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Crusader Servicing Corporation v. Godwin Avenue Urban Renewal Limited Partnership

A-0288-08T1 (N.J. Super. App. Div. 2009) (Unpublished)

TAXATION; PILOT AGREEMENT — Where a municipality, for years, leads an owner to believe that the owner will benefit from a PILOT agreement, it cannot then sell tax certificates and if it does, there can be compelling justification for a court to void the tax sales certificates.

Property was redeveloped for the purpose of constructing affordable housing. The owner applied for a tax abatement. The municipality, by resolution, approved a financing agreement for a thirty-year tax abatement under a payment in lieu of taxes (PILOT) program. The Agreement was not finalized or executed even though it was a necessary component of a tax abatement application. The tax assessor wrote an internal memorandum to the municipality’s corporation counsel that there was no record of the financial agreement for the tax abatement and that this prevented him from setting up a PILOT payment schedule. There was no response. The assistant corporation counsel subsequently sent a proposed financial agreement to the owner, who made changes to the document and redelivered it to the corporation counsel’s office. The assistant corporation counsel never followed up. In the interim, the tax assessor sent bills to the owner. These taxes went unpaid. Tax sale certificates for real estate taxes and sewer charges issued and sold. The tax certificate purchaser instituted a foreclosure action.

The lower court enjoined the municipality from selling any future tax sale liens on the property. After a trial, it denied the relief requested by the certificate holder. It also ordered: (a) the PILOT and financial agreement, as approved by the municipal resolution become effective as of the date the revised finance agreement was delivered to the corporation counsel’s office by the owner; (b) the tax sale certificates sold by the municipality be voided with the municipality to refund the amounts paid by the certificates purchaser, together with interest at the statutory rate; (c) the owner to pay all PILOT amounts and all interest due on the PILOT through the date of the judgment; and (d) the owner to pay all taxes and sewer charges due to the date of the judgment, including interest at the statutory rate and penalties. The lower court estopped the municipality from arguing that the PILOT was ineffective or that the owner’s claims be denied for failing to comply with the statutory requirements because it found there was a meeting of the minds that the approved resolution was for the subject property and everyone acted in accordance with that belief. The court rejected the municipality’s argument that the owner should have filed a tax appeal because the approved PILOT and the applicable statute provided no grounds for appeal.

The lower court found the municipality’s actions to be unconscionable because the municipality led the owner on “for years,” and then inappropriately sold the tax certificates “for immediate budget relief.” Despite the fact that the owner did not fully comply with the statutory requirements, the court determined that it had received sufficient proofs to show that the owner was nevertheless entitled to a tax exemption and that there was a “compelling justification” for the court to void the tax sale certificates. The municipality appealed. The tax sale certificate holder cross-appealed, arguing that the statutory interest rate recited in the Court’s order referenced the various interest rates contained in the applicable tax sale law and did not require the municipality to refund the invalid portion of the tax sale certificates at that rate.

The Appellate Division affirmed the appeal, but remanded on the cross-appeal for the entry of a judgment identifying the pertinent “lawful interest rate” for both the invalid and valid assessment periods. As to the appeal, it believed the lower court reached an equitable result finding that the old legal maxim: “equity considers that as done, which ought to be done,” applied here. In determining the meaning of “statutory rate,” the Court noted there were several rates called for by the tax sale law depending on different scenarios, including a rate for: (a) tax sale certificate redemptions; (b) voided tax sale certificates, when the assessment itself is otherwise valid; and (c) voided tax sale certificates, when the assessment is invalid. Here there were valid and invalid tax assessments for different periods. Those assessments imposed prior to the PILOT’s effective date were valid, while those assessments imposed after the PILOT effective date were invalid. Therefore, the Court remanded these issues to the lower court for a finding as to the amount due for the invalid and valid assessment periods consistent with its opinion

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