Niagara Mohawk Power Corp. v. Cutler

• Decision Date: 18 July 1985
• Citation: 492 N.Y.S.2d 137,109 A.D.2d 403
• Parties: In the Matter of NIAGARA MOHAWK POWER CORPORATION, Appellant, v. Elaine CUTLER, as Chief Assessor of the Town of Day, New York, et al., Respondents.
• Court: New York Supreme Court — Appellate Division

Page 137

492 N.Y.S.2d 137

109 A.D.2d 403

In the Matter of NIAGARA MOHAWK POWER CORPORATION, Appellant, v. Elaine CUTLER, as Chief Assessor of the Town of Day, New York, et al., Respondents.

Supreme Court, Appellate Division,

Third Department.

July 18, 1985.

Lee, Le Forestier, Malone & Hanft, P.C., Troy (David R. Murphy, Troy, of counsel), for appellant.

Roger J. Paul, Amsterdam, for Robert Spence, respondent.

John W. Sutton, Galway, for Melvin Hatley, respondent.

Phil Sloan, Albany, for Division of Equalization and Assessment, amicus curiae.

Before KANE, J.P., and MAIN, CASEY, YESAWICH and LEVINE, JJ.

CASEY, Justice.

At issue on this appeal is the validity of the 1982 and 1983 real property tax assessments entered against petitioner as to certain "water rights" by the assessors in three Saratoga County towns containing lands submerged by waters impounded by the Conklingville Dam on the Sacandaga River (Great Sacandaga Lake). We hold that those "water rights" were improperly included in the assessment rolls prepared by respondents and that petitioner's motion for summary judgment canceling the assessments should have been granted.

The Hudson River-Black River Regulating District (District) is a public corporation created to construct, maintain and operate reservoirs within its district for the purpose of regulating the flow of streams when required by the public welfare (ECL art. 15, tit. 21). The District's predecessor, the Hudson River Regulating District (HRRD), determined to construct a regulating reservoir on the Sacandaga River and to impound the waters by a dam at or near Conklingville, Saratoga County. For this purpose, HRRD purchased certain land from the New York Power and Light Corporation (NYPLC), petitioner's predecessor. In conveying this land, NYPLC reserved the right to use for its own purposes 15 feet of "head" on the Sacandaga River within the bounds of part of the property so conveyed. The term "head" refers to the difference between the height of the water behind the dam and that below the dam.

By an agreement dated November 14, 1927, NYPLC agreed to construct, maintain and operate, on its own land below the proposed Conklingville Dam, a power house capable of using not only its 15 feet of "head", but also the additional "head" to be developed by HRRD's dam, fixed at 56 feet. NYPLC also agreed to pay HRRD for furnishing the dam by which NYPLC's 15 feet of "head" would be developed and for the power produced by the power house from the use of HRRD's additional "head". HRRD agreed to maintain and operate the dam upon completion and to permit NYPLC to connect the necessary equipment to the outlet of the dam so that the water impounded by the dam could be taken directly into NYPLC's power house "when, as and if released by for the regulation of the flow of the river". Both parties complied with all terms of the agreement, as amended, which expired in 1980. Petitioner and the District entered into a successor agreement, dated June 17, 1980, having a term of 50 years, which provides for the continued operation of the dam and the power house.

In 1982 and again in 1983, pursuant to advice of the State Board of Equalization and Assessment (SBEA), assessors for towns containing lands submerged by the Great Sacandaga Lake, which was created by the waters impounded by the Conklingville Dam, included in their assessment rolls petitioner's "water rights" arising out of the transaction described above. Petitioner filed protests, to no avail, and commenced the instant proceeding seeking declaratory relief and relief pursuant to Real Property Tax Law article 7. Special Term denied petitioner's motion for summary judgment and this appeal ensued.

The right to use the "head" developed at the District's dam involves the right of a riparian owner to a reasonable use of the water flowing in a natural stream over his premises, which includes the right to temporarily detain it by a dam to furnish power (Pierson v. Speyer, 178 N.Y. 270, 272, 70 N.E. 799). ¹ The riparian right is natural and inherent, and a part of the estate of each riparian owner (Strobel v. Kerr Salt Co., 164 N.Y. 303, 320, 58 N.E. 142). "It is properly classified at common law, equally with the land itself, as real property" (Matter of Van Etten v. City of New York, 226 N.Y. 483, 486, 124 N.E. 201). "It is a valuable property right which can be severed from the riparian land by grant, condemnation, relinquishment or prescription" (United Paper Board Co. v. Iroquois Pulp & Paper Co., 226 N.Y. 38, 46-47, 123 N.E. 200). When, as here, it is severed from the riparian land, it is an incorporeal hereditament (1 J. Rasch, New York Law and Practice of Real Property § 683 ).

Turning to the validity of the assessments at issue herein, our analysis begins with certain general principles. "The taxation of real property is authorized solely by statute" (Matter of Crystal v. City of Syracuse, Dept. of Assessment, 47 A.D.2d 29, 30, 364 N.Y.S.2d 618 affd. 38 N.Y.2d 883, 382 N.Y.S.2d 745, 346 N.E.2d 546), and in determining whether property is subject to taxation, tax statutes are to be construed most strongly against the government and in favor of the citizen (see Matter of Grace v. New York State Tax Comm., 37 N.Y.2d 193, 196, 371 N.Y.S.2d 715, 332 N.E.2d 886). Real Property Tax Law § 300 makes all real property within the State subject to real property taxation, unless exempt therefrom by law. But whether property is classified as real property at common law is not decisive of the question as to its status as taxable real property, for consideration must be given to the definition of real property contained in Real Property Tax Law § 102(12) (Matter of City of Lackawanna v. State Bd. of Equalization & Assessment of State of N.Y., 16 N.Y.2d 222, 226-227, 264 N.Y.S.2d 528, 212 N.E.2d 42).

Based upon the foregoing principles, we conclude that the riparian right to use the "head" developed by a dam is not, in and of itself, taxable real property within the scope of Real Property Tax Law § 300. The definition in Real Property Tax Law § 102(12) contains no reference to riparian rights, water rights or hereditaments. In addition to numerous specific inclusions not relevant herein, the statute defines real property as "itself, above and under water, including trees and undergrowth thereon and mines, minerals, quarries and fossils in and under same" (Real Property Tax Law § 102). By way of contrast, the Real Property Law defines real property as "co-extensive in meaning with lands, tenements and hereditaments" (Real Property Law § 2), and "the word hereditaments is more extensive in its signification than land or tenements", including within its scope incorporeal rights (Nellis v. Munson, 108 N.Y. 453, 458, 15 N.E. 739). It is also noteworthy that the definition of taxable real property in Real Property Tax Law § 102(12)(b) specifically includes the right to wharfage which, like the riparian right involved herein, has been recognized as an incorporeal right (Mayor of New York v. Mabie, 13 N.Y. 151, 154). ²

Matter of City of New York v. Schwartz, 36 A.D.2d 402, 320 N.Y.S.2d 983, lv. denied 29 N.Y.2d 482, 324 N.Y.S.2d 1026, 273 N.E.2d 575, involving the taxation of certain riparian rights acquired by the City of New York for water supply purposes, is a case in point. This court concluded that, although riparian rights appurtenant to riparian land are includable in the assessment of such land as an enhancement to its...