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New Jersey Mortgage Finance Agency v. McCrane

Decided: July 6, 1970.


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


[56 NJ Page 416] Plaintiffs, New Jersey Mortgage Finance Agency and James C. Brady, Jr., The Commissioner of Banking (hereinafter Agency) brought this action to obtain a declaratory judgment (N.J.S.A. 2A:16-50 et seq.) that the New Jersey Mortgage Finance Agency Law (hereinafter

Law), L. 1970, c. 38, N.J.S.A. 17:1B-4 et seq., is valid and constitutional. The action was filed after the defendant State Treasurer refused to lend money authorized by the Law for the use of the Agency. The Treasurer's refusal was based on his doubts of the Law's constitutionality. The case was tried on stipulated facts, and on cross motions for summary judgment the Law Division held for the plaintiffs. We certified the defendant's appeal directly to this Court. R. 2:12-1.

The Law was signed into law by Governor Cahill on May 4, 1970, and is the result of the Legislature's determination that New Jersey is experiencing a severe shortage of housing and a decline in "housing starts" caused in large part by "the lack of funds available to finance housing by the private mortgage lending institutions." N.J.S.A. 17:1B-5. In order to channel additional funds into the mortgage market, the Legislature established the Agency and empowered it to raise funds from private investors through the sale of tax exempt bond issues. These funds are then to be made available to private lending institutions for residential mortgage loans.

The Agency is a public corporation organized under the Department of Banking. N.J.S.A. 17:1B-7(a). Its members include the Commissioner of Banking, the Commissioner of Community Affairs, the State Treasurer, and two persons to be appointed by the Governor with the advice and consent of the Senate. N.J.S.A. 17:1B-7(b). The Law designates the Commissioner of Banking as the Chief Executive Officer. N.J.S.A. 17:1B-7(d). The Agency is authorized to sue and be sued, to make and alter bylaws for its internal organization and management, to make rules and regulations for the conduct of its business, to borrow money and to issue negotiable bonds or notes and to provide for and secure the payment thereof, to make loans to mortgage lenders for the making of new residential mortgages, and to take all necessary steps to carry out the purpose of the Law. N.J.S.A. 17:1B-8.

Rules and regulations made by the Agency "shall be designed to effectuate the general purposes of this act and the following specific objectives:

(i) the expansion of the supply of funds in the State available for new residential mortgages; (ii) the provision of the additional housing needed to remedy the shortage of adequate housing in the State and eliminate the existence of a large number of substandard dwellings; and (iii) the effective participation by mortgage lenders in the program authorized by the act and the restriction of the financial return and benefit thereto from such program to that necessary and reasonable to induce such participation." N.J.S.A. 17:1B-9(b)(7).

The Legislature appropriated to the account of the Agency the sum of $200,000 designed to defray initial expenses. L. 1970, c. 38, ยง 23. The Agency was obligated to reimburse the State Treasurer from the proceeds of bond sales within a period of five years. Id. Pursuant to this section, The Commissioner of Banking certified to the State Treasurer that the sum of $100,000 was required by the Agency in order to commence preliminary operations. The treasurer refused to release the funds for the reasons previously expressed, and the present suit resulted.

In his answer to plaintiffs' complaint, the Treasurer set up separate defenses contending: 1) that the case is not justiciable; 2) that the law does not meet the constitutional requirement of fulfilling a public purpose; 3) that even if the Law meets a public purpose, the means employed to carry out the purpose require a declaration of invalidity; 4) that the title of the Law fails to comply with constitutional requirements; and 5) that the Law constitutes an invalid delegation of legislative power to the Agency. We shall consider these questions in the order presented.

Defendant urges that the case is not justiciable since the suit is essentially a friendly one in which he has a mere difference of legal opinion with the plaintiffs. We cannot accept the argument. The suit, of course, does not

seek an advisory opinion upon some hypothetical matter. A statute does exist and the defendant has refused to comply with it because of doubts he asserts. Specifically, he has refused to make available to the Agency funds already appropriated by the Legislature, and the Agency cannot function without these funds. Such a refusal constitutes the basis of a true controversy. Moreover, the policy behind refusing to entertain suits where the parties do not stand in truly adversary positions is not threatened in this case. That policy is to avoid rendering decisions where it is unlikely that both sides will ...

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