Second National Bank v. City of New York

Ingraham, P. J.:

This is an action at law against the city of New York to recover a sum of money paid by plaintiff to defendant as a tax upon certain shares of stock of plaintiff. The city of New York under the provisions of the former Tax Law and the charter levied a tax upon certain shares of stock of plaintiff, which tax the plaintiff paid. The plaintiff commenced no proceeding by certiorari to review the assessment or the levy of the tax, and the time within which such a proceeding could be instituted was allowed to expire without plaintiff’s questioning the tax or objecting in any way to the validity of the assessment or the levy of the tax. This tax was paid 'for the years 1904, 1905, 1906 and 1907, on December 29, 1904, December 28, 1905, December 28, 1906, and December 30, 1907. The action was brought to recover the total amount of taxes paid with interest, but recovery was allowed, however, only for interest from dates of payment to October 1, 1909, when by proceeding under chapter 74 of the Laws of 1909 the amount of the assessment and the tax thereon was rendered valid. Other stockholders in other banks assessed at the same time as the plaintiff took proceedings by certiorari to review the assessment for taxation and questions as to the validity of this assessment and the levy of this tax came before the Court of Appeals in People ex rel. Bridgeport Savings Bank v. Feitner (191 N. Y. 88) when the assessment against the relator was canceled. The relator in that case contended that the tax in question was imposed without notice or an opportunity to be heard, and that the statute contained no provision for either. The court held that, if that was true, not only must the tax he set aside but the statute must he adjudged invalid, for it is a principle of our law that there can be no taxation without notice and a chance to complain on account of the alleged error or mis*493take. The taxpayer may object or protest even if he has no just ground for doing either. The court then examined the statutes under which this tax was imposed, and held that under the statute there was provision for notice to stockholders of bank stock and that, therefore, the statute was valid. It further held that the statute had not been complied with; that although a grievance day was provided, notice thereof was not given, and, therefore, while the statute was valid, the tax was voidable. In disposing of this question the court said: “There is a material difference between a case where the statute imposing the tax fails to provide a grievance day and a case where the taxpayer has been deprived of an opportunity to be heard because the assessing officers failed to give him notice as provided by statute. A taxing act, which requires a valuation of property as part of the procedure, is unconstitutional unless it provides a grievance day, or an adequate opportunity to be heard and any tax levied under such a statute is void. If, however, a grievance day is provided but notice thereof is not given, while the statute is valid, the tax is voidable. The assessors have jurisdiction, but the failure to give notice is an irregularity (People v. Turner, 145 N. Y. 451), and the assessment, if attacked in due form and in due time, will be set aside, on account of such irregularity. In the case now before us the statute was valid but the assessing officers failed to comply with it. They gave no notice and refused to hear any complaint, owing doubtless to a misunderstanding of the law. While, therefore, we hold the statute valid, • we are compelled, on account of the irregularity in failing to give notice, to reverse the orders * * * and to cancel the assessment against the relator.” The court there held that the tax was not void but voidable because of the failure to give notice required by statute and an opportunity to the owner of the property assessed to be heard, and that an assessment if attacked in due time and in due form will be set aside on account of such irregularity. It was the assessment that was voidable for irregularity and not the levy of the tax, and to take advantage of a voidable assessment the party aggrieved must institute a proceeding to review the assessment. The plaintiff took no such proceeding; it made no objection to the *494assessment or the levy of the tax, but in due course paid the same to the comptroller of the city of New York.

I do not understand that a person whose property is assessed for taxation can pay the tax and then seek to recover the amount paid in an action at law because of an irregularity in either making the assessment or imposing the tax. Here the distinction to which the Court of Appeals- called attention in the Bridgeport Savings Bank case is applicable. Where the statute imposing the tax is unconstitutional, the tax itself and all acts of the taxing officers under the void statute are void, and, of course, a tax paid under such a void statute, when not a voluntary payment, can be recovered back. But when the statute is constitutional and there is a mere irregularity in the enforcement thereof by failing to give notice which it requires or by failing to comply with any other of the provisions of the statute, the tax is not void, but voidable, and when proper proceedings are taken to correct the error the assessment and tax imposed will be vacated. I think it would be conceded, if the error of the commissioners had been in refusing to hear the owners of the property assessed, after having given the notice required by the statute, that such a refusal would be an irregularity that would have to be corrected by a direct attack upon the' validity of the assessment, or, if the owners of the property were heard, but the commissioners refused to correctly determine the claim of the property owners to a reduction of the assessment the same result would follow. I can see no difference between the failure to give notice required by statute and the refusal to hear the owners of the property assessed after notice given. The distinction is between a void statute. assuming to impose a tax, and an irregularity or defective proceeding under a valid statute, which was the fact in the case at bar. A voidable tax is void only on the election of the person taxed. Certainly, if the person taxed paid the tax and failed to take proceedings to review the assessment or the levy of the tax within the time allowed by law, the irregularity is waived and the tax becomes a valid tax. There is no basis for an action to recover from the State or municipality imposing the tax the amount paid or any part thereof because of such an irregularity.

*495The Court of Appeals having on January 31, 1908, held this tax voidable in the Bridgeport Savings Bank case, the Legislature passed the act known as chapter 74 of the Laws of 1909, which authorized the board of taxes and assessments of the city of New York to cancel or reduce assessments for taxation of shares of stock of banks or banking associations in the city of New York made by the board in and for the years 1901 to 1907. The act then provided for application for reduction or cancellation of assessments by any person deeming himself aggrieved by such assessments for those years, which might be made to said board on or before September 1,1909, and requiring the board on or before October 1, 1909, to determine every appeal presented under the act and to declare its determination by cancellation or reduction on the assessment rolls where necessary for any such assessment. It further provided that any determination of the board under the act might be reviewed by certiorari in the same manner that other assessments of personal property may be reviewed under section 906 of the charter, * and that any such proceeding to review must be begun on or before October 31, 1909. Section 2 of the act provided that all assessments of bank shares made from 1901 to 1907 inclusive, as to which no application for review shall be made under the act as therein provided, shall be and thereby are ratified and confirmed. It further provided that the act should apply to all said assessments of bank shares for the years 1901 to 1907 inclusive, “not heretofore directed to be canceled or reduced by order of court, from which* order no appeal is pending or can be taken at the time this act takes effect.”

It appears that the tax commissioners proceeded under this act, published the notice therein specified and heard all applications for reduction and cancellation of assessments and taxes. Plaintiff presented no such objection to the board, and, therefore, under the express provisions of section 2 of the act the assessments were ratified and confirmed. The effect of this act came before the Court of Appeals in People ex rel. American Exchange National Bank v. Purdy (196 N. Y. 270). That was a proceeding by certiorari *496to review the assessments upon the capital stock of relator, a national hank in the city of New York. It was claimed by the relator that the assessment was void and incurable because made without jurisdiction and without due process of law. It was further insisted by the relator that the assessments could not be cured by a confirming act; that the provisions in the act of 1909 for hearing and correction of the assessments after they had been made were insufficient to cure the vice in the method of making them; that the provisions in the act of 1909 that no court or other tribunal should have the power to grant relief against the illegality of the assessments on account of any irregularity, either in pending or subsequent proceedings, is unconstitutional in so far as it applies to irregularities that are not cured by the act of confirmation; that the defects in the assessments in question were jurisdictional and, therefore, it was not within the power of the Legislature to cure them, and that the curative act was unconstitutional for the further reason that it attempted to give notice and a hearing after final imposition of the tax. The court, however, held the act was constitutional. “The object of the statute was to lay hold of assessments commenced several years before the act was passed and to authorize their completion by doing what had not been done, although required by law. It provides for a notice to be given and a hearing to be had in the place of those omitted, owing to a misunderstanding of the statute governing the procedure. Any person deeming himself aggrieved by the tentative assessment is given ample opportunity to make complaint, to have it duly heard and determined, and to credit or restitution if the tax has been paid and the assessment is reduced or canceled. All persons who make no complaint pursuant to the opportunity afforded, are concluded the same as they would have been if the opportunity had been duly given as required by the Tax Law. * * * A curative statute acts directly upon the defective assessment and legalizes it without further procedure by the taxing officers. This may legally be done as to such features of the procedure as might have been omitted in the original statute without affecting its validity. When, however, the new act requires something more to be done by the taxing officers *497and legalizes the assessment, provided those acts are done, it provides for a reassessment, or the completion of the old assessment. Such legislation is valid, provided the original taxing act was valid and the omission sought to be remedied is not jurisdictional, but an irregularity. Such, as we read it, is the act now before us, which we uphold as constitutional, both upon principle and authority,” with, however, one exception, and that is a provision in the first section of the act, which is not important in this action. Then the court proceeded: “ To the extent that this prohibits the courts from giving relief in actions or proceedings pending when the act was passed on account of irregularities theretofore existing, we regard it as unconstitutional, because in effect it legalizes the assessment, even if no opportunity to be heard is given as required by the other provisions of the act. This would indorse and perpetuate the original evil of condemnation without a hearing, which the Legislature had no power to do, either directly by legalizing the assessment without further proceedings, or indirectly by depriving the constitutional courts of jurisdiction in matters then pending before them. ”

As I read that decision it expressly upholds the validity of the statute (Laws of-1909, chap. 74), which in express terms provided that these assessments of bank shares made from 1901 to 1907 inclusive, as to which no application for review should be made under the act, were ratified and confirmed. Now, therefore, after the passage of the act of 1909, the assessments still continued as tentative assessments, the banks assessed had an opportunity to appear before the commissioners and have corrected any error in the assessments, and a time was fixed within which such an application to the tax commissioners must be made. The plaintiff made no such application. The statute provided that if no such application was made the assessment and the tax thereon were ratified and confirmed, and this application relates back to the time when the assessment was made and the assessment and the tax were made valid and legal, to which thereafter no objection could be made. Of course, an entirely different question would have been presented if the plaintiff had appeared before the tax commissioners and *498had presented objections to the assessment and such objection had been sustained, or if the plaintiff had applied for a writ to review the action of the taxing officers before the passage of the act of 1909, or after its passage in accordance with its provisions. But having had the opportunity to appear and present objections, and having failed to avail itself of that opportunity, it seems. to me, it is now conclusively established that the assessment was just, the tax proper, and the plaintiff is now precluded either by direct proceeding to review the tax or indirectly to recover the money or any portion thereof paid to satisfy the tax from the city of New York.

I think, therefore, the judgment appealed from must be reversed and, if the view hereinbefore taken is correct, the plaintiff has no cause of action and the complaint must be dismissed.

Laughlin and Clarke, JJ., concurred; McLaughlin and Scott, JJ., dissented.

See Laws of 1897, chap. 378, § 906; Laws of 1901, ehap. 466, § 906.— [Rep.