Zheng v. City of New York
973 N.E.2d 711, 19 N.Y.3d 556 (2012)
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Rule of Law:
To determine whether parties have entered into a binding contract, courts must look to the objective manifestations of intent as gathered from the totality of their expressed words and deeds, the attendant circumstances, and the objectives they were striving to attain. A government social services program does not create a contractual obligation absent a clear, objective manifestation of intent to be contractually bound.
Facts:
- In 2007, the City of New York created the Advantage New York program, a rental assistance program to help homeless families and individuals move into permanent housing.
- The program was designed to fix problems with a predecessor program (HSP) where landlords' subsidy payments were cut off if a tenant's public assistance case was closed or sanctioned.
- To encourage landlord participation, the City provided participants with a certification letter stating the 'Advantage program guarantees that the subsidy portion of the rent will be paid directly to your landlord for one year.'
- At lease signing, landlords signed a 'landlord statement of understanding' which stated the City 'will pay' subsidies directly to them, and in return, landlords made commitments such as offering a second-year lease at the same rent.
- The City was not a party to the lease agreement between the tenant and the landlord.
- During informational meetings, landlords requested that the City obligate itself to the leases, but the City explicitly stated that the lease obligations were solely between the landlord and the tenant.
- In 2011, the State of New York and the federal government withdrew their funding, which constituted two-thirds of the program's budget.
- Following the loss of funding, the City of New York announced the termination of the Advantage program and its subsidy payments.
Procedural Posture:
- Jasmine Zheng and A.T., on behalf of a class of program participants, sued the City of New York in New York Supreme Court (the trial court of first instance).
- The trial court denied the plaintiffs' motion for a preliminary injunction.
- After a non-jury trial, the trial court entered a judgment for the City, finding that the Advantage program was a social benefit program, not an enforceable contract.
- Plaintiffs (appellants) appealed the final judgment to the New York Supreme Court, Appellate Division, First Department (an intermediate appellate court).
- The Appellate Division affirmed the trial court's judgment, holding that the City did not intend to be contractually bound.
- Plaintiffs (appellants) were granted leave to appeal to the New York Court of Appeals (the state's highest court).
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Issue:
Does the City of New York's administration of a rent subsidy program, through program documents containing promissory language, create a legally enforceable contract obligating it to continue payments to landlords after the program's funding is eliminated?
Opinions:
Majority - Read, J.
No. The City did not create a legally enforceable contract because, under the totality of the circumstances, it did not manifest an intent to be contractually bound. Applying the standard from Brown Bros. Elec. Contrs. v Beam Constr. Corp., the court found that the various documents referred to Advantage as a 'program,' not a contract. The court determined that the word 'guarantee' was used in a specific context to assure landlords that, unlike the prior HSP program, subsidy payments would not be tied to a tenant's public assistance eligibility status; it was not a guarantee against the termination of the entire program due to loss of funding. The City's explicit refusal in meetings to obligate itself to the leases further demonstrated a lack of intent to be bound. Therefore, the lower courts' finding of fact that no contract existed was supported by sufficient evidence in the record.
Dissenting - Ciparick, J.
Yes. The City formed an enforceable contract with the landlords, and the question should be decided as a matter of law based on the unambiguous written documents. The use of clear, mandatory language such as 'guarantee,' 'will pay,' and 'shall pay' in the program documents objectively manifested an intent to be contractually bound. A reasonable person in the landlord's position would interpret this language as a binding promise to pay the rent subsidy for the lease term. The majority's interpretation renders these promissory terms meaningless and improperly relies on the City's unexpressed, subjective intent rather than the objective meaning of its words.
Analysis:
This case establishes that the use of promissory language like 'guarantee' by a government entity in the administration of a social benefit program does not, by itself, create an enforceable contract. The decision reinforces the 'totality of the circumstances' test from Brown Bros. for determining contractual intent, emphasizing context over isolated words. This precedent gives government bodies flexibility to terminate social programs when funding is lost, protecting them from unintended contractual liability. However, it also creates uncertainty for private parties, such as landlords, who rely on the government's stated commitments when entering into related agreements.
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