On certification to the Superior Court, Appellate Division, whose opinion is reported at 158 N.J. Super. 512 (1978).
For vacation and remandment -- Chief Justice Hughes and Justices Mountain, Sullivan, Pashman, Clifford, Schreiber and Handler. For affirmance -- None. The opinion of the court was delivered by Schreiber, J.
This real property tax case concerns the assessment and taxation by a municipality of county-owned property located within the taxing district. The issue arose when plaintiff Bergen County filed a complaint in lieu of prerogative writ alleging that it was the owner of certain land in the Borough of Paramus designated on the Borough's tax map as Lot 1X, Block 6401 and Lot 2X, Block 6404. Plaintiff asserted that the properties were utilized for public purposes and therefore exempt from taxation by the Borough, and that the Borough had denied the exemption and notified the County that the land was to be sold for non-payment of taxes. The County sought an adjudication that the land was tax exempt and a restraint against any tax sale.
The trial court issued an ex parte restraint and ordered the Borough to show cause why the relief sought should not be granted. The Borough's answer admitted that plaintiff owned the land and that its tax collector had notified plaintiff of its intention to advertise the sale of the land for non-payment of taxes, but denied the property was tax exempt. As a separate defense the Borough claimed that the County was not utilizing the property for public purposes and that the Supreme Court in Borough of Paramus v. Capello, 66 N.J. 1 (1974), had held the Borough was not entitled to a tax rebate under N.J.S.A. 54:4-5 because the County had not been using the property in question.
No testimony was taken or other evidence offered on the return day. During the argument counsel apparently agreed that the land was owned by the County, that the lots were vacant and separate from the Bergen Pines Hospital complex, that plaintiff had no plans "to do anything" with the land
and that the property at some indefinite point in time in the future had a potential public use. The trial judge found that the property was being held for potential public use and was therefore exempt from municipal taxes. He viewed the key issue to be whether Borough of Paramus v. Capello, supra, gave rise to either res judicata or collateral estoppel. Reasoning that to impose realty taxes on vacant county land would prevent long term planning and would not be in the public interest, he entered an order permanently enjoining defendant from assessing the land or advertising a tax sale.
The Appellate Division reversed. 158 N.J. Super. 512 (1978). Noting that a tax exemption was not available unless the land was used for public purposes or there was a present intent for public use, the Appellate Division referred to the findings in Borough of Paramus v. Capello that "these very same lands" were unused when the Borough sought a tax rebate from Bergen County under N.J.S.A. 54:4-5. The court reasoned that the tax exempt and tax rebate statutes are in pari materia, that the denial of the rebate implies that the land was not exempt from taxation and that the criteria "occupy" and "use" respectively employed in N.J.S.A. 54:4-5 and N.J.S.A. 54:4-3.3 are identical.
We granted plaintiff's petition for certification. 77 N.J. 502 (1978).
Neither party has raised the issue of the appropriateness of commencing the proceedings in the Superior Court. Resolution of that question may well have aborted this judicial action. N.J.S.A. 54:3-21 provides that an aggrieved taxpayer may file a petition of appeal from a municipal tax assessment with the county board of taxation. A taxpayer who claims an exemption from an assessment falls within the category of an aggrieved taxpayer. As such, an appeal asserting that an exemption has been wrongfully denied should be filed with the county board of taxation. See Boys' Club of Clifton, Inc. v. Tp. of Jefferson, 72 N.J. 389, 405 (1977); N.J. Turnpike Auth. v. Tp. of Washington, 16 N.J. 38, 41 (1954). This procedure, concordant
with principles of exhausting administrative remedies, should have been followed here. See City of East Orange v. Tp. of Livingston, 102 N.J. Super. 512, 519-520 (Law Div. 1968), aff'd 54 N.J. 96 (1969); Roadway Express, Inc. v. Kingsley, 37 N.J. 136, 139-141 (1962). Though we envisage no reason why that was not done in this case, we shall address the substantive questions, since the matter is of public importance.
The heart of the issue concerns an interpretation of N.J.S.A. 54:4-3.3 which states that "property of the respective counties * * * used for public purposes * * * and property acquired by any municipality through tax title foreclosure or by deed in lieu of foreclosure, if not used for private purpose, shall be exempt from taxation under this chapter * * *." (The ...