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Bamberger v. Division of Tax Appeals of Department of Taxation

Decided: December 6, 1948.

L. BAMBERGER & CO., A CORPORATION, PLAINTIFF-APPELLANT,
v.
THE DIVISION OF TAX APPEALS OF THE DEPARTMENT OF TAXATION AND FINANCE, AND CITY OF NEWARK, DEFENDANTS-RESPONDENTS



For affirmance: Chief Justice Vanderbilt, Justices Case, Oliphant, Burling and Ackerson. For reversal: None. The opinion of the court was delivered by Case, J.

Case

[1 NJ Page 152] The appeal is from a judgment of the former Supreme Court, whose opinion is reported in 136 N.J.L. 463, dismissing a writ of certiorari. The writ had brought up judgments of the Division of Tax Appeals of the Department of Taxation and Finance affirming the assessments of appellant's property in the City of Newark for the years 1944 and 1945.

The Essex County Board of Taxation had earlier affirmed the assessments. The property consisted of the land and the building thereon forming the entire block bounded by Market, Halsey, Bank and Washington Streets in the City of Newark and was used as a unit by Bamberger for its store purposes. The assessment was $9,172,900.00 for each year, allocated $3,485,200.00 to land and $5,687,700.00 to improvements.

The fundamental legal propositions upon which appellant's argument is substantially rested may be conceded. The constitutional provision was that property should be assessed according to its true value (1844 Constitution as amended 1875, Article IV, Section VII, para. 12). The assessor was directed by statute (R.S. 54:4-23) to determine a price for which, in his judgment, the property would sell at a fair and bona fide sale by private contract on October first next preceding the date on which he should complete his assessments, viz., the first day of October preceding the tax year. The Court of Errors and Appeals deduced the legislative conception to be that such a selling price was to be the guiding indicium of fair value, New Jersey Bell Telephone Co. v. Newark, 124 N.J.L. 451 (E. & A. 1940), affirming on the opinion of the Supreme Court, 118 N.J.L. 490, 494 (1937), and that while ordinarily the selling price was merely evidential, it might under peculiar circumstances become controlling subject to the limitation that the determination properly involved the weighing and appraising of all component factors and adventitious circumstances, North Bergen Township v. Bergen Boulevard Holding Co., 133 N.J.L. 569 (E. & A. 1945).

The building was erected in three parts, the first in 1912-13, the second in 1923-24 and the last in 1928-29. The entire property, with an exception presently to be noticed, was sold by Bamberger to the Aetna Life Insurance Company in December of 1945; subsequent, as will be observed, to the assessing dates for the disputed taxes. The sale was bona fide, from a willing seller to a willing buyer. The designated sale price $6,750,000.00 was paid in cash. Bamberger would have that sale price control the assessment; if not actually control, then carry greater influence than it was accorded. And that is the nub of

the present controversy. Superficially, the question may appear to have legal aspects; actually it is one of studying and weighing the facts, arranging them in true perspective and from them appraising the value.

Bamberger did not sell under duress; it considered that it could use its money in its merchandising business to better advantage than in owning real estate; it preferred to be a tenant rather than a landlord. But it would not and did not sell except upon conditions named by it, and those conditions included a lease for a period of twenty-two years, with options to Bamberger of renewing for periods extending to the year 2034, upon terms such as the right to demolish and to construct and the duty to pay taxes. The lease gave to Bamberger many of the rights and laid upon it many of the duties of ownership for the duration of its leasehold; not a preexisting leasehold by a third party, but one contemporaneously carved by it out of the estate sold. Aetna bought without any constraint so to do except its desire to make proper investment, with such increment as safety permitted, of its capital funds. Other competitive and potential buyers were Columbia University (for its endowment fund), Equitable Life Assurance Society and Northwestern Life Insurance Company. The active market from which the sale emerged was composed of companies with capital obligations; that is to say, of companies whose business was of such a nature as to require the investment of capital funds with safety of principal the primary duty, and with the volume of increment secondary to and dependent upon the preservation of capital.

Bamburger argues that the economic impulses which led either seller or buyer to engage in the transaction were of no concern to the assessor; and that is true. But the conditions which those impulses led the participants, and particularly the present appellant, to impose upon the transaction were very much the concern of the assessor in formulating his judgment as to whether or not the sale was in such a market and under such circumstances as to constitute the immediate transfer of dollars the measure of value and the sale a fair sale within the purview of our tax laws. It was open to him to determine that

a part of the value in the transaction lay in what was really the estate reserved to Bamberger. It was, we may assume, of great interest to Aetna to be assured of a responsible tenant whose obligations under the lease were guaranteed by R. H. Macy & Co., sole owner of Bamberger; but the nature of the transaction tended to shut out all prospective buyers beyond the class mentioned above and, specifically, it shut out any prospective competitor of Bamberger from entering the field. It is not a baseless suggestion that some large merchandiser from elsewhere might have been interested in opening a Newark establishment in that favorable and well-advertised location, just as Bamberger proposed, according to the proofs, to use a part of its released funds for the opening of new stores in other urban and suburban centers. The immediate money consideration, although it was evidential, was not controlling in fixing true value.

The construction costs of the building in its various stages as disclosed by ...


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