Board of Educ., Lakeland Cent. School Dist. of Shrub Oak v. State Educ. Dept. of State of N.Y.

• Decision Date: 30 January 1986
• Citation: 498 N.Y.S.2d 516,116 A.D.2d 939
• Parties: , 30 Ed. Law Rep. 805 In the Matter of BOARD OF EDUCATION, LAKELAND CENTRAL SCHOOL DISTRICT OF SHRUB OAK, Appellant, v. STATE EDUCATION DEPARTMENT OF the STATE OF NEW YORK et al., Respondents.
• Court: New York Supreme Court — Appellate Division

Page 516

498 N.Y.S.2d 516

116 A.D.2d 939, 30 Ed. Law Rep. 805

In the Matter of BOARD OF EDUCATION, LAKELAND CENTRAL SCHOOL DISTRICT OF SHRUB OAK, Appellant, v. STATE EDUCATION DEPARTMENT OF the STATE OF NEW YORK et al Respondents.

Supreme Court, Appellate Division,

Third Department.

Jan. 30, 1986.

Steyer & Sirota (Paul Martinson, of counsel), White Plains, for appellant.

Robert Abrams, Atty. Gen. (Alan W. Rubenstein, of counsel), Albany, for respondents.

Before MAHONEY, P.J., and MAIN, YESAWICH, HARVEY and LEVINE, JJ.

HARVEY, Justice.

Appeal from a judgment of the Supreme Court at Special Term (Connor, J.), entered March 20, 1985 in Albany County, which, in a proceeding pursuant to CPLR article 78, granted respondents' motion to dismiss the petition for failure to state a cause of action.

In this CPLR article 78 proceeding, petitioner seeks to compel respondents to reimburse it for State aid funds which were withheld on a retroactive basis from its June 1984 State aid payment. Respondents moved for dismissal of the petition, asserting objections in point of law pursuant to CPLR 7804(f). As permitted by that provision, respondents did not submit an answer to the petition prior to their dismissal motion.

In their motion to dismiss, respondents asserted that article 78 relief is barred by operation of the four-month Statute of Limitations (CPLR 217). We, as did Special Term, disagree with that contention. The controlling date which commenced the running of the applicable Statute of Limitations was June 29, 1984, the date petitioner received its Board of Cooperative Educational Services (BOCES) State aid payment from which the decision was made. Here, as in Matter of Chemical Bank v. Regan 90 A.D.2d 581, 582, 456 N.Y.S.2d 132, affd. 58 N.Y.2d 809, 459 N.Y.S.2d 267, 445 N.E.2d 650, the right to commence this article 78 proceeding accrued when respondent Comptroller's audit decision became final and binding. That occurred when the deduction on the basis of the audit was actually made from petitioner's 1984 BOCES State aid payment (see, id. at 582, 456 N.Y.S.2d 132). Thus, the instant proceeding was timely commenced by service of the petition within four months thereafter (cf. Board of Educ. of Altmar-Parish-Williamstown Cent. School Dist. v. Ambach, 49 N.Y.2d 986, 987, 429 N.Y.S.2d 167, 406 N.E.2d 1061, cert. denied 449 U.S. 874, 101 S.Ct. 216, 66 L.Ed.2d 95).

The second objection in point of law is respondents' contention that the petition does not state a cause of action. Special Term granted the motion on that ground, determining that the first stated cause of action raised only constitutional issues in which petitioner had no standing and the second cause of action based upon equitable estoppel was not maintainable against a governmental agency. We agree as to the second cause of action, but disagree as to the first for the reason that more than a constitutional issue is raised.

Since respondents elected not to submit an answer prior to moving for dismissal, we are required to treat their motion as one directed only to the sufficiency of the pleadings in a manner similar to the determination of a CPLR 3211 motion (see, Matter of Nassau BOCES Cent. Council of Teachers v. Board of Coop. Educational Servs. of Nassau County, 63 N.Y.2d 100, 102-103, 480 N.Y.S.2d 190, 469 N.E.2d 511; McLaughlin, Practice Commentaries, McKinney's Cons. Laws of N.Y., Book 7B, CPLR C7804:7, p. 507). On such a motion, we are limited to examining the petition to determine whether it states a cause of action (Matter of De Paoli v. Board of Educ., Somers Cent. School Dist., 92 A.D.2d 894, 459 N.Y.S.2d 883; Matter of Stokes v. Connelie, 81 A.D.2d 988, 989, 440 N.Y.S.2d 78). In examining the sufficiency of the petition, we must accept the facts alleged therein as true and interpret them in the light most favorable to petitioner (Matter of Burke v. Carey, 82 A.D.2d 953, 954, 440 N.Y.S.2d 78; Matter of Stokes v. Connelie, supra, 81 A.D.2d p. 989, 440 N.Y.S.2d 78; Matter of Board of Educ., City School Dist., City of Mount Vernon v. Allen, 32 A.D.2d 985, 301 N.Y.S.2d 764). Only affidavits submitted by petitioner in support of his causes of action may be considered on a motion of this nature (Rovello v. Orofino Realty Co., 40 N.Y.2d 633, 635-636, 389 N.Y.S.2d 314, 357 N.E.2d 970; Matter of Burke v. Carey, supra, 954, 440 N.Y.S.2d 78). It is significant that although Special Term could have considered the matter as a motion for summary judgment upon proper (Rovello v. Orofino Realty Co., 40 N.Y.2d 633, 635-636, 389 N.Y.S.2d 314, 357 N.E.2d 970; Matter of Burke v. Carey, supra, 82 A.D.2d p. 954, 440 N.Y.S.2d 78). It is significant that although Special Term could have considered the matter as a motion for summary judgment upon proper notice to the parties (CPLR 3211), it did not do so.

Reviewing the petition, we find that petitioner has stated a claim for article 78 relief. The petition sets forth that, Commissioner of Education, pursuant to the provisions of Education Law § 1950(4)(d), to contract with its BOCES to provide certain instructional services for handicapped students. This program was later carried out by utilizing five resource rooms located within petitioner's school district and by instructional services provided by BOCES. From time to time, petitioner was billed for those instructional services and paid said bills in accordance with the BOCES contract approved by the Commissioner (Education Law § 1950(4)). Each participating component school district was granted State aid in accordance with a formula computed upon the basis of student participation. The statute imposed the requirement that a school district receiving BOCES State aid must provide the programs "on a cooperative basis" (Education Law § 1950).

The thrust of the petition is that petitioner fully complied with all aspects of law and regulations and received State aid as provided by law. Petitioner received a communication from the Commissioner with a copy of a letter dated April 2, 1979 and signed by the Comptroller, which revealed a policy not previously expressed. The letter stated that in performing audits, the Comptroller had discovered that in certain instances the sharing of BOCES programs was accomplished only on a token basis and that the practice would not be tolerated beyond July 1, 1979. The letter stated specifically that there would be forgiveness of any claim for retroactive disallowance of State aid payments made. The petition further alleges that in spite of said assurance by the Comptroller, respondent Department of Education disallowed $75,970.73 of the State aid previously given to petitioner for the 1976-1977 school year.

It is the contention of petitioner that it is entitled to a return of the disallowed State aid for three reasons. The first is that the decision of the Comptroller as to shared programs was illegal, arbitrary and capricious. The petition, including the exhibits attached thereto, states the contention that although conceivably only a token sharing of resource rooms might have taken place to a minor degree within petitioner's school district, the overall program was available to all of the component districts and the total program was shared by more than a token number of students. Secondly, it is contended that the Comptroller's decision represented a change of policy which could not be given retroactive effect. Third, if it were assumed that the change of policy was proper and did have a legal retroactive effect, petitioner claims that the Comptroller waived any right to the retroactively imposed disallowance.

Special Term dismissed the first cause of action, finding that it sought only relief for alleged violations of petitioner's constitutional rights by respondents. That court also dismissed petitioner's second cause of action, asserting that respondents should be estopped from recovering the BOCES State aid. While dismissal as to the second cause of action was proper, it was error with reference to the first cause of action set forth in the petition. Article 78 provides a remedy for actions of an administrative body which are illegal or arbitrary and capricious (Matter of Conley v. Ambach, 61 N.Y.2d 685, 687, 472 N.Y.S.2d 598, 460 N.E.2d 1083; Matter of Pell v. Board of Educ., 34 N.Y.2d 222, 231-234, 356 N.Y.S.2d 833, 313 N.E.2d 321; Matter of Johnson v. Ambach, 74 A.D.2d 986, 426 N.Y.S.2d 178; Siegel, N.Y. Prac § 557, at 774; McLaughlin, Practice Commentaries, McKinney's Cons. Laws of N.Y., Book 7B, CPLR C7801:3; CPLR C7801:4, pp. 30-31). "Whether administrative action violates applicable statutes and regulations is a question within the traditional competence of the courts to decide" (Matter of Dental Soc. of State of N.Y. v. Carey, 61 N.Y.2d 330, 335, 474 N.Y.S.2d 262, 462 N.E.2d 362).

The petition also claims error in respondents' recoupment predicated on a retroactive application of the Comptroller's policy. Recoupment by respondents may be improper (see, Matter of Daleview Nursing Home v. Axelrod, 62 N.Y.2d 30, 33-34, 475 N.Y.S.2d 826, 464 N.E.2d 130; see also, Hurlbut v. Whalen, 58 A.D.2d 311, 318-319, 396 N.Y.S.2d 518, lv. denied 43 N.Y.2d 643, 401 N.Y.S.2d 1028, 372 N.E.2d 803).

Finally, ...