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Cold Indian Springs Corp. v. Township of Ocean

Decided: October 21, 1977.

COLD INDIAN SPRINGS CORP., A NEW JERSEY CORPORATION; MIDDLEBROOK AT MONMOUTH, INC., A NEW JERSEY CORPORATION; WOODMERE AT EATONTOWN, INC., A NEW JERSEY CORPORATION; WOODSHIRE APARTMENTS, A NEW JERSEY PARTNERSHIP; RALEIGH CORPORATION, A NEW JERSEY CORPORATION; CONTINENTAL ENTERPRISES, A NEW JERSEY PARTNERSHIP; CONTINENTAL LAND DEVELOPERS, INC., A NEW JERSEY CORPORATION, PLAINTIFFS,
v.
TOWNSHIP OF OCEAN, A MUNICIPAL CORPORATION OF THE STATE OF NEW JERSEY; AND MARTIN BAILEY, TAX COLLECTOR OF THE TOWNSHIP OF OCEAN, DEFENDANTS, AND FRANK LINZMAYER AND EILEEN L. YOUMANS, ON BEHALF OF THEMSELVES AND AS REPRESENTATIVES OF TENANTS IN BUILDINGS INVOLVED IN THIS ACTION, INTERVENING DEFENDANTS-COUNTERCLAIMANTS. CHESTERFIELD ASSOCIATES, INC., A CORPORATION OF THE STATE OF NEW JERSEY, PLAINTIFFS, V. TOWNSHIP OF FREEHOLD, A MUNICIPAL CORPORATION OF THE STATE OF NEW JERSEY, AND ROBERT N. FERRELL, TAX COLLECTOR OF THE TOWNSHIP OF FREEHOLD, DEFENDANTS



Lane, A.j.s.c.

Lane

This is the return day of orders to show cause why orders should not be entered enjoining defendants from enforcing the Tenants' Property Tax Rebate Act, N.J.S.A. 54:4-6.2 et seq., as amended, L. 1977, c. 81, against plaintiffs pending further order of the court and enjoining defendants from enforcing tax collector certifications pending further order of the court. Plaintiffs in each case have moved for summary judgment. Defendants in both actions have moved for summary judgment. Both matters are being decided in one opinion; however, they are not consolidated.

Plaintiffs in both actions allege that the Tenants' Property Tax Rebate Act is unconstitutional facially and as applied and that irreparable injury in the form of fines and civil liability to tenants will result if the act is enforced against them. Defendants were preliminarily enjoined from enforcing the Tenants' Property Tax Rebate Act and the tax collector certifications. Obligations represented in the certificates were stayed. Copies of the order to show cause and complaint in lieu of prerogative writs were ordered to be served upon defendants and plaintiffs' tenants. In Cold Indian Springs , copies of the documents were also sent to the Attorney General whose office has responded by letter that it does not intend to intervene at this time, although reserving the right to do so in the future. He has filed a brief.

Plaintiffs in the Cold Indian Springs action are owners of apartment complexes in the Township of Ocean who have joined in this action to present identical grievances about the Tenants' Property Tax Rebate Act. In addition, Cold Indian Springs, Inc. alleges that the rebate certification for Block 218-2, Lot 1-G requires plaintiff to refund monies

on account of a reduction in apartment units on the lot in question.

From approximately August 10 to August 15, 1977 plaintiffs received tax collector certifications from Martin Bailey, tax collector of the Township of Ocean. Plaintiffs allege that these certifications improperly included reductions in real estate taxes in 1977 which resulted from a municipal-wide revaluation of properties within the township. Each plaintiff further alleges that this revaluation "was implemented to correct an improper, incorrect and mistaken assessment imposed against plaintiff's premises." Plaintiffs claim that since they did not actually receive cash from the 1977 tax reductions, they cannot be required to pass the reduction on to tenants.

The Township of Ocean answers denying that the certifications were incorrect or that the act is unconstitutional. The township asserts that the certifications were prepared in compliance with the statute and the regulations of the Division of Local Government Services in the Department of Community Affairs. The township states that the statute is presumed to be constitutional. The township disputes Cold Indian Springs' allegation that the number of units in Block 218-2, Lot 1-G changed. The township states that there was a rearrangement of units but that the total number of units and the assessment remained the same. The township also states that the action should be dismissed for failure to join the tenants who are indispensable parties to this action.

Plaintiff in Chesterfield Associates, Inc. v. Township of Freehold is the owner of a multi-family garden apartment complex. Plaintiff received a tax collector certification from the tax collector of the Township of Freehold on or about July 25, 1977. Chesterfield Associates obtained a judgment from the Monmouth County Board of Taxation on November 15, 1976, which reduced the assessment for the premises from $2,206,900 to $1,732,300. That judgment is not reflected in the calculations for the property tax reduction.

Plaintiff argues that the reduction occurred before the effective date of the amendments in question. Plaintiff also argues that it is required to return money to tenants which the owner has not actually received. For these reasons plaintiff argues that the act is unconstitutional and an arbitrary and unreasonable deprivation of property without due process of law.

Plaintiff also argues that the interpretation of the act is incorrect. Plaintiff claims that the taxes paid in the base year should reflect reductions obtained from judgments of county boards of taxation. Plaintiff argues that the Legislature intended to allow landlords to retain reductions from tax appeals and if the act is interpreted to require landlords to share such reductions with tenants, a denial of equal protection results in that landlords seeking such reductions are penalized.

The Township of Freehold contends that the statutory method of determining reductions is ambiguous because it is unclear whether the base year figure should reflect reductions resulting from judgments entered by county boards of taxation. The township claims that it requested guidance from John Laezza, Director of the Division of Local Government Services in the Department of Community Affairs, who informed the township that the statute should be read to mean that the base year figure should exclude reductions resulting from judgments of county boards of taxation. The township agrees that such an interpretation may be "unjust" but states that if the court finds that interpretation should be that espoused by the Director of the Division of Local Government Services, the act should be found constitutional nonetheless. The township also opposes plaintiff's demand to free them from all responsibility under the act, arguing that the plaintiff should be required to rebate the correct amount to tenants.

Frank Linzmayer, a tenant in Twin Brook Apartments, owned by Woodshire Apartments, a plaintiff in the Ocean Township action, seeks to intervene as a defendant in this

action in order to protect his interest in the rebate and to assert a right to a double rebate on behalf of himself and all other tenants whose rebates are past due. Eileen Youmans, a tenant in West Park Manor Apartments, owned by Raleigh Corporation, another plaintiff in the Ocean Township action, also seeks to intervene in a similar capacity. The intervening class defendants seek to compel the plaintiffs to deposit in court twice the amount of the rebates due.

The intervening defendants seek certification to represent the class of tenants affected by the Cold Indian Springs action as well as all tenants in the State who are entitled to but have not received their property tax rebates. Intervening defendants seek not only the statutory penalties but also punitive damages and costs of the action.

The intervenors claim that the tenants are the real parties in interest and are indispensable parties to this suit.

R. 4:33-1 provides for intervention as of right:

Upon timely application anyone shall be permitted to intervene in an action if the applicant claims an interest relating to the property * * * which is the subject of the action and he is so situated that the disposition of the action may as a practical matter impair or impede his ability to protect that interest, unless the applicant's interest is adequately represented by existing parties.

R. 4:33-2 further provides for permissive intervention:

Upon timely application anyone may be permitted to intervene in an action if his claim or defense and the main action have a question of law or fact in common. * * * In exercising its discretion the court shall consider whether the intervention will unduly delay or prejudice the adjudication of the rights of the original parties.

Ordinarily, applications for intervention in an action are treated liberally. State v. Lanza , 39 N.J. 595, 600 (1963). In Allan-Deane Corp. v. Bedminster Tp. , 121 N.J. Super. 288, 291, 292 (App. Div. 1972), rev'd 63 N.J. 591 (1973), nonresidents of Bedminster sought to intervene as of right and as a class in an action challenging the validity

of the township's zoning ordinance. The trial court and the Appellate Division ruled that the proposed intervenors had an insufficient interest in the litigation, sought to intervene in an untimely manner and would interfere with the expeditious disposition of the merits. 121 N.J. Super. at 292-293. The Supreme Court remanded, directing the trial court to allow the intervention.

It is clear that the tenants, Frank Linzmayer and Eileen Youmans, having a direct financial interest in this litigation and having presented a timely application for intervention, must be allowed to intervene in this action.

The question remains whether these tenants should be allowed to intervene as representative parties of the class of tenants affected by the Cold Indian Springs action. Intervenors argue that all tenants in the apartments owned by the plaintiffs in the Cold Indian Springs action are indispensable parties to this action. Plaintiffs oppose the tenants' motion to maintain their intervention as a class action.

R. 4:28-1 provides that

[a] person who is subject to service of process shall be joined as a party to the action if * * * he claims an interest in the subject of the action and is so situated that the disposition of the action in his absence may * * * as a practical matter impair or impede his ability to protect that interest * * *. If he has not been so joined, the court shall order that he be made a party.

Whether a party is indispensable depends upon the circumstances of the particular case. As a general proposition, a party is not truly indispensable unless he has an interest inevitably involved in the subject matter before the court and a judgment cannot justly be made between the litigants without either adjudging or necessarily affecting the absentee's interest. Allen B. DuMont Labs., Inc. v. Marcalus Mfg. Co. , 30 N.J. 290, 298 (1959); Jennings v. M & M Transp. Co. , 104 N.J. Super. 265, 272 (Ch. Div. 1969).

The subject matter of this controversy is the amount of money which the landlords must credit to the tenants.

As such, each tenant has an interest in the subject matter of the litigation. Any judgment issued by this court will necessarily affect the tenants. Relitigation of any issues determined adversely to the tenants will be discouraged by stare decisis. As indispensable parties, the tenants must be joined in this action.

R. 4:32-1 provides:

(a) General Prerequisites to a Class Action. One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.

(b) Class Actions Maintainable. An action may be maintained as a class action if the prerequisites of paragraph (a) are satisfied, and in addition:

(1) the prosecution of separate actions by or against individual members of the class would create a risk either of (A) inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class, or (B) adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests; or

(2) the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole; or

(3) the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. The factors pertinent to the findings include: first, the interest of members of the class in individually controlling the prosecution or defense of separate actions; second, the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; third, the difficulties likely to be encountered in the management of a class action.

In the absence of a clear showing that a class suit is improper, a court should certify an action as a class suit in

accordance with the liberal construction that must be afforded the rule. See Pressler, Current N.J. Court Rules , Comment R. 4:32. See also, Riley v. New Rapids Carpet Center , 61 N.J. 218, 228 (1972); Lusky v. Capasso Brothers , 118 N.J. Super. 369, 373 (App. Div.), certif. den. 60 N.J. 466 (1972).

Intervenors represent that there are 2500 residential rental units in the Cold Indian Springs action. Joinder is therefore impracticable. Lusky v. Capasso Brothers, supra , 118 N.J. Super. at 372.

The questions of law and fact are common to the members of the tenant class. The question of law involves the interpretation of the same section of the Tenants' Property Tax Rebate Act. The questions of fact as to the amount of the certifications are also similar. The defenses of each of the tenants are the same although their claims to rebate may vary depending on their proportionate entitlement under the statute. Differences in damages is not sufficient in itself to justify dismissal of a class action. Lusky v. Capasso Brothers, supra , 118 N.J. Super. at 373. The representative parties will fairly and adequately protect the interests of the class, as demonstrated by their performance to date.

Intervenors also argue that adjudication in the immediate case will as a practical matter substantially impair the ability of those not now parties to protect their interests. If the question of statutory interpretation or the right to a double rebate is decided adversely to the tenants, there may be more difficulty obtaining a reversal on appeal. Full participation by counsel for the class members is preferable at the trial level. Linzmayer and Youmans will therefore be allowed to intervene as a class representative of all tenants in apartment complexes owned by plaintiffs in the Cold Indian Springs action. Counsel's request to certify the tenants as representatives of all tenants in the county or State is denied. This court cannot certify a class action for matters pending before other courts.

Plaintiffs urge that the court adopt the "test case" approach adopted by the Appellate Division in Kronisch v. Howard Savings Inst. , 143 N.J. Super. 423, 431 (App. Div. 1976), rev'g 133 N.J. Super. 124 (Ch. Div. 1975). In Kronisch plaintiffs brought a test case to establish a constructive or express trust over mortgage monies held by defendant bank. Plaintiffs sought to be certified as a class under R. 4:32-1(b)(3). The Appellate Division ruled that in a test case such as plaintiffs', certification of the action as a class can await adjudication of liability. The court based its ruling on the superiority requirement of R. 4:32-1(b)(3).

Here, defendants are proceeding under R. 4:32-1(b)(1)(B) and no such superiority requirement is contained in that section of the class action rule.

R. 4:32-2 provides the notice requirements for class actions:

(b) Notice. In any class action maintained under R. 4:32-1(b)(3) the court shall direct to the members of the class the best notice practicable under the circumstances, consistent with due process of law. The notice shall advise that (1) each member, not present as a representative, will be excluded from the class by the court if he so requests by a specified date; (2) the judgment, whether favorable or not, will bind all members who do not request exclusion; and (3) any member who does not request exclusion may enter an appearance. The cost of notice may be assessed against any party present before the court, or may be allocated among parties present before the court, pending final disposition of the cause.

(c) Judgment. The judgment in an action maintained as a class action under R. 4:32-1(b) (1) or (b) (2), whether or not favorable to the class, shall include and describe those whom the court finds to be members of the class. The judgment in an action maintained as a class action under R. 4:32-1(b) (3), whether or not favorable to the class, shall, to the extent practicable under the circumstances, consistent with due process of law, describe the class and specify those who have been excluded from the class. In any class action, the judgment may, consistent with due process of law, confer benefits upon a fluid class, whose members may be, but need not have been members of the class in suit.

While the notice requirement of paragraph (b) of the rule is directed to actions under R. 4:32-1(b)(3), the judgment in an action maintained as a class action under R. 4:32-1(b)(1) includes absentee class members. While the tenants have been noticed that the action is pending before this court, they have not been informed that they are members of a class whose rights will necessarily be determined in this action. As such, these tenants are entitled to notice of maintenance of this action as a class action. Such notice will be mailed by plaintiffs by regular mail or can be deposited in each tenant's mailbox within 20 days of the order on the matters before the court. The costs of providing this notice will be divided between the parties, plaintiffs being responsible for 50% of the cost and defendants-intervenors being responsible for the other 50%. Defendants-intervenors will supply the wording of the notice within ten days of the order.

Defendants-intervenors move to require plaintiffs to post security for the amount in controversy, either by posting the amount of the rebates due or double that amount. While R. 4:52-3 allows a court to require such security when granting a temporary ...


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