Opinion
226262.
Decided June 24, 2011.
SEGAL, GOLDMAN, MAZZOTTA SIEGEL, P.C., (Paul J. Goldman, Esq., of Counsel), Attorney for Plaintiff, Albany, New York.
THE LAW OFFICES OF ROBERT L. BEEBE, LLC, (Robert L. Beebe, Esq. and Scott M. Ronda, Esq., of Counsel), Attorney for Defendant Town, Clifton Park, New York.
McNAMEE, LOCHNER, TITUS WILLIAMS, P.C., (David J. Wukitsch, Esq., of Counsel), Attorneys for the School District, Albany, New York.
These are three combined tax certiorari proceedings commenced under RPTL Article 7 for years 2008, 2009 and 2010. The petitioner owns and operates a warehouse and distribution facility on the subject property. By Order (Lynch, J.) dated March 3, 2011, the matter has been scheduled for a trial day certain on July 20, 2011.
By Notice of Motion returnable May 13, 2011, the Town respondents have moved to dismiss the petition as barred under the terms of certain Payment in Lieu of Tax (PILOT) Agreements between petitioner and the Rensselaer County Industrial Development Agency (hereinafter RCIDA), requiring valuation disputes to be resolved through arbitration. Petitioner has opposed the application and cross moved for an order confirming that it is an aggrieved party under RPTL § 704(1). Petitioner essentially maintains that through the cause of conduct in these proceedings respondents have waived any right to demand arbitration of the dispute. The court agrees.
There are three separate PILOT agreements at issue, corresponding with the development of the facility over three phases. The first PILOT agreement, dated February 28, 1990, involved the construction of an approximately 407,000 square foot distribution center/warehouse (see Exhibit "2" annexed to cross motion). Petitioner and the RCIDA entered into a second PILOT agreement dated February 1, 2003, involving the construction of a 30,000 square foot addition to the facility (see Exhibit "32" annexed to cross motion). A third PILOT agreement, dated February 1, 2006), involved the construction of a 75,000 square foot addition to the facility (see Exhibit "33" annexed to cross motion).
Pursuant to Section 2.03(B)(1) of the 1990 PILOT agreement; the parties agreed that the Assessor would determine the value of the land for purposes of calculating the payment due. Importantly, section 2.03(B)(2) provided a format for petitioner to protest that valuation. Absent an agreement among petitioner, the RCIDA and the Assessor, petitioner and the RCIDA could pursue resolution through arbitration. Similar arbitration clauses are included in the 2003 PILOT (Section 2.02[B][2]) and the 2006 PILOT (Section 2.02[B][2]). Notably, the 2003 and 2006 PILOT's also include the Assessor as a participant in the actual arbitration process.
Both the 2003 and 2006 PILOT agreements include ten year terms involving a lease-leaseback arrangement between the petitioner and the RCIDA. The underlying lease for both agreements define the "leased land" as "the portion of the Land under the Addition . . . and all improvements" (see Exhibits 32 and 33 at p. 4). The point here is that the "exemption" under each agreement applied to the respective additions only. Under Section 202.(B)(1), petitioner was "entitled to written notice of the initial determination of the Assessed Value of the Leased Land and the Improvements and of any change in the Assessed Value of the Leased Land or the Improvements". During the term, the PILOT payment was calculated at 50% of the normal tax for the first year, increased each succeeding year by 5% (Section 2.02[C][4]). Throughout the PILOT term, the property was required to be assessed as "exempt" on the assessment roll (Section 2.01 and 2.02 [C][5]).
In 2008, the Town completed a full value reassessment of all real property in the Town and issued an assessment notice to petitioner valuing the entire Project at $38,473,100 (see Exhibit "1" annexed to the cross motion). By comparison, for 2007, the project was valued at $11,226,900, based on a 25.5% equalization rate. The notice expressly advised petitioner of its right to file a grievance if it disagreed with the tentative assessment. After petitioners grievance was denied (Exhibit "5" annexed to cross motion), the first of the three pending Article 7 proceedings was commenced (Exhibit "6" annexed to cross motion).
With this background, petitioner first contends that its contractual obligation to challenge the assessment through the arbitration process outlined in the PILOT agreements was not triggered since the Town failed to provide separate assessments for each of the three project phases. While the Court agrees that the Town was required to provide a specific valuation for each phase, the failure to do so did not excuse petitioner's contractual obligation to comply with the arbitration process. Confronted with the 2008 assessment notice (Exhibit "1"), petitioner certainly could have issued a written notice of dissatisfaction under Section 2.03[B][2] of the 1990 PILOT agreement and Section 2.02[B][2] of the 2003 and 2006 PILOT agreements.
That being said, the court cannot ignore the history of this litigation. Each notice issued by the Town advised petitioner of its right to challenge the subject assessment through the typical grievance and Article 7 process (see Exhibits "1", "5", "14"). Both the Town and the School District participated throughout this litigation without raising the arbitration issue prior to the instant motion. Both parties filed an initial Notice of Appearance in lieu of an answer as was their right (RPTL § 712). As a result, the allegations in the petition were effectively denied, but an arbitration objection was not raised. Thereafter the parties engaged in discovery and appraisals have been exchanged and filed. Importantly, by Stipulation and Order (Lynch, J.) dated December 3, 2009, the 2008 and 2009 proceedings were consolidated for purposes of scheduling and trial. At the request of Counsel for the School District, the Court issued a further Order of Consolidation (Lynch, J.) dated October 14, 2010 confirming all three proceedings were consolidated for scheduling and trial purposes. Notably, that order authorized respondents new expert to inspect the property and extended the appraisal deadline to December 1, 2010. Not to be overlooked here is that the Court's March 3, 2011 order scheduling the trial date, also extended respondents appraisal deadline to March 25, 2011. It is the Court's understanding that respondents filed their appraisal on March 24, 2011.
With this background, the Court finds that respondents active participation in the litigation effectively waived their claim to bind petitioner to the arbitration limitations of the PILOT agreements (see Sherrill v. Grayco Builders, Inc., 64 NY2d 261). While respondents maintain the arbitration clause implicates the Court's subject matter jurisdictional, it is a contract provision that may be waived (see Sherrill v. Grayco Builders, supra., 64 NY2d at 272; Matter of Campbell v. State of New York, 37AD3d 993, 994). Correspondingly, petitioner has standing to continue these proceedings.
Not to be overlooked is petitioner's acknowledgment that Phase I of the project effectively lost its exemption status upon expiration of the RCIDA's leasehold status on or about December 31, 2003 (see Sur Reply Affidavit of Paul Goldman at paragraphs 4 — 26). Had the Assessor accurately adjusted the assessment roll from 2004 forward, Phase I of the project would have lost its exempt status — thereby confirming petitioner's direct standing to initiate an Article 7 proceeding for Phase I of the project. The record submitted shows that the Assessor has now made this correction on the 2011 assessment role (compare Exhibit "38" annexed to the Reply Affidavit of Paul Goldman dated May 13, 2011, with Exhibit "47" annexed to the Sur Reply). Also, as of at least 2004, the payments due under the 1990 PILOT agreement were equal to 100% of the normal taxes due on Phase I — a burden that confers aggrieved status upon petitioner (see Matter of Waldbaum, Inc. V. Finance Adm'r of City of NY, 74 NY2d 128, 133).
Remarkably, a similar dispute arose between the parties in 1997, in which the Court found respondents active participation in the litigation waived their arbitration objection (see Decision and Order [Canfield, J.] dated December 4, 1997 Index Nos. 191764 and 188910). Given this history, it is difficult to accept the explanation of respondents counsel that only a recent review of the PILOT agreements revealed the arbitration limitation. Similarly unconvincing is respondents thesis there has been no waiver since the Assessor was "merely a bystander to the arbitration procedure established in the Agreement" (Affirmation of Robert Beebe, Esq. dated May 20, 2011 at paragraph 5). The record shows that petitioner applied for a real property tax exemption pursuant to RPTL 412-a, and that the Assessor accorded the property exemption status in accord with the PILOT agreements, as required (see Matter of Regeneron Pharms., Inc. v. McCarthy, 26 Misc 3d 1203[A], affirmed 77 AD3d 1246, lv denied 16 NY3d 704). The PILOT agreements speak to the value of the property as determined by the Assessor. In the event of a protest by petitioner, all three agreements require arbitration if petitioner, RCIDA, and the Assessor are unable to reach agreement. Both the 2003 and 2006 PILOT agreements actually involve the assessor in the arbitration process. Given this structure, it is manifest that the Assessor knew or very well should have known of the arbitration restriction and yet respondents waited until the eleventh hour to raise the objection. That tactic is simply not acceptable.
The Court acknowledges the holding in Matter of Metropolitan Life Ins. Co. v. Harlow , ( 14 AD3d 848 ) finding that a RPTL Article 7 proceeding is not proper, where, as here, a PILOT agreement clearly provides that a valuation challenge must be made through arbitration (see, also, Matter of Town of Wallkill Indus. Dev. Agency v. Assessor of Town of Wallkill, 270 AD2d 494; Ball Metal Beverage Container Corp. v. Assessor for the City of Saratoga Springs, 194 Misc 2d 42). The difference, however, is the extent of respondents active engagement in this litigation, coupled with virtually an eve of trial motion to dismiss.
Accordingly, respondents motion to dismiss is denied; and petitioner's cross motion is granted, all without costs.
This Memorandum constitutes the Decision and Order of the Court. This original Decision and Order is being returned to the attorney for petitioner. The below referenced original papers are being mailed to the Rensselar County Clerk. The signing of this Decision and Order shall not constitute entry or filing under CPLR 2220. Counsel is not relieved from the provision of that rule regarding filing, entry, or notice of entry.
Papers Considered:
(1)Respondent Town's Notice of Motion returnable May 13, 2011, with Affirmation of Scott Ronda, Esq. dated April 14, 2011, with Exhibit "A" annexed; Memorandum of Law dated April 14, 2011 with Exhibit "A" annexed; Reply Affirmation of Robert L. Beebe, Esq. dated May 20, 2011 with attachments;
(2)Affidavit of Dvid Wukitsch, Esq. dated May 10, 2011;
(3)Supplemental Affidavit of Dave Wukitsch, Esq. dated May 23, 2011;
(4)Notice of Cross Motion returnable May 13, 2011, with Affidavit of Paul Goldman, Esq. dated May 5, 2011; Affidavit of Robert McDonald dated April 26, 2011; Affidavit of Rebecca Brown dated April 29, 2011, with Exhibits "1" — "34" attached;
(5)Reply Affidavit of Paul Goldman, Esq. dated May 13, 2011 with Exhibits "35" — "38" attached; and
(6)Sur Reply Affidavit of Paul Goldman dated June 3, 2011 with Exhibits "39" — "49". Given respondents' late submission of responding papers on the cross motion, the Court authorized petitioner's Sur Reply submission by letter order dated May 23, 2011 — notably without objections from respondents.