New York Law Review

Garrison Protective Services, Inc. v. Office of the Comptroller of the City of New York, 92 N.Y.2d 730 (1999): Enforceability of Unregistered Municipal Contracts

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Garrison Protective Services, Inc. v. Office of the Comptroller of the City of New York, 92 N.Y.2d 730 (1999)

Acceptance of services under an unauthorized contract does not estop a municipality from asserting the invalidity of the contract due to failure to comply with mandatory registration requirements.

Summary

Garrison Protective Services sought payment from New York City for security services provided under a contract extension that was not properly registered with the Comptroller. The Comptroller refused to register the extension due to concerns about Garrison’s potential corrupt activity. The Court of Appeals held that mandamus was inappropriate to compel registration because the Comptroller has discretion to object to contracts where corruption is suspected. Furthermore, the court reiterated that a municipality is not estopped from denying the validity of an unregistered contract, even if services were accepted. The case was remitted to determine if the Comptroller’s denial of an ‘illegal but equitable’ claim was arbitrary and capricious.

Facts

Garrison provided security services to the NYC Department of Environmental Protection (DEP) under contract SM-51W. The contract was extended twice, the second time through May 23, 1993. After the second extension, the Comptroller’s office determined the extension was not properly registered. DEP submitted a contract extension form and then a contract renewal form, but the Comptroller never registered either. The Department of Investigation began investigating Garrison for fraud related to other city contracts, and a search warrant was executed seizing relevant documents. DEP then withdrew its renewal request.

Procedural History

Garrison filed a notice of claim, which the Comptroller audited but could not substantiate due to missing records. Garrison commenced an Article 78 proceeding seeking to compel registration or convert the proceeding to a plenary action. Garrison pleaded guilty to mail fraud in federal court. Supreme Court granted mandamus relief, ordering the Comptroller to pay the full amount claimed. The Appellate Division affirmed. The Court of Appeals reversed and remitted the case.

Issue(s)

  1. Whether mandamus is an appropriate remedy to compel the Comptroller to register a contract.
  2. Whether acceptance of services under an unregistered contract estops a municipality from asserting the contract’s invalidity.

Holding

  1. No, because the Comptroller has discretion to object to registration where there is reason to believe there is possible corruption in the letting of the contract or that the proposed contractor is involved in corrupt activity.
  2. No, because acceptance of services performed under an unauthorized contract does not estop a municipality from asserting the invalidity of the contract.

Court’s Reasoning

The Court of Appeals reasoned that mandamus is inappropriate because the Comptroller has discretionary authority under Section 328(c) of the New York City Charter to object to contract registration if there is reason to believe in possible corruption. By the time DEP submitted the purportedly proper extension form, there was reason to believe Garrison was involved in corrupt activity. The court emphasized that Supreme Court’s decision would strip the Comptroller of statutory discretion and protection of public funds.

The court also stated, “This Court has long held that acceptance of services performed under an unauthorized contract does not estop a municipality from asserting the invalidity of the contract” citing Seif v City of Long Beach, 286 NY 382. DEP’s failure to submit proper forms cannot be attributed to the Comptroller, and misfeasance by the contracting agency does not waive the requirement to properly register the contract.

The court remitted the matter to Supreme Court to determine whether the Comptroller’s denial of Garrison’s “illegal but equitable” claim (Administrative Code § 7-206) was arbitrary and capricious. The court noted it could consider whether the Comptroller’s failure to review the materials provided by Garrison’s counsel was arbitrary.

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