For the State, David T. Wilentz, Attorney-General of New Jersey (Milton B. Conford, Harry A. Walsh and John Solan, of counsel).
For the trustees (Shelton Pitney and Walter P. Gardner) of the Central Railroad Company of New Jersey, Autenreith & Wortendyke (William F. Hanlon and Joseph F. Autenreith, of counsel).
For Jersey City, Charles A. Rooney, Joseph C. Glavin, John F. Lynch, Jr., and Charles Hershenstein.
Before Justices Parker, Heher and Perskie.
The opinion of the court was delivered by
PERSKIE, J. This is a railroad tax case. R.S. 54:29A-1, et seq. The consolidated writs present for review the attacks made by prosecutors, Central Railroad Company of New Jersey, City of Jersey City and the Attorney-General, for the state (each is hereafter respectively referred to as Central, Jersey City and Attorney-General) upon the judgment of the State Board of Tax Appeals on their respective appeals from the property and franchise valuations and assessments made, after review by the State Tax Commissioner (hereafter referred to as Commissioner), against Central for the tax year of 1942.
The judgment of the State Board wrought the following results:
It reduced the valuations and assessments of $22,446,300 on class II lands in Jersey City, to $14,987,593, a reduction of $7,458,707.
It reduced the $2,338,293 of valuation and assessment on main stem lands (class I) in Hudson County to $1,540,413, a reduction of $797,880; but it did not, however, disturb the valuations and assessments of $7,801,495 on structures.
It affirmed the franchise tax assessments of $1,130,235.51 as finally fixed by the Commissioner. More about this later.
It reduced the valuations and assessments of $124,485 of overhead bridges (class II property) by $111,251.
It sustained the inclusion of valuations and assessments in the elimination of the Somerville, Perth Amboy and Cranford grade crossings.
It canceled and set aside, on the concession of the Commissioner that its inclusion was improper, the assessment and valuation to the extent of $248,666 on account of bridges and culverts -- grade crossings on the Elizabethport and Perth Amboy branch of Central's property.
It dismissed the appeals of Jersey City and otherwise confirmed, in all other respects, the valuations and assessments fixed by the Commissioner against Central's property and franchise taxes. See In re Pitney, 20 N.J. Mis. R. 448; 28 A.2d 660.
A clear understanding of the several attacks requires at least a broad statement of the grounds upon which each attack is made.
Central, on the record as submitted, assailed the legality of the franchise tax as assessed under R.S. 54.29A-13, et seq. (Railroad Tax Law of 1941), and the legality of the assessment of grade crossings under R.S. 54:29A-7 and R.S. 54:29A-10.
In computing the franchise tax due by Central's system, the Commissioner included the revenue which Central derived from the operation of its leased lines (known as L. & S. Division) in the State of Pennsylvania under the "net railway operating income" of its system in our state, for the year ending December 31st, 1941. Line No. 4, Exhibit CR-4.
The Commissioner's computation was attacked upon several grounds. They were (a) that, on the proofs, the revenue derived from its operation of the L. & S. Division in Pennsylvania should have been excluded because "separate operating accounts" were maintained for said Division; (b) that the contrary result reached by the Commissioner, and affirmed by the State Board, erroneously expanded the franchise base with the resultant tax of $1,130,235.51 against it rather than the minimum tax of $4,000 (R.S. 54:29A-15) which, it was urged, should have been assessed against it, and (c) that such computation was the result of an erroneous construction of the provisions of the statute because it taxed property and
income in the State of Pennsylvania in violation of the due process clause of the Fourteenth Amendment, and of the commerce clause (article 1, section 8), of the United States Constitution.
Central additionally attacked the computation on the ground that even if the inclusion of the revenue derived from the operation of its leased L. & S. Division were proper, nonetheless the tax assessed is excessive because no deduction was made for the rentals which it paid ($2,346,128) as part of its operating costs for the "use and occupation" of such lines in Pennsylvania.
Jersey City assails the dismissal, by the State Board, of its appeals by which it sought an increase in the valuations of class II property from $22,446,300 to $26,486,334 and in the valuation of structures from $7,801,495 to $10,337,900.01, and it further assails the failure of the State Board to determine its asserted claim for re-classification of certain lands from class I to class II property.
The Attorney-General (R.S. 54:29A-33) assails the judgment of the State Board to the extent that it reduced the valuations of class II and main stem property and eliminated the valuation of overhead bridges. In these respects, the State seeks a restoration of the valuations and assessments as made by the Commissioner. Otherwise, the state resists the assaults of Central and Jersey City, and defends the disposition made of them by the State Board.
The record in this case is voluminous. It consists of nine volumes. These volumes contain a mass of expert testimony and over 190 exhibits many of which are of a highly technical and statistical nature. The briefs too are voluminous; they total in all over 565 pages. In addition to argument, they contain in all hundreds of judicial and statutory references. Our careful study of the record, oral arguments and briefs leads us, save as otherwise indicated, to the same results as those urged for the state.
We are met at the threshold of our determination of this case by the contentions of the Attorney-General and Jersey City that the "judgment of the State Board is a nullity" because it is not the judgment of the State Board but of one
man, its president, who alone sat and took the testimony. A detailed statement of the facts which give rise to the stated contention is set down in the majority opinion in the case of Pitney v. Kelly, 21 N.J. Mis. R. 405, 419, et seq.; 34 A.2d 547.
It is urged that the provisions of R.S. 54:2-18 and R.S. 54:3-20.1 requiring the one member who takes the testimony "to report thereon to the Board" and that "no determination shall be made thereon except by the Board," were not satisfied. In other words, the contention is that the basic requirement of "fair play" which underlies the quoted provisions of the statute is lacking. Morgan v. United States, 298 U.S. 468; 80 L. Ed. 1288. Cf. Redcay v. State Board of Education, 128 N.J.L. 281; 25 A.2d 632; Jersey City v. Hudson County Board of Taxation, 130 N.J.L. 309; 32 A.2d 594.
There is no need, in our opinion, to pass upon the question. For it is our duty to make an independent finding of the facts and law totally apart from the finding made by the State Board. Since the entry of the judgment by the State Board, the Attorney-General and Jersey City, pursuant to order based upon the statute (R.S. 2:81-8) and pursuant to decisions of this court (Hoboken v. State Board of Tax Appeals, 127 N.J.L. 179; 21 A.2d 34; affirmed, 128 N.J.L. 321; 24 A.2d 849; Lawrence Township v. State Board of Tax Appeals, 124 N.J.L. 465; 12 A.2d 244) have taken and submitted additional testimony. Thus the record before us is complete and no useful purpose would be served in remitting it to the State Board for a finding by that body.
Subsequent to the submission of the record as aforestated, Central concluded to withdraw its appeal from the franchise tax assessment for the year of 1942 and to abandon the reasons filed therefor under the writ of certiorari issued in these proceedings and the points and arguments with respect thereto contained in its briefs. Accordingly, an order, consented to for the Attorney-General, was signed on December 27th, 1945, dismissing Central's appeal from the judgment of the State Board in so far as it relates to the franchise tax
assessments for the year of 1942, and the reasons filed for the review. Incidentally, orders were also signed on December 27th, 1945, dismissing Central's writs for the review of the franchise tax assessments for the year of 1943 and 1944. Thus Central's attack now is limited to the legality of the assessments of grade crossings.
In determining the merits our course is well charted. We make an independent determination of the disputed questions of "fact as well as of law" and we "reverse in whole or in part," the tax assessment brought up for review. R.S. 2:81-8, R.S. 54:4-62. But we do not reverse in the absence of "palpable error," (United New Jersey, &c., Co. v. State Board, 103 N.J.L. 33, 35; 134 A. 669), or otherwise stated, unless the evidence is persuasive that the determination under review is erroneous. Hoboken v. State Board of Tax Appeals, supra (at p. 181); Gannon v. State Board of Tax Appeals, 123 N.J.L. 450, 451, 452; 9 A.2d 531; Lawrence Township v. State Board of Tax Appeals, supra (at p. 467).
We proceed to our consideration and determination of the cause on the merits.
Assessment of Class II Lands, Terminal Area, Jersey City.
We recently have held that the "railroad tax law of 1941" is, on its face, free from constitutional restraint as to future taxation. Jersey City v. State Board of Tax Appeals, 133 N.J.L. 202; 43 A.2d 799. Pursuant to that law, the Commissioner fixed a value of $22,446,300 on class II lands, consisting of twenty-three parcels, which are located at Central's terminal area in Jersey City and which lands constitute an integral part of Central's entire railroad system. On appeal, the State Board fixed the value at $14,987,593, a reduction of $7,458,707, or about one-third of the amount assessed by the Commissioner. In re Pitney, 20 N.J. Mis. R. 448; 28 A.2d 660. For the weight, if any, thereafter given by the State Board to the holding in the cited case, see Pitney v. Kelly, 21 N.J. Mis. R. 405, 408, et seq.; 34 A.2d 547.
Did the "railroad tax law of 1941" in anywise change the prevailing method continuously employed by the Commissioner and his predecessors in office since 1884 in assessing the true value (article IV, paragraph 12 of State Constitution) of railroad property for taxation. Our answer is in the negative.
The Joint Legislative Committee, constituted by Senate Concurrent Resolution No. 8, 1941, made two reports to the legislature. The first was made to the 165th legislature. Exhibit S-9. Broadly and briefly stated, this report discloses that the Committee heard and considered the views and recommendations of all in interest, including the railroads, on proposed legislation relating to the railroad tax problem. The Committee reviewed and compared the tax burdens on railroad property under the then existing law with those under the proposed law and made like comparisons with the resultant financial effect on all the parties in interest. As a result of its recommendations, the legislature enacted what is characterized as the Settlement Acts (chapter 290, Pamph. L. 1941, amended by chapter 241, Pamph. L. 1942) and the "railroad tax law of 1941," supra.
The Committee made a second report to the 166th legislature (Exhibit S-10) as to the operation of the "railroad tax law of 1941" and suggested amendments which were adopted, but which are not here in issue.
A reading of these reports and of the "railroad tax law of 1941" discloses no intention either on the part of the Committee or on the part of the legislature to disturb the long prevailing and continuously followed method of ascertaining the true value of railroad property here in issue. Per contra, these reports and the "railroad tax law of 1941" do disclose an unquestionable intent to ease and make more flexible the burden of taxation of railroad property, by fixing a flat rate of $3 on each $100 of valuation of all property used by a railroad for railroad purposes and by computing the franchise tax based upon earnings of the railroad. The result is that, in comparison with property not used for ...