Coastal Eagle Point Oil Co. v. Township of West Deptford

• Decision Date: 19 July 2002
• Parties: COASTAL EAGLE POINT OIL CO., Plaintiff-Appellant, v. TOWNSHIP OF WEST DEPTFORD, Defendant-Respondent, and Borough of Westville, Defendant.
• Court: New Jersey Superior Court

801 A.2d 1199

353 N.J. Super. 212

COASTAL EAGLE POINT OIL CO., Plaintiff-Appellant, v. TOWNSHIP OF WEST DEPTFORD, Defendant-Respondent, and Borough of Westville, Defendant.

Superior Court of New Jersey, Appellate Division.

Argued May 29, 2002.

Decided July 19, 2002.

Seth I. Davenport, Montclair, argued the cause for appellant.

John R. Lloyd, Springfield, argued the cause for respondent (Rosenblum Wolf & Lloyd, attorneys; Mr. Lloyd, on the brief).

Before Judges SKILLMAN, WALLACE, JR. and WELLS.

The opinion of the court was delivered by SKILLMAN, P.J.A.D.

Plaintiff, which owns the Eagle Point Refinery in West Deptford Township and Westville Borough, appeals from an order denying its motion under the Freeze Act, N.J.S.A. 54:51A-8, to freeze the tax assessment on its property in West Deptford for the 1988 and 1989 tax years at the assessment amount for the 1987 tax year.

For the 1987 tax year, West Deptford and Westville assessed plaintiff's refinery for the aggregate amount of $75,530,500. In Coastal Eagle Point Oil Co. v. West Deptford Township, 13 N.J. Tax 242 (Tax 1993), the Tax Court reduced the amount of those assessments to $48,406,400. On appeal, we affirmed this reduction in plaintiff's 1987 assessments. Coastal Eagle Point Oil Co. v. West Deptford Township, 15 N.J. Tax 190 (App.Div.),certif. denied,143 N.J. 320, 670 A.2d 1061 (1995).

Plaintiff filed a motion with the Tax Court to freeze its 1988 and 1989 assessments at the amounts established for 1987 in accordance with the Freeze Act. See R. 8:7(d). West Deptford and Westville opposed the motion on the ground that plaintiff had made substantial improvements to its refinery between the assessment date for 1987 and the assessment dates for 1988 and 1989, which resulted in a substantial increase in the property's market value.

The Tax Court granted plaintiff's application for Freeze Act relief with respect to the 1988 tax year, but concluded that a plenary hearing was required with respect to the applicability of the Freeze Act to the 1989 tax year. The municipalities appealed the Tax Court's decision that plaintiff was entitled to Freeze Act relief with respect to the 1988 tax year, and we reversed in an unreported opinion. Coastal Eagle Point Oil Co. v. West Deptford Township, 15 N.J.Tax 190 (1995). We concluded that in view of plaintiff's expenditure of more than $10 million during 1988 for improvements in property assessed for $48,406,400 and the opinion of the municipalities' expert that those expenditures had "significantly enhanced" the property's market value, the municipalities were entitled to "a plenary hearing on the issue of change in value." (slip op. at 5). As a result of our decision, a plenary hearing was required with respect to the applicability of the Freeze Act to both the 1988 and 1989 tax years.

Before this hearing, the Tax Court solicited briefs and argument regarding two threshold legal issues: first, whether the Tax Court's prior determination of the property's value for the 1987 tax year established the base year value from which any change in value for the 1988 and 1989 tax years must be measured; and second, whether the municipalities were required to show that any change in the property's value between the 1987 base year and the 1988 and 1989 freeze years was attributable to improvements in the property as distinguished from an overall increase in its fair market value. The court ruled that its prior determination of the property's value for the 1987 base year was binding upon the parties under the doctrine of collateral estoppel. Neither party challenges this ruling, and it is not implicated in plaintiff's appeal.

As to the second issue it had posed, the Tax Court stated:

A change in value attributable solely to the fact that real estate values are generally on the increase is not the kind of change in value contemplated by the Freeze Act. Rather, a Freeze Act change in value must result from internal changes to the property, e.g., capital improvements, or to property specific external changes that suggest a change in the property's highest and best use. (slip op. at 8).

The court ruled that "[the municipalities] must show that any change in value was attributable solely to the physical changes to the property, not to general inflationary trends in the real estate market or in refinery values[,]" and "[i]n addition, [the municipalities] must show that any changes in value were meaningful and substantial." Ibid.

Sometime after these rulings, plaintiff and Westville entered into a settlement. Thereafter, the case proceeded solely against West Deptford. Before the hearing on the applicability of the Freeze Act could be held, the Tax Court judge to whom the case had been assigned died. The judge to whom the case was transferred construed the pretrial rulings of the previously assigned judge as precluding the parties from undertaking "to prove the value of the property for the 1988 and 1989 tax years." Moreover, the judge concluded that he was barred by the "law of the case" doctrine from revisiting this issue.

The Tax Court concluded that even though it was impossible, in view of the pretrial ruling barring the introduction of evidence regarding the value of plaintiff's property for the 1988 and 1989 tax years, for West Deptford to prove that there had been a substantial and meaningful increase in the property's value between the base year and freeze years, plaintiff was still not entitled to the protection of the Freeze Act:

I have concluded that West Deptford has not proved the amount of the change in value of the subject property from the base year (1987) to the freeze years (1988 and 1989). Because of certain pretrial rulings, particularly the one that precluded the parties from submitting proof as to the 1988 and 1989 value of the subject, the proof of the amount of change in value was almost impossible. I have found no way of proving the amount of change in value without proving before and after value. But after careful reflection, I also have concluded that in a complex case, such as this, there is no way to prove the amount of change in value, other than by proving value before and after the asserted change. To require a plaintiff-taxpayer to have to disprove a change in value in order to avoid application of the Freeze Act would render the protection of the Freeze Act meaningless. In order to get the protection of the Freeze Act ... a taxpayer would be put to the expense and nuisance of precisely what the act is intended to protect plaintiff from. Accordingly, in cases such as this, I have concluded what is implicit in and intended by the Appellate Division's May 1995 determination—when a taxpayer makes significant and meaningful expenditures on a parcel of real estate—it may not enjoy the protection of the Freeze Act. Stated another way, I have found that the defendant municipality has proven a significant and meaningful change in value, for purposes of the Freeze Act, without proving the precise amount of that change. This conclusion is difficult to reconcile with some of the technical rules which have grown up surrounding applications to apply or avoid the Freeze Act, but it is the only conclusion consistent with (1) the purposes of the Freeze Act (the avoidance of punitive and vindictive reassessments after successful tax appeals) ... (2) the fact that the taxpayer had made substantial ($19.2 million) expenditures on the property between the three assessing dates for 1987, 1988, and 1989, and (3) the Freeze Act's requirement of an abbreviated method of proving value.

To allow the taxpayer to have its 1988 and 1989 assessments reduced to the 1987 level without any proof after having made expenditures of $19.2 million is not consistent with [the] stated purpose of the Freeze Act. To force the municipality or the taxpayer to advocate or defend against the proof of change in value submitted by defendant without being able to prove value as of the assessing dates is an impossible task. To force the parties to prove freeze year assessing date values is precisely what the Freeze Act is designed to avoid. The case law has put the parties in a situation which as a practical matter it is impossible to solve, other than for this court to conclude that when a taxpayer expends significant and meaningful amounts on a refinery such as this, it may not seek the protection of the Freeze Act.

The Tax Court's view that a property owner which has expended substantial amounts of money for improvements between the assessment dates for the base year and freeze years may not claim Freeze Act protection, even though the municipality failed to show that those improvements resulted in a substantial increase in value, is inconsistent with the firmly established rule that to avoid application of the Freeze Act a municipality must show that changes in the property subsequent to the base year substantially and meaningfully increased the property's value. Therefore, we reverse the order denying plaintiff's application for Freeze Act relief and remand the case to the Tax Court for further proceedings to determine whether there was a substantial and meaningful increase in the property's value between the assessment dates for the base and freeze years.

The Freeze Act provides in pertinent part:

Where a judgment not subject to further appeal has been rendered by the Tax Court involving real property, the judgment shall be conclusive and binding upon the municipal assessor and the taxing district, parties to the proceeding, for the assessment year and for the 2 assessment years succeeding the assessment year covered by the final judgment, except as to changes in the value of the property occurring after the assessment date.¹

[N.J.S.A. 54:51A-8.]

The purpose of this provision was "to eliminate the harassment of requiring yearly [tax] appeals to be taken ... when there has been no change in the value of the property." Borough...