Niagara Mohawk Power Corp. v. City School District of City of Troy

OPINION OF THE COURT Main, J. Plaintiff Niagara Mohawk Power Corporation (hereafter Niagara Mohawk) commenced this action on June 23,1980 seeking refund of portions of real estate taxes for the years 1974-1975 through 1977-1978 which it avers were paid [168] under protest and alleging that portions of the taxes levied and collected by the City of Troy (hereafter city) were in excess of the constitutional limitation on real property taxes and thus were illegally imposed and collected. In response, and before answering, the city moved to dismiss the complaint pursuant to CPLR 3211 (subd [a]) on the ground that Niagara Mohawk had failed to present a written verified claim to the governing body of the school district as provided in subdivision 1 of section 3813 of the Education Law (hereafter subdivision 1). Special Term, in denying the motion, held that the letters of protest accompanying the payments constituted substantial compliance with subdivision 1 and, although this relief was not formally sought by Niagara Mohawk, granted leave to verify the protest letters nunc pro tunc. The city has appealed and Niagara Mohawk has cross-appealed from that portion of the order which held that subdivision 1 requires that a notice of claim be filed as a condition precedent to the commencement of an action to recover taxes allegedly unlawfully imposed and paid under protest. We disagree with Special Term in its finding that subdivision 1 is applicable. From Hurd v City of Buffalo (34 NY2d 628, affg 41 AD2d 402) came a message strong and clear, i.e., local subdivisions were put on notice that patent circumvention of constitutional limitations on their taxing powers would not be tolerated. Despite the admonition of Hurd of which it was aware, the city proceeded to enact legislation which was legally indistinguishable from that in Hurd and almost identical with the legislation ultimately and emphatically struck down by Bethlehem Steel Corp. v Board of Educ. (44 NY2d 831, app dsmd sub nom. City of Rochester v Waldert, 439 US 922) wherein the Court of Appeals found the measures to be a palpable evasion of constitutional provisions. Nonetheless, the city seeks to retain these moneys generated by this faulty legislation upon the ground that Niagara Mohawk failed to comply with subdivision 1. In our view, subdivision 1, under the circumstances presented, is inapplicable for the reason that when a tax statute is alleged to be unconstitutional, by its terms or application, or where the statute is attacked as wholly inapplicable, it may be challenged in judicial [169] proceedings other than those prescribed by the statute as “exclusive”; the invalidity or inapplicability affects the entire statute, including the limitations and restrictions provided in it (Matter of First Nat. City Bank v City of New York Fin. Admin., 36 NY2d 87, 92). Moreover, even if the section were otherwise applicable, a supposition of highly doubtful validity, where, as here, one of the purposes of the action is to seek vindication of a public interest, compliance with subdivision 1 is not required and this is so even though benefits of the proceeding will inure to the benefit of the party bringing the lawsuit as well as to other parties (Union Free School Dist. No. 6 of Towns of Islip & Smithtown v New York State Human Rights Appeal Bd., 35 NY2d 371, 379-380). While conceding that the legislation herein is identical to that presented in Bethlehem Steel Corp. v Board of Educ. (supra) and that the public interest is involved, the city contends that once the illegality has been established in an action the public interest vanishes as to any subsequent action. No sound authority is advanced for this contention. The city’s assertion that Board of Educ. v New York State Div. of Human Rights (Arluck) (44 NY2d 902, 904) is supportive of this contention is erroneous for that case speaks of “‘only enforcement of private rights’ ” as opposed to “ ‘vindication] [of] a public interest’ ”. In a case involving this same defendant and which, like this case, was an action which attacked the very jurisdiction of the taxing authorities, this court held that it was not necessary for the plaintiff to present a verified claim pursuant to subdivision 1 (see Troy Towers Redevelopment Co. v City of Troy, 51 AD2d 173). Finally, we note that the letters of protest effectively afforded the city notice and opportunity for settlement and adjustment of the issues in substantially the same manner and degree as would the verified claim provided in subdivision 1. The order should be modified, on the law, by striking the first decretal paragraph thereof which permitted plaintiff to verify the letters of protest nunc pro tunc, and, as so modified, affirmed, with costs.