Appellants Reply Brief — Equitable Life Assurance Society of the United States v. Finance Administration

OCT 25 tom

No. 62-290 ALEXANDER L. STEVAg,

CLERK

Supreme Court of the United States

October Term, 1982

THE EQUITABLE LIFE ASSURANCE SOCIETY

OF THE UNITED STATES,

0 Appellant,

THE FINANCE ADMINISTRATION AND THE

TAX COMMISSION OF THE CITY OF NEW YORK,

and

ROBERT ABRAMS,

Attorney General of the State of New York,

Appellees.

On Appeal From the Court of Appeals of New York

BRIEF OPPOSING MOTIONS TO

DISMISS OR AFFIRM

October 22, 1982

international Printing Co., 711 So, GO St, Phila. Pa. 19143 — Tel. (216) 727-6711

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Jurispiction Lies Id THis Coubuauamnmʒm cece eens 4

Tue Feperat Question Is SünsTAN TI. 6

. 10

(i)

Cases Cited: Page

American Export Lines, Inc. v. Alvez, 446 U. S. 274 (1980) 5

Colt Industries, Inc. v. Finance Adminisitator of the City of

New York, N. V. L. J., June 4, 1980, at 10, col. 2 (Sup.

Ct. N. V. Co., June 12, 1980) (A20-21), aff'd, 81 A. D. 2d

777, 439 N. V. S. 2d 385 (Ist Dept. 1981), aff'd in part,

mod. in part, 54 N. V. 2d 533, 446 N. V. S. 2d 237

ere 2.7

Colt Industries, Inc. v. Finance Administrator of the City of

New York, 54 N. V. 2d 533, 446 N. V. S. 2d 237 (1982) 5,7

Cox Broadcasting Corp. v. Cohn, 420 U. S. 469 (1975) ..... 4.5

Guaranty Trust Co. v. York, 326 U. S. 99, reh’g denied, 326

rr eee se 00 7

Ed Guth Realty, Inc. v. Gingold, 34 N. Y. 2d 440, 358 N. v. S.

eee ' eee 3

Mills v. Alabama, 384 U. S. 214 (196866)))))))) 5

People ex rel. Parklin Operating Corp. v. Miller, 287 N. v.

ee eee eee eee 4

Pope v. Atlantic C. L. R. Co., 345 U. S. 379 (1953) ........ 5

Radio Station WOW, Inc. v. Johnson, 326 U. S. 120 (1945) 5

Shapiro v. Thompson, 394 U. S. 618 (1969) .............. 8

Slewett & Farber v. Board of Assessors, 54 N. Y. 2d 547, 446

re céccccdbcosodes 4

Statutes Cited:

Ze 4,5

Act of April 27, 1969, ch. 302, McKinney's 1969 New York

2 de ccccccsiddoececctccoccocctose 2

Act of December 3, 1981, ch. 1057, §7, McKinney's 1981

N. V. Session Laws (Mar. 1982 Supp. at 1981-233) .... 3,5

N. V. Real Property Tax Law §716 (McKinney 1972) ..... 8,9

(ii)

TABLE OF AUTHORITIES (Continued)

Miscellaneous:

Study for City Calls Realty Tax ‘Hideously Inequitable’, N. V.

Times, Apr. 24, 1981, § 1, at 1, col. 2 2

Real Property Tax Policy for New York City, “A study con-

ducted under contract with the Department of Finance,

City of New York, by Graduate School of Public Admin-

istration, New York Unviresity” December 31, 1980 at I-2

(iii)

No. 82-290

Supreme Court of the United States

October Term, 1962

THE EQUITABLE LIFE ASSURANCE SOCIETY

OF THE UNITED STATES,

Appellant,

THE FINANCE ADMINISTRATION AND THE TAX

COMMISSION OF THE CITY OF NEW YORK,

and

ROBERT ABRAMS,

Attorney General of the State of New York,

Appellees.

Ow Arr. Fuom tas Cover or Arrzais or New Yoru

is the term a recent study,

prepared by the Dean of New York University’s Graduate

School of Publie Administration and commissioned by the

City of New York, used to describe the real property

assessment practices of New York City. Study for City

Calls Realty Taw ‘Hideously Inequitable’, N. T. Times,

Apr. 24, 1981, §1, at 1, col. 2. Despite the inequity in

(1)

2 Brief Opposing Motions to Dismiss or Affirm

assessment practices of New York City, which can fairly

be described as a classification system with 830,000 classes

—each parcel of real property is its own cless—and the rate

of tax for each class deiermined by neither the State Con-

stitution, State law or the legislative bodies of the City

of New York,’’ there have been no real estate tax inequal-

ity challenges within the City for approximately eighty

years. Real Property Tax Policy for New York City, A

study conducted under contract with the Department of

Finance, City of New York, by Graduate School of Public

Administration, New York University December 31, 1980

at 1-2. See Colt Industries, Inc. v. Finance Administrator

of the City of Jew York, N. T. L. J., June 4, 1980, at 10, col.

2 (Sup. Ct. N. V. Co., June 12, 1980) (A at 27),' af d, 81

A. D. 2d 777, 439 N. Y. S. 2d 385 (ist Dept. 1981), af d

in part, mod. in port, 54 N. T. 2d 588, 446 N. T. 8. 2d 287

(1982).

Appellee, Robert iio, Attorney General of the

State of New York (‘‘State’’), correctly concludes that in-

come-producing property owners, who previously failed

to prosecute their tax certiorari petitions, began to notice

the proceedings for trial on the basis of inequality of

assessment when it became apparent that an effective rem-

edy to redress such inequality was available. S. M. at 5.“

The perceived effective remedy derived from a State legis-

lative enactment and a decision of the Court of Appeals

of New York. First, in 1969, the Legislature amended

New York Real Property Tax Law §720(3), Act of April

27, 1969, ch. 302, McKinney’s 1969 New York Session Laws

399, and permitted exclusive reliance upon the State

Equalization Rate in real property tax proceedings predi-

1. Appendix references are to the appendix to the Jurisdictional

Statement and are designated “A”.

2. The Motion to Dismiss or Affirm of the State is designated

“S. M.”; the Motion to Dismiss or Affirm of the Finance Admin-

istration and the Tax Commission of the City of New York (“City”)

is designated C. M.“

Brief Opposing Motions to Dismiss or Affirm 3

v. Gingold, 34 N. Y. 2d 440, 447-450, 358 N. Y. S. 2d

367, 371-373 (1974), held that the State Equalization Rate

tions equal

tices, effectively restores to New York City the historic

freedom from challenge of its unequal assessment prac-

tices.

The State and the City of New York urge that this

4 Brief Opposing Motions to Dismiss or Affirm

The decision of the New York Court of Appeals is a

final judgment or decree within the scope of 28 U. S. C.

§ 1257. A tax review proceeding predicated upon a claim

of inequality of assessment is a bifurcated proceeding in

which there is an initial trial of the issue of the aggregate

ratio of assessed values-to-fair market values within the

assessing unit. The second aspect of the proceeding is a

trial of the fair market value of the property whose specific

tax assessment is challenged. The ratio established in the

initial trial is applied to the value determined in the second

stage. Slewett d Farber v. Board of Assessors, Nassau

County, 54 N. Y. 2d 547, 555, 446 N. Y. S. 2d 241, 243

(1982); S. M. at 3; C. M. at 3. The decision of the Court

of Appeals on the federal issue presented herein pre-

ordains the outcome of further proceedings: Appellant,

the Equitable Life Assurance Society of the United States

(‘*Equitable’’), is precluded from using the State Equali-

zation Rate to establish the aggregate ratio of assessed

values-to-fair market values in the City; the cost of the

sales and selected parcels methods of proof precludes

Equitable from using either, or both, of these methods to

establish the de facte standard of assessment within the

Oity; no other remedy is statutorily available. J. S. at

12-14.“ Were Equitable to proceed solely with the valua-

tion issue, the trial court would be required to apply the

de jure full value assessment standard, not the de facto

standard sought by Equitable. See People ex rel. Parklin

Operating Corp. v. Miiler, 287 N. Y. 126, 128-29 (1941).

Thus, the issue of whether Equitable’s property has been

assessed at a greater percentage of full value than that

percentage generally prevailing in the City effectively can-

not be addressed. The outcome of the case is pre-ordained.

The federal question presented herein and at each judicial

level is the controlling question. There is no additional

remaining federal question; nor will there be. In these

circumstances, jurisdiction lies in this Court. Cow Broad-

3. The Jurisdictional Statement is designated “J. S.”.

Brief Opposing Motions to Dismiss or Affirm 5

casting Corp. v. Cohn, 420 U. S. 469, 479 (1975); Pope v.

Atlantic C. L. R. Co., 345 U. S. 379, 381-383 (1953); Mills

v. Alabama, 384 U. S. 214, 217-218 (1966).

Appellees urge that the decision of the Court of Ap-

peals pertains solely to the facial validity of L. 1981, ch.

1057, 67 and not to the constitutionality of the statute as

applied. S. M. at 12; C. M. at 8. The Court of Appeals,

however, unequivocally stated: [Wie hold this section of

the Real Property Tax Law IL. 1981, ch. 1057, 671, as

enacted on December 3, 1981, to be constitutional. Colt

Industries, Inc. v. Finance Administration of the City of

New York, 54 N. V. 2d 533, 544, 446 N. Y. S. 2d 237, 240

(1982) (A at 6). Moreover, Appellees have drawn a dis-

tinction without a difference. It is clear that a lower court,

being required to follow the mandates of the Court of

Appeals, will apply the statute so as to deny Equitable use

of the State Equalization Rate to establish the inequality

of its real property assessments.

Secondly, even were Equitable to proceed with the

valuation trial, the issue of whether its assessments are un-

equal vis-d-vis that of all other property in the City effec-

tively cannot be determined in light of the decision of the

Court of Appeals that Equitable is precluded from relying

upon the State Equalization Rate. The only issue which

would be reviewable in further State proceedings is the

correctness of the valuation decision—an issue which

hardly presents a federal question. Therefore, the situa-

tion presented herein also falls within the second category

of cases enunciated in Cox Broadcasting Corp. v. Cohn,

supra, 384 U. S. at 480, in which the federal issue, finally

decided by the highest court in the State, will survive and

require decision regardless of the outcome of future stato-

court proceedings. See American Export Lines, Inc. v.

Alves, 446 U. S. 274, 279 (1980) ; Radio Station WOW, Inc.

v. Johnson, 326 U. S. 120, 123-27 (1945).

For the foregoing reasons, the decision of the Court

of Appeals on the federal issue should be deemed a final

judgment for the purposes of 28 U. 8. C. 61257. Cor

Broadcasting Corp. v. Cohn, supra, 420 U. S. at 477.

6 Brief Opposing Motions to Dismiss or Affirm

In their attempt to defeat Equitable’s position that

this Court should note probable jurisdiction of this appeal,

Appellees incorrectly assert: 1) that the decision of the

Court of Appeals relates to a procedural issue which is a

matter of state and local concern; 2) that Equitable may

establish the aggregate ratio of assessed values-to-market

values by use of sales and selected parcels methods of

proof; and 3) that, in any event, Equitable can be com-

pensated for the costs of proving the aggregate ratio.

S. M. at 15, 12, 13; C. M. at 7, 9, 8.

As evidenced by the Record (Haims Affidavit; A at

48-49), use of the sales and selected parcels methods of

proving the de facto standard of assessment for just one

of the geographic sections in New York City would cost

approximately 63,000,000.“ By extrapolation, it is easy to

see that the cost of establishing the de facto standard of

assessment for the entire City of New York by use of these

methods would be astronomical. In contrast to the over-

whelming costs of proving the City-wide de facto standard

of assessment, Equitable’s potential recovery is small.

For example, with respect to the property located at 645

Madison Avenue, Equitable’s maximum potential recovery

is 62,721,900.“

4. Manhattan has 8 such sections; the other four boroughs in

New York City comprise approximately 90 such sections.

5. This figure is derived from the claimed values, claimed equali-

zation rates and actual assessments which appear in each petition and

were part of the Record in the Court of Appeals. The sum is the

result of the following processes: (1) the claimed fair market value

of the property is multiplied by the claimed equalization rate for each

tax year at issue, (2) the products, which represent the equalized

claimed values, are subtracted from the corresponding actual annual

assessments, (3) the difference for each tax year is multiplied by the

appropriate actual tax rate.

The maximum potential recovery with respect to the property

located at 717 Fifth Avenue, as calculated from figures appearing in

the Record, is $3,540,985.

Brief Opposing Motions to Dismiss or A firm 7

The Court of Appeals in this case held that Equitable

has the right to proceed on a whole-roll basis of compari-

son.“ Given the fact that under New York law a taxpayer

has the legal right to have its property assessed at the

prevailing City-wide rate and given the astronomical costs

of proving such rate in New York City by use of the sales

and selected parcels methods, the Appellees’ assertion that

the decision of the Court of Appeals concerns only a pro-

cedural’’ matter is meaningless. The effect of the decision

is substantial, regardless of the characterization applied

to its subject matter.

Moreover, Equitable has established that denial of

the use of the State Equalization Rate in challenges to

real property assessments predicated upon claimed in-

equality of assessment is outcome-determinative and,

therefore, substantiv:. See Guaranty Trust Co. v. York,

326 U. S. 99, 109, reh’g denied, 326 U. S. 806 (1945). If, as

asserted by the City and State, such a denial is merely

procedural in nature and the sales and selected parcels

methods of proof do provide real remedies, why has no City

taxpayer proceeded with an inequality of assessment chal-

lenge for the past eighty years? Whatever appellation is

attributed to the denial of the use of the State Equaliza-

tion Rate, its constitutional impact cannot be denied.

The cases cited by both the City and the State for the

proposition that the sales and selected parcels methods of

6. Equitable at every step of the proceeding, has asserted its

right to have its assessments reviewed on a whole-roll basis, i. c., a

City-wide basis. The cost estimate in the Haims Affidavit, however,

was prepared in accordance with the ruling of the trial court in Colt

Industries, Inc. v. Finance Administration of the City of New York,

supra, that a valid classification system of assessment exists in New

York City and that an inequality challenge in the City may proceed

only on the basis of a comparison of the challenged assessment with

that of comparable (like-kind) properties within a section of the City.

The Court of Appeals rejected the lower court’s conclusion in Colt

Industries, Inc., supra, when it considered this issue on appeal. 54

N. V. 2d at 541, 446 N. V. S. 2d at 238 (A at 2).

8 Brief Opposing Motions to Dismiss or Affirm

proof are real, not illusory, remedies are inapposite to the

situation faced by New York City taxpayers. Each and

every cited case involved properties in assessing units out-

side the City, where the costs of proving inequality of

assessment by these methods would be substantially less.

See S. M. at 12-13; C. M. at 8-9.

Finally, the State and Nassau County (as Amicus

Curiae) have themselves implicitly admitted that the chal-

lenged statute is substantive. While asserting that the

challenged statute is only procedural, the State itself has

defeated this assertion by claiming: ‘‘[T]he automatic

‘application of the state rate, once litigated, threatened

units such as Nassau County and the City of New York

(if the R. P. T. L. was applicable) with sudden exposure

to the refund of billions of dollars in real property tax

refunds [footnote omitted... S. M. at 5.“ The State’s

theme is echoed by the County of Nassau which indicates,

at page 2 of its Amicus Curiae brief, that the County

Executive directed sponsorship of the brief [i lnasmuch

as the evidentiary ratio issue can and will substantially

affect the Treasury and Assessment Roll of the County of

Nassau. These statements are implicit admissions

not only of a widespread inequity in the system of real

property tax assessments in these areas but also of the

inability of taxpayers to present an effective challenge to

that inequitable system by use of the sales and selected

parcels methods. Legislation to insulate municipalities

from purported financial harm or the consequences of ille-

gal acts cannot be sustained, particularly when weighed

against individual constitutional guarantees. See Shapiro

v. Thompson, 394 U. S. 618, 633 (1969).

The fact that there is a statutory provision for the

recovery of expenses in certain limited circumstances does

not make remedial that which otherwise is a non-remedy.

Section 716 of the New York Real Property Tax Law pro-

7. The State observes that ſilu the City of New Yor" this ex-

posure was reported at 17 to 2.7 billion dollars.” S. M. at 5 (f.n.).

Brief Opposing Motions to Dismiss or Affirm 9

vides that recovery of expenses is possible only in those

situations where, upon the refusal of an assessing unit to

admit to a demanded ratio, the taxpayer ‘‘proves that the

percentage of full value at which other real property in

the assessing unit is assessed is not in excess of the per-

centage specified in his demand... (emphasis added).

Moreover, the court, upon application for recovery of ex-

penses, need not order reimbursement if it finds that the

assessing unit had good and sufficient reason for its failure

to admit the ratio of assessment. Id. Thus, this statutory

provision hardly is a guarantee of cost recoupment; nor

is it an incentive to a taxpayer to spend millions of dollars

8. The full text of this section provides :

§716. Admission of percentage of full value at which real

property is assessed.

1. Except in a proceeding to review a special franchise assess-

ment, at any time after answer has been served or has been

deemed made and not later than twenty days before the trial,

the petitioner may serve upon the respondent a demand for

admission for the purposes of such proceeding that the percent-

age of full value at which other real property is assessed in the

unit is a percentage specified in such demand, but not in excess

of ninety-five per centum. Unless the respondent within fifteen

days after service of such demand, or within such further time

as the court may allow on motion on notice, serves and files a

notice specifically denying that the percentage specified in such

demand is correct, such percentage shall be deemed admitted.

2. After being served with such demand if the respondent serves

such a notice of denial, and the petitioner thereafter proves that

the percentage of full value at which other real property is as-

sessed in the assessing unit is not in excess of the percentage

specified in his demand, he may apply to the court at or im-

mediately following the trial for an order requiring the respondent

to pay him the reasonable expenses incurred in making such

proof including the reasonable fees of experts and attorneys.

Unless the court finds that there was good and sufficient reason

for the respondent’s denial, the order shall be made irrespective

of the results of the proceeding.

10 Brief Opposing Motions to Dismiss or Affirm

up-front inasmuch as he could find himself in the position

of demanding admission of a fifty percent ratio and, upon

denial of such demand, establishing a fifty-one percent

ratio. In such an event, the taxpayer could not apply to

recover the costs-of-proof even though he had substar tially

prevailed on his claims.

Thus, the decision of the Court of Appeals, precluding

use of the State Equalization Rate to establish the viola-

tion of the right of a New York City real property tax-

payer to equality of assessment, effectively denies chal-

lenge of unequal assessments. The federal question is

substantial.

CONCLUSION

For the foregoing reasons, this Court should note

probable jurisdiction of this appeal.

Respectfully submitted,

Davi A. Ross

Member of the Bar of the

United States Supreme Court

Decusrt Price & RRHOA DO

Eleven Broadway

New York, N. Y. 10004

Counsel of Record for Appellant

The Equitable Life Assurance

Society of the United States

Of Counsel:

Ga G. Moscow

H. Faancn DeLonz, Jr.

Dated: October 22, 1982