Robert B. Blaikie & Co. v. City of New York
| Decision Date | 08 November 1963 |
| Citation | 41 Misc.2d 371,245 N.Y.S.2d 121 |
| Parties | ROBERT B. BLAIKIE & CO., Inc., Plaintiff, v. CITY OF NEW YORK, Defendant. |
| Court | New York Supreme Court |
Harry H. Lipsig, New York City (Harry H. Lipsig, Murray L. Lewis, New York City, of counsel), for plaintiff.
Leo A. Larkin, Corp. Counsel, City of New York (Stanley Buchsbaum, Asst. Corp. Counsel, Samuel J. Warms and Sanford I. Freedman, New York City, of counsel), for defendant.
Motions numbered 44 and 107 are consolidated herewith. All parties move for summary judgment in their favor. The actions are for a declaratory judgment declaring that Chapter 257 of the Laws of 1963, the enabling act for the New York City Commercial Rent or Occupancy Tax, and Local Law No. 38 for 1963, the local law imposing the tax, are void, unconstitutional and ineffectual.
Chapter 257 of the Laws of 1963 enabled any city having a population of 1,000,000 or more to impose and collect taxes on rent or occupancy. Pursuant to this statute, the City of New York enacted Local Law No. 38 for the year 1963, imposing a tax on use or occupancy. This law provides that every tenant of taxable premises is required after June 1, 1963, to pay a tax of 2 1/2 per cent of his base rent where his base rent is not in excess of $2,500 per year, or 5 per cent of his base rent where his base rent is in excess of $2,500 per year (Chap. 46, Title L, § L46-2.0[a], Admin. Code). Taxable premises are defined as:
'Any premises in the city occupied, used, or intended to be occupied or used for the purpose of carrying on or exercising any trade, business, profession, vocation or commercial activity, including any premises so used even though it is used solely for the purpose of renting, or granting the rights to occupy or use, the same premises in whole or in part to tenants; except premises within the area leased by the City of New York to the New York World's Fair 1964-1965 Corporation pursuant to chapter four hundred twenty-eight of the laws of nineteen hundred sixty, as amended during the period of such lease.' (Chap. 46, Title L, § L46-1.0, subd. 5 of the Admin. Code.)
The plaintiff contends that the tax is unconstitutional, based principally on the grounds that it:
1) imposes a real estate tax which exceeds the limit set forth in Article 8, section 10, of the New York State Constitution;
2) imposes an ad valorem tax in violation of Article 16, section 3, of the New York State Constitution;
3) violates the 'Due Process' and 'Equal Protection' clauses of the 14th amendment of the Constitution of the United States.
(Defiance Milk Products Co. v. Du Mond, 309 N.Y. 537, 540-541, 132 N.E.2d 829, 830; Matter of Hotel Ass'n of New York City v. Weaver, 3 N.Y.2d 206, 216, 165 N.Y.S.2d 17, 25, 144 N.E.2d 14, 19.)
The plaintiff's arguments can best be considered in the order in which they are raised.
Article 8, section 10, of the State Constitution provides that the amount to be raised by tax on real estate by the City of New York shall not exceed an amount equal to 2 1/2% of the average full valuation of taxable real estate of the city. The plaintiff contends that the tax herein is one imposed on real estate, and, when added to the tax already imposed on assessed valuation, the amount thus raised would exceed the constitutional limitation. The Commercial Rent or Occupancy Tax, as heretofore stated, is imposed on a tenant of a taxable premise according to his base rent for the tax year. The ordinance defines 'tenant' as anyone who pays rent for premises as a lessee, sublessee, licensee or concessionaire (Chap. 46, Title L, § L46-1.0Admin. Code). The issue is whether such tax can be construed as constituting a tax on real estate within the meaning of the article. I find that they do not. Leaseholds are not considered to be real property under the Real Property Tax Law, § 102(12). This question was fully discussed by the Court of Appeals in the Matter of Fort Hamilton Manor, Inc. v. Boyland, 4 N.Y.2d 192, at page 197, 173 N.Y.S.2d 560, at page 563, 149 N.E.2d 856, at page 858, where it was unequivocally held that a leasehold interest constituted personal property. Judge Van Voorhis, writing for a unanimous court, stated:
'Under a long line of New York decisions, the interest of a tenant of realty under a real estate lease is not realty but is a chattel real which is personal property (citations). The most recent expression of this court upon the point is in [Matter of] Grumman Aircraft Eng. Corp. v. Board of Assessors, 2 N.Y.2d 500, 507, 161 N.Y.S.2d 393 , where it was said: 'It is significant to note that nowhere in the Tax Law has the Legislature characterized a leasehold as taxable real property. Such omission is understandable, as a lease for years is deemed personalty (citations).''
Plaintiff's contention that the City treats leases as real property is without merit. The definition relied on is only for the purposes of assessable improvements (Chap. 12, Title A, § 291-1.0, Admin.Code), and "assessable improvement' means any public betterment involving either a physical improvement or the acquisition of real property for a physical improvement * * *' (Chap. 12, Title A, § 291-1.0 Admin.Code.) An assessable improvement is merely a levy for local improvements and not a tax (see Knickerbocker Village, Inc. v. Reid, 281 N.Y. 861, 24 N.E.2d 500, and Cooper Union, etc. v. City of New York, 272 App.Div. 438, 71 N.Y.S.2d 204, affd. 298 N.Y. 578, 81 N.E.2d 108). The definition of real property contained in section 981-1.0(12) of Chapter 42, Title A, of the Administrative Code in no way sustains the plaintiff's position. It is clear that the tax in question does not constitute a tax on real estate, and therefore does not violate the provisions of Article 8, section 10, of the State Constitution.
The second point raised is that the tax violates Article 16, section 3, of the State Constitution in that it is an ad valorem tax on intangible personal property. This section is concerned with 'moneys, credits, securities and other intangible personal property * * *'. This contention is without merit, as this section deals with a particular kind of intangible personal property not applicable here. The same rules apply to the construction of a Constitution as to that of statute law (Matter of Wendell v. Lavin, 246 N.Y. 115, 123, 158 N.E. 42, 44). Under the rule of ejusdem generis, where 'a statute enumerates several classes of persons or things, and immediately following and classed with such enumeration the clause embraces 'other' persons or things, the word 'other' will generally be read as 'other such like,' * * *' (McKinney's Consol. Laws of N. Y., Book 1, Statutes, § 239; Matter of Bowen v. Allen, 17 A.D.2d 12, 230 N.Y.S.2d 578). The intangible personal property referred to must therefore be construed as meaning intangibles similar to moneys, credits and securities. The rule of ejusdem generis, however, is a rule of construction, which must yield to the Legislature's evident purpose in enacting statutes and should be construed to carry out the objects sought to be accomplished by them (Blatnicky v. Ciancimino, 1 A.D.2d 383, 151 N.Y.S.2d 267, affd. 2 N.Y.2d 943, 162 N.Y.S.2d 38, 142 N.E.2d 211). On this point the intent of the constitutional convention was clearly set forth by Senator Saxe, who, as Chairman of the Committee proposing this provision, stated: '* * * we can reap, maintain, conserve and reap a further benefit from assuring to people of other states that they can keep their money and their securities in the State of New York, and until they employ them in business in the State of New York they are not going to be subjected to taxation merely by sending it here and leaving it here * * * and that is the underlying purpose of Section 3; that is, at least of the first sentence.' (N. Y. State Constitutional Convention, 1938, Revised Record, Vol. II, p. 1113.) Under both the rule of ejusdem generis and the intent of the constitutional convention, the personal property taxed here does not fall into the category of 'moneys, credits, securities and other intangible personal property' as set forth in Section 3 of Article 16. In any event the tax is neither an ad valorem tax nor an excise tax levied solely because of ownership or possession. A tax on a tenant based on the rent paid by him is not a tax ...
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