City of Philadelphia v. Smith
| Decision Date | 02 April 1980 |
| Citation | 413 A.2d 952,82 N.J. 429 |
| Parties | CITY OF PHILADELPHIA, Plaintiff-Respondent, v. George A. SMITH, Jr., Charles W. Bonnen, James L. Alesi, William A. Berenato, Myrl P. Evans and Andrew Felix Bella, Sr., Defendants-Appellants. |
| Court | New Jersey Supreme Court |
Lee B. Laskin, Haddonfield, for defendants-appellants (Laskin & Botcheos, Haddonfield, attorneys; George L. Botcheos, Haddonfield, on the brief).
Charles Crabbe Thomas, Camden, for plaintiff-respondent.
John L. McGoldrick, Newark, submitted a brief on behalf of amicus curiae New Jersey Car and Truck Rental and Leasing Ass'n ("N.J. Catrala") (McCarter & English, Newark, attorneys; John L. McGoldrick, Newark, of counsel and on the brief; Roslyn S. Harrison, Newark, on the brief).
The opinion of the court was delivered by
This appeal by defendants presents the question whether the Full Faith and Credit Clause, U.S. Const., Art. IV, § 1, requires a state to recognize that portion of a sister state's money judgment representing a civil penalty for unpaid taxes. Our conclusion is that such recognition must be given.
Defendants are New Jersey residents employed by the federal government on the naval base in Philadelphia. They are subject to the Philadelphia Wage and Net Profits Tax Ordinance (City Code § 19-508), but failed to pay the tax due under the ordinance. The federal employer did not withhold these wage taxes. See 5 U.S.C.A. § 5520. Suits were filed against defendants in the Commonwealth of Pennsylvania and default judgments obtained for the taxes due, interest thereon, and a civil penalty of 1% a month on the amount of the unpaid tax pursuant to section 9-508 of the Philadelphia City Code which provides:
* * * (i)f any tax * * * is not paid when due, interest at the rate of 1/2% of the amount of the unpaid tax and a penalty at the rate of 1% of the amount of the unpaid tax shall be added for each month or fraction thereof during which the tax shall remain unpaid and shall be collected, together with the amount of the tax.
The respective amounts included in the Pennsylvania judgments are:
Taxpayer- 1 Taxes, Costs
Defendant and Interest Penalty
--------------- ------------ -------
Alesi $2,216.15 $358.76
Berenato 1,904.39 311.34
Evans 1,494.10 235.79
Bella 1,413.64 231.18
Philadelphia then filed a consolidated action in Camden County against defendants based on the judgments obtained in Pennsylvania. The trial court entered judgments in favor of the City for the amount of the unpaid taxes, costs and interest. However, it disallowed the amount of the penalty on the ground that full faith and credit did not require this State to enforce a tax penalty imposed by a sister state, even though the penalty was included in a money judgment obtained by that state against the delinquent taxpayer.
On appeal by the City of Philadelphia the Appellate Division held that the entire amount of the Pennsylvania judgments, including penalties, must be given full faith and credit. 169 N.J.Super. 156, 404 A.2d 360 (App.Div.1979). We granted defendants' petition for certification. 81 N.J. 355, 407 A.2d 1228 (1979).
The Philadelphia wage tax has generated considerable litigation, particularly with regard to its applicability to New Jersey residents who are employed by the federal government in Philadelphia. See, e. g., In re Thompson, 157 F.Supp. 93 (E.D.Pa.1957), aff'd sub nom. United States ex rel. Thompson v. Lennox, 258 F.2d 320 (3 Cir. 1958), cert. den. 358 U.S. 931, 79 S.Ct. 317, 3 L.Ed.2d 303 (1959) (); Buckley v. Huston, 60 N.J. 472, 291 A.2d 129 (1972) (); Kiker v. Philadelphia, 346 Pa. 624, 31 A.2d 289 (Sup.Ct.1943), cert. den. 320 U.S. 741, 64 S.Ct. 41, 88 L.Ed. 439 (1943) (); Philadelphia v. Stadler, 164 N.J.Super. 281, 395 A.2d 1300 (Cty.D.Ct.1978) ().
Appellants recognize that it is now settled that they are subject to the wage tax and that it can be enforced in New Jersey. Their argument is that the Full Faith and Credit Clause of the United States Constitution (Art. IV, § 1) does not require New Jersey to recognize and enforce those parts of the Pennsylvania judgments which represent the penalty for nonpayment. They assert a "penal law" exception to full faith and credit, relying on Milwaukee County v. White Co., 296 U.S. 268, 56 S.Ct. 229, 80 L.Ed. 220 (1935), which, while it held that a judgment is not to be denied full faith and credit in state and federal courts merely because it is for taxes, added:
We intimate no opinion whether a suit upon a judgment for an obligation created by a penal law, in the international sense * * * is within the jurisdiction of the federal District Courts, or whether full faith and credit must be given to such judgment even though a suit for the penalty before reduced to judgment could not be maintained outside of the state where imposed. (296 U.S. at 279, 56 S.Ct. at 235, 80 L.Ed. at 229).
Appellants also rely on this Court's opinion in Buckley v. Huston, supra, which held that the taxing authority of Philadelphia had a common law right to bring a direct action in New Jersey to recover wage taxes due Philadelphia, but also said Although the plaintiff's complaint includes a claim for penalties as such * * * in addition to the tax and interest due thereon, we have not been asked nor are we disposed to reject, at least in the circumstances presented by the instant matter * * *, the prevailing doctrine that foreign penalties as such are not recoverable. (60 N.J. at 482, 291 A.2d at 134).
This comment, of course, was made in the context of a direct action to recover wage taxes. Buckley did not involve a Pennsylvania judgment...
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