Opinion
Index No. 702313-2023
09-27-2023
17 Grand Avenue Corp., Petitioner, v. Preston Niblack, in his capacity as the Commissioner of Finance of the City of New York and the City of New York, Respondents.
Attorneys for Petitioner: Scott Goldberg, Esq. Goldberg & Bokor LLP Attorneys for Respondents: Sarah E. Gilbert, Esq. NYC Law Department
Unpublished Opinion
Attorneys for Petitioner:
Scott Goldberg, Esq. Goldberg & Bokor LLP
Attorneys for Respondents:
Sarah E. Gilbert, Esq. NYC Law Department
Kevin J. Kerrigan, J.
The following numbered papers read on this article 78 proceeding brought by petitioner 17 Grand Avenue Corp., (17 Grand), seeking a declaratory judgment to reverse the determination of respondent Preston Niblack i/c/o Commissioner of Finance of the City of New York, which sustained the finding by the New York City Department of Finance, (DOF) that a tax classification of the subject vacant property, zoned residential with a commercial overlay, outside Manhattan, as tax class 4 for fiscal year (FY), 2016-2024, was correct and allegedly exercised his discretion provided by Admin Code § 11-206 in an arbitrary and capricious manner, in violation of law, in failing to correct such tax class designation to tax class 1.
Papers Numbered
Notice of Petition and Petition - Exhibits EF 1-20
Answer and Answering Affidavits- Exhibits EF 24-30
Reply Affidavits EF 31-36
Upon the foregoing papers it is ordered that the petition is determined as follows:
In this article 78 proceeding for declaratory judgment and other relief the petitioner seeks to reverse the administrative decision of DOF, upheld on appeal by the Commissioner of Finance, which determined that the tax classification of Tax Class 4, assigned to the subject vacant property was correct. At issue, is whether the Commissioner's final determination, that the designation of the subject vacant property as a tax class 4, building class V1, for such a property zoned residential, outside Manhattan, rather than as tax class 1, building class V0, was arbitrary, capricious or in violation of law.
In support of its petition, petitioner submitted, among other things, a copy of the pleadings, a copy of the Notice of Property Value FY 2016-2024, a copy of DOF's "Clerical Error Rule" promulgated by the Commissioner of Finance effective date July 16, 2016, a copy of petitioner's request to DOF to correct the clerical error, and a copy of DOF's Final Administrative Decision. In opposition, the respondent submitted, inter alia, a copy of its Answer. In reply, 17 Grand submitted, among other things, a copy of its attorney's reply affirmation, copies of additional decisions by courts of coordinate jurisdiction each finding the Commissioner's failure to correct the tax class designation arbitrary and capricious, reversing the Commissioner's determination, and examples of stipulations entered by DOF granting the relief requested by the petitioner to correct the tax class designation, under the same or similar circumstance as within.
At the outset, the court finds that the submissions of these stipulations by the petitioner are admissible, for the purpose of showing possible disparities in treatment of aggrieved taxpayers in the same or similar circumstances, as well as examples to bely DOF's basic position that it lacks legal authority to make such corrections. For the reasons following, it is unnecessary to address the issue of disparity of treatment.
The subject property is identified as 72-19 Grand Avenue, Queens County, Block: 2506 Lot 96, (hereinafter referred to as the "property".) The property was vacant and unimproved land zoned as R6B (residential), with a C1-2 commercial overlay. On November 11, 2021, the petitioner submitted a request to DOF seeking the change of tax classification from the erroneous designation as tax class 4 to the proper and lawful tax class 1, for the 2016-2024 tax period. This request was allegedly made in conformity to the provisions of RPTL § 1802 (1) (d), and in accordance with NYC Administrative Code § 11-206, and 19 RCNY 53 et seq., known as the "Clerical Error Rule".
On or about October 7, 2022, the Commissioner responded, as follows, in its pertinent part:
"After considering this information, we found that the original combination of assessment, exemption, and lot characteristics will remain unchanged for the years indicated on your filing.
Specifically: Finance determines that the parcel is a vacant lot and appropriately valued."
The respondent's primary argument is that CPLR article 78 proceedings are not the legally proper method to contest tax assessments, as it asserts RPTL article 7 is the exclusive remedy for such a review. The respondent avers that even if it were proper, the statutory authority provided to it by Admin Code § 11-206, to correct "clerical errors", and "errors in description" is not broad enough to correct these types of errors.
Real Property Tax Law (RPTL) § 1802 (1) (d) (i), states that property is classified as tax class one (TC 1), if zoned residential, and falls within the following restriction:
"(d) all vacant land located within a special assessing unit which is a city (i) other than such land in the borough of Manhattan..."
NYC Administrative Code (Admin Code), § 11-206, provides the Commissioner with the discretion to correct, "any assessment or tax which is erroneous due to a clerical error or to an error of description contained in the several books of annual record of assessed valuations or in the assessments-rolls." In order to implement its statutory authority, DOF promulgated its "Clerical Error Rule", 19 RCNY 53 et seq., which includes within its rules, a few examples of correctable scenarios.
Generally, challenges to tax assessments made by the Department of Finance are made in a tax certiorari proceeding pursuant to RPTL article 7, (s ee RPTL § 706; Kahal Bnei Emunim & Talmud Torah Bnei Simon Israel v Town of Fallsburg, 78 N.Y.2d 194 [1991].) However, contrary to the respondent's assertions, it is not the exclusive remedy for a taxpayer seeking relief. RPTL § 700 provides that, "a proceeding to review an assessment of real property shall be brought as provided in this article unless otherwise provided by law ." An aggrieved taxpayer need look no further than Admin Code § 11-206, for another lawful method, albeit limited to "clerical errors"or "errors in description", authorizing the Commissioner of Finance to exercise its discretion to correct them. DOF's own rules, (19 RCNY 53 et seq), provide for a six year look back period within which the Commissioner may act to make this specific type of correction. The Appellate Division, Second Department's ruling in Better World, 122 A.D.3d 27 [2d Dept 2014], clearly held that an article 78 proceeding may be brought to seek judicial relief from the Commissioner's arbitrary and capricious exercise of such statutory authority. (Admin Code §11-206.) (See The Better World Real Estate Group, 122 A.D.3d 27 [2d Dept 2014].)
In an article 78 proceeding involving a decision made by an administrative agency without a hearing, the scope of the court's review is limited to a determination as to whether the agency used improper procedure, error in law, or was an arbitrary and capricious decision. (See Kripalani v State Div. Of Housing & Community Renewal, 126 A.D.3d 904 [2d Dept 2015.) An action is arbitrary and capricious when it is taken without sound basis in reason or regard to the facts. (See 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].)
Here, it is undisputed that the property was zoned residential, "R6B", with Commercial Overlay, "C1-2" and is located outside of Manhattan. The Notices of Property Valuation, which are official records kept by the DOF, were mailed to the property owner/taxpayer to advise of the tax status of their property in each given taxable period. Each stated that the property was "vacant" land. This conclusion is a result of the work that DOF's appraisers do each year to ascertain the accurate descriptions and classifications of properties in the City of New York for tax purposes.
It is clear that vacant properties that are zoned residential, including those zoned residential with commercial overlays, by law, are to be taxed as TC 1 properties. (See Shore Development Partners v Board of Assessors of County of Nassau, 112 A.D.3d 724 [2d Dept 2013]; see also Shore Development Partners v Board of Assessors of County of Nassau, 82 A.D.3d 988 [2d Dept 2011].) The following is a partial listing of courts of coordinate jurisdiction ruling that such property(ies) must be classified and taxed as a TC 1 property, (see 9313 Rockaway Beach, LLC v Niblack, 79 Misc.3d 1211 (A), [Sup Ct, Queens Cty, J. Catapano-Fox 2023]; Richmond SI Owner LLC v Soliman, 75 Misc.3d 1211 (A), [Sup Ct, Richmond Cty, J. Ozzi 2023; Seetharam Adimoolam, et al., v Niblack, et al., [Sup Ct, Richmond Cty J. Marrazzo 2022]; 1543 E NY Ave LLC v Soliman, et al., [Sup Ct, Kings Cty J. Rothenberg, 2022]; Jomaniam LLC v Niblack, et al., [Sup Ct, Richmond Cty J. Porzio 2022]; MLK LY LLC v The Commissioner of Finance of the City of New York, et al., 2022 NY Slip Op. 33386(U), [Sup Ct, Kings Cty J. Rothenberg 2022].)
Every case cited above was decided in an article 78 proceeding seeking relief from the DOF's determination that Admin Code §11-206 did not permit correction because the "errors" referred to within the statute were to be narrowly interpreted. In The Better World Real Estate Group v New York City Dept. Of Finance, 122 A.D.3d 27 [2d Dept 2014]), the Appellate Division, Second Department held that since the Administrative Code does not define the terms "clerical error" or "error of description," courts should construe them, "as to give effect to the plain meaning of the words used", and should not defer to Finance's interpretation. (Better World, 122 A.D.3d at 35.) Therefore, succinctly stated, despite DOF's own findings of fact, that the property is zoned residential, is vacant land, and is located outside Manhattan, it erroneously designated the property as TC 4, instead of TC 1 as required by RPTL § 1802 (1) (d) (i), and Admin Code § 11-206 permits correction by the Commissioner for such errors.
Respondent's counsel's claim that it is an "interpretation" issue, is without merit. RPTL § 1802 (1) (d) (i) is very clear that vacant land, zoned residential, located outside of Manhattan, as this property is, by law, must be classified as TC1. Legal precedent on the appellate level, as cited herein, and the numerous cases of coordinate jurisdiction cited have unanimously found that such property is to be classified TC1, and have ordered DOF to reclassify those properties accordingly.
In light of the foregoing, the Commissioner's denial of petitioner's request to correct the erroneous tax class designation from TC 4 to TC 1, pursuant to Admin Code § 11-206 and its own rules under 19 RCNY 53 et seq., was arbitrary and capricious, and not in accordance with the law. The court includes FY 2022-23 in its decision, as it would be an exercise in futility, and an additional waste of resources to require resubmission, as evidenced by the history of DOF's wrongful denials corrected by judicial intervention. Pursuant to DOF's own rules, the look back period is six years prior to the submission for correction. As that brings the applicable six year look back date to November 11, 2015.
Therefore, it is ordered that the article 78 petition is granted. It is further ordered that the DOF's final determination dated October 7, 2022 is vacated, and it is further ordered that the designated tax class for the subject property shall be corrected from TC 4 to TC 1 for the contested tax period. The matter is remanded to the Department of Finance for recalculation of the taxes levied on the property for the FY 2016-2024. For FY 2016, the recalculation is to commence November 11, 2015.
It is troubling that despite ruling after ruling, DOF has been causing aggrieved taxpayers to litigate, rather than properly exercise its discretion afforded by statute to correct these errors. It is not in the interests of the taxpayers of the City of New York, nor of the court system to expend valuable resources unnecessarily. It is to be noted, that the State of New York entrusts the City of New York to utilize DOF to assess and to collect real property taxes for both the city and the state. As such, DOF is arguably acting as an agency of the state. CPLR article 86, also known as, "New York State Equal Access to Justice Act", provides for the court's consideration of attorney's fees applications, so as to even the playing field for aggrieved parties who have waged a successful battle against a state agency or agent of the state. This court will entertain attorney's fee applications accordingly.