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Behnke v. New Jersey Highway Authority

Decided: February 28, 1953.

HENRY J. BEHNKE, PLAINTIFF,
v.
NEW JERSEY HIGHWAY AUTHORITY, THEODORE D. PARSONS, ATTORNEY-GENERAL OF THE STATE OF NEW JERSEY, AND WALTER T. MARGETTS, JR., TREASURER OF THE STATE OF NEW JERSEY, DEFENDANTS



Ewart, J.s.c.

Ewart

[25 NJSuper Page 151] The plaintiff, a citizen, resident, free-holder and taxpayer in the Township of Upper Deerfield, County of Cumberland, by his complaint filed in this cause levels an attack against the constitutionality of L. 1952, c. 17, by the terms whereof the State of New Jersey would guarantee punctual payment of the principal and interest

of bonds, not exceeding in the aggregate the sum of $285,000,000, to be executed in the name of and issued by New Jersey Highway Authority, created by L. 1952, c. 16 (N.J.S.A. 27:12 B -1 et seq.), and providing for a referendum by the qualified legal voters of the State at the general election in 1952 as to whether or not the terms of said act, i.e., L. 1952, c. 17, should be approved or disapproved.

The complaint alleges (par. 13) that in accordance with the provisions for said referendum vote by the people, the said statute (L. 1952, c. 17) was approved by a majority of the legally qualified voters of the State voting thereon.

In his complaint the plaintiff charges that the guarantee provided in L. 1952, c. 17, is unconstitutional because it contravenes Art. VIII, Sec. II, par. 1, of the Constitution of 1947, which provides that the credit of the State shall not be directly or indirectly loaned in any case, and Art. VIII, Sec. III, par. 3, of the 1947 Constitution , which provides that no donation of land or appropriation of money shall be made by the State to or for the use of any society, association or corporation whatever.

Plaintiff demands a declaratory judgment under the provisions of the statute, N.J.S. 2 A:16-52, 53, determining the question of the constitutionality of the said act, L. 1952, c. 17, and an injunction restraining New Jersey Highway Authority and the State Treasurer from proceeding under the provisions of the statute last cited.

The defendants, by their respective answers, admit the essential factual allegations of the complaint and join in the plaintiff's demand for a declaratory judgment. And the answer of New Jersey Highway Authority sets up additional separate defenses, all of which tend to support the constitutionality and validity of the statute in question.

Defendants have moved for judgment in their favor on the pleadings pursuant to the provisions of Rule 3:12-3. At the argument on said motion, a consent order was entered amending the complaint by adding sub-paragraphs (c) and (d) to paragraph 18 thereof, which sub-paragraphs attack the constitutionality of L. 1952, c. 17, by alleging in sub-paragraph

(c) that it violates Art. VIII, Sec. II, par. 2, of the 1947 Constitution , which provides that no money shall be drawn from the State Treasury but for appropriations made by law, etc., and by alleging in sub-paragraph (d) that said statute violates Art. VIII, Sec. I, par. 1, of the 1947 Constitution which provides that property shall be assessed for taxation under the general laws and by uniform rules, etc.

And by the terms of said order permitting an amendment to the complaint, the defendants' answers theretofore filed to the original complaint are taken as denying the additional matters alleged by the said amendments to the original complaint.

While the plaintiff does not attack the constitutionality or validity of L. 1952, c. 16 (N.J.S.A. 27:12 B -1 et seq. which creates New Jersey Highway Authority and defines its authority, powers, duties and obligations, it is deemed necessary to notice generally the provisions of the said chapter 16 because of its close relationship to chapter 17, L. 1952 which is under attack.

L. 1952, c. 16 (N.J.S.A. 27:12 B -1 et seq.), known as The New Jersey Highway Authority Act, was apparently modeled upon the New Jersey Turnpike Authority Act of 1948 (L. 1948, c. 454; N.J.S.A. 27:23-1 et seq.). The constitutionality of the New Jersey Turnpike Authority Act, excepting section 17 thereof, was upheld by our State Supreme Court in New Jersey Turnpike Authority v. Parsons , 3 N.J. 235 (1949), and that decision no doubt is the reason why plaintiff does not now attack the constitutionality of the act creating New Jersey Highway Authority.

Both the Turnpike Authority Act and the Highway Authority Act establish within the State Highway Department bodies corporate and politic with corporate succession, to be known under the Turnpike Authority Act as "New Jersey Turnpike Authority" (N.J.S.A. 27:23-3), and under the Highway Authority Act as "New Jersey Highway Authority" (N.J.S.A. 27:12 B -4). Under both acts the Authority is constituted an instrumentality exercising public

and essential governmental functions, and the exercise by the Authority of the powers conferred by the respective acts in the construction, operation and maintenance of highway projects are deemed and declared to be essential governmental functions of the State.

Both the Turnpike Authority and the Highway Authority are, by the terms of the respective acts, authorized to acquire, construct, maintain, repair and operate modern express highways; to impose tolls and charges for the use of said highways; and to make, issue, negotiate and sell notes and bonds for the purpose of raising funds to finance the cost of acquisition, construction and maintenance of said highway projects; and under both statutes the respective Authorities are authorized to pledge the highway tolls and charges collected for the payment of the interest to accrue and the principal of said notes and bonds as they may severally mature.

Both the Turnpike Authority and the Highway Authority are given power of eminent domain in the acquisition of lands necessary for the construction of the highways.

The New Jersey Highway Authority (L. 1952, c. 16; N.J.S.A. 27:12 B -1 et seq.) is authorized to construct, maintain, repair and operate a highway project to be known as "The Garden State Parkway," being a highway to begin at such points as the Authority may select at Paterson and at State Highway Route 17 in Paramus or Ridgewood, and thence extending in a general southwardly direction to a junction in Passaic County; thence generally along an existing state highway route through Clifton in Passaic County; thence through Essex and Union Counties to Woodbridge; thence to the Raritan River in the vicinity of the Edison Bridge; thence over the Raritan River southwardly through Middlesex and Monmouth Counties to Toms River; thence southwardly to a point at or near the City of Cape May.

Section 2 of the Turnpike Authority Act (N.J.S.A. 27:23-2) and section 10 of the Highway Authority Act (N.J.S.A. 27:12 B -10) both expressly provide that bonds or notes issued under the provisions of the respective acts by

the respective Authorities shall not constitute a debt or liability of the State or of any political subdivision thereof, or a pledge of the faith and credit of the State or of any such political subdivision, and that all such notes or bonds issued by the respective Authorities shall contain on their face a statement to that effect.

Section 10 of the Highway Authority Act (N.J.S.A. 27:12 B -10), while providing that the notes or bonds to be issued by New Jersey Highway Authority shall not constitute a debt or liability to the State or a pledge of the faith and credit of the State, contains the qualifying phrase, "except as otherwise provided by or pursuant to any law or laws hereafter submitted to the people pursuant to Section II of Article VIII of the State Constitution and approved by a majority of the legally qualified voters of the State voting thereon."

L. 1952, c. 17, the validity of which is attacked in this suit, provides in part as follows:

"1. A liability of the State of New Jersey is hereby authorized for the guaranty of punctual payment of principal of and interest on bonds, not exceeding two hundred eighty-five million dollars ($285,000,000.00) in aggregate principal amount, of the New Jersey Highway Authority (hereinafter called the 'Authority'), the body politic and corporate established in the State Highway Department * * *.

2. No bonds of the Authority shall be guaranteed by the authority of this act except bonds which mature within thirty-five years from their respective dates and bear interest at a rate or rates not exceeding three per centum (3%) per annum. The aggregate principal amount of bonds of the Authority which shall be guaranteed by the authority of this act shall not exceed two hundred eighty-five million dollars ($285,000,000.00).

4. Guaranty made under this act of any bond of the Authority shall make the State unconditionally liable for the payment, when due, of the principal of and interest on the bond so guaranteed. In the event that the Authority shall fail to pay, when due, the principal of or interest on any bond so guaranteed, the State Treasurer shall pay the same to the holder thereof out of the funds provided pursuant to this act and thereupon the State shall be subrogated to the rights of the holder so paid."

Section 3 of the act provides the mechanics evidencing the State's guarantee of payment of the bonds.

Sections 5, 6 and 7 of the act contain an appropriation, provision for a tax levy, and a method of determining what amount must be raised in each year to meet the State's obligation.

Section 8 of the act provides for a referendum vote on the question by the voters of the State at large at the general election in November 1952.

The sections of the 1947 Constitution which plaintiff charges are violated by the provisions of L. 1952, c. 17, are as follows:

"The credit of the State shall not be directly or indirectly loaned in any case. Art. VIII, Sec. II, par. 1.

No donation of land or appropriation of money shall be made by the State or any county or municipal corporation to or for the use of any society, association or corporation whatever. Art. VIII, Sec. III, par. 3.

No money shall be drawn from the State treasury but for appropriations made by law. All moneys for the support of the State government and for all other State purposes as far as can be ascertained or reasonably foreseen, shall be provided for in one general appropriation law covering one and the same fiscal year; except that when a change in the fiscal year is made, necessary provision may be made to effect the transaction. No general appropriation law or other law appropriating money for any State purpose shall be enacted if the appropriation contained therein, together with all prior appropriations made for the same fiscal period, shall exceed the total amount of revenue on hand and anticipated which will be available to meet such appropriations during such fiscal period, as certified by the Governor. Art. VIII, Sec. II, par. 2.

Property shall be assessed for taxation under general laws and by uniform rules. All real property assessed and taxed locally or by the State for allotment and payment to taxing districts shall be assessed according to the same standard of value; and such real property shall be taxed at the general tax rate of the taxing district in which the property is situated, for the use of such taxing district." Art. VIII, Sec. I, par. 1.

Defendants contend that the constitutional prohibitions against the loan of the State's credit and the appropriation of public moneys to or for the use of any society, association or corporation were intended to conserve public resources and prevent their use for the support or aid of privately controlled projects or ventures, and that the sections

of the Constitution above mentioned have no application to support of public projects or ventures, undertaken and controlled by public corporations in which no individual, association, society or corporation has any selfish interest by way of ownership, dominion, control or otherwise. And defendants, on economic grounds, justify the proposed guaranty and assumption of liability by the State by the argument that the proposed issue of bonds by the Highway Authority, the proceeds from the sale of which are dedicated to the construction of the Garden State Parkway, can be marketed at a much lower rate of interest if payment be guaranteed by the State than the rate of interest that would have to be paid without the State's guarantee, and suggest that the saving in interest to accrue on the bonds, over the life thereof, would amount to as much as $80,000,000. And it has also been suggested that the experience of the New Jersey Turnpike Authority would tend to indicate that there is little likelihood that the State would ever be called upon to make good on its guarantee of the payment of the interest and principal of said bonds in view of the fact that the revenues and tolls to be collected from the operation of a Garden State Parkway are to be pledged for the payment of the interest and principal of said bonds. Those arguments, of course, are without value on the question of whether or not L. 1952, c. 17, contravenes the constitutional provisions, but they do explain the reasons for the proposal to have the State guarantee payment of the principal and interest of the proposed bond issue by the New Jersey Highway Authority.

There are no disputed questions of fact for ...


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