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Dickinson v. Fund for Support of Free Public Schools

Decided: October 22, 1982.

FAIRLEIGH S. DICKINSON, JR., ET AL., PLAINTIFFS-RESPONDENTS AND CROSS-APPELLANTS,
v.
THE FUND FOR THE SUPPORT OF FREE PUBLIC SCHOOLS, ET AL., DEFENDANTS-APPELLANTS AND CROSS-RESPONDENTS



On appeal from the Superior Court, Law Division, Bergen County, whose opinion is reported at N.J. Super. .

Matthews, Michels and Morton I. Greenberg. The opinion of the court was delivered by Morton I. Greenberg, J.A.D. Michels, P.J.A.D. (dissenting in part).

Greenberg

This opinion records another episode in the ongoing and seemingly endless controversy concerning ownership of lands in New Jersey claimed by the State as tidelands. See, e.g., Wildwood Crest v. Masciarella, 51 N.J. 352 (1968); O'Neill v. State Hwy. Dep't, 50 N.J. 307 (1967); Garrett v. State, 118 N.J. Super. 594 (App.Div.1972). An understanding of this litigation requires that the background of the problem be set forth at length.

History

In England the sovereign owned the tidelands. See Schultz v. Wilson, 44 N.J. Super. 591, 596-599 (App.Div.), certif. den. 24 N.J. 546 (1957); River Developm. Co. v. Liberty Corp., 51 N.J. Super. 447, 460 (App.Div.1958), aff'd 29 N.J. 239 (1959). This ownership included the lands up to the mean high tide. See O'Neill v. State Hwy. Dep't, supra, 50 N.J. at 323. Not surprisingly, this sovereign ownership was recognized to exist in New Jersey when it was a colony. See Schultz v. Wilson, supra, 44 N.J. Super. at 596-599. Accordingly, at the time of the American Revolution title to the tidelands became vested in the State as successor to the English sovereign. O'Neill v. State Hwy. Dep't, supra, 50 N.J. at 322-323; Schultz v. Wilson, supra, 44 N.J. Super. 596-599.

During its first two centuries our State Government made no effort on a state-wide basis to catalog or itemize all of the tidelands claimed by the State. See O'Neill v. State Hwy. Dep't, supra, 50 N.J. at 320. In the absence of a clear delineation of the State's claim, private persons developed lands which arguably

were state-owned. In many instances there can be no doubt but that these persons were acting in good faith since it was a difficult process to ascertain the line of mean high tide separating public and private ownership. See O'Neill v. State Hwy. Dep't, supra, 50 N.J. at 327. In such circumstances, if the property developed had in fact been tidal, the State was de facto deprived of its lands, its loss being attributable in part to its neglect in asserting its claim. In other cases properties, though once tidal, by reason of gradual accretion lawfully became privately owned and were then developed. See Wildwood Crest v. Masciarella, supra, 51 N.J. at 352. In yet other situations properties that were close to but above the mean high water line and never had been below that line, were filled and developed. The State could have no valid claim to properties in the second and third categories. But the State would, unless barred by grant or on some other basis, have a claim to properties in the first category. The difficulty in distinguishing among the types of lands after they were filled, coupled with the absence of mapping of the State's claims, guaranteed that there would be doubt as to the ownership of particular parcels.

As might be expected, properties in all three categories were sold and conveyed and reconveyed. A purchaser, after several conveyances following the original improvement of the property, would have a difficult time in ascertaining whether the State could assert a legitimate claim to his property. See Gormley v. Lan, 88 N.J. 26, 29 (1981).

The Supreme Court recognized the difficulty caused by these title uncertainties in O'Neill v. State Hwy. Dep't, supra, 50 N.J. at 307. The court, though declining generally to bar the State's claim to tidelands on principles of estoppel, adverse possession or prescription, noted that for the most part people dealing with the tidelands had acted in good faith. 50 N.J. at 327. Hence the court directed that the burden of proof in tidelands title disputes would be on the person attacking the existing scene. Ibid. Since ordinarily private persons do not suggest (absent a riparian grant from the State) that tide-flowed property is

privately owned,*fn1 this principle assigning the burden of proof ameliorated the strictness of the rules declining to apply estoppel, adverse possession or prescription against the State. In short, the State was ordinarily given unlimited time to make its claim but it was burdened with the obligation to prove it. Further, the court, in an effort to bring order out of chaos, made a suggestion to the Legislature that the State catalog its property. 50 N.J. at 320.

The legislative response to the court's suggestion was prompt. By L. 1968, c. 404, the then Resource Development Council of the Department of Conservation and Economic Development was directed "to undertake title studies and surveys of meadowlands throughout the State and to determine and certify those lands which it finds are State-owned lands." N.J.S.A. 13:1B-13.2. The initial survey, which was to be completed within six months, was to be of the Hackensack meadowlands. Ibid. No doubt this was a reflection of the economic significance of that property. Indeed, O'Neill v. State Hwy. Dep't, supra, 50 N.J. at 307, was a Hackensack meadowlands case. The Legislature was overly optimistic as to the time in which the surveys could be completed. The Hackensack meadows were not properly surveyed within the six months period. Nor was the balance of the State surveyed by December 31, 1974, the time the Legislature contemplated in 1968. See L. 1968, c. 404, § 92. Indeed, the State has to this day not been completely surveyed.

Two other aspects of the 1968 act are also significant for our purposes. As noted, the Council was to study and survey "meadowlands" throughout the State. Meadowlands were defined as being lands "now or formerly consisting chiefly of salt water swamps, meadows or marshes." L. 1968, c. 404, § 87;

N.J.S.A. 13:1B-13.1. Thus, by its terms the Council was not directed to survey property such as unlawful stream encroachments. But we have no doubt but that this restrictive terminology is simply a reflection that the Legislature's attention was directed to the Hackensack region. Indeed, the principal purpose of the statute was to create the Hackensack Meadowlands Development Commission. L. 1968, c. 404, § 5. There the title disputes to a large degree did involve meadowlands. In any event, the Resource Development Council and its successor agencies, first the Natural Resource Council (N.J.S.A. 13:1D-3), and now the Tidelands Resource Council (L. 1979, c. 386, § 1), have construed L. 1968, c. 404, as authorizing mapping of all State tidelands. We accept this practical administrative interpretation. See Malone v. Fender, 80 N.J. 129, 137 (1979).

Secondly the statute does not expressly indicate the consequence of the classification of a property as State-owned or not. There can be no question, of course, that the State could not, simply by claiming the property, deprive a rightful owner of his title. Indeed, the Legislature contemplated no such thing. Rather, it established mechanisms for a claimant to challenge the State's claim of title. N.J.S.A. 13:1B-13.5.

A more difficult question is whether the Legislature intended that lands not claimed by the mapping under L. 1968, c. 404, be free from any future state claim. It is well known that the proceeds of the sale of riparian grants are and have been dedicated to the Fund for the Support of Free Public Schools. See Gormley v. Lan, supra, 88 N.J. at 31; River Development Corp. v. Liberty Corp., supra, 51 N.J. Super. at 475. Thus, the State cannot make a gift of such lands, even to a municipality. See Garrett v. State, supra, 118 N.J. Super. at 599; In re Camden, 1 N.J.Misc. 623, 639-641 (Sup.Ct.1923); Henderson v. Atlantic City, 64 N.J. Eq. 583 (Ch.1903). While we note this point, we find it unnecessary to decide in this case. Therefore, it might be asserted that even if the State does not make a

claim to lands on a map made pursuant to L. 1968, c. 404, a subsequent claim is not barred.*fn2

Finally, it is important to note that the Legislature intended to give a landowner no relief other than finding out the status of his property. The landowner would know if the State claimed it. And he could challenge the decision administratively or judicially. Beyond that his only recourse was to obtain a grant. N.J.S.A. 13:1B-13.7. There was no amnesty in the act for owners of properties unlawfully filled.

The initial mapping techniques used pursuant to L. 1968, c. 404, were inadequate. The original map of the Hackensack meadowlands, "Block and Lot Subdivision in the Hackensack Meadows, Part I and Part II," called the "gray and white map," became implicated in litigation entitled " State of New Jersey by the Commissioner of Transportation vs. The Council in the Division of Resource Development of the Department of Conservation and Economic Development of the State of New Jersey," L-12561-68. Judge Trautwein, on September 8, 1971, in that action held that the map had not been properly prepared. See Newark v. Natural Resource Council, 82 N.J. 530, 533 (1980), cert. den. 449 U.S. 983, 101 S. Ct. 400, 66 L. Ed. 2d 245 (1980). He ordered that the map not be received into evidence to prove ownership of the State and that to the extent the map purported to prove or establish ownership it was suppressed.

Fortunately, this failure was replaced by success. The State developed sophisticated mapping techniques which, after several years of litigation, were approved by the Supreme Court in Newark v. Natural Resource Council, supra, 82 N.J. at 530. Of course, approval of the method of mapping did not mean that the state claim as to any property was valid. 82 N.J. at 542.

Obviously, the State could make no such binding finding in an ex parte administrative determination.

Passage of the Amendment

The approval of the State's methods in Newark v. Natural Resource Council, supra, 82 N.J. at 530, gave the necessary legal foundation for the State to complete the mapping it was undertaking. Indeed, the Commissioner of Environmental Protection had already approved a program to complete the mapping. But it also meant that large numbers of landowners might find themselves confronted with an official claim to their properties, surely a most disquieting situation. The problem for these landowners was aggravated by the fact that the mapping had been judicially approved. It was against this background that the Legislature adopted a resolution submitting to the people for their approval or not on November 3, 1981 a constitutional amendment, now N.J. Const. (1947), Art. VIII, § V, par. 1, (hereinafter called "amendment"), providing as follows:

No lands that were formerly tidal flowed, but which have not been tidal flowed at any time for a period of 40 years, shall be deemed riparian lands, or lands subject to a riparian claim, and the passage of that period shall be a good and sufficient bar to any such claim, unless during that period the State has specifically defined and asserted such a claim pursuant to law. This section shall apply to lands which have not been tidal flowed at any time during the 40 years immediately preceding adoption of this amendment with respect to any claim not specifically defined and asserted by the State within 1 year of the adoption of this amendment.

The Legislature perceived that the results contemplated in the amendment could be achieved only by constitutional amendment since the proceeds from the sale of the riparian lands have been long dedicated constitutionally to the public schools. See N.J. Const. (1844), Art. IV, § VII, par. 6; N.J. Const. (1947), Art. VIII, § IV, par. 2; L. 1894, c. 71; N.J.S.A. 18A:56-5. The effect of the amendment is quite limited. It simply provides that lands which have not been tide-flowed for 40 years shall not be riparian and State-owned unless within the 40-year period the State "has specifically defined and asserted a claim pursuant to law." With respect to lands that were not tide-flowed for 40

years immediately before the adoption of the amendment, the State was given an additional one year after the adoption of the amendment to assert its claim.

The record before us shows that there was heated public debate with respect to the amendment. Some persons characterized it as a give-away. The state administration then in office vigorously opposed it. Yet other persons considered it just that the State be compelled to make its claim expeditiously. The proposal generated two legal actions before the election. In Gormley v. Lan, 181 N.J. Super. 7 (App.Div.1981), this court held that the interpretative statement prepared by the Attorney General to be printed on the ballot was unfair. We suggested a different statement. Our decision was immediately appealed to the Supreme Court. That court affirmed our decision precluding the use of the original statement. The Supreme Court, however, suggested a different statement. Its statement was adopted by the Secretary of State and used on the ballot. 88 N.J. 26 (1981).

The second action is the one now before this court. Plaintiffs sought an injunction barring the referendum on the amendment. Plaintiffs' application for a preliminary injunction was denied. The election then went forward on November 3, 1981 and the amendment was approved by a vote of 864,445 yes and 756,220 no.

Following the election plaintiffs amended their complaint. Plaintiffs in the amended complaint include New Jersey residents, taxpayers and landowners, a New Jersey public school teacher, a New Jersey public school student, a purchaser of riparian lands from the State and the owner of a school bond issued by a New Jersey school district. Defendants are various state officers, including the trustees of the Fund for the Support of Free Public Schools and the Tidelands Resource Council. The first count of the amended complaint alleged that the amendment was invalid because it sought to convey without compensation state land which had been irrevocably dedicated as trust

property for the Fund for the Support of Free Public Schools. The second count alleged that the amendment will unlawfully deprive the trustees and beneficiaries of their property without due process and just compensation through the process of eminent domain exercised for private purposes. The third count recited that the State would only be able to map a portion of its claim and thus would be able to assert only part of the state claim within a one-year period after the adoption of the amendment on November 3, 1981. Thus, it was set forth that there would be an unconstitutional discrimination between owners of property that will be or will not be mapped. The fourth count of the complaint requested that the court order the Tidelands Resource Council expeditiously to map and approve maps of the riparian lands prior to November 3, 1982.

The fifth count of the complaint was rather complicated. It alleged that all riparian lands are dedicated to the support of the public schools so that the proceeds from the sale of such lands are dedicated to the school fund. It set forth that in 1980 the New Jersey School Bond Reserve Act, L. 1980, c. 72, N.J.S.A. 18A:56-17, was adopted. The purpose of this act was to improve the credit ratings of New Jersey school districts by pledging a portion of the assets of the school fund to secure the payment of principal and interest on bonds issued for school purposes. It was alleged that purchasers of school bonds issued since 1980 have relied upon the pledged security from the proceeds of sale of riparian lands. Finally, it was set forth that the amendment would impair the bondholders' right of contract since their security would be impaired without their consent and without the consent of the trustees of the school fund.

Defendants duly answered. In general, they denied that there was anything unlawful or unconstitutional in the amendment.

A trial was conducted by Judge Simpson in the Law Division sitting without a jury. Many of the facts were stipulated and various exhibits were marked into evidence by consent. In

addition, oral testimony was taken. Plaintiffs called as their witness Roland S. Yunghans, Chief of the Office of Environmental Protection, Office of Environmental Analysis. Yunghans had become involved in the mapping pursuant to L. 1968, c. 404, after Judge Trautwein suppressed the gray and white map. Yunghans was charged with devising and implementing a new method of mapping. He studied various methods of mapping; ultimately he settled on what he characterized as a "hybrid" method which included consideration of surveying, aerial photography, old maps and tidal datum. The first area mapped was the Hackensack meadowlands. In August 1978 Yunghans submitted five different plans to the Commissioner of Environmental Protection to map the rest of the State. The plan adopted contemplated that mapping would start January 1, 1979. The projected cost and completion date were respectively $12,500,000 and December 31, 1985.

Yunghans and his staff utilized a map of the State which placed all possible tidal areas into squares of 1.5025 square miles. This map was designated at the trial as P-13. There are 1,632 squares shown on the map. This constitutes 2,452 square miles, or about 30% of the total land area in the State. Yunghans estimated that about 215,000 to 300,000 acres within the squares could be claimed by the State. Most of that acreage is on the Atlantic coast. About one-half of the amount of acreage that could be claimed on the Atlantic coast could be claimed in the Delaware River region. Yunghans also explained in detail how the maps are processed and approved by the Tidelands Resource Council. He indicated that as of the time of the trial he had completed and submitted to the Council only about half of the 1,632 maps to be prepared. He said that almost the entire Atlantic coast region would be mapped by November 3, 1982. This would constitute about 53% of the land within the 1,632 squares. Yunghans testified that it would take until December 31, 1985 to complete the mapping of the rest of the State. He explained that the process could not be accelerated. He also

indicated that notwithstanding the adoption of the amendment the mapping will continue.

David Moore, chairman of the Tidelands Resource Council since 1971*fn3 testified that the map approval process is complicated and time-consuming. He considered that the method followed by the Council, prior to the new "hybrid" program described by Yunghans, to assert and define claims to riparian land had been a "haphazard process." He also explained the extraordinarily involved procedure for conveyance of riparian lands. He indicated that an application for a grant is reviewed by the staff in the Department of Environmental Protection. He stated: "The review process, first of all, will determine whether or not an alienation would be in the public interest, whether or not it meets environmental standards and whether or not the compensation that has been suggested by appraisal is adequate." He pointed out that if the council will not agree to a conveyance, then no funds from the sale of the property go to the school fund. He also indicated that more often than not it is not in the public interest to convey riparian property and thus no grant is made.

Moore was questioned by the trial judge as to the possibility of adopting P-13 as the State's claim in areas where the detailed maps had not been prepared. Moore indicated that even though the State would lose some property along the Delaware, the Council felt that it would not be a responsible act to file P-13 as the State's claim. He later explained when questioned by the deputy attorney general that there were a number of reasons for this view, not the least of which was that the council "feels a responsibility not to claim land that it has knowledge that the State has no interest in. We know as a result of the mapping process that's gone on that there are likely to be significant areas of land to which the State has no claim involved in the P-13 exhibit along the Delaware." He also pointed out that the

Council would be swamped with information disputing the claims. See N.J.S.A. 13:1B-13.5.

Three financial experts were produced as witnesses in this case, two by plaintiffs and one by defendants. Stanislaw Wellisz, a professor of economics at Columbia University, testified for plaintiffs that the school age population in New Jersey would decline until 1985 but would rapidly increase thereafter. Thus, more school bonds would have to be issued to finance capital improvements.

Plaintiffs also called Charles Wolf, a professor in the Columbia University finance department. He testified as to the effect of the amendment on school bonds, particularly those issued after the Legislature adopted the New Jersey School Bond Reserve Act, N.J.S.A. 18A:56-16 et seq., in 1980. Wolf said that after the establishment of the reserve fund in July 1980 one of the two major bond rating services, Standard and Poor's, upgraded the ratings it had issued 47 school districts in New Jersey. These ratings influence the interest rate that the school district will be compelled to pay the purchasers of its bonds. The higher the rating the lower the rate of interest. Wolf gave an example of a school district with bonds outstanding. Upon the reclassification of its bonds it appeared that the holder of them was able to resell them to yield a lower interest rate. Thus he apparently received a higher sale price. Presumably, had the school district itself been selling bonds it could have obtained an initially lower rate. Wolf attributed the improvement in the rate to the fact that the rating service recognized that the school fund was being enhanced by the aggressive action of the State to recover compensation for its lands.

Wolf expressed concern that the amendment might affect Standard and Poor's ratings. He acknowledged that the ratings had not been changed upon the adoption of the amendment, but thought they might be changed when the service obtained additional information. He also thought that a potential ...


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