Opinion
No. 29.
Decided March 30, 2004.
Appeal, by permission of the Court of Appeals, from an order of the Appellate Division of the Supreme Court in the Second Judicial Department, entered September 16, 2002. The Appellate Division order, insofar as appealed from, modified so much of an order of the Supreme Court, Nassau County (Edward G. McCabe, J.), as, upon reargument, adhered to a prior order of that Supreme Court which, in a consolidated declaratory judgment action and CPLR article 78 proceedings, had directed that a trial be held with respect to the calculation of the damages sustained by plaintiff and petitioners as a result of the improper assessment of real property in noncountywide special districts, and denied defendants' cross motion in the action for summary judgment dismissing the complaint and respondents' motion to dismiss the proceedings. The modification consisted of deleting the provisions that adhered to the original determination directing that a trial be held with respect to the calculation of the damages sustained by plaintiff and petitioners as a result of the improper assessment of real property in noncountywide special districts, and adding provisions thereto granting (1) defendants' cross motion in the action for summary judgment dismissing the complaint, and (2) respondents' motion to dismiss the proceedings to the extent of precluding the payment of tax refunds.
New York Tel. Co. v. Nassau County, 297 A.D.2d 663, reversed.
Peter J. Mastaglio, for appellant New York Telephone Company.
Theodore F. Duver, for appellants New York Water Service Corp. and Long Island Water Corp.
Elizabeth Botwin, for respondents.
Chief Judge Kaye and Judges Ciparick, Rosenblatt, Graffeo, Read and Robert Smith concur.
The primary issue here is whether the Appellate Division abused its discretion when it held that, owing to the County's financial situation, certain utilities were not entitled to County tax refunds, even though the court found that they had been improperly assessed a tax. We reverse the order of the Appellate Division and remit for a hearing both on the amount of refund due and on any financial hardship the County would suffer as a result of requiring payment to the utilities.
Under article 18 of the Real Property Tax Law, Nassau County is a "special assessing unit" for real property taxation. The County's real property is divided into four classes: classes one and two include all residential property, class three includes utility property and class four includes commercial property.
Plaintiff New York Telephone Company (NYNEX) owns class three and class four property in Nassau County, which is subject to county, town, village, school district and countywide special district taxes. Some of this property is also located in countywide and non-countywide "special districts." As part of the 1997 tax assessment process, the County imposed special ad valorem levies on non-countywide special districts — including property owned by NYNEX. The County assessed the real property in the non-countywide special districts using the same method as countywide assessments under RPTL article 18.
New York Telephone Company is now known as Verizon New York, Inc., a wholly owned subsidiary of NYNEX Corp., which is a wholly owned subsidiary of Verizon Communication. "County" as used herein includes the various defendant entities related to Nassau County.
A special district is a "county improvement district * * * established for the purpose of carrying on, performing or financing one or more improvements or services intended to benefit the health, welfare, safety or convenience of the inhabitants of such district or to benefit the real property within such a district, and in which real property is subject to special ad valorem levies or special assessments for the purposes for which such district was established" (RPTL 102 [16]).
In April 1997, NYNEX commenced an action seeking a declaration that this method of assessing real property in non-countywide special districts violated the RPTL, enjoining the County from assessing non-countywide property in this manner and demanding a tax overpayment refund. After joinder of issue, NYNEX moved for summary judgment on the issue of liability, and the County cross-moved for summary judgment dismissing the complaint. NYNEX commenced a second action seeking similar relief for the 1998 tax year.
Petitioners New York Water Service Corporation and Long Island Water Corporation (collectively, the "Water Companies") owned class three special franchise property in Nassau County in countywide and non-countywide special districts. As in the NYNEX action, the County imposed special ad valorem levies on those properties in the non-countywide special districts. In April 1997, the Water Companies each initiated a CPLR article 78 proceeding to recover tax overpayments due to the County's alleged unauthorized assessment method. Thereafter, the Water Companies and the County stipulated that the proceedings would also cover the 1998-2000 tax years.
Special franchise property is property owned by utilities located in easements in public streets.
Supreme Court granted the County's motion to consolidate the various suits, and (1) granted the relief requested by the plaintiffs and petitioners (collectively "the utilities"), (2) enjoined the County from assessing real property in non-countywide special districts pursuant to RPTL article 18 and (3) referred the issue of damages to trial. Upon reargument, the court adhered to its decision.
The Appellate Division modified the order of the Supreme Court to the extent of precluding payment of the refunds, and, as modified, affirmed, stating:
"Although the tax assessments were invalid, NYNEX and the Water Companies are not entitled to retroactive monetary relief. The record reveals that the payment of tax refunds will have a significant financial impact in many non-Countywide special districts, where taxes have been paid, tax liens matured, budgets adopted, and expenditures made, all in reliance on the ad valorem levies. Under these circumstances, the courts should exercise restraint and not act so as to `cause disorder and confusion in public affairs even though there may be a strict legal right.' Accordingly, Supreme Court improvidently exercised its discretion in authorizing tax refunds and directing a trial to determine their amount."
As the Appellate Division noted, the Legislature subsequently amended RPTL article 18 to include non-countywide special districts in "adjusted base proportion" calculations, thereby allowing prospective application of article 18 to non-countywide special districts in a manner similar to the methodology previously employed for other classifications ( see L 2001, ch 191).
The Appellate Division denied the utilities' motions to reargue or for leave to appeal. This Court granted the utilities' motions for leave to appeal, and we now reverse. We do not reach the propriety of the tax assessment. The County did not appeal that portion of the Appellate Division order.
DISCUSSION
The sole question before us is whether the Appellate Division erred in denying tax refunds to the utilities because of the financial impact such refunds would have on the County when the amount of the refunds had not been established, nor proof submitted demonstrating the impact the refunds would have on the County.
NYNEX estimates its refund to be approximately 10 million dollars, less than one half of one percent of the taxes the County collected for that year. The Water Companies estimate that their refund would be approximately one million dollars each.
In some circumstances, notwithstanding that a party prevailed on the merits, this Court has refused to grant the relief requested based on the effect it would have on the municipality. For example, in Foss v. City of Rochester ( 65 N.Y.2d 247, 260), plaintiff challenged the constitutionality of section 305 and article 19 of the Real Property Tax Law as well as Rochester Local Law No. 6 of 1983 on the ground that they deprived him of due process and of the equal protection of the law. Although the Court determined that article 19 and Rochester Local Law No. 6 violated the equal protection clauses of the Federal and State Constitutions, it refused to require a retroactive refund because of the practical reality that the government had "relied upon the revenues derived from implementing [RPTL Article 19] and would suffer an undue burden if it had to refund the taxes collected" ( 65 N.Y.2d at 260).
Retroactive relief, similarly, was denied in Hellerstein v. Assessor or Islip ( 37 N.Y.2d 1, where the Town's assessment rolls were held invalid, because the result could bring financial chaos to the Town. In Matter of Andresen v. Rice ( 277 N.Y. 271, 282), this Court invalidated a statute that provided for the appointment of State Police officers without a competitive examination but declined to grant the relief requested because it would "cause disorder and confusion in public affairs."
Here, Supreme Court declined to hear evidence of hardship. Thus, the amount of refund to which the utilities are entitled — including any financial impact on the County of requiring payment — must be determined at a hearing, upon submission of proof.
Accordingly, the order of the Appellate Division, insofar as appealed from, should be reversed, with costs, and the cases remitted to Supreme Court for further proceedings in accordance with this opinion.
Order, insofar as appealed from, reversed, with costs, and cases remitted to Supreme Court, Nassau County, for further proceedings in accordance with the opinion herein.