Inwood Owners, Inc. v. Little Falls Tp.

• Decision Date: 02 April 1987
• Parties: INWOOD OWNERS, INC., Plaintiff-Respondent, v. TOWNSHIP OF LITTLE FALLS, a Municipal Corporation, Defendant-Appellant.
• Court: New Jersey Superior Court — Appellate Division

Page 485

216 N.J.Super. 485

524 A.2d 441

INWOOD OWNERS, INC., Plaintiff-Respondent, v. TOWNSHIP OF LITTLE FALLS, a Municipal Corporation Defendant-Appellant.

Superior Court of New Jersey Appellate Division.

Argued March 2, 1987.

Decided April 2, 1987.

James V. Segreto, Haledon, for defendant-appellant (Segreto & Segreto, attorneys; James V. Segreto, of counsel, David R. Bruins, on the brief).

Steven Muhlstock, Hackensack, for plaintiff-respondent (Gittleman, Muhlstock & Meyers, attorneys; Steven Muhlstock and Brian Chewkaskie, on the brief).

Before Judges PETRELLA, GAYNOR and SCALERA.

The opinion of the court was delivered by

PETRELLA, P.J.A.D.

The Township of Little Falls (Township) appeals from the judgment of the Tax Court which held void and invalid an increase in the tax assessment of a cooperative apartment complex owned by Inwood Owners, Inc. (Inwood). On or about November 1, 1985 the tax assessor attempted to increase Inwood's assessment by imposing omitted assessments for the tax years 1984 and 1985, evidentially based on the fact that the apartment complex had been converted to a cooperative status. The claimed omitted assessment was apparently based on the recited consideration in a July 17, 1984 deed by Inwood at Great Notch, a partnership, to Inwood Sponsor Corp. which was Inwood's predecessor in title. ¹

The municipal tax assessor had utilized the alternate method of imposing an omitted assessment under N.J.S.A. 54:4-63.31 for the 1984 and 1985 tax years in the amount of $4,706,400. The assessor had bills issued for the omitted assessments for both years on or about November 1, 1985, with payment due that date. The bills also recited that appeals to the County Board of Taxation (County Board) could be taken on or before December 1. This resulted in an omitted gross tax of $272,029.92 for 1984 and $276,736.32 for 1985 attributable to the conversion of the property from unified single ownership to cooperative ownership. No improvements or changes had been made to the physical property.

The Township contends that (1) the Tax Court lacked jurisdiction because Inwood failed to pay the omitted assessment due November 1, 1985 prior to filing its tax appeals; (2) the Tax Court erred in holding that the municipality had no authority to impose the additional tax under the omitted assessment procedures; (3) the Tax Court lacked jurisdiction as to the 1984 omitted assessment because there was no judgment for that assessment by the County Board, and (4) the Tax Court lacked jurisdiction as to the 1985 omitted assessment because the complaint was filed prior to the entry of a judgment by the County Board.

Judge Kahn in a comprehensive and thorough letter opinion in the Tax Court rejected the Township's arguments and held that the requirement to pay current taxes was not applicable to an appeal of an omitted assessment; the mere fact of the conversion of the subject property, without more, was not a proper basis for imposition of an omitted assessment, and inaction by the County Board regarding the 1984 tax year was a judgment within the purview of N.J.S.A. 54:4-63.39.

I

We turn first to the Township's argument that plaintiff should be barred from contesting the omitted assessment because N.J.S.A. 54:51A-1b requires that all taxes for the year for which review is sought must be paid by the time a complaint is filed with the Tax Court. That statute provides in pertinent part:

b. At the time that a complaint has been filed with the tax court seeking review of judgment of county tax boards, all taxes or any installments thereof then due and payable for the year for which review is sought must have been paid. No interest shall be due and payable by the appellant for the period from November 1 of the current tax year to the date of filing the complaint.

Defendant maintains that a jurisdictional prerequisite to consideration of any tax appeal from the decision of a County Board by the Tax Court is the payment of taxes. Its argument relies principally on Schneider v. City of East Orange, 196 N.J.Super. 587, 483 A.2d 839 (App.Div.1984), aff'd 103 N.J. 115, 510 A.2d 1189 (1986), cert. den. --- U.S. ----, 107 S.Ct. 97, 93 L.Ed.2d 48 (1986) (complaint filed November 13, 1979 dismissed because balance of taxes not paid until December 16, 1979); Woodlake Heights Homeowners Ass'n v. Middletown Twp., 7 N.J.Tax 364, 368 (App.Div.1984) (complaint dismissed because fourth quarter taxes were due and payable before the complaint was filed); Stewart v. Hamilton Twp., 7 N.J.Tax 368, 372-373 (Tax Ct.1985). However, the cases relied on for defendant's argument specifically address the payment of taxes due on the original assessment for the tax year.

N.J.S.A. 54:4-63.39 speaks to appeals from omitted assessments:

Appeals from assessor's omitted assessments shall be made to the county board of taxation on or before December 1 of the year of levy and the county board shall hear all such appeals within 1 month after the last day for filing such appeals. Appeals to the tax court from the judgment of the county board of taxation shall be made within 45 days from the date fixed for final decisions by the county board of taxation on appeals from assessor's omitted assessments. In all other respects such appeals shall be governed by the laws concerning appeals from real and personal property assessments.

Noting that the last sentence of the statute requires that "in all other respects such appeals shall be governed by the laws concerning appeals from real and personal property assessments," the Township argues that the jurisdictional requirement for prepayment of taxes is applicable to omitted or added assessments.

Judge Kahn held that the prepayment of taxes is not a jurisdictional prerequisite to filing an appeal from an omitted assessment. He stated:

In filing conventional appeals to the County Board, prepayment of taxes due and payable is a jurisdictional prerequisite. Woodlake Heights Homeowners Ass'n v. Middletown Tp. 7 N.J.Tax 364 (Tax Ct.1984). The municipality's need to receive timely payments of tax collections in conventional appeals is based on the financial hardship which would result from an interruption in the flow of tax revenues. See Lecross Associates v. City Partners, 168 N.J.Super. 96 (App.Div.1979); Schneider v. City of East Orange, 196 N.J.Super. 587 (App.Div.1984). I find that such is not the case with respect to added and omitted assessments. The added and omitted assessment appeal statutes are completely silent with respect to the payment of taxes. An omitted tax is not budgeted as a revenue. A municipality does not rely on the collection of these omitted taxes to operate its government or meet required expenses.

I find that an unwarranted strain would be placed on legislative construction to attempt to argue that the prepayment provision of N.J.S.A. 54:3-27 or N.J.S.A. 54:51A-1, which clearly apply to conventional appeals, should apply to omitted assessments. N.J.S.A. 54:3-27, N.J.S.A. 54:2-39 and N.J.S.A. 54:3-24.3 were all adopted or amended as part of Chapter 375 of the Laws of 1977 and that the legislature had to have had knowledge of the fact that the two omitted and the added assessment acts were on the books. The legislature had to know that there was no provision for payment of such taxes as a condition to filing such appeals to the County Board and it had to know that by the changing of the tax payment requirements of N.J.S.A. 54:3-27 from the ninety percent to three quarters, it was not applying that requirement to the added and omitted appeal statutes which were and still remain silent with respect to the payment of taxes.

It is unreasonable to conclude that the legislature intended that any added or omitted taxes would have to be paid to either the County Board or to the Tax Court as a condition for taking such appeals. It is more reasonable to conclude that the prepayment provisions only apply to conventional appeals.

We agree with Judge Kahn. Two methods are available to impose omitted assessments. N.J.S.A. 54:4-63.12 et seq. ² requires a complaint to be filed by the municipality, its agents or by a taxpayer with the County Board. No tax is payable under this procedure until a judgment is rendered. N.J.S.A. 54:4-63.20. Prior to 1968, the County Boards had exclusive jurisdiction to impose omitted assessments under this procedure. N.J.S.A. 54:4-63.12; N.J.S.A. 54:3-20.

In 1968 an alternative method was enacted (L. 1968, c. 184). Under this method the tax assessor prepares a list of omitted property ( N.J.S.A. 54:4-63.32) and gives notice to the owner thereof ( N.J.S.A. 54:4-63.35). Upon receipt of the list of omitted properties, the tax collector forwards an appropriate tax bill to the involved municipal taxpayers ( N.J.S.A. 54:4-63.36). This method, selected here by the Township's assessor, imposes upon the taxpayer the obligation to contest the omitted assessment. N.J.S.A. 54:4-63.39. The Township contends that the Legislature required prepayment of the omitted tax when the alternate method is used, but no prepayment when the standard procedure is used.

Our cases have held that the validity of the requirement for prepayment of taxes on the original assessment has been based on the municipality's need to receive timely payments of tax collections and the fact that financial hardship would result if those tax revenues were held in abeyance pending appeals. Schneider v. City of East Orange, supra, 196 N.J.Super. at 593, 483 A.2d 839; Lecross Associates v. City Partners, 168 N.J.Super. 96, 99, 401 A.2d 1099 (App.Div.1979), certif. den. 81 N.J. 294, 405 A.2d 837 (1979). A municipality does not rely on the collection of omitted taxes unknown during the budget process to operate its government or meet its expenses in the tax year in which the omitted assessment is imposed. Presumably it would then be unaware of such assessments.

Here, the property had been fully assessed...