Murnick v. City of Asbury Park

• Decision Date: 27 February 1984
• Citation: 95 N.J. 452,471 A.2d 1196
• Parties: Theodore MURNICK and Maxine Murnick, his wife, Plaintiffs-Appellants, v. CITY OF ASBURY PARK, Defendant-Respondent, and Attorney General of New Jersey, Intervenor-Respondent.
• Court: New Jersey Supreme Court

Page 452

95 N.J. 452

471 A.2d 1196

Theodore MURNICK and Maxine Murnick, his wife, Plaintiffs-Appellants, v. CITY OF ASBURY PARK, Defendant-Respondent and Attorney General of New Jersey, Intervenor-Respondent.

Supreme Court of New Jersey.

Argued Dec. 12, 1983.

Decided Feb. 27, 1984.

Carl G. Weisenfeld, Newark, for plaintiffs-appellants (Hannoch, Weisman, Stern, Besser, Berkowitz & Kinney, Newark, attorneys; Carl G. Weisenfeld, Todd M. Sahner and Paul H. Brownstein, Newark, of counsel and on the briefs).

Edward G. Rosenblum, Secaucus, for defendant-respondent (Rosenblum & Rosenblum, Secaucus, attorneys).

Harry Haushalter, Deputy Atty. Gen., for intervenor-respondent (Irwin I. Kimmelman, Atty. Gen., attorney; James J. Ciancia, Asst. Atty. Gen., of counsel).

The opinion of the Court was delivered by

POLLOCK, J.

At issue on this appeal is the constitutionality of N.J.S.A. 54:1-35a and N.J.S.A. 54:2-40.4 (commonly known as "chapter 123") under art. VIII, § 1, para. 1(a) of the New Jersey Constitution, which mandates that real property be assessed according to a uniform standard of value. Resolution of that issue involves determining whether chapter 123 provides the exclusive form of relief from a claim of property tax discrimination.

The Tax Court found that chapter 123 was not exclusive, and that the taxpayers, Theodore and Maxine Murnick, were entitled to tax relief. 2 N.J.Tax 168 (1981). In reversing, the Appellate Division found chapter 123 to provide the only basis for relief in a tax discrimination case. 187 N.J.Super. 455, 459-61, 455 A.2d 504 (1982).

The taxpayers appealed as of right, contending that the Appellate Division's interpretation of chapter 123 would violate the constitutional mandate. R. 2:2-1(a). We conclude that the Appellate Division erred in interpreting chapter 123 as providing the sole remedy in all cases. In egregious cases of discrimination, a taxpayer retains a constitutional right to relief. Except in those cases, which we expect will be rare, chapter 123 establishes both the right to and measure of relief. We further conclude that the Murnicks have a right to show that the Director of the Division of Taxation (Director) should have excluded certain sales from the data used in calculating the average ratio for the City of Asbury Park. Consequently, we reverse in part the judgment of the Appellate Division and remand the matter to the Tax Court. On remand, the plaintiffs may seek to exclude the challenged sales from the Director's table.

I

This case concerns the property tax assessment of a 15-story apartment building in Asbury Park and the inequality of assessments in that city. For the years 1977, 1978, and 1979, the property was assessed at $1,974,000, allocated $74,000 for land and $1,900,000 for improvements. The Murnicks objected to the assessment, claiming it was discriminatory. Thereafter, the Monmouth County Board of Taxation affirmed the assessments, and the Murnicks appealed to the Tax Court. Originally the 1977 and 1978 appeals were made to the former Division of Tax Appeals, which transferred the cases to the Tax Court upon its creation in 1979. N.J.S.A. 2A:3A-1.

In the Tax Court, the parties agreed on the assessment-true value ratio for 1977 (72.51%) and 1979 (63.09%), but disagreed on the ratio for 1978. The Tax Court ruled that no common level of assessment existed in Asbury Park during 1978, a ruling not questioned on this appeal. In fact, Asbury Park had not conducted a revaluation during the fifteen years preceding the tax years in question, and no common level of assessment existed for those years.

Although the City contended that the taxpayers' right to relief was restricted to chapter 123, the taxpayers urged that the court could apply either the chapter 123 ratio or the Director's average ratio used by the State to distribute school aid, N.J.S.A. 54:1-35.1. Chapter 123 provides a statutory formula for determining whether an assessment is discriminatory. Under the statute, the test is whether the ratio of assessed to true value of the property in question exceeds by 15% the average ratio for the district. When a taxpayer is entitled to relief, the assessment is adjusted by applying the district average ratio to the true value of the property. For 1978, the average ratio for Asbury Park, as determined under chapter 123, was 80%, and the assessed-true value ratio for the subject property was 91%, which was within the common level range of 68-92%. Hence, the Tax Court found that taxpayers are not entitled to relief under chapter 123.

Nonetheless, the Tax Court continued:

I find that in the context of the present matter, Chapter 123 fails to provide an adequate and equitable remedy as contemplated by the Supreme Court of New Jersey in In re Appeal of Kents, Inc. [34 N.J. 21, 166 A.2d 763 (1961) ], supra. This is especially so in light of the fact that defendant does not oppose a ratio application but rather seeks only to afford the taxing district a higher ratio in order to obtain a greater assessment for the tax year of 1978. Based on these circumstances, I find Chapter 123 inadequate and will apply the Director's average ratio for 1978 to relieve the taxpayers from an inequitable assessment. .

Using the Director's average ratio, the Tax Court determined the effective tax rate and recalculated the 1978 true value of the property, concluding:

The value as recomputed produces a ratio of assessment to true value of 88.3%. Compared to the director's average ratio for 1978 which is 73.42%, the difference is 20.27% (88.3 - 73.42 = 14.88 / 73.42 = 20.27%) which i find to be a substantial difference. Therefore, relief should be awarded pursuant to In re Appeal of Kents, Inc., supra. [Id. at 192].

Consequently, the Tax Court entered judgment reducing the assessments to $1,596,900 for 1977, $1,641,600 for 1978, and $1,522,000 for 1979.

On appeal, Asbury Park urged that the Legislature intended chapter 123 to be exclusive and that the Tax Court should not have reduced the 1978 assessment. The City further argued that the stipulated 1979 ratio (63.09%) was invalid because it did not comply with chapter 123. The Appellate Division agreed, held that chapter 123 was exclusive, and reversed the judgment reducing the 1978 assessment. For reasons set forth more fully below, the Appellate Division also vacated and remanded the judgment on the 1979 assessment. The court dismissed the 1977 appeal, and that matter is not before us.

As for the 1979 assessment, the Appellate Division wrote:

We next turn to the determination with regard to the 1979 tax year. It is conceded that the city stipulated to the application of an average ratio of 63.09%. The city now insists that the chapter 123 ratio would have been greater. The stipulated ratio would entitle the taxpayer to relief since its original assessment to true value ratio exceeded 63.09% by more than 15%. Defendant does not dispute that the stipulation was made. Rather, it challenges the right of the court to accept such a stipulation.

We recognize that counsel for the city requested application of the 63.09% ratio. However, the record shows that he did so because he used the Director's figures for the wrong year. He failed to realize that chapter 123 requires use of the ratio for the pretax year. The ratio requested and stipulated was based on the Director's 1979 study, whereas the statute would have required use of the ratio based upon his 1978 study.

The Director's weighted ratio for the preceding tax year, mandated for use by chapter 123 for the 1979 tax year, was fixed and available. The use of any other ratio thus violates the statute and should be corrected under the plain error rule. R. 2:10-2. Hence, we vacate the judgment for the 1979 tax year and remand the tax appeal for that year for reconsideration. The applicable 'common level range' must be determined based upon the Director's weighted average for the previous tax year. The taxpayers contend that they relied on the stipulation and therefore did not attempt to attack the director's ratio calculations. On remand, the chapter 123 ratio applicable for the 1979 tax year must be determined and the tax refund, if any, must be adjusted accordingly. If the taxpayers' ratio does not meet the chapter 123 threshold, they should be afforded the opportunity to demonstrate error in the director's calculations if they so desire. [187 N.J.Super. at 462-63, 455 A.2d 504 (footnote omitted) ].

We agree with the remand of the 1979 assessment to the Tax Court. The issue concerning the 1978 assessment is more complex and requires some exposition of the right of taxpayers to equality of treatment in shouldering their fair share of the tax burden.

II

Equality of treatment in sharing the duty to pay real estate taxes is a constitutional right. The New Jersey Constitution, art. VIII, § 1, para. 1, expressly provides that real estate "shall be assessed according to the same standard of value." If the assessment ratio applied to a parcel substantially exceeds the assessment ratio applied generally in a taxing district, the taxpayer has a right to relief. Piscataway Assocs., Inc. v. Township of Piscataway, 73 N.J. 546, 553-54, 376 A.2d 527 (1977); In re Appeal of Kents 2124 Atlantic Ave., Inc., 34 N.J. 21, 33-34, 166 A.2d 763 (1961). Not every deviation, however, is of constitutional dimension. Mathematical precision is not required. Kents, supra, 34 N.J. at 32, 166 A.2d 763. Substantial, although imperfect, justice satisfies the constitutional mandate. Siegal v. Newark, 38 N.J. 57, 61, 183 A.2d 21 (1962).

In this technical area, an evaluation of equality depends on statistical analysis and a comparison of the assessments of properties within a taxing district. Underlying that evaluation is the development of a fair method of comparing the assessed value with the true value of the property. Preliminarily, by dividing the assessed value by the true value, one derives...