Domenick Migliorato v. Township of Hillsborough

NOT FOR PUBLICATION WITHOUT APPROVAL OF

THE TAX COURT COMMITTEE ON OPINIONS

TAX COURT OF NEW JERSEY

Patrick DeAlmeida R.J. Hughes Justice Complex

Presiding Judge P.O. Box 975

Trenton, New Jersey 08625-0975

(609) 292-8108 Fax: (609) 984-0805

October 19, 2012

Thomas J. Cafferty, Esq.

Gibbons, P.C.

One Gateway Center

Newark, New Jersey 07102

Martin Allen, Esq.

DiFrancesco, Bateman, Coley, Yospin,

Kunzman, Davis, Lehrer & Flaum, P.C.

15 Mountain Boulevard

Warren, New Jersey 07059

Re: Domenick Migliorato v. Township of Hillsborough

Docket No. 016630-2011

Dear Counsel:

This letter constitutes the court s opinion on the parties cross-motions for summary judgment with respect to plaintiff s request for relief under the Correction of Errors statute, N.J.S.A. 54:51A-7. For the reasons explained more fully below, plaintiff s motion is denied, defendant s motion is granted, and the Complaint is dismissed.

*

I. Findings of Fact and Procedural History

This letter opinion sets forth the court s findings of fact and conclusions of law on the parties cross-motions for summary judgment. R. 1:7-4. The following findings of fact are based on the certifications and exhibits submitted by the parties. R. 1:6-2(d).

Plaintiff Domenick Migliorato is the owner of fifteen residential properties in defendant Township of Hillsborough. The properties, condominium units, are designated by the township as follows:

Block 200.06, Lot 2.03 13 Chandler Court

Block 200.06, Lot 2.04 14 Chandler Court

Block 200.06, Lot 2.12 33 Chandler Court

Block 200.06, Lot 2.15 35 Chandler Court

Block 200.06, Lot 2.13 36 Chandler Court

Block 200.06, Lot 2.21 51 Chandler Court

Block 200.06, Lot 2.23 55 Chandler Court

Block 200.06, Lot 2.90 223 Chandler Court

Block 200.06, Lot 2.88 224 Chandler Court

Block 200.06, Lot 2.80 243 Chandler Court

Block 200.06, Lot 2.78 244 Chandler Court

Block 200.06, Lot 2.77 245 Chandler Court

Block 200.06, Lot 2.79 246 Chandler Court

Block 200.06, Lot 2.87 225 Merry Lane

Block 200.06, Lot 2.89 226 Merry Lane

Each of the properties is a deed-restricted rental unit subject to the Uniform Housing Affordability Controls regulations of the Council on Affordable Housing. N.J.A.C. 5:80-26.1, et seq. Plaintiff leases the properties to low- and moderate-income tenants. Pursuant to regulations, the rent that plaintiff was permitted to collect from his tenants during 2011 could not exceed .50% more than the rent charged in 2010.

For tax year 2010, each property carried the same assessment:

Land $ 13,000

Improvements $ 35,000

Total $ 48,000

The Chapter 123 ratio for Hillsborough Township for tax year 2010 was 60.71%. This means that each property carried an equalized value of $79,064 ($48,000 .6071 = $79,064) for tax year 2010.

The township implemented a municipal-wide revaluation for tax year 2011. As a result of the revaluation, each of plaintiff s properties carried the same assessment:

Land $ 110,000

Improvements $ 88,400

Total $ 198,400

Because of the revaluation, the ratio for Hillsborough Township for tax year 2011 is 100%. The assessments, therefore, reflect the assessor s judgment of the true market value assigned to the properties as of October 1, 2010.

Plaintiff failed to file petitions of appeal with the Somerset County Board of Taxation challenging the tax year 2011 assessments on the properties by the May 1, 2011 statutory deadline. See N.J.S.A. 54:3-21. Instead of filing a timely appeal of the tax year 2011 assessments, on September 22, 2011, plaintiff filed a Complaint in this court seeking relief under the Correction of Errors statute, N.J.S.A. 54:51A-7.

The Complaint alleges that the facts constituting the error or mistake in assessment that would warrant relief under the statute are explained in an attached certification of plaintiff. The attached certification of plaintiff, however, merely contains the conclusory statement that when setting the assessments on the properties for tax year 2011 the assessor failed to classify the properties as income-restricted affordable housing, resulting in incorrect assessments for the properties. No evidence supports this assertion. Plaintiff submits no proof of the classification assigned to the subject properties or any evidence that the assessor overlooked the rent regulations impact on the properties value.

The Complaint requests a Judgment setting the assessment on each property at a total of $48,000 for tax year 2011. This is the assessment in place prior to the municipal-wide revaluation. The Complaint does not explain why the assessment for tax year 2011, when the revaluation year Chapter 123 ratio is 100%, would be the same as the assessment for tax year 2010, when the Chapter 123 ratio for the municipality was 60.71%. Nor does the Complaint explain why there would be no change in value for the properties from tax year 2010 to tax year 2011, even when considering the effect of the rent control regulations.

Defendant filed an Answer denying that relief was available under the Correction of Errors statute because the tax year 2011 assessments on the properties were set based on an exercise of judgment by the tax assessor.

After submission of a stipulation of facts, the parties cross-moved for summary judgment. Because the parties waived oral argument, the court decides the motions on the papers. R. 1:6-2(d).

II. Conclusions of Law

Summary judgment should be granted where the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law. R. 4:46-2. In Brill v. Guardian Life Ins. Co., 142 N.J. 520, 523 (1995), our Supreme Court established the standard for summary judgment as follows:

[W]hen deciding a motion for summary judgment under Rule 4:46-2, the determination whether there exists a genuine issue with respect to a material fact challenged requires the motion judge to consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party in consideration of the applicable evidentiary standard, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party.

The court finds that there are no disputed material facts in this matter. The parties have stipulated to all of the material facts. Plaintiff s claim for relief, therefore, is ripe for resolution through summary judgment.

This court s jurisdiction to review assessments on real property is established by statute. With respect to assessments of the amount at issue here, N.J.S.A. 54:3-21a provides in relevant part that:

a taxpayer feeling aggrieved by the assessed valuation of the taxpayer s property . . . may on or before April 1, or 45 days from the date the bulk mailing of notification of assessment is completed in the taxing district, whichever is later, appeal to the county board of taxation by filing with it a petition of appeal . . . . In a taxing district where a municipal-wide revaluation or municipal-wide reassessment has been implemented, a taxpayer or a taxing district may appeal before or on May 1 to the county board of taxation by filing with it a petition of appeal . . . .

Once the board issues its decision, a taxpayer, if dissatisfied with the result, may thereafter file an appeal in this court. N.J.S.A. 54:51A-1; R. 8:4-2(a)(2). Compliance with the filing requirement is a necessary predicate to establish jurisdiction in this court for review of an assessment. As our Supreme Court explained, failure to file a timely appeal is a fatal jurisdictional defect. F.M.C. Stores v. Borough of Morris Plains, 100 N.J. 418, 425 (1985). Strict adherence to statutory filing deadlines is of particular concern in tax matters, given the exigencies of taxation and the administration of local government. Id. at 424 (citing Princeton Univ. Press v. Borough of Princeton, 35 N.J. 209, 214 (1961)). A failure to file a timely Complaint divests this court of jurisdiction even in the absence of harm to the defendant municipality. Lawrenceville Garden Apartments v. Township of Lawrence, 14 N.J. Tax 285 (App. Div. 1994).

The Correction of Errors statute is an exception to the regular tax-appeal process established in N.J.S.A. 54:3-21a. The statute establishes a longer period for seeking relief after the normal deadline for a standard appeal has expired. The statute provides that:

[t]he tax court may, upon the filing of a complaint at any time during the tax year or within the next 3 years thereafter, by a property owner, a municipality or a county board of taxation, enter judgment to correct typographical errors, errors in transposing, and mistakes in tax assessments, provided that such complaint shall set forth the facts causing and constituting the error or errors and mistake or mistakes, or either thereof sought to be corrected and that such facts be verified by affidavits submitted by the plaintiff. The tax court shall not consider under this section any complaint relating to matters of valuation involving an assessor s opinion or judgment.

[N.J.S.A. 54:51A-7.]

The Supreme Court defined the scope of the Correction of Errors statute in Hovbilt, Inc. v. Township of Howell, 138 N.J. 598 (1994). In that case, the taxpayer submitted a timely application for farmland assessment of property that was being used to cultivate soy beans. Id. at 601. The application was either misplaced or mishandled by the tax assessor s office. As a result, the tax assessor never reviewed the application and the property was assessed at its full fair market value for the following tax year. Ibid. The taxpayer did not appeal the assessment to the county board pursuant to N.J.S.A. 54:3-21a. Instead, after expiration of the time in which to file such an appeal, the taxpayer sought relief under the Correction of Errors statute. Id. at 601-02.

After reciting an exhaustive review of the lower court precedents interpreting the statute, the Court held that the apparent conflict between the Legislature s decision strictly to limit the time for filing tax appeals and its authorization of an extended period of time within which mistakes can be corrected can best be reconciled by construing the statute in accordance with its plain meaning. Id. at 617 (citing Levin v. Township of Parsippany-Troy Hills, 82 N.J. 174, 182 (1980)). The Court explained that [i]n authorizing the correction of typographical errors, errors in transposing and mistakes in tax assessments, the Legislature s only express qualification of the judiciary s power to correct mistakes in tax assessments was to exclude matters of valuation involving an assessor s opinion or judgment. Id. at 617-18. We understand that exclusion as a clear expression of legislative intent to limit the statutory authorization to the correction of mistakes that are indisputable and not subject to debate about whether the assessment to be corrected resulted from an assessor s exercise of judgment. Id. at 618.

The Court explained that the clearest examples of errors that fall under the Correction of Errors statute are that category of mistaken assessments . . . caused by errors concerning undebatable physical attributes of the land or structures. A simple example would be a mistaken assessment of vacant land that was calculated on the assumption that the property was improved, when in fact no improvements had ever been constructed. Ibid. Whether that mistake was attributable to a typographical error, a mistake in transposing, or some other discoverable or undiscoverable cause, an over assessment of property based on non-existent improvements ordinarily would not have occurred because of an assessor s opinion, judgment or exercise of discretion. Ibid. Moreover, because the correct assessment would be readily inferable on the basis of the underlying error, correction of so obvious a mistake in assessment is reconcilable with the predictability and procedural regularity of the tax appeal process. Ibid. When such an error occurs without involvement of an assessor s exercise of discretion, and its correction is also self-evident and non-discretionary, remediation of that error pursuant to the Correction of Errors statute would effectuate the legislative goal of remedying incontestable assessment errors and avoiding manifest injustice. Ibid. In our view, avoidance of obvious injustice in the assessment process was the Legislature s primary objective in enacting and amending the Correction of Errors statute. Ibid.

Justice Stein expressed the Court s holding succinctly:

Accordingly, we hold that mistakes in assessments that are indisputable, and cannot plausibly be explained on the basis of an exercise in judgment or discretion by the assessor or his or her staff, are within the category of mistakes that can be corrected under the statute. Based on our characterization of the category of mistaken but correctable assessments, we hold further that the correct assessment must readily be inferable or subject to ready calculation on the basis of the assessment mistake for which correction is authorized.

[Id. at 618-19.]

Applying this standard to the misplaced application for farmland assessment, the Court held that relief under the Correction of Errors statute was not available. Under the Farmland Assessment Act of 1964, N.J.S.A. 54:4-23.1 to -23.23, the tax assessor is required to determine whether the property that is the subject of an application for farmland assessment is actively devoted to agricultural or horticultural use and whether other statutory criteria have been met. According to the Court, [i]n performing those functions, the assessor s opinion and judgment necessarily are implicated. Id. at 621. Because the taxpayer could not establish that it was indisputable that its property would have qualified for farmland assessment had its application not been misplaced or that the correct assessment on the property, if the farmland assessment application had been granted, would be readily inferable and subject to ready calculation, relief under the Correction of Errors statute was not available. Id. at 621-22.

The Hovbilt standard has been applied in a number of circumstances. In Borough of Paramus v. Etaner Enterprises, 15 N.J. Tax 217 (App. Div.), certif. denied, 143 N.J. 319 (1995), the parties agreed that during the revaluation process the taxpayer and a representative of the revaluation company agreed to an assessment on the relevant property of $11,827,000. Id. at 222. For reasons unknown to any party an assessment of $5,520,500 was entered on the property. Id. at 221. No party introduced evidence indicating that the $5,520,500 assessment was the product of the exercise of judgment by the revaluation company or tax assessor. Ibid. The court concluded that the assessment was strictly an error in transposing subject to revision under the Correction of Errors statute. Ibid. The correct assessment was readily ascertainable given the parties agreement to assess the property at $11,827,000.

In City of Port Republic v. Brusco, 16 N.J. Tax 143 (Tax 1996), during a municipal-wide reassessment the tax assessor determined that the relevant property, vacant land, would be assessed at $74,000. His handwritten entry on a printout of all properties in the municipality confirmed the assessor s determination. Id. at 144-45. The list containing the tax assessor s handwritten notation was sent to a vendor providing data entry and computer services to the State for the purpose of maintaining a database of assessments on real property. Id. at 145. An employee of the vendor entered an assessment of $740,000, adding a zero to the amount set by the tax assessor and significantly increasing the assessment on the property. The assessor did not notice the error until after expiration of the time in which to file an appeal with the county board to correct the assessment. Ibid.

Judge Rimm concluded that the error fell within the Correction of Errors statute. As he explained:

The land assessment of $740,000 did not reflect the judgment, opinion or determination of the assessor. Rather it was placed on the records of the municipality, contrary to the assessor s judgment and determination that the assessment should be $74,000, as a result of a typographical error made by a computer operator. This is precisely the kind of error which was intended by the Legislature to be corrected under N.J.S.A. 54:51A-7, the correction of errors statute.

[Id. at 147.]

Finally, in 303, Inc. v. City of North Wildwood, 21 N.J. Tax 376 (Tax 2004), the taxpayer constructed an eight-unit residential building on the subject property and filed a master deed subdividing the property into eight individual condominium units. The tax assessor failed to take notice of the deed and listed the property as a single line item with a single assessment in the municipal records. Id. at 380. No timely appeals were filed from the single line item assessment. Several years later, the taxpayer, having sold several of the units, sought to void the assessment of the property as a single line item. The taxpayer sought relief under the Correction of Errors statute for the years in which a timely tax appeal was not filed. Ibid.

Judge Small held that the assessor s mistake was self-evident in that he plainly failed to take notice of the deed that subdivided the property into condominium units. Id. at 385. However, noting that the Court in Hovbilt held that an error is correctable only if the appropriate remedy is readily inferable or subject to ready calculation, he denied relief under the Correction of Errors statute. While recognizing that the eight condominium units should have been separately assessed, Judge Small held that the appropriate amount of the eight assessments is anything but self-evident and non-discretionary. The assessor must exercise judgment in order to quantify the assessments on the eight separate line items. Id. at 386. As a result, the court concluded that the error could not be corrected under the Correction of Errors statute.

Application of these precedents to the facts of this case requires dismissal of plaintiff s Complaint. Plaintiff has not established that the tax assessor mistakenly overlooked the regulatory restrictions on the rental income that may be generated from the subject properties. Although plaintiff makes the conclusory statement in his certification that the income restrictions were not considered during the revaluation process, he submitted no evidence establishing that claim. The allegation appears to be based on nothing more than the fact that the assessment on the subject properties increased. In addition, although the Complaint alleges that the assessor placed an incorrect classification on the property, this allegation is not explained and the motion record contains no evidence of the classification plaintiff alleges to be in error. The court is not satisfied that plaintiff has proven a mistake on the part of the tax assessor. The conclusion alone is sufficient to justify dismissal of the Complaint.

Moreover, even if the court were to consider as true plaintiff s allegation that the tax assessor made a mistake by not considering the rent regulations limiting the subject properties income potential, relief under the Correction of Errors statute would not be available to plaintiff. The mere existence of an error does authorize relief under the statute. In order for the court to change an assessment pursuant to N.J.S.A. 54:51A-7, the taxpayer must demonstrate that in the absence of the error, the correct assessments on the subject properties for tax year 2011 are readily . . . inferable or subject to ready calculation. Hovbilt, supra, 138 N.J. at 619. Plaintiff cannot establish this prong of the Hovbilt analysis.

Plaintiff argues that the readily inferable correct assessment for the subject properties for tax year 2011 is $48,000. The court can identify no principled rationale for this argument. The assessed value of real property is determined as of October 1st of each year. N.J.S.A. 54:4-23; Aperion Enterprises, Inc. v. Borough of Fair Lawn, 25 N.J. Tax 70, 86 (Tax 2009). In addition, each year the Director, Division of Taxation determines an average ratio of assessed value to true value for each municipality. N.J.S.A. 54:1-35b. Prior to township-wide revaluation for tax year 2011, the assessment on each of the subject properties was $48,000. The Chapter 123 ratio for Hillsborough Township for tax year 2010 was 60.71%. This means that each property carried an equalized value of $79,064 ($48,000 .6071 = $79,064) for tax year 2010. After the revaluation the total assessment on each of the subject properties was $198,000 for tax year 2011. Because of the revaluation, the tax year 2011 assessment is at 100%. As a result, the tax year 2011 assessments reflect true market value.

To return the assessments to $48,000 for tax year 2011, where the ratio is 100%, would, in effect, result in a significant reduction of the equalized value of the subject properties ($79,064 for tax year 2010; $48,000 for tax year 2011). Plaintiff does not explain why the assessor s mistake in overlooking rent control regulations would result in a decrease in the equalized value of the properties from tax year 2010 to tax year 2011. The court cannot simply overlook the reality that every property in the municipality was subject to revaluation for tax year 2011 and that the assessments for all properties were set at true market value as of October 1, 2010, as determined by the assessor s exercise of judgment. If, as plaintiff requests, the assessments on the subject properties were returned to $48,000, they would be the only properties in the municipality with assessments determined in a prior tax year based on a valuation date prior to October 1, 2010. This is not a rational way to apply N.J.S.A. 54:51A-7.

In addition, the court cannot readily calculate the correct value of the subject properties as of October 1, 2010, including the impact of the rent regulations, without the exercise of judgment. To determine what the subject properties were worth on October 1, 2010 the court would have to examine either comparable sales, with appropriate adjustments for the impact of rental control regulations (the sales comparison approach), evidence of economic income, expenses, capitalization rates and other factors (the income approach), or the cost of constructing the properties new minus depreciation (the cost approach). Each of these approaches involves the exercise of discretion and judgment to determine true value. This is precisely what is not permitted by N.J.S.A. 54:51A-7 and the cases interpreting the statute. Plaintiff s opportunity to challenge the assessor s value judgment and to have this court make an independent determination of the properties true value on the relevant valuation date expired when plaintiff failed to file a timely appeal of the assessments pursuant to N.J.S.A. 54:3-21.

The facts presented here are nothing like those previously found to warrant relief under N.J.S.A. 54:51A-7. There is no evidence of a typographic error, a transposition of assessments from one property to another or the valuation of an improvement (the value of which can readily be determined) that does not exist. Even under the facts as alleged by plaintiff and viewed in the light most favorable to plaintiff, correction of the mistake alleged by plaintiff necessarily requires the exercise of judgment to calculate the impact that the rent regulations have on the properties true market value as of October 1, 2010.1

The court denies plaintiff s motion for summary judgment, grants defendant s motion for summary judgment and will enter an Order dismissing the Complaint.

Very truly yours,

Patrick DeAlmeida, P.J.T.C.

1In his brief, plaintiff argues that [t]his is not a situation in which the Assessor performed an inspection of the Properties and used his (sic) judgment to assign a value. Plaintiff provides no evidentiary support for this assertion. Defendant in its reply brief asserts that all properties in the township, including the subject properties, were inspected during the revaluation. No evidence was submitted to support that assertion. It has been the court s experience that municipal-wide revaluations include the inspection of all properties in the municipality. Without evidence in the record on this point, however, it is not possible for the court to make a finding with respect to whether the subject properties were inspected prior to issuance of the 2011 assessments. Resolution of this factual issue is not necessary to determine whether plaintiff is entitled to relief. Whether or not the properties were inspected is immaterial to plaintiff s claim. The error on which plaintiff predicates his request for relief is that the assessor overlooked the impact of rent control regulations. Plaintiff does not claim that the assessor attributed physical attributes to the properties that did not exist, or mischaracterized the physical condition of the properties, their size or location. Inspection of the properties is not related to whether the assessor considered rent control regulations when setting the assessment.