Linden Hill No. 2 Co-op. Corp. v. Tishelman

• Decision Date: 06 February 1981
• Parties: Matter of LINDEN HILL NO. 2 COOPERATIVE CORP. v. Harry S. TISHELMAN, etc.
• Court: New York Supreme Court

Page 936

435 N.Y.S.2d 936

107 Misc.2d 799

Matter of LINDEN HILL NO. 2 COOPERATIVE CORP. v. Harry S. TISHELMAN, etc.

Supreme Court, Special Term, Queens County, Part 1.

Feb. 6, 1981.

Schrier, Kaufman, Schwartz & Gelles, New York City, for petitioner; Paul Korngold, New York City, of counsel.

Allen G. Schwartz, Corp. Counsel, New York City, for respondent; Judith R. Greenwald, Brooklyn, of counsel.

ALBERT H. BUSCHMANN, Justice.

This is an Article 78 proceeding to review a determination by respondent which prorated petitioner's real estate tax refund after a court-ordered reduction of the assessed value of petitioner's property because of a "J-51" exemption upon the said property.

Petitioner is the owner of a large multiple dwelling in the Borough of Queens, City of New York. Respondent is the Commissioner of Finance of the Department of Finance of the City of New York.

The facts in this case are undisputed. For the tax year 1972/73 the assessed valuation of petitioner's property was $3,480,000. Due to alterations and improvements to the subject property the assessed valuation was increased to $3,520,000 for the tax year 1973/74. Thereafter, the petitioner applied for a tax exemption pursuant to section 489 of the Real Property Tax Law and section J51-2.5 of the Administrative Code. The City granted the petitioner a tax exemption of $40,000 to run for 12 years commencing with the 1973/74 tax year. The $40,000 exemption represented the difference between the 1972/73 assessment before the improvement and the 1973/74 assessment after the improvement. In 1979, tax certiorari proceedings instituted by petitioner resulted in a reduction of its real estate tax assessment for the years 1973/74 through 1978/79. The order, entered on January 29, 1980, provided that it should be "paid to the petitioner the amounts, if any, paid by the said petitioner as taxes against the said erroneous assessment in excess of what the taxes would have been if the said assessment had been made as determined by this order." On March 26, 1980 an application for a refund was made to the respondent. On or about June 30, 1980 a check was received by the petitioner for $133,906.40, said sum reflecting a reduction of $1,608.08 of the excess tax payment. Upon requesting a reason for the reduction in the refund, petitioner was told that because the reduction in the overall assessment was prorated between the exempt and nonexempt portion of the property, respondent apportioned the refund according to that proration of the reduction.

The issue confronting the court in this case is whether a court-ordered reduction in assessed valuation affects only the taxable portion of the property or whether it affects proportionally the taxable and exempt portion of the property requiring a proportionate reduction in the tax refund.

In order to decide this controversy it seems essential at the outset to delineate those sections of the Real Property Tax Law which govern the procedure by which an exemption is granted on improvements to real property; an assessment is fixed by the assessor on real property for tax purposes and a tax assessment, once entered on the assessment roll, is judicially reviewed. Subdivision (1)(a) of section 489 of the Real Property Tax Law authorizes the City of New York to enact legislation "providing that any increase in assessed valuation resulting from alterations and improvement to (real property) shall be exempt from taxation for local purposes for a period not to exceed twelve years after the taxable status date immediately following the completion thereof." The implementation of said section is found in section J51-2.5 of the Administrative Code of the City of New York, commonly referred to as the J-51 law, which echoes the enabling statute. The procedure by which a J-51 exemption is computed is by subtracting the assessed valuation of the property before the improvement from the assessed valuation of the property after the improvement. That difference in valuation, translated into a dollar amount, becomes the J-51 exemption (Matter of 111 Fourth Ave. Assoc. v. Fin. Admin. of the City of New York, 101 Misc.2d 950, 422 N.Y.S.2d 558).

Contained in Article 5 of the Real Property Tax Law are the provisions of general application relating to the assessment and taxation of real property. To arrive at an assessment for taxation purposes, an assessor must determine "the valuation of real property, including the valuation of exempt real property" (Real Property Tax Law, § 102(2)). It is only this total assessment which is subject to judicial review (Real Property Tax Law, § 502(3); Connolly v. Bd. of Assessors of the County of Nassau, 32 A.D.2d 106, 300 N.Y.S.2d 192). When the assessor fixes value of property following an improvement, the cost of construction of the improvement is only one factor for the assessor to consider in arriving at total value (Matter of Deull v. Housing and Dev. Admin., 40 A.D.2d 803, 338 N.Y.S.2d 122). Thus, it is possible if an owner of a building expends $10,000 on improvements it is not certain that the increase in valuation will be $10,000; the increase could be greater than $10,000 or less than $10,000 depending on the relationship of those improvements to total value.

A proceeding for a review of assessment upon real property by certiorari is granted by Article 7 of the Real Property Tax Law. If the court determines that the assessment under review is erroneous, refund must be made to the person entitled thereto (Real Property Tax Law, § 726(1)). Subdivision 1(a) of said section provides that "there shall be ordered and paid to the petitioner or other person paying such tax * * * the amount paid by him in excess of the amount which would have been paid had such assessment been made as determined by such order together with interest thereon." That is, a court-ordered reduction in assessment replaces the original erroneous assessment and the amount refunded to the taxpayer is that amount in excess of what the tax would have been if the original assessment had been as ordered (Moon v. Bloomer, 183 Misc. 62, 50 N.Y.S.2d 531).

The petitioner would have us interpret the above sections of the Real Property Tax Law so as to reach the conclusion that since the procedure by which the taxpayer receives an exemption and the tax certiorari proceeding to review an assessment are separate and distinct proceedings and that the latter does not...