For affirmance -- Chief Justice Weintraub, and Justices Jacobs, Francis, Proctor, Hall, Schettino and Haneman. For reversal -- None. The opinion of the court was delivered by Francis, J.
[40 NJ Page 340] These three appeals were consolidated for argument because they arise out of the same transaction and involve common questions of law and fact. Review is sought of two judgments of the Division of Tax Appeals increasing the average ratio of assessed value of real property to true value in the Town of Kearny for application in the 1960 tax year from 33.87% to 46.31%. The lower figure was promulgated by the Director of the Division of Taxation in his 1959 table of equalized valuations for use in the allocation of state school aid to the various municipalities of Hudson County, including Kearny. That lower percentage was accepted by the Hudson County Board of Taxation and utilized for the purpose of apportioning the county tax burden for 1960 among the same municipalities. In calculating the ratio, the Director excluded certain sales of industrial property in Kearny made during the period used in constructing the equalization table. These sales, if included, would have raised
the ratio of assessed value to true value in the equalization table to 46.31%. The Director's refusal to do so produced a decrease of $26,326 in Kearny's allotment of school aid for 1960. Acceptance of the Director's table and ratio by the County Tax Board imposed on the town an additional county tax burden substantially in excess of $600,000.
Kearny attacked the 33.87% ratio on two fronts. An appeal was taken to the Division of Tax Appeals from the Director's order promulgating the equalization table for school aid distribution purposes. The county equalization table adopted by the County Tax Board (but based on routine acceptance of the Director's table) was challenged before that board. The attacks were unsuccessful and ultimately both matters reached this court. Kearny v. Division of Tax Appeals, 35 N.J. 299 (1961).
The need for an equalization table and for a determination of the ratio of assessed to true value of property for school aid and county tax distribution stemmed from the failure of local assessors to assess property in their municipalities at true value or at a uniform percentage thereof uniformly applied by all municipalities. In preparing the table, the Director of the Division of Taxation follows a convenient and uncomplicated system. All sales of real estate in each municipality in the State during the year being studied are reported to him. The sale price as indicated by the revenue stamps on the deed is treated as representing true value. The ratio of assessment to true value is then determined by comparison between the sale price and the assessed value. The process is further refined by classifying the sales into four categories: (1) vacant land; (2) residential; (3) farm; (4) "other" (which includes commercial, industrial, apartments, etc.). An over-all average ratio is calculated, which, by application to the total assessed value of real property in the municipality under study, as reported by the local assessor, produces the aggregate equalized (hypothetically the true) value of such property. This total figure provides the basis for allocation of state school aid to each municipality, N.J.S.A. 18:10-29.33,
and (when and if adopted by the county tax board) for distribution of the county tax burden among the municipalities. See Kearny v. Division of Tax Appeals, supra (35 N.J., at p. 303).
As we pointed out in the earlier opinion, during the year in question more than 50% of assessable real property in Kearny was industrial and the sales of such property showed a higher ratio of assessed to true value than was true in the other classes. Moreover, the sales were markedly fewer in the industrial class (only 9 out of 287), but the assessments were larger and the tax revenue therefrom substantial. Consequently, omission of a few such sales in fashioning the equalization table was bound to have a very significant impact on the town's overall average ratio. Id., at p. 314. The Director declined to utilize three industrial sales in his calculations. They were: (1) E.I. duPont de Nemours & Company to Carla Holding Company on August 11, 1958 for $9,500; (2) Congoleum-Nairn, Inc. to Kearnyland, Inc. on January 15, 1959 for $800,000; and (3) duPont to Wasco Chemical Company, Inc. on September 26, 1958 for $400,000. He classified them as within a category of non-usable sales called "split-offs," i.e., "sales of property conveying only a portion of the assessed unit." Such transfers under administrative rules established by him are generally to be excluded unless "after full investigation it clearly appears that the transaction was a sale between a willing buyer and a willing seller and * * * meets all other requisites of a usable sale." Id., at p. 306.
After studying the record we concluded that none of the three sales should be treated as a "split-off." Sales (1), duPont to Carla Holding Company, and (2), Congoleum-Nairn, Inc. to Kearnyland, Inc., required no further consideration. Consequently, we directed that they be utilized by both the Director and the County Board for equalization table purposes. As to (3), however, duPont to Wasco Chemical Company, Inc., we felt that an important issue had not been fully explored below. The issue was whether the $400,000 sale price represented the fair purchase price of the land and
buildings involved, and was arrived at by the parties dealing with each other as an owner willing but not compelled to sell, and a buyer willing but not compelled to buy. Therefore we remanded the matter to the Division of Tax Appeals for full factual development and determination of that problem. Id., at p. 319.
The question arose largely because the contract of sale included personalty consisting of equipment and inventory as well as real estate, and provided as follows:
"It is agreed between the parties hereto that the purchase price of Six Hundred Thousand Dollars ($600,000.00), herein provided, was determined on the following basis: Real estate and improvements thereon situate, Four Hundred Thousand Dollars ($400,000.00); Movable manufacturing equipment, One Hundred Fifteen ...