BJ Van Ingen & Co. v. Burlington County Bridge Com'n

• Decision Date: 06 April 1949
• Docket Number: Civ. No. 11848.
• Citation: 83 F. Supp. 778
• Parties: B. J. VAN INGEN & CO., Inc. v. BURLINGTON COUNTY BRIDGE COMMISSION et al.
• Court: U.S. District Court — District of New Jersey

83 F. Supp. 778

B. J. VAN INGEN & CO., Inc. v. BURLINGTON COUNTY BRIDGE COMMISSION et al.

Civ. No. 11848.

United States District Court D. New Jersey.

April 6, 1949.

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Pitney, Hardin & Ward and Donald B. Kipp, all of Newark, N.J. (William P. Reiss and Francis W. Brennan, both of Newark, N. J., of counsel), for plaintiff, B. J. Van Ingen & Co., Inc.

John A. Matthews, of Newark, N. J. (James M. Davis, Jr., of Mount Holly, N. J., and Milton B. Conford, of Newark, N. J., of counsel), for defendants, Henry S. Haines and Richard J. Lippincott.

Robert L. Hood, of Newark, for defendant, Burlington County Bridge Commission.

FORMAN, District Judge.

This is a motion to restrain the plaintiff from further prosecuting a declaratory judgment suit filed in this court and to stay the suit until there is a final disposition of an action now pending in the Superior Court of New Jersey, Law Division, Burlington County wherein the present defendants Henry S. Haines and Richard J. Lippincott are plaintiffs and the present defendant Burlington County Bridge Commission and the plaintiff B. J. Van Ingen & Company are named as defendants.

This suit is based upon a complaint for a declaratory judgment alleging that on October 22, 1948, the defendant Burlington County Bridge Commission adopted a resolution authorizing the acquisition of the Tacony-Palmyra and Burlington-Bristol Bridges spanning the Delaware River and connecting Burlington County, New Jersey with the Commonwealth of Pennsylvania and the issuance of Bridge Revenue Bonds for the purpose of financing the cost of acquisition of the said bridges in the principal amount of $12,400,000 and to sell same for cash, at the principal amount plus accrued interest from October 1, 1948 to Ketcham & Nongard, a partnership; that this resolution was duly approved on October 22, 1948 by the Board of Chosen Freeholders of Burlington County and the bonds were issued and sold as aforesaid to Ketchum & Nongard; that subsequent to the above transaction the plaintiff, in good faith, and in reliance upon the validity and binding effect of the bonds and the resolution under which they were bought and sold, and without notice of any infirmity in the bonds or defect in the title of the seller negotiating the same to the plaintiff, or of any other facts or circumstances which might in any way affect the validity or binding effect thereof, and before any payment thereon had become due, purchased $6,200,000 aggregate principal amount of the bonds by paying $6,022,145 (the principal amount less normal underwriting discount), plus accrued interest to the date of payment therefor, in cash; that on or about October 26, 1948 the plaintiff sold $4,712,000 principal amount of these bonds to others and now owns $1,488,000 principal amount thereof. The plaintiff further alleged that the defendants Haines and Lippincott brought a tax payers' suit in the Superior Court of New Jersey, Law Division, Burlington County, to enjoin the defendant Bridge Commission from performing its obligations and agreements under the resolution and that temporary restraints have been issued. Therefor the plaintiff was informed and believed that the Bridge Commission failed, refused and will continue to fail to make payments contrary to the resolution by reason of the restraints issued by the State court; that Haines and Lippincott and the Bridge Commission are estopped from attacking the validity of the resolution and the bonds under New Jersey law found in N.J.S.A. 27:19-2; and that the state court suit has impaired the value and marketability of the plaintiff's bonds. The plaintiff prays that this court adjudge: (1) that the resolution under attack in the state court was validly and legally adopted and binding in accordance with its terms; (2) that the bonds were validly and legally issued according to their terms; (3) that the Bridge Commission is obligated to perform all covenants, obligations and agreements under said resolution and bonds; (4) that the plaintiff is a holder in due course of the bonds it owns; and (5) that the defendants are estopped to attack the validity and effectiveness of the resolution and bonds. In addition it prayed that upon declaring judgment as above that Haines and Lippincott be enjoined by this court from prosecution of their suit in the state court.

The answer of the defendant Burlington County Bridge Commission to the plaintiff's claim admitted all the essential facts as contended in the complaint with minor exceptions as follows. It left the plaintiff to its proof that it was without knowledge of the infirmity on the bonds purchased and that it hypothecated the bonds as alleged but stated that it believed that the plaintiff had pledged the bonds as collateral security. The Bridge Commission further answered that its counsel advised it that it is estopped to challenge the validity of the bonds because of the provisions of N.J.S.A. 27:19-2 and that it could not meet its obligations on the bonds because of the restraining order obtained in the state court as a result of the suit initiated there by the defendants Haines and Lippincott.

The defendants Haines and Lippincott filed an answer in which they set forth among other defenses that they had initiated a tax payers suit in the Superior Court of New Jersey, Law Division, Burlington County against the Burlington County Bridge Commission and others including the present plaintiff and alleged that in this suit there were raised identical issues as those presented in their state court action. See Haines et al. v. Burlington County Bridge Commission et al., N.J.Super.A.D., 63 A.2d 284. They also filed a counterclaim against the present plaintiff and a cross-claim against the Burlington County Bridge Commission incorporating the allegations set forth in their answer to the main complaint herein and in their suit in the state court.

In filing this motion to stay proceedings in this court the defendants Haines and Lippincott, contended that the state action which they initiated involves a grave question of state policy and that "the interests of the appropriate relationship between federal and state authorities functioning as a harmonious whole" would best be served by such stay. They urged that the pendency of the injunction issued out of the New Jersey court and the existence of entirely unadjudicated questions of New Jersey law as to matters of great public importance dictate the abstention of the application of federal jurisdiction pending the disposition by the New Jersey court of those questions.

The plaintiff argued that neither as a matter of law or discretion should this court stay its hand for the reason that only an injunction pendente lite is in force in the state court action, that the issues of this suit are not the same as in the state court action, and that it is a stranger to the state court action. It urged that the issues in this case are federal in nature and that this court is the most appropriate forum. It further contended that the present motion is premature for the reason that this case will not actually be reached for trial for a long time, no rights of the defendants Haines and Lippincott will be impaired by permitting the case to remain on the calendar because involved questions of procedure remain to be resolved in other suits, and it is impossible to now fully appraise the scope of the over-all litigation.

Both parties have argued extensively that the decision in the case of In re Central R. Co. of New Jersey, 3 Cir., 163 F.2d 44, supports their respective positions. It is unnecessary to go into a recital of the complicated issues of fact and law involved therein because the considerations discussed in this opinion reflect the principles of that case in so far as they are thought to be applicable.

In Meredith v. City of Winter Haven, 320 U.S. 228, 64 S.Ct. 7, 88 L.Ed. 9, the Supreme Court made it plain that a federal court may not avoid a decision of disputed questions of state law upon which there was no authority merely because the interpretation of that law is difficult and involved. The rule is qualified in other cases where the principle is laid down that a federal court will not decide questions of state law where an important state policy is involved. It was stated in Railroad Commission of Texas v. Pullman Company, 312 U.S. 496, at pages 500-501, 61 S.Ct. 643, 645, 85 L.Ed. 971 that: "Few public interests have a higher claim upon the discretion of a federal chancellor than the avoidance of needless friction with state policies, whether the policy relates to the enforcement of the criminal law, Fenner v. Boykin, 271 U.S. 240, 46 S.Ct. 492, 70 L.Ed. 927; Spielman Motor Co. v. Dodge, 295 U.S. 89, 55 S.Ct. 678, 79 L.Ed. 1322; or the administration of a specialized scheme for liquidating embarrassed business enterprises, Commonwealth of Pennsylvania v. Williams, 294 U.S. 176, 55 S.Ct. 380, 79 L.Ed. 841, 96 A.L.R. 1166; or the final authority of a state court to interpret doubtful regulatory laws of the state, Gilchrist v. Interborough Co., 279 U.S. 159, 49 S.Ct. 282, 73 L.Ed. 652; cf. Hawks v. Hamill, 288 U.S. 52, 61, 53 S.Ct. 240, 243, 77 L.Ed. 610. These cases reflect a doctrine of abstention appropriate to our federal system whereby the federal courts, `exercising a wise discretion', restrain their authority because of `scrupulous regard for the rightful independence of the state governments' and for the smooth working of the federal judiciary. See Cavanaugh v. Looney, 248 U.S. 453, 457, 39 S.Ct. 142, 143, 63 L.Ed. 354; Di Giovanni v. Camden Fire Ins. Ass'n, 296 U.S. 64, 73, 56 S.Ct. 1, 5, 80 L.Ed. 47. This use of equitable powers is a contribution of the courts in furthering the harmonious relation between state and federal authority without the need of rigorous congressional restriction of those powers. Compare 37 Stat. 1013, 28 U.S.C.A. § 380; Judicial Code, § 24(1), as...