Jacobs, Eastwood and Bigelow. Bigelow, J.A.D. (for the court, and also dissenting in part).
BIGELOW, J.A.D. (for the court, and also dissenting in part).
In the greater part of this opinion I have the honor to speak for a unanimous court, but at the very end, and that is the most important part, my role becomes one of dissent. The dissent will be plainly designated in order that there may be no uncertainty in that regard.
This matter is before us on cross-appeals from the action of the Division of Tax Appeals settling the assessment of second-class railroad property of the Delaware, Lackawanna & Western Railroad Company lying in Hoboken and Jersey City. The Director of the Division of Taxation, pursuant to the Tax Law of 1948, L. 1948, c. 40, §§ 8 and 9; N.J.S.A. 54:29 A -17 and 18, assessed the property at $16,011,234. Both the taxpayer and the cities, dissatisfied, appealed to the Division of Tax Appeals, where the assessments were increased by $1,823,393 to $17,834,627. And now the parties are here. Before going at all into the facts, certain questions of law propounded to us may be considered. [16 NJSuper Page 549] The railroad company urges that the valuation found by the Director of the Division of Taxation is still presumably correct, despite the determination by the Appeals Division. The argument is based principally on a provision of the Railroad Tax Act of 1948 which empowers the Director (who in this respect has succeeded to the powers of the State Tax Commissioner) and anyone who is "delegated by him to value and assess property in railroad use," "to use his personal knowledge and judgment as to the value of any property which he is required to assess, upon original assessment or upon review thereof." N.J.S.A. 54:29 A -67. (The review mentioned at the end of the passage is a review by the Director of his own assessment, and not a review thereof by some other authority or tribunal, such as the Division of Tax Appeals.) This authority of the Director -- but not of his delegate -- to use his personal knowledge and judgment, had been possessed by his predecessors in the function of assessing railroad lands since 1884. L. 1884, p. 142, §§ 15 and 20. It is in substance the same as the authority of local assessors to use their knowledge and judgment in valuing taxable property under the General Tax Law. R.S. 54:4-23; State v. Metz , 31 N.J.L. 378 (Sup. Ct. 1865); State v. Tindall , 36 N.J.L. 97 (Sup. Ct. 1872). And see 61 C.J., Taxation , § 790, p. 640. When the assessment of the township or other local assessor is reviewed on certiorari , the assessment is presumed to be correct and the objector has the burden of proving otherwise. State v. Abbott , 42 N.J.L. 109 (Sup. Ct. 1880). It has been said that the proofs must show "a clear error" in the valuation or the assessment will be upheld. Estell v. Hawkens , 50 N.J.L. 122 (Sup. Ct. 1887). Likewise, there is a strong presumption that the assessment of railroad lands made by the Director is correct, when it is the subject of appeal or certiorari. Central R.R. v. State Board , 49 N.J.L. 1 (Sup. Ct. 1886); Long Dock Co. v. State Board , 82 N.J.L. 21 (Sup. Ct. 1911), affirmed 84 N.J.L. 762 (E. & A. 1913). Although it has frequently been said that the great weight given to the valuation made
by the Director -- or his predecessors -- is the result of his power to use his personal knowledge, we incline to believe that the true reason is the broad experience the Director and his staff have had in the field of valuation of railroad properties. When we recall that the railroads which the Director must assess extend into every county and even into every considerable municipality of the State, it is evident that the personal knowledge of the Director plays a small part in his assessments, compared with the role of personal knowledge of municipal assessors.
But the assessment that we are called upon to review is not that of the Director; the assessment before us is the one made by the Division of Tax Appeals, and that is the assessment now presumed to be correct. Kearny v. Board of Equalization , 81 N.J.L. 106 (Sup. Ct. 1911); Colonial Life Ins. Co. v. State Board , 126 N.J.L. 126 (Sup. Ct. 1941). This is in accordance with the principle that the burden is always on an appellant to show that the judgment of which he complains is erroneous. Donofrio v. Haag Bros. , 10 N.J. Super. 258 (App. Div. 1950); McGowan v. Peter Doelger Brewing Co. , 10 N.J. Super. 276 (App. Div. 1950). We go one step further. The question before us is not whether the Appeals Division gave sufficient weight to the appraisal of the Director. The question put to us by the Legislature is whether the final determination of the Appeals Division, in respect to the assessment, is "illegal, excessive, insufficient, or that there has been illegal discrimination in the assessment." If it is so made to appear, we "correct, adjust and equalize such assessment and tax or refer same back" to the Director. L. 1941, c. 291, § 37; N.J.S.A. 54:29 A -37. The valuation of the Appeals Division must be sustained unless the evidence preponderates against it.
Before turning to our next topic, we would mark the differing natures of the actions of the Director and of the Division of Tax Appeals. The action of the Director is strictly administrative. He makes his assessment without notice to the taxpayer and without taking evidence, although
he will review the assessment at the request of the taxpayer. N.J.S.A. 54:29 A -18; L. 1948, c. 40, § 9. But this review is "a mere revision and not an appellate review." Tuckerton R.R. Co. v. State Board , 75 N.J.L. 157 (Sup. Ct. 1907). By contrast, the proceeding before the Appeals Division is judicial in nature and in method. The party aggrieved by the assessment of the Director files a complaint, a hearing on notice is had, proofs are submitted, and a determination of the appeal is made, based upon the evidence which has been submitted to the Appeals Division. The proceeding is a trial de novo. There is no room here for the undisclosed personal knowledge of the Director or of members of the Division. The determination must be supported by the record. Giordano v. City Commission , 2 N.J. 585 (1949). Until 1933, when an administrative appeal was first provided (L. 1933, c. 305, § 2; R.S. 54:26-7), the assessment made by the State Board of Assessors, or whatever might be the title of the administrative body charged with assessing railroad lands, was reviewed in the first instance in the Supreme Court on certiorari. There the assessment was accorded great weight, as we have pointed out -- more weight probably than is now given to the determination of the Appeals Division, although that determination is presumed to be correct. In the instant case, only half of the members of the Division -- those constituting the panel -- heard the witnesses and the oral arguments of counsel; the other members of the Division had to rely on the typewritten transcript and briefs. We have before us all the proofs that were before the Division and in a form more convenient for study. But there seems to be no necessity for, and no advantage to be gained by, attempting to measure the strength of the presumption in favor of the assessment made by the Appeals Division.
The Attorney-General, intervening in behalf of the railroad appellants, argues that it was a prerequisite to a determination by the Division of Tax Appeals that they take the testimony of the Director in order to learn what was the
basis of his valuation; that since neither of the parties produced the Director as a witness, the Division, on their own motion, should have taken his testimony. The testimony of the Director as to material facts within his own knowledge might have been presented to the Appeals Division, just as the testimony of a juror in a negligence case may be taken if it so happens that he saw the accident that is the subject of the trial. State v. Langhans , 94 N.J.L. 17 (Sup. Ct. 1919), 95 N.J.L. 213 (E. & A. 1920). So the Director, if he personally examined the property of the railroad, could testify to what he saw; if he was cognizant of any sales of comparable properties, he might testify about the sales. As a witness to facts relevant to the fair value of the property, he would be on the same footing as any other witness and the admissibility of his testimony would be governed by the same rules. But the Director could not be questioned as to the operation of his mind in valuing the property -- what factors were considered by him, what weight he gave them, what inferences he drew, and how he reached his conclusions. Long Dock Co. v. State Board , 86 N.J.L. 592, 597 (E. & A. 1914); Chicago B. & Q.R.R. Co. v. Babcock , 204 U.S. 585; 27 S. Ct. 326 (1907). There is no indication that the Director had any knowledge that might properly have been the subject of testimony by him before the Division of Tax Appeals. If either litigant before the Appeals Division surmised that the Director had such knowledge, doubtless he would have been asked to testify. The Tax Division was under no obligation to call him.
The municipalities base their chief argument on "tax history." The assessments of the properties now under consideration and of all railroad waterfront properties in Jersey City and Hoboken, were reduced ten per cent in 1936 from the valuations of the late 1920s. In 1939, there was a second ten per cent reduction and since then the assessments of the particular lands here in question have remained level, neither raised nor lowered, except for the reduction in 1949 made by the Director and cancelled by the Appeals Division.
Between 1939 and January 1, 1948, land values generally increased in value, and the municipalities claim that the lands now under consideration likewise increased in value during the same period. In this situation, argue the municipalities, the Division was bound to set aside the reduction made by the Director, and also to increase the assessment above prior years.
It must not be forgotten that each annual assessment of property for taxation is a separate act and independent of the assessment of the same property for other years. United New Jersey, etc., Co. v. State Board , 103 N.J.L. 33 (Sup. Ct. 1926). An argument substantially the same as that now presented to us, was characterized in In re New York, etc., Co. , 5 N.J. Super. 156 (App. Div. 1949), as "without force because assessments are made each year and the valuations of one year are not conclusive or binding for the following year. Such prior valuations were merely circumstances for the State Board to consider. It is also possible that the valuations for the prior years were not at true value." The doctrine of res judicata does not apply, notwithstanding intimations to the contrary in Pitney v. State Board , 136 N.J.L. 157 (Sup. Ct. 1947). But, of course, tax history of the kind presented to us is relevant and may be forceful proof. Hackensack Water Co. v. State Board , 129 N.J.L. 535 (Sup. Ct. 1943), affirmed Hackensack Water Co. v. North Bergen , 130 N.J.L. 483 (E. & A. 1943); Jersey City v. State Department , 136 N.J.L. 353 (Sup. Ct. 1947). There ought to be a certain degree of stability in tax assessments.
In 1936 and 1939, as we have seen, the valuation of railroad lands in Jersey City and Hoboken were lowered 19 per cent beneath the figures of 1924 to 1935. In 1944, the county board reduced the assessment of 80 per cent of the parcels of land in Jersey City, not including land used for railroad purposes. Counsel for the municipalities admits that the reduction was approximately 36 per cent of total land assessments in Jersey City, and that a similar reduction in
Hoboken amounted to about 18 per cent. The company points out that unless the assessments of second-class railroad lands are brought into line with the local assessments, the railroads have to bear a disproportionate share of the tax load.
The Railroad Tax Act of 1884, § 4, dealt with the possibility that real estate other than railroad lands might be assessed by the local assessors at a relatively lower scale than the assessed value laid upon railroad land in the same taxing district. In such event, the State Board of Assessors was required to accept the valuation of the local assessors as a correct standard of value and thereby correct or reduce the railroad assessment. But our Supreme Court, in Central R.R. Co. v. State Board , 49 N.J.L. 1 (1886), held that the constitution required the State Board to assess the railroad land at "true value" whether or not the local assessor fixed his assessments perhaps as low as 40 per cent of true value. As a result of this decision, the provision of the 1884 statute, which we have just mentioned, was omitted from the 1888 Railroad Tax Act, L. 1888, p. 269.
A discrimination between taxpayers, so that one is assessed upon the full value of his property and others are assessed upon only a fraction of full value, violates the Fourteenth Amendment to the Federal Constitution. Mere errors in judgment do not support a claim of discrimination, for there must be something which in effect amounts to an intentional violation of the essential principle of practical uniformity. Where -- as in New Jersey -- most land is assessed by local authorities, but certain land is assessed by a body of state officials, then, if there is systematic undervaluation by the local authorities, while the state officials, though presumably aware of such local undervaluation, yet make their assessments upon full value, a case of unlawful discrimination is presented. It was formerly considered that the only remedy of the taxpayer who was the victim of the discrimination was a proceeding to increase the assessments of other taxpayers, but now we recognize that such a remedy is not enough and
that he may rightfully demand that his own assessment be reduced to the common level. The constitutional mandate to assess at full value must yield to the even more fundamental requirement of relative equality. Greene v. L. & I.R. Co. , 244 U.S. 499; 37 S. Ct. 673 (1917); Sioux City Bridge Co. v. Dakota County , 260 U.S. 441; 43 S. Ct. 190 (1923); Hillsborough Township v. Cromwell , 326 U.S. 620; 66 S. Ct. 445 (1946).
It was probably in recognition of this principle of constitutional law that our Legislature in 1933 inserted in the Railroad Tax Act a provision similar to that which had been held ineffective by our Supreme Court in 1886. If any party in interest claims "that there has been illegal discrimination in the assessment of * * * property * * * under" the Railroad Tax Act, "as compared with the assessment of property generally" under the General Tax Law, and if it shall be made to appear "that there has been illegal discrimination in the assessment, the board shall correct, adjust and equalize the assessment and tax of such property." The last passage quoted was also written into the provision for review on certiorari. L. 1933, c. 305, § 2; R.S. 54:26-7, 9 and 12. The 1941 revision of the Railroad Tax Law omits the detailed description of the claim of discrimination and merely directs that a written complaint shall be filed "specifying the grounds of complaint and the relief sought"; but the statute still directs on the appeal to the Division of Tax Appeals and on judicial review, that the assessment shall be equalized if it appears "that there has been illegal discrimination in the assessment." L. 1941, c. 291, §§ 31, 33 and 37; N.J.S.A. 54:29 A -31, 33 and 37. We conceive that under the revision of 1941 (now named the Railroad Tax Law of 1948) just as under the statute of 1933, where the Director's assessment of second-class railroad lands is based on a higher norm of true value than the municipal assessment of comparable property in the same taxing district, or where the one is based on 100 per cent of true value and the other is systematically set at a fraction of true value, the Division of Tax Appeals, on
proper complaint and proof, should equalize the assessment by lowering the assessment on second-class railroad property. It would seem to follow that the Director, making his assessment of railroad property in any given taxing district, may and should have in mind the established custom of the municipal assessor.
But discrimination is not assumed. It must be alleged in the complaint to the Appeals Division and proved, or else the railroad company is not entitled to relief on that score. In the present instance the company did not charge discrimination and the evidence does not indicate discrimination either in the original assessment of the Director or in the revised assessment of the Appeals Division. The subject of the general trend of land assessments in Jersey City and Hoboken will be touched on a little later.
A question of the law of evidence is presented. Mr. Stewart, one of the valuation experts for the municipalities, had made inquiry concerning the rental of piers along the river front in Jersey City and Hoboken, and drawn a schedule showing the results of his inquiry. All the information contained in the schedule he obtained from the lessors or lessees, or by examination of the leases. This data was a factor in his reaching an opinion of the value of the company's waterfront property. Over objection that the schedule was built on hearsay, the panel of the Appeals Division received it in evidence. Several other schedules with a somewhat shaky foundation were received. For example, Floor Area of Piers in New York and other Ports; Tonnage in and out of Port of New York through New Jersey Rail Terminals. We prefer not to consider evidence that a court ought not accept, and will deal with the question presented by the admission of the rent schedule as if it had been a court and not an administrative body sitting.
The modern trend in the law of evidence favors both a liberal rule of admissibility and the giving of a broad discretionary control to the trial judge. The present rule in many, perhaps in a majority, of American jurisdictions permits an
expert witness as to value to base his opinion on those sources of information to which business men usually resort, and allows the witness to divulge to the court the data on which his opinion is based, even though hearsay testimony is thus presented. 32 C.J.S., Evidence , § 545, p. 289. Our standard of true value is the price a willing purchaser and a willing seller would agree upon. Murphy v. West New York , 132 N.J.L. 111 (Sup. Ct. 1944). The expert witness should consider the same elements as would willing and intelligent buyers and sellers; he may rely upon the same sources of information that they would use. As Chief Judge Parker pointed out in U.S. v. 25,406 Acres of Land , 172 F.2d 990 (4 th C.C.A. 1949), since the court adopts the standards of the market place in making valuations, there is no reason why it should close its eyes to how the market place arrives at and applies the standards. And see the opinion of Chief Justice Maltbie in Vigliotti v. Campano , 133 A. 579 (Conn. 1926). Also Baltimore v. Hurlock , 78 A. 558 (Md. 1910); and Davenport v. Haskell , 200 N.E. 409 (Mass. 1936).
There are several aspects of the use of hearsay as a basis of expert opinion. First, its effect on the opinion itself. A medical opinion is no better than the data on which the doctor relies, and so the court will receive his opinion which is based in part on what someone told him, only if the circumstances carry a strong likelihood that he was told the truth. Cf. State v. Gedicke , 43 N.J.L. 86 (Sup. Ct. 1881), with Birtwistle v. Public Service Ry. Co. , 94 N.J.L. 407 (E. & A. 1920). In determining the fair value of land, we picture a bargaining process carried on in the same manner in which real bargains are struck. The participants accept as fact whatever seems to them reliable. A widely believed report, though erroneous, may have real influence on the price. And so an appraisal based on such reports may be more accurate than if the expert were confined to facts duly proved. See R.S. 2:101-1. A second facet of the problem is illustrated by State v. Gedicke, supra , where the physician was permitted to repeat to the jury what his patient had told
him about her symptoms. Wharton's Crim. Ev. , § 518. Such testimony may incidentally bear on the question of liability and should therefore be received reluctantly, for it may influence the jury on that issue, even though they be instructed to disregard it except for the purpose of weighing the expert's opinion. But in the case before us, no such obstacle to the reception of the schedule of rents existed. The rents were not in issue; for the only question before the Tax Appeals Division was the value of the company's lands.
A third factor in a complicated valuation proceeding like the present is convenience. The hearing in the matter before us, took all or parts of 27 days; the appendix runs to 3,000 printed pages. If each pier owner had been called to testify, if all the data relied on by the experts had been established by witnesses having first-hand knowledge, the hearing might have been two or three times as long as it was. The cumbersomeness of the process would well nigh have defeated justice. It is because practical convenience requires it that schedules prepared by the expert on valuation, or his staff, and not proved otherwise than by the oath of the expert that he believes them credible, are constantly received by commissions and courts when valuing public utility systems as a step in rate making. The same considerations in a case like the present justify a departure from the strict rule enunciated in Essex County Park Com. v. Brokaw , 107 N.J.L. 110 (E. & A. 1930). We find that the Division of Tax Appeals properly received the schedules now in question.
Now at last we come to the facts. The land which is the subject of the appeal, comprises two separate tracts. One is the Lackawanna's main terminal on the Hudson River, and the other is a yard at Eleventh Street, Hoboken, three-fourths of a mile north of the terminal. Only the land itself, not the buildings or improvements, are involved. Of the terminal tract, 50.4 acres, including the ferry lot, lie in Hoboken and 132.4 acres are in Jersey City. For a decade, the Hoboken part of the terminal had been assessed at $93,312 an acre,
and the Jersey City land at $92,340. The Director reduced the assessment of the entire tract to $83,100 an acre and the panel recommended that the old assessments be restored, making a total of $16,935,302. The Eleventh Street property, which is mostly under water, comprises two adjoining parcels, the Ocean tract of 5.3 acres, and the Manor tract, 7.6 acres. The Director assessed the former at $66,650 and the latter at $60,750 per acre. The panel recommended increasing the assessments to the ...