Aetna Life Ins. Co. v. City of Newark

• Decision Date: 16 June 1952
• Docket Number: No. A--121,A--121
• Citation: 10 N.J. 99,89 A.2d 385
• Parties: AETNA LIFE INS. CO. v. CITY OF NEWARK (two cases).
• Court: New Jersey Supreme Court

Page 99

10 N.J. 99

89 A.2d 385

AETNA LIFE INS. CO. v. CITY OF NEWARK (two cases).

No. A--121.

Supreme Court of New Jersey.

Argued May 19, 1952.

Decided June 16, 1952.

Herbert J. Hannoch, Newark, argued the cause for appellant (Hannoch & Lasser, Newark, attorneys).

Vincent J. Casale, Newark, argued the cause for respondent (Charles Handler, Newark, attorney).

The opinion of the court was delivered by

BURLING, J.

Aetna Life Insurance Co., a corporation (hereinafter called the plaintiff) has appealed under Rule 3:81--8 from two judgments of the Division of Tax Appeals affirming assessments made by the taxing authorities of the City of Newark (hereinafter called the defendant) in this State, on real property situate in the City of Newark. The appeals were addressed to the Superior Court, Appellate Division, but prior to hearing there we allowed certification upon our own motion.

The appeals in this case concern assessments made for the tax years 1949 and 1950 upon what is commonly known as the Bamberger Department Store, consisting of land and improvements lying in the rectangular area formed by Market, Halsey, Washington and Bank Streets in the City of Newark, exclusive of that portion of the entire store area located at the northwest corner of Market and Halsey Streets, known locally as the Weiler property--the store area includes both the property subject to the assessments from which these appeals stem and the Weiler property. Plaintiff acquired the entire property exclusive of the Weiler portion from the store operating concern, L. Bamberger & Co. (hereinafter called Bamberger) in December 1945, and immediately thereafter leased to Bamberger the same premises for a term of 22 years with renewal options for subsequent periods which if invoked will extend the period of occupancy by Bamberger thereunder to the year 2034. The lease gave to Bamberger many of the rights and laid upon it many of the duties incidental ordinarily to ownership for the period of its leasehold. The physical structures constituting the improvements were erected in three parts, the first in 1912--13, the second in 1923--24 and the final portion in 1928--29. Subsequently modernization and reconstruction of the premises has occurred in several respects, and the lessee conducts therein an extensive merchandising business.

The plaintiff's property which constitutes a considerable portion of the above described Bamberger store premises was assessed for the tax year 1949 at a valuation of $3,018,800 for land and $5,549,700 for improvements, and for the tax year 1950 at the identical figures. The plaintiff appealed from both assessments to the Essex County Board of Taxation. The county board dismissed the appeals and the plaintiff thereupon pursued its statutory right of appeal to the Division of Tax Appeals, Department of the Treasury, State of New Jersey. The appeals were consolidated and hearings were had on the consolidated appeals before the Division of Tax Appeals. On November 23, 1951, the Division of Tax Appeals entered judgments on both appeals, affirming the assessments at the amount levied by the defendant and dismissing the appeals. The plaintiff then appealed both said judgments to the Superior Court, Appellate Division, which on January 7, 1952 ordered the appeals consolidated. Prior to hearing there we allowed certification of the consolidated appeals upon our own motion, as hereinbefore stated.

The questions involved in these appeals are: (1) whether the decision of this court in L. Bamberger & Co. v. Division of Tax Appeals, 1 N.J. 151, 62 A.2d 389 (1948) is dispositive of these appeals; (2) whether the Division of Tax Appeals properly applied the law relating to presumption of correctness of tax assessments; (3) whether the Division of Tax Appeals properly determined the probative value of plaintiff's proof (in various categories); and (4) whether the Division of Tax Appeals erred in valuing the land, independent of the improvements, upon proofs which plaintiff alleges were grounded in unlawful standards.

On the first question, it is settled that tax litigation should not be prolonged and should be brought to an end with definiteness if possible, but it is also settled that each annual assessment of property for taxation is a separate entity, distinct from the assessment of the previous or subsequent year. Hackensack Water Co. v. Division of Tax Appeals, 2 N.J. 157, 162, 65 A.2d 628 (1949). However tax history is evidential and is often resorted to in order to help clarify and explain the issues presented in controversies of this nature. See City of Jersey City v. Lehigh Valley Railroad, 9 N.J. 362, 88 A.2d 497 (1952); Hackensack Water Co. v. State Bd Tax Appeals, 129 N.J.L. 535, 539, 30 A.2d 400 (Sup.Ct.1943); affirmed Hackensack Water Co. v. North Bergen Tp., 130 N.J.L. 483, 33 A.2d 821 (E. & A.1943); Koch v. Jersey City, 118 N.J.L. 85, 88, 191 A. 558 (Sup.Ct.1937), affirmed Koch v. State Board of Tax Appeals, 119 N.J.L. 432, 197 A. 275 (E. & A.1938). And where the factual situation and questions presented are the same, the prior holding of the court in a case of this nature may be controlling. Cf. City of Jersey City v. Lehigh Valley Railroad, supra. In the present case, the questions involved include matters not involved in L. Bamberger & Co. v. Division of Tax Appeals, supra, and therefore our former decision is not completely controlling although it governs some aspects of the examination of the points argued here.

Adjective.

Appellate review in these cases is controlled by the rules. Rule 3:81--13 relating to the appellate courts' power to review facts in proceedings in lieu of prerogative writs, provides that the reviewing court 'shall have power to review the facts and make independent findings thereon, which power may be exercised by it to such extent as the interests of justice may require,' and the pertinent portion of Rule 1:2--20(a) relating to appellate review on facts generally, provides: 'On a review of any cause involving issues of fact not determined by the verdict of a jury, new or amended findings of fact may be made, but due regard shall be given to the opportunity of the trial court to judge of the credibility of the witnesses.' The duty of the appellate court under these rules in this class of cases is to review the evidence and render such decision as it deems proper in the light of that evidence but not to disturb the judgment of the Division of Tax Appeals unless the evidence is persuasive that the administrative tribunal erred.

Merits.

On the merits in this case the first question involved is whether the Division of Tax Appeals correctly applied the principles of law relating to the presumption of correctness of an assessment for tax purposes and the burden of proof in reviewing the assessments. The settled rule is that there is a presumption that an assessment made by the proper authority is correct and the burden of proof is on the taxpayer to show otherwise. L. Bamberger & Co. v. Division of Tax Appeals, supra (1 N.J., at page 159, 62 A.2d 389). And the taxpayer has not met this burden unless he has presented the appellate tribunal with sufficient competent evidence to overcome the presumption, that is, to establish a true valuation of the property at variance with the assessment. Riverview Gardens v. North Arlington Borough, 9 N.J. 167, 175, 87 A.2d 425 (1952). In other words, it is not sufficient for the taxpayer merely to introduce evidence: the presumption stands until sufficient competent evidence is adduced to prove a true valuation different from the assessment. Such evidence must be definite, positive and certain in quality and quantity to overcome the presumption. Central R.R. Co. of N.J. v. State Tax Dept. 112 N.J.L. 5, 8, 169 A. 489 (E. & A.1933).

The next questions involved include those relating to the determination of the Division of Tax Appeals as to the true value of the plaintiff's property, including the sufficiency and competency, or probative value, of the plaintiff's proofs.

Of the formulae for determination of 'fair value' upon which evidence was adduced or proffered by the plaintiff in the proceedings before the Division of Tax Appeals was one relating to computation of value of the improvements on the land by a method of capitalization of actual current and prospective rental income under the lease between Aetna (owner) and L. Bamberger & Co. (lessee). Another formula was designed to prove 'fair value' of the subject property by a method of capitalization of income based upon a percentage of gross sales, computed by application in part of a real estate expense factor derived from statistical analyses known as the 'Harvard Studies.' The plaintiff contends that the Division of Tax Appeals erred in holding that plaintiff failed to carry the burden of proof, arguing that the Division improperly disregarded the plaintiff's 'uncontroverted' evidence of true value asserted on these two bases.

While it is necessary to treat these two classifications of evidence separately in determining their probative value, which in this case we find to be inconsequential, in general we recognize and reaffirm the law of this State that rental income may be a relevant factor in reaching true value of real estate for tax assessment purposes. Borough of Hasbrouck Heights v. State Board of Tax Appeals, 125 N.J.L. 617, 18 A.2d 24 (Sup.Ct.1941); Prudential Ins. Co. of America v. Division of Tax Appeals, 133 N.J.L. 153, 154--155, 43 A.2d 271 (Sup.Ct.1945).

But mathematical calculations in appraisals, though made in the best of faith, can lead to divergent results and should be closely scrutinized. Town of Kearny v. Division of Tax Appeals, 137 N.J.L. 634, 636, 637, 61 A.2d 208 (Sup.Ct.1948), affirmed 1 N.J. 409, 64 A.2d 67 (1949).

Upon the actual rental basis, the plaintiff introduced experts' appraisals and supporting testimony based upon the existing long term lease...