Karedes v. Colella, 100 N.Y.2d 45 (2003)

A municipality may enter into contracts that bind successor boards when acting in its proprietary capacity, such as operating a business enterprise for revenue generation, as opposed to performing a governmental function.

Summary

This case addresses whether a village’s contract with a golf club manager was enforceable against successor village boards. The Village of Endicott contracted with Karedes to manage its golf club, a revenue-generating facility. A subsequent mayor refused to sign a contract extension, arguing it improperly bound future boards. The Court of Appeals held that because the village operated the golf club in a proprietary capacity, akin to a private business, the contract was enforceable and not subject to the term limits doctrine that restricts a municipal body from binding its successors in matters of governance. The key determination was whether the Village was acting as a business or performing a traditional government function.

Facts

The Village of Endicott owned and operated the EnJoie Golf Club, which included an 18-hole golf course, pro shop, and restaurant. The Club hosted the B.C. Open, a PGA tour event, and the Village leased portions of the Club to third parties for rent.
John Karedes was initially hired by the Village Board of Trustees in 1996 as an independent contractor to manage the Club. His responsibilities included personnel matters, budget preparation, and facility maintenance. His initial contract was for one year, later renewed for three years. In 2000, the Board approved a four-year extension to Karedes’s contract, which significantly increased his compensation. The new mayor, Michael Colella, refused to sign the agreement, deeming it contrary to taxpayers’ interests.

Procedural History

Karedes initiated a CPLR article 78 proceeding and declaratory judgment action to compel the mayor to execute the contract and to validate the agreement. The Village and Colella moved to dismiss, arguing the proceeding was time-barred and the contract was impermissibly binding on future boards. Supreme Court dismissed the mandamus claim as time-barred but declared the contract valid and enforceable. The Appellate Division affirmed the dismissal of the mandamus petition but modified the order, declaring Karedes’s contract void, reasoning the contract curtailed the discretionary power of future boards. Karedes appealed to the Court of Appeals.

Issue(s)

1. Whether the term limits doctrine prohibits enforcement of the Village’s four-year contract with Karedes.
2. Whether Karedes’s request for declaratory relief is barred by the four-month statute of limitations applicable to article 78 proceedings.

Holding

1. No, because the Village was acting in its proprietary capacity when contracting with Karedes, the term limits doctrine does not apply.

2. No, because the substance of Karedes’s declaratory judgment claim was for contract validation, the claim is governed by a six-year statute of limitations.

Court’s Reasoning

The Court of Appeals reasoned that the term limits rule generally prevents a municipal body from contractually binding its successors in areas relating to governance, unless authorized by statute or charter. However, this rule does not apply when a municipality acts in a proprietary capacity, behaving like a private business. Proprietary functions supplement traditionally private enterprises.
Here, the Village operated the golf club to generate revenue, substituting itself for a private enterprise. The Court emphasized that the Village did not identify any public purpose for owning the Club. The Court distinguished this case from others where a municipality was performing a governmental function.
The Court stated: “By its purchase of the Club, the Village effectively substituted itself for what is traditionally a private enterprise”.
Regarding the statute of limitations, the Court held that Karedes’s claim was essentially a contract validation claim, subject to a six-year statute of limitations, making the action timely.