705 A.2d 1270 | N.J. Super. Ct. App. Div. | 1998
The opinion of the court was delivered by
After a trial, the Tax Court reduced the property tax assessment on a tract of land in Cresskill and Alpine Boroughs.
Contending that the underlying assessments were improperly calculated, and that the Freeze Act judgment was entered prematurely, the municipality has filed two appeals. We affirm the first, essentially for the reasons expressed by Judge Kahn, and dismiss the second as moot.
At trial, the taxpayer valued the property as a going business, using the income capitalization method, alternatively calculating value based on use of the entire tract as a residential subdivision with value computed pursuant to a discounted cash flow (DCF) analysis over five years. The municipality claimed the highest and best use of the property would be to develop thirty acres into twenty-four one acre residential lots and maintain the clubhouse as a catering business on the remaining 5.58 acres. It also calculated the value of the residential subdivision by a DCF methodology, over four years. The clubhouse was valued by the cost approach and the land under it by a market sales analysis. Regardless of the methodology, the parties stipulated that the finished residential lots in the hypothetical subdivision would each have a market value of $455,000.
Judge Kahn resolved the conflict over which subdivision plan would produce the “highest and best” use of the property by deciding that the municipality failed to prove a “reasonable probability that the [clubhouse] use would be permitted [if the property were subdivided for residential uses]”. Id. at 638. He also found that “the municipality’s appraisal expert’s valuation analysis of the building and land thereunder is insufficient ... to determine value.” Id. at 641. Each appraisal expert used the discounted cash flow analysis and each concluded the value would be greater under that method than the other methods each had considered. Judge Kahn decided that the highest and best use of the property
I.
The municipality first contends that the exclusion of the clubhouse from the use considered highest and best was erroneous. Its argument centers on the zoning classification of the clubhouse which existed as a nonconforming use on the country club property. The judge was not persuaded by testimony from various municipal officials to the effect that the municipality would allow the banquet hall use to continue after the country club ceased to exist. He decided that the reduction in lot size from 35.58 acres to 5.58 acres constituted an expansion of a nonconforming use by increasing the intensity of use on the remaining smaller lot, a situation analogous to Razberry’s Inc. v. Kingwood Tp. Pl. Bd., 250 N.J.Super. 324, 593 A.2d 1264 (App.Div.1991). Thus, a use variance would be required to permit the clubhouse to continue as a permitted use, but Judge Kahn found it too speculative to permit valuation based on the possibility of a variance being granted. Tamburelli, supra, 15 N.J. Tax at 637. He further considered that sales of lots in the development of adjacent property, formerly a golf course, were conditioned on demolition of the catering clubhouse located thereon. That clearly showed that buyers of high-end residences in the area do not want to live in the immediate vicinity of a busy banquet hall. As he stated, the municipality failed to produce any evidence of what effect the continued clubhouse would have on the value of the lots, “especially those closest to the buffer area.” Id. at 638. Each of these findings have substantial support in the record and are therefore affirmed.
II.
Judge Kahn utilized the DCF analysis to calculate the true market value of a twenty-eight lot subdivision of the property. He found DCF useful here because the parties had stipulated the value of a finished lot and estimated that it would take either four or five years to sell every lot. Thus it was appropriate to adjust the total mathematical value (28 x $455,000 = $12,740,000) by deducting entrepreneurial profit, sales commissions, and management and overhead expenses in order to produce annual cash flows which were then reduced to present value, and then to reflect the time it would take to complete the subdivision by applying an “absorption discount.” At trial, the taxpayer and the municipality followed the same procedure, differing only by their experts’ opinions as to the appropriate percentages and costs. At the court’s request, the parties calculated several different models, yielding different values dependent on the variables used. Direct and indirect costs of development were stipulated for the Cresskill property. As to the parameters of value that were not stipulated, Judge Kahn explained why he found the development would take
On appeal, the municipality argues for the first time that utilization of an absorption discount to account for the development and sale of all the lots in a five year period violates the constitutional requirement that assessment of real estate should be made uniformly. Our Constitution provides:
Properties shall be assessed for taxation under general laws and by uniform rules. All real property assessed and taxed locally or by the State for allotment and payment to taxing districts shall be assessed according to the same standard of value.
[N.J. Const, art. VIII, § 1, H 1(a).]
Cresskill posits that this constitutional provision requires each lot of the highest and best subdivision to be assessed separately, and without a discount factor to account for the period required to sell off all the lots, thus achieving uniformity of assessment. In support of that argument, the municipality cites Chesterfield Assoc. v. Edison Tp., 13 N.J. Tax 195 (Tax 1993)(upholding separate assessment of each unit in 95 townhouse complex, built as individual single-family units but always owned by plaintiff and individually rented to tenants, and rejecting valuation as a single investment package rejected), aff'd, 14 N.J. Tax 181 (App.Div.1994); Glen Pointe Assoc. v. Teaneck Tp., 10 N.J. Tax 506, 516-17 (Tax 1989) (partially finished seven-story office building valued by cost approach with deduction for cost to complete construction; absorption discount rejected because it yields an unconstitutional comparison of finished and unfinished buildings), aff'd 12 N.J. Tax 127 (App.Div.1991); Thomas J. Lipton, Inc. v. Raritan Tp., 10 N.J. Tax 202 (Tax 1988)(discount factor inappropriate to property appraised by cost approach because it double counts delay in marketing property), aff'd, 11 N.J. Tax 100 (App.Div.1989); Glenpointe Assoc. v. Teaneck Tp., 10 N.J. Tax 288 (Tax 1988)(171 unit condominium development where each unit valued separately by market approach on completed units and cost approach on unfinished units; market discount held improper as double counting
We reject all of these proffered authorities as factually inapposite in that the properties involved were capable of being valued on the comparable sales or cost approach, or were actually divided into separate economic units that could be valued separately. On the other hand, in valuing undeveloped acreage and in the absence of comparable sales of large parcels of raw land, it has been recognized that since lots in a subdivision will be sold over a period of time, an “absorption study is critical” to determine the time needed to market the lots. Genola Ventures — Shrewsbury v. Shrewsbury, 2 N.J. Tax 541, 547 (Tax 1981). Of the eight steps required by Genola Ventures — Shrewsbury to appraise the value of vacant land for subdivision purposes
There is appraisal authority to support a developer’s discount for marketing a subdivision. Boykin, “Developmental Method of Land Appraisal,” The Appraisal Journal 181 (April 1976); American Institute of Real Estate Appraisers, Subdivision Analysis (1978). However, this method measures the value of an entire subdivision to a single owner. The discounting process takes into consideration both the marketing cost and the time period required to sell all of the lots.
[5 N.J. Tax at 306.]
Since there were individual extant campsites (lots) to be considered in Tall Timbers, the absorption discount was disallowed.
Of the cases cited by the municipality, Chesterfield Assoc. v. Edison Tp., supra, has facial similarities to this case. There, the parties disputed the assessment on 95 townhouses in a single development, arguing that if all 95 townhouses were placed on the market simultaneously, there would be insufficient buyers. 13 N.J. Tax at 210-11. The plaintiff wanted a discounting factor to be applied to the assessments to take into account the delay in marketing all the units. However, the court said that the valuation problem at issue there was “not to estimate the value of an
Tamcrest Country Club falls within that exception: the subdividing of the Tamcrest property should be valued as one single entity — the value of the entire subdivision to a single owner — as noted in Tall Timbers, supra, 5 N.J. Tax at 306. Judge Kahn recognized this when he distinguished Tall Timbers, noting that the campsites were already existing, with some having been sold, while here there are no subdivided lots and there is just a single owner. Therefore, DCF analysis using an absorption discount as one factor in the calculation of value is appropriate here.
We further hold that the municipality’s attempt to appeal this method of valuation after embracing it at trial violates the doctrine of judicial estoppel. Judicial estoppel is an equitable doctrine precluding a party from asserting a position in a case that contradicts or is inconsistent with a position previously asserted by the party in the case or a related legal proceeding. Its roots go back to Davis v. Wakelee, 156 U.S. 680, 689, 15 S.Ct. 555, 558, 39 L.Ed. 578, 584 (1895). It is frequently said that judicial estoppel is meant to protect the integrity of the judicial system, designed to prevent litigants from “playing fast and loose with the courts.” Scarano v. Central Railroad Co., 203 F.2d 510, 513 (3d Cir.1953); see also Prudential Ins. Co. v. Tp. of Parsippany-Troy Hills, 16 N.J. Tax 148 (App.Div.1996)(where both parties relied on the same approach to valuation, but municipality urged another method on appeal, held that a “party may not urge one course upon a trial court and then argue on appeal that the trial court erred in adopting it”). Here the municipality cannot be permitted to argue for valuation of the subject property with an absorption
III.
In the separate appeal, Cresskiil contends that the Tax Court erred in fixing the 1996 assessment under the Freeze Act as soon as its judgment for 1995 was entered. The Freeze Act provides that after a successful appeal to the Tax Court, an assessment shall not be changed for the year in question and the two succeeding years after the Tax Court has rendered a final judgment. N.J.S.A 54:51A-8.
Cresskiil sought to apply the holding of Curtiss Wright Corp. v. Wood-Ridge, 4 N.J. Tax 68 (Tax 1982), that if a judgment was appealed to the Appellate Division and remained undecided, there was no “judgment final” as contemplated by N.J.S.A 54:2-43, the predecessor statute, and the Freeze Act would not apply. When that section was re-enacted in the general revision of the tax laws in 1983, it became N.J.SA 54:51A-8. Although the enacted version used the term “judgment final,” revision by the Legislative Counsel of the Office of Legislative Services, concurred in by the Attorney General, changed it to “final judgment.” See N.J.S.A 1:3-1. Unaware of this circumstance, in Inganamort Bros. v. Borough of Fort Lee, 202 N.J.Super. 87, 91, 493 A.2d 1304 (App.Div.), certif. denied, 102 N.J. 304, 508 A.2d 190 (1985), we held the change was intended to be substantive, and the Legislature meant to allow a freeze judgment to be entered as soon as the tax court issued its ruling, instead of awaiting the outcome of the appellate ruling on the underlying assessment. Curtiss Wright was, therefore, deemed inapplicable to Inganamort Bros. In light of the revelation of how the language was changed when the
A comparison of the language of the Tax Court Freeze Act, N.J.S.A. 54:51A-8, with the County Board of Taxation Freeze Act, N.J.S.A. 54:3-26, supports the conclusion that the term “final judgment” in the Tax Court Freeze Act means a “judgment final,” that is, one no longer subject to further appeal. N.J.S.A. 54:3-26, in pertinent part, provides:
Where no request for review is taken to the Tax Court to review the action or determination of the county board involving real property the judgment of the county board shall be conclusive and binding upon the municipal assessor and the taxing district for the assessment year, and for the 2 assessment years succeeding the assessment year, covered by the judgment, except as to changes in value of the property occurring after the assessment date.
[Emphasis added.]
There is no reason to believe that the Legislature intended the Freeze Act to apply to a Tax Court determination that remains on appeal, but not to a County Board of Taxation determination that is on appeal.
However, we need not rule on the applicability of the Freeze Act here, because both parties agreed at oral argument that the issue would be moot if we affirmed the judgment of the Tax Court. Accordingly, the second appeal (A-1806-96T5) is dismissed.
The judgment of the Tax Court of June 28, 1996 (in A-7342-95T5) is affirmed, essentially for the reasons stated in Tamburelli Properties Assn. v. Cresskill Borough, 15 N.J. Tax 629 (Tax 1996).
Only the portion of the property located in Cresskill is of concern here.
1. Identify the economic bracket of the residents and check the range of sales prices of typical new homes in the area.
2. By distribution, or comparison with lot sales in similar subdivisions, decide what figure represents a typical lot value in this category of development.
3. Study and lay out a subdivision plan to develop typical lots.
4. Project the total probable gross sale price for these lots.
5. Estimate development costs to include:
a. Engineering or other fees
b. Cost of streets and utilities
c. Advertising and cost of sales.
6. Estimate overhead and administrative costs to include:
a. Taxes and inspection fees
b. Financing fees and carrying costs.
8. Deduct for time lag by discounting, at an appropriate risk rate, the annual net income flow over the time needed for completion and market absorption of the project.
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