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Schierstead v. City of Brigantine

Decided: February 16, 1959.

OSCAR A. SCHIERSTEAD, PLAINTIFF-APPELLANT,
v.
CITY OF BRIGANTINE, A MUNICIPAL CORPORATION OF THE COUNTY OF ATLANTIC AND STATE OF NEW JERSEY AND ELIAS G. NAAME, DEFENDANTS-RESPONDENTS



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

Jacobs

The plaintiff appealed to the Appellate Division from the Law Division's action in dismissing his complaint, entering judgment for the defendants, and denying his motion for leave to amend. We certified the appeal on our own motion under R.R. 1:10-1(a).

In 1931 the Legislature adopted the Municipal Finance Commission Act which was intended to meet the then public

emergency arising from defaults in the payment of municipal obligations and the resulting impairment of public credit. See L. 1931, c. 340, p. 830. It provided in section 101 that whenever it was made to appear to a justice of the Supreme Court, from a petition by the holder of a bond or note issued by a municipality, that payment was in default for over 60 days, the justice could conduct a summary investigation and enter an appropriate order creating the Municipal Finance Commission for the municipality with all of the powers set forth in the act. See R.S. 52:27-2. In section 103 the Legislature also provided for the creation of the commission where the municipality itself adopted a resolution saying it could not meet its note and bond obligations; although this section did not originally provide, as did section 101, for a summary investigation and order by the Supreme Court justice, it was later so amended. See L. 1933, c. 330, p. 860; R.S. 52:27-3.

Section 403 (now R.S. 52:27-4) set forth that the commission shall continue in force and exercise its powers and perform its duties until all bonds or notes or other indebtedness which has fallen due, and all bonds or notes which shall fall due within one year, and the interest thereon, have been paid or funded or refunded (excepting tax anticipation or tax revenue notes or bonds of the current year) at which time "its authority under this act shall cease," and that thereafter the Commissioner of Municipal Accounts (later the Director of the Division of Local Government) shall have power to continue the employment of the auditor as provided in section 301 (R.S. 52:27-6) and exercise the power of the commission under section 209 (R.S. 52:27-22), until the debt of the municipality is within statutory limitations, at which time "his authority under this act shall cease." In June 1932 the act was amended (L. 1932, c. 236, p. 519) and shortly thereafter bondholders of the City of Brigantine filed a petition resulting in an order by Justice Donges which placed the City of Brigantine under the control and supervision of the Municipal Finance Commission. In 1933 the act was again

amended (L. 1933, c. 330, p. 859) and was supplemented by a provision (now R.S. 52:27-5) to the effect that where a justice of the Supreme Court has "heretofore or hereafter made an order annulling, vacating and discharging" any order theretofore made by him under the act, the commission shall cease to continue in the municipality and shall not exercise any powers or perform any duties therein, provided, however, that the commission "shall have heretofore or hereafter determined by resolution that it is not functioning" in the municipality. L. 1933, c. 375, p. 1059. The introducer's statement indicated that the purpose of the supplement was to remove a question which had been raised as to the power of a justice to revoke an order issued by him under the act (see Senate No. 460 (1933)); apparently the question had been raised in connection with In re Armstrong where Justice Bodine had on June 1, 1933 entered an order finding the City of Garfield to be in default on its bonds but "cancelled, annulled, vacated, and discharged" his order on the following day.

The Municipal Finance Commission Act was amended from time to time thereafter and, as amended, is still in effect. See R.S. 52:27-1 et seq. It has been passed upon in many judicial decisions. See Hourigan v. North Bergen Township, 113 N.J.L. 143, 149 (E. & A. 1934); Rippel v. City of Asbury Park, 118 N.J.L. 45 (Sup. Ct. 1937); Shay v. Delaware Township, 122 N.J.L. 313 (Sup. Ct. 1939), affirmed 124 N.J.L. 124 (E. & A. 1940); Faitoute Iron & Steel Co. v. City of Asbury Park, 316 U.S. 502, 504, 62 S. Ct. 1129, 86 L. Ed. 1629, 1632 (1942). In Hourigan, Justice Heher noted that the act conferred powers upon the commission "somewhat akin to those exercised by receivers of insolvent corporations" (see Hetrick v. Roberts, 117 N.J.L. 584, 585 (Sup. Ct. 1937), affirmed 118 N.J.L. 586 (E. & A. 1937)), that it was designated to prevent financial collapse and paralysis of municipal functions, and that it was a valid exercise of the State's police powers; and in Faitoute Justice Frankfurter noted that New Jersey had "adapted the underlying principles of an equity receivership

to the solution of the problem of insolvent municipalities" [316 U.S. 502, 62 S. Ct. 1130] and that its legislation did not violate the contract clause of the Federal Constitution.

In Schierstead v. City of Brigantine, 20 N.J. 164, 167 (1955), the plaintiff attacked a contract of sale which Brigantine had entered into with Mr. Walker and which the Municipal Finance Commission had approved under R.S. 52:27-29.1. That statutory provision authorizes the governing body of any municipality "in which the commission is or may be functioning" to sell, with the commission's consent, any municipal real estate at public or private sale. The plaintiff did not contend that the Municipal Finance Commission Act was invalid in its entirety but did urge that R.S. 52:27-29.1 was invalid "as an unconstitutional delegation of power"; this court, in an opinion by Justice Wachenfeld which referred to Hourigan and Faitoute and their expressions of the legislative policy, held that, when read as a whole, the act contained enough to withstand the contention that the delegation lacked the required norm or standard.

In 1956 Brigantine offered for public sale certain lands located at the south end of the city; the plaintiff obtained a temporary restraint which was followed by a modification or clarification of the conditions of sale and by a public sale which resulted in a bid of $30,000 by the defendant Naame, subject to the approval of the Municipal Finance Commission. On July 13, 1956 Brigantine accepted Naame's bid, subject to the approval of the commission, but on August 17, 1956 it rescinded its approval and the commission never acted on the matter. On September 14, 1956 Naame filed a complaint in the Chancery Division seeking specific performance but his action was dismissed under an agreement in which Brigantine undertook to sell the land pursuant to R.S. 52:27-29.1 to ...


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