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Wee Love, Inc. v. Township of Maple Shade


July 7, 2008


On appeal from the Tax Court of New Jersey, Docket Nos. 0154-2004 and 0155-2004.

Per curiam.


Submitted June 2, 2008

Before Judges Graves and Alvarez.

Defendant, Township of Maple Shade, appeals from a Tax Court judgment that plaintiff, Wee Love, Inc.'s day care facility is a school for purposes of local property tax exemption pursuant to N.J.S.A. 54:4-3.6. Plaintiff cross- appeals, alleging that the Tax Court had jurisdiction to decide the question of the tax exemption for 2002 as well as for 2003. We affirm.

Plaintiff has operated as a non-profit corporation since 1977. The certificate of incorporation states the purpose of the school is "to promote and provide a program for all phases of a child's physical, social, emotional, and mental development and the delivery of other social services." It is exempt from federal taxation because of its non-profit status, and licensed by the New Jersey Department of Human Services, Division of Youth and Family Services, as a child care center. Plaintiff's founder and director is I. Caroline Morrell, who also formed the non-profit corporation that operates the facility.

Prices charged do not result in a profit as the school is operated either on a break even or slight loss basis. Some students are fully subsidized by the government, some receive partial subsidies, and the remainder pay their own way. Salaries are quite modest, including the salary paid to Morrell.

Plaintiff's facility is open between 6:30 a.m. and 6:00 p.m., and is licensed to serve children up to thirteen years of age. All teachers, with the exception of those who serve the infants and toddlers, submit weekly lesson plans to Morrell.

The facility is housed in a building, formerly used as a public school, acquired in 1986. The building had been exempt from local property taxation because of its prior use. After the purchase, defendant's Tax Assessor added the property to the tax rolls, plaintiff appealed, and the matter was settled by a stipulation of dismissal entered in the Tax Court in 1988 or 1989. The agreement called for the property to be exempt from taxation in 1987, 1989, and 1990, set a schedule for payment of taxes for 1988, and required plaintiff to make a payment in lieu of taxes in the amount of $2500 for the tax year 1990.

For reasons not explained in this record, plaintiff made the "in lieu of" payments from 1990 through 1992, and ceased making any payment whatsoever to defendant after that year. It was not until 2003 that the Tax Assessor issued the notices of contested payments due.

In 2004, defendant sold a tax lien on plaintiff's property for outstanding taxes assessed in 2002 and 2003. In 2003, plaintiff sold a portion of the land on which the school is located to a developer. At closing, plaintiff paid $34,295.57 from the sale proceeds to redeem the tax sale certificate and satisfy other municipal charges. Of that amount, $26,230 went towards payment of taxes for 2002 and 2003. The balance of the payment included 2004 taxes, and "delinquent sewer and water charges and statutory year-end penalties for late payment of taxes and fees." At the closing, plaintiff was also required to pay taxes for the fourth quarter of 2004 in the amount of $6,120.57.

Plaintiff appealed the assessment to the Burlington County Board of Taxation (the Board), contending as it does here that because it was a school it was exempt from property tax. The Board ruled in defendant's favor; plaintiff then appealed to the Tax Court. The Tax Court decision now being appealed was rendered in 2007.

Although the Board issued a judgment for the tax year 2003, none was rendered for the tax year 2002. Plaintiff contends the Board and the Tax Court decisions should have included both years. The confusion arose from plaintiff's filing of an initial appeal application form with the Board which did not state that separate appeals were being pursued for 2002 and 2003.

We affirm substantially for the reasons expressed by the Tax Court judge in her thoughtful and well-written June 27, 2007 opinion. "The scope of appellate review from a determination of the Tax Court is no different from that applicable to a non-jury determination of any other trial court." G & S Co. v. Borough of Eatontown, 6 N.J. Tax 218, 220 (App. Div. 1982). "Since the judges assigned to the New Jersey Tax Court have special expertise, we will not disturb their findings unless they are plainly arbitrary or there is a lack of substantial evidence to support them." Ibid.

"[The] party claiming the exemption must bear the burden of proof demonstrating entitlement to the exemption. . . ." Twp. of Monroe v. Gasko, 182 N.J. 613, 620-21 (2005). "Tax-exemption statutes are strictly construed against those claiming exemption because of the compelling public policy that all property bear its fair share of the burden of taxation." N.J. Carpenters Apprentice Training & Educ. Fund v. Borough of Kenilworth, 147 N.J. 171, 177 (1996), cert. denied, 520 U.S. 1241, 117 S.Ct. 1845, 137 L.Ed. 2d 1048 (1997). Nevertheless, "strict construction does not require 'a rigid scholastic interpretation. . . . The rule of strict construction must never be allowed to defeat the evident legislative design.'" Id. at 177-78 (alteration in original) (quoting Boys' Club of Clifton, Inc. v. Twp. of Jefferson, 72 N.J. 389, 398 (1977)).

In N.J. Carpenters Apprentice Training & Educ. Fund, supra, 147 N.J. at 180, the Court identified with approval cases which considered the tax exemption issue in regards to primary or secondary schools, including West Orange Twp. v. Joseph Kushner Hebrew Academy, 13 N.J. Tax 48 (Tax 1993). In Joseph Kushner Hebrew Academy, supra, 13 N.J. Tax at 52, the judge concluded that a private nursery school*fn1 was a school "within the contemplation of N.J.S.A. 54:4-3.6." This Tax Court judge reasoned that mention of Joseph Kushner Hebrew Academy, supra, 13 N.J. Tax 48, in N.J. Carpenters Apprentice Training & Educ. Fund, supra, 147 N.J. at 180, "indicat[es] at least that a nursery school is not ineligible for exemption." We agree.

"'Undeniably[,] it is the public benefit resulting from education that justifies granting schools and colleges exemption from taxation . . . .'" N.J. Carpenters Apprentice Training & Educ. Fund, supra, 147 N.J. at 189 (first alteration in original) (quoting Kimberley Sch. v. Town of Montclair, 2 N.J. 28, 42 (1949)). Plaintiff provides a public benefit by offering an education suitable for very young children in their earliest developmental phases. As the judge said:

After considering all of the evidence in this case, I conclude that plaintiff's preschool and kindergarten classes (what plaintiff calls its sparrow, bluebird, owlet and owl groups) provide an education suitable for the age of the children enrolled in these groups. What takes place in those classes is educational rather than mere custodial care or "baby-sitting." The children are led by the staff and instructed in accordance with a fairly structured schedule each morning. They sing, they learn the rudiments of counting, the names of the months and the days of the week, they listen to stories that are read to them, they participate in various craft activities that require them to draw and develop other skills that will be helpful in learning to write when they are able to do so. The afternoons are primarily devoted to rest and play, with staff supervision, but that is a practical acknowledgement of the age groups of these children, which range from approximately three years old to six years old, and their ability to absorb instruction over an entire day.

The judge further found that even the infant and toddler classrooms activities were designed to "contribute to the mental and physical development" of the children, not merely warehouse them.

The judge also concluded that only the before- and after-school programs lacked any indicia of being educational, and were purely child care. Because a portion of the school's activities were not educational, it is necessary to determine which part of the building was used for non-school purposes in order to fully calculate the exemption. Since most of the building "serves all the children at one time or another," thereby complicating the equation, the court employed a "predominant use" test to determine if apportionment was feasible.

The predominant use test in the context of hospital exemptions, N.J.S.A. 54:4-3.6, allows a court some flexibility in apportioning which areas are taxable because of the practical difficulties inherent in making the assessment in a more concrete fashion. See Hunterdon Med. Ctr. v. Readington Twp., 22 N.J. Tax 302, 333 (Tax 2005), aff'd, 391 N.J. Super. 434, 439-44 (App. Div.), certif. granted, 192 N.J. 72 (2007). The test appears well-suited for this exemption question, and it was not error for the judge to use it in this context. The judge determined that since virtually all of the building is used by pre-school children, the predominant use of the building is as a school, although at times some portion is occupied by before-and after-school program participants. Since she concluded that the predominant use of the premises was as a school, the entire premises were exempt. Substantial credible evidence supports this conclusion, and we will therefore not disturb it on appeal.

We also concur with the judge's decision that no judgment could be entered as to 2002. Even if plaintiff's error in failing to include 2002 on the appeal form filed with the Board was innocently made, the Tax Court cannot serve as the first forum to appeal the assessment for 2002. The Tax Court has jurisdiction to act only when reviewing judgments of county boards of taxation pursuant to N.J.S.A. 2B:13-2(a)(2), and over other matters as provided by statute. N.J.S.A. 2B:13-2(c). There is no statutory provision that would have allowed plaintiff to file a direct appeal from a tax assessment. If plaintiff did not obtain a judgment from the Board, it cannot appeal that judgment to the Tax Court.

Plaintiff urges that the court find substantial compliance in order to avoid a technical reading that would bar relief. See Negron v. Llarena, 156 N.J. 296, 305 (1998). Plaintiff further contends that a flexible reading of the statute would allow consideration of its 2002 claim. In this instance, however, the issue is one of actual jurisdiction, not just a technical defect that defeats an otherwise valid claim. Equitable principles do not create jurisdiction in an instance where there is no order from which an appeal can be taken.


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