State v. Assessors, 24 N.J.L. 370 (N.J.)

The Chief Justice.

The prosecutors complain of the illegality of an assessment of taxes, made upon their property by the assessors of the township of Paterson, in the year 1849.

1. The first ground of complaint is, that the real estate of the prosecutors was illegally assessed. It is claimed that, by the fourth section of their act of incorporation, the lands of

the society are exempt from taxation for all purposes whatever, except for the use of the state. By that section it is enacted “that all the lands, tenements, hereditaments, goods, and chattels, to the said society belonging, shall be, and they are hereby declared to be, free and exempt from all taxes, charges, and impositions whatsoever under the authority of this state, whether for state or for county uses, or for any other use whatsoever; provided, always, that the said exemption shall not be construed to extend to the private or separate property of any member of the said corporation, in his or her individual capacity; and, as touching the lands, tenements, and hereditaments of the said society, shall continue in force for the term of ten years only, after which term it shall be lawful to lay such taxes for the use of the state upon the said lands, tenements, and hereditaments as shall be laid upon other lands, tenements, and hereditaments of like value, nature, or description.”

.The language of the enactment leaves no room for the application of the principle adopted in the case of The Railroad Co. v. Hillegas (3 Harr. 11, 71,) that all taxes are state taxes, because they are imposed by the authority of the state. This section, in the most explicit terms, distinguished between the authority by which the taxes are assessed and the uses to which they are to be applied. The exemption is “ from all taxes, charges, and impositions whatsoever under the authority of this state, whether for state or for eounty uses, or for any other use whatsoever.” The proviso is, that, as to the lands, the exemption “ shall continue in force for the term of ten years only, after which it shall .be lawful to lay such taxes for the use of the state upon .the said lands, &c., as shall be laid upon other lands, <fcc., of like value, nature, or description.” The first clause of the proviso, standing alone, would limit the operation of the exemption clause, so far as regards the real estate, to the term of ten years. The second clause of the proviso qualifies the limitation, by confining it to a particular class of taxes. The effect of the whole proviso, taken together, is not to determine the entire operation of the exemption clause at the end of ten years, but to narrow its ope

ration at that time to a part of the subject matter to which it originally applied.

It was argued with much ingenuity that, by the proviso, the exemption of the real estate from taxation totally ceases at the expiration of ten years; that the last clause of the proviso was designed merely to provide for the mode in which the state taxes should be assessed, and cannot by mere implication revive the exemption from township and county taxes. However plausible the suggestion may be, it is obvious that it is not the natural and plain meaning of the section. That construction can only be reached by detaching the various members of the sentence from the relation in which they stand to each other. The proviso, as it stands in relation to the exemption clause, declares that the exemption of the lands of the society from all taxes, for state, county, or other uses, shall continue in force for the term of ten years only, after which the exemption shall not include taxes for state uses.

By the terms of the charter, the lands of the society were exempted from all taxes whatever under the authority of this state for the term of ten years. From the expiration of that term the lands are exempt from all taxes for county, township, or city purposes. They are liable to taxes under the authority of this state for the use of the state only. It is conceded that the entire assessment sought to be relieved against in this cause was made for township and county uses.

It was decided by this court, in the case of The State v. Mansfield (3 Zab. 510), that where the property of an incorporated company is by their charter exempted from taxation, the exemption extends only to such property held by the company as is necessary to effect the1 purposes of their incorporation. It is objected, in this case, that none of the real estate of the prosecutors is held by them for uses incident to the object of the incorporation; that the society was originally incorporated for carrying on the business of manufactures in this state; that they have long since ceased to carry on the business of manufactures, and have abandoned all intention of returning it; and that they have perverted the institution from its original design, by confining their operations to ere

ating water ¡lower, and leasing out sites and water privileges for manufacturing establishments; and hence it is insisted, upon the authority of the case just cited, that the society cannot claim the benefit of the exemption from taxation granted in their charter.

This very objection was urged against the society, as a ground of forfeiture of charter, on an application by them for an injunction against the Morris Canal Company, before Chancellor Williamson, at January term, 1829. The objection, as it is now presented, cannot be more appropriately answered than in the language of the learned and sagacious chancellor on that occasion.

“Yor has the society, in my opinion, by employing their funds in improving the natural advantages of the district, by increasing their water power and multiplying seats for manufacturing establishments, and granting leases for manufacturing purposes to individuals and private companies, either abused their corporate powers or perverted the institution from its original design. A right to improve their estate, and to sell, lease, or otherwise dispose of its property, is incident to all •corporations, unless restrained by the provisions of their charter ; and the society, as the proprietors of the lands, had the clear right, without the grant of an express power for the purpose, to have done all those things. But the legislature has expressly granted to the society, not only a capacity to acquire and hold lands, but to sell, grant, demise, alien, and dispose of them. And without a power to improve and sell or lease, I would ask, what would have been the condition of the town of Paterson in comparison with its present condition ? where its 8000 souls, its cotton and iron business, and its various other branches of manufactures, now successfully carried on there ? Without those rights and powers, all the natural advantages of the place, this - important stream of water, capable of supplying numerous manufactories, and thereby furnishing employment for many thousands of men, women, and children, must have been held by the society a monopoly of privileges and advantages, without a capacity to use them, or power to permit others to do it. The society has, by the exercise of this

power and the judicious management of its funds, actually introduced and established manufactures, excited numerous individuals to enterprise and industry, drawn into the district capital and manufacturers, and built up a large flourishing town, and thereby greatly added to the wealth and population of New Jersey, and elevated her character in the Union as a manufacturing state • and I have not any doubt that the population, active industry, and wealth of the district have been much better promoted, and the interest of the state infinitely more advanced, by the employment of the funds of the society in increasing their water power, creating advantageous sites for factories, and otherwise improving the great-natural advantages of the place, than if the society had employed its capital in erect-, ing buildings, digging and establishing navigable canals, and carrying on themselves the business of manufactures. And I cannot consider the employment of- their capital, in the way in which it is employed, either an abuse of power or a perversion of the end of the institution.”

We concur fully in the views, and adopt the conclusion of the chancellor. The society have not perverted the end of their institution, or, by the creation and lease or sale of water privileges, applied their property to uses alien to the object of their incorporation, and thereby forfeited the right of exemption from taxation granted by their charter.

But it appears, by the case, that the prosecutors were assessed with 120 acres of land. A part of it was mountain land, a part of it is described as suitable for town lots, and portions of it appear to have been used as ordinary farm land. The water power itself not only, but the banks, dams, canals, and all lands appropriate for mill sites, or necessary for the maintenance and extension of the raceways and other works of the company, are incident to the purposes of their incorporation, and are, by - the charter, exempt from taxation. But mountain lands, farm lands, town lots or dwellings, can have no necessary connection with the water power or privileges; they are not necessarily incident to the purposes of the corporation, and are not exempt from taxation under the provisions of the society’s charter.

A part of the property of the prosecutors being liable to taxation, it remains to inquire whether tlje assessment was legally made.

The first ground of complaint is, that the sum of $597.52, for anticipated bad debts, was added to the amount ordered to be-raised, and was included in the assessment. This was clearly illegal, and to that extent the assessment should be corrected. The State v. Bentley, 3 Zab. 532.

It is further objected, that certain stores, mills, and manufactories, which by law were required to be rated as certainties, and Ihe amount thus assessed to be deducted from the total taxation before the assessment upon the real estate is made, were not so rated, but were assessed in common with other real estate. The act of 1847, (Pamph. Laws 177) under which the assessment was made, requires that certain “ articles, persons, and things,” in the act specifically enumerated, shall be valued and rated at the discretion of the assessor. It farther provides that no property, by the act specifically mentioned as taxable, shall be subject to a tax as real estate. The property thus specifically enumerated in the act as taxable, includes several kinds of mills and manufactories, which the assessor, in - making the present assessment, has valued as real estate. The assessment in this respect is erroneous. The error might have afforded just ground of complaint to any person whose property was thereby assessed beyond its legal proportion. But it does not appear that any prejudice whatever, by the erroneous mode of taxing these manufactories, was occasioned to the owners of other real estate, or that the amount of taxes assessed upon other lands was thereby in any wise increased ; on the contrary, as the articles thus specifically enumerated in the act were to be valued or rated entirely at the discretion of the assessor, it seems clear that the error in the mode of making the assessment could not have operated to the prejudice of the owners of other real estate so as to afford a legal ground of complaint.

It is further objected, that a sail duck manufactory, in which the prosecutors were interested as part owners, was taxed, as real estate, for an amount much larger than could have been

rated if taxed specifically, as directed by the statute. This error appears, by the case, to have been committed, and as the assessment upon the manufactory is higher than it could have been if taxed in pursuance of the statute, it operated injuriously to the owners, and affords a legitimate ground of complaint. It appears, however’, that the manufactory thus illegally assessed rvas not owned by nor assessed to the prosecutors in their own name. The assessment was against the Paterson Manufacturing Company, to whom the factory belonged, in which company the prosecutors were stockholders. The Paterson Manufacturing Company, against whom the assessment was made, and who are the party aggrieved, are not here complaining of its illegality. It is objected, and rightfully, on the part of the defendants, that it does not lie in the mouth of every individual stockholder, whether his interest be small or great in a corporation aggregate, to complain of an illegal assessment against the body corporate. The exception should be made by the corporation itself which is wrongfully assessed, and not by the individual stockholders. The certiorari would never have been allowed to the prosecutors upon this ground, nor can they now avail themselves of the exception.

The last ground of complaint is, that in making the assessment upon the real estate of the prosecutors, the assessors included the rent derived from the water power as one of the elements of value. The mode of making the valuation is thus stated in the case agreed upon: “ In fixing the value of the lands of the prosecutors, the assessors considered the water power owned by the prosecutors as one of the elements of value; that is to say, they considered the land of the prosecutors much enhanced in value by its location in the vicinity of an extensive water power, much of the land being adapted for building lots, and valued it accordingly. They also ascertained, from the different lessees of the prosecutors, the number of feet of water owned by the prosecutors; they made a calculation of the rents arising from such water, and estimated the rent per foot of such water as equal to one-tenth of its real valué. They did not assess for the w'hole amount thus arrived at, as they found the sum very large, but made some deduction from it.

The first element of value adopted by the assessors, rb. the location of the lands in the vicinity of an extensive water power, was an advantage possessed by the lands of the prosecutors in common with other lands similarly situated, and is clearly a legitimate ground of valuation. But the enhanced value placed upon the land of the prosecutors, by reason of the value of their water power, and of the rents derived from it, is obviously but an indirect mode of taxing property of the company, which is exempted from taxation by their charter. In this respect, also, the assessment is erroneous. The objection is not merely that the assessment is higher than it should have been, but that it is made upon erroneous principles. It is, therefore, properly the subject of relief in this court.

The assessment must, if practicable, be corrected in the various particulars in which it is erroneous. If there are no means by which the errors may be corrected, and the assessment conformed to the rights of the prosecutors and the rules of law, the assessment must be set aside.

Justices Ogden and Haines concurred.

Cited in State v. Powers, 4 Zab. 401; State v. Blundell, Id. 405 ; State v Powers, Id. 407; State v. City of Elizabeth, 4 Dutch. 112; State v. Metz, 2 Vr. 386; State v. Cook, 3 Vr. 340-348; Cook v. State, 4 Vr. 478 ; State v. Hancock, 6 Vr. 545.