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New Jersey Highway Authority v. Sills

Decided: March 25, 1970.

NEW JERSEY HIGHWAY AUTHORITY, A BODY CORPORATE AND POLITIC CREATED AND EXISTING UNDER AND BY VIRTUE OF CHAPTER 16 OF THE LAWS OF 1952, AS AMENDED AND SUPPLEMENTED; FIDELITY UNION TRUST COMPANY, A BANKING CORPORATION OF THE STATE OF NEW JERSEY, AS TRUSTEE UNDER THE GENERAL BOND RESOLUTION OF THE NEW JERSEY HIGHWAY AUTHORITY ADOPTED JULY 8, 1953, AS SUPPLEMENTED; AND FIRST NATIONAL STATE BANK OF NEW JERSEY, A NATIONAL BANKING ASSOCIATION, AS TRUSTEE UNDER THE JUNIOR BOND RESOLUTION OF THE NEW JERSEY HIGHWAY AUTHORITY ADOPTED JULY 7, 1962, AS SUPPLEMENTED, PLAINTIFFS,
v.
ARTHUR J. SILLS, ATTORNEY GENERAL OF THE STATE OF NEW JERSEY, DEFENDANT



Herbert, J.s.c.

Herbert

This action was brought for a declaratory judgment that chapters 352 and 414 of the Laws of 1968 are unconstitutional, and for ancillary injunctive relief against their operation and enforcement. The amended complaint also contains demands for a judgment declaring that any legislation which purports to exempt classes of vehicles and persons from paying tolls on the Garden State Parkway will be unconstitutional so long as bonds heretofore issued are outstanding, and there is a demand for such other relief as the interests of justice may require. The caption names and, to some extent, describes the plaintiffs. The sole defendant is Arthur J. Sills, the Attorney General of the State of New Jersey.

Chapter 352 of the Laws of 1968 exempts properly identified members of the New Jersey National Guard from the payment of tolls on any toll road, bridge or ferry within the State used by them while going to, or returning from, any required parade, encampment, drill, meeting or active duty for training. Chapter 414 does the same thing for properly identified members of a reserve component of the armed forces of the United States. Both were passed over vetoes by the Governor. In each case, the Governor's veto message cited the unconstitutionality of the statute as the basis for his action.

Plaintiffs charge that chapters 352 and 414 are unconstitutional in that they impair the obligation of contracts, abridge the privileges or immunities of citizens of the United States, deprive persons of liberty or property without due process of law, interfere with the natural and inalienable right of acquiring, possessing and protecting property, and violate the guarantee of equal protection. Plaintiffs have moved for summary judgment on the basis of these claims.

Affidavits and documents filed by plaintiffs show that the New Jersey Highway Authority currently has outstanding bonds in the total approximate amount of $327,000,000. They were issued pursuant to resolutions authorized by

statute (N.J.S.A. 27:12B-8) and adopted by the Authority. The Garden State Parkway, which is a toll road throughout most of its length, was paid for in large part by using the proceeds of sale of the bonds. Tolls charged to users of the Parkway are the primary source of funds to pay the bonds, both principal and interest.

Section 9 of the New Jersey Highway Authority Act specifies the provisions which the Authority may include in any bond resolution and provides that such a resolution shall constitute a contract with the bondholders. Among the provisions which may be included are covenants as to rates of tolls and other charges to be established.

Pursuant to section 9 of the act, the Authority's general bond resolution of July 8, 1953 and its junior bond resolution of July 7, 1962 contain covenants as to the rates of tolls and other charges. For example, in the general resolution (1) section 501 pledges the tolls and other revenues of the Authority for the benefit of the bonds issued pursuant to the resolution; (2) various sections establish funds into which the revenues of the Authority are to be paid; (3) section 707 contains a covenant that the Authority has the right and power to fix, charge and collect tolls and other charges for use of the Garden State Parkway, and (4) section 711 requires the Authority to exercise its powers to fix, charge and collect tolls so that revenues in each year will meet certain specified requirements.

In addition to the provisions of the general resolution and the junior bond resolution, the act itself constitutes a contract with, and pledge to, the bondholders. Sections to be mentioned here include (1) section 5(i) of the act which gives the Authority the power to fix and revise and collect tolls, (2) section 5(j) which gives the Authority the power to establish rules and regulations for the use of the Garden State Parkway; (3) section 9 (referred to above) which specifies that such a resolution shall constitute a contract with the bondholders and that among the provisions

which may be included are covenants as to rates of toll and other charges to be established; (4) section 14 which specifies that the Authority is authorized to fix, revise, charge and collect tolls and charges; that such tolls and charges shall be so fixed and adjusted as to carry out and perform the terms and provisions of any contract for the benefit of bondholders, and that such tolls and charges shall not be subject to supervision or regulation by any agency of the State, (5) section 18(a) which provides that no vehicle shall be permitted to make use of the Garden State Parkway except upon payment of such tolls as may be prescribed by the Authority, and (6) section 20 which requires the Authority to permit the largest toll-free use of the Parkway consistent with its obligations to the bondholders and consistent with safe and economical construction and operation of the project on a self-supporting basis.

Considering the provisions of the New Jersey Highway Authority Act and those of the two bond resolutions of the Authority, I think that chapters 352 and 414 of the Laws of 1968 are both unconstitutional impairments of the existing contracts between the Authority and its bondholders. The Attorney General, in his answer to the amended complaint, concedes that these statutes are unconstitutional. An affidavit filed by Philip S. Carchman, the Deputy Attorney General entrusted with the handling of this case, states that in view of its opinion that the statutes in question are unconstitutional, "the Office of the Attorney General cannot defend" this action. ...


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