Ampco Printing-Advertisers' Offset Corp. v. City of New York

• Decision Date: 20 February 1964
• Docket Number: PRINTING-ADVERTISERS
• Citation: 197 N.E.2d 285,247 N.Y.S.2d 865,14 N.Y.2d 11
• Parties: , 197 N.E.2d 285 AMPCO' OFFSET CORP. et al., Appellants, v. CITY OF NEW YORK et al., Respondents; Louis J. Lefkowitz, as Attorney-Generalof the State of New York, Intervenor-Respondent. ROBERT B. BLAIKIE & CO., Inc., Appellant, v. CITY OF NEW YORK, Respondent.
• Court: New York Court of Appeals Court of Appeals

Page 865

247 N.Y.S.2d 865

14 N.Y.2d 11, 197 N.E.2d 285

AMPCO PRINTING-ADVERTISERS' OFFSET CORP. et al., Appellants, v. CITY OF NEW YORK et al., Respondents; Louis J. Lefkowitz, as

Attorney-Generalof the State of New York,

Intervenor-Respondent.

ROBERT B. BLAIKIE & CO., Inc., Appellant, v. CITY OF NEW YORK, Respondent.

Court of Appeals of New York.

Feb. 20, 1964.

Harold Riegelman, H. H. Nordlinger, Simon J. Hauser and Neil B. Hirschfeld, New York City, for appellants in the first above-entitled action.

Leo A. Larkin, Corp. Counsel (Stanley Buchsbaum, Samuel J. Warms and Sanford I. Freedman, New York City, of counsel), for respondents in the first above-entitled action.

Charles W. Merritt, New York City, for Chamber of Commerce, amicus curiae, in the first above-entitled action.

S. Arnold Witte, New York City, Arthur M. Arnold and Eugene Rubin, New York City, for Commerce and Industry Assn. of N. Y., Inc., amicus curiae, in the first above-entitled action.

Louis J. Lefkowitz, Atty. Gen. (Samuel A. Hirshowitz and Gustave Soderberg, New York City, of counsel), in his statutory capacity under section 71 of the Executive Law in each of the above-entitled actions.

Harold J. Treanor, New York City, and William F. Treanor for the Real Estate Board of N. Y., Inc., amicus curiae, in the first above-entitled action.

Murrary L. Lewis and Harry H. Lipsig, New York City, for appellant in the second above-entitled action.

Leo A. Larkin, Corp. Counsel (Stanley Buchsbaum, Samuel J. Warms and Sanford I. Freedman, New York City, of counsel), for respondent in the second above-entitled action.

FULD, Judge.

On these direct appeals on constitutional grounds from judgments rendered at Special Term, we are called upon to determine the constitutionality of the New York City Commercial Rent or Occupancy Tax Law.

In the first of the above-entitled actions Ampco v. City of New York the plaintiffs seek a declaratory judgment that chapter 257 of the Laws of 1963, McK.Unconsol.Laws, § 9447, the enabling act for the tax in question, and Local Law No. 38 of the City of New York for 1963, the law imposing the tax, are void and unconstitutional. The plaintiff Ampco is engaged in business on leased premises, the plaintiff Katz operates a public parking business on leased land and the plaintiff Georgian Press owns real property, portions of which it rents to others. In the second of the above-entitled cases, also for a declaratory judgment that the laws in question are unconstitutional, the plaintiff is a tenant on leased premises engaged in the insurance brokerage and bonding agent business. After service of the answers by the defendant city and intervenor Attorney-General all parties moved for summary judgment.

The court at Special Term rejected each of the contentions advanced by the plaintiffs, concluding that the tax imposed (1) is not one on real estate in violation of article VIII, section 10, of the New York State Constitution; (2) does not constitute an ad valorem tax on intangible personal property in violation of article XVI, section 3, of that same Constitution; and (3) does not violate the due process or the equal protection clauses of either the State or Federal Constitution (N.Y.Const., art. I, §§ 6, 11; U.S.Const., 14th Amdt.). On this appeal, the plaintiffs and the several amici curiae, 'friendly' to them, advance the same arguments as were urged below.

The enabling act, chapter 257 of the Laws of 1963, authorizes a city having a population of one million or more to impose a tax, such as the State Legislature could impose, 'on persons occupying premises in such city for the purpose of carrying on or exercising any trade, business, profession, vocation or commercial activity, measured by the rent paid for the use or occupancy of such premises'. Pursuant to this statute, the city enacted Local Law No. 38 for the year 1963 which imposes the authorized tax. It provides that every tenant of taxable premises is required, after June 1, 1963, to pay a tax of 2 1/2% of his base rent where such rent is not more than $2,500 a year or 5% of his base rent where it is in excess of that amount (Administrative Code of City of New York, § L46-2.0, subd. a). It defines 'taxable premises', insofar as pertinent, as (§ L46-1.0, subd. 5)

'Any premises in the city occupied, used, or intended to be occupied or used for the purpose of carrying on or exercising any trade, business, profession, vocation or commercial activity, including any premises so used even though it is used solely for the purpose of renting, or granting the rights to occupy or use, the same premises in whole or in part to tenants'.

Article VIII, section 10, of the State Constitution, upon which the plaintiffs predicate their first point, concededly applies only to a 'tax on real estate'. This constitutional provision limits the amount to be raised by such a tax to a percentage 'of the average full valuation of taxable real estate' of the city and such average full valuation is determined by 'taking the assessed valuations of taxable real estate on the last completed assessment rolls and the four preceding rolls * * * and applying thereto the ratio which such assessed valuation * * * bears to the full valuation'. If, as the plaintiffs assert, the tax under consideration is one imposed on real estate, adding it to the tax already imposed on assessed valuation would admittedly result in a total tax which would exceed the limit permitted by the Constitution.

The commercial rent or occupancy tax, as already stated, is imposed on a tenant of taxable premises according to his base rent for the tax year, and 'tenant' is defined as anyone who pays rent as lessee, sublessee, licensee or concessionaire (Administrative Code, § L46-1.0, subd. 3). This is not a tax on real estate within the sense of the constitutional provision. It is imposed neither on real estate nor on owners of real estate. It is imposed on lessees of real estate or on those who acquire lesser rights to use someone else's real estate for business or other commercial activity.

A leasehold has long been regarded in this State as a 'chattel real' and as such is personal property. (See, e. g., Matter of Fort Hamilton Manor Inc. v. Boyland, 4 N.Y.2d 192, 197, 173 N.Y.S.2d 560, 563-564, 149 N.E.2d 856, 858; Matter of Grumman Aircraft Eng. Corp. v. Board of Assessors of Town of Riverhead, 2 N.Y.2d 500, 507, 161 N.Y.S.2d 393, 397-398, 141 N.E.2d 794, 797-798; Despard v. Churchill, 53 N.Y. 192; see, also, 3 Thompson, Real Property (1940), § 1018, pp. 8-10.) 'Under a long line of New York decisions,' this court recently declared in the Fort Hamilton Manor case (4 N.Y.2d, at p. 197, 173 N.Y.S.2d, at p. 563, 149 N.E.2d, at p. 858), 'the interest of a tenant of realty under a real estate lease is not realty but is a chattel real which is personal property (cases cited). The most recent expression of this court upon the point is in (Matter of) Grumman Aircraft Eng. Corp. v. Board of Assessors (of Town of Riverhead), 2 N.Y.2d 500, 507, 161 N.Y.S.2d 393, 397 (141 N.E.2d 794); where it was said: 'It is significant to note that nowhere in the Tax Law has the Legislature characterized a leasehold as taxable real property. Such omission is understandable, as a lease for years is deemed personalty (cases cited).''

We are not persuaded by the plaintiffs' contention that the economic impact of the tax is equivalent to a tax on real estate and that, therefore, it should be treated as coming within the constitutional limitation. After observing that ownership of real property includes the right to use it and to lease it for use by others, the plaintiffs conclude that a tax on the use of real estate is a tax on the real estate itself. Such reasoning has been repeatedly rejected. (See, e, g., Bromley v. McCaughn, 280 U.S. 124, 50 S.Ct. 46, 74 L.Ed. 226; New York ex rel. Cohn v. Graves, 300 U.S. 308, 314-315, 57 S.Ct. 466, 468-469, 81 L.Ed. 666; Hale v. Iowa State Board of Assessment and Review, 302 U.S. 95, 107, 58 S.Ct. 102, 106, 82 L.Ed. 72.) Thus, Mr. Justice Stone stated in the Bromley case (280 U.S., at p. 136, 50 S.Ct., at p. 47, 74 L.Ed. 226):

'While taxes levied upon or collected from persons because of their general ownership of property may be taken to be direct, Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429, 15 S.Ct. 673, 39 L.Ed. 759; Id., 158 U.S. 601, 15 S.Ct. 912, 39 L.Ed. 1108, this court has consistently held, almost from the foundation of the government, that a tax imposed upon a particular use of property or the exercise of a single power over property incidental to ownership, is an excise which need not be apportioned, and it is enough for present purposes that this tax is of the latter class.' (Emphasis supplied.)

Also without merit is the plaintiffs' second point that the tax is an ad valorem tax on intangible personal property and, by reason thereof, violative of article XVI, section 3, of the State Constitution. The second sentence of section 3, upon which the plaintiffs rely, provides, in part, that 'Intangible personal property shall not be taxed ad valorem nor shall any excise tax be levied solely because of the ownership or possession thereof'. The tax here involved is not an ad valorem tax but, even if it were, it would be one on a leasehold which, quite clearly, is not 'intangible personal property' within the sense of the constitutional provision.

The phrase 'ad valorem' means 'according to the value' and is used in the field of taxation to designate an assessment of taxes against property at a certain rate upon its value. An ad valorem property tax is always based upon ownership of property and is payable regardless of whether the property is used or not. (See Matter of Guardian Life Ins. Co. of America v. Chapman, 302 N.Y. 226, 238-239, 97 N.E.2d 877, 883-884; Powell v. Gleason, 50 Ariz. 542, 547-548, 74 P.2d 47, 114 A.L.R. 838; City of Walla Walla v. State, 197 Wash. 357, 362...