                           State of New York
                    Supreme Court, Appellate Division
                        Third Judicial Department
Decided and Entered: February 23, 2017                    522983
________________________________

CITY OF SCHENECTADY,
                    Respondent,
      v

EDISON EXPLORATORIUM, INC.,                  MEMORANDUM AND ORDER
   Also Known as EDISON
   TECH CENTER,
                    Appellant.
________________________________


Calendar Date:   January 17, 2017

Before:    Peters, P.J., McCarthy, Egan Jr., Rose and Mulvey, JJ.

                              __________


      Law Office of Kathryn McCary, Schenectady (Kathryn McCary
of counsel), for appellant.

      Carol G. Falotico, Corporation Counsel, Schenectady, for
respondent.

                              __________


Rose, J.

      Appeal from an order of the Supreme Court (R. Sise, J.),
entered April 14, 2016 in Schenectady County, which, among other
things, partially granted plaintiff's motion for summary
judgment.

      On September 30, 2005, plaintiff entered into a contract to
convey adjoining buildings located at 132 and 136 Broadway in the
City of Schenectady, Schenectady County to defendant, a not-for-
profit corporation formed for educational purposes, for $1 and
other good and valuable consideration. The contract required
defendant, within one year after the closing dates, to "do and
take such actions that are necessary to bring [each building]
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into compliance with all applicable laws, rules and regulations"
(hereinafter the compliance provision). The parties further
agreed that, as "additional consideration" for the contract,
defendant would not apply for a real property tax exemption as to
136 Broadway for a period of 20 years (hereinafter the tax
exemption provision). Title to each property was then
transferred to defendant. In August 2007, plaintiff's Bureau of
Code Enforcement notified defendant that each property had been
inspected and found to be in violation of the Code of the City of
Schenectady. In addition, it is undisputed that, starting with
the 2007 tax year, defendant applied for, and was granted, a real
property tax exemption for both 132 and 136 Broadway.

      In August 2011, plaintiff wrote to defendant stating that
defendant had violated the compliance provision and the tax
exemption provision and requesting that defendant take measures
to cure this default. When defendant failed to do so, plaintiff
commenced this action for rescission of the contract. Following
joinder of issue, plaintiff moved for summary judgment and
defendant cross-moved for summary judgment dismissing the
complaint. Supreme Court found that defendant had breached the
compliance provision and that rescission was the proper remedy.
As for the tax exemption provision, the court found that issues
of fact existed as to whether plaintiff's decision to grant
defendant's applications for a real property tax exemption
constituted a waiver of that provision. Accordingly, the court
partially granted plaintiff's motion and denied defendant's cross
motion. Defendant now appeals.

      Defendant argues that plaintiff failed to meet its summary
judgment burden as to breach and rescission of the compliance
provision and the tax exemption provision, respectively, and
that, in any event, an issue of fact exists as to the affirmative
defenses of laches and waiver. Turning first to the compliance
provision, we find that plaintiff met its initial summary
judgment burden of establishing that defendant breached this
provision and thereby established a basis for rescission of the
contract. "Rescission of a contract is permitted for such a
breach as substantially defeats its purpose. It is not permitted
for a slight, casual or technical breach, but, as a general rule,
only for such as are material and willful, or, if not willful, so
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substantial and fundamental as to strongly tend to defeat the
object of the parties in making the contract" (O'Herron v
Southern Tier Stores, 9 AD2d 568, 568 [1959] [internal quotation
marks and citation omitted]; see Grace v Nappa, 46 NY2d 560, 566
[1979]; Mortgage Elec. Registration Sys., Inc. v Maniscalco, 46
AD3d 1279, 1281 [2007]; RR Chester, LLC v Arlington Bldg. Corp.,
22 AD3d 652, 654 [2005]).

      Here, plaintiff's proof demonstrated that the properties
were inspected on July 31, 2007, at which time plaintiff's
Housing Inspector observed numerous deficiencies to the facade of
each property that violated the Code of the City of Schenectady,
including damage to the masonry columns, wood facade and
brickwork of 132 Broadway and deterioration of the stone veneer
and the cement exterior of 136 Broadway. In addition,
plaintiff's Corporation Counsel submitted an affirmation stating
that defendant never applied for a building permit to repair the
facades, despite the fact that one of plaintiff's goals in
entering into the contract "was to have the facade [of the
properties] fully repaired (brought to code)." Corroborating
this, the record also establishes that the approval of the
conveyances by plaintiff's City Council was predicated upon
defendant's "agree[ment] to bring both parcels into compliance
with [plaintiff's] building codes." Further, the contract
highlighted the importance of the compliance provision by
reciting it twice – once for each property.

      Contrary to defendant's argument, this evidence, coupled
with the plain language of the contract requiring defendant to
bring the properties "into compliance" with all applicable laws,
leads to the logical conclusion that, at the time the contract
was entered into, the facade of each property contained
conditions that violated the Code of the City of Schenectady and
that defendant failed to "do and take such actions" that were
necessary to bring the properties into compliance within one year
of the closing dates. Further, plaintiff demonstrated that the
compliance provision was an integral and material part of the
contract and that defendant's breach substantially defeated the
contract's purpose (compare RR Chester, LLC v Arlington Bldg.
Corp., 22 AD3d at 654). Plaintiff's proof also established that,
under the circumstances presented here, rescission of the
                              -4-                522983

contract is the only adequate remedy (compare Slezak v Stewart's
Shops Corp., 133 AD3d 1179, 1180 [2015]). In opposition,
defendant failed to submit any evidence demonstrating that it did
not breach the compliance provision or that rescission is not a
proper remedy.

      Turning next to the tax exemption provision, plaintiff
again met its burden of showing a breach of the contract that was
so substantial and fundamental as to make rescission the proper
remedy. In response, defendant argues that neither party had the
authority to agree to the tax exemption provision pursuant to NY
Constitution, article XVI, § 1 and RPTL 420-a and, therefore,
Supreme Court should have found that it was unenforceable. NY
Constitution, article XVI, § 1 provides that real property tax
exemptions may be granted to educational organizations by
legislation and, once granted, may not be "altered or repealed."
RPTL 420-a sets forth that educational organizations "shall be
exempt from taxation" (RPTL 420-a [1] [a]). Taken together,
"[t]he Constitution and the State Legislature, in the furtherance
of the general welfare, have established a clear policy that
[educational] institutions are to be free, if they so choose,
from local taxes" (Matter of PACER, Inc. v Planning Bd. of City
of Middletown, 217 AD2d 47, 52 [1995] [emphasis added], lv
denied 87 NY2d 810 [1996]). Contrary to defendant's contention,
we find that nothing in NY Constitution, article XVI, § 1 or RPTL
420-a prohibits an educational organization, such as defendant,
from freely choosing to refrain from applying for a real property
tax exemption. Rather, the prohibition set forth is to restrain
municipalities from denying a real property tax exemption to a
statutorily exempt organization once an application has been
submitted or attempting to extort the organization's waiver of
the exemption (see e.g. Matter of PACER, Inc. v Planning Bd. of
City of Middletown, 217 AD2d at 52). Accordingly, we find that
the tax exemption provision is enforceable.

      Finally, defendant asserts that the doctrines of waiver and
laches bar plaintiff from receiving any relief in this action
and, therefore, Supreme Court should have dismissed the
complaint. As for the defense of laches, "[t]he essential
element of this equitable defense is delay prejudicial to the
opposing party" (Matter of Schulz v State of New York, 81 NY2d
                              -5-                522983

336, 348 [1993] [internal quotation marks and citation omitted];
accord Capruso v Village of Kings Point, 23 NY3d 631, 641
[2014]). Here, defendant has failed to proffer any evidence
demonstrating "that [plaintiff's] delay in bringing this action
has caused [defendant even] the slightest harm" (Saratoga County
Chamber of Commerce v Pataki, 100 NY2d 801, 817 [2003], cert
denied 540 US 1017 [2003]; compare Sparkling Waters Lakefront
Assn., Inc. v Shaw, 42 AD3d 801, 803-804 [2007]). At best,
defendant has offered no more than an unsupported and conclusory
assertion that it has expended an unspecified amount of funds
preserving and maintaining the properties. In view of this,
defendant has failed to raise a triable issue of fact as to the
defense of laches.

      Turning to waiver, however, the record before us reflects
that, regarding the compliance provision, plaintiff had no
further contact with defendant between August 2007 and August
2011. In fact, although the August 2007 violation letters state
that plaintiff would reinspect the properties in September 2007,
the record is devoid of any evidence that this reinspection
occurred or that plaintiff took any further steps to require
defendant to adhere to the contract. As for the tax exemption
provision, plaintiff undisputably granted defendant's yearly
application for a real property tax exemption concerning 136
Broadway. Plaintiff maintains, however, that this was a result
of an administrative error – namely, a lack of communication
between the Corporation Counsel's office and the Department of
Assessment. In our view, there are issues of fact as to whether
plaintiff's actions in failing to reinspect the properties to
ensure that defendant was adhering to the contract, granting
defendant's application for a real property tax exemption and
delaying the commencement of this action for rescission until
September 2012 constitute "the intentional relinquishment of a
known right" (Werking v Amity Estates, 2 NY2d 43, 52 [1956]
[internal quotation marks and citation omitted], appeal
dismissed 353 US 933 [1957]; see Gilbert Frank Corp. v Federal
Ins. Co., 70 NY2d 966, 968 [1988]). Thus, although we agree that
rescission is the appropriate remedy for defendant's established
breaches of the contract, rescission would be premature at this
point because issues of fact exist as to defendant's affirmative
defense of waiver.
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      Defendant's remaining contentions, to the extent not
expressly addressed, have been examined and determined to be
lacking in merit.

     Peters, P.J., McCarthy, Egan Jr. and Mulvey, JJ., concur.



      ORDERED that the order is modified, on the law, without
costs, by reversing so much thereof as partially granted
plaintiff's motion for summary judgment; motion denied to that
extent; and, as so modified, affirmed.




                             ENTER:




                             Robert D. Mayberger
                             Clerk of the Court
