Albion Indus. Center v. Town of Albion (Orleans County)

• Decision Date: 19 May 1978
• Citation: 62 A.D.2d 478,405 N.Y.S.2d 521
• Parties: ALBION INDUSTRIAL CENTER, a partnership consisting of Carl Petronio, Jr., Carl Petronio, Sr., Matt Pecorella, Jr., and John Petronio, Appellants, v. The TOWN OF ALBION (ORLEANS COUNTY, New York) and Maynard Reed, et al., Individually and as Members constituting the Town Board of said Town of Albion, Respondents.
• Court: New York Supreme Court — Appellate Division

Page 521

405 N.Y.S.2d 521

62 A.D.2d 478

ALBION INDUSTRIAL CENTER, a partnership consisting of Carl

Petronio, Jr., Carl Petronio, Sr., Matt Pecorella, Jr., and John Petronio, Appellants, v. The TOWN OF ALBION (ORLEANS COUNTY, New York) and Maynard

Reed, et al., Individually and as Members

constituting the Town Board of said Town

of Albion, Respondents.

Supreme Court, Appellate Division,Fourth Department.

May 19, 1978.

Fix, Spindelman, Turk & Himelein, Rochester, for appellants (John Schwartz, Rochester, of counsel).

Church & Church, Albion, for respondents (Nixon, Hargrave, Devans & Doyle, David Lascell, Rochester, of counsel).

Before MARSH, P. J., and SIMONS, DILLON, HANCOCK and DENMAN, JJ.

DILLON, Justice:

This is an action for money damages arising from an alleged breach by the defendants of a contract, entitled "Lease Agreement", entered into between the parties in August, 1974. The agreement provided that the plaintiff would erect a building upon its five-acre parcel of property in the Town of Albion, New York, and that the land and building would then be leased to the town for use as a town garage and offices under conditions described as a "net lease". ¹ The term of the agreement was five years and the rental was fixed at $1,000 per month for the first six months and $3,875 per month for the remaining 54 months. The town was given the option to purchase the premises after the first day of the sixth month of the term but prior to the commencement of the seventh month thereof, for the sum of $141,200. It was further provided that if the town failed to exercise its option to purchase prior to the seventh month of the demised term, the option would expire. No provision was made for renewal at the expiration of the original term.

After the execution of the lease, plaintiff retained an architect to design a building which would be suitable for the town's purposes, began preparation of the building site, and ordered and received various materials to be used in the construction. On December 31, 1974 the town clerk notified the plaintiff that the town did not intend to proceed under the terms of the agreement. After notice to the town that it regarded the lease agreement as breached, the plaintiff filed notices of claim with the town board and thereafter commenced this action for damages.

Special Term granted the town's motion to dismiss the complaint made pursuant to CPLR 3211 (subd. (a), par. 7), upon the ground that the agreement was made in violation of the competitive bidding statute (General Municipal Law, § 103). Upon reargument, the court again dismissed the complaint and plaintiff appeals from both orders.

Section 103 of the General Municipal Law provides, inter alia, that "all contracts for public work involving an expenditure of more than thirty-five hundred dollars and all purchase contracts involving an expenditure of more than fifteen hundred dollars, shall be awarded * * * to the lowest responsible bidder." In their respective briefs, the parties largely have ignored that portion of the statute relating to "contracts for public work" and, instead, have focused upon the question of whether the agreement is a "purchase contract" within the contemplation of the statute.

An agreement for the purchase by or rental to a municipality of real property is not subject to the bidding requirements of section 103 of the General Municipal Law (Davies v. Mayor, etc., City of New York, 83 N.Y. 207). The state comptroller consistently has opined that the term "purchase contracts" in section 103 pertains to purchase of materials, supplies, equipment or apparatus and should be read as not relating to real property (19 Opns.St.Comp., 1963, p. 120, 19 Opns.St.Comp., 1963, p. 280, 11 Opns.St.Comp., 1955, p. 39).

If a political subdivision determines that it needs a particular property for a public use, any requirement that the property "can only be obtained through the forms prescribed by the (bidding) statutes" would necessarily mean that the property "cannot be obtained at all" for it " cannot become the subject of a competitive offer to be consummated by a written contract with the person making the most favorable offer" (Harlem Gas-Light Co. v. City of N. Y., 33 N.Y. 309, 329). Statutes which establish forms of procedure for public bodies "are only obligatory to the extent, and in cases to which they are by their terms applicable." (Matter of Petition of Dugro, 50 N.Y. 513, 517.) Moreover, each parcel of land and each building has its unique character which distinguishes it from all others such that to impose upon the municipality the obligation to receive competitive bids on similar or comparable premises would be inappropriate and illogical (see, 1A Antieau, Municipal Corporation Law, § 10.28). Thus, if the document under review may fairly be regarded as a lease of private property for public use, and nothing more, it would not fall within the proscription of section 103.

In asserting its position that the agreement is void for failing to adhere to the competitive bidding requirement, the defendant strays from that issue in relying upon Marine Midland Trust Co. of So. N. Y. v. Village of Waverly (42 Misc.2d 704, 248 N.Y.S.2d 729, affd 21 A.D.2d 753, 251 N.Y.S.2d 937) and an opinion of the state comptroller (25 Opns.St.Comp., 1969, p. 114), both of which related to purported leases which were in fact installment purchase agreements in violation of the Local Finance Law. The comptroller's comment, however, is relevant here.

"The municipality has several options available if it wishes the owner to construct * * * a structure on his land. The municipality can lease or purchase the land and have the building constructed thereon for the municipality. The construction contract, however, is a public works contract * * * and subject to competitive bidding (Gen.Mun.L. § 103). * * * Secondly, the owner can privately construct the building on his land and lease it to the municipality. This arrangement must be a true lease for a reasonable sum." (25 Opns.St.Comp., 1969, p. 115, emphasis in original.)

The options recited by the comptroller were available to the town in fulfilling its need for the construction of a garage and offices. It chose to have the plaintiff construct the building on plaintiff's land, and since the agreement has the obvious potential of serving as a device to circumvent the competitive bidding statute, it must be carefully examined. In that regard, it is not dispositive that the parties have labeled the document a "Lease Agreement". We must look to the substance of the agreement and the rights it confers and the obligations it imposes "in order to determine the true nature of the transaction and the relationship of the parties" (Feder v. Caliguira, 8 N.Y.2d 400, 404, 208 N.Y.S.2d 970, 973, 171 N.E.2d 316, 318; Matter of New York World-Telgram Corp. v. McGoldrick, 298 N.Y. 11, 18, 80 N.E.2d 61, 63).

Additionally, in construing the document, we must be mindful of the strong policy considerations underlying the...