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TRUMP-EQUITABLE FIFTH AVENUE COMPANY v. CITY NEW YORK ET AL. (07/26/90)

SUPREME COURT OF NEW YORK, APPELLATE DIVISION, FIRST DEPARTMENT No. 39885 1990.NY.49356 <http://www.versuslaw.com>; 559 N.Y.S.2d 692; 160 A.D.2d 7 July 26, 1990 TRUMP-EQUITABLE FIFTH AVENUE COMPANY, RESPONDENT-APPELLANT,v.CITY OF NEW YORK ET AL., APPELLANTS-RESPONDENTS Cross appeals from an order and judgment (one paper) of the Supreme Court (Harold Tompkins, J.), entered September 7, 1989 in New York County, which held that respondent City of New York incorrectly allocated certain tax benefits between residential and commercial units of a building owned by petitioner, annulled certain remission letters, upheld the computation by respondent City of said building's aggregate floor area, and declared interest on additional tax refunds to be payable only after entry of judgment. Kevin L. Smith of counsel (Leonard Boxer, Janis Ettinger and Mitchell C. Shapiro with him on the brief; Stroock & Stroock & Lavan, attorneys), for respondent-appellant. Edith I. Spivack of counsel (Regina Feder with her on the brief; Victor A. Kovner, Corporation Counsel, attorney), for the appellants-respondents. Asch, J. Murphy, P. J., Sullivan, Milonas and Rosenberger, JJ., concur. Author: Asch


Cross appeals from an order and judgment (one paper) of the Supreme Court (Harold Tompkins, J.), entered September 7, 1989 in New York County, which held that respondent City of New York incorrectly allocated certain tax benefits between residential and commercial units of a building owned by petitioner, annulled certain remission letters, upheld the computation by respondent City of said building's aggregate floor area, and declared interest on additional tax refunds to be payable only after entry of judgment.

Asch, J. Murphy, P. J., Sullivan, Milonas and Rosenberger, JJ., concur.

Author: Asch

 OPINION OF THE COURT

Petitioner Trump-Equitable Fifth Avenue Company is a joint venture, initially owning a parcel of property located on Fifth Avenue commonly referred to as Trump Tower. This 59-story structure is a mixed-use condominium consisting of 18 floors of retail and commercial space and 38 residential floors housing 266 luxury units. The City's Department of Housing Preservation and Development (HPD) calculated that 64.6% of the building's aggregate areas is residential and the rest commercial.

In July 1980, when construction of the project began, municipal respondents (the City) twice denied petitioner's application for partial exemption from local real property taxes under Real Property Tax Law § 421-a. Pursuant to this statute, during construction and the first two years afterward, the property owner receives a full benefit of exemption. Thereafter, it is phased out in increments of 20% every two years. Petitioner successfully challenged the City's denial of such benefits (Matter of Trump-Equitable Fifth Ave. Co. v Gliedman, 57 N.Y.2d 588, after remand 62 N.Y.2d 539). During the construction, petitioner sold individual residential condominium units at Trump Tower, which had been designated as a single lot on the City's tax map. From the 1984-85 fiscal year, it was redesignated as numerous lots to reflect the new condominium status. Petitioner retained sole ownership of the commercial portion, which was designated as a single lot (lot 1001). Trump Tower was completed in June 1984.

During the pendency of the court challenges to the City's denial of section 421-a tax benefits, petitioner paid the City's tax assessments under protest. After the Court of Appeals ruled petitioner was entitled to receive section 421-a tax benefits, the City gave petitioner a refund check in March 1986 and then issued a set of remission letters in April 1986 concerning the payment of certain refunds for the overpayment of tax assessments for the 1981-82 through 1983-84 tax years. The refund, however, was based on an application of section 421-a tax exemption benefits to that portion of Trump Tower which consisted of residential units calculated to be 64.6% of the building's aggregate floor area. Petitioner maintains the correct amount of residential units is 66.31% of aggregate floor area.

In 1986, petitioner commenced a proceeding challenging the City's refund on the grounds that the City (1) failed to provide petitioner with a section 421-a tax exemption to the commercial unit of up to 12% of that area; (2) miscalculated the floor space as to the differential between the residential and commercial spaces; (3) incorrectly applied the entire tax-exempt percentage to the residential units after it unlawfully segregated the building into its commercial and residential parts; and (4) failed to pay interest on refunds pursuant to CPLR article 50.

In February 1988, the Court of Appeals, in Matter of Alamo Assocs. v Commissioner of Fin. of City of N. Y. (71 N.Y.2d 340), determined that the City was required to assess the taxable valuation of a mixed-use condominium building by applying the tax exemption of RPTL 421-a on a building-wide basis, including its nonresidential units, regardless of whether such space was "incidental" to the residential units. Thereafter, the City issued another set of remission letters, in July 1988, to petitioner.

According to petitioner, these 1988 remission letters (1) miscalculated the ratio of residential/commercial floor space at Trump Tower as being 64.6% to 35.44%, respectively, instead of 66.31% to 33.69%, in calculating tax refunds and remissions for tax years 1981-82 through 1988-89; (2) improperly allocated the entire nonexempt portion of the Trump Tower assessed valuation to the commercial unit alone, rather than applying one tax-exempt percentage to each of the building tax lots, as purportedly required by section 421-a; (3) miscalculated a statutory 20% reduction in the amount of the tax exemption for the third and fourth tax years (1987-88 and 1988-89) by using an erroneous base figure; and (4) improperly reduced the amount of the tax exemption on the commercial unit by adding the portion of the alternative minitax assessment, instead of using it as an alternative, to the tax on the lot as a whole. Additionally, petitioner sought interest on all refunds going back to 1981.

The IAS court, relying primarily on Alamo (supra), decided all of the issues in favor of petitioner except on the issue of the measurement of floor space. The court determined that the City's calculation of section 421-a tax benefits to Trump Tower as a whole was incorrect, as only one exempt percentage for all of the tax lots had to be calculated and applied equally to the residential and commercial units of Trump Tower. The court further determined that the correct method of tax assessment to the individual residential unit owners was an assessment to each condominium unit based on RPTL 421-a. The court also declared that all of the residential/commercial unit owners were to pay the taxes on a proportionate basis. The court, however, deferred to the City's Department of Housing Preservation and Development's computation of the percentages of floor space allocated to the residential and commercial portions of Trump Tower, which were based on regulations which measured the aggregate floor area from the interior faces of the exterior walls, and not the exterior of the exterior walls, as urged by petitioner. Finally, the court rejected the City's argument that there was no authority for the payment of interest in a CPLR article 78 proceeding, but limited such interest to further refunds pursuant to CPLR 5003 from the time of judgment. The court also rejected the City's other arguments that the action should be dismissed because the owners of the residential condominium units were not joined as necessary parties, or because petitioner was time barred from seeking relief as to the tax years 1981-82 through 1984-85 due to the City's payment of tax refunds in 1985. [1] The City's calculation as to the ratio of commercial and residential space at Trump Tower was improper, and the IAS court's acceptance of it was erroneous. The HPD's architect's findings allocated the ratio as being 64.6% residential to 35.4% commercial. This computation was based on HPD's measurement of the premises from the interior faces of the exterior walls, as required by HPD's "Rules and Regulations Governing Tax Exemption pursuant to 421-a of the Real Property Law". Section 1.3 (5) of the rules defines "aggregate floor area" as "the sum of the gross horizontal areas of a dwelling or dwellings and accessory structures on a lot measured from the interior faces of exterior walls".

While the City asserts that nothing in the record questions the accuracy of its calculations, the accuracy of the calculations is not the issue here but, rather, the method of calculation. Moreover, the City fails to address the glaring contrast between HPD's rules and regulations governing the computation of the floor area ratio in dispute and the section 421-a statute itself. Section 421-a (1) (b) defined "floor area" as "[t]he horizontal areas of the several floors or any portion thereof of a dwelling or dwellings and accessory structures on a lot measured from the exterior faces of exterior walls or from the center line of party walls". While "aggregate floor area" is not separately defined in the statute, the wording contained in the statutory definition of "floor area" appears to encompass its usage through its plural reference to "floor". Since "'the words of the statute are clear and the question simply involves the proper application of the provision "there is little basis to rely on any special competence or expertise of the administrative agency and its interpretative regulations", especially when the interpretation, as embodied in a regulation, directly contravenes the plain words of the statute (Kurcsics v Merchants Mut. Ins. Co., 49 N.Y.2d 451, 459)'." (Matter of Trump-Equitable Fifth Ave. Co. v Gliedman, 62 N.Y.2d 539, 545, supra.) Thus, the matter must be remanded for recomputation of the floor area calculations pursuant to the language of the statute, as the certainty of petitioner's own calculations cannot be independently ascertained. In the event the City concedes that petitioner's calculations as measured from the "exterior walls" are correct, then those figures should be adopted.

The City contends that the July 1988 remission letters properly distributed the 12% exemption for commercial space allowed by RPTL 421-a among all units in the building and properly charged the remaining liability for excess nonexempt commercial space to the commercial unit alone.

In 1981, the Legislature amended RPTL 421-a to provide that in any multiple dwelling entitled to a tax exemption: "[I]f the aggregate floor area of commercial, community facility and accessory use space exceeds twelve per cent of the aggregate floor area * * * tax exemption shall be reduced by an amount equal to the per cent of the aggregate floor area by which the aggregate floor area of commercial, community facility and accessory use space exceeds twelve per cent of the aggregate floor area of the multiple dwelling" (L 1981, ch 995, amending Tax Law § 421-a [2] [d]).

[2] Thus, the commercial portion of such a mixed-use multiple dwelling is entitled to the exemption based upon the ratio of aggregate floor area devoted to each use, to establish the maximum commercial use which may be incorporated in the building. Where the Commercial use exceeds the 12% of the aggregate floor area allowed, ...


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