Opinion
No. 508432/2016.
04-12-2017
In the Matter of the Application of 37 REALTY CORP., Petitioners, For a Judgment under Article 78 of the Civil Practice Law and Rules and a Declaratory Judgment v. NEW YORK CITY DEPARTMENT OF FINANCE, Jacques Jiha in his capacity as Commissioner of Finance of the City of New York, and the City of New York, Respondents.
Scott Goldberg, Esq., Goldberg & Bokor, LLP, Cedarhurst, Zachary W. Carter, Esq., Corporation Counsel, Jacques Jiha, Commissioner of Finance, New York, Attorneys for Petitioner.
Scott Goldberg, Esq., Goldberg & Bokor, LLP, Cedarhurst, Zachary W. Carter, Esq., Corporation Counsel, Jacques Jiha, Commissioner of Finance, New York, Attorneys for Petitioner.
Recitation, as required by CPLR 2219(a), of the papers considered in the review of this motion:
| Papers | Numbered |
|---|---|
| Pet. Notice of Petition & Verified Petition | 1–2 |
| Pet. Memorandum of Law | 3 |
| Res. Notice of Cross–Motion & Annexed Affirmation | 4–5 |
| Res. Memorandum of Law | 6 |
| Pet. Affirmation in Opposition to Cross–Motion | 7 |
| Res. Affirmation in Reply | 8 |
Upon the foregoing cited papers and after oral argument, the decision and order on petitioner's petition and respondents' cross-motion is as follows:
I. Introduction
In this Article 78 proceeding, petitioner seeks to have all property taxes and interest for fiscal years 2009 and 2010 (for the period July 1, 2008 through May 10, 2010) canceled and fully refunded, and a declaration that respondent New York City Department of Finance (DOF) is collaterally estopped from asserting any right to retain sums already paid, or in the alternative, canceling all interest or interest assessed retroactively from May 10, 2010 through January 20, 2016. Respondents seek dismissal pursuant to CPLR 3211(a)(1) and (7), on the grounds of documentary evidence and failure to state a cause of action.
II. Findings of Fact
Petitioner owns a parcel of vacant land (subject property) which was carved out of Block 5348, Lot 9, and conveyed to petitioner on or about November 5, 2004, from the New York City Economic Development Corporation. In compliance with the contract for the sale of the subject property and prior to the closing, petitioner applied for a tentative lot number and the subject property was designated tentative Lot 12. However, the deed recorded on the Automated City Register Information System (ACRIS) on December 1, 2004, identified the lot as "part of Lot 9." There is no recording of tentative Lot 12. Petitioner never filed a request for assignment of a permanent tax lot number or an owner's registration card.
Petitioner also owns the adjacent property located at 1427 38th Street, Brooklyn, Block 5348, Lot 67 (adjacent property). Pursuant to a 1999 agreement with the New York State Industrial Development Agency, at the time of the sale of the subject property, petitioner was making payments in lieu of real estate taxes on the adjacent property. Petitioner alleged it believed the taxes on the subject property were being paid under the adjacent property from 2004 through 2007. However, no documentary evidence was proffered to substantiate this allegation, and the taxes for this period are not at issue in this proceeding.
On or about May 30, 2007, DOF apportioned Lot 9 and re-designated the subject property Lot 11. The "Historic Alteration Books for Block: 5348" show that on May 30, 2007, Block 5348, Lot 9 was altered and new lot numbers 7, 11, 15, and 17 were created (petitioner's exhibit D). The remarks for this entry include the deed filed on December 1, 2004, under CRFN 2004000741746. The "apportionment application," dated May 30, 2007, identified the second grantee as 37 St. Realty Corp., located at 1430 37th Street, Brooklyn, N.Y. 11218, and referenced the deed filed on December 1, 2004, under CRFN 2004000741746 (respondent's exhibit D).
Thereafter, taxes were assessed, petitioner failed to pay, and a lien resulted for unpaid taxes for the period from July 1, 2008 through May 10, 2010, inclusive of interest. Petitioner did not receive contemporaneous notice of the apportionment and re-designation of the lot, assessment, or tax bills, and did not pay taxes for fiscal years 2009–2010. The quarterly statements of account, the notices of property value, and the tentative and final assessment rolls for this period identified the property address only as "37 Street," Block 5348, Lot 11. These documents did not bear an owner's name and/or indicated the owner's name as "NOT ON FILE," and there was no mailing address and/or the mailing address was indicated as "BAD LOCATION ADDRESS."
On or about May 10, 2010, DOF sold the lien to NYCTL 2010–A Trust (Trust). On May 6, 2011, the Trust commenced a tax lien foreclosure action in Supreme Court, Kings County, under index number 10352/2011. Petitioner avers its first notice that DOF re-designated the subject property as Lot 11 was service of the summons and complaint in the 2011 tax lien foreclosure action (petitioner's exhibit N).
The affidavit of Tzvi Goldstein, Vice President of 37 St. Realty Corp., here alleges in early 2012, petitioner began receiving tax bills for Lot 11 (petitioner's exhibit N). Believing this was an error, petitioner did not pay these bills and another lien resulted. On May 8, 2012, after receiving the 30–day notice for the 2012 tax lien, Marty Herskowitz, a representative for petitioner, went to DOF's Manhattan Business Center and allegedly spoke with a Ms. Blocker. Petitioner alleged Ms. Blocker confirmed there was a "mix-up" and petitioner was being billed for the new Hatzolah garage on the corner of 37th Street and 14th Avenue, and that she would submit a copy of petitioner's 2004 Deed to Register to have petitioner's name removed from Lot 11. Thereafter, petitioner continued to receive tax bills for Lot 11, and at an unspecified future point in time, petitioner paid the 2012 lien.
On November 1, 2012, upon the default of all defendants in the 2011 tax lien foreclosure action, Justice Jack M. Battaglia denied with leave to renew the plaintiffs' ex parte application for an order granting default judgment and an order of reference. Justice Battaglia reasoned, in relevant part,
Plaintiffs fail to submit any evidence that defendant 37 St. Realty Corp. is the owner of the subject property. The schedule attached to Tax Lien Certificate No. 3A, Brooklyn, August 5, 2010, shows no "Owner" for the subject property; and the Indenture dated November 5, 2004 between defendant New York City Economic Development Corporation and defendant 37 St. Realty Corp. relates to Block 5348, part of Lot 9, and not Block 5348, Lot 11.
Subsequently, plaintiffs in the foreclosure action made a renewed application for an order of reference. On March 17, 2015, the order was granted by Justice Ellen M. Spodek upon default of all defendants in the action.
Petitioner appeared in this 2011 tax lien foreclosure action when plaintiffs moved for a judgment of foreclosure and sale. Petitioner opposed plaintiffs' motion and cross-moved to vacate Justice Spodek's order, the August 8, 2015 referee's report, the Notice of Pendency, and dismiss the foreclosure action pursuant to CPLR 3215, and on the grounds that plaintiff violated 37 St. Realty Corp.'s due process rights. In that action, Tzvi Goldstein, petitioner's Vice President, submitted the affidavit attached here as petitioner's exhibit N, dated November 25, 2015, previously discussed above.
On January 20, 2016, plaintiffs' motion for a judgment of foreclosure and sale and defendant's cross-motion were withdrawn pursuant to a stipulation that required the City and DOF to void and cancel the assignment of the 2011 tax lien. The stipulation also provided, "... the Action shall be discontinued and the Notice of Pendency of the Action shall be cancelled and that a discharge of the tax lien, and/or any other document shall be recorded on the real property tax records to cancel the tax lien of record, ... [emphasis added]." Further, the parties agreed that the stipulation, "does not, in any way, affect the validity of the Delinquent Taxes, ... bar or preclude future collection, enforcement and assignment of the Delinquent Taxes ..., nor does it preclude 37 St. Realty Corp. from challenging the Delinquent Taxes and/or interest assessed upon said taxes ..."
In contravention of the stipulation, on February 10, 2016, DOF served petitioner a 90–Day Notice of Intention to Sell Tax Liens regarding the taxes from July 1, 2008 through May 10, 2010. On February 19, 2016, petitioner received a quarterly tax bill showing an outstanding balance of $23,366.89, representing the taxes owed for fiscal years 2009 and 2010, plus interest, and retroactive interest to May 9, 2010. Thereafter, petitioner allegedly received a 60–day notice and a 30–day notice of a tax lien sale. Between April 18, 2016 and May 9, 2016, petitioner's attorney communicated with DOF in an attempt to cancel the sale or resolve the lien. Failing such, petitioner alleges on May 9, 2016, it paid all of the taxes, including the retroactive interest, to avoid a tax lien sale.
Petitioner now seeks to cancel the taxes for fiscal years 2009 and 2010, a full or partial refund, or a refund of the retroactive interest on the grounds that its due process rights were violated because it was not notified of the May 2007 apportionment, re-designation and assessment of Lot 11, and it did not receive a tax bill until February 19, 2016. Respondents assert that the petition should be dismissed because the failure to receive tax bills does not implicate due process rights.
III. Discussion
In an Article 78 proceeding, the court must grant deference to an agency determination, unless it "... was made in violation of lawful procedure, was affected by an error of law or was arbitrary and capricious or an abuse of discretion, including abuse of discretion as to the measure or mode of penalty or discipline imposed" ( CPLR 7803[3] ; Matter of Pell v. Board of Educ. of Union Free School Dist. No. 1 of Towns of Scarsdale & Mamaroneck, Westchester County, 34 N.Y.2d 222 [1974] ). In determining whether an agency has violated lawful procedures, the Court must consider the statutes, rules and regulations governing the particular agency and its area of regulatory competence (Vincent C. Alexander, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C7803:1). If the reviewing court finds that a determination is "supported by facts or reasonable inferences that can be drawn from the record and [that it] has a rational basis in the law, it must be confirmed" (Milea Associates v. New York City Dep't of Fin., 2011 N.Y. Misc. LEXIS 7301 [Sup Ct, Kings County 2011], citing American Tel. & Tel. Co. v. State Tax Com., 61 N.Y.2d 393, 400 [1984] ).
DOF is empowered to assess and tax real property within the City of New York (New York City Charter § 1504[1] ). The Administrative Code of the City of New York charges the commissioner of finance (the Commissioner) generally with the duty and responsibility of assessing all real property subject to taxation within the city (§ 11–201). It requires the Commissioner to appoint a surveyor who shall make the necessary surveys and corrections of the block or ward maps, and make all new tax maps which may be required (§ 11–202). New tax maps must be certified by DOF and filed in its main office within thirty days (§ 11–203 [e] ).
DOF is required to notify the property owner of information related to the estimate of assessed valuation (§ 11–207.1). Specifically, at least thirty days prior to the final date for filing any appeal of an estimate of assessed valuation, DOF must inform the property owner of the web address and how to access additional information on the website of the department regarding valuation of the subject real property, including the factors used by the department to determine the market value of such real property (§ 11–207.1 [b] ). If the commissioner of finance elects to apportion any assessment, the Administrative Code requires the commissioner, within five days, to cause written notice of the new assessments to be mailed to the owners of record of the real estate so assessed at their last known residence or business address, and an affidavit of the mailing of such notice to be filed in the main office of the department of finance (§ 11–214[a] ). Consequently, it is well-settled that assessment and collection of taxes without adequate notice to the owner thereof is taking property without due process ( Douglas v. Board of Sup'rs of Westchester County, 172 N.Y. 309, 314 [1902] ["the assessment and collection of a tax without adequate notice to the owner is taking property without due process of law"]; cf F.W. Eversley & Co., Inc. v. Finance Adm'r of City of New York, 88 Misc.2d 340, 342 [Sup Ct, New York County 1975], see Kenford v. Legislature of Erie, 45 A.D.2d 210 [4th Dept 1974] ).
In 2007, under statutory authority, DOF apportioned Lot 9, re-designated it Lot 11, assessed the property and levied the taxes (Administrative Code §§ 11–201, 11–202). DOF did not refute petitioner's allegation that its first notice of the 2007 apportionment and re-designation of Lot 9 was by service of the summons and complaint in the 2011 tax lien foreclosure action. The documentation provided evinces that DOF was aware of the name of the rightful owner, the owner's address, and the 2004 deed recording when the apportionment application and Historic Alteration Books were completed. Further, DOF did not explain why the quarterly statements of account, the notices of property value, and the tentative and final assessment rolls for this period failed to identify the proper owner and address, or why the first ACRIS recording of Lot 11 was the 2010 Tax Lien Sale Certificate. Instead, DOF argued it was petitioner's obligation to ensure the taxes were paid (Milea Associates v. New York City Dep't of Fin., 2011 N.Y. Misc. LEXIS 7301 [Sup Ct, Kings County 2011] citing see M.S.H. Realty Corp. v. City of New York, 188 Misc. 1039, 1041–1042 [1947] ).
Similar to the property owners in Milea Associates and Matter of F.W. Eversley & Co., plaintiff alleges it never had the opportunity to challenge the assessments. If the inquiry ended here, the Court might conclude DOF failed to establish it followed procedures under the Administrative Code which afford petitioner the opportunity to challenge the assessment ( Douglas v. Board of Sup'rs of Westchester County, 172 N.Y. 309, 314 [1902] ; see Kenford v. Legislature of Erie, 45 A.D.2d 210 [4th Dept 1974] ). However, this case has a more complex history.
Petitioner conceded it had a tax liability (petition, ¶ 15; exhibit N, ¶¶ 3, 15, 32, 34) and alleged it believed it was paying taxes on the subject property. The Court finds petitioner's contention that it believed the taxes on the subject property were being paid under the adjacent property unavailing and unsubstantiated.
In 2012, petitioner admitted it began receiving tax bills for the subject property, which petitioner eventually paid. Assuming petitioner had no contemporaneous notice that Lot 11 referred to the subject property or that taxes had been assessed for fiscal years 2009–2010, certainly by 2012, petitioner had actual notice that taxes were due on the property. Further, in 2015, petitioner indicated it "... would be more than happy to pay $13,739.50 [the amount of the tax lien sold on May 12, 2010] ..., if the Court determines that said amount is appropriate" (petitioner's exhibit N, ¶ 3). Significantly, the Court also notes that at no time did petitioner challenge the assessed value. Rather, petitioner conceded it had a tax liability, paid the taxes beginning in 2012, and in 2015, offered to pay the amount assessed for 2009–2010, minus the interest. Accordingly, the Court finds that petitioner waived any challenge to assessment of the subject property.
Moreover, the 2004 deed recorded on ACRIS referenced Lot 9, as did the 2007 application for apportionment and the Historic Alteration Books for Block 5348. There is no allegation or proof by petitioner that these documents were not properly filed with DOF and unavailable for inspection. Therefore, as DOF asserted, it can be inferred that had petitioner reviewed the tax documentation for the property, petitioner would have discovered the apportionment and re-designation of the lot number, even absent a recording on ACRIS. In fact, it appears petitioner's attorney did just that (affirmation of petitioner's counsel at 6).
DOF also correctly noted that there is ample precedent establishing that the failure to receive a tax bill does not impair the validity or collectability of taxes (Milea Associates, 2011 N.Y. Misc. LEXIS 7301, citing Matter of F.W. Eversley & Co. v. Finance Admin. of City of NY, 88 Misc.2d 340, 342 [1975], affd 49 A.D.2d 733 [1975], affd. 40 N.Y.2d 863 [1976] ; see Matter of American Pen Corp. v. Tax Commn. of City of New York, 281 A.D.2d 249 [1st Dept 2001] ; Administrative Code § 11–309 [failure to mail notices or bills to a property owner does not affect the validity or collectability of an assessment, and no claim shall exist against the City for any failure to mail notices or bills] ).
However, critical here, the parties entered into a stipulation that mandated, not only vacating assignment of the tax lien, but also "... that a discharge of the tax lien, and/or any other document shall be recorded on the real property tax records to cancel the tax lien of record." Stipulations are contracts (see CPLR 2104 ; see Kraker v. Roll, 100 A.D.2d 424, 436 [2d Dept 1984] ). Stipulations are to be construed according to the parties' intent, which is generally discernable from the four corners of the stipulation (see CPLR 2104 ; see Kraker v. Roll, 100 A.D.2d 424, 436 [2d Dept 1984] ; Wilson v. Poughkeepsie City School Dist., 147 AD3d 1112 [2d Dept 2017], citing River St. Realty Corp. v. N.R. Auto., Inc., 94 AD3d 848, 849 [2d Dept 2012], citing MHR Capital Partners LP v. Presstek, Inc., 12 NY3d 640, 645 [2009] ). "When parties set down their agreement in a clear, complete document," as here, the Court should enforce the stipulation according to its terms ( Wilson, 147 AD3d at 1112, citing see Vermont Teddy Bear Co. v. 538 Madison Realty Co., 1 NY3d 470, 475 [2004] ; Waterfront Joints, Inc. v. Tarrytown Boat Club, Inc., 119 AD3d 553, 554 [2d Dept 2014] ). The stipulation should not be read "so as to render any term, phrase, or provision meaningless or superfluous" ( Wilson, 147 AD3d at 1112, citing Givati v. Air Techniques, Inc., 104 AD3d 644, 645 [2d Dept 2013], citing, inter alia, God's Battalion of Prayer Pentecostal Church, Inc. v. Miele Assoc., LLP, 6 NY3d 371, 374 [2006] ).
Accordingly, the Court finds DOF agreed to cancel the lien of record. However, DOF failed to attach proof of compliance with this provision of the stipulation. Instead, on February 10, 2016, DOF sent petitioner a 90–day Notice of Intention to Sell Tax Liens. Although section 11–301 of the Administrative Code provides, "[a]ll taxes and all assessments ..., and the interest and charges thereon, which may be laid or may have heretofore been laid, upon any real estate now in the city, shall continue to be, until paid, a lien thereon," section 11–354 provides,
... whenever any tax, assessment ... that is made a lien subject ... [as here], or interest and penalties thereon, has been due and unpaid for a period of at least one year from the date on which the tax, assessment ... became a lien, ... the city, as owner of a tax lien, may maintain an action in the supreme court to foreclose such lien [emphasis added].
On these facts, the Court finds the February 10, 2016 Notice of Intention to Sell Tax Liens was issued prematurely for taxes from July 1, 2008 through May 10, 2010. Since DOF stipulated to vacate the tax lien on January 20, 2016, no subsequent lien for the subject taxes could have been due and unpaid for at least one year at the time DOF sent the 90–day notice (Administrative Code § 11–354). However, petitioner paid the lien in full on May 9, 2016, and may not obtain a refund for a tax assessment otherwise owed. Petitioner nevertheless claims it should not be required to pay the interest and retroactive interest on assessments.
While it is undisputed that DOF is empowered to collect "all ... assessments and arrears against real property and all other taxes, assessments and arrears payable to the city" (New York City Charter § 1504[1][b] ), the instant bill included interest and retroactive interest. DOF argued that the Administrative Code forbids the Commissioner from lowering the interest rate on property taxes, citing section 11–232 which provides, "the comptroller shall not reduce the rate of interest upon any taxes or assessments below the amount fixed by law." Relying on American Pen Corp. v. Tax Com'n of City of New York, petitioner argued that the taxes did not become due and payable until the February 2016 bill was received (see 281 A.D.2d 249 [1st Dept 2001] [holding that due to an error on the part of the City Register of Deeds, the properties were carried as tax exempt, and under such circumstances the back taxes did not become due and payable until the bill was presented] ). Although in this case, at no time was the property recorded as tax exempt in error, petitioner still states a claim entitling it to relief.
V. Conclusion
Until the aggregate amount of a tax lien is fully paid and discharged, the holder of the tax lien certificate is generally entitled to receive interest (§ 11–332[b] ). However, here, on January 20, 2016, DOF agreed by stipulation to "a discharge of the tax lien, ... and/or ... cancel the tax lien of record," thereby terminating its entitlement to receive interest. Therefore, on these facts, the back taxes billed for on February 19, 2016, did not become payable until the bill was presented to petitioner, and the period for imposing interest and penalties should be calculated from that date (see American Pen Corp., 281 A.D.2d at 250 ] ). Petitioner's actions contrariwise constitute an error of law. Accordingly, the petition is granted to the extent petitioner shall receive a refund in the amount of all interest, billed for and paid, for the period of July 1, 2008 through May 10, 2010, and continuing to February 19, 2016. Respondents' cross-motion is denied.
This constitutes the decision and order of the Court.