Court Opinion

ID: 3565565
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:15:25.386905+00
Date Added: 2024-06-11T13:44:51.243066
License: Public Domain

This is an appeal from a judgment of the Supreme Court entered upon an order discharging certain consolidated rules directing the State Comptroller to show cause why a writ of mandamus
should not issue commanding him "to draw his warrant upon the Treasurer of the State of New Jersey for the distribution of interest which became due on taxes assessed against Class 2 railroad property and has been paid into the State Treasury, to the municipalities in which said Class 2 property was situated * * *."
The Supreme Court held (132 N.J.L. 601):
"The questions at issue are broadly two:
"I. Will the writ go against a state officer? This depends upon the question of whether R.S. 54:24-11, et seq., still controls the distribution of moneys derived from railroad tax payments.
"II. Are chapters 4, 5, 6 and 34 of Pamph. L. 1945, constitutional enactments?"
The members of the court found themselves "not completely in accord" upon the second question above stated and dismissed the consolidated rules to show cause, stating "The constitutionality of the statute is the main issue before us."
Consequently this appeal to this court under R.S. 2:83-15.
Following the decision of this court in Wilentz,Attorney-General, c., v. Hendrickson, State Treasurer, c.,135 N.J. Eq. 244, the delinquent railroads paid into the state treasury, as required by statute, $20,203,639.33 on account of principal of past due taxes and $15,276,373.33 in interest due and owing under R.S. 54:27-4, the correct amount of this latter item being in dispute between the railroads and the state at that time and is in litigation now. Certain other railroads are still in default as to principal or interest or both. The tax arrearages were for the years 1932 to 1940, inclusive.
The principal and interest on the past due Class I, III and IV railroad taxes were paid into the state treasury pursuant *Page 439 
to R.S. 54:24-6 and the paid principal of Class II railroad taxes was allocated and distributed by the State Treasurer and State Comptroller to the municipalities entitled thereto underR.S. 54:24-11 and 54:24-13. The State Comptroller refused to allocate and distribute to these same municipalities $8,076,047.60 which is the interest actually paid by the railroads on Class II taxes, and he challenged their right to it under R.S. 54:24-11 and 54:24-13 on the ground that these sections did not specifically authorize the distribution of it on the same basis as the principal of Class II taxes.
This impasse between the relators-appellants and the respondent-comptroller was reached late in 1944. Early in 1945, and subsequent to our judgment in Wilentz v. Hendrickson,supra, the legislature passed Pamph. L. 1945, chs. 4, 5, 6 and 34, the ostensible general purpose of which was a new and integrated statutory scheme for the allocation and distribution of the interest already paid and to be paid on such past due railroad taxes. The real and drastic change designed to be accomplished by the statutes is the diversion of all the interest, paid or unpaid and accrued on unpaid principal, of all Class II railroad taxes from the municipalities in which such properties are located and for whose purposes such taxes were assessed, levied, collected and dedicated by statute, R.S.
54:24-7 to 54:24-13 and to require that they be paid into the treasury of the state as general funds subject to use by the state or kept available for such other purposes as the legislature should determine.
The respondents, at the outset, raise two objections to the proceedings: (1) they are in fact a suit against the state which may not be maintained without its consent; (2) mandamus will not issue in a doubtful case.
A consideration of all the applicable statutes, together with decisions of this court construing them, discloses that the duties imposed by these sections of the statute upon the State Comptroller are ministerial and do not involve any exercise of discretion by him as a state officer.
A suit against a state officer or agency to compel bymandamus, or similar process, the performance of official duties of a purely ministerial nature, involving the exercise of no *Page 440 
discretion is not a suit against the state and may be maintained without its consent, 59 C.J. 312, § 466; 38 Id. 659, § 198. It is the essence of a prerogative writ, such as mandamus, that it is an appeal to the crown or sovereign state to remedy whatever may be amiss in the conduct of its public affairs, because the administration thereof is not chargeable to the crown personally or the state, but is chargeable to the ministers or officers who are accountable to the people. The prerogative of the crown or state extends not to do any injury; for being created for the benefit of the people, it cannot be exerted to their prejudice. 3 Blackstone [*]255.
The reason for the rule that mandamus will lie against a state officer is that a sovereign state must be presumed to be willing that its laws shall be obeyed. Through its laws it speaks to its servants and commands them to do that which is required. Certainly those servants by their acts of disobedience do not represent or stand for the state. The action on mandamus, therefore, instead of being a suit against the state, is against its servants to compel them to do that duty, which by accepting office, they agreed to perform, 59 C.J. 312. Where the duty of a public treasury official is delineated and "charged by statute," the writ will clearly lie. Tapping on Mandamus
[*]265.
This we conceive to be the situation here presented. Cf.Angle v. Runyon, Comptroller, 38 N.J.L. 403; Compton v.Anderson, Comptroller, 52 Id. 150; Willson v. Swain,Treasurer, 60 Id. 115; Trustees of Rutgers College v.Morgan, Comptroller, 70 Id. 460; affirmed, 71 Id. 663. In the very case relied on most strongly by the respondent-comptroller to support his arguments as to the proper construction of R.S. 54:24-11 and 54:24-13, Burlington County
v. Martin, c., Murray, Comptroller, et al., 128 N.J.L. 203;affirmed, 129 Id. 92, this court did not question thatmandamus would lie against the State Comptroller. The Comptroller is an auditing officer and cannot question the validity of an act of legislation directing the payment of money by the state or disregard its authority, Angle v. Runyon,Comptroller, supra (at pp. 408, 409).
We hold, therefore, adversely to the contentions of the *Page 441 
respondent-comptroller on both of these preliminary objections.
With these questions disposed of we turn our attention to the other basic issues suggested, but not decided, by the Supreme Court.
The first is: Is the interest on delinquent taxes against Class II railroad properties a part of the tax and does it follow the principal?
We conclude that it is and does. This is conclusively disposed of by Wilentz v. Hendrickson, 135 N.J. Eq. 244, 256. The holdings of this court in Burlington v. Martin, 129 N.J.L. 92; affirming 128 Id. 203, and Wilentz v. Hendrickson,135 N.J. Eq. 244, are not in conflict. Neither the class of tax nor the statutes are identical.
The interest follows the principal in a transfer inheritance tax and is wholly retained by the state. The amendment whereby the county of decedent's residence profits to the extent of five per cent. of the tax (54:33-10) does not include any part of the interest. The statute does not so provide. These statutes are notin pari materia and no legitimate argument could be advanced for that proposition. The former is a transfer inheritance tax statute; the latter a Railroad Tax Act providing for taxation of a certain class of railroad property.
That the interest follows the principal is a corollary ofWilentz v. Hendrickson, supra. The interest was compensation for the loss of the use of the principal and on this basis alone it follows the principal. There is nothing in the statutes to suggest a purpose to separate the two and make one disposition of the principal and another of the interest, but quite to the contrary. Since interest is compensation for loss of the use of the principal it inevitably follows that the interest belongs to him who has lost the use of his principal. A contrary construction would do violence to reason and logic.
The history of all these statutes clearly indicates a legislative intent to compensate municipalities for the loss of ratables used for railroad purposes. Originally the property a railroad could acquire and hold was limited by its charter. See Charter of New Jersey Railroad and Transportation Company, *Page 442 
limiting it to a main stem width of 66 feet and for each terminal three acres. Pamph. L. 1832, pp. 96, 98, 102. In the face of agitation starting in 1846, Pamph. L. 1855, ch. 52, p. 118, was enacted and authorized the railroads to acquire lands in excess of their charter grants but provided that the excess should be subject to taxes the same as other lands in the same city would be. As the railroads acquired such other properties there was great public agitation that they, too, should pay a fair share of the cost of local government which reached high points in 1846, 1869, 1870 and 1881.
The preamble of Pamph. L. 1873, ch. 450, p. 112, clearly states the legislative intent that the burden of local government should be shared by the railroads. The act of 1884, followed this pattern and intention. The 1896 Commission appointed by the Governor recommended that Class II railroad property should be taxed and the proceeds allotted to the local taxing districts. See Commission Report, pages 13-25. This said also that in all large cities throughout the country where railroad terminals are located, similar property is taxed and the tax turned over to local governments as compensation for the loss of ratables. The history and purpose of subsequent legislation, now found in the Revised Statutes of 1937, is set forth at length in Board ofAssessors v. Central Railroad Co., 48 N.J.L. 146; Bergenand Dundee Railroad Co. v. State Board of Assessors, 74 Id.742, 744; Central Railroad Co. v. State Board of Assessors,75 Id. 120, 124; Id. 771, 773.
There is disclosed in all this history a legislative intent to compensate the local district for the loss of ratables. It follows, therefore, that the interest should follow the principal as compensation for the non-payment of the principal of the tax.
If such taxes, when due, are not promptly paid, the loss falls upon the particular municipality — not the state. Therefore the compensation for the loss (interest), when paid, goes to remedy the situation resulting from delinquence. This is the common sense of the matter.
In Burlington County v. Martin, supra, the affirmance of this court was based primarily upon the ground that the *Page 443 
settled practical construction of the statute for over thirty years coupled with a delay of four years in asserting its rights did not justify the county's claim to interest, and that the prerogative writ of mandamus would not be awarded where such allowance would create disorder and confusion.
This we particularly pointed out in the Wilentz v.Hendrickson case which is controlling here.
In Wilentz v. Hendrickson, supra (at p. 256), this court speaking through Mr. Justice Perskie said: "The statute (R.S.
54:27-4, et seq.) fixes the quality of the interest charge; and we are not at liberty to make an essential distinction not found in the legislative expression. The interest, as it accrues, merges in what the statute itself denominates a `debt' due [from the company] the state * * * for which an action at law or suit in equity may be maintained, and shall be a preferred debt in case of insolvency."
The depositions taken in the cause indicate that it has been a long standing practice to allocate and distribute the interest on the same basis as the principal of the tax. In the absence of a specific provision in the statute there could be no other rational construction thereof. Contemporaneous construction has given the force of law to the doctrine that the interest follows the principal. The duty was apparently so obvious that prior State Comptrollers followed the practice without question. The respondent-comptroller admits the practice and the effect of contemporaneous construction, but his position is that such action and practice were erroneous.
We hold to the contrary and that under the statute the interest is an integral and inseparable part of the tax debt and is to be distributed on the same basis as the tax principal for these reasons: (1) such a conclusion is compelling in the decision inWilentz v. Hendrickson, supra, (2) in the absence of a specific provision to the contrary, no other rational construction of the statute is possible, (3) the uninterrupted contemporaneous construction placed upon these actions for years by the respondent-comptroller's predecessors in office is most persuasive in reaching this conclusion.
Most of the provisions of "An act for the taxation of railroad and canal property" (Pamph. L. 1884, ch. 101, p. 142) *Page 444 
as amended and supplemented were repealed by Pamph. L. 1941,ch. 291, as amended by Pamph. L. 1942, ch. 169, but the seventy-fourth section of these acts (R.S. 54:29A-74), provides that "Nor shall this act affect in any manner any distribution allotment or apportionment of tax receipts made or required to be made under any provision of law repealed by this Act." In such a situation the rule is that the pre-existing law stands unaffected.
We now turn to a consideration of chapters 4, 5, 6 and 34,Pamph. L. 1945.
Their intended effect is to divert and redistribute these interest funds. While the enactments are four in number they present one integrated plan and purpose and must be consideredin pari materia.
The relator-appellants contend that these statutes for several reasons are unconstitutional.
We are warranted in determining these questions to consider the purpose and effect of these acts and are not limited to "verbal and rhetorical niceties." Wilentz v. Hendrickson, supra (atpp. 251, 252), and cases there cited; Erion v. Board ofPension, c., Hoboken, 11 N.J. Mis. R. 122, 126; affirmed,111 N.J.L. 243.
Generally speaking, all taxes are state taxes and may be distributed by the legislature without control of the judicial department. However, such legislative power of distribution is subject to the restraints of the constitution having regard in the construction thereof to certain established fundamental rules and principles under our republican form of government.
We so held in Jersey City v. Martin, 126 N.J.L. 353, and this is conceded by the relators as well as that they have not vested interest in the funds. However, when these funds (interest) were paid, being an inseparable part of the tax debt, they were constructively funds of the respective taxing districts in which were located second class railroad properties upon which the principal of these taxes had been assessed and raised. To all intents and purposes the situation became the same as if the money (interest) had been distributed, as it should, with the principal under R.S. 54:24-11 and 13.
Constructive possession is a possession in law, without possession *Page 445 
in fact; that which exists in contemplation of law, without actual personal possession. Hodges v. Eddy, 38 Vt. 344; 3Bouv. Law Dict., "Possession;" 7 Am.  Eng. Encycl. 4; 8Cyc. 1142; 12 C.J. 1304.
The lowest and most imperfect degree of title consists in the mere naked possession, or actual occupation of the estate without any apparent right or any shadow or pretense of right, to hold and continue such possession. The right of possession may reside in one man while the actual possession is not in himself but another. Though the actual possession be lost, yet he still may have the right of possession and may assert it whenever he thinks it proper. 2 Blackstone [*]196.
And this is the situation here.
Our holdings in Wilentz v. Hendrickson, supra, both in reason and logic lead to the indubitable conclusion that these funds (tax principal and interest) were in the constructive possession of the respective municipalities as an inseparable part of the tax debt from the time of the payment thereof by the tax debtor.
It is to be borne in mind that as to Class I, III and IV properties that part of the tax was levied for "the uses of the State, according to law," at a state rate fixed by the legislature, and the valuations were not included in the local ratables.
On the other hand, Class II property valuations were added to the aggregate of valuations of the districts where such properties were located, R.S. 54:24-9, the anticipated income from the tax was included in the receipts of the local budgets,Williams v. Bettle, 51 N.J.L. 512, and the tax levied at a local rate struck on this bases, R.S. 54:24-10. The tax when collected was allotted to the local district to be "at the disposal of the proper authorities for public purposes." R.S.
54:24-13.
This plan met the constitutional requirements set out in the decisions of this court in Bernards Township v. Allen,61 N.J.L. 228, and Van Cleve v. Passaic Valley SewerageCommission, 71 Id. 574.
We held in those cases that where there is a delegation of the taxing power, or an essential element thereof, to a local *Page 446 
taxing district, the tax raised thereunder can only be used for the sole purpose of enabling such districts to exercise the powers of government conferred on them within the territorial limits of the district.
The fixing of a rate is an essential part of the taxing power. A local tax rate in a taxing district of this state is determined annually and increases or decreases in approximately direct proportion to the cost of local government. The principle that taxation and representation go together which applies here, VanCleve v. Passaic Valley Sewerage Commission, supra (at p.
584), has its genesis in the right of a citizen to choose by ballot the officers of a taxing district for whose public purposes he is taxed and a citizen can thereby control the expenditures and cost of government in that district. Van Riper
v. Parsons, 40 N.J.L. 1 (at p. 5).
It follows, therefore, that the local taxing district was entitled under our system of representative government to these funds.
The temporary actual possession of the state was but a convenient form of collection and distribution of the tax. StateBoard of Assessors v. Central Railroad Co., supra (at p.
292). The local districts were entitled to receive the tax intoto just as other municipal taxes are received for local purposes generally, Gillen v. Essex County Board of Taxation,91 N.J.L. 76 (at p. 80).
The fact that the moneys in question may be extra moneys not called for by the current local budgets is of no moment. A sufficient answer to that is that the burdens of taxation in the future are lightened to that extent. Pennsylvania T.  T.R.R.Co. v. Hendrickson, 87 N.J.L. 239, 243; Cf. Williams v.Bettle, supra.
The moneys were to be distributed to the local districts for local purposes and in the absence of a specific provision we discern no legislative intention that they could be diverted to other unrelated purposes prior to their disbursement.
There is no doubt but that the legislature may do as it will with tax funds, collected or uncollected, distributed or undistributed, in whole or in part, so long as it is accomplished in a way and manner, which under the facts presented, *Page 447 
do not violate the constitutional restraints and limitations and fundamental principles of taxation.
But do these enactments do so?
Our answer is in the negative.
Whether denominated as tax, recapture, or diversion acts the result is the same.
And it must be prominently kept in mind that what the legislature may not constitutionally do directly it may not do indirectly. In re Voorhees, 123 N.J. Eq. 142; Union CountyTrust Co. v. Martin, 121 N.J.L. 594; 124 Id. 35, andWilentz v. Hendrickson, 135 N.J. Eq. 244 (at p. 252).
The acts in question plainly violate article IV, section 7, paragraph 11, of the constitution in that they are special and discriminatory and arbitrarily create a classification of fourteen contributing municipalities and 553 beneficiary municipalities.
Under this provision of the constitution, the state may not arbitrarily take funds from one municipality and allot them to another, nor arbitrarily require a group of municipalities to contribute from their tax revenues to the support of the state government and absolve others from the same obligation, especially where the diverted funds are derived from assessments levied upon local properties. Nor may the state call upon the municipalities, or some of them, to turn over to it, for state purposes, or for disbursement to other municipalities, moneys raised by local taxation upon a specified class of property, such as farm lands, public utilities or any other special class, for thereby would be created a grossly disproportionate sharing of the common obligation and some would escape it entirely.
The distribution of the burden cannot be arbitrary or unreasonable.
The purpose, operation and effect of these statutes will be a diversion that will bring a loss to municipalities in Hudson County of $3,612,907.45 to the benefit and gain, in varying amounts to these in each of the other twenty counties of the state.
In other words an impost is laid upon the Hudson County municipalities for the benefit and gain of the municipalities *Page 448 
and school districts of all the rest of the state. Does this make for equality and uniformity of the tax burden or is it confiscation? The presentation of the proposition immediately forces the latter as the answer.
As stated by Chief Justice Beasley in Agens v. Newark
(Court of Errors and Appeals, 1874), 37 N.J.L. 415, 421: "In a government in which the legislative power is not omnipotent, and in which it is a fundamental axiom that private property cannot be taken without just compensation, the existence of an unlimited right in the lawmaking power to concentrate the burthen of a tax upon specified property, does not exist. * * * If this cannot be maintained, then it follows that it is conceded that the legislative power in question is not completely arbitrary. It has its limit; and the only inquiry is, where that limit is to be placed."
It is axiomatic that a draft by the state upon the municipalities for the support of the state government, or a subject of primary concern to it, must apportion the burden equally and fairly among the municipalities for, in the final analysis, the local owners of real and personal ratables are affected, since the moneys thus withdrawn are necessarily, both in theory and practice, reflected in their tax bills.
The sole criterion, in these statutes, of the obligation to contribute moneys for general state or state school purposes is the legal right to receive tax moneys from a particular kind of assessed ratable and all municipalities which are not in this category are exempt from the obligation of making contributions.
This makes these acts clearly special and discriminatory and the classification is illusory and inappropriate.
They create preferences and inequalities within a class and do not operate equally on all members of the class. Alexander v.Elizabeth, 56 N.J.L. 71, 81, 82; Van Riper v. Parsons, 40Id. 1; Woodruff v. Passaic, 42 Id. 533. They do notincidentally produce a local or special result but were illusorily conceived with a purpose and idea that their inherent force and scope would produce a local and not a general result.In re Cleveland, 51 Id. 319, 322; Raymond v. Teaneck, 118Id. 109; In re Prudential Insurance Co. (Court ofChancery), *Page 449 132 N.J. Eq. 170, 173. And their resulting effect is to regulate the "internal affairs of towns and counties * * *."
All matters which are the subject of control by a municipality, which exist or may thereafter be conferred, concern the internal affairs of a town, county or municipality. Alexander v.Elizabeth, supra (at p. 76). A law regulates the internal affairs of a municipality when it imposes an expense upon it or adds to its treasury, State v. Price, 71 N.J.L. 249, 251, or regulates how it shall spend its funds, Freeholders v.Stevenson, 46 Id. 173, 187. See, also, Anderson v.Trenton, 42 Id. 486, 488; Freeholders of Hudson v. Buck,51 Id. 155, 159; Halsey v. Nowrey, 71 Id. 481, 485, and cases cited there.
In fact these statutes work arbitrary impositions upon certain municipalities and their taxpayers for the benefit of other municipalities and the state generally. Impositions are not laid upon 394 municipalities and not visited upon 553, in the sense that the combined effect is such as to give to the latter a net pecuniary gain.
In Skinkle v. Essex Road Board (Supreme Court, 1885),47 N.J.L. 93, recognition is given to the principle that the legislature may not divert the property of one municipality to the support or benefit of another.
This is precisely what was done here. The interest moneys, following the principal, were the property of the respective municipalities, although constructively, but there is no essential difference, in principle, between moneys in the local treasuries and funds belonging to the municipalities but in the state treasury, for the time being, merely awaiting proper distribution.
And in Baldwin v. Fuller (1877), 39 N.J.L. 576, 578;affirmed (1878), 40 Id. 615, Mr. Justice Van Syckle said: "But it seems equally clear that a tax for state purposes must fall upon the state at large; for county purposes, upon the county; and for the public uses of any lesser political district, upon such district.
"The County of Hudson could not be required to defray the entire expense of the state government, nor could one township, in that county, be compelled to yield the whole *Page 450 
revenue necessary for county purposes; nor could the legislature impose upon a single citizen the whole burden of taxation in the township in which he may reside. Any such fiscal scheme would bepronounced, by the common judgment of mankind, so contrary to theprinciples of natural justice, that we would be driven toconclude that there was some radical error in the premises uponwhich its justification was grounded. Not that courts may pronounce a law which it is within the general sphere of legislation to pass, to be void merely because it is, in their judgment, contrary to the principles of equity. The rule is conceded to be otherwise, but there are some things so repugnantto our sense of justice, that we cannot admit that they arecomprehended, in our system, in the powers of government. As an instance, we unhesitatingly declare that the legislature cannot make a man to be a judge in his own case. Aside from this consideration, laws of the character specified would, to the extent that one man's property is appropriated by them, inexcess of his just contribution, to relieve others of a publicburden, properly resting upon them, take private property forpublic use, without just compensation. It would be confiscation,not taxation." [Italics ours.]
For these reasons we find that chapters 4, 5, 6 and 34, Pamph.L. 1945, are constitutionally infirm and so arbitrary and unjust and discriminating that they cannot be upheld. They violate the essential quality of fairness in the matter of just distribution of the burdens of government. The funds in question should have been and must be distributed as provided by R.S. 54:24-11 and 13.
Other constitutional infirmities are urged, but having concluded as we do that these enactments are special and discriminatory and thus trespass upon article IV, section 7, paragraph 11 of the state constitution it becomes unnecessary to consider or pass upon the other objections thereto.
The judgment under review is reversed and the cause remanded to the Supreme Court with direction to issue its peremptory writ ofmandamus in accordance with the prayer of the petition. *Page 451