Wa-Wa-Yanda, Inc. v. Dickerson

• Decision Date: 08 April 1963
• Docket Number: INC,WA-WA-YAND
• Citation: 18 A.D.2d 251,239 N.Y.S.2d 473
• Parties: In the Matter of, Petitioner-Respondent, v. Arthur G. DICKERSON, Building Inspector, Town of Islip, Suffolk County, Appellant.
• Court: New York Supreme Court — Appellate Division

Page 473

239 N.Y.S.2d 473

18 A.D.2d 251

In the Matter of WA-WA-YANDA, INC., Petitioner-Respondent, v. Arthur G. DICKERSON, Building Inspector, Town of Islip Suffolk County, Appellant.

Supreme Court, Appellate Division, Second Department.

April 8, 1963.

Geo. F. X. McInerney, Bay Shore, for appellant.

Milton S. Zeiberg, New York City, for respondent.

Before UGHETTA, Acting P. J., and CHRIST, BRENNAN, RABIN and HOPKINS, JJ.

SAMUEL RABIN, Justice.

The basic problem presented on this appeal is whether a town which has granted a lease on land owned in its proprietary capacity, may thereafter, by governmental action in adopting an amended zoning resolution, curtail the tenant's use of the demised premises as authorized by the leasehold agreement.

At the core of this proceeding is a written lease made on December 31, 1952 by the Town of Islip, as landlord, acting through its then supervisor, pursuant to a prior resolution adopted by the Town Board. The lease demised to petitioner Wa-Wa-Yanda, Inc., a domestic corporation, ten acres on the easterly portion of Captree Island for a term of 30 years. Captree Island lies in Great South Bay, north of the easterly end of the body of land whereon Jones Beach and other State recreational facilities are located. Captree Island has an area of approximately 600 acres and is almost entirely marsh or wetland. The 10 acres demised are actually part of a smaller island separated from the main portion of Captree Island by water, and the demised premises are located on upland, accessible by boat only and unusable in winter.

The written lease, insofar as presently relevant, provided as follows:

'Said premises are to be used and occupied for the following purposes and for the following purposes only:

'For conducting a hotel on said premises (the buildings constituting said hotel, bar and restaurant, already being on the premises and owned by the Tenant); for a yacht basin, dock, marina and associated purposes for the sale of gasoline and other related items in conjunction with navigation.'

In addition, the lease provided that the tenant was to pay a specified annual rental, and that, in the event of war involving the United States and entailing gasoline rationing and restriction of travel, the tenant was to have the option either of paying 10 per cent of the stipulated rent or of canceling the lease.

In 1953, petitioner entered into possession and used the demised premises in accordance with the purposes stated in the lease. Such use conformed to the uses permitted by the existing zoning regulations which placed the demised premises in a 'business' district. In such a district the maintenance of a yacht basin and dock for the sale of gasoline and other necessary items in conjunction with navigation was authorized.

In 1954 a hurricane damaged some of the buildings and the dock in use on the demised premises. The petitioner removed debris and began a program of repairs and improvements which continued up to 1960. In this program, no new building was erected and no new gasoline tanks or pumps were installed. The renovations made were confined to replacements necessitated by the hurricane and entailed expenditures of $13,195.98.

In the interim, and while the lease continued in full force and effect, the Town, in March, 1956, amended its zoning ordinance, effective October 1, 1956. The effect of the amendment was to change the classification of 5.3 acres of the premises here involved from a 'business' to a 'business 1 district.' The amendment further prescribed that in a 'business 1 district' only a retail business, the practice of a profession or the rendition of personal service (with some exceptions not now relevant) 'will be permitted if the same is confined to the interior of the building.'

At this time, some question as to the validity of petitioner's lease was raised by a title company. To remove any doubt as to the continued validity of the petitioner's lease, on September 18, 1956, twelve days before the effective date of the new zoning amendment, to Town Board adopted a further resolution. By the terms of this resolution, the Town Board expressly 'ratified and approved' the lease and stated that the premises were to be used 'for a hotel, restaurant, bar, yacht basin, dock, marina, associated purposes and dwellings'.

In 1960, the petitioner initiated a more extensive program to rebuild and further improve the premises 'including the dock, basin, restaurant and bar.' This improvement program included the installation of a new gas tank and pump for the storage and sale of gasoline as well as piping and electrical connections therefor at an expense of over $68,000.

Petitioner then made application for and received a permit for the operation of a public restaurant and bar. Its further application for a permit to install gasoline tanks, pedestal and other related equipment for the sale of gasoline was denied on February 6, 1961 by the appellant Building Inspector with the notation, 'Gasoline Service Station not permitted in Bus. I Zone.' That denial gave rise to the instant proceeding to compel him to issue the necessary permit for the installation and use of the gas tanks and related equipment.

On consent of the parties, the proceeding was heard and determined by the learned Special Referee. Upon the hearing, testimony was offered to show that petitioner's 1960 program had resulted in the completion of dock and marina facilities with the exception of the mechanisms requisite for the sale of gasoline, and that its expenditures in connection therewith were made in reliance upon its lease with the Town, including particularly the provisions therein authorizing the sale of gasoline.

On behalf of the Town, appellant contended that after the enactment of the 1956 zoning amendment the petitioner was no longer entitled to a permit for a marine gasoline service station because the leased premises were no longer situated in a district currently zoned for such use. Appellant further contended that petitioner's lease was granted by the Town in its private and proprietary capacity, as distinguished from its governmental capacity; that the 1956 zoning amendment was effected by the Town while acting in its governmental capacity; and that while acting in the latter capacity the Town could not exempt its own privately owned property from the burden of the amended zoning ordinance.

In his written opinion, the learned Special Referee stated that he had reached the conclusion that the petitioner was entitled to a mandamus order by virtue of three principal considerations. In sum, these turned upon the Town's deprivation of petitioner's contractual rights as granted to it by the lease and the 1956 confirmatory resolution of the Town Board; and characterization of the 1956 Zoning Amendment as unreasonable, arbitrary and capricious because the new 'business I' classification of the subject premises limited their use to activities confined to the interior of buildings; and the exercise by petitioner of a valid nonconforming use of the subject premises at the time the zoning amendment took effect.

Upon the present appeal, apart from the disputation on the three grounds upon which the learned Special Referee rested his decision in this proceeding, the parties tender another and more determinative issue--the impairment of a subsisting contract by a municipal ordinance. Appellant Building Inspector contends: (a) that every municipal contract, and particularly a lease made by a town in its proprietary character, is subject to the prospective exercise of its sovereign attribute of police power; and (b) that whether or not the 1956 zoning amendment amounted to unilateral cancellation of petitioner's 1952 lease, and whether such amendment entitled petitioner to maintain an action for damages against the Town for breach of lease, are collateral matters for future litigation beyond the focal issue of the exercise of the sovereign's police power in the instant proceeding. Accordingly, we are presented with the issue as to whether a town, acting in its governmental capacity, may impair an existing contract of lease which it previously made in its proprietary character.

In determining this fundamental issue, it may be noted that, while the Town demised the subject premises in its proprietary character and later enacted the zoning change in its governmental capacity, on both occasions it acted through its Town Board. As a matter of history, it appears that originally the dominion over Captree Island, as the property of the Town, was exercised by a separate board of trustees (Town of Islip v. Estates of Havemeyer Point, 224 N.Y. 449, 121 N.E. 351), and that subsequently, by legislative enactment, the trustees' functions were transferred to the Town Board which now exercises both proprietary and governmental functions on behalf of the Town (L.1916, ch. 131).

The resolution of the primary issue must be predicated upon the mandate of the Federal Constitution that, 'No State shall * * * pass any * * * Law impairing the Obligation of Contracts * * *' (U.S.Const., Art. I, § 10). The general rule is that this mandate applies to a contract to which a State 'or a subdivision thereof' is a party as well as to contracts between individuals (16 C.J.S. Constitutional Law, § 285, p. 1301, note 77). Within the constitutional intendment, a lease is ordinarily deemed a contract which may not be altered by legislative enactment (16A-C.J.S. Constitutional Law, § 345, p. 15, note 72). However, when emergency arises and the public welfare requires, remedial ligislation addressed to a legitimate end, which invokes reasonable and appropriate means to that end and which is enacted in the exercise of the State's police powers, may impair the obligation of a contract or lease, or may curtail the rights of private property (Twentieth Century Associates v. Weldman, 294 N.Y. 571, 580, 63 N.E.2d 177, 179, 162 A.L.R....