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City of Bayonne v. Palmer

Decided: June 29, 1966.


For affirmance -- Chief Justice Weintraub and Justices Francis, Proctor, Hall and Schettino. For reversal -- None.

Per Curiam

The judgment is affirmed substantially for the reasons expressed by Judge Matthews in the Superior Court, Chancery Division. City of Bayonne v. Palmer, 90 N.J. Super. 245 (Ch. Div. 1966).


On this appeal plaintiffs renew their charge that the contracts between the Commissioner of the State Highway Department

and the railroads are violative of Article VIII, § III, par. 3 of the State Constitution. More specifically they assert that payment by the State of any moneys called for under the contracts (details of which are outlined in the opinion below, 90 N.J. Super. 264-268) constitutes a donation of public funds to a private corporation, which is prohibited by the article. The contention is predicated primarily upon Wilentz v. Hendrickson, 133 N.J. Eq. 447 (Ch. 1943), affirmed 135 N.J. Eq. 244 (E. & A. 1944). We agree with the Chancery Division that the case is clearly distinguishable.

Wilentz v. Hendrickson involved an attack upon the constitutionality of certain statutes authorizing a compact by the State to remit accrued and unpaid interest on the full amount of delinquent taxes on the property of certain private railroad companies operating in New Jersey. The Chancery Division and the Court of Errors and Appeals declared the statutes unconstitutional because there would be no legal consideration for the contract authorized thereunder. More particularly both courts pointed out that the full debt of the railroads, consisting of taxes and accrued interest, was due, and collectible, and the State's right thereto vested. Consequently, an agreement for remission of the interest and to discharge the entire obligation in return for installment payment of the portion thereof due for taxes was without valid consideration and therefore void. Such payment was nothing more than the performance of an act which the railroads were already legally bound to do, and the formal undertaking to do so added nothing of legal substance in the way of quid pro quo for the State's remission. The agreement to discharge the interest portion of the debt therefore, was a gratuity, a gift or appropriation of public money to private companies and transgressive of Article I, § XX (now Article VIII, § III, par. 3) of the Constitution.

That situation is not present in the matter before us. The contracts between the Commissioner and the railroads, as authorized by L. 1962, c. 191, N.J.S.A. 48:12A-17 to 20, and L. 1964, c. 88, § 5, N.J.S.A. 48:12A-16.5, contain a

number of undertakings on the part of the carriers which are described in the opinion below. 90 N.J. Super. 264-268. The Attorney General and the railroads assert that these commitments and obligations constitute sufficient legal consideration for the promise by the State to pay the moneys called for by their agreements. And the railroads contend that since such payments rest upon a valid and not illusory or insignificant quid pro quo, they are not gifts or donations or appropriations of public money to a private company within the intendment of the Constitution. The trial court accepted defendants' position as sound and sustained the contracts. In approving that view we believe certain additional comments should be made with respect to one aspect of the statute which is made part of the contracts by reference.

Section 5 of the statute, L. 1964, c. 88, N.J.S.A. 48:12A-16.5, provides among other things, that the contract shall obligate the carrier:

"(c) During the term of the contract * * *, unless otherwise approved in writing by the commissioner, not to initiate, take or prosecute and to actively resist, any proceedings before any State or Federal agency or court for any order, approval, judgment, decree or other action impairing or limiting the rights, powers and capacity of the carrier to operate the contracted service and carry out and perform its obligations under said contract with respect to the contracted service".

The contract with Central Railroad Company recites that upon completion of the improvements to capital facilities listed therein and in similar agreements between the State and the Lehigh Valley and Pennsylvania Railroads, Central "will operate or cause to be operated [the stipulated] passenger carrying services for a period of not less than five years from their inauguration." The contract with the Lehigh Valley Railroad Company also contains similar provisions with respect to agreed periods of continuous operation. No contract between the State and Pennsylvania Railroad Company directly relating to consummation of the Aldene Plan was put in evidence. None seems to have been made. It does

appear, however, that in the general operational contracts between the State and Pennsylvania covering continuance of the latter's over-all intrastate passenger service, general provision was made for cooperation with Central and Lehigh with respect to use of such Pennsylvania facilities as might be necessary to accomplish the Aldene Plan. The testimony shows that certain necessary rental agreements had been made with respect to use of Pennsylvania's trackage and other facilities. Plaintiffs' attack on the constitutionality of the State's payments to Pennsylvania is necessarily directed against the series of general operational contracts respecting continuance of passenger service and against the statute which authorized them. Of ...

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