Various Tenants of 446-448 West 167th Street v. New York City Department of Housing Preservation & Development

(dissenting). I would modify the orders appealed from to the extent of remanding this proceeding to the Civil Court for a hearing to determine whether DHPD should be relieved from its obligations under the stipulation^) upon appropriate terms. It appears that at the time the original stipulation was executed in August 1989, the agency did not fully appreciate the extent and prohibitive cost of the total rehabilitation which must now be undertaken to render the premises safe and habitable. Because of the substantial sums which must be expended to secure the buildings’ foundations, DHPD estimates that its ultimate cost per unit will approach *224$70,000, whereas the average cost for renovating apartments in its construction program is approximately $33,000 per unit.

While stipulations of settlement between private contracting parties are not generally cast aside in the absence of a compelling reason such as fraud or mistake (1420 Concourse Corp. v Cruz, 135 AD2d 371), a court’s discretion should be not that closely confined where the municipality has improvidently entered into an agreement which is subsequently demonstrated to be inequitable and economically unfeasible (Foote v Adams, 232 App Div 60; Matter of Frutiger, 29 NY2d 143, 150). The public interest will not be served by requiring DHPD to invest a disproportionate percentage of its limited construction budget in buildings which may be structurally unsound, to the detriment of other, more deserving and cost-effective projects which would benefit a greater number of tenants. Since the agency has at least raised a factual question as to whether these buildings can be realistically rehabilitated at this juncture, at a cost which is not profligate, there should be a hearing to ascertain whether relief from the stipulation is warranted. At the time, DHPD should present in detail its plans for relocation assistance to the tenants in possession.

I agree with the majority that this is not a proper case for the' imposition of criminal contempt.

Riccobono and Parness, JJ., concur; Ostrau, P. J., dissents in a separate memorandum.

OPINION OF THE COURT

Order entered May 1, 1991 modified only to the extent of vacating so much thereof as directed a hearing on the issue of appellant’s liability for criminal contempt; as modified, order affirmed, with $10 costs.

Order dated August 8, 1991 affirmed, without costs.

We affirm the order adjudging appellant Department of Housing Preservation and Development (DHPD) in civil contempt, substantially for the reasons stated in the decisions below. In settlement of enforcement proceedings commenced by petitioner tenants’ association, DHPD, in its capacity as manager of the subject building premises for the City, entered into a so-ordered stipulation in Housing Court providing for foundation and interior reconstruction in accordance with an enumerated work schedule. It is not seriously disputed that DHPD did not even commence, let alone substantially perform, the work required by the terms of the stipulation. In consequence, tenants’ rights in the litigation were necessarily and significantly impaired (Judiciary Law § 753 [A] [1]). Nor were the petitioners required to establish that appellant’s actions were deliberate or willful in order to sustain a finding of civil contempt (Great Neck Pennysaver v Central Nassau Publs., 65 AD2d 616). However, since a showing of willfulness is a necessary ingredient for a finding of criminal contempt (Matter of McCormick v Axelrod, 59 NY2d 574, 583; Judiciary Law § 750 [A] [3]), and since there is no view of the evidence which could support a determination beyond a reasonable doubt that appellant’s actions were willful, we vacate so much *223of the order appealed from as directed a hearing on the issue of criminal contempt.

DHPD’s application to vacate the August 1989 stipulation, which was not made until tenants had moved for contempt and after DHPD had, in a second stipulation on November 7, 1990, agreed to expeditiously designate an engineer for the purpose of completing the structural repairs, was properly denied. DHPD argues that the settlement should be set aside because unanticipated budgetary constraints have rendered the agreed-to construction impracticable. Instead of rehabilitating the premises, appellant now proposes that the building be closed and that relocation assistance be afforded to the displaced tenants. Only where there is cause sufficient to invalidate a contract, or where public policy is affronted, will a party be relieved from the consequences of a stipulation made during litigation (1420 Concourse Corp. v Cruz, 135 AD2d 371, 372). DHPD was in possession of engineering studies and cost estimates prior to execution of the stipulation. While in retrospect it now views the bargain it made as economically improvident and an inappropriate allocation of scarce resources, these factors do not warrant vacatur — particularly where the petitioners’ status as tenants will not be preserved (1420 Concourse Corp. v Cruz, 175 AD2d 747; cf., Foote v Adams, 232 App Div 60). Indeed, it is not unfair to note that DHPD consistently opposes similar arguments of economic hardship raised by private landlords when the agency appears on behalf of petitioning tenants in enforcement or contempt proceedings (see, Eyedent v Vickers Mgt., 150 AD2d 202; Department of Hous. Preservation & Dev. v Mill Riv. Realty, 169 AD2d 665). In the end, public policy will best be served by requiring that the City, as landlord, also observe its agreements in Housing Court.