Trump-Equitable Fifth Ave. Co. v. Gliedman, TRUMP-EQUITABLE

• Decision Date: 14 December 1982
• Docket Number: TRUMP-EQUITABLE
• Citation: 457 N.Y.S.2d 466,57 N.Y.2d 588,443 N.E.2d 940
• Parties: , 443 N.E.2d 940 In the Matter ofFIFTH AVENUE COMPANY, Appellant, v. Anthony B. GLIEDMAN, Individually and as Commissioner of the Department of Housing Preservation and Development of the City of New York, Respondent.
• Court: New York Court of Appeals Court of Appeals

Page 466

457 N.Y.S.2d 466

57 N.Y.2d 588, 443 N.E.2d 940

In the Matter of TRUMP-EQUITABLE FIFTH AVENUE COMPANY, Appellant, v. Anthony B. GLIEDMAN, Individually and as Commissioner of the

Department of Housing Preservation and Development

of the City of New York, Respondent.

Court of Appeals of New York.

Dec. 14, 1982.

Milton S. Gould and Roy M. Cohn, New York City, for appellant.

Frederick A.O. Schwarz, Jr., Corp. Counsel, New York City (Edith I. Spivack and Rochelle M. Corson, New York City, of counsel), for respondent.

OPINION OF THE COURT

WACHTLER, Judge.

The Trump-Equitable Fifth Avenue Company (Trump), which seeks a partial tax exemption in this proceeding, is a joint venture which owns a parcel of real property located at 721-725 Fifth Avenue in Manhattan. Before Trump acquired the property, the site was improved with a 12-story structure used as a retail department store owned and occupied by Bonwit Teller & Company. Trump demolished the building and is in the process of replacing it with Trump Tower, a 59-story structure to consist of 18 floors of retail and commercial office space to be retained by Trump, and 38 residential floors housing 266 luxury condominium units. The condominium units are to be sold for a sum of $155 million in prices which range from $407,000 to $3,150,000.

Trump applied to the New York City Department of Housing Preservation and Development (HPD) for a partial tax exemption for the 38 residential floors pursuant to section 421 (now 421-a) ¹ of the Real Property Tax Law, subdivision 1 of which provided in part, as originally enacted: "To be eligible for exemption under this section such construction shall take place on vacant, predominantly vacant or under-utilized land, or on land improved with a non-conforming use". ² HPD denied Trump's application on the ground that "on the operative date, the site was [not] occupied by a functionally obsolete non-residential or residential building". The "functional obsolescence" standard has its source not in the legislation but in HPD Regulation No. 4 which requires that in order to be eligible for the exemption the subject property must have been vacant, predominantly vaca or under-utilized on October 1, 1971. The regulation defines under-utilized land as "land or space which was substantially under-utilized by virtue of the fact that * * * [i]t is occupied by functionally obsolete non-residential or residential buildings."

Special Term vacated respondent commissioner's denial of Trump's application as arbitrary and capricious and excess of his authority, essentially on the ground that the regulation requiring "functional obsolescence" was invalid. The court then determined that the subject parcel was "under-utilized" within the meaning of the statute as of October 1, 1971, and ordered respondent to grant Trump's application for the partial tax exemption.

The Appellate Division, 87 A.D.2d 12, 450 N.Y.S.2d 321, reversed the order of Special Term, reinstated respondent's determination, and dismissed the petition. The court found it unnecessary to consider whether respondent's definition of under-utilization in terms of "functional obsolescence" constituted an unwarranted extension of the meaning of the statute in light of its own determination that the subject property was, as of October 1, 1971, not under-utilized "in any ordinary understanding of the term" or "as a practical matter". (87 A.D.2d at p. 16, 450 N.Y.S.2d 321.) In our view the Appellate Division erred in not vacating an agency determination expressly based upon an administrative regulation clearly inconsistent with the plain words of the governing statute. We therefore reverse.

A fundamental principle of administrative law long accepted by this court limits judicial review of an administrative determination solely to the grounds invoked by the agency, and if those grounds are insufficient or improper, the court is powerless to sanction the determination by substituting what it deems a more appropriate or proper basis (Matter of Montauk Improvement v. Proccacino, 41 N.Y.2d 913, 394 N.Y.S.2d 619, 363 N.E.2d 344; Matter of Barry v. O'Connell, 303 N.Y. 46, 100 N.E.2d 127; see, also, Securities Comm. v. Chenery Corp., 332 U.S. 194, 67 S.Ct. 1575, 91 L.Ed. 1995).

In denying Trump's exemption application HPD did not rely on the statutory concept of under-utilization except insofar as that concept was redefined by the functional obsolescence standard embodied in its own regulations. The Appellate Division acknowledged that respondent's determination was premised on Trump's failure to establish that the subject property was occupied by a functionally obsolete structure on the operative date. That court determined, however, that it was unnecessary to consid whether the functional obsolescence requirement was inconsistent with the statutory concept of under-utilization, for it found that the property was not under-utilized "in any ordinary understanding of the term" and that the agency determination therefore had a rational basis and was not subject to vacatur. Thus, in failing to review HPD's denial of the partial tax exemption on the specific ground invoked by the agency and in substituting its own independent rationalization for upholding the agency's determination, the Appellate Division exceeded the appropriate boundary of judicial review in this area (Matter of Montauk Improvement v. Proccacino, supra; Matter of Barry v. O'Connell, supra; Securities Comm. v. Chenery Corp., supra).

In reviewing the legality of the basis upon which HPD acted we note that section 421-a requires only that the subject land be "under-utilized" in order to qualify for the partial tax exemption. HPD Regulation No. 4, however, defines "under-utilized land" as property "substantially under-utilized by virtue of the fact that * * * [i]t is occupied by functionally obsolete non-residential or residential buildings". In our view, the regulation substitutes requirements as preconditions to obtaining the exemption not found in this statute itself. Section 421-a does not require "substantial" under-utilization, nor does the provision imply that only one specific type of under-utilization may qualify property for the exemption. In addition the statute focuses on under-utilization of the land; the regulation focuses on obsolescence of the buildings. Had the Legislature intended to limit the availability of the exemption solely to property under-utilized by virtue of the presence of functionally obsolete structures, it could have done so through appropriately worded legislation. By requiring functional obsolescence of the building then, the regulation improperly limits the availability of the exemption to one category of under-utilized land in direct contravention of the plain words of the statute. ³

It is well established that in exercising its rule-making authority an administrative agency cannot extend the meaning of the statutory language to apply to situations not intended to be embraced within the statute (Matter of Jones v. Berman, 37 N.Y.2d 42, 371 N.Y.S.2d 422, 332 N.E.2d 303). Nor may an agency promulgate a rule out of harmony with or inconsistent with the plain meaning of the statutory language (Finger Lakes Racing Ass'n v. New York State Racing & Wagering Bd., 45 N.Y.2d 471, 410 N.Y.S.2d 268, 382 N.E.2d 1131; Matter of Harbolic v. Berger, 43 N.Y.2d 102, 400 N.Y.S.2d 780, 371 N.E.2d 499). Applying these settled principles, we conclude that by substituting a requirement not specified in section 421-a, the definition of "under-utilized land" found in HPD Regulation No. 4 is invalid.

Application of principles of statutory construction supports our conclusion. Under the maxim noscitur a sociis, the meaning of a doubtful word may be ascertained by reference to the meaning of words associated with it. This maxim expresses the rule of construction that the words used in a statute are construed in connection with, and their meaning is ascertained with reference to, the words and phrases with which they are associated (McKinney's Cons. Laws of N.Y., Book 1, Statutes, § 239, subd. a). Applying this principle here, the meaning of the statutory term "under-utilized" is determined by reference to the two preceding terms "vacant" and "predominantly vacant"...