The opinion of the court was delivered by: Pizzuto
Before Presiding Judge ANDREW, and Judges AXELRAD, CRABTREE, DOUGHERTY, HAMILL, LASSER, PIZZUTO, RIMM and SMALL, pursuant to R. 8:8-6.
Plaintiff contests a 1994 local property tax assessment by a complaint filed directly with the Tax Court pursuant to N.J.S.A. 54:3-21. Defendant has moved to dismiss the action on the ground that taxes and municipal charges due through the first quarter of 1994 have not been paid in full, as required by N.J.S.A. 54:3-27. It is undisputed that full payment of the required amount has not been made.
The motion was argued before the entire Tax Court pursuant to R. 8:8-6 on October 20, 1994. Since the date of argument, the Appellate Division has decided consolidated appeals from Tax Court decisions that reached inconsistent results in the Disposition of motions to dismiss under N.J.S.A. 54: 3-27. The consolidated matters include the appeal concerning the 1993 assessment on the property whose 1994 assessment is the subject of this action.
The decision of the Appellate Division, J.L. Muscarelle, Inc. v. Saddle Brook, -- N.J. Tax -- (App. Div.1994), authoritatively resolves the conflict within this court and requires dismissal of this action. Further Discussion, reflecting the reasoning of individual Judges, is not necessary to the Disposition of the matter and is appropriately found in the separate concurrences of those Judges.
Judgment shall be entered accordingly.
RIMM, J.T.C., Concurring.
I concur completely with the opinion of Judge Pizzuto for the court. In view of the strong pronouncement of the Appellate Division in J.L. Muscarelle, Inc. v. Saddle Brook Tp.,-- N.J. Tax -- (App.Div.1994), no purpose would normally be served by adding anything to his opinion which relies on that Appellate Division decision holding that "the tax payment prerequisite does not violate a taxpayer's due process rights." Id. at --. (Slip opinion at 4).
In its short opinion, the Appellate Division said it all; and, by its affirmance of Muscarelle Development Co., Inc. v. Manalapan Tp., 13 N.J. Tax. 330 (Tax 1993), and its reference to the opinion entering the one judgment which it reversed, the Appellate Division considered all the due process arguments which have been made in this case. I write in concurrence only to emphasize the insidious consequences which would follow from the determination urged by plaintiff in this matter.
In the context of this case, taxpayers may be divided into two groups: those who pay their taxes on time and those who do not. If we adopted plaintiff's position, those taxpayers who do not pay their taxes on time would be encouraged to file frivolous tax appeals. Those taxpayers who normally pay their taxes on time would be encouraged to delay making those payments while they prosecute appeals. The only loss they would face is the difference between the interest paid to the municipality and the cost of money. Both situations would force municipalities to settle to avoid the expense of otherwise unnecessary litigation and to avoid significant increases in tax rates in order to make up for unpaid taxes. And while the matters are in the Tax Court, municipalities will be deprived of the funds necessary to operate and to provide services to all taxpayers, except upon incurring additional expense for interest on money which they will have to borrow. The unavoidable result would be the imposition of an unnecessary financial burden on other taxpayers by increasing the tax rate in a subsequent year.
"A municipality's revenues depend on local property taxes, and the legislative history of L. of 1991, c. 75 [ N.J.S.A. 54:3-27] refers to the 'increasingly strained fiscal conditions' of local municipalities." Route 88 Office Assoc. v. Brick Tp., 13 N.J. Tax. 14, 20 (Tax 1992). Indeed, because of the problems faced by municipalities on account of the non-payment of taxes, they are forced to take various steps to collect real estate taxes. For example, Hamilton Township, Atlantic County, New Jersey has introduced two separate ordinances intended to pressure late taxpayers into paying delinquent taxes.
The governing body declared open season Monday on delinquent taxpayers. . . . 'Every municipality is going after people who are not paying their taxes,' [a Committeewoman said]. 'We have to protect the citizens who are'. . . . 'I think anything we can do to encourage people to pay their taxes will help all the people of Hamilton Township,' [a Committeeman said].
[Steven R. Levine, Hamilton Declares War on Delinquent Taxpayers, The Press of Atlantic City, November 23, 1994, at C7.]
The acceptance of the argument made by the taxpayer in this matter
could deprive a municipality of substantial tax revenues while an appeal is pending. N.J.S.A. 40A:4-40 emphasizes the legislative concern for fiscal responsibility in the face of unpaid taxes. This statutory provision requires a municipality to set aside a 'reserve for uncollected taxes' in its budget and to cover the anticipated shortfall in the collection of the subsequent year's taxes. Since municipalities must include this reserve in their yearly budgets, they must artificially inflate their fiscal needs and increase tax rates.
[ Route 88 Office Assoc. v. Brick Tp., supra, 13 N.J. Tax. at 20-21.]
The requirement that taxes be paid for the Tax Court to have jurisdiction over the contest of a local property tax assessment is to avoid putting the burden of an appealing taxpayer's unpaid property taxes on the other taxpayers in the taxing district, "a burden reflected in the reserve for uncollected taxes, and thus in the tax rate." Schneider v. City of East Orange, 196 N.J. Super. 587, 593, 483 A.2d 839 (App.Div.1984) (quoting Statement to Assembly, No. 2147, July 11, 1977) affd o.b., 103 N.J. 115, 510 A.2d 1118, cert. denied, 479 U.S. 824, 107 S. Ct. 97, 93 L. Ed. 2d 48 (1986). In the Schneider case, the Appellate Division said, "the interest of the municipality in receiving timely payment of taxes is clearly significant and outweighs any incidental burden imposed upon plaintiffs, and other taxpayers similarly situated, by this jurisdictional requirement." Id. at 595, 483 A.2d 839. "It is well settled that this interest of the municipality in receiving timely payment of taxes may be protected. Rosewell v. LaSalle Nat'l Bank, 450 U.S. 503, 101 S. Ct. 1221, 67 L. Ed. 2d 464 (1981)." Route 88 Office Assoc. v. Brick Tp., supra, 13 N.J. Tax. at 23.
The argument of the taxpayer in this case has been effectively disposed of in Town of West Orange v. Block 107, 162 N.J. Super. 314, 392 A.2d 1213 (App.Div.1978):
The collection of admittedly due taxes cannot thus be permitted to rest with the unilateral business judgment of a taxpayer. To sustain defendants' contention as a general rule might well seriously frustrate the collection of tax revenues required for governmental operations. The condition imposed by the court below for the stay properly compels the taxpayer to make its commercial choice in advance of the ultimate determination of the tax appeals by the payment of taxes that are conceded to be due. That result, which is just to both the taxpayer and the municipality, merely requires good faith equitable conduct by the taxpayer before it may obtain relief from a pending tax foreclosure action.
In Town of West Orange, a tax lien foreclosure matter, the taxpayer sought a stay of the entry of a judgment of foreclosure until pending tax appeals could be heard. However, the taxpayer had failed to pay the amount of taxes then required by the statute to be paid in order to prosecute a tax appeal. To allow the taxpayer to pursue the tax appeals, the lower court conditioned a stay of the foreclosure action on the payment of the taxes required to be paid under the then applicable statute. When the taxpayer refused to pay the taxes, the court entered judgment in the tax lien foreclosure action. The Appellate Division affirmed.
The Town of West Orange case is a telescoped version of precisely what is before this court now and what was before the Appellate Division in J.L. Muscarelle, Inc. v. Saddle Brook Tp., supra. Contrary to the assertion that the present case is a case of first impression, the very issue raised by the taxpayer in this case was decided adversely to it in Town of West Orange. The court held that judgment in the tax foreclosure action could be entered without the taxpayer having a hearing on its assessment if taxes were not paid as required by the statute.
The critical claim of a denial of due process is vitiated by the complete failure of the taxpayer to prove, or even claim, that it is unable to pay its taxes. It is difficult to understand how a taxpayer is being deprived of due process of law by making a business decision not to pay his taxes.
The motion to dismiss plaintiff's complaint should be granted, and I concur.
I am authorized to state that Judges CRABTREE, SMALL, HAMILL and AXELRAD join in this opinion.
HAMILL, J.T.C., Concurring.
I concur in the opinion of Judge Pizzuto for the court. I add the following comments because they express the views of several members of the Tax Court.
In this local property tax matter plaintiff filed a direct appeal to the Tax Court of the 1994 assessment on Block 801, Lot 6 in Saddle Brook. The assessment totaled $10,000,000. Pursuant to N.J.S.A. 54:3-27 the taxing district moved to dismiss the complaint for nonpayment of taxes. The statute requires that a taxpayer who appeals an assessment must pay all taxes and municipal charges due, up to and including the first quarter of the current year. The tax collector of Saddle Brook certified that there were outstanding taxes on the property for all of 1993 and the first quarter of 1994 as well as unpaid water bills. As of the end of August 1994 when the collector's certification was filed, the total liability, including municipal charges, interest and penalty, amounted to $258,300.96, of which $43,225 was the payment due for the first quarter of 1994.
In support of its motion, defendant taxing district maintains that, under the decided cases, the Tax Court should not hear the matter due to plaintiff's failure to pay the taxes.
In response, plaintiff taxpayer maintains, first, that as a matter of statutory construction, dismissal of the complaint is not the appropriate sanction. The correct sanction, according to plaintiff, is the accrual of interest and penalties and eventually the sale of a tax certificate. Second, plaintiff maintains that dismissal of the complaint without a hearing may violate the Uniformity Clause of the state constitution because, without a hearing, there is no way of knowing whether the assessment is reasonable and nondiscriminatory. Third, according to plaintiff, dismissal of the complaint without a hearing would violate the due process guarantees of the federal and state constitutions unless plaintiff is accorded a reasonableness hearing of the type permitted under Ocean Pines, Ltd. v. Point Pleasant Bor., 112 N.J. 1, 547 A.2d 691 (1988). Unless a reasonableness hearing is provided, plaintiff asserts, the present statutory scheme denies it the opportunity to be heard at a meaningful time and in a meaningful manner because, once the complaint is dismissed, there is no opportunity to challenge the assessment.
Much of plaintiff's argument that dismissal of the complaint is not the appropriate sanction under N.J.S.A. 54:3-27 was addressed previously by this court in Joseph L. Muscarelle Dev. Co., Inc. v. Manalapan Tp., 13 N.J. Tax. 330 (Tax 1993), aff'd sub nom J.L. Muscarelle, Inc. v. Saddle Brook Tp.,-- N.J. Super. -- (or -- N.J. Tax. --) (App.Div.1994). *fn1 As made clear in the Tax Court's prior published opinion, decisions of the Appellate Division have consistently confirmed that dismissal of the complaint is the appropriate sanction. Muscarelle, supra, 13 N.J. Tax. at 335-38. An additional pertinent case not discussed in the prior Muscarelle opinion is Jefferson-Halsey Roads Assocs., L.P. v. Parsippany-Troy Hills Tp., 13 N.J. Tax. 138 (App.Div.1993), appeal dismissed for failure to state a substantial constitutional issue, 135 N.J. 298, 639 A.2d 299 (1994). There, as in its earlier decisions, the Appellate Division affirmed the Tax Court's dismissal of a local property tax complaint under N.J.S.A. 54:3-27.
Plaintiff suggests that, because those cases do not deal specifically with the language in N.J.S.A. 54:3-27 requiring that taxes be paid "in the manner prescribed in R.S. 54:4-66," they do not support the Conclusion that dismissal is the appropriate sanction. Plaintiff's argument is no longer viable because in its recent Muscarelle decision the Appellate Division affirmed this court's opinion in Joseph L. Muscarelle Co., Inc. v. Manalapan Tp., supra. In that opinion this court dealt at length with plaintiff's argument that the Appellate Division had failed to address the particular statutory language on which plaintiff relies. It must thus be presumed that in reaching its recent decision, the Appellate Division considered plaintiff's argument and rejected it even though it did not address the argument in precise terms. See State v. Bianco, 103 N.J. 383, 393, 511 A.2d 600 (1986) ("There is no requirement of law or in the court rules that an appellate court must accompany its decision by a written opinion, except in the case of a Judge Dissenting in the Appellate Division.").
Plaintiff suggests that the omission of language in N.J.S.A. 54:3-27 mandating dismissal of the complaint for nonpayment of taxes indicates that the Legislature did not contemplate any such sanction. Plaintiff, however, concedes that dismissal is the appropriate sanction under N.J.S.A. 54:51A-1(b), the provision requiring payment of taxes on an appeal from the county board. That provision is equally devoid of language requiring dismissal of the complaint when the taxes are not paid, and both provisions are equally mandatory in tone, N.J.S.A. 54:3-27 specifying that the taxes "shall" be paid and N.J.S.A. 54:51A-1(b) specifying that the taxes "must" be paid. If dismissal is appropriate under N.J.S.A. 54:51A-1(b), dismissal is appropriate under N.J.S.A. 54:3-27. Schneider v. East Orange, 196 N.J. Super. 587, 483 A.2d 839 (App.Div.1984), aff'd o.b., 103 N.J. 115, 510 A.2d 1118, cert. denied, 479 U.S. 824, 107 S. Ct. 97, 93 L. Ed. 2d 48 (1986) (dismissal under N.J.S.A. 54:51A-1(b); Jefferson-Halsey Roads Assocs., L.P. v. Parsippany-Troy Hills Tp., supra (dismissal under N.J.S.A. 54:3-27).
During argument plaintiff suggested that the only purpose of N.J.S.A. 54:3-27 in its present form is to mandate payment of a specified portion of the taxes so as to permit a taxing district to sell a tax certificate if a taxpayer fails to pay the requisite taxes. This was not possible under the pre-1975 version of the statute, which permitted the taxpayer to pay only that portion of the taxes which were not in dispute. Under that scheme, "Upon payment the municipality was thereafter generally barred from pursuing tax foreclosure proceedings pending Disposition of the tax appeals." Lecross Assocs. v. City Partners, 168 N.J. Super. 96, 98, 401 A.2d 1099 (App.Div.) certif. denied, 81 N.J. 294, 405 A.2d 837 (1979); Rice v. Newark, 136 N.J. Eq. 53, 55, 40 A.2d 13 (Ch. 1944). To the contrary, the legislative history of the 1975 amendment makes clear that the Legislature intended to require payment of a specified portion of the taxes so as to alleviate the financial hardship on taxing districts during the pendency of tax appeals. The Legislature gave no indication that the purpose of the amendment was to permit the sale of a tax certificate. See Senate Revenue, Finance and Appropriations Committee Statement to A. 1276, quoted in Lecross Assocs. v. City Partners, supra, 168 N.J. Super. at 98-99, 401 A.2d 1099. Sale of a tax certificate does not replace the prompt payment of delinquent taxes. A municipality may not sell a tax certificate until April 1 of the year following the year in which the taxes become delinquent (or October 1 of that year for municipalities on the State's fiscal year). N.J.S.A. 54:5-19. Nor is it certain that a third party will buy a certificate, particularly when the taxes on the property are in dispute. As pointed out in this court's prior Muscarelle opinion, 13 N.J. Tax. at 337-38, had the Legislature merely intended to permit a municipality to sell a tax certificate and otherwise to leave a municipality to its existing remedies of interest and penalties, it would simply have repealed N.J.S.A. 54:3-27, leaving in place the statutory deadlines for paying taxes that are contained in N.J.S.A. 54:4-66, the provision for interest on delinquent taxes contained in N.J.S.A. 54:4-67, and the Tax Sale Law, N.J.S.A. 54:5-1 to -129.
Plaintiff asserts that dismissal of its complaint without a hearing could lead to a violation of the Uniformity Clause of the state constitution because there would be no determination that the assessment was set by the "same standard of value" as other properties in the taxing district.
The Uniformity Clause provides:
Property shall be assessed for taxation under general laws and by uniform rules. All real property assessed and taxed locally or by the State for allotment and payment to taxing districts shall be assessed according to the same standard of value, except as otherwise permitted herein, and such real property shall be taxed at the general rate of the taxing district in which the property is situated, for the use of such taxing district.
[ N.J. Const. art. VIII, § 1, P 1(a).]
Without doubt the Uniformity Clause guarantees a substantive right to equality in real property taxation. Murnick v. Asbury Park, 95 N.J. 452, 458, 471 A.2d 1196 (1984). This substantive right, however, can be lost by procedural default. Examples include a failure to abide by the April 1 deadline for filing a local property tax appeal (N.J.S.A. 54:3-21); the 45 day requirement for appealing a decision of a county board of taxation to the Tax Court (N.J.S.A. 54:51A-9a); failure to pay taxes on an appeal from the county board to the Tax Court (N.J.S.A. 54:51A-1(b), and failure to prosecute a local property tax appeal at the county board (N.J.S.A. 54:51A-1c(2)). Since the appeal of a local property tax assessment is a statutory cause of action, an appealing party must comply with all statutory requirements for maintaining the appeal. F.M.C. Stores Co. v. Morris Plains Bor., 100 N.J. 418, 424, 495 A.2d 1313 (1985).
Under plaintiff's theory, any procedural default would trigger a violation of the Uniformity Clause. The theory is untenable. Unless plaintiff can establish that it is totally incapable of paying the taxes, due perhaps to indigency, its failure to pay the requisite taxes is no different conceptually than a failure to timely file. Counsel conceded during argument that plaintiff is not indigent, stated that he was not asserting that plaintiff could not pay the taxes, conceded that none of plaintiff's properties, to counsel's knowledge, had been lost through tax foreclosure, and conceded that, when another municipality had scheduled a tax sale of one of plaintiff's properties, plaintiff had paid the taxes to prevent the sale. Plaintiff does not suggest that the present assessment is egregious or arbitrary, maintaining that whether this is so cannot be determined until an appraisal report is obtained. Thus, plaintiff's constitutional right to uniformity is not at risk because plaintiff is helpless to protect that right. It appears that plaintiff has failed to pay the taxes as a result of a business decision not to do so. Under these circumstances there is no violation of the Uniformity Clause.
Plaintiff maintains that the denial of any opportunity to be heard concerning the reasonableness of the assessment violates its rights to procedural due process.
The short answer is that in Jefferson-Halsey Roads, supra, the Appellate Division squarely rejected plaintiff's argument and that in the same case our Supreme Court dismissed the taxpayer's appeal on the ground that no substantial constitutional issue was presented. The taxpayer in Jefferson-Halsey Roads had filed a direct appeal, which the Tax Court dismissed on the township's motion under N.J.S.A. 54:3-27. The taxpayer argued that its inability to pay the taxes should lead to an exception to the requirements of N.J.S.A. 54:3-27 in order to preserve its due process rights. The Appellate Division stated that it was bound by the holding in New York, Susquehanna and W.R.R. Co. v. Vermeulen, 44 N.J. 491, 501-03, 210 A.2d 214 (1965). The Jefferson-Halsey Roads court added that the taxpayer's reliance on Boddie v. Connecticut, 401 U.S. 371, 91 S. Ct. 780, 28 L. Ed. 2d 113 (1971), was misplaced because there was no dispute in Boddie that the particular individual seeking access to the courts was indigent whereas the taxpayer before it plainly could not claim indigency since its property had an assessed value of $367,000. Jefferson-Halsey Roads, supra, 13 N.J. Tax. at 139-40.
As in Jefferson-Halsey Roads, the statute at issue is N.J.S.A. 54:3-27. This means that plaintiff, like the taxpayer in Jefferson-Halsey Roads, had no prior hearing before the county tax board. The assessment on plaintiff's property is $10 million, making any argument of inability to pay even less persuasive than in Jefferson-Halsey Roads. Being unable to establish its inability to pay, plaintiff cannot mount an "as applied" constitutional challenge to the tax payment requirement, and the tax payment requirement is clearly valid on its face. Compare Boddie v. Connecticut, supra, in which the Supreme Court invalidated a filing fee as applied to an indigent couple seeking a divorce, with Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 69 S. Ct. 1221, 93 L. Ed. 1528 (1949), sustaining the constitutionality of a state statute that required certain shareholders in a shareholders' derivative suit to post security to cover the defense's costs in the event the plaintiffs did not prevail.
The Appellate Division's decision in Echelon Glen Coop., Inc. v. Voorhees Tp., 275 N.J. Super. 441, 646 A.2d 498 (App.Div.), certif. denied, 138 N.J. 272, 649 A.2d 1291 (1994), lends further support to the Conclusion that plaintiff's due process argument is foreclosed. There, the Appellate Division upheld the Tax Court's denial of the taxing district's motion to dismiss the complaint for nonpayment of taxes under N.J.S.A. 54:3-27. The Tax Court had denied the motion on two grounds. The first was the fact that the taxpayer was in receivership and concededly could not pay the taxes. The second was that the taxing district had sold a tax certificate on the property prior to the return date on the township's motion to dismiss. The Appellate Division first rejected the lower court's ruling based on the indigency of the taxpayer. Citing Jefferson-Halsey Roads, supra, it stated, "We recently rejected the notion that there is a constitutional right to pursue a tax appeal before payment of the taxes." Echelon Glen, supra, 275 N.J. Super. at 445, 646 A.2d 498. The court then went on to conclude that the sale of a tax certificate prior to the return date on a motion to dismiss for nonpayment of taxes defeats the motion. Relying on Freehold Office Park v. Freehold Tp., 12 N.J. Tax. 433 (Tax 1992), the Appellate Division reasoned that, since the sale of a tax certificate produced the tax revenues that would otherwise have been paid by the taxpayer, the purpose of N.J.S.A. 54:3-27 to ensure an uninterrupted flow of tax revenues during the pendency of a local property tax appeal was fulfilled and there was no need to dismiss the complaint for nonpayment of taxes. Echelon Glen, supra, 275 N.J. Super. at 450, 646 A.2d 498. Not only does the case involve the precise statute at issue in the present matter, but it appears to foreclose even the hypothetical situation posed by plaintiff of a taxpayer who cannot afford to pay the taxes necessary to maintain a local property tax appeal.
Two earlier decisions of the Appellate Division reach a similar Conclusion that requiring the payment of taxes as a condition for maintaining a local property tax appeal does not violate the Due Process Clause. Both cases involve the tax payment requirement of N.J.S.A. 54:51A-1b, which applies on an appeal from the county tax board to the Tax Court. Although it might be argued that the requirements of due process are met in that situation because a taxpayer has already had a hearing before the county board, that was not the basis for the decisions in the two cases. In Woodlake Heights Homeowners Ass'n v. Middletown Tp., 7 N.J. Tax. 364 (App.Div.1984), the taxpayer argued that the tax payment requirement was unconstitutional because it prevented access to the courts and an opportunity for a hearing on the merits. The taxpayer questioned the viability of the "pay now, litigate later" principle and the lower court's reliance on New York, Susquehanna and W.R.R. Co. v. Vermeulen, supra, and General Trading Co. Inc. v. Director, Div. of Taxation, 83 N.J. 122, 416 A2d 37 (1980). The court responded that, "The principle that taxes must be paid when due as a condition to litigating liability for the amount alleged due is firmly embedded in our law." Woodlake Heights, supra , 7 N.J. Tax. at 366. The court continued that the "critical components of due process" were met--"A taxpayer has an opportunity to be heard before his tax liability is finalized." Id. at 367. Finally, the court rejected the taxpayer's reliance on Boddie v. Connecticut, supra, on the ground, equally applicable here, that plaintiff does not plead poverty and that in any event "marriage was involved in the Boddie case and marriage involves a fundamental interest of basic importance to society." Ibid.
In Schneider v. East Orange, supra, the Appellate Division reached the same result as in Woodlake Heights, affirming against a due process challenge the tax payment requirement that applies on an appeal from a county board to the Tax Court. The court pointed out that the "critical components of due process are adequate notice, opportunity for a fair hearing and availability of appropriate review." Schneider v. East Orange, supra, 196 N.J. Super., at 595, 483 A.2d 839. The court continued:
Plaintiffs' opportunity for appropriate review of the county board determination is not impaired by the added procedural limitation that taxes then due be paid before the jurisdiction of the Tax Court can be invoked. The interest of the municipality in receiving timely payment of taxes is clearly significant and outweighs any incidental burden imposed upon plaintiffs, and other taxpayers similarly situated, by this jurisdictional requirement. See Mathews v. Eldridge 424 U.S. 319, 335, 96 S. Ct. 893, 903, 47 L. Ed. 2d 18, 33 (1976). It is well settled that a taxpayer may be required to pay the taxes then due as a condition to litigating the amount due. ...