64 N.Y.2d 1121 (1985)

A party contracting with a municipality is bound to know the limits of the municipality’s agents’ authority and cannot rely on representations made beyond that authority, especially when the authority is a matter of public record.

Summary

Maidgold Associates sued the City of New York for damages, alleging the City misled them into believing a sublease was binding, preventing them from seeking other tenants. Maidgold also sought to eject the Department of Housing Preservation and Development (HPD) from the premises, claiming the sublease lacked proper approval. The Court of Appeals affirmed the dismissal of both actions, holding that Maidgold was aware of the need for Financial Control Board (FCB) and Mayoral approval and could not reasonably rely on a city agent’s (Liberman) representations exceeding his authority. The court found no evidence of bad faith by the City in obtaining necessary approvals and determined that the sublease, as modified and approved, complied with the Board of Estimate resolution.

Facts

Maidgold, a tenant, negotiated with the City of New York to sublease space at 75 Maiden Lane. The Board of Estimate authorized the sublease, contingent on approval by the FCB and the Mayor. A City representative, Liberman, requested Maidgold to begin renovations and assured reimbursement even if the FCB disapproved. Subsequently, the City deemed the space unsuitable for the original intended purpose but considered it for other agencies. Maidgold submitted a sublease requiring FCB approval. Later, HPD expressed interest in part of the space. An agreement modifying the sublease to exclude one floor was executed, also contingent on FCB and Mayoral approval. FCB and the Mayor’s Office of Management and Budget (OMB) eventually approved the modified sublease.

Procedural History

Maidgold sued the City and Liberman for damages based on alleged tortious conduct. The City defended that the complaint failed to allege Mayoral approval. Maidgold then sued to eject HPD, claiming illegal occupancy due to lack of Mayoral approval. The trial court granted summary judgment to the City in the damages action and dismissed the ejectment action. The Appellate Division affirmed both dismissals. The New York Court of Appeals affirmed the Appellate Division’s decisions.

Issue(s)

1. Whether the City was liable for damages to Maidgold based on alleged misrepresentations by its agent regarding the sublease approval process.

2. Whether HPD’s occupancy of the premises was illegal due to a lack of proper approval from the Mayor’s office.

Holding

1. No, because Maidgold was aware of the need for FCB and Mayoral approval and could not reasonably rely on representations exceeding the agent’s authority.

2. No, because FCB and OMB approval of the modified sublease was obtained, and the Board of Estimate resolution was complied with since a City agency occupied the space.

Court’s Reasoning

The Court reasoned that Maidgold was aware that the sublease would be ineffective until FCB and Mayoral approval was secured. Maidgold, having previously negotiated with the City, should have understood the limits of its agents’ authority, which is a matter of public record. Citing Moore v Mayor of City of N. Y., 73 NY 238 and Lindlots Realty Corp. v County of Suffolk, 278 NY 45, the Court emphasized that parties contracting with a municipality bear the responsibility to ascertain the agent’s actual authority. Even assuming Liberman made misrepresentations, he lacked the authority to bind the City. Regarding the ejectment action, the Court noted that the Board of Estimate resolution authorized a sublease to any City agency, and since HPD, a City agency, occupied the space, the resolution was satisfied. The Court dismissed the argument that the City’s defense in the damages action constituted a “judicial admission” of the sublease’s illegality, clarifying that the two actions dealt with unrelated issues. The court stated, “[Maidgold] had no right to rely upon representations they may have made beyond the extent of their authority, which authority is a matter of public record.”