Wells Reit Ii-80 Park Plaza LLC v. Dir.
Decision Date | 28 July 2010 |
Citation | 414 N.J.Super. 453,999 A.2d 489 |
Parties | WELLS REIT II-80 PARK PLAZA, LLC, Plaintiff-Appellant,v.DIRECTOR, DIVISION OF TAXATION, Defendant-Respondent.Chicago Five Portfolio, LLC, Plaintiff-Respondent,v.Director, Division of Taxation, Defendant-Appellant. |
Court | New Jersey Superior Court |
COPYRIGHT MATERIAL OMITTED
Joseph A. Boyle argued the cause for appellant Wells Reit-80 Park Plaza, LLC, in A-5276-07T3 (Kelley Drye & Warren, attorneys; Mr. Boyle and Vincent P. Rao, II, Parsippany, on the briefs).
Heather Lynn Anderson, Deputy Attorney General, argued the cause for appellant in A-3381-08T3 and respondent in A-5276-07T3 (Paula T. Dow, Attorney General, attorney; Lewis A. Scheindlin, Assistant Attorney General, of counsel; Ms. Anderson, on the briefs).
Robert L. Selvers, Woodbridge, argued the cause for respondent Chicago Five Portfolio, Inc. in A-3381-08T3 (Wilentz, Goldman & Spitzer, attorneys; Mr. Selvers, on the brief).
Before Judges RODRÍGUEZ, REISNER and CHAMBERS.
The opinion of the court was delivered by
A.A. RODRÍGUEZ, P.J.A.D.
In this opinion, we address conflicting Tax Court decisions regarding a 2006 legislative amendment 1 to New Jersey's realty transfer fee on property purchases over $1,000,000, also known as the “Mansion Tax,” N.J.S.A. 46:15-7.2. This amendment, codified as N.J.S.A. 46:15-7.4, provides a refund of the Mansion Tax to contracts for commercial properties that were “fully executed before July 1, 2006,” provided that the deed was transferred on or before November 15, 2006. We address both appeals in one opinion. The source of the dispute is that two Tax Court judges came to different interpretations of the phrase “fully executed before July 1, 2006.” We hold that: (1) N.J.S.A. 46:15-7.4 is not an “exemption” from the Mansion Tax, but rather a refund provision; (2) as such, the section should be construed in favor of the taxpayer; and (3) the plain meaning and common usage of the phrase “fully executed before July 1 2006” means a real estate contract that is signed and binding upon the parties before July 1 2006, whether or not there are subsequent amendments to the terms.
The statutory section at issue here provides:
On June 13, 2006, Wells Reit's assignor entered into a contract with Newark Urban Renewal Investors, L.P., (Newark Urban) to purchase property located at Park Place in Newark for $155,000,000. All parties signed the contract on that date. The contract included a “due diligence period,” which was to end on June 21, 2006. The parties subsequently agreed to seven contract amendments, each referring to June 13, 2006, as the date the contract was formed. A July 25, 2006 amendment reduced the price to $147,500,000.
On September 21, 2006, the purchaser assigned the contract to Wells Reit and the parties closed on the sale. Wells Reit paid a $1,475,000 realty transfer fee set by N.J.S.A. 46:15-7.2 and recorded the deed. Wells Reit subsequently filed an RTF-3 Claim for Refund of the realty transfer fee with the Division of Taxation. The Division denied Wells Reit's claim for the following reasons:
Your claim contained a contracted sale-purchase agreement ... for a purchase price of $155,000,000. The sale agreement had several amendments and the July 25, 2006 [amendment] set the purchase price at $147,500,000 to reflect the consideration amount on the deed. Although the deed was recorded before the November 15, 2006 deadline as mandated by [ L. 2006 c. 33] [the Division] must deny your claim because the contract sale was not fully executed on July 1, 2006[,] as provided by statute.
Wells Reit appealed this decision and filed a complaint against the Director, Division of Taxation (Director) in the Tax Court.
After both parties moved for summary judgment, the judge granted summary judgment in favor of the Director. The judge concluded that “[i]n enacting the [M]ansion [T]ax as a revenue-raising measure for general State purposes, the Legislature carved out, in N.J.S.A. 46:15-7.4, a limited exclusion from the tax for certain transactions.” Wells Reit II-80 Park Plaza, LLC v. Dir., Div. of Tax'n, 24 N.J.Tax 98, 103 (Tax 2008). The judge found that N.J.S.A. 46:15-7.4 was “equivalent to an exemption from the tax[,] which should be construed narrowly.” Ibid. Therefore, the judge construed “the phrase ‘fully executed before July 1, 2006’ as referring to a contract signed on or before June 30, 2006, none of the essential terms of which was amended in a material respect on or after July 1, 2006.” Id. at 103-04. Therefore, the Director's motion for summary judgment was granted, Wells Reit's motion was denied, and the complaint was dismissed. Id. at 104. Wells Reit appealed. Chicago Five Portfolio, Inc. (Chicago Five)
On June 12, 2006, Chicago Five's assignor agreed to purchase property in Fort Lee for $18,155,000 from ECS-FT. Lee, LLC. A month later, the parties agreed to lower the purchase price to $17,400,000 and added a new economic feasibility clause, which allowed the purchaser to terminate the contract if it concludes “that the acquisition of the property is not economically feasible ... prior to the expiration of the due diligence period.” In August 2006, the purchaser assigned its rights to Chicago Five. The transaction closed on August 16, 2006.
Pursuant to N.J.S.A. 46:15-7.2, Chicago Five paid a realty transfer fee in the amount of $174,000 and subsequently filed an RTF-3 Claim for Refund of the realty transfer fee. The Division denied the claim, finding:
Chicago Five appealed the decision and filed a complaint against the Director in the Tax Court. Both parties moved for summary judgment. Judge Vito L. Bianco granted summary judgment to Chicago Five. In his published decision, the judge wrote:
Judge Bianco then engaged in statutory interpretation. Because the Legislature provided no definition of the term “fully executed,” Judge Bianco consulted several dictionaries and legal treatises:
Judge Bianco found no “clear and definite intention” of the parties “to effect a novation,” which would have created a new contract and extinguished the old one. Id. at 356. Rather, the contract amendment contained a provision expressly stating that all terms and conditions of the purchase agreement were to remain in full force and effect. He concluded that the amendment was a modification and not a novation, thus the purchase agreement was fully executed before July 1, 2006, as required by N.J.S.A. 46:15-7.4. He also found that N.J.S.A. 46:15-7.4 was not a tax exemption and should be construed in favor of the taxpayer. Thus, the judge granted summary judgment to Chicago Five. The Director appealed.
Wells Reit raises the following arguments in A-5276-07T3:
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