Parker 86th Associates v. City of New York

• Citation: 461 N.Y.S.2d 794,93 A.D.2d 388
• Parties: PARKER 86TH ASSOCIATES, Parpin Construction Corp., Notre Dame Leasing Corp. and Lincoln Plaza Associates South, Plaintiffs-Appellants-Respondents, v. The CITY OF NEW YORK, The Mayor of the City of New York and The Commissioner of Finance of The City of New York, Defendants-Respondents-Appellants.
• Decision Date: 26 April 1983
• Court: New York Supreme Court Appellate Division

Page 794

461 N.Y.S.2d 794

93 A.D.2d 388

PARKER 86TH ASSOCIATES, Parpin Construction Corp., Notre

Dame Leasing Corp. and Lincoln Plaza Associates

South, Plaintiffs-Appellants-Respondents, v. The CITY OF NEW YORK, The Mayor of the City of New York and The Commissioner of Finance of The City of New

York, Defendants-Respondents-Appellants.

Supreme Court, Appellate Division,

First Department.

April 26, 1983.

Gary Schuller, New York City, of counsel (Leonard Olarsch and Joseph A. Vogel, New York City, with him on brief, Frederick A.O. Schwarz, Jr., Corp. Counsel, New York City, attorney), for defendants-respondents-appellants.

Alan Kolod, New York City, of counsel (Charles G. Moerdler, David S. Welkowitz and Naomi Siegel, New York City, with him on brief, Stroock & Stroock & Lavan, New York City, attorneys), for plaintiffs-appellants-respondents.

Before KUPFERMAN, J.P., and SULLIVAN, SILVERMAN, BLOOM and MILONAS, JJ.

BLOOM, Justice:

In this uncertified class action plaintiffs seek a declaration that Local Law 29-1982 of the City of New York is unconstitutional, void and unenforceable, enjoining its enforcement and requiring the City to refund to members of the plaintiff-class all revenues alleged to have been illegally obtained from them by the City pursuant to the local law. On October 5, 1982, the day following the joinder of issue defendants moved for summary judgment declaring that § 2 of Local Law 29 is constitutional and valid in all respects. Plaintiffs cross-moved for summary judgment declaring that the local law is invalid and unconstitutional, determining that the action may be maintained as a class action under Article 9 of the Civil Practice Law and Rules, and seeking a refund on behalf of the entire class of the taxes alleged to have been illegally paid.

Special Term granted plaintiffs' motion to the extent of declaring Local Law 29-1982 unconstitutional as in violation of Article 9, § 2, subd. (c)(8) of the Constitution of the State of New York. However, it failed to grant certification of class status to plaintiffs and did not pass on the demand for a refund of the taxes paid. Both sides appeal; defendants from so much of the judgment as declared Local Law 29 unconstitutional and plaintiffs from so much thereof as denied them class action certification and failed to order a refund of the taxes claimed to have been illegally paid. We are in disagreement with the conclusion reached by Special Term. Accordingly, we reverse and grant defendants' motion for summary judgment and declare that Local Law 29-1982 of the City of New York, and particularly § 2 thereof, is a valid and constitutional exercise of the taxing power of the City.

I

This appeal had its genesis in the now repealed § 306 of the Real Property Tax Law which required that "[a]ll real property in each assessing unit shall be assessed at the full value thereof". Despite the ancient history of the statute, which traces its beginnings to a 1788 statute adopted by our state legislature (L.1788, ch. 65), the general rule had been to value real estate for assessment purposes at a fraction of its true value. However, there was considerable lack of uniformity in the holdings of the courts with respect to the validity of assessments based upon a fraction of the value of the real property (compare Van Rensselaer v. Whitbeck, 7 N.Y. 517 and People ex rel Board of Supervisors v. Fowler, 55 N.Y. 252 with C.H.O.B. Associates, Inc. v. Board of Assessors, 45 Misc.2d 184, 257 N.Y.S.2d 31, aff'd 22 A.D.2d 1015, 256 N.Y.S.2d 550, aff'd 16 N.Y.2d 779, 262 N.Y.S.2d 501, 209 N.E.2d 820; People ex rel Yaras v. Kinnaw, 303 N.Y. 224, 101 N.E.2d 474; Nicolette v. Village of Clyde, 34 A.D.2d 202, 310 N.Y.S.2d 896; Matter of Connolly v. Board of Assessors, 32 A.D.2d 106, 300 N.Y.S.2d 192). Not until Hellerstein v. Assessor of the Town of Islip, 37 N.Y.2d 1, 371 N.Y.S.2d 388, 332 N.E.2d 279 was the issue finally set to rest by a sharply divided Court of Appeals. In that case fractional assessments were outlawed. However, recognizing that confusion and disruption of existing procedures would attend assessment at full value, the court allowed until December 31, 1976, approximately a year and a half after the decision, before compliance with its mandate would be required.

After a series of legislatively imposed moratoria (L.1977, ch. 888 and L.1981, ch. 259) and the establishment of a temporary state commission to study the problem and to make recommendations with respect thereto (L.1977, ch. 889) the problems attendant upon Hellerstein finally reached resolution in the adoption by the State Legislature of L.1981, ch. 1057 which became effective December 3, 1981 upon override by the Legislature of the veto of the Governor. Section 1 repealed § 306 of the Real Property Tax Law and enacted, in its place, a new § 305 which authorized the continuance in effect of existing methods of assessment. It further provided that "[a]ll real property in each assessing until shall be assessed at a uniform percentage of value (fractional assessment) except that, if the administrative code of a city with a population of one million or more permitted prior to January first, nineteen hundred eighty-one, a classified assessment standard, such standard shall govern unless such city by local law shall elect to be governed by the provisions of this section". It also authorized assessing units which had adopted the full value standard by reason of revaluation under Hellerstein to adopt a level of assessment in accord with the new § 305.

Section 2 of ch. 1057 enacted a wholly new Article 18 of the Real Property Tax Law. Section 1802 subdivided real property in a "special assessing unit" defined as "an assessing unit with a population of one million or more" under § 1801, subd. (a), into four categories. Class one is defined as all one, two and three family real property used primarily for residential purposes. Included in class one is property held in cooperative or condominium form. Class two embraces all other residential real property except commercial property used primarily for dwelling purposes. Class three is limited to utility real property while class four covers all other real property not included in the foregoing categories. Section 1803 provides for the method of apportioning assessment among the several classes and the manner of adjustment thereof.

On May 8, 1979, some two and one-half years prior to the adoption of ch. 1057, the Finance Committee of the City Council of the City of New York began considering means of increasing the cash flow of the City without increasing the tax burden on its residents. One of the means suggested jointly by the City's Office of Management and Budget (OMB) and the Finance Commissioner was the advancement of the payment of the real estate tax from quarterly payments then in effect to semi-annual payments. Estimates compiled by OMB indicated that this acceleration of payment would provide an additional cash flow of some $35 million. Coupled with an interest rate of 12% "on the expense side" it was estimated that this $35 million would generate an additional $19 million benefitting the City annually by an aggregate total of $54 million. Additionally, there would be a substantial savings in mailing, handling and processing costs.

The recommendation led, in 1979, to the introduction in the City Council of a proposal that all real estate taxes be accelerated so that collection would be on a semi-annual rather than a quarterly basis. Because of the opposition the proposal languished in the Finance Committee. Finally in 1982 a compromise was struck. Recognizing that the change would be particularly onerous for property owners who would find it difficult to fund the prepayment of the initial installment of a semi-annual tax, the Finance Committee proposed that the tax on all real property with an assessed valuation of thirty thousand dollars or less and on real property held in cooperative form of ownership with an assessed value of thirty thousand dollars or less (computed by dividing the number of dwelling units into the total assessment for the real property) would be payable in four installments, due July 1, October 1, January 1, and April 1, in each year. On all other property the tax would be payable in three installments for the fiscal year commencing July, 1982 and thereafter, in two installments. These proposals, embodied in Local Law 29-1982, were adopted by the City Council on May 25, 1982 and approved by the Mayor on June 7, 1982. The local law became effective immediately upon its adoption.

Special Term held that the subdivision of real property by Local Law 29 into classes different from those contained in § 1802 permitted some of the taxpayers placed in the same class by § 1802 to pay their taxes quarterly in advance while requiring others to pay their taxes semi-annually in advance, and thereby deprived those who were required to pay semi-annually the use of their money for some period of time. This resulted in an inequality of tax burden. It further read Article 18 as requiring that all property in each class be taxed at the same rate. Accordingly, it concluded that Local Law 29 was in conflict with Article 18, a general law, and, by reason thereof, it transgressed the limitation imposed by Article 9, § 2, subd. (c)(8) of the State Constitution on the home rule powers of the City. By consequence, it held that Local Law 29 was unconstitutional.

II

We are of the view that the confusion of the categories fixed by the State Legislature for assessment purposes with the classes fixed by the City Council for payment of the tax led to an erroneous result. We know of no case decided by the courts of this State, nor has any been brought to our attention, which deals with the precise issue now before us. However, the problem has been before courts in other jurisdictions, some perhaps in a different context. These holdings persuade us...