[269 NJSuper Page 219] This is a condemnation action in which plaintiff deposited $120,000.00 with the Clerk of the Superior Court pursuant to its
Declaration of Taking under the Eminent Domain Act of 1971 and supporting appraisal. N.J.S.A. 20:3-18; R. 4:73-9. All parties including the property owner have been served, but only the City of Rahway ("City") and State of New Jersey ("State") have filed answers. Neither of these defendants contests the asserted value of the property or the plaintiff's appraisal of the property. By cross motions, however, each seeks the amount on deposit based upon the priority of their respective liens for unpaid taxes.
The real estate taxes assessed by the City upon the property subject to condemnation have not been paid since 1986. In 1990, the City purchased the certificate for unpaid 1987, 1988 and 1989 taxes. The total amount now due, including the first half of 1993, and interest, well exceeds the value of the property and the $120,000 sum on deposit. In any event, the amount claimed due under the tax sale certificate, with interest to July 1, 1993, is $108,893.08, and the City asserts entitlement to at least that amount. Rahway bases its claim upon the provisions of the Tax Sale Law, N.J.S.A. 54:5-1 to -129, specifically:
N.J.S.A. 54:5-6. Unpaid taxes a lien; penalties and costs
Taxes on lands shall be a lien on the land on which they are assessed on and after the first day of the fiscal year of the municipality for which the taxes are assessed, and all interest, penalties, and costs of collection which thereafter fall due or accrue shall be added to and become a part of such lien.
N.J.S.A. 54:5-9. Municipal liens paramount
Every municipal lien shall be a first lien on such land and paramount to all prior or subsequent alienations and descents of such lands or encumbrances thereon, except subsequent municipal liens.
The State claims unpaid taxes due from the property owner under the N.J. Gross Income Tax Act (N.J.S.A. 54A:1-1 to 10-12) and specifically the provisions thereof imposed upon an employer to withhold such taxes from the wages paid to employees, 54A:7-4 & -5; and under the N.J. Sales and Use Tax Act, N.J.S.A. 54:32B-1 to -29. The State's claim to the condemnation proceeds is asserted under the State Tax Uniform Procedure Law, which provides:
N.J.S.A. 54:49-1. Tax a debt and lien; preference; proceeds paid to commissioner
The taxes, fees, interest and penalties imposed by any such State tax law, or by this subtitle, from the time the same shall be due, shall be a personal debt of the taxpayer to the State, recoverable in any court of competent jurisdiction in an action in debt in the name of the State. Such debt, whether sued upon or not, shall be a lien on all the property of the debtor except as against an innocent purchaser for value in the usual course of business and without notice thereof, and except as may be provided to the contrary in any other law, and shall have preference in any distribution of the assets of the taxpayer, whether in bankruptcy, insolvency or otherwise. The proceeds of any judgment or order obtained hereunder shall be paid to the commissioner.
The State alleges that the property owner owes unpaid sales taxes from the first quarter of 1986 thru the third quarter of 1992 totaling $48,746.48, and unpaid withheld income taxes from the first quarter of 1988 thru the reconciliation return for the year 1990 totaling $21,050.24, to which should be added statutory interest, penalties and costs of collection. As of May 28, 1993, the State is asserting outstanding balances on the sales tax liability thru the first quarter of 1988 of $25,443.47 and on ...