Atty. Gen. v. Hendrickson, 206.

CourtUnited States State Supreme Court (New Jersey)
Citation38 A.2d 199
Docket NumberNo. 206.,206.
PartiesWILENTZ, Atty. Gen., v. HENDRICKSON, State Treasurer.
Decision Date22 June 1944

38 A.2d 199

WILENTZ, Atty. Gen.,
HENDRICKSON, State Treasurer.

No. 206.

Court of Errors and Appeals of New Jersey.

June 22, 1944.

38 A.2d 200


Information by David T. Wilentz, Attorney General, informant, against Robert C. Hendrickson, State Treasurer, and others, to enjoin enforcement of statutes relating to collection of certain delinquent taxes from railroad companies. From a final decree advised by the Vice Chancellor, 133 N.J.Eq. 447, 33 A.2d 366, continuing a temporary injunction previously granted, the state treasurer appeals.


CASE, PARKER, and COLIE, Justices, and WELLS, Judge, dissenting.

38 A.2d 201

Herbert J. Hannoch, of Newark (Josiah Stryker and J. H. Thayer Martin, both of Newark, and T. Millett Hand, of Cape May, of counsel), for appellant.

David T. Wilentz, of Trenton (Joseph Lanigan, of Trenton, and Milton B. Conford and Joseph Weintraub, both of Newark, of counsel), for respondent.

PERSKIE, Justice.

The basic question for decision is whether the remission of the accrued and unpaid interest, on the full principal amount of the delinquent property taxes upon private railroad companies operating in this State, as authorized by the interrelated statutes (P.L.1941, ch. 290, as amended and supplemented by P.L.1942, ch. 241, N.J.S.A. App.A:4-7.1 et seq.), contravenes Article I, paragraph 20, of our State Constitution, N.J.S.A., which provides: ‘No donation of land or appropriation of money shall be made by the state or any municipal corporation to or for the use of any society, association or corporation whatever.’ (As added, Election September 7, 1875, Proclamation, September 28, 1875.)

A few prefatory words as to the parties are desirable. In form, this is a suit between two of our high State officials, the Attorney General and the State Treasurer, each appearing in a representative capacity. The status of neither is questioned. The Attorney General, ‘acting in behalf of

38 A.2d 202

the people of the state’ filed an information challenging the constitutionality of the two statutes, supra, and the State Treasurer defends their constitutionality, with the aid of counsel, at the expense of the State, as ‘authorized and directed’ by P.L.1941, ch. 391, p. 1012. In substance, the actual parties affected by this suit are the people of the State, on the one side, and the private railroad taxpayers, on the other. With this in mind we turn to the consideration and determination of the merits of this case as submitted.

Pursuant to the then applicable railroad tax law (R.S. 54:19-1 et seq., N.J.S.A., which has for its source P.L.1888, ch. 208, as amended and supplemented), many private companies, owning and operating either a railroad system, or a railroad not a part of a system, in this State, were delinquent, on December 1, 1940, in the payment of their taxes for the years of 1932 to 1940, inclusive. The delinquencies totalled a sum of at least $34,358,949.40 principal and, in addition thereto, a sum of at least $24,130,085.34 for the statutory rate of ‘interest’ on the delinquent principal of ‘one per cent for each month until paid.’ R.S. 54:27-4, N.J.S.A. The accuracy of the stated figures is not in issue. It depends-we are told-upon the determination of the contrary views of the parties as to whether payments on account of arrears shall first be credited to principal or to interest. By stipulation that question was reserved.

The sizable amount of these interest delinquencies, the steadfast adherence by these private railroad companies, with few exceptions, to their continuous withholding and contesting of the payment of their taxes when due to the state (Central R. R. Co. v. Thayer-Martin, 114 N.J.L. 69, 73, 175 A. 637) quite naturally engendered great concern on the part of those of the public in interest. That concern found expression alike by former Governors of this State, representatives of the major political parties, by private and legislative committees and others.

Suffice it to observe here that this concern ultimately found legislative expression by the enactment of P.L.1941, ch. 290, p. 768. Generally stated, this statute provides for installment payments and acceptances thereof, over a fixed number of years, of the full principal amount of the delinquent taxes due and owing by the private railroad companies on December 1, 1940, and remaining unpaid on the effective date of the statute (July 22, 1941), but without the payment of the delinquent ‘interest’ of over $24,000,000.00. It is interesting at this point to mark the fact that for the first time our Legislature, adopting a new nomenclature, denominated or characterized such delinquent interest as ‘interest penalties', and provided for their ‘remission’. The Legislature set down in the preamble to the statute, N.J.S.A.App.A:4-7.1 note, the facts that motivated the challenged legislation. They are, in substance, that four railroad systems in the State are or have been recently in reorganization under the Federal bankruptcy laws and that there was ‘doubt’ as to the ‘ability of the railroads * * * to pay the delinquent taxes' and ‘at the same time to continue to furnish adequate and safe service;’ that ‘immediate payment’ of the accumulated tax delinquencies would ‘impair the capacity’ of the delinquent railroads to furnish efficient transportation service to meet the demands of the ‘industrial development’ of the State especially because of the present demands of production for national defense; and that the delinquencies ‘have tended’ to create chaotic conditions in State and municipal finances, and that the State has an urgent interest in the immediate solution of the problem ‘in the maintenance’ of ‘stable transportation facilities and public finances.’

A brief statement of the more important developments in the progress of this case will help more clearly to lay bare the posed question requiring decision.

Conceiving the statute thus enacted (P.L.1941, ch. 290) to be unconstitutional, Mr. David Wilentz, the then Attorney General, acting on behalf of the people of the State, filed an information in our Court of Chancery, on September 3, 1941, alleging among other grounds, that the statute was unconstitutional in that it contravened Article I, par. 20, of our State constitution. He prayed that the statute be declared invalid and that the State Treasurer, his agents and servants, be restrained from carrying out or executing any and all of its provisions. The right to the relief sought was disputed by the then State Treasurer and thereafter by his successors.

On May 21, 1942, Vice-Chancellor Jayne granted a rule to show cause with ad interim restraint in accordance with the prayers for relief.

38 A.2d 203

On the very same day (May 21, 1942) the Legislature amended and supplemented P.L.1941, ch. 290, by P.L.1942, ch. 241. A reading of the latter statute clearly indicates that it is the handiwork of capable counsel, drafted and directed to the single end of further buttressing the objectives sought to be attained by P.L.1941, ch. 290, in light of the attack made upon its constitutionality. It amends the title of the act to include the remission of the unpaid interest (continued to be called penalties), it emphasizes the waiver of the right to contest the legality of any assessment on railroad property for the years therein stated, it re-states the objectives of the act in some twelve paragraphs under section 15 thereof, N.J.S.A. App.A:4-7.15. These paragraphs are in the nature of an historical resumé of the circumstances-some of which have already been noted-leading up to the passage of the challenged statute, and conclude with the statement that the delinquent tax problem ‘can best be disposed of’ and the ‘unpaid’ balance ‘can best and most quickly be collected’ in the manner provided by the statute and that ‘upon the acceptance of, and compliance with, such terms and conditions by any railroad taxpayer the State will have received full, fair and adequate consideration, and the best interests of the State will have been served and furthered.’ (Italics supplied.)

After due consideration of the merits of the order to show cause with the ad interim restraint granted, based upon the affidavits and exhibits attached thereto, argument and briefs of the respective parties, Vice Chancellor Jayne answered the posed question in the affirmative. His answer was based upon the findings, in substance, that the delinquent interest was not, in the circumstances exhibited, a penalty but rather was it compensation which together with the unpaid principal taxes should, as it did, ‘merge and constitute’ the ‘debt’ owing by each railroad company to the State, that the remission of that debt, i. e., the delinquent interest, was not supported by either a legal, equitable or moral consideration and hence the remission thereof was an indirect appropriation of public funds to a private corporation prohibited by Article I, paragraph 20, of our State constitution. In reaching that result, Vice Chancellor Jayne concedes that the holding in the case of In re Voorhees' Estate, 123 N.J.Eq. 142, 196 A. 365, affirmed by our Supreme Court, 121 N.J.L. 594, 3 A.2d 891, affirmed by this court, 124 N.J.L. 35, 10 A.2d 650, was ‘exceedingly influential.’ See his comprehensive opinion in which is set down the facts, a detailed analysis of the statutes, the respective contentions, and the controlling law upon which he based his result. Wilentz v. Hendrickson, 133 N.J.Eq. 447, 33 A.2d 366.

Accordingly, the Vice Chancellor advised an order (July 27, 1943) which was entered decreeing that P.L.1941, ch. 290 and P.L.1942, ch. 241 were invalid, and restraining and enjoining the State Treasurer, his successors, agents and servants, until final hearing of the case, from carrying out or executing any and all provisions of the statutes. An appeal was taken from the preliminary injunction, but it was not prosecuted because (so we are told) the appeal...

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