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New Jersey Highway Authority v. Sills

Decided: July 29, 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

[111 NJSuper Page 314] This supplements an earlier opinion dated March 25, 1970 which is reported in 109 N.J. Super. 424 (Ch. Div. 1970). After that opinion was published, but before any judgment was entered, application was made by 78th Division (Training) United States Army Reserve and by National Guard Association of New Jersey to intervene for the purpose of defending against plaintiffs' contentions that Chapters 352 and 414 of the Laws of 1968 are unconstitutional. Over objections intervention was allowed, the

order of intervention being dated April 16, 1970 and providing for a final hearing on the merits on May 7, 1970.

My recollection is that nothing took place on May 7th except that an adjournment to a later date was arranged. Either on May 7th or on a later date the attorney for the intervenors as well as counsel for the other parties agreed that there was no need to hear the testimony of any witnesses. It was agreed further that written material on behalf of the intervenors would be served and filed. That has now been done in the form of letters dated June 24, 1970 and July 22, 1970. Both of these are, in effect, informal briefs which develop arguments and cite authorities in support of intervenors' position. Although the letter of June 24th mentioned a failure to furnish information about total Garden State Parkway revenues for 1969, total bond service costs for 1969 and the amount of alleged loss of tolls in the same year resulting from free passage by National Guard and Army Reserve personnel, such information was furnished promptly thereafter. It is now my understanding that I have before me everything that any party desires to submit.

Total Parkway revenues for 1969 were: gross, $46,942,171.00; net, $33,312,885.00. Total bond service costs for that year were $17,816,740.00. As to toll-free passage, 99,546 tickets or passes were used by National Guardsmen and Army Reservists from February to December of 1969 indicating, at a value of 25 cents each, approximately $25,000.00 of revenue lost during that period of eleven months. In a full year, free passage at this rate of use would result in loss of approximately $27,300.00 if the likely assumption is made that no appreciable number of guardsmen and reservists would cease to drive on the Parkway because of a requirement that they pay for passage.

There is no need, however, to determine with accuracy, or even estimate with great care, the diminution of revenue which has resulted, and would result in the future, from use of the toll-free privileges provided by the two statutes in question. Whatever the precise figures, the diminution is

certainly very small when contrasted with total revenues and with the margin of about $15,500,000.00 left from net revenues in 1969 after providing for bond service costs. I agree with one basic premise of intervenor's argument; I cannot foresee any possibility that toll-free passage by guardsmen and reservists as provided in the two statutes will ever cause a default on bonds now outstanding or will ever create a situation which might threaten a default. However, the possibility of an early call is part of a bondholder's contract. The difference between having and not having $27,000 a year will not cause a default but when viewed as loss of the means to retire bonds each year, by call or open-market purchase, the impact of the statutes becomes more important.

Intervenors contend that the relatively small diminution in tolls caused by free trips on the Parkway as provided for in Chapters 352 and 414 of the Laws of 1968 does not make those statutes unconstitutional. The case on which they principally rely is City of El Paso v. Simmons , 379 U.S. 497, 85 S. Ct. 577, 13 L. Ed. 2d 446 (1965) rehearing denied 380 U.S. 926, 85 S. Ct. 879, 13 L. Ed. 2d 813 (1965). That case dealt with an application of the contract clause of the Federal Constitution. In my earlier opinion, without having had the benefit of intervenors' arguments, I ruled that the two statutes in question were in conflict with the contract clauses of the Federal and New Jersey Constitutions.

In addition to City of El Paso these cases have been cited by intervenors: State v. Sutton , 83 N.J.L. 46 (Sup. Ct. 1913), affd. 87 N.J.L. 192 (E. & A. 1915); Public Service Railway Co. v. Board of Public Utility Commissioners , 89 N.J.L. 24 (Sup. Ct. 1916); O'Gorman & Young v. Phoenix Assurance Co. , 105 N.J.L. 642 (E. & A. 1929); City of Newark v. Public Service Co-Ordinated Transport , 9 Misc. 722 (Sup. Ct. 1931), affd. 109 N.J.L. 270 (E. & A. 1932); Hourigan v. North Bergen , 113 N.J.L. 143 (E. & A. 1934); State Board of Milk Control v. Newark Milk Co. , 118 N.J. Eq. 504 (E. & A. 1934); In re North Jersey Title Insurance

Co. , 120 N.J. Eq. 148 (Ch. Div. 1936); Bucsi v. Longworth Building & Loan Assn. , 119 N.J.L. 120 (E. & A. 1937); Faitoute Iron & Steel Co. v. City of Asbury Park , 127 N.J.L. 239 (E. & A. 1941); Veix v. Sixth Ward Building & Loan Assoc. of Newark , 310 U.S. 32, 60 S. Ct. 792, 84 L. Ed. 1061 (1940); Jamouneau v. Harner , 16 N.J. 500 (1954), and Ohlson v. Phillips , 304 F. Supp. 1152 (D.C. 1969). A number of them, though dealing with questions of constitutionality, did not in any way involve the subject of contract impairment; and in that class I place State v. Sutton, Public Service Railway Co., City of Newark v. Public Service, State Board of Milk Control and Jamouneau, supra. Some, if not all of the others in the list above, as well as City of El Paso, supra show that in some situations legislation which represents a valid exercise of police power has been held to be constitutional in spite of resulting impairment of contract obligations.

In City of El Paso v. Simmons, supra , predecessors of Simmons had contracted in 1910 to buy school lands from the State of Texas. The law at the time provided that in the event of any declaration of forfeiture for non-payment of interest the purchasers or their assignees might on written request have their claims reinstated at any time by paying into the state treasury the full amount of interest due on the claim up to the date of reinstatement. In 1941 the statute was amended to provide that within five years after a declaration of forfeiture the right to reinstate might be exercised, but not thereafter. A forfeiture was declared by the State in 1947, followed more than five years later by an application for reinstatement on the part of Simmons, who had taken quitclaim deeds to the lands. The application was rejected as too late and in 1955 Texas undertook to sell to the City of El Paso. The Supreme Court, reversing ...


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