Petition — Stadler v. City of Philadelphia

re) Q- 1 2 2 6 Office Supreme Court, U.S,

rik £ PD

In Th ,

ares JAN 27 1981

|

Supreme Court of the Hrited Stites |

October Term, 1980

HENRY STADLER,

Petitioner,

vs.

CITY OF PHILADELPHIA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

SUPREME COURT OF NEW JERSEY

GEORGE J. BOTCHEOS

LASKIN & BOTCHEOS

Attorneys for Petitioner

36 Tanner Street

Haddonfield, New Jersey 08033

(609) 795-1500

LUTZ APPELLATE PRINTERS, INC.

4516 : ; ee

Law and Financial Printing

South River, N.J. New York, N.Y. Philadelphia, Pa. Washington, D.C.

(201) 257-6850 (212) 840-9494 (215) 563-5587 (202) 783-7288

QUESTIONS PRESENTED

1. Does the Pennsylvania application of the doctrine of

estoppel to exhaust administrative remedies effectively preclude

a defendant from notice and opportunity to be heard on the

merits at every stage of the Pennsylvania proceeding, thereby

denying due process of law?

2. Did the Philadelphia Court Rule requiring defendants to

provide a Pennsylvania address before the defendant could file

any paper prohibit a non-resident from appearing and making a

defense, denying such defendants due process of law?

il

TABLE OF CONTENTS

Page

Questions Presented .....cccccccccccccvscscveseseccseses i

Table of Contents ...cccsesncscvctecusssuaeebeasee ewan il

Table of Citations ...ccscnsecccsesess sesdeen sn eeeeeeee ill

Opinions Below .....ccsccccccscercccsscssessesessesess l

Jurisdiction .nccscccccccsessseeswe sense een enanen eee 2

Constitutional Provisions Involved .........seeeeeeeeeees 4

Seatement of the Case ...ccccceccctsccssecsasses smaunee 2

Reasons For Granting the Writ:

I,

I.

The Philadelphia County Rules of Court procedure

in effect prior to May 17, 1976, prohibited a non-

resident defendant from appearing and making a

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The Pennsylvania court’s application of the doctrine

of estoppel to exhaust administrative remedies

effectively precludes a defendant from notice and

Opportunity to be heard on the merits at any stage of

Pennsylvania proceeding in violation of due process

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Contents

Page

TABLE OF CITATIONS

Cases Cited:

City of Philadelphia v. Gould, Court of Common Pleas,

October Term, 1975, Docket No. 3544X ...........0... 4

City of Philadelphia v. Kenny, 369 A. 2d 1343 (1977) ....... 6,7

City of Philadelphia v. Sam Bobman Department Store,

oe ee a | rer 7

City of Philadelphia v. Simon, Phila. Court of Common

Pleas, December Term 1976, Docket No. 3805X ....... 4

Commonwealth v. Lentz, 44 A. 2d 291 (Pa. Sup. 1945) ..... 7

Foote v. Newell, 29 Mo. Reports 400 (1860) .............. 11

Griffen v. Griffen, 327 U.S. 220 (1946) ............4.. 6, 10, 11

Hymen v. Muller, et al., 62 A. 2d 221 (1948) .............. 10

N.Y. Susquehanna v. Vermeulen, 44 N.J. 491 (1965) ....... 14

Pe A, Pe, OP RP, PO CUIEED i bcvcccaneebeadbadeaces 8,9

oo A ee re 13

Philadelphia v. DelRossi, #155159 Camden County Dis-

PO Te ee ere eee ete ee ee eee Ee eT 8

iv

Contents

Page

Philadelphia v. Foster, #157847 Camden County District

ROE jcc cnbcsngecetbehsbseae dese sakgeseteetee sey 8

fc ae genre wy gee ae eener ae erery etre ey 8

Smith v. Kincaid, 249 F. 2d 243 (6th Cir. 1957) ........4... 9

State v. Security National Bank, 173 N.W. 885 ............ 11

State Tax Commission of Utah v. Cord, 404 P. 2d 422

CE bia he ns ced bbe k es shies eek ae banens ores Panes 12

State of Ohio, Department of Taxation v. Kleitch Bros.

a ee ee re 13

Wuebter v. Fiamati, Z76 U.S. 13 (I9ZE) on ccc ccccesscccssss 9

Statutes Cited:

Philadelphia City Code, Section 19-1702 ........... ava 10

St AE, UMTS 6Opn cecees ous cceyeeewsenddteesadiaes 2

Go Fe. CBA BUCO BIGe vbw acce csi even evedsccedenks 10

United States Constitution Cited:

Fe SES heb ven. be46o40 doh kcennscheeeeeKienas 10

I ce vaca hlwes ab eeee 2

Vy

Contents

Fage

Rule Cited:

Rule 306, Pa. R.C.P. (Philadelphia County) ............... 4,5

Other Authorities Cited:

3 Cooley on Taxation (4th Ed.) Section 1118 ............ 11, 12

Philadelphia Home Rule Charter, Sections 6-207 .......... 9

Restatement of Confl. of Laws, 2d, Sections 103, 105, 110,

eee 10

APPENDIX

Appendix A — Opinion of the Supreme Court of New

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No.

Suvoreme Court of the United States

+

October Term, 1980

HENRY STADLER,

Petitioner,

vs.

CITY OF PHILADELPHIA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

SUPREME COURT OF NEW JERSEY

OPINIONS BELOW

The Supreme Court of New Jersey did not file an opinion

with its order denying the petition for certification. The order

appears in the appendix hereto as Appendix A. The opinion of

the New Jersey Superior Court Appellate Division is

unreported. A copy of the opinion appears in the appendix

hereto as Appendix B. The opinion of the Burlington County

District Court is reported at 164 N.J. Super. 281 (1978) and 395

A. 2d 1300. A copy of the opinion appears in the appendix

hereto at Appendix C.

rs

2

JURISDICTION

The Supreme Court of New Jersey denied a petition for

certification on October 21, 1980 (Appendix, la). The

jurisdiction of this Court is invoked under Title 28, U.S.C.

§1257(3).

CONSTITUTIONAL PROVISIONS INVOLVED

This case concerns the application of the Due Process

Clause of the Fourteenth Amendment of the United States

Constitution which states as follows:

“All persons born or naturalized in the

United States, and subject to the jurisdiction

thereof, are citizens of the United States and of

the State wherein they reside. No State shall

make or enforce any law which shall abridge the

privileges or immunities of citizens of the United

States; nor sha!l any State deprive any person of

life, liberty, or property, without due process of

law; nor deny to any person within its

jurisdiction the equal protection of the laws.”

STATEMENT OF THE CASE

Petitioner, a resident of New Jersey, is an employee of the

federal government on a federal enclave in the City of

Philadelphia. The City of Philadelphia assessed its municipal

wage tax against Mr. Stadler on the basis of that employment

and brought suit in the Pennsylvania courts in an effort to

collect the tax. Process was served on the petitioner by certified

mail, return receipt requested. Since Mr. Stadler was not a

resident of Pennsylvania, he was unable to file an answer under

the Philadelphia Rules of Court which required at that time that

3

the first paper filed by a party must have a Pennsylvania address

where papers and notices can be served. For this and other

reasons explained below a default judgment was entered.

The City of Philadelphia then sought to enforce the

judgment through the New Jersey courts under the Full Faith

and Credit Clause of the United States Constitution. The city

obtained summary judgment in the Burlington County District

Court (Appendix, 5a). That decision was appealed to the New

Jersey Superior Court, Appellate Division, which affirmed the

lower court decision (Appendix, 4a). The New Jersey Supreme

Court denied the petition for certification (Appendix, la).

The constitutional issues asserted in this petition were raised

in each court below, but were specifically addressed only by the

trial court (Appendix, 5a). Each one was rejected by that

court.

REASONS FOR GRANTING THE WRIT

I.

The Philadelphia County Rules of Court procedure in effect

prior to May 17, 1976, prohibited a non-resident defendant from

appearing and making a defense.

The Pennsylvania judgment which respondent seeks to

enforce was rendered without procedural due process since a

local Rule of Court in effect prior to May 17, 1976, prohibited a

defendant whose address was not within the Commonwealth of

Pennsylvania from filing papers in his own defense. That rule

provided:

“The first paper filed by a party in a case shall

have endorsed thereon an address in the

4

Commonwealth at which all papers and notices

thereafter may be served upon him, and the

prothonotary shall not accept filing unless it

contains such endorsement.” Rule 306 Pa. R.C.P.

(Philadelphia County).

Many New Jersey citizens have in past years attempted to

defend themselves in wage tax actions brought in the courts of

Philadelphia County. The rule, by its terms, precluded these

non-residents, many of whom had been notified of the pending

Pennsylvania actions by long arm service in New Jersey, from

appearing and defending. This impediment was strengthened

and confirmed in 1975-1976 when the Philadelphia City

Solicitor’s Office wrote ex parte to the Presiding Judge and

Court Administrator of the Philadelphia Courts, in apparent

response to many pro se non-resident appearances, requesting

that the rule be enforced. Thereafter, Judge David N. Savitt

responded on January 7, 1976, as follows:

“I acknowledge receipt of your letter of

December 23, 1975, and the brief which was

enclosed. Both Judge Bradley and I believe that

Rule 306 should be stringently enforced, and |

have so directed the Prothonotary.”

During this same period, the City of Philadelphia sought to

enforce the rule against actions which had been accepted for

filing in non-conformity with Rule 306. See for example, City of

Philadelphia v. Simon, Phila. Court of Common Pleas,

December Term 1976, Docket No. 3805X. The denial of

constitutional rights being patent and obvious, the New Jersey

Public Advocate sought to intervene amicus curiae in the case of

City of Philadelphia v. Gould, Court of Common Pleas, October

Term, 1975, Docket No. 3544X. This issue was decided on other

grounds and the constitutional issue was never reached by the

5

court. However, effective May 1976, the rule was amended in

obvious recognition of its previous unconstitutionality. The rule

now reads:

“(1) The first paper filed by a party in a case

shall have endorsed thereon an address in the

Commonwealth at which all papers and notices

thereafter may be served upon him, and the

Prothonotary shall not accept any such paper for

filing unless it contains such endorsement.

Thereafter any party may file with the

Prothonotary a suggestion, which shall be noted

upon the appearance docket and form part of the

record in the case, setting forth a new address in

the Commonwealth at which such service may be

made.

(2) Any party appearing pro se shall specify ona

form to be provided by the Court a reasonable

address at which all papers and notices thereafter

may be served on him. If the party is not a

resident of the Commonwealth, the specified

address need not be located in the

Commonwealth. The party shall agree on the

form provided to accept service of all papers and

notices sent by ordinary mail to the address

provided by him, in the manner provided in (1)

or to any new address later furnished by him by

written notice filed of record in the case.” Rule

306, Pa. R.C.P. as amended May 17, 1976. Also

cited as Rule 40-H(1) and (2), Philadelphia Civil

Rules.

Upon this background only one conclusion obtains: Default

judgments obtained upon Pennsylvania actions filed prior to

6

May 17, 1978, against non-residents do not meet the

requirements of due process and should not be enforced. A

judgment obtained in violation of procedural due process is not

entitled to full faith and credit when sued upon in another

jurisdiction. Griffen v. Griffen, 327 U.S. 220 (1946). These New

Jersey residents cannot be held accountable for having failed to

file responsive pleadings in actions pending in foreign tribunals

when the rules of such tribunals on their face prohibited such

filings. The superseded rule having been patently discriminatory

and unconstitutional as applied to non-residents cannot form the

basis for enforceable foreign judgments.

The Pennsylvania court’s application of the doctrine of

estoppel to exhaust administrative remedies effectively precludes

a defendant from notice and opportunity to be heard on the

merits at any stage of Pennsylvania proceeding in violation of

due process of law.

The Pennsylvania judgment which respondent seeks to

enforce was rendered without an opportunity for the petitioner

to be heard before the Pennsylvania courts. The federal

constitution does not require states to enforce foreign judgments

rendered without notice or opportunity to be heard. Griffen v.

Griffen, 327 U.S. 220 (1946). Pennsylvania courts have applied a

doctrine known as “estoppel to exhaust remedies” in such a way

so as to completely bar the assertion of any defense in

Philadelphia wage tax enforcement cases. City of Philadelphia v.

Kenny, 369 A. 2d 1343 (1977). The law of Pennsylvania

therefore denies a defendant his fundamental right to be heard in

violation of due process of law.

The doctrine of estoppel to exhaust administrative remedies

finds expression in Pennsylvania law in the case of

7

Commonwealth v. Lentz, 44 A. 2d 291 (Pa. Sup. 1945), which

held that one who fails to pursue a statutory remedy may not

thereafter raise issues which could have been raised by pursuing

such remedy. The Pennsylvania courts have applied this doctrine

directly to Philadelphia wage tax cases. City of Philadelphia v.

Sam Bobman Department Store, 149 A. 2d 518 (Pa. Sup. 1959);

City of Philadelphia v. Kenny, 369 A. 2d 1343 (1977). To

understand the unconstitutionality of this doctrine as applied to

non-resident defendants, one must understand the basic pre-

litigation procedures used by the City of Philadelphia to collect

its tax.

The City of Philadelphia transmits tax billings by regular

mail to persons it believes are subject to its wage tax but from

whom no payment has been received. Although these tax billings

are characterized as “assessment notices” by the Pennsylvania

court in Kenny, supra, no such denomination is made in any

Pennsylvania statute or Philadelphia city ordinance. In fact,

there exists no authority whatsoever for the mailing of such

billings. In so doing the Philadelphia Department of Collections

acts gratuitously pursuant to internal policy and outside the

mandate of any legislative authority.

However, the Pennsylvania courts have reasoned that the

failure of the alleged taxpayer to voluntarily come forward and

contest this gratuitous billing before the Philadelphia City Tax

Review Board gives rise to an estoppel preventing such putative

taxpayers from raising any substantive defenses in later judicial

proceedings. City of Philadelphia v. Kenny, 369 A. 2d 1343

(1977). In the case of a non-resident this doctrine requires him to

voluntarily come forward and subject himself to the jurisdiction

of a Pennsylvania tribunal in order to preserve his right to make

a defense.' In essence the Pennsylvania courts say to a non-

resident: You can make your defenses at the time the State of

Pennsylvania has no in persona:n jurisdiction over you but when

such jurisdiction is properly obtained (via long arm statute) you

are estopped from raising any defenses.?

Fair notice of the pendency of an action (or in this case, the

availability of a remedy) is required in order to satisfy due

process Pennoyer v. Neff, 95 U.S. 714 (1877). A foreign court

must bring a non-resident actually before it by personal service

or must do some act tantamount to achieving that result in

1. There can be no doubt that Philadelphia relies upon this doctrine in

obtaining its judgments in the case of this petitioner, Paragraph 6 of the

Pennsylvania complaint avers:

“Based on information supplied by the Federal Agency to

the Department of Collections of the City of Philadelphia,

assessments were made and the defendant was duly notified

of such assessments from which the defendant failed to file a

Petition for review with the Philadelphia Tax Review Board

as permitted under Section 19-1702 of the Philadelphia

Code.”

2. The City has relied upon this doctrine for many years. Interestingly,

Philadelphia asserted this doctrine in several original suits brought in New

Jersey in 1975. In an unpublished decision, written by Judge King before his

elevation to our Appellate Division, Judge King recognized the jurisdictional

question as being one of notice, holding:

“In view of the failure of proof on the plaintiff's Uasic

contention as to substantive liability, this Court does not

reach the question of whether failure to pursue

administrative remedies precludes the utilization of

affirmative defenses here assuming taxpayer is on notice of

the availability of the administrative remedy.” (Emphasis

added). Camden County District Court associated cases:

Philadelphia v. Smith, #155152; Philadelphia v. DelRossi,

#155159; and Philadelphia v. Foster, #157847.

9

which case in personam jurisdiction is said to be obtained by

“substituted service”. Pennoyer, supra. But it is clearly

established in our law that there must be a legislative basis for

such substituted service and gratuitous actual notice of a

proceeding outside the mandate of any legislative authority is

insufficient. Wuchter v. Pizzuti, 276 U.S. 13 (1928). In Wuchter,

the United States Supreme Court held:

“These cases and others indicate a general trend

of authority toward sustaining the validity of

service of process, if the statutory provisions in

themselves indicate that there is reasonable

probability that if the statutes are complied with,

the defendant will receive actual

notice...” Wuchterv. Pizzuti, 276 U.S. 13, 19

(1928).” (Emphasis added.)

Moreover the statutory basis for such service must be strictly

observed. Smith v. Kincaid, 249 F. 2d 243 (6th Cir. 1957).

As previously mentioned, no statutory basis in fact exists

under Pennsylvania law for substituted service of wage tax

“assessment notices” on putative taxpayers.

The Philadelphia Tax Review Board is created by the

Philadelphia Home Rule Charter and its duties are not clearly

prescribed:

“The Tax Review Board shall perform such

duties as the Council shall from time to time

impose on it.” Philadelphia Home Rule Charter,

Section 6-207.

Provisions of Philadelphia ordinances likewise offer no guidance

regarding the form and manner of serving assessment notices.

10

The Code provides simply:

“Every petition for review of any decision or

determination relating to the liability of any

person for any unpaid money or claim collectible

by the Department of Collections including, but

not limited to, any tax, water or sewer rent,

license fee or other charge, ana interest and

penalties thereon, shall be filed with the Tax

Review Board within 60 days after the mailing of

a notice of such decision or determination to the

petitioner.” Philadelphia City Code, Section 19-

1702.

The Pennsylvania long arm statute is likewise inapplicable to

any form of notice other than court process and it is clear that

service of these “assessment notices” is never made in

compliance with such statute. 42 Pa. C.S.A., Section 8307.

While it is clear that the federal Constitution requires New

Jersey courts to honor judgments rendered by other states, this

obligation is not absolute and is subject to many constitutional

and public policy exceptions. U.S. Const. Art. 4, Section 1;

Restatement of Confl. of Laws, 2d, Sections 103, 105, 110, 115,

118 and 120. Primary among such exceptions is the rule that a

judgment rendered without adequate notice or opportunity to be

heard will not be recognized or enforced in other states. Griffen

v. Griffen, 327 U.S. 220 (1946). The New Jersey courts have held

that a party is denied the opportunity to be heard “when the

affected party has not the means of knowing what evidence is

offered or considered and is not afforded an opportunity to test,

explain or refute it.” Hyman v. Muller et al., 62 A. 2d 221

(1948).

The right to be heard is fundamental to our system of law

and due process is violated whether the impediment to a full and

fair hearing arises from court rule, substantive law or the fraud

of a party. In Griffen v. Griffen, supra, a state procedure

whereby arrearages in alimony payments were entered

automatically as a judgment upon ex parte motion was declared

violative of due process. Similarly, in a very old case, the

Supreme Court of Missouri refused to extend full faith and

credit to a “Judgment” entered under an Indiana statute which

permitted the Clerk of the Court to file a replevin bond which

thereupon was to be “considered as and have the same force and

effect as a Judgment” reasoning:

“The question involved in this cause is not what

faith and credit shall be given to a judicial

proceeding of a sister state,.... Indeed if this is

a judicial proceeding it is difficult to find a

reason why a state may not declare any contract

or undertaking, on being filed with the clerk of a

court of record, a Judgment by confession and

having the force and effect of a Judgment and

thus make it a judicial proceeding within the

meaning of the Federal Constitution.” Foote v.

Newell, 29 Mo. Reports 400 (1860).

Of importance to this issue is the generally accepted concept

that in tax matters a lesser standard of notice and hearing may

be employed without offending due process. 3 Cooley on

Taxation (4th Ed.), Section 1118. But it is submitted that the

observation of the Minnesota Supreme Court that “it has never

been held that a personal Judgment may be obtained in a tax

proceeding without personal notice” must surely be the law of

every state and indeed is a constitutional imperative. State v.

Security National Bank, 173 N.W. 885, 887. Professor Cooley

suggests that due process does not require notice and hearing at

any particular stage of the proceedings “if notice or opportunity

to be heard exists before the amount is finally determined or in

12

subsequent proceedings for... collection.” 3 Cooley on

Taxation (4th Ed.), Section 1118. But, in fact, no provision for

notice is made under Pennsylvania law before a non-resident can

contest the amount of the Philadelphia tax. To permit the entry

of a wage tax judgment in Pennsylvania summarily without any

right to assert defenses is in essence allowing such judgments to

enter automatically in violation of due process.

Only two reported cases have ever directly faced the full

faith and credit questions in connection with the enforcement of

foreign tax judgments “automatically entered.” In State Tax

Commission of Utah v. Cord, 404 P. 2d 422 (1965), the Nevada

Supreme Court considered enforcement of a Utah income tax

judgment which was entered automatically upon the filing of an

“income tax warrant” under Utah law. On an alternative theory

of recovery, the Utah Commission sought enforcement of the

underlying tax warrant as a “record” entitled to full faith and

credit. After finding that the defendant’s contacts with Utah

were insufficient to permit the assertion of jurisdiction over their

persons under Utah law, the court held:

“The appellant contends that the warrant

judgment imposing personal liability on the

Cords is a public record of Utah which must be

given full faith and credit. We will not enforce a

personal liability imposed by another state on a

resident of our state without jurisdiction over

him simply because the imposition of liability is

called a record and not a judgment. The

jurisdictional requirements must be met whether

the matter is regarded as a ‘judicial proceeding’

or a ‘record’.” State Tax Commission v. Cord,

supra at 424.

Similar factual circumstances were faced by the Michigan

13

Supreme Court in State of Ohio, Department of Taxation v.

Kleitch Bros., Inc., 98 N.W. 2d 636 (1959). There the State of

Ohio sought to enforce a judgment for highway use taxes which

was entered statutorily as a matter of course upon the ex parte

application of the Ohio Department of Taxation. The court

found that the judgment was entitled to full faith and credit and

noted at length that the assessment procedure which preceded

the summary entry of judgment provided for service of the

assessment upon the Ohio Secretary of State and service by

registered mail upon the taxpayer. The fofm of the assessment

notice was in the nature of a summons containing a demand for

payment and full details on the taxpayer's right to file a petition

for reassessment. Thus, the procedure was based in statute and

ws calculated to give the defendant notice of pending

prc ceedings. The court relied heavily upon People v. Skinner,

155 P. 2d 488, a case of similar effect only concerning the

intrastate enforcement of taxes, and significantly it adopted the

following language:

“From all the authorities, it is evident that the

state has the power to assess taxes and fix

methods for the collection thereof, and it does

not matter if these remedies be summary in their

nature, so long as the taxpayer is in some way, at

some stage of the proceedings given an

Opportunity to be heard and have his rights

determined before some competent tribunal... .

The statute provides for adequate notice of any

additional assessment and an opportunity for

mistakes to be rectified upon the filing of a

petition within the time prescribed .... Ohio v.

Kleitch, supra, at 642.”

The New Jersey Supreme Court has recognized that due

14

process requires a hearing in tax matters at some stage of the

proceecings. N.Y. Susquehanna v. Vermeulen, 44 N.J. 491

(1965).

Applying these principles to the case at bar, it is clear that

no such notice and opportunity was provided by the City of

Philadelphia to the petitioner. Many substantive defenses exist

which could be asserted by tax defendants. For example,

traveling employees are entitled to allocate their time between

time spent within and without the City of Philadelphia. Often

wage records are inaccurately reported, misread, or confused.

But the respondent City of Philadelphia would have New Jersey

courts enforce judgments resulting from such offensive

procedures even though the petitioner has no opportunity to

make such meritorious defenses at any stage wherein he

jurisdictionally is before the foreign tribunal. It is respectfully

submitted that the instant judgment is not entitled to

enforcement and violates the right to due process.

CONCLUSION

Although this petition is filed on behalf of only one person,

the issues it presents affect thousands of New Jersey residents

who commute to a place of employment in the City of

Philadelphia.

Petitioner respectfully requests that this Court grant

certiorari in order that the important due process rights of these

interstate commuters can be adequately protected.

Respectfully submitted,

s/ George J. Botcheos

LASKIN & BOTCHEOS

Attorneys for Petitioners

la

APPENDIX A — OPINION OF THE SUPREME COURT

OF NEW JERSEY

SUPREME COURT OF NEW JERSEY

C-126 SEPTEMBER TERM 1980

Filed Oct. 21, 1980

CITY OF PHILADELPHIA,

Plaintiff-Respondent,

HENRY H. STADLER, SALVATORE DiMARTINO,

JOSEPH A. SULPIZIO, JAMES SPROULES and JAMES M.

McCULLOUGH, JR.,

Defendants-Petitioners.

To the Appellate Division, Superior Court:

A petition for certification of the judgment in A-1742-78

having been submitted to this Court, and the Court having

considered the same;

It is ORDERED that the petition for certification is denied

with costs.

WITNESS, the Honorable Robert N. Wilentz, Chief

Justice, at Trenton, this 20th day of October, 1980.

s/ Stephen W. Townsend

Clerk

2a

Appendix A

/tsg

A TRUE COPY

s/ Stephen W. Townsend

Clerk

3a

APPENDIX B — OPINION OF THE SUPERIOR COURT

OF NEW JERSEY

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

A-1742-78

CITY OF PHILADELPHIA,

Plaintiff-Respondent,

v.

HENRY H. STADLER, SALVATORE DiMARTINO,

JOSEPH A. SULPIZIE, JAMES SPROULES and JAMES M.

McCULLOUGH, JR.,

Defendants-Appellants.

Argued: April 1, 1980 — Decided: Apr. 18, 1980

Before Judges Fritz, Kole and Lane.

On appeal from Burlington County District

Court whose opinion is reported at 164 NJ.

Super. 281 (1978).

William S. Ruggierio argued the cause for

appellant (Ruggierio & Freeman, attorneys).

Charles Crabbe Thomas argued the cause for

respondent.

PER CURIAM

4a

Appendix B

We affirm the judgment essentially for the reasons given in

Judge Wells’ published opinion. City of Philadelphia v. Stadler,

164 N.J. Super. 281 (Cty. D. Ct. 1978). See also, City of

Philadelphia v. Smith, N.J. —— (April 2, 1980), aff'g 169

N.J. Super. 156 (App. Div. 1979).

We find no merit to any of the contentions raised on this

appeal as grounds for reversal.

Affirmed.

A TRUE COPY

s/ Elizabeth McLaughlin

Clerk

Sa

APPENDIX C — OPINION OF BURLINGTON COUNTY

COURT

| BURLINGTON COUNTY COURT, 1978

164 N.J. Super. City of Philadelphia v. Stadler.

CITY OF PHILADELPHIA, PLAINTIFF, v. HENRY H.

STADLER, DEFENDANT.

CITY OF PHILADELPHIA, PLAINTIFF, v. SALVATORE

DIMARTINO, DEFENDANT.

CITY OF PHILADELPHIA, PLAINTIFF, v. JOSEPH A.

SULPIZIE, DEFENDANT.

CITY OF PHILADELPHIA, PLAINTIFF, v. JAMES

SPROULES, DEFENDANT.

District Court

Burlington County

December 11, 1978.

Mr. Charles Crabbe Thomas, attorney for plaintiffs.

Mr. William S. Ruggierio, attorney for defendants.

WELLS, J.S.C. These four cases consolidated for hearing

and decision are before the court on plaintiffs motion for

summary judgment. Plaintiff City of Philadelphia (city) seeks

New Jersey judgments based upon judgments against each

defendant entered in the Court of Common Pleas, Trial

Division, of the County of Philadelphia, State of Pennsylvania,

pursuant to the Full Faith and Credit Clause, U.S. Const., Art.

IV, §1. Defendants resist, asserting various constitutional

defenses. The undisputed facts are:

6a

Appendix C

Since 1939 the city has levied a tax upon wages earned by

persons working within the County of Philadelphia,

Philadelphia Pa. Code, §19-1500 (1973). This tax, known as the

wage and net profit tax (hereinafter wage tax), is a self-assessed

tax which places the responsibility of filing a return upon the

taxpayer. In these actions defendant taxpayers are residents of

the State of New Jersey who are employed by the Federal

Government on federal enclaves inside the boundaries of

Philadelphia.' The defendants refused to file the necessary forms

or pay the assessed taxes.

In each case suits alleging the resultant tax deficiency

against such defendant were filed in the Court of Common Pleas

of Philadelphia County and served upon defendants under the

Pennsylvania Long-Arm Statute, 42 Pa. C.S.A. §8301 et seq., by

serving the Secretary of the Commonwealth and defendants at

their last known address by certified mail, return receipt. The

records of the Pennsylvania proceedings before this court show

that all the addresses were to communities within Burlington

County and that in three cases the certified mail went unclaimed

and that one was refused. After defendants failed to answer,

appear or otherwise defend, the city moved to enter judgments

by default for failure to plead. Notices pursuant to Pennsylvania

R.C.P. 2082 were sent to each defendant by certified mail, return

receipt requested notifying them that default judgments would

be entered within 20 days of the mailing of the notice. Once

again defendants either refused delivery of the letter or it went

unclaimed. Following expiration of the 20-day period without

response from defendants, judgments were entered in favor of

the city. These New Jersey actions on the aforesaid Pennsylvania

judgments followed.

1. The United States, unlike other employers, pursuant to 5 U.S.C.A.

§5520 does not withhold the taxes from certain of its employees’ wages.

Ta

Appendix C

[1-3] Defendants argue on various grounds that the

judgments entered by the courts of the Commonwealth of

Pennsylvania are not entitled to full faith and credit. U.S.

Const., Art. IV, §1. Generally, the Full Faith and Credit Clause

requires every state to give at least the res judicata effect which

the judgment would be accorded in the state which rendered it.

Duke v. Durfee, 375 U.S. 106, 109, 84 S. Ct. 242, 11 L. Ed. 2d

186 (1963). However, it is a well established constitutional

principle that a judgment entered without due process of law is

not entitled to full faith and credit and may not be enforced even

as a matter of comity. Griffin v. Griffin, 327 U.S. 220, 228-229,

66 S. Ct. 556, 90 L. Ed. 635 (1946); See also, Restatement,

Conflicts 2d, §104 at 315 (1969). Thus, a court of this State,

when asked to enforce a foreign state judgment, must deny full

faith and credit if the rendering court lacked in personam

jurisdiction, Duke v. Durfee, supra, 375 U.S. at 106, 84 S. Ct.

242, 11 L. Ed. 2d 186; subject matter jurisdiction, James v.

Francesco, 61 N.J. 480, 485 (1972); Klaiber v. Frank, 9 NJ. 1

(1952), or failed to provide adequate notice and an opportunity

to be heard. National Exchange Bank v. Wiley, 195 U.S. 257, 25

S. Ct. 70, 49 L. Ed. 184 (1904); Griffin v. Griffin, supra.

Defendants assert that the judgments recorded in the

Commonwealth courts were entered without due process. U.S.

Const. Amend XIV. The primary issues may be summarized as

follows:

1. Did lack of notice to defendants of their rights to

administrative review prior to the filing of the suits in

Pennsyivania, combined with the probable application in

Pennsylvania of its doctrine of exhaustion of remedies,

deprive defendants of an effective right to be heard

within the Commonwealth of Pennsylvania?

8a

Appendix C

2. Did the application of Rule 306, PA. R.C.P.

(Philadelphia County); amended May 17, 1976, also

cited as Rule 40-H(1) and (2), Philadelphia Civil Rules,

operate to deny defendants the effective opportunity to

appear and defend in the Pennsylvania courts?

3. Did defendants have sufficient minimal contacts in

Pennsylvania for its courts to render in personam

judgments against them grounded upon service outside

Pennsylvania under the Pennsylvania Long Arm Statute?

4. Does New Jersey public policy preclude the entry of

judgments in these cases?

[4] Addressing the first issue, defendants argue that the

default judgments were entered in violation of their due process

rights since they never received notice in the form of tax bills or

assessment notices of their right to appeal to the Philadelphia

Tax Review Board, an administrative agency in which all

taxpayers must “exhaust any remedy” prior to either prosecuting

or defending any action in court relative to the tax.? See

Philadelphia v. Kenny, 28 Pa. Cmwlth. 531, 369 A.2d 1343

(Cmwith. Ct. 1977), cert. den. 434 U.S. 1025, 98 S. Ct. 754, 54 L.

Ed. 2d 774 (1977).

2. This argument is quite different than that first asserted at argument on

the motion. Then defendants virtually conceded receipt of delinquent tax bills

on the back of which was printed a statement of appeal rights to the

Philadelphia Board of Tax Review, and contended that such notice was not

statutorily authorized and hence invalid as notice. Compare Wuchter v.

Pizzutti, 276 U.S. 13, 48 S. Ct. 259, 72 L. Ed. 446 (1928), with Juzek v.

Hackensack Water Co., 48 N.J. 302 (1966), and Jersey City v. Div. of Tax

Appeals, 5 N.J. Super. 375 (App. Div. 1949), aff'd 5 N.J. 433 (1950). The court

need not now reach that argument since defendants have shifted their factual

position to one of denial that they received the tax bills. They also seek to take

depositions on the issue. In view of the determination herein, depositions are

unnecessary and such leave is denied.

9a

Appendix C

The court is not satisfied that defendants

have the right to complain that they did not receive such notice.

The complaints filed in the actions before the Pennsylvania

courts specifically alleged that such notices had been given.?

Thus each of the defendants, had they chosen to receive the

complaints served on them, would have been apprised that the

city took the position that a notice of the right to an

administrative remedy had been given. Defendants could then,

in the Pennsylvania actions, have specifically denied that such

notice had been sent and put the city to its proofs on the issue of

notice of the availability of administrative review. Such notice is

important to defendants since they argue that the doctrine of

exhaustion of remedies, as applied in Pennsylvania, would have

precluded them from a right to be heard on the merits within the

Commonwealth of Pennsylvania, and cite the case of

Philadelphia v. Kenny, supra. However, that case is clearly

distinguishable. Although in Kenny the court did apply the

doctrine of exhaustion of remedies, the issue of the mailing of

the notice of administrative review was not disputed. No case

shown to this court indicates that Pennsylvania would apply the

doctrine of exhaustion of remedies if it found, in fact, that

defendants’ had not received notice of the administrative remedy

they were obliged to pursue.

[5] Defendants next argue that Rule 306, Pa. R.C.P.

(Phila. Cty.), amended May 17, 1976, also cited as Rule 40-H(1)

3. Paragraph (6) states:

Based on information supplied by the Federal Agency to the

Department of Collections of the City of Philadelphia, assessments

were made and the Defendant was duly notified of such assessments

from which the Defendant failed to file a Petition for Review with the

Philadelphia Tax Review Board as permitted under Section 19-1702

of The Philadelphia Code.

10a

Appendix C

and (2), Philadelphia Civil Rules precluded the defendants in

these actions from appearing in the courts. of the

Commonwealth. The rule, before its amendment, provided as

follows:

The first paper filed by a party in a case shall have

endorsed thereon an address in the Commonwealth at

which all papers and notices thereafter may be served

upon him, and the Prothonotary shall not accept filing

unless it contains such endorsement.

In Buckley v. Huston, 60 N.J. 472 (1972), the court ruled that a

common law right existed in favor of a foreign municipality to

sue in the courts of New Jersey to collect the very tax here at

issue. Although in a different procedural posture, this reader

fails to discern in that opinion any expression of policy which

would prevent enforcement of a foreign judgment. If the policy

of New Jersey permits the filing of original suits in its courts for

the collection of the tax, it seems highly unlikely, and this court

refuses to so hold, that this same policy would cause a court of

New Jersey to deny full faith and credit to a sister state’s

judgment.

[11] In a like vein, defendants argue that the assessment of

a penalty and interest for failing to timely satisfy the tax

obligation is a penal law not entitled to full faith and credit.

Again reliance is placed on Buc, /ey v. Huston, supra, where our

Supreme Court chose not to eliminate the prevailing doctrine

that foreign penalties as such are not recoverable in an original

suit for the collection of taxes. 60 N.J. at 482. See also,

Restatement, Conflicts 2d §129 (1969). This court fails to find in

the record that the nominal penalty arose under a penal law or is

of such a nature as to preclude suit to recover it outside of the

Commonwealth. Milwaukee Cty. v. M.E. White Co., 296 U.S.

268, 56 S. Cr. 229, 80 L. Ed. 220 (1935).

lla

Appendix C

[12] Lastly, defendants ask this court to declare that the

35-year-old holding of Kiker v. Philadelphia, 346 Pa. 624, 31 A.

2d 289 (Sup. Ct. 1943), cert. den. 320 U.S. 741, 64 S. Ct. 41, 88

L. Ed. 439 (1943), is erroneous. Kiker upheld the power of the

City of Philadelphia to levy and collect the wage tax on income

earned by nonresidents employed on federal areas within city

boundaries. This result has been followed ever since. Lang v.

Philadelphia, 31 Pa. Cmwlth,. 537, 377 A. 2d 849 (Cmwith. Ct.

1977), app. dism. U.S. 99 S. Cr. 59, 58 L. Ed. 2d 96

(1978); Philadelphia v. Kenny, supra; Philadelphia v. Konacki,

27 Pa. Cmwlth. 391, 336 A. 2d 608 (Cmwith. Ct. 1976);

Application of Thompson, 157 F. Supp. 93 (E.D. Pa. 1957) aff'd

sub nom. U.S. ex rel. Thompson v. Lennox, 258 F. 2d 320 (3

Cir. 1958), cert. den. 358 U.S. 931, 79 S. Ct. 317, 3 L. Ed. 2d 303

(1959). Moreover, this court finds it lacks the jurisdiction to

inquire into the power of Philadelphia to levy this tax, in an

action on valid Pennsylvania judgments.

In People of State of New York v. Coe, 112 N.J.L. 536

(1934), the New Jersey Court of Errors and Appeals ruled that a

New York judgment for taxes was entitled to full faith and

credit. In so doing the court pointed out that questions of the

construction and application of the New York tax laws were not

the subject of litigation in New Jersey since they had been

conclusively determined by the New York judgment which

established the liability for the tax. /d. at 538. Likewise, in

another proceeding to recover a tax in a foreign court, it was

said:

In a suit upon a money judgment for a civil cause of

action, the validity of the claim upon which it [is]

founded is not open to inquiry, whatever its genesis.

Regardless of the nature of the right which gave rise to

it, the judgment is an obligation to pay money in the

nature of a debt upon a specialty. [Milwaukee Cty.,

supra, 296 U.S. at 275, 56 S. Ct. at 233]

12a

Appendix C

Consequently, this court concludes that it lacks the capacity in a

full faith and credit enforcement proceeding to attach a different

interpretation to the wage tax.

Having reviewed defendants’ contentions and there existing

no genuine issue of material fact, plaintiff's motion for summary

judgment is granted, R. 4:46-2; Judson v. Peoples Bank & Trust

Co. of Westfield, 17 NJ. 67, 73-75 (1954), in the case of

Philadelphia v. Stadler; Philadelphia v. DiMartino and

Philadelphia v. Sulpisie.

In the case of Philadelphia v. Sproules, also consolidated

for disposition on motion, it appears that Sproules actually

appeared and defended in the Philadelphia Court of Common

Pleas. No issue was raised as to his nonreceipt of a notice of

administrative remedy and Sproules, like Bullion, lost on the

merits. As to him, on this motion, counsel raises only the public

policy arguments in defense of the application for summary

judgment. For the same reasons as given supra, that argument is

rejected and summary judgment is allowed in favor of the city.

Defendants contend this rule precludes pro se nonresident

defendants from appearing in the Philadelphia Commonwealth

: Courts. This court disagrees with that interpretation. The rule

on its face only requires that a party to a lawsuit list an address

within the Commonwealth. It does not exclude a nonresident

litigant from making his appearance. In these matters defendants

could have provided a mailing address within the city since they

worked on installations clearly within its boundaries. No

authority has been presented to this court which holds that the

Pennsylvania courts deny access to the court for failure to

comply with the above-cited rule. Nor did defendants make any

effort whatsoever to appear. Therefore, no shred of evidence

supports the theory that this rule is violative of the Fourteenth

Amendment.

13a

Appendix C

The last due process argument utilized by defendants to

resist enforcement of the Pennsylvania judgments is that they

lacked sufficient minimal contacts with Pennsylvania to satisfy

due process under the test announced in /nternational Shoe Co.

v. Washington, 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95 (1945).

In the Pennsylvania proceedings, service pursuant to the long

arm statute, 42 Pa. C.S.A. §8301 et seqg., was invoked on the

theory that §8304 thereof permits service in the manner

described on nonresidents who “shall have done any business” in

Pennsylvania. For purposes of this statute, working in

Philadelphia is “doing business” there under the definition of

that phrase given in 42 Pa. C.S.A. §8309. Philadelphia v.

Bullion, 28 Pa. Cmwith. 485, 368 A. 2d 1375 (Cmwith. Ct.

1977). This court is bound by that interpretation for “where the

construction of a foreign statute is involved, our courts will

accept as controlling the interpretation placed thereon by the

courts of that state.” King v. Klemp, 26 N.J. Misc. 140, 145, 57

A. 2d 530, 533 (Ch. 1947); Watson v. Lane, 52 N.J.L. 550 (E. &

A. 1890); 73 Am Jur. 2d, Statutes, §143 (1974).

[6] In Bullion facts identical to those in the present case

were involved except: (1) defendant conceded employment in

Philadelphia and (2) appeared in Pennsylvania to contest service

under the long arm statute. He lost. Consequently, the only

avenue of inquiry open to the court is whether merely working

in Pennsylvania satisfies the constitutional requirement of

minimal contacts to give it long arm jurisdiction over New

Jersey residents consistent with due process. /nternational Shoe,

supra, McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.

Cr. 199, 2 L. Ed. 2d 223 (1957); Hanson v. Denckla, 357 U.S.

235, 78 S. Ct. 1228, 2 L. Ed. 2d 1283 (1958). The central concern

of the inquiry into personal jurisdiction has become the

relationships among defendant, the forum and the litigation

rather than the mutually exclusive sovereignty of the states on

14a

Appendix C

which the rules of Pennoyer v. Neff, 95 U.S. 714, 24 L. Ed. 565

(1877), were based. Shaffer v. Heitner, 433 U.S. 186, 188, 97 S.

Ct. 2569, 2571, 53 L. Ed. 2d 683, 685 (1977). Even before

Shaffer, our own Supreme Court answered the question posed

above. In J.W. Sparks and Co. v. Gallos, 47 N.J. 295 (1966),

defendant, a New Jersey resident, purchased stock via telephone

through a New York broker with an office in New Jersey and

the court held defendant had “purposefully avail [ed] [him]self of

the privilege of conducting activities within the forum state” and

thus it could be said that he invoked “the benefits and

protections of its laws.” The court then reversed a county district

court holding disallowing a New Jersey judgment based upon a

New York default judgment secured after service in New Jersey

under New York’s long arm statute. If a single stock purchase,

where defendant buyer never went to New York but merely used

a New York agent, is sufficient “minimal contact,” clearly years

of continuous employment in Philadelphia with all its attendant

use of streets, police service and other amenities is clearly

contact with Pennsylvania sufficient to satisy traditional

concepts of fair play in requiring these defendants to respond to

actions arising out of such employment in Pennsylvania. McGee,

supra; Hanson, supra; J.W. Sparks, supra; Avdel Corp. v.

McCure, 58 N.J. 264 (1971).

[7] Defendant next argues that the public policy of New

Jersey forbids enforcement of the Pennsylvania judgment.

Although full faith and credit may on rare occasions give way to

the policy of enforcing state, Restatement, Conflicts 2d, §103

(1969), such an exception has an extremely narrow application.

In fact, it has been said that there are no exceptions in the case

of a money judgment rendered in a civil action by the courts of

another state. Zelek v. Brosseaus, 47 N.J. Super. 521,533 (App.

Div. 1957), affd 26 NJ. 501 (1958). See also, Magnolia

Petroleum Co. v. Hunt, 320 U.S. 430, 64 S. Ct. 208, 88 L. Ed.

15a

Appendix C

149 (1943), reh. den. 321 U.S. 801, 64 S. Ct. 483, 88 L. Ed. 1088

(1944). In Milwaukee Cty. v. M.E. White Co., 296 U.S. 268, 56

S. Ct. 229, 80 L. Ed. 220 (1935), Mr. Justice Stone succinctly

summarized the full faith and credit clause and its function in a

federalist system:

The very purpose of the full faith and credit clause was

to alter the status of the several states as independent

foreign sovereignties, each free to ignore obligations

created under the laws or by the judicial proceedings of

the others, and to make them integral parts of a single

nation throughout which a remedy upon a just

obligation might be demanded as of right, irrespective of

its origin. [at 276-277, 56 S. Cr. at 234]

[8] It is the contention of defendants that the public policy

of the State of New Jersey is so undividedly opposed to the

imposition of the wage tax that the courts of New Jersey should

not enforce a judgment for its collection. Such policy,

defendants argue, is manifested in two Assembly bills, Assembly

Concurr. Resolu. 118 (February 15, 1974) and Assembly Resolu.

16 (May 17, 1974), and the Attorney General’s appearance

amicus curiae in Non-Resident Taxpayers Ass'n v. Munic. of

Philadelphia, 341 F. Supp. 1135 (D.N.J. 1872), aff'd 478 F. 2d

456 (3 Cir. 1973). Admittedly, these materials reveal an earnest

dislike for the imposition of the wage tax upon all New Jersey

residents working within the city, but to base a denial of full

faith and credit on such an expression would be to revive the

status of the several states as “independent foreign sovereignties,

each free to ignore obligations ... of the others.” Milwaukee

Cty., supra, 296 U.S. at 276, 56 S. Ct. at 234.

16a

Appendix C

(9, 10] New Jersey recognizes tax actions of foreign states,

N.J.S.A. 54:8A-46(b), in its courts. More importantly,

Restatement, Conflicts 2d §117 (1971), provides:

A valid judgment rendered in one state of the United

States will be recognized and enforced in a sister state

even though the strong public policy of the latter state

would have precluded recovery in its courts on the

original claim.