author: Larner, A. J. S. C.

text:
    MARY RUTHERFORD, INDIVIDUALLY AND AS ADMINISTRATRIX, PLAINTIFF, v. MODERN TRANSPORTATION COMPANY, DEFENDANT.
    Superior Court of New Jersey Law Division
    Decided March 20, 1974.

      Mr. Ira J. Zarin for plaintiff (Messrs. Zarin and Moran, attorneys).

      Mr. Neil Reiseman for defendant (Messrs. Conway, Reiseman and Michaels, attorneys).
   Larner, A. J. S. C.

Plaintiff as administratrix, both general and ad prosequendum, brings this wrongful death action for damages resulting from the death of her husband Roosevelt Rutherford as a result of an accident which occurred on October 9, 1970. One of the defendants against whom negligence is alleged is Modern Transportation Co. This defendant has asserted as one of its defenses that decedent Roosevelt Rutherford was its employee, that the occurrence and death arose out of and in the course of his employment, and that as a consequence the exclusive remedy for dependency benefits is limited to a petition in -the Workmen’s Compensation Division. Plaintiff disputed this contention, claiming that decedent was an independent contractor entitled to bring an action at law for damages arising out of the negligence of defendant.

With consent of the parties the court conducted a plenary hearing without a jury in advance of trial to determine the true status of decedent and whether plaintiff is barred by the provisions of the Workmen’s Compensation Act. It is undisputed that decedent was killed as a result of an accident which arose out of and in the course of his work on the day of the occurrence. The narrow issue for determination, therefore, is whether he was an employee within the Workmen’s Compensation Act and the cases interpreting the same.

Modern Transportation Co. is in the business of collecting and disposing of liquid wastes from sewage treatment plants and other sources. The sewage material is brought by trucks owned by Modem and others and unloaded into a holding tank at the Modern facility in Kearny from which it is ultimately pumped into barges and dumped at sea. On the day of the accident decedent had transported a load of this waste in a truck owned by Modern and was waiting to unload it into defendant’s tanks when poisonous fumes or gases escaped from the tanks as a result of the dumping of some chemical waste by another trucker. Several persons were overcome and three of them died, including Rutherford.

For some time prior to May 1970 Rutherford had been operating a truck for Modern and was carried on its payroll as añ employee. In May 1970 (the exact date unavailable in the proofs) a new arrangement was made between Rutherford and Modern whereby Modern removed him from the payroll as an employee and terminated all the requisite formal accompaniments of the usual employer-employee relationship, such as withholding taxes, W-2 forms, social security, unemployment deductions, etc.

An agreement admitted into evidence reveals that in July 1970 Modem leased a 1970 Diamond Eeo tractor to Eutherford, trading as John Anthony Trucking Co., without any stated consideration. In fact, the evidence supports the finding that no moneys were paid by Eutherford for the lease of this piece of equipment.

Under this agreement, and from the evidence relating to its implementation, the court finds that Eutherford was required to and did pay for the cost of fuel and other normal maintenance costs of the tractor. It is clear that the tractor was used solely for the transportation of sewage material in connection with Modern’s business, and that Eutherford was directed each day by Modern’s foreman when and where to go for this purpose.

The agreement guaranteed Eutherford sufficient hauling to return a minimum weekly income of $600. Invoices introduced as samples establish that Eutherford billed Modern on a weekly basis at an hourly rate of $10, and that the weekly billings far exceeded the $600 minimum.

Pursuant to the agreement Modern continued to maintain insurance on the truck. In addition, the agreement sought to eliminate any title interest in the vehicle in Eutherford by designating him as a “bailee for hire.”

At the time of the change in relationship in May 1970 Eutherford opened g new bank account in the name of John Anthony Trucking, with an initial deposit of $20 furnished by his employer. The secretary of A & S Transportation Co. (an affiliate of Modern Transportation) handled all the secretarial and bookkeeping functions for Eutherford. She arranged for an employer identification number; she made out checks for John Anthony Trucking; she made bank deposits; she made out all necessary I. E. S. forms; she maintained all his books and records.

Prom the evidence the court finds that Eutherford spent his full time in the service required by Modern, and that all the moneys deposited in the John Anthony Trucking bank account between May and October 1970 emanated solely from Modern’s payments.

It also appears that Rutherford had purchased a Mack truck from Chemquid Disposals in November 1969 which was thereafter registered in his name, and that he made regular monthly payments on account with the checks paid from the John Anthony Trucking account. The evidence is vague as to the use of this truck. However, Mrs. Rutherford testified that her husband did some trucking for Chemquid, and invoices in evidence reveal billings from Rutherford to Chem-quid between January and May 1970. It is also apparent that the Mack truck was utilized in connection with Modern’s operations subsequent to May 1970, for the billings reflect charges from time to time at $10 an hour for each of two trucks, and other billings reflect a number of hours beyond the daily capacity of one truck and one driver.

Payroll records of John Anthony Trucking reflect three employees during 1970 as follows:

Gross Earnings

James Lennon —Week ending June 12, 1970' — • $79.16

Week ending June 18, 1970 — 79.16

Week ending July 2, 1970 — 80.00

Week ending July 9, 1970 — 79.16

Herbert Belton — Week ending June 12, 1970 — 120.00

Week ending June 18, 1970 — 240.00

Week ending June 26, 1970 — 250.00

Week ending July 2, 1970 — 275.00

Week ending July 9, 1970 — 226.00

Herman Shipman — Employment full-time from week ending June 26, 1970 to September 25, 1970

Prom the limited evidence it can be inferred that the foregoing drivers were in the main employed by Rutherford to operate the Mack truck for hauling on behalf of Modern during the periods involved.

It is manifest that the foregoing panorama of facts contains certain elements pointing to an independent contractor status and other elements pointing to an employee status. And if the issue arose in the context of the determination of vicarious liability through agency between Kutherford and Modern in a tort or contract action, the balancing of the facets of the relationship under traditional tests might lead to a conclusion that Kutherford was an independent contractor. However, as observed by Judge Conford in his dissent in Marcus v. Eastern Agricultural Ass’n, Inc., 58 N. J. Super. 584, 602 (App. Div. 1959) rev'd per curiam, 32 N. J. 460 (1960) (adopting dissenting opinion) :

But they [various tests] have less relevance as guides where the inquiry determines the scope of social legislation for the benefit of workers in business and industry. Effectuation of the policy of statutes in that category requires that their use of the term “employee” not be accorded a constrictive and mechanical definition but rather one geared to comport with the specific statutory purpose.

From Marcus to Tofani v. LoBiondo Brothers Motor Express, Inc., 83 N. J. Super. 480 (App. Div. 1964), aff’d 43 N. J. 494 (1964), to Caicco v. Toto Brothers, Inc., 62 N. J. 305 (1973), there has devolved a shift in emphasis from the “right to control” test to the “relative nature of the work” test. From these cases decided by the Supreme Court it has been mandated that courts apply an extremely liberal interpretation to fact situations in order to effectuate the purpose of the Workmen’s Compensation Act to protect workers for injuries arising out of their employment. See IA Larson, Worhmen’s Compensation Law, § 43 (1973).

Ho longer do the legal formalities of the relationship control. Hence the effort by Modern in this instance to divest itself of the various formal trappings of the employer-employee relationship in connection with agency, taxes, reports, etc., is of no great significance. What is more significant under modern tests for the determination of an employer-employee relationship is the fact that Kutherford spent all his time and derived all his income from the work accomplished for Modern and that the nature of the work performed by him was but a cog in the overall operation of Modern’s business. Rutherford depended completely on Modern for his livelihood, and in this connection was in the same economic position as an employee maintained on Modern’s payroll as such.

In addition, Rutherford had to report daily at a certain time to Modern’s place of business and was directed by the foreman as to the location where he was to make his pickups. He had no discretion in that regard.

Thus, if we apply a combination of the “relative nature of the work” and the “right to control” tests, the factual picture spells out the existence of an employee-employer relationship for workmen’s compensation purposes. In fact, the operative evidential presentation so closely resembles the factual pattern in the cited eases decided by the Supreme Court that this court is precedent-bound to conclude that Rutherford is to be considered as an employee of Modern within the ambit of the benefits of the Workmen’s Compensation Act.

In view of this finding, the court turns to the further contention of the plaintiff to the effect that the liberal interpretation pointing to the existence of an employment relationship is limited to cases where the alleged employee is a petitioner in the Workmen’s Compensation Division seeking the benefits of the Workmen’s Compensation Act. It is urged that where the employee or his representative seeks to invoke greater financial benefits from a common law negligence recovery, the motivation for the liberal approach no longer exists and that the court should apply the traditional tests applicable in other common law litigation. It is further suggested that Modern and its insurance carrier should be es-topped from denying the existence of an independent contractor relationship because of the acts of Modern in seeking to create the superficial badges of such a relationship by its legalistic creativity in May 1970.

Of course, it is apparent that plaintiff takes this position because there exists a meritorious negligence cause of action against Modern with, the potential of a monetary recovery greatly in excess of that permitted by the Workmen’s Compensation Act.

In effect, plaintiff seeks a different legal result because the issue arises in a different court and because in this instance it is to the financial benefit of decedent’s dependents to assert that Eutherford was an independent contractor.

There are no New Jersey cases in which the alleged employee sought to establish his status as an independent contractor rather than the converse thereof. Every reported case involves the allegation by a petitioner in a workmen’s compensation proceeding that he was an employee and the effort by the alleged employer to prove that the petitioner was an independent contractor.

Nevertheless, the appellate opinions on the subject establish a pervading principle of interpretation of the Workmen’s Compensation Act. This principle must be applied equally to all parties in all courts wherein the issue for determination is whether an injured person is an employee governed by the Workmen’s Compensation Act. It cannot depend upon the vagaries of each case, subject to the ad hoc contentions of either party for a greater advantage in one court or the other. Such a result would destroy the basic tenet of our judicial system to mete out equal justice for all.

As observed in 101 C. J. S. Workmen's Compensation § 918 (1958) :

The rule that the compensation act is to be liberally construed in favor of its applicability is not altered by the fact that a plaintiff believes he can establish negligence and brings a civil suit for damages; the act is to be liberally construed, so as to include all services that can reasonably be said to be within it, not only when the injured person seeks its protection, but when he attempts to have himself excluded from the coverage of the act. [at 364]

The same thought was expressed by the Supreme Court of Kansas in Schafer v. Kansas Soya Products Co., 187 Kan. 590, 358 P. 2d 737 (1961), in the following:

Notwithstanding the fact this court is committed to the rule of liberal construction of the Workmen’s Compensation Act in order to award compensation to an injured workman in cases where it is reasonably possible to do so within the provisions of the act, consistency of decisions involving interpretation of the act cannot he maintained by construing it liberally in favor of compensation where the workman seeks compensation and strictly against compensation when he seeks damages. In other words, the same rule must govern a given set of facts whether invoked by an employer or an employee. Bright v. Bragg, supra [175 Kan. 404, 264 P. 2d 494] and Shuck v. Hendershot, 185 Kan. 673, 347 P. 2d 362. [at 742]

To the same effect, see Cole v. Chevron Chemical Co. Oronite Division, 477 F. 2d 361, 365 (5 Cir. 1973); Jackson v. Southern Pacific Co., 285 F. Supp. 388, 389 (S. D. Nev. 1968); Adamson v. Okland Const. Co., 29 Utah 2d 286, 508 P. 2d 805, 807 (1973); Smith v. Alfred Brown Co., 27 Utah 2d 155, 493 P. 2d 994, 995 (1972).

Furthermore, it must be noted that if a person sustained injuries or death arising out of and in the course of his employment and his status is as an employee, his sole and exclusive remedy in New Jersey is under the Workmen’s Compensation Act, N. J. S. A. 34:15-8. In the absence of a clear-cut waiver in writing signed by either party, neither the worker nor the business man has the option to proceed in a common law action. N. J. S. A. 34:15-9. Such a waiver was not executed by either of the parties herein. Hence plaintiff is statutorily limited to recovery in the Workmen’s Compensation Division under the schedule contained in the act. She has no right to seek greater benefits from a common law action in negligence.

And by the same token, when a factual pattern is interpreted so as to' designate the worker as an employee, that interpretation controls whether it redounds to the benefit of the employee or the employer. Any other conclusion would make a mockery of justice.

The general assertion of estoppel advanced by plaintiff is also without merit. There are totally absent the criteria of true estoppel in that decedent did not act to his detriment or prejudice in reliance upon the acts of Modern. In the first place, there was nothing illegal or unholy in the creation of the paper relationship of an independent contractor in May 1970. It was a mutual arrangement, and for certain purposes was perfectly valid and effective. The result of the court’s conclusion is not to vitiate the arrangement as invalid, but merely to disregard it for the limited purpose of interpreting the relationship between the parties under the Workmen’s Compensation Act. Defendant cannot be estopped from asserting an employee-employer relationship merely because it participated in creating an independent relationship for other purposes. Modern did not assume a position upon which Rutherford relied to his prejudice. The position asserted by its insurance carrier in this litigation is not necessarily inconsistent and does not effect an unjust result. It rather produces a result consistent with law and justice, albeit less profitable to plaintiff.

In view of the foregoing, the defense asserted by Modern is a complete legal bar to the pending action. Since the exclusive jurisdiction lies in the Workmen’s Compensation Division, judgment will be entered in favor of defendant Modern Transportation Company and against the plaintiff Rutherford.


source: Caselaw Access Project

author: King, J. C. C.,

license: Public Domain

text:
    THE STATE OF NEW JERSEY, v. WALTER KOZARSKI, DEFENDANT.
    Superior Court of New Jersey Law Division
    Decided May 14, 1974.

      Mr. Arnold Golden for the State (Mr. Thomas F. Shusted, Prosecutor of Camden County, attorney).

      Mr. Joel B. Korin for the defendant (Mr. Herbert I. Wachstein, Public Defender, attorney).
   King, J. C. C.,

Temporarily Assigned. Defendant was convicted in this court during the year 1973 on a charge of impairing the morals of a minor, specifically, committing the act of fellatio on an 11-year-old boy. Following the conviction the court directed the filing of a second offender accusation pursuant to the statute, N. J. S. A. 2A:85-8. Also following conviction the defendant was referred to Menlo Park Diagnostic Center for evaluation pursuant to the Sex Offenders’ Act, N. J. S. A. 2A:164-3 et seq. At Menlo Park defendant was found to be a repetitive, compulsive offender within the meaning of the act, N. J. S. A. 2A:16A-5. The Menlo Park authorities indicated that if the court were to incarcerate defendant, the appropriate facility would be the Diagnostic Unit, State Prison Farm, Rahway. Defendant now challenges his Menlo Park classification as a chronic offender and requests a hearing under State v. Horne, 56 N. J. 372 (1970). Defendant also moves to strike the second offender accusation and for disqualification of the court. Defendant further argues that if his sex offender status is affirmed, the enhanced punishment envisioned by the Habitual Offender Act will conflict with and be repugnant to the therapeutic goals of the Sex Offender Act. Additionally, defendant urges that the Habitual Offender Act is unconstitutional on its face as well as in its application to him.

The presentence report discloses that in 1965 defendant was convicted on three counts of debauching the morals of a minor, each count involving fellatio on a young boy. At that time he was classified at Menlo Park as a repetitive compulsive sex offender. For these offenses he received two three-year suspended State Prison sentences and two years’ probation with psychiatric treatment. In June 1968 he was arrested and charged with two counts of lewdness, exposing himself to young girls. He was convicted on the lewdness charges in February 1969 and sentenced to a six-year maximum indeterminate term at the Rahway Diagnostic Center after again having been classified as a repetitive, compulsive sexual offender by Menlo Park. While awaiting trial on the June 1968 lewdness charges defendant was arrested and charged with firing a loaded weapon at his wife in December 1968. He was convicted in 1970 on this charge and received a suspended sentence and probation consecutive to the six-year maximum indeterminate term imposed on the 1969 lewdness conviction he then was serving at Rahway. Defendant served 2J/2 years at the Rahway Diagnostic Center on the February 1969 sentence and was released on parole in October 1971. On March 12, 1972 he was arrested on the present charge of impairing the morals of a minor, N. J. 8. A. 2A:96-3, a misdemeanor with a maximum potential sentence of three years. He was returned to Rahway as a parole violator and was convicted on the present morals charge in June 1973.

At defendant’s hearing on his Menlo Park classification as a repetitive compulsive sexual offender the State presented testimony by two psychiatrists who participated in his classification, Dr. Martin and Dr. Brancale. Defendant presented no testimony but assorted that his deviant tendencies were caused by a blood metabolism condition known as hypoglycemia. No defense of lack of mental capacity was presented at trial. Both of the state’s physicians discounted any relationship between the blood condition and the sexual problem. The court was especially impressed with the testimony of Dr. Brancale, who has served as director of Menlo Park for 26 years and who has specialized in correctional psychiatry. His classification appears well justified, if not mandatory, and certainly meets the burden of proof imposed upon the prosecution by State v. Horne, supra.

Defendant first moves to disqualify the court because of the court’s instruction to the prosecutor to file the second offender accusation under N. J. S. A. 2A:85-8. The procedure for filing is described in N. J. S. A. 2A:85-13. The statute provides that if the offenses resulting in the second offender conviction “are such as to warrant the imposition of a penalty greater than the maximum * * *, then the court shall direct the prosecutor * * * to file an accusation accusing * * * [the defendant of the] prior convictions.” This procedure was followed here. The court was of the opinion that the three-year maximum sentence was not adequate to protect the interests of society and to insure maximum potential rehabilitative consideration for defendant. The court quite naturally anticipated a Menlo Park classification as a chronic, repetitive sexual offender at the. time the prosecutor was directed to file the accusation in view of the prior classifications. Here we have a defendant convicted a third time of sexual offenses with children and once of a violent assault with a loaded weapon upon his wife. A previous period of incarceration and treatment for 2J4 years at the Rahway Diagnostic Center was unproductive in preventing the offense for which defendant presently stands convicted. The coupling of these sexual offenses against children, with a demonstrated capacity for violent assault is a disturbing situation for the court to consider.

The predecessor statute to N. J. S. A. 2A:85-13 laid the duty of filing a multiple offender accusation upon the county prosecutor, stating “it shall be the duty of the prosecutor of the county” to file an accusation. N. J. S. A. 2A:85-13 (1951). The reason for shifting the responsibility to the judiciary for filing the accusation is obtained from the statement accompanying Senate Bill 285 introduced on March 18, 1953, which eventually became L. 1953, c. 166, our present N. J. S. A. 2A:85-13:

The defendant’s previous record is known before sentence. Where the court intends to sentence defendant as a multiple offender, the defendant is entitled to a trial to prove that he is a multiple offender, but otherwise no such trial is necessary. Under section 2A:85-13 as it now stands, numerous accusations have been filed against defendants who thereafter were nevertheless sentenced to no more than the maximum for a first offense. Under this proposed amendment, such accusations will be filed only when necessary. The practice under the present statute is expensive, takes much time in preparation and trial, slows up sentencing, and keeps defendants in the county jail at county expense for long periods before transfer to State institutions.
The Attorney-General and all of the county prosecutors favor the passage of this bill.

The apparent legislative intent was to provide a procedure whereby the accusation would be filed only when a court was actually giving serious consideration to sentencing above the statutory maximum for a first offender. Obviously such instances would be rare because of the broad range of discretion already granted the trial judge under the general sentencing statutes, e. g., robbery while armed, 25 years; rape, 30 years; murder in second degree, 30 years. Defendant asserts that the judge’s direction to file the second offender accusation gives rise to a compulsion for disqualification under B. 1:12-1 which states as reasons for recusing: “(d) giving his opinion upon a matter in question in the action; (e) expressing personal interest in the event of the action; and (f) providing defendant with reason to believe a fair and unbiased hearing and judgment might be precluded.” To heed defendant’s argument would require disqualification whenever the statute is invoked. The utilization of the Multiple Offender Act creates no new substantive crime but does enhance punishment. State v. Washington, 47 N. J. 244 (1966). This power has been given to the sentencing judge by the Legislature. In State v. Jennings, 126 N. J. Super. 70 (App. Div. 1972), Judge Conford said:

In that sense, use of the statute by the court is merely a phase of the permissible exercise of discretionary judgment as to what is appropriate punishment for a particular offender within available legal limits. The statute authorizes the court to require the filing of a multiple offender accusation when the court thinks the current offense is such as to warrant imposition of a greater penalty than the maximum allowable by law for that offense. N. J. S. A. 2A:85-13. We find no arbitrary exercise of discretion in that regard below * * *” [at 79-80]

In this ease there was no factual dispute as to the applicability of the Multiple Offender Act. The invocation of judicial discretion to enhance the sentence from three to six years strikes the court as of no difference in kind than the discretion to utilize probation in an armed robbery case as opposed to a custodial sentence of up to 25 years. Indeed the difference in the later example is much more extreme. The Multiple Offender Act does nothing more than permit the trial court to read the normal sentencing statute as allowing twice the stated sentence for a second offender in the appropriate case. The court does not feel that this approach to sentencing compels disqualification, especially where our system provides an ample avenue of appellate review to correct abuses of judicial discretion in sentencing. State v. Ward, 57 N. J. 75 (1970); State v. Yormark, 117 N. J. Super. 315 (App. Div. 1971); State v. Brunetti, 114 N. J. Super. 57 (App. Div. 1971). Therefore the motion to disqualify the court is denied.

Defendant next argues that the application of the Multiple Offender Act to him is arbitrary and capricious and is thus constitutionally infirm. The proofs demonstrated that in the last ten years in Camden County the statute was only invoked once, and then against a criminal abortionist as a fourth offender. Proofs were also offered by the Public Defender’s office to show that from July 1, 1972 to July 1, 1973 that office handled 72,641 charges against various defendants on a state-wide basis. Only one such charge was leveled under the multiple offender statute. Other evidence produced tended to establish that from the inception of the Public Defender’s Office in July 1967 until June 30, 1973 the act was invoked only two or three times. It is therefore without question that utilization of the act is extremely rare in this State.

Defendant here claims that the application of the multiple offender statute to his particular case is arbitrary and capricious thereby denying him equal protection of law under the doctrine of Yick Wo v. Hopkins, 118 U. S. 356, 6 S. Ct. 1064, 30 L. Ed. 220 (1886). There the Supreme Court stated:

Though the law itself be fair on its face, and impartial in appearance, yet, if it is applied and administered by public authority with an evil eye and an unequal hand, so as practically to make unjust and illegal discriminations between persons in similar circumstances, material to their rights, the denial of equal justice is still within the prohibition of the constitution. [118 U. S. at 373 — 374, 6 S. Ct. at 1073]

There is no doubt as to the facial constitutionality of the multiple offender statute. Similar statutes and other enhanced sentence laws have been enacted in all states and by the Federal Government. See Spencer v. Texas, 385 U. S. 554, 559-560, 87 S. Ct. 648, 17 L. Ed. 2d 606 (1967) ; Annotation 79 A. L. R. 2d 826 (1960). The statutes have withstood attacks asserting they violate constitutional standards of double jeopardy, ex post facto laws, cruel and unusual punishment, due process, equal protection and privileges and immunities. Oyler v. Boles, 368 U. S. 448, 82 S. Ct. 501, 7 L. Ed. 2d 446 (1962) ; Gryger v. Burke, 334 U. S. 728, 68 S. Ct. 1256, 92 L. Ed. 1683 (1948); Graham v. West Virginia, 224 U. S. 616, 32 S. Ct. 583, 56 L. Ed. 917 (1912); McDonald v. Massachusetts, 180 U. S. 311, 21 S. Ct. 389, 45 L. Ed. 542 (1901); Moore v. Missouri, 159 U. S. 673, 16 S. Ct. 179, 40 L. Ed. 301 (1895). The question raised here is whether very infrequent application in itself creates a constitutional infirmity. This argument was considered by the United States Supreme Court in Oyler v. Boles, supra, which declared that something more than infrequent application must be shown. Justice Clark stated:

Moreover, the conscious exercise of some selectivity in enforcement is not in itself a federal constitutional violation. Even though the statistics in this case might imply a policy of selective enforcement, it was not slated that the selection wTas deliberately based upon an unjustifiable . . . arbitrary classification. Therefore grounds supporting a finding of a denial of equal protection were not alleged. [368 U. S. 456, 82 S. Ct. 506, 7 L. Ed. 2d at 453]

Here there has been no showing of intentional and purposeful discrimination through the application of an invidious standard. Moss v. Hornig, 314 F. 2d 89, 92-93 (2 Cir. 1963); United States v. Riclcenbacher, 309 F. 2d 462, 464 (2 Cir. 1962); cert. den. 371 U. S. 962, 83 S. Ct. 542, 9 L. Ed. 2d 509 (1963); Washington v. United States, 130 U. S. App. D. C. 374, 401 F. 2d 915, 924^925 (1968); United States v. Maplewood Poultry, 320 F. Supp. 1395 (D. Me. 1970); Mottram v. Murch, 330 F. Supp. 51 (S. D. Me. 1971) rev’d on other grounds 458 F. 2d 626 (1 Cir. 1972.); State v. Boncelet, 107 N. J. Super. 444, 452, 453 (App. Div. 1969). Indeed, it would appear that defendant may be uniquely qualified for treatment as an habitual offender. Here multiple sex offenses and one violent assault are the background presented, with only a three-year maximum sentence available if the act is not invoked. Previous treatment as a sex offender for 2J^ years has proven inadequate. Defendant’s conduct has itself generated the basis for selectability.

Defendant finally argues that invocation of the multiple offender statute is inherently incompatible with a classification compelling sentencing as a compulsive repetitive sex offender under N. J. S. A. 2A:164-3 et seq. Defendant asserts that the underlying philosophy of the Sex Offender Act is treatment and hopefully an ultimate cure, while the purpose of enhancing the punishment of the habitual offender is essentially punitive and preventative as to the particular individual.

Our courts have stated the purpose of the Sex Offender Act as follows: The philosophy of the Sex Offender Act is that those who come within it require treatment, not punishment . . . The purpose of the act is cure of a defendant. That is the prime justification for the provision of the act that, regardless of the circumstances of the offense or the willingness of the victim, a defendant is subject to confinement until he is “capable of making acceptable social adjustment in the community.” [State v. Mickschutz, 101 N. J. Super. 315, 320 (App. Div. 1968)]

The court in State v. Andrews, 105 N. J. Super. 62 (1969) noted that the “philosophy of the act is treatment, not punishment, of the offender, and the goal his cure.” The theory of the habitual offender statute is imposition of a greater penalty “where such defendant has persistently engaged in unlawful activities.” State v. Washington, 47 N. J. 244, 248 (1966). The court perceives no conflict here with any legislative intent, if indeed any such intent was collectively present in the Legislature concerning the inter-relationships of the two acts. The specialized treatment under the Sex Offender Act is naturally related to therapy for the social aberration. The statute declares that upon classification as a sex offender “it shall be the duty of the court, upon recommendation of the Diagnostic Center, to submit the offender to a program of specialized treatment for his mental and physical aberrations.” N. J. S. A. 2A:164-5. In the event of incarceration the institution designated by the Commissioner of Institutions and Agencies pursuant to N. J. S. A. 2A :164 — 6 is the Diagnostic Unit at Eahway. The truly differentiating feature of the act insofar as a custodial sentence is concerned is the indeterminate characteristic of the sentence under N. J. S. A. 2A.164-8. The court does not specify any minimum sentence but in no event may a sentence exceed “a period of time greater than that provided by law for the crime of which such person was convicted.” N. J. S. A. 2A:164-6. A person committed to confinement under the act “may be released under parole supervision when it shall appear to the satisfaction of the state parole board, after recommendation by a special classification review board appointed by the state board of control of institutions and agencies, that such person is capable of making an acceptable social adjustment in the community.” N. J. S. A. 2A:164-8. The statute also requires the director of the institution to report to the Commissioner in writing at least semi-annually his recommendation as to continued confinement or release on parole.

This court finds no real conflict between the two acts or between the two social policies enunciated therein by the legislature. Invocation of the habitual offender act deprives defendant of none of the benefits contemplated by the Sex Offender Act. He is still committed to the Diagnostic Unit at Rahway where his specialized treatment is afforded. He received no minimum sentence and his custodial sentence still remains “indeterminate.” Defendant remains eligible for release at any time during the period of commitment upon recommendation that he is capable of making the appropriate adjustment in the community. His right of semi-annual reporting to the Commissioner on his parole status still abides, assuring him of virtual constant reconsideration of his status by the proper authority.

Application of the Habitual Offender Act to increase the maximum does afford the state rehabilitative agency with additional time within which a defendant may hopefully be treated and cured. This approach also lessens the likelihood of release back to society at a time when the hoped for cure has not been obtained and further therapy is indicated. Use of the increased maximum seems most desirable here where defendant has so recently demonstrated recidivistic characteristics after 2years’ confinement at the Diagnostic Center. He has obviously not obtained the goal of compatible adjustment with society. In this case, where defendant is both a sexual and an habitual offender, with a demonstrated capacity for violence, it seems highly consonant with the philosophies of both legislative schemes to afford defendant treatment for a potentially greater period in view of his repetitive characteristics, subject always to the continuing necessity for such therapeutic committment as determined by the institution and the parole board. Defendant is therefore sentenced to a six-year maximum indeterminate sentence at the Rahway Diagnostic Center, a term twice the length of the term provided by statute as the penalty for the misdemeanor for which he stands convicted.


author: Horn, A. J. S. C.

text:
    STATE OF NEW JERSEY, PLAINTIFF, v. LEE R. ROBINSON, JAMES TELLIES, ANTONIO G. VILLAFANE A/K/A ANTONY VILLAFANE, GERALD SCHENK, BENJAMIN ARCHER, LARRY DAVIS, WILBUR JORDAN, FRANK SCHREFFLER, RAYMOND NORRIS, MILTON WINROW, DAVID A. WILLETTS, EARL HARRIS, PAUL FRANKENHAUSER, JOSEPH ZELIE AND CLARENCE MOORE, DEFENDANTS.
    Superior Court of New Jersey Law Division
    May 21, 1974.

      Mr. Solomon Forman, First Assistant Prosecutor, for the State (Mr. Richard J. Williams, Prosecutor, attorney).

      Mr. Nathan Davis, Jr., assigned attorney for defendant Benjamin Archer (Mr. Stanley C. Van Ness, Public Defender, attorney).

      Mr. Robert S. Greenberg, assigned attorney for defendants Lee R. Robinson, James Tellies, Antonio G. Villafane a/k/a Antony Villafane, Frank Schreffler, Raymond Norris, Milton Winrow, David A. Willetts and Clarence Moore (Mr. Stanley C. Van Ness, Public Defender, attorney).
   Horn, A. J. S. C.

Defendants in this matter filed individual but substantially the same post-conviction relief petitions, pursuant to B. 3 :22 et seq., seeking to have the judgments of conviction and sentence set aside and the indictments by which they were charged dismissed, or, in the alternative, an evidentiary hearing, appointment of .counsel equal in number and qualified in experience to that of counsel representing the State. Defendants base their motion primarily on the alleged denial of due process as guaranteed by the Federal Constitution, in that respective grand and petit juries involved in their indictments and convictions were improperly selected, thereby eliminating from the said juries a proper cross-section of the community. The array of the juries, then, is challenged because of such alleged impropriety of the selection and its composition.

The State has moved to consolidate the individual applications and to dismiss them on the ground that they waived the right to challenge the array of the respective grand and petit juries because such challenge must be raised prior to trial, on the authority of Davis v. United States, 411 U. S. 233, 93 S. Ct. 1577, 36 L. Ed. 2d 216 (1973). This ease stands for the stated proposition. The foundation for this decision is Federal Rule of Criminal Procedure 12(b)(2), which provides that:

* * * defenses and objections based on defects in the institution of the prosecution or in tile indictment or information other than that it fails to show jurisdiction in the court or to charge an offense maybe raised only by motion before trial. * * * Failure to present any such defense or objection as herein provided constitutes a waiver thereof, but the court for cause shown may grant relief from the waiver.

Although the holding enumerated in the Davis case is dependent on a procedural rule, its ruling is buttressed by the fact that the court relied on Parker v. North Carolina, 397 U. S. 790, 90 S. Ct. 1458, 25 L. Ed. 2d 785 (1970), to supply emphasis to the decision. In Parker the court also refused to hear a challenge to a grand jury array. The basis for this denial was a law which stated that all exceptions to grand jurors on account of their qualifications shall be taken before the petit jury is sworn and impaneled to try the issue, and if not taken shall be deemed to be waived. This state rule of practice, the Supreme Court said, in Parker, would constitute an adequate ground for precluding its reaching the grand juiy issue if the case were on direct review.

Both Davis and Parker emphasize the necessity of deciding these motions for post-conviction relief in light of our procedural rules.

R. 3:6-2 limits the challenge to the array of the grand jury to within 30 days of the service of the complaint or within 30 days of the entry of a plea, whichever is later, or within such further time as the court permits. R. 1:8-3 limits the challenge to the array of a petit jury to the time before any individual juror is examined. Although these particular rules do not use the term “waived,” as do the rules considered by the United States Supreme Court in Davis and Parker, they do state that the challenges must be made prior to a certain point in the proceeding; therefore, the necessity for the raising of the challenge is quite clear. However, defendants contend that the question is whether the waiver that is required is that which is defined in Fay v. Noia, 372 U. S. 391, 83 S. Ct. 822, 9 L. Ed. 2d 837 (1963) (that being an understanding and knowing relinquishment of the privilege or right, whether for strategic, tactical or any other reasons that can fairly be described as deliberate bypassing of state procedures), or whether the statements in Davis, supra, control (those being that, when a rule exists that specifically provides for waiver of a particular kind of constitutional claim if not timely made, the assertion cannot be made at a later date, thereby foreclosing the Fay v. Noia, supra, definition of waiver).

It can then be said that, when constitutional matters are in issue, upon showing of good cause the courts should not hesitate to permit a defendant to present a challenge to the petit jury involved in his case. But to permit the party to bypass the rule on the theory espoused in Fay v. Noia, supra, is not permissible, as it is opposed to the principles declared in Davis, supra. This, too, is true regarding R. 3 :6-2 (grand jury challenge). Even though there is an addtiional stipulation within this section which leaves open the opportunity for the court to permit a challenge subsequent to the time limits, it still must be limited by good cause; to permit exceptions for other than good cause would subvert the purpose of the rule.

To challenge for good cause is not a perfunctory matter; it is essential for the petitioning party to state grounds sufficient for the court to open the matter for investigation. Challenge to an array of grand jurors made on the day of trial, on the grounds that members of defendants’ race were not on the grand jury in sufficient numbers, was properly denied where, among other things, defendants’ counsel had had many months to investigate the situation with respect to the grand jury. Under the circumstances, any other course would have grossly disserviced the orderly administration of justice. State v. Laws, 50 N. J. 159 (1967). The court in United States ex rel. Laws v. Yeager, 448 F. 2d 74 (3 Cir. 1971), adds credence to this theory because the court refused to grant a petition for habeas corpus and stated as one of its grounds for denial the failure of the defendant to present supporting facts for his assertion of systematic exclusoin of negroes from the Bergen County grand jury.

A similar absence of supporting allegations was also the reason for the denial of habeas corpus in the case of Wade v. Yeager, 377 F. 2d 841 (3 Cir. 1967).

Thus, in all the instant petitions defendants have alleged improper selection of grand and petit juries as violative of due process, as well as in some cases stating ineffective assistance of counsel as a ground for relief. But not one of the petitioners has provided a concrete basis for an evidentiary hearing on the matter by stating any supporting facts. To open a full-scale, evidentiary hearing on unsupported allegations would be opposed to the procedural rules, and, as stated above, a disservice to the administration of justice. Constitutional rights should ordinarily not have to bow to mere rules of procedure. On the other hand, such challenges must be shown to rest on fact. Mere conclusions are inadequate. To hold otherwise would open the courts to an avalanche of frivolous applications, each of which would require hearings.

In the case at bar no facts or figures have been presented, nor has there been any information concerning the source of the selection process — only an allegation that the parties were not given an opportunity to challenge the system.

I have considered all remaining contentions of the respective petitioners and find them without any legal basis.

Accordingly, the petitions are consolidated and each is respectively denied.


author: Horn, A. J. S. C.:

text:
    STATE OF NEW JERSEY, PLAINTIFF, v. SAMUEL KLIGERMAN AND ETHEL KLIGERMAN, DEFENDANTS.
    Atlantic County Court
    May 28, 1974.

      Mr. Marie Biel for the State (Messrs. Blatt, Blatt & Mairone, attorneys).

      Mr. Sidney M. Goodelman for defendants.
   Horn, A. J. S. C.:

Defendants appeal from their individual convictions for parking their motor vehicles in front of or near their homes in Yentnor City at a time when during a two-hour period parking was prohibited under a municipal ordinance of said city. It appears that this ordinance was adopted for the purpose of keeping vehicles from parking during those hours to enable the city street-sweeper vehicle to perform its function.

Defendants admit the parking in violation of the ordinance but contend that the parking regulation is invalid by reason of the fact that the ordinance was not approved by the Director of the Division of Motor Vehicles. N. J. S. A. 39 :4-202 and N. J. S. A. 39:4-8.

N. J. 8. A. 39:4-8 provides in part that:

No ordinance or resolution concerning, regulating or governing traffic or traffic conditions, adopted or enacted by any board or body having jurisdiction over highways, * * * shall be of any force or effect, unless the same is approved by the director or has been approved by the Commissioner of Motor Vehicles or the 'Traffic Commissioner according to law. [Emphasis supplied]

The city contends that parking regulations do not come within the scope of this section. I disagree.

The concept which forms the foundation of the city’s contention is that because the traffic channel of the street is widened the effect of the parking prohibition is such that it does not concern traffic or regulate traffic. It would have to concede that if it permitted parking in the street it would concern traffic because it would restrict or narrow the channel for moving vehicles. The requirement of approval may not be measured by the beneficial or deleterious effect on traffic which the regulation may impose.

Traffic is defined as meaning vehicles, either singly or together, while using any highway for purposes of travel. N. J. S. A. 39 :1-1. A street-sweeper is a vehicle and clearing the street for the purpose of arranging for its travelling thereon concerns traffic.

The fact that the regulation may be justified uuder the police power of the municipality likewise does not present any basis for eliminating the necessity for approval. Nothing is found in the motor vehicle law which lends such interpretation.

N. J. S. A. 39 :4-197 specifically authorizes municipalities to enact or dinaces “[r]egulating the parking of vehicles on streets and portions thereof * *

N. J. S. A. 39:4 — 202 directs that “(n)o resolution ordinance or regulation passed, enacted or established under the authority of this article, shall be effective until submitted to and approved by the director [of motor vehicles] as provided in section 39 :4-8 of this Title.”

Our former Supreme Court, in Eveler v. Atlantic City, 91 N. J. L. 135 (1917), set aside a conviction under a municipal ordinance which restricted parking at a stated location lor a longer period of time than required to load and unload.

The court in that case referred to the then applicable statute prohibiting municipalities from passing ordinance on matters covered in the traffic statute but authorizing the passage of such

* * * which apply to a special condition existing in such municipality alone on designated subjects and within certain limitations, one of which is “regulations governing the parking of vehicles on streets and portions of streets,” but all such ordinances passed shall not be in force and effect until the same have been submitted to the commissioner (now director) of motor vehicles and approved by him.

Librizzi v. Plunkett, 126 N. J. L. 17 (Sup. Ct. 1940), is not to the contrary. In fact, a careful reading of same establishes that it supports the same conclusion. It merely held that an ordinance regulating a business of removing vehicles from streets and highways was not sufficiently identified as regulating traffic so as to require approval of the Commissioner of Motor Vehicles under the prevalent statutory enactments.

State v. Dorman, 124 N. J. Super. 160 (App. Div. 1973), impliedly holds that parking regulations are a subject of approval under the applicable statutes referred to.

The court has been informed that the ordinance under attack in ahe instant case was submitted to the Commissioner of Transportation (N. J. S. A. 27 :1A-3) and has been approved. However, since it admittedly had not been approved when defendants allegedly violated the ordinance, it was not valid and effective.

Accordingly, the judgment of conviction entered below is reversed. ■


author: Kole, J. S. C.,

text:
    NEWARK BUILDING ASSOCIATES, APPELLANT, v. DIRECTOR, DIVISION OF TAXATION, RESPONDENT.
    Superior Court of New Jersey-Appellate Division
    Argued December 10, 1973
    Decided May 28, 1974.

      Before Judges Handler, Meanor and Hole.

      Mr. Martin B. Cowan, of the New York Bar, argued the cause for appellant (Mr. Jacob Slavitt, attorney).

      Mr. Herbert K. Glickman, Deputy Attorney General argued the cause for respondent (Mr. George F. Kugler, Jr., Attorney General of New Jersey, attorney).
   The opinion of the court was delivered by

Kole, J. S. C.,

Temporarily Assigned. The Division of Tax Appeals entered a judgment imposing liability on appellant to pay taxes under the New Jersey Unincorporated Business Tax Act, N. J. S. A. 54:11B-1 et seq. (sometimes hereafter referred to as “the act”), for its taxable years ending August 31, 1967 and 1968, respectively. The Division held that appellant was taxable as a “business” as that term is used in the act. This appeal followed.

Appellant was organized on August 1, 1952 by agreement as a New Jersey partnership for the purpose of acquiring and holding title to a 33-story office building, the National Newark Building at 744 Broad Street, Newark, New Jersey. At is inception appellant consisted of 20 individuals, each of whom contributed $110,000 to the partnership capital. Under the agreement, any two partners may execute a lease of the property; partnership interests may be sold and transferred; and the partnership is to continue on the death of any partner.

On September 2, 1952 appellant entered into an agreement with another New Jersey partnership, 744 Broad Street Bealty Associates (Broad Street), leasing the entire National Newark Building to Broad Street for a term of 25 years, with an option to renew for another 25 years, at an annual rent of $736,000 payable in equal monthly installments of $61,333.64. On October 1, 1962 appellant purchased an adjacent parcel of land used as an open-air parking lot, and simultaneously leased it to Broad Street at an annual rental of $11,500 for a period coterminous with the lease of the National Newark Building. Both leases will be referred to hereafter as “the lease.” The lease permits the lessee to terminate the tenancy at any time on 60 days’ notice.

The lease is a “net lease.” Appellant receives the rental free from all taxes, charges or expenses of any kind. Broad Street, the lessee, is required to operate and manage the property, collect all rents, pay all taxes, charges, operating and maintenance expenses, insurance premiums, and costs of repairs, improvements and replacements. Broad Street is permitted to assign the lease and sublet. Accordingly, at no time has appellant ever operated or managed either the building or the parking lot or rendered any services to any tenant or subtenant. Broad Street has taken possession and has sublet the premises to various tenants. Appellant’s activities have consisted solely of maintaining its existence as a partnership and filing such documents as are required of it by law, accepting the net rent and depositing it in its bank account, making the required payments to the mortgagee, and distributing to the partners the net proceeds. It has no employees. Its required accounting, legal and other partnership supervisory acts are performed by its attorneys at a stated fee of $12,000 a year, plus, apparently, disbursements for accounting fees. At the time of the instant controversy appellant’s partners had increased from 20 to 54. At August 31, 1968 the partnership assets were about $5,500,000 and the partners’ capital account was about $1,000,000. For the tax year ended August 31, 1968, it had gross income of $659,888.99, net income of $153,338.36 and an expenditure of $15,499.93 for “legal and accounting fees.”

The Unincorporated Business Tax Act was enacted in 1966 and imposes

* * * Upon every individual or other unincorporated entity engaged in an unincorporated business an annual excise tax, measured by the gross receipts of such unincorporated business, and allocated to the State as hereinafter provided at the rate of % of 1%; * * *. [N. J. B. A. 54 ¡11B-3]

N. J. 8. A. 54:llB-2(e) reads in part:

“Unincorporated business” shall mean and include any trade, business, profession or occupation conducted or practiced for profit in whole or in part within this State by any individual or other unincorporated entity not subject to the Corporation Business Tax Act (1945) (P. L. 1945, c. 162) or the Financial Business Tax Daw (1946) (P. L. 1946, c. 174), except that:
ii. An individual or other unincorporated entity, except a dealer holding property primarily for sale to customers in the ordinary course of his or its trade or business, shall not be deemed engaged in an unincorporated business solely by reason of the purchase, sale or exchange of property for his or its own account, but this subparagraph shall not apply if the unincorporated entity is taxable as a corporation for Federal Income Tax purposes.

The sole issue on this appeal is whether the Legislature intended the kind of real property activities engaged in by appellant to render it an “unincorporated business” as that term is used in N. J. S. A. 54-.11B-1 et seq. It is taxable under that act only if it is a business.

The Division of Tax Appeals found appellant’s operation was an “unincorporated business” and thus subject to the tax. In so deciding the judge appeared to place weight on two factors: (1) the replacement tax program, L. 1966, cc. 133 to 138, of which the Unincorporated Business Tax Act is a part, was intended by the Legislature to impose a business tax on all sectors of the business community (see Foosaner v. Director, Div. of Taxation, 58 N. J. 57 (1971)); (2) N. J. S. A. 42:1-6(1) defines a partnership as “an association of two or more persons to carry on as co-owners a business for profit” (emphasis supplied). We find neither rationale persuasive.

The mere fact that the Legislature may have intended the entire business community of the State to share in some way in the payment of business taxes does not aid in the determination of whether, in the first instance, it contemplated that a particular activity be considered a “business” under the act. There can be no doubt that some activities conducted for profit were not intended to be subject to this tax. If this were not so, N. J. S. A. 54:11B-2(e) would have defined “unincorporated business” as meaning and including “any [activity] conducted or practiced for profit * * *,” rather than as a “trade, business, profession or occupation” so conducted. The reliance on the legislative definition of partnership found in the Partnership Act, N. J. S. A. 42:1-1 et seq., as a business for profit” was misplaced. The tax statute applies to a business, irrespective of whether it is operated in an individual or partnership capacity. Additionally, N. J. 8. A. 54:11B-1 et seq. and the Partnership Act, N. J. S. A. 42:1-1 et seq., are not in pari materia, nor are they statutes on cognate subjects. See State v. Brown, 22 N. J. 405, 415 (1956); Aviation Services v. Hanover Tp. Bd. of Adjustment, 20 N. J. 275, 285 (1956). Further, a corporation is organized for the purpose of doing business, and, as hereinafter discussed, corporations have been held under certain circumstances not to be engaged in business. And subparagraph (ii) of N. J. S. A. 54:11B-2(e) specifically provides that, except for a dealer, an individual or other unincorporated entity “shall not be deemed engaged in an unincorporated business solely by reason of the purchase, sale or exchange of property for his or its own account” (emphasis added).

Appellant conceives of itself merely as a passive investor rather than a business. On the limited record before us, we conclude that it is correct and thus is not subject to the tax.

Prior to the enactment in 1966 of the Unincorporated Business Tax Act there existed a judicially well-established principle in tax law that distinguished between the ownership of property and the passive receipt of income therefrom, on the one hand, and activities connected with such ownership that constituted a business. Generally, it was held that one who actively participates, directly or indirectly — e. g., through an agent — in the management of property he owns is in business, while one who allocates such management to others and himself performs only such acts as are appropriate to safeguard his ownership, including distribution of income received from the property, is not. The latter is considered an investor who passively receives income. The determination of the issue, of course, depends upon the facts of the particular case. Von Baumbach v. Sargent Land Co., 242 U. S. 503, 516, 37 S. Ct. 201, 61 L. Ed. 460 (1917); Whipple v. Commissioner, 373 U. S. 193, 197, 83 S. Ct. 1168, 1171, 10 L. Ed. 2d 288 (1963); Flint v. Stone Tracy Co., 220 U. S. 107, 31 S. Ct. 342, 55 L. Ed. 389 (1911); Zonne v. Minneapolis Syndicate, 220 U. S. 187, 31 S. Ct. 361, 55 L. Ed. 428 (1911). Flint, supra, early defined “business” as that “ ‘which occupies the time, attention and labor of men for the purpose of a livelihood or profit,’ ” 220 U. S. at 171, 31 S. Ct. at 357. The emphasis is on an active role in the production of profit. See concurring and dissenting opinion in District of Columbia v. Brady, 109 U. S. App. D. C. 324, 288 F. 2d 108, 120 (D. C. Cir. 1970).

Thus, the federal capital stock tax imposed a tax on corporations engaged in business. A line of cases decided thereunder holds that the enjoyment of the passive benefits, of ownership of real property does not constitute “doing business” for tax purposes. In the cases that found the corporation not engaged in business and thus not subject to the capital stock tax, the taxpayer did not operate or manage the leased premises. Bather, the situations involved either net leases or circumstances akin thereto. See, e. g., United States v. Emery, 237 U. S. 28, 35 S. Ct. 499, 59 L. Ed. 825 (1915); McCoach v. Minehill Ry., 228 U. S. 295, 33 S. Ct. 419, 57 L. Ed. 842 (1913); Zonne v. Minneapolis Syndicate, supra; Kingkade Hotel Co. v. Jones, 30 F. Supp. 508 (W. D. Okl. 1939), app. dism., 108 F. 2d 1015 (10 Cir. 1939).

The State argues that the persuasiveness of the above cases is tempered by subsequent Federal court rulings involving the same statute. We disagree.

In Edwards v. Chile Copper Co., 270 U. S. 452, 46 S. Ct. 345, 70 L. Ed. 678 (1926), plaintiff corporation was organized for the purpose of supplying funds to a second corporation which owned mines but needed money to operate them. Plaintiff held the capital stock of the other corporation, issued bonds secured by the pledge of the stock, and furnished the proceeds from time to time to that corporation. Thus, plaintiff owned and voted the stock of the mining corporation and elected its directors. It is true, as the State points out, that the court, in finding plaintiff liable for the tax, placed reliance on the fact that it was realizing profit from the sole activity that it was organized to pursue. 270 U. S. at 455, 46 S. Ct. at 346. However, we also, note the observations of the court that plaintiff was more than a mere conduit of funds. It was actually the brain of the other corporation and not only owned but governed it. 270 U. S. at 456, 46 S. Ct. at 346. Thus, an important factor leading to the result in Chile Copper was the control over mining operations, albeit indirect, exercised by plaintiff. In contrast, in the net lease situation presently before us Broad Street’s operation of the business of renting space in the office building appears to be independent of any control on appellant’s part.

Other eases decided under the federal capital stock tax statute and referred to by the State for the proposition that the mere ownership of property and collection of the fruits thereof constitute “doing business” are similarly distinguishable. Eor example, in Lamar Hotel Corp. v. Fly, 134 F. 2d 225 (5 Cir. 1943), the taxpayer was organized expressly for the purpose of taking over a hotel business, acquired the hotel, and was held to be “doing business” under the statute despite the fact that it had employed another corporation to manage the hotel. However, this was clearly not a net lease situation. The taxpayer had entered into a management contract with the second corporation and the latter served as its agent in operating the business. The facts showed that the taxpayer actively participated through that corporation in the conduct of the hotel business. Eor similar reasons we reject the State’s reliance on Harmar Coal Co. v. Heiner, 34 F. 2d 725 (3 Cir. 1929).

There are also cases interpreting various sections of the Interna] ¡Revenue Code that recognize the distinction between investment and business and tend to support the view that appellant’s activity is properly characterized as an investment. I. B. C. (1954) § 1221(2) denies to real property used in a taxpayer’s trade or business the status of “capital asset.” Compare Union National Bank of Troy v. United States, 195 F. Supp. 382 (N. D. N. Y. 1961), involving a true net lease, with Fackler v. Commissioner, 133 F. 2d 509 (6 Cir. 1943). In finding that the property was used in a trade or business and not a capital asset, Fackler stressed that the taxpayer, through agents, was actively engaged in the business of managing and renting property:

It is a fair inference from the evidence that petitioner acquired the leasehold with the primary intention of operating the building upon it for profit and that he was not holding the property merely as an investment and solely for the purpose of collecting rents without rendering personal service to tenants. * * * The management of the property necessarily involved alterations and repairs commensurate with the number of tenants who occupied the building. It was also necessary to furnish elevator service, heat, light and water which required regular and continuous activity and the employment of labor, the buying of material and many other things which come within the definition of business. [133 F. 2d at 511-512]

See Cleveland Trust Co. v. Commissioner, 115 F. 2d 481 (6 Cir. 1940), cert. den. 312 U. S. 704, 61 S. Ct. 809, 85 L. Ed. 1137 (1941), where the court said that the “mere receipt of income from leased property and its distribution * * * amounts to no more than receiving the ordinary fruits that arise from the ownership of property and does not constitute doing business.” 115 F. 2d at 483. See also, Higgins v. Commissioner, 312 U. S. 212, 61 S. Ct. 475, 85 L. Ed. 783 (1941); Pinchot v. Commissioner, 113 F. 2d 718 (2 Cir. 1940).

The District of Columbia has a tax on incorporated business under a statute that is similar to that under review. Cases decided thereunder support the view that a property owner receiving rents pursuant to a net lease is not carrying on a business unless he participates himself or through agents in the management of the property:

Of course neither the ownership per se nor even the leasing of owned property necessarily constitutes the carrying on of the business of renting real property. The focal point in the inquiry is whether [the taxpayer] operated the leased properties. Operation of [the] property is a business. [District of Columbia v. Brady, 109 U. S. App. D. C. 324, 288 F. 2d 108, 117 (D. C. Cir. 1960)]

In the latter case the court determined that the evidence was inconclusive as to whether the taxpayer’s real estate agents “(a) effectively insulated him from the active participation in the management or (b) were simply his agents in the operation,” and remanded the matter for findings on this issue (at 117). See also, District of Columbia v. Pickford, 86 U. S. App. D. C. 17, 179 F. 2d 271 (D. C. Cir. 1949).

An unincorporated business tax. statute of New York containing a definition of “unincorporated business” comparable to our act has been given a like interpretive gloss by the New York Court of Appeals. In People ex rel. Nauss v. Graves, 283 N. Y. 383, 28 N. E. 2d 881 (Ct. App. 1940), appellants were owners in common of investment real property acquired by inheritance. Deferring to many of the federal cases we have cited, the court said that when “used in tax statutes * * * ‘business’ or ‘doing business’ connotes something more than the ownership of property and the receipt of income derived from property,” and alluded to “the principle which distinguishes between a passive and an active owner or investor.” The court found that management had been delegated to rental agents, with appellants making disbursements, executing leases negotiated by the agent, passing on major alterations and consulting weekly with the agent. These activities, it held, did not constitute the conduct of a business, and thus appellants were not taxable. Cf. People ex rel. Voelkel v. Browne, 268 App. Div. 596, 52 N. Y. S. 2d 822 (App. Div. 1944), aff’d o. b. 294 N. Y. 834, 62 N. E. 2d 390 (Ct. App. 1945).

Our Legislature, in the Corporation Business Tax Act of 1945, has recognized the distinction in a revenue law between a business and merely owning property. That act enlarged the prior franchise tax law coverage by imposing a corporate business tax not only on a corporation “for the privilege of exercising its franchise in this State or for the privilege of doing business or maintaining an office in this State,” N. J. S. A. 54:32A--8, but also for “employing or owning capital or properly” in this State. N. J. S. A. 54:10A-2 (emphasis added). See Roadway Express, Inc. v. Director, Div. of Taxation, 50 N. J. 411, 483 et seq. (1967), app. dism. 390 U. S. 745, 88 S. Ct. 1443, 20 L. Ed. 2d 276 (1968).

Both appellant and the State seek support for their respective positions in In re Maneely, 21 N. J. Misc. 229, 32 A. 2d 852 (Bd. Tax App., 1943), aff’d o. b. 22 N. J. Misc. 170, 37 A. 2d 196 (Sup. Ct. 1944). That case held that a foreign corporation that had ceased conducting its pipe business in this State but retained ownership of real property here, leased it to others and managed and kept it in repair, was “doing business” or exercising its franchise for franchise tax purposes. Part of the property had been so leased even while it operated the pipe business, and it continued to receive substantial gross rent from that property, as well as other property, even after abandoning its pipe enterprise. The State relies on the size of the rentals as having induced the result. We are not persuaded that this was an important factor in the case. Appellant correctly contends that the determination was based in part on the privilege of exercising the corporate franchise here and that the case also involved rental from owner-managed real estate which it concedes constitutes doing business. We thus consider Maneely significant only to the extent that it supports the view that management of investment real property is a business.

The threshold inquiry is whether the Legislature intended that, at least with respect to real property gross receipts, the Director and, on review, the courts, be faced with the task of resolving, on a case to case basis, when the taxpayer is or is not a business. The judicial precedents we have examined that apply the general principle do not lead to readily predictable results.

In our view the New York Court of Appeals in Graves, supra, went quite far in categorizing as a passive investment under its unincorporated business tax statute a situation where the owner executed leases negotiated by its agent, consulted weekly with it and passed on major alterations. Nevertheless, subsequently in an opinion affirmed by the Court of Appeals, the New York Appellate Division went further and held that executors who owned, managed and leased the decedent’s real property were not engaged in a business under the same act. People ex rel. Voelkel v. Browne, supra. The Appellate Division dissenting judge noted that the court was departing from the principle of Graves. The hazy line between business and passive investment under an unincorporated business tax statute is also illustrated by that part of the decision in District of Columbia v. Brady, supra, dealing with whether the taxpayer-physician was also engaged in the business of lending money. The court divided 5 to 4 on the question. The four dissenting judges in a persuasive opinion held that he was in that business, using as the “underlying guides * * * whether the person does or does not hold himself out to others for the supply of goods or services and whether the activities are or are not extensive, continuous and regular * * * [T]his taxpayer was not simply investing money which he had but rather was receiving requests for loans and then supplying the funds. [This accords with] * * * [t]he Veil settled’ definition of business as that which occupies the time, attention and labor of men for the purpose of a livelihood or profit.” 288 F. 2d at 120.

We have reviewed the sparse legislative history of the New Jersey act, both before and after its adoption in 1966. Although there is data which may support the view that its interpretation should not be complicated by hypertechnieal distinctions, we find it to be too inconclusive to justify a determination that the historical dichotomy between business and passive investment should be by-passed, at least as to real property.

Thus, in discussing the replacement tax program of which the act was to be a part (see Foosaner, supra, 58 N. J. at 60), the 1965 report of the Governor’s Committee on Local Property Taxation stated that any “realistic tax program must be capable of ready administration with a nrmiTmrm of cost and confusion for taxpayer and tax administrator alike.” But we also note the Committee’s comment that the unincorporated business tax is only one part of the program and “does not represent a major revenue source” thereunder. Again, although it further concluded that a net income approach under the proposed act would be “entirely too cumbersome considering the low rates and yields involved,” the concern is limited to whether a net or gross income tax should be imposed. Moreover, the Committee had considered revenue statutes in neighboring states, including New York, before making its proposals. When the report was made and the act was adopted, New York’s unincorporated business tax statute expressly provided that an “owner of real property, a lessee or a fiduciary shall not be deemed engaged in an unincorporated business solely by reason of holding, leasing or managing real property.” Unincorporated Business Income Tax, Art. 23 (L. 1960, c. 564), New York Tax Law, § 703(e) (McKinney’s Consol. Laws, c. 60, 1966). Indeed, when Graves and Browne were decided in 1940 and 1944, respectively, the then New York statute (see fn. 4, supra) already had been amended for the years after 1935, the tax year dealt with in these cases, to provide for this exclusion from the tax. Nevertheless, the New Jersey act substantially adopted the judicially construed language of the New York statute without the express exclusion.

In testimony before the Joint Taxation Committees of the Senate and Assembly on March 27, 1968, a representative of the State Association of Eeal Estate Boards complained of the tax authority’s considering a lessor under a net lease, as well as any owner receiving rents, as an unincorporated business. She also pointed to the “morass” of administrative interpretation required by the act. Joint Committee on Taxation, Public Hearing of March 27, 1968, at 7-4-77. In view of what we have said, we do not consider the subsequent inaction by the Legislature as acquiescence in the Director’s construction of the statute with respect to the kind of net lease here involved. See Kingsley v. Hawthorne Fabrics, Inc., 41 N. J. 521 (1964); Eagle Truck Transport, Inc. v. Board of Review, etc., 29 N. J. 280, 291 (1959); Mechanics Finance Co. v. Austin, 8 N. J. 577, 584 (1952); Arrow Builders Supply Corp. v. Hudson Terrace Apts., Inc., 15 N. J. 418, 427 (1954), pet. for reh. den. 16 N. J. 47 (1954). Cf. Automatic Merchandising Council of New Jersey v. Glaser, Director, Division of Taxation, 127 N. J. Super. 413 (App. Div. 1974).

Oil balance, we conclude that the search for legislative intent must be limited to the statutory language alone. So viewed, the term “business” carries with it the judicial definition, already discussed, given it in other tax statutes, including other unincorporated business tax legislation. See Lullo v. Intern. Ass’n of Fire Fighters, 55 N. J. 409, 424 (1970) ; In re Lichtenstein, 52 N. J. 553, 587 (1968); Todd Shipyards Corp. v. Weehawken, 45 N. J. 336, 343 (1965). If the Legislature desires to include all real property income as a business, it should so provide plainly and unequivocally. Meanwhile, however, there is no requirement that, in interpreting the New Jersey act, the Director slavishly follow the results reached in other jurisdictions even on similar fact patterns. See Higgins v. Commissioner, supra, 312 U. S. at 217, 61 S. Ct. 475; District of Columbia v. Brady, supra 288 F. 2d at 114. With respect to real property, absent more concrete legislative direction, he has the authority, under N. J. S. A. 54:11B-20(a), to give such reasonable construction of the act as is appropriate to carry out its goal, as long as a sensible distinction is maintained between a business and a passive investment. See State v. Hatch, 64 N. J. 179, 186 (1973).

Turning to the evidence presented before the Division, we conclude that the limited activities of the appellant under this net lease, heretofore discussed, do not constitute a business under the act.

We do not agree with the State that the size of appellant’s assets, income or expenditures is of significance in determining whether it is a business under the act. Had the Legislature intended any of these factors as a determinant of whether one were a business subject to the tax, it would have so provided. Instead, it merely limited taxability to businesses whose gross receipts were over $5,000 a year. N. J. S. A. 54:11B-3. See Higgins v. Commissioner, supra 312 U. S. at 218, 61 S. Ct. 475; District of Columbia v. Brady, supra 288 F. 2d at 114.

We also conclude that the State’s reliance on N. J. 8. A. 54:llB-4(e) is misplaced. That section deals solely with the allocation formula to be used in determining taxable gross receipts of taxpayers maintaining a place of “business” outside the State. It provides that for that purpose gross receipts will include “rentals from property situated * * * within the State.” It does not aid the resolution of the issue before us. The taxpayer, in order to fall within this provision, must still be a business under the act rather than one who passively receives income. Cf. Household Finance Corp. v. Director, Div. of Taxation, 36 N. J. 353, 360 (1962), app. dism. 371 U. S. 13, 83 S. Ct. 41, 9 L. Ed. 2d 49 (1962). We note that this provision is the same as that used in the allocation formula for corporate taxpayers maintaining a regular place of business outside of the State contained in N. J. S. A. 54:10A-6(B) (5), a part of the earlier enacted Corporation Business Tax Act. It will be recalled that the latter specifically imposes a tax where the taxpayer corporation owns property in the State. N. J. S. A. 54:10A-2.

The State contends that (1) the lease provision permitting the lessee to terminate it on 60 days’ notice and (2) the purchase and lease, ten years after the initial lease, of the parcel adjoining the building for parking purposes, in some fashion make appellant a business. Hot so. The termination clause, although on the surface unusual, does not convert the lessee into a managing agent; and the purchase of an adjoining lot for parking under the same net lease arrangement as the building in no way modifies appellant’s investor status.

However, these factors may take on some significance in a different factual context. Appellant admits that it and Broad Street have some common ownership. In addition, we note that Harry B. Helmsley, a partner in taxpayer, signed the lease on behalf of the lessee. We need not decide whether this fact alone or with other evidence might establish a degree of participation by partners of appellant in the lessee’s operations sufficient to warrant a finding that appellant is more than a recipient of passive income and is indeed a business. The State did not pursue this issue, and on the record below we are unable to determine it. Our conclusion in this case does not preclude its factual development for taxable years after 1968. Cf. Kingkade, supra, 30 F. Supp. 508.

The judgment of the Division of Tax Appeals is reversed. Since appellant has paid taxes for the tax years in question, it is entitled to a refund.

      We do not determino whether this somewhat unclear exemption from the act is involved in the issue before us. We do not read it as exempting all receipts from real property merely because the latter involves a “purchase” for the taxpayer’s account.

      §37 of the Corporation Excise Tax of 1909 (Act of Aug. 5, 1909, 36 Stat. 112).

      §47-1574 D. C. Code 1951. That statute provided that “unincorporated business” means “any trade or business conducted or engaged in by any individual, * * * trust, estate, partnership, or * * * any other entity or fiduciary, other than [a] * * * corporation * *

      Article 16-A of the New York Tax Law, McKinney’s Consol. Law, c. 60, § 386, provided that “the words ‘unincorporated business’ mean any trade, business or occupation conducted” or engaged in by an individual or an entity other than a corporation. Section 350, subdivision 11, provided that the “word ‘partnership’ includes a syndicate * v * or other unincorporated organization, through or by means of which any business, financial operation, or venture is carried on *' *

      See Foosaner, supra, 58 N. J. at 61-62, where the court compared the exemption in the New York statute' of professions as a business with the plain inclusion thereof in the New Jersey act.

      Appellant does not, and in our view cannot meritoriously, challenge the Director’s ruling that rentals under a gross lease are deemed business income which must be included in gross income. N. J. A. C. 18 :11-2.3 (c). It only questions the legality of the part of the regulation that considers rentals under a net lease as gross income under the act.

       Appellant lias raised the spectre of double taxation should it be held to be subject to the act. We need not deal with the question in view of our determination. See, however, U. S. Steel Corp. v. Director, Div. of Taxation, 38 N. J. 533, 548 (1962), involving the Corporation Business Tax Act, which indicates that that kind of problem, if it exists, may be met appropriately by legislative action.


author: Michels, J. A. D.

text:
    EVELYN LE COMPTE, PLAINTIFF-APPELLANT, v. THE STATE OF NEW JERSEY, RICHARD SULLIVAN, COMMISSIONER OF THE DEPARTMENT OF ENVIRONMENTAL PROTECTION, AND THE NATURAL RESOURCE COUNCIL OF THE DIVISION OF MARINE SERVICES OF THE DEPARTMENT OF ENVIRONMENTAL PROTECTION, DEFENDANTS-RESPONDENTS.
    Superior Court of New Jersey Appellate Division
    Argued January 2S, 1974
    Reargued May 13, 1974—
    Decided May 29, 1974.

      Before Judges Collester, Lynch and Michels.

      Mr. Richard O. Venino argued the cause for appellant.

      Mr. William C. Rindone, Jr., Deputy Attorney General, argued the cause for respondents (Mr. William F. Hyland, Attorney General of New Jersey, attorney; Mr. George F. Kugler, Jr., former Attorney General of New Jersey, and Mr. Rindone on the brief).
   The opinion of the court was delivered by

Michels, J. A. D.

This is an appeal from the approval by defendant Richard Sullivan, Commissioner of the Department of Environmental Protection, of a decision of the Natural Resource Council of the Division of Marine Services of said Department (“Council”), establishing the sum of $127,000 as the consideration to be paid by plaintiff Evelyn LeCompte for two riparian grants.

In 1968 plaintiff purchased a spit of land known as Dutchman’s Point, in Brick Township, Ocean County, New Jersey. This land was to be improved and developed as MantoloMng Shores, Sections 7 and 8. The plans submitted by plaintiff to the Council indicate that she intended to bulkhead and fill the perimeter of Dutchman’s Point thereby increasing its width, and creating sufficient land to subdivide into 34 building lots of approximately 85 x 160 feet each. The development was divided into two sections. Separate applications were filed for each section, the first (No. 68-182) in June 1968 and the second (No. 69-24) in January 1969. Separate hearings were held on each application. The result of Council action in both cases was to establish a total consideration of $50,460.60 for both grants based upon a formula price of $15 a front foot for the frontage along Barnegat Bay and Long Island Cove.

It was customary, at that time, for the Natural Resource Council to rely on an informal procedure which, although it had no basis in statute, was available to all applicants. That procedure involved payment of one-half of the consideration specified by the Natural Resource Council in contemplation of a grant being made. Upon receipt of one-half of the consideration a permit would issue from the Division of Marine Services (or its predecessor in designation), which would permit the applicant to pursue the contemplated construction activities without waiting for the final issuance of the grant which could take some many months. In accordance with said procedure plaintiff paid $10,425 on account for No. 68-182 and $10,000 for No. 69-24 and received permits to bulkhead and fill only, in accordance with plans and specifications submitted with the application for the grant. These permits expressly provided:

The granting of this permit shall not be construed to in any way affect the title or ownership of property and shall not make the Department of Conservation and Economic Development, Division of Resource Development or the State a party to any suit or question of ownership of property.
The granting of this permit shall not affect any title the State or any municipality or county has or may have in any lands or property.
The granting of this permit shall not relieve the permittee from the necessity of his observing any and all laws and ordinances.

Plaintiff proceeded to bulkhead and fill the land. Thereafter, upon approval by the Planning Board of the Township of Brick, but prior to receiving the grants from the Council, plaintiff subdivided not only the upland previously owned, but also the riparian land which was to be the subject of the two grants applied for, and sold eight of these lots. Water and sewer systems, roads, sidewalks, curbs and other improvements were made on the subdivided land. The remaining 26 lots have not been sold and remain in plaintiff’s ownership. Of the eight lots sold, seven have structures erected thereon of a substantial nature and appear to be occupied by their respective owners.

In February 1969 Anthony C. Scoppetuolo, Supervisor of Grants and Leases, notified plaintiff’s attorney by separate letters with respect to each application that the Council had voted to issue a grant based upon a rate of $15 a foot. Each letter provided:

Aftei- the prepared instrument is submitted for your approval, the grant must be forwarded to the Commissioner of the Department of Conservation and Economic Development, the Attorney General and the Governor for final review and approval as provided by law, before this grant is effective. It is essential to call to your attention that until these final approvals are forthcoming, the ownership of the property remains in the State. [Emphasis added]

The Bureau has had many cases where the applicants have failed to acquire grants after same have been ready for delivery. You are therefore advised that the price set forth herein will remain in effect for one (1) year only.

In 1969 all riparian grants were delayed, reviewed as to sufficiency of purpose and consideration, and in appropriate cases, turned back for revision or disapproval. In this connection an appraisal of the instant property was made for the benefit of the Council. The appraisal indicated a net value of the subject unimproved property of $161,760.

Following receipt of this appraisal the Council revised upward the consideration for the two grants. Plaintiff and her attorney appeared before the Council and a compromise lump sum price of $85,000 was agreed upon for both grants. The grants were processed and submitted to the Office of the Attorney General preliminary to submission to the Governor for his approval, in accordance with N. J. S. A. 12 :3 — 7.

James R. Johnson, Supervisor of Riparian Section, Bureau of Marine Lands Management, wrote to plaintiff’s attorney in May 1972 advising him of the new consideration for each grant. Each letter contained the following admonition: “until final approvals from the Authorized State Officials are obtained, and delivery is made, the State has not conveyed its title nor has it intended to convey its title.”

Thereafter, the Attorney General again reviewed said grants and the substantiating data, and a determination was made that, in view of the appraisal showing a fair market value of approximately $161,760 for the subject property, the agreed consideration of $85,000 was inadequate, unacceptable and would not be acceded to by the Governor. Accordingly, the documents and files were returned to the Council with a recommendation that the consideration be reviewed and increased in light of the higher appraisal. In April 1973 the Council reconsidered the subject grants. After having heard the arguments of plaintiff’s counsel and his submission, together with the recommendation of its staff and that of the Attorney General, the Council determined to establish a new total consideration in the amount of $127,000. This action, increasing the consideration, was approved by Commissioner Sullivan in May 1973, from which determination plaintiff appeals.

I

Respondents contend at the outset that the determination of the Council setting forth the consideration for the two riparian grants in the amount of $127,000, and the approval thereof by Commissioner Sullivan was not a final decision and therefore not appealable as of right pursuant to the provisions of R. 2:2-3(a). The thrust of the argument is that under express statutory authority the grants are not allowable except when approved and signed by the Governor. See N. J. S. A. 13:1B-13. While it is true that the riparian grants are not finalized until signed by the Governor, nevertheless, the determination by the Council and the approval thereof by the Commissioner is not interlocutory within the intendment of R. 2:2-3(b). Such a determination constitutes a final decision within the purview of R. 2:2-3 (a) (2) from which an appeal may be taken as a matter of right. Accordingly, respondents’ motion to dismiss the appeal is denied.

II

Plaintiff’s contention that the State is estopped from reconsidering the price to be paid for the grants is groundless. While our courts have indicated that the principle of estoppel may apply to the State in a proper case, O'Neill v. State Hwy. Dept., 50 N. J. 307, 319-320 (1967), it is clear that in the instant ease the necessary elements of estoppel are not present. See Highway Trailer Co. v. Donna Motor Lines, Inc., 46 N. J. 442 (1966), where the court quotes from Pomeroy as follows:

“Equitable estoppel is the effect of the voluntary conduct of a party whereby he is absolutely precluded, both at law and in equity, from asserting rights which might perhaps have otherwise existed, either of property, of contract, or of remedy, as against another person, who has in good faith relied upon such conduct, and has been led thereby to change his position for the worse, and who on his part acquires some corresponding right, either of property, of contract, or of remedy.” 3 Pomeroy’s Equity Jurisprudence (5th ed. 1941) § 804. [at 449]

It is beyond dispute that plaintiff was advised on four separate occasions in writing by the state officials that the grants were not yet effective and, most importantly, that the' price quoted would be in effect for one year only. Furthermore, the permits issued to plaintiff, which permitted only bulkheading and filling, expressly stated that the granting of the permit would not in any way affect the title or ownership of the property. Accordingly, plaintiff has failed to establish justified reliance which is essential to proof of equitable estoppel. See Taylor v. Sullivan, 119 N. J. Super. 426 (App. Div. 1972), certif. den. 62 N. J. 70 (1972), where this court held that the State was not estopped to cancel a grant of riparian land before payment of the consideration. The court stated therein:

The situation here is not to be analogized with that of private vendor and vendee of lands. The statute does not contemplate an executory agreement between the State to sell and the upland owner to buy. Rather does it fix conditions for consummation of the grant, and an essential such condition prerequisite is payment of the consideration by the grantee. N. J. S. A. 12:3-6; 12:3-10. The specified consideration was here never paid, or even tendered, by appellant. Until payment and acceptance thereof the intrinsic intent of the statutory scheme is that the State’s representatives are free to cancel the inchoate proposal.

The principle of estoppel does not apply here in law or in fact. See O’Neill v. State Hwy. Dept., 50 N. J. 307, 319 (1967). Discretion of the kind here reposed by the statute in the Commissioner and Governor is beyond judicial review. Id. at 315. [at 431]

With respect to the facts of the case, the court held (at 431) that [t]he element of substantial damage because of justified reliance * * * is here absent. (Emphasis added)

The fact that plaintiff paid part of the consideration initially required cannot operate to create an estoppel against the State in this case. Plaintiff made the partial payment with full knowledge that the grant was not effective, and that the price was not even guaranteed for more than one year. Cf. Taylor v. Sullivan, supra. Furthermore, the improvements that plaintiff made were made with full knowledge that she held a permit which allowed only bulkheading and filling, and that the permit that was issued expressly warned that the granting thereof would not affect the title of the State. Any improvements which plaintiff made were made solely at her own risk and with full knowledge of the circumstances then existing.

Ill

Plaintiff next argues in effect that she was deprived of constitutional due process by reason of the fact that she was not afforded a hearing after it was determined that the consideration of $85,000 was inadequate and unacceptable and would not be acceded to by the Governor, and a new consideration of $127,000 was set for the proposed riparian grants. The apparent thrust of this argument is that N. J. 8. A. 13 :1B-13 is unconstitutional because it fails to provide for a “fair hearing” before final action is taken on the issuance or denial of a riparian grant. This argument is untenable. While it is fundamental that a person shall be secure in his property, and that it may not be taken from him without due process of law, it is equally fundamental that plaintiff does not have any property or other rights in riparian lands applied for until the grants have been issued in accordance with the applicable statutes. N. J. S. A. 13:1B-13 expressly provides that riparian grants are not effective “except when approved and signed by the Governor and the Commissioner * * *.” A careful review of the statutes governing riparian grants establishes clearly that the Council is entrusted with complete discretion subject to approval of the Governor and the Commissioner in determining whether it will issue any grant, and, if so, at what price. Cf. Taylor v. Sullivan, supra at 430; Bailey v. Driscoll, 34 N. J. Super. 228, 253 (App. Div. 1955), afFd in part and rev’d in part 19 N. J. 363 (1955). Consequentty, plaintiff did not possess any right to the riparian lands for which she sought grants, and a fortiori she did not have a right to a hearing to contest the price set by the State to be paid for such grants. Therefore, N. J. S. A. 13 :1B-13 is not unconstitutional, and plaintiff was not deprived of any constitutional right of due process. As a matter of fact, plaintiff was afforded two opportunities to be heard, and on each occasion she appeared and was represented by counsel and submitted material for consideration by the Council. To suggest that she should have been afforded an additional opportunity to be heard is totally lacking in merit.

IV

Plaintiff’s final contention that the calculation of the rate of compensation for the riparian grants she sought was unjust and discriminatory in that a disparity existed between the rate charged her and that charged to others similarly situated completely lacks merit.

N. J. S. A. 12:3-10 provides that the Board (now the Council, see N. J. S. A. 13:1D-1 and 3 (b)) shall determine the compensation to be paid by any riparian owner on tidewater for a state grant. N. J. S. A. 12 :3-16 provides with respect to the fixing of the purchase price that the Board (now the Council), together with the Governor, shall fix and determine within the limits prescribed by law the price or purchase money to be paid by any applicant for such riparian grants. The applicable limits, however, have not been prescribed by statute.

The Council in this case determined the consideration based upon the fair market value of the properties which we deem to be a proper method of evaluation. Cf. In re Camden, 1 N. J. Misc. 623, 639-641 (Sup. Ct. 1928). The method by which the appraiser reached his conclusion does not appear to be erroneous or contrary to the statutory scheme for evaluating riparian lands. Moreover, there is no merit in the argument that the appraisal based on fair market value should have been limited to the property in its unimproved state. The reliance by plaintiff on N. J. S. A. 13 :1B-13.9, which provides that the Council is to determine fair market value¡' of property in its unimproved state at the time of a conveyance, is misplaced.

N. J. S. A. 13:1B-13.9 does not apply to the valuation of grants for riparian lands issued pursuant to chapter 3 of Title 12. Bather, it applies solely to the evaluation of conveyances relating to meadowlands to which the State of New Jersey has made claim pursuant to the provisions of N. J. S. A. 13:1B-13.2 ei seq. Obviously, with respect to such lands it would be entirely inequitable to determine the fair market value of the property in its improved state. Tidal lands are entirely different. The riparian owner does not own nor does he claim ownership of the property for which he seeks the riparian grant, and the State must obtain the fair market value thereof for such a conveyance. Consequently, the grant should be evaluated on the basis of the fair market value of the property at the time of the conveyance whether or not improved.

Affirmed.