HERKIMER COUNTY INDUSTRIAL DEVELOPM v. VILLAGE OF HERKIMER ( 2015 )

SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Fourth Judicial Department
1233
CA 13-02122
PRESENT: SCUDDER, P.J., PERADOTTO, LINDLEY, SCONIERS, AND VALENTINO,
HERKIMER COUNTY INDUSTRIAL DEVELOPMENT AGENCY,
PLAINTIFF-RESPONDENT,
V MEMORANDUM AND ORDER
VILLAGE OF HERKIMER, DEFENDANT-APPELLANT,
AND COUNTY OF HERKIMER, DEFENDANT-RESPONDENT.
LONGSTREET & BERRY, LLP, SYRACUSE (MICHAEL J. LONGSTREET OF COUNSEL),
FOR DEFENDANT-APPELLANT.
KERNAN AND KERNAN, P.C., UTICA (MICHAEL H. STEPHENS OF COUNSEL), FOR
PLAINTIFF-RESPONDENT.
ROBERT J. MALONE, COUNTY ATTORNEY, HERKIMER (LORRAINE H. LEWANDROWSKI
OF COUNSEL), FOR DEFENDANT-RESPONDENT.
Appeal from a judgment (denominated order) of the Supreme Court,
Herkimer County (Erin P. Gall, J.), entered June 17, 2013 in a
declaratory judgment action. The judgment granted the motion of
defendant County of Herkimer for summary judgment against defendant
Village of Herkimer and denied the cross motion of defendant Village
of Herkimer for summary judgment.
It is hereby ORDERED that the judgment so appealed from is
unanimously modified on the law by reinstating the second counterclaim
in the amended answer of defendant Village of Herkimer, and by
granting judgment in favor of plaintiff and defendant County of
Herkimer as follows:
It is ADJUDGED and DECLARED that the assessment of real
property taxes against plaintiff by defendant Village of
Herkimer was unlawful based upon plaintiff’s tax exempt
status, and that defendant County of Herkimer properly
cancelled the tax lien against properties owned by
plaintiff,
and as modified, the judgment is affirmed without costs.
Memorandum: In this declaratory judgment action, defendant
Village of Herkimer (Village) appeals from a judgment granting the
motion of defendant County of Herkimer (County) seeking summary
judgment on its cross claims against the Village and dismissing the
Village’s cross claims. The judgment also denied the Village’s cross
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CA 13-02122
motion seeking summary judgment on its counterclaim against plaintiff
and dismissed the counterclaim. This matter was previously before us
(Herkimer County Indus. Dev. Agency v Village of Herkimer, 84 AD3d
1707), and we modified the judgment by denying the Village’s motion
for summary judgment on its cross claims against the County and
permitting the County to amend its answer to allege a third cross
claim against the Village.
As we explained on the prior appeal, plaintiff commenced this
action seeking a declaration that the real property taxes levied
against it by the Village are void inasmuch as plaintiff is exempt
from the payment of real property taxes. Pursuant to Village Law §
11-1118, the Village added unpaid water rents owed by plaintiff’s
tenant to the annual tax levies in 2004 and 2005 and, when plaintiff
failed to pay those taxes, it turned the unpaid tax levies over to the
County pursuant to RPTL 1436. The affected properties were thereafter
included in an in rem foreclosure proceeding commenced by the County.
The County, however, withdrew those properties from the in rem
foreclosure proceeding based upon an automatic stay of the proceeding
pursuant to 11 USC § 362 (a) (4) and RPTL 1140 (1) following the
filing of a chapter 13 bankruptcy petition by plaintiff’s tenant.
Pursuant to RPTL 1138 (6) (a), the County Legislature determined that
there was no practical method to enforce the collection of the
delinquent tax liens on the two parcels, and the tax liens were
cancelled. In its amended answer, the Village asserted cross claims
against the County challenging the propriety of its actions in
cancelling the tax lien. We conclude that Supreme Court properly
determined that the actions of the County were lawful and granted the
County’s motion for summary judgment on its cross claims against the
Village. The court erred, however, in failing to declare the rights
of the parties (see Maurizzio v Lumbermens Mut. Cas. Co., 73 NY2d 951,
954; Haines v New York Mut. Underwriters, 30 AD3d 1030, 1030), and we
modify the judgment accordingly.
We note, as an initial matter, that the Village has abandoned its
contentions on appeal that the court erred in granting those parts of
the County’s motion for summary judgment on its first and second cross
claims and limits its contention to the County’s third cross claim
(see Ciesinski v Town of Aurora, 202 AD2d 984, 984).
The Village contends that the County used an improper basis for
its determination to withdraw the properties from the in rem
foreclosure proceeding and to cancel the tax liens, i.e., the
bankruptcy proceeding filed by plaintiff’s tenant. Although the
County does not explicitly respond to the Village’s contention that
the bankruptcy petition of plaintiff’s tenant did not operate to stay
the in rem proceeding because plaintiff is the property owner, we
nevertheless reject that contention. “[A] leasehold, like all other
interests of the debtor, immediately becomes property of the
[debtor’s] estate whenever bankruptcy relief is sought” (Matter of
Sturgis Iron & Metal Co., Inc., 420 BR 716, 721 [Bankr WD.Mich]; see
Matter of Ames Dept. Stores, Inc., 287 BR 112, 122 [Bankr SDNY]; see
also Alternate Energy Mgt. Corp. v Goodman, 151 AD2d 453, 453; see
generally Matter of Prudential Lines, Inc., 928 F2d 565, 573 [2d
-3- 1233
CA 13-02122
Cir]). Thus, the tenant’s petition operated as a stay to “enforce any
lien against property of the estate” (11 USC § 362 [a] [4]). We
therefore conclude that the County properly determined that the in rem
foreclosure proceeding with respect to the subject parcels was stayed
pursuant to RPTL 1140 (1), and properly withdrew those parcels from
the proceeding. As noted above, the Village abandoned its contention
that the court erred in granting that part of the County’s summary
judgment motion on its cross claim alleging that plaintiff is a tax
exempt entity and thus that the assessment of a levy of real property
taxes against it is in violation of New York law. We therefore
further conclude that the County had a proper basis to cancel the tax
lien based upon its determination that “there is no practical method
to enforce the collection of the delinquent tax lien and that a
supplementary proceeding to enforce collection of the tax would not be
effective” (RPTL 1138 [6] [a]). Thus, we conclude that the County
established its entitlement to judgment on its third cross claim and
that the Village failed to raise an issue of fact sufficient to defeat
the motion (see generally Zuckerman v City of New York, 49 NY2d 557,
562).
We further conclude, however, that the court erred in dismissing
the Village’s counterclaim against plaintiff, alleging that plaintiff
is responsible for the unpaid water rents as the owner of the
property, and we therefore further modify the judgment accordingly.
We note that the court dismissed the counterclaim as barred by the
statute of limitations (see UCC 2-725 [1]; Matter of Village of
Scarsdale v New York City Water Bd., 33 AD3d 1011, 1013), and that it
did so in the absence of a cross motion from plaintiff seeking that
relief. In any event, we agree with the Village that the claim it
asserted in the second counterclaim of its amended answer “is deemed
to have been interposed at the time the claims in the original
[answer] were interposed” (CPLR 203 [f]). We reject plaintiff’s
contention that it did not have notice of the transactions or
occurrences giving rise to the claim (see id.). Although the original
answer is not included in the record before us, the failure to include
the original pleading is not fatal to the Village’s claim in the
second counterclaim (see generally Holst v Liberatore, 105 AD3d 1374,
1375). Where, as here, the amended answer “merely adds a new theory
of recovery arising out of transactions already at issue in this
litigation” (Presutti v Suss, 254 AD2d 785, 786; see Boxhorn v
Alliance Imaging Inc., 74 AD3d 1735, 1736), the counterclaim contained
in the amended answer is not time-barred (see C-Kitchens Assocs. Inc.
v Travelers Ins. Cos. [Travelers Ins. Co.], 15 AD3d 905, 906).
Entered: January 2, 2015 Frances E. Cafarell
Clerk of the Court