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Essex County Park Commission v. State Board of Tax Appeals

Decided: January 18, 1943.


On application for writs of certiorari.

For the prosecutor, Harrison & Roche (J. Henry Harrison and John J. McDonough, of counsel).

For the respondents, Raymond Schroeder (Vincent J. Casale, of counsel), for the City of Newark; Edward C. Pettit, for the Town of Bloomfield; Philip D. Elliot, for the Borough of Caldwell; Howard R. Cruse, for the Village of South Orange.

Before Brogan, Chief Justice, and Justices Parker and Porter.


The opinion of the court was delivered by

BROGAN, CHIEF JUSTICE. The ultimate question in this case involves the constitutionality of a certain section of our tax statute that has to do with exemption of public property from taxation. This case before us arises on rule to show cause why certiorari should not be allowed to review a judgment of the State Board of Tax Appeals. The proposed prosecutor of the writ contends that certain real properties owned by it, a public agency, and assessed by the several taxing districts in which the properties lie, are exempt from taxation under the statute. The assessments were approved by the county tax board and on appeal to the State Board of Tax Appeals these judgments were affirmed. The properties, located in four taxing districts in Essex County, are seven in number and are owned by the Essex County Park Commission. The Park Commission, it appears, had invested pension fund money in bond and mortgage on these properties. The several mortgagors defaulted; two of the mortgages were foreclosed and the property purchased by the Commission at the sheriff's sale; in the remaining five cases, the mortgages being in default, the mortgagors conveyed the property to the Commission in consideration of the mortgage debt. The question is whether these properties are validly subject to taxation by the local taxing districts in which they are located. The pertinent statute is N.J.S.A. 54:4-3.3 which provides as follows: "The property of the United States, and except as otherwise provided by article 1 of this chapter (ยง 54:4-1, et seq.), the property of the state of New Jersey; and the property of the respective counties, school districts and taxing districts, when located therein and used for public purposes, or for the preservation or exhibit of historical data, records or property shall be exempt from taxation under this chapter, but this exemption shall not include real property bought in for debts or on foreclosure of mortgages given to secure loans out of public funds or out of money in court, which property shall be taxed unless devoted to public uses, * * *." (Italics supplied.)

The present case, as has been said, comes to us on rule to show cause why certiorari should not be allowed. The question

raised is important, affects the public interest, and we think it should be decided. The writ is therefore allowed and, pursuant to stipulation between the parties, to which this court assented, we proceed to examine the ultimate question as though a return had been perfected and reasons for reversal filed.

The prosecutor contends in the main that the quoted statute, particularly the underscored portion thereof, supra, is unconstitutional. For its first point, conceding that the legislature may tax the property of the state or that of its subdivisions, the argument is that intent to tax must be clearly expressed. This may be admitted. Jersey City v. Blum, 101 N.J.L. 93; 127 A. 214. It is then conceded that the intent of the legislature was clearly expressed in the statute, viz., to withhold exemption from taxation of real property bought in for debts or foreclosure, but that nonetheless (a) the provision is unconstitutional; (b) the property is in fact used for public purposes and therefore exempt; (c) that the statute, if constitutional, does not in express terms include property which was "conveyed to prosecutor by deed."

One of the reasons advanced in the brief for the invalidity of the statute, supra, is that it is not general, relying on Tippett v. McGrath, 70 N.J.L. 110, 113, and Jersey City v. Blum, supra. One of the principles for which these cases stand is that property may not be classified for exemption or taxation on the status of its owner but rather upon features or characteristics that inhere in the property itself or in the purposes to which it is devoted. The prosecutor says that therefore any classification or distinction as to exemption for property owned by it, based on the manner of its acquisition, is specious and invalid. This argument would be sound if it was based on a fair reading of the statute. The premise upon which it is based is not complete in that it fails to take into account the words of the statute requiring such property be taxed "unless devoted to public purposes." If these properties, obtained by foreclosure or by deed, were devoted to public purposes they would be within the protection of the statute. The statute, in a word, provides that the

property of the state, or any of its named subdivisions, used for public purposes, shall be exempt from taxation; and further in very explicit language the statute provides that exemption shall not apply to properties taken for debts or by foreclosure unless they, too, are put to public use. It seems manifest that where real estate is acquired, as the properties in question were (either by foreclosure or by deed in lieu of foreclosure), in an effort to salvage the mortgage investment, that circumstance does not endow such property with a public status or a public use. These properties are not used for park purposes or for any other public use. As a matter of fact, it is stipulated that they are occupied and rent is being paid by tenants, which goes ...

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