For affirmance -- Chief Justice Weintraub, and Justices Jacobs, Francis, Proctor, Hall and Schettino. For reversal -- None. The opinion of the court was delivered by Francis, J.
The State Division of Tax Appeals cancelled certain tax assessments imposed upon the Pennsylvania & Newark Railroad Company for the years 1906 through 1956 by the Director of the Division of Taxation. An appeal was taken to the Appellate Division and we certified it before argument there.
On December 19, 1905, the Pennsylvania & Newark Railroad Company (hereafter called P & N) was granted a corporate franchise under L. 1903, c. 257 (R.S. 48:12-1
et seq.), an act providing for the establishment of railroad companies. The Secretary of State was not permitted to accept such a certificate of incorporation for filing unless an affidavit was appended thereto signed by at least five of the directors, reciting an intention in good faith "to construct, maintain and operate the road mentioned in the certificate." R.S. 48:12-8. In the present controversy the Director does not dispute that the franchise was sought and obtained in good faith for the purposes set out in the statute. The corporation was a wholly owned subsidiary of the Pennsylvania Railroad Company. It was organized to construct and operate a railroad from Trenton-Morrisville to connect with the Pennsylvania Railroad facilities near Elizabeth, New Jersey.
The legislation required a deposit with the State Treasurer of $2,000 for each mile of the proposed route, to be held by him until construction or abandonment of the road. R.S. 48:12-8, 25, 40. Such a deposit was made at intervals so that by December 27, 1917, $84,400 had been posted. That sum remained with the Treasurer until December 10, 1956, when it was returned. Necessary surveys of the route and several amended descriptions and surveys thereof were filed with the Secretary of State. R.S. 48:12-24. Between 1906 and 1929, P & N purchased at least 71 parcels of land and in 1918 acquired one tract by condemnation. The authority to condemn was an incident of the railroad franchise. Over the period of its corporate existence, down to 1955, 40 pieces of land were sold with the approval of the Board of Public Utility Commissioners. Certain bridge piers necessitating an expenditure of $272,775.93 were erected from 1906 through 1916. They were demolished between 1931 and 1938 at a cost of $80,332.56. The corporation received $206,000.46 as real estate rental from 1905 through 1954. The record does not disclose the specific property rented or the use to which it was put. Over the years, as the real estate was acquired along the route, it was assessed locally by the various municipalities and taxed accordingly.
During its entire corporate life, P & N filed with the Secretary of State the annual reports required of every domestic corporation. N.J.S.A. 14:6-2. One of the statements called for is "the character of its business." The Director has stipulated that each report set out the business as "railroad and transportation."
Section 14 of the Railroad Act of 1903 provided that the grantee of the franchise shall commence the proposed railroad within six months from the date of its organization and that where the road is not more than 50 miles in length at least one track shall be opened and completed within two years of the commencement. R.S. 48:12-29. On failure to do so, the holder "shall forfeit * * * the franchises." R.S. 48:12-30. Apparently the forfeiture was not intended to be automatic. The same section says that if any part of the road is not constructed "within the time allowed by law" and thereafter another company files a survey of a location crossing or occupying that portion, the latter company shall have priority over such location. Cf. Brummitt v. Snow Hill Ry. Co., 197 N.C. 381, 148 S.E. 444 (Sup. Ct. 1929); Mylrea v. Superior & St. C.R. Co., 93 Wis. 604, 67 N.W. 1138 (Sup. Ct. 1896); Combes v. Milwaukee & M.R. Co., 89 Wis. 297, 62 N.W. 89, 27 L.R.A. 369 (Sup. Ct. 1895); and see contra Hanbury v. Metropolitan Securities Co., 215 App. Div. 225, 213 N.Y.S. 555 (App. Div. 1926), appeal dismissed 253 N.Y. 527, 171 N.E. 767 (Ct. App. 1930).
During the entire period from incorporation to November 16, 1954, when the directors adopted a resolution for the dissolution of P & N, no track was laid and, of course, no transportation was ever engaged in. It is undisputed, however, that commencing as far back as 1878 (L. 1878, c. 13, p. 23) the Legislature passed a series of acts extending for an additional period, at first three years and later two years, the time for the completion of any railroad authorized to be constructed. The last of these enactments was in 1953. L. 1953, c. 99. (Legislation of this type was not peculiar
to New Jersey. See State v. Twin Village Water Co., 98 Me. 214, 56 A. 763 (Sup. Jud. Ct. 1903); New York & L.I.R. Co. v. O'Brien, 121 App. Div. 819, 106 N.Y.S. 909 (App. Div. 1907), affirmed 192 N.Y. 558, 85 N.E. 1113 (Ct. App. 1908); Hanbury v. Metropolitan Securities Co., supra.)
After January 1, 1886, the extensions applied only to those companies which had expended moneys in surveys or location of route, or in acquisition of right of way or in construction. See, e.g., L. 1953, c. 99; L. 1937, c. 13. They were made dependent also upon the filing in the office of the Secretary of State of a waiver approved by the Governor and the Attorney General of any special charter provision relating to taxation; and an agreement to be bound by any general law of New Jersey for the taxation of railroad corporations. L. 1953, supra, section 1. In the early years P & N filed such documents biennially but after 1919 that burden was removed and the new extension was given on the basis of the waiver agreement already on file. L. 1921, c. 34. The effect of each successive enactment was a waiver by the State of the default or nonuser of the franchise and to keep the company viable for the additional period. Point Breeze Ferry & Imp. Co. v. Bergen Neck Ry. Co., 53 N.J.L. 108 (Sup. Ct. 1890); New York & L.I.R. Co. v. O'Brien, supra; Brummitt v. Snow Hill Ry. Co., supra; Mylrea v. Superior & ...