Atty. Gen. v. Hendrickson

• Decision Date: 20 July 1943
• Docket Number: 139/272.
• Citation: 33 A.2d 366
• Parties: WILENTZ, Atty. Gen., v. HENDRICKSON, State Treasurer.
• Court: New Jersey Court of Chancery

33 A.2d 366

WILENTZ, Atty. Gen.,

v.HENDRICKSON, State Treasurer.

139/272.

Court of Chancery of New Jersey.

July 20, 1943.

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Information by David T. Wilentz, Attorney General, informant, against William H. Albright, State Treasurer, and others, to enjoin enforcement of certain statutes relating to collection of certain, delinquent taxes from railroad companies. Defendant William H. Albright died and Robert C. Hendrickson, his successor, was substituted as a defendant. A temporary injunction was granted. On order to show cause why temporary injunction should not be continued until final hearing.

Temporary injunction continued.

1. Normally, the responsibility of advising the state officials in matters of law rests with the attorney general. (R.S. 52:17-2, N.J.S.A. 52:17-2.)

2. The power to issue an injunction pendente lite is exercised whenever necessary to subserve the ends of justice. Doubt of the validity of the complainant's asserted cause of action is not an adequate reason for refusing to maintain the subject of litigation in statu quo pending a definitive settlement of the right on final hearing. Unless such be the rule, the final hearing, and the appeal in the event of an adverse decree, would be vain forms.

3. The granting or refusal of a preliminary injunction exacts the exercise of a sound judicial discretion in view of all the circumstances of the particular case.

4. The office of attorney general is of ancient origin. The functions of our attorney general are similar to those exercised by the representative of the crown at the time of the separation of the colonies. It has also been determined that those functions, in the absence of constitutional limitations, are subject to increase, alteration or abridgment by legislative enactment.

5. It has not been regarded as anomalous for the attorney general of our state to file informations ex officio challenging the constitutionality of acts of the legislature.

6. The duty devolving upon the judicial department to determine, when so required, the constitutionality of legislative enactment is indeed a grave and solemn undertaking which is ordinarily approached with reluctance and must be discharged with the most patient and extensive deliberation. It is not the province of courts to supervise legislation, but it is the imperative duty of the courts to condemn that which contravenes the constitution.

7. A gift of public funds or property to a private corporation is unconstitutional whether made directly or indirectly; and the annulling by the legislature of a financial obligation due from such corporation to the state, the right to which has theretofore already become fixed and vested in the state, is (unless supported by some legal, equitable or moral consideration therefor) such a gift, and hence invalid. (Const. Article I, paragraph 20, P.S.)

8. In the absence of statute, a tax in its essential characteristics was not regarded as a debt, but rather an impost levied by authority of government in invitum upon its citizens or subjects. The payment of taxes could not be enforced by an action of debt. Thus, too, a tax did not carry interest.

9. Legislatures, of course, possess the power to declare that a tax shall be a debt, that the tax shall bear interest and that the tax and interest may be recovered by suit. Our legislature has to declared in respect of taxes payable by railroad companies. R.S. 54:27-4, N.J.S.A. 54:27-4.

10. A penalty is a means of punishment for default; interest is a means of compensation.

11. The distinction between statutory ‘interest’ and ‘penalty’ is resolved by a proper construction of the statute by which the exaction is created and imposed. Our statutes exhibit a distinctive and discriminative use of the words ‘interest’ and ‘penalty.’

12. Courts, particularly obligated as they are to liberally recognize and enforce prohibitory constitutional provisions, should not sanction the release of a pecuniary obligation due to the state from a private corporation under the implication that it is a ‘fine’ or ‘penalty’ unless such obligation is in its very essence indubitably a ‘fine’ or ‘penalty.’

13. The legislative intent of the Railroad Tax Act (R.S. 54:27-4, N.J.S.A. 54:27-4) was to oblige defaulting companies to pay ‘interest’ on their unpaid taxes and to impose a paramount lien upon all the lands, tangible property and franchises of the defaulting company to secure the payment of a debt comprising both the unpaid taxes and the accrued interest.

14. Nothing is consideration that is not regarded a such by both parties.

15. In the present case, the adequacy of an alleged consideration is not to be weighed as in the case of private parties merely to determine whether an agreement has the obligation of a contract. Patent inadequacy of consideration might be a salient and decisive factual circumstance in resolving whether legislation was in truth enacted in furtherance of a lawful contract, or manifestly in furtherance of a donative purpose prohibited by our constitution. Article I, paragraph 20.)

16. It is settled that the payment of a recognized moral obligation assumed for services rendered in the past in furtherance of a public purpose, is within the legislative power and its discharge does not constitute a donation of public funds.

17. Corporate bodies that engage in a public or quasi public occupation are created by the state upon the hypothesis that they will be a public benefit. They enjoy privileges that individuals cannot have. Perpetual or certain life is accorded to them. While the state confers special privileges upon these favorites, it at the same time exacts from them duties which also tend to the public welfare. The whole scheme of the laws of their organization is to equip and control them as instruments for the public good.

18. It is elementary that doing or promising to do what one is already legally bound to do, is no consideration.

19. The adoption of constitutional provisions akin to ours (Article I, paragraph 20) did not alter the basic premise that the promotion of transportation is a public purpose for which public funds may be expended. These constitutional amendments were, however, directed at the means of effectuating that public purpose. They were intended to prevent the accomplishment of that purpose by the means of aid to private corporations not constituting public agencies controlled by the state.

20. However, important, however useful the objects designed by the legislature, they may not be accomplished by a gift or a loan of the credit to an individual or a corporation.

21. Where there are a number of interwoven considerations, and one of them is illegal, the entire agreement is avoided by reason of the impossibility of estimating and allocating the weight which the void portion may have had as an inducement to the contract.

22. It is impossible to calculate how much of this generous remission of accrued interest was made in return for the abandonment of tax appeals and how much was intended to spare certain railroads from ‘the probability of bankruptcy proceedings' and to foster ‘safe and efficient management’ of the railroads and to enable ‘railroads to meet the transportation demands of the present emergency,’ and to liberate them from being ‘financially harassed.’ The latter are represented by the defendant to be considerations for the proposed compact.

23. In the existing state of the proofs, the contention that the legislation was of a contractual character is not established.

24. Courts should not gradually emasculate or whittle away the beneficent provisions of the supreme law. They must always be alert to detect and suppress all evasions of constitutional interdictions.

David T. Wilentz, Atty. Gen., and Joseph Lanigan, Asst. Atty. Gen. (Joseph Weintraub and Milton B. Conford, both of Newark, of counsel), for informant.

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

JAYNE, Vice Chancellor.

A precursory reference to some of the principal events will suffice to exhibit the essence of the intermediate application made by the attorney general and at present submitted for decision in this cause.

During several years immediately preceding the year 1941, many companies possessing franchises to maintain and operate railroads within our state failed to pay the taxes levied and assessed upon their properties devoted to such use, and the efforts of the state to enforce the payment of the taxes were persistently resisted. These accumulating delinquencies for the tax years 1932-1940, inclusive (minima $34,358,969.40 taxes, plus $24,130,085.84 interest on December 31, 1940) ultimately evoked considerable interest and anxiety. At its session in 1941 the legislature enacted an act, entitled ‘An Act relating to the collection of certain delinquent taxes upon railroad companies', now identified as Chapter 290, P.L.1941, p. 768. The act was approved on July 22, 1941.

On September 4, 1941, the attorney general in his official capacity filed in this court an information in which he alleged that the act was in defiance of certain provisions of our state constitution, and prayed for an injunction restraining the state treasurer from pursuing the terms of the statute.

At the succeeding session of the legislature an act was passed amending the title and body of the former act and supplementing its provisions. This latter act was approved on May 21, 1942, and is distinguished as Chapter 241, P.L.1942, p. 651, N.J.S.A.App.A.:4-7.1 et seq.

On March 16, 1942, the defendant, State Treasurer William H. Albright, died and on May 28, 1942, Honorable Robert C. Hendrickson qualified as his successor. These occurrences subsequent to the presentation of the original information have occasioned the...