City of Rochester v. Chiarella

• Decision Date: 12 April 1982
• Citation: 449 N.Y.S.2d 112,86 A.D.2d 110
• Parties: CITY OF ROCHESTER, Respondent, v. Angelo CHIARELLA, Real Estate Board of Rochester, New York, Inc., and Midtown Holdings Corp., et al., individually and on behalf of all payers of real property taxes to the City of Rochester for the fiscal years 1974-75 through 1977-78, Defendants, Stephen J. and Charlene Sercu, Appellants. ROCHESTER GAS AND ELECTRIC CORPORATION, Appellant, v. CITY OF ROCHESTER, Respondent. ROCHESTER TELEPHONE CORPORATION, Appellant, v. CITY OF ROCHESTER, Respondent. CITY OF ROCHESTER, Appellant, v. Angelo CHIARELLA, Real Estate Board of Rochester, New York, Inc., and Midtown Holdings Corp., et al., individually and on behalf of all payers of real property taxes to the City of Rochester, for the fiscal years 1974-75 through 1977-78, Respondents, Stephen J. and Charlene Sercu, Appellants.
• Court: New York Supreme Court — Appellate Division

Page 112

449 N.Y.S.2d 112

86 A.D.2d 110

CITY OF ROCHESTER, Respondent, v. Angelo CHIARELLA, Real Estate Board of Rochester, New York,

Inc., and Midtown Holdings Corp., et al., individually and

on behalf of all payers of real property taxes to the City

of Rochester for the fiscal years 1974-75 through 1977-78, Defendants,

Stephen J. and Charlene Sercu, Appellants.

ROCHESTER GAS AND ELECTRIC CORPORATION, Appellant, v. CITY OF ROCHESTER, Respondent.

ROCHESTER TELEPHONE CORPORATION, Appellant, v. CITY OF ROCHESTER, Respondent.

CITY OF ROCHESTER, Appellant, v. Angelo CHIARELLA, Real Estate Board of Rochester, New York,

Inc., and Midtown Holdings Corp., et al., individually and

on behalf of all payers of real property taxes to the City

of Rochester, for the fiscal years 1974-75 through 1977-78,

Respondents,

Stephen J. and Charlene Sercu, Appellants.

Supreme Court, Appellate Division Fourth Department.

April 12, 1982.

Louis N. Kash, Corp. Counsel, Rochester, for City of rochester.

Nixon, Hargrave, Devans & Doyle, Rochester, for Rochester Gas & Elec. & Rochester Tel. Corp.; Michael Tomaino, Rochester, of counsel.

Harter, Secrest & Emery, Rochester, for General class respondents; Kenneth Payment, Rochester, of counsel.

David J. Angelone, Rochester, for Subclass A appellants Sercu.

Johnson, Mullan, Brundage & Keigher, P. C., Rochester, for Subclass B Representatives, amicus curiae; Byron Johnson, Rochester, of counsel.

Before DILLON, P. J., and HANCOCK, DOERR, DENMAN and MOULE, JJ.

DOERR, Justice.

In Angelone v. City of Rochester, 72 A.D.2d 445, 424 N.Y.S.2d 933, affd. 52 N.Y.2d 982, 438 N.Y.S.2d 287, 420 N.E.2d 85, we held that Ordinance No. 79-307 which was adopted by the City of Rochester in order to establish a special capital fund to pay the tax refunds which were mandated by Waldert v. City of Rochester, 44 N.Y.2d 831, 406 N.Y.S.2d 752, 378 N.E.2d 115, modfg. 61 A.D.2d 147, 402 N.Y.S.2d 655 was unconstitutional. A direct refund of excess property taxes collected for the fiscal years 1974-1978 was ordered.

Anticipating the litigation that was sure to follow our decision, the City of Rochester commenced this class action on June 26, 1980 against certain named individuals as representatives of all payers of real property taxes to the City for the fiscal years 1974-1979. The City sought declaratory relief establishing the rights and liabilities of all the parties in the class action and requested the court to direct a method of payment to those entitled to a refund according to a plan to be proposed by the City. Numerous actions for tax refunds had already been commenced by taxpayers when the instant class action was commenced and literally hundreds more were commenced thereafter.

Two orders issued by the Justice specially assigned to this case are the subject of this appeal. In the first order entered October 9, 1981 Special Term: (1) permanently certified the action as a class action; (2) appointed a representative of the General Class which was described as including all persons or entities who paid real property taxes to the City at any time from 1974 to 1978; (3) established four subclasses within the General Class; (4) appointed the Harter, Secrest and Emery law firm to represent the General Class and appointed various Rochester law firms to represent the four subclasses; (5) dismissed approximately 311 individual actions because they were filed after the court took jurisdiction over the General Class; and (6) consolidated all actions which were commenced prior to the class action. This order also directed that prior to resolution of any other issues, the parties were to litigate the threshhold issue of whether those taxpayers who paid illegal taxes without written protest were nevertheless entitled to a tax refund.

From this order Rochester Gas and Electric and Rochester Telephone Corp. (Utilities) and the representatives of Subclass A appeal. Rochester Gas and Electric and Rochester Telephone Corp. were the only two entities included within Subclass D. Subclass A was defined as representing those taxpayers who paid their taxes under some form of written protest and who challenge the right of non-protesters to obtain tax refunds in whole or in part. For the reasons which follow, we modify and remit for further proceedings insofar as the October 9, 1981 order is concerned.

In the second order appealed entered November 4, 1981, Special Term decided the threshhold issue which it framed in the October 9, 1981 order. Special Term determined that non-protesters, i.e., those taxpayers who paid their tax without protest, are legally entitled to refunds and that formal written protest was unnecessary. From this order both the City of Rochester and representatives of Subclass A appeal. We reverse this order.

First of all, on the issue of protest, the law is clear that a taxpayer is entitled to a refund for the payment of illegal taxes only if he can show that the payment was either made under protest or was otherwise involuntarily made (Mercury Mach. Importing Corp. v. City of New York, 3 N.Y.2d 418, 424-425, 165 N.Y.S.2d 517, 144 N.E.2d 400). The need for appropriate protest in tax refund cases is well established and has been reiterated time and again by this court and by the Court of Appeals and needs no elaboration here. In Hurd v. Buffalo, 41 A.D.2d 402, 406, 343 N.Y.S.2d 950, affd. 34 N.Y.2d 628, 355 N.Y.S.2d 369, 311 N.E.2d 504, the fountainhead of all recent tax refund litigation, we held that the City of Buffalo "would be liable only for those taxes paid under protest." Similarly, in Angelone, 72 A.D.2d 445, 449, 424 N.Y.S.2d 933, supra, we stated that "only those taxpayers who paid their taxes 'under protest' are legally entitled to a refund * * *." In Waldert v. City of Rochester, 44 N.Y.2d 831, 835, 406 N.Y.S.2d 752, 378 N.E.2d 115, modfg. 61 A.D.2d 147, 402 N.Y.S.2d 655, cert. den. 439 U.S. 922, 99 S.Ct. 303, 58 L.Ed.2d 315, the Court of Appeals stated that "the plaintiff * * * is entitled to establish its rights to repayment of real property taxes paid in excess of the constitutional limitation if such taxes were paid under appropriate protest."

Formal written protest is not necessary if the taxes were paid under compulsion or duress which has been described as payment made "where present liberty of person or immediate possession of needful goods is threatened by nonpayment of the money exacted * * * " (Mercury Mach. Importing Corp. v. City of New York, 3 N.Y.2d 418, 425, 165 N.Y.S.2d 517, 144 N.E.2d 400, supra see Adrico Realty Corp. v. City of New York, 250 N.Y. 29, 33-34, 39-40, 164 N.E. 732). In our view the tax payments at issue here were not made under duress. There was no immediate threat to the possession or use of the real property except that a lien was routinely created against the property until the tax was paid. If the threat to a taxpayer is not immediate, the subsequent tax payment is considered to be voluntary and therefore not recoverable in a tax refund proceeding absent formal written protest (see Tripler v. Mayor, 125 N.Y. 617, 625-626, 26 N.E. 721; Title Guarantee and Trust Co. v. City of New York, 265 App.Div. 304, 306, 38 N.Y.S.2d 715, affd. 290 N.Y. 910, 50 N.E.2d 301; Goldberg v. City of New York, 260 App.Div. 61, 20 N.Y.S.2d 801, affd. 285 N.Y. 705, 34 N.E.2d 386). The cases relied upon by the general class are distinguishable on their facts since they involved situations where either actual protest had been made, a lawsuit had been commenced, or there was an immediate threat of...