United States: Court Of Appeals #10

In 2008, defendant lived with his girlfriend and her five-year-old son on the second floor of a two-family house[.]

The boy's father had visitation rights, and in the spring of 2008 he noticed that when it was time for his son to return home after a visit, the child would start crying and refuse to get ready. On May 4, 2008, after a conversation with his son, the father told the mother he would not return the child to her. She contacted the police, who appeared at the father's home and required that he release the child to the mother's custody.

On May 6, 2008, the father tried to reach the mother on her cellphone, using his own cellphone. He called several times without reaching her; the calls went directly to voicemail. Finally, a call went through, but no-one said anything to the father. However, the line was open, and the father was able to hear what was occurring in defendant's apartment. Defendant and the child's mother were yelling at the child, who was crying. Defendant threatened to beat him and punch him in the face. The father, using another cellphone, tried to call the landline telephone in the apartment, but no-one answered.

At this point, the father decided to record what he was hearing using a voice memo function on his cellphone. On the recording, which was played to the jury at defendant's trial, defendant told the five-year-old boy that he was going to hit him 14 times for lying and that this would hurt more than a previous beating. The father saved the recording on his cellphone. He did not contact the police.

Several months later, defendant was arrested when his landlord called the police. The child was treated at a medical center for extensive bruising and told the police his mother had beat him. The father thereafter gave the audio recording to the police.

The father testified concerning the circumstances leading to the recording. Asked whether he had been afraid for his son's safety when he was listening to what was occurring in the apartment, he responded that he had not thought that defendant would physically harm his son, but was afraid for the boy to the extent that defendant's "tone was getting louder and louder."

[D]efendant argued...that the recording amounted to eavesdropping in violation of Penal Law § 250.05, because no party to the conversation consented to the recording, so that the evidence was inadmissible under CPLR 4506[.]

"[t]he contents of any overheard or recorded communication, conversation or discussion, or evidence derived therefrom, which has been obtained by conduct constituting the crime of eavesdropping, as defined by section 250.05 of the penal law, may not be received in evidence in any trial, hearing or proceeding before any court or grand jury"[.]

Penal Law § 250.05, in turn, provides that "[a] person is guilty of eavesdropping when he unlawfully engages in wiretapping, mechanical overhearing of a conversation, or intercepting or accessing of an electronic communication." Eavesdropping is a class E felony.

Wiretapping is defined as "the intentional overhearing or recording of a telephonic or telegraphic communication by a person other than a sender or receiver thereof, without the consent of either the sender or receiver, by means of any instrument, device or equipment"[.]

"'Mechanical overhearing of a conversation' means the intentional overhearing or recording of a conversation or discussion, without the consent of at least one party thereto, by a person not present thereat, by means of any instrument, device or equipment"[.]

The father's actions on his cellphone did not constitute "wiretapping" because, with respect to the telephonic communication he recorded, he was "a sender or receiver thereof"...Defendant argues, however, that the father's actions amounted to the crime of "mechanical overhearing of a conversation"..., and that the recording was consequently inadmissible. Defendant points out that the father deliberately used a device to record a conversation between defendant, the child, and his mother, without obtaining the consent of any of those three people, and without being present at, or a party to, the conversation. We agree that the father's actions matched the statutory elements. Certainly, mechanical overhearing of a conversation or "bugging" has been interpreted to include the interception of face-to-face communications by means of a recording device on a telephone...This, however, does not end our analysis.

The analytical core of this case is consent. The father did not ask for or obtain the consent of any party to the conversation. Nor is there evidence in the record that the mother intentionally manipulated her cellphone so that the father's call would go through. We conclude, however, that the father gave consent to the recording on behalf of his child.

The principle of vicarious consent that we adopt originates in federal case law. The federal wiretapping law, like the New York statutes we interpret here, contains an exception for the interception of a communication with the consent of one party. "It shall not be unlawful under this chapter . . . for a person not acting under color of law to intercept a wire, oral, or electronic communication where such person is a party to the communication or where one of the parties to the communication has given prior consent to such interception unless such communication is intercepted for the purpose of committing any criminal or tortious act in violation of the Constitution or laws of the United States or of any State"[.]

This Court agrees with the approach taken by the Sixth Circuit in Pollock, and by the Appellate Term in Clark, as applied below. There is no basis in legislative history or precedent for concluding that the New York Legislature intended to subject a parent or guardian to criminal penalties for the act of recording his or her minor child's conversation out of a genuine concern for the child's best interests. By contrast, the vicarious consent doctrine recognizes the long-established principle that the law protects the right of a parent or guardian to take actions he or she considers to be in his or her child's best interests. Yet it also recognizes important constraints on that right, by requiring that the parent or guardian believe in good faith that it is necessary for the best interests of the child to make the recording, and that this belief be objectively reasonable.

Applying the vicarious consent doctrine to the present case, the record supports the conclusion of the courts below that the People have sufficiently demonstrated that the father had a good faith, objectively reasonable basis to believe that it was necessary for the welfare of his son to record the violent conversation he found himself listening to. The father testified that he was concerned for his son's safety because of the volume and tone of defendant's threats. Although other portions of the father's testimony reveal that he may have been in doubt about whether physical harm would ensue, it does not follow that he had no good faith reason to believe that it was necessary to record the conversation. Furthermore, the evidence that the child had previously expressed fear of returning home adds support to the conclusion that the father had a good faith basis, despite his delay in providing the recording to the police. While defendant argues that the father should have contacted the police earlier, his failure to report what he had heard immediately does not diminish the evidence of good faith.

Moreover, the father's basis is objectively reasonable. The father had heard defendant and the child's mother yelling at the five-year-old child, and defendant threatening to beat him. Furthermore, he could not get through to the apartment on the landline phone. It was reasonable for the father to conclude that making the recording was necessary to serve the child's best interests. Additionally, the recording, which captures a five-year-old crying while defendant is threatening to hit him 14 times and referring to previous beatings, speaks volumes. The contents of the recording demonstrate that there was an objectively reasonable basis for the father to believe that recording what he was hearing was necessary to serve his son's best interests.

Our holding should not be interpreted as a vehicle to attempt to avoid criminal liability for the crime of eavesdropping when a parent acts in bad faith and lacks an objectively reasonable belief that a recording is necessary in order to serve the best interests of his or her minor child. [The law] cannot be so easily circumvented. To be sure, the procedural vehicles of pretrial hearings in [the Criminal Procedure Law] must be used to determine the admissibility of any recordings and will result in the suppression of any parent's recording that a court determines did not meet our narrowly tailored and objective test.

Mark Chanko (decedent) was brought into the emergency room of defendant The New York and Presbyterian Hospital (the Hospital). He had been hit by a vehicle, but was alert and responding to questions. Defendant Sebastian Schubl was the Hospital's chief surgical resident and was responsible for decedent's treatment. While decedent was being treated, employees of ABC News, a division of defendant American Broadcasting Companies, Inc. (ABC), were in the Hospital — with the Hospital's knowledge and permission — filming a documentary series (NY Med) about medical trauma and the professionals who attend to the patients suffering from such trauma. No one informed decedent or any of the individual plaintiffs— most of whom were at the Hospital — that a camera crew was present and filming, nor was their consent obtained for filming or for the crew's presence.

Less than an hour after decedent arrived at the Hospital, Schubl declared him dead. That declaration was filmed by ABC, and decedent's prior treatment was apparently filmed as well. Schubl then informed the family of decedent's death, with that moment also being recorded without their knowledge.

Sixteen months later, decedent's widow, plaintiff Anita Chanko, watched an episode of NY Med on her television at home. She recognized the scene, heard decedent's voice asking about her, saw him on a stretcher, heard him moaning, and watched him die. In addition, she saw, and relived, Schubl telling the family of his death. She then told the other plaintiffs, who also watched the episode. This was the first time plaintiffs became aware of the recording of decedent's medical treatment and death.

[W]e begin by observing that the physician-patient privilege did not exist at common law; it was created by statute, with New York having the first such statute in the nation, now codified at CPLR 4504...That statute provides that, "[u]nless the patient waives the privilege, a person authorized to practice medicine . . . shall not be allowed to disclose any information which he [or she] acquired in attending a patient in a professional capacity, and which was necessary to enable him [or her] to act in that capacity" (CPLR 4504 [a]).

The policy objectives of the statute are to: (1) maximize unfettered communication between patients and medical professionals, so that people will not be deterred by possible public disclosure "from seeking medical help and securing adequate diagnosis and treatment;" (2) encourage physicians to candidly record confidential information in medical records, so they are not torn between the legal duty to testify and the professional obligation to honor patient confidences; and (3) protect the reasonable privacy expectations of patients that their sensitive personal information will not be disclosed[.]

The privilege applies not only to information orally communicated by the patient, but also to information ascertained by observing the patient's appearance and symptoms, unless those factual observations would be obvious to lay observers...Generally, the privilege covers all "'information relating to the nature of the treatment rendered and the diagnosis made'"...Although not covered by the statute, "information obtained in a professional capacity but not necessary to enable the physician to fulfill his or her medical role is a protected confidence, the disclosure of which constitutes professional misconduct in the absence of patient consent or legal authorization"[.]

A physician's disclosure of secrets acquired when treating a patient "naturally shocks our sense of decency and propriety," which is one reason it is forbidden...Even apart from CPLR 4504, the Legislature has declared that it is the public policy of this State to protect the "privacy and confidentiality of sensitive medical information"...As relates to emergency rooms, specifically, this Court has stated that "[p]atients should not fear that merely by obtaining emergency medical care they may lose the confidentiality of their medical records and their physicians' medical determinations. A contrary result would discourage critical emergency care, intrude on patients' confidential medical relationships and undermine patients' reasonable expectations of privacy"...The physician-patient privilege, together with its concomitant duty of confidentiality, belongs to the patient and is not terminated by death alone[.]

The elements of a cause of action for breach of physician-patient confidentiality are: (1) the existence of a physician-patient relationship; (2) the physician's acquisition of information relating to the patient's treatment or diagnosis; (3) the disclosure of such confidential information to a person not connected with the patient's medical treatment, in a manner that allows the patient to be identified; (4) lack of consent for that disclosure; and (5) damages...Here, the complaint alleges that decedent was a patient at the Hospital and that Schubl was his treating physician. In the complaint's fourth cause of action, decedent's estate alleges "[t]hat defendants[] unnecessarily, recklessly, willfully, maliciously and in conscious disregard of [decedent's] rights disclosed and discussed his medical condition with cast members of NY MED and allowed them to videotape said conversations and videotape his medical treatment for broadcast and dissemination to the public in an episode of that television show." Asserting that the public does not have any legitimate interest in this information, the complaint states that "[d]efendants' disclosure of [decedent's] medical information constitutes a violation of physician[-]patient confidentiality and an invasion of his privacy and is a violation of State and Federal statutes protecting the privacy of medical records and information"[.]

In sum, the pleadings, together with the submitted affidavits, allege that a fiduciary physician-patient relationship existed, and that the duty of confidentiality springing from that relationship was breached when the Hospital and Schubl allowed the ABC crew to be present during the filming of decedent's medical treatment and/or to view such film at a later time[.]

This Court has enumerated four elements of a cause of action for intentional infliction of emotional distress: "(i) extreme and outrageous conduct; (ii) intent to cause, or disregard of a substantial probability of causing, severe emotional distress; (iii) a causal connection between the conduct and injury; and (iv) severe emotional distress"..."'Liability has been found only where the conduct has been so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community'"...Here, the complaint's fifth cause of action addresses each element above and alleges that the Hospital and Schubl allowed ABC to broadcast and disseminate the footage of the final moments of decedent's life, without the knowledge or consent of decedent or plaintiffs. The complaint alleges that plaintiffs watched the episode and were shocked and upset, that "[d]efendants acted intentionally, recklessly, willfully, maliciously and deliberately," and that it was foreseeable that plaintiffs would be caused to suffer emotional distress. Alternatively, the complaint alleges that "defendants acted with reckless disregard for the probability that they would cause plaintiffs to suffer emotional distress," and that defendants knew or should have known that emotional distress was a likely result of their actions. The complaint further alleges that plaintiffs experienced emotional distress due to defendants' conduct, and that "[d]efendants' conduct was extreme and outrageous, beyond all possible bounds of decency, utterly intolerable in a civilized community, and without privilege."

Although these allegations facially address all of the required elements, they are not sufficient to support this cause of action because they do not rise to the level necessary to satisfy the outrageousness element — the element most susceptible to a determination as a matter of law — which is designed to filter out petty complaints and assure that the emotional distress is genuine...Noting that "the requirements . . . are rigorous, and difficult to satisfy," we have commented that, "of the intentional infliction of emotional distress claims considered by this Court, every one has failed because the alleged conduct was not sufficiently outrageous"[.]

The conduct at issue here for purposes of the fifth cause of action — the broadcasting of a recording of a patient's last moments of life without consent — would likely be considered reprehensible by most people, and we do not condone it. Nevertheless, it was not so extreme and outrageous as to satisfy our exceedingly high legal standard. The footage aired by ABC was edited so that it did not include decedent's name, his image was blurred, and the episode included less than three minutes devoted to decedent and his circumstances. We cannot conclude that defendants' conduct in allowing the broadcasting of that brief, edited segment is more outrageous than other conduct that this Court and the Appellate Division Departments have determined did not rise to the level required to establish "extreme and outrageous conduct" sufficient to state a cause of action for intentional infliction of emotional distress. For example, we did not deem a newspaper's conduct sufficiently outrageous when it published a picture of a person in a psychiatric facility — thereby informing the world that the photographed person was a patient at such a facility — even though the residents were photographed by someone trespassing on facility grounds and the facility had expressly requested that the newspaper not publish pictures of residents...Similarly, the conduct of a television station has been deemed insufficiently outrageous when the station displayed recognizable images of rape victims after repeatedly assuring them that they would not be identifiable[.]

Shortly after receiving notice of the injury to Hub-Langie's employee, Spoleta's insurer sent a letter to Hub-Langie about the claim, seeking the contact information for Hub-Langie's insurer and its insurance policy number, stating that Hub-Langie had agreed to defend and indemnify Spoleta and hold it harmless, and requesting that Hub-Langie "place [its] insurance carrier on notice of this claim so that they m[a]y do their own investigation of this claim." Hub-Langie's broker forwarded the letter to Aspen — as its insurer — along with a general liability notice of occurrence/claim form describing the employee's injury. Hub-Langie also sent a copy of the subcontract at Aspen's request.

Approximately three months later, Hub-Langie's employee commenced the underlying action against Spoleta and the property owner, seeking to recover for his injuries. Spoleta's counsel notified Aspen thereof, by letter, and indicated that Spoleta had not yet received a response to its previous request for defense and indemnification. This time, counsel expressly stated that Hub-Langie was required to defend and indemnify Spoleta and name it as an additional insured, and included a certificate of insurance demonstrating that Spoleta was named as an additional insured on the policy that Aspen issued to Hub-Langie. Aspen denied coverage due to late notice because, in its initial letter, Spoleta "framed" itself only as a claimant against Hub-Langie, not as an additional insured of Aspen, and coverage had been denied to Hub-Langie for unrelated reasons.

At the relevant time, "the rule in New York [was] that where a contract of primary insurance require[d] notice 'as soon as practicable' after an occurrence, the absence of timely notice of an occurrence [constituted] a failure to comply with a condition precedent which, as a matter of law, vitiate[d] the contract...[and] [n]o showing of prejudice [was] required". The Appellate Division, therefore, properly stated the issue as whether Spoleta's initial letter — forwarded to Aspen by Hub-Langie's broker at Spoleta's request — constituted notice of an "occurrence" under the policy issued by Aspen. The pertinent notice provision of the policy stated: "You must see to it that [Aspen is] notified as soon as practicable of an 'occurrence' or an offense which may result in a claim." Notice was to include, to the extent possible: "(1) How, when and where the 'occurrence' or offense took place; (2) The names and addresses of any injured persons and witnesses; and (3) The nature and location of any injury or damage arising out of the 'occurrence' or offense."

We reject Aspen's argument that the documentary evidence established as a matter of law that Spoleta did not timely see to it that Aspen was notified of an occurrence. Aspen claims that it interpreted Spoleta's initial letter as seeking only a defense and indemnity from Hub-Langie pursuant to the indemnification provision of the subcontract because Spoleta did not expressly state that it was seeking coverage as an additional insured. However, the letter itself did not identify the indemnification provision of the subcontract as the basis for the communication — it simply requested a defense and indemnity under the contract without specifically invoking either the indemnification or additional insurance provisions. Moreover, the letter requested that Hub-Langie "place [its] insurance carrier on notice of this claim" (emphasis added) and provided information about the identity of the injured employee, as well as the date, location and general nature of the accident. That is, in addition to requesting that the insurer be put on notice, the letter provided the details that the policy required to be included by an insured in notice of an occurrence.

In December 2000, the petitioners/plaintiffs, Exeter Building Corp....and 17K Newburgh, LLC...became the owners of a parcel of approximately 29 acres of real property in the Town of Newburgh. The property was within the Town's R-3 zoning district, which permits multi-family housing. In 2002 the plaintiffs applied to the Town of Newburgh Planning Board...for approval of a site plan for a proposed project to be known as Madison Green that was to consist of 34 residential buildings, each containing four single-family units, for a total of 136 units. Exeter was aware that final approval of the site plan for Madison Green could not be obtained until a sewer moratorium then in effect was lifted. Exeter acknowledged in a May 2002 letter to the Planning Board that it was pursuing the approval of the site plan for Madison Green at its own risk.

Meanwhile, the Town was engaged in a rezoning effort. In April 2001, it had commissioned the preparation of a draft comprehensive plan, and an initial draft was completed that month. The initial draft did not include a proposal to change the R-3 zoning of the plaintiffs' property.

Over the course of several years, as the Town refined its draft comprehensive plan, the plaintiffs appeared before the Planning Board in furtherance of the final approval of the site plan for Madison Green. In December 2003, during the approval process, a consultant to the Planning Board recommended, for several reasons, that the plaintiffs adjust a boundary line between their property and an adjoining property. Accordingly, the plaintiffs commenced negotiations with the owner of that adjoining property.

The plaintiffs commenced this hybrid proceeding and action against the Town, the members of the Town Board, the Planning Board, the ZBA and its members, and the Town Code enforcement officer...seeking, among other things, to annul the ZBA's determination and a judgment declaring that the plaintiffs have a vested right under the common law to develop Madison Green under the R-3 zoning regulations. After a hearing, the Supreme Court issued an order and judgment, inter alia, granting that branch of the petition which sought to annul the determination and declaring that the plaintiffs have a vested right to develop Madison Green under the R-3 zoning regulations.

In the summer of 2005, the Town's planning consultant recommended that the Town revise the draft comprehensive plan to include a change of the zoning of various properties, including the plaintiffs' property, from R-3 to R-1, a more restrictive category. The chairperson of the Planning Board warned the plaintiffs in a letter that adoption of the proposed change to the draft comprehensive plan would "directly affect" the final approval of the site plan for Madison Green in that development of Madison Green would not be permissible under R-1 zoning. The chairperson cautioned the plaintiffs that their continued efforts to develop Madison Green would be at their own risk. The chairperson assured the plaintiffs that, in the event that they chose to move forward, the Planning Board would continue its review in a "timely fashion." In August 2005, the Town Board voted to include the revision in the draft comprehensive plan.

The plaintiffs commenced legal proceedings against the Town, its Planning Board, and the Town's Building Inspector, seeking invalidation of Local Law 3 and a declaration that they have vested rights, under both statute and common law, to develop Madison Green under the R-3 zoning regulations. In November 2006, the Supreme Court issued an order invalidating Local Law 3, but also declaring that the plaintiffs did not have vested rights to develop Madison Green under the R-3 zoning regulations. The plaintiffs appealed, and the Town and its Building Inspector cross-appealed from that order.

That summer, after successful negotiations for an exchange of land with an adjoining property owner, the plaintiffs submitted a proposal for a boundary adjustment to their property. In October, the Planning Board approved the boundary adjustment, and the approval was filed on January 24, 2006. Review of the site plan for Madison Green proceeded, but on March 6, 2006, the Town Board enacted its comprehensive plan as Local Law No. 3 (2006) of Town of Newburgh (hereinafter Local Law 3), and the plaintiffs' property was rezoned from R-3 to R-1.

In June 2007, while the appeals were pending, the plaintiffs received preliminary site plan approval for Madison Green, subject to numerous conditions. The next month, the Town's code compliance department granted the plaintiffs a permit authorizing the demolition of a single-family residence on the property, and the plaintiffs demolished the residence. Additionally, on December 20, 2007, the Planning Board passed a "Resolution of Approval Site Plan Final"...with respect to Madison Green, upon the plaintiffs' satisfaction of certain conditions. The Resolution stated, in relevant part, that "THE PLANNING BOARD RESOLVES to approve this Site Plan as said proposal is depicted on the plans identified above upon the conditions outlined below, and the Chairperson . . . is authorized to sign the plans upon satisfaction of those conditions below noted to be conditions precedent to signing." The Resolution contained 18 specific conditions, 11 of which were required to be met before the chairperson of the Planning Board would be authorized to sign the plans. From the submission in 2002 of their application for approval until the Resolution was approved, the plaintiffs had incurred $358,999.73 in engineering and review costs.

Zoning...[is] an exercise of the "police powers"[.] The doctrine of vested rights is implicated when a property owner seeks to continue to use property, or to initiate the use of property, in a way that was permissible before enactment or amendment of a zoning ordinance but would not be permitted under a new zoning law...In those situations, the right of the property owner is to be balanced against the right of the public to enforce the zoning law[.]

Four months later, in March 2008, this Court decided the appeal and the cross appeal...This Court upheld Local Law 3 and agreed with the Supreme Court that the plaintiffs had not established that they have a vested right under the common law to proceed with Madison Green under the R-3 zoning regulations. Nonetheless, we also held that the boundary adjustment that the plaintiffs had negotiated with an adjoining property owner, and which the Town approved, constituted a subdivision...The effect of this subdivision was to give the plaintiffs a three-year exemption from the rezoning of their property...During that exemption period, the plaintiffs were entitled to proceed with the approval process in order to establish a vested right under the common law to build Madison Green under the R-3 zoning regulations. The parties agree that the exemption period began on January 24, 2006, and ended on January 24, 2009. As of the date of our decision and order, approximately 10 months were left in the three-year exemption period.

"In New York, a vested right can be acquired when, pursuant to a legally issued permit, the landowner demonstrates a commitment to the purpose for which the permit was granted by effecting substantial changes and incurring substantial expenses to further the development". "Neither the issuance of a permit . . . nor the landowner's substantial improvements and expenditures, standing alone, will establish the right. The landowner's actions relying on a valid permit must be so substantial that the municipal action results in serious loss rendering the improvements essentially valueless"[.]

"Reliance" is an essential element of the doctrine...Although many cases speak in terms of reliance on permits...a right may vest in certain situations when "subdivisions" have been given a "final grant of approval"...Whether a planning board's final unconditional approval of a site plan may, even in the absence of a building permit, satisfy the first prong of the test has not been settled in New York[.]

The plaintiffs placed the issue of common-law vesting directly before the ZBA, which had the authority to determine the claim...The ZBA's determination must be upheld unless it "was made in violation of lawful procedure, was affected by an error of law or was arbitrary and capricious or an abuse of discretion"...The ZBA's determination was neither arbitrary and capricious nor an abuse of discretion. Even if a property owner may claim vested rights in reliance on an unconditional final approval of a site plan, it is undisputed that the Planning Board never granted unconditional approval of the plaintiffs' site plan. Indeed, since the plaintiffs did not fulfill the conditions precedent that were delineated in the Resolution, the chairperson was not authorized to sign the site plan. Accordingly, the plaintiffs could not establish that they had vested rights to develop Madison Green under the Resolution.

Further, the plaintiffs may not ground a claim of common-law vesting upon reliance on the limited permits that were issued to them. None of those permits—which authorized demolition of the single-family house and the water tanks, erection of a sign, and regrading and clearing—either singly or together amounted to the Town's approval of Madison Green. Thus, the plaintiffs' expenditures and construction in reliance on those limited permits could not satisfy the prerequisite for common-law vesting of the right to construct the entire project. At most, the limited permits authorized the plaintiffs to complete the work described in the permits themselves, which, if undertaken, would leave the subject property in a condition amenable to development under the new, more restrictive R-1 zoning regulations.

An owner of real property can acquire a common law vested right to develop the property in accordance with prior zoning regulations when, in reliance on a "legally issued permit," the landowner "effect[s] substantial changes and incur[s] substantial expenses to further the development" and "[t]he landowner's actions relying on [the] valid permit [are] so substantial that the municipal action results in serious loss rendering the improvements essentially valueless"...Here, it was not reasonable for petitioners to rely on the December 2007 conditional Final Site Approval of the development, in carrying out any substantial actions furthering the development. In particular, in 2005, the year before the rezoning of petitioners' property by means of Local Law No. 3 (2006) of Town of Newburgh, the Town Planning Board had repeatedly warned petitioners of the proposed rezoning. The December 2007 Approval itself did not engender expectations to the contrary. It included a statement of the new zoning status of the property. Additionally, while petitioners challenged the rezoning in court, petitioners must have been "cognizant of the potential for an eventual legal ruling that the Local Law was in fact valid"[.]

We need not address whether a conditional final site approval can be the basis for acquisition of a vested right to develop property. Even if the right could vest under such a site approval, petitioners here do not satisfy the Magee test, because the element of reasonable reliance on municipal permission was not satisfied. Nor did limited permits, authorizing petitioners to demolish a single-family residence, remove certain water tanks and their foundation, conduct clearing and grading, and erect signs on the subject property, amount to approval of petitioners' proposed development. Consequently, the Appellate Division properly held that petitioners have no vested right to develop the subject property under the prior zoning regulations.

Petitioner is the owner of property located at 663-669 Second Avenue in Manhattan. For many years, petitioner maintained a large illuminated advertising sign on the side of its building at that location. The DOB had issued a permit for that sign in 1980. Thereafter, the New York City zoning regulations were amended in such a way that no longer permitted the advertising sign. The original sign was, however, "grandfathered" in as a legal, non-conforming use.

In May 2002, petitioner sought, and the New York City Board of Standards and Appeals (BSA) granted, a zoning variance for the construction of a new 34-story mixed-use building on the property. The BSA also approved petitioner's request to relocate the original sign, with slightly modified dimensions, as part of petitioner's plans to construct the mixed-used building on the property. To date, petitioner neither built the mixed-use building nor constructed the advertising sign approved under the 2002 zoning variance.

In 2008, the DOB issued petitioner a violation for its failure to maintain the then-vacant building on which the original sign was affixed. After a July 2008 emergency declaration, the building was demolished, and, with it, the sign.

Petitioner then filed two applications with the DOB to erect a new support structure and a new sign. The DOB granted the support structure application, but objected to the proposed sign on the bases that the new sign was different than the original sign because it was a double-sided sign; it was not located in the same position as the original sign; and the replacement sign was 25 feet lower than the original. The DOB noted that, in order to be "grandfathered" in as a legal non-conforming use the new sign must be single-sided and in the same location as the original sign.

Petitioner sought reconsideration of its application. The then-Manhattan Borough Building Commissioner overruled DOB's objections and approved the new sign permit, stating: "OK to accept prior sign as grandfathering of existing non-conforming sign. OK to accept lower sign as no increase in degree of noncompliance." Shortly thereafter, DOB issued a permit for the installation of petitioner's new sign on the support structure.

In the spring of 2010, after petitioner had installed the structure and new sign, the DOB audited its earlier permit approvals. In the course of that audit, the DOB determined that petitioner's sign had not been lawfully approved. Accordingly, it revoked the permits for both the support structure and the sign, determining that its prior approval was improperly granted.

Petitioner then commenced this CPLR article 78 proceeding to, among other things, annul the BSA's resolution and reinstate the permits revoked by the DOB, thereby restoring petitioner's right to maintain the new sign on its property. Petitioner argued that it had relied in good faith on the Commissioner's approval and the subsequently-issued permits in expending substantial funds to install the new sign.

Supreme Court denied the petition and dismissed the proceeding. The court found the BSA's determination upholding the revocations rational and not arbitrary or capricious. The court also rejected petitioner's argument that the DOB or the BSA should have considered its good-faith reliance on the permits issued by the DOB, concluding that estoppel is not available against an agency even when correction of its prior erroneous determination leads to harsh results.

The Appellate Division noted that the BSA's conclusion that "it could not consider the issue of [petitioner's] good faith under its appellate jurisdiction...was incorrect"...Thus, the court determined that remand to the BSA was required so that it could determine, "in its appellate capacity...whether [petitioner] is entitled to a variance applying the factors set forth in City Charter"...The court further determined that, "[b]ecause the record was not fully developed as to these criteria...the BSA shall permit the parties to make further submissions"...Moreover, the Appellate Division determined that the record established "as a matter of law" that petitioner relied in good-faith upon the 2008 determination by the Manhattan Borough Building Commissioner to grant its permit applications...Thus, the court concluded that in deciding whether to grant a variance on remand, the BSA must [also] consider...petitioner's "good-faith reliance"...Lastly, the court rejected petitioner's argument that no variance was required, reasoning that the new sign is in a different location and position than the original.

Perlbinder argued that "it [was] entitled to maintain the sign because it acquired a common-law vested right to do so based on the fact that it had spent substantial funds to erect the new sign and did so in good-faith reliance on the 2008 permit".

Vested rights cannot be acquired, however, where there is reliance on an invalid permit...When a permit is wrongfully issued in the first instance, the vested rights doctrine does not prevent the municipality from revoking the permit to correct its error. Because the 2008 permit was unlawfully issued, petitioner could not rely on it to acquire vested rights.