Gushee v. City of New York, 10 N.Y.2d 255 (1961)

The characterization of an agreement as a lease versus a license hinges on the degree of control and dominion granted over the property, with a lease conveying a possessory interest and a license merely granting a privilege to use.

Summary

This case concerns a taxpayer action challenging an agreement between New York City and a private entity for the operation of a restaurant and related facilities in a public park. The plaintiffs argued the agreement was an invalid lease because it circumvented competitive bidding requirements. The Court of Appeals affirmed the lower court’s ruling that the agreement constituted a valid license, not a lease, because the city retained significant control over the premises and the agreement included a clause allowing for easy termination if the space was needed for park purposes. The dissent argued that the agreement should be considered a license due to the Commissioner’s explicit intent to grant a license, the City’s inalienable ownership of the land, and the detailed controls the city maintained over the licensee’s operations.

Facts

New York City entered into an agreement with a private entity (Restaurant Associates, Inc.) to operate a restaurant, parking lot, and other facilities in Flushing Meadow Park. The agreement was characterized as a “license” by the City’s Parks Commissioner. The agreement contained provisions allowing the City to terminate the agreement on short notice if the premises were needed for park purposes. The agreement stipulated that any structures built on the land would immediately become the property of the City.

Procedural History

Taxpayers brought an action challenging the agreement, claiming it was an invalid lease and violated competitive bidding requirements. The lower court upheld the validity of the agreement. The Court of Appeals affirmed the lower court’s decision, finding the agreement to be a valid license.

Issue(s)

Whether the agreement between New York City and Restaurant Associates, Inc. constituted a lease requiring competitive bidding, or a valid license.

Holding

No, the agreement was a valid license because the city retained significant control over the premises, and the agreement contained a clause allowing for easy termination.

Court’s Reasoning

The court distinguished between a lease, which grants exclusive possession and control of property, and a license, which merely confers a privilege to occupy or use property subject to the owner’s control. The court emphasized that the agreement allowed the City to terminate the arrangement with only five days’ notice if the Commissioner deemed the premises necessary for park purposes. The court noted that the city retained ownership of all structures built on the land. The court cited prior precedent, emphasizing that the critical test is whether the agreement gives the grantee exclusive possession of the premises against the world, including the owner. Because the city retained significant control and the right to terminate on short notice, the agreement was deemed a license.

The dissenting opinion argued that the explicit intent of the Parks Commissioner to grant a license should be given greater weight. It pointed out that the City Charter prohibited the alienation of parkland, making a lease impossible. The dissent also emphasized the detailed control the city retained over the licensee’s operations, further suggesting a license rather than a lease. Judge Bergan stated, “Although the literal use of the terms ‘lease’ or ‘license’ is not fully conclusive on the court in determining the nature of an instrument, if a public officer, who has the express power to grant a license or franchise for property of which he has jurisdiction, gives what he describes in plain words to be a license, it ought to be accepted on its face that this is what he has done unless it becomes clearly evident that he has done something else.” The dissent believed the majority was improperly frustrating a routine and beneficial public act. The dissent distinguished *Williams v. Hylan*, noting that in that case, the license was deemed not to be for a public purpose, unlike the present case.