Opinion ID: 1468027
Heading Depth: 1
Heading Rank: 1

Heading: the congoleum-nairn inc. to kearnyland inc. sale of january 15, 1959.

Text: Prior to December 15, 1958, Congoleum-Nairn Inc. owned the following four separately assessed land units in Kearny: TABLE A. Land Improvement Unit # Block Lot Area Assessment Assessment Total 1 23 1 $65,000. $251,500. $316,500. 2 23 2 & 3 35,000. 100,000. 135,000. 1 21 7 to 9 6.827 74,900. 96,200. 171,100. acres 2 21 7A, 8A, .473 5,450. 5,450. 9A acres On December 15, 1958 Congoleum applied to the town for the subdivision of units designated 1 and 2 of Block 21. The application was approved by the Planning Board on December 18, 1958. The subdivision partitioned the two units in this fashion: TABLE B. Land Improvement Unit # Block Lot Area Assessment Assessment Total 1 21 9C & 1.857 $20,450. $ $20,450. 9AC acres 2 21 9B & 5.443 59,900. 96,200. 156,100. 9AB acres 7 to 9B It should be noted that the total acreage of these units, 7.30 acres, is the same before and after the subdivision; the same is true of total assessment of the lots, $176,550. When Units 1 and 2 of Block 21 were subdivided, they were reassessed separately but informally in December 1958, lots 9C and 9AC being valued for the purpose at $20,450. According to the Assistant Assessor, he made the reassessment and noted the change in his work book or field book. Through inadvertence or mistake (as the Appellate Division put it) he failed to note the revision on the Assessor's list, N.J.S.A. 54:4-24, either in December or down to January 10, 1959, when the completed list had to be filed with the County Tax Board. N.J.S.A. 54:4-35. On January 15, 1959, Congoleum-Nairn sold Units 1 and 2 and the new subdivided Unit 1 to Kearnyland Inc. for $800,000. The total assessment of all the units conveyed amounted to $471,950. The transaction may be shown thus: TABLE C. Land Improvement Unit # Block Lot Assessment Assessment Total 1 23 1 $65,000. $251,500. $316,500. 2 23 2 & 3 35,000. 100,000. 135,000. 1 21 9C & 9AC 20,450. 20,450. _________ Total Assessed Value ........... $471,950. It will be noted that the assessments of Units 1 and 2 of Block 23 in this Table remained as originally assessed. They were not involved in any way in the subdivision. But, as the Appellate Division observed, on account of the mistake in not recording the subdivision and the change in the assessments of Units 1 and 2 of Block 21 on the Assessor's list prior to filing with the County Tax Board, when the deed to Kearnyland was recorded and the sale abstracted for the Director on the form supplied by him, he did not become aware of the subdivision of those units which resulted in Lots 9C and 9AC and the $20,450 new assessment thereon. His inspection of the Assessor's list revealed Units 1 and 2 of Block 21 as they appear on Table A above as to acreage and assessment. Units 1 and 2 of Block 23, of course, appeared thereon in accordance with their unaltered and unaffected assessment. Despite the fact that the latter two unchanged units represented more than 95% of the total assessed value ($451,500 out of $471,950), the Director considered inclusion of revised Unit 1 of Block 21 in the transaction as giving it the character of a category 6 split-off and therefore not a usable sale in the computation of the average ratio of assessed to true value of real property in Kearny. Assuming that this sale technically constitutes a split-off, should it have been included as a usable sale? The question must be resolved in the light of the qualification created by the Director himself, i.e., that such split-offs should generally be excluded but may be used if after full investigation the transaction clearly appears to be a sale between a willing buyer and willing seller and meets all other requisites of a usable sale. There appears to be no doubt that the sale by Congoleum to Kearnyland was bona fide. No one questions it. So far as the parties are concerned, it was an arms length transaction and the consideration of $800,000 (against an assessment total of $471,950) as a fair market price, was not challenged. There is no doubt that the lots of Block 21 had been officially subdivided before the sale. Moreover, the evidence supports the conclusion that the assessments had been informally revised and that on the new lots 9C and 9AC set at $20,450. If this latter assessment had been formally noted on the Assessor's list as filed with the County Tax Board, everyone agrees that the sale could not be classed as a split-off and would have to be used in ascertaining the Kearny ratio. The Director's representative, in his testimony before the Division of Tax Appeals, frankly said that in his investigation report of the matter he commented that if the Town had kept its tax map in shape and had the assessors revised their assessments, they could have claimed the breakdown in 1959 for use in our study, but they didn't make any change. He conceded also that if the assessors had actually carried the subdivision into the 1959 assessment list there would have been no problem here at all. It cannot be denied that the face of the record, i.e., the official Assessor's list on file with the County Tax Board, when examined by the Director's agent, showed the old assessment of Units 1 and 2 of Block 21 and did not reflect the subdivision and new valuations for tax purposes. The Assistant-Assessor's explanation was: I might say that we are one of the very few taxing districts left that write the books by hand, and, as you know, over that period of time you are up to your neck in work and it was just an error that didn't get on the property record cards and didn't get into the 1959 book. Here it should be recalled that the subdivision approval by the Planning Board took place on December 18, 1958, and that the statute required the completed 1959 Assessor's list to be filed with the County Tax Board by January 10, 1960, just five days before the sale in question. Thus, the official record presented the appearance and not what the owner and the town intended to be the true fact of the assessment situation. Obviously, the Director was justified in accepting the record which prima facie represented both appearance and fact. But on learning of the error, did not a fair exercise of discretion require that the burden imposed thereby on the taxpayers of Kearny be rectified? We think so. As has been said, the Director's table, based as it is on sales during a given two-year period, provides for purposes of state school aid and county tax burden distribution a practical approximation of both the average ratio of assessment to true value and the aggregate true value of all real property ratables in a particular municipality. But the very nature of the formula used in reaching the ratio would seem to call for adjustment or correction when specific facts relating to a sale or sales are revealed to the Director or to the County Tax Board, which facts, when given proper effect, demonstrate that the share of county tax burden imposed on the particular municipality is dramatically or substantially excessive or that the allotment of state school aid to it is dramatically or substantially below its just share. In fact, the record before us shows that the Director's ratios are not regarded as immutable. The ratios of Jersey City, Bayonne and Union City, as shown in the table in question, were changed either by the Division of Tax Appeals or by the County Tax Board. The Jersey City change resulted from the inclusion of a single large sale which the Director had not used in his calculations. These revisions must be considered as normal incidents of a difficult and large undertaking which has not yet achieved perfection. The Director's task is a heavy one. In a limited time he must examine and evaluate expeditiously, and in the light of his 27 nonusable sales categories, many thousands of property transactions. His operation represents a salutary endeavor in an otherwise blurred assessment procedure. But it does have some inherent limitations which, in the interest of fairness and justice to local taxpayers in occasional specific factual situations, call for adjustment of his formulaic results. Proper exercise of discretion requires just treatment of such cases. This court has recognized that the system has weaknesses along with its utilitarian value, and that the duty of the interested agencies is to minimize so far as possible any unfair results: Imperfect as equalization of aggregates of real estate assessments is, the county and state agencies have the duty to administer the equalization of aggregates process as best to secure the fair distribution of the tax burden common to municipalities;   . City of Passaic v. Passaic County Board of Taxation, 18 N.J., at p. 381. And in discussing the County Tax Board's duty at the equalization hearing, the opinion continued: In the discharge of its legislative or quasi -legislative function, it is its duty to seek all enlightenment that will help it so far as possible to avoid errors in its ultimate determination of assessment ratios. [Citation omitted.] It therefore receives and should receive any proofs reasonably calculated to assist it in reaching a correct determination of the ratios and the board should not reject such proofs or refuse appropriate evidential weight to them out of an over-sensitive regard for their admissibility under rules of evidence applicable in judicial proceedings. Id., 18 N.J., at p. 389. The statutes and the decisions discussing and interpreting them show plainly that the entire equalization process does not and should not lend itself to rigid technicality and formalism. The legislative and judicial purpose is to secure as far as possible the equal distribution of school aid and of the county tax load among the municipalities. A spirit of fairness and equality must be regarded as an essential ingredient of all applicable administrative rules, not excluding those defining and governing split-offs. Here the Congoleum-Kearnyland sale was an honest one, the subdivision was honest and accomplished before the sale, the old assessments prior to the partition were continued on the record by mistake, and the new informal assessment was not substituted by mistake. In our judgment, the exercise of discretion which failed to give more weight to the equity than to the technical deficiency must be regarded as mistaken. Accordingly, the sale should have been treated as a usable one and permitted to influence the determination of Kearny's ratio.