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Tax Review Thwarted by “Property Owner” Technicality
by Michael Blahy

    Lenity is especially appropriate because this case involves the presence of a type of party we rarely see in our Court: a happy family. Happy families are alike in a way particularly germane to the application of lenity here. The members of happy families often do not execute formal written agreements with each other, though they clearly understand and perform the bargained-for agreements between and among them.(Judge Rowan D. Wilson)
Frank and Susan Carfora incorporated their family business, Larchmont Pancake House, to operate an IHOP franchise on property they owned in the Town of Mamaroneck. After the death of Frank Carfora, Susan Carfora became the sole owner of the property.

Susan Carfora’s will, specified that the property was to be transferred to a revocable trust (the Carfora Trust) prior to having it transferred to her two daughters Irene Corbin (Corbin) and Portia DeGast (DeGast).

In October 2009, Susan Carfora passed and the property was transferred to the Carfora Trust. Corbin and DeGast continued to operate the IHOP franchise including paying all operating expenses, which included real estate taxes. In June 2013, the property was finally transferred to Corbin and DeGast.

Real Property Tax Law (RPTL) sets out rules for filing complaints on property assessments:

  1. A complaint “must be made by the person whose property is assessed, or by some person authorized in writing by the complainant or his officer or agent to make such a statement who has knowledge of the facts stated therein"

  2. After the proper filing of a complaint, and the review of the board of assessment, a judicial review may be sought by any "aggrieved party".
As president or owner of the Larchmont Pancake House, DeGast four times filed administrative grievance complaints, challenging the real property assessments for 2010, 2011, 2012, and 2013. Each time, the board of assessment review confirmed the tax assessments.

DeGast filed tax certiorari proceedings against the Board of Assessors, the Assessor of the Town of Mamaroneck, and the Board of Assessment Review (the Town) with the Supreme Court for each of the tax years.

The Town moved to have the actions dismissed, arguing:

  1. The Supreme Court lacked subject matter jurisdiction because Larchmont Pancake House was not the owner of the real property and therefore had not satisfied the RPTL requirements for commencing the administrative proceeding

  2. Larchmont Pancake House lacked standing to challenge the tax assessments because it was not an aggrieved party.
Supreme Court declining to "hang the decision on that simplistic peg" of "the petition was ‘not signed by the owner of the property’ ", denied the motion to dismiss the petition saying that DeGast "was one of the beneficiaries of a Trust which owned the property." And that she “was an aggrieved party with the necessary standing" to ask for the judicial proceeding.

The Town appealed to the Appellate Division which reversed the lower court decision. The Appellate Division agreed that DeGast had standing as an "aggrieved party", but was not the owner of the property and therefor not eligible to file administrative grievance complaints. Accordingly, the Court held that petitioner "failed to satisfy a condition precedent to the filing of the petitions" and therefore Supreme Court "should have granted respondents' motion to dismiss the petition in each proceeding".

The case was finally taken to the New York State Court Of Appeals.

In studying the case of Waldbaum, Inc. v Finance Adm'r of City of N.Y. (74 NY2d 128, 132 [1999]) and other cases in the State of New York, a taxpayer is aggrieved under article 7 where the tax assessment has a "direct adverse affect on the challenger's pecuniary interest" . . . When an assessment is laid, it is "[t]he owner of the land" whose property is "rendered much less the valuable to him" and "worth so much the less in the market". A lessee of an undivided assessment unit may be aggrieved by a tax assessment "if legally bound by the lease to pay the entire assessment on behalf of the owner at the time it is laid.

In the Waldbaum case, the lease with the shopping center allowed the shopping center to modify the annual rent based on changes to property tax. It was decided that Waldbaum, as a practical matter, the property assessment had an adverse financial impact on the petitioner, it had, "in the legal sense," only a "remote and consequential impact" on the petitioner's pecuniary interest - "not the required direct adverse affect necessary to confer standing".

In a lease where the tenant assumes the undivided tax liability ensures the requisite direct pecuniary impact . . . only a lessee who is "obligated to pay" an assessment is sure to "lose something from his own property or means”.

The Court Of Appeals also noted that requiring [a] direct legal obligation also promotes the goals of clarity, efficiency, and judicial economy embodied in the RPTL:

  • avoiding a fracturing of challenges against an assessment

  • preventing duplicative petitions

  • protecting the taxing authority from multiple litigations as to the same parcel by parties of unknown relation to the taxed premises
    By narrowing the field of appropriate challengers, this bright line rule avoids needless confusion and thereby minimizes the risk of fractured and duplicative assessment challenges.
In this case, during the years 2010, 2011, 2012, and 2013 the petitioner was not "legally responsible" for paying the undivided tax liability . . . But like any tenant . . . petitioner could have ceased paying the property taxes at any time without incurring any direct legal consequence vis-à-vis the taxing authority or the property owner. Instead, it was the property owner - the Carfora Trust - that risked loss of the property if the taxes were not paid.

In a five to two split decision, the majority found that [p]etitioner (the Larchmont Pancake House) is a non-owner with no legal authorization or obligation to pay the real property taxes and, as such, petitioner is not an aggrieved party within the meaning of RPTL article 7. Because petitioner lacks standing, we have no occasion to consider the parties' dispute concerning the scope of appropriate challengers under RPTL 524. Accordingly, the order of the Appellate Division should be affirmed, with costs.

In dissenting, Judge Wilson (Judge Rivera concurs) wrote:

    The majority holds that a person who, pursuant to a longstanding arrangement, pays 100% of the property taxes on a piece of land, cannot "claim[] to be aggrieved" even by the improper inflation of the property taxes they pay.

    That conclusion is as wrong as it sounds. Worse still, the mistake relied on to divest these aggrieved taxpayers of their right to judicial review is purely clerical: hardworking pancake proprietors, following their mother's death, listed the name of their business instead of the name of the trust that temporarily held legal (but not equitable) title to the land on which their business sat. The trust filed an affidavit saying it would have approved of the tax proceedings when they were filed, and executed authorizations of the proceedings once the problem was brought to its attention. To top it off, the Town knew all along who owned the property and did not see fit to mention it until four years had passed. All agree the claimed error was harmless, yet the Court dismisses the proceedings anyway.

    For almost a century, we have followed the rule that courts should disregard errors like this, so that taxpayers can vindicate their rights to an accurate and equitable property tax assessment.

(Larchmont Pancake House v Board of Assessors (New York State Court of Appeals, 2019 NY Slip Op 02441))

Decided: April, 2019
Published: April, 2019

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