Posted on Jun 15, 2016 in NYMuniBlog Main
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By The Hon. Victoria A. Graffeo
On June 9, 2016 an important opinion dealing with tax reimbursements was issued by the New York Court of Appeals, the state’s highest court. With 733 school districts in our state, any pronouncement by the Court regarding the interpretation of tax certiorari statutes can have an effect on district budgeting and reserve accounts. In Matter of Westchester Joint Water Works v Assessor of City of Rye, the Court was asked to decide whether a taxpayer can be given an additional six months after a court dismisses a tax certiorari petition because the taxpayer failed to send a school district the required notice and petition within 10 days of serving the municipal assessment authority and there was no good cause for the oversight. Recognizing the importance of school districts receiving proper notification so that districts can decide whether to participate in the court proceedings and if monies should be placed in reserve funds, the Court rejected the taxpayer’s argument that it was entitled to an extension of time after the expiration of the statute of limitations to recommence the proceeding.
The facts of this case were not in dispute. The petitioner/taxpayer owned a water supply and pipe system in Westchester County and challenged its tax assessments for years 2002-2010 by commencing nine tax certiorari proceedings against the City of Rye Assessor. In addition to serving the municipality, Real Property Tax Law (RPTL) 708 (3) further requires, with certain exceptions, that within 10 days of the service upon the municipality, a copy of the notice of petition and the petition in a tax certiorari proceeding must be mailed to the superintendent of any school district in which a portion of the real property subject to the contested assessment is situated. In this case, one parcel was located within the Rye City School District and one fell within the boundaries of the Rye Neck Union Free School District.
The Rye City school district received timely notice but the Rye Neck school district was not notified. In the process of settling the contested assessments regarding the other parcel, petitioner’s lawyer realized the oversight regarding the Rye Neck school district and advised the superintendent of the mistake. The school district sought to intervene in the proceeding, and after the trial court granted the Rye Neck school district intervenor status, it requested the dismissal of the proceeding under RPTL 708 (3). The city also similarly moved to dismiss the proceeding. This prompted the taxpayer to ask the court for leave to recommence the proceeding, relying on a six-month grace period provided under CPLR 205 (a) for dismissed actions which are not terminated on the merits but the statute of limitations has expired. The trial court dismissed the proceeding with respect to the parcel at issue for failure to comply with RPTL 708 (3) and declined to permit the extended time under CPLR 205 (a) to start a new proceeding. It also held the city lacked standing to move for dismissal of that petition since it was properly served with notice. On appeal, the Appellate Division, Second Department, determined that the city had standing to contest the proceeding and dismissed the petitions involving the Rye Neck parcel against both the city and the Rye Neck school district. The intermediate appellate court further upheld the denial of the taxpayer’s request to take advantage of CPLR 205 (a).
The New York Court of Appeals accepted the taxpayer’s appeal and had to determine whether noncompliance with the RPTL 708 (3) notification requirement can be corrected through the use of the extension of time to recommence provided by CPLR 205 (a). The unanimous answer was no. Its analysis began with a review of the legislative history underlying the enactment of RPTL 708 (3) in 1996, noting that the state Legislature was concerned that school districts needed to be assured of an opportunity to participate in tax certiorari proceedings. To accomplish these objectives, the Legislature adopted several amendments, of which two were pertinent. First, a requirement that a petitioner in a tax certiorari proceeding send the notice of petition and the petition to the affected school district(s) within 10 days of the date of service upon the municipality. Equally important, new language was added to RPTL 708 (3) providing that a failure to comply with such requirement “shall result in the dismissal of the petition, unless excused for good cause shown.” Since the courts below had not found good cause for the error, the taxpayer sought to resurrect its assessment challenge by using the additional time provision found in CPLR 205 (a).
In considering the interplay between the two statutes, the Court discussed the different treatment of CPLR 205 (a) in earlier appellate precedent and concluded that precluding recommencement under CPLR 205 (a) was the better rule because the statutory construction “reflects an intent to permit a petitioner who has ignored the subject mailing requirement to proceed only where the error is found to be excusable.” Since RPTL 708 (3) expressly addresses the failure to comply, there was no need to resort to the CPLR. The Court noted that to do as the taxpayer requested would essentially write out the specific dismissal provision of the statute.
From a policy perspective, the Court emphasized that the Legislature recognized the importance of a school district receiving notice in a tax certiorari case, thereby enabling a district to consider whether to participate in a proceeding and whether it should place monies in reserve, as permitted by Education Law section 3651 (1-a), in the event that it has to satisfy a judgment awarded a taxpayer. Since some judgments in these tax certiorari cases can be quite substantial, the outcome of a tax certiorari proceeding can create a budget deficit or other fiscal problems for school districts. School districts should be alert to determine if timely notice has been received, and if not, the courts will now be required to dismiss the proceeding against the school district if there was no good cause for the failure to serve notice.
Please note: Harris Beach represented the Assessor of City of Rye in this matter in which the Court of Appeals upheld the Appellate Division, Second Department’s earlier decision in favor of the City of Rye, as well as the Rye Neck School District, dismissing nine years of tax certiorari proceedings and denying petitioner’s request to refile under CPLR 205 (a).