New York State Court of Claims

New York State Court of Claims

SMILEY v. PALISADES INTERSTATE PARK COMMISSION and THE STATE OF NEW YORK, #2009-032-100, Claim No. 110284, Motion Nos. M-75243, CM-75524


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:
Blatchly & Simonson, P.C.By: Jon A. Simonson, Esq.
Defendant’s attorney:
Hon. Andrew M. Cuomo, NYS Attorney GeneralBy: J. Gardner Ryan, Assistant Attorney General, Of Counsel
Third-party defendant’s attorney:

Signature date:
January 9, 2009

Official citation:

Appellate results:

See also (multicaptioned case)


The claimants in this action are descendants of Alfred F. Smiley and Ruth H. Smiley, and they possess certain leasehold interests in a residential cottage and parcel of property located within the Minnewaska State Park Preserve in Ulster County. In 1999, in connection with earlier litigation, claimants and defendant entered into a stipulation establishing the nature of those rights and the relative authority and responsibilities of the parties. This claim results from subsequent events that caused the cottage to be uninhabitable for a period of time.

The property in question was once part of the well-known Lake Minnewaska resort, which was established by members of the Smiley family in 1879. Features of the resort included two grand Victorian hotels, the Minnewaska Mountain (Cliff) House (225 rooms) and the Wildmere (350 rooms), as well as several cottages and a large number of other structures. In 1955, Alfred and Ruth Smiley turned control of the resort over to a closely held corporation, George H. Smiley and Son., Inc., while reserving certain rights to the property for themselves and for their descendants. Pursuant to two revised agreements, both executed in 1958 (Smiley Affidavit, Exhibits D, E), Alfred and Ruth Smiley retained, among other things, the right to occupy portions of two cottages on the property, Wildmere Cottage and Wayside Cottage, and the right to occupy and improve at their own expense five other parcels of land[1]. The agreements also required the Corporation “to pay all charges for maintenance, repairs and utilities” for Wildmere and Wayside Cottages (id. Exhibit E, ¶ 2[g]) and to “make any utilities which are at its hotels available” to the Smileys, charging them only the additional cost, if they chose to develop any of the five unimproved parcels of land (id. ¶ 2[h]). The agreements further provided that, upon their deaths, the descendants of Alfred and Ruth Smiley would be entitled to occupy a portion of Wildmere Cottage and the five other parcels for a period of 99 years, on a $1 per parcel, per year lease. During this tenancy, the Corporation was “to provide adequate utilities at cost to it of same” (id. ¶ 3).

Subsequent to the transfer, the popularity of the resort began to decline. In 1972, Cliff House was closed, and it was destroyed by fire some years later. Also in 1972, large portions of the property were sold to the State. In 1979, Wildmere Hotel was closed and also subsequently lost to a fire. All remaining lands of the resort property were acquired by the State between 1985 and 1987 through a series of eminent domain proceedings and purchases. All transfers of property to the State were made subject to the terms and conditions of the 1958 agreements. Alfred Smiley died in 1975, and Ruth Smiley died in 1988, at which time the descendants rights came into being.

The State initially refused to acknowledge the rights of the Smiley descendants, asserting that the 1958 agreements had violated the Rule Against Perpetuities. The matter was litigated in both Supreme Court, Ulster Co. (Index No. 92-2667) and the Court of Claims (Claim No. 83159), and the State’s argument regarding the rule against perpetuities was rejected in the Court of Claims (Payne v Palisades Interstate Park Commission, 204 AD2d 787 [3d Dept 1994]). The litigation in Ulster County Supreme Court resulted in a ruling that the 1958 agreements did not give the descendants’ the right to build new improvements on any of the land (Payne v Palisades Interstate Park Commission, 226 AD2d 902 [3d Dept 1996]).

Both lawsuits were ultimately resolved by a Stipulation of Settlement and Discontinuance, which was “So Ordered” on January 29, 1999 (Smiley Affidavit, Exhibit H). This stipulation expressly continues the provisions of the 1958 agreements, except to the extent that they conflict with the terms of the stipulation. It notes that as long as the Smiley descendants maintain the lease, their rights will continue until 2087. Pursuant to the stipulation, the Smiley descendants received some monetary compensation and gave up a number of the rights that they had received under the 1958 agreements. They retained, however, the right to use and occupy all of Wildmere Cottage, rather than just a portion, “together with an area of land for Claimants to operate and maintain at their own expense a septic system to support Wildmere Cottage and its appurtenances.” They also retained one of the original additional five parcels of land (Parcel B), which when added to the parcel on which the cottage is located was referred to as the “Wildmere Parcel.” The stipulation also dealt anew with the issue of utilities, in light of the many changes that had occurred since the 1958 agreements were executed.

After the hotels closed and the State took over the balance of the property in 1987, the wreckage of the hotels was removed, along with the supporting infrastructure, such as water and sewage systems, that had serviced the hotels and outlying buildings. Electrical service continued to be available, and the State installed a new water line and pump to bring water to Wildmere Cottage, half of which was occupied by the Smileys and half of which housed the park offices for a while. Plans were also made for the construction of a new sewage system. The first system was attempted in 1995 but had to be abandoned when bedrock was encountered at shallow depths, making the design unworkable. A second septic system, utilizing a “raised bed” leech field, was designed, and its construction began in 1997. It was this second system to which reference is made in the 1999 stipulation of settlement and discontinuance. Both parties acknowledge that at the time the stipulation was signed, this septic system had not been completely installed and consequently Wildmere Cottage was uninhabitable (Smiley Affidavit, ¶ 10; Ryan Reply Affirmation, ¶ 5). The stipulation’s provisions regarding utilities are as follows:

3. Septic System: Defendants have partially constructed a septic system upon the Wildmere Parcel designed to be suitable for the private residential use of Wildmere Cottage as a four bedroom single family unit[2]. Defendants will pay for the cost of completing the septic system in an amount not to exceed $7,000. Defendants represent that appropriate materials were used and will continue to be used in accordance with the plans and specifications approved by claimant’s licensed engineer (Smiley Affidavit, Exhibit H, ¶ 3).

4. Waterline and Pump. (a) Claimants have the right to draw water from the pump house for their use at Wildmere Cottage and shall have the right and obligation to maintain the electric lines necessary for such purpose (id. ¶ 4).

5. Electrical and Telephone Service. Claimants agree that the Wildmere Cottage is currently furnished with electricity and telephone service and that Defendants have no further obligations in connection with such service, except that Defendants agree they will not take any actions, and will not authorize third-parties to take any actions, which shall interfere with Claimants’ electric and telephone service to Wildmere Parcel during the term of the leasehold. . . . (id. ¶ 5).
The stipulation further provided:
All repairs maintenance, upkeep and costs of utilities, including the septic system, waterline, and pump house for the Wildmere Parcel and its appurtenances shall be the sole responsibility and expense of Claimants. Claimants shall have the right to access any facilities reasonably required to perform maintenance or repairs upon approval by Defendants which shall not be unreasonably withheld (id. ¶ 6[a]).[3]

The leech field septic system that was under construction in 1999, and to which reference was made in the stipulation, was never completed. It was ultimately determined that that system would be insufficient to contain all of the wastes from Wildmere Cottage, the park offices that had by now been moved from the cottage to a temporary location a few hundred yards away, and a planned permanent structure that was to house both the park office and a comfort station to be used by visitors to the park. It was proposed, therefore, that a single, larger septic system be designed to accommodate all of the structures. Revised plans were drawn up for this system, which was to include its own aerobic waste treatment facility, and the project was added to the master plan for the Park.
Because some time, possibly years, would be needed for that portion of the master plan to be financed and implemented, an interim waste system was developed for use by both Wildmere Cottage and the temporary park offices. This system consisted of a new 2,000 gallon waste holding tank to be used by the cottage which was connected to a large 10,000 gallon waste holding tank, which would later be incorporated into the permanent system. The contract for installation of this interim system was awarded by the State in June 2001, and installation was completed in September 2001. Subsequently, problems were discovered with ground water seeping into the tanks, and these problems were not resolved until August 2004, but it appears that the system was able to function nevertheless. This dual holding-tank waste management system is currently in use at the cottage, and one aspect of the instant claim is the question of whether it constitutes a permanent and adequate septic service for Wildmere Cottage and, if not, who bears the responsibility for installing a permanent system.[4]

In November 2001, an ice storm felled the poles and cables that brought electricity and telephone service from State Route 44/55 to the top of the mountain where the Wildmere Parcel is located. A temporary transmission line was erected by the State to bring service to the location, but that line also failed. Portable generators were used for a period of time and then the park offices were moved from the Lake Minnewaska area to a location near the park entrance where electrical service had not been disturbed. The possibility of underground power lines was explored by the State but eventually, in April 2006, new poles and cables were strung and power was restored to the Lake Minnewaska area[5]. This restoration of electrical service was done at the State’s expense. Because electrical service was needed to pump water and heat the premises, Wildmere Cottage was uninhabitable for a period of approximately four and one-half years following the November 2001 ice storm.[6]

The instant claim, which was filed and served in December 2004 (before power was restored to the Cottage), alleges that defendant breached its duty “to keep the septic and electrical services available to service the residential use of the Wildmere Parcel” (Claim, ¶3[i]). Four separate causes of action are set forth in the claim:
  1. breach of contract, measured by the diminution of the value of the Wildmere Parcel by each day the septic and utility services were “withheld”;
  2. de facto taking and appropriation of claimants’ leasehold rights;
  1. breach of the Warranty of Habitability set forth in Real Property Law[7] § 235-b; and
  1. contempt arising from the State’s failure and refusal to comply with the terms of the stipulation which “continues to be willful and is intended to frustrate and prevent” claimants’ use of Wildmere as a residence.

Damages in the amount of $5,908,000 are claimed for each of the first three causes of action, and no specific sum is attached to the cause of action for contempt.

Claimants now move for summary judgment in their favor on the first cause of action for breach of contract or, alternatively, on the second cause of action for de facto appropriation. As damages, they seek compensation for the period of time that Wildmere Cottage was uninhabitable, which they measure from January 1999, when the stipulation was signed, to April 2006, when the electrical power was restored. In addition, claimants seek damages in the sum necessary to pay for installing a proper, permanent septic system. Defendant has cross moved for dismissal of the second, third, and fourth causes of action (de facto appropriation, breach of the Warranty of Habitability, and contempt). With respect to the cause of action for breach of contract, defendant takes the position that unresolved questions of fact preclude summary judgment, specifically the issues of whether the current septic system is adequate and whether it was the responsibility of claimants or the State to repair the electrical transmission lines.
Before consideration of the primary cause of action for breach of contract, defendant’s cross motion to dismiss the second, third and fourth causes of action will be addressed.

De Facto

A de facto appropriation, or inverse condemnation, occurs when “the government has intruded onto the citizen's property and interfered with the owner's property rights to such a degree that the conduct amounts to a constitutional taking requiring the government to purchase the property from the owner” (O'Brien v City of Syracuse, 54 NY2d 353, 357 [1981]). To recover, the property owner must establish that there was either “a physical entry by the condemnor, a physical ouster of the owner, a legal interference with the physical use, possession or enjoyment of the property or a legal interference with the owner's power of disposition of the property.” (City of Buffalo v Clement Co., 28 NY2d 241, 255 [1971]). Here, claimants allege that their physical use, possession and enjoyment of the property was prevented by the State’s long delay in restoring electrical and septic services to Wildmere Cottage.

In situations in which de facto takings have been recognized, the injured party has been able to prove either “a direct invasion of the condemnee's property” or a “direct legal restraint on its use” (id. at 253). The Court of Appeals has stated that “to hold that there can be a de facto appropriation absent a physical invasion or direct legal restraint would, needless to say, be to do violence to a workable rule of law. It is our view that only the most obvious injustice compels such a result” (id.) In this context, the term “direct legal restraint” is applied when the governmental entity having condemnation power enacts laws, regulations or ordinances that “by their own force and effect, deprive owners of property or materially affect its beneficial use and free enjoyment” (id. at 256; see also Horizon Adirondack Corp. v State of New York, 88 Misc 2d 619 [Ct Cl 1976] and cases discussed therein). A well known example of a de facto taking is found in the Matter of Keystone Assoc.v Moerdler (19 NY2d 78 [1966]) and related cases, where the Legislature enacted a statute, later held to be unconstitutional, that prevented the owner of the Old Metropolitan Opera House from developing his property.

In the instant case, the State’s actions and its alleged failure to restore electrical power to claimants’ property may be considered breach of a contractual duty, breach of a proprietary duty owed by a landlord or, possibly, some failure of the State’s police power, and in theory the State could be liable for a breach of such a duty. But delay or inefficiency in fulfilling a contractual, common law or statutory duty does not and cannot equate to a direct or affirmative legal restraint being placed on claimants’ ability to use and enjoy their property. Consequently, there can be no viable cause of action for de facto appropriation in the situation presented here.

Warranty of Habitability

Section 235-b of the Real Property Law provides, in relevant part, as follows:
1. In every written or oral lease or rental agreement for residential premises the landlord or lessor shall be deemed to covenant and warrant that the premises so leased or rented and all areas used in connection therewith in common with other tenants or residents are fit for human habitation and for the uses reasonably intended by the parties and that the occupants of such premises shall not be subjected to any conditions which would be dangerous, hazardous or detrimental to their life, health or safety.
Since claimants do not seek to recover damages for any period of time prior to execution of the 1999 stipulation, it is that document which must be considered in determining whether there can be a viable cause of action under this provision. In appropriate circumstances, a stipulation between the parties has been recognized as a “lease or rental agreement” to which the warranty of habitability applies (Callahan v Reid, 119 Misc 2d 190 [NYC Civ Ct 1983]). It is not clear, however, that the extensive stipulation entered into by these parties, which governs their rights and responsibilities with respect to a very unusual property and continues a lease relationship established decades earlier by different parties, would qualify. Neither party has sought to address this issue.

Nor has either party addressed the critical question of whether a warranty of habitability would be implicit in any sort of rental or lease agreement that relates to property that is, at the time of the agreement, uninhabitable. In the instant case, both parties acknowledge that in January 1999, when the stipulation was “So Ordered,” Wildmere Cottage was uninhabitable, apparently because there was no functioning sewer system. This situation was not rectified until September 2001. Can a landlord be liable for violating the warranty of habitability when the property being rented or leased is known by all parties to be uninhabitable? At least one case suggests that where tenants take possession of a property “as is” and the necessary services to make it habitable are not present at the time, they may not thereafter rely on the warranty of habitability (RST Corp. v Meyerhoff, 4 AD3d 148 [1st Dept 2004], lv denied 2 NY3d 708 [2004]).

Finally, the measure of damages for breach of the warranty of habitability is limited to “the difference between the fair market value of the premises if they had been as warranted, as measured by the rent reserved under the lease, and the value of the premises during the period of the breach” (Park W. Mgt. Corp. v Mitchell, 47 NY2d 316, 329 [1979], cert denied, 444 US 992 [1979]). The statute does not contemplate any compensation for recovery for loss or diminution in value of personal property, personal injuries, pain and suffering or other types of consequential damages (Richardson v Simone, 275 AD2d 576 [3d Dept 2000]; Elkman v Southgate Owners Corp., 233 AD2d 104 [1st Dept 1996]). Here, the only “rent” paid for the Wildmere premises was $1.00, or possibly $2.00 if both parcels are considered. Claimant’s demand for damages in the amount of $5,908,000 bears no rational relationship to the asserted claim for breach of warranty. Consequently, the Court concludes that claimants do not have a viable cause of action based on an alleged breach of the warranty of habitability.


Claimants’ counsel identifies article 19 of the Judiciary Law as the authority under which the cause of action for contempt is stated (Simonson Affidavit, ¶ 11). He further acknowledges that the warning language required by Judiciary Law §756 for civil contempt proceedings is not contained in the claim and informally moves to amend the claim to add such language. To support a finding of contempt, the court order that is alleged to have been disobeyed must express an unequivocal mandate, allowing for no uncertainty as to whether there was wilful disobedience of the court’s direction (Judiciary Law § 753[A][1]; Gerelli Ins. Agency, Inc. v Gerelli, 23 AD3d 341 [2d Dept 2005], quoting Matter of Department of Envtl. Protection of City of N.Y. v Department of Envtl. Conservation of State of N.Y., 70 NY2d 233, 240 [1987]). Here, the central question in the breach of contract cause of action is whether the State had a duty to perform certain acts and whether it can be liable for any failure to do so, and the answer to that question is anything but “unequivocal.” To the extent that claimants seek any damages beyond those that would be available to them under the breach of contract claim, this effort to impose a sanction for contempt is little more than an attempt to obtain punitive damages, something that is not recoverable against the State (Sharapata v Town of Islip, 56 NY2d 332, 339 [1982]; Harvey v State of New York, 281 AD2d 846, 848-849 [3d Dept 2001]).

Breach of Contract

The parties do not dispute that the circumstances presented here can give rise to a viable cause of action for breach of contract. They disagree, however, about whether the matter is ripe for summary judgment at this time.

Summary judgment is a drastic remedy which should not be granted unless it is clear that there are no triable issues of fact (Andre v Pomeroy, 35 NY2d 361, 364 [1974]). The Court’s function in a motion for summary judgment is not to resolve issues of fact, but to determine whether issues of fact exist (Barr v County of Albany, 50 NY2d 247 [1980]). The proponent of a motion for summary judgment must make a prima facie entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact (Alvarez v Prospect Hosp., 68 NY2d 320 [1986]). Once this showing has been made, the burden shifts to the opponent of the motion to produce evidentiary proof, in admissible form, sufficient to establish the existence of material issues of fact which require a trial of the action (id.; Winegrad v New York University Med. Center, 64 NY2d 851 [1985]; Zuckerman v City of New York, 49 NY2d 557, 562 [1980]). The evidence must be viewed in the light most favorable to the opponent of the motion, and that party should be given every favorable inference (see McKinnon v Bell Sec., 268 AD2d 220 [1st Dept 2000]).

In the instant claim, there are too many unanswered questions for the Court to decide this matter on the submissions now before it. It is true that some of these open questions could be resolved at an inquest, which claimants suggest, or at trial of damages. These include determining the specific time period(s) when Wildmere Cottage was uninhabitable; identifying the days or weeks within those periods when claimants would have made use of Wildmere Cottage as a residence if it were habitable; and whether there was any compensable damage caused to the property because of a lack of sewer or electrical service even during times when claimants would not have been in residence.

Other questions, however, are more substantive and relate directly to the issue of contract interpretation and, therefore, liability. Further documentation and, most likely, testimony of involved witnesses will be necessary to resolve some conflicts and uncertainties within the language of the relevant documents. One example would be the requirement in the 1958 agreements that the Corporation (later the State) “provide adequate utilities at cost”and the possibly contradictory statement in paragraph 5 of the stipulation that the Cottage is furnished with electrical and phone service and defendant has “no further obligations” in that regard. Does this mean that defendant has no further obligation as long as the service continues to be provided? Or is it that defendant had no further obligation, not even to make sure the services continued? “The fundamental, neutral precept of contract interpretation is that agreements are construed in accord with the parties' intent,” and when the intention of the parties cannot be determined from the plain language of the agreement, then extrinsic evidence of their intent may be considered (Greenfield v Philles Records, 98 NY2d 562, 569 [2002]).

Similarly, there is a conflict between a literal reading between the language of paragraph 6 of the stipulation, which appears to place responsibility for all repairs on claimants, and the contrary fact that several years later the State paid for and carried out replacement of the electrical service to claimants’ cottage following the ice storm. The parties’ intentions with respect to a contract can often be revealed or confirmed by their subsequent actions (Young v Zwack, Inc., 98 AD2d 913 [3d Dept 1983]), and where those subsequent actions appear to directly conflict with the ordinary meaning of a contract’s terms, “it is safer not to grant final judgment on the . . . . affidavits alone” but to explore the matter at trial and allow for an assessment of the witnesses’ credibility (Kuehne & Nagel, Inc. v Cargo Export Corp., 86 AD2d 501 [1st Dept 1982]).

Furthermore, it is undisputed that the provision regarding septic service had to be altered because the septic system was not completed. The decision to make a change appears to have been mutual, since both parties determined that the design was inadequate (see, Gjone Affidavit, ¶¶ 8-10), but there is no probative evidence of the nature of any alternative agreement reached between them. In sum, on the record now before the Court, this portion of the claim is not ready for adjudication.

Defendant’s cross motion is granted with respect to the second, third and fourth causes of action for de facto appropriation, breach of the warranty of habitability, and contempt, and those causes of action are dismissed. Claimant’s motion for summary judgment in their favor on the remaining cause of action, for breach of contract, is denied.

January 9, 2009
Albany, New York

Judge of the Court of Claims

The following papers were read on claimants’ motion for summary judgment in their favor and on defendant’s cross motion to dismiss the claim’s 2nd, 3rd, 4th, and part of the 1st causes of action.

1. Notice of Motion and Supporting Affidavits of Alfred Brennan Smiley, John Tarolli, and Roger Gjone, with annexed Exhibits;

2. Notice of Cross Motion and Supporting Affirmation of J. Gardner Ryan, AAG and Affidavit of Michael Tesik, with annexed Exhibits;

3. Reply Affidavit of Alfred Brennan Smiley and Affidavit of Jon A. Simonson, Esq., with annexed Exhibits;

4. Affirmation of J. Gardner Ryan, AAG.

Filed papers: Claim

[1].Alfred and Ruth Smiley also retained, for life, the rights to hospitality at the resort hotels, occupancy of certain rooms in the hotels, use of any guest rooms for themselves or guests, meals for themselves and guests at the main dining room, and use of all natural resources of the property in any manner so long as it did not cause injury to the property. Interestingly, they were also required, if their health permitted, to spend at least part of the summer at the resort each year “so that they will be seen by other guests in and about the properties” (Smiley Affidavit, Exhibit E, ¶ 1).
[2].This reference is puzzling, because elsewhere Wildmere Cottage is uniformly described elsewhere as a seven bedroom, two-family dwelling and the same stipulation gives claimants the right to occupy the entire cottage.
[3].An exception to this was noted whereby the State would be liable “for the cost of any repairs with respect to the Septic System and the waterline installed by Defendants or its agents, required as a result of Defendants’ deviation from the specifications referred to herein” (id. ¶ 6[b]). The State’s responsibility to repair the waterline if it froze due to its placement at a depth of less than four feet was noted as an example.
[4].In an affidavit submitted in support of claimants’ motion, Roger Gjone, a licensed Professional Engineer, states that a holding tank system such as this is prohibited for long term use in year-round residences and, in his opinion, an aerobic septic system must be installed for a permanent solution to the problem (Gjone Affidavit). Michael A. Tesik, a Professional Engineer employed by the State, states that, upon consultation with representatives of the Ulster County Health Department, he has been informed that there is no prohibition for use of a holding tank system like this “on an interim basis” (Tesik Affidavit).
[5].Although there are references in the Smiley affidavit to electrical service being restored in July 2006, defendant asserts and Smiley agrees that service was restored in April 2006.
[6].In one document (Ryan, Supporting Affirmation ¶ 26) the date of the ice storm is given as November 16 and 17, 2002. Elsewhere, the year is said to be 2001.
[7].The claim mistakenly contains a reference to RPAPL rather than Real Property Law.