendant's Exhibit 1). The facts underlying the Claim are summarized in the Complaint (defendant's Exhibit 1, Complaint annexed to Claim ¶ 2) as follows:
“In essence, State Parks entered into a Lease which it has made impossible to perform because it and other State agencies completely control and have manipulated the [variance] approval process. A review of the facts contained herein reveal a concerted effort by a new Commissioner to set claimant up so that she would be in a position to make radical changes or even terminate the Lease entered into by the previous administration, a goal which has now been advanced with the assistance of other agencies of the DOS and the Board causing claimant to suffer damages in the form of lost profits, increased design costs and increased construction costs, which damages continue to accrue but which are believed to be in an amount no less than Five Hundred Million ($500,000,000.00).”

The Request For Proposals (RFP) relative to the ground lease required that the proposed development plan “demonstrate responsiveness and sensitivity to enhancement of the scenic, historic, natural and environmental resources of the Park” but imposed no limitations on the size of the facility to be constructed (defendant’s Exhibit 1, Complaint annexed to Claim, ¶ 9). Claimant’s response to the RFP provided for re-use of the existing basement, an additional 46,0000 square feet above ground and a final building height of 41 feet. By letter dated May 21, 2004 claimant was advised that its proposal had been accepted and that the next step in the process was execution of a “Letter of Intent” which was to “describe any contingencies that would affect signature of the Lease” (defendant’s Exhibit 1, Complaint annexed to Claim, ¶ 15). Design plans were submitted and on May 25, 2005 State Parks issued a formal Letter of Intent, subject to design criteria, which limited the height of the building to between 19 and 22 feet above the boardwalk and restricted the building footprint to 36,000 square feet (defendant’s Exhibit 1, Complaint annexed to Claim, ¶ 20). According to the allegations of the Complaint annexed to the Claim the existing basement, which was intended for use as kitchen and support facilities, was determined not to be sufficient and the building was to be shifted landward so that it would be located outside the Coastal Erosion Hazard Zone. Claimant alleges that State Parks acted as the owner and lessor of the proposed facility as well as the Lead Agency for State Environmental Quality Review Act (“SEQRA”) purposes. As such, State Parks hired Cashin Associates to prepare an environmental assessment based upon the design plans submitted by the claimant. Claimant alleges that the environmental assessment prepared by Cashin made no mention of the need for a variance from any section of the New York State Uniform Fire Prevention and Building Code Act (Executive Law§ 370 et seq. ) or that review by the New York Department of State (“DOS”) was required. Rather, as alleged in the Claim:
“State Parks represented to claimant that, because the Project is on state land, State Parks served as its own building department/building code officer with respect to the State Building and Fire Prevention Code and was responsible for issuing building permits and approvals for the Project, as well as Fire Marshal. Various reviews of the plans were conducted by State Parks with the comment that they were generally in conformance with the Code” (defendant's Exhibit 1, Complaint annexed to Claim, ¶ 27).

The Lease was executed on September 25, 2006, amended on November 22, 2006 and approved by the New York State Attorney General and Office of the State Comptroller on December 1, 2006 (defendant’s Exhibit 1, Complaint annexed to Claim, ¶ 34). The Complaint attached to the Claim alleges the Lease required that claimant "commence construction of the Capital Improvements upon execution and approval of this lease by all necessary parties and to complete construction within thirty-six (36) months thereafter" (defendant's Exhibit 1, Complaint annexed to Claim, ¶ 36). Claimant alleges that the Lease gave State Parks the right to terminate the Lease if construction was not completed by the deadline provided therein.

Claimant further alleges that on January 1, 2007 Eliot Spitzer replaced George Pataki as Governor and subsequently appointed Carol Ash to replace Bernadette Castro as Commissioner of State Parks. Claimant submitted to State Parks further plans prepared by its architect for review and on January 30, 2007 a meeting was held with Commissioner Ash in which she demanded that a 200 seat restaurant be relocated to the ocean front side of the building and that the project be LEED certified.[1] The claimant alleges that despite its acceding to these demands, State Parks continued to delay routine processing of plan reviews until June 14, 2007 when a letter agreement memorializing the change with respect to LEED certification was executed (defendant’s Exhibit 1, Complaint annexed to Claim, ¶ 47).

Subsequent to execution of the letter agreement with regard to LEED certification, State Parks sent a letter establishing June 14, 2010 as the date for completion of construction pursuant to the Lease provisions requiring that construction be complete within thirty-six months of final Lease approval. At the heart of the Claim is the following allegation:
“Based on its review of the plans State Parks knew or should have known that a variance would be required from another agency, i.e., DOS and that if the variance was denied, the Project could not be completed by June 14, 2010. Nevertheless, knowing that claimant would be induced to spend money to enter into construction contracts, start its marketing and sales efforts and enter into catering event contracts, State Parks failed to disclose that it was not in control of the approval process” (defendant’s Exhibit 1, Complaint annexed to Claim, ¶ 50).

Following execution of the June 14, 2007 letter agreement claimant commenced certain demolition activities and entered into construction contracts and catering agreements (defendant's Exhibit 1, Complaint annexed to Claim, ¶ 51, ¶ 53). Claimant alleges that it was not until September 12, 2007 that it was first advised by State Parks that the basement area was required to comply with ASCE 24, a design standard which incorporates regulations associated with the Federal Flood Insurance Program adopted into the State Building Code (defendant's Exhibit 1, Complaint annexed to Claim, ¶ 54). Claimant alleges that “after reviewing plans containing a basement for over three years and after failing to disclose the Department of State Division of Code Enforcement as a reviewing agency, and representing it was its own permitting officer, State Parks determined that it must seek a variance from the Board of Review, thereby further delaying the progress of construction” (defendant’s Exhibit 1, Complaint annexed to Claim, ¶ 58). On November 23, 2007, State Parks, on behalf of itself and the claimant, applied to the Department of State, Division of Code Enforcement Regional Board of Review, for a variance from various provisions of the Building Code including those pertaining to the ASCE 24 requirements. Claimant alleges that State Parks failed to send a Deputy Commissioner to the hearing and that the State Parks’ employees who did attend failed to make strong statements in support of the variance (defendant’s Exhibit 1, Complaint annexed to Claim, ¶ 64). The variance application was denied and, subsequent to the hearing, claimant alleges that it specifically requested that State Parks show support at the next variance hearing by sending a Deputy Commissioner, which it refused to do.

State Parks submitted a second application for a variance on January 14, 2008 in which supplemental information regarding horizontal flood doors was provided. Claimant appeared at the hearing held on March 4, 2008 together with its cadre of experts but, according to the allegations in the Complaint, State Parks sent only a single mid-level administrator. Following the testimony of witnesses and public comment, Board members together with DOS staff deliberated and then read into the record its decision that “The Claimant has not carried its burden of proving that granting the variance requested would not substantially adversely effect provisions for health, safety and security” (defendant’s Exhibit 1, Complaint annexed to Claim, ¶ 99).

In opposition to defendant’s motion, claimant submits the memorandum decision of the Honorable Ira B. Warshawsky which found that the decision of the Board denying claimant's application for a variance was arbitrary and capricious. The parties have advised the Court that an appeal from the judgment determining the article 78 proceeding is pending.

As a preliminary matter, the Court will first address the defendant’s contention that this Court lacks jurisdiction to hear a claim which would require review of an administrative determination. The law is clear that "[a]s a court of limited jurisdiction, the Court of Claims has no jurisdiction to grant strictly equitable relief" (Madura v State of New York, 12 AD3d 759, 760 [2004], lv denied 4 NY3d 704 [2005], citing Ozanam Hall of Queens Nursing Home v State of New York, 241 AD2d 670, 671 [1997] and Psaty v Duryea, 306 NY 413 [1954]). The threshold question in determining the subject matter jurisdiction of the Court of Claims is "[w]hether the essential nature of the claim is to recover money, or whether the monetary relief is incidental to the primary claim" (Matter of Gross v Perales, 72 NY2d 231, 236 [1988]; see also Guy v State of New York, 18 AD3d 936 [2005]). "The second inquiry, regardless of how a claimant categorizes a claim, is whether the claim would require review of an administrative agency's determination – which the Court of Claims has no subject matter jurisdiction to entertain . . . as review of such determinations are properly brought only in Supreme Court in a CPLR article 78 proceeding" (City of New York v State of New York, 46 AD3d 1168, 1169 [2007], lv denied 10 NY3d 705 [2008]; citing Hoffman v State of New York, 42 AD3d 641, 642 [2007] and Matter of Scherbyn v Wayne-Finger Lakes Bd. of Coop. Educ. Servs., 77 NY2d 753 [1991]; see also Matter of Salahuddin v Connell, 53 AD3d 898 [2008]; Sidoti v State of New York, 115 AD2d 202, 203 [1985]; Schaffer v Evans, 86 AD2d 708, 709 [1982], affd 57 NY2d 992 [1982]). Inasmuch as the claimant has already sought review of the administrative determination denying the variance, and succeeded in having it set aside as arbitrary and capricious, this Court is not required to review an administrative determination in the first instance in order to render an award of damages (see Signature Health Ctr., LLC v State of New York, 23 Misc 3d 1103 [A] [2009]; Ouziel v State of New York, 174 Misc 2d 900, 905 [1997]). In fact, the Court understands the Claim, as elucidated by the attached Complaint, as alleging a failure by State Parks to both disclose the need for a variance and to adequately support its application for a variance, resulting in money damages due to delays and inefficiencies. Such allegations are grounded in contract and, accordingly, no jurisdictional impediment precludes hearing the Claim on this basis.

The Court will next address defendant’s contention that the Claim does not meet the pleading requirements of Court of Claims Act § 11(b). The law is clear that the State’s waiver of immunity under Section 8 of the Court of Claims Act is contingent upon claimant’s compliance with certain specific conditions set forth in article II of the Court of Claims Act (see Lepkowski v State of New York, 1 NY3d 201, 206 [2003]). “Because suits against the State are allowed only by the State’s waiver of sovereign immunity and in derogation of the common law, statutory requirements conditioning suit must be strictly construed” (Long v State of New York, 7 NY3d 269, 276 [2006] quoting Lichtenstein v State of New York, 93 NY2d 911, 913 [1999] [other citations omitted]). Section 11 (b) of the Court of Claims Act places five specific substantive conditions upon the State's waiver of sovereign immunity by requiring the Claim to specify (1)"the time when" the claim arose; (2) the "place where such claim arose"; (3) "the nature of [the claim]"; (4) "the items of damage or injuries claimed to have been sustained" and (5) "the total sum claimed."

Here the first two criteria above were met in that the Claim sets forth the time when and the place where the Claim arose (cf. Wilson v State of New York, 61 AD3d 1367 [2009]). The Claim alleges an accrual date of March 4, 2008 the date of the second variance hearing. Moreover, the dates and location of the events underlying the Claim are set forth in significant detail in the Complaint annexed to the Claim.

With respect to the requirement that the nature of the Claim be set forth, the statement must be "made with 'sufficient definiteness to enable the State to be able to investigate the claim promptly and to ascertain its liability under the circumstances. The statement must be specific enough so as not to mislead, deceive or prejudice the rights of the State. In short, substantial compliance with section 11 is what is required' " Wharton v City University of New York, 287 AD2d 559 [2001], quoting Grumet v State of New York, 256 AD2d 441, 442 [1998]).

In the Court’s view, sufficient facts and allegations were set forth to enable the defendant to investigate the Claim promptly and ascertain its liability under the circumstances. The Claim alleges by way of background the specific demands which were made upon the claimant to redesign the facility and obtain LEED certification. To all of these demands the claimant “capitulated” and claimant finally received State Parks permission to proceed (defendant’s Exhibit 1, Complaint annexed to Claim, ¶ 47, 51). Claimant commenced demolition of the existing foundation and was notified on September 12, 2007 in response to its application for a piling permit that the basement of the facility was required to comply with ASCE standards (defendant’s Exhibit 1, Complaint annexed to Claim, ¶ 54). Applications for a variance submitted by State Parks on claimant’s behalf were denied (defendant’s Exhibit 1, Complaint annexed to Claim, ¶ 62). As set forth above, the crux of the Claim is the alleged failure of State Parks to assist the claimant in any meaningful way to obtain the variance necessary to meet its obligations under the Lease agreement. These alleged facts adequately state the nature of the Claim to satisfy the requirements of Court of Claims Act § 11 (b).

Whether these facts state a cause of action is another matter. On a motion to dismiss a Claim pursuant to CPLR 3211 (a) (7) the court is required to “accept the facts as alleged in the [Claim] as true, accord [Claimant] the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory” (Leon v Martinez, 84 NY2d 83, 87-88 [1994]; see also Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d 314, 326 [2002]). The motion must be denied if from the four corners of the Claim " ‘factual allegations are discerned which taken together manifest any cause of action cognizable at law’" (511 West 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d 144, 152 [2002] [citations omitted]).

Two causes of action are alleged in the Claim. The first is a cause of action alleging that the “[d]efendant breached its obligations under the Lease to perform pursuant to the covenant of good faith and fair dealing and has thereby deprived claimant of the profits it would have received from the Lease and caused claimant to incur additional costs and expenses and expend sums of money for no purpose" (defendant’s Exhibit 1, Complaint annexed to Claim, ¶ 115). The second cause of action alleges that “defendant breached the Lease in that it actively delayed, hampered, interfered with, retarded and impeded claimant’s performance and completion of the construction work required under the Lease” (Id. at ¶ 118). Claimant alleges that “[b]y reason of the said breaches of contract by defendant, the completion of the capital improvement . . .was and will be unreasonably delayed” (Id. at ¶ 120). As the success or failure of the claimant's first cause of action for breach of the implied covenant of good faith and fair dealing is dependant upon the viability of the claimant's second cause of action for breach of contract, the breach of contract cause of action will be addressed first.

The law is well settled that “[i]n order to plead a breach of contract cause of action, a complaint must allege the provisions of the contract upon which the claim is based” (Maldonado v Olympia Mech. Piping & Heating Corp., 8 AD3d 348, 350 [2004]). Failure to allege in nonconclusory language the essential terms of the contract upon which liability is predicated may result in dismissal for failure to state a cause of action (Matter of Sud v Sud, 211 AD2d 423, 424 [1995]; see also Peters v Accurate Bldg. Inspectors Div. of Ubell Enters., Inc., 29 AD3d 972 [2006]; Atkinson v Mobil Oil Corp., 205 AD2d 719 [1994]). While claimant alleges as a basis for both its first and second causes of action that State Parks unreasonably delayed claimant in its performance of the Lease causing claimant to suffer damages, it bases this allegation solely on the alleged failure of State Parks to provide meaningful assistance in obtaining a variance for the project. Absent an allegation in the Claim that State Parks was contractually obligated to obtain the required variance or otherwise assist the claimant in doing so, the allegation that State Parks failed to adequately assist the claimant in procuring the variance fails to state a breach of contract cause of action. As the essential terms of the contract which claimant alleges were breached were not set forth in the Claim, it fails to state a cause of action and claimant’s second cause of action for breach of contract must therefore be dismissed.

Under New York law, all contracts imply a covenant of good faith and fair dealing (511 West 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d at 153). The covenant “embraces a pledge that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract” (id. [internal quotation marks and citations omitted]). It is viewed as encompassing “promises which a reasonable person in the position of the promisee would be justified in understanding were included” (id). However, “the duties of good faith and fair dealing do not imply obligations ‘inconsistent with other terms of the Contractual relationship’ ” (id., quoting Murphy v American Home Prods. Corp., 58 NY2d 293, 304 [1983]). Rather, such a covenant will only be implied where it “is in aid and furtherance of other terms of the contractual relationship” (Murphy v American Home Prods. Corp., 58 NY2d 293, 304 [1983]). Here, as stated above, claimant alleges no provision of the contract which would obligate State Parks to obtain or assist claimant in obtaining a variance. To imply such a provision would obligate State Parks to perform a task not otherwise required by the express terms of the contract. For example, in Rooney v Slomowitz (11 AD3d 864 [2004]) the Appellate Division, Third Department, held that no obligation of good faith and fair dealing could be implied to require the seller of property to obtain government approvals for a roadway the buyer was contractually obligated to build. The Court stated “[h]aving concluded that [seller] had no contractual obligation to obtain such approvals...we find that the alleged conduct does not support a claim for breach of the covenant of good faith and fair dealing” (Id. at 867). This conclusion is in accord with the principle that a cause of action for breach of the covenant of good faith and fair dealing must be dismissed where it is merely a substitute for a non-viable breach of contract claim (Triton Partners v Prudential Sec., 301 AD2d 411, 411 [2003], citing Murphy v American Home Prods. Corp., 58 NY2d 293, 304 [1983];Fellion v Darling, 14 AD3d 904 [2005]). Likewise, a cause of action for breach of the implied covenant of good faith and fair dealing is properly dismissed where it is duplicative of the breach of contract claim in that both claims arise from the same facts (Logan Advisors, LLC v Patriarch Partners, LLC, 63 AD3d 440 [2009]; Cerberus Intl., Ltd. v Banc Tec, Inc., 16 AD3d 126 [2005]; Parker E. 67th Assoc. v Minister, Elders & Deacons of Refm. Prot. Dutch Church of City of N.Y., 301 AD2d 453 [2003], lv denied 100 NY2d 502 [2003]; Empire State Bldg. Assoc. v Trump, 247 AD2d 214 [1998], lv denied 92 NY2d 885 [1998]). Here, claimant’s failure to allege a breach of any specific provision of the Lease obligating State Parks to obtain a variance or otherwise assist the claimant in doing so requires that the first cause of action alleging a breach of the implied covenant of good faith and fair dealing be dismissed.

Finally, even were the Court to find that a covenant of good faith and fair dealing should be implied, claimant has failed to allege any facts to support such a claim. Claimant does not deny that a variance was a legal requirement and specifically sets forth that State Parks applied to secure the required variance(s) on two separate occasions. Neither the denial of the applications by a separate and distinct government entity nor the failure to assign an individual of sufficient stature, in the claimant's opinion, to attend the variance hearings come close to stating a cause of action for breach of an implied covenant of good faith and fair dealing.

Based on the foregoing the defendant’s motion to dismiss the Claim for failure to state a cause of action pursuant to CPLR 3211 (a) (7) is granted and the Claim is dismissed.



July 14, 2009
Saratoga Springs, New York

HON. FRANCIS T. COLLINS
Judge of the Court of Claims


The Court considered the following papers:
  1. Notice of motion dated December 3, 2008;
  2. Affirmation of Michele M. Walls dated December 3, 2009 with exhibits;
  3. Memorandum of law of Michele M. Walls received in Clerk's Office December 4, 2008;
  4. Affirmation of Steven R. Schlesinger dated March 11, 2009 with exhibit;
  5. Memorandum of law of Steven R. Schlesinger dated March 11, 2009;
  6. Affirmation of Michele M. Walls dated April 13, 2009.

[1]. According to the allegations in the Complaint, the lease required only LEED compliance, a less rigorous standard (defendant’s Exhibit 1, Complaint annexed to Claim, ¶ 42).