Court Opinion

ID: 9764751
Source: CourtListenerOpinion
Date Created: 2023-08-29 03:38:42.717524+00
Date Added: 2024-06-11T07:30:01.355099
License: Public Domain

Jacobs, J., with whom William J. Brennan, Jr., J.,
joins (dissenting). In 1947 the constitutional delegates drafted and the citizens approved our basic instrument of government which was well designed to protect the liberties and further the welfare of all of the people of our State. *67In traditional fashion it vested in the Legislature, with the concurrence or above the veto of the Governor, comprehensive power to enact laws, subject only to the extraordinary power of the judiciary to determine them unconstitutional. In exercising this power courts are governed by limitations which, though well recognized, cannot be restated too often. Under democratic principles, matters of wisdom and policy are the exclusive concern of the Legislature which is fully accountable to. the electorate acting at the polls. Consequently, a law may not be stricken solely because the court thinks it dangerous and unwise. When duly .enacted it is presumptively valid, and only when it clearly appears to run counter to an express restrictive provision of the Constitution will it be declared invalid in a case actually requiring such determination. See Garrison, J., in Attorney-General v. McGuinness, 78 N. J. L. 346, 371 (E. & A. 1910); Brandeis, J., in Ashwander v. Tennessee Valley Authority, 297 U. S. 288, 341, 56 S. Ct. 466, 80 L. Ed. 688, 707 (1936).
The majority opinion concerns itself with the constitutional debt limitation embodied in Article VIII, Section II, paragraph 3, and we shall do the same. That paragraph provides that the Legislature may not create a debt or liability which, together with preexisting debts, exceeds 1% of the amount appropriated in the general appropriation act for that year, unless it is authorized by a law which provides the means for payment of interest, and discharge of principal within 35 years, and has been duly approved by a referendum of the people. It was a continuation of the policy of constitutional debt limitation found in Article IV, Section VI, paragraph 4 of the Constitution of 1844. The history of the times renders evident the purpose of the provision in the 1844 Constitution. Early in the 19th Century many of the states borrowed for the development of highways, canals and other internal improvements. Business boomed, money was plentiful, and the states had little difficulty in selling their bonds. By 1840 the bonded indebtedness of the states exceeded the then tidy sum of $200,000,000. However, with the aftermaths of the financial crisis of 1837, the borrowing *68states found themselves in difficulties and many states defaulted on their bond obligations. See Rep. No. 296, House of Rep., 27th Cong. (1843); Dewey, Financial History of the United States 243 (1934); McGrane, Foreign Bondholders and American Slate Delis (1935). In 1842 Rhode Island adopted a constitutional debt limitation and within the next two years New Jersey, although it had itself escaped difficulties, did likewise. See Tilton, Constitutional Limitations on the Creation of State Debt, 2 Const. Conv. 1947, 1708 (1951). See also Requirements for State Bond Referenda, in 10 New York State Constitutional Convention Committee, Problems Relating to Taxation and Finance, at p. 81 (1938). That the delegates to the 1844 Constitutional Convention had in mind liability such as state bonded indebtedness finds support not only from the pertinent history but also from the actual language used by them, particularly the specific requirement that the law authorizing the debt make provision “to pay the interest of such debt or liability as it falls due, and also to pay and discharge the principal of such debt or liability within thirty-five years from the time of the contracting thereof.”
The appellant has advanced the contention that within the meaning of the debt limitation provisions of the 1844 and 1947 Constitutions a lease creates an immediate liability in the aggregate amount of all of the future rents which will become due until the date of expiration. Although there are some supporting decisions the overwhelming weight of authority is to the contrary. See Ambrozich v. City of Eveleth, 200 Minn. 473, 274 N. W. 635, 112 A. L. R. 269 (Sup. Ct. 1937); City of Los Angeles v. Offner, 19 Cal. 2d 483, 122 P. 2d 14, 145 A. L. R. 1358 (Sup. Ct. 1942); Dean v. Kuchel, 35 Cal. 2d 444, 218 P. 2d 521 (Sup. Ct. 1950); Jefferson School Township v. Jefferson Township School Building Co., 212 Ind. 542, 10 N. E. 2d 608 (Sup. Ct. 1937); 112 A. L. R. 278; cf. Kelley v. Earle, 325 Pa. 337, 190 A. 140 (Sup. Ct. 1937); Walinske v. Detroit-Wayne *69Joint Bldg. Authority, 325 Mich. 562, 39 N. W. 2d 73 (Sup. Ct. 1949); Heberer v. Board of Com'rs, of Chaffee County, 88 Colo. 159, 293 P. 349 (Sup. Ct. 1930); Walla Walla v. Walla Walla Water Company, 172 U. S. 1, 19, 19 S. Ct. 77, 43 L. Ed. 341, 349 (1898); 15 McQuillin, Municipal Corporations (3rd ed. 1950), 394.
In Gardiner v. William, S. Butler & Co., 245 U. S. 603, 605, 38 S. Ct. 214, 62 L. Ed. 505, 506 (1918) Justice Holmes pointed out that the law as to leases was “not a matter oí logic in vacuo” but “a matter of history that has not forgotten Lord Coke.” Whatever we may now think of the feudal origins of the common-law principles governing the landlord-tenant relationship, they admittedly did not recognize future rent as a presently existing debt or liability. See 1 Tiffany, Landlord and Tenant (1910), § 166. Thus in Bordman v. Osborn, 23 Pick. 295, 40 Mass. 295, 299 (Sup. Jud. Ct. 1839) Chief Justice Shaw expressed the prevailing common-law concepts as follows:
“'Rent is a sum stipulated to be paid for the actual use and enjoyment of another's land, and is supposed to come out of the profits of the estate. The actual enjoyment of' the land is the consideration for the rent which is to be paid, and, therefore, if the lessee is evicted before the rent becomes due, in whole or in part, it is a good answer to a claim for rent, by an action of debt or covenant, or by distress. 1 Saunders, 204, note. From this it seems clear, that although there be a lease, which may result in a claim for rent, which will constitute a debt, yet no debt accrues until such enjoyment lias been had; because, says Lord Coke, in discussing the effect of a release, a debt is merely a thing in action, and, therefore, if a man be bound to the payment of a debt, at a future time, a release of all actions by the obligee, is a perpetual bar, for ‘albeit no action lyeth for the debt, because it is delitum in praesenti, quamvis sit solvendum in futuro, yet because the right of action is in him, the release of all actions is a discharge of the debt itself.’ Co. Lit. 292b. And the next section is still more explicit. But if a man leaseth land for a year, reserving a rent jiayable at Michaelmas, and before that time releaseth all actions, yet after said feast he shall have an action of debt. The reason, says Lord Coke, is, that it was neither deibitum nor solvendum when the release was made; for if the land be evicted from the lessee, before the rent become due, the rent is avoided, for it is to be paid out of the profits of the land. Co. Litt. 292b.”
*70Similarly in Block v. Bell Furniture Co., 111 N. J. Eq. 551, 557 (E. & A. 1932), our own Justice Case quoted approvingly from In re Roth & Appel, 181 F. 667 (C. C. A. 2 1910):
“Rent is a sum stipulated to be paid for the use and enjoyment of land. The occupation of the land is the consideration for the rent. If the right to occupy terminate, the obligation. to pay ceases. Consequently, a covenant to pay rent creates no debt until the time stipulated for the payment arrives. The lessee may be evicted by title paramount or by acts of the lessor. The destruction or disrepair of the premises may, according to certain statutory provisions, justify the lessee in abandoning them. The lessee may quit the premises with the lessor’s consent. The lessee may assign his term with the approval of the lessor, so as to relieve himself from further obligation upon the lease. In all these cases the lessee is discharged from his covenant to pay rent. The time for payment never arrives. The rent never becomes due. It is not a case of debitum, in praesenti solvendum in futuro. On the contrary, the obligation upon the rent covenant is altogether contingent. Watson v. Merrill, 136 F. [359] 362, 69 C. C. A. 185, 69 L. R. A. 719 [8 Cir.]. See, also, Coke on Littleton, 292b; Wood v. Partridge, 11 Mass. [488] 492; Bordman v. Osborn, 23 Pick. [295] 299.”
Wholly apart from the foregoing there are persuasive modern day considerations which support the view that the delegates to the Constitutional Convention of 1947 never contemplated the aggregation of future rents as a debt or liability within Article VIII, Section II, paragraph 3. In the first place, generally accepted accounting practice throughout the country did not encompass future rentals as debts or liabilities; corporate balance sheets would have been examined in vain for reference to lease rentals which would become payable in future years. Secondly, the State of New Jersey had for years prior to the 1947 Convention entered into many long-term leases; though these leases were executed without any specific law supported by referendum, there never had been any suggestion that their execution violated any constitutional provision. And finally, it is hardly conceivable that the inapt constitutional phraseology with respect to payment .of “interest” and discharge of “principal” within the stipulated period would have been used as *71applicable to the customary leasing by the State of the use of property for public purposes.
The appellant’s amended complaint attacks the validity of a lease entered into on September 12, 1952 between the State as lessee and Prentice Realty Co. as lessor. Under the terms of the lease the Realty Co. lets to the State the new building to be erected on the east side of 222 West State Street and the existing building in the rear thereof for .a period of ten years at the annual rental of $38,811 to be paid in monthly installments of $3,234.25. The appellant’s position apparently is that under this lease a present liability of $388,110 has been created without compliance with the requirements of the Constitution. The.lease affords to the State the additional and important advantage of having the premises built to meet its special needs; in other respects it does not differ significantly from the many other outstanding leases of the State. The record before us discloses that the State now occupies space under 173 leases bearing terms ranging up to 50 years. It may be assumed that current annual rentals under these leases are being duly provided for in current annual appropriation laws as provided in Article VIII, Section II, paragraph 2 of the Constitution of 1947. Cf. McMahon v. City of Bayonne, 10 N. J. Misc. 1215 (Sup. Ct. 1932); Viracola v. Long Branch, 1 N. J. Misc. 200 (Sup. Ct. 1923); DeBow v. Lakewood Township, 131 N. J. L. 291 (Sup. Ct. 1944). Insofar as rentals which may become due in the future years are concerned, they are not present debts or liabilities requiring referenda approval under Article VIII, Section II, paragraph 3. We have already indicated that this view is supported fully by the authorities and controlling reasons; indeed, any contrary view would seriously impair the State’s outstanding leases and would severely restrict its power to avail itself of the acknowledged advantages of negotiating long-term leases where the public interest dictates such action. As expressed by the State’s Director of the Division of Purchase and Property:
“It has been our experience that leases for one and two years result in either rapid increases in rent or wasteful moving. Wher*72ever possible, like any efficient business, we attempt to stabilize our locations, particularly when they are satisfactory, and obtain at least a five year term, with renewal options if possible. The short terms are generally either the longest term which the landlord will give or are on facilities we are anxious to relocate as soon as possible. To attempt to house our departments on a year-to-year basis would be a practical impossibility. If examined on the basis of being theoretically possible, such a policy would entail an exorbitant cost both rentwise and with respect to efficiency, to say nothing of detrimentally affecting the operation of the business of the State. In addition it would cause and create great annoyance and inconvenience to the public who would be unable to keep up with changed locations.”
In addition to the Prentice lease, the appellant’s amended complaint attacks three leases between the State and the State Building Authority relating to: (1) the Princeton Barracks, (2) the Somerville Barracks and (3) state motor vehicle stations, and also asserts the unconstitutionality of L. 1950, c. 255, as amended (R. S. 52:18A-50 et seq.). It seems clear to us that any attack on the constitutionality of the statute itself must fail under the principles announced by the court in New Jersey Turnpike Authority v. Parsons, 3 N. J. 235 (1949), recently reaffirmed in Behnke v. New Jersey Highway Authority, 13 N. J. 14 (1953), and generally supported by decisions elsewhere. See Kelley v. Earle, supra; Walinske v. Detroit-Wayne Joint Bldg. Authority, supra; Nehemkis, The Public Authority: Some Legal and Practical Aspects, 47 Yale L. J. 14 (1937). The statute creates the State Building Authority, an independent entity which is wholly comparable to the Turnpike Authority and the New Jersey Highway Authority. The State Building Authority is authorized to acquire, construct, maintain and operate buildings to be leased to the State, including inspection stations and police barracks at sites designated respectively by the Director of the Division of Motor Vehicles and the Superintendent of State Police with the approval of the Attorney-General and the State House Commission. R. S. 52:18A—52. The Turnpike Authority and the New Jersey Highwa]'' Authority are authorized to acquire, construct, maintain and operate state highways at locations designated *73by the State Legislature. R. S. 27:23-1; R. S. 27:12B-2. The suggested differences in the status of the Authorities, as legal entities independent of the State, appear to us to be wholly unrealistic. Cf. Kelley v. Earle, supra; Greenhalgh v. Woolworth, 361 Pa. 543, 64 A. 2d 659 (Sup. Ct. 1949); Nehemkis, supra. The State Building Authority is expressly authorized to issue bonds but its bonds are not those of the State. On the contrary, the statute expressly provides (R. S. 52:18A-68) that the bonds shall not be deemed to constitute a debt or liability of the State or any political subdivision or a pledge of the faith and credit of the State or any political subdivision. The statute further provides that the bonds shall contain on their face a statement that neither the State nor any political subdivision is pledged to pay principal or interest and that neither the faith and credit nor the taxing power of the State or of any political subdivision is pledged to pay principal or interest. Purchasers of the Authority’s bonds can be under no misapprehension whatever; they rely upon the obligation of the Authority, as distinguished from the State, and upon that obligation alone.
Nowhere on the face of the act does the State itself assume any burden except that it will not impair the Authority’s functions to the prejudice of bondholders. R. S. 52:18A-69. But that limited burden might well be deemed existent without express provision, and in any event does not constitute any state debt or liability or any pledge or loan of the State’s credit within the Constitution. See New Jersey Turnpike Authority v. Parsons, supra, at p. 243. Unlike the situation in Behnke v. New Jersey Highway Authority, supra, there was no guaranty by the State of the Authority’s bonds requiring approval by referendum of the people. The first and only liability of the State, as distinguished from the Authority, occurs when the State actually enters into a lease with the Authority, and the nature and extent of that obligation, if any, can be ascertained only by an examination of the terms of the lease. Thus, if the State were to insist that all future leases with the Authority contain provisions authorizing the State to vacate at will and thus terminate the leases, it would *74appear beyond per adventure that the State would incur no obligation thereon except to pay for current use through current appropriations. We assume that the propriety of incurring such obligation would be acknowledged universally.
We come then to the crucial and only remaining issue: are the leases between the Authority and the State relating to the Princeton Barracks, the Somerville Barracks and the state motor vehicle stations to be stricken as violative of the Constitution P Although the majority opinion refers to plans and specifications for a State Office Building in Trenton and an Administration Building on the campus of the New Jersey State Teachers College at Trenton, it is sufficient to note that they are not properly before us for consideration. They are not mentioned in the original or amended complaint and are not ripe for any determination in this proceeding. The lower court had no occasion to pass on them and its actual judgment was properly confined to a determination of the constitutionality of the statute, the validity of the Authority’s bonds, and the validity of the four leases, including the Prentice lease, brought into issue by the amended complaint. Insofar as the leases for the Princeton and Somerville Barracks are concerned, we need only refer to the fact that their term is one year with annual renewal options in favor of the State. The State’s obligation at most is to pay for current yearly occupancy, which presumably is provided for in current appropriations, and it seems frivolous to suggest that such obligation impairs the letter or purpose of the constitutional provision against loaning the State’s credit or the constitutional debt limitation.
The lease relating to the motor vehicle inspection stations is for a period of 20 years commencing on January 1, 1953. It provides that the Authority as lessor lets to the State the 12 inspection stations described therein at stated annual rentals which aggregate $33,374. -The lease provides, as do many commercial leases, that the lessee shall operate the leased premises in proper and lawful manner, that the lessee shall pay taxes and assessments on the premises and that the lessee shall keep the premises insured. In the event of *75default the Authority may declare the lease void, may take possession of the premises, and obtain the appointment of a receiver. The lessee covenants that in the preparation of each annual budget of the Division of Purchase and Property the annual rental will be included as the basis of legislative appropriation. The lease contains no provision whatever relating to any purchase or other acquisition of title to the property by the State, though it is suggested that by legislative dissolution of the Authority the State may, subject to the rights of bondholders, acquire the property as though purchased; presumably the same may be said of the New Jersey Turnpike, the New Jersey Highway Authority, and similar public authorities, the validity of which is now beyond question. Indeed, every private corporation may be dissolved by its stockholders, thus vesting the corporate property in the stockholders, .subject to the payment of debts. Yet it is no longer questioned that leases between stockholders and their corporations, and leases between parent and subsidiary corporations, are leases for all legal purposes. Cf. Klein v. Board of Tax Supervisors, 282 U. S. 19, 24, 51 S. Ct. 15, 75 L. Ed. 140, 143 (1930); Frank v. Frank’s, Inc., 9 N. J. 218, 223 (1952). The 12 inspection stations were formerly rented from private concerns at aggregate rentals of $40,700 per year; the leases thereon were about to expire with threatened substantial increases; and the Authority had the opportunity of acquiring, through options to purchase, stations appraised at $690,000 for the purchase price of $327,100. From a business point of view, it would have been foolhardy for the Authority not to acquire the stations and for the State not to lease them from the Authority; it may be noted that the State has actually received income from the operation of these stations amounting to over $468,000 during the calendar year 1952 and to over $160,000 during the first four months of 1953.
In the leading case of Kelley v. Earle, supra, the Pennsylvania Supreme Court dealt fully with the power of its General State Authority, a public body comparable to our State Building Authority, to enter into leases with the State *76for the use of property for public purposes. The leases were to be for 30-year terms without any express provisions for any conveyance to the State at their expiration. The court in an opinion delivered by Chief Justice Kephart for all of its members rejected the contention that the transaction between the authority and the state amounted to a prohibited purchase rather than a permissible lease [325 Pa. 337, 190 A. 146]:
‘Tt is urged that the transaction is in effect a purchase of capital assets by installments. To sustain this conclusion, of necessity we must hold the agreement a sale; we have held the agreement is a lease and nothing more. If this were an outright purchase of property to be paid for in the future, it would undoubtedly be within the constitutional objection, but it is not a purchase nor does it have the attributes of a purchase. The title to the property is in the lessor Authority, it may be subjected to defined uses and purposes by the trustee under the deed of trust; the Commonwealth, under the lease cannot intermeddle with it if a default in the payment of rent exists. The fact that the proposed plan might be termed an evasion of the Constitution would not condemn it unless such evasion was illegal. ‘It is never an illegal evasion to accomplish a desired result, lawful in itself, by discovering a legal way to do it.’ Tranter v. Allegheny County Authority, supra, 316 Pa. 65, at page 84, 173 A. 289, 297. The bonds of the Authority are to be paid out of its revenues. The credit of the State is not pledged or bargained away.”
Many decisions rendered both before and after the adoption of our Constitution of 1947 have expressed approval of the principles enunciated in the Earle case. See Greenhalgh v. Woolworth, supra; Dean v. Kuchel, supra; Loomis v. Keehn, 400 Ill. 337, 80 N. E. 2d 368 (Sup. Ct. 1948); Jefferson School Township v. Jeferson Township School Building Co., supra; Walinske v. Detroit-Wayne Joint Bldg. Authority, supra; cf. Texas National Guard Armory Board v. McGraw, 132 Tex. 613, 126 S. W. 2d 627 (Sup. Ct. 1939); Sheffield v. State School Bldg. Authority, 208 Ga. 575, 68 S. E. 2d 590 (Sup. Ct. 1952). Although the majority opinion suggests factual distinctions from those presented in the Earle case, they are clearly without significance; the fact is that the court in the Earle case flatly sustained the state’s power *77to enter into long-term leases with its building authority, for revenue or non-revenue producing property, with a sweeping opinion embracive of far more comprehensive situations than that presented by the actual lease relating to the 12 inspection stations. The majority opinion also quotes from Wilson, Attorney-General v. State Water Supply Commission, 84 N. J. Eq. 150 (E. & A. 1915) and Opinion of the Justices, 146 Me. -, 79 A. 2d 753 (Sup. Jud. Ct. 1951). The Wilson case did not deal with any leasing arrangement between the State and a public authority and, as the court has had recent occasion to point out, its language must be confined to its context. See Salomon v. City of Jersey City, 12 N. J. 379 (1953); De Caro v. De Caro, 13 N. J. 36 (1953). The Maine expression was merely an advisory opinion as to the validity of pending legislation and the justices did not have the important benefits of factual and legal presentations in an actual case or controversy. See Frankfurter, A Note on Advisory Opinions, 37 Harv. L. Rev. 1002 (1924). The Maine statute provided that upon construction of the building the state would enter into a lease with the authority; unlike our statute the execution of the lease was mandatory upon the state and upon retirement of the Authority’s bonds the property was “to be conveyed to the State”; and unlike the 12 inspection stations the building would be non-revenue producing. The justices, while apparently recognizing that ordinarily a long-term lease would not, within the constitutional debt limitation, create a present liability of aggregate future rentals, concluded that the proposed transaction would actually constitute a contract by the State for the purchase of the building, involving an immediate liability for the purchase price in the amount of the aggregate rentals. Without considering the soundness of the opinion of the justices, it seems to us that the arrangement between the State of New Jersey and the State Building Authority with respect to the 12 inspection stations was an actual lease fully as much as the many unquestioned leases throughout the country from public corporations to governmental bodies and private corporations to *78their dominant stockholders. Cf. New Jersey Turnpike Authority v. Parsons, supra, at p. 243. See Klein v. Board of Tax Supervisors, supra [282 U. S. 19, 51 S. Ct. 16], where the United States Supreme Court noted that “it leads nowhere to call a corporation a fiction. If it is a fiction it is a fiction created by law with intent that it should be acted on as if true. The corporation is a person and its ownership is a non-conductor that makes it impossible to attribute an interest in its property to its members.”
The adverse practical effects and the retrogressive implications of the action taken by the majority have given us concern. The struggle for constitutional reform in New Jersey was hard and long. As early as 1873 the then Governor unsuccessfully recommended that a constitutional convention be held, many later recommendations for constitutional revision likewise failed to bear fruit, and finally our recent Constitutional Convention was convened. In the meantime a century had elapsed, our State had changed from a rural into an industrial community and much had been learned about the operations of government and industry. The delegates to the Convention set about their task of preparing a nrodern instrument of government which would strengthen each of the three branches and" properly equip them for the discharge of their responsibilities in safeguarding the liberties and providing for the welfare of our people. Their completed work has enabled tremendous forward strides by our judiciary, and with sympathetic judicial construction should enable equally forward strides by the coordinate branches of government. In authorizing and executing the actual leases in controversy before us the Legislative and Executive Branches have simply applied sound and economical current business practices without incurring any new state bonded indebtedness or imposing any new taxes, without endangering the State’s credit, and without violating any restrictive constitutional policies expressed by the delegates. We fail to find substantial basis for invading their conscientious judgment in a field within their proper domain and in striking down the very limited action *79taken by them in the reasonable belief that it would advance the interests of the State and its people. Cf. the famous quotation from the opinion of Justice Holmes in Missouri, Kansas Texas Railway Company of Texas v. May, 194 U. S. 267, 270, 24 S. Ct. 638, 639, 48 L. Ed. 971, 973 (1904):
“Great constitutional provisions must be administered with caution. Some play must be allowed for the joints of the machine, and it must be remembered that legislatures are ultimate guardians of the liberties and welfare of the people in quite as great a degree as the courts.”
We would affirm the judgment entered below.
For reversal—Chief Justice Vanberbilt, and Justices Heher, Oliphant, Wacheneelb and Burling—5.
For affirmance—Justices Jacobs and Brennan—2.