New York State Court of Claims

New York State Court of Claims
TRUMP v. THE STATE OF NEW YORK, # 2010-015-116, Claim No. 115001, Motion No. M-77170

Synopsis

Claimant's motion to reargue prior order granting defendant's motion to dismiss claim was denied. Defendant in a breach of contract action alleging the failure to issue a building variance may not be held liable where it is not alleged that an express term of the contract was breached and the State did what it was required to do under the law.

Case information

UID: 2010-015-116
Claimant(s): TRUMP ON THE OCEAN, LLC.,
Claimant short name: TRUMP
Footnote (claimant name) :
Defendant(s): THE STATE OF NEW YORK
Footnote (defendant name) :
Third-party claimant(s):
Third-party defendant(s):
Claim number(s): 115001
Motion number(s): M-77170
Cross-motion number(s):
Judge: FRANCIS T. COLLINS
Claimant's attorney: Jaspan Schlesinger, LLP
By: Steven R. Schlesinger, Esquire and Laurel R. Kretzing, Esquire
Defendant's attorney: Honorable Andrew M. Cuomo, Attorney General
By: Michele M. Walls, Esquire
Assistant Attorney General
Third-party defendant's attorney:
Signature date: March 22, 2010
City: Saratoga Springs
Comments:
Official citation:
Appellate results:
See also (multicaptioned case)

Decision

Claimant, Trump On The Ocean, LLC, moves pursuant to CPLR 2221 (d) and (e) to reargue and renew this Court's prior Decision and Order dismissing the claim for failure to state a cause of action and pursuant to CPLR 3025 for leave to amend the claim. For the reasons which follow, the motion is denied.

As set forth at length in the prior Decision and Order (Trump on the Ocean, LLC v State of New York, Ct Cl, July 14, 2009 [Claim No. 115001, Motion No. M-75976, UID # 2009-015-186] Collins, J. unreported), this claim arises out of a lease (Lease) between the claimant and the State of New York acting by and through the Office of Parks, Recreation and Historic Preservation (State Parks) for the development and operation of a new boardwalk restaurant at Jones Beach State Park in Wantagh, New York. The claim and the complaint incorporated by reference therein seek damages for lost profits and increased design and construction costs stemming from the alleged misconduct of State Parks in the variance approval process. Claimant alleges that this conduct was motivated by changes in the administration, which led to unreasonable demands for changes in the previously approved plans for the design of the structure. The Lease was executed on September 25, 2006, amended on November 22, 2006, and approved by the New York State Attorney General's Office and the State Comptroller on December 1, 2006 (claimant's Exhibit C, complaint annexed to claim, 31, 34). (1)

Following the claimant's alleged capitulation to certain demands by Carol Ash, the newly appointed Commissioner of State Parks, claimant contends that it commenced demolition activities and entered into construction contracts and catering agreements (claimant's Exhibit C, complaint annexed to claim, 51, 53). According to the allegations in the complaint annexed to the claim, the overall height and foot print of the building required that most of the restaurant's kitchen facilities be located in the basement (claimant's Exhibit C, complaint annexed to claim, 19). Claimant alleges that it was not until September 12, 2007 that it was first advised by State Parks that the basement of the facility was required to comply with ASCE 24, a design standard incorporating FEMA regulations, associated with the Federal Flood Insurance Program, which are adopted into the applicable New York State Fire Prevention and Building Code (Building Code) (claimant's Exhibit C, complaint annexed to claim, 54, 55). The complaint 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 that 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" (claimant's Exhibit C, complaint annexed to claim, 58). Thereafter State Parks, on behalf of itself and the claimant, applied for a variance from various provisions of the Building Code relating to the construction of an occupied basement in a flood zone (claimant's Exhibit C, complaint annexed to claim, 59). The application was submitted to the Department of State (DOS), which referred it to the appropriate Regional Board of Review (the "Board") for a hearing (claimant's Exhibit C, complaint annexed to claim, 61). The initial hearing was held in Westchester County on December 11, 2007 and resulted in a denial of the application for insufficient evidence (claimant's Exhibit C, complaint annexed to claim, 62, 66). A second application for the variance was submitted and a hearing was held on Long Island on March 4, 2008 (claimant's Exhibit C, complaint annexed to claim, 70, 77). It is alleged that various members of the Board recused themselves, which claimant attributes to manipulation by DOS at the behest of State Parks to insure that the second application would be denied (claimant's Exhibit C, complaint annexed to claim, 83). Claimant appeared at the hearing with its team of experts but alleges that "[d]espite claimant's request that State Parks actively support the application by the appearance and participation by a Deputy or Executive Commissioner capable of addressing the public policy issues, State Parks again refused to show the appropriate level of support for the project and appeared by a single mid-level administrator" (claimant's Exhibit C, complaint annexed to claim, 85). Following the testimony of witnesses and public comment, claimant alleges that the Board denied the application, stating "[t]he Claimant has not carried its burden of proving that granting the variance requested would not substantially adversely effect provisions for health, safety and security" (claimant's Exhibit C, complaint annexed to claim, 99).

Claimant sought review of the determination of the Board pursuant to CPLR article 78, which resulted in the entry of a judgment dated December 1, 2008 setting aside the determination of the Board as arbitrary and capricious. The Court has been advised that an appeal from the judgment is pending.

In the prior Decision and Order, the Claim was dismissed on the ground that it failed to state a cause of action. Accepting all of the facts alleged in the claim as true and according the claimant the benefit of every favorable inference (see Leon v Martinez, 84 NY2d 83, 87-88 [1984]), this Court concluded that claimant's failure to allege the particular provisions of the contract which it claimed were breached by the defendant required dismissal of the breach of contract cause of action (claimant's second cause of action) (citing Maldonado v Olympia Mech. Piping & Heating Corp., 8 AD3d 348, 350 [2004]; Matter of Sud v Sud, 211 AD2d 423, 424 [1995]; Peters v Accurate Bldg. Inspectors Div. of Ubell Enters., Inc., 29 AD3d 972 [2006]; Atkinson v Mobile Oil Corp., 205 AD2d 719 [1994]). The Court stated in this regard:

"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."

With respect to the cause of action for a breach of the implied covenant of good faith and fair dealing (claimant's first cause of action) the Court held that because such a covenant "is in aid and furtherance of other terms of the contractual relationship", and that to imply such a provision would obligate State Parks to perform a task not otherwise required by the express terms of the contract (Murphy v American Home Prods. Corp., 58 NY2d 293, 304 [1983]). The Court also stated:

"[E]ven 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."

A motion to reargue is addressed to the sound discretion of the Court and requires the moving party to demonstrate that the Court overlooked or misapprehended matters of fact or misapplied existing law to the facts presented (see, CPLR 2221 [d] [2]; Peak v Northway Travel Trailers, 260 AD2d 840 [1999]; Spa Realty Assoc. v Springs Assoc., 213 AD2d 781 [1995]). Such a motion does not serve as a vehicle to permit the unsuccessful party to argue once again the very questions previously decided (see, Foley v Roche, 68 AD2d 558, 567 [1979], lv denied 56 NY2d 507 [1982]). Claimant contends that reargument is appropriate, in part, because the thrust of the defendant's dismissal motion was the purported failure to comply with the pleading requirements of Court of Claims Act 11 (b) and not the failure to state a cause of action under more traditional pleading analysis, which claimant's opposition papers did not directly address (claimant's memorandum of law, p. 22). Though defendant's motion, which was made pursuant to CPLR 3211 (a) (2), (7) and (8), was by no means a model of clarity, it did sufficiently set forth the grounds on which this Court's prior Decision and Order dismissing the claim was based (see claimant's Exhibit D, defendant's Memorandum of Law, pp. 5-6).

Moreover, the Court finds that the arguments claimant now makes lack merit. In support of its motion seeking reargument, claimant argues that the Court overlooked the key fact that the State is not only the owner of the property on which the structure was to be erected, but its own code enforcement official. It argues, therefore, that in unreasonably withholding its approval of the plans, the defendant breached both the express provisions of the Lease as well as the implied covenant of good faith and fair dealing.

Notwithstanding that neither the claim nor the complaint incorporated by reference therein alleged the breach of any specific provision of the Lease, claimant now submits, for the first time, a copy of the Lease (claimant's Exhibit A) and a proposed amended complaint in which the following provision is relied upon:

"12. Construction by Lessee

a) Lessee shall not erect any structures, undertake any work that affects the exterior of the Leased Premises, including grounds and parking areas, or undertake any work for which a building permit would be required under the State Building and Fire Prevention Code affecting the Leased Premises and/or Jones Beach State Park, or install any fixtures in or on the Leased Premises (other than trade fixtures, removable without injury to the Leased Premises) without the prior written consent of State Parks. Any construction, improvement, alteration, modification, addition, repair or replacement shall become the property of State Parks upon final acceptance and Lessee shall have no right to change or remove the same either during the term or at the expiration thereof without the consent of State Parks.

b) State Parks shall make all due efforts to respond to requests from Lessee within ten business days. Approval by State Parks shall not be unreasonably withheld. In the event any construction, improvement, alteration, modification, addition, repair or replacement is made or done without such consent, as soon as reasonably possible upon notice from State Parks given at any time during the term of this Lease, Lessee shall remove or change any improvements made or done by it without State Parks' consent."

Claimant also relies upon State Building Code 103.3, which states, according to the claimant, the following:

"This code is not intended to prevent the use of any material or to prohibit any design or method of construction not specifically prescribed by this code, provided that any such alternative has been approved by the code enforcement official or the State Fire Prevention and Building Code Council. An alternative material, design or method of construction may only be approved when it is determined to comply with the intent of the provisions of this code and be at least equivalent of that prescribed in this code in quality, strength, effectiveness, fire resistance, durability and safety" (claimant's memorandum of law, p. 26-27, quoting New York State Building Code 103.3).

In this Court's view, neither the express language of the Lease nor the above-quoted section of the Building Code authorized State Parks to issue a permit for construction of a building which fails to conform with the requirements of the Code. As claimant's counsel acknowledges, a variance is required for any structure with a basement in a flood zone (see e.g. claimant's counsel's reply memorandum of law, p. 3), including one owned by the State containing a basement in which 35 to 85 persons are expected to work.

While claimant argues that State Parks is its own code enforcement official authorized to issue a permit, the applicable regulations leave no doubt that compliance with the Building Code or the issuance of a variance is no less required for State-owned buildings than those which are privately owned. Indeed, the regulatory scheme embodied in 19 NYCRR Part 1204 establishes procedures to assure conformance by State agencies with the applicable provisions of the Building Code (see e.g. 19 NYCRR 1204.5 [a]; 1204.6 [d]; 1204.7; 1204.12). Section 1204.7 [c] states in no uncertain terms that "[a] permit shall not be issued unless the proposed work is determined to be in conformance with the requirements of the Uniform Code. . ." Thus, the fact that State Parks is a "construction-permitting agency" as defined by 19 NYCRR 1204.3 (e) forms no basis for excusing compliance with the Code. The applicable regulations require the submission of a petition for a variance to the DOS, which has the authority in routine cases to decide the issue on the papers submitted rather than referring the petition to a Board of Review (19 NYCRR 1205.6). Non-routine cases are properly referred to a Board of Review for determination (19 NYCRR 1205.4).

With this background it is clear that claimant's reliance on the Lease language to support its breach of contract cause of action is misplaced. The language relied upon, stating that "Lessee shall not erect any structures . . . or undertake any work for which a building permit would be required . . . without the prior written consent of State Parks" (claimant's Exhibit A, Lease, 12 [a]) and that "[a]pproval by State Parks shall not be unreasonably withheld"(claimant's Exhibit A, Lease, 12 [b]) has no bearing or effect on the issuance of a permit. While State Parks as a construction-permitting agency could issue a permit where construction is in conformity with the Building Code, the applicable regulations specifically prohibit issuance of a permit "unless the proposed work is determined to be in conformance with the requirements of the Uniform Code (19 NYCRR 1204.7 [c]). State Parks' alleged refusal to issue a permit or allow the construction of a building without the necessary variances was therefore required by law. The defendant does not incur liability in either contract or tort for doing that which is required by law. Consequently, to the extent claimant seeks to reargue the prior motion and amend its claim to premise its causes of action on paragraph "12" of the Lease, both the motion to reargue and the proposed amendment are meritless as a matter of law.

With respect to the cause of action for a breach of the implied covenant of good faith and fair dealing, claimant has proffered nothing which changes this Court's prior determination. The covenant of good faith and fair dealing will not be implied where to do so would be inconsistent with the terms of the contract and not in furtherance thereof (Murphy v American Home Prods. Corp., supra 58 NY2d at 304). Here, claimant does not allege in either the claim or the complaint annexed thereto that State Parks was obligated to issue or obtain a variance. To the contrary, the terms of the Lease, which was submitted in support of the claimant's instant motion, make clear that it was the claimant who was required to "procure at its own expense all permits, licenses or other approvals necessary for the performance of this Lease" (claimant's Exhibit A, 38). Thus, no cause of action is stated with respect to a breach of the implied covenant of good faith and fair dealing because to do so would be at odds with the plain language of the Lease and is not in furtherance thereof.

Moreover, as stated in this Court's prior Decision and Order, "[n]either 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."

Turning to that branch of claimant's motion seeking renewal, such a motion must "be based upon new facts not offered on the prior motion that would change the prior determination or shall demonstrate that there has been a change in the law that would change the prior determination" and "contain reasonable justification for the failure to present such facts on the prior motion" (CPLR 2221[e]; see also 2 N. St. Corp. v Getty Saugerties Corp., 68 AD3d 1392 [2009]; Tibbits v Verizon N.Y., Inc., 40 AD3d 1300, 1302-1303 [2007]; Wahl v Grippen, 305 AD2d 707 [2003]; Cippitelli v County of Schenectady, 307 AD2d 658 [2003]).

In support of claimant's motion to renew it submits the Decision and Order of Judge Warshawsky dated August 25, 2009 granting claimant's motion for a preliminary injunction enjoining the State from collecting rent or declaring claimant in default on a performance bond, and tolling the time period to substantially complete the project until a building permit is issued (Trump on the Ocean, LLC v Carol Ash, 24 Misc 3d 1241 [A] [2009]). Claimant argues that this Decision and Order establishes an abandonment of the project by the State, which the defendant is collaterally estopped from relitigating in the Court of Claims.

In Ryan v New York Tel. Co. (62 NY2d 494 [1984]) the Court of Appeals set forth the principles of collateral estoppel as follows:

"The doctrine of collateral estoppel . . . precludes a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party or those in privity, whether or not the tribunals or causes of action are the same. . . We have recently reaffirmed that collateral estoppel allows 'the determination of an issue of fact or law raised in a subsequent action by reference to a previous judgment on a different cause of action in which the same issue was necessarily raised and decided' (Gramatan Home Investors Corp. v Lopez, 46 NY2d 481, 485). What is controlling is the identity of the issue which has necessarily been decided in the prior action or proceeding.

Of course, the issue must have been material to the first action or proceeding and essential to the decision rendered therein . . . and it must be the point actually to be determined in the second action or proceeding such that 'a different judgment in the second would destroy or impair rights or interests established by the first' . . ." (Id. at 500-501).

In granting the claimant's application for a preliminary injunction enjoining the State from declaring claimant in default on a performance bond, the Court applied "the long-standing doctrine of contra-preferendum" thereby resolving in claimant's favor an ambiguity it found existed between sections 10 and 11 of the Lease regarding the required effective date of the bond. The Court concluded that the claimant was entitled to cancel the capital improvement bond until the defendants issued a building permit for the sinking of pilings. After reaching this conclusion, the Court stated the following:

"Lastly, it would be hard to imagine the equities being balanced more favorably toward Plaintiff. Rather than proceed to honor their obligations under the agreement they have acted to the detriment not only of the citizenry who now have an unsightly crater at the Central Mall at Jones Beach, instead of a quality restaurant and catering facility, but to all the taxpayers in the State of New York. Despite the constant wailing about the State's declining tax revenues and increasing obligations, Defendants have prevented the creation of a $24,000,000 capital improvement on State Parks land, at no cost to themselves, and seem intent on denying the coffers of the State the share of the gross proceeds of the facility to which the lease entitles them" (id.).

Based upon this language, the claimant argues that the defendant is estopped from relitigating the issue of whether or not the State unreasonably withheld its approval of the project and is acting to abandon the Lease (see claimant's counsel's affirmation in support, p. 5 and reply memorandum of law, p. 4).

Claimant also argues in its reply memorandum of law that the Supreme Court's determination applying the force majeure clause of the Lease to excuse its continued performance thereunder evidences the State's intention to abandon and delay the project. This provision permitted an extension of the period for doing an act that was prevented or delayed by, inter alia, "unforeseen restrictive governmental laws, regulation, acts or omissions" (claimant's Exhibit A, 37).

Neither the Supreme Court's statement that "Defendants have prevented the creation of a $24,000,000 capital improvement on State Parks land" nor its application of the force majeure clause necessarily decided any of the issues in the instant breach of contract action (see Ryan v New York Tel. Co. supra). This Court's sole focus in deciding the defendant's dismissal motion was whether, assuming all the facts alleged in the claim as true, the claim failed to state a cause of action. This issue was not decided in the Supreme Court action granting claimant's motion for a preliminary injunction. Additionally, since the issues raised on a motion to dismiss for failure to state a cause of action are questions of law, the doctrine of collateral estoppel is inapplicable (Matter of Oneida Indian Nation of N.Y. v Pifer, 43 AD3d 579 [2007] [the doctrine of collateral estoppel is inapplicable to questions of law). To the extent the Supreme Court appeared to indicate that State Parks had the power to issue a variance but unreasonably failed to do so, this too is an issue of law for which application of the doctrine of collateral estoppel would be inappropriate (id.) and, in any event, such a determination was unnecessary to its decision granting claimant's motion for a preliminary injunction. Moreover, "a general prerequisite to invocation of either res judicata or collateral estoppel is the existence of a final judgment" (Ott v Barash, 109 AD2d 254 , 262 [1985]). While the Supreme Court found the equities weighed in favor of granting the claimant's application for a preliminary injunction, the determination was preliminary to a final judgment and has no collateral estoppel effect.

Finally, as stated earlier herein, a construction permitting agency such as State Parks is not authorized to issue a construction permit "unless the proposed work is determined to be in conformance with the requirements of the Uniform Code" (19 NYCRR 1204.7 [c], 1204.3 [d]). In his decision of October 21, 2008 Judge Warshawsky did not find that either the Department of State or the Board of Review lacked jurisdiction of the matter at issue. Rather, the Court simply found that

"the Board's conclusion . . . that plaintiff had not sustained his burden of proving that granting the requested variance would not substantially adversely effect provisions for health, safety and security is contrary to the uncontradicted evidence in the record and lacked a rational basis. . ." (claimant's Exhibit E).

Judge Warshawsky's decision is impliedly consistent with this Court's view that applicable regulations prohibit a construction permitting agency from issuing a permit for a project which fails to comply with the Building Code and requires, in such circumstances, that a variance be obtained from the appropriate regional board of review (19 NYCRR 1205.4). Apart from dicta, there is nothing in Judge Warshawsky's Decision and Order dated August 25, 2009, which references this Court's prior decision dismissing the instant claim, that would support claimant's motion to renew and /or require a different result.

Accordingly, claimant's motion for reargument and renewal and to amend the claim is denied.

March 22, 2010

Saratoga Springs, New York

FRANCIS T. COLLINS

Judge of the Court of Claims

The Court considered the following papers:

  1. Notice of motion dated September 10, 2009;
  2. Affirmation of Steven R. Schlesinger dated September 10, 2009 with exhibits;
  3. Memorandum of Law of Steven R. Schlesinger and Laurel R. Kretzing dated September 10, 2009;
  4. Affirmation of Michele M. Walls dated November 4, 2009 with exhibits;
  5. Memorandum of Law of Michele M. Walls dated November 4, 2009;
  6. Reply affirmation of Steven R. Schlesinger dated November 18, 2009 with exhibits;
  7. Memorandum of Law of Steven R. Schlesinger and Laurel R. Kretzing dated November 18, 2009.

1. Although construction was initially required to be completed within 36 months following approval of the Lease by all necessary parties, this date was subsequently extended to June 14, 2010.