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TM PARK AVE. ASSOCS. v. PATAKI

October 18, 1997

TM PARK AVENUE ASSOCIATES, Plaintiff, W.E.A. ASSOCIATES, Plaintiff-Intervenor, JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, Plaintiff-Intervenor, against GEORGE E. PATAKI, Individually and as Governor of the State of New York; H. CARL MCCALL, Individually and as the Comptroller of New York State; NEW YORK STATE DEPARTMENT OF AUDIT AND CONTROL; STATE UNIVERSITY OF NEW YORK; FREDERICK SALERNO, Individually and as Chairman of the Board of Trustees of the State University of New York; BOARD OF TRUSTEES OF THE STATE UNIVERSITY OF NEW YORK; THOMAS A. BARTLETT, Individually and as Chancellor of the STATE UNIVERSITY OF NEW YORK; Lonnie Clar, Individually and as Associate Counsel to the State University of New York; Irving Freedman, Individually and as Vice Chancellor of Capital Facilities of the State University of New York and General Manager of the State University Construction Fund; NEW YORK STATE DORMITORY AUTHORITY; THE STATE OF NEW YORK, Defendants.


The opinion of the court was delivered by: MCAVOY

 I. Background

 A. Procedural history

 Plaintiff TM Park Avenue Associates' ("TM") initiated this action against the State of New York, numerous state entities and various state officials both in their official and individual capacities. TM contends, inter alia, that a New York statute, Chapter 312 of the Laws of 1995, violates the Contract Clause of the United States Constitution, as it substantially impairs TM's long-term lease with the State University of New York ("SUNY").

 Now before this Court are three summary judgment motions. First, TM moves for an order granting summary judgment declaring the enactment of Chapter 312 of the Laws of 1995 violative of the Contract Clause of the United States Constitution, and enjoining the defendants from terminating payments to TM under the authority of Chapter 312. *fn1" Alternatively, should this Court not grant summary judgment, TM seeks an order preliminary enjoining defendants from terminating payments under authority of Chapter 312 during the pendency of the litigation. Second, plaintiff-Intervenors John Hancock Mutual Life Insurance Company ("Hancock") and W.E.A. Associates ("WEA") also move for summary judgment, similarly challenging the constitutionality of Chapter 312. Third, defendants cross move for summary judgment, asserting that Chapter 312 of the Laws is constitutional in all respects. Defendants further request an order dismissing plaintiffs' claim that Chapter 312 violates the Due Process Clause of the Fourteenth Amendment.

 For the reasons that follow, plaintiffs' motions for summary judgment are granted in part and denied in part, and defendants' motion for summary judgment is granted in part and denied in part.

 TM is the owner of 315 Park Avenue South in New York City. In April 1986, TM and SUNY entered into a new lease whereby SUNY leased space at 315 Park Avenue South for its College of Optometry. The lease commenced on April 17, 1996, with an expiration of July 31, 2004. This lease later was amended and restated so that ultimately SUNY is leasing approximately 200,000 square feet (roughly 70%) from TM.

 At the time TM and SUNY executed the lease, the New York State Finance law required that all leases with the State of New York contain an executory clause. As such, the lease provided that

 
This contract shall be deemed executory only to the extent of money available to the State for the performance of the terms hereof and no liability on account thereof shall be incurred by the State of New York beyond moneys available for the purpose thereof.

 Plaintiff-Intervenors Hancock and WEA, respectively, hold a first and second mortgage on 315 Park Avenue South and security interests in the lease. Over a period of time, SUNY entered into various subordination, non-disturbance and attornment agreements with Hancock and WEA, which provided, in part, that SUNY would neither terminate nor modify its lease with TM without the written permission of the mortgage holders.

 From 1989 and thereafter, SUNY explored various options to convert the College of Optometry to public space. *fn2" SUNY acknowledges that some of these options would have resulted in a cessation of lease payments prior to the lease's expiration in 2004.

 At the same time that SUNY was pursuing its various relocation options, the City University of New York ("CUNY"), in 1994, went to the Division of Budget ("DOB") and sought an appropriation to purchase the B. Altman Building. CUNY sought to relocate its graduate center from its existing site at 42nd Street to the B. Altman Building and utilize the 42nd Street to consolidate other CUNY operations. In discussions between DOB and CUNY, the DOB suggested that the 42nd Street location be utilized by SUNY as its new permanent home, instead of being used by CUNY to consolidate other CUNY operations. *fn3" Between late 1994 and March 1995, SUNY and CUNY drafted and submitted a joint proposal to the DOB orchestrating the relocations and requesting state funding.

 During the 1995 Legislative Session, Chapters 312 and 313 were passed into law. Chapter 312 reads, in relevant part:

 
§ 4. Notwithstanding any other provision of the law, no appropriation shall be available on or after July 1, 1996, or as soon thereafter as the state university college of optometry shall complete relocation to facilities owned and financed for public purposes, for funding support for privately or commercially leased building space for the state university college of optometry operations at 100 East 24th Street/315 Park Avenue South, in New York City, to reflect the elimination of such funding support due to fiscal deficiencies and unavailability of funds. *fn4"

 Chapter 312 also authorizes the Dormitory Authority to finance the acquisition of property occupied by the CUNY Graduate School and University Center, for the use of the SUNY School of Optometry. Additionally, Chapter 313 authorizes the Dormitory Authority to acquire the B. Altman Building, into which the CUNY Graduate School and University Center will move as part of its consolidation plan.

 On October 16, 1995, plaintiffs commenced this action seeking a declaratory ruling that Chapter 312 of the Laws of 1995 violates the Contract Clause of the U.S. Constitution. *fn5" Pending on cross motions for summary judgment is the constitutionality of Chapter 312. TM asserts that Chapter 312 of the Laws is, as a matter of law, violative of the Contract Clause because it substantially impairs TM's unexpired lease with the state, and it is not reasonable and necessary to an important public purpose. Hancock and WEA join TM in this argument, and further assert that Chapter 312 violates the Contract Clause because it substantially impairs SUNY's subordination, non-disturbance and attornment agreements with Hancock and WEA.

 Defendants, in turn, contend that: (1) plaintiffs' action presents no justiciable case and controversy; (2) the Eleventh Amendment bars suit against certain of the defendants; (3) plaintiffs bring only a state-law claim for breach of contract, and thus this Court lacks jurisdiction; (4) Chapter 312 is constitutional in all respects and (5) plaintiffs have not demonstrated their entitlement to a preliminary injunction. Further, defendants move for summary judgment in their own right to dismiss plaintiffs' claim that Chapter 312 violates the Due Process Clause of the Fourteenth Amendment.

 At present, the SUNY School of Optometry remains at 315 Park Avenue Street. SUNY continues to make all rental payments due under the lease, and expects that occupancy will continue until at least June 30, 1999.

 II. DISCUSSION

 A. Standard For Summary Judgment

 The standard for summary judgment is well-settled. A party seeking summary judgment must demonstrate that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The moving party bears the initial burden of "informing the . . . court of the basis for its motion, and identifying those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986) (quoting Fed. R. Civ. P. 56(c)). The initial burden is to demonstrate "that there is an absence of evidence to support the nonmoving party's case." Id. at 325.

 The nonmoving party may defeat the summary judgment motion by producing sufficient evidence to establish a genuine issue of material fact for trial. See id. at 322. The test for existence of a genuine dispute is whether a reasonable juror could find for the nonmoving party; that is, whether the nonmovant's case, if proved at trial, would be sufficient to survive a motion for judgment as a matter of law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250-51, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986).

 In ruling on a motion for summary judgment, a Court is required to resolve all ambiguities and draw all reasonable inferences in favor of the nonmoving party. See Donahue v. Windsor Locks Bd. of Fire Comm'rs., 834 F.2d 54, 57 (2d Cir. 1987). The nonmoving party, however, "must do more than simply show that there is some metaphysical doubt as to material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986). Indeed, the nonmoving party's opposition may not rest on mere allegations or denials of the moving party's pleading, but "must set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e). "The non-movant cannot escape summary judgment merely by vaguely asserting the existence of some unspecified disputed material facts, or defeat the motion through mere speculation or conjecture." Western World Ins. Co. v. Stack Oil, Inc., 922 F.2d 118, 121 (2d Cir. 1990) (citations and quotations omitted).

 It is with the foregoing standards in mind that the Court turns to the issues presented.

 B. Justiciability

 TM, in contrast, asserts that by enacting Chapter 312, the State has eliminated its obligations under the lease, and changed a long-term contract into a month-to-month tenancy at the sole will of SUNY. According to TM, this transformation reduces the current value both of the lease and 315 Park Avenue South. Additionally, TM argues that it is threatened with imminent injury upon SUNY moving and ceasing to pay rent under the lease.

 Article III, § 2 of the United States Constitution confers judicial power on courts to decide "cases" and "controversies." U.S. CONST. art. III, § 2. The doctrine of ripeness rests both on Article III concepts and prudential considerations. See, e.g., Buckley v. Valeo, 424 U.S. 1, 114, 46 L. Ed. 2d 659, 96 S. Ct. 612 (1976). The ripeness doctrine springs from the notion that "courts should not render decisions absent a genuine need to resolve a real dispute." Charles A. Wright & Arthur R. Miller, 13A Federal Practice & Procedure § 3532.1, at 114 (2d ed. 1990). The classic test is whether there exists "'a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declamatory judgment.'" Lake Carriers' Assn. v. MacMullan, 406 U.S. 498, 506, 32 L. Ed. 2d 257, 92 S. Ct. 1749 (1972) (quoting Maryland Cas. Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273, 85 L. Ed. 826, 61 S. Ct. 510 (1941)).

 In the present case, the Court finds that the dispute is ripe to justify decision. As a result of the enactment of Chapter 312, TM already has suffered actual injury through both reduced lease and land values. Further, plaintiff suffers actual injury, as its ability to procure a future tenant is harmed as a result of the uncertain termination date of the lease.

 TM also is threatened with imminent injury upon SUNY relocating to 42nd Street and terminating its lease obligations. Although SUNY presently is making all of its rental payments to TM, Chapter 312 eliminates all appropriations for such rental payments upon SUNY's move to 42nd Street. Moreover, there is little doubt that SUNY will relocate prior to the expiration of the lease. SUNY's move is far from a mere hypothetical situation. See Babbitt v. United Farm Workers Nat'l Union, 442 U.S. 289, 297-98, 60 L. Ed. 2d 895, 99 S. Ct. 2301 (1979). Indeed, much planning and thought has been given to SUNY's move, as evidenced by both the joint proposal of SUNY and CUNY and the subsequent enactment of Chapter 312 and its counterpart Chapter 313.

 The Court thus finds that both actual injury and sufficient immediacy of injury warrant review of this controversy at this time.

 Defendants next oppose plaintiff-intervenors Hancock's and WEA's motion for summary judgment by arguing that they lack standing to assert that Chapter 312 unconstitutionally impairs the TM-SUNY lease. Specifically, defendants argue that the plaintiff-intervenors can claim no personal injury to themselves as a consequence of the enactment of Chapter 312. This Court disagrees.

 As holders of large security interests in the lease, Hancock and WEA have a personal stake in the outcome of this litigation. See Valley Forge Christian College v. Americans United Separation of Church and State, Inc., 454 U.S. 464, 70 L. Ed. 2d 700, 102 S. Ct. 752 (1982) (stating Article III requires distinct injury, traceable to challenged action and likely to be redressed by favorable decision). The enactment of Chapter 312 immediately reduced the value of the TM-SUNY lease, and SUNY's relocation will render the lease worthless. By decreasing the value of the lease, the value of Hancock's and WEA's security interests in that collateral likewise is reduced. See American Re-Insurance Co. v. Janklow, 676 F.2d 1177, 1181 (8th Cir. 1982) (holding security holder in lease had claim against state under Contract Clause for impairment of underlying lease); Pioneer Commercial Funding Corp. v. United Airlines, Inc., 122 ...


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