Township Ordered to Refund Property Owner that Paid Taxes by Mistake

by: Daniel Kim
10 Oct 2017

The Correction of Errors statute, N.J.S.A. 54:4-54, provides relief where a taxpayer has mistakenly paid the property taxes of another.  Under this statute, in Hanover Floral Co. v. East Hanover Twp., the plaintiff sought a refund of property taxes paid by mistake of property that was not their own.  By mistake of the Township’s Tax Assessor, the Township had erroneously listed the plaintiff as the owner of the subject property.  Unbeknownst to the plaintiff, the plaintiff had been receiving the tax bills for property it did not own since 2001.  After discovering this discrepancy in 2011, the plaintiff promptly notified the Township and also pursued an appeal with the Tax Court.

Both parties filed their respective summary judgment motions, the Township seeking to dismiss the complaint and Hanover Floral seeking a refund of taxes paid.  The Township argued that Hanover Floral knowingly paid taxes and thus it did not constitute a mistake under the applicable statute.   Under N.J.S.A. 54:4-54, a mistake occurs when either (1) “the Taxpayer is unaware that an assessment on property of another is included in the assessment on the Taxpayer’s property . . . or (2) the Taxpayer lacks knowledge of facts providing a plausible basis for disputing the Taxpayer’s ownership of the property subject to tax.”  The Township argued that since the Notice of Assessment cards and tax bills received by Hanover Floral both note that they pertain to Lot 100 and taxes for that lot, Hanover Floral knew that it was paying the taxes for Lot 100.

The court rejected the Township’s argument and concluded that Hanover Floral had in fact paid property taxes by “mistake,” as defined under the statute.  The court agreed with the plaintiff that it had unknowingly paid taxes on the property owned by another and it did not discovery this error until 2011.  Given the history of the property and the tax bills for the parcels, the court concluded that Hanover Floral “did not know, and had no reason to know, that it was erroneously paying taxes of another.”  The court admonished the Township for not “turning square corners” and having failed to “to take proper steps to ameliorate the situation, even after Hanover Floral repeatedly informed the Township of the discrepancy and the Township’s Tax Assessor acknowledge the error.”

The court also held that a refund under the Correction of Errors statute, N.J.S.A. 54:4-54, is mandatory and does not provide the municipality with discretion on whether it should provide a refund.  The Township’s argument that it was entitled to collect taxes on the property even though it collected from the wrong entity did not hold water with the court.  Given the shortcomings of the Township and its failure of exercise due diligence, the court was not inclined to “reward the Township for failing to turn square corners.”  Although the plaintiff had mistakenly paid taxes on property for over a decade (2001 to 2012), the court was restrained under the statute to order the refund of taxes paid for the year in which the complaint was filed (2012) and the three years prior.  However, in light of the way the Township behaved in this case, the court further ordered the Township to refund all taxes paid by Hanover Floral for parts for 2013 and 2014.

Hanover Floral is a family-owned business that had been operating in the Township since 1928 and the owner (taxpayer) is eighty-eight years old and a life-long resident of the Township.  Given the circumstances here, the outcome may have been different had the Township exercised due diligence.  Nonetheless, this case illustrates the importance of government entities to “turn square corners” and to deal fairly with taxpayers.

This decision has been approved for publication and can be read here.

The property owner in this matter was represented by McKirdy, Riskin, Olson & DellaPelle’s Jeff Lewis.

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