Jurisdictional Statement — Wilentz v. Sovereign Camp, Woodman of the World

- .... INDEX.

\ SussEect Iwpex.

nL Betis ofthe jurisdiction of the Senet Court |

~ of the Unifed States ....2.

{IL Statutory provisions sustaining jurisdiction

JIL Ststute of the State of New Jersey, the validity. Ponds

of which is involved....................%

vik Date of final decree and date of application. for

A 8 Ho in 6) wel Bc gn gon dno we ales

AY. Nature of the case and of the rulings of the spe-

_ _ gially constituted United States District Court

VL Cases believed to sustain the jurisdiction of the

Supreme Court of the United States _.

Cases holding that the complaint does not .

state a case for a three-judge court, but

shouid be remitted..,............

Cases holding that a single-judge district

court would not have to considey the con-

stitutionality of the stays. ___.

_= Cases holding that the stays are Mceaition.

aty and constitutional. ...—-—s—s.—.....

» . . Gases holding that plaintiff is not entitled

to injunction or declaratory judgment

against the acceptance of bonds for taxes

Cases holding that plaintiff’s rights on its

bonds are governed by the Tax Act of

1918 rather than the Executions Act ..

Cases holding that piaintiff’s procedural

rights on its bonds were lost by merger. of

- its.rights on its original obligation i in its

ee con ycal ny

Cases holding that appeal is ‘the Proper

Saw ccd sates eek hue Une eIne

ac

~)

PLP OANA NO ORBLE Hs

___ Acton v. Goodman, 205-Ky. 382, 265 8. W. 806, 807

ii - IJNDEX

* . Taste or Oases anD Statutes Crrep.

Case v ;

rn Valley Authority, 297 U.S.

288, 325 (1936)....... re eI, oy Neit 20, 2, 24

Automotive Equipment Co. v. Trico Products Corp.,

- 11 Fed. Supp. 292 (U.S. D. C., W. D. N.-Y., 1935)... 1

mis ak UR SOS aha a ae %

Banning v. Marsh, 124 Nebr. 207, 245 N. W.. 775,. :

I ett a ee ae eo Spl ye x: nH

Barnes v. Drake, 31 N. J. Law 317 (Supr. 1865). . 2

Electric Bond and Share Co. ¥. eeqceuecaiit 303 U. S.

419, 4463 (1008). °..: :...; SNe” Sig SO gio paeaiaeaeen 20,24

Film Transport Co. v. Michigan Publ. Util. Comm.,

' 17 F. (2d) 957 (U.S. D. C., E. D. Mich:, 1927). -._16

Friedland v. - Lsquith; 106 N-F- Eq. 344, "349, 150 Atl.

. {. & aR See ita aan 26

Hi-Ball Transit Co. vs. Railroad themes: of Texas, a7 —

' ‘Fy (2d) 425 (U.S. D. C., N. D. Tex., 1928) ......... 1

Hlourigan-v. Township of North Bergen, HIS N. J...

Law 143, 172 Atl. 193, concurring opinion 172 Atl. |

ne Ns CS oo ke cs ce sweeten c ee. 10, 23

Morrison v. Fall, 290 Fed. 306 (App. D. C. 1923), af- —~

firmed sub. nom. Morrison v. Work, 266 U. 8. 481

ad

RN ote A et ee et ea a diss ety cs . =

Matthews v. Rodgers, 248 U. S. 521:(1932) .. Gi

Pleasant v. Missouri-Kansas-Texas Ry., 66 ‘FF. (2d)

842, 843-44 (C. C. A., 10th, 1933), cert. den., 291 =

Nim 2 ts cw ks x ee co wb ha ey ems 19

Rogers v. Penobscot ny Co., 154 Fed. 606, 610

Re oe Nh ccw ee 19

Rees v. City of Watertown, 19 Wall. 107, 124 (1873). 21

‘Salem Trust Co. v. Manufacturers’ Finance Co., 262

Brae ee I oie ee re a Ga see so ra

Schuler v. Israel, 120 U. S. 506, 5 ;

Sovereign Camp, Woodmen of t orld vw Wilentz

et als:, 23 Fed. Supp. 23 (v. . D. C., D. N. J.; 1938, i

this case below) ena rerr er, Saree er eee sth 5)

INDEX _

a,

Sperry- -Hutchinson Co. v. Kuhn, 212 Fed. 555, 557,

(U.S. D. C., E. Dz Mich., 1912). wen i

Stratton v. St. Louis S. W. Ry. Co., 284 U. S. 530

RE railed ea Chain teh chek s cwsrns oNs

Thomason v. Allen County, 115 U. 8. 550 (1885). .

United States ex rel. Christmas v. “Asbury Park, "78

~ “FP, (2d)-1003 (C. C. A., 3d, 1935), cert. den., 296°U. S.

naa ean eee ae

’ Vanderpeoll v.. Borough of Mt. Ephraim, WW N, J.

Law 423, got 168 Atl..575 (E. & A., 1933). u

. 21,

Walkley v. City of Muscatine, 6 Wail. 481, 482

ee ee Ob OL a Re tia see nk 6 GMs hag

Wright y. Vinton Branch Bank, 300 U.S. 440, 460-61

(19ST) nrc ee

Zenie Bos. v. Mishend: 10 Fed. Supp. 779, 782 - S.

= Oe 2S & ee) nee

Statutes:

P. L. New Jersey, 1881, C. 77, Sec. J (Executions

ere ee 5h dt A eck xs. 5

P. L. New Jersey, 1903 (2d Sp. Sess. , C: 1, Sec. 237.

I eo og us Gace ay Gad’

P. L. New Jersey, 1910, C. 242, aan ,

P. L. New Jersey, 1918, C. 236, See. 101...

P. L. New Jersey, 1918, C. 236, Sec. 505 — Act of .

RR aes er re een

P. L. New Jersey, 1928, C. 123, See 1......

P. L. New Jersey, 1931, C. 340, as amended and sup-

plemented, generally Dy ON ree arte ree

Revised Statutes New Jersey (1937): |

Ne a yy kas ea ar Sve

Rs 8 ig vs Varga wha 5 pete

| ee ee ee

92: 27-1 to 65 ..... calm w week .

EE eo ere | ep Aes °

le * 5 Geer Parann con

O32: 27-322 ....: visa ke a

a, bck vs ba wk so

i + eres

52: 27-62 ...... eae fests

iv - "_sINDEX

36 Stat. -1162 (Act of March 3, 1911, C. 231, Sec.

266) .

_ 37 Stat..1013 (Act of March 4, 1913, C: 160) ENE

’ 43 Stat. 938 (Act of February 13, 1925, C. 229,

- See. 1) . , ,

‘43 Stat. 938 (Act of February 13, 1925, ¢ 229,

: See. 1, Sub-See. 3) F

United States Constitution, Amendment 10. ee

United States Constitution, Amendment 11 oo

United States Judicial Code, Sec. 238(3).. .. st’.

See; 266 ... . 42,13, 17,18

Sec. 274d

- $OPREME. COURT OF THE UNITED. STATES

OCTOBER TERM, 1938

No. 448

4

A

DAVID T. WILENTZ, ATTORNEY GENERAL oF THE STATE

_or New Jersey; J. H. THAYER MARTIN, Stare Tax

. CoMMISSIONER OF THE. State or New Jersey, anp WAL-

‘TER R. DARBY, Commissioner or MunicrpaL Accounts

oF THE StaTE OF NEW JERSEY, AS AND CONSTITUTING THE

- MunicrpaL Finance CoMMission OF THE STATE OF New

Jersey; EARL KIRCHER, CONRAD WEBER anv

WILLIAM G. HIRSCH, Memsers or tHE Boarp or As-

SESsORS OF THE BoroucH or RuNNeMEDE, NEw. JERSEY,

ann ALBERT W. SPENCER, Tax Cotzector OF THE

Borovce or RUNNEMEDE, NEw JERSEY,

a Appellants,

Te CAMP, WOODMEN OF THE WORLD,

rere

‘STATEMENT UNDER RULE 12 OF THE RULES OF

THE SUPREME COURT OF THE UNITED STATES.

(ae August 29, 1938.)

‘L Basis of Jurisdiction of the Supreme Court of the United

| : States, ,

The basis upon which it is contended that the Supreme

- Court of the United States. has jurisdiction upon appeal

lm

eet eee

- @& >

to review the decree in question is that said appeal is fron

' a final decree of a specially-constituted three-judge_Unitei

States District Court, convened pursuant to Section 3%

of the Judicial Cod« of the United States. There is-dram

in question in this suit the validity of a statute of the State

of New Jersey on tae gronnd of its being repugnant to th

- Constitution of the United States, and the enforcement ani

execution of said statute by an administrative commission

of the State of New Jersey, viz. the. Municipal. Finane

Commission of the State of New Jersey. The said final

decree is‘a decision against the validity of the said statute

and of its enforcement and execution by the ‘said Municipal

Finance Comasiacion.

Il. Siatutory Provisions ‘Guntine Jurisdiction. -

The statutory provisions which sustain the jurisdiction’

of the Supreme Court of. the United States are Section 2) —

of the Judicial Code of the United States, being Chapter ;

. 231, Section 266, of the Act of March 3, 1911 (36 Stat

1162), as amended by Chapter 160 of the Act of March 4 3

1913 (37 Stat. 1013), as amended by Chapter 229, Section

1, of the Act of February 13, 1925 (43 Stat. 938), and Ses

tion 238(3) of thy Judicial Code of the United States; being .

Subsection 3 of Section 1 of Chapter 229 of the Act of

February 13, 1925 (48 Stat. 938), entitled ‘Section 238”

Ill. Statute of the State of New Jersey, the Validity of |

Which is Involved.

The statute of the State of New Jersey, the validity o!

sections of which is involved, is ‘‘An Act Concerning Mz.

nicipal Finances’’, being Chapter 340 of the Pamphlet.Lav:

of 1931 of the State of New Jersey, as from time to time

‘. amended and supplemented. Said statute, as amended and

supplemented, may be found in the official edition of ‘*The

3

: Revised Statutes of New Jersey (1937)”, being Title 52,

Chapter 27, Sections 1 to 66, both inclusive (52:27-1 through

66); Title 52, Chapter 24, Section 19.1 (52:24-19.1) ; Title

52, Chapter 14, Sectior 32 (52;14-32); and Title 1, Chiap-.

ter.1, Section 10 (1:1-20). The pertinent portions of said

statute, being those the yalidity of which was assailed by *

the complaint below and held void in the opinion, findings

of fact and eonclusions of law, and final decree, are bere

_ set out verbatim as follows: +

_+ Whenever.the commission shal! function in any

municipality and so long as it shall continue so to do,

no judgment,’ decree, levy or execution against the

- municipality or the property thereof for the recovery

_ of the amount due on any bonds, notes or other obliga-

_ tions-of the municipality, in the payment of which the

municipality has defaulted, shall be enforced until

otherwise specially ordered by the supreme court or a

justice thereof in an appropriate proceeding for such

purpsse, after notice to tlre commission, and the enforce-

. ment of any such judgment, de*ree, levy or execution

shall be stayed until otherwise specially ordered as

aforesaid.’’ (Revised Statutes of New Jersey (1937)

32 :27-32.1.) -.

‘**Whenever the commission shall function in any

- Municipality and so long’as it shall continue so-to do,

’.. no action or proceeding of any kind, either direct or’

.. ancillary, by way of mandamus or otherwise, shall be

brought against such municipality or any public officers

for. the assessment, levy or collection of taxes by or for

such_muhicipality and any and all actioas or proceed-

‘ings therefor shall be and they hereby are stayed; ex-

_ cept that first, the supreme court or a justice thereof,

after notice to the commission, may authorize one or -

more creditors of such municipality to bring and main-

tain an action or proceeding theréfor in the supreme

eourt,-whick shall be brought for the benefit of them-

selves and all other creditors of such murcipality and

in which all other creditors of such municipality shall

have the right to intervene and assert their claim and

-2m ion wee e

4

‘in which au other creditors of such municipality may,

and the commission shall, be made parties in such map.

- ner and upon such notice as the supreme court shal

approve ; and except that, second, the commission way

bring and maintain an action or actions b¥ way of man

damus or by any other appropriate proceeding Or pro-

ceedings for the assessment, levy or collection of taxe

by such municipality for the payment of principal or in.

terest of the indebtedness of the municipality found t:

be outstanding as provided in section 52-27-14 of this

title. .

- ** Without limiting its power otherwise to direct br

mandanwis the assessment, levy. or collection of taxes.

the supreme court in any such proceeding may, to the

extent which it shall deem just and equitable, «ford to

the holders collectively of any due and unpaid clain: .

’ against a municipality any remedy which might be 2.

forded under any other law to any individual credito:

in any mandamus proceeding for the assessment, lev

or collection of taxes, to the same extent as if there had

been an entry of judgment: in their favor, issuance o!

execution and return thereof unsatisfied, service thereo!

upon public officials and performance of any and al

other conditions precedent to the affording of such re. °

_ljef by mandamus under such other law; provided, ths:

the court be first satisfied from ‘proof submitted by afi-._

davit or otherwise that the claims for the enforcemert

of which such remedy is sought are claims upon which

a judgement could be obtained.’’ (Revised Statutes of

New Jersey (1937) 52 :27-33. z

‘Whenever the commission shall “function in any

municipality and se long as it shall continue to do s0.

no action or proceeding .at law or in equity shall bk

brought or proseeuted, the purpase of which is to affect

the disposition of property or funds owned or controlled

by the municipality, except as provided in this chapter.

. “If any such municipality has in its possession or

under its control, or there is in the possession or under:

the control of the commission, any property or funds of

such mtnicipality which are or may be available for the

payment of interest or principal upon any of the debts

of such municipality (over and above the payment of

‘2 ee ae

the current operating expenses of the municipality

and the maintenance of a reasonable working capital},

“then such municipality in its diicretion may apply, or

if directed by the commission shall apply, to the su-

preme court to determine the application and distribu-

tion of such preperty or funds to and among the

ereditors of the municipality, and in any such case the {

supreme court in its discreticn may permit an applica- 4

tion for relief of the same character to be made by any |

creditor of: the municipality. In any such proceeding

-all creditors of the municipality shall be made “parties

thereto in such mahner and upon such notice by publica-

-. thon or otherwise as the supreme court shall approve,

ard any creditor may appear therein and assert his

= to receive all or any part of such property or

unds

‘In case any such proceeding shall be instituted, the.

supremé court may direct the municipality to make no

payments from any of such moneys so.available until —

the determination of the proceeding or until. permitted

_ «¥ the supreme court. Unless and until such a direction

shall te made, payments may be made by such munici-

pality qn account of principal and interest as the mu:

_ Ricipality may determine and 1s may be approved by

the commission.’’ (Revised Statutes oY New Jersey

(1937) 52 :27-33.2.)

‘‘Whenever the commission shall function in a mu-

nicipality having a school district coterminows there-

with which is governed by the provisions of chapter 7

of the title Education (§ 18:7-1, et seq.) :

a. No judgment, decree, levi or execution against

~. such school district or the property thereof for: the |

_Tecovery of the amount due on any bonds, notes or other

obligations of the school district, in the payment of

which sach s¢hool district has jefaulted shall be en-

forced untilo herwise tina ordered by the supreme

_ court or a justice thereof in an appropriate proceeding

for such purpose, after no to the commission, and

- the enforcement of any such j i gement, decree, levy or

" execution shall be and it hereby'is stayed until otherwise

‘specially ordered as aforesaid ;

*

ny ee ee

° . .

i

it

v. No, action or proceeding of anv kind either direc

or ancillary, by way of mandamus or otherwise, shall

be brought ‘against such school disffict, municipality,

or any public officers for the assessment, levy or colle.

tion-of taxes for sucli school district and any and al!

actions or proceedings therefor shail be and they hereby |

are stayed; except that first, the supreme. colt or a

justice. thereof, after notice to the commission may ‘au-

thorize one or more “reditors of such school district to

_ bring and maintain an action or proceeding therefor ‘1

. the supreme court, which shall be brought for the benefit

of themselves and all other creditors of such school dis-

= and in which alt other creditors of such school dis.

li -have the right to intervene and assert their

< claim and in which all other creditors of such school

district may, and such commission shall, be @ade par.

ties in such manner and upon such notice as the supreme’

court shall approve; and except that, second, the com-:.

mission may bring and maintain an action or actions

by way of mandamus or by any other appropriate prv-

ceeding or proceedings for the assessment, levy wx col

- lection of taxes for such\school district for the payment.

of principal! or interest of the indebtedness of the schoo!

district found to be outstanding as provided in sectior

52 :27-46 of this title; without limiting’ its power cther-

wise to direct by mandamus the assessment, levy or col-

lection of taxes, the supreme court in any such proceed.

ing may,:to the extent which it shall deem just and equi-

table afford to the holders collectively of any due and

unpaid claims against a school district any remedy

which might be afforded-under. any other law. to any iz-

dividual creditor in any mandamus proceeding for the

. assessment, levy or colleetion of taxes, to the’*same er-

‘tent as if there had been an entry of judgment in their. -

favor, issuance of execution and return thereof unsat- ’

isfied, service thereof i public officials and perfori-

‘ance of any and all other conditions precedent to the

affordihg.of such relief by mandamus under such other

law; provided, that the court be first satisfied from

proot submitted by affidavit or otherwise that the

claims for the enforcement of which such remedy is

eee

.

- , . . a?

sought are claims sane “ a ome could be

obtained; ~

.¢e..No action or venti at ine or in adie shall

be brought or prosecuted, the purpose of which is: to

affect the disposition of property or funds owned or con-

trolled by the school district, except as herein provided ;

if any such school district has in its possession or under ©

its control,. or there is in the possession or under the

: control of the commission, any property or fa

such schoo] district which are or may be available for

the payment of interest or principal upon-‘any of the

' debts of such school district (over and above the pay-

_ment of the current operating expenses of the school

-’ distrieé and the. maintenance of a reasonable working

, capital), then such school district in its discretion may

"apply, or if directed by the commission shall apply, to

_ the supreme court to determine the application and dis-

tribution of such property or furids to and among the

nds of.

.

creditors of the school district, and in any such case the |

supreme court in its discretion may permit an applica-

tion for relief of the same character.to be made by any

creditor of the school district; in any such proceeding

all creditors of the school district shall be made parties

thereto in such manner and upon such notice by publica- ,

tion or otherwise as the supreme court shal] approve,

and any creditor may appear therein and assert his

rights to receive all or.any part of such property or

funds; in case any such proceeding shall be instituted,

the supreme court may direct the municipality to make

no payments from any of such moneys so available until

_ the determination of the proceeding or until permitted

by the supreme court; unless and until such a direction

shall be made, payments may be made by such munici-

pality on account of principal and. interest as the mu-

nicipality may determine and as may be approved by

‘ the municipal finance commission:

d. Upon the application of any creditor made upon

notice to the schoo] district and the commission, the

supreme court may vacate, modify or restrict any statu-

tory stay contained in this statute.’’ ‘(Revised Statutes

of New Jersey (1957) 52 :27-62.)

oan

.

ee em Cn RARE mt A NAN ty shen

8.

‘‘The governing body of any municipality in whid

the commission is functioning may compromise an

adjust the whole or any part of any special assessments

or taxes delinquent to th. municipality, but nothing in

this section shall be constrned to impair or affect in any

way the existing rights and remedies of any holder of |

a certificate of tax sale, representing any tax title or

titles.to lands in such municipality sold on account of

delinquent taxes or delinquent assessments, or both.

“*No claims of the municipality for taxes or assess.

ments, and interest thereon, in excess of five hundred

dollars, shall be compromised without the assent in

writing of the commission.

' “All moneys received by the municipality by com-

promise or adjustment of taxes or special assessments

shall, if the commision so provide, be paid only to the.

account of the reserve fund referred to in section 52:2

25 of this title.’’ (Revised Statutes of New Jersey

(1937) 52:27-26.)-. , :

Your petitioners would like to call the attention of this

Honorable Court to the provisions of a section of the said

Act not cited below by complainants or the court.

‘‘Upon the application of any creditor made upon

notice to the municipality and the commission, the sv-

preme court may vatate, modify or restrict anv statu-

tory stay contained in this article.”’ (Revised Statate g ;

of New Jersey (1937) 52 :27-33.3.)

Nor was the provision for relaxation of stays in wed

districts (52:27- 62d, supra) becaes below by complainants or

court.

IV. Date of Fina! Decree and Date of Application for

2s ? | Appeal: -

The final decree sought to be reversed was entered on

June 6, 1938, The application for — is presented on

August 29, 1938. .

Aaa _ ~ ~~

V. Nature of the Case and of the Rulings of the Specially

Constituted United States District Court. |

The Borough of Runnemede, a municipality of the State

of New Jersey, having within it a school district cotermin-

ous with it, in 1934 was forced by the pressure of economic

circumstances: to default in payment of interest upon and

principal of its bonded debt. Pursuant to the provisions of

the New Jersey ‘‘Act Concerning Municipal Finances’’, the _

Borough in 1934 applied to the Supreme Court of New Jer-

sey for an order adjudging it unable to meet its obligations, |

and ordering the Municipal Finance Conumission of the

State of New Jersey to function within it. The order was

made and granted, upon hearing, by Justice Lloyd of the

New Jersey Supreme Court.

_ When a municipality in New Jersey is subject to the juris-

diction of the Municipal Finance Commission, the statutes

of New Jersey provide that such jurisdiction shall be

deemed to cover also coterminous school districts. The-acts

provide in substance for stays of creditors’ remedies when

municipalities and.school districts are subject to the juris-

diction of the Municipal Finance Commission. These stays

provide for a creditors’. action for the benefit of all credi-

tors, and that the stay may be relaxed or modified upon ap-

plication by any creditor.

The.complainant in the case below was owner and holder

of a final judgment, obtained in the United States District

Court for the District of New J ersey, against the Board of

Education of ‘the. Borough of nen, based upon

municipal bonds dated June 1, 1930.

In June, 1936, the complainant brought this suit: The

complaint contained four eounts. In Counts 1, 3 and 4 all

of the defendants were made parties. in Count 2, only the

Municipal Finance Commission was made a party. After.

alleging the above matters in substance, Count 1 alleged °

arr

NL) ORY RRR oN em OEE

10.

that a demand had been made for the payment of the judg.

ment, execution issued and returned nulla bona and a eerti-

fied copy thereof served upon the assessors pie a

districts in which the school district is located, and that such -

assessors had failed in the duty enjoined upon thgm by law ©

to assess’a tax to meet such execution, basing their refusal .

upon the stays made effective by the Act Concerning Munici-

pal Finances when the Municipal Finance-C on

been given jurisdiction over the taxing district. ‘It then

. ail. ved that the Act Concerning Municipal Finances em-

taining such stays was enacted after the issuance of the

bonds represented by plaintiff’s judgment and that such.

stays have been held valid by the Court of Errors and Ap. .

- peals of the State of New Jersey-in the case of Hourigany.

_ Township of North Bergen, 113 N. J..Law 143, 172 Atl. 193,

concurring opinion 172 Atl. 785 (N. J. Err. and App. 2934).

It alleged’ the stays to be unconstitutional as applied to

plaintiff’s bonds. The count ‘then charged that the Munici- |

pal Finance: Commission had verti“ ed to the Borough Coun-

cil of the Borough of Runnemede a budget which contained

no provision for the levy and collection of a special tax to

meet plaintjff’s judgment, and had approved a budget for |

the Board of Education which contained no such provision, ©

and that the municipal officers would adopt and put into

force budgets which would not include such provision. It

alleged that the Municipal Finance Commission had no

affirmative power to levy taxes, had failed and neglectéd

to exercise diligently the limited powers granted to it in the

interests of holders of the bonds of the borough and school

district, had been lax and dilatory, and had encouraged the

borough and sckool district ta disregard the demands for

payment of any amounts to bondholders.

The count alleged that plaintiff had filed a petition for a

writ of mandamus, in the United States District Court‘ for

the District of New Jersey, to compel the assessment of

- taxes for the payment of its judgment, and that proofs had

‘been taken on‘said petition but charged that the. matter

would not be decided for some time..

It then alleged that if the Borough Council and Board of

Education of the borough should adopt and: put inte force

and effect budgets-which made ‘no provision for plaintiff’s

” judgment prior to:a final determination of the application

' for a writ of mandamus, the plaintiff would suffer irre-

parable injury and damage. The count closes with -the

allegation that plaintiff had no remedy at law. ‘

The prayer for relief was that the Municipal Finance

Commission be enjoined from functioning in the school dis-

__triet; that the court adjudge the stay provisions. of the Act

Ouantvhing Municipal Finances unconstitutional and void;

that the local Board of Assessors and Tax Collector be en-

. jomed from assessing taxes fog 1936 without including the

amount of plaintiff’s judgment, and that the court declare -

thut the plaintiff’s rights to compel a tax levy were gov-

erned solely by the New Jersey Executions Act. :

‘ Count 2 substantially re-alleged the allegations of Count

i, and added that plaintiff owned additiona! bonds of the

‘same issue as those on which the judgment was based, that

as a Tesult’of the stay provisions of the Act Concerning -

Municipal Finances, a cloud of unenforceability had been

east upon these bonds, and that the school district and board

of education would make no payments thercon as principal

and interest might become due, so that the plaintiff would

be forced to bring a multiplicity of suits. In the prayer of

- Count 2 only the: Municipal Finance Commission was made ~

defendant.

Count 3 substantially re-alleged the allegations of Count

1, and so much of Count 2 as alleged the ownership of. bonds

in addition to those on which the judgment was based. H

3m

ee eee

_ diction was empowered to compromise taxes provided that

12

added the statement that plaintiff’s eileen adi bond

were payable in lawful money. of the United Stat tes only,

that at the time of the issuance of the bonds it was. the law of |

the State of New Jersey that taxes should be paid in lawful

- money only, and that, pursuant.to the Act Concerning

Municipal Finances, the governing body. of a municipality

over which the Municipal Finance Commission has juris. —

no claim for more than $500 shall be compromised without

the consent of the Commission. It further alleged that in

‘two instances the Municipal Finance Commission had con.

sented to such compromises with respect -to the Borough of

Runnemede. Plaintiff alleged that it owned no property in

- the Borough of Runnemede, and.that the compromise was

illegal because it gave a preference to the holders of bonds |

_ aecepted in payment of taxes.’ :

The prayer for relief was that the Municipal Finance

Commission be enjoined from assenting to such compro-

mises, that the tax collector be enjoined from consummating

the same, and that the court declare unconstitutional the

provisions of the Act Concerning Municipal Finances au-

‘thorizing such compromises.

Count 4 substantially re-alleged the identities of Count:

1, and the allegations of Count 2 with respect to the owner-. .

ship of bonds in addition to those upon which the plaintiff's

judgment is based, and added that an actual controversy

existed between plaintif and defendant, the Municipal Fi-

nance Commission, as to the constitutionality of the stay

provisions.

It repeated the prayers for relief against the functioning

of the Commission in the municipality and for a declaration |

as to the unconstitutionality of the stay provisions, and —

added a prayer for. an injunction against the enforcement

and execution of the statutes by the Municipal vane Com-

mission.

The Commission’s answer to Count I admitted the de-

scription of the parties, the nature’of the claim and the

‘amount, Runnemede’s general default and the inception of

the Commission’s functioning’ in the borough and school |

district. It admitted the existence of the Act, as passed

after the bonds were issued (but pointed out that the law

permitted a creditor to ask that any stay be vacated, modi-

fied or restricted). It admitted recovery of the judgment, -

and that payment, had been asked, but not that execution -

had been served on the assessors and collector. It admitted

that no special levy was included in the borough budget, but

alleged that the borough had no such duty, that the school

hpdget had been adopted before bringing the suit, tax bills

made out and paid, and that to direct a levy would — m

utter confusion.

Making the same disposition of repeated allegations, the »

Commission admitted as to Count II that plaintiff held

bonds not reduced to judgment. As to Count III, it admitted |

that plaintiff’s bonds and judgment were payable in lawful

money of the United States, and that when the bonds were —

issued New Jersey law provided that taxes should be so.

paid, but alleged that at that time the cgmpromise of taxes

due was permitted by Jaw: It admitted that the Commission

had, some time before, approved acceptance.of bonds for

taxes, but pointed out that this practice was discontinued

some six months before the bill was filed, save for two trans- _

actions actually then pending, and that the resolution for —

discontinuance made this a permanent policy of the Com-

Mission. Other matters were denied.

' By way of separate defenses in point of law arising upon

the face of the bill, the Commission alleged, inter alia, that

‘no cause for equitable relief was made out, that the remedy

at law was adequate. It further alleged that the court was

without, jurisdiction to issue an injunction, under Section

266 of the Judicial Code, because the suit was not brought

14 ~ a

to restrain the operation of a State statute, or the actions

or orders of. State officers or 4 board or commission in en.’

forcing it. It alleged-that the statutory court was without.

_ jurisdiction to issue an injunction against the local offitials

to restrain. their collecting taxes without making provision —

for plaintiff’s judgment. It alleged that the court was with

out jurisdiction of the bill of complaint because the com-

plaint way in fact a suit against a State, within the ban of

the 11th Amendment of the Federal Constitution, and that :

any injunction, if issued, weuld exceed the-powers of the

court by interfering with the internal and local government —

and affairs of the State of New Jersey, in derogation of the

10th Amendment of the Federal Constitution.

The answer of the local officials was virtually the same.

They also alleged that the particular remedies, if any; at- |

tached to plaintiff’s bonds, had been lost by merger of any

cause of action on the bonds in the judgment, that the judg.

ment had been recovered after passage of the Act, and that

consequently no impairment of contract within the Federal -

Constitution could be claimed to exist. ;

The conte.ition of the defendants that-the ditees court —

below was completely without jurisdiction of the suit, since

the State officers and the enforcement of a State statute by

‘itnem was at most only colourably invalved, is thus.the pri- |

mary question for determination. Over and above that,

however, the contention of the defendants was that even the

single-judge district court to which the ease must be re-

‘mitted would not be ¢alle@ upon to issue. an injunction or

declaratory judgment. The principal issues in the suit be-

came: (a) the alleged unconstitutionality of the Act Con-

cerning Municipal Finances; (b) the alleged unconstitution-

ality of the acceptance by the borough of bonds in payment

of taxes; (c) the seeking of a determination that the plain-

tiff’s right as judgment creditor were governed by the old

New Jersey Executions Act rather than the Tax Act of 1918.

; ; /

15 -

’ /

° . /

After stpeainmnins from time to time on terms, without

“the granting of an interlocutory injunction, the matter came

on for hearing October 29; 1936. Evidence was taken; that

' for plaintiff was directed solely to its claim that the-value

of its bonds not reduced to judgment had been lessened by

the mere existence of the Act. On March 21, 1938, Judge

' Avis filed for the Court an opinion which is adequately

summed up in the findings of fact and conclusions of law.

-The opinion is reported at.23 Federal Supplement 23, and

1s attached.

“\. The fridings were that the municipality was in default

and that the Mynicipal Finance Commission, pursuant to

an order of the Supreme Court of New Jersey, was func-

tioning in it and: its school district ; that-plaintiff had taken

Ot

judgment on its bonds in default; that no taxes had been -

levied to pay the judgment, because of the pending manda-

mus; “‘that one reason for said failure and omission was °

because the Municipal Finance Commission was functioning

in the municipality’’. It was also found that there was no ~

sufficient evidence of a cloud of unenforceability, or great

depreciation of\the bonds because of the Act.

» The. court below concluded on Count [{ that it had juris-

diction ; that the Municipal Finance Commission was a nec-

essary party to all counts; that the defense of merger was

Saeed that the stay provisions were unconstitutional

“in so far as they affect the right of the complainant to

enforce its judgment obtained in anid entered in.this Court”’; °

that the Execution Act and Schooi Law, rather than the Tax

Act of 1918, controlled the plaintiff’ s remedy; and that it

would not.enjoin the borough from collecting taxes without

- providing for plaintiff’s. judgment. The court concluded

. under Count ITI to enjoin defendants from making settle-

ment for taxes ‘“‘by any medium except in accordance with

the laws of saa Jersey’’. ,As te Count lV. it found an -

ea eis

16

‘‘actaal controversy’’ and granted relief applicable wha

judgment shou!d be obtained on bonds not yet sued on.

The final decree specifically embodied these findings ani

conclusions, enjoined the defendant Commission from func.

tioning in the municipality ‘‘to the extent that such func.

. tioning may be inconsistent with the right of the complain.

ant to enforce its execution in the. manner herein stated”.

It held the Acts unconstitutional ‘‘in so far as they affed

the right of the complainant to enforce its judgment”’, bat

_ denied an injunction against levying taxes not including the

jadgment. It decreed that the Execution Act applied. The .

decree restrained the defendants frém ‘‘ making settlement.

- for taxes by any medium except in accordance with the lav:

of the State of New Jersey’’. Finally it decreed the stay

provisions unconstitutional in so far as they might affect

future recovery on other bonds.

VI. Cases Believed to Sustain the Jurisdiction of the

Supreme Court of the United States.

_ Cases holding that the complaini does not state a case for

a three-judge court, but should be remitted:

- (a) As to Counts 1, 2 and 4 of the complaint:

‘ In Counts 1; 2 and 4 of the complaint both the Commis

sion and the local taxing officers were made parties.defend- -

ant. The act sought to be enjoined is the ‘‘fnnctioning”’ of. }

the Commission within the municipality. :

Where a three-judge district court convenes upon a case

in which it has no jurisdiction, it is bound to remit it toa

single district judge for trial. This is particularly true

where, as here, no interlocutory injunetion i is insistéd upon

or ranted.

Smith v. Wilson, 273 U.S. 388, at 391 (1927) ;

Film Transport Co. v. Mich. Publ. Utility Comm., 17 F:

(2d) 957 (U. S. D. C.J E. D. Mich., 1927) ;

Htv-Ball Trassit Co. v. Railroad Comm. of Texas, 27 F.

(28) 5 (U.S. D.C, N ‘. D. Tex., 1928).

a

‘ 17 |

Section 266 of the Judicial Code provides that an inter-

joentory injunction may be issued to restrain the enforce-

“ynent of a State statute and the officers enforcing it; when

unconstitutionality is the ground alieged, only when heard

before a three-judge court. The requirement as to the pres-

Paitin haw hen, mat be ara ro The

plaintiff in such a suit, then, mugt be barred from its usual

forum because it seeks (a) an iftterlocutory injunction (b)

against the enforcement of a State statute (¢) which will

control officers (d)'on the ground of unconstitutionality.

Plaintiff’s basic claim of unconstitutionality is the stay

‘provisions of the Act Concerning Municipal Finances.

These stay provisions provide that as long as the Commis-

sion functions in a municipality execution is.stayed unless

otherwise ordered by the State Supreme Court; that man-

damus is stayed except that the State Supreme Court may

authorize a creditors’ action in mandamus for the benefit

of all ereditors, or that the Commission may bring such an

action; ana that a proceeding may be. brought for distribu-

tion of tax collections on hand in reserves, in which case the

State Supreme Court may order that no disbursement be

made pending determination of the application. The law

also provides that any creditor may apply to the Supreme

Court to relax any of these stays. It is the plaintiff’s claim

thaf the stays impair the obligation entered into by the

municipality when it sold the bonds at a time — to the

- enactment of the law in question.

The only State officers involved are the iiiletinad Fingnee

Commission. They do not enforce the stay, or order it into

being. If they are enjoined from enforcing the stays, the

injunction is tiseless, for they cannot relax them.

There is no virtue in the argument that. an injunction is .

asked against the Commission’s functioning in the munici-

pality rather than its enforcing the stays. The stay lasts

as long. as the appointment of the Commission for the

- I8

municipality continues unrevoked, and if a hypothetical!

injunction were issued barring the Commission from per.

forming any act in the municipality, the stay would none.

’ theless continue. It is completely divorced from positir

acts of the Commission.

If the plaintiff were right in its contention that an injum-

tion against the Commission's’ functioning im the muni. -

pality would result in ‘the stay ipso’ facto falling, that would

still give no basis for an injunction. Ali the acts of the~

Commission in the municipality are included in its functiot-

ing under-the plaintiff’s argument. But may the Commis |

sion be stayed from its many undisputedly constitutional |

activities simply to destroy the stay which the Commissic

itself does not enforce or bring into being?

‘The very decree below illustrates the truth of petitioners’

argument. It enjoins the ‘*Municipal Finance Commission .

from functioning in the Borough oi Rannemede, New Jer-

sey, to the extent that such functioning may be inconsistent

with the right of the complainant to enforce its execu ion

in thé manner herein stated, but without prejudice to any

of the powers or duties of the Municipal Finance Commis-

sion under-the Municipal Finance Commission Act ‘except

as the stays therein contained affect the righi of the com-

. plainant. to enforce its judgment’’. No specific act of en-

forcement of a State statute by State Officers (the. Commis- :

‘ sion) is named. Yet that is the sine qua non of jurisdiction

of a three-judge court under Judicial Code, Section 266.

. (b) Asko Count 3 of the complaint :

Count 3 of the complaint, directed against the approval —

by the.Commissioa of acceptance.of bonds in settlement of

taxes where the deal in question involves more than $0)

is the only count directly involving a positive act by the

Commission.

a ees

The Commission ceased the practice, save for a few minor

prior commitments, in. October, 1935. 6 months befor. Ye

complaint was filed. soe

Any action which ‘the Munitipal. esata ‘Commission —

could take would be wholly secondary—a matter of approv-

- ug by an ‘assent in writizig’’ a settlement made by joca!

oficials. The sole reason for joining the Commission in

this count is to gain a colourable joinder in order to seek a

“three-judge district court. This i is even mére obvious when

we see that the plaintiff did not join as a defendant the

body which makes such settléments, the Borough Council.

It is settled that a.mere nominal joinder of State-officials

as defendants in a case where the substantial relief really

_ sought is an injunction against local officiais does not require

the convening of.a three-judge court. __

. Pleasant v. Missouri-Kansas- Texas Ry., 66 F. (2d) . :

at 843-44 (C. C. A. 10th, 1933), cert. den. 291 U. |

659 (1934).

| e

An exact parallel is ere in the cases arising

on colourable joinder of parties to secure State or Federal

jarisdiction through their citizenship: In such cases the

_ colourable joinder of unnecessary parties .is again rejected

as insufficient. ops . :

1 Rogers: vi Penobscot Mining Co., 154 Fed. 606; at 610

(C.C.A. 8th, 1907), and cases there cited. ;

Salem’ Trust Co. v. Manufacturers’ Finance Co., 262

@. S: 18, at 190 (1924). |

If plaintiff’s demand for relief on this i issue were in wiod

faith, it would seek an injanction in district court against

- the tax collector, who accepts such payment of taxes, or

_ against the local governing body, which under the Act Con-

_ cerning Municipal Finances itgelf.is the only body which

makes them. If plaintiff's contention as to such compro-

. : : ;

20

, / ;

mises is correct, an injunction against ‘the responsible

parties in a one-judge district court would sefve its every —

_ purpose far more efficiently than the Present colourapk

joinder.

\

_. Cases holding that a single-judge district court would not

have to consider the constitutionality of the stays:

The plaintiff ’s ease is based upon a demand for an injune-

tion and a demarid for a declaratory gudgment. As has

been pointed out, an injunction against the | Commission

does not lie-because the Commission does not enforce or

relax the stays.

A declaratory judgment against the Commission cannot

be issued for the same reason. The Commission did not ©

assert against the piajntiff that the stays were constitu-

_ tional, nor did it enforce them against plaintiff. The Fei-

_ eral Deeldratery Judgment Act extends only to eases of

actual controversy. Judicial Code, Section 274d. The Su- .

preme Court has récently pointed: out that there miust; to

support a declaratory judgment, be ‘‘action of a definite @

and concrete character constituting an actual or threatened

interference with the rights of the persons complaining.”

Ashwander vy. Tennessee Valley — 297 U. 8°

288, at 325 (1936) ; |

+ Electric Bond Co. v. Comm., 303 .U.: S. 419, at 445

(1938) ;

Banning v. Marsh, 124-Nebr. 207, 245 N. W. 775 , at 775

(1932) ; sae ig

Axton v. Goodman, 208 Ky. 382, 265 S. W806, at 807.

(1924).

The samé disassociation from the power to enforce the”

stays which prevents an injunction against the Commission

bars a declaratory judgment—the declaratory judgment .

j a. *

does not attempt to’ change the essential requisites for the

exercise of judicial power. The fundameutal difficulty is

that the Commission has nothing to do with the enforce-

ment of the stays.

‘Nor can an injunction issue eaniant the local officers to

prevent them, under Count I, from collecting any taxes

without including plaintiff’s judgment therein. There is an

adequate legal remedy—mandamus, of which the plaintiff,

indeed, bad availed itself. Ancillary mandamus is, under , Pas

settled law, the only, way to enforce the judgment if a levy

of taxes is sought and a bill in equity does not lie:

J?

| Walkley v. City of Muscatine, 6 Wall. 481, at 482 (1867) ;

~ Rees v. City of Watertown, 19 Wall. 107, at 124 (1873);

Thompson v. Allen County, A115 U. 8. 550 (1885).

‘Binee the remedy ~ mandamus is adequate, a declara-

tory judgment against the local officials does not lie. While

some small conflict of. authority exists in cases. where the

legal remedy i is not adequate, there is no opportunity for

the declaratory judgment Vnete. the — remedy is plain

and enough.

Automotive Equipment, Inc., v. Trico Products Corp.,

11 Fed. Supp. 292 (U.S. D. C., W. D. N. Y., 1935) ;

Zenie Bros. v. Miskend, 10 Fed. Supp. 7, at 782 (D. €.,

S. D. N. Y., 1935).

If this should result in the plaintiff being denied mandamus

in the discretion of the court, as in United States ex rel.

Christmas vy. Asbury Park, 78 F. (2d) 1003 (C. C. A. 3rd

1935), it would merely go to show that the plaintiff had no-

interest, in the controversy sufficient to justify the granting

cf a déciaratory judgment, as intimated in Ashwander v.

Tenneosee Valley Authority, 297 U. S. 288 (1936).

ee ee

22,

Cases holding that the stays are discretionary and con |

stitutional :

aa petitioners do not believe there is any need to cn i

' sider, the constitutionality of the stays, since they feel that -

playAtiff has failed to make out a ease upon its pleadings

for the exercise of either injunction or- declaratory judg. —

ment. The following cases will serve to illustrate, how.

ever, that the stays are discretionary and constitutional.

The right of mandamus which plsintiff may have po:-

sessed was at all times subject to the rule that mandamus

is a discretionary remedy, to be exercised only in the sound |

diseretion of thé court. This has always been the rule in

the Federal courts, most recently announced with precise

_ application to the New Jersey statute here under consid-

‘eration: | aa

United States ex rel. Christmas v. Asbury Park, 78F.

,(2d) 1003 (C. C. A. 3rd 1935), cert. den. 296 U. &

624 (1935). .

The Circuit Court of Appefis there said that mandamu § ,

was to be granted by the court only in the exercise of a

sound diseretion.. That is the precise wording and intent

of the statute here involved. The State law is in accord

with the Federal law. No argument can be made, of course,

_ that the statutory stay is to be applied by the Federal eour!

without power to relax it, in contradistinction to the disere-

tionary stay power already existing there. Naturally no

State statute is drawn in’an attempt to confer upon 7

take from a Federal court its power to issue writs.

* The stay provisions have been set oat above. All of then

are effective only ‘‘until otherwise specially ordered by the

Supreme Court or a justice thereof in.an appropriate pro-

ceeding for such purpose’’. In addition, any creditor may

apply to the Supreme Court fo vacate, modify or restrict

any: stay. .

o = a

In the New Jersey courts as s well the remedy of manda-

mus is a discretionary one. The Act was considered on

constitational grounds four years ago by the highest court

of New J ersey, and held valid.

Hourigan v. North Bergen Township, 113 N. " Law |

- 143, 172 Afl. 193, concurring opinion 172 Atl. 785

(N. J. Err. and App. 1934).

The aversion of the New Jersey courts to permitting a sin-

gle creditor a preference over all other creditors in a race

of diligence to secure the funds of an insolvent municipal-_

ity was well-illystrated in:

Vanderpoel vy. Borough.of Mt. Ephraim, 111 N. J. Law

423, at 424, 168 Atl. 575 (N. J. Err. and App. 1933).

The only stays in the Act complained of are stays discre-

tionary with the State court. The Federal court has the

same discretion, irrespective of the Act, 4s the State court.

The fact tuat the State court has this discretion to relax

them does not render them unconstitutional. If they were

otherwise bad, it would save them. The Supreme Court

has ruled that the second Frazier-Lemke Act, since it had.

such a —— complied with the requirements of due

procéss :

Wright v. Vinton Branch Bank, 300 U.S. 440, at 460-81 .

(1937).

Cases holding that plaintiff is not entitled to injunction

or declaratory judgment against the acceptance of bonds

for faxes:

There is no danite between the parties that the plaintiff

attacks acceptance of bonds for tax payments, rather than

tax compromises generally. October 11,1935, six months .

before the complaint was filed, the Commission resolved

to make no further bond tax settlements save those then

pending. It has been stipulated by the parties that this 4

had been adhered to.--For-that reason neither injunction

- nor declaratory judgment can issue, for there is no: real

threat to plaintiff : |

Morrison, v. Fall, 290 Fed. 306 (App. D. C. 1923), af

firmed sub. nom. Morrison v. Work, 266 U. 8. 48]

(1925);

Ashwander v. Tennessee v ities Authority, 297 v. 8.

288, at’ 325 (1936) ;

Electric Bond Co. v. Comm., 303 U. S. 419, at 484

(1938).

Plaintiff conceivably might see fit to claim th~’ the pos

sibility that the Commission might assent to a bond com-

promise at some time in the future constitutes some sort

of a threat. Equity, however, may not be invoked. against

an inoperative statute because of its mere existence, partie-

ularly with the procedure here attempted :

Sperry-Hutchinson Co. v. Kuhn, 212 Fed. 555, at 557

(U.S. D. C., E. D. Mich., 1912).

The Ashwander ‘ease demonstrates that the declaratory

judgment ‘does not alow actions supported solely on sup

‘position. |

Passing that point, can hain be doubt that the conceded

power of the municipality to ‘‘compromise taxes’’ includes

power to do so by accepting bonds? Unfairness and prefer

ence to one set of bondholders could justify setting such

action aside on eonstitutional grounds. No proof was o-

fered of such unfairness, nor was any attempt made to show:

the power was not or could not be exercised fairly and cot

stitutionally. The admitted benefits of such action ar

great, for property is thus kept on the tax roll, the munici-

_pality’s interest burden is lessened, and remaining bond:

}

re SS @&. i

r

25

holders have an increased ratio of basic security to the .

debt they hold. No tax liens are extinguished, and the Com-

mission allowed only previous year’s taxes so to be extin- |

gnished, requiring full payment in cash for the current year.

n the bonds were issued the municipality could com-

promise taxes where they exceeded the value of the Prop-

erty, 1. €., were in fact uncollectible. .

Pamphlet Laws of 1928 of New J eraey, Chapter 123, ‘Se

tion 1, at page 250.

There is no proof in the instant case that the Commis-

sion ever allowed settlements where the taxes were other-

wise collectible.

tess holding that platntiff’s rights on its bonds are gov-

Act:

The New Jersey courts have never had occasion to rule on

this question., Plaintiff claims that it is entitled to levy

execution under Section 35 of the Executions Act and See-

tion 237 of the School Law. These sections (here denomi-.

nated the Executions Act) governed executions against »

schoo: districts:

Pamphlet. _— of 1881 of New Jersey, Chapter 77,

‘Section 1, page 80; °

Pamphlet Laws of 1903 of New Jersey (2nd Sp. Sess.),

Chapter 1, Section 237, page 93.

Defendants contend that in 1930, when plaintiff’s bonds

were issued, these had been superseded by the Tax Law ,

of 1918.

Pamphlet Laws of 1918 of — Jersey, ee 236,

Section 505, page 865, second sentence.

erned by tie Tax Act of 1918 rather than the: Executions —

° . : -_ —

a a Cann eceeiinaad

16

The Tax Act of 1918 governs. executions against ““<faxing

districts’’. There can be no doubt that a school district j in

New Jersey is a taxing district.

- Pamphlet Laws of 1918 of New Jersey, Chapter 2

Section 101, page 847;

Pamphlet Laws of 1910 of New Jersey, Chapter 049

Section 1, page 399.

Since the inhabitants of a school district have the power to

“°° "= special district tax’’, a school district isa

taxing district.

The Executions Act required the execution against 1

school district to be lodged with the assessors of the taxing .

district. The Tax Act of 1918 requires it to betodged with

the County Board of Taxation. The two provisions simply

cannot exist side by side—if they do, then a judgment credi-

tor can have two executions, two maandamuses, and two

taxes. | |

Cases holding that plaintiff’s procedural rights on %:

bonds were lost by merger of its rights on its orginal obliga-

tion in its judgment:

When a cause of action is reduced te judgment, the jude.

ment merges both the original cause of action and the evi-

dence of the debt.

Schuler v. Israel, 120 U.S. 506, at 509 (1887) ; |

Barnes v. Drake, 31 N. J. Law 317 (N. J. Supr. 1865):

Friedland v. Isquith, 106 N. J. Eq. 349, 150 Atl. 8!

(N. J. Ch. 1930). :

27

Cases holding that appeal ts the proper remedy:

Matthews v. Rodgers, 248 U. S. 521 (1932); _ |

Stratton v. St. Louis S. W. Ry. Co., 284 U.S. 530 (1932).

Dated August 29,1938... —~ .

Dav T, Wiutentz, J. H: THAYER MakTIN

- ~ and Watrer R. Darsy, as and Con-

aot stitting the Municipal Finance.

Commission of the State of New

Jersey; Eart Kircuer, Conran:

Weser and Wiiiiam G. Hirscu,

Members of the Board of Assessors

of the Borough of Runnemede, New

Jersey; and Axsert W. Spencer,

Tax Collector ‘of the Borough of

Runnemede, New. Jersey,

‘diel:

Wiiumo A. Stevens,

- Solicitor for. Appeilants David T. _

' -‘Wilentz, J. H. Thayer Martin and

Walter R. Darby, as, and Consti-

tuting the Municipal Finance Com-

mission of the State of New Jersey;

S. Lewis Davis, :

Solicitor for Appellants Earl Kiveher i

Conrad Weber. and William G._

Hirsch, Members of the Board of

Assessors of.the Borough of Runne-.

mede; New Jersey, and Albert. W.

Spencer, Tax Collector of the Bor-

ough of Runnemede, New Jersey.

28

EXHIBIT “‘A”’.

UNITED STATES DISTRICT COURT, DISTRICT OF

NEW JERSEY.

In Equity. E-5515.

Sovereign Camp, WoopMEen OF THE Wor Lp, Complainasi,

<o. : ; . Vs.

i

David T. Witentz, Attorney General of the State of New

Jersey; J. H. Tavern Martiy, State Tay Commissioner

of the State of New Jersey, and War ter R. Darsy, Con-

missioner of Municipal Accounts of the State of Nev

Jersey, as and Constituting ‘ne Municipal Finance Cor-

mission of the State of New Jersey; Earu Kircuer, Cos:

raD WEBER and Wim G. Hmscu, Members of th

Board of Assessors of the Borough of Runnemede, Ner

Jersey, and Atspert W. Spencer, Tax Collector of th

Borough of Runnemede, New Jersey, Defendants. °

On Bru ror Issuncrion, ETc.

(Filed: March 21, 1938.)

Arthur T. Vanderbilt, for Complainant.

William A. Stevens, for Municipal Finance. Commission

E. J. Dimock, B. L. Visscher and Arnold Frye, of Cou

sel.

Joseph Varbalow, for iataberi of Board of Assessors

and Tax Collector of the Borough of Runnemede. —

Harry Grossman, of Counsel.

Before Davis, Circuit Judge, and Avis and Forman, District

Judges.

Avis, District Judge:

“The bill of complaint in this -cause contains four coant::

the first, in general, alleging that the School District 0

Runnemede, New Jersey,\is coterminous with the Boroust

of Runnemede, a municipal corporation of the State o

¢ | ees

New fiieae and that complainant is the senate and holder

of a final judgment, i in the amount of $21,776.21\ entered. in

this court on December 5, 1935, against the Board of Edu-

cation of said Borough on certain bonds then matured, and

overdue- coupons, held. by.said complainant and anpaid;

that execution was isSned on said judgment, served by the

United States Marshal on the officers of said Borough. as ©

required by law, and returned nulla bona on January 5,

1936; that the officers of said Borough have failed and neg-

lected to provide for the payment of said judgment in.

accordance with the statutes of the State of New Jersey

and ‘to make an assessment: ‘upon the persons and property

in said Borough to raise the money to satisfy said judg-

ment and executior.

The first count of said bill further alleges that a manda- :

mus proceeding i is pending i in this court, which } is undeter-

mined.

It is alleged that the failure ana refusal of the officers

of said Borough to make said assessment and levy is based

upon the fact that said School District is and has been un-

der the control of the Municipal Finance Commission of

the State of New Jersey, under the statutes of said State;

and in accordance with the provisions of said statutes no

judgment, levy or execution against such School Distriet,

or property thereof shall be enforced until otherwise spec-

ially ordered by the Supreme Court of the State of New

Jerser, or a Justice thereof, after notice to the Commis-

sioa, &e..

It is further stnait that.the wetitie authorizing the said ae

Commission was passéd and approved after the issue of

the bonds and coupons, the basis of the judgment so held

by the complainant: .

The prayers of this count are:

(a) That subpena issue.

(b) That defendant Municipal Finance Commission. be

restrained from functioning in said School District:

{c) That-said Commission be temporarily restrained.

(d) That this court adjudge and declare Chapter 330,

Laws of 1933, and Chapters 195 and 258, Laws of -1935, -

,

OO AL ALONE AB ARDC A ER A QM A RR Pe

er ee Lar Paee Ee ye oer Yo

‘30

_ as amended and supplemented, unconsti tutional and void

insofar as they attempt to affect the enforceability 6f con.

plainant’s bonds and judgment by staying proceedings for

-the enforcement thereof.

(e) — assessing and etllecting olliders of said Bor..

ough be restrained from assessing, levying or collecting any -

taxes in said Borough for the year 1936, without. ince

the amount due on complainant’ S judgment.

(f) That it be adjudgéd and declared that complica’ 3

right to collect is governed solely by Section 35 of the Exe.

cution Act and Section 237 of the School-Laws of New Jer.

sey, as cited in the bill of complaint.

(g) Other and further relief as may be equitable and jus. |

The second count embedies.all of the allegations of fact

and. law contained in the first count; ‘alleges that it owns

bonds -of the School District of Runnemede, dated June |.

1930, numbered 9 to 78, inclusive, in the amount of $1,000

each, with the interest coupons attached, the principal of

- said bonds accruing serially, and that by reason of th

enactment of the statutes relating to the Municipal Finane

Commission, which attempt to restrain the enforcement of

any obligations of a\municipality under.the supervision 0!

said Commission, a cloud of unenforceability has been pub-

licly cast upon complainant’s bonds, and that. by reasoz

thereof complainant has been and will continue to be irre.

parably damaged.

The prayers in this count are:

(a) For subpeena.

(b) That.the cloud be eal: by seitheiah: sasiel é

fendants Wilentz, Martin and Darby, constituting the Mun

cipal Finance Commission, and the Comnfission restrained

from functioning in said School District. . "

‘(e) That temporary or interlocutory injunction and re

straint issue.

_ (d) That the statutes creating the Municipal Finance

Commission be declared mnconatitetionl and void as to

complainant’s bonds.

1

:

;

2

|

“31

te) Th rca escola 0 to compel a levy and col-

lestion of ‘taxes 1s ed solely by the Execution Act

and School Laws of the State of New J ersey.

just.

Tae third co: count ‘ail thie facts and law as contained

in the first count, and further alleges that the Commission

has approved resolutions of the Borough providing for com- ©

promise of certain taxes and assessments due:said Borough

by aecepting bonds in payment thereof. Alleges that such |

action gives a preference; that the security of complainait’s

bonds is théreby-impaired,-all of which is in violation of

the United States Constitution, to wit, Article I; Section 10.

The prayers are: :

(a) For stbpeena.

(b) That the Municipal — Commission be re-

strained from assenting to such compromises.

~ (e} That said Commission be restrained from authoris..

ing or assenting to the acceptanee of any medium other than

lawful money in payment of taxes.

2 (d) That the tax collector of the Borough be restrained:

_ from receiving payment of taxes, except from payment of

. full amount, interest and penalties.

(e). That said collector be restrained from accepting any

medium j in payment of taxes other than lawful money.

__(f) That this court decree that Section-6-of Chapter 330,

‘Laws of 1933, as amended and supplemented, to be uncon-

stitutional and*void as to complainant’s judgment and

bonds, as. being contrary to Article I, Section 10 of the

United States Constitution. . :

(g) For other and further relief.

: Count four realleges and reaffirms the facts and law al-

‘leged in the first count and in paragraph 2 of the second

“eount, and is in the nature of an action for a declaratory

decree as to the right of the complainant to make collection —

_(£) For other and further relief as may be-equitable and : :

*

0 A EEE AAO OT AO NY AOR GLEE AIS OMELET

(o

et ed

32 ;

on its bonds and coupons because of the unconstitutionaliy

of the stays contained in the Municipal Finance Commissiv

Acts of the State of New Jersey.

Its prayers are:

(a). For subpena.

(b) That this court hold, wins and declare that, as te

the Schoo] District bonds issued prior to. their enactment,

the Municipal Finance Commission Acts of .the State of

New Jersey are uncoustitutional and void, contrart t

_ Artiéle I, Section 10 of the United States Constitutign.

(c) That the Conamission be enjoined in the ¢ nforcement |

and execution of said statutes.

( d) That this éourt restrain the Commission and its men.

bers from functioning in the School District of the Borough -

of Runnemede.

(e) For other and further relief.

_The matter came before the Court originally on June &

1936, when it appeared that the validity of a State statute

was challenged, requiring the convening of a Three Judge

Court. Arrangements were made to convene such a cout,

and on the aforesaid date an order to show cause was issued, .

returnable on July 9, 1936, at Trenton.

On that date, after a hearing, it was agreed i in open court

that the defendants would not accept or approve the accept-

ance, until the further order of the court, of bonds of the

Borough or Schooi District of Runneinede in, payment of

‘current or delinquent taxes, and further that counsel woud

prepare for final hearing on or before September 15, 1934.

Upon this agreement, no preliminary injunction, was issued

and decision on all questions was — until fina

hearing.

Answer for all defendants was filed on hao 1, 1936, and

final hearing took piace on Octoter 29, 1936: On this dates

‘stipulation of certain facts, signed by counsel for the respe-

_ tive parties, was filed, and some witnesses mee who

gave their testimony.

Argument has been heard and briefs submitt ed.

. 33 .

‘rem the testimony taken, and the stipulation filed, we

find as facts : if ;

a) That: wpeAoroush of Runnemede is a municipal cor-

poration ofthe State of New Jersey.

nemede is coterminous with the Borough of Runnemede,

(3) That on or about June 1, 1930 the Board of Education

of the Borough of Runnemede,issued and sold $78,000 school

bonds, dated June 1, 1930, numbered 1 to 78, inclusive, of

the denomination of $1000 each, and bearing interest at the

rate of five and‘one-quarter per cent per annum, payable

semi-annually on the first days of June and December of

each vear; that complainant purchased all of said bands;

‘that the bonds were serial bonds, maturing in numerical

order, $2000 on June first in each year 1932 to 1937, in-

inclusive; that on June. 1, 1932, Numbers 1 and 2 of said

not been paid, and that the interest on the remaining bonds,

has not been paid.

(4) That upon May 15, 1934, after a summary investiga:

-tion, and upon application of the Borough of Runnemede

‘of New Jersey, made and entered an order, in which it was

‘determined that the Borough was unable to meet its obiiga-

tons, and the Municipal Finance Commission was author-

powers and duties conferred by the statute. :

(5) That thereupon the said Commission commenced to

function in said. Borough, and has since that time so fune-

Honed with relation thereto, as well as with relation to the

| said Board of Education.

(6) That judgment on the ‘overdue iii and the de-

| linquent interest represented. by the coypons upon which

default had been: made, was entered in this court in a suit

brought by complainant om December 5, 1935 for the sum of

$21,776. 21. a oe

(2) That the Board of Education of the Borough of Run-

clusive, and $3000 on June first in each year 1938 to 1959,

bonds were. paid; that the bonds thereafter maturing have »

which became due on June 1; 1932, or at any subsequent date,

Frank T. Lloyd, Justice of the Supreme Court of the State:

zed. anid instructed té function- in-said Borough with alt the -

EE OLS PIRI AO dcmmiennt CO LUO AP

° ‘

Tee oe

. 34

cd

(7) That execution was issued thereon, on December 4,

1935, directed to the Marshal of the District of New Jersey,

which execution was in the usual form, and was returned bs

the said Marshal as served upon Gardner S. Driver, Seer.

tary of the Camden County Board of Taxation, Albert ¥.

Spencer, ‘Tax Collector of the Borough of Runnemede, ani:

William G. Hirsch, Tax Assessor for said Borough.

(8) That Arthur T. Vanderbilt, counsel for complainant,

on January 3, 1936, addressed a letter to Conwood (Conraé)-

Weber, Secretary, "Board of Tax Assessments of said Bor.

ough, reciting the serving of the execution, and inquiring as .

- to whether the Board of Assessors would assess and levy the .

amount due on the execution, and that no reply thereto Was

ever received.

(9) That the said Arthur T. Vanderbilt, counsel as afore.

- said, also wrote and despatched a letter to the Secretary of

.the Camden County Board of Taxation, requesting informa-

tion as to whether the saidHoard of Taxation would add the

amount due upon the execution to the amount certified by

the taxing officials of said Borough, pursuant to Section 505

of P. L. 1918, Chapter 236. To this letter said Secretary

replied, advising that the matter’ would be referred to kis

Board, and that said Board would probably refer the mat-.

ter to the county solicitor. The county solicitor, on or about

Fobruary 24, 1936, by letter, advised counsel for coniplain-

unt that the ‘Camden County Board of Taxation would not

so add the amount, until the determination of the mandamus

proceedings then pending. °

(10) That.the Board of Assessors failed and omitted fo

add the amount of said judgment to the moneys to be raised

_ for the year 1936, and that one reason for.said failure and

omission was because the Municipal Finance Commission

* was functioning in the municipality, and that said assessors-

made no change in the ratevas fixed by the county tax board;

that the county tax board made no change to include the

amount due on ti.e execution because it had been advised by

special counsel of the Municipal Finance Commission that

litigation was then pending in the United States Distrie

Court for the District of New Jersey as to the necesrity of

. adding said additional amount.

ms

“relating to the effect of the legislation claimed to be un

stitutionai upon the value of municipal securities, is urdis-

_ puted, it is not sufficient tc establish the fact claimed by com-

-plainant that said legislation had publicly cast a cloud of

unenforceability, or that by reason thereof the market value

of coniplainant’s bonds has heen greatly depreciated.

. (11) Although the evidence produced by ier

=

Conclusions of law: ”

We are satisfied that; under the ee of Section 266

of the Judicial Code (28 U. S. C. A. see. 380), the issues

raised in the pleadings in this cause have been legally pre-

sented to a Three-Judge Court, and that this Court, as con-

stituted, has jurisdiction to dispose of the question of pre-

liminary injunction, as well ‘as the determination of -the

issues presented by the. pleadings. All matters involved

were, by stipulation and order, continued to final hearing,

upon the agreement of defendants not to accept or approve

acceptance of bonds in payment of current or delinquent

taxes until the further order of the Court.

We hold that the members of the Municipal Finance Com-

mission are proper, necessary ‘and indispensable parties to

the action because of the supervisory contro} which the act

_of the Legislature of the State of New Jersey gives them

over the municipality in question; that as such members

they are given authority to enforce the provisions of the

act, and that such authority invests them with powers mak-

ing it necessary tliat they should be party defendants for the

enforcement of any decree that may be made in this action.

This conclusion applies to-all of the counts in: the bifl of

comptaint. ,

We also determine that the rights of the complainant are

not impaired or changed by reason of the fact that the judg-

ment on bonds and coupons has been entered in this court,

but that ics rights are to be determined by tho law in effect

at the-time the bonds were issued and the contract made. |

We liave examined the proofs and considered the argu-

ment and briefs submitted as to the relie* prayed for in

count one, and have concluded, without citing the many

authorities presented on behalf of all parties, that the com- |

36

plainant is entitled to «4 uecree adjudging and—

Chapter 330, Laws of New Jersey 1933, and Chapters 15

and 258, Laws of New Jersey 1935, as amended and sp

plemented, to be unconstitutional and void insofar wae

affect the right of the complainant to <nforce its judgmex

obtained and entered in this court, and that, srch' enfore-

ment shall be in accordanée with the laws existing in th

State of New Jersey at the time of the issuance and sale ¢

the bonds in question, and the laws applicable are Section 3

of the Execution Act (2 Comp. Stats: p. 2256) and Sectin

237 of- the School Law (4 Comp. Stats. 4804). The fro

visions of the Tax Act of 1918 did not, by implication, r

peal the above mentioned laws, upon which the complainart

relies. Such repeals are not favored, and the provisions ¢

the various statutes are not materially inconsistent.

The defendants, members of the Municipal Finance Con-

mission, will be restrained from functioning in the Boroug:

of Runnemede, to the extent that such functioning may

inconsistent with the right of the complainant to enfore

its execution in the manner herein stated.

The prayer to enjoin and restrain the Assessors of sail

Boroogh from assessing and levying the taxes, and the Co:

lector from collecting the same, without including therei

the amount of complainant’s judgment is denied,,as beyond

the power of this Court, as well as unnecessary in view of

_ the relief granted on other prayers.

We are not construing the provisions of the Municips

Finance Commission Atts of the State of New Jersey, its

constitutionality or its effect, except as the stays there

contained affect the right of the complainant to enforee it:

judgment.

As to count two, we have determined as a fact that the

complainant has not produced sufficient evidence to satis!

the Court that it should use the extraordinary remedy 0!

injunction to restrain the members of the Municipal Financ

- Commission from functioning in the Borough of ‘Runne

mede, and the conclusions as to count one of the complait!

give ample and sufficient protection for the collection of tle

balance of the bonds owned by complainant.

Gees et ape test 2a bs) 2

The necessity for an injunction under count three appears

to be moot, if thy Commission adheres to its present policy.

However, it is apparent that. settlement of texes by the ac-

of bonds may materially interfere with the com-

plainant i in the collection of its judgment, and restraint will

be granted enjoining the defendants from making settle-

ment for taxes by any medium except in accordance with the .

laws of the State of New Jersey.

Count four is based upon, and asks for relief under; the -

Declaratory Judgment Act (28 U.S.C. A. sec. 400). An ex-

amination of the cases indicates that the complainant has

an ‘‘actual controversy’’, under the provisions of that act,

ta is entitled to a decree of simila; character to that

granted herein with relation to count one, applicable to the ~

remainder of complainant’s bonds, if and when judgment

may be entered thereon, or any portion thereof, in this court

and execution issued.

“Decree will be made i in accordance with this opinion.

»-

(8252)

4m

Le ESI RY IRE ENTE LENORE