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Betty Simon, Trustee, LLC v. Chicago Title Insurance Company

363 N.J. Super. 582, 833 A.2d 1110 (App. Div. 2003)

TAXATION; TAX SALES; REFUNDS—Where a tax assessor mistakenly places a formerly tax exempt property on the taxable rolls without telling the property owner and without the property owner ever knowing, and then sells the property at a tax certificate sale because the taxes were unpaid, the sale is void and the municipality is required to refund the purchase price even though the original property owner timely failed to appeal the mistaken determination.

A parcel of land was apparently acquired by the State of New Jersey in 1969 from two individuals. Thereafter, it was carried on the municipality’s tax exempt list. In 1994, the municipality’s tax assessor received a letter from the New Jersey Attorney General’s office stating that two particular parcels “were not conveyed to the State of New Jersey from Citibank. As our investigation indicated, there was a one-half interest in [others].” Although it appeared that this was in response to an inquiry from the tax assessor, the record did not show any prior correspondence from the assessor. The Court, after carefully reading the letter, concluded that it did “not” say that the State did not own the property or that the “others” owned it. In fact, it was undisputed that the State had “indeed continued to own the property throughout the years in question.” Nonetheless, the assessor apparently interpreted the letter to indicate that the true owner of the property was the “others” named in the letter and the tax rolls were changed to name those persons at an “unknown address.” According to the Appellate Division, “[t]his was a mistake, predictably, the taxes were not paid.”

The municipality then sold the tax title lien and the buyer, after paying the taxes for more than two years, initiated a foreclosure action. She obtained a judgment by default. When she “learned that her title was no good because of the State’s ongoing ownership of the property [she] initiated [an] action against the title insurer” who settled with her and continued the action. The lower court found “that the taxes assessed against the property were erroneously assessed due to the assessor’s mistake” and voided the sale of the tax title lien and ordered payment of a refund. On appeal, the municipality argued that the reimbursement claim was time barred because a taxpayer “‘feeling aggrieved by the assessed valuation of the taxpayer’s property’ must appeal the assessment by April 1 of the tax year.” In essence, it contended that the State should have contested classification of the property as taxable rather than exempt. Prior case law made clear that State agencies are taxpayers and must make such claims by April 1 of each year. The reasoning of the case law was the thought that “the State and its agencies will not ‘often be called upon to pay tax bills, provided they file their exemptions and appeals in a timely fashion.’” Also, in the case that established that rule, the municipality’s tax collector had attempted to collect taxes from a State agency. Here, the situation was “quite different.” The State had filed the required statement of exemption. The property’s tax exempt status was perfected for many years before the assessor’s mistake. The State was never given notice of a change in status of the property. Further, after the court decision that held that State agencies were obligated to file tax appeals by April 1, the law was amended to require every assessor to give notice, prior to February 1, “of the current assessment and preceding year’s taxes.” A corresponding amendment extended the date for filing appeals to the later of April 1 “or 45 days from the date the bulk mailing of notification of assessment is completed and in the taxing district.” Here, “the State was out of the loop. It is was not ‘called upon to pay tax bills.’ It received none. Nor did it receive notice of a change in assessment status.” Therefore, unless the State scoured the tax records of every municipality to look for such mistakes, it would not know to file an appeal. As a result, the Appellate Division held that there was “no basis to impose such an obligation on the State or other public agencies to protect against assessors’ mistakes.” For this reason, the Appellate Division agreed that the tax title lien was void at its inception. If an assessment is void, “the tax sale held upon such an assessment is equally void.” A New Jersey statute provides that when a tax sale is set aside, the municipality is required to refund the purchase price, with lawful interest. Even though it was held that this was “an honest mistake made in the good faith exercise of the assessor’s duties,” the municipality was still not entitled to “receive a windfall for taxes to which it was never entitled.”


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