Xerox Corp. v. Town of Webster

• Decision Date: 22 April 1986
• Citation: 131 Misc.2d 817,502 N.Y.S.2d 379
• Parties: , 32 Ed. Law Rep. 760 XEROX CORPORATION, Plaintiff, v. The TOWN OF WEBSTER, New York, Margaret Kuhn as Assessor of the Town of Webster, New York, the Village of Webster, New York, Delores Harloff, as Assessor of the Village of Webster, New York, Monroe County, New York, and Webster Central School District, Defendants.
• Court: New York Supreme Court

Page 379

502 N.Y.S.2d 379

131 Misc.2d 817, 32 Ed. Law Rep. 760

XEROX CORPORATION, Plaintiff, v. The TOWN OF WEBSTER, New York, Margaret Kuhn as Assessor of the Town of Webster, New York, the Village of Webster, New York, Delores Harloff, as Assessor of the Village of Webster, New York, Monroe County, New York, and Webster Central School District, Defendants.

Supreme Court, Monroe County.

April 22, 1986.

Davidson, Fink, Cook & Gates, Rochester (Douglas S. Gates and Anthony J. Adams Jr., of counsel), for plaintiff.

Greisberger, Zicari, McConville, Cooman, Morin & Welch, P.C., Rochester (Dennis T. Barrett and Richard A. Dollinger, of counsel), for defendant, Webster Central School Dist.

Levy, Feldman & Licata, P.C., Rochester (Robert A. Feldman, of counsel), for defendant, Town of Webster.

County of Monroe Law Dept., Rochester (Raymond L. Lum, of counsel), for defendant, Monroe County.

DAVID O. BOEHM, Justice.

This motion presents the novel question of whether one municipality, the Town of Webster, is obligated to indemnify another municipality, Webster Central School District, for a loss in school tax revenue resulting from the town's adoption of homestead dual tax rates (Real Property Tax Law, Article 19), and the certification of such rates to the school district.

The motion follows a previous order by this court, dated October 17, 1985, ruling that use of dual tax rates by the defendant, Webster Central School District (School District), against properties located within the defendant, Town of Webster (Town), was unconstitutional as applied to the plaintiff, Xerox Corporation (Xerox), and enjoining the defendants from attempting to collect from Xerox school taxes in excess of the amount that would be payable by Xerox if a uniform rate of taxation were applied. As a result, the School District was required to reduce the 1985-1986 school tax levy imposed on Xerox by approximately $892,000. Now the School District moves for summary judgment on its cross claim for indemnification against the Town to recover these lost revenues.

On April 22, 1985 the Webster Town Board passed Local Law No. 1 (1985), which adopted a dual tax rate structure under the Homestead Act as it then existed (Real Property Tax Law, Article 19). Thereafter, on May 10, 1985, Xerox commenced this action to challenge the constitutionality of the local law.

On June 6, 1985, six weeks after the enactment of Local Law No. 1, the Court of Appeals rendered its decision in Foss v. City of Rochester, 65 N.Y.2d 247, 491 N.Y.S.2d 128, 480 N.E.2d 717 (Foss I ), which held in part that the use by the County of Monroe of the homestead dual rate tax structure adopted by local law of the City of Rochester was unconstitutional because it resulted in higher county taxes for non-homestead properties within the City compared with the county tax for similar non-homestead properties outside the City. Inasmuch as no rational demographic basis was demonstrated for imposing demonstrably different tax burdens on similar properties in different geographic locations, the court concluded that the statute as applied resulted in invidious discrimination violating the equal protection clauses of the Federal and State constitutions.

In response to the obvious dilemma created by the Foss I decision to taxing units which encompassed a number of separate municipalities, such as counties and school districts, Real Property Tax Law Article 19A was enacted on August 2, 1985 and made retroactive to June 6, 1985, the date Foss I was decided. The effect of this new law was to replace the traditional system of direct levies by each county and school district against individual properties within a municipality. Under Article 19A, the county or district determined the proportion of its tax to be collected from each municipality, and the municipality had the responsibility of arriving at the amount of school or county tax to be levied upon each property within its boundaries and making such levies directly.

Following the enactment of Article 19A, Xerox amended its complaint in this action to test the constitutionality of the local law in light of the new legislation. It then moved for partial summary judgment, seeking a declaration that the use of dual tax rates by the School District against properties located within the Town was unconstitutional as applied, and an injunction prohibiting the School District and Town from collecting any taxes in excess of the amount payable under uniform rates. At the same time the Town moved to dismiss the School District's cross-claims against it for contribution and indemnification if Xerox prevailed, and the School District cross-moved for summary judgment on its cross-claims.

Shortly before the return date of these motions, Article 19A was held unconstitutional in Monroe County Supreme Court at Special Term (Foss v. City of Rochester, decided September 30, 1985, [J. Conway] ) (Foss II ). Thereafter, on the October 11, 1985 return date, this court granted Xerox's motion for declaratory and injunctive relief. At that time the Town and School District agreed to adjourn their motions regarding the School District's cross-claims, pending a decision by the Court of Appeals in Foss II.

On November 20, 1985, the Court of Appeals affirmed Special Term's decision in Foss II (Foss v. City of Rochester, 66 N.Y.2d 872, 498 N.Y.S.2d 758, 489 N.E.2d 727), noting that the constitutional deficiency in Foss I had not been cured by the legislation.

The School District now renews its prior motion for summary judgment on its cross-claim for indemnification against the Town wherein it seeks to recover from the Town the amount of tax revenue it lost as a result of the judgment granted Xerox. It is undisputed that the lost revenues of the School District resulted from the Town's discretionary actions in adopting Local Law No. 1 and in certifying its base proportions to the School District.

The right of indemnity springs from a contract, express or implied, in which full reimbursement is sought (McFall v. Compagnie Maritime Belge [Lloyd Royal], S.A., 304 N.Y. 314, 328, 107 N.E.2d 463). Implied indemnification, the relief sought here, has a long history in common law and operates to prevent unjust enrichment (McDermott v. City of New York, 50 N.Y.2d 211, 216-217, 428 N.Y.S.2d 643, 406 N.E.2d 460). It rests upon the principle that everyone is responsible for the consequences of his own acts, and if another person is compelled to pay damages which ought to have been paid by the wrongdoer, they may be recovered from him (Dunn v. Uvalde Asphalt Paving Co., 175 N.Y. 214, 217-218, 67 N.E. 439; Oceanic S.N. Co. v. Compania Transatlantica Espanola, 134 N.Y. 461, 467-468, 31 N.E. 987). A valid claim for implied indemnification may exist in favor of one municipality against another (see Twitchell v. Town of Pittsford, 106 A.D.2d 903, 905, 483 N.Y.S.2d 524, affd. 66 N.Y.2d 824), 498 N.Y.S.2d 363, 489 N.E.2d 250). However, for the reasons which follow, such a claim may not be upheld in this case.

Real Property Tax Law Section 305 and Article 19 authorized local assessing units to elect to institutionalize a de facto dual system of real property taxation, dividing all real property subject to tax into two classes, homestead properties, three or fewer families, and non-homestead, all other properties (Foss v. City of Rochester, 65 N.Y.2d, supra, p. 255, 491 N.Y.S.2d 128, 480 N.E.2d 717). Pursuant to section 1302 of the Real Property Tax Law, a school district is required to base the tax it levies upon the assessment rolls of the municipalities within its boundaries; it is without power to question the assessments or the method of arriving at the assessed valuation (Matter of District Three IUE Housing Development Fund Corp. v. Buckley, 74 Misc.2d 1078, 347 N.Y.S.2d 125; see also, Foss v. City of Rochester, 65 N.Y.2d, supra, p. 259, 491 N.Y.S.2d 128, 480 N.E.2d 717).

Since the civil divisions of the State, its counties, cities, towns and villages, possess no independent sovereignty, the waiver by the State of its sovereign immunity (Court of Claims Act, § 8) rendered its civil divisions answerable for their own wrongs (Becker v. City of New York, 2 N.Y.2d 226, 159 N.Y.S.2d 174, 140 N.E.2d 262; Bernardine v. City of New York, 294 N.Y. 361, 62 N.E.2d 604). This waiver of immunity, however, is not absolute (see generally, 2C, Pt. 1, Warren's Negligence [3d ed.], Mun. Corps., 2.03 [3] ). Generally, no liability attaches for the performance of governmental functions involving the exercise of judgment and discretion (Tango v. Tulevech, 61 N.Y.2d 34, 40-41, 471 N.Y.S.2d 73, 459 N.E.2d 182; Garrett v. Holiday Inns, 58 N.Y.2d 253, 263, 460 N.Y.S.2d 774, 447 N.E.2d 717; Weiss v. Fote, 7 N.Y.2d 579, 200...