Columbia County Mental Retardation Realty Co., Inc. v. Palen

• Decision Date: 28 November 1978
• Citation: 410 N.Y.S.2d 789,97 Misc.2d 9
• Parties: In the Matter of COLUMBIA COUNTY MENTAL RETARDATION REALTY COMPANY, INC., Petitioner, v. James J. PALEN et al., Constituting the Board of Assessors of the Town of Claverack, Respondents.
• Court: New York Supreme Court

Page 789

410 N.Y.S.2d 789

97 Misc.2d 9

In the Matter of COLUMBIA COUNTY MENTAL RETARDATION REALTY

COMPANY, INC., Petitioner, v. James J. PALEN et al., Constituting the Board of Assessors

of the Town of Claverack, Respondents.

Supreme Court, Special Term, Columbia County, Part I.

Nov. 28, 1978.

Meyers, Griffen & Whitbeck, Hudson (Carl G. Whitbeck, Jr., Hudson, of counsel), for petitioner.

Francis J. Roche, Hudson, for respondents.

HAROLD J. HUGHES, Jr., Justice:

This is a motion by respondent board of assessors of the Town of Claverack (board) for partial summary judgment dismissing so much of the petition as seeks a tax exemption for petitioner's property pursuant to section 421 of the Real Property Tax Law. Petitioner Columbia County Mental Retardation Realty Company, Inc. (realty company) cross-moves for summary judgment. The motions arise in a proceeding under article 7 of the Real Property Tax Law to review a 1978-79 tax assessment on real property owned by the petitioner realty company.

Petitioner was incorporated under the Not-For-Profit Corporation Law on December 31, 1975. Its certificate of incorporation, together with later amendments, states that it is organized exclusively to hold title to real and personal property utilized by the Columbia County Chapter of the New York State Association for Retarded Children, Inc. (Columbia chapter) and to collect income therefrom, turning all of such income, less expenses, over to an organization which is exempt under section 501(a) of the Internal Revenue Code. The realty company purchased land and buildings located in the Town of Claverack, Columbia County, on April 27, 1978, and entered into a lease dated May 3, 1978, leasing the premises to the Columbia chapter for a term of ten years at an annual rent of $48,000, with title to the property to be conveyed to the New York State Association for Retarded Children, Inc. (NYSARC), at its option, at the completion of the term. The board proceeded to assess the property at $40,000 for 1978-79 and the realty company presented a complaint seeking a reduced assessment due to claimed inequality and overevaluation, and a total exemption based on illegality. The board rejected the illegality claim and the instant proceeding ensued.

The issue presented on this motion is whether a corporation formed under the Not-For-Profit Corporation Law for the sole purpose of holding title to real and personal property and to lease same exclusively to a charitable corporation (which would qualify for a § 421 exemption) is entitled to an exemption under section 421 of the Real Property Tax Law. The board argues that the property in question must be owned by a corporation organized or conducted exclusively for the purposes set forth in section 421 to qualify for an exemption, and that a real estate holding corporation is not such an entity. The realty company contends that it qualifies for an exemption since it leases exclusively to the Columbia chapter of NYSARC, which would qualify for an exemption if it owned the property, and the realty company is "organized exclusively for the mental improvement of men, women and children" since it can only hold title to real property used by an exempt organization.

Section 421 provides an exemption for "Real property Owned by a corporation . . . organized or conducted exclusively for religious, charitable, hospital, educational, moral or mental improvement of men, women or children or cemetery purposes . . . And used exclusively for carrying out thereupon one or more of such purposes . . . ." The statute establishes two criteria for an exemption, to wit: (1) ownership by a corporation formed exclusively for the purposes specified in section 421 and, (2) the property must be used primarily in furtherance of those purposes without pecuniary profit to any officer, member, or employee of the corporation, nor as a guise for profit-making operations (Matter of New York Cardiac Center v. Kondzielaski, 46 A.D.2d 810, 361 N.Y.S.2d 201, affd. after remand, 53 A.D.2d 671, 384 N.Y.S.2d 684; Matter of Shrine of Our Lady of Martyrs of Auriesville v. Bd. of Assessors of Town of Glen, 40 A.D.2d 75, 337 N.Y.S.2d 786, affd. 33 N.Y.2d 713, 349 N.Y.S.2d 993, 304 N.E.2d 563). The statute is to be strictly construed against the party seeking the exemption (Matter of Ass'n of Bar of City of N. Y. v. Lewisohn, 34 N.Y.2d 143, 153, 356 N.Y.S.2d 555, 561, 313 N.E.2d 30, 34). The requirement of technical legal ownership is strictly enforced (Young Israel of Far Rockaway v. City of New York, 33 A.D.2d 561, 305 N.Y.S.2d 432). It is the court's opinion that petitioner realty company has failed to meet the first requirement that the property be owned by an organization formed exclusively for a purpose specified in the statute. A strict construction of section 421 of the Real Property Tax Law simply does not permit a finding that a corporation formed exclusively to own and lease real estate, albeit solely to a charitable non-profit lessee, is ". . . organized and conducted exclusively for religious, charitable, hospital, educational, moral or mental improvement of men, women or children".

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