Indep. Warehouses Inc. v. Scheele

• Decision Date: 31 January 1946
• Docket Number: Nos. 4, 28.,s. 4, 28.
• Parties: INDEPENDENT WAREHOUSES, Inc., et al. v. SCHEELE, Township Recorder, et al. THOMPSON v. SAME.
• Court: New Jersey Supreme Court

134 N.J.L. 133

45 A.2d 703

INDEPENDENT WAREHOUSES, Inc., et al.

v.SCHEELE, Township Recorder, et al.

THOMPSON

v.SAME.

Nos. 4, 28.

Court of Errors and Appeals of New Jersey.

Jan. 31. 1946.

Appeal from Supreme Court.

Certiorari by Independent Warehouses, Inc., against William Scheele, Recorder of the Township of Saddle River, and the Township of Saddle River, in Bergen County, wherein the Pennsylvania Coal Company and the Erie Railroad Company intervened, consolidated with a certiorari proceeding by James Thompson against the same defendant to review convictions of the prosecutors for violation of an ordinance of the defendant municipality on a charge of storing coal in a warehouse without first having obtained a license therefor. From a judgment of the Supreme Court, 132 N.J.L. 390, 40 A.2d 796, setting aside the ordinance and reversing the convictions, the defendants appeal.

Judgments of the Supreme Court reversed and the judgments of conviction affirmed.

WELLS and DILL, Judges, dissenting.

Chandless, Weller & Kramer, of Hackensack (Ralph W. Chandless, of Hackensack, of counsel), for appellants.

Collins & Corbin, of Jersey City, for respondents Independent Warehouses, Inc., and James Thompson.

Hobart, Minard & Cooper, of Newark (Robert J. Bain, of Jersey City, and Duane E. Minard and G. Addison Hobart, both of Newark, of counsel), for respondents Pennsylvania Coal Co. and Erie R. Co.

HEHER, Justice.

The challenged ordinance provides for the licensing of ‘the business of the storage of personal property in a warehouse engaged in storing goods for hire,’ and ‘the place of premises' in which such business ‘is conducted or carried on,’ and levies, admittedly as a revenue measure, an ‘annual fee’ to be computed ‘on the basis or rate of three-quarters of a cent for each square foot of the total ground area of the place and premises' devoted to the business; and it is the insistence of respondents that, since this bylaw lays the license fee upon the ‘place or premises' in which the storage business is carried on, ‘measured by land areas,’ it is, in effect, an additional tax ‘upon the property,’ and that, at all events, it is in substance a tax laid upon the stored coal ‘in lieu of personal property taxes' that would be leviable thereon were it not for the exemption granted by R.S.54:4-3.20, N.J.S.A., and thus a negation of that legislative policy. If ‘perishable goods' are stored upon the licensed premises, the licensee is under a duty to comply with all health regulations ‘required by any federal, state or municipal authority.’ He is also enjoined to observe all police and fire regulations laid down by the local ‘police and fire authorities.’ And there is provision for inspection of the premises by the local police, fire and health authories, and a requirement that the storage of ‘any inflammable or combustible matter’ thereon shall be immediately reported to the governing body. Respondents' business in within the exemption category. Pattison & Bowns, Inc., v. Township of Saddle River, 129 N.J.L. 135, 28 A.2d 485, affirmed 130 N.J.L. 177, 32 A.2d 363. We find these points to be devoid of substance.

The ordinance was enacted in the purported exercise of the power conferred by R.S.40:52-1 subd. g and 40:52-2 N.J.S.A.; and these provisions and sec. 54:4-3.20, supra, are mutually exclusive. The former involves a license or privilege tax or excise levied for both revenue and regulation under the police power, while the latter section has reference to a property tax merely. The levies may coexist, if such be the legislative intention; and this is the case here. Sec. 54:4-3.20 plainly confines the exemption to property taxes, i. e. ‘personal property stored in a warehouse’ of one ‘engaged in the business of storing goods for hire.’

License is a means of regulating and taxing privileges and occupations and the use and disposal of property. The exactions thereby made do not take the category of an ad valorem property tax. License and property taxes cover separate and distinct areas of the local taxing power; and they have radically different attributes. Jersey City v. Martin, 126 N.J.L. 353, 19 A.2d 40. See, also, Bowman v. Continental Oil Co., 256 U.S. 642, 41 S.Ct. 606, 65 L.Ed. 1139. The one is a tax upon the business of the warehouseman; the other is a direct tax upon the property of third persons stored in the warehouse. And the exercise of the latter power is confined by specific constitutional limitations which do not apply to the former. There is no suggestion of a legislative purpose to render the storage and warehouse business immune from the tax for revenue and regulation permissible under the cited licensing statute. The frame of the statutes is not consistent with the theory of an all-inclusive exemption from taxes of both classes. The contention contra necessarily proceeds upon the hypothesis that, prior to the adoption of the exemption statute, the ad valorem property tax was exclusive of all license taxes and excises; and this proposition is obviously untenable. The argument of competitive disadvantage is one to be addressed to the legislative forum.

But the exercise of the licensing power cannot exceed the bounds of reason. The law will not suffer confiscation and oppression under the guise of taxation. The quantum of the tax rests in sound discretion, guided by reason; and judicial intervention is justifiable only where there has been an abuse of the power. If the local legislative action is not clearly unreasonable or unduly appressive or discriminatory, its policy is not a justiciable question. The Great Atlantic & Pacific Tea Co., Inc., v. Camden, 122 N.J.L. 47, 4 A.2d 16; Giant Tiger Corporation v. Camden, 122 N.J.L. 240, 4 A.2d 775; American Grocery Co. v. Board of Commissioners of New Brunswick, 124 N.J.L. 293, 11 A.2d 599; Gurland v. Town of Kearney, 128 N.J.L. 22, 24 A.2d 210.

And we are clear that the taxes thus levied do not constitute a direct and undue burden upon and therefore a regulation of interstate commerce in contravention of Article I, sec. VIII, cl. 3, of the Federal Constitution.

The regulation of foreign and interstate commerce is a subject within the exclusive jurisdiction of the Congress. This control embraces all the instrumentalities by which such commerce may be carried on. And, while a state possesses the power to tax property having a situs within its confines, whether employed in interstate commerce or not, it cannot impose a tax for the privilege of engaging in such commerce. Helson v. Commonwealth of Kentucky, 279 U.S. 245, 49 S.Ct. 279, 73 L.Ed. 683; Sprout v. South Bend, 277 U.S. 163, 48 S.Ct. 502, 72 L.Ed. 833; McCall v. People of California, 136 U.S. 104, 10 S.Ct. 881, 34 L.Ed. 392. But a tax for the privilege of exercising a corporate franchise within the state is not obnoxious to the commerce clause. A tax measured by net profits earned within the state is valid, even though these profits may have been derived in part, or indeed mainly, from interstate commerce. A franchise is deemed a part of the corporate property lawfully taxable in the state. Underwood Typewriter Co. v. Chamberlain, 254 U.S. 113, 41 S.Ct. 45, 65 L.Ed. 165; United States Glue Co. v. Oak Creek, 247 U.S.321, 38 S.Ct. 499, 62 L.Ed. 1135; Northwestern Mutual Life Ins. Co. v. State of Wisconsin, 247 U.S. 132, 38 S.Ct. 444, 62 L.Ed. 1025. The tax levy here is not of the proscribed class.

The essential facts are not in dispute. The storage plant, commonly known as ‘Coalberg,’ is owned by the Pennsylvania Coal Company, a Pennsylvania corporation. It comprises 67 1/4 acres of land and buildings, tracks, chutes, hoppers, scales, machinery and equipment. The owner leased the yard in its entirety to Independent Warehouses, Inc., a New York corporation, at the nominal annual rental of one dollar. These corporations are wholly owned subsidiaries of the Erie Railroad Company, a common carrier in interstate commerce; and under agreements between these parties, the plant is operated by the Pennsylvania Company ‘for the benefit and on behalf of,’ and at the sole expense of the Erie Company's trustees, ‘as a public service facility for shippers of prepared anthracite coal on Erie lines desiring storage space in accordance with and under the rates named in a certain tariff on file with the Interstate Commerce Commission and the Public Utilities Commission of the State of New Jersey, issued January 24, 1939,’ and any supplements thereto. The Erie's trustees agreed to maintain an agent at the yard authorized on their behalf to issue warehouse receipts for coal placed therein ‘for storage by shippers.’ The Pennsylvania Company undertook to remit to the trustees, monthly, the net operating surplus; and the trustees assumed the obligation of reimbursement for the net operating loss, if any. By express provision, ‘taxes' are includable in the ‘allowable items of expense chargeable against’ operation and maintenance. By this arrangement, the Erie's trustees sought to avert the diversion ‘of shipments of coal * * * to other and competing lines on which facilities for coal storage are available.’

The agreement with Independent Warehouses, Inc., recites that it was ‘the desire and for the interest’ of the Pennsylvania Company that the lessee should conduct upon the premises the ‘general business of a warehouseman,’ and provides that the lessee shall devote the yard to such purposes, and shall furnish storage therein for ‘any and all types of coal * * * tendered to it for warehousing for the account or at the request of’ the Pennsylvania Company (if there shall be available storage space) at the rate of two cents per ton, with a minimum annual charge of $600. There was also a provision for reimbursement of the lessee for its losses, costs and expenses not classable as ‘ordinary.’ By a supplemental agreement, the storage rate was reduced to one-half cent per ton, and the annual minimum charge to $500. The...