Opinion
Docket No. 004082-2011
07-25-2013
Re: WPH Mount Laurel, LLC v. Township of Mount Laurel
Paul Tannenbaum, Esq. Zipp & Tannenbaum, LLC Michael L. Mouber, Esq. Timothy M. Prime, LLC
NOT FOR PUBLICATION WITHOUT APPROVAL OF
THE TAX COURT COMMITTEE ON OPINIONS
Patrick DeAlmeida
Presiding Judge
Paul Tannenbaum, Esq.
Zipp & Tannenbaum, LLC
Michael L. Mouber, Esq.
Timothy M. Prime, LLC
Dear Counsel:
This letter constitutes the court's opinion on defendant's motion to quash a notice of deposition and request for the production of documents served by plaintiff seeking discovery to assist in opposing defendant's pending motion to dismiss the Complaint because of plaintiff's failure to timely respond to the assessor's 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 and denied in part.
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. The findings of fact are based on the certifications and exhibits submitted by the parties on the motion.
Plaintiff WPH Mount Laurel, LLC is the owner of income-producing real property located in defendant Mount Laurel Township. The property is designated in the records of the municipality as Block 1202, Lot 4 and is commonly known as 915 Route 73.
On October 13, 2010, 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, stated that it was intended to assist the assessor in determining the assessment to place on the property for tax year 2011. The request indicated that the taxpayer's response must be submitted to the assessor on or before November 30, 2010, forty-five days from October 16, 2010. The assessor apparently calculated this date by adding to the 45-day response period prescribed by N.J.S.A. 54:4-34 three additional days to account for a delay in the delivery of the request by mail.
The assessor's request for information was delivered to plaintiff on October 15, 2010.
The taxpayer's response was received by the assessor on December 13, 2010, after expiration of the statutory 45-day response period. The assessor thereafter set an assessment of $12,155,200 on the property for tax year 2011.
On March 18, 2011, plaintiff filed a Complaint in this court challenging the tax year 2011 assessment.
On August 22, 2011, the municipality moved to dismiss the Complaint pursuant to Chapter 91 based on plaintiff's untimely response to the tax assessor's request.
The return date of the motion was adjourned numerous times to facilitate settlement discussions for this and other tax appeals filed by plaintiff. To date, those discussions have proven unsuccessful.
On or about November 11, 2011, the taxpayer served on the municipality a notice to take the deposition of an officer, agent and/or employee of the municipality and a demand for the production of documents. These requests seek testimony and documents concerning the following subjects:
1. The Township Assessor's office's general policies and procedures concerning the use of information obtained from taxpayers' responses to requests for income and expense information forwarded to them by the Township's Assessor's office pursuant to N.J.S.A. 54:4-34 ("Chapter 91").The taxpayer argues that the information sought is relevant to a potential defense to the municipality's motion to dismiss. According to the taxpayer, a Chapter 91 request for income and expense information is "legitimate," and can support a motion to dismiss a Complaint, only if the assessor actually reviews the Chapter 91 responses as part of the assessing function. If, the taxpayer contends, the assessor sends Chapter 91 requests to property owners with no intention of reviewing any responses received, the requests are a "pretext" to block the appeals of taxpayers who fail to respond in a timely fashion and dismissal of a taxpayer's Complaint would be unwarranted.
2. The Township Assessor's office's use of information provided by property owners/taxpayers in responses to Chapter 91 requests forwarded by the Assessor's Office in 2010.
3. The reasons for any changes in real property tax assessments in the Township between tax years 2010 and 2011.
On March 30, 2012, the municipality moved for a protective order quashing both the deposition notice and demand for documents.
The court heard argument from counsel on the motion for a protective order. Because the taxpayer has yet to respond to the municipality's motion to dismiss under Chapter 91, that motion has been held in abeyance until the present motion is resolved.
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.
"The purpose of Chapter 91 is to assist the municipal tax assessors, who are charged with the responsibility for property valuations, by affording them access to fiscal information that can aid in the valuation of property." Lucent Techs, Inc. v. Township of Berkeley Heights, 405 N.J. Super. 257, 263 (App. Div. 2009), rev'd in part, aff'd in part, 201 N.J. 237 (2010). "The correct and timely availability of this information to the tax assessor 'avoid[s] unnecessary expense, time and effort in litigation.'" Ibid. (quoting Ocean Pines, Ltd v. Borough of Point Pleasant, 112 N.J. 1, 7 (1988)(internal quotations omitted)).
A taxpayer's failure to submit a timely response to a valid request for information results in a significant sanction. In Ocean Pines, supra, our Supreme Court held that a taxpayer who fails to comply with N.J.S.A. 54:4-34 may seek only 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. This limited inquiry contrasts sharply with the scope of review available in a full appeal of an assessment.
In light of the severity of the appeal-preclusion provision of N.J.S.A. 54:4-34, this court has consistently held assessors to a standard of strict compliance with the statute. The "severity of the penalty for noncompliance provided by N.J.S.A. 54:4-34, namely, the taxpayer's loss of his right to appeal the assessment, requires a strict construction of the statute." Great Adventure, Inc. v. Township of Jackson, 10 N.J. Tax 230, 233 (App. Div. 1988). "The defendant municipality cannot seek to close the door of tax appeals until it has given property owners fair notice of their obligations in the Chapter 91 request . . . ." Cassini v. City of Orange, 16 N.J. Tax 438, 450 (Tax 1997). "The government must speak in clear and unequivocal language where the consequence of non-compliance is the loss of the right to appeal assessments." Id. at 453. "The touchstone of due process is fair notice and an opportunity to be heard. The door to tax appeals cannot be closed unless the municipality has given the property owner fair notice of the Chapter 91 obligations." Towne Oaks v. Borough of South Bound Brook, 326 N.J. Super. 99, 102 (App. Div. 1999).
The statute places no affirmative obligation on the assessor to send Chapter 91 information requests. Nor, where such information requests are sent, does the statute require the assessor to use the responses in the assessing function in any specified way. Indeed, in SKG Realty Corp. v. Township of Wall, 8 N.J. Tax 209 (App. Div. 1985), the court rejected a taxpayer's argument that it should not have its appeal precluded under Chapter 91 where the owner failed to report that it received regular rental payments that were calculated to meet inter-subsidiary accounting needs rather than economic rates. The court explained that
[w]here 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 taxpayer to decide whether to consider the information furnished.It is plainly within the assessor's discretion to determine how information provided in response to a Chapter 91 inquiry is to be used in the assessing function.
[Ibid.]
The question raised by plaintiff, however, is whether an assessor may issue Chapter 91 information requests with no intention of reviewing the information provided in response to those requests. According to plaintiff, where a taxpayer's untimely response to a Chapter 91 information request interferes with the assessing process preclusion of the taxpayer's appeal is warranted as a sanction. However, plaintiff contends, if the taxpayer's response could not have assisted in the assessing process - i.e. if the tax assessor's practice is not to review any of the Chapter 91 responses - then dismissal of the taxpayer's appeal would not be justified
In support of its argument, the taxpayer relies on the holding in John Hancock Mut. Life Ins. Co. v. Township of Wayne, 13 N.J. Tax 417, 422 (Tax 1993). In that case the court held that a Chapter 91 information request sent to a property owner too late to be used in the assessing process could not be the basis for dismissal of the property owner's Complaint. The court explained that "[t]o advance the purpose of N.J.S.A. 54:4-34, the assessor's request must be timely, so that upon its receipt, the assessor can utilize the information by January 10" in setting an assessment for the upcoming tax year. This holding reflects the fact that the courts recognize that a Chapter 91 information request may be used as a predicate for the harsh sanction of dismissal only if the request was issued to provide financial information to the assessor for use in the assessing process.
The taxpayer also relies in support of its argument on the overall obligation of government officials to turn square corners when dealing with taxpayers. The Supreme Court examined the square corners doctrine in the local property tax context in F.M.C. Stores Co. v. Borough of Morris Plains, 100 N.J. 418, 426-27 (1985). The Court's directive was clear:
We have in a variety of contexts insisted that governmental officials act solely in the public interest. In dealing with the public, government must "turn square corners." Gruber v. Mayor and Twsp. Com. of Raritan Tp., 73 N.J. Super. 120 (App. Div.), aff'd., 39 N.J. 1 (1962). This applies, for example, in government contracts. See Keyes Martin v. Director, Div. of Purchase and Property, 99 N.J. 244 (1985). Also, in the condemnation field, government has an overriding obligation to deal forthrightly and fairly with property owners. See Rockaway v. Donofrio, 186 N.J. Super. 344 (App. Div. 1982); State v. Siris, 191 N.J. Super. 261 (1983). 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.The currency of the square corners doctrine in the area of taxation was highlighted by the Court. The "statutory provisions governing substantive standards and procedures for taxation, including the administrative review process, are premised on the concept that government will act scrupulously, correctly, efficiently, and honestly. It is to be assumed that the municipality will exercise its governmental responsibilities in the field of taxation conscientiously, in good faith and without ulterior motives." Id. at 427. See also Lowe's Home Centers v. City of Millville, 25 N.J. Tax 591 (Tax 2010); Gastime, Inc. v. Director, Div. of Taxation, 20 N.J. Tax 158 (Tax 2002).
[Id. at 426-427.]
This court is reluctant to allow a taxpayer to delve into the assessor's practices and broad discretion with respect to the use in the assessing process of financial information provided in response to Chapter 91 inquiries. It is clear that the Legislature intended to vest in the assessor the authority to review responses to Chapter 91 inquiries and decide, based on the assessor's opinion of the utility of the responses, whether, and to what extent, those responses will be used in the assessing process. It is likely that even a minimal review of the Chapter 91 responses by the assessor or assessor's staff will suffice to establish that a taxpayer's failure to respond or late response warrants preclusion of an appeal.
Indeed, a certification from an assessor in support of a motion to dismiss a Complaint pursuant to Chapter 91 detailing the assessor's practices with respect to the review and use of Chapter 91 responses might well defeat an attempt by a taxpayer to seek discovery of the type at issue here. No such certification was submitted in this case. This is not to suggest in any way that the Mount Laurel assessor did not use the Chapter 91 responses she received in 2010 in the assessment process for tax year 2011. Plaintiff has not even suggested an improper motive on the part of the assessor in this case. However, without having an opportunity to explore the issue through discovery plaintiff would have no way of knowing the practices of the assessor's office for the tax year in question.
Thus, despite the broad discretion vested in the assessor under the statute, it is not possible for the court to conclude that plaintiff could uncover no evidence through its proposed discovery that would support a defense to defendant's motion. As a general rule, there shall be a substantial liberality in the granting of discovery in New Jersey courts. Shanley & Fisher, P.C. v. Sisselman, 215 N.J. Super. 200, 215-216 (App. Div. 1987). A party may seek production of all information "relevant to the subject matter involved in the pending action" or which "appears reasonably calculated to lead to the discovery of admissible evidence," R. 4:10-2(a); In re: Liquidation of Integrity Ins. Co., 165 N.J. 75, 82 (2000). This court has the discretion to determine the scope and manner of permissible discovery between the parties. Payton v. New Jersey Turnpike Auth., 148 N.J. 524, 559 (1997). Plaintiff is entitled to pursue its potential defense to the municipality's motion through discovery.
The first two areas of inquiry identified by the taxpayer: (1) the assessor's office's general policies and procedures concerning the use of information obtained in Chapter 91 responses; and (2) the assessor's office's use of information in Chapter 91 responses during 2010 fall within the scope of discovery with respect to plaintiff's potential defense to the municipality's motion to dismiss. The taxpayer's third area of inquiry - the "reasons for any changes in real property tax assessments in the Township between tax years 2010 and 2011"— is beyond the scope of permissible discovery for purposes of the taxpayer's response to the municipality's Chapter 91 motion. The proposed area of inquiry is unrelated to any possible defense identified by plaintiff in response to Mount Laurel's motion.
The court does not view plaintiff's discovery requests as seeking disclosure of the contents of any Chapter 91 response by any taxpayer. Plaintiff has identified no need at this juncture for disclosure of the contents of Chapter 91 responses received by the municipality's tax assessor in 2010. It is the assessor's use of Chapter 91 responses in the assessment process for tax year 2011 that is relevant to plaintiff's potential defense to the municipality's Chapter 91 motion.
Defendant's motion to quash plaintiff's notice of deposition and request for the production of documents is therefore granted with respect to the third area of inquiry identified in those documents by the taxpayer. Defendant's motion is denied in all other respects. Plaintiff shall limit its deposition questions and request for the production of documents to the first two areas of inquiry identified by plaintiff in those documents.
Very truly yours,
___________
Patrick DeAlmeida, P.J.T.C.