ISCA Enterprises v. City of New York

• Decision Date: 02 May 1991
• Parties: , 572 N.E.2d 610 In the Matter of ISCA ENTERPRISES, Individually and as Successor in Interest and Assignee of Greater New York Savings Bank et al., Appellant, v. CITY OF NEW YORK et al., Respondents. Linton CAMPBELL et al., Respondents, v. CITY OF NEW YORK, Appellant.
• Court: New York Court of Appeals Court of Appeals

Page 927

569 N.Y.S.2d 927

77 N.Y.2d 688, 572 N.E.2d 610

In the Matter of ISCA ENTERPRISES, Individually and as

Successor in Interest and Assignee of Greater New

York Savings Bank et al., Appellant, v. CITY OF NEW YORK et al., Respondents.

Linton CAMPBELL et al., Respondents, v. CITY OF NEW YORK, Appellant.

Court of Appeals of New York.

May 2, 1991.

Herbert Rubin, New York City, Michael A. Drobenare, Brooklyn, David B. Hamm and Miriam Skolnik, New York City for appellant in the first above-entitled proceeding.

Victor A. Kovner, Corp. Counsel (Pamela Seider Dolgow, Leonard Koerner and Gary Marton, of counsel), New York City, for respondents in the first above-entitled proceeding.

Victor A. Kovner, Corp. Counsel (Pamela Seider Dolgow, Leonard Koerner and Gary Marton, of counsel), New York City, for appellant in the second above-entitled action.

Richard Jankell and Paul L. Beck, New York City, for respondents in the second above-entitled action.

Stuart M. Fischman and Jill F. Hunter, New York City, for New York State Land Title Assn, amicus curiae, in the second above-entitled action.

OPINION OF THE COURT

KAYE, Judge.

A former mortgagee in the first appeal and former property owners in the second, challenge the constitutionality of New York City's "notice-by-request" procedure for in rem tax foreclosure actions, asking that the tax deeds on the subject properties be declared void and their interests restored. We resolve both appeals in the City's favor, the first on the ground that petitioner mortgagee had actual notice in time to bring suit, and the second on the ground that the City's statutory scheme for giving notice to property owners met the requirements of due process. The factual record in the first case makes it unnecessary for us to consider whether the City's notice provisions would also meet due process requirements as to mortgagees.

The "In Rem" Procedure in General

Title 11 of the New York City Administrative Code makes available a summary tax foreclosure procedure whenever an outstanding tax lien has been unpaid for more than one year (Administrative Code § 11-404[a], and it sets forth the mechanics for notifying interested parties that this procedure has been initiated.

In rem actions are commenced by the filing of duplicate lists of delinquent taxes in the office of the clerk of the county in which the parcels are located (Administrative Code § 11-405[d]. Publication of a notice of foreclosure must be made at least once a week for six successive weeks in the City Record and in two newspapers published and circulated within the relevant county (Administrative Code § 11-406[a]. In addition to publication, the Commissioner of Finance must mail a copy of the notice to all owners, mortgagees, and lienors who have filed "owner's registration" or "in rem" cards (Administrative Code § 11-406[c].

Owner registration cards must include the owner's name and mailing address, and are designed to enable the Commissioner to mail bills for taxes and other charges, as well as foreclosure notices, to the proper party in interest (Administrative Code § 11-416). In rem cards purport to provide mortgagees, lienors and others having an interest in the property--but not authorized to receive tax bills--with a means of receiving notice of any foreclosure action initiated by the Commissioner (Administrative Code § 11-417).

If no owner registration or in rem card is on file, the Commissioner must mail the notice to the name and address, if any, listed on the latest annual record of assessed valuations (Administrative Code § 11-406[c].

For a period of 10 weeks from the date of first publication of the notice of foreclosure, any person claiming an interest in a parcel listed in that notice has the opportunity to redeem it by paying all delinquent taxes, interest and penalties (Administrative Code § 11-407[a]. Upon expiration of this 10-week period (the last date for redemption), any interested party may still redeem a parcel by payment of a 5% penalty in addition to the other charges. This window for redemption is open until the Commissioner is notified by Corporation Counsel that the preparation of the judgment of foreclosure has been commenced (Administrative Code § 11-407[c].

An interested party may serve a verified answer within 20 days of the last date for redemption, thereby severing the action as to any parcel in which the defendant has pleaded an interest (Administrative Code § 11-409[a]. If no answer is interposed--and none was in respect to any of the parcels involved in these appeals--the court, after satisfying itself that the City has complied with all procedural requirements, is directed to enter final judgment awarding the City possession of the parcels listed (Administrative Code § 11-412). The judgment must also contain a direction to the Commissioner of Finance to prepare, execute and record a deed conveying title to all affected parcels to the City.

For a period of two years from the date the tax deed is recorded, an owner or mortgagee may apply for release of the property (Administrative Code § 11-424[a]. If this application is made within four months of the filing date--and includes all requisite taxes, charges and penalties--the City must grant the release. If an application is made after this four-month period, but prior to the expiration of the two-year limitation, release of the property is within the discretion of the Board of Estimate.

Finally, title 11 contains what is in effect a Statute of Limitations, providing that, after a period of two years from filing, a tax foreclosure deed raises a conclusive presumption that the in rem foreclosure proceeding was conducted in accordance with all provisions of law relating thereto (Administrative Code § 11-412[c]. No action to set aside the tax deed may be commenced after the expiration of this two-year period.

Challenge by ISCA Enterprises

In May 1981, the City commenced an action to foreclose on all real property located in Kings County with tax delinquencies of more than one year. Approximately 17,000 parcels were involved.

ISCA Enterprises, at that time, was the mortgagee on two of those parcels, its interests duly recorded, but it did not receive any actual notice of the foreclosure action. It is uncontested that notice was published according to the provisions of title 11 and that the proper filing was made in the Kings County Clerk's office.

On July 28, 1983, the City acquired title to the two ISCA parcels under a deed executed by the Commissioner of Finance pursuant to a judgment of foreclosure. Tax deeds were recorded at this time. In addition, prior to July 1983, ISCA had become the owner of a third parcel that was also among those subject to the judgment of foreclosure.

ISCA became aware of the tax foreclosure, and the recording of the tax deeds, in December 1983, with more than a year and a half left to run on the two-year Statute of Limitations. Instead of commencing an action to set aside the tax deeds, however, ISCA elected to pursue an application for release with the Board of Estimate, making the required filing in October 1984. Release was denied in October 1987, after which ISCA brought the present action--a full four years after learning of the foreclosure. The petition alleged that ISCA had been denied due process in that it was not given notice reasonably calculated to apprise it of the pendency of the foreclosure action.

Supreme Court granted the City's motion to dismiss, finding that the cause of action accrued on December 1, 1983 at the latest. On that basis, the court concluded that the instant action, commenced more than four years later, was time barred. The ruling was affirmed by the Appellate Division.

We now affirm the Appellate Division order. ISCA's actual notice of the foreclosure action well within the two-year limitation period precludes that party from challenging the conclusive presumption raised by the properly recorded foreclosure deed (see, Administrative Code § 11-412[c]. Having itself delayed commencement of its action for nearly four years from notice, ISCA cannot be heard to complain of a constitutional infirmity in the original notice procedure (see, Town of Somers v. Covey, 2 N.Y.2d 250, 257-258, 159 N.Y.S.2d 196, 140 N.E.2d 277, cert denied 354 U.S. 916, 77 S.Ct. 1378, 1 L.Ed.2d 1432).

Nor is there merit in ISCA's two additional arguments. First, ISCA asserts that the suit could not have been brought prior to the exhaustion of administrative remedies. A claim that a statute is unconstitutional may be raised in a judicial proceeding without first exhausting the administrative review process (see, Young Men's Christian Assn. v. Rochester Pure Waters Dist., 37 N.Y.2d 371, 375, 372 N.Y.S.2d 633, 334 N.E.2d 586). Matter of Tax Foreclosure No. 35, 71 N.Y.2d 863, 527 N.Y.S.2d 747, 522 N.E.2d 1044, is not to the contrary. There, the property had been released to its former owner on payment of taxes, interest and penalties, which the owner elected not to make; in those circumstances, the owner could claim no deprivation of due process.

Second, ISCA asserts that the Board of Estimate procedure tolled the Statute of Limitations on the constitutional claim. There is no support for this position in the Administrative Code, which sets up the release procedure as a means of paying off all taxes and charges on the forfeited property. ISCA was free to bring its constitutional challenge regardless of its decision to pursue a release, and pursuit of that course should therefore have no tolling effect (see, Board of Regents v. Tomanio, 446 U.S. 478, 486-487, 100 S.Ct. 1790, 1796, 64 L.Ed.2d 440; see also, Craig v. Township of Ewing, 678 F.Supp. 1106, 1108 [D.N.J.].

For these reasons we affirm the order of the Appellate Division, 160 A.D.2d 698, 553 N.Y.S.2d 470, upholding the dismissal of ISCA's petition without reaching the constitutional issues tendered for our review. While we...