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McMahon v. City of Newark

A-1703-05T5 (N.J. Super. App. Div. 2007) (Unpublished)

TAXATION; APPEALS — The law governing urban renewal does not extend the deadline for filing tax appeals and a settlement agreement containing no terms exempting a party from compliance with the deadline for a tax appeal cannot be interpreted to allow an appeal within the six year statute of limitations as contrasted with a shorter time period allotted to tax appeals because overriding local property taxes will go against the fundamental legal principle that contract provisions inconsistent with statutory law or public policy cannot be enforced.

A property owner was organized as an urban renewal association. It built an office building in an urban area and in accordance with New Jersey law governing urban renewal. In connection with that project, it entered into an agreement with the municipality. According to the agreement, the property owner was to be exempt, for twenty years, from paying property taxes on any improvements. The agreement contained a provision terminating the tax exemption if the property was sold without the municipality’s written consent. Prior to the expiration of the twenty year period, the owner filed for bankruptcy protection and, during the proceedings, it was reorganized as a trust which then took title to the property. This was at the insistence of its lender. One year later, the municipality sent the trust a bill for added assessments. The municipality considered a transfer without its consent. The bill for additional taxes notified the trust that it could file an appeal to the county tax board by December 1 of the same year. The bankruptcy receiver got the tax bills but did not appeal by the deadline specified on the bill.

More than one year following the deadline stated on the bill, the receiver brought an action against the municipality in an adjacent county and argued that the municipality violated its agreement with the urban renewal association when it cancelled the tax exemption for the trust. The receiver sought: (a) a declaration that the municipality acted wrongfully in cancelling the tax exemption; (b) reinstatement of the tax exemption; (c) cessation of tax interest accrued; and (d) new tax bills indicating payments made in the place of the bill for the added taxes. The municipality requested a dismissal of the claims on the grounds that the receiver did not appeal the updated tax bill prior to the statutory deadline. The lower court chose not to rule on either party’s request and transferred the matter to the Tax Court.

While the proceedings were pending, the parties reached an agreement. It established an amount owed by the association to the municipality for past and present property taxes due. Following payment by the association of the agreed upon amount, the municipality issued another additional tax bill for that current year. The taxes were paid under protest by the receiver who never filed a motion to have the agreement enforced. Following the municipality’s motion for dismissal of the remaining claims and failed negotiations by the parties, the matter remained dormant for six years. At the end of the six year period, the municipality, at the direction of the lower court, moved for dismissal on the basis that the receiver had not filed a timely challenge to the tax increase. The receiver argued that his claims were contractual and were not governed by tax appeal laws. The Tax Court agreed with the municipality and found that the receiver’s claims were time barred.

In the appeal by the receiver, the Court rejected the receiver’s claim that the municipality should have been equitably estopped from seeking the additional taxes or from seeking dismissal of the matter due to the receiver’s failure to meet the tax appeal deadline. The Court pointed out that equitable estoppel is applied when there is a misrepresentation or concealment of material facts, but found that there were no such actions on the part of the municipality. The Court additionally pointed out that absent unusual circumstances, the estoppel doctrine could not be applied in tax collection proceedings. Here, it found no such circumstances.

The receiver’s argument that his claims were based on a breach of contract, and not subject to statutory deadlines, was rejected. The Court pointed out that statutory deadlines cannot be circumvented by alternative causes of action or legal theories, or by filing for declaratory judgment, or for taxpayer claims that an assessment is ultra vires, or beyond the power of the assessor. Taxpayers must still adhere to statutory deadlines. The Court also rejected the receiver’s claim that the statutory deadline for appealing the assessments was preempted by then existing law governing urban renewal, the agreement by the parties, and the municipality’s resolution approving the agreement. The Court found that there was no such explicit or implicit reference in the law governing urban renewal and that the agreement contained no terms that exempted the receiver from compliance with the deadline for appeal. It noted that the agreement allowed either party to bring an action before the lower court in the event of a breach, but that any such provision in the agreement was to be applied to matters other than the dispute of tax assessments because those are governed by statue. The Court additionally noted that to interpret the agreement between the parties as overriding local property tax law would go against the fundamental legal principle that contract provisions inconsistent with statutory law or public policy cannot be enforced.

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