Before Judges Skillman, Wallace, Jr. and Wells. On appeal from the Tax Court of New Jersey, Docket Nos. 1893-87, 1894-87, 1895-87.
The opinion of the court was delivered by: Skillman, P.J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Plaintiff, which owns the Eagle Point Refinery in West Deptford Township and Westville Borough, appeals from an order denying its motion under the Freeze Act, N.J.S.A. 54:51A-8, to freeze the tax assessment on its property in West Deptford for the 1988 and 1989 tax years at the assessment amount for the 1987 tax year.
For the 1987 tax year, West Deptford and Westville assessed plaintiff's refinery for the aggregate amount of $75,530,500. In Coastal Eagle Point Oil Co. v. West Deptford Township, 13 N.J. Tax 242 (Tax 1993), the Tax Court reduced the amount of those assessments to $48,406,400. On appeal, we affirmed this reduction in plaintiff's 1987 assessments. Coastal Eagle Point Oil Co. v. West Deptford Township, 15 N.J. Tax 190 (App. Div.), certif. denied, 143 N.J. 320 (1995).
Plaintiff filed a motion with the Tax Court to freeze its 1988 and 1989 assessments at the amounts established for 1987 in accordance with the Freeze Act. See R. 8:7(d). West Deptford and Westville opposed the motion on the ground that plaintiff had made substantial improvements to its refinery between the assessment date for 1987 and the assessment dates for 1988 and 1989, which resulted in a substantial increase in the property's market value.
The Tax Court granted plaintiff's application for Freeze Act relief with respect to the 1988 tax year, but concluded that a plenary hearing was required with respect to the applicability of the Freeze Act to the 1989 tax year. The municipalities appealed the Tax Court's decision that plaintiff was entitled to Freeze Act relief with respect to the 1988 tax year, and we reversed in an unreported opinion. Coastal Eagle Point Oil Co. v. West Deptford Township, A-2963-93T2 (May 23, 1995). We concluded that in view of plaintiff's expenditure of more than $10 million during 1988 for improvements in property assessed for $48,406,400 and the opinion of the municipalities' expert that those expenditures had "significantly enhanced" the property's market value, the municipalities were entitled to "a plenary hearing on the issue of change in value." (slip op. at 5). As a result of our decision, a plenary hearing was required with respect to the applicability of the Freeze Act to both the 1988 and 1989 tax years.
Before this hearing, the Tax Court solicited briefs and argument regarding two threshold legal issues: first, whether the Tax Court's prior determination of the property's value for the 1987 tax year established the base year value from which any change in value for the 1988 and 1989 tax years must be measured; and second, whether the municipalities were required to show that any change in the property's value between the 1987 base year and the 1988 and 1989 freeze years was attributable to improvements in the property as distinguished from an overall increase in its fair market value. The court ruled that its prior determination of the property's value for the 1987 base year was binding upon the parties under the doctrine of collateral estoppel. Neither party challenges this ruling, and it is not implicated in plaintiff's appeal.
As to the second issue it had posed, the Tax Court stated:
A change in value attributable solely to the fact that real estate values are generally on the increase is not the kind of change in value contemplated by the Freeze Act. Rather, a Freeze Act change in value must result from internal changes to the property, e.g., capital improvements, or to property specific external changes that suggest a change in the property's highest and best use. (slip op. at 8).
The court ruled that "[the municipalities] must show that any change in value was attributable solely to the physical changes to the property, not to general inflationary trends in the real estate market or in refinery values[,]" and "[i]n addition, [the municipalities] must show that any changes in value were meaningful and substantial." Ibid.
Sometime after these rulings, plaintiff and Westville entered into a settlement. Thereafter, the case proceeded solely against West Deptford.
Before the hearing on the applicability of the Freeze Act could be held, the Tax Court judge to whom the case had been assigned died. The judge to whom the case was transferred construed the pretrial rulings of the previously assigned judge as precluding the parties from undertaking "to prove the value of the property for the 1988 and 1989 tax years." Moreover, the judge concluded that he was barred by the "law of the case" doctrine from revisiting this issue.
The Tax Court concluded that even though it was impossible, in view of the pretrial ruling barring the introduction of evidence regarding the value of plaintiff's property for the 1988 and 1989 tax years, for West Deptford to prove that there had been a substantial and meaningful increase in the property's value between the base year ...