RIC Metuchen LLC v. Borough of Metuchen Block 116

Decision Date29 July 2022
Docket Number010120-2021
PartiesRIC Metuchen LLC v. Borough of Metuchen Block 116, Lot 34
CourtTax Court of New Jersey

NOT FOR PUBLICATION WITHOUT APPROVAL OF THE TAX COURT COMMITTEE ON OPINIONS

Michael I. Schneck, Esq. Schneck Law Group Attorneys for Plaintiff

Adam J. Colicchio, Esq. Renaud Deappolonio LLC Attorneys for Defendant

Dear Counsel:

This opinion decides defendant's motion to dismiss plaintiff's above referenced complaint under N.J.S.A 54:51A-1(b) for nonpayment of the second quarter 2021 taxes when the complaint, appealing the county board of taxation's judgment, was filed in the Tax Court. Plaintiff opposed the motion on grounds delinquent taxes should be paid "by date that the complaint must be filed" and not when the complaint is filed, per Olde Lafayette Village, Ltd. v. Twp. of Lafayette, 9 N.J. Tax 562 (Tax 1988). Since plaintiff paid the delinquent tax (plus interest) on July 12, 2021, which was within the 45-day appeal period, dismissal is improper.

In response to the court's query whether the tax payment requirement can be relaxed pursuant to N.J.S.A. 54:51A-1(b) plaintiff contended that due to its March 2021 Chapter 11 bankruptcy filing, it could not pay the taxes until it was able to open a debtor-in-possession (DIP) checking account which was delayed due to COVID-19, therefore, its nonpayment was involuntary. The Borough argued that the evidence provided by plaintiff in this regard did not support alleged involuntariness.

For the reasons below, the court finds that while the plain language of N.J.S.A. 54:51A-1(b) requires taxes be current at the time the complaint is filed, the infancy of the bankruptcy proceedings merits relaxation of this requirement. Further the Borough is not prejudiced because the payment was made within the jurisdictional appeals period and within 18 days of the complaint filing date. Therefore, the Borough's motion to dismiss the complaint is denied.

FACTS

The facts are undisputed. By judgment dated June 4, 2021 (and mailed June 9, 2021), the Middlesex County Board of Taxation issued a judgment affirming the assessment of $835,000 imposed on the above referenced property (Subject) for tax year 2021 under code 6B (dismissed without prejudice because hearing was waived). The deadline to appeal this judgment was July 27, 2021 (45 days from the judgment's mailing date plus 3 days for mailing, see N.J.S.A. 54:51A-9(a); R. 8:4-1(a)(4); R. 1:3-3). Plaintiff appealed to this court on June 24, 2021 (thus 33 days before the limitations deadline) alleging that the Subject was over-assessed.

On July 6, 2021, the Borough moved to dismiss the complaint under N.J.S.A. 54:51A-1(b). Per its assessor's certification, as of the complaint's filing date, plaintiff owed $13,272.23 as local property tax for the second quarter of 2021 which was due and payable May 1, 2021. The motion was returnable July 23, 2021.

On July 12, 2021, plaintiff paid the delinquent tax plus interest in the amount of $13,756.76. Thus, the payment was made within eighteen days of the filing of the complaint, and six days of the filing of the dismissal motion.

One day before the return date of the Borough's motion, thus on July 22, 2021, plaintiff's counsel advised the court that plaintiff had "paid-in-full" the taxes for the Subject. It then opposed the dismissal motion on August 17, 2021. It contended that under Olde Lafayette, its complaint survives because it was filed much before the July 27, 2021, filing deadline, and it had also paid the delinquent tax before such deadline.

The Borough opposed the reply noting that in the ensuing years since 1988 when Old Lafayette was decided, there has been no record of any case employing a similar interpretation of N.J.S.A 54:51A-1(b), that the court there held. Rather, subsequent precedent including the Appellate Division's decision in Dover-Chester Assocs. v. Twp. of Randolph, 419 N.J.Super. 184 (App. Div. 2011), construed that statute by its plain language.

Post oral argument of the motions, the parties, at the court's direction briefed the issue of whether the tax payment requirement merits relaxation as permitted by N.J.S.A. 54:51A-1(b). Plaintiff's brief filed January 28, 2022, contained the certification of its manager as follows: plaintiff offered furnished office space for short-term leases, often on a month-to-month cases, tenants being small businesses or sole proprietors. Due to COVID-19, rental income, plaintiff claimed, decreased by almost 50% from end of 2020 into the second quarter of 2021. Plaintiff therefore filed for Chapter 11 bankruptcy on March 7, 2021. Plaintiff was required, per the U.S. Trustee's Operating Guidelines, to open DIP bank accounts to make payments "including one account specifically for payment of tax obligations." Although plaintiff tried to open such accounts, the process was stymied due to bank formalities to "verify the need for the [DIP] accounts" due to COVID-19. Meanwhile, plaintiff used a property management company to collect rents and pay operating expenses (as was being done pre-petition) with permission of the U.S. Trustee and sometime in July of 2021, obtained further permission to have this company pay the delinquent property taxes although "the DIP accounts were not yet in place."

Plaintiff thereafter provided the court its e-mail exchange with the U.S. Trustee's office on July 8, 2021 (the date of the Borough's dismissal motion), seeking confirmation that plaintiff was required to have a "new" DIP checking account since it had opened only a "new DIP Saving account" with Chase Bank. The U.S. Trustee asked plaintiff seek advice from plaintiff's bankruptcy counsel, which plaintiff did, noting that "Chase just needs the Trustee to say that she's requiring a checking account and then they'll open it." Plaintiff's bankruptcy counsel responded on July 9, 2021, that per the U.S. Trustee's Chapter 11 Operating Guidelines, there should be two DIP bank accounts: one for tax escrow (a savings account would do) and the other for cash collateral (a checking account required since operating expenses are paid from this account), with any check to include the bankruptcy case number and that it was a DIP account.[1]

Plaintiff provided the court with monthly operating reports it filed with the U.S. Trustee for the months of March 2021 through August 2021. For March through June, they reported $4,425 as having been paid each month for post-petition property taxes. No such line item was shown for July 2021. For August 2021, the report showed $13,543 as being paid for post-petition property taxes (cumulative post-petition property taxes paid shown as $31,243). This amount was also shown on the August profit and loss statement as "property taxes." Apparently, this was the July payment to the Borough for the second quarter 2021 taxes (although the Borough's receipt showed a payment of $13,756.76).

Plaintiff also included bank statements for the DIP savings account which was opened April 26, 2021 (the statement shows it is for 5 days, April 26 to April 30, 2021, with a beginning balance of $0) by transferring money from another savings account. Each month's transactions were few. Plaintiff's DIP savings account for the month of July showed a deposit (via an online transfer from a checking account) of $13,756.76. That amount was then withdrawn on July 9, 2021. This was for payment of the second quarter 2021 tax plus interest.

The Borough's Tax Collector's certification responded that a tax sale certificate was issued on December 7, 2017, against the Subject, and the lienholder paid "all subsequent taxes . . . through 2018, 2019, 2020" and for the first quarter of 2021. The Borough argued that these facts should be informative in the context of relaxing the tax payment requirement.

Plaintiff's bankruptcy was dismissed by Order dated January 22, 2022. The case was terminated May 5, 2022.

ANALYSIS

The issue here is whether July 27, 2021, the appeal deadline, is the date that taxes must be paid, or is it June 24, 2021, the date the complaint was actually filed, and if the latter then whether the same can be relaxed by this court.

Automatic Stay

Initially, the court briefly addresses whether the automatic stay provisions of the Bankruptcy Code, 11 U.S.C. §362(a), prevents this court from deciding the motion. The stay prevents not only collection or pre-petition debts, but also the continuation of pending state court litigation against the debtor. Maritime Elec. Co., Inc. v. United Jersey Bank, 959 F.2d 1194, 1206 (3rd Cir.1991) ("automatic stay suspends any non-bankruptcy court's authority to continue judicial proceedings then pending against the debtor"). Here, the court is not constrained because the bankruptcy case was dismissed January 27, 2022, and the matter was terminated May of 2022. See 11 U.S.C. §362(c)(2) (stay continues "until the earliest of' the case's closure, or dismissal, or grant of discharge).

Tax Payment Requirement

When an appeal from a county board of taxation's judgment is filed with the Tax Court (hereinafter "CBJ appeal"), there is an attendant condition that there should be no outstanding taxes. This requirement is imposed by N.J.S.A. 54:51A-1(b), which provides:

At the time 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.

Thus where a taxpayer has "gone through an adjudication" at the county board of taxation, "all taxes that are due for the year under review . . . must be satisfied at the time the complaint is filed with the Tax Court." Dover-Chester, 419 N.J.Super. at 189. The plain language of N.J.S.A. 54:51A-1(b)...

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