On appeal from the Superior Court, Appellate Division, whose opinion is reported at 405 N.J. Super. 257 (2009).
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
The issue before the Court is whether there is a time limitation governing when a municipality may file a motion to dismiss a tax appeal that rests on the taxpayer's false or fraudulent account.
On June 29, 2001, plaintiff, Lucent Technologies, Inc. (Lucent), transferred title to the subject property in Berkeley Heights to LTI NJ Finance LLC (LTI), a limited liability company of which Lucent was the sole member. At the same time, Lucent entered into a leaseback agreement with LTI that included a twenty-year term. The leaseback agreement designated LTI as the landlord and Lucent as the tenant and it specifically described the agreement as a "true lease" for purposes of "state law" and federal income taxes. The agreement fixed an annual rental fee and granted Lucent an option to purchase the property in certain circumstances for an agreed-upon sum.
In June 2003, a tax assessor for defendant, Township of Berkeley Heights (Township), mailed a request to Lucent for income and expense information related to the property, as authorized by N.J.S.A. 54:4-34 and commonly referred to as a Chapter 91 request. Lucent's tax manager responded to the request in writing, stating basically that the property is owner occupied with the exception of 72,000 square feet occupied by Optical Fiber Solution (OFS).
In June 2004, the Township's tax assessor made another Chapter 91 request by sending Lucent a letter and a copy of the 2004 Annual Statement Worksheet. The letter requested that Lucent provide "the current income and expense data for the property identified" for the "year ending December 31, 2003." On July 8, 2004, Lucent's tax manager responded: "Please be advised that this property is owner occupied with the exception of less [than] 5% being occupied by OFS (Optical Fiber Solutions)." In June of each of the two following years, the Township's tax assessor sent Chapter 91 requests to Lucent. Each year, Lucent's tax manager submitted identical responses, asserting that the property is "owner occupied" except for the space leased to OFS, which was described as being less than two percent of the building space.
On March 10, 2005, Lucent filed a complaint in the Tax Court, appealing its 2005 assessment. The Township served interrogatories on Lucent, which were responded to on July 18, 2005. In those interrogatory answers, Lucent revealed for the first time that LTI, rather than Lucent, was the owner of the property and describing the 2001 leaseback agreement. Lucent's answers to interrogatories also disclosed, for the first time, that there were actually four subleases. Copies of documents relating to the leaseback transaction and subleases were attached to Lucent's answers.
Lucent filed its tax appeals for 2006 and 2007 on March 23, 2006, and March 22, 2007, respectively. The Township served interrogatories on Lucent on May 19, 2006 and June 21, 2007, seeking information relating to those tax years. Lucent responded to both sets of interrogatories on September 24, 2007, providing information relating to leaseback transactions and the subleases that was similar to the interrogatory answers served in 2005.
In November 2007, the Township moved to dismiss all three of Lucent's tax appeals, arguing that because each rested on responses to the Chapter 91 requests that were false or fraudulent, the taxpayer was not entitled to relief. The Tax Court granted the application only for the tax years 2006 and 2007, declining to dismiss the 2005 tax appeal because of what the court characterized as the Township's delay in filing its dismissal motion. In reaching its conclusion, the Tax Court reasoned that motions for relief pursuant to the statute are governed by the 180-day timeframe established in Rule 8:7(e), a limitation that made the motion timely only as it related to the 2006 and 2007 tax years.
The Appellate Division granted the Township's motion for leave to appeal the Tax Court's denial of its motion to dismiss the 2005 tax appeal. In reversing the order of the Tax Court, the Appellate Division concluded that neither the governing statute, N.J.S.A. 54:4-34, nor Rule 8.7(e) limited the time within which the municipality was required to move to dismiss a tax appeal founded on a false or fraudulent account. The matter was remanded to the Tax Court to enter judgment dismissing the 2005 tax appeal.
The Supreme Court granted Lucent's motion for leave to appeal from the Appellate Division judgment.
HELD: Although the municipality's dismissal motion was not untimely, the Court reverses the appellate panel's judgment that that tax appeal be dismissed in its entirety and remands to the Tax Court for a reasonableness hearing consistent with the Court's holding in Ocean Pines, Ltd. v. Borough of Point Pleasant.
1. The issue raised here is a narrow one, arising in the context of a tax appeal that rests on the taxpayer's submission of a "false or fraudulent" account. Within that context, the Court must interpret the interplay between N.J.S.A. 54:4-34, and Rule 8:7(e). The statute states in relevant part that no appeal shall be heard from the assessor's evaluation and assessment with respect to income-producing property where the owner has failed or refused to respond to such written requests for information within forty-five days of such requests, or to testify on oath when required, or shall have rendered a false or fraudulent account. Rule 8:7(e) is the enforcement mechanism for the statute and provides that, except in the case of a false or fraudulent account, all motions to dismiss for refusal or failure to comply with N.J.S.A. 54:4-34 shall be filed no later than the earlier of 180 days after the filing of the complaint or thirty days before the trial date." The heart of this dispute is whether the 180-day limit imposed in Rule 8:7(e) applies to the time for filing a dismissal motion based on a taxpayer's submission of a false or fraudulent response to a Chapter 91 inquiry. (Pp.7-10)
2. The language of N.J.S.A. 54:4-34 is plain and unambiguous. It first requires every real property owner to respond to certain specified requests made by the tax assessor and to submit, if requested, to an examination under oath. The statute next imposes a forty-five-day time limitation within which the taxpayer must respond, further providing that if the taxpayer "fails or refuses" to do so within that time frame, or if the taxpayer renders a "false or fraudulent account," the tax assessor is permitted to make his or her evaluation of the property based on the information available. The authority of the assessor is qualified by the requirement that the assessor reasonably determine the full and fair value of the property. Finally, as it relates to income-producing properties, if the taxpayer fails or refuses to respond within the permitted timeframe, or if the taxpayer responds by submitting a false or fraudulent account, the statute provides that there shall be "no appeal" from the assessment. (Pp. 10-14)
3. Rule 8:7(e) establishes certain procedural requirements for enforcing the statute by imposing a time limit on when the municipality's dismissal motion may be filed. These time limits apply only to tax appeals in which the taxpayer has failed or refused to make a timely response to the Chapter 91 request. Rule 8:7(e) explicitly begins with the admonition that the limitation shall apply "[e]xcept in the case of a false or fraudulent account." (Pp. 14-15)
4. In Ocean Pines Ltd. v. Borough of Point Pleasant, this Court previously has considered the meaning and intent of the statutory prohibition on pursuing an appeal in the context of a taxpayer's failure or refusal to provide information about an income-producing property. In that case, the Court noted that the statutory language is both clear and unambiguous in providing that the taxpayer's absolute failure to make any response to the Chapter 91 inquiry precluded it from pursuing its appeal. The Court also considered whether the "strict enforcement" of the prohibition on an appeal could withstand constitutional challenges, concluding that the statute deprived the taxpayer of neither a substantive nor a procedural due process right. The Court also interpreted the statute's requirement that the assessor's valuation be reasonable, even in the context of a taxpayer's failure to respond, providing a limited avenue for relief for the taxpayer. The Court harmonized that remedy with the statute's clear preclusion of an ordinary tax appeal, pointing out that there were two significant limitations on the reasonableness proceeding that the statute made available to the taxpayer. First, that the taxpayer's appeal would be limited to a review of whether the valuation was reasonable, both as to the underlying data considered and the methodology utilized, in light of the information that was available to the assessor at the time of the assessment. Second, the court pointed out that because of the limited nature of that remedy, the taxpayer was entitled to specific discovery, but had no right to a plenary hearing. The Court concluded that the taxpayer would be barred from producing the contrary proofs that it had withheld from the assessor so as to remain faithful to the statutory language in precluding an appeal. (Pp. 15-17)
5. This appeal asks the Court to look beyond its decision in Ocean Pines and to consider whether Rule 8:7(e), which was subsequently promulgated, imposes a time limitation that restricts the right of the municipality to move to dismiss a tax appeal based on a false or fraudulent account. The Court concludes that it does not. Rule 8:7(e) is entirely consistent with the statutory prohibition of a tax appeal in those circumstances in which the taxpayer has submitted a false or fraudulent account. The rule explicitly exempts from its embrace any motion based on the filing of a false or fraudulent account. In light of that exception, the time limit set forth in Rule 8:7(e) does not apply to this case. There is nothing in the Appellate Division's decision that suggests a misunderstanding about the procedural nature of the Rule. However, the language used to effectuate the statutory remedy is inconsistent with the relief the Court found was appropriate in Ocean Pines. That is, the Court does not read the statute's command that "no appeal shall be heard" to completely foreclose any remedy. Regardless of whether the taxpayer's shortcoming is its failure to timely respond to the Chapter 91 request or its submission of false or fraudulent information, the Court does not understand the Legislature to have intended, by precluding a tax appeal, to have permitted as a consequence the imposition of a valuation or unreasonable methodology. Instead, the language of the statute which permits the harsh result of dismissal is itself tempered by the bedrock principle that all valuations be reasonable in light of the information the assessor had available. (Pp. 17-19)
6. The Court concludes, as it did in Ocean Pines, that the complaint in the Tax Court should not be dismissed, but the remedy available to the taxpayer must be circumscribed. Therefore, the Appellate Division's judgment to the extent that it directed the complaint to be dismissed in its entirety, was in error. In its place, the Court imposes the same limited remedy that it concluded was available in Ocean Pines. The Court vacates that portion of the appellate panel's judgment that directed the Tax Court to dismiss the complaint and the matter is remanded to the Tax Court for the limited purpose of conducting a reasonableness hearing in accordance with this opinion. (Pp. 19-20)
Judgment of the Appellate Division, to the extent that it directed that the complaint be dismissed, is REVERSED, and the matter is REMANDED to the Tax Court for further proceedings.
JUSTICE ALBIN, CONCURRING, agrees with the Court's well-reasoned opinion but notes that there may be cases in which a taxpayer inadvertently files false information and quickly attempts to remedy the mistake. Justice Albin does not read the Court's opinion to preclude -- in rare circumstances -- the Tax Court from exercising its equitable powers to deny a municipality's dilatory motion to dismiss, provided the taxpayer does not have unclean hands.
JUSTICE RIVERA-SOTO, CONCURRING, writes separately to place the concurrence submitted by Justice Albin in its proper context. According to Justice Rivera-Soto, Justice Albin's bogeyman is simply not present in this case. Any consideration of it lies outside of this case's decisional authority and belongs instead somewhere in the non-precedent netherworld of dicta.
CHIEF JUSTICE RABNER and JUSTICES LONG, LaVECCHIA, and WALLACE join in JUSTICE HOENS' opinion. JUSTICE ALBIN filed a separate concurring opinion. JUSTICE RIVERASOTO filed a separate concurring opinion.
The opinion of the court was delivered by: Justice Hoens
In this interlocutory appeal, we consider whether there is a time limitation governing when a municipality may file a motion to dismiss a tax appeal that rests on the taxpayer's false or fraudulent account. In addressing that question in the first instance, the Tax Court concluded generally that there was such a limitation embodied in our Court Rule, see R. 8:7(e), as a result of which the municipality's dismissal motion was untimely. In an interlocutory appeal, the Appellate Division disagreed. Lucent Techs. v. Twp. of Berkeley Heights, 405 N.J. Super. 257 (App. Div. 2009). The panel concluded that neither the governing statute, N.J.S.A. 54:4-34, nor Rule 8:7(e) limited the time within which the municipality was ...