Goodstein Const. Corp. v. Gliedman

• Decision Date: 06 May 1986
• Citation: 117 A.D.2d 170,502 N.Y.S.2d 136
• Parties: In the Matter of the Application of GOODSTEIN CONSTRUCTION CORP., Dic-Underhill Industries and Milstein Properties, a Joint Venture, Petitioner-Respondent, For a Judgment pursuant to Article 78 of the CPLR v. Anthony GLIEDMAN, as Commissioner of The New York City Department of Housing Preservation and Development and The City of New York, Respondents-Appellants.
• Court: New York Supreme Court — Appellate Division

Page 136

502 N.Y.S.2d 136

117 A.D.2d 170

In the Matter of the Application of GOODSTEIN CONSTRUCTION CORP., Dic-Underhill Industries and Milstein Properties, a Joint Venture, Petitioner-Respondent For a Judgment pursuant to Article 78 of the CPLR v. Anthony GLIEDMAN, as Commissioner of The New York City Department of Housing Preservation and Development and The City of New York, Respondents-Appellants.

Supreme Court, Appellate Division First Department.

May 6, 1986.

June A. Witterschein, of counsel (Jeffrey Schanback and Leonard Koerner with her on brief; Frederick A.O. Schwarz, Jr.), for respondents-appellants.

Charles G. Moerdler, of counsel (Mark E. Klein and Elizabeth A. Mullins with him on brief; Stroock & Stroock & Lavan), for petitioner-respondent.

Before SANDLER, J.P., and ROSS, FEIN, KASSAL and ELLERIN, JJ.

Interlocutory order of the Supreme Court, New York County (Stanley S. Ostrau, J.), entered on January 4, 1985 which granted petitioner's application to the extent of directing a trial on the question of whether appellants acted arbitrarily in making a determination to de-designate petitioner as developer of the Washington Street Renewal Area, reversed, on the law, without costs, to strike the direction for a trial and dismiss the petition.

Interlocutory Order, Supreme Court, New York County (Stanley Ostrau, J.), entered on January 4, 1985, reversed, on the law, without costs and without disbursements, to strike the direction for a trial and dismiss the petition.

SANDLER, J.P., concurs in an opinion in which ROSS, J., concurs.

FEIN, J., concurs in a separate opinion in which ROSS, J., concurs.

ELLERIN, J., dissents in an opinion in which KASSAL, J., concurs.

SANDLER, Justice (concurring).

In this Article 78 proceeding, petitioner-respondent, a joint venture, seeks annulment, and certain ancillary relief, of a determination that de-designated it as developer of Sites 5 B and 5 C in the Washington Street Urban Renewal Area ("WSURA"). Respondents-appellants, Anthony Gliedman, Commissioner of the New York City Department of Housing Preservation and Development ("HPD"), and the City of New York ("City"), appeal by permission of Special Term from an interlocutory order of the Supreme Court, New York County (Stanley S. Ostrau, J.) entered January 4, 1985, that granted the petition to the extent of directing a trial as to whether the challenged determination was arbitrary and capricious, and as to whether it represented a good faith judgment.

The stated reason for de-designating petitioner-respondent as developer of the two sites was a governmental decision to change the land uses of the vacant city sites in question from those originally intended at the time petitioner-respondent was designated as a developer, and a further decision that the development of the areas in question in accordance with the revised land uses made desirable a different procedure for conveying the sites. We perceive no factual basis in the record for petitioner's claim that these governmental decisions affecting the use of city-owned lands were arbitrary or capricious. Nor do we perceive any factual basis for the claim that these decisions did not represent a good faith judgment reached by the responsible governmental officials in what they believed to be the best interests of the City.

The Washington Street Urban Renewal Area is comprised of 38.4 acres of city-owned land in the Tribeca section of downtown Manhattan. Site 5 B comprises approximately 2.06 acres of land area, and is bounded on the north by Warren Street, on the east by Greenwich Street, on the south by Murray Street, and on the west by West Street. Site 5 C comprises approximately 1.90 acres, and is bounded on the north by Chambers Street, on the east by Greenwich Street, on the south by Warren Street, and on the west by West Street.

In letters dated January 29 and February 1, 1982 respectively, after study of proposals submitted in response to Requests for Proposals ("RFP") by HPD, HPD informed petitioner that it had been selected to negotiate exclusively with the City on the terms of disposition of Sites 5 B and 5 C.

In accordance with the RFP for Site 5 C, the petitioner's proposal contemplated new multi-family residential buildings, and obligated the developer to submit plans for obtaining rent subsidies under the Federal Section 8 Housing Assistance Program. In accordance with the RFP for Site 5 B, petitioner's proposal provided in pertinent part for the construction of 1.1 million square feet of office space with associated retail space and parking. The letters of designation provided that the City could elect to renew the 90-day negotiating period in 30-day increments if, by the end of the initial 90-day period, the parties had not agreed on the terms of the Land Disposition Agreement ("LDA").

In letter agreements dated June 2, 1982, petitioner and HPD entered into new designation agreements with respect to the development of the sites. The agreement specified in considerable detail the responsibilities of the parties, and further provided that the terms and conditions set forth in the letter relative to the sale and development of the sites were to be merged into the LDAs.

As set forth in the letter agreements, during the exclusive negotiating period and any extensions of that period, the parties were to negotiate the terms and conditions in LDAs which were to contain all the terms, covenants and conditions relative to the sale and development of the sites. As here pertinent, petitioner was obligated under the agreement to post as assurance deposits two letters of credit in the sum of $100,000 for each site, and to "continue to develop, at your sole risk, cost and expense, building designs, marketing concepts, massing studies and financial projections." Petitioner agreed that after the form and substance of the LDAs had been agreed upon, it would, at its sole cost and expense, fully and expeditiously cooperate with HPD in meeting the legal requirements for approval of the LDAs by the Board of Estimate, set forth in Section 197-c of the New York City Charter ("ULURP") and in the New York Urban Renewal Law ("URL"). In turn HPD agreed to undertake and expeditiously complete all of its obligations in connection with the legal requirements, including the ULURP precertification process.

The petitioner alleges, and it is not disputed, that petitioner conscientiously and faithfully discharged the obligations it assumed under the agreements to bring to fruition the development of the two sites, expending time, money, effort and resources in that endeavor. Petitioner further alleges, and it is not disputed, that agreement was in fact reached on the terms of the LDAs.

In a letter dated November 29, 1983, HPD informed petitioner that its designation as developer of the two sites had been terminated, stating the reason for that action in the following words: "This action is being taken because of the City's interest in retaining and attracting back office jobs in New York City. Given the difficulty and time needed to assemble large parcels in Manhattan, the City has decided it is in the best interest of the City to reserve the Washington Market Urban Renewal Sites 1, 5B and 5C for commercial development by back office users, many of whom wish to construct their own buildings."

At a meeting on December 21, 1983 between representatives of the petitioner and Charles Reiss, Deputy Commissioner of HPD, the City restated the reasons originally given in the letter for the termination of petitioner's designation, agreeing that no fault had been found with petitioner's discharge of its obligations under the designation agreements. In a further meeting between petitioner's representatives and Kenneth Lipper, then Deputy Mayor for Finance and Development of the City of New York, the details of which are not set forth in the record, it appears reasonable to infer that he restated the previously given reasons for the termination of petitioner's designation.

In an affidavit submitted on behalf of respondents-appellants, Mr. Lipper detailed the considerations that had led to the governmental decisions here challenged. As set forth in his affidavit, he and other City officials had become apprehensive that the need of financial service companies with corporate headquarters in the city for millions of square feet of new back office space for clerical, communication and computer operations might result in the relocation of such companies to New Jersey, Delaware and Nassau County. In connection with this concern, he set forth a judgment that had been reached that such corporations with their own real estate development capabilities would prefer an opportunity to develop and own their facilities, independent real estate developers representing to them increased costs, and depriving them of varied benefits that accompany ownership. Accordingly, City agencies had been instructed to identify large vacant areas of city-owned land that could be offered for back office development directly to user-owners. It had been determined that for brokerage firms in particular, the WSURA sites were most suitable. For these reasons it was decided that although this land had been targeted for mixed commercial and residential use through a developer, it would be in the best interests of New York City to retain the WSURA sites for owner-users seeking cleared large building sites who might otherwise consider relocating outside New York City.

On January 17, 1984, Mr. Lipper executed on behalf of the City of New York, a memorandum of agreement with Shearson/American Express, Inc. ("Shearson") providing for the conveyance of Site 1 of WSURA to Shearson, on condition that Shearson would construct a building for the exclusive, or substantially exclusive, use of Shearson or its affiliates, that would utilize a work force of approximately 900 to 1,400 employees. This memorandum of...