City of Buffalo v. Wysocki

• Decision Date: 11 February 1982
• Citation: 112 Misc.2d 543,447 N.Y.S.2d 386
• Parties: The CITY OF BUFFALO, Plaintiff, v. Jacek WYSOCKI, et al., Class Defendants.
• Court: New York Supreme Court

Page 386

447 N.Y.S.2d 386

112 Misc.2d 543

The CITY OF BUFFALO, Plaintiff, v.Jacek WYSOCKI, et al., ClassDefendants.

Supreme Court, Erie County.

Feb. 11, 1982.

Joseph P. McNamara, Buffalo (Stanley Moskal, Buffalo, of counsel), Corp. Counsel, for the City of Buffalo.

Peter A. Vinolus, Lackawanna, for Jacek A. Wysocki, et al.

Olszewski, Janik & Wierzbicki, Buffalo, for John G. Olszewski, Mary Stolarek, et al.

Jaeckle, Fleischmann & Mugel, Buffalo (David Calverley, Buffalo, of counsel), for Edwin B. Righter, et al.

Phillips, Lytle, Hitchcock, Blaine & Huber, Buffalo (Kenneth Manning, Buffalo, of counsel), for National Fuel Gas Distribution Corp., National Fuel Gas Supply Corp. and National Gypsum Co.

Kavinoky, Cook, Sandler, Gardner, Wisbaum & Lipman, Buffalo (Randy Oppenheimer, Buffalo, of counsel), for L. L. Berger, Inc.

Moot, Sprague, Marcy, Landy, Fernbach & Smythe, Buffalo (Jeremiah McCarthy, Buffalo, of counsel), for New York Tele. Co., and CC & F Buffalo Development Co., Inc. et al.

Falk, Siemer, Glick, Tuppen & Maloney, Buffalo (Ed Wolf, Buffalo, of counsel), for Rose Marie Guarasci, et al.

Offerman, Fallon, Mahoney, Cassano & Geller, Buffalo (David Mahoney, Buffalo, of counsel), for Philip W. Ransom.

Cox, Barrell, Walsh, Roberts & Grace, Buffalo (Horace Gioia, Buffalo, of counsel), for David A. Schichtel and Patricia Schichtel.

Benzow, Finck, Handel & Owens, Buffalo (Roland Benzow, Buffalo, of counsel), for Nelson R. Barrett.

Herbert J. Mellan, pro se.

Michael J. Ryan, pro se.

Sullivan, Johnson, Peters, Burns, Adams & Mullin, P. C., Rochester (Dirk Adams, Rochester, of counsel), for Robert D. Blumreich, et al.

DECISION

SAMUEL L. GREEN, Justice.

In this class action suit, Defendants who are individual and corporate taxpayers have moved for summary judgment against the Plaintiff City of Buffalo(CITY) for the refund of real property taxes paid from 1974 through 1978.Two questions of law are presented.First, whether Defendants' claims for tax refunds were timely asserted.Second, whether all Defendants, or only those who paid their taxes under appropriate legal protest, are entitled to refunds.

The City asserts that Section 324 of the Charter of the City of Buffalo is a complete defense to the claims of all the taxpayers since no actions were commenced within one year of the payment of their taxes.The taxpayers assert that Section 213(2) of the CPLR allows them six years in which to commence an action for the refund of illegal or unconstitutional taxes.

If Section 324 does not apply then this Court must decide not only whether protest is necessary, but also what forms of protest are appropriate.If protest is not required, the City estimates that the refund to all taxpayers would be sixty million dollars.($60,000,000.00).If protest is required, the total estimated recovery would amount to approximately ten million dollars.($10,000,000.00).

The City commenced this class action to economize its legal resources and to secure one judgment which would encompass all claims arising from the "Hurd" decision.(Hurd v. City of Buffalo, 41 A.D.2d 402, 343 N.Y.S.2d 950, aff'd34 N.Y.2d 628, 355 N.Y.S.2d 369, 311 N.E.2d 504).This Court certified two major classes of Defendants--those who allegedly paid their taxes under protest and those who did not.Some Defendants were permitted to participate by retained counsel.Defendants answered and counterclaimed for refund of their taxes illegally collected by the City from 1974-1978.(These claims were identical to allegations in separate actions commenced against the City prior to this class action).The City uniformly replied to each counterclaim by asserting the affirmative defense of the one year limitation in Section 324 of the City Charter.

Section 324 is derived verbatim from Chapter 275, Section 9 of the Laws of 1880 and states in relevant part:

An action or proceeding to test the validity or regularity of any tax or assessment contained on the annual assessment rolls shall be commenced within one year from the first publication of the notice that the roll in which the tax assessment is contained is ready for collection as provided by section five hundred and ninety of this act.(emphasis added )

Defendants do not challenge the City's power to adopt this provision (see e.g., Matter of Hoople, 179 N.Y. 308, 72 N.E. 229;Loomis v. City of Little Falls, 176 N.Y. 31, 68 N.E. 105).Since the "validity or regularity" of their taxes had already been decided adversely to the City in Hurd, Defendants submit there is no need to relitigate that issue in this class action.Defendants are simply saying to the City you collected our taxes unconstitutionally, we want our money back, and the traditional six year period of limitations should apply.(Diefenthaler v. Mayor, 111 N.Y. 331, 337, 19 N.E. 48, 92 A.L.R. 1360).

The City asserts however, that a fair interpretation of Section 324 must be guided by the presumption that in 1880the Legislature intended to place a time limitation upon actions or proceedings then available for the review of assessments.Since these included not only traditional certiorari proceedings but also actions seeking tax refunds, the City speculates that the Legislature must have intended Section 324 to apply to all actions, regardless of form, in which taxpayers sought refunds.The City further contends that Section 324 must apply to more than just declaratory judgment actions which question the validity but not the recovery of taxes, because such proceedings were not available in this state until 1921(Section 471 of the Civil Practice Act).Since the one year period in Section 324 is a "different time * * * prescribed by law" than the six year period in CPLR 213(2), the City concludes that the claims are time barred.[CPLR 201]

The City's argument however, ignores the letter and spirit of recent tax refund cases in which the City did not fare so well.It is not the "validity or regularity" language in Section 324 that is determinative.Rather, it is the preceding words "to test."Since the taxes paid by Defendants had already been held unconstitutional for each of the four tax years here in question (Central Buffalo Project Corp. v. City of Buffalo, 74 A.D.2d 336, 428 N.Y.S.2d 102, aff'd52 N.Y.2d 986, 438 N.Y.S.2d 79, 419 N.E.2d 1078), there was no need for Defendants"to test" the legality of the taxes they paid.In fact, Defendants did not request such relief, either in the complaints in their original actions, or in their counterclaims in this class action.

The law is clear.An action to recover taxes paid on an unconstitutional levy is based upon an implied contractual obligation and is subject to a six year statute of limitations which accrues when the taxes are paid.(Diefenthaler v. Mayor, 111 N.Y. 331, 337-338, 19 N.E. 48, see alsoFirst National City Bank v. New York Finance Administration, 36 N.Y.2d 87, 93, 365 N.Y.S.2d 493, 324 N.E.2d 861;People ex rel. First National Bank v. Schadt, 237 App.Div. 233, 261 N.Y.S. 849, 131 A.L.R. 822).Since the taxing authorities of the City have continued to ignore the rationale of Hurd, supra, and have collected taxes which they knew were illegal, Defendants were entitled to bring a plenary action to recover their money.They were under no legal obligation to first test the validity or regularity of the taxes they paid.Section 324 may have been a valid defense for the City in the days before Hurd, but it has no relevance to the monetary relief requested in this class action.

Defendants ask why Section 324 was not raised as a defense in the Central Buffalo Project case in which the City was ordered to refund more than one million dollars?Defendants submit that because the City has never asserted this defense before, despite having a full and fair opportunity to do so, it should be collaterally estopped from defending this action on the basis of Section 324.The doctrine of collateral estoppel however, has no application to multiple taxpayer suits.(Murphy v. Erie County, 28 N.Y.2d 80, 85-86, 320 N.Y.S.2d 29, 268 N.E.2d 771;Siegel, N.Y.Prac. § 447, p. 593;cf.McCory Corp. v. Gingold, 52 A.D.2d 23, 26-27, 382 N.Y.S.2d 407).

Since the six year period of limitations applies, the only further issue before this Court is which Defendants are entitled to recover.It has long been the law in this state that illegal taxes voluntarily paid are not recoverable.Only those taxes paid under protest or duress may be recovered.(Mercury Machine Importing Corp. v. City of New York, 3 N.Y.2d 418, 165 N.Y.S.2d 517, 144 N.E.2d 400;Adrico Realty Corp. v. City of New York, 250 N.Y. 29, 164 N.E. 732;Peyser v. Mayor, 70 N.Y. 497;see alsoPellnat v. City of Buffalo, N.Y. City Ct., 367 N.Y.S.2d 672, rev'd on other grounds, 87 Misc.2d 742, 386 N.Y.S.2d 965, aff'd59 A.D.2d 1038, 399 N.Y.S.2d 788;10 Lafayette Square Holding v. City of Buffalo, 108 Misc.2d 960, 439 N.Y.S.2d 289).This is so because real property taxes are intended for current expenditures for the common good.It would be unjust to require a municipality to repay them after they had been properly expended.Yet this would often be the case if suit could be brought for recovery without notice having been given at the time of payment because "if no protest has been lodged, it is generally assumed that taxes paid can be retained to meet authorized public expenditures, and * * * provision is not made for contingent refunds."(Mercury Machine Importing Corp. v. City of New York, 3 N.Y.2d 418, 426, 165 N.Y.S.2d 517, 144 N.E.2d 400).

Defendants who did not protest payment of their taxes contend however, that they are entitled to refunds because Hurd, supra, provided ample notice to the City that its taxes were illegal.These Defendants further argue that protest was unnecessary because they paid their taxes under duress of a statutory lien.(Buffalo City Charter, § 534).Neither argument is persuasive.

Underlying the...