On appeal from Division of Tax Appeals, Department of the Treasury.
For affirmance -- Chief Justice Weintraub, and Justices Heher, Wachenfeld, Burling, Jacobs and Francis. For reversal -- None. The opinion of the court was delivered by Burling, J.
This is an appeal from an order of the Division of Tax Appeals affirming a determination of the Hudson County Board of Taxation cancelling an amount of $200,000 imposed each year from 1952 to 1955, inclusive, as an ad valorem personal property tax assessment by the appellant, The Town of West New York, against respondent, Hackensack Water Company. Prior to hearing and while the cause was pending in the Appellate Division, we certified it to this court on our own motion.
The Hackensack Water Company supplies water to the inhabitants of 55 municipalities in northern New Jersey. One of the municipalities supplied by its system is the Town of West New York. Over the years the Water Company has paid a personal property tax to West New York for its water mains, service connections, meters, hydrants and other tangible personal property located within the confines of the municipality. In the years 1952 through 1955 that property was assessed at $403,000. In addition, beginning in 1952 and during each of the successive years 1953, 1954 and 1955 West New York assessed "the average amount of water located and sold by the Hackensack Water Company in the taxing district of West New York" at a value of $200,000. The $200,000 valuation for the water flowing through the mains of West New York was arrived at by computing the annual billings to the consumers located in West New York for the year 1952, which sum amounted to approximately $260,000. While it is not entirely clear from the record, apparently certain service charges made for sprinkler systems and fire hydrants were then deducted from this amount, thus establishing an approximate figure of $200,000 as the value of the water in the mains. The same figure applied to the years 1953, 1954 and 1955.
Each year the Hudson County Board of Taxation set aside the personal property assessment for the water and West New York appealed from each determination. The four appeals were heard together by the Division of Tax Appeals in 1956. After a hearing, the Division found "that a water company which is permitted to divert water from its natural source under public franchise and thereafter treats and distributes such diverted waters does not carry with it the incidence of title or ownership similar to those understood to exist where personal property is assessed and taxed under New Jersey Personal Property Assessment Statute R.S. 54:4-1." It further found that the contention of the Water Company "that the Water Company does not sell water, but supplies water and makes a service charge for supplying such water in proportion with the amount of water used is reasonable." Accordingly, a judgment was entered for each of the years 1952 to 1955 affirming the cancellation of the $200,000 assessment of Hudson County Board of Taxation.
The fundamental question involved is whether the water in question is an intended subject for taxation under the basic statute, R.S. 54:4-1 which provides:
"All property real and personal within the jurisdiction of this State not expressly exempted from taxation or expressly excluded from the operation of this chapter shall be subject to taxation annually under this chapter at its true value, and shall be valued by the assessors of the respective taxing districts. An executory contract for the sale of land, under which the vendee is entitled to or does take possession thereof, shall be deemed, for the purpose of this act, a mortgage of said land for the unpaid balance or purchase price. Personal property taxable under this chapter shall include, however, only tangible goods and chattels and shall not include any intangible personal property whatsoever whether or not such personalty is evidenced by a tangible or intangible chose in action, except as otherwise required by sections 54:4-20, 54:4-21 and 54:4-22 hereof. Property omitted from any assessment may be assessed by the county board of taxation within such time and in such manner as shall be provided by law. All property shall be assessed to the owner thereof with reference to the amount owned on October first in each year, and the person so assessed for personal property shall be personally liable for the taxes thereon."
The question is apparently a novel one. The parties have not cited, nor have we been able to discover a case in point in this jurisdiction or elsewhere, where it was held that water in the mains of the distributing system of a water company was subject to a local ad valorem personal property tax.
Before proceeding to a consideration of the contentions advanced by the parties on this appeal and to our ultimate resolution of the controversy it might be well to observe at the outset a pertinent canon of legislative interpretation:
"The literal interpretation of the words of an act should not prevail if it creates a result contrary to the apparent intention of the legislature and if the words are sufficiently flexible to admit of a construction which will effectuate the legislative intention. The intention prevails over the letter, and the letter must if possible be read so as to conform to the spirit of the act. 'While the intention of the legislature must be ascertained from the words used to express it, the manifest reason and obvious purpose of the law should not be sacrificed to a literal interpretation of such words.'" 2 Sutherland, Statutory Construction (3 d ed. 1943), § 4706.
The Town of West New York views the Water Company as a vendor of water, much the same as a merchant of any other commodity. The Hackensack Water Company is a public utility operating under the Water Act of 1876, R.S. 48:19-1 to 48:19-25, inclusive. See Hackensack Water Co. v. Ruta, 3 N.J. 139, 144 (1949). By its terms that statute confers upon the Water Company three major powers: it may divert such water from springs and streams "as shall be necessary and proper to enable the company to carry into effect the purposes of its incorporation" (R.S. 48:19-13); it may condemn privately owned streams and springs (R.S. 48:19-15), and it may "sell and dispose of the water issuing from its reservoirs, aqueducts or pipes for such prices, or quarterly or annual rents and such restrictions as they may think proper." (R.S. 49:19-18). West New York contends that the powers of ...