78 South First Street Housing Development Fund Corp. v. Crotty

• Court: New York Supreme Court — Appellate Division
• Writing for the Court: Before SULLIVAN; All concur except MILONAS and KASSAL, JJ., who dissent in a memorandum by MILONAS; MILONAS
• Citation: 78 South First Street Housing Development Fund Corp. v. Crotty, 541 N.Y.S.2d 388, 150 A.D.2d 218 (N.Y. App. Div. 1989)
• Decision Date: 16 May 1989
• Parties: 78 SOUTH FIRST STREET HOUSING DEVELOPMENT FUND CORPORATION, et al., etc., Plaintiffs-Appellants, v. Paul A. CROTTY, etc., et al., Defendants-Respondents.

Page 388

541 N.Y.S.2d 388

150 A.D.2d 218

78 SOUTH FIRST STREET HOUSING DEVELOPMENT FUND CORPORATION et al., etc., Plaintiffs-Appellants, v. Paul A. CROTTY, etc., et al., Defendants-Respondents.

Supreme Court, Appellate Division First Department.

May 16, 1989.

G.A. Rosenberg, New York City, for plaintiffs-appellants.

J.R. Greenwald, New York City, for defendants-respondents.

Before SULLIVAN, J.P., and CARRO, MILONAS, KASSAL and ELLERIN, JJ.

MEMORANDUM DECISION.

Order, Supreme Court, New York County (Francis V. Pecora, J.), entered August 12, 1988, which granted defendants' motion for an order dismissing the complaint and denied plaintiffs' cross-motion for class action certification, modified, on the law, to deny the motion to dismiss, and, except as thus modified, affirmed without costs or disbursements.

This declaratory judgment action was instituted by several low income housing development fund corporations challenging their tax assessments on the ground that the City had disregarded the use and resale restrictions on the properties in computing the assessments. The properties were acquired from the City of New York in 1982 after foreclosure against the previous owners, and were sold to plaintiffs without public auction or sealed bids through programs for the sale of City-owned property for use solely as a low income housing project.

Each plaintiff's certificate of incorporation restricts the use of the property to low income housing, and precludes resale of the property for a specified period of time after the date of the original conveyance by the City, without the prior written approval of the Commissioner of the Department of Housing Preservation and Development. The certificate also limits the amount an individual tenant shareholder may retain from the sale of an individual unit to the sum of the original purchase price, plus the cost of certain capital improvements, and a small percentage of the balance of the sale price, after a specified period of time. The deed to each property embodies these restrictions.

Plaintiffs sought leave to include all other similarly situated low income housing corporations. The essence of the complaint was that in assessing plaintiffs' properties the Department of Finance had disregarded the use and resale restrictions contained in the deeds and the certificates of incorporation, which would reduce the value of the property. The complaint also alleged that the City's assessment method is illegal because it violates the requirement that assessments reflect the sum for which each parcel of real estate would sell (see, Administrative Code of the City of New York, § 11-207.) Consequently, a declaration and injunction was sought preventing the City from disregarding the restrictions on the use and transfer of the properties, and from assessing the properties in excess of the aggregate consideration originally tendered by each plaintiff for its property ($250 per apartment.)

The City moved to dismiss on the grounds that the action was time-barred and failed to state a cause of action. Plaintiffs cross-moved for class certification. The basis of the claim that the action was time-barred was that the challenged assessments were made final in May 1986 and May 1987, and that the action was not commenced until October 28, 1987. Section 166 of the City Charter requires that a proceeding to review an assessment, pursuant to Real Property Tax Law Article 7, be commenced before the twenty-fifth day of October following the date when the assessment was made. The court agreed that the assessment could only be challenged in an Article 7 proceeding and dismissed the complaint. The court also denied the cross-motion for class action certification.

While Real Property Tax Law Article 7 is the exclusive method of challenging an assessment that is illegal, irregular, excessive or unequal, where the particular method of assessment is attacked, the plaintiff is relieved of the obligation to proceed via Article 7. (Matter of 22 Park Place Coop. v. Board of Assessors of County of Nassau, 102 A.D.2d 893, 476 N.Y.S.2d 935; Samuels v. Town of Clarkson, 91 A.D.2d 836, 458 N.Y.S.2d 392.) Plaintiffs' challenge here is to the legality of the method of assessment, i.e., the alleged practice of assessing properties as if they were unencumbered by the various restrictions on use and marketability. Administrative Code § 11-207(b) requires that assessments reflect the sum for which each "parcel of real estate would sell...." Plaintiffs argue that the City's method of assessment disregards the legally mandated sales price. Thus, we find that the challenge is to the methods employed in the valuation of the properties, rather than on the individual valuation, and that plaintiffs are not required to proceed exclusively under Article 7.

"Where the challenge concerns not the overvaluation or undervaluation of specific properties, but rather the alleged illegal use of a method involving several properties, a proceeding pursuant to CPLR Article 78 is appropriate...." (22 Park Place Coop., supra, 102 A.D.2d at 893, 476 N.Y.S.2d 935, citing Matter of Dudley v. Kerwick, 52 N.Y.2d 542, 548-551, 439 N.Y.S.2d 305, 421 N.E.2d 797). Challenges to the method of valuation have also been entertained in declaratory judgment actions. (See, e.g., Zinder v. Board of Assessors of County of Nassau, 66 Misc.2d 150, 151-152, 320 N.Y.S.2d 594, aff'd. 38 A.D.2d 836, 329 N.Y.S.2d 1017.) Here, the complaint clearly alleges a continuing injury, which is a factor supportive of declaratory relief. Moreover, considerations of judicial economy weigh heavily in favor of resolution of the issue by declaratory judgment. The alternative is requiring over 200 low-income housing development fund corporations to bring individual actions. Inasmuch as the statute of limitations for a declaratory judgment action is six years (CPLR 213(1)), the action is timely.

At the same time, the granting of class action status is not warranted. Suffice to say, a class action is not superior to an ordinary lawsuit where it is brought against a governmental entity since stare decisis will afford adequate protection to the members of the class. (Matter of Martin v. Lavine, 39 N.Y.2d 72, 75, 382 N.Y.S.2d 956, 346 N.E.2d 794.)

All concur except MILONAS and KASSAL, JJ., who dissent in a memorandum by MILONAS, J.

MILONAS, Justice (dissenting).

The complaint herein alleges that the assessments of plaintiffs' properties are unlawful and excessive because of the failure of the Commissioner of Finance to consider certain restrictions on the use and transfer of their properties mandated by Article XI of the New York State Private Housing Finance Law secs. 570-582, whose purpose is to promote the construction and rehabilitation of low income housing. In that connection, plaintiffs contend that the market value of properties acquired under programs for the sale of City owned buildings to low income residents residing therein is adversely affected by the resale and occupancy restrictions which encumber such housing. Plaintiffs,...