Henry Modell & Co., Inc. v. City of New York

• Decision Date: 20 March 1990
• Citation: 159 A.D.2d 354,552 N.Y.S.2d 632
• Court: New York Supreme Court — Appellate Division
• Parties: HENRY MODELL & COMPANY, INC., Plaintiff-Appellant, v. The CITY OF NEW YORK, Defendant-Respondent.

Page 632

552 N.Y.S.2d 632

159 A.D.2d 354

HENRY MODELL & COMPANY, INC., Plaintiff-Appellant, v. The CITY OF NEW YORK, Defendant-Respondent.

Supreme Court, Appellate Division First Department.

March 20, 1990.

L.A. Mandelker, New York City, for plaintiff-appellant.

J.L. Kalkstein, New York City, for defendant-respondent.

Before SULLIVAN, J.P., and ROSENBERGER, ASCH and SMITH, JJ.

MEMORANDUM DECISION.

Order and judgment (one paper), Supreme Court, New York County (Edward Lehner, J.), entered June 8, 1989, which granted defendant's motion to dismiss plaintiff's complaint, unanimously affirmed, without costs.

Many years ago, plaintiff entered into two leases with the City for premises located at 280 Broadway. One lease was for retail space, the other for office space. After the City abandoned a plan to condemn the building, plaintiff remained as a month-to-month tenant until June of 1982, when the City and plaintiff entered into a five-year lease for the retail space.

In 1986, the City and plaintiff discussed whether the 1982 lease would be renewed on a "sole source" basis or whether public bidding would be required. On February 25, 1987, the City advised plaintiff it would not renew the 1982 lease and would instead insist on public bidding. A notice terminating the lease as of October 31, 1988 was sent to plaintiff.

Plaintiff contends that it had engaged in discussions with officials at the Department of General Services ("DGS") in 1986 concerning a renewal lease and that Frederic Pocci, an Assistant Commissioner of DGS, had sent plaintiff a letter stating that the City could offer plaintiff a five-year renewal lease. The letter provided for base annual rents and required certain building improvements.

Based on this letter, plaintiff asserted that it relied on the "reasonable belief that it had reached an agreement" for a new store lease. Plaintiff charges that the City refused to renew its lease on a "sole source" basis because one of plaintiff's affiliates had declined to renegotiate another lease in Queens County. Consequently, plaintiff claims denial of equal protection, denial of procedural and substantive due process, arbitrary and capricious administrative action, equitable and promissory estoppel and entitlement to specific performance. In addition, plaintiff seeks a judgment enjoining the City from terminating its tenancy at 280 Broadway, directing the City to execute a new lease, enjoining the City from raising a defense that the agreement reached with DGS is ultra vires and declaring that the agreement as contained in the Pocci letter is a binding, enforceable agreement.

In granting the City's motion to dismiss plaintiff's complaint, the Supreme Court noted, inter alia, that pursuant to "City law", Pocci's actions were insufficient to bind the City to a lease. As for the equal protection claim, the trial court ruled that plaintiff failed to allege any facts demonstrating that the City violated any policy it had with regard to "sole source" leasing. As to the due process claim, plaintiff could not point to any property interest it had that was constitutionally protected.

In order to protect the public from corrupt or ill-considered actions of municipal officials, a municipality's power to contract is statutorily restricted (Genesco Entertainment v. Koch, 593 F.Supp. 743, 747-748). "[W]here there is a lack of authority on the part of agents of a municipal corporation to create a liability, except by compliance with well-established regulations, no liability can result unless the prescribed procedure is complied with and...