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Supreme Court, Appellate Division, Fourth Department, New York.

Matter of Barbara SMITH, Edward Smith and Erin Kelley, Petitioners-Appellants-Respondents, v. NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL and Buffalo Municipal Housing Authority, Respondents-Respondents-Appellants.

Decided: March 17, 2006

PRESENT:  SCUDDER, J.P., KEHOE, MARTOCHE, SMITH, AND PINE, JJ. Chiacchia & Fleming, LLP, Hamburg (Christen Archer Pierrot of Counsel), for Petitioners-Appellants-Respondents. Eliot Spitzer, Attorney General, Albany (Darren Longo of Counsel), for Respondent-Respondent-Appellant New York State Division of Housing and Community Renewal. Hodgson Russ LLP, Buffalo (Joshua Feinstein of Counsel), for Respondent-Respondent-Appellant Buffalo Municipal Housing Authority.

Petitioners commenced this CPLR article 78 proceeding seeking to annul the determination of respondent New York State Division of Housing and Community Renewal (DHCR) that the reserve funds of Marine Drive Apartments, Inc. (MDAI) may not be used to meet MDAI's severance obligations to petitioners and to compel DHCR to authorize the release of those reserve funds so that petitioners may receive the severance payments.   Respondent Buffalo Municipal Housing Authority was permitted to intervene and, following discovery, respondents moved to dismiss the petition.   Supreme Court granted that motion in part, determining that DHCR “had a rational basis to make the decision [that] this severance package was excessive.”   The court further determined, however, that it was “not rational, based on the record before the Court, to say [petitioners are] not entitled to any severance package at all.”   The court ordered the parties to renegotiate the severance package and to report back to the court within 60 days with a new proposal.   We agree with respondents that the court should have granted their motion in its entirety.

 It is well settled that, “in a proceeding seeking judicial review of administrative action, the court may not substitute its judgment for that of the agency responsible for making the determination, but must ascertain only whether there is a rational basis for the decision or whether it is arbitrary and capricious” (Flacke v. Onondaga Landfill Sys., 69 N.Y.2d 355, 363, 514 N.Y.S.2d 689, 507 N.E.2d 282;  see Matter of Bath Petroleum Stor. v. New York State Dept. of Envtl. Conservation, 298 A.D.2d 883, 747 N.Y.S.2d 835, lv. denied 99 N.Y.2d 507, 757 N.Y.S.2d 817, 787 N.E.2d 1163;  see generally Matter of Jennings v. New York State Off. of Mental Health, 90 N.Y.2d 227, 239, 660 N.Y.S.2d 352, 682 N.E.2d 953;  Matter of Pell v. Board of Educ. of Union Free School Dist. No. 1 of Towns of Scarsdale & Mamaroneck, 34 N.Y.2d 222, 231-232, 356 N.Y.S.2d 833, 313 N.E.2d 321).  “[O]nce it has been determined that an agency's conclusion has a ‘sound basis in reason’ ․, the judicial function is at an end” (Paramount Communications v. Gibraltar Cas. Co., 90 N.Y.2d 507, 514, 663 N.Y.S.2d 133, 685 N.E.2d 1214, rearg. denied 90 N.Y.2d 1008, 666 N.Y.S.2d 103, 688 N.E.2d 1385, 1386, quoting Pell, 34 N.Y.2d at 231, 356 N.Y.S.2d 833, 313 N.E.2d 321;  see Matter of Stacor Corp. v. Egan, 122 A.D.2d 480, 482, 505 N.Y.S.2d 241).   Although we agree with the court that there was a rational basis for DHCR's determination that the severance package was excessive, we conclude that the court lacked the authority to order the parties to renegotiate.   We therefore modify the judgment accordingly.

We have reviewed petitioners' remaining contentions and conclude they are lacking in merit.

It is hereby ORDERED that the judgment so appealed from be and the same hereby is unanimously modified on the law by granting the motion in its entirety, dismissing the petition and vacating the second and third decretal paragraphs and as modified the judgment is affirmed without costs.