On appeal from the Superior Court, Appellate Division, whose opinion is reported at 187 N.J. Super. 455 (1982).
For reversal in part; affirmance in part and remandment -- Chief Justice Wilentz, and Justices Clifford, Schreiber, Handler, Pollock, O'Hern and Garibaldi. Opposed -- None. The opinion of the Court was delivered by Pollock, J.
At issue on this appeal is the constitutionality of N.J.S.A. 54:1-35a and N.J.S.A. 54:2-40.4 (commonly known as "chapter 123") under art. VIII, § 1, para. 1(a) of the New Jersey Constitution, which mandates that real property be assessed according to a uniform standard of value. Resolution of that issue involves determining whether chapter 123 provides the exclusive form of relief from a claim of property tax discrimination.
The Tax Court found that chapter 123 was not exclusive, and that the taxpayers, Theodore and Maxine Murnick, were entitled to tax relief. 2 N.J. Tax. 168 (1981). In reversing, the Appellate Division found chapter 123 to provide the only basis for relief in a tax discrimination case. 187 N.J. Super. 455, 459-61 (1982).
The taxpayers appealed as of right, Appellate Division's interpretation of chapter 123 would violate the constitutional mandate. R. 2:2-1(a). We conclude that the Appellate Division erred in interpreting chapter 123 as providing the sole remedy in all cases. In egregious cases of discrimination, a taxpayer retains a constitutional right to relief. Except in those cases, which we expect will be rare, chapter 123 establishes both the right to and measure of relief. We further conclude that the Murnicks have a right to show that the Director of the Division of Taxation (Director) should have excluded certain sales from the data used in calculating the average ratio for the City of Asbury Park.
Consequently, we reverse in part the judgment of the Appellate Division and remand the matter to the Tax Court. On remand, the plaintiffs may seek to exclude the challenged sales from the Director's table.
This case concerns the property tax assessment of a 15-story apartment building in Asbury Park and the inequality of assessments in that city. For the years 1977, 1978, and 1979, the property was assessed at $1,974,000, allocated $74,000 for land and $1,900,000 for improvements. The Murnicks objected to the assessment, claiming it was discriminatory. Thereafter, the Monmouth County Board of Taxation affirmed the assessments, and the Murnicks appealed to the Tax Court. Originally the 1977 and 1978 appeals were made to the former Division of Tax Appeals, which transferred the cases to the Tax Court upon its creation in 1979. N.J.S.A. 2A:3A-1.
In the Tax Court, the parties agreed on the assessment-true value ratio for 1977 (72.51%) and 1979 (63.09%), but disagreed on the ratio for 1978. The Tax Court ruled that no common level of assessment existed in Asbury Park during 1978, a ruling not questioned on this appeal. In fact, Asbury Park had not conducted a revaluation during the fifteen years preceding the tax years in question, and no common level of assessment existed for those years.
Although the City contended that the taxpayers' right to relief was restricted to chapter 123, the taxpayers urged that the court could apply either the chapter 123 ratio or the Director's average ratio used by the State to distribute school aid, N.J.S.A. 54:1-35.1. Chapter 123 provides a statutory formula for determining whether an assessment is discriminatory. Under the statute, the test is whether the ratio of assessed to true value of the property in question exceeds by 15% the average ratio for the district. When a taxpayer is entitled to relief, the assessment is adjusted by applying the district average ratio to
the true value of the property. For 1978, the average ratio for Asbury Park, as determined under chapter 123, was 80%, and the assessed-true value ratio for the subject property was 91%, which was within the common level range of 68-92%. Hence, the Tax Court found that taxpayers are not entitled to relief under chapter 123.
Nonetheless, the Tax Court continued:
I find that in the context of the present matter, Chapter 123 fails to provide an adequate and equitable remedy as contemplated by the Supreme Court of New Jersey in In re Appeal of Kents, Inc. [34 N.J. 21 (1961)], supra. This is especially so in light of the fact that defendant does not oppose a ratio application but rather seeks only to afford the taxing district a higher ratio in order to obtain a greater assessment for the tax year of 1978. Based on these circumstances, I find Chapter 123 inadequate and will apply the Director's average ratio for 1978 to relieve the taxpayers from an inequitable assessment. [2 N.J. Tax. at 191].
Using the Director's average ratio, the Tax Court determined the effective tax rate and recalculated the 1978 true value of the property, concluding:
The value as recomputed produces a ratio of assessment to true value of 88.3%. Compared to the director's average ratio for 1978 which is 73.42%, the difference is 20.27% (88.3 - 73.42 = 14.88 / 73.42 = 20.27%) which I find to be a substantial difference. Therefore, relief should be awarded pursuant to In re Appeal of Kents, Inc., supra. [ Id. at 192].
Consequently, the Tax Court entered judgment reducing the assessments to $1,596,900 for 1977, $1,641,600 for ...