In this breach of contract and fraudulent misrepresentation lawsuit, the Village of Malone ("Defendant" or "Village") moves to dismiss Plaintiff Bianchi Industrial Services, Inc.'s ("Bianchi" or "Plaintiff") complaint, pursuant to New York C.P.L.R. 3211(a)(1), and for summary judgment on its counterclaim to recoup $68,850 previously paid by it to Bianchi for site mobilization costs in connection with the parties' contract for demolition of the fire-ravaged, unsafe Hotel Flanagan structure in Malone, New York. Defendant opposes the relief on substantive and procedural grounds, noting the Village's motion stayed discovery, depriving it of the benefit of certain discovery responses.

For the reasons that follow, Defendant's motions are denied and the parties are directed to complete discovery.

Defendant alleges its contract with Bianchi is illegal and, thus, void since no funds were appropriated and available for the work as required by New York Village Law §5-520. "The policy underlying the rule against holding municipalities liable on an implied contract theory is that of safeguarding the taxpayers' interest against extravagance and collusion on the part of public officials' by requiring municipalities to abide by statutory restrictions on their contractual authority." Vrooman v. Village of Middleville, 91 AD2d 833, 835 (4th Dep't 1982), citing to Corning v. Village of Laurel Hollow, 48 NY2d 348, 352 (1979); see also Gill, Korff and Assoc. v. Onondaga County, 152 AD2d 912 (4th Dep't 1989) [denial of quantum meruit recovery to contractor]. Where "...denial of recovery would result in unjust enrichment of the municipality and a recovery based upon quantum meruit would not be contrary to the policy underlying the [*2][above-quoted] general rule," a plaintiff is entitled to recover "where... [it]...has entered into a contract in good faith, the municipality possesses the authority to enter into the contract, the contract is not violative of public policy and the circumstances indicate that if plaintiff is not compensated, the municipality would be unjustly enriched." Vrooman at 834, citing to Lindlots Realty Corp. v. County of Suffolk, 278 NY 45, 53 and 10 McQuillin, Municipal Corporations [3d ed., revised] §§ 29.110, 29.111.

Contemporary news accounts — regardless of accuracy — detailed the municipality's successful efforts at securing additional funds from elected officials to raze the structure based on characterizations it posed a danger to the public. Defendant does not dispute Plaintiff incurred site mobilization and related costs on its behalf, but rather seeks to escape liability therefor, citing statutory violation. The Village twice solicited bids for the project, entering into an August 22, 2003, $459,000.00 Lump Sum Construction Contract with Bianchi for the stated purpose of "Demolition and removal of Flanagan Hotel building," as evidenced by then-Mayor Gokey's execution of the Contract. This Contract stated that work was to commence on or before September 22, 2003, and specified a deadline date of May 31, 2004.

At some point in time, it appears the Village — whether under a mistaken belief or not — determined the funds available for the Hotel's demolition imposed upon it a duty to coordinate with the State Office of Parks, Recreation and Historical Preservation ("SOPRHP") for sign-off and approval of the project. The SOPRHP correspondence presented by the Village on this motion appears to condition the release of funds on the Village's preservation of a portion of the premises (limiting demolition to the top three floors). These two letters, dated March 18, 2002, and April 8, 2002, set forth SOPRHP's position that the demolition of the Hotel was to be limited to the upper three floors which were deemed to have been a "later, non-historic addition to the building***Additional demolition... is not acceptable." [March 18, 2002 SOPRHP letter to Village's consultant]. A copy of that letter was forwarded to the Village's Mayor by letter dated April 8, 2002.

Bianchi denies any knowledge of the letters or their content noting discovery was stayed upon this motion's filing and, instead, argues that a later-dated letter of January 31, 2003, from the U.S. Department of Housing and Urban Development, provides evidence that the federal government had no objection to Defendant using its remaining 1996 and 1999 Community Block Development Grant ("CBDG") to demolish the Hotel. In this regard, it is argued that the application of the National Historic Preservation Act and regulations impose a requirement upon HUD, as a federal agency approving any federal undertaking, to coordinate with the SOPRHP. Thus, it is argued that since funding was being provided by HUD and it was obliged to comply with applicable historic preservation regulations, it must be presumed that HUD did comply prior to authoring the January 31, 2003, letter.

On October 28, 2003 the Village Board of Trustees convened a Special Board Meeting whereat, in recognition that "....funding for the Hotel Flanagan demolition project is presently unavailable, pursuant to action by [SOPRHP]...", the Trustees passed a Resolution terminating its contract with Franklin County respecting the Hotel's [*3]tax foreclosure status ^[FN1]. On that same day, Village Mayor Gokey sent Bianchi a letter requesting it "....refrain from any further startup or demolition activities since a substantial portion of the funding for this project is HUD money, which requires the consent of [SOPRHP]." This same letter provided assurances to Bianchi: "The village thinks that they can alleviate [SOPRHP's] concerns [about the Hotel demolition] fairly quickly." Having heard nothing, on May 27, 2004, Bianchi sent the Village's newly-elected Mayor, Brent S. Stewart, a certified letter inquiring "When can we expect to re-start and complete our work?" Having received no response, similar inquiry was made by Bianchi on August 18, 2004. Mayor Stewart replied by letter dated September 3, 2004, referring to Mayor Gokey's October 28, 2003, letter and the delay occasioned by SOPRHP's concerns about the Hotel's demolition and that "....to date [SOPRHP] has refused to consent to the demolition. As such, it is impossible to move forward with the demolition...." and requested a detailed invoice "...for such expenditures in light of said notice to refrain."

In the interim, the Village had received a January 13, 2004, letter from HUD to Mayor Stewart referring to its receipt of two, October 17, 2003, objections to the release of funds. The objections were forwarded to the Village on October 28, 2003 — the same day as the Special Board Meeting — for its "point-by-point response." HUD determined the objections had merit:

"We have determined that the [Village] did, in fact, omit one or more of the steps set forth at subparts F and G of 24 CFR 58 for the conduct, preparation and completion of an environmental assessment (EA). This occurred when the Village used the environmental impact statement prepared for a demolition limited to the top three floors of the Hotel, although a decision has been made to demolish the entire Hotel."

(January 13, 2004, HUD letter to Mayor Stewart, emphases added).

"As a result, we are denying the Village's request to release HUD funding, until the Village re-evaluates its environmental review record, receives written clearance from [SOPRHP], and publishes an acceptable notice of intent to release funds and a notice of finding no significant impact, or a combined notice. Proof of these actions should be enclosed when the village submits another Request for Release of [*4]Funds...."

More than one year after the Contract's specified startup date, Bianchi wrote an October 1, 2004, letter to Mayor Stewart seeking final resolution of the matter:

"On September 17th, 2004 I sent you...a copy of the Flanagan Hotel charges and lost profits [Bianchi] seeks from the [Village] in the event the Village considers its contract with Bianchi terminated. Our last instruction from the Village was to "suspend" work under the contract. Published reports indicate that the Village, apparently, has or will terminate the contract, although we have not received formal notice from the Village. We remain ready, willing and able to complete the work under the contract.

To date I have not had a return response. [Bianchi] will expect an answer on one of the following by October 11, 2004:

1. Direction to proceed with work; or

2. Notice that contract is terminated, with response to Bianchi's right to recover damages for improper termination.

If we don't hear from you by the given date we will proceed on the assumption, based on published reports, that the Village has terminated the contract. ****"

Bianchi filed a Notice of Claim, serving it on March 3, 2005, later serving an Amended Notice of Claim on March 22, 2005, thereafter commencing this action on June 13, 2005. As to the breach of contract cause of action, it is the Villages' position that the Notice of Claim was untimely served more than one year after the cause of action accrued, at the latest on October 28, 2003 (Mayor Gokey's letter to refrain from further startup or demolition activities); and, the action was untimely commenced more than 18 months after the cause of action accrued, both being in contravention of the time periods set forth in New York Civil Practice Law and Rules §9802. Similarly, the Village argues Bianchi's fraudulent misrepresentation cause of action is time-barred and that the Notice of Claim was not timely filed within 90 days as required by New York General Municipal Law §50-e. Additionally, it is argued that since Bianchi knew the Contract was contingent upon securing federal funding, no cause of action for fraudulent misrepresentation can be stated.

This highly-publicized project, put out to bid on two occasions, is not one [*5]which can be said to contravene public policy against collusion as a matter of law. Nor can it be said that Bianchi's services constitute an extravagance insofar as there was never any question that demolition — whether total or partial — must occur. It cannot be said the taxpayers received no benefit from Bianchi's services, inclusive of erected fencing and installation of electric service at the site. A jury may find Bianchi entered into the Contract in good faith, contracting for "the demolition and removal of the [Hotel]" insofar as the Contract was without stated reservation, exception, or contingencies as to either the scope of the work or the source of its financing. Clearly, the Village possessed the authority to enter into the Contract, as evidenced by the then-Mayor's signature. Whether the failure to appropriate funds by the Village Board was due to the Village Board members' hopes to use yet-to-be-released federal funds to underwrite the demolition, was a purposeful strategy, or was a result of administrative oversight, no evidence whatsoever has been presented on this motion that the Village Board either opposed this expenditure or was unaware of it.

While there was no resolution passed to approve the demolition Contract or its appropriation, the Court notes the substance of the October 28, 2003, Resolution canceling the related contract between the County and the Village. Specifically, the Village Board took no action with regard to Bianchi's services except to make passing reference, in its precatory language, as to the existence of a "demolition project" and the lack of funds therefor: "WHEREAS, funding for the Hotel Flanagan demolition project is presently unavailable, pursuant to action by the [SOPRHP]...." This project was well-known to the public and elected officials alike.

In deference to the Village's instructions to refrain from further work and in reliance upon its representations that the Village was working with SOPRHP to alleviate their historic preservation concerns, Bianchi awaited further word on the Village's progress. The parties' actions can be said to be consistent with their consent to hold the project in abeyance, impliedly extending the deadlines established in the Contract. At no time prior to January 2005 did the Village, itself, take a position on the contract's status. In response to Bianchi's numerous letters, Mayor Stewart referred to Mayor Gokey's October 24, 2003 [sic October 28, 2003] letter, characterizing the status as "For this reason, the Village has not consented to any further startup or demolition activities by your company." Not until Bianchi's letter of October 1, 2004, which imposed an October 11, 2004, reply deadline on the Village, was Bianchi able to "assume" the contract was terminated by the Village. Thus, it was on this date that Bianchi's cause of action accrued, making its Notice of Claim for both causes of action (breach of contract, fraudulent misrepresentation) and commencement of action timely.

Defendant's motion is properly denied.

SO ORDERED

DATED: April 17, 2006, at Chambers, Canton, New York.

DAVID DEMAREST, J.S.C.

ENTER:

{Decision & Order, and moving papers filed}