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Decision No. 14,188

Appeal of RICHARD HOLLISTER from action of the Board of Education of the Potsdam Central School District and the Canton-Potsdam Hospital regarding the lease of real property.

Decision No. 14,188

(August 12, 1999)

Cappello & Linden, Esqs., attorneys for respondents, Roger

B. Linden Esq., of counsel

CATE, Acting Commissioner.--Petitioner challenges a resolution adopted by respondent board of education on January 27, 1998, which approved a ten-year extension of a lease of parking space in a district-owned parking lot to the Canton-Potsdam Hospital. The appeal must be sustained.

On August 31, 1988, the Potsdam Central School District ("district") and the Canton-Potsdam Hospital ("hospital") entered into an agreement whereby the district leased to the hospital, for a ten-year period, 140 parking spaces in a parking lot located on its high-school campus and across the street from the hospital. Pursuant to the agreement, the hospital paid the district the sum of $95,000 for the 10-year lease and assumed responsibility for the maintenance of the leased property during the term of the lease.

The agreement also provided for a ten-year renewal of the lease at the hospital's election at no additional cost to the hospital, and further provided that if the consent of the Commissioner of Education were necessary to renew the lease and such consent could not be obtained, then the renewal provision would not be enforceable.

By letter dated December 10, 1997, the president of the hospital informed the board of education that the hospital was exercising its option to renew the lease for a second ten-year period. As noted above, at its meeting on January 27, 1998, respondent board approved a resolution renewing the lease. The initial ten-year term of the lease expired on August 31, 1998.

Petitioner commenced this appeal by service of a copy of the petition on respondents on February 24, 1998. On March 11, 1998, Commissioner Mills denied petitioner's request for a stay of the January 27, 1998 resolution pending a final determination of this appeal.

Petitioner alleges that the board's resolution violates Education Law "403-a(1) in that the leasing of parking spaces to the hospital is not in the best interest of the district and solely benefits the hospital. Petitioner further alleges that the resolution is defective because it misstates that the parking space is not currently needed for district purposes and will not be needed during the ten-year extension. Petitioner also contends that the lease's provision for a $95,000 rental payment, and the provision for no additional costs for the lease extension, violate the requirement in Education Law "403-a(1)(a) that the rental payment shall not be less than the fair market rental value of the leased property. Petitioner further contends that, to the extent it provides for a ten-year extension solely at the hospital's election, the lease is in fact for a twenty-year term and thus violates the provision in Education Law "403-a(1)(b) that a lease shall not exceed ten years.

In addition, petitioner alleges that the district improperly incurred a debt of $95,433 for expansion of its parking facilities in 1988, without the knowledge of the board of education or the approval of the district's voters pursuant to Education Law "2021(8). Petitioner alleges that the expansion was needed to 'move' the student parking area from the 140 spaces leased to the hospital, and that the board of education violated Education Law "2512(3) by failing to pass a resolution specifying in detail the necessity for such action. Petitioner alleges that respondent has intentionally attempted to discontinue use of the leased parking area for school purposes without any study, voter input or approval in violation of Education Law "401.

Petitioner requests that the board's January 27, 1998 resolution be declared null and void, that the lease be terminated and that the parking lot be restored as a designated area for school district staff, faculty, students and visitors. Petitioner also requests that the board conduct a study and hold a public hearing on the feasibility of the hospital's use of any remaining district parking spaces, and that any "user" agreement incorporate a fair-market fee as determined by the board of education.

Respondents generally deny petitioner's allegations and assert that the appeal is untimely and barred by the doctrines of laches and equitable estoppel. Respondents also contend that the appeal should be dismissed for petitioner's failure to serve a notice of claim upon the district pursuant to Education Law "3813. In addition, respondents contend that the appeal is moot because the State Education Department ("SED") has consented to the renewal of the lease pursuant to Education Law "403-a.

As a threshold matter, I note that petitioner's reply improperly raises issues and allegations that were not part of the petition. The purpose of a reply is to respond to new material or affirmative defenses set forth in the answer (8NYCRR ""275.3 and 275.14). A reply is not meant to buttress allegations in the petition or to add belatedly assertions that should have been in the petition (Appeal of Krantz, 38 Ed Dept Rep 485, Decision No. 14,077). Therefore, while I have reviewed petitioner's submissions, I have not considered those portions of them containing new allegations or exhibits which are not responsive to new material or affirmative defenses set forth in the answer.

I also decline to dismiss the petition for petitioner's failure to serve a notice of claim upon respondent board of education. Respondents' reliance on the notice of claim provision of Education Law "3813 is misplaced. An appeal to the Commissioner of Education is not an "action or special proceeding" within the meaning of Education Law "3813 (Appeal of Board of Education of the Hilton Central School District, 38 Ed Dept Rep 497, Decision No. 14,079; Appeal of Monk, 29 id. 444, Decision No. 12,347; Matter of Shusterman, 18 id. 516, Decision No. 9946).

Section 275.16 of the Regulations of the Commissioner of Education provides that an appeal to the Commissioner must be instituted within 30 days from the making of the decision or the performance of the act complained of, provided that the Commissioner, in his sole discretion, may excuse a failure to commence an appeal within the time specified for good cause shown. This appeal was commenced on February 24, 1998. Since petitioner provides no evidence to establish good cause to excuse their untimeliness, I must dismiss certain of petitioner's allegations relating to respondents' actions at the time the original lease was entered into on August 31, 1988. Specifically, I must dismiss petitioner's allegations that the district improperly incurred $95,433 in debt for expansion of its parking facilities in 1988 in violation of Education Law "2021; that the board violated Education Law "2512(3) in failing to pass a resolution specifying the necessity for the lease and expansion of its parking facilities; and that respondent board has allegedly violated Education Law "401 in failing to obtain voter approval for the lease and expansion of its parking facilities. All of these allegations concern the original lease agreement and are clearly untimely.

Although petitioner's appeal is untimely with respect to the aforesaid allegations concerning the original lease, petitioner's appeal was brought within 30 days of respondent board's January 27, 1998 resolution approving the ten-year extension of the lease. Therefore, petitioner's allegations with respect to the validity of respondents' actions to extend the lease for an additional ten-year period are not untimely pursuant to 8 NYCRR "275.16. Furthermore, while I recognize that paragraph 4. of the original lease mandates such extension at the election of the hospital, to the extent such provision may violate statutory authority it is void and unenforceable (Chelten Trust Co. v. National Automatic Press Co., 216 AD 380), and any actions taken by respondents with respect to this provision would be in the nature of a continuing wrong (Appeal of Dankleman; 37 Ed Dept Rep 415, Decision No. 13,892; Appeal of Tropia, 32 id. 606, Decision No. 12,929; Appeal of Aarseth, 32 id. 506, Decision No. 12,901). I therefore find petitioner's appeal to be timely commenced with respect to the lease extension.

Respondent also contends that this appeal is barred by the doctrine of equitable estoppel. "The sine qua non of estoppel is some inequitable or fraudulent conduct engaged in by the party sought to be estopped which is reasonably relied upon by the other party to his detriment" 57 NY Jur 2d, Estoppel, Ratification, and Waiver "13. I find no basis for equitable estoppel in view of the fact that petitioner's claim did not ripen into a justiciable controversy until respondent board adopted the January 27, 1998 resolution approving the lease extension, after respondent hospital had provided notice of its election of its option to extend the lease. As noted above, petitioner timely commenced his appeal within 30 days of the date of adoption of the resolution. Therefore, I find no inequitable or fraudulent conduct on the part of petitioner to warrant estoppel. Furthermore, in view of my finding, as discussed below, that the lease extension violates Education Law "403-a, equitable estoppel may not be used to nullify such violation (Moncel Realty Corp. v Whitestone Farms, Inc., 188 Misc. 431, aff'd 272 AD 899; 57 NY Jur 2d, Estoppel, Ratification, and Waiver "15).

Respondent also contends that the appeal is moot because by letter dated March 4, 1998, the Office of Facilities Planning of SED consented to the renewal of the lease pursuant to Education Law "403-a. The Commissioner of Education will only determine matters in actual controversy and will not render a determination on an issue which subsequent events have laid to rest (Appeal of Grinnell, 37 Ed Dept Rep 504, Decision No. 13,914; Appeal of Edward G., 36 Ed Dept Rep 9, Decision No. 13,636). The letter from the Office of Facilities Planning expressly states that consent to the renewal is granted based on the information provided in the letter of respondent's superintendent of schools, dated February 12, 1998, which requests the Commissioner's consent pursuant to Education Law "403-a. The superintendent's letter includes the period of renewal of the lease, the parties involved, and the purpose of the lease, and certification by the superintendent that the terms of the contract are in compliance with Education Law "403-a(1). In as much as the Office of Facilities Planning's letter providing consent was based upon the limited information in the superintendent's letter, I do not find it determinative with respect to the issues presented in this appeal and accordingly I decline to dismiss the appeal as moot.

Upon my review of the record, I find that the provision of the lease which mandates respondent board of education to extend the lease for an additional ten-year period at the sole election of respondent hospital violates Education Law "403-a.

Education Law "403-a(1) authorizes a board of education to adopt a resolution providing for the lease of specific real property of the district that "is not currently needed for school district purposes" in instances in which "the leasing of such property is in the best interest of the school district"; "403-a(2) provides for a renewal of the lease for a period of up to ten years, upon the consent of the Commissioner; "403-a(3) provides that the property may be leased to "any person, partnership or corporation" the board determines will provide the "most benefit to the school district". To effectuate the legislative intent of the statute that the lease involve unneeded district property, that the lease be in the best interest of the district and that the district receive the "most benefit" from such lease, it is necessary for the board to make such determinations at the time of renewal, as well as at the time the lease is first entered into. Paragraph 4. of the lease, in requiring the lease extension at the sole election of the hospital, impermissibly abrogates the board's responsibility and obligation to determine whether, at the time of renewal, the property is not currently needed for school district purposes, that the leasing of the property is in the best interest of the school district and that the district receive "the most benefit" from the lease extension. Furthermore, in removing any discretion of the board with respect to renewal of the lease, paragraph 4. impermissibly permits, in effect, a twenty-year lease at the sole discretion of the hospital, in violation of the provisions of "403-a(2), as well as "403-a(5), which requires that a lease for a period in excess of ten years receive voter approval by referendum.

While I acknowledge that, notwithstanding the provisions of paragraph 4. of the lease, the board's January 27, 1998 resolution states that the leased parking area is not currently needed for school district purposes and that it would not be needed for the duration of the ten-year lease renewal, I am not persuaded that this provision constitutes a bonafide determination, in view of respondent board's statements in its responsive papers that it considers itself to be contractually obligated to extend the lease, pursuant to paragraph 4. of the original lease. Furthermore, even if I were to take such provision at face value, respondent's resolution does not include a finding that the leasing of the real property is in the best interest of the district or that the lease extension will provide the "most benefit" to the district, as required by Education Law "403-a. Therefore, I find the board's resolution providing for the extension to be defective in that it fails to comply with the provisions of Education Law "403-a.

I also find that the lease extension fails to provide for at least fair market rental value of the leased property, in violation of Education Law "403-a(1)(a). While respondent's January 27, 1998 resolution states that ". . . the initial rental of fee of $95,000 paid by the Hospital to the District was set forth to be the total rental charge for both the initial ten year and the ten-year renewal, if exercised, and that therefore no additional rental will be charged to the Hospital . . .", there is no such provision in the lease. To the contrary, paragraph 2. of the lease provides that the $95,000 payment is for the original ten year lease ("as and for its payment for the ten (10) year lease aforesaid") and further states in paragraph 4. that "this lease shall be renewable for a second ten year period at no additional cost to the Hospital [emphasis added]". As a further indication that the $95,000 payment was for the initial ten-year lease only, the lease contains no provision for a refund of any part of the payment in the event that the lease extension does not occur.

A board of education has discretion to determine the use of school property and is authorized to enter into a lease agreement regarding district property, provided that the provisions of Education Law "403-a are met (Appeal of Hollister, 33 Ed Dept Rep 294, Decision No. 13,053). In view of the board's failure to meet the statutory requirements as discussed above, I find the board's resolution and the lease extension to be null and void.

Although the record in this appeal compels me to find the board resolution and lease extension null and void, respondent board remains free to reconsider whether the property in question is currently necessary for school district purposes. If the property is not currently necessary for district purposes, the board can enter into negotiations for the lease of the property for its fair market value if the board in good faith determines that such action would be in the best interests of the district, pursuant to Education Law "403-a.

THE APPEAL IS SUSTAINED.

IT IS ORDERED, that the January 27, 1998 resolution of the board of education approving the renewal of the initial ten-year lease which expired on August 31, 1998 is declared null and void; and it is further

ORDERED, that the lease extension entered into with respondent Canton-Potsdam Hospital as a result of such resolution is declared null and void.

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