U.S. Supreme Court Provident Institution v. Mayor of Jersey City, 113 U.S. 506 (1885)
Provident Institution for Savings v. Mayor of Jersey City, 113 U.S. 506 (1885)
Submitted January 9, 1885
Decided March 2, 1885
113 U.S. 506
I N ERROR TO THE COURT OF CHANCERY
OF THE STATE OF NEW JERSEY
An act which makes water rents a charge upon lands in a municipality, with a lien prior to all encumbrances, in the same manner as taxes and assessments gives them priority over mortgages on such lands made after the passage of the act, whether the water was introduced on the lot mortgaged before or after the giving of the mortgage.
An act thus making water rents a charge upon lands in a municipality prior to the lien of all encumbrances does no violation to that portion of the Fourteenth Amendment to the Constitution which declares that no state shall deprive any person of property without due process of law.
It is not necessary in this case to decide as to the effect of such act upon mortgages existing at the time of its enactment, but even in that case, the Court is not prepared to say that it would be repugnant to the Constitution.
This was a bill in equity filed in the Court of Chancery of New Jersey by the appellant, to foreclose two mortgages given to it on a certain lot in Jersey City by Michael Nugent and wife, and another person, the first being dated January
19, 1863, to secure the payment of $900 and interest, and the second, dated July 13, 1869, to secure the payment of $700 and interest. The complainants also claimed, under the stipulations of the mortgages, the amount of certain premiums of insurance paid by them. By an amended bill making the mayor and aldermen of Jersey City a defendant, the complainants alleged that the city claimed a lien on the mortgaged premises prior to that of the mortgages for certain water rents for supplying water to the occupants of the same for the year 1871, and from thence to the time of filing the bill; that this claim was made under an act of the legislature time of filing the bill; that this claim authorizing the construction of waterworks for the city, and the act revising the city charter, passed in March, 1871. The bill denied the validity of this claim, and averred that those portions of the said acts which purported to give such a priority had the effect to deprive the complainant of its property in the mortgaged premises without due process of law, and were in violation of the Constitution of the United States as well as that of New Jersey, and the complainant prayed for a foreclosure and sale of the lot in question as against all the defendants.
There was annexed to the bill and referred to therein a copy of the "Tariff of Rates and Regulations for the Use of Passaic Water; also Rules Regulating the Plumbing of Houses and the Tapping of Sewers," being the regulations adopted by the Board of Public Works of Jersey City under the statutes referred to in the bill. The water rates specified in this tariff (except for measured water) were graduated in a table according to the width and number of stories of the houses, and were made payable annually in advance on the 1st of May in each year, with a penalty of three percent if not paid by the 1st of July and interest at the rate of seven percent from the 20th of December. The regulations extend to many details, making provision for extra charges to certain kinds of establishments, providing penalties for misuse of the water, etc. The city authorities answered the bill, admitting that they had assessed upon the mortgaged premises the water rents set forth in the bill, and alleged that they were imposed in pursuance
of an act of the Legislature of New Jersey entitled "An act to authorize the construction of works for the supplying of Jersey City and places adjacent with pure and wholesome water," approved March 25, 1852, and an act entitled "An act to reorganize the local government of Jersey City," passed March 31, 1871, and the supplements thereto, and insisted that said water rents were a lien prior to the mortgages, and prayed that it might be so adjudged.
The other defendants made no defense.
The complainant and the city authorities entered into a stipulation to the effect that the allegations of fact in the bill were to be taken as true; that in the assessment of the water rents, interest, and penalties, all the requirements of the act "to reorganize the local government of Jersey City," passed March 31, 1871, and the supplements thereto, had been complied with, and that the only question to be determined by the court was whether, upon the facts stated in the bill, the water rents and interest and penalties mentioned therein, or any of them, were liens upon the property in question prior to the lien of the complainant's mortgages.
The chancellor decided that the giving of a priority of lien to the water rents over the mortgages pursuant to the statutes did not deprive the complainant of its property without due process of law and did not otherwise conflict with the Constitution of the United States or with that of New Jersey, and he decreed that for the purpose of raising the money due on the mortgages, the mortgaged premises must be sold subject to such lien, and that the bill must be dismissed as against the city. This decree, being appealed from, was affirmed by the New Jersey Court of Errors and Appeals and the record was remanded to the Court of Chancery. The case is brought here by writ of error, and the errors assigned resolve themselves into the single error of sustaining the priority of the lien of the water rents over that of the complainant's mortgages.
MR. JUSTICE Bradley delivered the opinion of the Court. He recited the facts as above stated and continued:
The ground on which the decision below was placed was that, the laws having made the water rents a charge on the land, with a lien prior to all other encumbrances in the same manner as taxes and assessment, the complainant took its mortgages subject to this condition whether the water was introduced onto the lot mortgaged before or after the giving of the mortgage, and hence the complainant had no ground of complaint that its property was taken without due process of law.
We do not well see how this position can be successfully controverted. The origin of the city's right to priority of lien goes back to the year 1852, when the legislature passed the act "to authorize the construction of works for supplying Jersey City and places adjacent with pure and wholesome water." That act laid the foundation of a scheme for leading water from the Passaic River to Jersey City, a distance of seven or eight miles, across the channel of the Hackensack River, and over the ridges of Lodi and Bergen. Power was given to a board of commissioners appointed for that purpose to take the necessary lands by right of eminent domain, to borrow money on the credit of the city, to lay pipes through the streets, and to make all necessary and proper regulations for the distribution and use of the water, and "from time to time to fix the price for the use thereof and the times of payment," and, by section 14 of the act, it was declared
"That the owner and occupier of any house, tenement, or lot shall be liable for the
payment of the price or rent fixed by the commissioners for the use of the water by such occupier, and such price or rent so fixed shall be a lien upon said house, tenement, or lot in the same way and manner as other taxes assessed on real estate in Jersey City are liens, and shall be collected in like manner."
This law has been substantially continued to the present time. On a revision of the city charter in 1871, the board of water commissioners was replaced by a board of public works, invested with the same powers and duties, and by section 81 of the revised charter, after providing for the fixing of the water rents as in the act of 1852, it was, among other things, further enacted as follows:
"And the said board shall from time to time determine and give public notice of the times and places at which the said water rents shall be due and payable and the penalties to be charged for delaying the payments beyond the times so fixed, and the said water rents shall, until paid, be liens upon the property charged therewith, and the said board may at any time after the twentieth day of December in each year deliver to the board of finance and taxation of Jersey City an account, certified under the hand of the president, of all such water rents and penalties for delinquency as are then due and remain unpaid, and the said board of finance and taxation shall, upon receiving said certified account, cause said lands to be sold for the payment of said water rents and penalties and the interest thereon, from said twentieth day of December at the rate of twelve percent per annum, and also costs, charges, and expenses of advertising and sale, in the same manner as said board of finance and taxation may be authorized by law to sell lands in said city for the payment of taxes thereon, and said proceedings and the effect thereof shall be the same in all things as if the said lands were sold for taxes."
By section 151 of the same charter, it was enacted (substantially as the law had been since the year 1839)
"That all taxes and assessments which shall hereafter be assessed or made upon any lands, tenements, or real estate situate in said city shall be and remain a lien thereon from the time of the confirmation thereof until paid, notwithstanding any devise,
descent, alienation, mortgage, or other encumbrance thereof, and that if the full amount of any such tax or assessment shall not be paid and satisfied within the time limited and appointed for the payment thereof, it shall and may be lawful for the board of finance and taxation to cause such lands, tenements, or real estate to be sold at public auction, for the shortest term for which any person will agree to take the same and pay such tax or assessment, or the balance thereof remaining unpaid, with the interest thereon, and all costs, charges, and expenses."
And it was provided
"That all moneys paid for the redemption of said lands, tenements, or real estate as aforesaid, together with such taxes and assessments as shall be paid by a mortgagee or other creditor under a judgment, attachment, or mechanic's lien, shall be a lien on said lands, tenements, or real estate for the amount so paid, with interest at the rate of seven percent per annum, and such lien shall have precedence of all other liens on said lands, tenements, or real estate, and on foreclosure of any mortgage by such mortgagee redeeming, shall be directed to be made out of said lands, and on sale of said lands under any such judgment, attachment, or mechanic's lien, shall be paid out of the proceeds of sale."
These extracts are sufficient to show the general character of the system by which the water rates are imposed and enforced in Jersey City. Much discussion has taken place in the state courts as to the precise nature of these water rents -- whether they are a tax or an assessment for benefits or a stipulated compensation resting on implied contract. If regarded as taxes, they have been supposed to conflict with a clause in the state constitution, adopted in 1875, declaring that "property shall be assessed for taxes under general laws, and by uniform rules, according to its true value." If regarded as special assessments for benefits arising from a public improvement, they have been held as open to the objection of not being laid on correct principles -- being distributed according to the dimensions and measurements of the several lots and buildings, and not according to the benefits received. These objections were held to be conclusive in the case of water rents imposed on unoccupied lots, and lots not supplied with water; both the
act of 1852 and the revised charter of 1871 having provided for the imposition of water rents on property of that kind situated on streets in which water pipes were laid. The supreme court of the state has decided that under the state constitution, this imposition cannot be sustained because, for the reasons just stated, it is neither valid as a tax nor as a special assessment for benefits. State v. Jersey City, 43 N.J.Law 135. But the rents imposed for water actually used, as in the case now under consideration, have been held valid on the ground of an implied contract to pay them. The terms being public and well known, persons applying for a supply of water are supposed to assent to them. Vreeland v. O'Neil, 36 N.J.Eq. 399; S.C. on appeal, 37 N.J.Eq. 574.
As the case comes before us, it is not necessary to enter into the discussions that have occupied the state courts. We are to assume that the rents, penalties, and interest claimed by the city have been imposed and incurred in conformity with the laws and constitution of the state, and that, by virtue of said laws and constitution, they are a lien on the property mortgaged to the complainant prior to that of its mortgages, and, this being so, we are only concerned to inquire whether those laws thus interpreted are or are not repugnant to the Constitution of the United States. The only clause of the Constitution supposed to be violated is that portion of the Fourteenth Amendment which declares that no state shall deprive any person of life, liberty, or property without due process of law. It is contended that the mortgages created in 1863 and 1869, there being then no valid water rents due on the lot mortgaged, invested the complainant with the first lien thereon, and that that lien is property, and that the statutes of 1852 and 1871, by giving a superior lien to water rents afterwards accused, deprive it of its said property without due process of law.
What may be the effect of those statutes in this regard upon mortgages which were created prior to the statute of 1852 it is unnecessary at present to inquire. The mortgages of the complainant were not created prior to that statute, but
long subsequent thereto. When the complainant took its mortgages, it knew what the law was. It knew that by the law, if the mortgaged lot should be supplied with Passaic water by the city authorities, the rent of that water, as regulated and exacted by them, would be a first lien on the lot. It chose to take its mortgages subject to this law, and it is idle to contend that a postponement of its lien to that of the water rents, whether after accruing or not, is a deprivation of its property without due process of law. Its own voluntary act, its own consent, is an element in the transaction. The cases referred to by counsel to the contrary, holding void a consent exacted contrary to the Constitution, have no bearing on the present cases.
It may, however, be contended (though it is not by the counsel in this case) that the revised charter of 1871 introduced new impositions additional to the mere water rent, such as authorizing a penalty to be imposed by the Board of Public Works, if payment of the water rents were not made by a certain time, and a heavy rate of interest on rents continuing in arrear. But we look upon these provisions as merely intended to enforce prompt payment and as incidental regulations appropriate to the subject. The law which authorized these coercive measures gave to mortgagees and judgment creditors the right to pay the rents and to have the benefit of the lien thereof, so that it was in their own power to protect themselves from any such penalties and accumulations of interest. They are analogous to the costs incurred in the foreclosure of the first mortgage, which have the same priority as the mortgage itself over subsequent encumbrances.
In what we have now said in relation to the anterior existence of the law of 1852 as a ground on which this case may be resolved, we do not mean to be understood as holding that the law would not also be valid as against mortgages created prior to its passage. Even if the water rents in question cannot be regarded as taxes nor as special assessments for benefits arising from a public improvement, it is still by no means clear that the giving to them a priority of lien over all other encumbrances upon the property served with the water would be repugnant
to the Constitution of the United States. The law which gives to the last maritime liens priority over earlier liens in point of time is based on principles of acknowledged justice. That which is given for the preservation or betterment of the common pledge is in natural equity fairly entitled to the first rank in the tableau of claims. Mechanics' lien laws stand on the same basis of natural justice. We are not prepared to say that a legislative act giving preference to such liens even over those already created by mortgage, judgment, or attachment, would be repugnant to the Constitution of the United States. Nor are we prepared to say that an act giving preference to municipal water rents over such liens would be obnoxious to that charge. The providing of a sufficient water supply for the inhabitants of a great and growing city is one of the highest functions of municipal government, and tends greatly to enhance the value of all real estate in its limits, and the charges for the use of the water may well be entitled to take high rank among outstanding claims against the property so benefited. It may be difficult to show any substantial distinction in this regard between such a charge and that of a tax strictly so called. But as the present case does not call for an opinion on this point, it is properly reserved for consideration when it necessarily arises.
The decree of the Court of Errors and Appeals of New Jersey is