Volume 6 - Opinions of Counsel SBEA No. 89
School districts (tax limitation) (refund of taxes paid in excess of limitation) (submission of verified claim) - New York State Const. Art. VIII, § 10; Education Law, § 3813:
A refund of school taxes levied and collected in excess of the constitutional tax limit is not contingent upon timely submission of a written verified claim pursuant to section 3813 of the Education Law, provided that the taxes were paid under “appropriate protest.”
We have been asked to consider our opinion 6 Op.Counsel SBEA No. 9 in light of the provisions of section 3813 of the Education Law. In that opinion, we interpreted the reference to payment of taxes under “appropriate protest” by the Court of Appeals in its decision in Bethlehem Steel Corp. v. Board of Education of the City S. D. of Lackawanna, 44 N.Y.2d 831, 378 N.E.2d 1l5, 406 N.Y.S.2d 752. The Court there concluded that school districts and other taxing jurisdictions which had levied taxes in excess of their constitutional tax limitations had acted illegally and were liable for refunds of the excess taxes paid provided the taxpayer had paid under “appropriate protest.”
The question presented is whether an applicant for a refund of school taxes under these circumstances must also show that a “written verified claim” was presented to the school district in accordance with section 3813 of the Education Law.
Subdivision 1 of section 3813 of the Education Law. provides as follows:
No action or special proceeding. . .shall be. . .maintained against any school district. . .unless it shall appear in the complaint. . .that a written verified claim upon which such action or special proceeding is founded was presented to. . .said district within three months after the accrual of such claim, and that the officer or body having the power to adjust or pay said claim has neglected or refused to make an adjustment or payment thereof for thirty days after such presentment.
The first issue is whether this statute applies to actions against school districts for refunds of taxes paid in excess of a constitutional tax limit. If it does, we must then determine when the claim for the refund “accrued.”
Most of the actions against school districts in which compliance with section 3813 has been required have been tort or contract claims. Throughout the history of section 3813, arguments have been made that certain types of actions should not be subject to its requirements, and the courts have found exceptions to its application. The Appellate Division, Third Department in Grey v. Board of Education, 60 A.D.2d 361, 401 N.Y.S.2d 880, summarized the three types of exceptions that have been recognized to date:
(1) when an action or proceeding is to vindicate a public interest rather than to seek enforcement of a private right or duty (Union Free School District No.6 of the Towns of Islip and Smithtown v. New York State Human Rights Appeal Board, 35 N.Y.2d 371, 320 N.E.2d 859, 362 N.Y.S.2d 139);
(2) when the claim is solely equitable in nature, with no monetary relief sought (Ruocco v. Doyle, 38 A.D.2d 132, 327 N.Y.S.2d 933); and
(3) when procedures are set forth in a separate statute or contractual provision which give the school district notice similar to that in section 3813 or which waive compliance with its requirements (Newburgh Nursery v. Board of Education, 41 Misc.2d 997, 247 N.Y.S.2d 74).
1. Public rights vs. private rights
In the case of Union Free S.D. No. 6, supra, a school teacher challenged a contractual provision which allowed a school board to single out childbirth among other physical conditions for special treatment in fixing terms of compensation and return to employment thereafter. The Court of Appeals held that such a policy violated this State’s Human Rights Law.
In so doing, the Court dismissed as a defense the failure of the complainant to file a written verified claim with the school district in accordance with section 3813. It held that that section was inapplicable to actions seeking to enforce “public” rights and noted the following:
[It] is true, of course, that this proceeding was triggered by the complaint of this one teacher and that the relief granted below will redound to the benefit of that teacher as well as to the benefit of other teachers similarly situated. Such circumstances cannot be allowed, however, to obscure the fact that advantages which accrue to these teachers stem not from their rights of contract or other individual entitlement but rather flow as an appropriate and intended consequence of the vindication by the division, acting on behalf of the public, of the public’s interest in the elimination of discrimination based upon sex - a public interest duly declared by legislative enactment (35 N.Y.2d at 380).
Analogizing to the facts at hand, we believe that the plaintiffs in the Bethlehem Steel case, supra, were, in fact, acting to vindicate the public interest. The fact that incidental private benefit would be forthcoming is irrelevant. Therefore, any failure of the complainants in Bethlehem Steel to comply with section 3813 would not have been a valid defense to a claim for a school tax refund.
However, the public right having once been established (i.e., the declaration that the statutory authority for taxing in excess of the constitutional limit was unconstitutional), it cannot be said that subsequent actions, founded on a similar cause of action, have been commenced to vindicate a public interest. The only interests inherent in those actions would be private ones. Therefore, this exception to the provisions of section 3813 appears not to be available to other taxpayer actions in the nature of the Bethlehem Steel case.
2. Equitable vs. monetary relief
There can be no question that individuals seeking a tax refund are pursuing monetary, not equitable, relief. Therefore, the second exception to the applicability of section 3813 is also unavailable.
3. Comparable notice
We begin this section with a citation from the Court of Appeals decision in the Bethlehem Steel case, to wit: “In view of Hurd. . .local subdivisions were put on notice that patent circumvention of constitutional limitations on their taxing powers would not be tolerated” (44 N.Y.2d at 835 (emphasis added)). The Court thus concluded that by virtue of the prior decision in Hurd v. City of Buffalo (41 A.D.2d 402, 343 N.Y.S.2d 950, aff’d, 34 N.Y.2d 628, 311 N.E.2d 504, 355 N.Y.S.2d 369), local governments would not be permitted to claim lack of notice as a general defense against a claim for a refund for taxes levied in excess of a constitutional tax limit. There is a question, however, of whether the general type of notice to which the Court so referred satisfies the requirements of section 3813 of the Education Law.
The cases which have involved the issue of comparable notice have, as a general rule, turned upon a specific alternative notice from the complainant to the school district, whether required by statute or contract.
In the Newburgh Nursery case, supra, the Supreme Court, Orange County, concluded that compliance with notice requirements of the Lien Law (§§12, 18) accomplished the same purpose as the notice required by section 3813 of the Education Law, that purpose being “to apprise a school district of the existence of a claim against it and to give it an opportunity to adjust or pay such claim” (247 N.Y.S.2d at 76).
In Almar Constr. Corp. v. P.M. Hughes & Sons Inc., 59 A.D.2d 615, 395 N.Y.S.2d 700, the court concluded that a contractor’s requisition incorporating certain letters claiming additional costs contained sufficient facts to constitute a notice of claim. “It gives the necessary information as to the nature of the claim, the time when it arose, the amount sought and how such amount was calculated [citation omitted]” (395 N.Y.S.2d at 701 (emphasis added)).
Similarly, in an action against a school district for alleged breach of contract for electrical work, the Court of Appeals noted that “the critical element in a verified claim in a contract action is the monetary demand and some suggestion at least on how the sum is arrived at or the damages incurred.... Without such statement adjustment and settlement of the dispute is rendered unlikely...” (P.J. Panzeca Inc. v. Board of Education, 29 N.Y.2d 508, 272 N.E.2d 488, 323 N.Y.S.2d 978 at 979-980 (emphasis added)).
The courts have also stated that the purpose of the notice requirement of section 3813 is to give the school district an opportunity to investigate claims and to obtain evidence promptly while it is still readily available (Matter of Brown v. Board of Trustees of Town of Hamptonburg, S.D. No. 4, 303 N.Y. 484, 490, 104 N.E.2d 866; State v. Waverly Central School District,, 28 A.D.2d 628, 280 N.Y.S.2d 505).
The implication of these and related decisions is that the school district must be promptly notified where the nature of the claim and extent of the damages are facts uniquely available to the complainant. In other words, a special notice has been made a condition precedent by the Legislature in order to allow school districts sufficient and timely opportunity to review the basis for the claim and to determine whether or not a settlement is in order. We question the need for this type of notice based on the facts at hand.
For one, the Court of Appeals has indicated that all municipalities were given at least general notice that statutory authorization to skirt constitutional tax limits, as struck down in Hurd, would no longer be tolerated. Thus, in employing the “emergency” legislation later declared unconstitutional in the Bethlehem Steel case, municipalities were proceeding at their own risk and could no longer claim a lack of notice as a defense in a refund action (cf., Hurd v. City of Buffalo, 41 A.D.2d 402, 343 N.Y.S.2d 950 at 954).
Second, in this situation, it is arguable that the nature and extent of damages are uniquely available to the school district, rather than the complainant. That is, the school district would have all the facts at hand (i.e., its constitutional tax limit; the amount levied in excess thereof; the amount of taxes paid by the complainant and the portion of those taxes representing payment above the tax limitation) necessary to a determination of whether there was any basis for the claim.
Finally, assuming the taxes were paid “under appropriate protest” (see, 6 Op.Counsel SBEA No. 9; Bethlehem Steel Corp. v. Board of Education, 44 N.Y.2d 831 at 835), the school district could be said to have been notified of the fact that a particular taxpayer was contesting the validity of his tax bill.
Given the general notice referred to in the Bethlehem Steel decision, and the particular notice given by each taxpayer who paid “under appropriate protest,” the only item of notice lacking to the school district would be the amount of the particular claim, which, as previously suggested, would be information more readily ascertainable by the school district than the taxpayer.
Therefore, we believe that because of the unique circumstances attendant to this case, a school district may be said to have received adequate notice of a claim, comparable to that required by section 3813, as long as the complainant paid taxes under appropriate protest.
August 30, 1979