Opinion
109373/2010.
Decided August 30, 2010.
Thomas C. Monaghan, Esq., Broad Channel, NY, for Petitioner.
Melanie V. Sadok, Esq., New York, NY, for Respondent.
In this Article 78 proceeding, Patgin Carriages Co. Inc. (Patgin) and Patrick J. Byrne challenge respondent's determination denying Patgin a permit to operate a horse stable, and respondent's issuance of two carriage horse licenses to Patrick Byrne with an expiration date of May 31, 2010, which were intended to supersede previously issued licenses set to expire on February 28, 2011.
BACKGROUND
Respondent is the New York City agency responsible for issuing permits to maintain or operate horse stables (horse stable permit). NY City Health Code (24 RCNY) § 161.09 (e). Respondent is also responsible for issuing a license for the "use or offer of use of a horse in the horse rental business" (rental horse license), which "means that a horse is used or offered for use by the public for a fee for the purpose of riding or drawing a horse drawn vehicle or is used in the operation of a horse drawn vehicle for hire such as a horse drawn cab." Administrative Code § 17-327. See also 24 RCNY 4-02 (a) (1). Horses that must be licensed fall into two types: riding horses and carriage horses. Administrative Code § 17-326; see Answer, Ex C.
The New York City Health Code does not require a permit "where a natural person or family owns a horse stable solely for housing and maintaining horses owned and used by the person or family for its exclusive recreational, non-commercial purposes." Health Code § 161.09 (e). This exception does not apply here.
The Administrative Code defines a "Riding horse" as "a horse which is available to the public for a fee for the purpose of riding." Administrative Code § 17-326 (e). "A Carriage horse' means any horse which is used by its owner or any other person to pull any vehicle, carriage, sled, sleigh or other device in exchange for a fee. A horse rented or leased by its owner to another for any of the foregoing purposes shall be deemed to be a carriage horse for the purposes of this subchapter." Administrative Code § 17-326 (f).
To operate a horse-drawn carriage business, other licenses are required. The Administrative Code requires a horse-drawn cab for hire — i.e., the horse-drawn vehicle itself — to be licensed (cab license) and requires a separate license for any driver of a horse-drawn cab (cab driver's license). Administrative Code §§ 20-373, 20-381. The New York City Department of Consumer Affairs is the agency responsible for issuing cab licenses and cab driver's licenses.
The horse stable at issue in this Article 78 proceeding is the Central Park Carriages stable, located at 547 West 37th Street in Manhattan, allegedly owned by non-party Cornelius Byrne. Respondent had issued Cornelius Byrne a horse stable permit, no. H34-0000841. The two carriage horse licenses at issue involve the horses known as Spaghetti and Decklan. Respondent had also issued to Cornelius Byrne horse licenses No. H02-1298300 and H02-126758 for Spaghetti and Decklan, respectively.
Pursuant to a Settlement Agreement dated September 25, 2009, between Cornelius Byrne, the New York City Law Department, the New York City Department of Consumer Affairs and respondent, Cornelius Byrne agreed that he shall be barred from having any involvement in the horse-drawn carriage business, the operation of any stable, and the use of any licensed horse after December 31, 2009. See Byrne Aff., Ex E [Settlement Agreement], at 5-6; Verified Answer, Ex A. According to the recitals, the Settlement Agreement resolved disputes arising out of the non-renewal of horse-drawn cab operator's licenses and horse-drawn cab driver's licenses issued by the Department of Consumer Affairs to Cornelius Byrne, Cornelius Byrne's Article 78 proceeding challenging such determination, and respondent's commencement of a proceeding to revoke Cornelius Byrne's horse stable permit for the Central Park Carriages stable, and to revoke twelve rental horse licenses.
The Settlement Agreement refers to Cornelius Byrne's horse licenses as rental horse licenses and does not further distinguish whether the rental horse licenses are for riding horses or carriage horses.
According to respondent, Cornelius Byrne's plea of guilty to disorderly conduct prompted the Department of Consumer Affairs's decision not to renew Cornelius Byrne's cab operator and cab driver licenses, as well as respondent's decision to revoke Cornelius Byrne's horse stable permit and rental horse licenses. Verified Answer at 6 n 4.
Respondent maintains that Cornelius Byrne was arrested for attempting to bribe an investigator from the New York City Department of Investigation. Verified Answer at 6 n 5. The recitals of the Settlement Agreement state that Cornelius Byrne was arrested and charged with one count of bribery in the third degree, one count of rewarding official misconduct in the second degree, and one count of giving unlawful gratuities. Patrick Byrne Aff., Ex E. The Settlement Agreement recites that Cornelius Byrne pled guilty to one count of disorderly conduct on January 29, 2008. Id.
With respect to his horse stable permit and carriage horse licenses for Spaghetti and Decklan (along with other horse licenses that he held), Cornelius Byrne agreed that they would be revoked, effective December 31, 2009. The Settlement Agreement further provides, in pertinent part:
"7.If BYRNE is unable to sell the stable or horses in arm's length transactions on or before December 31, 2009, he can arrange for use of the stable and the horses by his brother, PATRICK BYRNE and DOHMH [respondent] will issue to PATRICK BYRNE a permit for the stable and licenses for the use of the horses identified in paragraph 6 of this Settlement Agreement for the period January 1, 2010 through May 31, 2010.
8.PATRICK BYRNE may sell the horses or assign the lease for use of the stables to other persons pursuant to an arm's length transaction. The sales and assignment cannot be made to BYRNE or any member of the Byrne family. Each assignee and purchaser shall be required to obtain the necessary permits and licensees from DOHMH.
9.The permit for the stable and the licenses for the horses issued by the DOHMH Commissioner to BYRNE will terminate in accordance with this agreement on June 1, 2010. From January 1, 2010 to May 31, 2010, PATRICK BYRNE will be responsible for the sale or other humane disposition of the horses, so that no horse shall remain in the stable premises after June 1, 2020 unless (a) the lease to the stable has been assigned in an arm's length transaction to another person who has obtained the necessary permit to operate the stable, and (b) the horse is sold in an arm's length transaction to another person."
Id. Although the Settlement Agreement intended to impose various obligations on Patrick Byrne, Patrick Byrne was not a party to the Settlement Agreement.
In 2009, Patrick Byrne applied for carriage horse licenses for Spaghetti and Decklan, which respondent approved on January 6, 2010. Verified Answer, Ex B. According to respondent, an employee informed Thomas Monaghan, Esq., Patgin's and Patrick Byrne's attorney, that the applications were approved but would expire as of May 31, 2010, as per the terms of the Settlement Agreement. Verified Answer ¶ 45. Copies of the applications for Spaghetti's and Decklan's carriage horse licenses indicate in the "Office Use Only" section of the applications that each license expires on "5/31/10." Verified Answer, Ex B. However, the carriage horse licenses for Spaghetti and Decklan actually issued to Patrick Byrne indicated "02/28/2011" as the expiration date. Byrne Aff., Ex B.
Respondent maintains that the February 28, 2011 expiration dates on the carriage horse licenses for Spaghetti and Decklan were in error. On or about June 10, 2010, respondent reissued carriage horse licenses for Spaghetti and Decklan with May 31, 2010 as the expiration date.
Meanwhile, by letter dated February 24, 2010 to respondent, Monaghan enclosed an assignment of Cornelius Byrne's horse stable permit from Cornelius Byrne to "PATGIN CARRIAGE CO., Patrick J. Byrne, President, sole shareholder and director," for "ten dollars and other valuable consideration." Verified Answer, Ex D. By letter dated April 5, 2010, respondent advised Monaghan that New York City Health Code § 5.13 prohibited assignments of horse stable permits. Verified Answer, Ex E. Although respondent did not consent to an assignment of the horse stable permit, respondent acknowledged that Patrick Byrne could separately apply for a horse stable permit that would expire on May 31, 2010. The letter states in pertinent part:
"In accordance with the agreement entered into by the Department, the City Department of Consumer Affairs and Cornelius Byrne, if Cornelius Byrne has not found another person to operate the stable, the Department may issue a permit to Patrick Byrne for the operation of the stable. In accordance with the agreement, such permit will expire May 31, 2010. Neither PatGin Carriage Co., in which Patrick Byrne is the president and sole shareholder, nor Patrick Byrne, individually, is authorized under the agreement to hold a permit for the stable beyond May 31, 2010. . . .Accordingly, a permit may be issued to Patrick Byrne, individually, or to Patrick Byrne, President, PatGin Carriage Co., for this period, but a new application for the permit must be submitted."
Id.
Patgin claims to have submitted an application for a horse stable permit on or about May 4, 2010. Patgin's application for a horse stable permit allegedly included a lease for the stable commencing on June 1, 2010 and continuing until May 31, 2015. Section 6 of the lease states, "It is understood that this Lease is issued to Patrick J. Byrne, individually and as President of Patgin Carriages Co., Inc. and is personal to Patrick J. Byrne." Monaghan Suppl. Affirm., Ex I.
The cover letter to the application is dated May 5, 2010, but bears a "Received" stamp from the Department of Consumer Affairs with the date "May 40[ sic], 2010." Monaghan Suppl. Affirm., Ex I.
According to respondent, Patgin's application was considered as an application for a horse stable permit pursuant to the Settlement Agreement, and Patgin was issued a horse stable permit with an expiration date of May 31, 2010. Verified Answer ¶¶ 51-52. Respondent did not issue Patgin a horse stable permit for the period after May 31, 2010. By letter dated May 28, 2010, Monaghan requested respondent to forward a written statement setting forth the reasons for denying Patgin a horse stable permit. Monaghan Suppl. Affirm., Ex K. By letter dated June 11, 2010, respondent responded:
It cannot be determined from the record when this horse stable permit was issued. Neither petitioners nor respondent submitted a copy of the horse stable permit expiring May 31, 2010. Respondent does not contend that a horse stable permit issued to Patgin expiring May 31, 2010 was issued in response to Patgin's application with a cover letter dated May 5, 2010.
"Pursuant to the terms of the Settlement Agreement dated September 25, 2009, . . . Cornelius Byrne agreed to transfer ownership of the above referenced stable, carriages, and carriage horses, via arm's length transactions to individuals who were not family members on or before December 29, 2009. If Cornelius Byrne was not able to complete such transactions by that date, he agreed and the City agencies authorized him to transfer ownership to Patrick Byrne.
However, the agreement provides that Patrick Byrne is required to transfer ownership of the stable and any horses originally licensed to Cornelius Byrne to other persons, not members of Cornelius Byrne's family, via arm's length transactions, on or before May 31, 2010. Because such proof of arm's length transactions has not been provided, and because Patrick Byrne is the sole shareholder and officer of Patgin and Cornelius Byrne's brother, he is not eligible under the terms of this agreement to hold these permits."
Verified Answer, Ex G.
Notwithstanding the expiration of the horse stable permit on May 31, 2010, petitioners continued operating the stable.
On June 17, 2010, respondent issued an order directing Patgin and Patrick Byrne to cease and desist from the operation the horse stable and the use of Spaghetti and Decklan in any rental horse business. Verified Petition, Ex F. This Article 78 proceeding followed.
Even though this Article 78 proceeding names only one petitioner in the caption, the petition states that Patrick J. Byrne makes allegations "individually, and as President of Patgin Carriages Co., Inc." The petition challenges not only respondent's re-issuance to Patrick Byrne of carriage horse licenses for Spaghetti and Decklan, but also respondent's determination not to issue a horse stable permit to Patgin. Because Patgin is a corporation, it would not be accurate to refer to Patgin and Patrick Byrne as a single petitioner. Respondent has referred to them both as petitioners. To avoid confusion, this decision thus specifically refers to Patgin or Patrick Byrne as applicable, instead of as a single petitioner.
The petition asserts three causes of action. The first asserts that the "retroactive revocation" and denial of the horse stable permit was arbitrary and capricious; the second and third causes of action assert that petitioners were denied due process in the "retroactive revocation" of the carriage horse licenses and the denial of the horse stable permit.
Petitioners also sought an injunction pending determination of the petition. By so-ordered stipulation dated July 16, 2010, respondent agreed that the Central Park Carriages stable may remain open for business until August 31, 2010, and that Decklan and Spaghetti may work from the stable under their carriage horse licenses until the Article 78 petition is decided. This proceeding was finally submitted for determination on August 23, 2010.
DISCUSSION
Judicial review of administrative action is limited to determining whether the agency's determination was made in violation of lawful procedures, was affected by an error of law, was arbitrary and capricious, or an abuse of discretion. CPLR 7803. "Arbitrary action is without sound basis in reason and is generally taken without regard to the facts." Matter of Pell v Board of Educ. of Union Free School Dist. No. 1 of Towns of Scarsdale Mamaroneck, Westchester County, 34 NY2d 222, 231 (1974). "In this regard, the court's scope of review is limited to an assessment of whether there is a rational basis for the administrative determination without disturbing underlying factual determinations." Matter of Heintz v Brown, 80 NY2d 998, 1001 (1992). "[J]udicial review of an administrative determination solely to the grounds invoked by the agency, and if those grounds are insufficient or improper, the court is powerless to sanction the determination by substituting what it deems a more appropriate or proper basis." Matter of Trump-Equitable Fifth Ave. Co. v Gliedman, 57 NY2d 588, 593 (1982).
Here, as respondent indicates, the letters in support of the petition are outside the administrative record, and therefore may not be considered. Matter of L M Bus Corp. v New York City Dept. of Educ. , 71 AD3d 127 , 136 (1st Dept 2009).
Petitioners submitted 10 letters from individuals in the carriage horse industry, some of whom work at or out of the Central Park Carriages stable, and a letter from Teamsters Local Union No. 553.
Petitioners argue that respondent essentially retroactively revoked the initial carriage horse licenses issued to Patrick Byrne, and that Patrick Byrne was entitled to notice of the revocation and an opportunity to be heard. As to the horse stable permit issued to Patgin, petitioners argue that respondent should have considered the application as a "de novo new application" for a horse stable permit ( see Monaghan Suppl. Affirm., Ex I), i.e., an application for a horse stable permit wholly separate from the Settlement Agreement, for the period after May 31, 2010. Petitioners point out that Patrick Byrne is not a signatory to the Settlement Agreement, and that he is not the subject of any disciplinary proceedings in connection with charges brought against his brother, Cornelius Byrne. Petitioners believe that respondent's position "is that the entire Byrne family is not worthy to, and should not participate in, the Carriage Horse business by virtue of the transgressions of brother Cornelius" (Mem. at 6), and contend that such a position is irrational.
The Issuance of Carriage Horse Licenses that expired on May 31, 2010
Respondent contends that the issuance of the carriage horse licenses for Spaghetti and Decklan bearing a February 28, 2011 expiration date was in error. As indicated in the copies of the applications of the carriage horse licenses, the expiration date should have been May 31, 2010, as set forth in the Settlement Agreement. Petitioners do not dispute that carriage horse licenses were issued to Patrick Byrne pursuant to the Settlement Agreement. Neither do the petitioners dispute that the February 28, 2011 expiration date was an error. Rather, petitioners contend that the re-issuance of the carriage horse licenses with earlier expiration dates of May 31, 2010 constituted a revocation of the initial licenses. Viewed as a revocation, petitioners therefore argue that the only valid grounds for revocation of the carriage horse licenses would have been "illegality, irregularity in vital matters or fraud," citing People ex rel. Finnegan v McBride ( 226 NY 252). Petitioners also argue that they were entitled to a hearing before the carriage horse licenses were revoked.
In People ex rel. Finnegan, the Court of Appeals addressed the issue of whether the City of New York's Civil Service Commission could revoke an eligibility list for nurses, after an investigation revealed "gross irregularities" in the list. The Court ruled,
"The action of the commission, had with due deliberation, upon such a matter as the establishment of an eligible list, should, for obvious reasons, be regarded as a finality, but the commission's authority thereon does not wholly cease. It certifies names therefrom for appointment. Error may be corrected by setting it aside if it was the result of illegality, irregularity in vital matters, or fraud. The commission may not act arbitrarily. Public officers or agents who exercise judgment and discretion in the performance of their duties may not revoke their determinations nor review their own orders once properly and finally made, however much they may have erred in judgment on the facts, even though injustice is the result. A mere change of mind is insufficient."
Id. at 259. In Matter of Evans v Monaghan ( 306 NY 312), the Court of Appeals ruled on whether principles of res judicata barred the New York City Police Department from conducting a second departmental trial of police officers whom were acquitted in a prior departmental trial on essentially the same allegations, based on newly discovered evidence. Citing People ex rel. Finnegan, the Court of Appeals stated,
"The opinion of this court written by Judge Pound in People ex rel. Finnegan v. McBride, 226 NY 252, 123 N.E. 374, indicates the restraint which is to be exercised in permitting reconsideration even in the case of purely administrative action, to say nothing of that which is ordinarily characterized as quasi-judicial. Any general relaxation of the rule of res judicata is inadmissible even in strictly administrative matters."
Matter of Evans, 306 NY at 324. Based on these cases, a later court held, "In the absence of any statutory reservation of discretionary agency authority to reconsider its determinations, New York applies a long-standing policy of finality to the nonquasi-judicial determinations of an administrative agency." Matter of Centennial Restorations Co. v Abrams, 180 AD2d 340, 344 (3d Dept 1992). The policy of finality has been referred to as "the doctrine of administrative res judicata." Realty Indus. Corp. v Gaynor, 24 AD2d 201, 205 (1st Dept 1965).
More recently, the Court of Appeals has since limited the reach of People ex rel. Finnegan and Matter of Evans v Monaghan to quasi-judicial administrative determinations.
"The principles of administrative res judicata have been long settled. We have held that [s]ecurity of person and property requires that determinations in the field of administrative law should be given as much finality as is reasonably possible . . . Indeed, it is the instinct of our jurisprudence to extend court principles to administrative or quasi-judicial hearings insofar as they may be adapted to such procedures' (Matter of Evans v. Monaghan, 306 NY 312, 323-324, 118 N.E.2d 452 [1954]). . . .
To hold that res judicata applies to this nonadjudicative designation of eligibility, and thus preclude OMRDD from reviewing or reconsidering prior administrative action, would impermissibly estop it from enforcing its statutory mandate when it has erred in making an initial assessment [citation omitted]. We cannot sanction a rule that so severely limits an administrative agency's ability to review its prior administrative actions in cases such as this where a nonadjudicative determination was initially made."
Matter of Jason B. v Novello , 12 NY3d 107 , 113-114 (2009) (emphasis supplied). Thus, petitioners' reliance upon People ex rel. Finnegan is misplaced. Therefore, the doctrine of administrative res judicata did not bar respondent from correcting its erroneous issuance of carriage horse licenses to Patrick Byrne with an expiration date of February 28, 2011 rather than an expiration date of May 31, 2010, due to an error in processing the applications. "[T]he mistaken or erroneous issuance of a permit does not estop a municipality from correcting errors, even where there are harsh results." Matter of Parkview Assoc. v City of New York, 71 NY2d 274, 282-283 (1988).
However, as petitioners point out, the modification of the licenses constituted a defacto revocation of the carriage horse licenses. Respondent modified the expiration dates of the carriage horse licenses to reflect a date that had already passed. Because the reissued licenses were not valid as of the date they were issued, the only practical effect of the reissued licenses was to revoke the carriage horse licenses previously issued to Patrick Byrne.
Respondent argues that petitioners had no property interest in the renewal of their carriage horse licenses. This argument misses the point. Although Patrick Byrne had no legitimate expectation that he would receive carriage horse licenses that would be valid for an entire year, given the terms of the Settlement Agreement, he acquired a protected property interest in the licenses that were actually issued to him. "While a possible future license' involves a purely speculative property interest, once the government has granted a business license to an individual, the government cannot depriv[e] [the individual of] such an interest . . . without appropriate procedural safeguards.'" Spinelli v City of New York, 579 F3d 160, 169 (2d Cir 2009) (citations omitted).
The Court rejects the notion that one cannot acquire a protected property interest in a license, valid on its face, when the license was erroneously issued. Zimmerman v Mulrooney, 241 App Div 695 (2d Dept 1934). In Zimmerman, the plaintiff was issued a license to sell liquor in the city of Newburgh. Eighteen days after the plaintiff's liquor store was opened, a member of the alcoholic beverage control board came into the store, obtained possession of the license, and took it away without explanation. Plaintiff moved for a preliminary injunction, and the answering affidavits stated that the license "was issued through error by inadvertence." Id. The lower court denied the motion, but the denial was reversed on appeal. The Appellate Division, Second Department reasoned,
"The license was valid on its face, and the plaintiff was authorized to do business thereunder until such license was properly revoked. No summary power is given to the state alcoholic beverage control board to recapture or revoke licenses, whether the same have been issued through error of its own or for any other cause. Before the plaintiff can be deprived of her money, property and rights, she is entitled to be heard before some tribunal concerning the validity of the license issued to her."
Id. To hold otherwise would allow, in effect, the government to evade due process guarantees and thereby deprive an individual a livelihood simply by claiming "error" or "invalidity," without giving the aggrieved individual notice and an opportunity to be heard as to whether an error and invalidity actually occurred.
Here, like the license in Zimmerman, the carriage horse licenses issued to Patrick Byrne were valid on their face. The initial expiration dates of the carriage horse licenses were in compliance with Administrative Code § 17-327 (b), which provides that "A license shall be issued for a term of one year from the date of issuance thereof and shall be renewed prior to the expiration of such term." The carriage horse licenses reflect that they were issued on February 24, 2010, and had February 28, 2011 as the expiration date. Byrne Aff., Ex B. Like the alcoholic beverage control board in Zimmerman, the Administrative Code does not grant respondent any summary power or discretion to issue amended licenses, for error or for any other cause, that effectively revoke existing licenses.
"Once licenses are issued, as in petitioner's case, their continued possession may become essential in the pursuit of a livelihood. . . . In such cases the licenses are not to be taken away without that procedural due process required by the Fourteenth Amendment." Bell v Burson, 402 US 535, 539 (1971); see also Matter of Daxor Corp. v State of NY Dept. of Health, 90 NY2d 89, 98 (1997)("existing licenses cannot be revoked without a hearing"). Thus, like the plaintiff in Zimmerman, Patrick Byrne was entitled to due process concerning whether the awarded carriage horse licenses were validly issued to him, for their facially stated one year terms.
"Due process is flexible and calls for such procedural protections as the particular situation demands." Morrissey v Brewer, 408 US 471, 481 (1972). In determining how much process is due, a court must weigh (1) the private interest affected, (2) the risk of erroneous deprivation through the procedures used and the value of other safeguards, and (3) the government's interest. Mathews v Eldridge, 424 US 319, 335 (1976).
"In situations where the State feasibly can provide a predeprivation hearing before taking property, it generally must do so regardless of the adequacy of a postdeprivation tort remedy to compensate for the taking. Conversely, in situations where a predeprivation hearing is unduly burdensome in proportion to the liberty interest at stake, or where the State is truly unable to anticipate and prevent a random deprivation of a liberty interest, postdeprivation remedies might satisfy due process."
Zinermon v Burch, 494 US 113, 132 (1990) (internal citations omitted). "[A]bsent the necessity of quick action by the State or the impracticality of providing any predeprivation process,' a post-deprivation hearing here would be constitutionally inadequate." Logan v Zimmerman Brush Co., 455 US 422, 436 (1982), quoting Parratt v Taylor, 451 US 527, 539 (1981). Here, respondent does not contend that pre-deprivation process was impracticable. There is no evidence of any exigency. The decision to reissue carriage horse licenses to Patrick Byrne amending the expiration date was not a random, unauthorized act. Moreover, the fact that respondent did not reissue the carriage horse licenses until after the new, shortened expiration date had passed belies any possible claim for the necessity of quick action that would have made pre-deprivation process impracticable.
"Although postdeprivation remedies can provide constitutionally sufficient process in circumstances where the deprivation was caused by a state agent's conduct that was random' and unauthorized,' on the rationale that the state cannot reasonably anticipate such conduct, the principle does not apply where the deprivation was caused by high-ranking officials who had final authority over the decision-making process.'"
New Windsor Volunteer Ambulance Corps, Inc. v Meyers, 442 F3d 101, 115-116 (2d Cir 2006) (citations omitted). Petitioners assert that the amended carriage horse licenses were enclosed in the June 11, 2010 letter from respondent, signed by Norma S. Torres. Byrne Aff., Ex C. According to the letterhead, Ms. Torres is the Director of Veterinary Public Health Services. Id.
Respondent cites two cases for the proposition that an Article 78 proceeding satisfies the requirements of due process, citing Campo v New York City Employees' Retirement System ( 843 F2d 96 [2d Cir 1988]) and Liotta v Rent Guidelines Board for the City of New York ( 547 F Supp 800 [SD NY 1982]). However, these cases are distinguishable, because they were decided before the United States Supreme Court's decision in Zinermon v Burch.
Accordingly, respondent's decision to reissue the carriage horse licenses is annulled and vacated, because Patrick Byrne was not afforded notice and an opportunity to be heard before the decision was made. The carriage horse licenses that were issued for Spaghetti and Decklan with an expiration date of May 31, 2010 are therefore null and void. As such, those licenses had no effect upon the carriage horse licenses for Spaghetti and Decklan set to expire on February 28, 2011 that respondent had previously issued to Patrick Byrne.
Nothing in this decision should be read as constraining respondent from attempting to use appropriate procedures to modify the expiration date of the carriage horse licenses that were purportedly issued to Patrick Byrne in error, or from proceeding to revoke them pursuant to law. However, should respondent wish to reissue carriage horse licenses with an expiration date of May 31, 2010, respondent must begin the process anew and provide Patrick Byrne with notice and an opportunity to be heard before the modification takes effect. To remand the matter to respondent to afford Patrick Byrne notice and an opportunity to heard as to the re-issuance of carriage horses licenses at issue here would constitute post-deprivation process, insofar as notice and an opportunity to be heard would then take place after the re-issuance of the carriage horse licenses at issue. See Matter of Jacoby v New York State Bd. for Professional Med. Misconduct, 295 AD2d 655, 656-657 (3d Dept 2002) (annulling Board's suspension of medical licenses due to lack of reasonable notice and an opportunity to be heard, without remand); see also Whitbread-Nolan, Inc. v Shaffer, 183 AD2d 610 (1st Dept 1992)(annulling, without remand, revocation of real estate licenses because petitioner had not received fair notice of charges).
The Court does not reach the issue of what process is due to Patrick Byrne in the event that respondent were to commence the process to modify the expiration date of the carriage horse licenses. Because it is not known whether respondent will choose to commence anew the process of reissuing carriage horse licenses to Patrick Byrne, this Court will not issue what would amount to an advisory opinion.
Denial of Patgin's Application for a Horse Stable Permit
Although respondent initially considered Patgin's application for a horse stable permit on or about May 4, 2010 as an application for a permit through May 31, 2010, the cover letter to the application appears to indicate that Patgin was applying for a new horse stable permit for a future period after May 31, 2010. Monaghan's cover letter dated May 5, 2010 states, in pertinent part: "Enclosed herewith please find fully executed documentation for Permit to operate a horse stable submitted by the undersigned's client, the above captioned.. . . .The Permit presently in place pursuant to a Stipulation is scheduled to expire on May 31, 2010." Monaghan Suppl. Affirm., Ex I. Patgin's application for a horse stable permit included a lease for the stable commencing on June 1, 2010 and continuing until May 31, 2015. Section 6 of the lease states, "It is understood that this Lease is issued to Patrick J. Byrne, individually and as President of Patgin Carriages Co., Inc. and is personal to Patrick J. Byrne." Monaghan Suppl. Affirm., Ex I.
For the purposes of this petition, respondent contends that it has reviewed the application as if it were a "de novo" application, and has adopted the June 11, 2010 determination as its final determination on the issue. Opp. Mem. at 7 n 6.
Petitioners' argument that they were entitled to a hearing to contest the denial of Patgin's application lacks merit. "While existing licenses cannot be revoked without a hearing, there is no similar right for initial applications or renewals of licenses." Daxor Corp., 90 NY2d at 98; Matter of Wright v New York State Educ. Dept., 128 AD2d 989, 990 (3d Dept 1987) (massage therapist license denied); Matter of Lock v New York State Educ. Dept., 102 AD2d 979, 980 (3d Dept 1984) (license to practice medicine denied). Given the appellate authorities, the Court is not persuaded to follow 164th Bronx Parking LLC v City of New York ( 20 Misc 3d 796 [Sup Ct, Bronx County 2008]), which petitioners cited.
"The power to grant a license carries with it, by natural implication, a discretion on the part of the licensing authority to refuse to grant one. However, that discretion must be exercised in conformity with the express or clearly implied standard, policy or purpose of the licensing law." Matter of Maytum v Nelson, 53 AD2d 221, 227 (3d Dept 1976).
"[T]he licensing official has implicit discretion to pass upon the fitness of the applicant. . . . If an applicant for a license can show that he is a fit and proper person to engage in a licensed business under the provisions of the licensing statute, licensing officer may not arbitrarily impose limitations not contained in the statute upon his right to do business.'"
Matter of Barton Trucking Corp. v O'Connell, 7 NY2d 299, 309 (1959), quoting Matter of Picone v Commissioner of Licenses of NY, 241 NY 157, 161 (1925); Matter of C. Schmidt Sons v New York State Liq. Auth., 73 AD2d 399 (1st Dept 1980). "The limits of reasonable discretion are transgressed where refusal is based upon a ground which under the statute the licensing officer may not consider or upon a ground which is not supported by any evidence." Matter of Small v Moss, 277 NY 501, 507 (1938); Matter of Maytum v Nelson, 53 AD2d 221, supra.
Here, respondent relies on the letter dated June 11, 2010 as its explanation for the denial of of Patgin's application for a horse stable permit. The letter states, in pertinent part:
"However, the agreement provides that Patrick Byrne is required to transfer ownership of the stable and any horses originally licensed to Cornelius Byrne to other persons, not members of Cornelius Byrne's family, via arm's length transactions, on or before May 31, 2010. Because such proof of arm's length transactions has not been provided, and because Patrick Byrne is the sole shareholder and officer of Patgin and Cornelius Byrne's brother, he is not eligible under the terms of this agreement to hold these permits."
Verified Petition, Ex C.
Respondent's interpretation of the contractual obligations of the Settlement Agreement was incorrect. Contrary to respondent's letter dated June 11, 2010, the Settlement Agreement did not require Patrick Byrne to transfer ownership of the stable. The Settlement Agreement did not require Cornelius Byrne to transfer ownership of the stable to anyone. Rather, paragraphs 6, 7, and 8 of the Settlement Agreement provide, in pertinent part:
"If [Cornelius] BYRNE sells the stable . . . in an arm's length transaction, the purchaser shall be required to obtain a stable permit. . . .
7. If BYRNE is unable to sell the stable . . in arm's length transactions on or before December 31, 2009, he can arrange for use of the stable . . . by his brother PATRICK BYRNE and DOHMH will issue to PATRICK BYRNE a permit for the stable . . . for the period January 1, 2010 through May 31, 2010.
8. PATRICK BYRNE may sell the horses or assign the lease for the use of the stables to other persons pursuant to an arm's length transaction. The sales and assignment cannot be made to [Cornelius] BYRNE or any member of the Byrne family."
Verified Answer, Ex A. The Settlement Agreement explicitly authorized Cornelius Byrne to arrange for use of the stable by Patrick Byrne. The Settlement Agreement, by implication, permitted Cornelius Byrne to lease the stable to Patrick Byrne, and that Patrick Byrne could assign that lease to another person. The Settlement Agreement contemplated that Cornelius Byrne could remain owner of the stable, because paragraph 10 allowed Cornelius Byrne "to collect rent on any lease of the stable assigned in an arm's length transaction and may take such steps as are necessary to maintain the leased premises." Id. Moreover, the Settlement Agreement did not prohibit involvement by a business entity controlled by Patrick Byrne, such as Patgin. Thus, respondent erred in imposing a requirement upon Patgin's application for a permit that was not actually contained in the Settlement Agreement.
As quoted above, paragraphs 7 and 8 of the Settlement Agreement permitted Cornelius Byrne to lease the stable to Patrick Byrne if Cornelius Byrne were unable to sell the stable after December 31, 2009. The Settlement Agreement did not state that Cornelius Byrne could lease the stable to Patrick Byrne until May 31, 2010 and not thereafter. The Settlement Agreement contemplates that the stable could be leased to Patrick Byrne for a term longer than May 31, 2010. Thus, Cornelius Byrne's proposed five year lease of the horse stable, commencing to June 1, 2010 and continuing until May 31, 2015 to "Patrick J. Byrne, individually and as President of Patgin Carriages Co., Inc. and is personal to Patrick J. Byrne" (Monaghan Suppl. Affirm., Ex H), did not violate the Settlement Agreement.
The Settlement Agreement contemplates that any lease to Patrick Byrne would be assigned to another person other than Cornelius Byrne or Patrick Byrne, but the Settlement Agreement did not specifically require Patrick Byrne to assign the lease. Indeed, Patrick Byrne was not a signatory to the Settlement Agreement. Rather, the Settlement Agreement provides that, if the lease to Patrick Byrne were not assigned to another person after June 1, 2010, then none of the horses for which Cornelius Byrne had previously held licenses could remain in the stable. Paragraph 9 of the Settlement Agreement states,
"The permit for the stable and licenses for the horses issued by DOHMH Commissioner to BYRNE will terminate in accordance with this agreement on June 1, 2010. From January 1, 2010 to May 31, 2010, PATRICK BYRNE will be responsible for the sale or other humane disposition of the horses, so that no horse shall remain in the stable premises after June 1, 2010 unless (a) the lease to the stable has been assigned in an arm's length transaction to another person who has obtained the necessary permit to operate the stable, and (b) the horse is sold in an arm's length transaction to another person.
Verified Answer, Ex A at 5. Thus, while the Settlement Agreement provided great disincentives for Cornelius Byrne or Patrick Byrne to operate a horse stable after June 1, 2010, the Settlement Agreement itself did not expressly prohibit Cornelius Byrne from granting a stable lease to Patrick Byrne for a period after June 1, 2010.
The Court therefore finds that respondent abused its discretion in denying Patgin's application for a horse stable permit based solely on respondent's belief that the Settlement Agreement was not complied with. Because that belief was founded on a misinterpretation of the terms of the Settlement Agreement, respondent's determination lacked a rational basis.
The structure of the Settlement Agreement would suggest that respondent might have been concerned about Cornelius Byrne's continued involvement in the horse-drawn carriage business, either directly, or indirectly through family members. Paragraph 10 of the Settlement Agreement bars Cornelius Byrne "from having any involvement in any horse-drawn carriage business, the operation of any stable, and the use of any license horse after December 31, 2009. He cannot manage or otherwise conduct the affairs of any horse-drawn carriage business, operation of any stable, including [the Central Park Carriages Stable]. . . ." Paragraph 12 provides that Cornelius Byrne may apply to the Department of Consumer Affairs for a horse-drawn cab driver license after January 1, 2012, but paragraph 13 provides that "BYRNE will be barred from holding any permit or license issued by the DOHMH Commissioner," which would include a horse stable permit or a rental horse license. As discussed above, the Settlement Agreement provides great disincentives for Cornelius Byrne or Patrick Byrne to operate the Central Park Carriages stable after June 1, 2010.
However, even if respondent were concerned that Cornelius Byrne was the "real party in interest" in Patgin's application ( see e.g. Matter of Benidor Rest. v New York State Liq. Auth.,127 AD2d 534, 536 [1st Dept 1987]["It is for the Authority to assess whether the proposed transferee is a person who will properly conduct the premises and whether the alleged transferee is the real party in interest"]), this was not the reason offered in the June 11, 2010 letter. This Court may not "sanction the determination by substituting what it deems a more appropriate or proper basis." [ *14]Matter of Trump-Equitable Fifth Ave. Co., 57 NY2d at 593.
Even were the Court to consider, for the sake of argument, that the June 11, 2010 letter denied Patgin's application based on its concern that Cornelius Byrne was the real party in interest in Patgin's application, the record here is not sufficient to support that determination. The only support for that concern is based solely on the fact that Cornelius Byrne is Patrick Byrne's brother, which is not sufficient. See Ha Ha Ha, Inc. v New York State Liq. Auth., 262 AD2d 1008, 1008 (4th Dept 1999) (collecting cases).
Therefore, the branch of the petition seeking to annul the respondent's determination issuing a horse stable permit to petitioner Patgin Carriages Co., Inc. is granted, and the determination is vacated. That does not lead to the conclusion that respondent should have issued Patgin a horse stable permit for the period after May 31, 2010. "The appropriate procedure upon a finding that an agency acted arbitrarily is to remand to the agency for further proceedings in accordance with the opinion." Matter of Ansonia Assoc. v State Div. of Hous. Community Renewal, 147 AD2d 420, 421 (1st Dept 1989). To be clear, remand does not entitle Patgin or Patrick Byrne to operate the Central Park Carriages stable while Patgin's application is being reconsidered. Under CPLR 7805, the Court's power to stay further enforcement of any determination under review does not extend beyond the determination of the Article 78 petition.
Both sides stipulated that the stable may remain open for business until August 31, 2010. The Court has no equitable powers to extend that period in the absence of the parties' consent. Neither is it appropriate for the Court to invoke its equitable powers to permit the stable to remain open in the absence of a permit. Patrick Byrne, as the principal of Patgin, knew or should have known, at the time of the May 5, 2010 letter application, that their application might not be granted, and that the existing stable permit would expire as of May 31, 2010. The granting of a new license or renewal of an expiring license is a discretionary act, and an applicant cannot assume that its application will be granted. The Court is aware of the hardship that closing the stable may cause, but petitioners should have reasonably anticipated the possibility of closure and made appropriate arrangements for the horses and the other carriage drivers; indeed the July 16, 2010 stipulated stay of the stable's closure through August 31, 2010 permitted notice of, and preparation for, such eventuality.
CONCLUSION
Accordingly, it is hereby
ADJUDGED that the branch of the petition seeking to annul the respondent's issuance of carriage horse licenses for Spaghetti and Decklan with an expiration date of May 31, 2010 is granted, and the modification of the February 28, 2011 expiration dates of the original licenses is annulled and vacated; and it is further
ADJUDGED that the branch of the petition seeking to annul the respondent's denial of the application of petitioner Patgin Carriages Co., Inc. for a horse stable permit is granted, the determination is vacated, and the application for a horse stable license is remanded to the respondent for further consideration consistent with this decision and judgment.