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De Lorenzo v. City of Hackensack

Decided: May 12, 1952.

WILLIAM DE LORENZO, PLAINTIFF-APPELLANT,
v.
CITY OF HACKENSACK, A MUNICIPAL CORPORATION OF NEW JERSEY, AND PARKING AUTHORITY OF THE CITY OF HACKENSACK, A BODY CORPORATE AND POLITIC, DEFENDANTS-RESPONDENTS



On certification from the Law Division, Superior Court.

For reversal -- Chief Justice Vanderbilt, and Justices Heher, Oliphant, Wachenfeld, Burling, Jacobs and Brennan. For affirmance -- None. The opinion of the court was delivered by Jacobs, J.

Jacobs

This court granted certification under Rule 1:5-3 to review a judgment of the Law Division which sustained the power of the Parking Authority of the City of Hackensack to issue bonds as a body corporate and politic validly created under L. 1948, c. 198 (R.S. 40:11 A -1 et seq.) and declared the legality of certain agreements entered into between the authority and the city of Hackensack.

Following the passage of L. 1948, c. 198, the City of Hackensack, by ordinance, created its parking authority. Thereafter studies were made, the construction of several off-street parking projects was planned, and the authority entered into negotiations for the sale of its bonds in the principal amount of $650,000. It was evident that if the authority's bonds could pledge the city's credit as well as its own they would be more readily saleable at lower interest rates. Accordingly, the city and the authority entered into three agreements dated respectively January 24, 1951, April 1, 1951, and June 4, 1951.

In the main these agreements provided that the authority would acquire certain designated parcels of land and construct parking facilities thereon; the city would lease the land and facilities for 30 years and would agree to pay fixed

annual rentals; possession and operation of the land and facilities would remain in the authority which would reduce each annual rental payment from the net revenue realized by it during the preceding year from such operation; the authority could mortgage the premises, issue its bonds and assign the rental payments due from the city to a trustee for bondholders, as additional security, and in such event the city's obligation to make its rental payments would remain absolute and unconditional even though the authority did not undertake or complete the construction of the parking facilities or otherwise defaulted.

Although the agreements purported to effectuate leasing arrangements it seems clear that none of the ordinary incidents of leases was present. Looking through their form to their substance, the agreements obligated the city to contribute annually during each of the 30 years the difference between the net revenues of the authority in the previous year and the amount required by the authority for payment of principal and interest on its bonds. That much is expressly conceded in the brief amicus curiae filed in this court at the request of the attorneys for the city and the authority in the name of the chairman of the authority. No ordinance relating to the agreements was ever adopted by the city and the only appropriation made pursuant thereto was in the city's budget for 1951 in an amount representing the 1951 rental payable under the agreements.

In July, 1951, the plaintiff-appellant William De Lorenzo, a taxpayer residing in Hackensack, filed his complaint in the Law Division seeking a declaration as to the validity of the agreements between the city and the authority. The city filed answer and the authority filed answer, counterclaim and cross-claim seeking a declaration that the agreements were valid and enforceable and that a proposed assignment, as security, by the authority to a trustee for bondholders of the annual rental payments from the city would be valid and enforceable. Thereafter motions for judgment on the pleadings were made by the taxpayer and the authority. In its opinion

sustaining the agreements and the authority's right to assign the annual rental payments to a trustee for bondholders, the Law Division indicated its view that L. 1948, c. 198 was a constitutional exercise of legislative power (McSorley v. Fitzgerald, 359 Pa. 264, 59 A. 2 d 142 (Sup. Ct. 1948)), that the city had power to enter into its agreements with the authority (R.S. 40:11 A -21; R.S. 40:11 A -23; R.S. 40:56-1.1 et seq.), and that no appropriation beyond the rental payment for the then current year of 1951 or further ordinance was necessary (Debow v. Lakewood Township, 131 N.J.L. 291 (Sup. Ct. 1944); Viracola v. Long Beach, 1 N.J. Misc. 200 (Sup. Ct. 1923)). The ensuing judgment dismissing the taxpayer's complaint and granting the relief sought by the authority is now before us for review and the cause has been reargued at the court's direction.

The parking problem confronting urban municipalities in New Jersey and elsewhere is a serious one. See Giant Tiger Corporation v. Board of Commissioners of Trenton, 11 N.J. Misc. 836, 839 (Sup. Ct. 1933); England v. Millburn Township, 122 N.J.L. 462, 465 (E. & A. 1939). It is being dealt with in many communities by public off-street parking facilities operated oftentimes by the municipalities themselves or by so-called parking authorities created pursuant to enabling legislation. Dean Fordham has referred to the State of Pennsylvania as the leading exponent of the authority plan (Fordham, Local Government's Power to Provide and Finance Parking Facilities, 5 Traffic Quarterly 369, 370 (1951)) and a discussion of the enabling statute in that state may be found in Alpern, Unsnarling the Traffic Jam by the Use of Parking Authorities, 36 Va. L. Rev. 1029 (1950). In McSorley v. Fitzgerald, supra, the Supreme Court of Pennsylvania in sustaining its Parking Authority Law had little difficulty in accepting the ...


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