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Frybarger v. Dep't of the Treasury


April 20, 2010


On appeal from the Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-511-07.

Per curiam.


Submitted December 15, 2009

Before Judges Carchman, Lihotz and Ashrafi.

Plaintiff Scott Frybarger appeals from a summary judgment dismissal of his complaint alleging constitutional violations by defendant Department of the Treasury, Division of Taxation, including illegal search and seizure, tortious confiscation of property, infringement of the right to interstate travel, and invasion of privacy. Plaintiff is the owner of Titan Power Equipment, Inc. ("Titan"), an Ohio corporation with its principal place of business in Florida. Plaintiff claims defendant's agents executed a warrant for jeopardy assessment of unpaid sales tax, and then confiscated Titan's construction equipment as it was being transited through New Jersey. The Law Division granted summary judgment on October 16, 2008, concluding plaintiff had failed to file a timely challenge to the tax assessment.

On appeal, plaintiff focuses his challenge on alleged constitutional deprivations and argues the court erred in denying him a jury trial or, alternatively, by denying his request that the matter be transferred to the Tax Court. We have considered these issues in light of the record, the applicable law, and the arguments presented. We concur with the Law Division's determination and affirm.

These are the facts as derived from evidence submitted by the parties in support of, and in opposition to, the summary judgment motion viewed in a light most favorable to plaintiff. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 523 (1995).

Penny Knowles, an Investigator I for defendant, received information that the driver of an out-of-state pickup truck carrying a load of industrial shop equipment and tools was staying at the Homestead Inn in Woodbridge, New Jersey. At Knowles's request, a Woodbridge police detective went to the motel and observed approximately twelve fully loaded, out-of-state pickup trucks and an enclosed trailer parked in the motel's lot. Magnetic signs containing Titan's address were attached to each pick-up.

On May 20, 2005, Knowles, along with investigator Donald Smith, went to the Homestead Inn accompanied by three local police officers. She questioned the motel manager, who told her a group of individuals driving pickup trucks with Titan signs had stayed at the motel from June to August the previous summer. Knowles questioned two pick-up truck drivers, Joseph R. Sauer and James F. Nelson, Jr. Sauer and Nelson explained they answered an ad in an Ohio newspaper and had been in New Jersey for approximately three weeks.

Their first week was spent being trained at the hotel on how to make the sales. Since then, they and four others, have been loading their pickup trucks from the trailer with equipment, and going to construction sites to make sales. The trailer was periodically restocked by a tractor-trailer. When they make a sale, the price is negotiated via cell phone by Mr. Frybarger or his crew chief.

Knowles called plaintiff, who admitted he owned the trailer and paid drivers for sales of Titan's equipment. Plaintiff also acknowledged he had been selling equipment in New Jersey for four years, under the name Eastern Tool and Equipment. Knowles advised the defendant an assessment would be issued for unpaid sales tax, and the trailer and its contents would be seized.

Following Knowles's investigation, defendant issued a Warrant of Execution Jeopardy Assessment for plaintiff's failure to file and pay sales tax for the period 2002 through 2005, pursuant to N.J.S.A. 54:49-5. Pursuant to N.J.S.A. 54:49-7, an arbitrary assessment of $660,000*fn1 was sent by certified mail to plaintiff's Ohio address. Attached to the warrant was a notification of plaintiff's right to a hearing and appeal, which stated in pertinent part:

New Jersey statutes grant you certain appeal rights. Therefore, if you disagree with any portion of this assessment, you may either (1) protest and request an informal administrative conference with the Conference and Appeals Branch, (2) file an appeal with the required fee to the Tax Court or (3) for assessments regarding periods ending on or after January 1, 1999, a taxpayer who paid the entire assessment within one year after time to protest or appeal has expired may thereafter file a refund claim on form A-1730 within 450 days after the time to protest or appeal has expired. If the taxpayer initially requests a conference or files a refund claim pursuant to the aforementioned, the taxpayer may subsequently appeal that decision to the Tax Court.

The notification further advised that a protest to the Conference and Appeals Branch "must be [submitted] in writing and within (90) [ninety] days from the date of this notice in the form and manner described in N.J.A.C. [18:32-1.2] in order to be valid."*fn2 Finally, the notification specified the necessary information to be included in the protest and provided the address, fax number, and internet address to which the protest should be sent. Finally, the notification explained that while most matters can be resolved through the informal Conference and Appeals process, plaintiff, nevertheless, had the right to file a complaint "within (90) ninety days from the date of this notice, directly with the Tax Court of New Jersey in accordance with the provisions of N.J.S.A. 54:51A-13 et. seq."

Defendant seized Titan's trailer of equipment on May 20, 2005. When plaintiff received the assessment on May 26, he denied any sales tax obligation existed because Titan's trucks were merely passing through New Jersey en route to Florida. On July 5, 2005, plaintiff filed a tort claim notice with defendant for matters "arising from failure of the State of New Jersey to properly enforce their forfeiture laws, as well as failure to properly marshal and insure that equipment that was confiscated from the Claimant was placed in a secure location to prevent damage to the property in question." The notice further asserted defendant "was negligent in the confiscation of the equipment that belonged to the Claimant and that the Claimant has suffered substantial damages."

When the assessment was not paid, defendant issued a notice of public auction, advising plaintiff the trailer and equipment would be sold on October 3, 2005. Plaintiff responded by filing an order to show cause and verified complaint in the United States District Court for the District of New Jersey asserting false representation, invasion of privacy, and illegal warrantless search and seizure (Count One); infringement of the right to interstate travel, invasion of privacy, and unlawful search and seizure (Count Two); violation of the "Interstate Commerce Commissions Act" (Count Three); and fraud, conspiracy and conversion of property (Count Four). The complaint was later amended to add claims that included violation of 42 U.S.C.A. § 1983 and negligent infliction of emotional distress.

Defendant agreed to stay the sale pending the court's resolution, and the parties prepared a consent order to transfer the case to the Tax Court. Plaintiff later withdrew his consent to the transfer. Thereafter, defendant moved for dismissal for lack of subject matter jurisdiction, and plaintiff moved for default judgment.

Applying principles of comity, along with the provisions set forth in the Tax Injunction Act of 1937, 28 U.S.C.A. § 1341, the District Court concluded "this is a tax case primarily, and not an action to be decided pursuant to the law of Section 1983 and common law of torts." See Fair Assessment in Real Estate Assocs., Inc., v. McNary, 454 U.S. 100, 114-15, 102 S.Ct. 177, 185-86, 70 L.Ed. 2d 271, 282-83 (1981) (applying principles of comity, federal jurisdiction under § 1983 was declined as action intruded on state tax scheme). The District Court pointed out that the State Tax Court had jurisdiction to provide plaintiff with a "plain, adequate and complete remedy." Accordingly, the court denied plaintiff's motion and dismissed plaintiff's complaint.

On February 14, 2007, plaintiff filed a complaint in the Law Division. After limited discovery was exchanged, plaintiff moved to strike defendant's pleading for failure to produce its investigators for deposition. Defendant filed a motion to dismiss plaintiff's complaint or, in the alternative, to transfer the matter to the Tax Court.

The Law Division judge reviewed the statutory and rule authority establishing a ninety-day appeal period from the date of actions by defendant and concluded [g]enerally, failure to file a timely appeal is a fatal jurisdictional defect and if a plaintiff fails to file within the requisite statutory time frame the plaintiff must be pr[o]scribed from an appeal in the Tax Court and any consideration of its case on the merits.... Plaintiff never filed a proper notice of protest with [defendant's] Conference and Appeals Branch or a complaint with any court [with]in the pr[o]scribed 90 day period. In fact, as pointed out by the defendant[,] plaintiff waited over four months before he officially challenged [defendant's] jeopardy assessment when he filed the complaint with the United States District Court for the District of New Jersey.... Plaintiff also waited nearly 21 months before filing a complaint with this court.

The motion judge concluded plaintiff's failure to file a timely protest precluded consideration of the issues raised in his complaint.*fn3 Plaintiff appeals from the October 16, 2008 order for summary judgment dismissal of his complaint with prejudice,*fn4 and the December 5, 2008 order denying his request for reconsideration, which, for the first time, requested the matter be transferred to the Tax Court.*fn5

On appeal, plaintiff does not discuss his failure to comply with the administrative prerequisites to contest the validity of the assessment. Rather, he asserts various constitutional violations occurred because "Titan never entered one foot into the State of New Jersey, and only allowed Titan equipment and trailers to pass through New Jersey being handled by subcontractors," and "[a]t no time was Titan ever conducting business in New Jersey." Plaintiff argues Knowles and Smith "were acting under the authority of the policy that was promulgated by the... Legislature in authorizing the agents to enforce New Jersey Tax law" and are liable for falsely representing themselves as law enforcement officials; breaking the locks on Titan's trailer; seizing the trailer and its contents; and arbitrarily assessing Titan for unpaid sales taxes. Plaintiff's arguments, although couched as constitutional deprivations, actually challenge defendant's imposition of the arbitrary assessment and its actions to effectuate collection.

In enacting the Sales and Use Tax Act, N.J.S.A. 54:32B-1 to -55 (the Act), "the Legislature delegated to the Director both general and specific powers intended to effectuate the administration and collection of the sales tax, which is a significant source of State tax revenue." Kawa v. Wakefern Food Corp., 24 N.J. Tax 444, 449 (App. Div.) (quotations omitted), certif. denied, 200 N.J. 369 (2009). The statute imposes personal liability on corporate officers for corporate sales tax liability. N.J.S.A. 54:32B-2(w), -14(a) (providing that every person required to collect any sales or use tax is personally liable for the tax); Skaperdas v. Dir., Div. of Tax., 14 N.J. Tax 103, 113-14 (Tax 1994), aff'd, 16 N.J. Tax 454 (App. Div. 1996); Cooperstein v. Dir., Div. of Tax., 13 N.J. Tax 68, 71 (Tax 1993), aff'd, 14 N.J. Tax 192 (App. Div. 1994), certif. denied, 140 N.J. 329 (1995).

Here, a sales tax obligation was triggered by the sale of plaintiff's equipment in New Jersey. "The combination of physical presence in New Jersey and transfer of possession [of the equipment] in New Jersey is sufficient to impose on [plaintiff] an obligation to collect the sales and use tax in a two-party transaction." Steelcase, Inc. v. Dir., Div. of Tax., 13 N.J. Tax 182, 188 (Tax 1993) (citing Falcone v. Dir., Div. of Tax., 12 N.J. Tax 75 (Tax 1991)). Even if, as plaintiff suggests, the subcontractors made each sale, plaintiff remains liable for the collection and turnover of sales taxes, as "the same principles that govern two-party transactions also apply to three-party transactions." Ibid. As the vendor and owner of the seized equipment, plaintiff became liable for incurred taxes when equipment was transferred in New Jersey upon his approval for each sale. Therefore, plaintiff retains the obligation to collect the sales or use tax for all transactions that are not otherwise qualified exempt sales.

Defendant is authorized to make an arbitrary assessment for unpaid sales taxes and [a]s an additional or alternate remedy, the [defendant] may issue a warrant, directed to the sheriff of any county commanding him to levy upon and sell the real and personal property of any person liable for any State tax, which may be found within his county, for the payment of the amount thereof, with any penalties, interest, [and] fees imposed for the cost of collection as may be provided by law and the cost of executing the warrant[.] [N.J.S.A. 54:49-13a.]

An aggrieved taxpayer may appeal "any decision, order, finding, assessment or action of the [defendant]... to the tax court in accordance with the State Uniform Tax Procedure Law, [N.J.S.A. 54:48-1 to -7]." N.J.S.A. 54:32B-21(a). The Act further provides that the appeal process "provided by this section shall be the exclusive remedy available to any taxpayer for review of a decision of the [defendant] in respect of the determination of the liability of the taxpayer for the taxes imposed by this act." N.J.S.A. 54:32B-21(b) (emphasis added); see also N.J.S.A. 54:51A-16 (stating appeal to Tax Court is the exclusive remedy available to a taxpayer for review of an action of the Director with respect to a tax matter). All taxpayer's complaints must be filed within ninety days of the action sought to be reviewed. N.J.S.A. 54:51A-14(a); C.J. Kowasaki, Inc. v. Dir., Div. of Tax., 13 N.J. Tax 160, 168 (Tax 1993).

The Tax Court was "established as a court of limited jurisdiction pursuant to Article VI, Section 1, paragraph 1 of the New Jersey Constitution[,]" N.J.S.A. 2B:13-1(a), and is "a court of record[.]" N.J.S.A. 2B:13-1(b). Its jurisdiction, defined by statute, permits it "to review actions or regulations with respect to a tax matter [by]... [a]ny State agency or official[.]" N.J.S.A. 2B:13-2(a)(1). The Legislature has recognized the Tax Court's "expertise in matters involving taxation" by granting it "jurisdiction over actions cognizable in the Superior Court" raising such issues. N.J.S.A. 2B:13-2(b). The Tax Court is empowered to "grant legal and equitable relief so that all matters in controversy between the parties may be completely determined." N.J.S.A. 2B:13-3(a). The Superior Court is authorized to transfer such matters to the Tax Court. R. 4:3-4(a).

Plaintiff learned of the assessment on May 20, 2005, and received the formal warrant of execution for jeopardy assessment by certified mail on May 26, 2005. He does not dispute that he neither filed a protest with defendant,*fn6 N.J.S.A. 54:49-18(a), nor a complaint in the Tax Court, pursuant to N.J.S.A. 54:32B-21(a). Plaintiff's first challenge to the arbitrary assessment was the District Court complaint filed on September 26, 2005, more than ninety-days following the assessment.

"'Failure to file a timely appeal is a fatal jurisdictional defect.'" McMahon v. City of Newark, 195 N.J. 526, 544 (2008) (quoting F.M.C. Stores Co. v. Borough of Morris Plains, 100 N.J. 418, 425 (1985)). Indeed, limitation periods for claims are common administrative provisions justified by the State's need for predictability of revenue. William McCullough Transp. Co. v. Div. of Motor Vehicles, 113 N.J. Super. 353, 360 (App. Div. 1971). "Strict adherence to statutory time limitations is essential in tax matters, borne of the exigencies of taxation and the administration of local government." F.M.C. Stores, supra, 100 N.J. at 424; see also Dougan v. Dir., Div. of Tax., 17 N.J. Tax 110, 112 (App. Div. 1997) (affirming Tax Court's dismissal of an appeal received one day beyond the ninety-day limit); New Jersey Transit Corp. v. Borough of Somerville, 139 N.J. 582, 589-90 (1995) (noting that strong policy concerns require taxpayers to adhere strictly to the filing-time deadlines prescribed by statute); Bonanno v. Dir., Div. of Tax., 12 N.J. Tax 552, 556 (Tax 1992) (holding that "[s]tatutes of limitations in tax statutes are strictly construed in order to provide finality and predictability of revenue to state and local government"); Franklin Tp. v. Dep't of Envtl. Prot., 7 N.J. Tax 224, 231 (Tax 1984) (explaining that "[i]f time limitations imposed on the right of challenge in governmental fiscal matters were subject to extensions and exceptions the amount of revenue available to the State could not be conclusively established"), aff'd, 7 N.J. Tax 657 (App. Div. 1985).

Although cloaked in terms of constitutional deprivation, plaintiff's complaint actually challenges the quantum of the sales tax assessment, as well as the methodology employed by defendant therein. These claims are subject to the established statutory appeal process, which plaintiff chose not to follow. We conclude plaintiff's failure to comply with the jurisdictional prerequisites to having tax matters heard is a fatal flaw barring his requested relief.

We reject as unfounded plaintiff's contentions that defendant's seizure of his property violated his constitutional rights "protected by 42 U.S.C.A. Section 1983" and that the court erred in not addressing this issue. Plaintiff's Superior Court complaint did not raise a § 1983 claim. "If not pled in a complaint, a cause of action cannot spring to life for the first time in an appellate court opinion. The basic function of a complaint is to 'fairly apprise an adverse party of the claims and issues to be raised at trial.'" Bauer v. Nesbitt, 198 N.J. 601, 610 (2009) (quoting Dewey v. R.J. Reynolds Tobacco Co., 121 N.J. 69, 75 (1990)).

Finally, plaintiff's claim that defendant performed an unlawful warrantless search and seizure and assertion of a right to jury trial are without merit and do not warrant extensive discussion. R. 2:11-3(e)(1)(E). We add these limited comments.

Our review discerns no "fraudulent representation" by defendant or its investigators in exercising its authorized power to issue a warrant of execution for jeopardy assessment of delinquent taxes, pursuant to N.J.S.A. 54:32B-22 and N.J.S.A. 54:49-13a. Under these statutes, defendant "shall have all the powers conferred by law upon sheriffs," and may levy upon and sell the real and personal property of the delinquent taxpayer in order to pay the amount assessed, along with any penalties, interest, and costs. N.J.S.A. 54:49-13a. Moreover, a taxing sovereign has the right to secure delinquent revenue through a summary proceeding, which may include collection by distraint, so long as an "adequate opportunity is afforded for a later judicial determination of the legal rights" of the taxpayer. Phillips v. Comm'r, 283 U.S. 589, 595-97, 51 S.Ct. 608, 611, 75 L.Ed. 1289, 1296-97 (1931).

With regard to the confiscation of plaintiff's property in partial satisfaction of the assessment, no Fourth Amendment protections, made applicable to the states by the Fourteenth Amendment were infringed. See G.M. Leasing Corp. v. U.S., 429 U.S. 338, 350-51, 97 S.Ct. 619, 627-28, 50 L.Ed. 2d 530, 542-43 (1977) (providing warrantless seizure of automobiles titled to the plaintiff found parked on the street did not violate the Fourth Amendment or invade the plaintiff's privacy and was a proper levy upon property for unpaid income taxes). The open seizure of plaintiff's trailer and its contents were within the scope of defendant's statutory authority and violated no protected privacy interest. Likewise, plaintiff's failure to avail himself of the statutory due process remedies for protesting the assessment defeat his contentions.

The right to trial by jury in New Jersey under Article 1, Paragraph 9 of the New Jersey Constitution must be either granted by statute or exist at common law. Brennan v. Orban, 145 N.J. 282, 291-92 (1996); see also In re Environmental Ins. Declaratory Judgment Actions, 149 N.J. 278, 298-99 (1997) (holding that "[w]ithout statutory authorization, a right to trial by jury does not attach to a claim if the claim did not exist at common law"). Neither common law nor statute allows a jury trial in the adjudication of a tax dispute. Cf. City of Jersey City v. Martin, 126 N.J.L. 353, 360-61 (E. & A. 1941); Township of Bernards v. Allen, 61 N.J.L. 228, 238-39 (E. & A. 1897); see also R. 8:8-1(a) (stating that "[a]ll matters in the Tax Court shall be heard by a single judge sitting without a jury"). Therefore, arguments that Tax Court adjudications deprive litigants of their right to a jury trial have been rejected by the courts as clearly without merit. Jet Urban Renewal Corp. v. City of Newark, 15 N.J. Tax 715, 719 (App. Div. 1996).

Plaintiff never filed a complaint in the Tax Court and opposed transfer to the Tax Court throughout the litigation.*fn7

Had plaintiff done so, his cognizable claims would have been adjudicated. The request for transfer is inordinately out of time.


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