                            State of New York
                     Supreme Court, Appellate Division
                        Third Judicial Department
Decided and Entered: January 7, 2016                     520888
________________________________

CHARLIE'S AT THE FAIR, LLC,
   et al.,
                    Appellants,
      v                                       MEMORANDUM AND ORDER

STATE OF NEW YORK,
                    Respondent.
________________________________


Calendar Date:   November 20, 2015

Before:   Lahtinen, J.P., McCarthy, Egan Jr., Lynch and Clark, JJ.

                               __________


      Smith, Sovik, Kendrick & Sugnet, PC, Syracuse (James W.
Cunningham of counsel), for appellants.

      Eric T. Schneiderman, Attorney General, Albany (Frederick
A. Brodie of counsel), for respondent.

                               __________


Lahtinen, J.P.

      Appeal from an order of the Court of Claims (Hard, J.),
entered June 27, 2014, which, among other things, granted
defendant's motion to dismiss the claim.

      Claimant Charlie's at the Fair, LLC, was notified by the
Department of Agriculture and Markets (hereinafter the
Department) in September 2011 that it was the successful bidder
to operate a restaurant in a facility at the Empire Expo Center,
the site of the New York State Fair, in the Town of Geddes,
Onondaga County. Charlie's allegedly expended funds and
commenced operating the restaurant in December 2011. The
licensing agreement specifically provided that it was not
effective until approved by the Comptroller and, in June 2012,
                              -2-                520888

Charlie's learned that the Comptroller had not approved the
agreement but had directed the Department to re-bid the contract
because of apparent irregularities by the Department in the
original bidding process. Charlie's and its two principals,
claimants James Bova and Michael Kyle, commenced this claim
asserting, among other things, breach of express and implied
contract, negligent and fraudulent misrepresentation, equitable
estoppel and defamation. Defendant made a pre-answer motion to
dismiss the claim, which the Court of Claims granted. Claimants
appeal.

      Although the law is liberal in preserving claims challenged
under CPLR 3211 (a) (7) (see e.g. Lewis v DiMaggio, 115 AD3d
1042, 1043 [2014]; Trump on the Ocean, LLC v State of New York,
79 AD3d 1325, 1326 [2010], lv dismissed and denied 17 NY3d 770
[2011]), we agree with the Court of Claims that several of
claimants' causes of action fall victim to State Finance Law §
112. Where, as here, a state agency contracts for value
exceeding $10,000, the contract is not enforceable until approved
by the Comptroller (see State Finance Law § 112 [3]), and "[a]
party contracting with [defendant] is chargeable with knowledge
of the statutes which regulate its contracting powers and is
bound by them" (Parsa v State of New York, 64 NY2d 143, 147
[1984]). "[A]pproval by a state agent, such as [the Department],
cannot satisfy the State Finance Law § 112 (3) condition
precedent of Comptroller approval" (Hamlin Beach Camping,
Catering, & Concessions Corp. v State of New York, 303 AD2d 849,
851 [2003]). "The result may seem unjust but any other rule
would completely frustrate statutes designed to protect the
public from governmental misconduct or improvidence" (Parsa v
State of New York, 64 NY2d at 147; see Rosefsky v State of New
York, 205 AD2d 120, 125 [1994]).

      The claim and documents annexed thereto, including the
alleged final agreement with signatures – which is not signed by
the Comptroller – confirm that the agreement was not approved by
the Comptroller. "The failure to obtain such approval as
required by State Finance Law § 112 (3) is a complete bar to
recovery based upon a breach of [the] executory contract" (Hamlin
Beach Camping, Catering, & Concessions Corp. v State of New York,
303 AD2d at 851 [citations omitted]; see Matter of Worth Constr.
                              -3-                520888

Co., Inc. v Hevesi, 32 AD3d 629, 630 [2006], affd 8 NY3d 548
[2007]). As for equitable estoppel, such relief is rarely
available against defendant (see e.g. Matter of Westmorland v New
York State & Local Retirement Sys., 129 AD3d 1402, 1404-1405
[2015]) and, specifically with respect to State Finance Law §
112, "it is well-settled law that defendant's acceptance of
benefits under a contract not properly approved 'does not estop
it from challenging the validity of the contract or from denying
liability pursuant to it'" (Hamlin Beach Camping, Catering, &
Concessions Corp. v State of New York, 303 AD2d at 853, quoting
Parsa v State of New York, 64 NY2d at 147; see M/A-Com, Inc. v
State of New York, 78 AD3d 1293, 1294 [2010]). "Claimant[s']
allegations regarding negligent or fraudulent misrepresentation
by [the Department] similarly cannot circumvent the provisions of
State Finance Law § 112, as the license agreement clearly
apprised claimant[s] of the Comptroller approval requirement and,
in any event, agents or officers of [defendant] have no power to
waive these provisions" (Hamlin Beach Camping, Catering, &
Concessions Corp. v State of New York, 303 AD2d at 853).

      Claimants contend that they set forth a viable cause of
action for a contract implied-in-law. We cannot agree. "State
Finance Law § 112 does not prevent recovery under a quasi
contract theory where a contract is implied-in-law to restore
money to its rightful owner" (M/A-Com, Inc. v State of New York,
73 AD3d at 1294-1295; see Parsa v State of New York, 64 NY2d at
149). Such a cause of action is premised upon "an obligation
which the law creates in the absence of agreement when one party
possesses money that in equity and good conscience [that party]
ought not to retain and that belongs to another" (Parsa v State
of New York, 64 NY2d at 148; see Torrance Constr., Inc. v Jaques,
127 AD3d 1261, 1263-1264 [2015]). Claimants and the Department
operated for many months consistent with the (ultimately
unapproved) agreement, under which claimants were provided the
pertinent restaurant space by the Department. In exchange, they
set up and operated their restaurant and paid a percentage of
receipts to the Department. This is not a case where funds were
paid by a claimant to the Department for no legitimate reason or
that the Department otherwise obtained a claimant's money
"through the medium of oppression, imposition, extortion, or
deceit" (Parsa v State of New York, 64 NY2d at 148 [internal
                              -4-                  520888

quotation marks and citations omitted]; see Goel v Ramachandran,
111 AD3d 783, 790-791 [2013]; M/A-Com, Inc. v State of New York,
78 AD3d at 1294-1295; compare Torrance Constr., Inc. v Jaques,
127 AD3d at 1263-1264).

      Finally, comments about claimants made by the Comptroller's
Director of the Bureau of Contracts in the document disapproving
the contract, which claimants contend were defamatory, are
protected by absolute privilege (see Ward Telecom. & Computer
Servs. v State of New York, 42 NY2d 289, 292 [1977]) and were
properly dismissed (see generally Cullin v Lynch, 113 AD3d 586,
587 [2014]).

     McCarthy, Egan Jr., Lynch and Clark, JJ., concur.



     ORDERED that the order is affirmed, without costs.




                             ENTER:




                             Robert D. Mayberger
                             Clerk of the Court
