Registrar & Transfer Co. v. Director, Division of Taxation, Dept. of Treasury

• Citation: 166 N.J.Super. 75,398 A.2d 1335
• Parties: REGISTRAR & TRANSFER COMPANY, Plaintiff-Respondent, v. DIRECTOR, DIVISION OF TAXATION, DEPARTMENT OF the TREASURY, State of NewJersey, Defendant-Appellant.
• Decision Date: 13 February 1979
• Court: New Jersey Superior Court — Appellate Division

Page 75

166 N.J.Super. 75

398 A.2d 1335

REGISTRAR & TRANSFER COMPANY, Plaintiff-Respondent, v. DIRECTOR, DIVISION OF TAXATION, DEPARTMENT OF the TREASURY State of NewJersey, Defendant-Appellant.

Superior Court of New Jersey, Appellate Division.

Argued Jan. 23, 1979.

Decided Feb. 13, 1979.

Harry Haushalter, Deputy Atty. Gen., for defendant-appellant (John J. Degnan, Atty. Gen., attorney; Erminie L. Conley, Asst. Atty. Gen., of counsel).

James F. Keegan, Morristown, argued the cause for plaintiff-respondent (Pitney, Hardin & Kipp, Morristown, attorneys; Gerald C. Neary and James F. Keegan, Morristown, on the brief).

Before Judges LORA, MICHELS and LARNER.

The opinion of the court was delivered by

LARNER, J. A. D.

The Director of the Division of Taxation appeals from a summary judgment granted to plaintiff Registrar & Transfer Company (Registrar) in an action for declaratory relief. The trial judge determined that receipts from the storage of cancelled stock certificates and miscellaneous related documents are not taxable under the New Jersey Sales and Use Tax Act which imposes a tax on receipts from services of "Storing all tangible property not held for sale in the regular course of business and the rental of safe deposit boxes or similar space." N.J.S.A. 54:32B-3(b)(3). The rationale for this determination is found in the court's opinion reported at 157 N.J.Super. 532, 385 A.2d 268 (Ch.Div.1978).

The Director attacks the propriety of the judgment on two fronts: (1) that plaintiff's action for declaratory judgment was improperly brought in the Chancery Division in that its exclusive remedy was by way of appeal to the Division of Tax Appeals and ultimately to the Appellate Division pursuant to R. 2:2-3(a)(2), and (2) that alternatively, the determination that the receipts from the storage service are not taxable is unwarranted in light of the purpose and intent of the applicable legislation.

We find it unnecessary at this stage of the litigation to embark upon an in-depth discussion of the question whether the trial judge was or was not justified in retaining jurisdiction of the declaratory judgment action. It is sufficient for us to note, as did the judge, that plaintiff's complaint for declaratory relief was properly brought under N.J.S.A. 2A:16-50 Et seq. as a means of adjudicating its rights under the tax statute where there existed a bona fide controversy that had not yet reached the stage at which either party could have sought a coercive remedy. See Union Cty. Bd. of Freeholders v. Union Cty. Park Comm'n, 41 N.J. 333, 336, 196 A.2d 781 (1964); Washington Tp. v. Gould, 39 N.J. 527, 533, 189 A.2d 697 (1963); Rego Industries, Inc. v. American Mod. Metals Corp., 91 N.J.Super. 447, 452-453, 221 A.2d 35 (App.Div.1966); Carls v. Civil Service Comm'n, 31 N.J.Super. 39, 42-43, 105 A.2d 874 (App.Div.1954), aff'd 17 N.J. 215, 111 A.2d 45 (1955). And since the issue for determination did not call for the exercise of administrative expertise and was purely a question of interpretation of a statute and its application to undisputed facts, we cannot fault the trial judge for continuing to exercise jurisdiction despite the intervening action of the Director in making a formal assessment while the matter was under judicial consideration.

However, regardless of the basic procedural requirements of our rules relating to administrative appeals (R. 2:2-3(a)(2)) as reflected in Equitable Life Mortg. and Realty Investors v. N. J. Div. of Tax., 151 N.J.Super. 232, 376 A.2d 966 (App.Div.), certif. den. 75 N.J. 535, 384 A.2d 514 (1977), or the traditional imperative of exhaustion of administrative remedies, the interests of justice dictate that we adopt the extraordinary course of bypassing the administrative agency in this instance in order to decide the merits of the controversy. See Matawan v. Monmouth Cty. Bd. of Tax., 51 N.J. 291, 296-297, 240 A.2d 8 (1968). We do so in order to resolve the question of construction of the statute expeditiously, without requiring the parties at this stage of the litigation to go through the process of an administrative proceeding in order to have the issue come before this court at some time in the future. The absence of controverted facts and the lack of need for administrative expertise militate against imposing such substantial delay and expense upon the litigants. See Roadway Express, Inc. v. Kingsley, 37 N.J. 136, 140-141, 179 A.2d 729 (1962); Nolan v. Fitzpatrick, 9 N.J. 477, 487, 89 A.2d 13 (1952). Under all the circumstances herein, we are satisfied that there is no compelling reason which would justify a transfer at this time. Fairness and justice require that we proceed to determine the merits of the controversy with dispatch.

The trial judge appropriately considered the merits of the controversy on cross-motions for summary judgment, for the issue is clearly one of law as applied to the undisputed operative facts.

Registrar is a registrar and transfer agent for publicly-held corporations. Among the services it renders to its customers is the storage in Jersey City of cartons of cancelled stock certificates and miscellaneous items such as stock powers, assignment forms, corporate resolutions, affidavits, inheritance tax waivers and the like. These cancelled and voided documents are retained for the purpose of preserving the information contained therein for such periods of time as may be requested by the respective corporate customers.

The corporations are entitled to this type of storage for a period of one year as an included service for the annual fee paid by each customer. Thereafter, Registrar bills the customer for the storage of cancelled documents on a quarterly basis, designating this charge on its invoices under Code No. 17. It is these quarterly storage charges which represent the base of the sales tax assessment by the Division of Taxation.

The controlling section of the statute (N.J.S.A. 54:32B-3) provides for a sales and use tax on:

* * * (b) The receipts from every sale * * * of the following services:

(3) Storing all tangible personal property not held for sale in the regular course of business and the rental of safe deposit boxes or similar space.

The "Definitions" section of the act defines tangible personal property as "corporeal personal property of any nature." N.J.S.A. 54:32B-2(g).

The focus of the opinion below and the position of Registrar are centered upon the legalism that stocks, bonds and other evidence of a right or claim against a person or corporation are categorized as "intangible" rather than "tangible" personal property. From this premise the trial judge reasoned that the cancelled stock certificates and related documents, without intrinsic value and preserved for informational purposes only, do not constitute "tangible personal property," and that the charges for their storage are therefore not subject to the sales tax.

In our opinion, this conclusion is unwarranted. Not only is it contrary to the purpose and intent of the legislation, but it is based upon an untenable premise. The trial judge mistakenly assumed that stock certificates and accompanying documents are intangible personal property. He failed to distinguish between the beneficial share of a stockholder in a corporation and the physical stock certificate evidencing that interest. The share in the corporation constitutes a chose in action which is an intangible property right. The certificate itself, however, the document evidencing stock ownership, is considered tangible personal property. See Duncan v. Kelly, 435 S.W.2d 29, 32-33 (Mo.Ct.App.1968); Strout v. Burgess, 144 Me. 263, 68 A.2d 241, 249 (Sup.Jud.Ct.1949); Tow v. Evans, 194 Ga. 160, 20 S.E.2d 922, 924 (Sup.Ct.1942); Mills v. Jacobs, 131 Pa.Super. 469, 200 A. 233, 235 (Super.Ct.1938), mod. on other grounds 333 Pa. 231, 4 A.2d 152 (Sup.Ct.1939); Bourland v. State, 133 Tex.Cr.R. 544, 112 S.W.2d 720, 721-722 (Crim.App.1937); 18 C.J.S. Corporations § 258 at 723-724. If, therefore, the paper documents herein are tangible personal property, the entire premise for...