Slewett & Farber v. Board of Assessors of County of Nassau

Mangano, J. (concurring in part and dissenting in part).

I agree that subdivisions 3, 4 and 5 of section 307 of the Real Property Tax Law are unconstitutional. I would only like to explain my interpretation of the tortuous language and obscured intent of subdivision 3 of that section. To do so, I must view subdivision 3 in the context of the Legislature’s entire 1978 scheme for pleading and proving a claim of inequality in a proceeding to review a real property assessment.

By chapter 476 of the Laws of 1978, section 307 was added to the Real Property Tax Law and section 720 was amended. Subdivision 3 of the former essentially regulated pleadings in assessment review proceedings, while subdivision 3 of the latter regulated evidence.

A literal construction of the statutory language of these two provisions results in procedural requirements of a rather confusing nature.

Initially, it must be pointed out that sections 307 and 720 have to be read in conjunction with section 706 of the Real Property Tax Law. That section sets forth the basic contents of a petition in an assessment review proceeding. By its terms, when a proceeding is brought to review an assessment on the ground that it has been made at a higher proportionate valuation than that of other real property on the *223same roll, the petition shall state that the petitioner is or will be injured by such inequality.

Without disturbing section 706, the Legislature enacted section 307, which, in subdivision 3, requires: “in a tax review proceeding which is based in whole or in part on a claim of inequality * * * the petition required by section seven hundred six of this chapter shall allege, in addition to the contents otherwise required by such section, that the assessment has been made at a higher proportionate valuation than the assessment of other taxable real property of the same major type, as determined by the state board of equalization and assessment pursuant to section twelve hundred of this chapter”. (Emphasis added.) Thus, the 1978 legislation seemingly established pleading requirements that would necessitate a petition alleging inequality based on the subject property’s inclusion in two distinct classes of property, viz., that of all properties on the same assessment roll (Real Property Tax Law, § 706) and that of all properties of the same major type on the same assessment roll (Real Property Tax Law, § 307, subd 3).

Subdivision 3 of section 307 continues, and the confusion is compounded. It reads that “evidence to such effect [a vague phrase] may be introduced together with such evidence otherwise admissible under subdivision three of section seven hundred twenty of this chapter.” (Emphasis added.) Again, literally construed, this language seems to indicate that any evidence showing the assessment inequality of the subject property with properties in the same class, as that class is determined by the SBEA, may be introduced in the proceeding. Furthermore, this evidence may be offered in addition to such evidence otherwise admissible under subdivision 3 of section 720.

In turn, subdivision 3 of section 720 (as amd by L 1978, ch 476, § 2) sets forth the three types of evidence admissible on the issue of inequality in any assessment review proceeding. The 1978 version of this provision authorizes the very same evidence as had been authorized for such proceedings since 1961 (L 1961, ch 942, § 1), i.e., (1) selected *224parcels, (2) actual sales, and (3) the State equalization rate. The 1978 amendment failed to effect any change in the statutory language that would require parcels to be selected or actual sales to be reviewed from among class properties. Furthermore, the State equalization rate, which is a universal rate applied to all properties, was maintained as admissible evidence. In other words, the same statutory language that had always authorized inequality evidence based on assessment comparisons with unclassified property remained unchanged. Moreover, a 1977 amendment to subdivision 3 of section 720 of the Real Property Tax Law (L 1977, ch 888, § 2), which had included in the subdivision the only reference to property classification contained therein, was deleted by the 1978 amendment now under review.

As a result of the 1978 legislation, therefore, a real procedural and evidentiary disorder was created. A petitioner in an inequality proceeding had to plead inequality with all properties on the roll, as well as inequality with those similarly classified. On his proof, a petitioner could present evidence as to each of these issues, but, of course, if he did, he either proved too much or too little, or both. And, if the last, then he would have proven the elements for two exclusive recoveries, without knowing which one he could rightfully claim.

Such a result is, of course, absurd, and, by the rules of statutory construction, must be avoided (McKinney’s Cons Laws of NY, Book 1, Statutes, § 145; Smith v People, 47 NY 330). Moreover, it must be presumed that such a result was never intended by the Legislature (McKinney’s Cons Laws of NY, Book 1, Statutes, § 145).

By applying the rules of statutory construction and by reviewing the Legislative history of chapter 476 of the Laws of 1978, the Legislature’s intent in enacting subdivision 3 of section 307 of the Real Property Tax Law becomes clear. It is this intent which is the primary consideration in ascertaining the meaning and effect of any statute (McKinney’s Cons Laws of NY, Book 1, Statutes, §92).

The natural and obvious meaning of the language of subdivision 3 of section 307 (see McKinney’s Cons Laws *225of NY, Book 1, Statutes, § 94) indicates that assessment inequality petitions must allege inequality based on class comparison. If this provision is read in conjunction with section 706, as it must be (see McKinney’s Cons Laws of NY, Book 1, Statutes, § 97), the result is an apparent conflict in pleading requirements, as discussed above. Consequently, a harmonious reading of the Real Property Tax Law becomes impossible. Harmony is achieved (see McKinney’s Cons Laws of NY, Book 1, Statutes, § 98), however, when subdivision 3 of section 307 is interpreted as repealing that portion of section 706 which merely required an allegation of inequality based on a comparison with properties on the same assessment roll, without reference to their classification. If legislative intent controls, as it does (see McKinney’s Cons Laws of NY, Book 1, Statutes, § 392), this repeal by implication will be dictated. The whole spirit of subdivision 3 of section 307 is that pleading requirements are being changed and more narrowly defined. This is firmly supported by legislative memoranda urging enactment of this statutory provision. For example, the memorandum in support of the Assembly bill reads, in relevant part: “[The new law p]rovides that in alleging inequality, petitioner must show that his property is assessed at a higher proportionate value than properties of the same major type on the same assessment roll * * * This Bill would Alter [present law.] Presently, a petitioner must show that the property is assessed at a higher proportionate value than all other properties not merely similar properties.” I must conclude, therefore, that subdivision 3 of section 307 was intended to introduce new pleading requirements that -superseded those in section 706, and to that extent, contrary provisions of section 706 were repealed.

Similarly, to the extent that subdivision 3 of section 307 changed and more narrowly defined the requisite allegation of assessment inequality in such a proceeding, it necessarily refined the meaning and effect of subdivision 3 of section 720. For in revising pleading requirements in an assessment proceeding, the Legislature must have intended that the nature of the evidence to be presented in proof thereof would concomitantly change. Once again, therefore, in reading the Real Property Tax Law as a whole and in attempt*226ing to harmonize all of its parts, I must conclude that the over-all effect of chapter 476 of the Laws of 1978 was to maintain the three types of evidence authorized by subdivision 3 of section 720, but to restrict their use in assessment inequality proceedings to proving comparison with similarly classified property. Thus, after 1978, a petitioner could only show actual sales and select parcels of property of the same major type as that under review. Furthermore, the State equalization rate, as a universal rate, could no longer be used. Instead, the more appropriate class rate could be proven, even though the SBEA has categorically denied the existence of such class rates. (See Memorandum to the Governor from counsel to the SBEA, disapproving L 1978, ch 476, as quoted by Special Term, Matter of Slewett & Farher v Board of Assessors of County of Nassau, 97 Misc 2d 637, 649.) Nevertheless, at Special Term, the county suggested that such class rates for major type property may be extracted from data and information on file with the SBEA. It must be implied, therefore, that the 1978 legislation replaced the State equalization rate as admissible evidence under subdivision 3 of section 720 with evidence of SBEA’s class data as proof of a class rate. For only the latter would be relevant evidence consistent with the 1978 pleading changes.

The foregoing is an explanation of my understanding of the procedural and evidentiary scheme in assessment inequality proceedings established by and resulting from chapter 476 of the Laws of 1978. Given this understanding, it is patently clear to me that the Legislature in 1978 intended a basic revision in the very nature and purpose of such a proceeding and, consequently, in the claim presented and the recovery sought therein. No longer could a taxpayer claim an unequal assessment as compared to all other taxpayers. No longer could he seek to recover a refund because a tax levy had cast on him an unequal share of the total burden of all taxpayers. By reason of chapter 476 of the Laws of 1978, he could only claim and recover a refund representing his payment of an unfair share of the tax burden of similarly situated property owners. Thus, by implication a property tax by property type, class, or category was established, and, by procedural and evidentiary revisions *227governing assessment inequality proceedings, this new tax structure was imposed.

Convinced that subdivision 3 of section 307, in effect, created a new and different property tax from that previously imposed, I must agree that subdivisions 4 and 5 of that section authorizing'an unlimited retroactive application of subdivision 3 to all pending assessment proceedings renders all three subdivisions (3, 4 and 5) unconstitutional.

I would add that subdivision 3 effects a substantive change in New York’s property tax structure. It does so by way of implication in a statute facially concerned with pleading requirements. As a result, there is authorized an inherently vague, indefinite, inconsistent and unpredictable tax, though one of major import, considering its almost universal application. Such a tax by property type or category, absent any specifications of the various types or categories contemplated, and absent procedures (presumably administrative) for their establishment based on clear statutory definitions, necessarily lacks uniformity and equality. Thus, property owners are deprived of substantive due process and equal protection of the laws. For this reason, subdivision 3 of section 307 cannot be constitutionally sustained.

I also agree that the 1979 amendment to the Real Property Tax Law adding section 721 (L 1979, ch 127), is unconstitutional in that it violates petitioners’ equal protection rights under the Fourteenth Amendment to the United State Constitution.

Justice Lazer so ably sets forth the criteria by which courts determine the appropriate test for weighing the constitutionality of statutes under an equal protection analysis. He concludes that since the statutes under review do not discriminate against any persons by way of suspect classification nor affect any fundamental right guaranteed by the Constitution, the traditional “rational basis test” should be employed herein, rather than that of “strict scrutiny”.

I cannot question his reasoning or conclusion in this regard, nor his ultimate conclusion that under the rational basis test section 721 of the Real Property Tax Law must be declared unconstitutional.

*228I would, however, emphasize one point. Section 721 can be viewed as affording residential property owners an evidentiary method of proving unequal assessments (i.e., the State equalization rate) which is denied to all others by section 720. Admittedly, this method is an easier, more expedient, and more inexpensive way of proving inequality. Thus, considered in this context, the 1979 amendments of the Real Property Tax Law can be said to streamline assessment review proceedings for some taxpayers (§721) and not for others (§ 720). The discriminating factor is the type of property under review, i.e., residential or nonresidential. Only the owners of the former will benefit from this streamlining. Whether there can exist no rational basis for this differential treatment seems difficult to decide, considering the many distinguishing features between these two different groups of property owners.

Nevertheless, when sections 720 and 721 are read together and in conjunction with section 720 as it had previously read (L 1978, ch 476, § 2), their net effect, in reality, is not to discriminate between residential and nonresidential property owners by giving the former an evidentiary right not given the latter. Rather, by denying the use of the State equalization rate to nonresidential property owners, the effect is to take away from this one group of property owners a method of proof previously available to all property owners. In this context, I note the legislative history of chapter 126 of the Laws of 1979 which clearly reveals that the State equalization rate had been found per se to be a wholly inappropriate method of proving assessment values for taxing purposes. In fact, such evidence was characterized as “spurious and counter-productive”. Since, therefore, the availability of this irrelevant evidence is only withheld from one distinct group of property owners, the combined effect of sections 720 and 721 is completely irrational. If a certain type of evidence is deemed irrelevant to the proof of a certain fact, the identity of the person employing such evidence will not alter the irrelevant nature of the evidence.

Therefore, I concur in declaring section 721 of the Real Property Tax Law unconstitutional.

Finally, I turn to what the plurality opinion by Justice Lazer calls the ultimate infirmity in this matter.

*229The plurality decides that subdivision 3 of section 720 (as amd by L 1979, ch 126) is strictly an evidentiary statute. Its retroactive application to pending proceedings does not, therefore, divest litigants therein of any vested rights because it has retrospectively denied them the use of the State equalization rate to prove the ratio of assessment value to full market value of their properties. As stated (p 213), “there is no right to have a controversy determined by a previously existing rule of evidence”. Moreover, the plurality concludes that based on the limited record in the case at bar, it cannot be held that the alteration of evidentiary rules made by subdivision 3 of section 720 has totally deprived tax review petitioners of their remedy for obtaining a tax refund. Since the statute seems to maintain two other apparently viable methods of proof (selected parcels and actual sales) to sustain a tax review petition in an assessment inequality proceeding, taxpayers are accorded a sufficient remedy for obtaining such a refund upon a rightful claim. Thus, on the issues of vested rights and inadequate remedy, the plurality holds that subdivision 3 of section 720 meets constitutional due process standards. I concur.

The plurality then holds that despite its conclusion that subdivision 3 of section 720 is constitutional, it may not be constitutionally applied to petitioners herein. It concludes that, pursuant to former subdivision 3 of section 720, petitioners have obtained a determination at Special Term fixing the ratio of assessed value to full market value of the property now subject to review, based solely on proof of the State equalization rate for Nassau County for 1977/78. That determination, denominated an order granting partial summary judgment, is considered by the plurality to be an interlocutory judgment, and is viewed as being final in nature with regard to the adjudication of the fact of assessment to market value ratio. I disagree with this view and, to that extent, I dissent.

Critical to a discussion of this issue is a clear understanding of the nature and effect of a judgment.

CPLR 105 (subd [k]) contains the following definition: “The word ‘judgment’ means a final or interlocutory judg*230ment.” CPLR 5011 expands on this rather sparing definition, stating that, whether final or interlocutory, a judgment, to be a judgment, must constitute a “determination of the rights of the parties in an action or special proceeding” (emphasis added). “More particularly it is a judicial determination that, on matters submitted to a court for decision, a legal duty or liability does or does not exist, or that, with respect to a claim in suit, no cause of action exists or that no defense exists.” (49 CJS, Judgments, § 1; emphasis added; see, also, Wood v City of Salamanca, 289 NY 279, 282.) If final, the judgment will dispose of the entire litigation before the court, both as to subject matter and parties. (49 CJS, Judgments, § 11, subd a; 5 Weinstein-Korn-Miller, NY Civ Prac, par 5011.03.) If interlocutory, it will be “an intermediate or incomplete judgment, where the rights of the parties are settled but something remains to be done.” (Cambridge Val. Nat. Bank v Lynch, 76 NY 514, 516; emphasis added; see, also, Buffalo Elec. Co. v State of New York, 14 NY2d 453, 458; Matter of Anonymous, 71 Misc 2d 943, 944.)

It is apparent, therefore, that the unique feature of the judicial act of rendering judgment is the determination of the rights of parties, whether partially or in their entirety. (See Towley v King Arthur Rings, 40 NY2d 129, 132.)

In Sherman v Jacobson (247 F Supp 261) and Lummus Co. v Commonwealth Oil Refining Co. (297 F2d 80, cert den sub nom. Dawson v Lummus Co., 368 US 986), both cases cited by the plurality, the issue was whether a judgment by another court was final enough to preclude, by collateral estoppel, relitigation of the same issue in a subsequent case.

In Sherman v Jacobson (supra, p 265), an action to collect the proceeds of seven notes, it was determined that another court had previously entered judgment, based on findings of fact “totalling about twelve legal-size pages and conclusions of law of one page * * * [The other court] found, inter alia, that Sherman had purchased the notes and mortgages in good faith and for value in the ordinary course of business and before they were due, that Jacobson failed to establish his affirmative defenses, that each note of Jacobson sued upon by Sherman here is a valid subsisting *231obligation of Jacobson, that each note is now in default, and that the principal as claimed by Sherman is due and owing to him, plus interest from the date of each note according to its terms.” The Sherman court (p 270) held, therefore, that the foregoing was final enough for the application of collateral estoppel to the issue of the validity of the notes.

In Lummus Co. v Commonwealth Oil Refining Co. (supra), a trial court had entered an order for a preliminary injunction staying arbitration of a dispute based on contract. This order was accompanied by a finding that a substantial issue existed as to whether the contract containing the arbitration clause was the result of fraud in the inducement (p 83). On appeal the trial court was reversed on a finding that no such issue of fraud existed and the stay of arbitration was vacated (pp 83-84). In Lummus (supra, pp 89-90), it was therefore held that regarding the issue of fraud, the prior appellate determination constituted a judgment final enough to preclude further litigation of that issue.

In each of these Federal cases, it is important to recognize that whether a prior judgment had been rendered was not in question. Instead, it was whether the judgment rendered was final enough in the context of collateral estoppel. (See, also, Bannon v Bannon, 270 NY 484, 490.) It was assumed, therefore, that a judgment had been rendered, and such an assumption was altogether appropriate. For in both Sherman and Lummus (supra), the prior judgments in question had settled certain rights as disputed by the parties, viz., the right to collect on notes in default and the right to enforce an arbitration clause in a contract.

In each case, then, an ultimate fact was proven upon which “the law makes the occasion for imposing its sanctions”. (The Evergreens v Nunan, 141 F2d 927, 928.) In each case, a right was established which became enforceable and capable of execution. (See, e.g., Stigwood Organisation v Devon Co., 44 NY2d 922.) In each case, a judgment was rendered.

In the case at bar, the threshold issue, therefore, is whether any judgment was rendered by reason of Special Term’s order granting summary judgment on the issue of *232assessment ratio for 1977/78. Or was the order mislabeled a judgment?

The order reads, in relevant part: “Ordered, Adjudged and Decreed that the State Board of Equalization and Assessment having determined that the state equalization rate for Nassau County for the 1977/78 tax year (tax status date May 1,1977), is 15.80%, the ratio for the 1977/78 tax year is hereby determined to be 15.80% for the purposes of this proceeding only.” Although viewed by the plurality as an interlocutory judgment, and denominated partial summary judgment, this order constitutes nothing more than a finding of fact. It did not settle or determine any of the rights of the parties as to the ultimate issues in controversy, viz., inequality of assessment, overpayment of taxes due to inequality and the amount of refund due to overpayment. No claim, or part thereof, was sustained, nor defense dismissed. No right was established that could be enforced. No judgment was rendered that could be executed. The order appealed from simply decided an evidentiary fact, “which is indifferent in itself, does not disclose its bearing upon the legal relationship in controversy, and is introduced by a party solely for the purpose of proving another fact, the latter fact, because it involves a material element of the legal relationship in controversy, being the ultimate fact” (Ann., 152 ALR 1193).

I am convinced that, by the order appealed from, petitioners were not granted partial summary judgment, but an order limiting issues of fact for trial, pursuant to CPLR 3212 (subd [g]). As part of that order, the fact oí the assessment ratio for 1977/78, as based on the State equalization rate for that tax year, was determined.

The real issue, then, is not whether petitioners have a vested right in an interlocutory judgment, but whether they can be said to have a vested right in a finding of an evidentiary fact.

It could be argued that, although the fact.of ratio as already proven gives petitioners no substantive right, by reason of its proof alone, there exists, per se, a right to the fact itself. That is, even if the order appealed from is deemed one limiting fact issues for trial, such an order *233would have to be read, pursuant to CPLR 3212 (subd [g] ), as “establish [ing] for all purposes in the action” the fact that the assessment ratio, based on the State equalization rate, is 15.80%. Can the Legislature, therefore, retroactively change or abolish this fact or deprive petitioners of it?

The answer to this question is another question, viz., was a fact changed or abolished by the 1979 legislation or taken from petitioners? I answer this in the negative.

As so ably explained by the plurality, chapter 126 of the Laws of 1979 represents a strictly procedural revision in the manner by which assessment inequality claims are prosecuted. By retroactive application of the amended subdivision 3 of section 720, petitioners in tax review proceedings still pending, who have not as yet proven inequality, an ultimate fact in any such proceeding, are now required to do so by the select parcels or actual sales methods only. Thus, if evidence of this type is not offered, a claim of inequality cannot be sustained.

In the case at bar, petitioners have not proven inequality, but have merely proven the evidentiary fact of ratio based on the State rate. This fact was not changed or abolished or taken away from petitioners by the Legislature in 1979. It remains a proven fact. As such, petitioners are free to rest on it in proof of the ultimate fact of inequality. However, such a position would be fatal, since the Legislature, in the exercise of its unique power to regulate procedure (9 NY Jur, Constitutional Law, § 248), has established evidentiary requisites for sustaining inequality petitions, which would not be fulfilled by proof of ratio based on the State rate alone. That which petitioners have already proven, then, is not declared nonexistent by the Legislature, but insufficient to sustain their claim, the ultimate issues of which remain sub judice. Petitioners, therefore, having obtained no rights enforceable against the county1 as a result *234of the instant petition, may still prosecute their pending claim, but must do so according to currently applicable procedure.2

Accordingly, I dissent in part, to the extent that I vote to declare the retroactive application to petitioners of subdivision 3 of section 720 of the Real Property Tax Law to be constitutional.

. The plurality also sees another divestiture of property rights in the retroactive application of the current version of subdivision 3 of section 720. They hold that since petitioners herein have proven ratio by evidence of the State rate, if ratio so proven is subsequently deemed irrelevant on the ultimate issue of inequality, petitioners’ cost in proving such ratio would not be reimbursable (n. contd.) *234under section 716 of the Real Property Tax Law. I note, however, that on this record petitioners would not be eligible for any reimbursement. There is no indication that a demand for admission was served upon the county in accordance with subdivision 1 of section 716. Failure to serve such a demand prior to proof of ratio would preclude an award of reasonable fees (see Real Property Tax Law, § 716, subd 2).

Nevertheless, even if petitioners had acted in accord with section 716, proof of ratio based on State rate creates such a minimal cost that a right to reimbursement would be one controlled by the maxim de minimis non curat lex. Moreover, section 716 was enacted in 1958 (L 1958, ch 959) when proof of ratio by the State rate was unavailable to tax review litigants. Obviously, then, it was intended to relate to the costlier methods of selected parcels and actual sales then available. These methods are again the only methods available. Since trial has not as yet commenced herein, a demand under 716 can he timely served, and, if the other requirements of 716 are met, petitioners will be eligible for reimbursement of the reasonable expenses incurred in proving assessment ratio.

. As shown by the plurality this procedure neither denies the right to which the remedy relates nor makes it impossible to proceed to judgment thereon. (See 9 NY Jur, Constitutional Law, § 249.)