New York State Division of Housing and Community Renewal v. Rivercross Tenants’ Corp., 70 N.Y.2d 844 (1987)

Estoppel generally cannot be invoked against a municipal agency to prevent it from discharging its statutory duties, especially when the agency acts in a governmental capacity and the party asserting estoppel had notice of potential regulatory changes.

Summary

The New York State Division of Housing and Community Renewal (DHCR) sought to enforce regulations requiring Rivercross, a Mitchell-Lama cooperative, to establish a waiting list for apartment resales. Rivercross argued that DHCR was estopped from enforcing these regulations due to statements in its prospectus allowing open market sales. The Court of Appeals reversed the Appellate Division, holding that estoppel could not be invoked against DHCR because it was acting in a governmental capacity. The court emphasized that Rivercross shareholders were aware that their resale rights were subject to regulatory changes and that public policy favored affordable housing and fair tenant balance.

Facts

Rivercross, a residential cooperative, was established under the Mitchell-Lama program, supervised by the Urban Development Corporation (UDC). The UDC’s prospectus stated that Rivercross shareholders could sell apartments to anyone, unlike other Mitchell-Lama cooperatives. The prospectus also stated that any conflicts between the offering plan and regulations would favor the latter. In 1981, DHCR succeeded UDC, assuming regulatory power over Rivercross. In 1984, DHCR ordered Rivercross to establish a waiting list and implement a fair housing plan, as required by regulations. Rivercross refused, citing the prospectus’s representations.

Procedural History

DHCR sued Rivercross to enforce compliance with the waiting list requirement. The Supreme Court granted summary judgment to DHCR. The Appellate Division reversed, finding DHCR was estopped by the prospectus’s representations. DHCR appealed to the New York Court of Appeals.

Issue(s)

1. Whether DHCR is estopped from enforcing regulations requiring Rivercross to establish a waiting list for apartment resales, given prior representations in the prospectus allowing open market sales.

2. Whether enforcing the waiting list requirement unconstitutionally impairs the contract between Rivercross and its shareholders.

Holding

1. No, because estoppel generally cannot be invoked against a municipal agency acting in a governmental capacity to prevent it from discharging its statutory duties, and because Rivercross shareholders were on notice that their resale rights were subject to regulatory changes.

2. No, because the terms of the contract between the shareholders and the cooperative corporation provided that the right to resell an apartment was subordinated to the applicable statutory and regulatory scheme.

Court’s Reasoning

The court reasoned that DHCR was acting in a governmental capacity when exercising its regulatory powers over Rivercross. “Generally, estoppel may not be invoked against a municipal agency to prevent it from discharging its statutory duties.” The court found no basis for an exception to this rule. The agreement between shareholders and the housing company included the prospectus, which stated conflicts would be resolved in favor of the Private Housing Finance Law and its regulations. Thus, shareholders were on notice that their resale rights were subject to change. Policy considerations also weighed against estoppel, as privately arranged sales could frustrate the goal of affordable housing and a proper demographic tenant balance. The court also noted that DHCR’s actions didn’t prevent shareholders from selling their improvements, only affecting their bargaining position. Regarding the contract clause challenge, the court found no impairment of contractual rights because the contract itself subordinated resale rights to the regulatory scheme.