C.A. Karmel v Assessor of the City of White Plains

[*1] C.A. Karmel v Assessor of the City of White Plains 2012 NY Slip Op 22199 Decided on July 20, 2012 Supreme Court, Westchester County Giacomo, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the printed Official Reports.

Decided on July 20, 2012
Supreme Court, Westchester County

C.A. Karmel, AS TRUSTEE OF THE SASSOWER FAMILY TRUST, AND DORIS L. SASSOWER, Petitioners, The Assessor of the City of White Plains, THE BOARD OF ASSESSMENT REVIEW OF THE CITY OF WHITE PLAINS, AND THE CITY OF WHITE PLAINS, Respondents.



5539/2007



Joseph Albert, Esq.

100 White Plains Road

Tarrytown, NY 10591

John G. Callahan, Esq.

Corporation Counsel, The City of White Plains 255 Main Street

White Plains, NY 10601

William J. Giacomo, J.

Petitioners bring this application seeking a refund from defendants of all property taxes paid since 2002 in connection with the alleged illegal increase in the property's assessment in 2002 plus interest.

A hearing was held before the Court on March 19, 2012 and the parties submitted memoranda of law thereafter. The Court now renders the following decision:

Petitioners own real property in the City of White Plains. The premises is an approximately 4.5 acre parcel improved with a forty-nine thousand seven hundred twenty-two (49,722) cubic foot structure. The structure contains eight bedrooms, seven bathrooms, two living rooms, a kitchen, ballroom and breakfast room. Petitioner's property is located in a single family residential zone and is classified as a single family residence (classification code 210) by the residential code established by the New York State Office of Real Property.

At some point prior to 2002, respondents, Assessor of the City of White Plains, the Board of Assessment review of the City of White Plains, and the City of White Plains (hereinafter collectively "respondents"), allege that the subject property was used as a bed and breakfast, a use that respondents contend continues today. Respondents' position is supported by a 2007 decision in White Plains City Court, in which the Court, (Friia, J.) found petitioner in violation of the White Plains Zoning Ordinance.

On the 2002 White Plains final assessment roll, the Assessor for White Plains assessed the subject property for $70,000. Prior to this filing, petitioners' property had been assessed for $44,575. Respondents contend that the increase in assessment was a result of reclassifying the property from a single family residential use to a commercial use classification entitled inns, lodges, boarding and rooming houses, tourist homes, fraternity and sorority houses (classification code 418). Petitioners contend the only reason for the reassessment in 2002 was because of this change in use.

Petitioners claim that the property is used only occasionally as a bed-and-breakfast and this is not an improper use of a single family home. Therefore, the reclassification was improper and could not serve as a basis for the assessment increase in 2002. Petitioners further allege that since no physical change was made to the property in 2002 and, there was no citywide reassessment that year, the reassessment violated §305(2) of New York Real Property Tax Law ("RPTL") and constituted "selective reassessment" in violation of the New York and United States Constitution.

Petitioners seek a refund of all property taxes paid since 2002 as a result of the illegal increase in the property's assessment that year together with interest.

The Issue:

The issue to be decided by the Court is whether a change in use classification of [*2]real property from residential to commercial constitutes a rational basis for reassessment of a single parcel of real property absent a citywide reassessment, and thus, is not "selective reassessment" in violation of Real Property Tax Law § 305(2), Article I §11 of the New York State Constitution and the Equal Protection Clause of the United States Constitution.

In rendering its decision, the Court reviewed the following statutes which read, in relevant part: New York Real Property Tax Law § 305(2): All real property in each assessing unit shall be assessed at a uniform percentage of value (fractional assessment) (NY Real Prop. Tax Law § 305 [McKinney 2003]).

New York Constitution Article XVI, §2: The legislature shall provide for the supervision, review and equalization of assessments for purposes of taxation. Assessments shall in no case exceed full value (NY Const. art. XVI, § 2).

New York Constitution Article I, § 11: No person shall be denied the equal protection of the laws of this state or any subdivision thereof (NY Const. art. I, § 11).

United States Constitution Amendment XIV: No State shall make or enforce any law which den[ies] to any person within its jurisdiction the equal protection of the laws (USCA CONST Amend. XIV).

Discussion

Governmental authorities have a wide range of latitude in the field of taxation. As a general rule, all real property within a district should be assessed at a uniform percentage of market value. (See NY Real Prop. Tax Law § 305 [McKinney]). The requirement imposed by statute is consistent with the State's constitutional directive that assessments within the various assessing units be equalized for taxation purposes. (See Krugman v. Bd. of Assessors of Vill. of Atl. Beach, 141 AD2d 175, 183 [2nd Dept 1988]).

The Appellate Division, Second Department, has recognized that "the integrity of any system of taxation, and particularly real property taxation, rests upon the premise that similarly situated taxpayers pay the same share of the tax burden." (Nash v. Assessor of Town of Southampton, 168 AD2d 102, 104-05 [2nd Dept 1991]). Therefore, government authorities have freedom in implementing property tax systems; however, they must be capable of being uniformly and fairly implemented or apply even-handedly to all similarly situated property. As a result, courts have struck down various tax reassessments that single out an individual or small minority of property owners as "selective reassessments".Generally, selective reassessments involve [*3]discrimination and are a violation of equal protection. (See e.g. Alleghany Pittsburgh Coal Co. v. County Commission of Webster County, 488 U.S. 336 [1989]). Under the United States and New York Constitution, a real property owner's right to equal protection of the law may be violated if a municipality selectively reassesses real property without a rational basis in law.(See Krugman v. Bd. of Assessors of Vill. of Atl. Beach, 141 AD2d 175, 183 [2nd Dept 1988]). If the selective reassessment lacks any rational basis it amounts to invidious discrimination (id. at 184). In Harris Bay Yacht Club v. Town of Queensbury the Appellate Division, Third Department, expounded this general rule as follows: "Indeed, an equal protection violation will be found when the assessing body isolates a particular property for reassessment and is unable to justify the changes with some legally recognized factor such as improvements to the property or equal application to all properties of similar character." (68 AD3d 1374, 1375 [3rd Dept 2009][emphasis added]). Therefore the test for constitutionality is whether the difference in treatment is arbitrary or capricious and results in invidious discrimination (see e.g. Alleghany Pittsburgh Coal Co. v. County Commission of Webster County, supra).

Even if the city provides an explanation that is facially reasonable, courts have held selective reassessments unconstitutional based on the assessors methodology. (See Stern v. Assessor of City of Rye, 268 AD2d 482, 483 [2nd Dept 2000][holding reassessments based on recent purchase price including improvements unconstitutional, in part, because it could not be imposed on unimproved similarly situated properties]). An approach to reassessment incapable of being uniformly implemented and applied even handedly to all similarly situated property is unconstitutional selective reassessment. (See AKW Holdings LLC v. Assessor of Town of Clarkstown, 12 Misc 3d 1160[A][NYSup Ct 2006]). In short, selective reassessments of individual property are constitutional when justified by a legally recognized factor and if the methodology used can be uniformly applied to all similar properties.

In New York, only physical improvements to property and equal application to all similarly situated properties justify a challenged reassessment on equal protection grounds. (See Harris Bay Yacht Club, 68 AD3d 1374, 1375) . However, the Third Department has suggested, albeit in dicta, that reassessment of a particular property between town wide revaluations could be constitutional; but only if the assessor could show "how any changes brings such assessment into line with those of other properties whose assessments go unchanged." (Id. at 1375 citing NYS Department of Taxation and Finance Opinions of Counsel SBRPS No. 60; see also Parisi v. Assessor of the Town of Southampton, 14 Misc 3d 1220[A][NYSup Ct 2007] aff'd sub nom. Parisi v. Town of Southampton, 54 AD3d 320 [2nd Dept 2008] [indicating that the New York State Office of Real Property Services has opined that an assessor may change the assessment of a property within the assessment unit without reassessing every property, so long as such action is necessary to maintain a uniform percentage as required by RPTL §305(2)]). However, this has only been suggested as a plausible reason for selective reassessment and which could defeat a challenge to an alleged unconstitutional selective reassessment.

Here, respondents reclassified the subject property from residential use to [*4]commercial use in 2002. Thereafter, they reassessed the property based on this reclassification at a higher value which this Court holds violates the Real Property Tax Law and United States and New York Constitutions.

It is undisputed that the 2002 assessment was not part of a citywide program. It is also undisputed that petitioners' property taxes were significantly increased as a result of the reassessment. Assuming, arguendo, that the subject property was being operated as a bed and breakfast, the dispositive question is whether change in use constitutes a legally sufficient factor for reassessing a single isolated property.

No New York court has explicitly held that a change in use of property can defeat a constitutional challenge to selective reassessment. In Towne House Village Condo v. Town of Islip (200 AD2d 749, 750 [2nd Dept 1994] the Second Department held that the reassessment of a single condominium building after it was converted from apartments was an improper selective reassessment. The reassessment in Towne House Village Condo was specifically prohibited by statute, however the Court also found that "there was no rational basis for reassessing only the subject property [and] is an improper denial of equal protection guarantees." (Id. at 750). While the Court did not support its conclusion with any reasoning, it is nonetheless clear. Reassessment of a single condominium, absent revaluation of all similarly situated properties, is an ad hoc piece-meal approach and if it is not implemented uniformly or applied even-handedly to all other condominiums is constitutionally impermissible. In the present case, a similar ad hoc reassessment based on change of use has no rational basis in law and violates statutory and constitutional guarantees.

Notably, the selective reassessment of the subject property was not necessary to maintain a uniform percentage as required by RPTL § 305(2). Respondents could have maintained uniformity through enforcement of the city's zoning ordinance (which they did successfully in 2007). Therefore, even the aforementioned cases that suggest in dicta that similar selective reassessments could be permissible are of no avail to respondents. Respondents demonstrated in commencing the 2007 action that by enforcing zoning ordinances reassessment in this case was not "necessary to maintain uniformity." (See Parisi v. Assessor of the Town of Southampton, 14 Misc 3d 1220[A][NYSup Ct 2007] aff'd sub nom. Parisi v. Town of Southampton, 54 AD3d 320 [2nd Dept 2008]).

Equally unpersuasive is respondents' reliance on RPTL §727(2)(I). RPTL §727(2)(I) deals with exceptions to RPTL §727, which statute imposes a mandatory three-year, freeze on reassessments following a judicial determination reducing the assessment. (See Colonie Plaza, Inc. v. Assessor of Town of Colonie, 15 AD3d 830, 832 [3rd Dept 2005]). The legislative history of RPTL § 727 indicates that its purpose was to prevent assessing units from increasing judicially reduced assessments in subsequent years and to prevent taxpayers from perpetually challenging their assessments. (See Rosen v. Assessor of City of Troy, 261 AD2d 9, 12 [3rd Dept 1999]). There is no legal basis, statutory or case precedent, which supports extending exceptions in an unrelated statute to curtail guarantees of the New York and United States Constitution.

In sum, a change in use classification of real property from residential to [*5]commercial is not a rational basis for selective reassessment of a single parcel of real property. This selective reassessment does not meet RPTL §305(2)'s requirement of uniformity and amounts to invidious discrimination in violation of the Equal Protection Clause of the New York and United States Constitution.

Accordingly, the petition is GRANTED and the petitioners are entitled to have returned to them all funds paid as a result of the 2002 tax increase (without interest) due to the improper reassessment of the property.

Dated: White Plains, New York

July 20, 2012

HON. WILLIAM J. GIACOMO, J.S.C.