Oberhand v. Director, Division of Taxation

Justice ALBIN,

concurring.

Although I agree with the plurality that the retroactive application of N.J.S.A. 54:38-1 to the estates of Cynthia Oberhand and Eugene Seidner cannot stand, I reach that conclusion for different reasons. Unlike the plurality, I would not follow a line of cases decided by this Court, which have held that judges possess the power to strike down clearly-worded legislation based on equitable principles. A judge’s sense of the unfairness or injustice of a statute, alone, cannot be the basis for upending a law duly enacted by the Legislature. As judges, it is not our role to pass on the wisdom of legislation. Statutory law, however, must conform to the supreme laws of our land — the New Jersey and United States Constitutions. Courts, through the power of judicial review, not only have the authority, but the duty to invalidate legislative enactments inconsistent with the provisions of our constitutional charters. The source of a court’s powers to declare a law invalid rests on the higher law of our constitutions, not on judicially-crafted equitable principles.

*575 For the reasons so powerfully and persuasively stated by Justice Wallace in the plurality opinion, ante at 573-74, 940 A.2d at 1210-11, 1 agree that the retroactive application of N.J.S.A. 54:38— 1 to the Oberhand and Seidner estates is manifestly unjust — not because, as the plurality believes, the statute violates common law principles of equity, but rather because it violates Article I, Paragraph 1 of our State Constitution, which guarantees fundamental fairness and due process of law.

I.

Until 1981, it was commonly understood in this State that a court could not nullify a duly enacted statute, even a retroactive one, unless the statute conflicted with either the State or Federal Constitution. See, e.g., Baldwin v. City of Newark, 38 N.J.L. 158, 159 (Sup.Ct.1875) (“Where the retrospective intention clearly appears on the face of a statute, the court will give it that effect, unless to do so would violate some constitutional provision.”); see also Howard Sav. Inst. v. Kielb, 38 N.J. 186, 193-94 , 183 A.2d 401 (1962) (implying same). Courts have long recognized that their inherent equitable powers to do justice cannot be invoked to restrain the effects of a statute. The common law principle that “equity follows the law” expresses the idea that a court exercising its equitable powers must bow to legislative precedents and not “unsettle” rights resting on legal principles created by statute. Dunkin’ Donuts of Am., Inc. v. Middletown Donut Corp., 100 N.J. 166, 183 , 495 A.2d 66 (1985).

Even before ratification of the United States Constitution, the maxim “equity follows the law” was an accepted legal postulate. In 1785, Thomas Jefferson wrote that a court of equity “cannot interpose in any case against the express letter and intention of the legislature. If the legislature means to enact an injustice, however palpable, the court of Chancery is not the body with whom a correcting power is lodged.” Letter from Thomas Jefferson to Phillip Mazzei (Nov. 1785), in 4 The Works of Thomas Jefferson 473, 476 (Paul Leicester Ford ed., 1904); see also United *576 States v. Schooner Peggy, 5 U.S. (1 Cranch) 103, 110 , 2 L.Ed. 49, 51 (1801) (Marshall, C.J.) (“If the law be constitutional ... I know of no court which can contest its obligation.”).

Despite the seemingly clear historical limitation on the equitable power of the judiciary, this Court issued a series of opinions, beginning in 1981, which support the approach taken by the plurality. See Gibbons v. Gibbons, 86 N.J. 515, 523-25 , 432 A.2d 80 (1981); see also Nobrega v. Edison Glen Assocs., 167 N.J. 520, 545-50 , 772 A.2d 368 (2001); 2nd Roc-Jersey Assocs. v. Town of Morristown, 158 N.J. 581, 604-05 , 731 A.2d 1 (1999); Gen. Motors Corp. v. City of Linden, 150 N.J. 522, 540 , 696 A.2d 683 (1997); Nelson v. Bd. of Educ. of Old Bridge, 148 N.J. 358, 369-72 , 689 A.2d 1342 (1997); In re D.C., 146 N.J. 31, 55-58 , 679 A.2d 634 (1996); Phillips v. Curiale, 128 N.J. 608, 625-27 , 608 A.2d 895 (1992); Twiss v. N.J. Dep’t of the Treasury, 124 N.J. 461, 467-70 , 591 A.2d 913 (1991); Edgewater Inv. Assocs. v. Borough of Edgewater, 103 N.J. 227, 239-41 , 510 A.2d 1178 (1986); N.J. Dep’t of Envtl. Prot. v. Ventron Corp., 94 N.J. 473, 498-99 , 468 A.2d 150 (1983). This Court’s first pronouncement on the subject in Gibbons, supra, appears to have been based on a misapplication of the United States Supreme Court’s use of the doctrine of “manifest injustice.” 86 N.J. at 523-24 , 432 A.2d 80 (citing Bradley v. Sch. Bd. of Richmond, 416 U.S. 696, 716-17 , 94 S.Ct. 2006, 2018-19 , 40 L.Ed.2d 476, 491 (1974), and Thorpe v. Hous. Auth. of Durham, 393 U.S. 268, 282 , 89 S.Ct. 518, 526 , 21 L.Ed.2d 474, 484 (1969)). To my knowledge, the “manifest injustice” doctrine under federal law has never been used to invalidate a clearly and unambiguously worded civil statute intended to apply retroactively. See Bradley, supra, 416 U.S. at 716-17 , 717 n. 24, 94 S.Ct. at 2019 & n. 24, 40 L.Ed. 2d at 491 & n. 24 (discussing Greene v. United States, 376 U.S. 149 , 84 S.Ct. 615 , 11 L.Ed.2d 576 (1964)); Thorpe, supra, 393 U.S. at 282 & n. 43, 89 S.Ct. at 526 & n. 43, 21 L.Ed.2d at 484 & n. 43 (same). 1

*577 The only time this Court has invalidated the retroactive application of a state statute on grounds of “manifest injustice” was in Nobrega, supra, 167 N.J. at 545-50 , 772 A.2d 368 . Once our Court took its first misstep in Gibbons , the path ahead was supported by that erroneous precedent. I believe that we should retrace our steps and get back on the right track rather than march on under the banner of an insupportable legal doctrine.

The doctrine of stare decisis — of keeping faith with our precedent — serves the important purpose of ensuring “the stability of the law.” Lawrence v. Texas, 539 U.S. 558, 577 , 123 S.Ct. 2472, 2483 , 156 L.Ed.2d 508, 525 (2003). Stare decisis, however, is not “an inexorable command.” Ibid.; see also White v. Twp. of N. Bergen, 77 N.J. 538, 550 , 391 A.2d 911 (1978). It is not a command to repeat the mistakes of the past. We should admit that this Court erred in its earlier cases and return to sound principles of constitutional jurisprudence. Invalidating the N.J.S.A. 54:38-l’s retroactive application based on nothing more than this Court’s own equitable principles, self-created in Gibbons , is a violation of our constitutionally-mandated separation of powers. See N.J. Const, art. III.

II.

Our State Constitution allows us to accomplish the same end as the plurality — preventing manifest injustice — through constitutional means. Article I, Paragraph 1 of our State Constitution provides that

[a]ll persons are by nature free and independent, and have certain natural and unalienable rights, among which are those of enjoying and defending life and liberty, of acquiring, possessing, and protecting property, and of pursuing and obtaining safety and happiness.

[.N.J. Const. art. I, ¶ 1.]

Article I, Paragraph 1, which sets forth the first principles of our governmental charter, protects our citizens from being deprived of their property through arbitrary governmental action. Although our State Constitution nowhere expressly states that our citizens are entitled to the equal protection and due process of the laws, *578 we have construed the expansive language of Article I, Paragraph 1 to embrace those fundamental guarantees. Sojourner A. v. N.J. Dep't of Human Servs., 177 N.J. 318, 332 , 828 A.2d 306 (2003). Simply put, the first paragraph of our State Constitution “protects against injustice and against the unequal treatment of those who should be treated alike.” Greenberg v. Kimmelman, 99 N.J. 552, 568 , 494 A.2d 294 (1985).

Our Court has recognized that “ ‘[fundamental fairness is a doctrine that is an integral part of due process, and is often extrapolated from or implied in other constitutional guarantees.’ ” Doe v. Poritz, 142 N.J. 1, 109 , 662 A.2d 367 (1995) (quoting State v. Yoskowitz, 116 N.J. 679, 731 , 563 A.2d 1 (1989) (Handler, J., dissenting)). New Jersey’s doctrine of fundamental fairness, which is encompassed within the protections of Article I, Paragraph 1 of our State Constitution, “‘serves to protect citizens generally against unjust and arbitrary governmental action.’ ” Id. at 108, 662 A.2d 367 (quoting State v. Ramseur, 106 N.J. 123, 377 , 524 A.2d 188 (1987) (Handler, J., dissenting)). The present ease is a perfect example of the exercise of arbitrary governmental authority at odds with the guarantees of Article I, Paragraph 1.

In this case, the plurality correctly states that the Legislature intended N.J.S.A 54:38-1 to apply retroactively. Ante at 565, 940 A.2d at 1205-06; see L. 2002, c. 31, § 5 (providing that amendment to N.J.S.A. 54:38-1, signed by Governor on July 1, 2002, “shall apply to the estate of any resident decedent dying after December 31, 2001”). The retroactive application of N.J.S.A. 54:38-1 treats unequally the estates of only those people who had the misfortune to die between January 1 and June 30 of 2002. Cynthia Oberhand and Eugene Seidner prepared their wills relying on the then-existing estate tax laws in New Jersey. After their deaths in early 2002, the Legislature enacted a new estate tax law and retroactively applied it to January 1, 2002. Under the applicable law at the time of their deaths, the Oberhand and Seidner estates owed no New Jersey estate taxes. Under the retroactively applied law, both estates owed taxes.

*579 Had Ms. Oberhand or Mr. Seidner been alive at the time of the passage of the new law, they would have been able to engage in tax planning and fashion their wills to eliminate the need for their estates to pay taxes. Changing the rules of the game after the game has been played is not permissible in a sports event and is contrary to fundamental notions of fairness guaranteed under our State Constitution when, as here, citizens rely to their detriment on the existing laws to make important financial decisions. Because Ms. Oberhand and Mr. Seidner died before passage of the new law, their financial decisions were irrevocable.

Manifest injustice and the denial of fundamental fairness are two ways of expressing the same concept. The statute’s unequal and seemingly irrational treatment of the estates of those who died between January 1 and June 30 of 2002 cannot be squared with any conception of fundamental fairness under our State Constitution. I therefore would invalidate the retroactive application of N.J.S.A. 54:38-1 to the Oberhand and Seidner estates on constitutional grounds.

For those reasons, I respectfully concur.

I agree with Justice Long's analysis that “manifest injustice" doctrine historically has been used as a canon of statutory interpretation when a court addresses an ambiguous statute and looks to divine legislative intent.