Morris Investors, Inc. v. Commissioner of Finance of City of New York

• Decision Date: 30 April 1987
• Citation: 516 N.Y.S.2d 635,69 N.Y.2d 933
• Parties: , 509 N.E.2d 329 In the Matter of MORRIS INVESTORS, INC., et al., Respondents, v. COMMISSIONER OF FINANCE OF the CITY OF NEW YORK, Appellant.
• Court: New York Court of Appeals Court of Appeals

Page 635

516 N.Y.S.2d 635

69 N.Y.2d 933, 509 N.E.2d 329

In the Matter of MORRIS INVESTORS, INC., et al., Respondents, v. COMMISSIONER OF FINANCE OF the CITY OF NEW YORK, Appellant.

Court of Appeals of New York.

April 30, 1987.

Peter L. Zimroth, Corp. Counsel (Joel A. Newman, Glenn Newman and Stanley Buchsbaum, New York City, of counsel), for appellant.

Morton Kaner, for respondents.

OPINION OF THE COURT MEMORANDUM.

The order of the Appellate Division 121 A.D.2d 221, 503 N.Y.S.2d 363, should be affirmed, with costs, and the certified question answered in the affirmative.

On August 15, 1983--the last day of the four-month limitations period for seeking review of a real property tax deficiency assessment--petitioners commenced an article 78 proceedi to challenge a deficiency assessed against them. Respondent Commissioner moved to dismiss the proceeding because, prior to its commencement, petitioners had failed to deposit the amount of the tax deficiency or post an undertaking, as required by Administrative Code of the City of New York § II46-7.0 (now § 11-2107); respondent's motion, however, was never actually submitted to the court. The court sua sponte dismissed the petition, "without prejudice and with leave to renew," on the ground that the proceeding should have been commenced by order to show cause rather than notice of petition. Petitioners deposited the tax and posted the bond and thereafter, on October 19, 1983, commenced the present article 78 proceeding by order to show cause. Respondent again moved to dismiss based upon petitioners' failure to comply with Administrative Code § II46-7.0 before the first proceeding. Special Term denied the motion on the ground that, under CPLR 205(a), petitioners were permitted an additional six months after dismissal of the first suit in which to commence a new proceeding. The Appellate Division, by a divided court, affirmed and granted leave to appeal on a certified question.

"If an action is timely commenced and is terminated in any other manner than by a voluntary discontinuance, a dismissal of the complaint for neglect to prosecute the action, or a final judgment upon the merits, the plaintiff * * * may commence a new action upon the same transaction or occurrence * * * within six months after the termination provided that the new action would have been timely commenced at the time of commencement of the prior action." (CPLR 205[a].) This section may be applied in article 78 proceedings (see, CPLR 105[b]; Matter of Day Surgicals v. State Tax Commn., 97 A.D.2d 865, 469 N.Y.S.2d 262; Matter of Kinsella v. Board of Educ., 64 A.D.2d 738, 407 N.Y.S.2d 78). Respondent urges, however, that petitioners must be denied the benefit of the six-month grace period because they failed to deposit the tax or post an undertaking before serving their first petition, and the proceeding was therefore not "timely commenced" within CPLR 205(a). We disagree.

CPLR 205(a), a remedial provision protecting the right of litigants who have given timely notice of the assertion of their claims, "has its roots in the distant past" (Gaines v. City of New York, 215 N.Y. 533, 537, 109 N.E. 594 [Cardozo, J.]; see, 1 Weinstein-Korn-Miller, NY Civ Prac p 205.01); "[i]ts broad and liberal purpose is not to be frittered away by any narrow construction." (Gaines v. City of New York, supra, at 539, 109 N.E. 594; George v. Mt. Sinai Hosp., 47 N.Y.2d 170, 177, 417 N.Y.S.2d 231, 390 N.E.2d 1156; Carrick v. Central Gen. Hosp., 51 N.Y.2d 242, 434 N.Y.S.2d 130, 414 N.E.2d 632; see also, CPLR 104.) Here, petitioners' first suit was actually "commenced" (CPLR 304) by service of process upon respondent; that service was made within the four-month limitations period specified by Administrative Code § II46-7.0 (see also, CPLR 217). Thus, the proceeding was "timely commenced" against respondent within the meaning of CPLR 205(a). That the first proceeding may have been defective for failure to deposit the tax or post a bond does not put it beyond the saving provision of CPLR 205(a). The statute by its very terms comes into operation in instances where a proceeding has been terminated for some fatal flaw unrelated to the merits of the underlying claim (see, George v. Mt. Sinai Hosp., supra, 47 N.Y.2d at 177-179, 417 N.Y.S.2d 231, 390 N.E.2d 1156), and it is to be liberally construed.

Nor can we agree with respondent that the failure to deposit the tax or post a bond within four months is a condition precedent that nullifies the underlying right to bring an action (see, Siegel, NY Prac § 34). To be distinguished from the Administrative Code provisions in issue here--which specify no particular time limitation for the deposit or undertaking apart from the four-month limitations period for commencement of article 78 proceedings generally--are situations where a right to seek relief is specifically conditioned upon compliance with a particular time requirement rather than, or in addition to, a Statute of Limitations (see, e.g., Cohen v. Pearl Riv. Union Free School Dist., 51 N.Y.2d 256, 434 N.Y.S.2d 138, 414 N.E.2d 639; Bernardez v. Federal Deposit Ins. Corp., 104 A.D.2d 309, 478 N.Y.S.2d 644, affd. for reason stated in App.Div. mem. 64 N.Y.2d 943, 488 N.Y.S.2d 650, 477 N.E.2d 1104). Here, the condition of a deposit or undertaking is linked only to the statutory limitations period for bringing suit, and thereby becomes subject to CPLR 205(a).

Finally, allowing petitioners the six-month grace period provided by CPLR 205(a) does not undermine the "pay first litigate later" scheme of tax litigation (dissent, at 937, 516 N.Y.S.2d at 637, 509 N.E.2d at 332). Taxpayers still must prepay the disputed tax, including interest and penalties, before their actions may be maintained. If indeed the Legislature fears the dire consequences foreseen by the dissent from application of CPLR 205(a) to this situation, then it lies wholly within the legislative province to make explicit an intention and requirement that the deposit and undertaking themselves be made within a specified time as a condition precedent to suit. Otherwise, a prelitigation requirement tied only to the Statute of Limitations for the underlyi action may fall within the liberally construed purview of CPLR 205(a).

ALEXANDER, Judge (dissenting).

In my view, the majority's holding that CPLR 205(a) affords petitioners six additional months in which to deposit the amount of a disputed tax or an undertaking in such amount, notwithstanding the contrary provision of section II46-7.0 of the Administrative Code of the City of New York (now § 11-2107), which imposes as a strict condition precedent to judicial review the requirement of depositing the tax or undertaking within four months of receiving notice of the determination of liability, undermines the carefully constructed scheme of the city's real estate transfer tax law and eviscerates the long-recognized public policy of securing the prompt payment of taxes. I therefore respectfully dissent.

It is a long-accepted premise that a taxpayer challenging an assessment against him may do so only after he has first paid the tax, and we have repeatedly recognized the propriety, indeed necessity, of conditioning the right to judicial review of a determination of tax liability on prepayment of the disputed tax (Matter of Sterling Estates v. Board of Assessors, 66 N.Y.2d 122, 125, 495 N.Y.S.2d 328, 485 N.E.2d 993; Grant Co. v. Srogi, 52 N.Y.2d 496, 516, 438 N.Y.S.2d 761, 420 N.E.2d 953; Press v. County of Monroe, 50 N.Y.2d 695, 704, 431 N.Y.S.2d 394, 409 N.E.2d 870; Harcel Liqs. v. Evsam Parking, 48 N.Y.2d 503, 507, 423 N.Y.S.2d 873, 399 N.E.2d 905; Matter of Parsons v. State Tax Commn., 34 N.Y.2d 190, 197, 356 N.Y.S.2d 593, 313 N.E.2d 57; see also, Flora v. United States, 357 U.S. 63, 78 S.Ct. 1079, 2 L.Ed.2d 1165; Dodge v. Osborn, 240 U.S. 118, 36 S.Ct. 275, 60 L.Ed. 557; Bull v. United States, 295 U.S. 247, 55 S.Ct. 695, 79 L.Ed. 1421; see generally, 58 NY Jur, Taxation, § 73). This "pay first, litigate later" condition precedent is soundly predicated upon the axiom that governments need funds to function. The very functioning of government relies on the timely collection of taxes, and just as impermissible "[r]estraints on the exercise of the taxing power * * * impede the progress of government and deprive it of the moneys it needs to provide essential services to the public" (Grant Co. v. Srogi, 52 N.Y.2d, at 516, 438 N.Y.S.2d 761, 420 N.E.2d 953), so does enabling extended delay in the collection of taxes.

As authorized by Tax Law § 1243(a), ¹ the City has expressly and unequivocally established the exclusive procedure for obtaining judicial review of determinations of tax liability assessed under Administrative Code, chapter 46, title II (real property transfer tax [now ch. 21] ) and has provided in section II46-7.0, as here pertinent, that "the determination of the director of finance shall be reviewable * * * by a proceeding under article seventy-eight of the civil practice law and rules if application therefor is made to the supreme court within four months after the giving of the notice of such determination [and that such a proceeding] shall not be instituted unless: (a) the amount of any tax sought to be reviewed, with penalties and interest thereon, if any, shall be first deposited with the director of finance * * * or (b) at the option of the applicant [an] undertaking filed with the director of finance * * * in a sum sufficient to cover the taxes, penalties and interest thereon * * * in which event the applicant shall not be required to deposit such taxes, penalties and interest as a condition precedent to the application" (emphasis supplied). ²

Significantly, language identical to that found in section II46-7.0 (see, Tax Law § 1138) has been construed consistently as a strict condition precedent to judicial revi (see, M & R Rubbish Removal v. Spaterella, 112 A.D.2d 202, 491 N.Y.S.2d 423; Matter...