May 16, 2019

In the Matter of Larchmont Pancake House v. Board of Assessors, 2019 N.Y. Slip Op. 02441 (April 12, 2019), New York’s highest court found that the family business operating an International House of Pancakes franchise had no standing to grieve the real estate taxes because the petition improperly named the family business instead of the legal owner, a trust, as the petitioner.

The Supreme Court held that Portia DeGast who signed the petition was both the president of the business and beneficiary of the trust and therefore she was an “aggrieved party with the necessary standing” to institute the judicial proceeding.

The Appellate Division unanimously reversed holding in relevant part as follows: that a taxpayer is aggrieved under article 7 of the Real Property Tax Law where the tax assessment has a “direct adverse affect on the challenger’s pecuniary interest…” “Here, petitioner lacks any legal obligation to assume the undivided tax liability or authorization to pursue this proceeding and, as such, lacks standing under article 7.”

The Court continued: “Nor is Portia DeGast an aggrieved party based on her status as a beneficiary of the Carfora Trust. The parties agree that, during the relevant years, the trust itself — not Ms. DeGast — owned the subject property. Like petitioner, Ms. DeGast was not authorized to pursue an article 7 proceeding on the property owner’s behalf. And, like petitioner, Ms. DeGast lacked any legal obligation to pay the real property taxes; to the contrary, the terms of the Carfora Trust explicitly authorized beneficiaries to “enjoy the assets held by the trust without rent or other compensation to the trust, such as by occupying the trust’s real property” (emphasis added). In any event, the petitioner in this matter is the Larchmont Pancake House — not Ms. DeGast.

As such the Court ultimately held that “Petitioner 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.”

Judge Wilson wrote a strong dissent, stating in relevant part:

“…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.”

A copy of the Court’s decision may be found online:

https://law.justia.com/cases/new-york/court-of-appeals/2019/16.html

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