author: Wick, J. S. C.

text:
    CRESCENT INVESTMENT CO., A CORPORATION, PLAINTIFF, v. COMMISSIONER OF BANKING AND INSURANCE OF THE STATE OF NEW JERSEY, DEFENDANT.
    Superior Court of New Jersey Chancery Division
    Decided July 18, 1968.
    See also 102 N. J. Super. 549; 103 N. J. Super. 27.

      Mr. W. Louis Bossle for plaintiff.

      Mr. Arthur J. Sills, Attorney General of New Jersey, for defendant (Mr. B. Robert Levy, Deputy Attorney General, of counsel).
   Wick, J. S. C.

This is a declaratory judgment action brought to determine the constitutionality of N. J. S. A. 17:11A-1 et seq., more commonly known as The Secondary Mortgage Loan Act of 1965. The facts are as set forth'below.

Plaintiff Crescent Investments Company was granted a license to do business pursuant to The Secondary Mortgage Loan Act of 1965, N. J. S. A. 17:11A-1 et seq. (hereinafter referred to as the “act”). By virtue of its authority as a New Jersey licensee plaintiff entered into numerous secondary mortgage loans with certain homeowners. Following an investigation based upon charges made against plaintiff re7 garding its lending activities, Charles R. Howell, the commissioner of Banking and Insurance of this State, issued an order to show cause why plaintiff’s secondary mortgage loan license should not he suspended, revoked or not renewed since it had violated the various provisions of the act and certain rules and regulations promulgated thereunder.

On the return date of the order to show cause the Deputy Attorney General appeared to present the evidence in support of the charges made in said order. After, the State completed its case and before plaintiff presented its, plaintiff instituted the within action by way of verified complaint and order to show cause why the Commissioner should not be enjoined from further prosecuting his order to show cause and for a declaration that sections 11 and 29 of the act are unconstitutional. Plaintiff’s order was issued and a,n interlocutory injunction was granted until such time as the court should make a determination as to the constitutionality of these provisions.

The provisions toward which plaintiff specifically directs its attack are as follows:

N. J. S. A. 17:11A-11:

‘"Tlie commissioner may suspend, revoke or refuse to renew any license issued hereunder, * * * if he shall find that the licensee or any owner, director, officer, member, partner, stockholder, employee or agent of such licensee has:
(a) made any material misstatement in the application;
(b) committed any fraud, engaged in any dishonest activities, or misrepresented or failed to disclose any of the material particulars of any secondary mortgage loan transaction to any one entitled to such information;
(c) violated any of the provisions of this act * * *;
(d) otherwise demonstrated unworthiness * * *."

N. J. S. A. 17:11A-29:

“No> obligation arising out of a secondary mortgage loan shall be enforceable in the courts of this State unless snch loan was negotiated and made in full compliance with the provisions of this act.'’

Plaintiff attacks these provisions as void for vagueness and overbreadth.

At the ouset it should be borne in mind that declaring a statute unconstitutional is a judicial power to be delicately exercised; Harvey v. Essex County Board of Freeholders, 30 N. J. 381 (1959). The burden of proving a statute unconstitutional is an extremely formidable one. Levitt & Sons, Inc. v. Division Against Discrimination, etc., 31 N. J. 514, 531 (1960). And a party who attacks a statute as unconstitutional has a strong burden of proving it, since the validity of the statute is presumed, and a court will not declare legislation void unless its repugnancy to the Constitution is clear beyond a reasonable doubt. Supermarkets General Corp. v. Sills, 93 N. J. Super. 336 (Ch. Div. 1966). The mere fact that more precise language might have been used by the Legislature does not render a statute unconstitutionally vague. All that need he shown is that the statute adequately informs persons accused of violations thereof of the nature and cause of the accusation against them; that is, the statute must reasonably notify the licensee involved here of the conduct prohibited. Supermarkets General Corp v. Sills, supra; United States v. L. Cohen Grocery Co., 255 U. S. 81, 41 S. Ct. 298, 65 L. Ed. 516 (1921). Thus, if the general terms of the statute, measured by common understanding, fairly and adequately convey its meaning to all concerned, the statute must be upheld. Laba v. Newark Board of Ed., 23 N. J. 364 (1957).

“* * * [A] statute should be Interpreted by a mind sympathetic to its aims which recognizes the difficulties inherent in formulating a precise expression of legislative intent in light of the diversity of circumstances to be covered.” Lane v. Holderman, 23 N. J. 304, 323 (1957).
“In dealing with the question of standards it is elementary that we are not confined to the specific terms of [the statutory action] but must examine the entire act in the light of its surroundings and objectives. See Carlson v. Landon, 342 U. S. 524, 72 S. Ct. 525, 96 L. Ed. 547 (1952). Nor are we restricted to the ascertainment of standards in express terms if they may be resonably implied from the entire act.” Ward v. Scott, 11 N. J. 117, 123 (1952).

It is within the framework set forth above that this court must examine plaintiff’s complaints.

Plaintiff first attacks N. J. S. A. 17:11A—11(a), which authorizes the Commissioner to cancel a license for “any material misstatement in the application.” Indeed, says plaintiff, it is clear that a licensee on reading this provision would naturally and properly assume that he could not lose his license for any misstatement which was not material. Yet nowhere is there a section which defines that which is material. Similarly, continues plaintiff, under subsection (b) the license may be cancelled if the licensee, or any other person named in that section, fail “to disclose any of the material particulars of any secondary mortgage loan transaction to any one entitled to such information.” Again there is no indication of what constitutes “material particulars” of the transaction. Plaintiff contends that although a licensee would naturally and properly assume that failure to disclose particulars which were not regarded material would be insufficient to revoke his license, nowhere is he told what are and what are not material particulars. Plaintiff further argues that although a licensee could lose his license for failure to disclose these material particulars to “anyone entitled to such information,” nowhere is there any indication as to who in fact is so entitled. As a result, says plaintiff, men of common intelligence must guess at several meanings, and consequently the statute is not sufficiently explicit to inform plaintiff what conduct or omission on its part, or those of its employees, might render it subject to the statutory penalties.

As if this were not enough, continues plaintiff, section 11 states that the Commissioner may suspend, revoke or refuse to renew the license. Plaintiff contends that use of the word “may,” rather than “shall,” gives the Commissioner the power to discriminate as to whose license he will affect. Thus, for a “material misstatement in the application,” without being told what constitutes a material misstatement, or for a failure “to disclose any of the material particulars” of a secondary mortgage loan transaction, without guidance as to what these are, or a failure to disclose these “to any one entitled to such information,” without having set forth who is so entitled, the Commissioner may suspend, revoke or refuse to renew a license; the result will inevitably be that the license will hang on the whim or caprice of the Commissioner.

Plaintiff also contends that the standard of defendant’s authority to suspend, revoke or refuse to renew a license under N. J. S. A. 17:11A-11 is the same as the prescribed authority for him to refuse to issue a license under N. J. S. A. 17:11A—5(6). (17:11A-5(b) specifically provides that the Commissioner may refuse to issue a license for “any reason for which the commissioner may suspend, revoke or refuse to renew any license under section 11 of this act.”) It follows, says plaintiff that the standards prescribed by said section 11, reading “committed any fraud, engaged in any dishonest activities [etc.],” must necessarily relate not only to such activities as are connected with the license, but any and all such activities no matter when committed or how remote in time, whether or not connected with the license or a secondary mortgage loan, and not' only as to a principal but to its shareholders, employees or agents as well. In these particulars, argues plaintiff, the statute is on its face repugnant to the Due Process clause and is a violation of equal protection of the Fourteenth Amendment of the United States • Constitution, and is void for overbreadth.

Plaintiff’s final contention is that section 29 of the act, precluding enforcement of any loans given without full compliance with the act, is not only vague but clearly a deprivation of property without due process of law; it impairs the obligatiori of contracts made under the act..

Each of the provisions attacked in plaintiff’s complaint must be read in light of the overall purpose and-objective of the Secondary Mortgage Loan Act. - A review of the relevant legislative history discloses that various institutions-of lending, both local-:and out-of-state, had been engaging in loan transactions with New Jersey residents in which misleading advertising was taking place and unconscionable amounts of interest as well as exorbitant fees were being exacted. These loans were secured by secondary mortgages on real estate located in New Jersey. It was to protect New Jersey residents from this misleading advertising and exorbitant charges and fees that the Secondary Mortgage Loan Act was enacted. This legislation is very restrictive regarding fees to be charged, safeguards around the transaction itself, location of the place of business, keeping books-and records, and the like. In short, this legislation was a remedial measure designed to give the State a very tight-fisted .control over the secondary mortgage loan business. Thus,- no person may make or negotiate a secondary mortgage loan unless he is licensed by the Commissioner (N. J. S. A. 17:11A-2); licensees are prohibited from transacting business under any other name or from maintaining an office at any other location than that designated in the license (N. J. S. A. 17:11A-7(c)); licensees must file surety bonds with the Commissioner (N. J. S. A. 17:11A-9); each licensee is required to maintain certain books, accounts and records relating to his transactions at his place of business (N. J. S. A. 17:11A-17); the Commissioner is empowered to prescribe the minimum information to be shown in these books, accounts and records (N. J. S. A. 17:11A—19); ledger cards for each loan are required by the Commissioner (Rule 3), which cards must contain the name and address of the borrower and various fees and charges; the amount of interest permitted is regulated by statute (N. J. S. A. 17:11A-21); the maximum charges, fees, services, points and premiums which are permitted are listed in a schedule by statute (N. J. S. A. 17:11A-22); certain specified provisions are prohibited in any instrument evidencing or securing the loan (N. J. S. A. 17:11A-23); no power of attorney may be used to confess judgment, etc. It becomes clear from the foregoing that the policy behind this legislation was to provide the strictest safeguards so as to assure the borrowing public that it would be treated with fairness. Since this court finds that the legislation hereunder attack is remedial rather than penal, the cases cited by plaintiff concerning the need for criminal intent are inapposite.

It is this court’s opinion that in light of the overall policies and objectives of the statute, and reading all of the provisions together, such terminology as “material misstatements,” “material particulars,” “anyone entitled to such information” and such other terms attacked by plaintiff for vagueness are sufficiently clear to forestall any such attacks. See Solo Cup Co. v. N. L. R. B. 332 F. 2d 447 (4 Cir. 1964); Dunn v. Decca Records, 120 F. Supp. 1 (S. D. N. Y. 1954).

A misstatement would clearly be material if it would be likely to affect the decision of the Commissioner as to issuing or renewing a license. It is obvious to the court that misstatements regarded as material by the Legislature (and consequently by the Commissioner) are those state- meats which misrepresent some fact which the act was specifically designed to protect against. We are of the opinion it would be equally clear to the applicant. See McGowan v. State of Maryland, 316 U. S. 420 (1961). Thus, misstatements as to interest charged, fees exacted and other such misstatements which by reason of their falsity would case a shadow on the integrity of the applicant in this type of business venture, are such misstatements as are material under the statute.

A like conclusion is reached regarding the term “material particulars” of a secondary loan transaction. Thus, if it came to light that plaintiff failed to accurately disclose interest rates, or to disclose the various fees and charges it would exact, or that a secondary mortgage loan was involved, or any other pertinent information regarding a particular transaction, the Commissioner would be justified in suspending, revoking or refusing to renew a license.

The phrase “anyone entitled to such information” also sufficiently clear when read in context of the entire act. Eor those entitled to such information are obviously those persons directly interested in the transaction pursuant to the intent of the Legislature, namely, persons to whom the licensee is “selling” the loan. This is not to say that the phrase is limited to the borrower himself, for the court feels this broader phraseology was specifically intended to encompass not only the borrower, but also anyone who might have such influence as to convince a potential borrower to enter into the particular loan transaction. Thus, for example, failure to disclose such material particulars to the potential borrower’s attorney or to some person in his confidence to whom he looks for advice would be encompassed. In short “any person entitled to such information” is any person to whom the licensee knows it will be necessary to “sell” the loan before the actual borrower enters into the transaction.

Plaintiff next attacks the statute on the ground that, as it interprets the act the Commissioner can revoke, suspend or refuse to renew or to issue a license if he finds that the applicant (or its representatives) has committed any fraud, engaged in any dishonest activities, misrepresented or conducted other similar activities, regardless of when or where such activities take place and regardless of whether these activities are connected with the license itself or any secondary mortgage loan transaction. Plaintiff argues that consequently the statute is on its face repugnant to the Fourteenth Amendment of the United States Constitution. Although there is some question in the court’s mind as to whether the act goes as far as plaintiff interprets it to go, even if plaintiff’s interpretation is correct, the validity of the act would not be affected. The court feels that the issue was impliedly decided in the case of Division of the N. J. Real Estate Commission, etc. v. Ponsi, 39 N. J. Super. 526 (App. Div. 1956). In that case the issue raised was whether the Beal Estate Commission had authority to suspend, revoke or deny the renewal of a real estate license when the licensee was deemed guilty of conduct demonstrating unworthiness, incompetency, bad faith or dishonesty, where that conduct was not connected with the pursuit of his licensed privilege. The court there concluded that acts not connected with the real estate license were sufficient to revoke the license.

“It seems from the examination of the statute that the advantageous object exhibited by its composition was to create and maintain a commission to scrutinize in general and with care the character, competency, and integrity of license applicants and license holders to the end that in the interest of the public welfare, incompetent, unworthy and unscrupulous persons would he excluded from the real estate brokerage business. * * *
We therefore express the opinion that acts of a licensed broker comprehended by the statute in its specifications which are determined by the Commission to disqualify the real estate broker from the retention or renewal of his license are, not necessarily restricted to those committed in the pursuit of the privileges accorded by the license.’ (at pp. 532-533)

The purpose of citing this case is not to affirm plaintiff’s interpretation of the breadth of the act here under consideration, but rather for the implications raised by the decision. It goes without saying that it is the court’s primary duty to uphold the Constitution of this State and of the United States. The court must anticipate the constitutional ramifications of each decision it makes, even when not expressly called upon to do so so as not to infringe upon the constitutional rights of any individual. Nevertheless, when called upon to interpret whether the act was intended to allow revocation of a license for acts not connected with the license, the Ponsi court answered in the affirmative, thus upholding the Real Estate Commission’s denial to renew Ponsi’s license. The Appellate Division obviously would not have reached such a conclusion had it felt that that conclusion was unconstitutional. To do so would be in derogation of its basic function. Indeed, the Appellate Division could and probably would have interpreted the statute in accordance with the licensee’s wishes had it felt that the broader interpretation was unconstitutional. Eor it is well-settled 'that where a statute is capable of two constructions, one of which would render it unconstitutional and the other valid, that which will uphold its validity must be adopted. See, e. g., Ahto v. Weaver, 39 N. J. 418 (1963). It is therefore this court’s conclusion that the Appellate Division’s determination in the Ponsi case impliedly supports the constitutionality of like powers which may be found in the statute challenged herein. And this is so notwithstanding that the prescribed conduct extends to employees of the licensee, for this extension does no more than make the licensee responsible for determining that its personnel are not of the quality which the Legislature obviously felt were necessarily to be excluded from the business of secondary mortgage loans in light of the protection intended to be afforded by that act.

As mentioned previously, plaintiff also challenges the act on the ground that section 11A—11 permits the Commissioner to revoke, suspend, or refuse to renew, without requiring him to do so if he finds a violation of that section. This provision, plaintiff contends, gives the Commissioner the right to discriminate, with the result that the cancelling of a license might be the result of whim or caprice. It has already been decided that the provision herein questioned provides standards which indicate the types of offenses for which the license may be suspended, revoked, or denied. It is the discretionary power to deny when such circumstances come to light that is presently challenged. It is well-settled that a standard will not be deemed inadequate simply because certain discretion allowed may bo abused; arbitrary action by an official will not be anticipated. See e. g., Moyant v. Borough of Paramus, 30 N. J. 528 (1959); Weiner v. Borough of Stratford, 15 N. J. 295 (1954). Thus, in Moyant it was stated:

“We ought to say that we find no legal obstacle to an ordinance enactment making the issuance of a canvasser's license discretionary (governed by sufficient standards) rather than automatic. Denial does not have to rest entirely on a criminal record for other important facis may well enter into the propriety of issuance to a particular individual in the light of the evil sought to be guarded against by the regulation.” (at pp. 553-554)

Here the Legislature has created an administrative body headed by a Commissioner, presumably well-versed in the field of loan transactions, to determine when violations of the statute should be sufficient to justify denial or revocation of a license. Indeed, he would through his expertize be more likely to be aware of the “other important facts” mentioned above than the Legislature itself might be. This court will not anticipate an abuse of the discretion specifically given to the Commissioner by the Legislature.

“It is to be appreciated that what lack of personal qualities should render one unworthy of a license would be most difficult of definite enumeration. In some official or administrative group must be lodged pragmatically a sound discretion in resolving those who are unworthy. One wdio seeks and accepts a license impliedly consents to submit his qualifications to the statutory tribunal which the Legislature has created to decide his fitness to continue the enjoyment of the licensed privileges within the legitimate discretionary boundaries of the applicable law.” Division of the N. J. Real Estate Commission, etc. v. Ponsi, supra, 39 N. J. Super., at p. 533.

Finally, plaintiff challenges section 29 of the act which precludes enforcement of any secondary mortgage loan unless made and negotiated in full compliance with the act. Plaintiff’s challenge is that this provision is not only vague but clearly impairs the obligation of contracts made under it, and is therefore a deprivation of property without due process, a taking without just compensation. Suffice to say that this court does not feel that the issue is properly before it at this time. The act is challenged as a result of certain administrative proceedings taken against plaintiff. It is by reason of these proceedings that plaintiff is given standing to challenge it. The Commission does not in any way attempt to deal with the enforceability of obligations arising out of loans made by plaintiff. There is therefore no justiciable issue between plaintiff and the defendant Commissioner concerning the enforceability of loans given under this act.


source: Caselaw Access Project

author: Consodine, J. C. C.

license: Public Domain

text:
    W., PLAINTIFF, v. H., DEFENDANT.
    Superior Court of New Jersey Chancery Division
    Decided September 18, 1968.

      Mrs. Martha G. Belle of the Essex County legal service center for plaintiff.
   Consodine, J. C. C.

(temporarily assigned). Plaintiff proves a complaint for divorce on the ground of extreme cruelty and seeks as further relief permission to resume her maiden name and to change the surname of the children to that name in their best interest. There are three children of the marriage, two of whom are unemancipated teenagers.

Generally, it is against the policy of the court to grant permission to resume a maiden name where unemancipated children who bear a different name are involved. The facts of this case clearly call for an exception.

In this case defendant pleaded guilty to sexual intercourse with his 11-year-old daughter and was sentenced to eight to ten years’ imprisonment. Previously lie had impregnated his oldest daughter, with the result that a child was horn of this relationship.

Query — can this court under its general equity jurisdiction and in the best interest of the children direct a change of surname to the mother’s maiden name ?

Our authority is sparse and tangential but relevant.

In Sobel v. Sobel, 46 N. J. Super. 284, 286, 287 (Ch. Div. 1957), the Court observed that in dealing with the custody of a child it had broad discretion, being aware that the welfare and happiness of the child is the controlling consideration and that only extenuating circumstances warrant the forfeiture of a father’s right to have his progeny bear his name.

The circumstances of this case negate that right. The actions of the defendant have caused physical, psychological and emotional detriment to the children. They are pariahs among their peers and thus forced to a nomadic existence.

Judgment of divorce on the ground of extreme cruelty, reserving to plaintiff the right to resume her maiden name and directing the use of that name by the unemancipated children in their best interest.


author: Horn, J. S. C.

text:
    HIMC INVESTMENT COMPANY, A CORPORATION OF THE STATE OF PENNSYLVANIA, PLAINTIFF, v. THOMAS F. SICILIANO AND PHYLLIS SICILIANO, JOINTLY AND SEVERALLY, DEFENDANTS.
    Superior Court of New Jersey Law Division
    Decided August 20, 1968.
    See also 102 N. J. Super. 549; 103 N. J. Super. 11.

      Mr. Clarence Blitz, attorney for plaintiff.

      Mr. Donald M. Karp'for defendants (Messrs'. Désnih & Amoscato, attorneys).
   Horn, J. S. C.

This is an action on a promissory note secured by a mortgage second in lien upon a house owned by defendants. Defendants counterclaim for the 'Cancellation of the "mortgage and for the discharge of the underlying obligation. A jury was not demanded. • •

On December 10, 1965 defendants Thomas' E. Siciliano and his wife Phyllis Siciliano, in response to a newspaper advertisement in the Asbury Park Evening Press, called the “Eirst Prudential Co. of Penna./’ listed in the advertisement at “S. E. Cor. 21st & Eanstead, Philadelphia, Pa. 19103,” at the New Jersey telephone number referred to in the advertisement. At that time they supplied some information over the telephone as to their assets and earnings. They subsequently executed and submitted a loan application form. . .

’ On December 21, 1965 defendants received a telephone call from someone representing himself to be associated with National- Consumer Service, Inc., telling them- that their loan application had been approved and to come to an address on 21st Street in Philadelphia the following day with a record of their outstanding debts and the deed to their property.

The next day, December 22, 1965, defendants went to the address to which they had been directed, and were first met by a man named “Vic.” They spent about 15 minutes discussing the loan with him and were told that they would have to pay a $600 commission, and also that because of their youth, earning capacity and assets, they could borrow only $2,800 rather than the $4,000 they sought.

Vie then went out of the room and returned with one Hass, who repeated that they eouhl only borrow $2,800 and that the amount of commission would be $600- — $500 for lender and $100 for National Consumer Service, Tnc., which he represented, and that if they made tlioir payments on time, they might be eligible to borrow more. Then Vie and Hass left, them alone to discuss whether they wanted to go through with the transaction because of the commission. Before they made up their minds they were told that the commission would only be $500.

Defendants agreed to the loan and signed their names to a number of legal instruments under Hass’ direction of Mr. Hass. These included the promissory note for $4,431, payable to the order of Equity of Asbury Park, Inc. (Equity), on which the action was brought; a mortgage indenture in the same amount, also payable to Equity, and a closing statement detailing the disbursement of the borrowed moneys. The amount of the note was based on the principal purportedly loaned together with interest computed pursuant to the provisions of the Secondary Mortgage Loan Act, N. J. S. A. 17:11A-21, payable $73.85 per month for 60 months. They wore given four cheeks signed by Hass, drawn upon the account of Provident Abstract Co., three of which they think they took with them, and the fourth, for $500, they endorsed and gave back to Hass. This check was subsequently endorsed by National Consumer Service, Tnc. “for deposit only.” In the lower left-hand corner of this check, in Hass’ handwriting, there was written the letter “0”. Hass denied that this letter stood for “commission,” bnt he could not offer any further explanation for it.

Two of the three checks that defendants believe they took with them, in the amounts of $804.87 and $845.72, were respectively made payable jointly to defendants and National State Bank, and to defendants and Fidelity Union Trust Co. to whom they were indebted. These, they believe, were endorsed by them and mailed to the respective banks. The words “Proceeds of Loan” were written at the bottom left-hand side of the third check for $649.41 which they took with them. This check was taken to the drawee bank and paid to defendants on the same day.

The mortgage loan was stated to be $3,268.32 on the closing statement. It represented $2,300, the sum of the above amounts of $804.87, $845.72 and $649.41, and the following: $500 actually taken by National Consumer Service, Inc. for commissions; $85.96 “Credit Life Insurance”; $93.94 “Accident and Health Insurance,” and $288.42, the aggregate of charges for “Attorney’s Fee,” “Appraisal and Inspection Fee,” “Search Fee,” “Credit Investigation Fee” and “Recording Fee.” Although the insurance charges were marked “Optional” on the statement, I find that defendants actually had no real choice and were compelled to accept the charges.

At the conclusion of the transaction defendants requested some memorandum of the transaction and were given a longhand note by Hass, acknowledging that the loan was made “pursuant to the secondary lien act of 1965 (passed about July),” an apparent reference to the New Jersey Secondary Mortgage Loan Act of 1965, N. J. S. A. 17:11A-1 et seq. (sometimes referred to herein as the “act”), which was approved on June 9, 1965. Before they left, Vic gave them a small clock radio as a gift.

The mortgage was assigned by Equity to M. Lippineott Mortgage Investment Co. (Lippineott) by an assignment originally dated December 22, 1965 and later changed to the 23rd by writing over the “'22.” It was acquired by plaintiff from Lippincott on December 30, 1965 for $3,215.42. The note provided for payment to be made in Hammonton, New Jersey, where Lippincott maintained a one-man office in the same building (but not in the same office) as plaintiff. The location of Equity’s office was not disclosed.

A short time after this transaction defendants received a letter from National Consumer Service, Inc. acknowledging their being customers and saying that if they supplied five names of possible customers they would receive a pocket radio as a gift. They supplied the names and received the radio. They subsequently received a coupon book directing them to make their monthly payments to “HIMCO” in Hammonton, New Jersey. Pursuant thereto they made four payments of $13.85 each, for January, February, March and April 1966. “HIMCO” is the same entity as plaintiff.

Some months later, when defendants finally received copies of the papers, Mr. Siciliano felt that they had been overcharged. He alleged that he then learned for the first time that they had executed a second mortgage upon a one-family dwelling they owned. Defendants consulted an attorney, and in May 1966, through their attorney’s efforts and upon order of the New Jersey Banking Department, Equity returned to defendants the bill of sale for their automobile, which had apparently been obtained by it from National State Bank when the bank was paid.

In June 1966, again apparently as a result of efforts of their attorney, defendants recovered $500 from National Consumer Service, Inc., for which they executed a release discharging National Consumer Service, Inc. from any obligation in connection with the loan agreement but reserving all rights or defenses “in respect to third parties, relating to or arising out of a certain alleged mortgage dated December 22, 1965.”

This transaction comes within the definition of a “secondary mortgage loan” contained in the New Jersey Secondary Mortgage Loan Act of 1965, N. J. S. A. 17:11A-1(a). The statutory definition includes “a loan made to an individual * * * not to be repaid in 90 days or less which is secured in whole or in part by a mortgage upon any interest in real property used as a dwelling with accommodations for not more than 4 families, which property is subject to the lien of one or more prior mortgages * * *.” Equity was licensed under that law.

No question of constitutionality of the act has been raised as- in Crescent Investments Co. v. Commissioner of Banking and Insurance, 103 N. J. Super. 11 (Ch. Div. 1968). In any event, Judge Wick there held generally that the act was constitutionally valid.

CHOICE OE LAW

Pla-intiff urges that this transaction is governed by the laws .of the State of Pennsylvania, which laws, if applicable, would allegedly treat this transaction as a usurious one, with a forfeiture of interest only. This is in contrast to the treatment under the provisions of the New Jersey Secondary Mortgage Loan Act of 1965, which provides that “No obligation arising out of a secondary mortgage loan shall be enforceable in the courts of this State unless such loan was negotiated and made in full compliance with the provisions” of said act. N. J. S. A. 17:11A-29.

In choice of law cases, the courts favor a rule which resolves the question by applying the law of the state possessing the most substantial contacts with, the transaction, and considers the public policy of the states which are involved, rather than the mere mechanical application of a rule based on ease of application and convenience rather than reason and rational analysis. Mellk v. Sarahson, 49 N. J. 226 (1967); Kievit v. Loyal Protective Life Ins. Co., 34 N. J. 475 (1961); Mount Vernon Fire Ins. Co. v. Gillian, 95 N. J. Super. 279 (App. Div. 1967); Present v. United States Life Ins. Co., 96 N. J. Super. 285 (Law Div. 1967).

An analysis of the contacts and the respective interests of the states involved, Pennsylvania and New Jersey, leads to the inescapable conclusion that the law of the latter should apply; more particularly, the Secondary Mortgage Loan Act of 1965.

The borrowers were New «Jersey residents; the mortgage was on realty in New «Jersey; the forum State is New Jersey; the solicitation for the loan was in a New Jersey newspaper; the defendants were invited to call the advertised New Jersey telephone number ; the place of payment of the loan as originally provided in the promissory note is in New «Jersey; and significantly, the lender’s representative, both by written note given to defendants at the time of the transaction on December 22, 1965 and by letter to defendant’s attorney dated April 13, 1966, acknowledged that the New Jersey act was applicable to the transaction.

In addition to an analysis and weighing of the contacts of the two states with the contract, it is an established rule that a contract valid where made will not be enforced in this State if it contravenes the public policy thereof, or is inconsistent with that policy as declared by the Legislature. Lobek v. Gross, 2 N. J. 100, 102 (1949); Minzesheimer v. Doolittle, 60 N. J. Eq. 394, 397 (E. & A. 1899). Flagg v. Baldwin, 38 N. J. Eq. 219, 244 (E. & A. 1884); Thompson v. Taylor, 65 N. J. L. 107, 109 (Sup. Ct. 1900).

Tire Secondary Mortgage Loan x\et evinces a strong policy of this State which must not be disregarded, to wit, the protection of borrowers who come within its scope. I see no valid reason why the rule of Mellk, supra, a negligence (¡ase, should not be followed in contract cases. See the Kievit, Mount Vernon Fire Insurance Co. and Present cases, supra.

For these reasons I hold that the law of this state governs.

HOLDER IN DUE COURSE

Plaintiff also contends that it occupies the status of a holder in due course of the promissory note, and thus is not bound by the “personal” defenses of defendants with respect to their obligation.

The Uniform Commercial Code, N. J. S. A. 12A :3-302 defines a holder in due course as one who takes an instrument for value and in good faith and without notice that it is overdue or has been dishonored, or of any defense against or claim to it on the part of any person.

N. J. S. A. 12A :3-304(1) (b) states that a purchaser of commercial paper has notice of a claim or defense if “the purchaser has notice that the obligation of any party is voidable in whole or in part.”

N. J. S. A. 12A :3-307(3) provides that after the obligor shows that a defense to the obligation exists, a person claiming the rights of a holder in due course has the burden of proving that he is a holder in due course. To do this, plaintiff must show that it or some person under whom it claims is “in all respects” a holder in due course. “In all respects” means that it must sustain this burden by affirmative proof of the facts within the definition of a holder in due course. See N. J. S. A. 12A :3-302.

On the matter of plaintiff’s proving the element of good faith, the New Jersey Study Comment to N. J. S. A. 12A :3-307 states that the holder “satisfies his burdeu with respect to good faith by testifying that he took the instrument in complete innocence and by disclosing the circumstance of the transfer.”

Plaintiff has not introduced any evidence on this issue. Moreover, it cannot be disputed that Hass, the representative who closed the transaction for the lender, was well aware of the terms of the New Jersey law on the subject of secondary mortgage loans.

Additionally, the various entities which took part in the transaction, including plaintiff, appeared to have had a prearranged method of handling such transactions, as shown by the proximity of the Lippincott office and plaintiff’s in Hammonton, New Jersey: the provision in the note for payment at Hammonton; the swift transfer of the note and mortgage from Equity and, of course, the terms of the various other instruments which accompanied file transfer of the note.

All these circumstances show that plaintiff had actual knowledge (rather than a mere suspicion) of the legal deficiencies in the transaction.

Plaintiff was not a holder in due course. Consequently it took the promissory note subject to defenses raised here under the provisions of the Secondary Mortgage Loan Act. See N. J. S. A. 12A :3-306.

CONSEQUENCES OF THE APPLICATION OF THE SECONDARY MORTGAGE LOAN ACT

There were violations of the act, principally the extraction of a brokerage fee of $500, in violation of N. J. S. A. 17:11A-22(b), and the required purchase of insurance, in violation of N. J. S. A. 17:11A-22(c).

However, plaintiff claims defendants are estopped from raising the defense that the provisions of the Secondary Mortgage Loan Act were violated because under oath they executed the “Closing Statement” which in part provided: “We further aver and swear that there are no exceptions, defenses, set-offs or counterclaims now asserted or hereafter to be asserted against Equity of Asbury Park, Inc., their successors or assigns.” It also relies upon the fact that defendants were both educated and knew and understood what they were signing.

I cannot agree. The act was promulgated because local and out-of-state lenders were engaging in such transactions by fraud and chicanery. They procured, borrowers through the means of false advertising. They then extracted “unconscionable amounts of interest as well as exorbitant fees.” Crescent Investments Co. v. Commissioner of Banking and Insurance, supra.

As with the small loan business, the Legislature decided upon a policy of protection by regulation — not to illegalize the second mortgage loan business or to bind it so closely that it could not function. Edelstein v. Hub Loan Co., 130 N. J. L. 511, 513 (E. & A. 1943).

Consequently, the statute provides for licensing of lenders who desired to engage in such business in order to exercise some degree of control. N. J. S. A. 17:11A-2. The regulation was reasonably calculated to take into consideration the protection of the lender’s “risk” capital as well as the protection of the New Jersey borrower, whose urgent financial need left him without any real bargaining power. Cf. Brookchester, Inc. v. Ligham, 17 N. J. 460 (1955).

Such being the legislative policy, assuming that defendants signed the closing statement with full knowledge of the contents and with full intention to be bound, the court cannot uphold the defense of estoppel.

The strong policy of the act may not be dissipated by the facts asserted to establish the estoppel. To hold otherwise would sanction the circumvention of the salutary benefits afforded by the law by means never contemplated by the statute which promulgated the policy.

Our Supreme 'Court, in dealing with a similar waiver of defenses clause in a sales contract, concluded that “the clause is an unfair imposition on a consumer goods purchaser and is contrary to public policy.” Unico v. Owen, 50 N. J. 101, 123 (1967). The clause is equally contrary to the public policy which is applicable here.

EQUITABLE RELIEE SOUGHT BY BORROWER

■As already observed, defendants were successful in securing •the payment of $500 to them upon a complaint that National Consumer Service, Inc. violated the act by taking this sum as a commission.

Defendants seek a judgment on their counterclaim directing plaintiff to cancel of record the second mortgage lien which was effected as a result of the loan.

Plaintiff’s objection to this rests upon its claim that it would be inequitable to grant this relief, since, even assuming excessive charges and fees, defendants have received a total of $2,800 — $2,300 at the time of the loan and $500 returned from National Consumer Discount, Inc. They had made four installment payments totalling $295.40.

The statutory remedy for violation of the provisions of the act is to render the obligation unenforceable. N. J. S. A. 17:11A—29. There is no provision for the cancellation of the mortgage, nor any provision for the repayment to the borrower of any payments already made or unlawful fees and commissions charged. Certainly this was a consequence which the legislation must have contemplated but deliberately failed to require.

Plaintiff argues that in seeking the equitable remedy of cancellation of the mortgage, defendants should do equity by at least repaying, without interest, the sum actually borrowed and received.

There is no doubt that the consequences to the lender of the violation of the act are drastic, although it should be noted that they are not as harsh as the penalty imposed by the Small Loan Law, N. J. S. A. 17:10-1 et seq., whereby the borrower is additionally “entitled to recover from the lender any sums paid or returned to the lender by the borrower on account of or in connection with the loan.” N. J. S. A. 17:10-14.

The Secondary Mortgage Loan Act is penal as to the lender and remedial as to the borrower. Cf. Ryan v. Motor Credit Co. Inc., 130 N. J. Eq. 531, 541 (Ch. 1941), affirmed 132 N. J. Eq. 398 (E. & A. 1942). In the “run-of-the-mill” case arising under this act, barring any collusion as was present in Ryan, or other inequitable conduct, since the note and mortgage are not enforceable the court will usually grant the request of the borrower, to have the (now unenforceable) mortgage cancelled. However, the case before us presents one factor which takes it out of the “run-of-the-mill” category.

After defendants engaged counsel and found out that plaintiff could not, under the law, enforce payment of the note, they ceased making payments. Notwithstanding this knowledge, they sought and recovered $500 which had been deducted from the amount supposedly loaned to them. Since the law does not forbid repayment of the loan by the borrower, or allow the borrower to maintain an action for the return of his pajunents, as does the Small Loan Law, when defendants received the additional $500 it was presumably paid to them under the assumption and with the intention that they would now repay the loan according to the terms of the note.

Their action in accepting the $500 under these circumstances smacks of inequitable conduct and an attempt to penalize plaintiff, and at the same time to personally profit to a greater extent than contemplated by the legislative purpose. Defendants could only justify the taking of this $500 if they intended to repay the amount actually received by them.

Consequently, I will direct that the lien of the mortgage be cancelled of record only upon the repayment of $500 by defendants to plaintiff, together with interest frpm the date of the receipt by defendants of the $500 from National Consumer Discount, Inc. '

I do not discuss any other contentions advanced by plaintiff since I do not find them of sufficient merit to warrant further discussion.

Accordingly, judgment will be entered dismissing the complaint and directing cancellation of the record of the mortgage upon the terms referred to.

       Number 1 of “Rules and Regulations”, adopted by the Department of Ranking and Insurance, provides:
      Notwithstanding the place of execution, nominal or real, of a secondary mortgage loan, if the real property is located in this State, said secondary mortgage loan will be deemed to be subject to The Secondary Mortgage Loan Act of 1965 and all other laws of the State of New Jersey.
      Same has been disregarded by me because the effective date of said rules and regulations was December 27, 1965, five days after the date of the transaction involved in this case.


author: Larner, J. S. C.

text:
    THE CITY OF NEWARK AND THE PORT OF NEW YORK AUTHORITY, PLAINTIFFS, v. THE ESSEX COUNTY BOARD OF TAXATION, DEFENDANT, AND TOWN OF BELLEVILLE, ET AL., INTERVENING DEFENDANTS.
    Superior Court of New Jersey Law Division
    Argued May 10, 1968
    Decided June 26, 1968.

      Mr. Norman N. Schiff for plaintiff, The City of Newark.

      Mr. Francis A. Mulhern, Solicitor, for plaintiff, The Port of New York Authority (Mr. Sidney Goldstein, General Counsel, of the New York bar, of counsel).

      Mr. Charles H. Landesman, Deputy Attorney General, for defendant, The Essex County Board of Taxation (Mr. Arthur J. Sills, Attorney General of New Jersey, attorney).

      Mr. Saul A. Wolfe for Intervening Defendants (Messrs. Skoloff £ Wolfe, attorneys).
   Larner, J. S. C.

This action was instituted by the Port of New York Authority (hereinafter port authority) for a declaratory judgment that certain lands and buildings leased by the City of Newark (hereinafter city) to the port authority in the Port Newark area are exempt from local taxation. The city did not ally itself with the position of the port authority, but joined as a party plaintiff for the purpose of achieving a determinative resolution of the issue by judicial declaration.

The particular focus of this litigation is the action of the Essex County Board of Taxation in the form of a resolution dated January 1967 removing the properties in question from the exempt rolls and directing the city to include them in the tax lists for the tax year of 1967.

The Essex County Board of Taxation contends that the properties and their use are not such as to warrant tax exempt status and that the county’s share of the city’s taxes should be increased accordingly.

All the other municipalities of the County of Essex have intervened in the action by permission of the court in view of their financial interest in the controversy, contending that the properties should be assessable for taxation and that the exemption from taxation would increase their tax burden to the county.

Background IItstory

Although the issues before the court involve only the determination of taxability for the year 1967, it is important to note the history of the relationship between the city and port authority and their involvement in this tax controversy in past years.

Plans for the development of a marine terminal on Newark Bay date back to the beginning of this century, with study commission reports and legislation leading to public ownership and operation of marine terminals. L. 1911, c. 161; New Jersey Harbor Commission, Fourth Preliminary Report (1914) p. 184-188; L. 1916, c. 162; R. S. 40:179-58 et seq.; L. 1917, c. 127; R. S. 40:179-46 et seq.; L. 1920, c. 176, R. S. 40:179-34 et seq.

Pursuant to the authority of the foregoing legislation, the City of Newark developed the marine terminal complex in the Port Newark area, covering approximately 700 acres, including the leasing of docks, lands and buildings to private concerns.

In the interim, New Jersey and New York entered into an interstate compact pursuant to Congressional authority, establishing the Port of New York District .and creating the Port of New. York Authority as the bi-state agency for the purpose of developing the port district. N. J. S. A. 32:1—2 et seq.

In 1945, the City of Newark requested the port authority to undertake a study of all matters relating to Port Newark and Newark Airport for the purpose of considering the possibility of the port authority undertaking the management and administration. As a result of such a study legislation was adopted in 1947 authorizing the cooperation between the port authority and municipalities in the development .of marine terminals. N. J. S. A. 32:1-35.28 et seq. Parallel legislation was adopted in the State of New York. N. Y. UNCONSOL. LAWS, § 6671 et seq. (McKinney 1948), Under this legislation, municipalities were empowered “to consent to the use by the port authority of any marine terminal owned by such municipality * * * [and] to grant, convey, lease or otherwise transfer to the port authority any such marine terminal or real or personal property upon: such terms as may he determined by the port authority and such municipality.” N. J. S. A. 32:1-35.31. In addition, every municipality was also authorized “to vest in the Port Authority the control, operation, maintenance * * * of any marine terminal now owned by such municipality.” Id.

instead of conveying the marine terminal properties to the port authority or retaining the port authority as a managing agent of the marine terminal within the ambit of the foregoing legislative authorization, the city entered into a lease agreement with the port authority on October 22, 1947 demising certain premises for a term of 50 jrears for marine and air terminal purposes, lender this lease, which carried a basic rental of $128,000 per year, the port authority assumed all the existing leases theretofore made by the city, and was authorized to sublet parts of the demised premises for the stated marine and air terminal purposes. Since entering into possession, the port authority has sublet most of the properties involved in the leasehold to private concerns, and that is the factual pattern which existed on October 1, 1986, ihe key assessment date for the tax year of 1967.

In 1960, the city concluded that certain of the demised premises were not being used for air and marine terminal purposes and should be subject to ordinary taxation. It therefore applied to the Essex County Board of Taxation to list these properties on the tax rolls as omitted assessments. The same approach applied to the tax years of 1961, 1962, 1963, 1964 and 1965. The Essex County Board determined that the property should be assessed with the port authority listed as “Owner”.

This determination inspired appeals to the appellate division and suits in the law and chancery divisions of the Superior Court, which became so “snarled procedurally” that the Supreme Court finally took jurisdiction of all aspects of the complex litigation and remanded the matter to the law division to hear de novo all the issues involved in the entire controversy. Port of New York Authority v. Essex County Board of Taxation, 46 N. J. 51 (1965).

Subsequent to the remand and pending the trial in the law division, the city and the port authority effected a settlement of their differences involving the tax years from 1960 to 1965 inclusive by entering into the “Ninth Supplemental Agreement with Respect to the Newark Marine and Air Terminals,” dated December 14, 1966. As part of the settlement agreement, the annual rental was increased from $128,000 to $1,000,000, with a provision for additional rental using a formula based upon a computation of the net revenue of the port authority.

Among other provisions relating to advance payments and retroactive rent for 1966, the agreement provided:

“In the event the City or the Port Authority, or both, under any law that may hereafter be enacted or applied, shall be or become subject to and liable for payment to the county in which the demised premises are located of any taxes, assessments or governmental levies or imposts upon or against the demised premises or upon any part or parts thereof then, as between the City and the Port Authority, the Port Authority shall pay the same and such payment by the Port Authority shall be included in the operation and maintenaee expense.”

It was also stipulated that all litigation pending between the parties would be dismissed with prejudice and that the city would designate on its tax records that all the properties involved in the leasehold are tax exempt.

The agreement went into effect, the prior litigation was dismissed, and the City marked the properties exempt on its tax roles. On a review of the assessments of the city for the taxable year 1967, the Essex County Board of Taxation set aside the exemption and directed that the city restore the demised properties to its tax rolls. The city complied with this directive and thereafter the present suit was brought for declaratory judgment relating to the taxability of the affected properties for the year of 1967. The determination of tlie taxability of the property in the context of this litigation is a mixed question of law and fact, involving the exploration and delineation of the controlling legal guidelines and the application of those guidelines to the specific properties according to their function and use. It is therefore advisable to discuss first the legal principles which must be applied to the factual patterns revealed by the evidence.

Legal Pblyctples

Preliminarily, the court will dispose oí the contention made by the defendants that the port authority does not have the standing to bring this action. Tt is urged that the authority is not the owner of the properties involved and that the tax assessment ordered by the Essex County Board of Taxation is against the ownership interest of the city and not the leasehold interest of the port authority as authorized by N. J. S. A. 54:4-2.3; and that as a consequence the port authority has no right to relief. Although the Authority is not the owner of the properties involved, it has a substantial financial stake in the taxability of the properties through its obligations under the lease with the city; and as a result has the requisite standing to seek declaratory relief. N. J. S. 2A :16-56. See Port of New York Authority v. Essex County Board of Taxation, 46 N. J. 51, 53 (1965); Bergen County v. Port of New York Authority, 32 N. J. 303, 307 (1960).

Any discussion of the taxability of property in the State of New Jersey must commence with the basic legislative mandate that “all property, real and personal, within the jurisdiction of this state not expressly exempted from taxation * * * shall be subject to taxation.” N. J. S. A. 54:4-1. The fundamental question therefore is whether or not the properties in question are expressly exempt from taxation.

Initially, it is clear that the legislature has not granted a specific exemption from local property taxation for property owned or used by the port authority as a marine terminal by any of the provisions of the 1947 enabling legislation. (N. J. S. A. 32:1-35.28 et seq.).

The port authority however points to the provisions of N. J. S. A. 32:1-144 as a basis for tax exemption:

“To the end that * * * cities * * * in the Port of New York District, may not suffer undue loss of faxes and assessments by reason of the acquisition and ownership of property therein by the Port of New York Authority * * * the port authority is hereby authorized and empowered, in iis discretion, to enter into a voluntary agreement or agreements with any * * * city * * * in said port district, whereby it will undertake to pay a fair and reasonable sum or sums annually in connection with any marine or inland terminal property owned by it, not in excess of the sum last paid as taxes upon such property prior to the time of its acquisition by the port authority.”

The authority cites the cases of Port of New York Authority v. City of Newark, 20 N. J. 386, 393 (1956) and Bush Terminal Co. v. City of New York, et al., 282 N. Y. 306, 26 N. E. 2d 269 (1940) as authority for the contention that the section impliedly grants a tax exemption to property owned and used by the port authority for marine terminal purposes, since the legislature in passing this section must necessarily have assumed that such property was exempt from taxation.

It is true that where the facts bring into play the “in lieu of” tax statute, the courts of last resort of the States of New York and New Jersey have held that their respective legislatures impliedly intended to grant tax exemption to the port authority despite the absence of a specific exemption in the legislation. Port of New York Authority v. City of Newark, supra; Bush Terminal Co. v. City of New York, supra.

These precedents, however, are distinguishable from the present case in two respects. Pirst, the Essex County Board of Taxation did not ■ direct that the property be assessed to the port authority; and second, the ownership of the property in question is not in the port authority, which is a prerequisite of the application of the “in lieu” statute. N. J. S. A. 32:1-144. Hence, it is the conclusion of this court that the reasoning of the foregoing cases cannot serve as a basis for exemption of properties owned by the city and leased to the port authority. This avenue of tax exemption by statutory implication from N. J. S. A. 32:1-144 is not available to the city in the context of the facts herein.

Another basis of exemption advanced by the port authority is the provision of R. S. 40:179-42 which states:

• “Every industrial terminal, and also all additions, extensions and improvements thereof, erected pursuant to the terms of this act. and every interest or estate therein, except personal property of any tenant or lessee shall, during the term of any lease thereof made as herein provided, be exempt from all taxes and assessments within this state.” (Emphasis supplied.)

This section of the statute was part of the comprehensive legislation passed in 1920 authorizing any city fronting upon navigable waters to establish an industrial terminal including docks, warehouses, ferries, terminals and shipping and industrial facilities, and to acquire lands for said purpose. It is urged that since the properties involved in this litigation were initially operated by the city pursuant to R. S. 40:179-34 prior to the time when port authority went into possession under its lease and since the provisions of R. S. 40:179-35 expressly permit a city to lease the industrial terminal facility for a term not exceeding fifty years, the tax exemption provided by R. S. 40:179-42 should apply to the port authority.

An analysis of this legislation involving industrial terminals reveals that it is not the applicable statute which controls the operation of the marine terminal in port Newark since 1947. It was the legislation under which the port was operated by the city between 1920 and 1947. However, when the city relinquished possession and control to the Port Authority by the lease of 1947, it did so pursuant to the legislation adopted for the very purpose of authorizing the arrangement between the city and the port authority, namely N. J. S. A. 32:1-35.28 et seq. See Port of New York Authority v. Hackensack Water Co., 41 N. J. 90, 95.

Any doubt as to the identification of the enabling legislation which controls the operation of the port by the port authority was resolved by the parties themselves in their original lease arrangement in the following language:

“WHEREAS, by the Treaty of April 30, 1921, creating the Fort of New York Authority, the two said states granted to the Port Authority full power and authority lo purchase, construct, lease and operate marine terminals within the Port of New York District, and by Chapters Forty-four [N. J. S. A. 32:1-35.28, et seq.] and Six Hundred and Thirty-one, respectively, of the Daws of New Jersey and the Daws of New York of 1947, said two states have authorized and empowered cities and other municipalities in the Port of New York District to cooperate with the Port Authority in the development of marine terminals and to consent to the use by the Port Authority of marine terminals owned by them and of any real and personal property owned by them, * *

In Section I, Definitions, the following also appears:

“ ‘Marine Terminal’ and ‘Newark Marine Terminal’ shall mean a Marine Terminal as defined in Section Three of Chapter Forty-four of the Laws of New Jersey of 1947, [N. J. S. A. 32:1-35.20] * * *."

By the foregoing, the city and the port authority acknowledged in 1947 that the operation of the port by the port authority was accomplished pursuant to the authority and terms of the recently adopted legislation, namely Chapter 44 of the Laws of 1947 (N. J. S. A. 32:1-35.28 et seq.) and not the pre-existing legislation adopted in 1920 consisting of Chapter 176 of the Laws of 1920 (R. S. 40:179-34 et seq.) Hence the exemption set forth in R. S. 40:179-42 which by its terms is limited to industrial terminals erected pursuant to the 1920 legislation is not applicable to the current operation of the port by the port authority, and cannot serve as the basis of statutory exemption claimed by the authority.

The port authority advances as a final ground of tax exemption the provision of N. J. S. A. 54:4-3.3 which exempts from taxation the property of taxing districts used for “public purposes.” It is clear that property owned by a municipality, as is the ease here, is exempt from taxation, if and only if that property is used for “public purposes.” Jamouneau v. Division of Tax Appeals, 2 N. J. 325 (1949); Teaneck Township v. Division of Tax Appeals, 10 N. J. Super. 171 (App. Div. 1950). In fact, public use is a necessary prerequisite in order to bring publicly owned property within constitutional standards for tax exemption. New Jersey Turnpike Authority v. Washington Township, 16 N. J. 38, 44 (1954); Const. Art. VIII, Sec. 1, par. 1. Since the statute requires both public ownership and public use to qualify the property for tax exemption, the mere receipt of rentals from a private lessee with financial benefits to the public agency does not transform a private use into a public use. Jamouneau v. Division of Tax Appeals, supra, 2 N. J., at p. 333. As observed by Justice Francis in Borough of Moonachie v. Port of New York Authority, 38 N. J. 414, (1962):

"[TM roperty owned by a public agency but employed primarily to obtain revenue or profit through private business uses is not immune from taxation, but property employed primarily for a public use does not lose immunity because the agency incidentally derives some private business income from it.” (at p. 426)

Although tax exemptions sought by private owners tire strictly construed and will not he extended beyond the ascertainable intention of the Legislature, Deubel v. Kervick, 33 N. J. 568, 574 (1960), our courts have adopted a more liberal attitude toward tax exemptions sought by governmental agencies. Walter Reade, Inc. v. Dennis Township, 36 N. J. 435, 440 (1962); Township of Hanover v. Town of Morristown, 4 N. J. Super. 22, 24 (App. Div. 1949). In cases involving governmental agencies, the requisite of use for public purpose is accorded a liberal construction — one reasonably broad to encompass the legislative aims. Id.

This so-called liberal construction however must be tempered by a countervailing policy consideration dictated by the increasing removal of real property by public agencies from the tax rolls of local governments. In Moonachie, supra, the Supreme Court pointed out:

“Recent years have witnessed also a steadily increasing takiug of private property by botli state and federal governments and various agencies thereof for public purposes, thus removing it from the tax rolls and casting a proportionately greater share of support of state and local government upon the private property owner. * * * Exemption of industrial property from taxation or its removal from tax rolls causes a particularly severe impact upon local government. Such property is a vital part of the tax base, in most communities since the tax revenue derived from it, as distinguished from residential property, usually greatly exceeds the cost of providing local public services. And it may be said that there are no substantial differences, either in the nature of their activity or in the economic effects upon local communities, between privately owned industrial plant's, and buildings owned by the Port Authority and leased for industrial operations unrelated to air terminal purposes.” (38 N. J., at p. 423)

The severe impact of such public agency encroachment upon the tax structures of our municipalities requires a form of braking action by our courts so as to permit exemptions only for such uses as are clearly within the intendment by the legislature.

Thus, the applicable guideline is whether the uses made of the involved properties as of October 1, 1966 were true public uses within the intent of the Legislature when it authorized the City of Newark to lease to the port authority the Port Newark complex for the development of a marine terminal.

The intervening municipalities of Essex County urge that the use of the properties for marine terminal purposes, even within the legislative authorization, is not equated with “public use” as required by N. J. S. A. 54:4-3.3. The port authority contends that the properties in question are being used for a public purpose since they are being used'as a marine terminal pursuant to N. J. S. A. 32:1-35.28 et seq. The other parties concede that a marine terminal is a public use and that the ultimate issue presented by this litigation is whether the properties are used for marine terminal purposes.

It is manifest from the legislation authorizing the development of air terminals (N. J. S. A. 32:1-35.1 to 32:1-35.19) and marine terminals (N. J. S. A. 32:1-35.28 to 32:1-35.36) and the history leading to this legislation that the legislature of our state mandated that the use of property by the port authority for the purposes defined therein constitutes a public use. See Port of New York Authority v. City of Newark, 20 N. J. 386 (1956). Moreover, the Supreme Court in Port of New York Authority v. Hackensack Water Co., 41 N. J. 90 (1963) referred to the Port Newark operation as follows:

“Two small items here involved relate to the Port Newark Marine Terminal, operated by the Port Authority under a lease from its owner, the City of Newark, pursuant to legislation of the States of which the New Jersey counterpart is N. J. S. A. 32:1-35.28 et seq. These terminal facilities are in the public use.” (Emphasis supplied), (at p. 95)

As a consequence, there is no doubt that a “marine terminal” purpose is also a “public purpose”; and that properties at Port Newark operated by the port authority under its lease with the City which are used for marine terminal purposes are tax exempt. Conversely, such properties which are not used for “marine terminal” purposes are subject to ordinary taxation, regardless of public ownership by the City and public operation by the port authority.

It is also manifest that these consequences follow regardless of the fact that the properties may be sub-let by the port authority to private concerns. It is the use and purpose which control within the framework of the public ownership in this case, and not the identity of the particular individual or corporation carrying out that purpose under lease or sublease from the city. Port of New York Authority v. City of Newark, supra, 20 N. J., at p. 395; Walter Reade, Inc. v. Dennis Township, supra; Town of Bloomfield v. Division of Tax Appeals, 84 N. J. Super. 19 (App. Div. 1964).

There thus remains for consideration the nature, type and extent of the business activities which are encompassed within the designation “marine terminal”, in order to tost the tax-ability of the particular property uses reflected' by the evidence.

The statutory definition of a marine terminal is that contained in the Marine Terminal Act (N. J. S. A. 32:1-35.28 et seq.) which authorized the agreement between the city and the port authority, and which was incorporated by reference in the lease of October 22, 1947. N. J. S. A. 32:1-35.30 provides in pertinent part:

“ ‘Marine terminals’ shall mean developments, consisting of one or more piers, wharves, docks, bulkheads, slips, basins, vehicular roadways, railroad connections, side tracks, sidings or other buildings, structures, facilities or improvements, necessary or convenient to the accommodation of steamships or other vessels and their cargoes or passengers.
“ ‘Marine terminal purposes’ shall mean the effectuation, establishment, acquisition, construction, rehabilitation, improvement, maintenance or operation of marine terminals.”

A further relevant definition appears in the basic compact between the States of New York and New Jersey which created the Port of New York Authority. N. J. S. A. 32:1-23 provides in pertinent part:

“ ‘Terminal facility’ shall include wharves, piers, slips, ferries, docks, dry docks, bulkheads, doclcwalls, basins, earfloats, floatbridges, grain or other storage elevators, warehouses, cold storage, tracks, yards, sheds, switches, connections, overhead appliances, and every kind of terminal or storage facility now in use or hereafter designed for use for the handling, storage, loading or unloading of freight at steamship * * * terminals.”

Tn the “Principles to Govern the Development” of the Port of New York, the Legislature proclaimed: (N. J. S. A. 32:1-26)

“First — That terminal operations within the Port district, so far as economically practical, should be unified;
“Second — That there should be consolidation of shipments at proper classification points, so as to eliminate duplication of effort, inefficient loading of equipment, and realize reduction in expenses.”

It is evident that the legislative design contemplated that the port authority would develop the port for the substantial benefit of the surrounding communities and their citizens; and that all activities reasonably necessary for the operation of a marine terminal would properly represent public uses.

It is also evident that the operations encompassed by the statutory definition of a marine terminal involve lands, structures and buildings utilized in the flow and movement of water-borne cargoes and passengers. And this includes not only the usual land accoutrements for shipping, such as piers, docks, wharves, railroad connections, sidings, etc., but also such “buildings, structures, facilities or improvements, necessary or convenient to the accommodation of steamships or other vessels and their cargoes or passengers.”

The permissible uses should be construed broadly in order to effectuate the basic purposes of the Bi-State Compact and the creation of the port authority, N. J. S. A. 32:1-35.32. However, such liberal construction can only be exercised within the limits of the statutory definition of the activities and functions of a marine terminal, which have as their common denominator the accommodation to the flow and movement of water-borne cargoes and passengers. Thus, even if the land, building or structure is not used for one of the enumerated purposes, it is nevertheless within the authorized uses if it is reasonably necessary or convenient for the efficient operation of a marine terminal. In re Township of Moon, 387 Pa. 144, 127 A. 2d, 361, 364 (1956). However, unless the use is one which is convenient or necessary for the operation of a marine terminal as a public instrumentality, it cannot qualify as a public use for tax exemption despite its incidental benefit to the public and to the public agency. Town of Harrison v. County of Westchester, 13 N. Y. 2d 258, 246 N. Y. S. 2d 593, 196 N. E. 2d 240 (1963); Borough of Moonachie v. Port of New York Authority, supra.

The evidence reveals that the uses of the involved properties are mainly concerned with water-borne imports and exports, which fall into the following general functional categories: (1) transit functions, temporary storage, and supporting services; (2) warehousing; (3) sales and delivery of merchandise; (4) processing and manufacturing. In addition, there are some uses which cannot be categorized and which must be analyzed on an individual basis.

In anj' event, the major areas of dispute arise with properties which are utilized by private companies under sublease from the port authority for the conduct of ordinary business activities involving the sale and delivery of goods to customers, warehousing of goods, and the processing and manufacturing of products.

The port authority contends that the uses of the properties in October 1966 were substantially the same uses which existed in October 1947 when the port authority entered into the lease with the city; and that as a result thereof, the court should declare such uses to be encompassed within the definition of “marine terminal.-” It urges that the legislature adopted the enabling legislation (N. J. S. A. 32:1-35.28 et seq.) in apparent recognition of the existing facilities and uses in the Port Newark complex operated by the city and that it thereby sanctioned the continuation of those uses as part and parcel of a marine terminal by the port authority under its contemplated lease with the city.

Such an argument presupposes that the legislation in question applies by its terms solely to the port of the city of Newark and that the statute is a special one for that city and its peculiar characteristics and problems. Although the impending lease with the City of Newark may have inspired the passage of the legislation, by its terms the statute applies to all municipalities within the Port of New York District. The statute does not purport in express language to equate the status quo of property uses iu the City of Newark with the permissible uses of a marine terminal. It rather defines in explicit terms the meaning of a marine terminal.

It is the duty of this court to construe the legislative intent within the limitation of the terminology utilized in the finalized text of the statute, and not within conjectural assertions as to the unexpressed intentions of the legislators when the statute was adopted. Petrangeli v. Barrett, 33 N. J. Super. 378, 386 (App. Div. 1954); Dumont Lowden, Inc. v. Hansen, 38 N. J. 49, 56 (1962).

Hence the court in passing upon the current property uses on October 1, 1966 is not controlled or persuaded by the nature of the uses in 1947. Neither the legislature by statute nor a- court by judicial determination has frozen the definition of marine terminals to the existing uses during the period pre-existing the port authority lease. The court must make independent findings based upon the factual pattern of 19*66, as controlled by the statutory definition of marine terminals.

In a further effort to expand the ambit of functions and uses involved in the operation of a marine terminal, the port authority offered testimony of two experts, trained and experienced in the management and operation of ports and marine terminals. One of these experts, Albert Lyle King, an employee of the port authority, offered his own definition of a marine terminal as follows:

“A marine termina], in my concept, is a complex of wharves, warehouses, open land and miscellaneous buildings for the purpose of generating and transferring cargo between land and water carriers and providing facilities for servicing, processing and distributing cargo."

By this definition as elaborated by his other testimony, Mr. King took the position that one of the important goals of the authority in the operation of the Newark Marine Terminal is to generate shipping business by attracting companies to the port area who are engaged in export and import activities. He asserted that such concerns should be considered part of a marine terminal and permitted to operate within the leased area of the port in order to compete with ports of other cities such as Philadelphia and Baltimore. It was his conception that these businesses should be located in the port and therefore properly within the operation of a marine terminal so that the port may develop into a bustling trade center which would in turn generate substantial shipping activity. It is for that reason that he included in his definition of a marine terminal the use of land and buildings for the purpose of generating cargo.

It was also because of this approach that the expert included within the definition of a marine terminal, uses involving the processing of fabricating of goods. It was his opinion that such an industrial activity is properly a marine terminal purpose so long as the goods are placed in waterborne commerce through importation or exportation. He also concluded that concerns engaged in the export and import business selling merchandise which is water-borne qualify as appropriate users of port properties within the limits of a marine terminal.

There is no doubt that the basic goals and motives of this expert and his employer, the port authority, are laudable from the viewpoint of the business development of the Port and the economic welfare of the city. These goals however are not the controlling test of taxability. They may be efficient and profitable standards for the development of a marine terminal when unhampered and unlimited by legislative controls. However, the desires and goals of the port authority in its ever-expanding activities cannot run counter to the legislative mandate. Definitions of the port authority or its experts based upon their best business judgment are of no legal significance on the issues at hand, which must be tested by the limitations of the statutory definition and not by the business judgment of the port authority executives and experts.

It is therefore incumbent upon the court to control the expansion of port authority activities via the route of tax exemption by limiting this extraordinary privilege only to those uses and purposes which are clearly within the legislative intendment. Public use is not synonymous with port authority use; it is synonymous with the uses designated by the legislature for a marine terminal.

Based upon this standard of legislative construction, which of the properties involved come within the statutory requirement that a marine terminal encompasses buildings, structures and facilities “necessary or convenient to the accommodation of steamships or other vessels and their cargoes or passengers” ? The evidence of the uses and purposes of the particular properties on October 1, 19'66 is not in substantial dispute. As far as possible, it would be appropriate to consider the specific properties in the applicable classes of the functional categories outlined above.

[The court proceeds to consider the taxability of each of the involved properties within the functional categories set forth supra. Generally, the court arrives at the following conclusions:

1. Properties used for transit functions, temporary storage and supporting services are exempt from taxation.

2. Properties used for general warehousing are taxable.

3. Properties used for sales and delivery of merchandise are taxable.

4. Properties used for processing and manufacturing are taxable.

5. Miscellaneous properties — some taxable, some exempt (as set out in filed opinion).]