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Stuyvesant Town Inc. v. Ligham

Decided: February 14, 1955.

STUYVESANT TOWN, INC., A NEW JERSEY CORPORATION, PETITIONER,
v.
CHESTER K. LIGHAM, STATE RENT CONTROL DIRECTOR, RESPONDENT



On petition for declaratory judgment.

For entry of judgment in accordance with majority opinion -- Chief Justice Vanderbilt, and Justices Oliphant, Burling, Jacobs and Brennan. For entry of judgment in accordance with minority opinion -- Justices Heher and Wachenfeld. The opinion of the court was delivered by Burling, J. Heher, J. (dissenting in part). Mr. Justice Wachenfeld joins in this dissent.

Burling

[17 NJ Page 474] This is a proceeding on petition for declaratory judgment comparable to the matter of Brookchester, Inc., Section I, v. Ligham, 17 N.J. 460. The declaratory relief sought by the petitioner herein, Stuyvesant Town, Inc.,

a New Jersey corporation, and resisted by Chester K. Ligham, Director of the Office of Rent Control of the State of New Jersey (hereinafter referred to as the State Director), parallels that sought by the petitioners in the Brookchester, Inc., case, supra, and the salient features herein are for purposes of disposition of this matter identical thereto. The petition in the present case was filed in the Superior Court, Appellate Division, in lieu of prerogative writ, under R.R. 4:88-10, and was certified prior to hearing there on our own motion.

The present matter involves questions disposed of by us in the Brookchester, Inc., case, supra. However, an additional question is presented in the present matter, concerning an alleged conflict between the police power of the State (as exerted in the State Rent Control Act of 1953, L. 1953, c. 216, N.J.S. 2 A:42-14 et seq., no question relating to the amendments thereto effected by L. 1954, c. 260, effective December 22, 1954, being advanced herein) and provisions of the National Housing Act, namely Title VI, sec. 608, of the Act of June 27, 1934, c. 847, as added May 26, 1942, c. 319, sec. 11, 56 Stat. 303, and the amendments and supplements thereto (see 12 U.S.C.A., sec. 1743). This is a question of importance and of general public significance and deserves consideration even though in respect to other matters the facts in this case should present a case exactly parallel to that just decided and would call for a like decision; because if the State has no right of control in the matter the declaration of invalidity of the State Director's orders insofar as they subject the petitioner's property to state rent control should not be qualified but should be absolute.

The pleadings and affidavits on file in this case show that the following are the uncontradicted facts.

Stuyvesant Town, Inc., the petitioner herein, was incorporated in 1946 under and by virtue of the statutes of this State, commonly known as the General Corporation Act, R.S. 14:1-1 et seq., and the several supplements thereto and acts amendatory thereof. Its purpose was expressly stated in

the certificate of incorporation to be "to create a private corporation to provide housing for rent or sale."

The certificate of incorporation authorized Stuyvesant Town, Inc.

"to apply for and obtain or cause to be obtained from the Federal Housing Commissioner a contract or contracts of mortgage insurance pursuant to the provisions of the National Housing Act as amended, covering bonds, notes and other evidences of indebtedness issued by this corporation and any indenture of Mortgage or Deed of Trust securing the same. So long as any property of this corporation is encumbered by a mortgage or Deed of Trust insured by the Federal Housing Commissioner it shall engage in no business other than the construction and operation of a Rental Housing Project or Projects."

It provided for the issuance of stock, including 100 shares of preferred stock. The certificate of incorporation provided in this respect:

"The preferred stock at any time outstanding may be redeemed by the corporation at par and dividends declared thereon, but unpaid to the date of such redemption, provided, however, that such stock shall be so redeemed, upon, but in no event before, the termination of any contract of mortgage insurance covering any indebtedness of the corporation without obligation upon the Commissioner*fn1 to issue debentures as a result of such termination. Preferred stock so redeemed shall be retired and cancelled."

It also contained the following express terms:

"SIXTH: The corporation shall not without prior approval of the holders of a majority of the shares of preferred stock, given either in writing or by vote at a meeting of the preferred stockholders called for that purpose (a) assign, transfer, dispose of or encumber any real or personal property, including rents, except as specifically permitted by the terms of the mortgage, (b) remodel, reconstruct, demolish or substract from the premises constituting the project and subject to such mortgage, (c) permit the occupancy of any of the dwelling accommodations of the corporation except at or below the rents fixed by the schedule of rentals provided hereinafter, (d) consolidate or merge the corporation into or with any other corporation; go into voluntary liquidation; carry into effect any plan of reorganization

of the corporation; redeem or cancel any of its shares of preferred stock, or effect any changes whatsoever in its capital stock; alter or amend the certificate of incorporation or fail to establish and maintain reserves as set forth in this certificate of incorporation.

EIGHTH: The following provisions are hereby adopted for the conduct of the affairs of the corporation and in regulation of the powers of the corporation, the directors and stockholders:

(a)(1) Dwelling accommodations of the corporation shall be rented at a maximum average rental per room per month fixed by the Board of Directors of the corporation and approved by the holders of the preferred stock. A schedule of rentals for the reasonable rental value of each apartment based upon the average as so determined shall be filed with the holders of the preferred stock, prior to leasing or offering for lease of any of the dwelling accommodations of the project, and when approved by them, shall thereafter be maintained except as provided in Article Sixth hereof. Store accommodations shall be rented at a rental to be fixed by the Directors with the approval of the holders of the preferred stock. (2) The corporation shall have the right to charge to and receive from any tenant such amounts as from time to time may be mutually agreed upon between tenant and the corporation with the written approval of the holders of a majority of the shares of preferred stock, for any facilities and/or services which may be furnished by the corporation to such tenant upon his request, over and above the facilities and services to which such tenant may be entitled by virtue of his lease, including, among other things, telephone operator and switchboard services, electric current, gas, air cooling and conditioning and other additional or extraordinary facilities or services which may be furnished by the corporation in connection with the operation of such housing facilities.

(b) In the event maximum rents are regulated throughout the United States and its possessions by any agency of the United States Government expressly established for purposes of controlling maximum rents, other than the Federal Housing Commissioner, the regulation and restriction provided for in Article Eighth, paragraph (a) will not be required. Such maximum rental as may be established by such Agency or Agencies of the United States as set forth herein will be accepted by the holders of the preferred stock as an approved rent schedule and upon the expiration of the authority of any such Agency of the United States to regulate and fix maximum rentals, the then existing schedule in force with respect to the project shall be the approved rental schedule within the provisions of Article Eighth, paragraph (a) above and shall not thereafter be changed except upon approval of the holders of the preferred stock." (Emphasis supplied.)

The affidavits filed demonstrate that these provisions of the corporate charter were required by the Federal Housing

Commissioner to qualify the petitioner as an applicant for mortgage insurance under section 608 of the National Housing Act, ante.

The affidavits show without contradiction that the petitioner acquired mortgage insurance from the Federal Housing Administration and constructed its rental housing accommodations (completing the project late in 1947) in accordance with its charter and the regulations promulgated by the Federal Housing Commissioner; and that maximum rent schedules applicable to this project have been approved by the preferred stockholder, i.e., by the Federal Housing Commissioner. The petition asserts, and the answer filed by the State Director admits, that section 608 of the National Housing Act, ante, expired in 1950, but the controls and restrictions imposed thereby upon projects covered by insured mortgages remain in effect until the mortgages insured thereunder have been fully paid and satisfied.

The State Director further admitted in his answer herein that the original rules and regulations adopted by him "excepted from the operation of the Act [ i.e., the State Rent Control Act of 1953, ante ] certain classes of rental property, one of ...


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