Story House Corp. v. State of N. Y. Job Development Authority

• Decision Date: 09 November 1971
• Citation: 325 N.Y.S.2d 659,37 A.D.2d 345
• Parties: STORY HOUSE CORPORATION, Respondent-Appellant, v. STATE OF NEW YORK JOB DEVELOPMENT AUTHORITY, Appellant-Respondent.
• Court: New York Supreme Court — Appellate Division

Page 659

325 N.Y.S.2d 659

37 A.D.2d 345

STORY HOUSE CORPORATION, Respondent-Appellant, v. STATE OF NEW YORK JOB DEVELOPMENT AUTHORITY, Appellant-Respondent.

Supreme Court, Appellate Division, Third Department.

Nov. 9, 1971.

D. Steve Rahmas, Charlotteville, for respondent-appellant.

Louis J. Lefkowitz, Atty. Gen. (Ruth Kessler Toch and Julius L. Sackman, Albany, of counsel), for appellant-respondent.

Before HERLIHY, P.J., and REYNOLDS, GREENBLOTT, COOKE and SWEENEY, JJ.

HERLIHY, Presiding Justice.

This is an appeal from an order entered on January 20, 1971 denying defendant's motion for summary judgment and a cross appeal by the plaintiff from the court's failure to grant summary judgment in its favor.

The present action arises from a loan agreement between the plaintiff and defendant upon which the plaintiff allegedly relied in constructing an additional building to its plant for the purpose of creating more employment in the operation of the business, which was primarily for binding books for schools, libraries and colleges and also the publication of books. After the plaintiff had completed the construction of the building, the State of New York Job Development Authority (hereinafter referred to as Job Development Authority), allegedly refused to disburse a $7,500 loan in accordance with the terms of an agreement entered into prior to the construction.

The defendant, Job Development Authority, is a public benefit corporation created by an act of the Legislature in 1961 for the express purpose 'to assist, promote, encourage, develop and advance the general prosperity and economic welfare of the people of the state and to improve their standard of living; to improve employment opportunities in any area of the state by assisting the financing of the cost of projects for the construction of new industrial or manufacturing plants * * *'. (Public Authorities Law § 1803.)

With reference to the cross appeal by the plaintiff for summary judgment, we affirm the denial thereof as there are factual issues concerning the marketable title of the real property.

The primary issue on this appeal is whether an action may be brought against the Job Development Authority in the Supreme Court or whether exclusive jurisdiction rests with the Court of Claims.

As the result of the creation by the Legislature in modern times of various Authorities, litigation has developed with reference to jurisdiction in a number of instances. There are three cases involving the New York State Thruway.

In Easley v. New York State Thruway Auth., 1 N.Y.2d 374, 377, 153 N.Y.S.2d 28, 29, 135 N.E.2d 572, 573 (1956) the question was 'whether the State Constitution (art. VI, § 23) so limits the jurisdiction of the Court of Claims that the Legislature could not validly confer on that court jurisdiction over claims that are asserted not against the State itself but against such an 'Authority'.' The court found there was no such limitation.

In Matter of Plumbing, Heating, Piping & Air Conditioning Contrs. Ass'n v. New York State Thruway Auth., 5 N.Y.2d 420, 185 N.Y.S.2d 534, 158 N.E.2d 238 (1959) the issue concerned whether section 135 of the State Finance Law was applicable to the 'Thruway', the contention being that it was a 'board' or 'department' within the meaning of the section. The court stated at pages 424, 425, 185 N.Y.S.2d at page 537, 158 N.E.2d at page 240: 'However close such relationship (between the Thruway and the State) may be, though, it is abundantly clear that the Authority stands on its own feet, transacts its business affairs through its own personnel and on its own initiative and is not subject to the strict requirements imposed upon a board or department of the State by a provision such as section 135 of the State Finance Law. (Cf. Public Housing Law § 151--a; General Municipal Law § 101.)'

Benz v. New York State Thruway Auth., 9 N.Y.2d 486, 215 N.Y.S.2d 47, 174 N.E.2d 727 (1961) determined that the Supreme Court had no jurisdiction over an equitable action against the Authority for rescission or reformation of a contract for the sale of land to the Authority.

The foregoing decisions involved the nature and extent of the identity of the Thruway Authority with the State. However, in regard to jurisdiction the enabling statutes of the Authority specifically provided at the time of those decisions that the Court of Claims had exclusive jurisdiction over the Authority (Public Authorities Law § 368(5)), except as otherwise provided. It seems apparent that those decisions are not controlling as to jurisdiction in legal actions involving the Job Development Authority as a party.

Another group of decisions, likewise not controlling, involve Authorities with a public function and a benefit to the State, but with a distinctly local application. (See Matter of Suffolk County Water Auth. v. Water Power & Control Comm. of State of New York, 12 A.D.2d 198, 209 N.Y.S.2d 978; Town of Amherst v. Niagara Frontier Port Auth., 19 A.D.2d 107, 241 N.Y.S.2d 247; Matter of Lakeland Water Dist. v. Onondaga County Water Auth., 24 N.Y.2d 400, 301 N.Y.S.2d 1, 248 N.E.2d 855; Swan Lake Water Corp. v. Suffolk County Water Auth., 20 N.Y.2d 81, 281 N.Y.S.2d 775, 228 N.E.2d 773.)

In a different category is Matter of Dormitory Auth. of State of New York (Span Elec. Corp.), 18 N.Y.2d 114, 271 N.Y.S.2d 983, 218 N.E.2d 693 where the court found that the Authority enjoyed a separate existence, transacting its own business, hiring and compensating its own personnel and, therefore, was not identical with the State and as an incident thereto an arbitration clause in a contract of the Authority was operative and effective in an action brought in the Supreme Court. Unlike the provisions of the enabling statutes for the Thruway Authority, the enabling statutes for the Dormitory Authority contain no specification by the Legislature granting any jurisdiction to the Court of Claims.

Upon the issue of jurisdiction in the Supreme Court under the Job Development Authority we are concerned with the question of sovereign immunity and although we have noted that the foregoing cases are not controlling, they nevertheless serve as an illustration that as a legal matter a public corporation can be cloaked with sovereign immunity and/or the Legislature may constitutionally provide that jurisdiction is solely in the Court of Claims.

The Legislature in 1961 created the Job Development Authority which is in essence a public benefit corporation for the express purpose of advancing the general prosperity of the State and improving employment operation by assisting in the financing of construction projects of industrial plants. (See Public Authorities Law §§ 1802, 1803.) In section 1803 (Public Authorities Law) there is a proviso as follows: 'In carrying out such purposes and in exercising the powers granted by this title, the authority shall be regarded as performing an Essential governmental function.' (Emphasis supplied.)

It would seem that ordinarily such a specific statement by the Legislature regarding the performance of a governmental function would be very nearly conclusive on the question of jurisdictional identity with the State. In Easley v. New York State Thruway Auth., Supra, 1 N.Y.2d 374, p. 376, 153 N.Y.S.2d 28, p. 29, ...