Opinion
Appellate Division Docket No.: A-4083-12 T1 Docket No.: 002581-2009 Docket No.: 001662-2010 Docket No.: 004258-2011 Docket No.: 001071-2012
05-15-2013
Re: Faber Brothers Inc. of New Jersey v. Borough of Paramus
Hon. , J.T.C.
JUDGE
Appellate Division Clerk's Office - via e-mail and regular mail
Joseph H. Orlando, Clerk
Hughes Justice Complex
25 Market Street
P.O. Box 006
Trenton, New Jersey 08625-006
Dear Mr. Orlando:
Pursuant to R. 2:5-1(b), please accept this letter as a supplement to the court's opinion issued on the record with respect to plaintiff's Motion to Enforce Settlement Agreement, Compel Payment of Refund and Interest and Enter Judgment Against Defendant. For the reasons explained more fully below, plaintiff's motion was granted on March 22, 2013.
I. Findings of Fact and Procedural History
This letter opinion supplements the court's findings of fact and conclusions of law on plaintiff's motion. R. 1:6-2(f). The findings of fact are based on the certifications and exhibits submitted by the parties on the motion, as well as the statements made by counsel at oral argument.
Plaintiff Faber Brothers, Inc. ("Faber") is the owner of real property located in defendant Borough of Paramus ("Paramus"). The property is designated in the records of the municipality as Block 3207, Lot 20 and is commonly known as 230 and 240 Route 17. At all times, Faber has paid its real property taxes in accordance with the property's assessed value.
The 2009 original assessment of the property is $86,313,600. The original assessment for tax years 2010, 2011 and 2012 is $70,000,000.
On October 1, 2012, Faber's attorney forwarded to the court a fully executed Stipulation of Settlement pursuant to R. 8:9-5, which was recorded as filed on October 5, 2012. The Stipulation of Settlement requests a reduction in the assessed value of the property to $60,000,000 for tax year 2009, $65,000,000 for tax years 2010 and 2011 and maintains an assessed value of $70,000,000 for tax year 2012. The Stipulation of Settlement states that a monetary refund is due for those years. Paragraph Four of the agreement states the following:
Statutory interest, pursuant to N.J.S.A. 54:3-27.2, having been waived by taxpayer, shall not be paid provided the tax refund is paid by December 31, 2012.
The Stipulation of Settlement was drafted by Faber's attorney and was based upon terms that had been negotiated since November 2011, when agreement regarding the reduction in the assessed values was reached. Specifically, the waiver of statutory interest was the subject of negotiations throughout the first half of 2012. For example, by letter dated April 12, 2012, Paramus proposed the following language be incorporated into the Stipulation of Settlement:
1. Pre-judgment and post-judgment interest are hereby waived as a condition of settlement.
...
4. Notwithstanding any foregoing provision, if payment is not rendered in accordance with the foregoing paragraphs 1, 2 and 3, then Plaintiff shall be entitled to receive statutory interest, but said statutory interest shall be calculated from December 31, 2012 until the date of payment.
By letter dated April 24, 2012, Faber rejected these proposed provisions and countered with a proposed payment date of October 1, 2012. The parties continued to negotiate the terms of the refund payment and on July 16, 2012, Paramus confirmed that it was in agreement with the terms of settlement and directed Faber's attorney to prepare and forward a Stipulation of Settlement. Faber sent a proposed form of Stipulation of Settlement by letter dated July 24, 2012 and a revised Stipulation of Settlement on August 2, 2012. The attorney for Paramus executed the revised Stipulation of Settlement nearly two months later on September 27, 2012.
The court received the fully executed Stipulation of Settlement on October 5, 2012 and it was forwarded to the Tax Court Management Office for entry of Judgments in the normal course of business. No request for an expedited issuance of the entry of Judgments was made to the court or to the Tax Court Management Office by either party.
Both Faber and Paramus were acutely aware that pursuant to their agreement, the waiver of statutory interest was conditioned upon the monetary refund due to Faber being paid by December 31, 2012. In fact, a reminder letter to this effect was transmitted by Faber's counsel to Paramus's counsel on December 4, 2012. Upon his own admission at oral argument, Paramus's counsel ignored this letter and did not respond because he found it to be suspicious in nature.
Judgments were entered on December 7, 2012 and December 14, 2012. The Tax Court Management Office sent copies of the Judgments to Faber's attorney and to the attorney and assessor of Paramus. Paramus received the Judgments no later than December 21, 2012. Although not prohibited from doing so, Paramus did not act on its receipt of the Judgments prior to December 31, 2012 and no monetary refund was paid to Faber by that date.
Correspondence dated December 20, 2012 from Faber's attorney demonstrates that his office was in receipt of the Judgments and that he sent by e-mail and regular mail copies of the Judgments to Paramus's assessor and defense counsel at that time, although he had no obligation to do so.
On February 20, 2013, Faber moved to enforce the Stipulation of Settlement and requested that the court compel payment of the monetary refund and statutory interest and to enter judgment to that effect against Paramus.
Paramus timely opposed this motion, arguing that Faber was seeking to disavow the parties' intent in entering into the settlement agreement at issue and recover public funds to which it has no entitlement. Furthermore, Paramus claims that the executed Stipulation of Settlement "can hardly be viewed as completely encompassing the parties' intent and incorporating all of the terms agreed to by the parties." Although language customarily used by Paramus providing for the waiver of statutory interest if payment is made within sixty days of judgment was not incorporated into the agreement, Paramus claims that it was the parties' intent that Paramus be provided more than sixty days from the entry of Judgment to provide the refund of the overpaid taxes.
Oral argument was heard on March 22, 2013. At the conclusion of argument, the court decided that time was of the essence for the issuance of a decision and consequently the motion was decided in favor of Faber for the reasons set forth on the record and without a written opinion. At Paramus's request, a further hearing was conducted by telephone to determine the amount of statutory interest due.
II. Conclusions of Law
A. Jurisdiction
Although not raised by the parties, the court first determines whether it has jurisdiction to decide Faber's motion.
The Tax Court is a court of limited jurisdiction. McMahon v. City of Newark, 195 N.J. 526, 546 (2008). The Tax Court was created by statute in 1978, in accordance with the Legislature's constitutional authority to establish, alter or abolish by law courts of limited jurisdiction. N.J. Const. art. VI, § 1, ¶ 1; N.J.S.A. 2B:13-1. The language of its enabling statutes constricts the Tax Court's jurisdiction. Prime Accounting Dept. v. Township of Carney's Point, 212 N.J. 493, 505 (2013).
N.J.S.A. 2B:13-2 establishes the Tax Court's jurisdiction as follows:
a. The Tax Court shall have jurisdiction to review actions or regulations with respect to a tax matter of the following:
(1) Any State agency or official;b. The Tax Court shall have jurisdiction over actions cognizable in the Superior Court which raise issues as to which expertise in matters involving taxation is desirable, and which have been transferred to the Tax Court pursuant to the Rules of the Supreme Court.
(2) A county board of taxation;
(3) A county or municipal official.
c. The Tax Court shall have jurisdiction over any other matters as may be provided by statute.
d. The Tax Court jurisdiction shall include any powers that may be necessary to effectuate its decisions, judgments and orders.
The Tax Court may "grant legal and equitable relief so that all matters in controversy between the parties may be completely determined." N.J.S.A. 2B:13-3(a). The Tax Court's Judgments may be appealed as of right to the Appellate Division. N.J.S.A. 2B:13-4.
In McMahon v. City of Newark, supra, the plaintiff filed a declaratory judgment action in the Superior Court, Law Division against Newark, requesting that the court declare the city's cancellation of a tax abatement null and void and for an order to restore the tax abatement. 195 N.J. at 536. The tax abatement in question was created pursuant to a written agreement entered into by the parties, which also contained a provision requiring disputes be heard in the Superior Court or, if it lacked jurisdiction, through arbitration with the American Arbitration Association. Id. at 531. The matter was transferred by the Superior Court to the Tax Court, which granted the city's summary judgment motion based upon the statute of limitations created in the tax statutes. Id. at 536-537. Plaintiff then appealed to the Appellate Division. Id. at 538. When the Appellate Division affirmed, the plaintiff appealed to the Supreme Court, which granted certification. Id. at 538-539.
In reviewing the case, the Supreme Court recognized that the action was not a tax appeal but rather was a contract and estoppel case. Id. at 544. At its core, plaintiff's complaint did not deal with issues "uniquely cognizable within the tax appeal process" but to the more fundamental question of whether the city breached its financial agreement with the plaintiff. Id. at 544-545. The Supreme Court held that the matter was therefore not cognizable within the context of a tax appeal, but constituted a breach of the financial agreement entered into by the parties, requiring resolution in the agreed upon forum of the Superior Court or under the rules of the American Arbitration Association. Ibid.
Although Faber's motion requests that the court enforce the terms of the Stipulation of Settlement, the court views this request equally as the enforcement of the statutory interest provided by N.J.S.A. 54:3-27.2. Factually, this matter originated as a series of tax appeals and the determination of whether statutory interest was due. The court's jurisdiction to resolve issues involving statutory interest is contemplated by both N.J.S.A. 2B:13-2 and N.J.S.A. 2B:13-3(a). The Stipulation of Settlement at issue was filed in accordance with the court rules and was the document upon which the Tax Court and the Tax Court Management Office relied upon in entering Judgments in resolution of Faber's tax appeals.
The Tax Court has jurisdiction over this matter as it is derived from and deals exclusively with issues originating in tax statutes. Having found that this court has jurisdiction, it now proceeds to the merits of Faber's motion.
B. Statutory Interest on Monetary Refunds
Taxpayers are entitled to statutory interest when they are refunded excess taxes paid. N.J.S.A. 54:3-27.2.
2. Except as required in paragraph (2) of subsection a. of section 2 of P.L. 1983, c. 137 (C, 54:4-134), in the event that a taxpayer is successful in an appeal from an assessment on real property, the respective taxing district shall refund any excess taxes paid, together with interest thereon from the date of payment at a rate of 5% per annum, less any amount of taxes, interest, or both, which may be applied against delinquencies pursuant to section 2 of P.L. 1983, c. 137 (c. 54:4-134), within 60 days of the date of final judgment.
[Ibid.]
Taxpayers are entitled to this interest on their tax refund regardless of whether the Judgment resulted from a trial or a settlement. Petrie Retail, Inc. v. Town of Secaucus, 19 N.J. Tax 356, 362-363 (Tax 2001), aff'd, 363 N.J. Super. 74 (App. Div.), certif. denied, 177 N.J. 223 (2003).
New Jersey has a "strong public policy toward settling litigation and enforcing settlements." Petrie Retail, supra, 19 N.J. Tax at 363 (citing Jannarone v. W.T. Co., 65 N.J. Super. 472, 476 (App. Div.), certif. denied, 35 N.J. 61 (1961)). The Tax Court typically views settlements as binding contracts. Petrie Retail, supra, 19 N.J. Tax at 363 (citing Nolan v. Lee Ho, 120 N.J. 465, 472 (1990)).
In Petrie Retail, supra, the settlement agreement contained a provision that waived the statutory interest set forth in N.J.S.A. 54:3-27.2, provided the refund was paid within sixty days of the date of Judgment. 19 N.J. Tax at 359. Although the refund check was printed within the sixty day period after the Judgment was entered, it was not received by the taxpayer until sixty-six days after the Judgment had been entered. Id. at 359-360. In awarding statutory interest to the taxpayer, the court stated that the interest provision within the Stipulation of Settlement was a "significant part of the stipulation of settlement and must be honored as written." Id. at 363. The court found the argument that the language is boilerplate as unconvincing because the taxpayer is "giving up a significant right of interest it would otherwise be entitled to receive under the statute, in the hope that payment will be made in prompt fashion." Ibid.
In a footnote of its decision, the court in Petrie Retail, supra, stated that interest "begins to accrue when the taxpayer initially pays the tax, not at the commencement of the sixty-day period. Thus, where an appeal consists of several years, with interest accruing the entire time, it is not uncommon for the total amount of interest to be a substantial figure." Id. at 360, n.4 (citing New York Life Ins. Co. v. Lyndhurst Township, 280 N.J. Super. 387 (App. Div.), certif. denied, 142 N.J. 457 (1995)).
The Supreme Court in McMahon, supra, emphasized that municipalities would be bound by the contracts they made and specifically stated the following:
It has long been the rule in New Jersey that "court[s] cannot relieve municipalities from hard bargains[.]" It has been emphasized that "[m]unicipal contracts stand on the same footing as contracts between natural persons and courts will not inquire into the reasonableness of the terms of such contracts in the absence of bad faith, fraud or capricious action."
Also, this Court repeatedly has hewed to the maxim that "[c]ourts cannot make contracts for parties. They can only enforce the contracts which the parties themselves have made." In other words, "[w]hen the terms of [a] contract are clear, it is the function of a court to enforce it as written and not to make a better contract for either of the parties [because t]he parties are entitled to make their own contracts." Thus, "[a]s a general rule, courts should enforce contracts as the parties intended." In doing so, the judicial task is clear: the "court must discern and implement the common intention of the parties [and its] role is to consider what is written in the context of the circumstances at the time of drafting and to apply a rational meaning in keeping with the expressed general purpose."
[195 N.J. at 545-546 (citations omitted).]
Paramus seeks to avoid payment of statutory interest on the agreed upon monetary refund by arguing that the Stipulation of Settlement meant something different from what it states and that it contemplated matters outside the parties' control.
This court finds that Paramus's argument is without merit. The agreement between the parties is clear and precise: Faber only waived its statutory right to interest if it received the monetary refund prior to December 31, 2012. Furthermore, the court rejects any argument that Paramus lacked control regarding the timing of the entry of Judgments. Paramus's attorney did not contact the court or the Tax Court Management Office to request that the entry of the Judgments be expedited or to inquire when the Judgments could be expected. Additionally, the Judgments were received prior to the December 31, 2012 deadline and Paramus's attorney chose not to take any steps necessary to ensure payment of the monetary refund by the end of the year. During oral argument, counsel for Paramus stated that in similar situations in the past he had reached out to opposing counsel when he knew a refund would not be payable by the agreed upon deadline. He conceded that he did not reach out to Faber's counsel to request an extension because of "prior contact with the firm" and fear that his actions would be misconstrued by Faber's attorney. Counsel for Paramus, therefore, did not take any action whatsoever to work with the court or opposing counsel when it appeared he may be unable to meet the December 31, 2012 deadline.
C. Calculation of Interest
Having found that the statutory interest was due to Faber in addition to the monetary refund, the court requested that the parties calculate the amount of said interest at five percent from the date of overpayment until March 22, 2013.
The parties could not agree on the interest calculations and the court was asked to resolve the dispute concerning the method of calculation.
Faber argues that the interest should be calculated from the date of each payment until March 22, 2013 and applying five percent simple interest. Utilizing software provided by Skinder-Strauss Associates, Faber determined that the amount of interest due is $93,607.71. Faber points out that this is the same approach used to calculate pre-Judgment and post-Judgment interest pursuant to R. 4:42-11.
Paramus argues that the accepted method of calculating tax refund interest is by following guidelines circulated by the New Jersey Department of Community Affairs. In her certification, Paramus's tax collector stated that she has been taught to follow the method documented in a Local Finance Notice dated January 5, 1996, which is issued by the New Jersey Department of Community Affairs, Division of Local Government Services. The guidelines provide that when calculating a Judgment of the Tax Court, all credits are applied to the fourth quarter. If the fourth quarter taxes are less than the refund due, the balance is applied to the third quarter. The date used for determining overpayment is the date that taxes are due (i.e. November 1 for fourth quarter taxes), not the date that the taxpayer renders payment. The tax collector also calculates taxes on 360 days and not 365, although she does not state her reasons for this adjustment in calendar days.
The court assumes that the 360-day calculation is based upon a financial accounting principle used to divide a year into four even quarters.
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Using this method, Paramus has calculated the amount of interest due under the court's ruling to be $85,257.21.
The court finds and accepts the method of calculation proffered by Paramus. Unlike the interest awarded pursuant to R. 4:42-11, the tax refund interest is not adjusted on an annual basis to reflect the true value of money. Rather, the Legislature allowed for a flat five percent interest on the monetary refund. Additionally, the court accepts as logical that overpayment of taxes is to be determined on an annual basis with uniformity among all municipalities in calculating and remitting refunds to taxpayers.
The court therefore finds that the amount of statutory interest Paramus owes Faber to be $85,257.21.
_________________________
Hon. Mary Siobhan Brennan, J.T.C.
cc: Antimo A. Del Vecchio, Esq., via e-mail only
Marc A. Raso, Esq., via e-mail only.