Hotel Dorset Co. v. Trust for Cultural Resources of City of New York

• Citation: 385 N.E.2d 1284,413 N.Y.S.2d 357,46 N.Y.2d 358
• Parties: , 385 N.E.2d 1284 HOTEL DORSET COMPANY, Respondent, v. TRUST FOR CULTURAL RESOURCES OF CITY OF NEW YORK et al., Appellants.
• Decision Date: 27 December 1978
• Court: New York Court of Appeals

Page 357

413 N.Y.S.2d 357

46 N.Y.2d 358, 385 N.E.2d 1284

HOTEL DORSET COMPANY, Respondent, v. TRUST FOR CULTURAL RESOURCES OF CITY OF NEW YORK et al., Appellants.

Court of Appeals of New York.

Dec. 27, 1978.

Merrell E. Clark, Jr., New York City, for Trust for Cultural Resources of the City of New York, appellant

Allen G. Schwartz, Corp. Counsel, New York City (Alfred Weinstein and L. Kevin

Sheridan, New York City, of counsel), for Abraham D. Beame, appellant

Arthur Richenthal, David Abrams and David G. Richenthal, New York City, for respondent.

Louis J. Lefkowitz, Atty. Gen. (Shirley Adelson Siegel and Samuel A. Hirshowitz, New York City, of counsel), in his statutory capacity under section 71 of the Executive Law and CPLR 1012 (subd. (b)).

Donald J. Robinson, Louis G. Adolfsen and Eugene W. Harper, Jr., New York City, for the Whitney Museum of American Art, amicus curiae.

OPINION OF THE COURT

GABRIELLI, Judge.

The court is presented with a challenge to a complex and well-considered plan, the purpose of which is to provide support for the continuation of financially troubled cultural institutions and museums in the State of New York. The Legislature, by chapters 902 and 903 of the Laws of 1976, enacted articles 13-E and 13-F of the General Municipal Law known respectively as the New York State Cultural Resources Act (SCRA) and the New York City Cultural Resources Act (CCRA). The immediate effect of these enactments was to permit the Museum of Modern Art to realize income through tax equivalency payments that would be made upon the completion and sale or rental of condominium apartments to be constructed above the museum facilities.

The history and background of the litigation which propelled this case to our court is simply stated. Special Term ruled the provisions of these statutes to be constitutional over plaintiff's claims that the result of the enactments was not a general law but a special law, and as such exceeded constitutional limitations. The Appellate Division, with one Justice dissenting, reversed Special Term and has held that the SCRA was a special law that could only be applicable to the Museum of Modern Art, a private nonprofit educational institution. The majority also concluded that since the CCRA involved condemnation of property, diversion of tax revenues and, further, because it was enacted without a home rule message, the New York State Constitution had been violated in several respects.

For the reasons hereinafter assigned and stated, we reverse the order of the Appellate Division and reinstate the order of Special Term.

The SCRA provides for the creation of cultural trusts (public benefit corporations) which, when authorized by separate legislation, are given the power to assist participating cultural institutions in the construction of combined-use facilities, i. e., institutions where part is devoted to the cultural purpose, and part used for commercial purposes designed to produce financial support for the cultural part. The legislation further provides that a trust is granted a general tax exemption, including an exemption from real estate taxation on the combined-use facility developed by the trust (General Municipal Law, § 317). The owners of the commercial part of the combined-use facility are required, however, to pay to the trust amounts equal to the real property tax that would otherwise be payable to the municipality. By separate legislation, the trust must specify the purposes for which such payments will be used (General Municipal Law, § 307, subd. 3) in aid of the cultural institution. In addition, this combined-use facility may not be developed by the trust unless the cultural institution to be aided has held fee title to contiguous tax-exempt real property in excess of 50,000 square feet for a period of at least five years (General Municipal Law, § 307, subd. 1). The institution, if located within a city of one million or more population must have had average annual admissions of at least 500,000 persons for a period of at least five years, or average annual admissions of at least 50,000 persons for such a period if in a city with a population of 125,000 or more; and the attendance requirement may be satisfied on the basis of either the five-year period preceding enactment of the SCRA or the five-year period preceding the agreement between a trust and an institution for development of the combined-use facility (General Municipal Law, § 302, subd. 5). It is further provided that the trust may acquire property by condemnation, but only if provided by separate legislation (General Municipal Law, § 307, subd. 2).

The separate legislation needed to effectuate the general scheme of the SCRA on a local basis and to any particular cultural institution is, in the present instance, found in the CCRA. Under the CCRA a trust is created for New York City to develop combined-use facilities. The trust is empowered to acquire property by condemnation, but the area of taking is limited by metes and bounds to property contiguous to that owned by the Museum of Modern Art (General Municipal Law, § 329). The trust must remit to the city from tax equivalency payments an amount equal to the tax that otherwise would have been paid by the private owner of the condemned property, but not less than an amount equal to 10% Of the tax equivalency payments for a period of 10 years following completion of the commercial construction; and the trust is to use the tax equivalency payments for servicing the debt incurred to build the institutional part of the combined-use facility. Then, after such servicing is complete, the tax equivalency funds are to be used only to pay the operating costs of the newly created institutional part of the facility. Any surplus of tax equivalency payments at the end of a fiscal year must be paid to the city (General Municipal Law, § 330, subd. 1); and an abatement of tax equivalency payments is allowed while the facility is being constructed, and this abatement will follow a declining scale for the 10-year period following completion of construction (General Municipal Law, § 330, subd. 2). Finally, the "effective date" portion of the CCRA legislation states: "This act shall take effect immediately, provided, however, that the provisions of the act shall not become operative unless and until the board of estimate, within ninety days after its enactment into law, adopts a resolution ratifying and approving the provisions hereof". The board's approval was effected on September 16, 1976.

The Museum of Modern Art is the first cultural institution in the State to avail itself of the benefits of the legislation. The trust created under CCRA, in conjunction with the museum, developed a plan for building a combined-use facility adjacent to the museum building on West 53rd Street in Manhattan. Under the plan, its facilities would be expanded whereby a museum wing consisting of approximately 50 stories would be constructed on the west side of the museum's existing building. The bottom six stories would be devoted to cultural purposes such as gallery space and a book store. The remaining stories would be used for condominium apartments from which the tax equivalency payments for support of the museum are to be derived. And the needed land would be acquired by the trust through its condemnation powers. Plaintiff is a qualified taxpayer, claims ownership to air rights which may be condemned, and owns land contiguous to the rights to be acquired.

Plaintiff has attacked the enabling legislation as being, in effect, special legislation designed only for the benefit of the Museum of Modern Art; and it is alleged that the precise specifications in the legislation, to wit, the ownership of 50,000 square feet of property for five years, along with the average annual admissions of at least 500,000 persons, applies only to this museum. This, it is urged, violates several provisions of New York State Constitution, among which are article IX ( § 2, subd. (b), par. (2) (necessity for a home rule message)); section 17 of article III (no private bill shall grant any private corporation any immunity or franchise); section 1 of article XVI (exemption from taxation to be granted only by general laws); and article I ( § 7, subd. (a) (property cannot be condemned for private use)).

The Appellate Division majority adopted and accepted these arguments and reasoned that article IX ( § 3, subd. (d), par. (1)) of the Constitution defines a general law as one "which in terms and in effect applies alike to all counties * * * all cities, all towns or all villages"; and that, despite the drafters' attempts to clothe the enactments with general language, they were tailored for the Museum of Modern Art, and only for that institution. If this view were accepted as valid, of course, it would necessarily follow that the enactments are in violation of the Constitution in the several respects advanced by plaintiff and found by the Appellate Division.

The Special Term Justice, however, took a different view. He stated: "While the museum presently qualifies as the sole beneficiary of the statute, as has already been demonstrated the language of the law opens similar opportunities in the future to others who may be fitted into the wording of the statute. The new law does not grant any exclusive privilege or franchise and cannot under the circumstances be deemed a private bill since it satisfies the Constitutional test of generality. What is important, is that the grant according to the legislative findings, is for a public purpose both educational and cultural".

It is significant to note that both courts below treated the case as one which turned on and was concerned only with questions of law, Special Term granting summary judgment for defendants, and the Appellate Division, on the other hand, denying that relief and granting summary judgment for plaintiff. Such being the case, it is difficult to...