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Crusader Servicing Corp. v. Port Authority of New York and New Jersey

July 18, 2006


On appeal from the Superior Court of New Jersey, Law Division, Hudson County, L-6411-03.

The opinion of the court was delivered by: Lisa, J.A.D.



Argued May 16, 2006

Before Judges Coburn, Lisa, S.L. Reisner.

This appeal concerns the liability of the Port Authority of New York and New Jersey, a bistate agency, for local property taxes, the payment of which came due after its acquisition of property in Jersey City for use in connection with its operation of the Holland Tunnel. The Port Authority acquired title on June 13, 2000. It did not file with the local assessor notice of its acquisition prior to January 10, 2001, pursuant to N.J.S.A. 54:4-3.3b. That section provides that when real property is acquired by the State, or a State agency, or an authority created by the State, "such property shall become tax exempt on January 1 of the calendar year next following the date of acquisition, provided that the [local] tax assessor . . . is given written notice of the acquisition by certified mail on or before January 10 of said calendar year next following." Nor did the Port Authority appeal the non-exempt status of its property. See N.J.S.A. 54:3-21(a).

On June 21, 2001, Jersey City sold a tax title lien on the property for the balance of the taxes due in 2000 and for the first two quarters of 2001. The purchaser of the lien assigned it to Crusader Servicing Corporation (Crusader). Crusader brought a declaratory judgment action against the Port Authority and Jersey City seeking a determination of the validity of the tax assessment and tax sale. If valid, it sought an order directing the Port Authority to redeem, in default of which it could commence a foreclosure action. If invalid, it sought a refund with interest from Jersey City.

The Law Division judge acknowledged the Port Authority's tax-exempt status, but determined that by the terms of N.J.S.A. 54:4-3.3b it enjoyed no exemption for the balance of 2000, and because it did not file the notice required by that section it was not entitled to exemption for 2001. The judge therefore entered judgment in Crusader's favor, determining that the taxes for 2000 and 2001 were lawfully assessed and the property was not exempt for those years. The judgment ordered the Port Authority to redeem within ninety days by paying the full amount required by the Tax Sale Law (N.J.S.A. 54:5-1 to -137), including 18% annual interest (N.J.S.A. 54:5-34).

The Port Authority appeals. It argues that the trial judge erred by failing to consider the unique tax exemption statute controlling its status as a bistate agency, and instead subjecting it to provisions in Title 54, applicable to New Jersey, its agencies and authorities it alone has created.*fn1 We agree that N.J.S.A. 54:4-3.3b is inapplicable to the Port Authority and provides no basis for withholding tax-exempt status from the Port Authority's property. We hold, however, that because the property was encumbered by a lien for the entire 2000 tax assessment at the time of the Port Authority's acquisition, the Port Authority took title subject to the lien and is liable for the balance of the taxes due for 2000. Because at the time of acquisition 2001 taxes had not yet been assessed and there was no lien on the property for 2001 taxes, the property was exempt for 2001 by virtue of the tax exemption statute applicable to the Port Authority. We remand for reformation of the tax sale certificate.

The Port Authority is an agency of the States of New York and New Jersey created by an interstate compact between the States, N.J.S.A. 32:1-1; N.Y. UNCONSOL. LAW Ch. 151, § 1 (2006), with the consent of the Congress of the United States, pursuant to the Interstate Compact Clause of the United States Constitution, Article I, Section 10, Clause 3. 42 Stat. 174; see Hess v. Port Auth. Trans-Hudson Corp., 513 U.S. 30, 35, 115 S.Ct. 394, 398, 130 L.Ed. 2d 245, 252 (1994). "Bistate entities, in contrast [to individual sovereign states], typically are creations of three discrete sovereigns: two States and the Federal Government." Id. at 40, 155 S.Ct. at 400, 130 L.Ed. 2d at 255. "Compact Clause entities owe their existence to state and federal sovereigns acting cooperatively, and not to any 'one of the United States.'" Id. at 42, 155 S.Ct. at 401, 130 L.Ed. 2d at 256. "[B]istate entities created by compact . . . are not subject to the unilateral control of any one of the States that compose the federal system." Ibid., 155 S.Ct. at 402, 130 L.Ed. 2d at 257.

The Port Authority Compact, and the corresponding laws of New Jersey and New York, reflect these principles. See, e.g., N.J.S.A. 32:1-35.68; N.Y. UNCONSOL. LAW Ch. 152, § 19 (2006) (each requiring enactment by the other state of "legislation having an identical effect" before the provision becomes effective). We need not list the many other examples of similar provisions throughout the statutory provisions of each state governing the Port Authority. Thus it is clear that the Port Authority is not an agency of or an authority created by the State of New Jersey, and it is not subject to N.J.S.A. 54:4-3.3b. Even if it could be construed that the Port Authority was an entity defined in N.J.S.A. 54:4-3.3b, the provision would be ineffective as to the Port Authority because New York has not enacted a concurrent law.*fn2

The Port Authority derives its tax-exempt status not from Title 54 (Taxation), but from Title 32 (Interstate and Port Authorities and Commissions). See N.J.S.A. 32:1-1 to 32:2-37. N.J.S.A. 32:1-131 provides:

The construction, maintenance and operation of vehicular bridges and tunnels within the said Port of New York District (including the said Holland tunnel and the said Midtown Hudson tunnel), are and will be in all respects for the benefit of the people of the states of New York and New Jersey, for the increase of their commerce and prosperity and for the improvement of their health and living conditions; and the port authority shall be regarded as performing an essential governmental function in undertaking the construction, maintenance and operation thereof and in carrying out the provisions of law relating thereto, and shall be required to pay no taxes or assessments upon any of the property acquired or used by it for such purposes. [N.J.S.A. 32:1-131 (emphasis added).]

New York has enacted concurrent legislation in identical form as part of its statutes governing the ...

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