For affirmance -- Chief Justice Weintraub and Justices Jacobs, Francis, Proctor, Hall and Schettino. For reversal -- None. The opinion of the court was delivered by Hall, J.
Does liability for local property taxes remain, with respect to real estate acquired by the State of New Jersey or New Jersey Highway Authority by voluntary conveyance for public highway purposes, from the date of acquisition until the end of that tax year, despite the general tax exempt status of such property in the hands of the State or the Highway Authority?
This thorny question, with implications broader than its precise limitations, is presented in the following framework. The State, through its highway department, is in the course of constructing the East-West Freeway in Essex County. In the city of East Orange the road will connect with the Garden State Parkway, a toll highway built and operated by the New Jersey Highway Authority as an agency of the State. Both entities have found it necessary to acquire many privately owned parcels of improved real estate situated within the route of the freeway and the interchange in the city. Both have declined to recognize any liability of the properties so acquired for the taxes levied against them by the city for the year of acquisition beyond a per diem proration thereof to the date of conveyance and have refused to pay the balance of such levies.
The State takes the view that its sovereign immunity from local taxation on its real property, now defined by statutory tax exemption provisions, especially N.J.S.A. 54:4-2.1, 2.2 and 3.3, is so strong, absent clear legislative direction to the contrary, that it is to be construed to take effect as of the
moment of acquisition, insofar as such subsequent taxes are concerned. The Highway Authority primarily rests on the exact language used in the tax exemption section of the statute creating it, N.J.S.A. 27:12B-16, urging that thereby its position is even more solid than that of the State itself.
The State claims further support from a tax apportionment provision first adopted as a section of the present general tax act, L. 1918, c. 236, § 514, p. 871. Its current form, N.J.S.A. 54:4-56, may well be quoted in full at this point:
"Upon the sale and transfer for a valuable consideration or the acquisition through eminent domain or similar proceedings of any real estate in this state, unless otherwise provided in a written agreement between the seller and purchaser or the parties in said proceedings or unless otherwise expressly stipulated, the seller or owner of property to be acquired shall be liable for the payment of such proportion of the taxes for the current year upon the property to be conveyed or so acquired as the time between the previous January first and the date of the delivery of the deed by the seller to the purchaser or the date the condemning body acquired its title bears to a full calendar year. If the amount of the taxes for the current year shall not have been determined at the time of the delivery of the deed of conveyance or the taking of its title by the condemning body, the amount of the taxes last previously assessed against such real estate shall be used as the basis for computing the apportionment herein provided."
The city, on the other hand, finds a clear enough legislative intent that liability shall remain for the balance of the taxes for the year of acquisition from an over-all view of the statutory structure of local tax assessment, collection and distribution and its relation to the raising of local governmental revenues. It points particularly to the provisions indicating that the taxable status of real property for the whole of a particular tax year, which is coextensive with the calendar year, is generally determined as of the assessment date -- presently October 1 of the preceding year, N.J.S.A. 54:4-23 and 35 -- and to the fact that taxes become a lien on January 1 of the tax year, N.J.S.A. 54:5-6, even though then not fixed in amount or due. The apportionment section is said to have no application to the question.
Each side urges judicial authority for its position in a different decision. The city stresses Jersey City v. Montville Tp., 84 N.J.L. 43 (Sup. Ct. 1913), affirmed o.b. 85 N.J.L. 372 (E. & A. 1913). There one municipality purchased lands in another, after the then assessment date, for a public purpose which would bestow subsequent tax exemption. The court denied the purchasing entity's claim to exemption for any portion of the tax assessed for the year of acquisition on the thesis that taxability for the entire year is determined by the status on the assessment date.
The State relies on Borough of Edgewater v. Corn Products Refining Co., 136 N.J.L. 664 (E. & A. 1948), which grew out of a controversy, between the owner-condemnee and the municipality in which the property was situated, over the distribution of the condemnation award in an eminent domain action by the United States in the federal court. The taking occurred after the assessment date. The Court of Errors and Appeals in effect held, primarily on the basis of the apportionment statute previously quoted, that the municipality was entitled to receive out of the award taxes for the year of acquisition only to the extent of the prorated portion thereof from January 1 to the date of taking. The State accordingly suggests that the effect of the apportionment statute, enacted since the decision in Montville, is to modify the holding of that case.
East Orange sought a resolution of the dispute by commencing the instant action in 1963 against the State Highway Commissioner, the State Treasurer and the Highway Authority. The complaint spoke in general terms of the acquisitions in that year, with illustrative reference to one specific parcel purchased by the State on February 4. It alleged that the ratables taken or to be taken for highway use within the city in 1963 aggregated approximately $12,000,000 and that the taxes thereon of which payment was refused amounted to about $600,000, which sum had been included for purposes of the city's 1963 budget, its tax rate and the proportion of county taxes which it had to pay to that entity.
The relief sought was a declaratory judgment that properties so acquired remained subject to tax liability from the date of acquisition to the end of the year as well as a mandatory direction to the defendants to pay the taxes on such parcels for that period.*fn1
The controversy was determined in the Chancery Division on cross-motions for summary judgment. In an opinion reported in 82 N.J. Super. 258 (1964), the court held that, as a trial tribunal, it felt compelled to follow Jersey City v. Montville Tp., supra, because here, as in that case, the tax-exempt owner acquired title by delivery of a deed, as distinguished from the situation where the acquisition was by means of eminent domain proceedings bringing into play the alleged thesis of Edgewater. Judge Herbert indicated, however, an appropriate feeling of unsoundness in having the result turn on the method of acquisition. He also decided against the further defense of the state officials that the suit amounted to an action against the State and so not maintainable under the immunity doctrine. This position was not asserted by the Highway Authority since the statute creating it expressly authorized the agency "to sue and be sued." N.J.S.A. 27:12B-5(d).
The judgment declared "that an obligation exists to pay all taxes on all lands acquired by purchase" by the State and the Authority "for the period of time between the date of acquisition of title to such lands and the end of the full calendar year following the last assessment date on which taxable ownership still prevailed" and ordered the defendants "to pay, discharge, and satisfy all unpaid property taxes with interest to date of payment with regard to each property acquired * * * for which an obligation exists to pay said
taxes as aforesaid * * *" The defendants' appeal to the Appellate Division was certified on our motion before argument there. R.R. 1:10-1(a).
As our earlier summary of the views of the parties indicated, all agree that tax liability for the balance of the year of acquisition by an exempt governmental entity is a subject within the sphere of permissive legislative action. We are satisfied that no presently existing enactment precisely settles the matter and that the legislative intent must therefore be determined inferentially.*fn2
At this point we should refer again to Judge Herbert's uneasiness in feeling constrained to distinguish between public
acquisitions by voluntary conveyance and those accomplished through eminent domain. We are in thorough accord with the parties that there is no sound distinction between the two methods as far as the question before us is concerned. To hold that a property remains liable for taxes for the balance of the year of acquisition when it is purchased, but not when it is condemned, makes no apparent sense. Indeed, such a thesis could bring about otherwise needless resort to the "rugged remedy" of condemnation, contrary to the universally accepted policy of encouraging acquisition through voluntary conveyance. See New Jersey Turnpike Authority v. Washington Township, 16 N.J. 38, 43 (1954). What we have to say in this portion of the opinion will, therefore, be generally applicable to both methods of public acquisition.
In seeking the legislative intent, we should constantly keep in mind Judge Herbert's apt analysis that the question is "[s]trictly speaking, * * * not one of tax exemption. The city agrees with the general proposition that the State and the Highway Authority are exempt from taxation on land acquired for this project; the controversy here is over the date on which exemption begins." 82 N.J. Super., at p. 261. So any rule that exemptions in favor of governmental entities should be liberally construed is of no appreciable assistance. See Walter Reade, Inc. v. Dennis Township, 36 N.J. 435, 440 (1962).
We disagree with the Authority's contention that the answer as to it is found in certain language of the tax exemption provision of its enabling act, N.J.S.A. 27:12B-16. The section reads:
"The exercise of the powers granted by this act will be in all respects for the benefit of the people of the State, for the increase of their commerce and prosperity, and for the improvement of their health and living conditions, and as the operation and maintenance of projects by the Authority will constitute the performance of essential governmental functions, the Authority shall not be required to pay any taxes or assessments upon any project or any property acquired or used by the ...