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Jamouneau v. Local Government Board of Division of Local Government

Decided: February 5, 1951.


On appeal from Local Government Board.

For reversal -- Chief Justice Vanderbilt, and Justices Case, Oliphant, Burling and Ackerson. For affirmance -- Justice Wachenfeld. The opinion of the court was delivered by Case, J.


[6 NJ Page 285] On December 31, 1928, the City of Newark was the owner of vacant land at Commerce Street and Raymond Boulevard in that city. It leased the land to Abraham E. Lefcourt for a term of 50 years, commencing January 1, 1929, at a minimum annual rental of $75,000 until the final five-year period and of $95,000 during that period. There was a provision, based upon recurring land appraisals, by which the rental could be raised, but not lowered, during the last 30 years of the term. The lessee was obliged to construct forthwith a fireproof building, at least 20 stories in height, of the value of approximately $3,500,000 and to "uphold, maintain and keep the building in good and satisfactory condition and repair." He was obligated to make repairs and replacements and to keep the building and its appurtenances in good repair and operating condition in manner more particularly hereinafter mentioned. The lease provided that the building, when erected upon the demised premises, should be deemed to be attached to the freehold and, at the end or other expiration of the lease, should remain upon and be surrendered with the premises as a part thereof and that on the last day of the term, or other sooner determination of the estate granted, the demised premises, together with the buildings thereon and the fixtures appurtenant thereto, would be surrendered and yielded up to the lessor and that the lessee would pay as so much additional rent all taxes upon the buildings and improvements upon said property, and all payments, extraordinary as well as ordinary, which should or might be levied or imposed or become a lien upon said real estate and upon any and all buildings and improvements thereon or to be erected thereon, and upon the leasehold estate, "excepting taxes on the ground," and, further, that a default by the lessee in any of his undertakings would, at the option of the lessor, terminate the lease and authorize the lessor to enter upon the

premises, the buildings and the improvements thereon, and to take full possession thereof and be vested therewith. There was also a provision that the lessor would not mortgage the fee of the premises during the term of the lease and that the lessee could not mortgage the fee but could mortgage the building, fixtures, equipment and contents and also the leasehold estate. When the negotiations for the present sale were under way, the lessee suggested that the mortgage which was placed upon the building is still unpaid and that the lien thereof would be superior to any interest the city might have. That contention is mentioned but not argued before us, and we shall presently state our assumption that the rights of the mortgagee are subordinate to those of the lessor.

A 34-story office building was erected upon the premises. So far as the records disclose, there have been no defaults and the estimates of value are all upon the assumption that there will be none. The Raymond Commerce Corporation is the successor in interest to the original lessee and is the present lessee.

Raymond Commerce Corporation made overtures to the city looking toward the purchase of the land and the cancellation of the lease. Two appraisals of value were obtained by the lessee, respectively $639,884 and $700,000, and two were obtained by the city, respectively $873,129 and $837,644. Thereupon the city, on November 28, 1949, passed a resolution reviewing some of the provisions of the lease, reciting difficulties encountered by the lessee in obtaining satisfactory financing, stating that the lessee was willing to take over ownership and to do all things required to improve and maintain the premises so as to maintain its present tax value and thereby to increase the tax revenue over the years and that the lessee offered to pay $400,000 for the fee of the land and $350,000 for the cancellation of the lease, a total of $750,000, referring to the real estate appraisals in the amounts above mentioned, alluding to the sum of annual taxes on the land which would accrue to the municipality and the "overall consideration," finding that it was for the best interest of the city to have the ownership consolidated and to sell the fee and the city's

interest at private sale to the lessee for the sum offered in accordance with the provisions of paragraph (d) of section 40:60-26 of our Revised Statutes, concluding that the merger of title to land and building in one ownership would enhance the total assessable value of the land and building, and directing the sale accordingly, subject to and contingent upon the approval of the Director of the Division of Local Government in the State Department of Taxation and Finance (R.S. 40:60-26(d), supra). The matter was reported to and approved by the Director of the Division of Local Government. That action, appealed by Leslie H. Jamouneau, a citizen and taxpayer of the City of Newark, was affirmed by the Local Government Board. The appeal from the Board to the Appellate Division has been certified to us on our own motion.

R.S. 40:60-26 sets up four methods by which the governing body of a municipality may sell lands, buildings or interests therein, not needed for public use. The fourth method, contained in paragraph (d) and the one here pursued, is distinguished by the requirement that the terms and conditions of sale be approved in writing by the Director of the Division of Local Government in the State Department of Taxation and Finance. That approval is a sine qua non in the procedure, yet the statute suggests no conditions upon which the approval shall be granted or withheld and pronounces no standard upon which the official action shall move. The officer in question, as his title indicates, is part of a state administrative agency. He is not a part of the local government; his authority is statewide, but he is given an absolute and unlimited discretion to authenticate or disqualify an act of strictly local significance, controlled by no rule, and upon no principle or terms of expediency declared by the Legislature. The authority may not be rested upon the broad powers given municipalities over their own acts because the officer is not a part of the local administration. It may not obtain validity as a delegated legislative authority because the Legislature has indicated no norm upon which the determination is to depend. Van Riper v. Traffic Telephone Workers' Federation of New Jersey, 2 N.J. 335 (1949); Gilhooly v. City

of Elizabeth, 66 N.J.L. 484 (Sup. Ct. 1901). The argument advanced in support of the legality of the power is, in effect, that the director is to check upon the provisions of the law, whether in statute or in Constitution, concerning the authority of the city to make the sale, upon the sufficiency of the findings of the city governing body and upon the general wisdom of the transaction with respect to the city finances; all of which is but to point toward various considerations which could have been set up as standards to control the officer in the exercise of his power, but were not. The attempted delegation of power to the Director is void in that it goes beyond the legitimate bounds of delegation of legislative power. That fault is an inseparable part of section (d) upon which the authority for the sale depends. The determination appealed from and the municipal action must, therefore, be set aside because of that fundamental defect in the statutory proceeding.

Since the matter may again become a matter of negotiation we express our view that the reasons upon which the consideration passing to the city was calculated are a confusion of sound and unsound assumptions.

One of the "whereas" clauses in the city resolution recites that the lessee is unable to obtain the long term financing necessary for "required improvements and high standard of repair and maintenance of the premises," wherefore the structure is rapidly depreciating through wear and tear as well as obsolescence. That statement inextricably mingles the burdens which the tenant must, by the terms of the lease, carry, or, on failure, submit to a default, with those which are not made a condition of the lease, and it is emphasized by the conclusion expressed in a later paragraph of the resolution that there was an "overall consideration" in the situation "relating to the premises itself in the light of depreciation and obsolescence thereof over the past years and the ensuing years, and the consequences thereof, ...

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