Appeal of BRENDA CAROLE ANDERSON from action of the Board of Education of the East Ramapo Central School District, Congregation Bais Malka, and the Hebrew Academy for Special Children, Inc., regarding real property, and application for the removal of board members Moses Friedman, Moshe Hopstein, Morris Kohn, Eliyahu Solomon, Yehuda Weissmandel and Aron Wieder.

Decision No. 16,438

(December 24, 2012)

Minerva & D’Agostino, P.C., attorneys for respondent Board of Education of the East Ramapo Central School District, Roslyn Roth, Esq., of counsel

Bingham McCutchen, LLP, attorneys for respondents Friedman, Hopstein, Kohn, Solomon, Weissmandel and Wieder, David J. Butler and Randall M. Levine, Esqs., of counsel

KING, JR., Commissioner.--Petitioner challenges a determination of the Board of Education of the East Ramapo Central School District (“Board”), as well as the actions of individual board members Moses Friedman, Moshe Hopstein, Morris Kohn, Eliyahu Solomon, Yehuda Weissmandel and Aron Wieder (“respondent board members”) (collectively “respondents”), relating to the sale of Colton Elementary School (“Colton”) to Congregation Bais Malka (“Bais Malka”) and the Hebrew Academy for Special Children, Inc. (“Academy”).  The appeal must be dismissed.  Moreover, to the extent that petitioner seeks the removal of respondent board members, the application must be denied.

As noted in Appeal of Hatton, 49 Ed Dept Rep 47, Decision No. 15,954 (“Appeal of Hatton”) [1] the Board voted to close Colton on April 1, 2009.  On July 15, 2009, the Board voted to lease Colton to Bais Malka and the Academy for five years, beginning August 1, 2009.  Pursuant to the lease approved by the Board, Bais Malka and the Academy were responsible for “all repairs and maintenance” of Colton except “major structural repairs.”[2]  In addition, the lease gave Bais Malka a “right of first refusal” to purchase Colton in an amount identical to “any arm’s length offer to purchase [Colton] by a third party” if the Board decided to sell it. 

On March 17, 2010, the Board authorized an independent appraisal of Colton that estimated its value as a “leased fee interest” at $6.8 million (“first appraisal”).  In February 2011, the Board obtained another appraisal from the same appraiser which estimated its value, again as a “leased fee interest,” at $6.6 million (“second appraisal”).  According to the appraiser, the second appraisal was lower than the first because it “took into consideration the overall market climate, which was declining.” 

On May 25, 2011, respondent board members, constituting a majority of the Board, voted to approve a contract for the sale of Colton to Bais Malka and the Academy for $6.6 Million.[3]  According to the Board’s resolution, this contract was “subject to an RFP” to solicit “higher and better offers.”  The contract thus was apparently conditioned on either the Board receiving no higher bids for Colton in response to the RFP or, if higher bids were received, Bais Malka and the Academy matching any higher bid, pursuant to Bais Malka’s “right of first refusal.”  Accordingly, the board’s president, Aron Wieder, executed a contract for the sale of Colton to Bais Malka and the Academy for $6.6 million.  Notably, the contract also gave Bais Malka and the Academy various “credits” against the sales price, including $36,310 for the “repair and replacement of the electrical system” and an unspecified amount for rent paid after the contract became “unconditional” (“rent credit”).[4] 

On June 1, 2011, the Board issued an RFP to solicit higher bids for Colton, and on June 20, 2011, petitioner commenced this appeal.  On July 6, 2011, I granted petitioner’s request for interim relief prohibiting the Board from completing the sale of Colton pending a final decision in this appeal.

The Board’s RFP for the sale of Colton was held open until July 27, 2011.  While the record reflects that there may have been some inquiries from prospective bidders, the Board received no bids for Colton in response to its RFP.  Accordingly, Colton is to be sold to Bias Malka and the Academy per the terms of its sales contract with the Board.  

Petitioner challenges the sale of Colton on several grounds.  Initially, she asserts that the Board did not have enough votes to approve the sale of Colton.  Petitioner further claims that the Board did not make a good faith attempt to obtain the best price for Colton and appears to suggest that certain sales credits given to Bais Malka and the Academy were improper.  In addition, petitioner maintains that selling Colton is not in the district’s best interest, that the Board improperly gave “preferential treatment” and “hidden preferences” to Bais Malka and the Academy, and that the Board generally has not acted in the district’s best interest.  As relief, petitioner requests that the Board be prohibited from selling Colton, that I direct the Board to “engage [in] a thorough and deliberative process before initiating any action to sell any district property,” and that I “review and approve all real property transactions proposed by [the Board].”  In addition, petitioner seeks the removal of respondent board members for “failing to follow the directions of the Commissioner in prior decisions in regards to selling school district property and repeated egress [sic] failure to fulfill their fiduciary responsibilities to act in the best interest of the East Ramapo Central School District.”

Respondents generally deny petitioner’s allegations and contend, among other things, that the decision to sell Colton was in the district’s best interests.  Respondents also contend that the Board took reasonable steps to ascertain Colton’s value and that the sales contract with Bais Malka and the Academy – including the sales price of $6.6 million – is neither arbitrary nor capricious.  In addition, respondent board members contend that they acted in good faith and “upon the advice of counsel” and raise a number of procedural defenses.  

I will first address the procedural issues, beginning with petitioner’s reply.  The purpose of a reply is to respond to new material or affirmative defenses set forth in an answer (8 NYCRR §§275.3 and 275.14).  A reply is not meant to buttress allegations in the petition or to belatedly add assertions that should have been in the petition (Appeal of Caswell, 48 Ed Dept Rep 472, Decision No. 15,920; Appeal of Hinson, 48 id. 437, Decision No. 15,908; Appeal of Baez, 48 id. 418, Decision No. 15,901).  Therefore, while I have reviewed the reply, I have not considered those portions containing new allegations or exhibits that are not responsive to new material or affirmative defenses set forth in the answer.

Respondent board members contend that petitioner lacks standing “to challenge the bidding process selected by the Board.”  An individual may not maintain an appeal pursuant to Education Law §310 unless aggrieved in the sense that he or she has suffered personal damage or injury to his or her civil, personal or property rights (Appeal of Waechter, 48 Ed Dept Rep 261, Decision No. 15,853; Appeal of Erickson, 47 id. 261, Decision No. 15,689).  Only persons who are directly affected by the action being appealed have standing to bring an appeal (Appeal of Waechter, 48 Ed Dept Rep 261, Decision No. 15,853; Appeal of Erickson, 47 id. 261, Decision No. 15,689). 

I find that petitioner, who brings this appeal and application as a district resident, has standing to do so.  When read in its entirety, petitioner’s appeal alleges waste and abuse by the Board.  Petitioner unquestionably has standing to bring such a claim (seee.g., Appeal of Roth, 50 Ed Dept Rep, Decision No. 16,171).  Similarly, to the extent that petitioner seeks removal of board members for alleged misconduct, she clearly has standing (seee.g., Appeal of Hertel, 49 Ed Dept Rep 267, Decision No. 16,021; Appeal of D.B., 47 id. 336, Decision No. 15,716).  Accordingly, I will not dismiss the appeal or application for lack of standing.

In addition, respondent board members contend that the appeal must be dismissed as premature because, at the time that they filed their answer, the RFP had not closed, and the sales contract was not “final.”  However, as noted above, petitioner’s claims are much broader than merely challenging a single contract.  In any event, the RFP has since closed.   Accordingly, I decline to dismiss petitioner’s claims as premature. 

Respondent board members further argue that the appeal should be dismissed because petitioner failed to join Bais Malka and the Academy as necessary parties.  Specifically, they contend that petitioner failed to clearly include Bais Malka and the Academy in the caption of the petition.  I disagree.

A party whose rights would be adversely affected by a determination of an appeal in favor of a petitioner is a necessary party and must be joined as such (Appeal of Murray, 48 Ed Dept Rep 517, Decision No. 15,934; Appeal of Miller, 48 id. 465, Decision No. 15,917; Appeal of Williams, 48 id. 343, Decision No. 15,879).  Joinder requires that an individual be clearly named as a respondent in the caption and served with a copy of the notice of petition and petition to inform the individual that he or she should respond to the petition and enter a defense (Appeal of Murray, 48 Ed Dept Rep 517, Decision No. 15,934; Appeal of Miller, 48 id. 465, Decision No. 15,917; Appeal of Williams, 48 id. 343, Decision No. 15,879).

On the record before me, I find that both Bais Malka and the Academy were properly joined as respondents.  Both Bais Malka and the Academy appear in the caption identified as “Respondents”, and the record reflects that both were personally served with copies of the petition and notice of petition.[5]  It is the notice of petition which alerts a party that he or she is required to appear in the appeal and answer the allegations contained in the petition (seee.g., Appeal of Luciano, 51 Ed Dept Rep, Decision No. 16,308; Appeal of Peterson, 48 id. 530, Decision No. 15,939; Appeal of R.R. and P.R., 48 id. 326, Decision No. 15,873).  Thus, while Bais Malka and the Academy did not appear in this matter, I find that both were clearly identified as respondents, appropriately served and given a full and fair opportunity to respond to the allegations in the petition.  Consequently, I will not dismiss petitioner’s appeal for failing to join them.

Respondent board members next assert that petitioner failed to provide them with adequate notice of her application to seek their removal, because the notice that she used did not advise them that an application for their removal was being made, as required by 8 NYCRR §277.1.  However, the papers filed by petitioner include both the appeal notice required by 8 NYCRR §275.11, as well as a notice that named each respondent board member individually and that complies with the requirements of 8 NYCRR §277.1 pertaining to removal applications.  Therefore, I am unable to conclude on the record before me that petitioner failed to provide respondent board members with adequate notice of her intent to seek their removal.

However, an appeal to the Commissioner must be commenced within 30 days from the making of the decision or the performance of the act complained of, unless any delay is excused by the Commissioner for good cause shown (8 NYCRR §275.16; Appeal of Lippolt, 48 Ed Dept Rep 457, Decision No. 15,914; Appeal of Williams, 48 id. 343, Decision No. 15,879).  It is undisputed that the Board approved a lease with Bais Malka and the Academy on July 15, 2009.  Accordingly, to the extent that petitioner challenges this lease or any of the provisions in it, including Bais Malka’s “right of first refusal,” her claims are untimely.

To the extent that petitioner seeks the removal of Aron Wieder as a board member, her removal application must be dismissed as moot.  The Commissioner will only decide matters in actual controversy and will not render a decision on a state of facts which no longer exist or which subsequent events have laid to rest (Appeal of a Student with a Disability, 48 Ed Dept Rep 532, Decision No. 15,940; Appeal of M.M., 48 id. 527, Decision No. 15,937; Appeal of Embro, 48 id. 204, Decision No. 15,836).  Respondents indicate and petitioner does not dispute that Aron Wieder is no longer a board member.  Accordingly, petitioner’s application to remove him as a board member is moot and must be dismissed (seee.g., Application of Laub, et al., 49 Ed Dept Rep 317, Decision No. 16,040; Application of Lilly, 47 id. 307, Decision No. 15,705). 

Turning to the merits, petitioner contends that the Board did not have enough valid votes to authorize the sale of Colton.   In particular, petitioner contends that board member Yehuda Weissmandel, whose vote in favor of the sale was necessary for its approval, had neither been appointed by the Board nor elected to any seat on the Board for the 2010-2011 school year, so the “motion to sell Colton did not pass with 5 valid votes.”  However, the record before me reflects that Yehuda Weissmandel had been elected for a term that began on March 18, 2011, and that he was sworn in as a board member on May 20, 2011.  Accordingly, I am unable to find that Mr. Weissmandel was not a board member on May 25, 2011 when he voted to sell Colton, or that the decision to sell Colton did not pass with “5 valid votes.”[6]

Petitioner contends that the Board did not make a good faith attempt to obtain the best price for Colton.  In this regard, petitioner suggests that the sale of Colton for $6.6 million was too low, and argues that the Board should have listed Colton with a real estate broker.  In addition, petitioner makes a number of contentions regarding the RFP, including that it was not held open long enough, not advertised correctly, and overall made Colton a “less than desirable sale” for bidders. 

It is well settled that when selling real property, a board of education has a fiduciary duty to secure the best price obtainable in the board’s judgment for any lawful use of the premises (seeRoss, et al. v. Wilson, et al., 308 NY 605; Davis, et al. v. Bd. of Educ. of Hewlett-Woodmere Union Free School Dist., 125 AD2d 534; New City Jewish Center v. Flagg, et al., 111 AD2d 814, aff’d 66 NY2d 980; Merritt Meridian Construction Corp. v. Gallagher, et al., 96 AD2d 933).  Unless a particular method of sale is prescribed by law, a board of education has broad discretion to determine the best price for which a property can be sold, to condition the sale on such terms, as in the board’s judgment, will yield the maximum financial benefit for the district, and to determine the best method of sale to be utilized in a particular case (seee.g., Ross, et al. v. Wilson, et al., 308 NY 605; Merritt Meridian Construction Corp. v. Gallagher, et al., 96 AD2d 933; seealsoAppeal of Brown School, 24 Ed Dept Rep 393, Decision No. 11,437; Appeal of Baker, 14 id. 5, Decision No. 8,833).  However, a board of education may not act arbitrarily, and it must exercise its judgment and discretion in good faith (seeRoss, et al. v. Wilson, et al., 308 NY 605; New City Jewish Center v. Flagg, et al., 111 AD2d 814; Appeal of Brown School, 24 Ed Dept Rep 393, Decision No. 11,437).  This includes taking reasonable steps to ascertain the value of a property and to utilize a method of sale which is apt to bring in the best price (seeRoss, et al. v. Wilson, et al., 308 NY 605; Merritt Meridian Construction Corp. v. Gallagher, et al., 96 AD2d 933; Appeal of Baker, 14 Ed Dept Rep 5, Decision No. 8,833).  In an appeal to the Commissioner, a petitioner has the burden of demonstrating a clear legal right to the relief requested and the burden of establishing the facts upon which petitioner seeks relief (8 NYCRR §275.10; Appeal of Aversa, 48 Ed Dept Rep 523, Decision No. 15,936; Appeal of Hansen, 48 id. 354, Decision No. 15,884; Appeal of P.M., 48 id. 348, Decision No. 15,882). 

As an initial matter, petitioner offers no proof establishing that Colton’s value is other than the $6.6 million for which it was appraised.  Rather, petitioner relies solely on the fact that Colton was assessed by the Town of Ramapo (“Town”) as of July 1, 2010 for $11,966,758 and appears to suggest that this is Colton’s fair market value.   However, the record is devoid of any explanation of how the Town arrived at its $11,966,758 assessed value.  In addition, there is no proof that the assessed value was based on a recent appraisal by the Town assessor or any other information that would allow me to conclude that this figure is a more accurate assessment of Colton’s fair market value than the appraisals relied upon by respondents.  Accordingly, to the extent that petitioner is alleging that Colton is worth $11,966,758, or that the Town’s assessment is “proof” that Colton is worth something more than $6.6 million, I am unable to find that she has met her burden of proof.

Nor am I able to conclude, as petitioner asserts, that the sale of Colton should be set aside because the Board did not list Colton with a real estate broker.  I note, initially, that the record is unclear as to whether the Board specifically engaged a broker to handle the sale, or merely used a realtor website.  In any event, Education Law §1804(6)(c), which authorizes central school districts to sell real property after at least seven years of centralization, does not prescribe a specific method of sale of a school building, nor do the other provisions of the Education Law that relate to the sale of school buildings (seee.g., Education Law §§402 and 1709(11)).  Thus, there is no requirement that a board of education use real estate brokers when selling real property.  As such, I am unable to find that the Board’s alleged non-use of a broker alone would require overturning the sale of Colton.

Petitioner’s assertions with respect to the RFP also are not sufficient to overturn Colton’s sale.  Although I am not fully persuaded by the Board’s contention that its RFP was a “reasonable step” towards obtaining the best price for Colton,  Education Law §1804(6)(c) does not require that an RFP be used when selling real property, and the Board here took additional steps to ascertain Colton’s value (i.e., by obtaining two appraisals).[7]  Both appraisals valued Colton relatively equally – at $6.8 million and $6.6 million.  The second appraisal valued Colton at $6.6 million, which is ultimately the amount for which Colton was sold - before the application of sales credits.   Thus, absent any proof that Colton’s sale for more than $6.6 million was possible (which petitioner does not provide), the sole question is whether the Board could reasonably rely on its second appraisal for purposes of valuing Colton.  On the record before me, I am unable to conclude that such reliance is unreasonable.  

Although petitioner attempts to discredit the Board’s appraiser and argues that the second appraisal “is basically a worthless document that tries to justify the selling price of Colton,” she offers no adequate proof to support her allegations.  For example, petitioner accuses the Board’s appraiser of lying in an affidavit and of being “biased,” but offers nothing more than her subjective opinion in support of her allegations.  Petitioner, who is not an appraiser, also appears to contend that the second appraisal is inaccurate for several reasons.  She challenges the district’s use of the same appraiser for each appraisal.  She also asserts there is an earlier 2009 appraisal the Board should have used instead.  Finally, she challenges the “comparable sales” analysis of the second appraisal.  However, the first two assertions do not provide any basis for discrediting the second appraisal.  Moreover, petitioner’s challenge to the “comparable sales” analysis relies solely on sale prices and the price of square footage with no analysis of other relevant factors in determining market value.  Petitioner offers nothing, therefore, from which I can conclude that the Board’s reliance on its second appraisal was unreasonable.[8]

Petitioner also challenges certain sales credits given to Bais Malka and the Academy in its contract of sale with respondent.  Many of petitioner’s allegations in this regard, however, appear not to challenge the propriety of the credits themselves, but rather the “advantage” that these credits allegedly give to Bais Malka and the Academy over other potential RFP bidders.  As noted above, however, the issuance of an RFP was not required, nor is competitive bidding.  The issue before me is not whether Bais Malka and the Academy were granted an advantage in the RFP process, rather it is whether the Board failed to obtain the best price. 

Petitioner, however, contends that a sales credit that respondent gave to Bais Malka and the Academy for the repair and replacement of Colton’s electrical system ($36,310) is improper in that this should have been done “at no cost to the district.”  As proof, petitioner cites to board minutes from March 16, 2011 which indicate that Bais Malka and the Academy were to install a “new fire alarm system” at Colton at their own expense.  However, I am unable to tell from the record whether the repair and replacement of Colton’s electrical system for which a credit is given, and the cited installation of a new fire alarm system are related.  Furthermore, I cannot tell from the record whether the repair and replacement of Colton’s electrical system is considered a “major structural repair” under the Board’s lease with Bais Malka and the Academy, requiring payment by the Board, though the definition of the term in the contract is sufficiently broad to encompass a repair of such magnitude.  Accordingly, on this record, I cannot conclude that this credit is improper.

In addition, petitioner contends that a “rent credit” that the Board is giving to Bais Malka and the Academy is improper.  However, it appears from the record that the “rent credit” to which petitioner refers is a negotiated credit in the sales contract between respondent and Bais Malka/the Academy in an amount equal to any rent paid by Bais Malka and/or the Academy after the agreed upon closing date of Colton’s sale, so long as any delay was not attributable to Bais Malka and/or the Academy.[9]  As such, petitioner – who simply notes that this credit “is not in the initial lease contract” - does not explain why it was improper to include such credit in the sales contract.  Further, while petitioner contends that this credit is “not in the best interest of the school district,” she offers nothing to support this claim.  It is not unreasonable for the purchaser of a building who enters an agreement with a closing date to seek compensation if the closing is delayed through no fault of its own.  Accordingly, I am unable to find that petitioner has met her burden of showing the the “rent credit” in respondent’s sales contract with Bais Malka and the Academy was improper.

Finally, petitioner challenges Colton’s sale by asserting that the Board “has not considered the impact on the actual amount the district would net from the sale of Colton.”  In particular, petitioner contends that after accounting for credits, lost rent revenue and money that may have to be paid back, the sale of Colton would generate “just $2,627,038 in additional revenue to the District,” and would put the district in worse shape than if it did not sell Colton at all.  In response, the Board denies this allegation and states that the sale of Colton will provide needed funds, will help reduce its debt, and will improve the district’s financial condition.  On the record before me, I am unable to find that petitioner has met her burden on this point.

In light of the above, I am unable to find the Board’s sale of Colton for $6.6 million was for less than fair market value or was otherwise improper and, consequently, am unable to overturn it.

Nor has petitioner demonstrated a basis for removal of respondent board members.  A member of the board of education or a school officer may be removed from office pursuant to Education Law §306 when it is proven to the satisfaction of the Commissioner that the board member or school officer has engaged in a willful violation or neglect of duty under the Education Law or has willfully disobeyed a decision, order, rule or regulation of the Board of Regents or Commissioner of Education (Application of Kolbmann, 48 Ed Dept Rep 370, Decision No. 15,888; Application of Schenk, 47 id. 375, Decision No. 15,729).  Here, I am unable to find that petitioner has sufficiently pled and proven a basis for removal.

Specifically, petitioner alleges as a basis for removal that respondent board members failed to fulfill their fiduciary responsibilities with respect to the sale of Colton.  In support of this contention, petitioner cites to two previous Commissioner’s decisions (Appeal of White, 50 Ed Dept Rep, Decision No. 16,239 and Appeal of Luciano and Hatton, 50 Ed Dept Rep, Decision No. 16,153), which involve the closing and sale of a different elementary school, in apparent support of her claim that sale of Colton was improper.  However, as set forth above, petitioner has failed to establish that the sale of Colton was improper or should be set aside.  Accordingly, I cannot find that this assertion is a basis for removal.

In addition, though not clearly articulated, petitioner appears to contend that respondent board members should be removed from office because the Board has allegedly shown “preferential treatment” to Bais Malka and the Academy in a number of ways, including the Board’s alleged refusal to enforce its lease with Bais Malka and the Academy with respect to late rent payments.  However, petitioner has failed to establish on this record that any individual respondent board member acted in willful violation of a decision, order, rule or regulation of the Board of Regents or Commissioner of Education. 

Overall, only two paragraphs in petitioner’s entire application set forth assertions against individual board members.  One of these paragraphs makes assertions against board member Aron Wieder who, as noted above, is no longer a board member.  The other paragraph asserts only that Moses Friedman, Moshe Hopstein, Morris Kohn, Eliyahu Solomon, and Yehuda Weissmandel have “abused their fiduciary responsibilities by approving the sale to Bais Malka and [the Academy] prior to the issuance of the RFP.”   While authorizing a sales contract prior to issuing an RFP may be unusual, I am unable to find that it is unlawful or a “willful” violation of any decision, order, rule or regulation of the Board of Regents or Commissioner of Education.

Finally, one administrative matter remains;  respondent board members have requested a certificate of good faith pursuant to Education Law §3811(1) for the purpose of reimbursing them for their legal fees and expenses incurred in this proceeding. 

Education Law §3811(1) generally authorizes a district to reimburse certain individuals, including board members, for the “reasonable costs and expenses” of defending an action or proceeding brought against them, including proceedings before the Commissioner of Education, that arise out of the exercise of their powers or the performance of their duties when a court or the Commissioner of Education find that such individuals “appeared to have acted in good faith.”  For the reasons discussed above, I am unable to find on the record before me that respondent board members acted in bad faith in this matter, though I share petitioner’s concern that respondent’s actions give an appearance of preferential treatment toward Bais Malka and the Academy.  Accordingly, I will issue a certification for the limited purpose of Education Law §3811(1), with the admonition that any such reimbursement must be reasonable, and that this decision should in no way be construed as a finding that any legal expenses identified in the record are, in fact, reasonable. 

THE APPEAL IS DISMISSED AND THE APPLICATION IS DENIED.

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