Infinite Engineering Solutions, LLC v. Washington Borough ( 2021 )

TAX COURT OF NEW JERSEY
JOSHUA D. NOVIN Dr. Martin Luther King, Jr. Justice Building
Judge 495 Dr. Martin Luther King, Jr. Blvd., 4th Floor
Newark, New Jersey 07102
Tel: (609) 815-2922, Ext. 54680
NOT FOR PUBLICATION WITHOUT THE APPROVAL
OF THE TAX COURT COMMITTEE ON OPINIONS
October 26, 2021
Michael W. C. Fourte, Esq.
212 Pompton Avenue
Verona, New Jersey 07044
Richard Conley, Esq.
100 Belvidere Avenue
Washington, New Jersey 07882
Re: Infinite Engineering Solutions, LLC v. Washington Borough
Docket Nos. 013509-2020
Dear Mr. Fourte and Mr. Conley:
This letter constitutes the court’s opinion following trial of the above local property tax
appeal. Infinite Engineering Solutions, LLC (“plaintiff”) challenges the 2020 local property tax
assessment on its mixed-use building located in Washington Borough (“Washington”).
For the reasons stated more fully below, the court affirms the 2020 local property tax
assessment.
I. Procedural History and Findings of Fact
Pursuant to R. 1:7-4, the court makes the following findings of fact and conclusions of law
based on the evidence and testimony offered at trial.
Plaintiff is the owner of the three-story mixed-use building located at 28-30 East
Washington Avenue, Washington Borough, Warren County, New Jersey. The property is
identified on Washington’s municipal tax map as Block 24, Lot 28 (the “subject property”). For
the 2020 tax year, the subject property was assessed as follows:
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Land: $ 12,000
Improvement: $212,000
Total: $224,0001
Plaintiff filed a Petition of Appeal (“Petition of Appeal”) with the Warren County Board
of Taxation (the “Board”), challenging the subject property’s 2020 local property tax assessment.
On October 28, 2020, the Board issued a Memorandum of Judgment affirming the 2020 tax
assessment and bearing judgment code 2B, “Presumption of correctness not overturned” (the
“Judgment”).
On December 23, 2020, plaintiff filed a Complaint with the Tax Court challenging the
Board’s Judgment.
At the outset of trial, Washington moved for dismissal of plaintiff’s Complaint, arguing
that no appraisal report was submitted and objecting to any testimony from plaintiff’s managing
member, Amgad Khalil, regarding the subject property’s sale. The court denied Washington’s
motion and placed a statement of reasons on the record.
During trial, Mr. Khalil offered testimony that plaintiff acquired the subject property and a
nearby mixed-use building at 14-16 East Washington Avenue, Washington, New Jersey (“14-16
East Washington Avenue”), on or about October 22, 2019. Mr. Khalil stated during trial that a
single Deed, reporting the total consideration paid for the two properties of $300,000, was recorded
in the Warren County Clerk’s Office.2
1
Washington’s average ratio of assessed to true value, commonly referred to as the Chapter 123
ratio, was 82.32% for the 2020 tax year. See N.J.S.A. 54:1-35a(a). When the average ratio is
applied to the subject property’s 2020 tax assessment, the implied equalized value of the property
is $272,109.
2
A copy of the Deed was not introduced during trial.
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According to Mr. Khalil, the subject property consists of a ground-floor commercial unit
and four apartments located above. Similarly, 14-16 East Washington Avenue also has a ground-
floor commercial unit; however, it contains only two apartments above. Mr. Khalil stated that 14-
16 East Washington Avenue’s commercial unit is approximately twenty percent smaller than the
subject property’s commercial unit. Mr. Khalil further offered that 14-16 East Washington
Avenue’s apartments are larger than the subject property’s apartments; however, Mr. Khalil was
unfamiliar with their square footage and could not offer precise testimony as to the size variations.
Mr. Khalil testified that he is an experienced investor, having purchased dozens of other
properties and having formerly been a New Jersey licensed real estate salesperson. He initially
saw the subject property and 14-16 East Washington Avenue’s listings on LoopNet and a multiple
listing service and then contacted the listing broker about the properties.3 4 Mr. Khalil expressed
that his purchase of the subject property and 14-16 East Washington Avenue was an arms-length
transaction, as the properties had been listed for sale for more than three hundred days.
During trial, Mr. Khalil identified the Contract for Sale of Real Estate he executed on
plaintiff’s behalf with Etienne Properties LLC (the “seller”) in or about August 2019 for the subject
property and 14-16 East Washington Avenue. Additionally, Mr. Khalil identified a Rider to
Contract executed between plaintiff and seller in or about August 2019. Mr. Khalil testified that
under the Rider, the seller requested that the parties allocate the $300,000 purchase price as
follows: (i) $155,000 to the subject property; and (ii) $145,000 to 14-16 East Washington Avenue.
However, Mr. Khalil could not explain and did not know how the allocation was arrived at.
3
Plaintiff submitted a copy of the subject property’s listing from the ColdwellBankerHomes.com
website. A copy of 14-16 East Washington Avenue’s listing was not furnished to the court.
4
Mr. Khalil offered conflicting testimony during trial whether one real estate salesperson was
involved in the transaction or two real estate salespersons were involved in the transaction.
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According to Mr. Khalil, “this was a request from the seller, and I do not know . . . his rationale,
to me at the end of the day, the mean price did not change, but he preferred the breakdown to be
as such, actually, I should have thought about it a little bit more, . . . but we accepted the $155,000
for the 28-30.” Moreover, Mr. Khalil testified that he did not obtain appraisal reports for either
the subject property or 14-16 East Washington Avenue prior to his purchase to determine the
accuracy of the purchase price allocation. Rather, Mr. Khalil surmised that maybe the size
difference between the two commercial units was “why [seller] priced it as such.”
In addition, questioning by the court revealed that the subject property was apparently
offered for sale on the ColdwellBankerHomes.com website for $125,000, however, Mr. Khalil was
unsure why the purchase price allocated to the subject property was $155,000. Additionally, Mr.
Khalil could not recall the listing price for 14-16 East Washington Avenue. Importantly, Mr.
Khalil did not know whether the seller had a mortgage either on the subject property or 14-16 East
Washington Avenue; whether the seller had to obtain the approval of any mortgage lender; and
whether the seller was under duress and had to sell the subject property and/or 14-16 East
Washington Avenue.5
II. Conclusions of Law
As construed by applicable case law, a presumption of validity attaches to original tax
assessments and county board of taxation judgments. MSGW Real Estate Fund, LLC v. Borough
of Mountain Lakes, 18 N.J. Tax 364, 373 (Tax 1998); Riverview Gardens, Section One, Inc. v.
North Arlington, 9 N.J. 167, 174-175 (1952); Aetna Life Insurance Co. v. Newark City, 10 N.J.
5
Plaintiff did not submit a copy of the Seller’s Residency Certification/Exemption, form
GIT/REP-3 or the HUD-1 Settlement Statement from the closing of the subject property and 14-
16 East Washington Avenue to enable the court to possibly ascertain if the sale was under duress
or if the sale was a short sale transaction.
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99, 105 (1952); Pantasote Co. v. City of Passaic, 100 N.J. 408, 413 (1985). The presumption
“attaches to the quantum of the tax assessment. Based on this presumption, the appealing taxpayer
has the burden of proving that the assessment is erroneous.” Pantasote Co., 100 N.J. at 413 (citing
Riverview Gardens v. North Arlington Borough, 9 N.J. 167, 174 (1952)). The presumption
remains intact “even if the municipality utilized a flawed valuation methodology, so long as the
quantum of the assessment is not so far removed from the true value of the property or the method
of assessment itself is so patently defective as to justify removal of the presumption of validity.”
Transcontinental Gas Pipe Line Corp. v. Bernards Twp., 111 N.J. 507, 517 (1988).
However, the presumption is not an evidentiary device functioning “as a mechanism to
allocate the burden of proof. It is, rather, a construct that expresses the view that in tax matters it
is to be presumed that governmental authority has been exercised correctly and in accordance with
law.” Pantasote Co., 100 N.J. at 413 (quoting Powder Mill, I Assocs. v. Hamilton Twp., 3 N.J.
Tax 439 (Tax 1981)). The evidence presented must be “based on sound theory and objective data,
rather than on mere wishful thinking.” MSGW Real Estate Fund, LLC, 18 N.J. Tax at 376. A
litigant can only surmount the presumption by introducing “cogent evidence” of true value. That
is, evidence “definite, positive and certain in quality and quantity to overcome the presumption.”
Aetna Life Insurance Co., 10 N.J. 99, 105 (1952). Thus, the appealing party shoulders the burden
of presenting the court with credible evidence “sufficient to determine the value of the property
under appeal, thereby establishing the existence of a debatable question as to the correctness of the
assessment.’” West Colonial Enters, LLC v. City of East Orange, 20 N.J. Tax 576, 579 (Tax 2003)
(quoting Lenal Properties, Inc. v. City of Jersey City, 18 N.J. Tax 405, 408 (Tax 1999), aff’d, 18
N.J. Tax 658 (App. Div. 2000), certif. denied, 165 N.J. 488 (2000)).
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In the absence of a motion for judgment or involuntary dismissal, under R. 4:37-2(b), the
court must nevertheless first decide whether the presumption of validity has been overcome before
engaging in an evaluation and analysis of the evidence. MSGW Real Estate Fund, LLC, 18 N.J.
Tax at 377. Only after the court has concluded that the presumption of validity has been “overcome
with sufficient evidence . . . must the court ‘appraise the testimony, make a determination of true
value and fix the assessment’” based on a fair preponderance of the evidence. Greenblatt v.
Englewood City, 26 N.J. Tax 41, 52 (Tax 2011) (quoting Rodwood Gardens, Inc. v. City of
Summit, 188 N.J. Super. 34, 38-39 (App. Div. 1982)). If the court concludes the presumption of
validity has not been overcome, in the absence of a counterclaim, the assessment must be affirmed,
and the court need not make an independent determination of value. Ford Motor Co. v. Edison
Twp., 127 N.J. 290, 312 (1992); Global Terminal & Container Serv. v. City of Jersey City, 15 N.J.
Tax 698, 703-704 (App. Div. 1996).
The inquiry, under R. 4:40-1, requires the trial court to “accept as true all the evidence
which supports the position of the party defending against the motion and accord him the benefit
of all inferences which can reasonably and legitimately be deduced therefrom.” Estate of Roach
v. TRW, Inc., 164 N.J. 598, 612 (2000) (quoting Dolson v. Anastasia, 55 N.J. 2, 5-6 (1969))
(citations and quotations omitted from original). In resolving such issue, the court must view the
evidence presented as “uncontradicted” and accord the non-moving party the “benefit of all
legitimate inferences” which can be deduced therefrom. Verdicchio v. Ricca, 179 N.J. 1, 30-32
(2004). See also MSGW Real Estate Fund, LLC, 18 N.J. Tax at 376. Thus, the decision of the
trial court turns upon an evaluation of the evidence presented.
Here, Mr. Khalil offered credible testimony that he acquired the subject property and 14-
16 East Washington Avenue for $300,000 consideration on or about October 22, 2019. Moreover,
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the court finds credible his testimony that only one Deed for both properties was delivered to him
and recorded in the Warren County Clerk’s Office.
However, plaintiff submits that the court should accept the purchase price allocated by the
seller under the Contract for Sale of Real Estate as evidence of the subject property’s true or fair
market value. Notably, Mr. Khalil admitted on the record that this allocation was made entirely
by the seller and that plaintiff made no independent investigation of the seller’s legal basis,
rationale, or justification for this allocation. Additionally, plaintiff did not engage an appraiser to
test the accuracy of the purchase price allocation in the marketplace. Rather, Mr. Khalil was
unconcerned with how the purchase price was allocated under the Rider to the Contract, provided
that the overall sales price for both properties remained fixed at $300,000. Other than the joint
sale of the subject property and 14-16 East Washington Avenue, plaintiff offered no other evidence
of comparable mixed-use property sales as of the October 1, 2019 valuation date.
As stated above, before weighing the testimony and determining a property’s true or fair
market value, the appealing party must have first presented the court with credible evidence
“sufficient to determine the value of the property under appeal, thereby establishing the existence
of a debatable question as to the correctness of the assessment.’” West Colonial Enters, LLC, 20
N.J. Tax at 579 (quoting Lenal Properties, Inc., 18 N.J. Tax at 408). However, in the absence of
credible evidence of value, the assessment must be affirmed, and the court need not endeavor to
determine a property’s true value.
In the court’s journey to determine a property’s true value for tax assessment purposes, the
focus of the inquiry is “the fair value of the property, the price a willing buyer would pay a willing
seller.” New Brunswick v. State of N.J. Div. of Tax Appeals, 39 N.J. 537, 543 (1963). The term
market value has been defined as:
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the most probable price, as of a specified date, in cash or in terms
equivalent to cash, or in other precisely revealed terms, for which
the specified property rights should sell after reasonable exposure in
a competitive market under all conditions requisite to a fair sale,
with the buyer and seller each acting prudently, knowledgeably, and
for self-interest, and assuming that neither is under undue duress.
[Appraisal Institute, The Appraisal of Real Estate 58 (14th ed.
2013).]
Thus, although the sale of property is indicative of an exchange of consideration between
parties, it may not be dispositive on the issue of true or fair market value. As expressed by our
Supreme Court, “[t]here may be instances when the sale price may not reflect true market value.
In such instances it is for the court to appraise the circumstances surrounding a sale to determine
if there were special factors which affected the sale price without affecting the true value.” Glen
Wall Associates v. Wall Twp., 99 N.J. 265, 282 (1985). For the sale of a property to be a
trustworthy and reliable indicator of fair market value, the following criteria must be met:
1) buyer and seller are typically motivated, and neither is under
duress;
2) buyer and seller are well informed or well advised and are acting
prudently, knowledgeably and in their respective self-interests;
3) the property has been reasonably exposed to an open, relevant
and competitive market for a reasonable period of time;
4) the purchase price is paid in cash or its equivalent; and
5) the purchase price is unaffected by special or creative financing
or by other special factors, agreements, or considerations.
See Venture 17, LLC v. Borough of Hasbrouck Heights, 27 N.J. Tax 108, 126 (Tax 2013); Hull
Junction Holding Corp. v. Borough of Princeton, 16 N.J. Tax 68, 94 (Tax 1996)).
Here, although the court finds credible Mr. Khalil’s testimony that the subject property and
14-16 East Washington Avenue were listed for sale and marketed on a multiple listing service, that
is not the sole measure by which the court determines the true value of a property under appeal.
Plaintiff lacked any knowledge and offered no evidence that the seller was typically motivated,
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acting prudently, and not suffering from any duress. Admittedly, Mr. Khalil did not know whether
the seller had any mortgages on the subject property or on 14-16 East Washington Avenue.
Moreover, Mr. Khalil did not know whether this transaction was a short sale, requiring the seller
to obtain the approval of its lender, or whether the seller was under duress and had to sell the
subject properties. Most importantly, the allocated purchase price was seemingly arrived at
capriciously and arbitrarily, without consideration of the subject property’s actual true or fair
market value. For example, the seller could have been unusually motivated to minimize its tax
burden associated with the sale by allocating a lower portion of the purchase price to the subject
property and a higher portion of the purchase price to 14-16 East Washington Avenue.
However, regardless of the seller’s alleged motivations, the record is clear that the purchase
price allocation was not arrived through arms-length negotiations between plaintiff and the seller
based on market data, nor was it independently verified with an appraiser. In sum, the court
concludes that insufficient evidence exists in the trial record to enable the court to determine the
true or fair market value of the subject property, thereby establishing the existence of a debatable
question as to the correctness of the subject property’s assessment.
Accordingly, the court concludes that plaintiff has failed to overcome the presumption of
validity that attaches to the subject property’s local property tax assessment. Plaintiff has failed
to prove, by a fair preponderance of the evidence, that the subject property’s 2020 local property
tax assessment exceeds its true market value. Therefore, the court shall enter judgment affirming
the 2020 assessment.
Very truly yours,
Hon. Joshua D. Novin, J.T.C.
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