City of New York v. Permanent Mission of India

• Decision Date: 08 February 2008
• Docket Number: No. 03 Civ. 6086(JSR).,No. 03 Civ. 3256(JSR).,No. 03 Civ. 6085(JSR).,03 Civ. 3256(JSR).,03 Civ. 6085(JSR).,03 Civ. 6086(JSR).
• Citation: 533 F.Supp.2d 457
• Parties: CITY OF NEW YORK, Plaintiff, v. PERMANENT MISSION OF INDIA TO THE UNITED NATIONS, et al., Defendants. City of New York, Plaintiff, v. Republic of Philippines, et al., Defendants. City of New York, Plaintiff, v. The Bayaryn Jargalsaikhan, as Principal Resident Representative to the United Nations of the Mongolian People's Republic, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

533 F.Supp.2d 457

CITY OF NEW YORK, Plaintiff, v. PERMANENT MISSION OF INDIA TO THE UNITED NATIONS, et al., Defendants.

City of New York, Plaintiff, v. Republic of Philippines, et al., Defendants.

City of New York, Plaintiff, v. The Bayaryn Jargalsaikhan, as Principal Resident Representative to the United Nations of the Mongolian People's Republic, et al., Defendants.

No. 03 Civ. 3256(JSR).

No. 03 Civ. 6085(JSR).

No. 03 Civ. 6086(JSR).

United States District Court, S.D. New York.

February 8, 2008.

John Rudolf Low-Beer, New York City Law Depart. Office of the Corporation Counsel, Michael A. Cardozo, New York, NY, for Plaintiff.

John J.P. Howley, Robert A. Kandel, Kaye Scholer, LLP, Robert Negron Jr., New York, NY, for Defendants.

OPINION AND ORDER

JED S. RAKOFF, District Judge.

These three related cases pit the City of New York against the governments of India Mongolia, and the Philippines. The subject, of course, is taxes.

Specifically, plaintiff the City of New York (the "City") seeks to recover property taxes from the Republic of the Philippines (the "Philippines"), the Permanent Mission of India to the United Nations ("India"), and the Principal Resident Representative to the United Nations of the Mongolian People's Republic ("Mongolia") on portions of the buildings housing defendants' New York consulates and missions to the United Nations. With respect to the Philippines, the City says that taxes are due on portions of such property used for a restaurant, a bank, and an airline office. With respect to India and Mongolia, the City says that taxes are due for the portions of such property used as residences for employees below the level of head of mission. In response, defendants principally argue that these same portions of their property are exempt from taxation under the Vienna Convention on Consular Relations, 21 U.S.T. 77 (1963, ratified 1969), the Vienna Convention on Diplomatic Relations, 23 U.S.T. 3227 (1961, ratified 1972), customary international law, New York common law, and, as to the Philippines, section 418 of the New York Real Property Tax Law.

By way of background, after the City had assessed the taxes in question, the defendants refused to pay, whereupon, by operation of law, the tax assessments converted to tax liens against the properties. The City then brought these actions in 2003, seeking as to each defendant both a declaration that the liens are valid and a money judgment in the amount of the withheld taxes. The City sought the declarations, "despite its admitted inability to foreclose on the properties, because (i) it believes that once the liens are declared valid the defendants may voluntarily choose to pay their tax liability; (ii) in the face of a valid court judgment, the United States may reduce each defendant's foreign aid by 110 percent of the outstanding debt, see Foreign Operations, Export Financing, and Related Programs Appropriations Act, 2008, § 543(a), 119 Stat. 2214; Consolidated Appropriations Act of 2005, § 543(a), 118 Stat. 3011; and (iii) the liens would be enforceable against subsequent purchasers. See Permanent Mission of India to the United Nations v. City of New York, ___ U.S. ___, ___, n. 1, 127 S.Ct. 2352, 2355 n. 1, 168 L.Ed.2d 85 (2007).

Procedurally, these cases were originally assigned to the late Judge Richard Conway Casey, U.S.D.J. India and Mongolia then moved to dismiss on the ground that they were immune from this Court's jurisdiction under the Foreign Sovereign Immunities Act of 1976 ("FSIA"), 28 U.S.C. § 1602 et, seq. Judge Casey, however, concluded that he had jurisdiction pursuant, to the FSIA's "immovable property exception," id. § 1605(a)(4), and that determination was then affirmed by the Second Circuit Court of Appeals, City of New York v. Permanent Mission of India to the United Nations, 446 F.3d 365. (2d Cir.2006), and, ultimately, by the Supreme Court of the United States, Permanent Mission of India to the United Nations v. City of New York, ___ U.S. ___, ___, 127 S.Ct. 2352, 2355, 168 L.Ed.2d 85 (2007).¹ Meanwhile, all parties filed motions for summary judgment, and these motions remained pending when, following Judge Casey's untimely death in 2007, the cases were transferred to the undersigned.

The Court now resolves those motions by holding, for the reasons discussed below, that the disputed portions of the residential property owned by India and Mongolia are subject to real estate taxation, as are the portions of the Philippines' property occupied by a bank office and an airline office, but that the portion of the Philippines' property used-to house a restaurant is exempt from taxation.

I. India and Mongolia

The following facts are undisputed:

At all times here relevant, India owned a twenty-six story building located at 235 East 43rd Street, New York, New York. Plaintiff's Local Rule 56.1 Statement in No. 03 Civ. 3256 ("Pl.56.1 — India") at ¶¶ 2-3; India's Local Rule 56.1 Counter-Statement in No. 03 Civ. 3256 ("Def.56.1 — India") at ¶¶ 2-3. The first six floors of the building house the offices of India's Permanent Mission to the United Nations, while the upper twenty floors contain residential units for employees of the Mission and of the Indian Consulate, all ranking below the head of mission. Pl. 56.1 — India at ¶¶ 4, 6; Def. 56.1 — India at ¶¶ 4, 6. The employees are Indian citizens who receive housing from the mission rent-free in accordance with Indian law. Def. 56.1 — India at ¶ 17; Pl. Counter-Statement Pursuant to Local Rule 56.1 in No. 03 Civ. 3256 ("Pl.Counter-56.1 — India") at ¶ 17. The City has assessed property taxes on the residential portion, along with charges for sidewalk repairs and elevators. Pl. 56.1-India, at ¶¶ 11-12. The City calculates that, as of September 12, 2007, the Mission owed $39,394,524.37 in property taxes and other charges, including interest Id. at ¶ 15.

At all relevant times, Mongolia owned a six-story building located at 330 East 46th St., New York, New York. Plaintiff's Local Rule 56.1 Statement in No. 03 Civ. 6086 ("Pl.56.1 — Mongolia") at ¶¶ 2-3; Mongolia's Local Rule 56.1 Counter-Statement in No. 03 Civ. 6086 ("Def.56.1 — Mongolia") at ¶¶ 2-3. The first two floors of the building house offices of Mongolia's Permanent Mission to the United Nations, and the' third floor contains the residence of Mongolia's Ambassador to the United. Nations. Pl. 56.1 — Mongolia at ¶¶ 5-6; Def. 56.1 —, Mongolia at ¶¶ 5-6. The remaining two floors are devoted to housing for employees of the Mission, all below the rank of head of Mission, and their families. Pl., 56.1 — Mongolia at ¶¶ 5-6; Def. 56.1 — Mongolia at ¶¶ 5-6. The City seeks to tax the top two floors only, and has calculated that, as of September 12, 2007, Mongolia owed $4,239,147.25 in property taxes, including interest, on that portion of the property. Pl. 56.1 — Mongolia, at ¶ 13.

Although India and Mongolia argue that the property used to house consular and diplomatic staff is exempt from taxation, their argument falters in the face of the plain language of the international conventions applicable to this issue. The tax status of the consular portions of the premises is controlled by Article 32 of the Vienna Convention on Consular Relations ("VCCR"), which provides:

Consular premises and the residence of the career head of consular post of which the sending State or any person acting on its behalf is the owner or lessee shall be exempt from all national, regional or municipal dues and taxes whatsoever, other than such as represent payment for specific services rendered.

VCCR art. 32 (emphasis supplied). While India and Mongolia try to argue that the consular residences here in question are part of the "consular premises," Article 32, on its face, distinguishes for tax purposes between "consular premises" and "residence" and limits the tax exemption respecting residence to "the residence of the career head of consular post" and hone other. As the Supreme Court stated in Sumitomo Shoji Am. v. Avagliano, 457 U.S. 176, 180, 102 S.Ct. 2374, 72 L.Ed.2d 765 (1982), "Interpretation of [a treaty] must, of course, begin with the language of the [t]reaty itself. The clear import of treaty language controls unless application of the words of the treaty according to their obvious meaning effects a result inconsistent with the intent or expectations of its signatories." (internal quotation marks omitted).

The tax status of the U.N. Mission portions of the premises is controlled by the Vienna Convention on Diplomatic Relations ("VCDR"). It reaches the same re stilt as the VCCR but through a slightly more circuitous route. First, Article 1 of the VCDR defines "premises of the mission" as consisting of:

the buildings or parts of buildings and the land ancillary thereto, irrespective of ownership, used for the purposes of the" mission, including the residence of the head of the mission.

VCDR Art 1(i) (emphasis supplied). Then, Article 23 of the VCDR provides:

The sending State and the head of mission shall be exempt from all national, regional, or municipal dues and taxes in respect of the premises of the mission, whether owned or leased, other than such as, represent payment for specific services rendered.

VCDR art. 23 (emphasis supplied). These two provisions of the VCDR, When taken together, make plain that the residential exemption from taxes is limited to "residence of the head of the Mission," and not to others.²

In short, the plain language of the VCCR and the VCDR unequivocally supports the City's position, and that is really the end of the matter. Indeed, of the remaining arguments to the contrary proffered by India and Mongolia, only one even merits mention. This is the argument that portions of the premises in issue are exempt from New York taxation by virtue of "customary international law" as construed as part of New York" common law by the New York Court of Appeals in Republic of Argentina v. Cify of New York, 25 N.Y.2d 252,...