[102 NJSuper Page 517] This is an action in lieu of prerogative writs brought by the City of East Orange against the Township of Livingston, Township of Millburn, Borough of Florham Park and the Essex County Board of Taxation. By its complaint plaintiff (hereinafter referred to as East
Orange) seeks a judgment directing that defendant municipalities assess approximately 2,500 acres of property owned by East Orange and located within their borders generally known as the East Orange Water Reserve, as farmland pursuant to the Farmland Assessment Act of 1964, L. 1964, c. 48, N.J.S.A. 54:4-23.1 et seq. East Orange alleges that its Water Reserve has been actively devoted to agricultural use and that it submitted timely applications for its assessment as farmland to the assessors of the Townships of Livingston and Millburn (hereinafter referred to as Livingston and Millburn), which were rejected. In a second count it is alleged that the lands constituting the East Orange Water Reserve have been the subject of continuous tax appeals commencing with the tax year 1957, and that because of the uncertainty as to the outcome of these proceedings public projects, the implementation of a bond issue and budgetary planning concerning the use of these lands for recreational and educational purposes involving East Orange, Livingston and Millburn have been "materially affected." As a result, East Orange seeks a judgment directing that defendant municipalities assess all eligible lands within the East Orange Water Reserve as farmlands pursuant to N.J.S.A. 54:4-23.1 et seq., and to exempt from taxation all of these lands "used for recreational and educational purposes."
Defendant municipalities in general contend that the East Orange Water Reserve is used principally for the purpose and protection of a public water supply and deny that any portion thereof is entitled to be taxed specially under the Farmland Assessment Act of 1964, or that any of the property is entitled to exemption for recreational or educational uses. They further contend that the court is without jurisdiction because plaintiff has failed to exhaust its administrative remedies, and any judgment rendered by the court would constitute an advisory opinion or adjudication. Defendant Essex County Board of Taxation (hereinafter referred to as the county board) has taken no position on the merits of the
controversy and asserts by way of separate defenses that the complaint fails to state a claim upon which relief may be granted; that there has been a failure to exhaust administrative remedies and that the court lacks jurisdiction; and further, it "reserves the right to move for dismissal of the complaint" on these various grounds. In the pretrial order the pleadings were deemed amended to make more explicit the contentions of defendant townships that the property of East Orange was not devoted to recreational uses and that, even without regard to such use, it was not entitled to exemption; and further, that the defenses of estoppel and laches apply.
The challenge to the authority of the court to entertain the action because of plaintiff's failure to exhaust administrative remedies should be disposed of at the threshold of the case. East Orange, pursuant to N.J.S.A. 54:4-23.14, filed applications with the assessors of Livingston and Millburn on September 13 and 29, 1967, respectively, for the taxation of its property located in these municipalities on the basis of farmland for the 1968 tax year.*fn1 The assessors of Livingston and Millburn rejected these applications.
There can be no question that the determinations of the assessors of these taxing districts are appealable to the county board of taxation. N.J.S.A. 54:3-21; Hackensack Water Co. v. Division of Tax Appeals, 2 N.J. 157 (1949). Under R.R. 4:88-14 the court would ordinarily not be entitled to preempt the county board in exercising jurisdiction over this controversy in the absence of countervailing circumstances demonstrating forcibly that the "interests of justice" require that administrative remedies be by-passed. Central R.R. Co. of N.J. v. Neeld, 26 N.J. 172 (1958),
Plaintiff contends that such circumstances obtain. In particular, it points to important and novel questions of law involving the construction of the Farmland Assessment Act of 1964 and the application of the act to a municipally-owned watershed. These considerations alone, however, would not be sufficient to side-step the appropriate administrative agency. The resolution of these questions requires the taking of evidence and the finding of facts preliminary to an ultimate determination of the legal issues. A case in this posture must be regarded as within the competence of the appropriate administrative agency having jurisdiction to adjudicate the controversy. Roadway Express, Inc. v. Kingsley, 37 N.J. 136 (1962). Nevertheless, there should be a diligent assessment of all the circumstances to determine whether or not the interests of justice require an exception to the rule of exhaustion of administrative remedies. Waldor v. Untermann, 10 N.J. Super. 188 (App. Div. 1950). The rule is essentially one of procedure for the proper administration of justice; it is neither jurisdictional nor absolute. Ibid.; Nolan v. Fitzpatrick, 9 N.J. 477 (1952); Ward v. Keenan, 3 N.J. 298 (1949).
Factors which might bear on the question of exhaustion of administrative remedies are relative relay and expense, possible prejudice to any of the litigants the public interest, the nature of the issues, and the extent to which the discretion of the administrative agency should be invoked in an adjudication. Cf. Port of N.Y. Authority v. Essex Cty. Board of Taxation, 46 N.J. 51 (1965). Many of these factors are present here. The litigants are governmental bodies. The controversy involves directly and primarily the public interest. The issues raised by the complaint are novel. While there is evidence to be taken and facts to be found, there is not involved in the present action the issue of valuation of property for tax purposes. In this sense, therefore, the special expertise of the county board
relative to tax valuation need not be involved in the adjudication of the issues in this case.
More importantly, the pretrial order especially required all defendants to bring by motion the defense based upon plaintiff's failure to exhaust administrative remedies and to bring such a motion sufficiently in advance of trial so that there could be a timely disposition thereof. The purpose of this provision in the pretrial order was made abundantly clear to all the parties at the time of the pretrial conference. It was to obviate the expense and effort of preparation and the investment of time which would otherwise be entailed in a trial if the complaint were not to be dismissed on this ground. Defendants failed to make such motions. Moreover, the county board, a party to the action and the administrative agency with statutory jurisdiction of the cause, disclaimed any interest in the controversy and did not itself move to have the matter dismissed or remanded on any grounds advanced in its answer, including failure to exhaust administrative remedies. As a result, there was a full plenary trial, consuming approximately three days, with the production of considerable expert and lay testimony and other evidence. Under these circumstances, the interests of justice dictate that the controversy be presently and expeditiously resolved on the merits by the court.
The defenses of estoppel and laches should be similarly addressed at the outset. It is asserted that East Orange is "in laches" and is "estopped" to claim that its Water Reserve is now taxable as farmland or otherwise exempt because it has acquiesced and consented for many years in the valuation, assessment and taxation of these lands as a watershed under N.J.S.A. 54:4-3.3. The doctrine of estoppel has been invoked in order "to prevent manifest wrong and injustice," but "it is not applied to a governmental agency performing a governmental function to the same extent as it is against individuals and private corporations." Feldman v. Urban Commercial Inc., 70 N.J. Super 463, 477
(Ch. Div. 1961); Vogt v. Borough of Belmar, 14 N.J. 195 (1954); Springfield Tp. v. Bensley, 19 N.J. Super. 147 (Ch. Div. 1952). The collection of taxes is an essential governmental function and a municipality will not be estopped in the proper performance of this duty even though it may be required to reverse or modify a position previously taken. City of Bayonne v. Murphy & Perrett Co., 7 N.J. 298 (1951). That East Orange has heretofore not challenged or disputed the taxability of its Water Reserve under N.J.S.A. 54:4-3.3 in no way estops it from asserting a different legal position today. It does not seek to undo taxes paid for years past. The public interest will not suffer by permitting East Orange to press its contentions; indeed, the public interest might lie in that direction. The doctrine of estoppel may not be invoked under these circumstances. The same reasoning and considerations would also preclude a bar to the action based upon laches. Thornton v. Ridgewood, 17 N.J. 499 (1955).
The property constituting the East Orange Water Reserve consists of a tract approximately 2,300 acres; 1470 acres are located in Livingston, 634 in Millburn, and 181 in Florham Park. East Orange acquired this tract over a great many years beginning in 1903. Some of the lands were acquired by deed and some through condemnation for the purpose of water supply and for the protection of water supply. The land has been used for this purpose since 1905 and it is presently utilized by East Orange for this purpose, that is, as a source of potable water which it supplies to its inhabitants. The actual source of the water is an aquifer, a subterranean water-bearing stratum or level beneath the surface. It was described by Ralph M. Legette, a ground water geologist and consultant familiar with the East Orange Water Reserve properties, as a glacial valley consisting of depositions of highly permeable sand and gravel which extends not only throughout the entire East Orange Water Reserve but also beyond in a general direction toward Chatham, Florham Park, Madison, Morristown and East Hanover, [102 NJSuper Page 523] which municipalities also derive water from these sources. No water is drawn directly from the surface. It is drawn from 13 wells which are located in well fields denominated as the Braidburn, Dickinson, Slough Brook and Canoe Brook well fields. Three of the wells are in Florham Park; seven are in Livingston and three in Millburn. As stated by Daniel Carluccio, water engineer and secretary to the Board of Water Commissioners for East Orange, who is directly in charge of the Water Reserve, the wells and well fields are widely separated and the entire 2,300 acres is needed as a "watershed" in order to protect the water source in the well fields and, through proper infiltration and percolation of surface waters, to enable the wells to be replenished. It was pointed out by Legette that virtually the entire surface area of this watershed is involved in the protection and replenishment of the underground water supply. It was explained that the well fields throughout the East Orange Water Reserve, as well as the aquifer throughout the similar adjoining property of the Commonwealth Water Company, all contained relatively impermeable clay-like materials which constituted an underground storage area, "like a huge bathtub." The well fields themselves are in these "storage areas" and not in what was characterized as "recharge areas." Recharge areas are surface areas where water from rainfall percolates and infiltrates into the ground and then flows through natural underground drainage into the deeper areas constituting the well fields. Maps offered into evidence indicate the general location of the well fields which seem to extend with indefinite boundaries like a large crescent along the westerly, southerly and easterly areas of the tract. The subterranean well fields themselves appear to constitute in extent considerably less than one-half of the total area of the Water Reserve. Legette stated that all of the remaining portion of the tract, which completely surrounds the area of the well fields, was a "potential recharge area," that is, the surface area necessary for the replenishment of the well fields. There are no reservoir or water storage facilities within
the confines of the Water Reserve itself. Water is pumped from the wells via a network of pipe lines to reservoirs located beyond the boundaries of the East Orange Water Reserve. There is a well house over each well and there are other operating equipment and storage facilities for equipment and machinery on the Reserve.
Most of the 1470 acres of the Water Reserve located in Livingston are heavily wooded, with some open, low meadowland, traversed by brooks and streams. In Millburn approximately 415 acres is woodland; 75 acres is open meadow or "pasture" land; there are some houses, actually former farmhouses, now utilized by employees of the East Orange Board of Water Commissioners on approximately ten acres of land, and a municipal golf course, the East Orange Golf Course, on 134 acres. In Florham Park the land is mostly low meadowland with few, very small trees, at a level below the flood plain of the Passaic River, which becomes extensively flooded in heavy rainfall.
East Orange asserts that substantial portions of its Water Reserve are taxable pursuant to the Farmland Assessment Act of 1964. In its application to Livingston for the taxation of its land under the act, filed on September 13, 1967, it stated that 1,250 acres constituted "woodland devoted to agricultural or horticultural use" and 220 acres constituted "permanent pasture." Ten acres were designated as being "land under and land used in connection with farmhouse." According to its application, all of its watershed acreage located in Livingston was devoted to agricultural or horticultural use. In the application filed with Millburn on September 28, 1967 covering 634 acres, 415 were designated as "woodland devoted to agricultural or horticultural use" and 75 as "permanent pasture," making a total of 490. Also designated as within the broad category of "farm acreage" were ten acres used in connection with farmhouses, and 134 acres, apparently the golf course, stated to be not otherwise devoted to agricultural or horticultural use. Thus, according to both applications, it may be inferred that East Orange
considered that all of its watershed acreage located in Livingston and Millburn was in Agricultural use, with the exception of the golf course and the farmhouse properties (not eligible under the act).
Historically, the property in question has been taxed pursuant to N.J.S.A. 54:4-3.3; e.g. In re Appeal of City of East Orange, 80 N.J. Super. 219 (App. Div. 1963). The salient portion of the statute authorizing the taxation of these lands as a municipal watershed provides:
"* * * The lands of counties, municipalities, and other municipal and public agencies of this State used for the purpose and for the protection of a public water supply, shall be subject to taxation by the respective taxing districts where situated, at the taxable value thereof, without regard to any buildings or other improvements thereon, in the same manner and to the same extent as the lands of private persons, but all other property so used shall be exempt from taxation. * * *"
East Orange contends that the tax status of its Water Reserve was altered by the later enactment of the Farmland Assessment Act of 1964 and it is now taxable as farmland "in the same manner and to the same extent as the lands of private persons." The Farmland Assessment Act of 1964 provides:
"[F]or general property tax purposes, the value of land, not less than 5 acres in area, which is actively devoted to agricultural or horticultural use and which has been so devoted for at least the 2 successive years immediately preceding the tax year in issue, shall, on application of the owner, and approval thereof as hereinafter provided, be ...