New York Law Review

Tag: Property Tax Refund

  • Matter of Carnegie Hall Society, Inc. v. Tax Commission of the City of New York, 60 N.Y.2d 851 (1983): Determining Entitlement to Property Tax Refund

    Matter of Carnegie Hall Society, Inc. v. Tax Commission of the City of New York, 60 N.Y.2d 851 (1983)

    A property tax refund is typically provided to the party who actually paid the tax.

    Summary

    This case addresses who is entitled to a tax refund when a mortgagee (HUD), not the property owner (Carnegie Hall Society), paid the property taxes during foreclosure proceedings. The Court of Appeals affirmed the lower court’s decision, holding that the assignee of the mortgagee (HUD) was entitled to the refund because HUD had directly paid the taxes and suffered a loss on the property’s sale. The court emphasized that the owner did not directly or indirectly pay the taxes, as HUD acted on its own behalf under court order, not as the owner’s agent, and the sale price didn’t cover the tax advances.

    Facts

    Carnegie Hall Society (appellant) defaulted on mortgage payments in 1974.

    The Department of Housing and Urban Development (HUD), the mortgagee, initiated foreclosure proceedings in 1975 and had a receiver appointed.

    The court ordered HUD to pay the property taxes during the foreclosure action, and HUD complied, paying $1,177,421.28 in taxes.

    In January 1979, the court entered a foreclosure judgment, and the property was sold.

    The sale resulted in a deficiency of $1,283,573.96, including the unpaid mortgage and the taxes HUD had paid.

    The mortgage agreement limited HUD’s recourse to foreclosure, so HUD did not seek a deficiency judgment against Carnegie Hall Society.

    Carnegie Hall Society argued that it was entitled to the tax refund because the tax payments increased the mortgage indebtedness.

    Procedural History

    Special Term ruled in favor of the assignee of HUD, finding that HUD had paid the taxes and the deficiency exceeded the taxes paid.

    The Appellate Division affirmed this decision without opinion.

    The Court of Appeals granted review.

    Issue(s)

    Whether the property owner/mortgagor (Carnegie Hall Society) or the assignee of the mortgagee (HUD) is entitled to receive a tax refund when the mortgagee directly paid the property taxes during foreclosure and incurred a loss upon the sale of the property.

    Holding

    Yes, the assignee of the mortgagee (HUD) is entitled to the tax refund because the mortgagee made the actual tax payments for its own account and suffered a loss upon the sale of the property.

    Court’s Reasoning

    The court based its reasoning on the principle that a property tax refund is normally given to the party who paid the tax, citing People ex rel. Crompton Bldg. Corp. v Sexton, 264 App Div 522 and Real Property Tax Law, § 726.

    The court emphasized that Carnegie Hall Society did not directly pay the taxes. Furthermore, it did not indirectly pay the taxes through HUD because HUD acted under a court order for its own benefit, not as an agent of Carnegie Hall Society. The court cited People ex rel. New York Tit. & Mtge. Co. v Miller, 262 App Div 175, affd 287 NY 685 and People ex rel. 342 East 57th St. Corp. v Miller, 262 App Div 132, affd 287 NY 682 to support this point.

    The court also rejected the argument that Carnegie Hall Society paid the taxes by forfeiting the property. The court noted that the sale price was insufficient even to cover the principal and interest on the mortgage, let alone the tax advances made by HUD.

    The court concluded, “Accordingly, respondent is entitled to the refund as the assignee of the party who paid the tax.”

    The court also dismissed the appellant’s argument that the taxes paid by HUD exceeded the amount found by the Special Term, as there was no support for that claim in the record.