Thiry years ago today, the Supreme Court decided Continental Trailways, Inc. v. Director, Div. of Motor Vehicles, 102 N.J. 526 (1986). Trailways, a large bus company, sued to declare New Jersey’s Bus Excise Tax, N.J.S.A. 48:4-20, unconstitutional as unlawfully discriminating against interstate commerce.
The purpose of the tax, as summarized in Justice Garibaldi’s majority opinion, “was to require interstate buses to pay for the privilege of using state highways, in effect to compensate the State for their share of the cost of constructing and maintaining the highways and of administering the motor vehicle laws.” No such tax was imposed, however, on regular intrastate bus service.
The Tax Court and the Appellate Division agreed with Trailways, invalidated the tax, and ordered a refund. The State appealed to the Supreme Court as of right, given the substantial constitutional issue involved.
Justice Garibaldi observed that in Safeway Trails, Inc. v. Furman, 41 N.J. 467 (1964), the Court had upheld this same tax as constitutional. At that time, there was a “complementary tax” on intrastate service. In 1972, however, the Legislature repealed that complementary intrastate tax. That repeal “thereby provid[ed] an indirect subsidy to intrastate carriers, in an attempt to ameliorate their serious financial plight in 1972.” The majority thus concluded that the tax unconstitutionally discriminated against interstate commerce, after canvassing United States Supreme Court precedents in this area.
But the majority rejected that portion of the decisions below that had granted Trailways a refund of taxes that it had paid under this unconstitutional statute. There was no specific statutory authority for a refund of Bus Excise tax payments, though such authority did exist as to other taxes. Though it seemed reasonable to apply the State Uniform Procedure Act, N.J.S.A. 54:48-1, to this tax, the Legislature had not done so, and the Court would “leave that determination to the Legislature.”
Justice Garibaldi invoked “the general common-law rule that where a party, without mistake of fact, fraud, duress, or extortion, voluntarily pays money on a demand that is noyt enforcible against him, he may not recover it.” There was no evidence that any of the exceptions to this “volunteer rule” applied to Trailways.
Writing separately, Justice Stein agreed that the Bus Excise Tax was unconstitutional. He disagreed, however, that Trailways should not get a refund. Justice O’Hern, on the other hand, in his own dissenting opinion, saw no reason to find the tax unconstitutional. But each of them was only a lone voice of opposition. The majority gave Trailways a win by invalidating the Bus Excise Tax, but dealt it a loss by denying it a refund of Bus Excise Tax paid.