Opinion
Docket No. 017139-2012
07-30-2013
Re: Rumbas Properties, LLC v. Township of Evesham
NOT FOR PUBLICATION WITHOUT APPROVAL OF
THE TAX COURT COMMITTEE ON OPINIONS
Patrick DeAlmeida
Presiding Judge
Jeff J. Horn, Esq.
Horn Law Group, LLC
200 Corporate Circle, Suite 2
Toms River, New Jersey 08755
Elizabeth M. Garcia, Esq.
Parker McCay, P.A.
9000 Midlantic Drive, Suite 300
Mount Laurel, New Jersey 08054-1539
Dear Counsel:
This letter constitutes the court's opinion with respect to defendant's motion to dismiss the Complaint because of plaintiff's false response to a request for income and expense information pursuant to N.J.S.A. 54:4-34, commonly known as Chapter 91 (L. 1979, c. 91). For the reasons explained more fully below, defendant's motion is granted, subject to plaintiff's right to a reasonableness hearing pursuant to Ocean Pines, Ltd., v. Borough of Point Pleasant, 112 N.J. 1, 11 (1988).
I. Findings of Fact and Procedural History
This letter opinion sets forth the court's findings of fact and conclusions of law on defendant's motion. R. 1:6-2(f). The findings of fact are based on the certifications and exhibits submitted by the parties on the motion.
Plaintiff Rumbas Properties, LLC is the owner of real property located in defendant Mount Laurel Township. The property is designated in the records of the municipality as Block 4.01, Lot 37.01 and is commonly known as 380 Route 73 South.
On or about July 15, 2011, the municipal tax assessor sent to plaintiff a written request for income and expense information associated with the subject property. The request, issued pursuant to N.J.S.A. 54:4-34, was intended to assist the assessor in determining the assessment to place on the property for tax year 2012.
On August 23, 2011, plaintiff responded to the request. Plaintiff's response unequivocally indicated that the property was owner occupied. In response to a request for the "[t]otal number of rental units" at the property plaintiff stated "None." In addition, in response to the question "[i]s rental of space subject to lease?" plaintiff responded "No." Under the "Comments" section of the information request plaintiff stated "100% Owner Occupied."
The assessor thereafter determined the assessment for the subject property for tax year 2012.
Plaintiff challenged the tax year 2012 assessment before the Burlington County Board of Taxation. The board affirmed the assessment through issuance of a Judgment.
On September 17, 2012, plaintiff filed a Complaint in this court challenging the Judgment of the county board.
During the course of discovery it became apparent to defendant that the subject property was not 100% owner occupied, as reported in plaintiff's response to the assessor's information request. The evidence submitted with respect to the motion establishes that the owner of the subject property, Rumbas Properties, LLC, is a single-member entity in which John Rumbas is the principal. A separate entity, 380 Route 73, Inc., which trades as Motor Trans Transmissions, is solely owned by Mr. Rumbas. 380 Route 73, Inc. operates a transmission shop at the subject property. That entity pays all expenses associated with the property, including utilities, maintenance and insurance. In addition, 380 Route 73, Inc. pays monthly to Rumbas Properties, LLC funds equal to the mortgage payments and property taxes due on the property. The mortgage provided funds to purchase the subject property, as well as equipment and a telephone number used by 380 Route 73 in its business. Rumbas Properties, LLC and 380 Route 73, Inc. have not executed a written lease agreement. The record does not contain evidence with respect to how Rumbas Properties, LLC, or Mr. Rumbas, reports on income tax returns the income received from 380 Route 73, Inc. Nor does the record contain evidence with respect to whether 380 Route 73, Inc. reports the payments as rental expenses on its income tax returns.
As a result of its discovery of this evidence, defendant, on May 20, 2013, moved to dismiss the Complaint based on plaintiff's false response to a Chapter 91 inquiry. Plaintiff opposed the motion, arguing that the property is, in effect, owner occupied.
Defendant also moved pursuant to R. 4:23-5 for dismissal of the Complaint for plaintiff's failure to respond to discovery requests. Defendant subsequently withdrew that motion.
The parties waived oral argument. The court, therefore, decides the motion on the papers. R. 1:6-2(d).
II. Conclusions of Law
N.J.S.A. 54:4-34 provides
Every owner of real property of the taxing district shall, on written request of the assessor, made by certified mail, render a full and true account of his name and real property and the income therefrom, in the case of income-producing property . . . and if he shall fail or refuse to respond to the written request of the assessor within 45 days of such request . . . or shall render a false or fraudulent account, the assessor shall value his property at such amount as he may, from any information in his possession or available to him, reasonably determine to be the full and fair value thereof. No appeal shall be heard from the assessor's valuation and assessment with respect to income-producing property where the owner has failed or refused to respond to such written request for information within 45 days of such request . . . or shall have rendered a false or fraudulent account.
As a threshold matter, plaintiff argues that defendant's motion should be denied as untimely. This argument has no merit. R. 8:7(e) controls the timing of a motion to dismiss a Complaint for failure to comply with N.J.S.A. 54:4-34. The rule 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 (1) 180 days after the filing of the complaint, or (2) 30 days before the trial date.
[(emphasis added).]
This rule "establishes certain procedural requirements for enforcing [Chapter 91] by imposing a time limit on when the municipality's dismissal motion may be filed." Lucent Techs., Inc. v. Township of Berkeley Heights, 201 N.J. 237, 247-248 (2010). Our Supreme Court recently explained that "the Rule, although it imposes time limits on motions to dismiss filed by the municipality, explicitly exempts from its embrace any motion based on the filing of a false or fraudulent account." Id. at 249-250. Such is the case here. The township argues that plaintiff's Chapter 91 response was false. The 180-day filing period established in R. 8:7(e) does not apply.
With respect to the substance of defendant's motion, plaintiff does not dispute that the assessor's request for income and expense information comports with Chapter 91. Nor is there any question that the property owner received the request and responded with a statement that the subject property was owner occupied. The question before the court is whether plaintiff's response to the request was a false or fraudulent account of the income and expenses associated with the subject property.
"[I]ncome producing property is generally limited to property producing rental income." ML Plainsboro, Ltd v. Township of Plainsboro, 16 N.J. Tax 250, 259 (App. Div.)(citation omitted), certif. denied, 149 N.J. 408 (1997). For purposes of Chapter 91, a property is income producing if a fee is paid to the owner of land for "the continuous and exclusive use of a specific portion of the land and buildings, in the traditional sense of a tenancy . . . . " Southland Corp. v. Township of Dover, 21 N.J. Tax 573, 589 (Tax 2004). See also Great Adventure, Inc. v. Township of Jackson, 10 N.J. Tax 230 (App. Div. 1988).
The court finds that a tenancy existed at the subject property for purposes of N.J.S.A. 54:4-34. 380 Route 73, Inc.'s payments to plaintiff were made in exchange for 380 Route 73, Inc.'s right to occupy the subject property, where that entity operates a business. 380 Route 73, Inc., which has no ownership interest in the subject property, is permitted to occupy the property continuously and, apparently, exclusively, in exchange for monetary compensation to the owner of the property. This arrangement is the very essence of a tenancy in the traditional sense. By failing to report the income it received from 380 Route 73, Inc. in its response to the assessor's inquiry, plaintiff produced a false account of the income and expenses associated with the subject income-producing property.
The fact that plaintiff and 380 Route 73, Inc. are related companies is not material to the court's analysis. The holding in SKG Realty Corp. v. Township of Wall, 8 N.J. Tax 209 (App. Div. 1985), is instructive on this point. In that case, the property owner was the wholly-owned subsidiary of a parent corporation. A division of another subsidiary of the parent corporation was the sole tenant at the subject property. Id. at 211. The parties made no effort to set economic rents. Rental payments and responsibility for expenses were established in such a way as to meet the inter-subsidiary accounting needs of the various entities that comprised the corporate structure of which the property owner and tenant were a part. Ibid. The property owner did not respond to a Chapter 91 request on the theory that the property was effectively owner occupied and did not produce income. Ibid.
This court granted the municipality's motion to dismiss pursuant to Chapter 91. The Appellate Division affirmed. The appellate court held that the taxpayer's opinion that the property was effectively owner occupied did not erase the statutory obligation to provide a full account of the income produced by the subject property. As the court explained:
Where real property is owned by one entity and occupied by a related entity, the manner in which they order their fiscal relationship may reduce the usefulness of the income accounting required by the statute. But, some or all of it may have utility, and it is up to the assessor and not the taxypayer to decide whether to consider the information furnished.See also Lucent Technologies, Inc. v. Township of Berkeley Heights, 24 N.J. Tax 406 (App. Div. 2009)(noting that trial court held that failure to reveal income from leases of less than three percent of subject property subjected taxpayer to Chapter 91 appeal-preclusion provision), aff'd in part, rev'd in part on other grounds, 201 N.J. 237 (2010).
[Ibid.]
The court has found that a landlord-tenant relationship existed at the subject property during the relevant period. Plaintiff very well may be of the view that the corporate relationship between the landlord and tenant rendered the property effectively owner occupied. A property owner, however, is not relieved of its obligation to provide a true account of the landlord-tenant relationship present at the subject property based on the owner's view of the value of the information to the assessing function. As the Appellate Division held in SKG Properties, whether information regarding the relationship between a tenant and a landlord is relevant to determining fair market value is a decision to be made by the tax assessor, not the property owner.
In Ocean Pines, supra, our Supreme Court held that a taxpayer who fails to comply with N.J.S.A. 54:4-34 may nevertheless seek a "sharply limited," and likely summary, review of the reasonableness of the assessor's valuation based upon the data available to the assessor when the valuation was made. Such an inquiry would be limited to "(1) the reasonableness of the underlying data used by the assessor, and (2) the reasonableness of the methodology used by the assessor in arriving at the valuation." 112 N.J. at 11.
The court, therefore, shall set a date for a reasonableness hearing and afford the parties sufficient time to conduct discovery related thereto. An Order effectuating the court's decision is enclosed.
Very truly yours,
Patrick DeAlmeida, P.J.T.C.