In re Central R. Co. of New Jersey
Decision Date | 15 July 1947 |
Docket Number | No. 8808.,8808. |
Citation | 163 F.2d 44 |
Parties | In re CENTRAL R. CO. OF NEW JERSEY. |
Court | U.S. Court of Appeals — Third Circuit |
Benjamin C. Van Tine, of Trenton, N. J. (Walter D. Van Riper, Atty. Gen. of New Jersey, and Milton B. Conford, of Newark, N. J., on the brief), for appellants.
James D. Carpenter, of Jersey City, N. J. (Howard L. Kern and Alexander H. Elder, both of New York City, on the brief), for trustee of debtor appellee.
Blair Reiley, of Newark, N. J. (A. M. Lewis, and Frank H. Heiss, both of New York City, Reynier J. Wortendyke, Jr., of Newark, N. J., Rathbone, Perry, Kelley & Drye, and Autenreith & Wortendyke, all of New York City, William A. Roberts, Philip S. Jessup, and Roberts & McInnis, all of Washington, D. C., Fred N. Oliver, Willard P. Scott, and Oliver & Donnally, all of New York City, Martin & Reiley, of Newark, N. J., Thomas Raeburn White, of Philadelphia, Pa., Edwin M. Slote, of New York City, and White & Williams, of Philadelphia, Pa., on the brief), for bondholders groups, etc., appellees.
Milton B. Conford, of Newark, N. J. (Charles A. Rooney, Atty. for Jersey City, and Charles Hershenstein, both of Jersey City, on the brief), for City of Jersey City amicus curiae.
Before GOODRICH, McLAUGHLIN and KALODNER, Circuit Judges.
Writ of Certiorari Denied October 27, 1947. See 68 S.Ct. 112.
This appeal concerns another phase of a matter long in litigation. The past history of it is summarized in a previous decision of this court reported at 3 Cir., 152 F.2d 408, 411, affirmed in part and reversed in part sub nom Gardner, Trustee of the Central Railroad of New Jersey, v. State of New Jersey, 329 U.S. 565, 67 S.Ct. 467. Some of the facts relevant here have been reported earlier; but those necessary will be set down regardless of that, in order to present the current question in an orderly way.
During the last two decades, New Jersey and the railroads operating within its borders have been at odds about taxation. Most of those railroads were in arrears in tax payments and some of them were in bankruptcy. The debtor here is one such railroad. In connection with this situation and after bitter controversy New Jersey enacted two statutes known as the Settlement Acts. The first of these, c. 290, P.L. 1941, p. 768, provided for payment by installments of previously delinquent railroad taxes. It forgave interest theretofore accrued and set up a new, lower rate of interest on installments to be paid. It waived other methods of the state for collection. It required waivers by the taxpayers of objections and suits contesting previous levies, the filling out of forms and the following of fixed procedures. Approval of the forms used was required of the State Attorney General. The railroads attempted to comply with the Act, but the Attorney General refused to approve the necessary forms. Drawing forms of their own, the railroads filed them together with installment payments at the office of the State Treasurer. Finally, the Attorney General brought an information in the New Jersey Court of Chancery to test the Act under the state constitution, and he secured a temporary restraint against the State Treasurer. The second Settlement Act, c. 241, P.L. 1942, p. 651, amended the title and body of the first, altering the method and nature of the provisions in a manner not here pertinent, and adding a few new provisions. On the very day of its enactment, Chancery extended its injunction of the first Act to include the second as well. The debtor here nonetheless made some vain effort to comply with the terms of the New Act.
In Wilentz v. Hendrickson, 133 N.J.Eq. 447, 33 A.2d 366, Chancery held both Settlement Acts were invalid and permanently enjoined compliance with them by the State Treasurer, the only named defendant in the case. The pertinent provisions of the final decree invalidating the Settlement Acts are as follows:
This decision was affirmed on its own reasoning and that of the Court of Errors and Appeals. 135 N.J.Eq. 244, 261, 38 A.2d 199.
Thereafter the debtor petitioned the Bankruptcy Court, in which it had been for some time for reorganization, to ascertain its status and obligations toward the state following the events above outlined. The debtor desired to know if the voiding of the Settlement Acts applied to it and if its attempted compliance with those Acts spelled out the execution of a contract with the state. By its order 250 the reorganization court appointed a master to ascertain a number of matters in the reorganization, including, by implication, power to recommend answers to the above problems. To this order the State Attorney General took exception. Representing New Jersey as a creditor for taxes in the debtor's reorganization, he petitioned for a stay against the master until a state court had passed upon the questions and for permission to bring those questions before that court. The reorganization court denied this petition.
The appeal from that denial, which is now at bar, was kept pending during the determination by the Supreme Court in the Gardner case, supra. Justice Douglas, speaking for that court in the Gardner opinion said, concerning this appeal, at page 582 of 329 U.S., at page 476 of 67 S.Ct.:
I. The first question to be passed upon is therefore whether a state court or a federal court should decide if the setting aside of a state statute applies to a party not represented in the state court and if the parties are bound by an alleged compromise reached earlier under that void Act.
If that were the only question present, the problem could be determined quite simply in favor of the federal court. There would be involved between parties properly in a federal forum under the terms of the Bankruptcy Act, 11 U.S.C.A. § 1 et seq., a number of state law questions to be decided by an application of state law as prescribed by Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487. There is no problem of the violation here of the federal constitution by a state statute as yet unconstrued by state courts, such as was present in Spector Motor Service, Inc., v. McLaughlin, 323 U.S. 101, 65 S.Ct. 152, 89 L.Ed. 101; Alabama State Federation of Labor et al. v. McAdory, 325 U.S. 450, 65 S.Ct. 1384, 89 L.Ed. 1725; City of Chicago v. Fieldcrest Dairies, 316 U.S. 168, 62 S.Ct. 986, 86 L.Ed. 1355; Railroad Commission of Texas v. Pullman Co., 312 U.S. 496, 61...
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