NY Appellate Court Concludes the Initial Sewer Agreement that was a Condition of PUD Zoning Could Not be Unilaterally Voided and Remained in Effect at All Times

This post was authored by Olena Botshteyn, Esq.

In 2004, Ryan Homes, Inc. (“Ryan”) commenced the development of a patio home community project (“Project”) in the Town of Mendon (“Town”). In order to pursue the project, Ryan was required to change the zoning of the parcel from Residential Agricultural-5 (RA-5) to Planned Unit Development (PUD). In November 2004, the Town rezoned the parcel for PUD through enactment of the local law. The Planning Board then approved the Project’s preliminary site plan. In 2006, the Town signed a Sewer Transmission Agreement with the Town of Pittsford in order to connect the Project to its sewer system. The agreement provided that the term of agreement shall be 40 years and that it could only be modified in writing “by the parties’ mutual assent.” In 2011, the Planning Board granted a final approval for Phase I of the Project, however, in 2015, Ryan decided to no longer pursue it due to economic unfeasibility.

In December 2017, Riedman Acquisitions, LLC (“Riedman”) purchased the parcel from Ryan with the goal to revive the Project. The Town Board then unilaterally declared the previously signed Sewer Agreement null and void and requested a new agreement. The Town Board attempted to negotiate the terms of a new Sewer Agreement with the petitioners and the Town of Pittsford, but at its January 2019 meeting the Town Board voted against the agreement. The Town Board also concluded that the parcel’s zoning automatically reverted to RA-5, as the approval of the project was a condition for PUD zoning and such an approval expired in 2015. Petitioners submitted a letter to the Town Board, stating that they were never warned about the possibility of an automatic reversion. The Town Board took no further action on the application and petitioners commenced this action.

The trial court concluded that the parcel remained zoned for PUD, declared the Town Board’s rejection of the new Sewer Agreement as arbitrary and capricious and decided that the previous Sewer Agreement was improperly terminated, estopped the Town Board from voting against the new agreement, directed the Town Board to act on the revised application and granted petitioners’ request for attorneys’ fees. The Town Board appealed.

On appeal, the court first concluded that the parcel remained zoned for PUD at all times. For a parcel to automatically revert to prior zoning, this must be specified in the zoning instrument and here, there was no express language warning the petitioners of automatic reversion if certain conditions were not met. The court further determined that the Town Board had to act on the revised application, as the Town Code states that a preliminary site plan approval is granted by the Town Board after review and approval by the Planning Board. The Town Board argued that petitioners submitted a sketch plan rather than a preliminary site plan, but the court concluded that the revised application effectively served as a preliminary site plan and the Town Board was obliged to consider it after the Planning Board issued a favorable report.

The court, however, decided that the trial court erred in compelling the Town Board to enter into the 2018 Sewer Agreement, since the Town Board properly exercised its legislative power when it refused to enter into the agreement and it could decide that it did not want to purchase sewer services from a neighboring town. The court further concluded that the 2006 Sewer Agreement remained in effect, as its terms clearly provided that it could be cancelled only if both parties, the Town and the Town of Pittsford, agreed to do so in writing.

Finally, the court declared that the trial court erred in granting petitioners’ request for attorneys’ fees, since federal petitioners’ due process and equal protection claims were insubstantial. The court concluded that petitioners failed to show that “there is either a ‘certainty or a very strong likelihood’ that an application for approval would have been granted”, because the Town Board had wide discretion with regard to the approval of the application, and thus, there was no substantive due process violation. With regard to equal protection, the court concluded that the petitioners failed to establish that the parcel and the proposed development were similarly situated to any other property in the Town, and thus, there was no equal protection violation either and both claims were insubstantial.

Riedman Acquisitions LLC v Town Board of Town of Mendon, 2021 WL 1826664 (NYAD 4 Dept. 5/7/2021)