O'Connell & Aronowitz, Albany (Cornelius D. Murray of
counsel), for appellants.
Letitia James, Attorney General, Albany (Owen Demuth of
counsel), for respondents.
Before: Egan Jr., J.P., Lynch, Clark and Pritzker, JJ.
from a judgment of the Supreme Court (Hartman, J.), entered
October 2, 2017 in Albany County, which partially dismissed
petitioners' application, in a proceeding pursuant to
CPLR article 78, to, among other things, review a
determination of respondent Office of Alcoholism and
Substance Abuse Services withholding monies due or recouping
monies from petitioner 820 River Street, Inc.
Peter Young, a Roman Catholic priest, is the founder of three
separate entities, petitioners 820 River Street, Inc., The
Altamont Program, Inc. and Vesta Community Housing
Development Board, Inc., all operating under the umbrella
name of Peter Young Housing Industries and Treatment
(hereinafter PYHIT). These entities provide job training,
housing and treatment for people struggling with alcohol
and/or substance abuse. Respondent Office of Alcoholism and
Substance Abuse Services (hereinafter OASAS) provided funding
to compensate petitioners for services performed under
separate contracts between petitioners and Rensselaer, Warren
and Washington Counties for services rendered to residents of
those counties. To obtain such funding, petitioners were
prequalified under the Grants Gateway Program (hereinafter
the Gateway Program), which is required for not-for-profit
corporations to win competitive grants or contracts with
state agencies. In 2013, petitioners obtained $650, 000 in
capital construction funds from OASAS for the purpose of
rehabilitating petitioners' property located in the Town
of Altamont, Albany County, but that project was not
completed. Between 2012 and 2015, five of the entities'
employees, including a chief financial officer and two chief
operations officers, were convicted of various financial
crimes, including grand larceny, for misappropriating
substantial funds from their programs. By letter dated
January 18, 2017, OASAS' counsel, respondent Robert Kent,
informed PYHIT that OASAS was terminating all contracts and
funding for 820 River Street, Inc. effective April 30, 2017.
The letter further advised that OASAS would begin to recoup
funds to pay off the capital loan by offsetting payments due
under PYHIT's service contracts with the counties.
Respondents proceeded to withhold funds for the period August
1, 2016 through December 31, 2016 in the amount of $277, 692,
utilizing $147, 800 to reimburse the counties for advance
payments made to PYHIT and crediting the balance against the
commenced this CPLR article 78 proceeding alleging that OASAS
arbitrarily and capriciously suspended them from the Gateway
Program and illegally withheld contract funds to offset the
loan. Following joinder of issue, Supreme Court determined
that respondents failed to follow their own procedures under
the Gateway Program before revoking PYHIT's
prequalification status and partially granted the petition by
directing respondents to issue a determination as to
petitioners' prequalification status. The court otherwise
upheld the withholding of funds, finding that petitioners
failed to raise a question of fact as to the amount due.
February 2018, respondents formally suspended PYHIT's
prequalification status. Following a prequalification appeal,
however, PYHIT's prequalification status was restored on
October 19, 2018. That administrative ruling further directed
OASAS to negotiate repayment of the capital loan with PYHIT,
and, absent agreement, to refer the matter to the Attorney
General for collection.
these developments, petitioners acknowledged at oral argument
that the capital funding was a loan, not a grant. Petitioners
further clarified that they were no longer challenging the
offsetting of contract funds against the loan. What
petitioners claim remains at issue is respondents'
failure to credit petitioners for services provided under the
contracts for the period January 1, 2017 through April 30,
2017. We agree with petitioners that this issue is preserved
for our review by virtue of their challenge to the recoupment
in the first instance and that a question of fact has been
raised as to whether petitioners are entitled to the claimed
credit. By their own account, respondents withheld funds up
to December 31, 2016, leaving open the prospect of a gap in
payment from January 1, 2017 to April 30, 2017, the effective
date that OASAS terminated petitioners' contracts. Upon
confirmation that services were provided during this period,
petitioners would be entitled to a credit for monies recouped
by OASAS and a corresponding reduction on the capital debt.
The matter should be remitted to OASAS for further
proceedings to resolve this issue.
Jr., J.P., Clark and Pritzker, JJ., concur.
that the judgment is modified, on the law, without costs, by
reversing so much thereof as dismissed that part of the
petition seeking a credit for monies recouped by respondent
Office of Alcoholism and Substance Abuse as more specifically
set forth herein; matter remitted to said respondent for