Opinion
DOCKET NO. A-4028-13T2 DOCKET NO. A-4029-13T2
10-28-2015
SURF CORPORATION, Plaintiff-Appellant, v. CITY OF NORTH WILDWOOD, Defendant-Respondent.
Kevin S. Englert argued the cause for appellant (The Irwin Law Firm, P.A., attorneys; Steven R. Irwin, of counsel; Mr. Englert, on the briefs). William J. Kaufmann argued the cause for respondent (Cafiero & Kaufmann, attorneys; Mr. Kaufmann, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Espinosa and Currier. On appeal from the Tax Court of New Jersey, Docket Nos. 3489-2009 and 3688-2010. Kevin S. Englert argued the cause for appellant (The Irwin Law Firm, P.A., attorneys; Steven R. Irwin, of counsel; Mr. Englert, on the briefs). William J. Kaufmann argued the cause for respondent (Cafiero & Kaufmann, attorneys; Mr. Kaufmann, on the brief). PER CURIAM
Plaintiff Surf Corporation filed property tax appeals contesting defendant's assessment of the valuation for two parcels of property for tax years 2009 and 2010. Following a trial of the matters, the tax judge adopted the highest and best use analysis presented by North Wildwood's expert and entered judgment against Surf on January 24, 2014. A subsequent motion for a new trial or, in the alternative, an amendment of the judgment was denied on April 11, 2014. Surf appeals those orders. After reviewing the record in light of the contentions advanced on appeal, we affirm.
Surf filed local property tax appeals under N.J.S.A. 54:3-21 and Rule 8:3-5(a)(3), contesting the 2009 and 2010 assessments for two parcels of property in North Wildwood. The Surf Motel is located on Lot 11 in Block 266 and is owned by Surf Corporation. John and Susan Geers each own fifty percent of the issued stock of Surf Corporation. A small shed and employee bunkhouse are situated on Lot 15 in Block 266 which is owned by John Geers. For the tax years 2009 and 2010, Lot 11 was assessed as: land $2,608,300, improvement $443,400, and total $3,051,700. Lot 15 was assessed for tax year 2009 and 2010 as follows: land $585,000, improvement $10,200, and total $595,200. The assessed total value for both parcels was $3,646,900.
[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; provided, however, that any such taxpayer or taxing district 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, file a complaint directly with the Tax Court, if the assessed valuation of the property subject to the appeal exceeds $1,000,000.
[N. J.S.A. 54:3-21(a)(1).]
The Surf Motel had been in operation since its construction in the 1960s. On the dates of assessment, the applicable zoning laws for both properties permitted various retail uses including hotels, motels, bed and breakfast establishments, offices, banks, restaurants and apartments.
Pertinent to our discussion of the case are the facts concerning a review of the master plan in North Wildwood. In September 2007, as required by N.J.S.A. 40:55D-89, North Wildwood began a re-examination of its master plan. A steering committee was formed and a draft document was presented to the planning board in January 2010 in which tourism was defined as an economic benefit and the preservation of available hotels was highlighted as a key concern. After the required public notices and hearings, N.J.S.A. 40:55D-13(1), the master plan was adopted on September 10, 2010. The first reading of the ordinance was not introduced, however, until November 20, 2012. N. Wildwood, N.J., Ordinance 1615 (2012) stated that the recommendations of the 2010 Master Plan were being considered for implementation. The ordinance was adopted at its second reading in December 2012, it was published later that month, and it became effective on January 8, 2013. Surf's property was placed in a "Motel Commercial" zone following the adoption of the master plan, in which residential use was no longer permitted. Redevelopment remained a permissive use, however, for over four years after the 2009 assessment and three years after the 2010 assessment. Therefore, apartments remained a permitted use for almost two years following the trial of this matter.
A trial of both cases took place in April 2011. Prior to the presentation of evidence, North Wildwood moved to dismiss Lot 15 on the grounds of a lack of jurisdiction, arguing that the parcels were not "in common ownership" as required by Rule 8:3-5(a)(3). The judge reserved decision on the motion, permitting the parties an opportunity to brief the issue.
In cases of direct review by the Tax Court pursuant to N.J.S.A. 54:3-21, the complaint shall contain an allegation that the assessed valuation of the property for which direct review is sought exceeds $1,000,000. A complaint for direct review may include in separate counts separately assessed, contiguous properties in common ownership, in the same or different taxing districts, provided that the assessed valuation of one of such separately assessed, contiguous properties exceeds $1,000,000.Prior to 2010, the Rule required the value of the property to be $750,000 for a direct review.
[R. 8:3-5(a)(3) (emphasis added).]
At trial, both parties presented the testimony and appraisals of their respective experts as to the highest and best use and value of Lot 11. Greg Manzione, M.A.I., testified as Surf's appraiser and after analyzing a number of factors, he concluded that the highest and best use of the property was its continued use as a motel. Manzione employed the income approach to value the existing motel and developed a capitalization rate for available mortgage data. Based on the above, the expert concluded that the property should be assessed at $896,000 and $870,000 for tax years 2009 and 2010 respectively.
North Wildwood's expert, Mark Hanson, M.A.I., testified and concluded that the highest and best use of the property was re-development consisting of residential condominium units. He compared this use to the property's revenue stream as a motel for the years 2005-2009. Hanson employed the direct sales comparison approach to determine that the property should be assessed at $2,400,000 for the tax years 2009 and 2010. Neither expert mentioned the ongoing re-examination of North Wildwood's master plan.
On January 24, 2014, the judge issued a comprehensive opinion, and judgment was rendered for both tax years 2009 and 2010. He found North Wildwood's expert's conclusions of the highest and best use to be the more credible analysis and assessed Lot 11 for tax year 2009 as follows: land $1,734,900, improvement $294,900, and total $2,029,800. The assessment for Lot 11 as to tax year 2010 was set at: land $1,542,600, improvement $262,200, and total $1,804,800. As to Lot 15, the judge found there was no common ownership between the parcels and, therefore, he did not have jurisdiction over the appeal.
Surf moved for a new trial or, in the alternative, an amendment of the judgment. Counsel for Surf certified that he had received information from his client that there was an updated master plan and subsequent zoning change. Surf argued that North Wildwood was obligated under the "square corners" doctrine to provide information to the judge during the trial that there were proposed changes being made to the master plan that might affect the highest and best use of this property. The judge rejected this argument and denied the motion.
No certification has ever been provided from the principals of Surf as to their personal knowledge of North Wildwood's plans. --------
On appeal, Surf contends that the judge erred in his findings, specifically that he incorrectly applied the standard of highest and best use and wrongfully determined that he did not have jurisdiction over Lot 15. Surf also argues that North Wildwood violated the "square corners" doctrine. See, e.g., F.M.C. Stores Co. v. Borough of Morris Plains, 100 N.J. 418 (1985).
We note at the outset that this court's review of a tax court decision is highly deferential. Brown v. Borough of Glen Rock, 19 N.J. Tax 366, 375 (App. Div.), certif. denied, 168 N.J. 291 (2001). The courts recognize that tax court judges have special expertise, so "their findings will not be disturbed unless they are plainly arbitrary or there is a lack of substantial evidence to support them." Glenpointe Assocs. v. Twp. of Teaneck, 241 N.J. Super. 37, 46 (App. Div.), certif. denied, 122 N.J. 391 (1990); see Ford Motor Co. v. Twp. of Edison, 12 N.J. Tax 244, 247 (App. Div. 1990) (applying a substantial-evidence standard of review to a tax court decision), aff'd, 127 N.J. 290 (1992).
Despite the deference that is afforded to the tax court's valuation decisions, matters of law are still subject to a de novo review. Toll Bros. v. Twp. of W. Windsor, 173 N.J. 502, 549 (2002); see Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995) ("A trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference.").
Generally, the government must "turn square corners" in dealing with the public. F.M.C. Stores Co., supra, at 426 (quoting Gruber v. Mayor and Twp. Comm. of Raritan Twp., 73 N.J. Super. 120, 127 (App. Div.), aff'd, 39 N.J. 1 (1962)).
It may not conduct itself so as to achieve or preserve any kind of bargaining or litigational advantage over the property owner. Its primary obligation is to comport itself with compunction and integrity, and in doing so government may have to forego the freedom of action that private citizens may employ in dealing with one another.Cases applying the square corners doctrine tend to involve misrepresentations by a government employee or unfair treatment by a municipal board. See New Concepts For Living, Inc. v. City of Hackensack, 376 N.J. Super. 394, 403-04 (App. Div. 2005) (holding that the city's failure to include proper exemption notice in a mailing to the taxpayer demonstrated a lack of fundamental fairness, thus evincing a violation of the square corners doctrine); see also Lowe's Home Ctr., Inc. v. City of Millville, 25 N.J. Tax 591, 604-05 (Tax 2010) (finding that the municipality failed to turn square corners because it had prior opportunities to determine the assessor's error but continuously failed to do so).
[Id. at 427.]
Surf contends that North Wildwood had the obligation to disclose the ongoing conversations of the master plan steering committee to the trial judge because of their implication for the highest and best use analysis of this property. In opposing Surf's post-judgment motion, North Wildwood submitted documents to the judge evidencing its compliance with the notice provisions in the applicable statutes. North Wildwood published the required notices in the newspaper and then went beyond its obligations and published notices on the municipal website and bulletin board. As required, public hearings were held before any revisions were made to the master plan. Surf's counsel acknowledged to the judge that there were public notices of public meetings and, therefore, it was public knowledge that the master plan was being reconsidered.
The trial judge found that the parties were aware several months in advance of trial that the experts disagreed as to the highest and best use of the property and therefore knew that would be the central issue of the trial. The valuation of the property would hinge on the judge's determination of which use was correct. Surf was aware of North Wildwood's contention that the highest and best use was redevelopment. The judge noted that Surf and its expert had the opportunity to investigate whether the master plan was being reconsidered and what the ramifications of that might be on its property. Addressing the argument that if the court had been aware of the master plan re-examination information, the decision and outcome would have been different, the judge stated:
It was still legal on October 1, 2008 and on October 1, 2009 to re-develop this property into residential units. The idea that that might change was a prospect. It's . . . always a prospect. The zoning could always change. And then maybe there was underway a plan to change it. But there was still time in the Court's mind for the approvals to be in place.
The master plan was not changed until 2012, December of 2012, more than four years after the first valuation date and more than three years after the second valuation date. There was still opportunity for a purchaser to secure the approvals necessary to redevelop the property and to then hold that as an investment until the market heated up again, which is what really was the basis of the Court's conclusion, that the market had been soft but that it was still a market at the right price point and that there would, again, return the market for these sorts of residential units in North Wildwood and that the prospect of a change in the plan would not have affected the highest and best use of those two valuation dates.
So even if introduced it would not have changed the Court's opinion, and therefore, was not a miscarriage of justice.
In addressing the square corners doctrine, the judge stated:
Here, the municipality did not withhold information that is not otherwise . . .
known [to the public]. The revaluation of the master plan's required by law. Any counsel could see that. It was familiar with zoning and taxation and property valuation. The master plan reconsideration was undertaken in a public way through public notice and public officials. It's not a document hidden in the files . . . of the municipality. That was not revealed during discovery. It is a commonly known and available premise that the master plan is to be reconsidered and the reconsideration here was done in a public way. There's nothing that the municipality did that precluded or in any way misguided the taxpayer from determining that the master plan might be reconsidered in the future.
And I find there was no undue litigational advantage on the part of the municipality here. It did not withhold information that was not otherwise . . . known [to the public], and as the Court has already indicated wouldn't have changed the Court's opinion anyway.
We agree. There were no misrepresentations or deceitful behavior on the part of North Wildwood. The re-examination of a city's master plan is required by law. The required public notices were filed and public hearings were held.
We find likewise that the judge's decision following trial as to the highest and best use of this property as of the dates of valuation was supported by substantial evidence. The judge found that Surf had produced sufficient evidence to overcome the municipality's presumption of validity. He then had to establish value by determining the highest and best use of the property. Because North Wildwood proffered a use different from Lot 11's current use, it was the municipality's burden to prove its proposition by a fair preponderance of the evidence. Penns Grove Gardens, Ltd. v. Borough of Penns Grove, 18 N.J. Tax 253, 263 (Tax 1999); Ford Motor Co. v. Edison Twp., 10 N.J. Tax, 153, 167 (Tax 1988), aff'd, 12 N.J. Tax 244 (App. Div. 1990), aff'd, 127 N.J. 290 (1992). We find the judge applied the appropriate criteria in considering North Wildwood's expert's analysis, after which he determined that opinion to be the more credible one offered during trial. We also find the judge's reasons for adopting North Wildwood's highest and best use analysis while rejecting that presented by Surf are neither plainly arbitrary nor lacking evidentiary support. See G&S Co. v. Borough of Eatontown, 6 N.J. Tax 218, 220 (App. Div. 1982).
Finally, we briefly address Surf's argument regarding Lot 15. Because the assessment of the parcel did not exceed $750,000 at the time of filing, it could only be joined with Lot 11 in a single complaint if both parcels were in "common ownership." Despite Geers' interest and stock in Surf, the property owners for each property were deemed separate and distinct entities by the judge. Therefore, the two parcels were not held in common ownership and the judge properly found that he lacked jurisdiction over the appeal on the assessment on Lot 15.
We affirm on this issue of first impression for the thoughtful reasons expressed by the judge in his written decision. "[T]he best approach to the meaning of a tax statute is to give to the words used by the Legislature 'their generally accepted meaning, unless another or different meaning is expressly indicated.'" Pub. Serv. Elec. & Gas Co. v. Twp. of Woodbridge, 73 N.J. 474, 478 (1977) (quoting N.J. Power & Light Co. v. Twp. of Denville, 80 N.J. Super. 435, 440 (App. Div. 1963)). In sum, the plain meaning construction of the statute as adopted by the judge is consistent with sound statutory interpretation and should be affirmed.
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION