On certification to the Appellate Division.
For reversal and remandment: Chief Justice Weintraub and Justices Jacobs, Francis, Proctor, Hall, Schettino and Mountain. For affirmance: None. The opinion of the Court was delivered by Jacobs, J.
[60 NJ Page 473] The plaintiff, as Revenue Commissioner of the Department of Collections of the City of Philadelphia, brought an action in the Law Division of our Superior Court to recover wage taxes due to Philadelphia from the defendant who had been employed at the Frankford Arsenal in Philadelphia from 1943 through 1966. See Application of Thompson, 157 F. Supp. 93 (E.D. Pa. 1957), aff'd, 258 F.2d 320 (3 Cir. 1958), cert. denied, 358 U.S. 931, 79 S. Ct. 317, 3 L. Ed. 2 d 303 (1959); Consolidation Coal Company v. Bailey, 330 F. Supp. 474, 475 (W.D. Pa. 1971). The matter was transferred to the Atlantic County District Court which entered judgment for the defendant and this was
affirmed by the Appellate Division. 115 N.J. Super. 367 (1971). We granted certification on the plaintiff's application. 59 N.J. 292 (1971).
There is much discussion in legal publications as to whether the courts of a state may and should entertain actions seeking to collect tax claims due to sister states or their political subdivisions. See Robertson, "Extraterritorial Enforcement of Tax Obligations," 7 Ariz. L. Rev. 219 (1966); Goldstein, "Interstate Enforcement of Tax Laws of Sister States," 30 Taxes 247 (1952); Leflar, "Extrastate Enforcement of Penal and Governmental Claims," 46 Harv. L. Rev. 193 (1932); Note, "Extraterritorial Enforcement of Tax Claims," 12 Wm. & Mary L. Rev. 111 (1970); Restatement (Second) Conflict of Laws § 89, at 266 (1971). The English cases which gave rise to the early American common law notion that one state would not enforce the revenue laws of another, arose in international commercial contexts which have no relation whatever to the context at hand. Thus Boucher v. Lawson, 95 Eng. Rep. 53 (K.B. 1734), involved an action for nondelivery of gold which had been shipped from Portugal in violation of its exporting restrictions. The action was held maintainable with Lord Hardwicke stressing that enforcement of Portugal's exporting restrictions "would be of very bad consequence to the principal and most beneficial branches of our trade" (95 Eng. Rep. at 56). In Holman v. Johnson, 98 Eng. Rep. 1120, 1121 (K.B. 1775), Lord Mansfield remarked that "no country ever takes notice of the revenue laws of another" but his remark came in an action to recover the purchase price of tea lawfully sold by the plaintiff in France to the defendant who intended to smuggle it into England. Shortly thereafter the quoted remark was repeated in Planche v. Fletcher, 99 Eng. Rep. 164, 165 (K.B. 1779), where the plaintiffs sued to recover insurance for the loss of goods which had been placed on board a ship bound for France but diverted to Belgium for its lower duties. By 1823 Abbott, C.J. was able to say in James v. Catherwood, 3 Dowl. & Ry. 165 (K.B.), that
it was considered settled that a British court "cannot take notice of the revenue laws of a foreign state" although the only reason he gave was the "inconvenience" of examining into the foreign law; but that reason would equally preclude recognition of foreign nonrevenue as well as revenue law. Cf. Adams v. National Bank of Greece  2 All E.R. 362, 369 (C.A.).
Relying entirely on the doctrine that foreign revenue laws would not be noticed, the courts in Municipal Council of Sydney v. Bull,  1 K.B. 7 and In re Visser,  Ch. 877, declined to entertain actions seeking to recover taxes and assessments imposed by foreign law. In Bull the City of Sydney in New South Wales brought an action in England to recover local property assessments due from the defendant. Grantham, J. described the proceeding as "analogous to an action brought in one country to enforce the revenue laws of another"; he held that such an action "will not lie outside the confines of the last mentioned State." 1 K.B. at 12. In Visser the court relied on Bull to support its holding that the Queen of Holland could not maintain an action in an English court to recover taxes due from the estate of a deceased subject of Holland. Neither decision embodied any discussion of the pertinent policy considerations and each may be viewed as broadly extending the early judicial expressions in international commercial contexts to the current tax context. See Mann, "Foreign Revenue Laws and the English Conflict of Laws," 3 Int'l. & Comp. L.Q. 465 (1954) where the author, in commenting on a Scottish decision (Att-Gen. for Canada v. William Schulze & Co. (1901) 9 S.L.T. 4) which had declined to entertain a foreign tax claim though it had been reduced to judgment, noted (at 471-72) that while in theory the result was harmonious with the general refusal of the English courts to entertain foreign governmental claims "in practice a rule which encourages tax evasion appears discreditable."
The early decisions in the United States embraced the English expressions without discussion. Thus in Ludlow v. Van
Rensselaer, 1 Johns 94 (N.Y. 1806), the plaintiff was permitted to recover on a note made in France but not having the stamp required by French law; Justice Livingston stated that the absence of the stamp was immaterial since "we do not sit here to enforce the revenue laws of other countries." In Henry v. Sargeant, 13 N.H. 321 (1843), the plaintiff brought an action in New Hampshire against the defendants who were selectmen of Chester, Vermont. He alleged that he had been improperly taxed and imprisoned in Vermont. In rejecting the defendants' contention that the New Hampshire court should not take jurisdiction since the revenue laws of Vermont were involved, the court noted that there was no attempt by the plaintiff's action to enforce Vermont's penal or revenue laws. However, in a dictum it stated without citation or elaboration that if the action had involved an attempt to collect a tax assessed in Vermont it would not be maintainable in New Hampshire. 13 N.H. at 332. Later cases, notably in New York (Colorado v. Harbeck, 232 N.Y. 71, 133 N.E. 357 (1921)), reasserted this dictum although again without any evaluation of the policy factors. See 3 Beale, Conflict of Laws § 610.2 (1935); cf. Moore v. Mitchell, 30 F.2d 600, 603-604 (2 Cir. 1929) (concurring opinion), aff'd, 281 U.S. 18, 50 S. Ct. 175, 74 L. Ed. 673 (1930).
In State v. Rodgers, 238 Mo. App. 1115, 193 S.W. 2 d 919 (Ct. App. 1946), we find, for the first time, a full examination of the underpinnings of the prohibition against actions on foreign tax claims. Judge Anderson pointed out that the English precedents furnished no sound base and that the American precedents had relied on them without any independent evaluation. He noted that in Milwaukee County v. White Co., 296 U.S. 268, 56 S. Ct. 229, 80 L. Ed. 220 (1935), the Court had held that a state must give full faith and credit to another state's judgement for income taxes and that the Court had ...