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Registrar & Transfer Co. v. Director of Division of Taxation

Decided: February 28, 1978.


Kentz, J.s.c.


This matter is before the court on cross-motions for summary judgment. R. 4:46. Plaintiff is the Registrar & Transfer Co. (Registrar), a registrar and transfer agent for securities of publicly held corporations, and defendant is the Director of the New Jersey Division of Taxation (Division). The substantive issue presented is whether certain materials stored by Registrar are taxable under the New Jersey Sales and Use Tax Act, N.J.S.A. 54:32B-1 et seq. (Supp. 1977-1978).

Registrar stores for various periods of time materials which plaintiff terms "informational documents." These materials

include cancelled stock certificates, documents attached to each certificate relating to its cancellation, cancelled checks, transfer sheets, miscellaneous receipts, registered mail envelopes and "window tickets" (receipts issued upon presentation of stock certificates). All of these documents are cancelled, closed, voided or time-expired and are maintained for limited periods as a method of preserving the information contained in the documents. No specific charge for the storage of these materials is imposed.

On April 27, 1977 Registrar was advised by the Division that it intended to assess a sales tax against Registrar or its customers on charges imposed for the storage of these "informational documents." Based upon this forewarning, Registrar commenced the present suit seeking a declaratory judgment determining that a sales tax charge for storing tangible personal property under N.J.S.A. 54:32B-3(b)(3) does not cover Registrar's storage of intangibles, i.e. , the information contained on these "informational documents."

Subsequently, on August 3, 1977, more than two months after the institution of this action, the Division assessed a sales tax, penalty and interest against Registrar in the amount of $3,709.89 for the storage of these documents for the period from January 1, 1966 to March 31, 1977. Registrar's motion for summary judgment was filed on November 28, 1977. On December 8, 1977 defendant filed its cross-motion for summary judgment and/or a dismissal of the complaint on the grounds that this action constitutes a complaint in lieu of prerogative writs properly cognizable in the Appellate Division pursuant to R. 2:2-3(a)(2) and that plaintiff has failed to exhaust the appropriate administrative remedies.

After hearing oral arguments on these motions, the court reserved its decision pending the filing by Registrar of an affidavit providing more details on the type of materials stored. On December 30, 1977, prior to the receipt of the requested affidavit, the Division issued its final determination regarding taxation of Registrar's receipts from

"storage of the intangible personal property." (Emphasis supplied). The Division determined that Registrar was liable for a deficiency of $5,518.46.

After reviewing the complaint, the answer and the accompanying affidavits, I find that there is no material fact in dispute and that this matter is ripe for summary judgment. Judson v. Peoples Bank & Trust Co. of Westfield , 17 N.J. 67, 74 (1954).

Before I address the basic question of whether the "informational documents" stored by Registrar constitute tangible personal property for the purpose of taxation under N.J.S.A. 54:32B-3(b)(3), I must decide whether the court has jurisdiction over this matter under the Declaratory Judgments Act, N.J.S.A. 2A:16-50 et seq.

Declaratory relief may be granted by any Division of the Superior Court. Abbott v. Beth Israel Cemetery Ass'n , 13 N.J. 528, 539 (1953); Government Employees Ins. Co. v. Butler , 128 N.J. Super. 492, 495 (Ch. Div. 1974). This relief is not characterized as either "equitable or legal, but takes on the color of either, depending upon the issue involved." Id.; accord, Util. Blade & Razor Co. v. Donovan , 33 N.J. Super. 566, 572 (App. Div. 1955). In the instant case Registrar is requesting both injunctive and declaratory relief. Where the relief involved is primarily equitable, such as an injunction, a declaratory judgment action can be maintained in the Chancery Division. See National-Ben Franklin Fire Ins. Co. v. Camden Trust Co. , 36 N.J. Super. 249, 254-255 (App. Div. 1955), aff'd 21 N.J. 16 (1956).

The next question to be answered is whether there exists a justiciable controversy. A primary procedural requirement for a declaratory judgment action is that there exists a real controversy between the parties. N.J. Home Builders Ass'n v. Civil Rights Div. , 81 N.J. Super. 243, 250 (Ch. Div. 1963), aff'd on other grounds sub nom. David v. Vesta Co. , 45 N.J. 301 (1965); Hammond v. Doan , 127 N.J. Super. 67, 71 (Law Div. 1974); Unsatisfied Claim

& Judgment Fund Bd. v. Concord Ins. Co. , 110 N.J. Super. 191, 196 (Law Div. 1970). In the instant case, Registrar is seeking a judicial declaration that its "informational documents" are intangible and therefore nontaxable. The Division, by its answer, has directly controverted plaintiff's contention by asserting that these items are tangible and hence taxable. Where one party definitively asserts legal rights and such rights are positively denied by the other party, a justiciable controversy exists. Union Cty. Bd. of Chosen Freeholders v. Union Cty. Park Comm'n , 77 N.J. Super. 425, 432 (Law Div. 1962), rev'd on other grounds, 41 N.J. 333 (1964). Furthermore, "no wrong need be proved, but the mere existence of a claim or threat of a possible claim disturbing the peace or freedom of the plaintiff by casting doubt or uncertainty upon the plaintiffs' right or status establishes the requisite condition of justiciability." Trustees of Rutgers College v. Richman , 41 N.J. Super. 259, 284 (Ch. Div. 1956). Registrar has been threatened with a possible tax assessment and seeks judicial guidance as to whether it must collect a sales tax. Based upon this factor and defendant's denial of Registrar's legal claim, I conclude that a justiciable controversy exists between these parties.

A more difficult question for the court is whether Registrar has other adequate remedies which would bar this suit for a declaratory judgment. "A judgment for declaratory relief, if appropriate, is not precluded by the existence of another appropriate remedy." R. 4:42-3; accord, Vonins, Inc. v. Raff , 101 N.J. Super. 172, 177 (App. Div. 1968) (declaratory relief granted in Superior Court even though action was pending in County Court); Unsatisfied Claim & Judgment Fund Bd. v. Concord Ins. Co., supra , 110 N.J. Super. at 196; Weinstein v. Newark , 100 N.J. Super. 199, 205 (Law Div. 1968). Whether such relief is appropriate and should be granted rests in the sound discretion of the court. E.g., Weissbard v. Potter Drug & Chem. Corp. , 6 N.J. Super. 451, 455-456 (Ch. Div. 1949), aff'd per curiam

4 N.J. 115 (1950); Empire Trust Co. v. Commerce & Navigation Bd. , 124 N.J.L. 406, 411 (Sup. Ct. 1940). Despite this broad judicial discretion, declaratory relief should be denied "where another remedy would be more effective or appropriate." Adams v. Atlantic City , 26 N.J. Misc. 259, 261 (Sup. Ct. 1948) (citations omitted); see, e.g., Util. Blade & Razor Co. v. Donovan, supra 33 N.J. Super. at 571; Hammond v. Doan, supra 127 N.J. Super. at 72.

In order to determine if a more effective remedy is available to Registrar, I have reviewed the cases wherein declaratory relief was denied on this ground. Several basic principles are clear. First, a declaratory judgment should not be granted "to preempt or anticipate the decision of the court in another pending action." Hartmann v. Maplewood School Transp. Co. , 106 N.J. Super. 187, 195 (Law Div. 1969), aff'd per curiam 109 N.J. Super. 497 (App. Div.), certif. den. 57 N.J. 124 (1970). But this principle is not blanketly followed. The Hartmann court, while noting its "grave doubt about the appropriateness of the declaratory judgment procedure," 106 N.J. Super. at 190, went to the merits of the indemnification issue even though the question of direct liability was pending in another court. Id. at 189-190. See also Vonins, Inc. v. Raff, supra , 101 N.J. Super. at 175-177 (declaratory judgment granted in Chancery Division on issue of rights under contract to certain merchandise while same issue was pending in the County Court); Unsatisfied Claim & Judgment Fund Bd. v. Concord Ins. Co., supra 110 N.J. Super. at 194, 200 (declaratory judgment action permissible on issue of proper parties to defend in a county court action even though liability suit was pending in the County Court).

Second, an action for declaratory judgment "cannot be used as a substitute for an appeal."*fn ...

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