People ex rel. Gale v. Tax Commission of City of New York

• Decision Date: 08 November 1962
• Citation: 233 N.Y.S.2d 501,17 A.D.2d 225
• Parties: The PEOPLE of the State of New York ex rel. Loring R. GALE and Lucille Gale Knapp, Relators-Appellants, v. The TAX COMMISSION OF the CITY OF NEW YORK, Respondent-Respondent. The PEOPLE of the State of New York ex rel. OXFORD PROPERTIES, INC., Relator-Appellant, v. The TAX COMMISSION OF the CITY OF NEW YORK, Respondent-Respondent.
• Court: New York Supreme Court — Appellate Division

Page 501

233 N.Y.S.2d 501

17 A.D.2d 225

The PEOPLE of the State of New York ex rel. Loring R. GALE and Lucille Gale Knapp, Relators-Appellants, v. The TAX COMMISSION OF the CITY OF NEW YORK, Respondent-Respondent.

The PEOPLE of the State of New York ex rel. OXFORD

PROPERTIES, INC., Relator-Appellant, v. The TAX COMMISSION OF the CITY OF NEW YORK, Respondent-Respondent.

Supreme Court, Appellate Division, First Department.

Nov. 8, 1962.

Harry H. Chambers, New York City, of counsel (Edward H. Helmke, New York City, with him on the brief, A. I. Madison, Brooklyn, and Lynton, Klein, Opton & Saslow, New York City,) for appellants.

James J. McGowan, New York City, of counsel (Edward J. McLaughlin, New York City, with him on the brief, Leo A. Larkin, Corporation Counsel, attorney) for respondent.

Before BREITEL, J. P., and RABIN, VALENTE, McNALLY and EAGER, JJ.

EAGER, Justice.

The relators appeal from a final order reducing real estate tax assessments for the tax years 1951-52 through 1954-55 on real property located at 2880 Broadway (northeast corner of Broadway and 112th Street), Borough of Manhattan, City of New York. The property is improved with a 7-story former luxury type apartment house now converted to a furnished rooming house type of occupancy above the ground floor which is occupied by 7 retail stores of various kinds.

Oxford Properties, Inc., the present owner of the property, became at first, in 1934, a lessee thereof under a lease for a term of 21 years at a fixed annual rental of $36,000. The lease gave the tenant an option for a 21-year renewal at the same rental and, in accordance with such option, Oxford in 1954 renewed the lease for the additional 21-year term. The annual rental of $36,000, to which the property was then bound, had been agreed upon in 1934 at the time of a depression and, clearly, on present day basis, this constitutes an extremely low rental for the premises.

In October, 1954, the then owners of the premises sold them to Oxford for the sum of $225,000. Obviously, however, the sales price was influenced and depressed by the existence of the renewal 21-year lease which bound the property until 1975 to the relatively low annual rental of $36,000.

It is the position of the relators here that the fixed low rental income and the 1954 sales price unquestionably establishes an assessable value in the property far below the value of $365,000 fixed at Special Term. Incidentally involved is the question of whether or not the assessment should have been limited to an assessment of the actual value of the owners' interest encumbered, as it was, by the outstanding 21-year lease.

By statute, it is provided that, 'all real property subject to taxation shall be assessed at the full value thereof' (Tax Law, § 8 in effect until October 1, 1959; now, Real Property Tax Law § 306). These provisions are supplemented by the provisions of the Administrative Code of the City of New York which provide that the assessed valuation of an improved property shall be set down at 'the sum for which such parcel would well under ordinary circumstances with the improvements if any thereon.' (See Administrative Code, § 158-1.0.) The two statutes are to be read together, and the 'statutory test of the full value of property is the price at which the property would sell under ordinary circumstances.' (People ex rel. Parklin Operating Corp. v. Miller, 287 N.Y. 126, 129, 38 N.E.2d 465, 466.)

It is well to bear in mind, however, that real property taxes are assessed on the basis of the full value of the property itself. In all cases the assessment is against the 'real property itself' (Tax Law, § 9 in effect until October 1, 1959; now, Real Property Tax Law, § 304), and the name of the owner, last known owner, or reputed owner, if noted on the assessment roll, is entered merely in connection with the identification of property assessed. (See Real Property Tax Law, § 502, subd. 2. Also Matter of Doughty v. Loomis, 9 A.D.2d 574, 189 N.Y.S.2d 413; Smith v. Russell, 172 App.Div. 793, 797, 159 N.Y.S. 169, 172; Matter of Donner-Hanna Coke Corp., 212 App.Div. 338, 340, 209 N.Y.S. 62, 63, affd. 241 N.Y. 530, 150 N.E. 541.) '* * * the pertinent statutes have to do with the assessment of land and improvements without reference to the identity, nature or extent of the ownership thereof. What is to be assessed is the whole of the property and the full value thereof regardless of restrictions personal to the owner. The resulting tax is on the real property; its consequence falls upon the owner whose personal disabilities and restraints neither lessen nor increase the amount. (Paddell v. City of New York, 50 Misc. 422, 424-425, 100 N.Y.S. 581, 583-584, affd. 114 App.Div. 911, 100 N.Y.S. 1133, affd. 187 N.Y. 552, 80 N.E. 1114, affd. 211 U.S. 446, 29 S.Ct. 139, 53 L.Ed. 275.)' Knickerbocker Village, Inc. v. Boyland, 16 A.D.2d 223, 228, 226 N.Y.S.2d 982, 987. See, also, Matter of Doughty v. Loomis, supra; Smith v. Russell, supra.

The tax levied is a tax upon the whole land, and not merely on the interest of a particular person therein. 'Where the fee is privately owned, the real property tax attaches to the combined interests of all the parties interested in the land and the improvements thereon.' (New York Mobile Homes Ass'n v. Steckel, 9 N.Y.2d 533, 539, 215 N.Y.S.2d 487, 491, 175 N.E.2d 151. See, also, Donovan v. Haverhill, 247 Mass. 69, 141 N.E. 564, 30 A.L.R. 358.) So, to comply with statutory provisions and to achieve the essential indiscriminate and full measure of taxation of real property as whole, it is not generally proper or necessary that separate legal interests in a piece of property be independently assessed.

Except in case of easement interests ^*, a division of ownership or the independent holding of separate legal interests in taxable property will not affect the mode of assessment. For instance, mortgagor and mortgagee interests, vendor and vendee interests, landlord and tenant interests, life tenant and remainder interests and co-tenant interests are not separately assessed. It was well settled at common law, unchanged by statute pertinent here, that the mortgagor, the vendee in possession, the lessor, the life tenant, or the co-tenants jointly, were bound to pay the entire tax on the property as if there were no mortgage, contract of sale, lease, remainder or co-tenant interests (See Bonbright, Valuation of Property, Vol. 1, p. 496; 84 C.J.S. Taxation §§ 95, 96, 98, 104; 59 C.J.S. Mortgages § 324; 92 C.J.S. Vendor & Purchaser § 290; 51 C.J.S. Landlord & Tenant § 359; 31 C.J.S. Estates § 47; 86 C.J.S. Tenancy in Common § 67. See, also, Wilson & Co. v. City of New York, McNally, J., Sup., 73 N.Y.S.2d 206, affd. 276 App.Div. 755, 92 N.Y.S.2d 918.) Thus, in any case, a single assessment of the property, at its full value, as if not subject to a mortgage, a vendor interest, a lease, a remainder or co-tenancy, is all that is required. 'Whether these methods of assessment are to be explained on historical or on other grounds, is immaterial on the principles of valuation. They can be justified practically on the ground that the number of assessments is reduced to a fraction of what they would otherwise be, and also that difficult problems of allocation of values are avoided.' (Bonbright, Valuation of Property, p. 497; 34 Col.L.Rev. 1436 (1934))

Consequently, it is clear that, notwithstanding real property is subject to a long term lease, there should be but a single assessment of the property without a separation of the interests of the lessor and lessee, and by statutory directive noted aforesaid, such assessment shall be at its full value.

Matter of City of New York (Maxwell), 15 A.D.2d 153, 222 N.Y.S.2d 786, is cited by the relators in support of a contention that, in the determination of the assessable value of their property, greater weight should have been given here the rental income fixed by the outstanding lease and to the 1954 sales price. In our opinion there, p. 173, p. 804 of 222 N.Y.S.2d in discussing the bearing of a long term rental contract on the value to be fixed for an owner's interest in eminent domain proceedings, we stated that, 'We cannot visualize a willing buyer faced with this certain limitation of income paying a price based on a theoretical income to be realized in a future so distant that no prudent man would invest on the possibility of what it might bring'; and we limited the award to the owner to a sum realistically equivalent to the market value of the property subject, as it was, to the certain long period limitation of income. It is clear, however, that there may be a distinction between the value to be paid an owner in condemnation proceedings and the true value of property for assessment purposes. In the former case, we may be concerned with the appraisal only of the owner's interest in the property, and seek to ascertain the fair market value of his interest at the time of condemnation. On the other hand, in arriving at the true value for tax assessment purposes of real property subject to a lease, an appraisal is to be made of the property as a whole regardless of the effect of the lease upon the value of owner's interest.

An outstanding lease may be a benefit or a detriment to the subject property, and thus its duration, covenants and the rental fixed are simply elements along with many other considerations used to arrive at the value of the property. The amount of rental fixed by a lease, even though negotiated at arm's length, could be very misleading, as to the true value of property, for it is well known that many rental contracts may be at excessive or inadequate rentals because of poor business judgment on the part of one party or another. Then, too, long...