REALTY ASSET PROPERTIES, LTD. v. TOWNSHIP OF MILLSTONE, et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-6225-04T56225-04T5

REALTY ASSET PROPERTIES, LTD.,

Plaintiff-Appellant,

v.

TOWNSHIP OF MILLSTONE,

A MUNICIPAL CORPORATION OF

THE COUNTY OF MONMOUTH

AND STATE OF NEW JERSEY,

Defendant-Respondent.

________________________________________________________________

 

Argued October 17, 2006 - Decided December 1, 2006

Before Judges Lisa and Holston, Jr.

On appeal from Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-908-05.

Lisa A. Buckalew argued the cause for appellant (Kaplin, Stewart, Meloff, Reiter & Stein, attorneys; Ms. Buckalew, of counsel and on the brief).

Michael J. Fasano argued the cause for respondent (Lomurro, Davison, Eastman & Mu os, attorneys; Mr. Fasano, on the brief).

PER CURIAM

Plaintiff, Realty Asset Properties, LTD, appeals the Law Division's June 14, 2005 order dismissing plaintiff's complaint against defendant, Township of Millstone (Township), pursuant to Rule 4:6-2(e), for failure to state a claim upon which relief can be granted. We affirm.

The facts below are repeated from our decision in Realty Asset Properties, Ltd. v. Oldham, 356 N.J. Super. 16 (App. Div. 2002) involving the same property, in which we held that the failure of plaintiff, as a tax sale certificate holder, to finalize the tax sale foreclosure proceedings within two years of the date that the sale was confirmed by the Township resulted in an automatic reversion of the certificate to the Township pursuant to N.J.S.A. 54:5-114.5. Id. at 25-26, certif. denied, 176 N.J. 71 (2003).

Plaintiff is the former owner of Tax Sale Certificate No. 16-95 for Block No. 23, Lot No. 24 on the tax map of the Township. The tax sale certificate was issued by the tax collector for the Township on November 9, 1995 for unpaid real estate taxes for part of 1992, and for 1993 and 1994. Id. at 19. On November 16, 1996, the Township assigned the certificate to FUNDCO, INC., plaintiff's predecessor in interest. Ibid.

The Township's governing body confirmed the sale of the certificate by resolution adopted December 4, 1996. Id. at 20. Paragraph two of the resolution stated:

Pursuant to N.J.S.A. 54:5-114.4 and 114.7 the Assignee's title to the said Tax Sale Certificate shall be forfeited and shall automatically revert back [sic] to the Assignor unless the Assignee forecloses the equity of redemption and records the Final Judgment with the Monmouth County Clerk's Office within two years of the confirmation of the sale by the governing body.

[Ibid.]

On May 13, 1997, after FUNDCO transferred the certificate to plaintiff, plaintiff filed a tax sale foreclosure complaint, to foreclose the equity of redemption, in the Chancery Division. Ibid. Final judgment of foreclosure was granted to plaintiff on January 12, 1998 and a writ of execution directed the Monmouth County Sheriff to sell the property at a public auction. The sheriff's sale was scheduled and adjourned by plaintiff three times, on March 23, April 6, and April 20, 1998. Ibid. By November 2001, when plaintiff rescheduled its sheriff's sale for December 1, 2001, almost five years had lapsed since entry of the final judgment of foreclosure. Ibid. Plaintiff, in that time frame, had taken no further action to finalize the tax sale certificate foreclosure proceedings. Ibid.

The Township and subsequent lien holders filed a formal objection to the sheriff's sale with the Chancery Division. On January 25, 2002, the court ordered the cancellation of the sheriff's sale and found that plaintiff's failure to complete the tax foreclosure proceeding by December 4, 1998 caused a reversion of the certificate to the municipality as a matter of law. Realty Asset Prop., supra, 356 N.J. Super. at 21. We affirmed the court's dismissal of plaintiff's foreclosure action. Id. at 26. We stated:

If a foreclosure proceeding is initiated in a timely manner and thereafter prosecuted with due diligence, the additional procedural requirements involved in bringing about a judicial sale pursuant to N.J.S.A. 54:5-87 can be easily accommodated under the two year limitation imposed by N.J.S.A. 54:5-114.2. However, in the event that additional time is necessary, a certificate holder may request an extension of time from the municipality under N.J.S.A. 54:5-114.5. Here, plaintiff's injury was self-induced. The five-year delay in scheduling a judicial sale is completely attributable to its own failure to act. In fact . . . plaintiff originally scheduled and adjourned three separate sheriff's sales nine months before the expiration of the two-year deadline established by N.J.S.A. 54:5-114.4.

[Id. at 24-25.]

On June 4, 1999, while the sheriff's sale was pending and prior to any claim for reversion being filed, plaintiff paid the Township the 1999 real estate taxes for the property in the amount of $24,575.57. According to plaintiff, it paid these taxes in order to protect its interest in the tax sale certificate.

On February 28, 2005, plaintiff filed its Law Division complaint against the Township by which it sought reimbursement for the $24,575.57 it paid to the Township for subsequent taxes in June 1999. The tax sale certificate had reverted to the municipality on December 4, 1998, two years after it was acquired. Plaintiff, therefore, alleged that at the time of its subsequent tax payment on June 4, 1999, the certificate actually belonged to the Township. Plaintiff claimed that its payment was a mistake of fact because it was made under the mistaken belief that it owned the tax sale certificate.

On April 26, 2005, the Township filed its motion to dismiss plaintiff's complaint pursuant to Rule 4:6-2(e). Defendant claimed that plaintiff was not entitled to recover for its payment of taxes as a matter of law, under the "voluntary payment rule." The Township asserted that plaintiff's tax payments were made under a "mistake of law," which is not an exception to the voluntary payment rule.

Plaintiff further argued that the Township would be unjustly enriched, because not only did defendant accept the tax payment from plaintiff, but after the tax sale certificate reverted, the Township was able to issue another tax sale certificate for the same taxes and thereby profit twice.

On June 14, 2005, Judge O'Hagan granted the Township's motion. The judge, relying on New Jersey Hospital Ass'n v. Fishman, 283 N.J. Super. 253, 264 (App. Div. 1995), determined that plaintiff's payment of the 1999 year's taxes, one year past the time period when the tax sale certificate reverted to the Township, was a voluntary act based on a mistake of law. The court determined that pursuant to the "voluntary payment rule," because plaintiff paid the 1999 taxes without compulsion and as a result of a misinterpretation of the law requiring reverter of the tax sale certificate to the Township, the money paid cannot be reclaimed by a suit at law. Accordingly, the court dismissed plaintiff's complaint pursuant to Rule 4:6-2(e).

Plaintiff presents the following arguments for our consideration:

POINT I

THE TRIAL COURT'S DECISION WAS BASED UPON AN INTERPRETATION OF LAW AND IT IS NOT ENTITLED TO DEFENSE ON APPEAL.

POINT II

THE TRIAL COURT'S DECISION SHOULD BE OVERTURNED, AS THE COURT ERRED IN DECIDING THAT PLAINTIFF'S CLAIM SHOULD BE DISMISSED UNDER THE VOLUNTARY PAYMENT RULE.

A. PLAINTIFF'S SUBSEQUENT TAX PAYMENT WAS A MISTAKE OF FACT, WHICH IS AN EXCEPTION TO THE VOLUNTARY PAYMENT RULE.

B. PLAINTIFF'S SUBSEQUENT TAX PAYMENT WAS NOT A MISTAKE OF LAW AND THE VOLUNTARY PAYMENT RULE SHOULD NOT APPLY.

POINT III

THE TRIAL COURT'S DECISION SHOULD BE REVERSED BECAUSE THE COURT OVERLOOKED THE PLAINTIFF'S UNJUST ENRICHMENT CLAIM AND DISMISSAL WAS INAPPROPRIATE.

A motion to dismiss a complaint for failure to state a claim upon which relief can be granted is "limited to examining the legal sufficiency of the facts alleged on the face of the complaint." Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989). A reviewing court must search the complaint "in depth and with liberality" to ascertain whether the basis for a cause of action may be found even from an obscure statement of a claim. Ibid. (quoting DiCristofaro v. Laurel Grove Mem'l Park, 43 N.J. Super. 244, 252 (App. Div. 1957).

Plaintiff seeks to recover real property taxes voluntarily paid under a mistaken belief that it held an interest in the property. Plaintiff seeks a refund from the Township pursuant to N.J.S.A. 54:4-54, which states in pertinent part:

Where one person has by mistake paid the tax on the property of another supposing it to be his own, the governing body after a hearing, on five days' notice to the owner, may return the money paid in error without interest and restore the record of the assessment and tax against the property in the name of the true owner, provided the lien of the tax has not expired and no transfer or encumbrance has been put on record against the property since the date of the payment in error.

Our decisions have long established that under N.J.S.A. 54:4-54 "mistake" refers to a mistake of fact, and that a refund is not appropriate where a voluntary payment is made as a result of a mistake of law. See Trapper v. City of Jersey City, 19 N.J. Tax 421 (Tax 2001), aff'd, 20 N.J. Tax 239 (App. Div. 2002).

In Continental Trailways, Inc. v. Director, Division of Motor Vehicles, 102 N.J. 526, 548-49 (1986), the Supreme Court refused to provide a refund of a tax paid under a mistake of law, even where the law was held unconstitutional, stating "in the absence of statutory authority, taxes voluntarily, although erroneously, paid . . . cannot be refunded." Id. at 548, cert. dismissed, 481 U.S. 1001, 107 S. Ct. 1636, 95 L. Ed. 2d 195 (1987). The Court found that recovery is inappropriate "where a party, without mistake of fact, fraud, duress, or extortion, voluntarily pays money on a demand that is not enforceable against him." Ibid. The court determined that the public policy underlying the "voluntary payment rule" is to discourage suits for the refund of taxes erroneously paid or illegally collected. Ibid. The reason is because government budgets are prepared on an annual cash basis and governments should be able to rely on the presumptive validity of its statutes in planning its budget. Lavin v. Bd. of Educ. of City of Hackensack, 90 N.J. 145, 154 (1982).

The reason for the "voluntary payment rule" was articulated more than a century earlier in Riker v. Jersey City, 38 N.J.L. 225, 225-26 (Sup. Ct. 1876), where Chief Justice Beasley wrote:

When money is demanded as a legal right, and it is paid without compulsion, and with a full comprehension of the facts, the money so paid cannot be reclaimed by a suit at law. The reason of this rule is, that the party paying had an opportunity to dispute the claim, and that having waived it at his own volition, it is impolitic to permit him to overhaul the transaction by an aggressive action.

In New Jersey Hospital, supra, we suggested the following definitions: (1) mistake of fact generally occurs where payment is made on a belief in the past or present existence of a fact which never existed; and (2) "mistake of law is a mistake as to the legal consequences of an assumed state of facts, which occurs where a person is truly acquainted with the existence or nonexistence of facts, but comes to an erroneous conclusion as to their legal effect." Id. at 266-67. (quoting 70 C.J.S. Payment 113 (1987)).

Voluntary payment of erroneous taxes has been characterized as a mistake of fact in cases where the plaintiff would not have had an opportunity or duty to know of an erroneous assessment. For example, in Farmingdale Realty Co. v. Borough of Farmingdale, 55 N.J. 103 (1969), the Court held that the plaintiff was entitled to a refund of excess taxes voluntarily paid where the defendant had made a clerical mistake in assessing the plaintiff's property. The Court found that the plaintiff could not be charged with personal knowledge as to the defendant's mistake of fact. Id. at 110-11. Likewise, in McShain v. Township of Evesham, 163 N.J. Super. 522, 528 (Law Div. 1978), the Law Division held that the plaintiffs were entitled to a refund of taxes voluntarily paid where they "had no reason to know or suspect that they were being assessed and billed for property which they did not own."

In contrast to Farmingdale Realty and McShain, voluntary payment of erroneous taxes has been characterized as a mistake of law where the plaintiff did not lack knowledge of facts to legally dispute payment. For example, in Trapper, supra, 19 N.J. Tax at 432-33, the court denied a refund of taxes voluntarily paid on property for which there was an on-going legal dispute as to ownership. Additionally, the plaintiff was later determined not to have had an interest in the property. Similarly, in New Jersey Hospital, supra, 283 N.J. Super. at 253, we upheld a finding that the plaintiff was not entitled to a refund for over-collected taxes where payments were made under a mistaken belief that the defendant's tax assessments were legally correct. We stated that all citizens are charged with knowing the law and that mistake of law furnishes no ground for recovery of illegally assessed taxes. Id. at 264.

Here, like in Trapper and New Jersey Hospital, plaintiff had full knowledge of all the facts and conditions concerning the status of the tax sale foreclosure proceedings, which it had initiated. However, before voluntarily paying taxes it did not owe, plaintiff failed to investigate the law of automatic reversion of title to a tax sale certificate, pursuant to N.J.S.A. 54.5-114.4 and 114.7, back to the municipality. Plaintiff knew from the governing body's resolution, when the tax sale certificate was assigned, that its interest in the property would revert to the Township if it failed to follow prescribed statutory foreclosure procedures. See Cannici v. Scott, 20 N.J. Super. 97, 100 (Ch. Div. 1952) (holding that failure to foreclose a tax certificate within the two year period required by the statute causes its reversion to the municipality); see also Realty Asset Props., supra, 356 N.J. Super. at 25-26 (finding that "plaintiff's injury was self-induced," where its "five-year delay in scheduling a judicial sale is completely attributable to its own failure to act.").

We are convinced that plaintiff paid the 1999 taxes based on a "mistake of law," because plaintiff came to an "erroneous conclusion" as to the "legal effect" of its failure to foreclose within the two year statutory period. Plaintiff knew the date its predecessor in title had purchased the certificate. It was also aware of the fact that two years had passed and the foreclosure had not been completed. Thus, plaintiff's only "lack of awareness" dealt with the legal consequences of facts of which it was, in fact, well aware. Plaintiff's failure to know the legal consequences of facts of which it was aware constitutes a "mistake of law."

Lastly, plaintiff contends that its claim of unjust enrichment should have survived defendant's motion to dismiss on the pleadings, because the court in considering a Rule 4:6-2(e) motion should not have been concerned with whether plaintiff was able to prove the allegations of the complaint. Plaintiff alleges that defendant would be unjustly enriched if plaintiff were not given a refund because defendant collected twice on the same taxes after the tax sale certificate reverted to defendant.

We are convinced, however, that the plaintiff's claim is not cognizable based on the facts here. The "volunteer rule" is the primary exception to the principle of restitution. In re Fees of State Bd. Of Dentistry, 84 N.J. 582, 588 (1980) (quoting 3 T. Cooley, Taxation 1282 at 2565 (4th ed. 1924)) ("[e]very man is supposed to know the law . . . . [A] mistake of law by one who voluntarily pays a tax . . . furnishes no ground of recovery"); Yardville Estates Inc. v. City of Trenton, 66 N.J. Super. 51, 64 (App. Div. 1961), (even if the requirement to pay was illegal "the equities are in favor of the [municipality,]" because the plaintiff paid on demand without protest); see also Trapper, supra, 19 N.J. Tax at 431 (N.J.S.A. 54:4-54 does not allow returns based on a mistake of law in part because a voluntary payment is an exception to unjust enrichment). We are convinced, therefore, that because plaintiff's payment was made voluntarily under a mistake of law that recovery based on the doctrine of unjust enrichment is barred.

Accordingly, we affirm the June 14, 2005 order dismissing plaintiff's complaint for failure to state a claim upon which relief can be granted. R. 4:6-2(e).

 
Affirmed.

The volunteer rule provides that "where a party, without mistake of fact, or fraud, duress or extortion, voluntarily pays money on a demand which is not enforceable against him, he cannot recover it back." City of Camden v. Green, 54 N.J.L. 591, 593 (E&A 1892).

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A-6225-04T5

December 1, 2006