Consolidated Edison Co. of New York, Inc. v. State Bd. of Equalization and Assessment
| Decision Date | 15 August 1983 |
| Parties | CONSOLIDATED EDISON COMPANY OF NEW YORK, INC., Petitioner, v. The STATE BOARD OF EQUALIZATION AND ASSESSMENT, et al., Respondent and Intervenors-Respondents. |
| Court | New York Supreme Court |
Wien, Lane & Malkin, New York City (Mark S. Tulis and Martin B. Cowan, New York City, of counsel), for petitioner.
Robert Abrams, Atty. Gen., Albany (Carl F. Rosenbloom, Asst. Atty. Gen., Albany, of counsel), and William Ryan, Albany, for respondent.
Allen G. Schwartz, Corp. Counsel, New York City (John P. MacArthur, Albany, of counsel), for City of New York, intervenor-respondent.
McCarthy, Fingar, Donovan & Glatthaar, Drazen & Smith, White Plains (Henry J. Smith, White Plains, of counsel), for City of Mount Vernon, intervenor-respondent.
Marvin S. Fink, Scarsdale, for Village of Scarsdale, intervenor-respondent.
Whiteman, Osterman & Hanna, Albany (Melvin H. Osterman, Jr., and Michael Whiteman, Albany, of counsel), for Town of Greenburgh and others, intervenors-respondents.
Frank DeBellis, Pelham, for Town of Pelham, intervenor-respondent.
Maxwell E. Charat and Daniel Boddie, New Rochelle, for City of New Rochelle, intervenor-respondent.
In these proceedings brought pursuant to article 7 of the Real Property Tax Law to review certain special franchise assessments, the respondent, State Board of Equalization and Assessment (SBEA) and the various intervenor-respondents, move for an order granting partial summary judgment dismissing those portions of the petitions which seek to establish that the assessment valuations were erroneous by reason of inequality. The petitioner, Consolidated Edison Company of New York Inc. (Con Ed), by way of cross motion, seeks a determination and order declaring that subdivision 1 of section 744 of the Real Property Tax Law violates the New York State and Federal Constitutions and is void. The cross motion will be addressed first.
Con Ed is a public utility and is the holder of special franchises in the City of New York and the counties of Rockland and Westchester. Maintaining that its special franchise assessments for the tax years 1974-78 had been unequal, overvalued, and illegal, it commenced 168 proceedings against the SBEA. 1
Soon thereafter, the SBEA and the various intervenor-respondents mounted challenges to those portion of Con Ed's petitions that alleged that the assessments were illegal and unequal. As a result, those portions of the petitions that were grounded in illegality were dismissed (see Matter of Consolidated Edison Company of New York v. State Board of Equalization and Assessment, 60 A.D.2d 356, 401 N.Y.S.2d 871), while those portions grounded in inequality were found to present a triable issue of fact and were upheld. (SeeMatter of Consolidated Edison Company of New York Inc. v. State Board of Equalization and Assessment, 73 A.D.2d 31, 425 N.Y.S.2d 651, affd. 53 N.Y.2d 975, 441 N.Y.S.2d 669, 424 N.E.2d 556.) With respect to the latter, the court held that special franchises should be treated no differently than conventional real property and that both could resort to subdivision 3 of section 720 of the Real Property Tax Law to demonstrate the inequality of their assessments. 2
In response to the court sustaining Con Ed's right to claim that their assessment was unequal, the legislature amended subdivision 1 of section 744 of the Real Property Tax Law. (L.1982, ch. 714, §§ 24, 29.) 3 The amendment retroactively precluded a special franchise holder from resorting to subdivision 3 of section 720 of the Real Property Tax Law and restricted his proof to the equalization rate or special equalization rate used by the SBEA in determining the final special franchise assessment under review.
Upon the amendment becoming law, Con Ed brought this motion to have it declared unconstitutional on the grounds, inter alia, that it denied them equal protection and due process.
Con Ed's equal protection claim is based on the premise that the 1982 amendment did not work a substantive change, but was procedural of nature. Given this premise, Con Ed argues that inasmuch as special franchises and conventional real property comprise but a single generic class, they cannot be accorded different treatment. It is claimed that to do so runs afoul of both the Federal and State Constitutions. (U.S. Const., 14th Amdt., § 1; N.Y. Const., art. I, § 11.)
Obviously, if the amendment were considered substantive, Con Ed's equal protection argument would necessarily fail. For it is to be noted that in the field of taxation, more than in any other field, the legislature possesses the greatest freedom in classification. (Matter of Tolub v. Evans, 58 N.Y.2d 1, 457 N.Y.S.2d 751, 444 N.E.2d 1; Matter of Long Island Lighting Co. v. State Tax Commission, 45 N.Y.2d 529, 410 N.Y.S.2d 561, 382 N.E.2d 1337.) Certainly, when considering the unique nature of a special franchise (see People ex rel. Metropolitan Street R. Co. v. State Board of Tax Commissioners, 174 N.Y. 417, 67 N.E. 69), justification can easily be found for the legislature's differential treatment. (See Kentucky Railroad Tax Cases, 115 U.S. 321, 6 S.Ct. 57, 29 L.Ed. 414; New York Rapid Transit Corp. v. City of New York, 303 U.S. 573, 58 S.Ct. 721, 82 L.Ed. 1024; Southern Ry. Co. v. Watts, 260 U.S. 519, 43 S.Ct. 192, 67 L.Ed. 375.)
Turning to the merits of the argument, it is noted that prior to 1982 the Real Property Tax Law was not clear as to whether special franchise holders were to be treated differently than conventional real property owners who were seeking to challenge the inequality of their assessments. As a result, it was held that they were to be treated the same, and that subdivision 3 of section 720 of the Real Property Tax Law applied with equal force to a review of a special franchise assessment. (Matter of Consolidated Edison Company of New York Inc. v. State Board of Equalization and Assessment, 73 A.D.2d 31, 425 N.Y.S.2d 651, affd. 53 N.Y.2d 975, 441 N.Y.S.2d 669, 424 N.E.2d 556, supra.) The 1982 amendment clarified the legislature's intent in this regard.
The 1982 amendment is procedural. Its object is to control evidence and, in so doing, to preclude holders of special franchises from collaterally attacking the equalization rate used by the SBEA in determining their assessments. No longer may interclass comparisons (see Real Property Tax Law, § 720, subd. 3 ) be utilized to challenge such rate.
The question presented is whether, under the circumstances, the differential treatment is justified. This necessarily depends on the petitioner demonstrating there was no rational basis for the legislative action. (See Matter of Slewett & Farber v. Board of Assessors of the County of Nassau, 80 A.D.2d 186, 438 N.Y.S.2d 544, mod. on app., 54 N.Y.2d 547, 446 N.Y.S.2d 241, 430 N.E.2d 1294.) That is to say, there existed no cognizable differences between special franchises and conventional real property that justified the differential treatment accorded.
In this regard, the petitioner's burden is a heavy one, since there exists a presumption that every statute is constitutional, and that the legislature has investigated the subject and acted with reason. (Hotel Dorset Co. v. Trust for Cultural Resources of City of New York, 46 N.Y.2d 358, 413 N.Y.S.2d 357, 385 N.E.2d 1284; Montgomery v. Daniels, 38 N.Y.2d 41, 378 N.Y.S.2d 1, 340 N.E.2d 444; Matter of Malpica-Orsini, 36 N.Y.2d 568, 370 N.Y.S.2d 511, 331 N.E.2d 486; I.L.F.Y. Co. v. Temporary State Housing Rent Commission, 10 N.Y.2d 263, 219 N.Y.S.2d 249, 176 N.E.2d 822.) This presumption is rebuttable, but unconstitutionality must be demonstrated beyond a reasonable doubt. (Lighthouse Shores Inc. v. Town of Islip, 41 N.Y.2d 7, 390 N.Y.S.2d 827, 359 N.E.2d 337; I.L.F.Y. Co. v. Temporary State Housing Rent Commission, 10 N.Y.2d 263, 219 N.Y.S.2d 249, 176 N.E.2d 822, supra; Wiggins v. Somers, 4 N.Y.2d 215, 173 N.Y.S.2d 579, 149 N.E.2d 869; Defiance Milk Products Co. v. DuMond, 309 N.Y. 537, 132 N.E.2d 829.)
The evidence presented here is clearly insufficient to demonstrate that Con Ed is denied equal protection of the law. Their argument is based on the assumption that no differences exist that would justify differential treatment. This is plainly not the case. A special franchise is unique. It is neither land, or an improvement of land. It is no single situs. For these reasons it has been considered sui generis. (People ex rel. Metropolitan Street R. Co. v. State Board of Tax Commissioners, 174 N.Y. 417, 67 N.E. 69, supra.) These differences have prompted special treatment in the past. For example, special franchises have procedurally been set apart from conventional real property. The latter is valued by local assessors, wherein the assessment valuation for special franchises is determined by the SBEA. (See Real Property Tax Law, § 600.) Also, special franchises have differed from conventional real property in the standard by which their assessment valuation is determined. At least until the 1981 amendment to the Real Property Tax Law (), the local assessors were required by statute to assess real property at full value. (See Matter of Hellerstein v. Assessor of the Town of Islip, 37 N.Y.2d 1, 371 N.Y.S.2d 388, 332 N.E.2d 279.) In contrast, special franchise assessments were determined at a fraction of full value. (See Real Property Tax Law, § 606, subd. 1.) Suffice it to say, if such differences justified procedural distinctions in the past, it is difficult to argue that they do not provide justification here.
Moreover, even had Con Ed's claim of equal protection been sustained, any right to resort to the evidentiary standards set forth in subdivision 3 of section 720 would appear to be a futile exercise. For such standards are...
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