Opinion
Index No. 727212/2022
06-09-2023
In the Matter of the Application of 9313 Rockaway Beach, LLC, Petitioner, For a Judgment Pursuant to CPLR Article 78 of The Civil Practice Law and Rules and/or For a Declaratory Judgment, v. Preston Niblack, in his capacity as THE COMMISSIONER OF FINANCE OF THE CITY OF NEW YORK CITY, and CITY OF NEW YORK, Respondents.
Petitioner was represented by Scott Goldberg of Goldberg & Bokor LLP. Respondent was represented by LaDonna Sharde Sanford of the New York City Law Department.
Unpublished Opinion
Petitioner was represented by Scott Goldberg of Goldberg & Bokor LLP.
Respondent was represented by LaDonna Sharde Sanford of the New York City Law Department.
Tracy Catapano-Fox, J.
The following papers numbered 1 to 11 were read on this petition to direct respondents to correct the Building Class and Tax Code for petitioner's property.
Papers
Numbered
Notice of Petition, Affirmation, Exhibits 1-4
Answer, Exhibits, Memorandum of Law 5-8
Reply, Exhibits 9-11
Upon the foregoing papers, it is ordered that this petition is determined as follows:
Petitioner's application to direct respondents to correct the Building Class and Tax Code for petitioner's property for the period of July 1, 2016 through June 30, 2023, and reduce the classification of the property's assessed value is granted, solely to the extent that respondents' determination is reversed and respondents are directed to hold an administrative hearing and permit evidence to be presented with regard to the misclassification of petitioner's property and issue a final written determination, and upon said determination, potentially recalculate the proper tax assessment for petitioner's property.
Petitioner argues that respondents misclassified its property and resulted in overcharging the taxes due for the above period of time. Petitioner alleges it is the owner of a vacant and unimproved residential land located at 90-13 Rockaway Beach Boulevard, Queens, New York. Petitioner argues that respondents erroneously classified the property as Building Class V1, a Tax Class 4 commercial property, rather than Building Class V0, a Tax Class 1 property. It argues that respondents' misclassification has caused it to be improperly assessed, is contrary to precedent, and has resulted in a substantial overcharge for real estate taxes. Petitioner presents trial level decisions where respondents entered into a stipulation of settlement to resolve the misclassification based upon a commercial overlay into a residential classification, and argues that respondents should do the same with petitioner.
Petitioner submits evidence that on December 6, 2021, it submitted a request to respondents to correct the clerical misclassification of its property. It further submits evidence that respondents issued a final administrative decision on September 2, 2022, which denied petitioner's request to correct the clerical error, finding that the property was a vacant lot and appropriately valued. Petitioner argues that it is not challenging the market value, but rather the tax assessment, because it is improperly based upon a commercial classification, rather than a proper residential classification with a Commercial Overlay, and it timely filed the Article 78 petition to declare respondents' determination as arbitrary and capricious.
Respondents oppose the petition and argue it should be dismissed. Respondents argue that petitioner improperly sought relief under Article 78, rather than filing an Article 7 proceeding for its claims, and argues petitioner failed to exhaust all administrative remedies. They further argue that even if the Article 78 petition is valid, it should be dismissed because the property is commercially zoned and correctly classified as a Tax Class 4 property. Respondents argue that the Article 78 petition is improper, as Article 7 is the near exclusive judicial remedy for reviewing real property tax assessment based on claims of excessive, unequal or unlawful assessment, and misclassified property. Respondents argue that petitioner is time barred from commencing an Article 7 petition, which must be commenced prior to October 25th of the year petitioner sought to challenge. They also argue that the petition should fail because petitioner did not exhaust all administrative resources for tax year 2022/2023, a prerequisite to filing an Article 7 petition.
Respondents also argue that the petition should fail because petitioner improperly sought to use a process meant solely for ministerial corrections to overturn a substantive tax assessment. They also argue that petitioner's reliance on case law is without merit, as the Second Department cases cited by petitioner involved Article 7 petitions.
In an Article 78 petition seeking judicial review of administrative action, the court may not substitute its judgment for that of the agency responsible for making the determination, but must decide only whether there is a rational basis for the agency determination, or whether the determination was arbitrary and capricious. (Matter of Weiss v. County of Nassau, 176 A.D.3d 1085, 1086 [2d Dept. 2019].) A decision is arbitrary and capricious when it is taken without sound basis in reason or regard to the facts, and "while judicial review must be meaningful, the courts may not substitute their judgment for that of the agency for it is not their role to weigh the desirability of any action or to choose among alternatives." (Matter of Dom Ben Realty Corp. v. New York City Loft Bd., 177 A.D.3d 731, 734 [2d Dept. 2019].)
Ordinarily, the proper method for challenging excessive or unlawful real property tax assessments is by the commencement of a tax certiorari proceeding pursuant to Article 7 of the Real Property Law. (Matter of Jonsher Realty Corp./Melba, Inc. v. Board of Assessors, 118 A.D.3d 787, 788 [2d Dept. 2014].) Such a proceeding is properly commenced after exhaustion of the administrative grievance remedies, and within 30 days after the filing of the final assessment roll. (Id.)
Petitioner demonstrated a valid claim under Article 78 to seek review and reclassification of tax years 2016-2017 through 2021-2022. Respondents' argument that Article 7 is the exclusive remedy for petitioner's relief is without merit, as the case law does permit such a proceeding under Article 78 as well as Article 7. While respondents characterize the Second Department decision in Matter of Better World Real Estate Group v. NY City Dept. of Finance (122 A.D.3d 27 [2d Dept. 2014]) as 'highly controversial', there is no question that it is a binding determination upon this trial court that permits tax classification issues to be retroactively corrected as a clerical error or error in description. (Id. at 36 ["Giving the petitioner the benefit of every favorable inference, the alleged error could have simply been the result of an error in reciting the number of units. Since such an error can be viewed as clerical in nature, the petition states a valid cause of action seeking the correction of the error pursuant to Administrative Code §11-206].) Contrary to respondents' characterization, it is noted that the Better World decision is cited several times in other Second Department cases without criticism.
Further, respondents' argument that the Second Department decision in Tricario v. County of Nassau (120 A.D.3d 658 [2d Dept. 2014]) requires dismissal of the petition is without merit, as the Court did not state that misclassification challenges can only be heard under Article 7, but stated 'In general, the proper method for challenging excessive or unlawful real property tax assessments is by the commencement of a tax certiorari proceeding pursuant to RPTL Article 7.' (Id. at 659.) It is noted that the Tricario Court did not specifically address or refute the findings in Better World, where the Court specifically held that real property assessment proceedings are remedial in nature and 'should be liberally construed to the end that the taxpayer's right to have his assessment reviewed should not be defeated by a technicality.' (Better World, 122 A.D.3d at 38.) Therefore, contrary to respondent's argument, the Court in Better World engaged in a fully developed analysis of the distinction between actions filed under Article 78 and Article 7 in a case almost identical to the present matter, and supports a finding that petitioner's request is clerical in error and could proceed under Article 78 rather than Article 7.
Petitioner further demonstrated that respondents' failure to consider and explain why the property should not be classified as Building Class V0, Tax Class 1 was arbitrary and capricious, and warrants an administrative hearing. Respondents' determination dated September 2, 2022, does not state it is a final determination, and merely states that upon review of petitioner's submission the original assessment remained unchanged. Respondents' determination failed to articulate a rational basis for its conclusion that the 'parcel is a vacant lot and appropriately valued' and therefore this Court finds the determination arbitrary and irrational, requiring an administrative hearing for a full and fair determination on this issue.
Based upon the above, petitioner's application to direct respondents to correct the Building Class and Tax Code for petitioner's property for the period of July 1, 2016 through June 30, 2023, and reduce the classification of the property's assessed value is granted, solely to the extent that respondents' determination is vacated as arbitrary and irrational, and respondents are directed to hold an administrative hearing to determine the correct classification of the property and explain why the property should not be classified as Building Class V0, Tax Class 1, and upon issuing a final determination with regard to the tax classification, to recalculate the assessed value of the property for the above time period.
This constitutes the decision and Order of the Court.