Port of New York Authority v. City of Newark, A--62

• Decision Date: 16 January 1956
• Docket Number: No. A--62,A--62
• Citation: 120 A.2d 18,20 N.J. 386
• Parties: The PORT OF NEW YORK AUTHORITY, Plaintiff-Respondent, v. The CITY OF NEWARK et al., Defendants-Appellants.
• Court: New Jersey Supreme Court

Page 386

20 N.J. 386

120 A.2d 18

The PORT OF NEW YORK AUTHORITY, Plaintiff-Respondent, v. The CITY OF NEWARK et al., Defendants-Appellants.

No. A--62.

Supreme Court of New Jersey.

Argued Dec. 12, 1955.

Decided Jan. 16, 1956.

Vincent P. Torppey, Newark, for appellants (Algernon T. Sweeney, Newark, on the brief).

Russell E. Watson, New Brunswick, for respondent (Isobel Muirhead, Linden, and Sidney Goldstein, Daniel B. Goldberg and Joseph Lesser, of the New York Bar, New York City, on the brief).

The opinion of the court was delivered by

WACHENFELD, J.

The effort here is to reverse a judgment of the Superior Court, Law Division, setting aside tax assessments levied by the City of Newark for the years 1952 and 1953 on property owned by the Port of New York Authority and known as the Newark Union Motor Truck Terminal, or Inland Terminal No. 3. Because of the importance of the question presented, we granted certification prior to disposition of the case in the Appellate Division.

In 1921, following the report of the New York, New Jersey Port and Harbor Development Commission, the States of New York and New Jersey entered into a Compact, McK. Unconsol. Laws, § 6401 et seq., N.J.S.A. 32:1--1 et seq., consented to by Congress, Public Resolution Aug. 23, 1921, 42 Stat. 174, in which the two states specifically pledged to each other their 'faithful co-operation in the future planning and development' of the Port of New York. To effectuate the broad purpose of the Compact, the Legislatures created a body corporate and politic known as the "Port of New York Authority," which they endowed, Inter alia, with 'full power and authority to purchase, construct, lease and/or operate any terminal or transportation facility within said district; and to make charges for the use thereof * * *.'

See N.J.S.A. 32:1--2, 4, 7.

In 1922 the two Legislatures adopted a 'Comprehensive Plan for the Development of the Port of New York,' N.J.S.A. 32:1--25 et seq., which stated certain principles to govern the development of the Port as follows (N.J.S.A. 32:1--26):

'First--That terminal operations within the port district, so far as economically practicable, should be unified:

'Second--That there should be consolidation of shipments at proper classification points, so as to eliminate duplication of effort, inefficient loading of equipment, and realize reduction in expenses;

'Third--That there should be the most direct routing of all commodities, so as to avoid centers of congestion, conflicting currents and long truck hauls;

'Fourth--That terminal stations established under the comprehensive plan should be union stations, so far as practicable; * * *.'

From the foregoing it may readily be seen that the purposes for which the Port of New York Authority was created, as set forth in the Compact of 1921 and the statement of principles contained in the 1922 Comprehensive Plan, specifically envisioned and authorized the construction and operation by the Port of New York Authority of union freight terminal facilities.

Pursuant to the legislative mandate the Port of New York Authority undertook a study of the freight terminal needs of the Port. The first tangible result of the study was the construction of a railroad freight terminal station in the City of New York known as Inland Terminal No. 1, which was completed in 1932. This terminal facility provides for the trans-shipment of less than carload railroad freight to delivery points within the metropolitan area. By 1939, however, it became apparent that motor trucks were, to a large extent, displacing railroad carriers in the haulage of small freight shipments, with the result that the bridge and tunnel facilities of the Port Authority and local streets and highways were suffering extreme congestion.

A study was initiated by the Port Authority in 1939 to ascertain the advisability of construction by the Port Authority of union motor truck terminals. The first Staff Report was submitted in 1941 and recommended the construction of a motor truck terminal in the City of New York, which has since been built and is known as Inland Terminal No. 2. The second Staff Report, submitted in 1945, proposed the construction of a similar motor truck terminal in the Newark area to serve the needs of Northern New Jersey.

Briefly described, the function of a motor truck terminal is to provide terminal facilities for over-the-road, long-haul carriers so that small loads can be efficiently assorted and trans-shipped via smaller trucks and vehicles for distribution within the local area served by the terminal. The Port Authority staff study concluded that 'from the standpoint of the community the benefits will be less congestion in city streets, less congestion at shippers' platforms, more expedition in handling and ultimately cheaper cost of transportation as terminal economies are reflected in the elimination of excess delivery charges, higher charges for minimum shipments, etc.'

Following a public hearing in 1945 at which almost all persons present voiced praise and approval of the Newark motor truck terminal plan, the respective Legislatures of New York and New Jersey adopted concurrent statutes providing for the financing of the project. N.J.S.A. 32:1--141.1 et seq.

Construction of Inland Terminal No. 3, in Newark, commenced in August of 1947. The terminal was completed in 1949 at a cost of $8,300,000.

However, in September 1948, shortly before the terminal was completed, the Newark Local of the International Brotherhood of Teamsters, Local No. 478, inserted, for the first time, a clause in its standard contract with employers which prohibited over-the-road carriers who were parties to Local 478 contracts from transferring, without the union's permission, more than 5,000 pounds of freight daily to local cartage companies. Both parties concede that this clause in effect made operation of the terminal under the Port Authority's plan impossible, since that plan depended entirely upon the trans-shipment of freight from over-the-road carriers to smaller local trucks operated by local cartage companies.

The Port Authority, with the cooperation of officials of the City of Newark, made repeated efforts to induce Local 478 to eliminate the 5,000-pound limitation from its contracts with employers or to waive its application to the terminal. Simultaneously, the Port Authority sought, through the Executive Board of the International Brotherhood of Teamsters with which Local 478 was affiliated, to procure a change in the 5,000-pound limitation. All of these efforts were to no avail, and in January 1951 Local 478 flatly refused to waive the 5,000-pound limitation. Each subsequent renewal of Local 478's contracts has, despite the International's express disapproval, contained the 5,000-pound limitation.

In November 1950, while negotiations with the Local and other parties in interest were proceeding with respect to the 5,000-pound clause, the Port Authority entered into an agreement with the City of Newark pursuant to the 'in-lieu-of' tax statute, N.J.S.A. 32:1--144, which provides:

'To the end that * * * cities * * * may not suffer undue loss of taxes and assessments by reason of the acquisition and ownership of property therein by the Port of New York Authority (hereinafter called the port authority), the port authority is hereby authorized and empowered, in its discretion, to enter into a voluntary agreement or agreements with any * * * city * * * in said port district, whereby it will undertake to pay a fair and reasonable sum or sums annually in connection with any marine or inland terminal property owned by it, not in excess of the sum last paid as taxes upon such property prior to the time of its acquisition by the port authority * * *.'

Under the terms of the agreement concluded between the Port Authority and the City of Newark, the Port Authority agreed to pay to the city, in lieu of taxes, the maximum amounts permitted under the abovequoted statute, retroactive to 1947, the year in which the Port Authority acquired the land on which the terminal was built.

When the negotiations with Local 478 ended in failure, the Port Authority was faced with an acute dilemma. It had on its hands an $8,300,000 structure which had been idle for more than a year and which was, to all intents and purposes, useless for the purpose for which it had been built. However, early in 1951, following the outbreak of the undeclared war in Korea, the United States Air Force indicated its intention to 'take over' all of Port Newark for its operations in connection with the Korean conflict and for the Mutual Defense Assistance Program. According to a witness at the trial below, the Air Force 'made it known that they were going to, with all the powers they had, take back Port Newark and Newark Airport,' which they had operated during World War II.

The Port Authority was opposed to the action which the Air Force contemplated, since it desired to maintain Port Newark as a commercial rather than a military port. Following negotiations between the Air Force and the Port Authority, an agreement was ultimately worked out whereby the Air Force limited its use of property at Port Newark, and as part of the arrangement the Air Force leased the then idle Inland Terminal No. 3 for a period commencing March 14, 1951 and expiring June 30, 1955.

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