author: Carton, P. J. A. D.

text:
    FRANK DAVENPORT, ET AL., PLAINTIFFS-APPELLANTS, v. APPORTIONMENT COMMISSION OF THE STATE OF NEW JERSEY AND ROBERT M. FALCEY, ACTING SECRETARY OF THE STATE OF NEW JERSEY, DEFENDANTS-RESPONDENTS.
    Superior Court of New Jersey Appellate Division
    Argued April 30, 1973
    Decided May 3, 1973.

      Before Judges Carton, Mintz and Seidmak.

      Mr. Henry Earner argued the cause for appellants Frank Davenport, A. Michael Rubin and Walter J. Price.

      Mr. Alfred J. Lechner, Jr. argued the cause for appellant Christopher Dietz.

      Mr. Donald L. Berlin argued the cause for appellants Dorothea Hummel, Elaine Obenhuber, Nancy Knapp, Lois Keitel, John C. Rice, Virginia K. Rooney, Katherine Roberts, Donald L. Berlin, Gray Gromleigh, Rose Brady, Lawrence Brown, Joseph Filiberto, Barbara Ali and Alex DeCroce (Messrs. Lieb, Teich & Berlin, attorneys).

      Mr. Walter F. Hoffman argued the cause on behalf of Amicus Curiae John Mazzacca.

      Mr. William Miller and Mr. David J. Goldberg argued the cause for respondent Apportionment Commission of New Jersey.

      Mrs. Joyce Usiskin, Deputy Attorney General, argued the cause for respondent Robert E. Falcey, Acting Secretary of State (Mr. George F. Kugler, Jr., Attorney General of New Jersey, attorney; Mr. Stephen Skillman, Assistant Attorney General, of counsel).
   The opinion of the court was delivered by

Carton, P. J. A. D.

This is the latest in a decade-long series of legislative apportionment eases considered by the courts of this State. Plaintiffs, residents of various municipalities in Union, Morris and Passaic Counties, challenge the districting plan certified on March 15, 1973 by the Apportionment Commission pursuant to N. J. Const. (1947), Article IV, § III, for state legislative elections this year and the remaining odd-numbered 3'ears of this decade. The gist of their respective complaints is that the Commission placed the municipalities in which they reside in districts consisting substantially of municipalities in another county or counties and that their ability as residents of their respective counties to maintain a strong voice in the State Legislature concerning matters of county interest has thereby been greatly diminished. The court below consolidated the various actions, conducted a hearing on them and dismissed the complaints, refusing to stay the approaching primary election. However, the trial judge did order the separation of the Borough of Tuckerton from District 9 with which it was not contiguous and directed its inclusion in District 2,. That determination was not appealed. Our Supreme Court denied certification.

At the outset we should say that we agree that district lines as approved by the court below should not be disturbed for this year’s elections. The overriding objective ira reapportionment must still be substantial equality of population among the various districts so that the vote of any citizen is approximately equal to that of any other citizen in the State. See Mahan v. Howell, 410 U. 8. 315 at 322, and 325, 93 S. Ct. 979 at 984 and 985, 35 L. Ed. 2d 320, at 329 and 331 (1973). The present plan with its maximum populations deviations from the ideal “one-man, one-vote” district of -f-2.854% and —1.389% satisfies that objective. Furthermore, in awarding or withholding immediate relief in a reapportionment case, the court should consider the proximity of the forthcoming election and the mechanics and complexities of state election laws. A court can reasonably/. endeavor to avoid a disruption of the election process which' might result from requiring precipitate changes that could, make unreasonable or embarrassing demands on a state in. adjusting the requirement of the court’s decrees. Reynolds-v. Sims, 377 U. 8. 533, 585, 84 S. Ct. 1362, 12 L. Ed. 2d 506 (1964); Mahan v. Howell, supra, 410 U. 8. at 330, 93' S. Ct. at 988, 35 L. Ed. 2d at 334. With somewhat less-severe time restrictions that this court now faces, our Supreme Court has declined to award immediately relief even where the complaint has had merit. See Jackman v. Bodine 53 N. J. 585 (1969); Jackman v. Bodine, 49 N. J. 40© (1967) ; Jackman v. Bodine, 44 N. J. 312 (1965).

Our decision not to disrupt this year’s election process does not mean that we approve the Apportionment Commission’s districting plan now before us. As we point out later, on the basis of the record before us we have grave doubts as to whether the plan complies completely as it should with state constitutional requirements.

A brief history of the reapportionment controversy will serve to provide a background for considering the specific respects in which the plan may be defective. In Baker v. Carr, 369 U. S. 186, 82 S. Ct. 691, 7 L. Ed. 2d 663 (1962), the United States Supreme Court held that the apportionment of seats in a state legislature may be a justiciable question. In the wake of that decision, an attack was launched on this State’s system of legislative representation under the 1947 (and 1844) Constitution — one senator allotted to each county and 60 assemblymen apportioned among the counties on the basis of population, but with each county receiving at least one. The trial court in Jackman v. Bodine, 78 N. J. Super. 414 (Ch. Div. 1963), ruled that Baker v. Carr, supra, permitted apportionment on other than a “one-man, one-vote” basis when that basis was a rational one. It concluded that a system of equal representation for counties of unequal population was rational. The ensuing appeal was certified by our Supreme Court and the decision withheld until the publication of the landmark opinion of Reynolds v. Sims, supra.

Reynolds held that both houses of a bicameral state legislature must be apportioned on a population basis. 377 U. S. at 568, 84 S. Ct. 1362. Consequently, our Supreme Court declared the allocation of one state senator per county to be unconstitutional. The court enjoined further elections under the 1947 Constitution and suggested that the Legislature adopt an interim plan consonant with the opinion and call a Constitutional Convention. Jackman v. Bodine, 43 N. J. 453 (1964).

Subsequently a legislative resolution attempting to retain the structure of the Senate but providing for weighted voting was declared a nullity, Jackman v. Bodine, 43 N. J. 491 (1964), and an application for one more election under the then existing structure was denied, Jackman v. Bodine, 44 N. J. 312 (1965).

In 1965 the Legislature adopted L. 1965, c. 19 (N. J. S. A. 52:10B-1 et seq.) which retained the method of apportioning members of the Assembly but enlarged the Senate to 29 members and created new senatorial districts. Each of these 14 new districts was composed of one or more whole counties and each was entitled to from one to four senators, depending on relative population. N. J. S. A. 52:10B-4. Our Supreme Court approved this interim plan in Jackman v. Bodine, 44 N. J. 414 (1965).

A Constitutional Convention met in 1966 and rewrote those sections of Article IV of the 1947 Constitution concerning the composition of the Legislature. The voters of the State ratified the proposed amendments in the general election of that year. The new Senate consisted of 40 members, the General Assembly of 80. The amendments provided for apportionment of the 40 members among Senate districts "as nearly as may be according to the number of their inhabitants,” but each. Senate district was required to be composed, "wherever practicable, of one single count}'', and, if not so practicable, of two or more contiguous whole counties.” N. J. Const. (1947) Art. IV, § IT, par. 1. In the case of a Senate district composed of two or more counties with two senators apportioned to the district, the senators were required to run singly in Assembly districts N. J. Const. (1947), Art. IV, § II, par. 2.

The amendments directed that each Senate district be divided into Assembly districts equal in number to the number of Senators apportioned to the Senate district, with two assemblymen to be elected from each Assembly district. The amendments detailed guidelines for the drawing of Assembly district lines:

* * «■ >phe Assembly districts shall be composed of contiguous territory, as nearly compact and equal in the number of their inhabitants as possible, and in no event shall each such district contain less than eighty per cent nor more than one hundred twenty per cent of one-fortieth of the total number of inhabitants of the State as reported in the last preceding decennial census of the United States. Unless necessary to meet the foregoing requirements, no county or municipality shall be divided among Assembly districts unless it shall contain more than one-fortieth of the total number of inhabitants of the state, and no county or municipality shall be divided among a number of Assembly districts larger than one plus the whole number obtained by ■dividing the number of inhabitants in the county or municipality by •one-fortieth of the total number of inhabitants of the State. [N. J. ■Const. (1947), Art.'IY, § II, par. 3]

The new constitutional provisions provided that the legislative district lines be drawn by an Apportionment Commission consisting of ten members, five of whom were to be .appointed by each of the major party state chairmen. N. J. Const. (1947), Art. IV, § III, par. 1. They provided for appointment of an eleventh member by the Chief Justice if a deadlock ensued. Id., Art. IV, § III, par. 2. The Commission was directed to perform its work regularly after the publication of each decennial census. Id., Art. IV, § III, par. 3.

New district lines were drawn for the 1967 elections. However, our Supreme Court, in Jackman v. Bodine, 49 N. J. 406 (1967), invalidated the new provision that assemblymen always be allotted to each Senate district at a ratio of two per senator, at least as it applied to Passaic and Union Counties. The court also disapproved of the entire senatorial districting scheme in the most southerly portion of the State and ruled that the constitutional provision for election of senators singly by Assembly districts when the senatorial district consisted of more than one whole county applied to all such multi-member districts, not just those allotted only two senators, as specified in Art. IV, § II, par. 2 of the Constitution. The court took these actions to reduce population deviation among districts to the minimum indicated in continuing United States Supreme Court reapportionment decisions. See Swann v. Adams, 385 U. S. 440, 87 S. Ct. 569, 17 L. Ed. 2d 501 (1967). The court-further ordered the Apportionment Commission to draw new lines for the 1969 Assembly elections consistent with its decision.

The next three reapportiomnent decisions emanated from this 1967 Jackman decision. In Jackman v. Bodine, 50 N. J. 127 (1967), the court approved the Commission’s redrawing of district lines in the southern. counties and ordered the odd assemblymen allotted to Passaic and Union Counties to run at large in the county rather than by Assembly district for that year’s election. In Jackman v. Bodine, 53 N. J. 585 (1969), the court accepted the Commission’s work for the 1969 Assembly elections, and in Jackman v. Bodine, 55 N. J. 373 (1970), the court approved the state constitutional scheme for the 1971 election of both houses.

Last year our Supreme Court once again considered the entire system of legislative representation in this State, however, and concluded that sweeping changes were necessary to insure that the legislative districts would conform to the increasingly rigid one-man, one vote principle as further developed by the federal Supreme Court. The court ordered that after 1973 all senators represent single-member districts and that two assemblymen be allotted to each of these districts. It further ordered the Apportionment Commission to draw these district lines without regard to county boundaries, paying attention only to substantial equality of population, municipal boundaries, contiguity and, to a limited extent, the constitutional requirement of compactness. See Scrimminger v. Sherwin, 60 N. J. 483 (1972).

In so ruling the Scrimminger court referred particularly to the federal Supreme Court decisions in Connor v. Williams, 404 U. S. 549, 92 S. Ct. 606, 30 L. Ed. 2d 704 (1972); Whitcomb v. Chavis, 403 U. S. 124, 93 S. Ct. 1858, 29 L. Ed. 2d 363 (1971), and Abate v. Mundt, 403 U. S. 182, 91 S. Ct. 1904, 29 L. Ed. 2d 399 (1971). In Connor the court disapproved of a Mississippi legislative districting plan which contained a total variance of 18.9% between the largest and smallest Senate districts and 19.7% between the largest and smallest House districts. The court did not upset the plan, however, because the election had already been held. In Whücomb the Supreme Court affirmed a lower court’s determination that an Indiana apportionment plan, although it followed a policy of adhering to county lines, was invalid because the total variance among Senate districts was 28.20% and among House districts, 24.78%. Our Supreme Court commented:

We read Whitcomb to mean that such deviations are invalid notwithstanding the stated purpose of the apportionment (i. e., to adhere to county lines), and even though that purpose could not be satisfied by another arrangement involving lesser deviations. * * * [Scrimminger v. Sherwin, supra, at 493 of 60 N. J.]

Abale involved county government. The court held that the need for flexibility, the desire to preserve the integrity of political subdivisions, and the limited number of representatives involved “lend support to the argument that slightly greater percentage deviations may be tolerable for local government apportionment schemes” than in the case of their state or national counterparts. 403 U. S., at 185 91 S. Ct. at 1907. The Abate court approved a total deviation of 11.9%. Our Supreme Court noted that

Abate leaves the reader with the conviction that the deviations it upheld are about the maximum permissible for county government, with something considerably less being the most that adherence to the lines of political subdivisions could justify in the case of a State legislature. [Scrimminger v. Sherwin, supra at 494 of 60 N. J.]

The Scrimminger court therefore concluded that the 28.83% deviation range among Senate districts and 26.20 deviation range among Assembly districts found in the Apportionment Commission plan for elections during the 1970’s under the constitutional scheme which it had previously approved in the 1970 Jackman case was now invalid. The court said that it was satisfied that adherence to the state constitutional mandate to respect county lines could not be enforced, under the demographic pattern revealed by the 1970 census, consistently with what it understood to be the permissible deviation from the one-man, one-vote ideal. 60 N. J. at 4.95.

Consequently, the court directed the Commission, in drawing the lines for the new districts, not to give any recognition to county lines, but to observe municipal lines if possible. It also directed the Commission to adhere to the constitutional mandate requiring contiguity as well as compactness to a limited extent. With respect to the latter requirement, the court said:

So also will the requirement for compactness, which may serve to justify a deviation or to curb the quest for partisan gain, although, as we have noted before, compactness may be of limited utility in the light of the odd configurations of our State and its municipalities. Jackman, 49 N. J. at 419. * * [Scrimminger, supra, at 498 of 60 N.J.]

The Commission, in fashioning the plan now before us, sought to follow the Scrimminger directives as it understood them. The plan was certified within three weeks after the United States Supreme Court decision in Mahan v. Howell. Although it appears that the Commission was aware of the imminence of the Mahan decision and apparently delayed for a short period of time promulgation of its own plan, it took the position that the Scrimminger directives were unaffected by the Mahan decision.

We consider first whether the plan as devised comported with the directives given to the Commission by our Supreme Court in Scrimminger.

Examination of the plan reveals that it divides the State into 40 districts. Twenty-two of the districts lie wholly within a single county. In addition, four districts encompass a whole county or two counties within their boundaries. The boundaries of county lines are breached in the case of 14 of the 21 counties. Portions of both Burlington and Morris Counties lie within six different districts. In both cases five of such districts are shared with neighboring counties. Similar fragmentation, although to a lesser extent, exists in the case of Monmouth, Middlesex, Ocean, Passaic and Union Counties.

The Commission followed the Scrimminger directive to use municipalities as building blocks, with necessary exceptions in the case of Newark and Jersey City. With one minor exception it also complied literally with the requirement of contiguity. That deviation was corrected by the trial court.

Examination of the map reveals a significant number of bizarrely shaped districts in approximately the “shoelace” and “horseshoe” configurations condemned in Jackman v. Bodine, 49 N. J. 406, 419 (1967). Two of these, Districts 24 and 25, are the subject of challenge in one of the present actions on the ground that they do not comport with the constitutional requirement of compactness. Each of these districts is more than 20 miles long 'and generally about three to four miles in width. District 24 has a common boundary for most of its length on the east with the western boundary of District 25. Each district includes municipalities in three different counties.

Although these two districts on their face seem to depart most radically from the concept of compactness, several others vie with them for that distinction. The affidavit submitted by the staff consultants in support of the plan states that the Commission followed the criteria prescribed by the Supreme Court in Scrimminger. However, it does not disclose how or to what extent the requirement of compactness was used. Inquiry at the oral argument developed that the Commission paid little or no attention to this requirement on the ground that it was incapable of a meaningful definition.

We note that Chief Justice Weintraub, in announcing the applicable criteria, indicated that the requirement of compactness “may be of limited utility in the light of the odd configurations of our State and its municipalities.” However, that pronouncement cannot be read to mean that “compactness” can be ignored. In this connection, we note also that the requirement appears in Art. IV, § II, par. 3 of the New Jersey Constitution as amended in 1966, which pertains to the drawing of Assembly districts: “The Assembly Districts shall be composed of contiguous territory, as nearly compact and equal in the number of their inhabitants as possible * *

Although the impact of the compactness directive cannot be precisely stated, we believe that the word itself can be given meaningful content. Webster’s Third New International Lictionary (1966) defines “compact” as “marked by concentration in a limited area.” Technically, we interpret the requirement of compactness to mean that between two districts of equal area the one with the smaller perimeter is the more compact. A somewhat similar idea was projected by counsel for the Apportionment Commission at the oral argument — that the objective of compactness could be determined by drawing a circle around each of the proposed districts. Those districts which occupy relatively greater areas within the circle could be said to be more compact. See People v. Swift, 270 Ill. 532, 110 N. E. 904, 905 (Sup. Ct. 1915).

We recognize that the constitutional mandate to draw districts equal in their number of inhabitants may conflict with the mandate for compactness and that the former is paramount. Compactness is undoubtedly a material factor, however, when the choice of districting plans includes one yielding bizarre designs. See Jackman v. Bodine, supra, 49 N. J. at 419. This is particularly so where compact districts may be drawn with a minimal increase in population deviation.

The evidence before us leads us to believe that the Commission can produce a plan with much more compact districts, and yet which is compatible with other constitutional criteria. Indeed, we note that one of the parties, on very short notice and without the aid of computer services, produced a plan which, at least on its face, represents a far greater compliance with the requirement of compactness while still complying substantially with the equal population imperative.

We note also from the affidavits submitted by the Commission’s consultants that it added other criteria than those set forth in Scrimminger:

The Commission chose to construct the new Senate districts generally conforming to the present Assembly districts, in order to reduce the number of combinations of building blocks (municipalities) and to provide desirable continuity in the democratic process of representation.

The affidavits then declared that in the maximum deviations in the certified plan are the result of the Commission’s policy of recognizing the existing Assembly districts * *

Whether or not this may be said to be a euphemistic description of gerrymandering, albeit of a bipartisan nature, we need not determine. But we are satisfied that the Commission exceeded the scope of the mandate it received by attaching so great significance to political subdivision of such recent vintage. Although it may be permissible to consider such political and administrative factors after constitutional criteria have been satisfied, it is clearly improper to apply them at the expense of the mandatory guidelines.

We turn now to an even more complex and difficult problem. This concerns the impact of the recent decision in Mahan v. Howell, supra, on the existing state constitutional scheme for the appointment of state legislative seats as interpreted by our Supreme Court in Scrimminger. Mahan was decided on February 21, 1973. The Commission’s certification is dated March 15, 1973.

Mahan involved the constitutionality of a reapportionment plan for the Virginia House of Delegates, which included districts which ranged in deviation from the ideal district by as much as 16.4% (or 23.6% by the dissenters’ calculations). The plan was accepted by a 5-3 majority of the court because the deviations were the result of a consistent policy of respecting county and city boundaries in drawing the district lines.

Prior to Mahan the trend of United States Supreme Court decisions such as Swann v. Adams, Connor v. Williams, Whitcomb v. Chavis, and Abale v. Mundt, supra, was toward a rule that states may deviate from an absolute equality of population among legislative districts only when necessary. See Mahan dissent, 410 U. S. 333, 93 S. Ct. at 989, 35 L. Ed. 2d at 341. The Mahan opinion explicitly indicates a return to a standard previously articulated in Reynolds v. Sims, supra, that “so long as the divergencies from a strict population standard are based on legitimate considerations incident to the effectuation of a rational state policy, some deviations from the, equal-population principle are constitutionally permissible * * 410 U. S. at 325, 93 S. Ct. at 985, 35 L. Ed. 2d at 330. The Mahan court concluded that the policy of maintaining the integrity of political subdivision lines in the process of reapportioning a state legislature was a rational one and it quoted the following justification of it in Reynolds v. Sims, supra:

Several factors make more than insubstantial claims that a State can rationally consider according political subdivisions some independent representation in at least one body of the state legislature, as long as the basic standard of equality of population among districts is maintained. Local governmental entities are frequently charged with various responsibilities incident to the operation of state government. In many States much of the legislature’s activity involves the enactment of so-called local legislation, directed only to the concerns of particular political subdivisions. And a State may legitimately desire to construct districts along political subdivision lines to deter the possibilities of gerrymandering. * * * [377 U. S. at 580-581, 81 S. Ct. at 13911

Surely, “Legislators represent people not trees or acres.” Reynolds v. Sims, supra at 562, 84 S. Ct. at 1382. But it must also be observed that legislators represent people as members of political groups as well as in their individual capacities. Social harmony often demands that groups of unequal strength in numbers be treated alike, or that certain groups be given influence out of proportion to the size of their membership. Governments have repeatedly given recognition to this principle in both their formal structure and their process of making decisions.

The reasons for treating citizens of the same county as such a unified political group were well expressed by Chief Justice Weintraub in Jackman v. Bodine:

The citizens of each county have a community of interest by virtue of their common responsibility to provide for public needs and their investment in the plants and facilities established to that end. Anciently, and still today, the counties reflect different economic interests, although of course these economic interests are not perfectly contained or separated by any political line, municipal, county or State. So, certain counties have a dominant concern with manufacturing and commerce; others have a large stake in agriculture; still others lean heavily upon the resort industry; and finally a few counties have a special interest in the products of the sea. And of course there may be competing area interests in such matters as highways, taxation, and water supply. [43 N. J. at 462 — 463]

It has also been observed that in this State the county is the basic unit of political party organization. State of New Jersey, County and Municipal Government Study Commission, County Government Challenge and Change, 74 (1969). We think that the value of treating citizens of the same county as members of a unified political group is conserved by placing as many districts as possible wholly within a county as well as it is by placing whole counties within a district.

Counteracting the principle that groups should often be given disproportionate weight is one which says that fundamental fairness demands that each citizen of the comprehensive political unit have roughly equal influence in determining matters of concern to all. We interpret the reapportionment decisions of the past decade to require that this latter principle weigh heavier in the balance but that the former principle be entitled to some consideration.

In Scrimminger mix Supreme Court rejected the Commission’s plan which was constructed pursuant to N. J. Const. (1947), Art. IV, § II, par. 1:

Each Senate district shall be composed, wherever practicable, of one single county and, if not so practicable, of two or more contiguous counties.

At the oral argument the Commission’s counsel explained that in 1971 the Commission could have divided the State into Senate districts with much smaller population deviations, but it refrained from doing so because such districts would consist of more than three counties and in many cases would have a relatively large number of senators assigned to them. The reason given for this decision was that such districts would be unwieldy and would have many senators elected at large. Our reading of Art. IV, § IT, par. 2, however, tells us that where several senators are assigned to a multi-county Senate district they must be elected in single-member Assembly districts in accordance with Art. IV, § II, par. 3, quoted above. Jackman v. Bodine, 49 N. J. 406, 416 (1967). If the Commission had proceeded on this thesis, it would have acted in harmony with the Scrimminger mandate for single-member districts and yet would have produced a plan in which as many districts as possible were made up of whole counties or districts lying entirely within a county.

The apportionment opinions of the courts of this State reveal a consistent desire to give significance to counties as units for representation. Scrimminger represents the first departure from this tradition in any way and followed a trend toward absolute exactness in constructing legislative districts. That trend has now been significantly modified.

We are uncertain as to precisely which portions of the state constitutional scheme were invalidated by Scrimminger. It is clear that the portion of Art. IV, § II, par. 3, which permits up to 40% population variation between districts does not comport with even the relaxed Mahan standard. Courts have been loath “to play the numbers games," but we see no alternative to discussion of mathematical limits.

Justice Rehnquist does not give'the outer limit of permissible deviation in the Mahan opinion. But he does state that 16.4% “may well approach tolerable limits." 410 U. S. 315 at 329, 93 S. Ct. 979, 35 L. Ed. 2d 320 (1973). The Supreme Court in 'Whiicomb, supra, struck down an apportionment of state legislative districts where the deviation was 24.78% although the plan respected county lines.

We are not required to determine where the line of demarcation is. However, in view of the great population disparities among our counties, and the odd configuration of- our State, our rational state policy might conceivably mandate a permissible deviation less than 16.4%.

In construing the constitutionality of state constitutional provisions the traditional rule is that courts should seek to preserve their validity as far as possible. A construction nullifying a specific clause will not be given to a constitution unless absolutely required by the context. Marbury v. Madison, 5 U. S. (1 Cranch) 137, 2 L. Ed. 60 (1803).

So far as the present litigation is concerned, the question narrows down to whether county lines can be recognized to any degree in drawing legislative districts.

In Scrimminger the Supreme Court held that the mandate of our State Constitution with respect to adherence to countjr lines cannot be enforced under the demographic pattern revealed by the 1970 census. 60 N. J. at 495. But the federal constitutional setting in which the apportionment controversies in this State must be resolved has changed considerably since publication of the Scrimminger decision. It appears to us that the Mahan decision may now permit eifecutation of our entire constitutional scheme for districting, with the exception of the permitted population deviations mentioned above.

Our Supreme Court did not explicitly declare Art. IV, § II, of our Constitution to be invalid, although that may have been the practical effect of its decision that county lines should not be adhered to. Since onr Supreme Court did not have the benefit of the new constitutional standard as enunciated in Mahan before it, we, of course, do not know whether its mandate to the Commission would have been the same. It is at least open to the argument that in the light of this State’s strong tradition of treating counties as units of representation it wonld have concluded that county lines should be respected as far as possible. This is especially so in view of the fact that the State Constitution contains a mandate to do so. That court may well decide that the constitutional provision remains viable.

We think the Commission should provide the court with information from which it can be determined whether compliance therewith is possible within the parameters of permissible population deviation as expressed in Mahan. The Commission was unable to inform us whether this could be done. But, as wo have already noted, one of the plaintiffs has produced a proposed alternative plan. We note that the affidavit attached to that plan states that maintenance of county units and maintenance of county lines as well as the other constitutional criteria were considered in its preparation. It also states that the range of deviation between high and low districts was 9.76%, a figure well under that found permissible in Mahan. At least superficially, it appears to adhere to the language of our Constitution as to the composition of legislative districts. It may well be that the Commission can develop a variety of plans meeting all of these objectives. The Commission would then be free to apply any other criteria within its field of expertise.

Under the circumstances and in view of the sparse record presented to us, we think the proper course is as follows: This court will not interfere with this year’s primary and general elections and it directs that they proceed on the basis of the apportionment plan as amended by the court below. This court will consider further argument as to whether the Commission should draw a new plan for the remaining legislative elections of this decade. To this end the Commission is directed to provide information to the court as to whether an apportionment plan can be formulated in accordance with N. J. Const. (1947), Art. IV, § II, within the deviation limits indicated by the Mahan decision. Our understanding is that with the aid of computer services this can readily be done. We believe that all the criteria — the primary goal of equal population, as well as contiguity, compactness and minimal transgression of county lines — can be translated into practical instructions for computer analysis. See O’Rourke, Reapportionment: Law, Politics, Computers (1972). If a number of plans satisfy all requirements, the Commission is directed to supply information as to all of them and to indicate which one or ones it would prefer if such criteria are ultimately deemed applicable.

In order to afford the Commission sufficient time to perform this task and in the meantime to permit any party desiring to apply for interlocutory review of these determinations, we fix September 10, 1973 as the date for the submission of the required data. At that time we will set a date for further argument unless the matter is otherwise disposed of.

So modified, the judgment appealed from is affirmed.


source: Caselaw Access Project

author: Mintz, J. A. D.

license: Public Domain

text:
    IN RE: ETHEL HOLLYWOOD, CLAIMANT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Argued March 26, 1973
    Decided May 9, 1973.

      Before Judges Lewis, Carton and Mintz.

      Mr. Michael D. Schottland argued the cause for appellant (Messrs. Chamlin and Schottland, attorneys).

      Miss Carla Vivian Bello, Deputy Attorney General, argued the cause for respondent Violent Crimes Compensation Board (Mr. George F. Eugler, Jr., Attorney General of New Jersey, attorney; Mr. Stephen Skillman, Assistant Attorney General, of counsel).
   Mintz, J. A. D.

Appellant appeals from an order dated September 12, 1972 entered by the Violent Crimes Compensation Board (Board), an agency of the State. She was one of the first applicants for compensation under the recently enacted Criminal Injuries Compensation Act of 1971 (act), effective October 4, 1971.

Appellant filed a claim with the Board following the murder of her son on January 3, 1972. A hearing was held, resulting in the order of September 12, 1972. Appellant was 73 years of age at the time of the murder. The order which is the subject of this appeal recites that appellant was dependent on her deceased son to supplement her support. She was awarded for her support $75 per month commeneing January 3, 1972 and continuing until the entire sum of $10,000 is used or until her death, whichever occurs first. Should she remarry the Board reserved the right to review the case tc determine whether to reduce or discontinue the monthly payments. She was awarded an initial payment of $750 for the ten months from January 3, W72 to October 3, 1972. Her counsel was allowed a fee of $1,000, with the first payment of $500 to be made in October 1972 and final payment of $500 in October 1973, and said counsel was to continue to render services to appellant until they were fully paid without additional charges. At the time of the hearing there were no rules or regulations adopted by the Board.

N. J. S. A. 52 AB-18 provides that no compensation shall be awarded in excess of $10,000, and that all payments shall be in a lump sum, “except that in the case of death or protracted disability the award may provide for periodic payments to compensate for loss of earnings or support * * Appellant argues that this provision is unenforceable because there are insufficient standards to guide the Board.

However, the Legislature has prescribed one basic standard, namely, that all awards by the Board must be paid in a lump sum except in the case of death or protracted disability of the victim. Additionally, N. J. S. A. 52:4B-9 in part provides that the Board in determining the amounts payable under the act consider the availability of funds appropriated for such purposes. This provision is indicative of the legislative intent to vest wide discretion in the Board so that it might equitably allocate, among potential applicants, whatever funds are available in a given fiscal year. The Board is not only a relatively new entity in New Jersey, it is a new concept throughout the country. More detailed statutory regulations may come from experience. Moreover, the nature of the area in which the Board functions requires an emphasis upon an individual approach, which may be accomplished only by granting the Board a wide area of digcretion. We further note that courts have expressed approval of broad delegations of power to administrative agencies. Cammarata v. Essex County Park Comm’n, 26 N. J. 404 (1958); Ward v. Scott, 11 N. J. 117, 126 (1952); Motyka v. McCorkle, 58 N. J. 165 (1971).

Secondly, appellant argues that the failure of the Board to promulgate standards or establish and adopt other criteria with regard to periodic payments vitiates that part of the order providing for a 10J^-year payout to appellant. At the time appellant filed her claim the Board had been in existence for less than one year. It is unrealistic to expect it to promulgate rules and regulations in so brief a period, especially in light of the fact that there are few states from whose experience the Board could benefit. The wiser approach under this act is is to adopt regulations based upon studied consideration and experience. Data Access Systems, Inc. v. State, 117 N. J. Super. 95 (App. Div. 1971), certif. granted 60 N. J. 283 (1972). Cf. Securities and, Exchange Com. v. Chenery Corp., 332 U. S. 194, 202-203, 67 S. Ct. 1575, 1760, 91 L. Ed. 1995 (1947). Appellant actually seeks a modification of the order by awarding her a lump sum payment of $10,000. We find no justification for such modification, particularly in view of the plain language of N. J. S. A. 52:4B-18. The Board’s decision to exercise the option to make periodic monthly payment over 10y2 years was not arbitrary, capricious or unreasonable. Hence we will not interfere with the administrative agency’s determination. Cf. Thomas v. Bd. of Ed., Morris Tp., 89 N. J. Super. 327, 332 (App. Div. 1965), aff’d 46 N. J. 581 (1966).

Finally, appellant’s counsel asserts that the Board erred in ordering their fee to be paid in two installments, each in the sum of $500. N. J. S. A. 52:4B-8 provides that the Board may determine and allow reasonable counsel fees which shall not exceed 15% of the award. There is no provision in the cited statute for installment pajnnents to counsel for future services. Counsel should be paid in full for the service performed to the date of the award.

Accordingly, the matter is remanded to the Board for a determination of the amount due counsel. In all other respects the order of September 12, 1972 is affirmed. We do not retain jurisdiction.


author: Kolovsky, P. J. A. D.

text:
    MAL BROTHERS CONTRACTING COMPANY, PETITIONER-APPELLANT, v. DIRECTOR, DIVISION OF TAXATION, DEPARTMENT OF THE TREASURY, STATE OF NEW JERSEY. RESPONDENT-APPELLEE.
    Superior Court of New Jersey Appellate Division
    Argued April 3, 1973
    Decided May 11, 1973.

      Before Judges Kolovsky, Matthews and Crahay.

      Mr. David A. Biederman argued the cause for appellant (Messrs. Biederman and Mulligan, attorneys).

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

      Messrs. Hughes, McElroy, Connell, Foley & Geiser filed a brief amicus curiae on behalf of New Jersey Heavy, Highway and Construction Industry Advancement Fund (Mr. Theodore W. Geiser, of counsel and on the brief).
   The opinion of the court was delivered by

Kolovsky, P. J. A. D.

Petitioner appeals from a judgment of the Division of Tax Appeals which affirmed the determination of the Sales Tax Bureau of the Division of Taxation that petitioner was obligated, under the provisions of the Sales and Hse Tax Act, L. 1966, c. 30; N. J. S. A. 54:32B-1 et seq. (the act), to pay, for the period from July 1, 1966 to December 31, 1968, sales taxes totalling $27,589.45 (besides penalties and interest) on rentals it had paid for leased road building equipment.

The essential facts are undisputed.

Subsequent to the effective date of the act, July 1, 1966, petitioner, a road building contractor, had entered into a contract with the Port of New York Authority for the construction of a highway in the “Port of New Jersey.” It leased from “Furnival,” a Pennsylvania company, equipment used “for the purpose of moving sand.” The leased equipment, which petitioner used only in performance of the Port Authority contract, was operated by persons employed by it.

Petitioner’s primary contention is that the rentals paid by it for construction equipment used in performance of its contract with the Port Authority are exempted from taxation by the provisions of section 8(w), N. J. S. A. 54:32B-8(w), a paragraph added to the original act, prior to its effective date, by L. 1966, c. 53. In addition, it contends that "a lease of construction 'equipment’ is not a 'retail sale’ within the ambit of N. J. S. A. 54:32B-2 and is therefore not taxable under the provisions of N. J. S. A. 54:32B-3.” We shall consider the contentions in reverse order.

The act, insofar as here pertinent, imposes a tax at specified rates upon "the receipts from every retail sale of tangible personal property, except as otherwise provided in this act.” N. J. S. A. 54:32B-3(a).

The words used in the quoted clause are defined in N. J. S. A. 54:32B-2 which provides:

Unless the context in which they occur requires otherwise, the following terms when used in this act shall mean:
[Eor purposes of clarity, we deviate from the sequence of definitions appearing in the section.]
* * * * * * *
(g) Tangible personal property. Corporeal personal property of any nature.
(f) Sale, selling or purchase. Any transfer of title or possession or both, exchange or barter, rental, lease or license to use or consume, conditional or otherwise, in any manner or by any means whatsoever for a consideration, or any agreement therefor, including the rendering of any service, taxable under this act, for a consideration or any agreement therefor. [Emphasis added]
(e) Retail sale. (1) A sale of tangible personal property to any person for any purpose, other than (A) for resale either as such oías converted into or as a component part of a product produced for sale by the purchaser, or (B) for use by that person in performing the services subject to tax under subsection (b) of section 3 [2V. J. S. A. 54:32B-3] where the property so sold becomes a physical component part of the property upon which the services are performed or where the property so sold is later actually transferred to the purchaser of the service in conjunction with the performance of the service subject to tax. For the purposes of this act, sales of tangible personal property lo all contractors, subcontractors or repairmen of materials and supplies for use by them in erecting structures for others, or building on, or otherwise improving, altering or repairing real property of others are deemed to be retail sales.
(2) The term retail sales does not include:
[The exclusions are not pertinent to this case.]
(d) Receipt. The amount of the sales price of any property and the charge for any service taxable under this act, valued in money, whether received in money or otherwise :l" * *.

It is immediately evident that there is no substance to petitioner’s contention that “a lease of construction ‘equipment’ is not a ‘retail sale’ within the ambit of N. J. S. A. 54:32B-2.”

Construction equipment is “corporeal personal property” and hence is to bo deemed “tanglible personal property” within the meaning of the act. By the express provisions of paragraph (f), the rental or lease of such tangible personal property is a “sale.” Eurther, since the transaction did not fall within any of the exclusions listed in paragraph (e) from the statutory definition of “retail sale” —“a sale of tangible personal property to any person for any purpose” — the lease transaction here involved constituted a “retail sale.”

The receipts therefrom, the rental paid, were therefore taxable under N. J. S. A. 54:32B-3 unless, as petitioner also contends, the receipts were exempted from taxation by N. J. 8. A. 54:32B-8(w) which reads as follows:

(w) Sales made to contractors, subcontractors or repairmen of materials, supplies or services for exclusive use in erecting structures, or building on, or otherwise improving, altering or repairing real property of organizations described in subsections (a) and (b) of section 9 of this act, provided any person seeking to qualify for this exemption shall do so pursuant to such rules and regulations and upon such forms as shall be prescribed by the director.

The Port of New York Authority is one of the organizations referred to in section 9(a) of the act (N. J. S. A. 54:32B-9).

The Sales Tax Bureau, in rejecting petitioner’s claim to an exemption, followed regulations which had theretofore been adopted by the Director of the Division of Taxation “to clarify the application of the Sales and Use Tax Act * * * to the building and construction trade and related activities.” See N. J. A. C. 18:24-5.1 et seq.

Pertinent are the following definitions set forth in N. J. A. C. 18:24-5.2:

“Construction equipment” means any vehicle, machine, tool, implement or other device used by a contractor in erecting structures for others, or building on, or otherwise improving, altering, or repairing property of others, which does not become a physical component part of the property upon which work is performed, and which is not necessarily consumed in the performance of such work. Construction equipment includes, but is not limited to, grading, lifting and excavating vehicles, compressors, scaffolds, forms, hand tools and ladders.
“Construction materials” means items of tangible personal property purchased by a contractor for incorporation into property as a physical component part of such property.
“Construction supplies” means items of tangible personal property consumed in the fulfillment of a construction contract, which items do not become a physical component part of the property upon which work is performed. Supplies include, but are not limited to lubricants, cleaning compounds, polyethylene covers, rock salt and rope.

Further, N. J. A. C. 18:24 — 5.4 reads as follows:

The purchase, rental or use of equipment by a contractor is subject to tax, whether or not the equipment is purchased, rented or used in fulfillment of a contract with an exempt organization.

Petitioner contends that the regulations constitute an impermissible dilution of the exemption granted by N. J. S. A. 54:32B-8(w). It argued before the Division of Tax Appeals, and argues to us, that since it used the leased construction equipment exclusively in the performance of its road construction contract with the Port Authority, the lease constituted an exempt sale under the express language of the statutory section exempting sales to contractors of “materials, supplies or services for exclusive use in * * * improving [or] altering real property.”

We are saúsfied, however, as was the Division of Tax Appeals, that the construction equipment here involved is not embraced within the reference in N. J. S. A. 54:32B— 8(w) to “materials, supplies or services” and hence that the transaction floes not qualify for the exemption claimed.

Statutes granting exemption from taxation “are most strongly construed against those claiming exemption.” Bloomfield v. Academy of Medicine of N. J., 47 N. J. 358, 363 (1966). Eurther, it is evident that the Legislature did not intend to exempt all tangible personal property sold to contractors for exclusive use in improving, altering or repairing real property owned by exempt organizations. It chose to exempt only a limited class of such tangible personal property, “materials and supplies.”

We are not persuaded by petitioner’s assertion that the word “materials” used in paragraph (w) was intended to encompass construction equipment. When the Legislature intended to exempt sales of equipment, it expressly referred to “equipment.” See N. J. S. A. 54:32B-8 (in) (1) (deleted by L. 1970, c. 7) and N. J. S. A. 54:32B-8(m) (2). Cf. Oldfield v. New Jersey Realty Co., 1 N. J. 63, 69 (1948).

Moreover, even if the construction equipment here involved were to be deemed “materials,” it would not qualify for the exemption claimed. The exemption provision requires that the materials purchased or leased be “for exclusive use in creeling structures or building on, or otherwise improving, altering or repairing real property” of exempt organizations. The reference to “exclusive use” relates to the use and disposition to he made of the materials and not to the identity of the seller or purchaser or the particular form of contractual arrangement, be it sale or lease, by which the user acquired possession thereof.

Materials and supplies to he incorporated in the structure or consumed in the course of construction are for “exclusive use” in such construction. On the other hand, if the materials or supplies will be still available for use after the construction for the exempt organization is completed, they do not qualify as materials and supplies for exclusive use in the construction for the exempt organization.

Here, once the contract with the Port Authority was completed, the equipment was available for use, as it had been prior thereto, for the purpose of moving sand on other construction contracts. It matters not that petitioner, instead of purchasing sand moving equipment which would remain available for use on other construction contracts after the Port Authority contract was completed — and hence would not qualify for exemption — elected instead to lease the equipment for a limited period, the duration of the Port Authority contract.

As far as liability for a sales and use tax is concerned, the only difference between a sales and a lease transaction relates to the amount of tax payable. Had the equipment been purchased, the sales and use tax payable would have been a percentage of the full purchase price instead of a percentage of the rental paid for the limited period.

The judgment of the Division of Tax Appeals is affirmed.


author: Collester, P. J. A. D.

text:
    RITE AID OF NEW JERSEY, INC., A CORPORATION OF NEW JERSEY, ET AL., APPELLANTS, v. BOARD OF PHARMACY OF THE STATE OF NEW JERSEY, RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued February 5, 1973
    Decided May 8, 1973.

      Before Judges Collester, Leonard and Halpern.

      Mr. Theodore W. Geiser argued the cause for appellants (Messrs. Hughes, McElroy, Connell, Foley & Geiser, attorneys; Mr. Mark L. Fleder, on the brief).

      Mr. Bertram P. Goltz, Jr., Deputy Attorney General, argued the cause for respondent (Mr. George F. Kugler, Jr.,
      Attorney General of New Jersey, attorney; Mr. Stephen Skillman, Assistant Attorney General, of counsel).
   The opinion of the court was rendered by

Collester, P. J. A. D.

This is an appeal by Eite Aid of New Jersey, Inc., and nine other retail pharmacists, from a regulation promulgated by the New Jersey Board of Pharmacy (Board) requiring pharmacists to maintain a patient profile record system.

The regulation requires a pharmacist to record information concerning each person for whom prescriptions are dispensed, including, among other things, the name, address and age group of such “patient,” the name of the prescribing physician, and the name, strength and quantity of the drug dispensed. It also provides that the pharmacist shall attempt to ascertain and shall record any allergies or idiosyncrasies of the patient and any chronic conditions which may relate to drug utilization, as communicated to the pharmacist by the patient; that upon receipt of a prescription the pharmacist must examine the patient’s profile record before dispensing the medication to determine the possibility of a harmful drug interaction or reaction; that upon recognizing a potential harmful reaction or interaction the pharmacist shall take appropriate action to avoid or minimize the problem, which shall, if necessary, include consultation with the physician.

Prior to adoption of the regulation a public hearing was conducted by the Board at which arguments were presented supporting or opposing its adoption. On February 24, 1972 the regulation was adopted by the Board to become effective July 31, 1972. The objecting pharmacists appealed and the effective date of the regulation was stayed pending final disposition of the appeal.

Appellants first contend that the promulgation of the regulation exceeds the authority delegated by the Legislature to the Board. They allege that the Legislature by statute has prescribed exactly what records are to be kept, the manner of record keeping in connection with the dispensing of prescription drugs, and the limited power of regulation granted to the Board regarding the same.

N. J. S. A. 45:14-15, in substance, provides that a pharmacist shall keep a prescription on file for five years and shall affix to the prescription container a label bearing the name of the pharmacy, the date the prescription was compounded, an identifying number, the name of the physician (or other licensed practitioner) prescribing it, and directions for its use as provided for by the physician. The pharmacist who fills the prescription must place his name or initials on the original prescription or in a book kept for the purpose of recording prescriptions. The statute also empowers the Board of Pharmacy or its agents to inspect the prescription files and other prescription records of the pharmacy. N. J. S. A. 45 :14^-17 provides that the Board shall have the power to make rules and regulations for the enforcement of section 15.

Appellants argue that where the Legislature has spoken with such particularity on the subject of record keeping there is no authority for the Board to adopt a regulation which requires record keeping beyond that specified in the statute and that the Board is limited to making appropriate rules and regulations for enforcement of the statute.

"We are satisfied that appellants read the statute regulating the practice of pharmacy too narrowly. It is settled beyond question that the grant of an express power by the Legislature is always attended by such incidental authority as is fairly and reasonably necessary or appropriate to make it effective, and authority granted to an administrative agency should be construed so as to permit the fullest accomplishment of the legislative intent. The purpose of the statute is not to be frustrated by an unduly narrow interpretation. Cammarata v. Essex County Park Comm’n, 26 N. J. 404, 411 (1958). In Cammarata the court stated that the Legislature may enact statutes setting forth in broad design its intended aims, leaving the detailed implementatiou of the policy thus expressed to an administrative agency. The court said:

Indeed, the function of promulgating administrative rules and regulations lies at the very heart of the administrative process. Through the entrustment of such powers, our lawmakers achieve expert and flexible control in areas where the diversity of circumstances and situations to be encountered forbids the enactment of legislation anticipating every possible problem which may arise and providing for its solution, [at 410]

It seems unnecessary to state that the objective of Chapter 14 of Title 45 regulating the practice of pharmacy is to protect the health and welfare of members of tbe public. Section 15, requiring certain record keeping by the pharmacist, was enacted in furtherance of that objective. As stated in CammaratOj quoted above, the Legislature in enacting section 15 could not he expected to anticipate every possible problem which might arise with regard thereto and provide for its solution.

The evidence submitted to the Board in this case clearly pointed out the dangers inherent in the compounding and dispensing of prescription drugs due to harmful interaction or reaction because of allergies or idiosyncracies of the patient. Following argument of this appeal our attention was called to public articles by physicians and leading researchers urging record keeping of medication profiles of persons for whom prescriptions are written. Dr. Milton Silverman, professor of pharmacology of the University of California, was recently quoted by the press as stating that there were about 24,000 deaths each year in the United States from adverse reaction to drugs. In another article Dr. Karl Neumann of Cornell Medical College urged the keeping oí medication profiles by pharmacists. lie pointed out that while the Federal Drug Administration could control the ready-prepared combinations of drugs, only the pharmacist is in a position “to see and know what potentially horrendous combinations the public buys over the counter.” He said that by keeping records of all purchases, staying abreast of the latest reports on toxicity, noting previous allergic and adverse reactions of individuals and recording excessive purchases of any one item, the pharmacist could suddenly become one of the most important members of the “health team.”

The patient profile record system regulation promulgated by the Board is designed to eliminate or lessen the dangers referred to above. It is in furtherance of the monitoring policy by a pharmacist referred to in Supermarkets Gen. Corp. v. Sills, 93 N. J. Super. 326, 338, 341 (Ch. Div. 1966).

With the changing times, the development of more diversified drugs, and knowledge gained by research of the dangers of interaction and reaction to members of the public, it is obvious that the control of prescription drugs is an area in which the enactment of specific legislation cannot anticipate every possible problem which may arise. A consideration of the overall provisions of Chapter 14 convinces us that the Board has implicit authority to expand the record keeping requirements by the pharmacist now provided by section 15 to meet the health hazards to which we have referred.

While appellants state in their brief that they do not contend that maintenance of such records required by the regulation is without merit, they argue that the regulation is unreasonable. They claim, among other things, that implementation of the regulation would increase operating costs which would eventually be passed on to the consumer; that it would interfere with the physician-patient privilege that protects the confidentiality of medical prescriptions which must be guarded by pharmacists; that the regulation suffers from lack of reliability of the information to be recorded, and that it would place a greatly increased and undue potential liability burden upon the pharmacist.

The administrative action taken by the Board must be accorded a presumption of reasonableness, and appellants have the burden of satisfying the court that the regulation is unreasonable. Consolidation Coal Co. v. Kandle, 105 N. J. Super. 104, 118 (App. Div. 1969), aff'd 54 N. J. 11 (1969). We have carefully examined the record and conclude that appellants have not sustained that burden. The Board had before it sufficient evidence indicating that the patient profile record system regulation would be practicable and have little economic impact upon pharmacies, and would not interfere with the physician-patient privilege or increase liability of the pharmacists. In fact, there was evidence adduced that some pharmacists have successfully utilized such a system for years.

Accordingly, the validity of the regulation is sustained.


author: Carton, J. A. D.

text:
    HERBERT H. DANIEL, ET AL., PLAINTIFFS-APPELLANTS, v. THE BOROUGH OF OAKLAND, DEFENDANT-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued April 2, 1973
    Decided May 10, 1973.

      Before Judges Lewis, Carton and Mintz.

      Mr. Kent A. Losche argued the cause for appellants (Messrs. Losche & Losche, attorneys).

      Mr. William DeLorenzo, Jr. argued the cause for respondent.
   The opinion of the court was delivered by

Carton, J. A. D.

The narrow issue posed on this appeal is whether a municipality has the power to increase water rates retroactively.

The mayor and council of defendant Borough of Oakland in 1967 adopted an ordinance creating a water department, which it charged with responsibility for the operation of its municipal water supply system. This ordinance, adopted pursuant to N. J. S. A. 40:62-47 et seq., provided for the sale of water to persons within and outside the borough on conditions and according to a schedule of fees set forth in the ordinance.

There was an increase in the cost of operation of the water utility during the early part of 1970, accompanied by a decrease in the estimated income for prior years, and, as a result of various public meetings, it became evident to the borough officials that the rates would have to be increased. The borough attorney was authorized in April to prepare an amendatory ordinance for introduction to raise the rates as of July 1. Nevertheless, the mayor and council delayed introduction of the ordinance in the hope that increased use of lawn sprinklers during the hot summer months might bring in revenue and thus negate the necessity for any rate increase. The anticipated increase in revenues failed to materialize, however, and in September 1970 the ordinance here challenged was adopted increasing the water charges retroactively to cover the period beginning July 1.

Plaintiffs, for themselves and as representatives of all consumers of water in the borough, brought this action to declare the ordinance illegal. It was undisputed that plaintiffs were residents and purchasers of water at all times pertinent to this case. It was also stipulated that there were some residents of the town after the ordinance was adopted who had not resided there previously, and that premises of those residents could be affected by liens for unpaid water charges.

Plaintiffs moved for a partial summary judgment. However, the court, 119 N. J. Super. 235, holding that the retroactive provision of the ordinance did not constitute an impairment of contractual obligation, upheld the validity of the ordinance and granted summary judgment in favor of defendant municipality. We believe this determination to be erroneous and that the ordinance, insofar as it mandated retroactive operation, was invalid. In other respects the validity of the ordinance is not here involved.

When the borough adopted the original ordinance in 1967 creating a water department and providing for the sale and distribution of water to its inhabitants for domestic and commercial use, it established the machinery for engaging in a private or proprietary function. Reid Development Corp. v. Parsippany-Troy Hills Tp., 10 N. J. 229 (1952). The business nature of this function differed in no substantial degree from similar functions carried on by public utilities.

Charges by a municipality for water furnished to its customers involve a sale and arise from a contractual relationship between it and the customer. As the court stated in Lehigh Valley R. R. Co. v. Jersey City, 103 N. J. L. 574, 576 (Sup. Ct. 1927), aff’d 104 N. J. L. 437 (E. & A. 1927) :

Our conclusion is that a charge for water furnished by a municipality to an owner or occupant of lands is not a tax, but is the subject of a contract, the sale of a commodity, creating the relationship of seller and purchaser as between the municipality and the consumer. * * *

See also Ford Motor Co. v. Kearny, 91 N. J. L. 671, 672 (E. & A. 1917).

In the present case the ordinance itself uses the language of contract. It refers to the “sale” of water to its customers, l't requires the customer requesting service to make a written application for such service and to enter into an agreement for its continuance. It describes that agreement as a “contract.” The conclusion that a contractual relationship existed between the borough and its customers is inescapable.

Such contract, as other contracts, was entitled to the protection provided by the Federal Constitution and the State Constitution. .Both prohibit the adoption of any law impairing the obligation of contract. U. S. Const., Art. I, § 10; N. J. Const. (1947), Art. IV, § VII, par. 3.

We note that it is not the retroactive aspect itself which renders the ordinance vulnerable to attack. That vulnerability arises because of the existence of the constitutional prohibitions against impairment of contract, which here result from the operation of the retroactive provision contained in the ordinance. As Sutherland points out:

Aside from the suspicion with which all retroactive operation is regarded, there are no limitations on retroactive laws other than the constitutional limitations which affect all legislation. [2 Sutherland, Statutory Construction (3d ed. 1943), § 2201 at 116]

There is nothing in our law, decisional or statutory, which supports the argument that the constitutional proscription against impairment of contract is not applicable to laws relating to agreements of sale to furnish water.

“The powers of a New Jersey municipality are wholly derivative from state statute.” West Point Island Civic Ass’n v. Tp. Comm., of Dover Tp., 54 N. J. 339, 345 (1969).

The source of power enabling defendant borough to sell water is N. J. S. A. 40:62-47. Section 47 confers upon the governing body the general power to “adopt all ordinances and resolutions [and to] enter into all agreements and contracts, and [to] do all other acts necessary to provide water for the public and private uses of the municipality and its inhabitants * * in accordance with the provisions of the following sections of that title.

Section 77 authorizes the governing body to fix and collect water rents or prices for water and to impose penalties in addition to cutting off water for nonpayment thereof.

The statute does not purport to confer power to impose retroactive water rates, and it cannot be implied.

Speaking of a similar situation in Federal Shipbuilding &c. Co. v. Bayonne, 102 N. J. Eq. 475 (Ch. 1928), aff'd 104 N. J. Eq. 196 (E. & A. 1928), the court said:

The last quoted provision of the Home Rule act [IV. J. S. A. 40:62-77] grants no power to Bayonne to make retroactive water rates, but only the power to fix and collect the water rents, and prices established in advance for the service to be rendered * * * [102 N. J. Eq. at 480]

We do not consider that the precedential effect of Federal Shipbuilding, &c. Co. v. Bayonne has been weakened or spent because of the adoption of the 1947 New Jersey Constitution. True, the new Constitution directs that laws concerning municipalities be liberally construed in their favor. True, also, that neither the United States Constitution nor the New Jersey Constitution in so many words prohibits the enactment of all retroactive legislation. But neither the mandate regarding liberality of interpretation nor the silence of the Constitutions as to the power to enact retroactive laws can properly be interpreted to authorize retroactive laws impairing the obligation of contract. The constitutional imperative against impairment of contracts remains in full force.

The challenged ordinance does alter contracts. By virtue of the provision making the rates retroactive, water already purchased and used at a clearly stated and fixed price became more expensive to the consumer. Furthermore, the additional price of water already purchased and consumed became attended with all the penalties fixed by the ordinance, including payment of interest on charges not paid within thirty days and discontinuance of service for unpaid arrearages.

It is not controlling that the period during which the retroactive charge was imposed was of relatively brief duration. The record indicates that about $4,000 in monies is involved. Such an infringement of contractual rights cannot be deemed de minimis even though the increased cost to each of the individual consumers is small. What was said in Kilpatrick v. Lefkowitz, 141 N. J. Eq. 18 (Ch. 1947), quoting Baldwin v. Flagg, 43 N. J. L. 4,95 (Sup. Ct. 1881) (at page 503) is apposite:

* * * It is perfectly clear that any law which enlarges, abridges, or in any manner changes the intention of the parties, resulting from the stipulations in the contract, necessarily impairs it, and the manner and degree in which this change is effected can in no respect influence the conclusion. Any deviation from its terms, by postponing or accelerating the period of performance which it prescribes, imposing-conditions not expressed in the contract, or dispensing with the performance of those which are part of the contract, however minute or apparently immaterial in their effect upon it, impairs its obligation. * * *

Determination that the retroactive provision of the ordinance is illegal (other aspects of the ordinance are not involved) will require the return of the monies unlawfully exacted or the crediting of such sums on the hills of consumers who remain residents of the community. But this presents no insuperable obstacle. Similar remedial action is commonly required in rate proceedings of ordinary public utilities.

It may also be, as defendant-municipality argues, that the invalidation of the retroactive provision of the ordinance may entail adjustments in the municipal budget or the adoption of other financing procedures, or both. However, defendant-municipality is in no position to complain, for its predicament is the result of its own failure to take timely and routine necessary measures to provide the revenues that the municipal officials were fully cognizant were needed for the operation of the water utility. Irrespective of their motivation, reliance on future favorable weather conditions which might make a rate increase unnecessary is hardly a valid reason for a knowing refusal to adopt the ordinance which would have avoided this situation.

Reversed. No fees or costs.


text:
    CITY OF NEWARK, PETITIONER-CROSS APPELLANT, v. ESSEX COUNTY BOARD OF TAXATION, RESPONDENT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Argued January 29, 1973
    Decided May 17, 1973.

      Before Judges Carton, Mintz and Larner.

      Mr. Richard M. Conley, Deputy Attorney General, argued the cause for Respondent-Appellant (Mr. George F. Kugler, Jr., Attorney General of New Jersey, attorney).

      Mr. Donald S. Coburn, Assistant Corporation Counsel, argued the cause for Cross-Appellant (Mr. William H. Walls, Corporation Counsel for the City of Newark, attorney).
   The opinion of the court was delivered by

Carton, P. J. A. D.

This appeal involves the propriety of the tax equalization tables promulgated by defendant Essex County Board of Taxation for the year 1971, and specifically as they affect petitioner City of Newark.

Newark made a two-pronged attack on the tax equalization table in the Division of Tax Appeals, asserting that (1) the Board improperly adopted the equalization ratio developed by the State Director of Taxation for distribution of school monies, and (2) the Board improperly included in the equalization table data some 245 Newark sales of real property which were financed by V. A. and E. H. A. loans.

The Division rejected Newark’s first argument that adoption of the state equalization ratio was improper, but accepted its argument with respect to 65 sales financed by V. A. and E. EL A. loans. These sales were withdrawn from the statistical sample and the municipal ratio of assessments to true value was recomputed on this basis.

In its appeal to this court the Board seeks to have its tax equalization tables approved as originally adopted. Newark’s cross-appeal repeats its challenge to the Board’s use of the state equalization ratio and reasserts its claim that none of the V. A. and E. H. A. financed sales should have been included in determining the equalization table.

USE OF STATE EQUALIZATION RATIO IN COMPUTING TIIE COUNTY RATIO OF ASSESSED VALUE TO TRUE VALUE.

Newark argues that the method of computing the ratio of assessed value to true value used by the Division of Taxation for each municipality and adopted by the County Board for its equalization tables is unreasonable. That method may be described as follows: The real property in the municipality is divided into four classes (residential, commercial, vacant and farm). The municipal assessment value is then compared with the record of sales in each category for the past year, certain categories of sales being eliminated (intrafamily et al.). The ratios in each of the four categories are then averaged, resulting in an overall municipal ratio. That overall ratio is then averaged with the final ratio for the previous year (recomputed with added and omitted assessments), thus producing a new final ratio for the current year. In other words, the sales data from any single year have a progressively diminishing effect on each year’s final ratio — first 50%, then 25%, then 12%1% and so on ad infinitum.

Newark specifically objects to the last step — the averaging of the one-year figure with the final ratio from the previous year. That process, it contends, unduly favors municipalities with increasing property values and works against those with declining values such as Newark. This analysis of the effect of averaging appears to be correct — the process causes the final ratio to lag behind the results of any single year study, whether property values are rising or falling.

It does not follow, however, that this result is necessarily unreasonable. The Legislature has not prescribed a specific plan or method to be followed by county boards in devising their equalization tables, and they are free to adopt any reasonable and efficient method. N. J. S. A. 54:3-17; Passaic v. Passaic County Bd. of Taxation, 18 N. J. 371, 385 (1955); Willingboro Tp. v. Burlington County Bd. of Taxation, 62 N. J. 203 (1973).

Our Supreme Court has specifically held that a county board may adopt the ratios promulgated by the Director of Taxation. Passaic v. Passaic County Bd. of Taxation, supra; Greenwich Tp. v. Gloucester County Bd. of Taxation, 47 N. J. 95, 99 (1966).

We conclude that Newark has not carried its burden of showing that the County Board or the Division of Tax Appeals acted unreasonably in the present case in adopting the ratios promulgated by the Director of Taxation, which include the averaging process to which the city specifically objects. The averaging process was fair and reasonably related to the ultimate objective of achieving fairly accurate approximations of the ratios between true and assessed valuation in each tax district.

True value is an ideal, unrealizable concept. See Kearny v. Division of Tax Appeals, 35 N. J. 299, 303 (1961). The best one can do is to approximate true value by means of observable data, i. e., sales. Obviously, the greater the number of sales that can be included in the sample, the more likely it is individual distortions will be ironed out and the ideal more nearly approached. The Director’s method of computing the final ratio of assessed to true value for any given year is designed to achieve this objective by including all sales from the first year the method went into operation but weighting such sales proportionately less as they are more remote in time from a particular year for which the ratio is determined.

The reasoning behind the averaging process is that the utilization of prior year’s data in conjunction with the current years data serves to partially level sharp peaks and valleys in the ratio occurring in two successive years. The averaging process thus serves to soften fluctuations in ratio from year to year and to inject a degree of continuity and predictability into a taxing district’s county burden from year to year. This is important to the tax district because it provides a means of predicting the county tax burden in advance for budget purposes. It is also desirable from the taxpayer’s point of view because it tends to keep individual tax bills fairly constant.

INCLUSION OF V. A. AND F. II. A. FINANCED SALES IN DETERMINING COUNTY EQUALIZATION TABLES

Newark’s attack upon the equalization tables directed towards the inclusion of 345 residential sales financed by V. .V. and F. H. A. mortgages presents more difficult and complex problems. Newark’s argument is that such sales should not be used or considered useable because they do not reflect the true value of the property involved.

Its argument is that under existing market conditions sales prices in such transactions are greatly inflated and are not indicative of market value or what a willing buyer will pay and a willing seller will accept. The thesis is that in such transactions in all probability no sale at all would come about but for the availability of government-insured financing; that the buyer who often makes little or no down-payment is concerned only with the amount of the required monthly payment and not the price. The seller, it is urged, must include in the sales price a number of items not usually required, or not required to the same extent as in sales of property not so financed. These include (1) points, sometimes as much as 10% of the mortgage; (3) buyers’ closing costs, which may amount to $1,000; (3) repairs required by the governmental insuring agency as a condition to mortgage approval, and (4) higher real estate commissions. On this basis it is contended that the price does not reflect true value as that term is defined in N. J. S. A. 54:1-35.3.

The Division judge agreed that as to 65 particular sales the sale price was so distorted from the norm by the presence of these factors that they should be considered nonuseable. Newark contends that such factors are so common to all of such transactions that all should be stricken as a class from the list of useable sales in Newark. The Board counters that none should be eliminated.

The threshold question is whether the circumstance that numerous sales of property are financed through Y. A. and F. H. A. government insured loans may properly be considered by the County Board as a factor in determining if they are nonuseable in the preparation of the county equalization ratios. The Director has established 37 categories of nonuseable sales for his sales studies for the preparation of the state ratios for distribution of school aid. One of these is a catchall for sales not otherwise excluded under the other categories. Arguably, Y. A. and P. H. A. financed sales could be excluded as falling within this group.

The Board argues that financing has never been used by the Director of the Division as a factor in determining whether the sales of real property are useable samples. This argument proceeds upon the theory that individual sales should not he considered in the sales ratio studies because the “objective of reliability” in such studies is achieved by the inclusion of many sales, thereby tending to cancel out possible distortions.

Acceptance of this view would make for administrative convenience and efficiency as well as ease of review. It finds some support in the principle that “any reasonable and efficient method of equalization may be used”; that mathematical exactness is not required; and that a degree of imperfection will be tolerated. Willingloro Tp. v. Burlington County Bd. of Taxation, 62 N. J. 203 (1973). Willingloro recognizes, however, that the County Board should not become subject to the tyranny of a formula in effectuating the equalization process. It emphasizes that when any method used imposes on a particular municipality a share “'dramatically or substantially excessive,” the reviewing agency or the court must grant relief. See Kearny v. Div. of Tax Appeals, supra, 35 N. J. at 310. Thus, it is not determinative that the Director, in making up the state ratios for distribution of school monies, has not heretofore regarded financing as a factor in determining the categories of excludable sales. Indeed, the mere fact that 27 such categories have been established confirms that it has been found desirable to eliminate certain types of sales by class because of their tendency to distort the objective reliability which sheer numbers are designed to achieve.

Thus, although the County Broad is free to adopt and apply the sales ratio promulgated by the Director in allocating the county tax burden, it need not slavishly follow the categories of useable sales promulgated by the Director. It may and should depart from its general application in specific situations which significantly affect the tax burden of a particular community.

The critical question here, therefore, is whether the fact that numerous sales of property in Newark are V.A. and F.H.A. financed does, in fact, so inflate the sale prices that they do not reflect true value, and, if so, whether this is true of substantially all cases, and, if not, whether such sales have occurred in sufficient numbers to have a significant impact on the municipality's share of the county tax burden.

In the hearing before the Division of Tax Appeals Newark presented the testimony of real estate experts to the effect that V.A. and F.H.A. financing does significantly distort the sales prices of homes in the city. The experts said that sellers in Newark pay more in points, greater repair and closing costs and higher commissions than their counterparts in suburban areas.

The County Board's expert, on the other hand, testified that while such financing may have an inflationary effect on the sales price, it does not have such a significant effect as to warrant excluding them. He also asserted that other municipalities in the county had sales subject to the same conditions and that discovery of the financing factors involved in all sales would be an insurmountable administrative problem.

We consider this administrative question first. The thrust of this argument is that in order to determine whether and to what extent weight should be given to this factor the Board would be required to make a detailed review of the numerous sales financed by V.A. and F.H.A. mortgages in a number of municipalities. This argument rests on the assumption that every municipality in which there exists a substantial number of transactions will annually challenge the ratios. It also proceeds on the premise that the County Board ought not be required to conduct such activities, and that it lacks the means and personnel to do so.

We believe this argument untenable for several reasons. In the first place, the Board is charged with the duty of equalizing aggregates and it cannot escape performance of that duty if a municipality offers credible evidence that use of such sales in the equalization process has the effect of imposing an unfair share of the county tax burden upon it. See Passaic v. Passaic County Bd. of Taxation, 18 N. J. 371, 390 (1955), and Willingboro Tp. v. Burlington County Bd. of Taxation, 62 N. J. 203, 218 (1973).

There are, of course, difficulties inherent in making such a study. It will, as the Board points out, necessitate examination of the official records of real estate transactions, including mortgage records. It may also require consulting with lending institutions, or such agencies as the V. A. or F. II. A. and the examination of appraisals in their files. But this is precisely what the Board was empowered to do before the enactment of N. J. S. A. 46 :15-o et seq., which now requires that deed records show the consideration paid for the property. See Little Ferry v. Bergen County Bd. of Taxation, 18 N. J. 400, 404 (1955).

The Board has not demonstrated that the task involved is either insurmountable or so administratively difficult that it should not be undertaken. The fact that Newark, in the present case, made a considerable, although by no means extensive, study of a great number of such transactions in the preparation for the appeal in this case, is indicative that the Board’s burden is not an intolerable one. Indeed, the secretary conceded that if the Board were supplied with certain information it could screen such sales prior to the statutory date for the completion of the tables.

We turn now to the merits. We are satisfied from the record in this case that a substantial number of sales of residential property during 1971 in Newark were V. A. or P. H. A.-financed and that the prices of the property involved in such transactions were in many cases affected by the factors mentioned above, commonly found present in such sales, and ordinarily not present in conventionally financed sales.

■ The record also indicates that a similar situation may prevail, although to a lesser degree, in a few other municipalities. The record further justifies the inference that although Y. A. and E. EL A.-financed sales also occur in many suburban communities, the fact that they are so financed does not have the same inflationary impact on such sales.

It appears that the savings which would result if the 65 sales found by the Division to be unuseable are eliminated from the list would be slightly more than $27,000 out of a total of its county tax burden of $24,608,887. This amoxmt would represent a .11% change in Newark’s ratio. If all 245 sales objected to were excluded, it is estimated that there would be a reduction of about $85,000 in Newark’s tax burden for 1971.

Although the percentage change in the ratio may seem relatively small, we are not prepared to say that the amount involved is so insignifiant as to be ignored simply because the formulation of equalization tables is not a perfect process. The County Board has the duty of minimizing, as far as reasonably possible, the unfair distribution of the county tax. Passaic v. Passaic County Bd. of Taxation, supra, 18 N. J. at 381. We cannot ignore the reality that Newark is particularly hard-pressed financially and that any additional tax burden imposed upon it serves to aggravate its problems.

The County and the Board also argue that, in any event, Newark failed to present adequate proof that Y. A. and E. El. A. sales prices were unrepresentative of market value because there was no expert testimony before the Division as to true value. However, it cannot be seriously questioned that the factor of Y. A. and F. H. A. sales financing in fact tended to distort the sales price to a considerable degree insofar as Newark is concerned. Moreover, the Board’s brief acknowledges that there was at least hearsay evidence to the effect that the sales prices in the challenged transactions were higher than they would have been if the buyers had arranged for conventional mortgage financing. Thus, it can be fairly argued that there was enough on the hearing before the Division to justify its eonchision that, at least as to the 65 sales eliminated by it, “no fair-minded person could conclude that these sales represented fair market value * *

Eurthermore, it seems also to have been tacitly assumed that the presentation of formal proof with respect to true market value of individual sales would have served no useful purpose in the face of the existing rule that the fact that sales were financed by V. A. or E. H. A. loans was not a pertinent consideration.

Since this is the first time this precise issue has come before an appellate court, and because it has been uncertain whether any proof as to the character of financing was admissible and, if so, its scope and content, we think that justice would best be served by remanding the matter to the County Board in order to afford Newark, within 30 days from the date of this determination, an opportunity to supply any alleged deficiencies in proof as to the 265 challenged sales.

We observe that although the other municipalities in the county were notified of the original hearing before the County Board, they did not appear. Consequently, there is no valid basis for the Board’s argument that it would be inequitable to grant relief to Newark alone because the effect would simply be to transfer pail: of its burden to other municipalities who might he able to establish their right to similar relief.

We advert now to the broader issues implicated by onr determination and consideration of possible solutions of the practical problems generated by them.

The dimensions of this question are not yet clearly defined. The evidence in this case suggests that it is not confined to Newark but pertains to at least some other municipalities in Essex County. It seems likely also to he an annually recurring problem. A similar, although not identical, issue has also already appeared in cases before the Division, and now on appeal to this court, concerning useability of Y. A. and E. II. A.-'financed sales in formulating the ratios promulgated by the Director for use in the distribution of school monies. We have no information as to whether the same disparity exists in other counties, especially those in which there are cities which, like Newark, contain large depressed areas.

We suggest that the situation may be one of sufficient magnitude to call for an exercise by the County Board of its administrative powers of investigation over and above those of a gwtm-judicial nature which are required to decide the present adversary proceeding. Such an investigation on a county-wide basis may well shed light on whether Y. A. and E. H. A. financing is a significant factor influencing the sale prices of residential properties in other municipalities and enable the Board to take any necessary measures to see that municipalities similarly affected receive the same treatment. More important, it should enable the Board, through the exercise of its administrative expertise, to develop formulae designed to reduce or eliminate entirely numerous controversies and expensive litigation on the subject.

Such investigation may conceivably result in the conclusion that Y. A. and E. H. A. financed sales should as a class be excluded from the list of useable residential sales; that all such sales in certain municipalities or areas thereof should automatically be excluded. Even if such studies do not reveal a basis for such a clear-cut classification, the Board may be able to establish administrative standards for determining categories by which particular sales should be excluded as nonuseable. Furthermore, it may be able to decide on a statistical basis the merits of the suggestion that ail such sales in which the down-payment is less than a specified percentage of the sale price should be automatically excluded as unrepresentative of true value and that all others be the subject of detailed proof by the municipality claiming the sale should be unuseable.

As we have already noted, the same or similar issue has already come to the Division’s attention in another county in a tax apportionment, and essentially the same question has been raised in a challenge in Essex and Hudson Counties to the ratios used by the Director for apportionment of school aid. Tinder the circumstances, and since the same situation may well exist in other counties throughout the State, the Director of Taxation should give consideration to the desirability of undertaking a broader study of the problem and the formulation of administrative procedures and standards which such study indicate. Passaic v. Passaic County Bd. of Taxation, supra, 18 N. J. at 384.

Reversed and remanded for proceedings in accordance with this opinion.

       It should be noted that we are not directly confronted with the question whether, in the formulation of the Director’s table, a new category for sales of this kind should be established, or whether they should be included in the “catchall” category. The ratio promulgated by him relates directly to the distribution of moneys to local school districts under N. J. S. A. 18A :58-l et seq. It has a collateral effect on the share of Newark in relation to that of other municipalities in Essex County because the Essex County Board has adopted the Director’s tables in arriving at the county equalization table. See Cherry Hill Tp. v. Director, Div. of Taxation, 119 N. J. Super.
        256 (App. Div. 1972), and Bayonne v. Div. of Tax Appeals, 49 N. J. Super. 230, 239 (App. Div. 1958), as to the difference in approach used on challenges to the Director’s ratio.

       An appeal involving Newark’s share of the county tax burden under the county apportionment for 1972 is now pending before this court.

       This question was raised in appeals by Newark and Jersey City involving the school ratio for the year 1671. The Appellate Division, in an unreported decision, found it unnecessary to reach this issue because of the insufficiency of proof.