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Pine Grove Manor v. Director

Decided: June 12, 1961.


Goldmann, Foley and Lewis. The opinion of the court was delivered by Lewis, J.A.D.


[68 NJSuper Page 137] Plaintiffs claim tax exemption under N.J.S.A. 54:10A-3(d), a provision of our statute commonly

referred to as the Corporation Business Tax Act. They are four nonstock corporations which were organized and incorporated on February 24, 1956, pursuant to the laws of the State of Maryland and under the respective corporate names of Pine Grove Manor, Section No. 1, Inc., Pine Grove Manor, Section No. 2, Inc., Pine Grove Manor, Section No. 3, Inc., and Pine Grove Manor, Section No. 4, Inc. On March 3, 1956 they complied with R.S. 14:15-3 to the extent that they made application for and obtained a certificate of authority to do business in the State of New Jersey.

Each of the four plaintiff corporations owns a section of land in Franklin Township, Middlesex County, New Jersey, upon which has been constructed a garden-type apartment building consisting of approximately 100 apartments. The total enterprise involved an estimated 400 apartments which were constructed, financed and insured as a National Housing Act project. New Jersey franchise tax returns were filed and corporate business taxes were paid for the years 1957, 1958 and 1959. In February 1958 plaintiffs filed a refund claim, alleging that these taxes were paid erroneously, as plaintiffs were exempt from such taxation.

On March 10, 1959 the Corporation Tax Bureau of the State Division of Taxation denied their demands for refund, and from that determination an appeal was taken, on June 8, 1959, to the Division of Tax Appeals in the Department of the Treasury where the matter was assigned, for review, to a single member of the Division pursuant to N.J.S.A. 54:2-41.1 and Rule 16:8-10.100 of the Division of Tax Appeals. A hearing was held on March 30, 1960 before Commissioner Ellis M. Kopp, who, after considering the evidence, the briefs submitted and the argument of counsel, filed a written opinion, and rendered judgment affirming the conclusions of the Supervisor of the Corporation Tax Bureau.

The Commissioner found and determined that the plaintiffs were not entitled to the claimed exemption because the

Maryland statute under which they were incorporated was not a "general or special law similar to Title 15, 16 or 17 of the Revised Statutes" of this State.

The appeal to this court is from the final judgment of the Commissioner, and the plaintiffs here contend that: (1) they were incorporated under the Nonstock Corporation Act of the State of Maryland which is a law similar to the laws of New Jersey relating to corporations and associations not for pecuniary profit; (2) they were organized as nonprofit corporations; (3) they are not conducted for the pecuniary profit of any private individual or shareholder; and (4), accordingly, (a) the judgment below should be reversed, (b) the taxes paid should be refunded, (c) they should be adjudged exempt corporations, and (d) they should be removed from the tax roster of the Corporation Tax Bureau of the State of New Jersey.

It was stipulated that all exhibits and documents admitted into evidence (which include in particular the corporation instruments relating to Pine Grove Manor, Section No. 4, Inc.) would be identical for each of the four corporations, and that the four cases should be tried together. There is no substantial dispute as to the facts, and the questions of law are common to each of the four plaintiffs.


The particular provision of the New Jersey Corporation Business Tax Act, which is the subject of appeal, is stated in these words:

"The following corporations shall be exempt from the tax imposed by this act:

(d) nonprofit corporations, associations or organizations established, organized or chartered, without capital stock, under the provisions of Titles 15, 16 or 17 of the Revised Statutes, or under a special charter or under any similar general or special law of this or any other State, and not conducted for pecuniary profit of any private shareholder or individual;" N.J.S.A. 54:10A-3(d).

It should be noted that Title 15 of our statutes relates to corporations and associations not for profit, and that Titles 16 and 17 are not applicable to the case sub judice , as the former deals with religious corporations and associations, and the latter concerns corporations and institutions for finance and insurance. Subdivision (d) of the quoted statutory provision, supra , expresses a legislative mandate, and its language is clear and unmistakable. In order to justify an exemption, a domestic nonprofit company organized without capital stock under Title 15, or a foreign corporation organized under a similar general or special law of another state, must not be conducted for the pecuniary profit of any private shareholder or individual.

Title 15 of the New Jersey Revised Statutes is captioned -- "Corporations and Associations Not For Profit." The first provision of the act reads:

"Any five or more persons, societies, associations, corporations or clubs may form a corporation for any lawful purpose other than for pecuniary profit , upon making, recording and filing a certificate of incorporation in writing as hereinafter provided." R.S. 15:1-1. (Italics supplied)

The plaintiffs were incorporated under the Annotated Code of Maryland, Article 23 (Corporations), Part II (Nonstock Corporations), Sections 132 to 138. The provisions salient to this review are:

" Sec. 132. General law.

(a) Compliance with regulations of stock corporations and particular classes of corporations. -- Except as otherwise provided in this Part II, every corporation of this State without capital stock shall comply with all provisions of Part I, Stock Corporations, and Part III, Particular Classes of Corporations, of this article, in so far as they are applicable.

(b) ' Stockholder,' etc., includes 'members '. -- Wherever the term stockholder, holder of shares, or other equivalent words are used in this article, they shall be deemed to include members, unless the context otherwise requires." Ann. Code , 1951, sec. 128; 1951, ch. 135, sec. 200; 1953, ch. 405, sec. 1.

" Sec. 133. Charter provision.

Every corporation of this State without capital stock, formed after June 1, 1951, shall specifically provide in its charter that it is not authorized to issue capital stock." Ann. Code , 1951, sec. 129; 1951, ch. 135, sec. 201.

" Sec. 137. Restrictions on property holdings.

No provision contained in the charter of any charitable or benevolent society or corporation of this State, existing on June 1, 1951, whether incorporated under any general or special law of this State, purporting to limit or restrict the tenure or enjoyment of property or income, shall, after June 1, 1951, be effective to limit or restrict the right of such corporation to hold, enjoy, use and deal with any property and income in any way; and all such provisions are hereby annulled and revoked." Ann. Code , 1951, sec. 133; 1951, ch. 135, sec. 205.

Nowhere in these sections or throughout Part II of the Maryland code dealing with nonstock corporations is any reference made to the term "nonprofit," nor is any language used which could be reasonably construed to prohibit or limit nonstock corporations from engaging in profit-making enterprises. To the contrary, section 137, supra , negates the idea of any such intended restrictions. It is also significant that the code provisions relating to nonstock corporations specifically incorporate, by reference, where applicable, the provisions of Part I and Part III of Article 23, which parts deal respectively with stock companies and special statutory corporations.

That the legislature of Maryland, under some circumstances, recognizes nonprofit corporations is to be evinced from Article 23, Part III, section 371, wherein certain cooperative associations organized under that part of the code may elect to operate on a nonprofit basis. If the Maryland legislature had intended to make any such distinction with relation to companies incorporated pursuant to Part II (nonstock corporations), under which plaintiffs were incorporated, it is only reasonable to assume that it would have done so, and the statute would certainly have been worded differently. The force of the maxim expressio unius est exclusio alterius is strengthened by contrast "where a thing is provided in one part of the statute and omitted in another." United States

v. Wiltberger , 5 Wheat. 76, 18 U.S. 76, 5 L. Ed. 37 (1820); 2 Sutherland Statutory Construction (3 d ed. 1943), sec. 4915.

Our attention has been directed in plaintiffs' brief to numerous provisions of the Maryland code that are allegedly comparable to the New Jersey act relating to associations and corporations not for profit. These similarities, for the most part, relate to incorporation details, form and procedure, which are clearly overshadowed by essential distinguishing characteristics. Indeed, it could be urged that there are many similarities between the New Jersey Title 15, under which nonprofit corporations are chartered, and our General Corporation Act, known as Title 14; but there is a controlling distinction -- the ...

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