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

text:
    FRANK H. TAYLOR AND SON, INC., PLAINTIFF-APPELLANT, v. SEYMOUR D. SHEPARD, DEFENDANT-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Submitted May 12, 1975
    Decided September 3. 1975.

      Before Judges Collester, Lora and Handler.

      Messrs. McElroy, Connell, Foley & Geiser, attorneys for appellant (Mr. Theodore W. Geiser, of counsel and on the brief).

      Messrs. De Sevo, Cerutti & Lombardi, attorneys for respondent (Mr. Floyd F. Lombardi on the brief).
   The opinion of the court was delivered by

Collester., P. J. A. D.

This is a legal malpractice suit. Plaintiff appeals from a judgment entered on a jury verdict of no cause for action in favor of defendant, an attorney at law of this State.

On March 17, 1966 plaintiff entered into a construction mortgage agreement with Belvidere Manor, Inc. and Anderson Construction Co. (hereinafter Belvidere). Under the terms of the agreement plaintiff was to advance monies to Belvidere to be used in the construction of garden apartments in Warren County. The agreement called for plaintiff to make periodic progress payments to Belvidere upon certification by the architect of the project at various stages of construction and upon approval of defendant, plaintiff’s attorney, whose responsibility it was to determine that the payment made by plaintiff would continue to be a first lien on the mortgaged property. The progress payments were to be used only for the construction of the housing project.

On April 6, 1966 Belvidere assigned the payments due under the construction mortgage agreement to the Engle-wood National Bank and Trust Company (hereinafter bank) as security for a loan by the bank to Belvidere, the proceeds of which were also to be used in the. construction of the project. Plaintiff refused to honor the assignment and on April 11 and April 28, 1966 paid over progress payments due under the construction mortgage agreement to Belvidere. Shortly thereafter Belvidere became insolvent. The bank sued plaintiff for its refusal to honor the assignment, and as a result of a judgment entered in favor of the bank, plaintiff was required to pay $37,700 together with interest.

Plaintiff brought a malpractice suit against defendant to recover the money it was required to pay and for legal expenses incurred in defending that litigation. Plaintiff alleged it sustained such damages as a result of the negligence of defendant in wrongly advising it not to honor the assignment to the bank and to make progress payments to Belvidere. Defendant denied that he was negligent and raised the defense of contributory negligence. He alleged that he had exercised the skill and care required of him in his profession.

During the trial defendant, who had been plaintiff’s counsel in matters relating to real estate and mortgage financing for 25 years, conceded that he had advised plaintiff not to honor the assignment. He testified that he had researched the law concerning the assignment of moneys payable under the terms of a construction mortgage and while he had found no relevant judicial decisions he had concluded that such an assignment was invalid. He based his opinion, in part, upon the fact that the construction mortgage agreement contained a provision that the agreement was not assignable, and further, that if the assignment was honored plaintiff would lose control of the distribution of the construction loan funds which should be used to pay for materialmen, labor and equipment on the Warren County project and that the funds might be diverted to another project being constructed by Belvidere in Sussex County. He was also concerned that if payments were not made to Belvidere in accordance with the construction mortgage agreement the monies paid under the assignment would lose their priority as a first lien on the mortgaged property.

Each party called expert witnesses to testify on their behalf. Both experts said they were never faced with the legal question which confronted defendant in this case. Plaintiff’s expert testified that defendant’s conduct varied from the usual accepted standard of the legal profession under the same or similar circumstances. He disagreed with defendant’s conclusion that the construction mortgage proceeds were not assignable. He expressed the view that defendant should have advised plaintiff to draw checks for the payments to both Belvidere and the bank and to let them “fight it out” as to who was going to get the proceeds or that defendant should have advised his client to start an interpleader suit.

Defendant’s expert testified that the disbursement of funds authorized by defendant was in accordance with the standards that would be followed by an attorney who was experienced in this field. He agreed with defendant that if the construction mortgage funds were diverted under the assignment plaintiff’s priority of lien for such payments would he subject to attack by the second mortgagee, subcontractors, materialmen and laborers employed in the event of a mortgage foreclosure. He indicated that if checks for payments had been made out to both Belvidere and the bank or an interpleader action was filed by plaintiff the project would go “down the drain” because of the delay and Taylor might have been held liable for not honoring the mortgage commitment. He expressed the opinion that in view of the lack of law regarding the situation at the time defendant exercised reasonable care for the protection of his client’s interests.

The jury returned a verdict in favor of defendant, and plaintiff’s motion for a judgment notwithstanding the verdict or a new trial were denied. This appeal followed.

Plaintiff initially contends the trial judge erred in denying its motion for judgment at the close of all the evidence and its subsequent motion for judgment notwithstanding the verdict. It argues there was no disputed question of fact and the judge should have ruled as a matter of law that defendant did not exercise the reasonable skill and care normally practiced by competent attorneys when he advised plaintiff not to honor the assignment of the construction mortgage progress payments to the Bank.

We do not agree. In an action against an attorney for malpractice it is the duty of the judge to instruct the jury as to the degree of negligence or want of skill for which the attorney is properly answerable, and what duty is imposed on him by law. It then becomes the responsibility of the jury to determine on all the facts and circumstances of the case whether the attorney has performed that duty, and, if not, whether the neglect or want of skill was of a character or degree that would render the attorney liable. 7 Am. Jur. 2d, § 189 at 157. See also McCullough v. Sullivan, 102 N. J. L. 381, 385 (E. & A. 1925).

The standard of care governing an attorney in the practice of his profession in this State is set forth in McCullough v. Sullivan, supra, where the court stated:

A lawyer, without express agreement, is not an insurer. He is not a guarantor of the soundness of his opinions, or the successful outcome of the litigation which he is employed to conduct, or that the instruments he will draft will be held valid by the court of last resort. He is not answerable for an error of judgment in the conduct of a case or for every mistake which may occur in practice. He does, however, undertake in the practice of his profession of the law that he is possessed of that reasonable knowledge and skill ordinarily possessed by other members of his profession. He contracts to use the reasonable knowledge and skill in the transaction of business which lawyers of ordinary ability and skill possess and exercise. On the one hand he is not to be held accountable for the consequences of every act which may be held to be an error by the court. On the other hand, he is not immune from the responsibility, if he fails to employ in the work he undertakes that reasonable knowledge and skill exercised by lawyers of ordinary ability and skill. The duties and liabilities between an attorney and his client are the same as those between a physician and his patient. Both the attorney and physician are required to exereise that reasonable knowledge and skill ordinarily possessed and exercised by others in their respective professions, [at 384]

The test to be applied by the trial judge on a motion for judgment at the close of all the evidence or on a motion for judgment notwithstanding the verdict is whether the evidence, together with the legitimate inferences therefrom, could sustain a judgment in favor of the party opposing the motion. If, accepting as true all the evidence which supports the position of the party defending against the motion and according him the benefit of all inferences which can reasonably and legitimately be deduced therefrom, reasonable minds could differ, the motion must be denied. Dolson v. Anastasia, 55 N. J. 2 (1969). In the instant case the issue of whether defendant violated the standard of care referred to in McCullough v. Sullivan, supra, was sharply controverted by the evidence offered by the parties. Reasonable minds could differ in the resolution of the issue. The jury was entitled to conclude upon the evidence and expert testimony that Shepard was not negligent because he was of the view that the assignment was ineffective and that if honored would jeopardize his client’s interests. Applying the Dolson test to the facts presented in this case it is clear that the trial judge properly denied plaintiff’s motion for judgment at the close of the ease and the motion for judgment n.o.v.

Plaintiff also claims the judge erred in failing to grant his motion for a new trial. It argues that the jury’s conclusion that defendant was free from negligence indicates an erroneous understanding of the professional standards to be applied. We find no support for this argument in the record. The trial judge clearly and comprehensively instructed the jury concerning the legal principles which applied, and the jury found that defendant did not negligently violate any standard of legal practice on the evidence presented in this case. Prom our review of the record we conclude the trial court properly denied the motion for a new trial and there was no miscarriage of justice under the law. R. 2:10-1.

It is urged that the trial judge erred by including the issue of contributory negligence in its charge to the jury. The record indicates the court submitted special interrogatories to the jury, the first of which was, “Did the defendant negligentfy depart from any standard of practice in the circumstances of this case?” The jury was instructed that if it answered the question in the negative it was not required to answer the three remaining interrogatories which dealt with proximate cause, contributory negligence, and damages. The jury answered the first interrogatory in the negative and having done so did not answer the three remaining interrogatories. It is thus clear that the jury did not reach or consider the question of plaintiff’s contributory negligence. Under the circumstances we are satisfied that plaintiff sustained no prejudicial error because of the inclusion of the issue of contributory negligence in the court’s charge.

Finally, in a supplemental brief, plaintiff argues that the charge and the special interrogatories submitted to the jury were misleading. Since no objections to the charge on this ground nor to the interrogatories were made below, these points necessarily are raised as plain error. B. 2:10-2. We have considered the arguments advanced and conclude that they are devoid of merit.

Affirmed.


source: Caselaw Access Project

author: Schoch, A. J. S. C.

license: Public Domain

text:
    HERBERT FITZGERALD, PLAINTIFF, v. WILBUR H. MA-THESIUS, ACTING PROSECUTOR OF MERCER COUNTY, DEFENDANT.
    Superior Court of New Jersey Law Division
    Decided April 11, 1975.

      Messrs. Lenox, Giordano, Devlin, Delehey & Socey, attorneys for plaintiff (Mr. Charles Delehey appearing).

      Mr. Wilbur H. Mathesius, Acting Prosecutor, Mercer County, and William A. Zarling, Assistant Prosecutor, Mercer County, attorneys for defendant.
   Schoch, A. J. S. C.

This is a matter brought by complaint in lieu of prerogative writs in which plaintiff demands judgment on the first count for an order requiring defendant to delete certain portions of the Manual of Rules and Regula tions promulgated by the Office of the Prosecutor of Mercer County, and an order prohibiting the prosecutor from dismissing plaintiff if and when plaintiff files a nominating petition for public office; and further, on the second count seeks to enjoin defendant from promulgating any further regulations that might bar plaintiff from seeking election to a public office.

The facts in this case are not in dispute.

Plaintiff has been employed as a county detective in the Mercer County Prosecutor’s Office for more than seven years. He is a registered member of the Republican Party and wishes to file a nominating petition for the June 3, 1975 primary wherein he seeks to be a Republican candidate for the General Assembly from the 13th Assembly District, in the general election to be held in November 1975. Defendant has informed plaintiff that participation in the political elective process, namely, the filing of a petition for the June 3 primary, will constitute a violation of the aforesaid rules and regulations and will result in plaintiff’s suspension or dismissal from employment in the Prosecutor’s Office. Plaintiff moves for summary judgment.

The thrust of the complaint is that the defendant is (1) violating plaintiff’s constitutional rights by enforcing these regulations, and (2) the regulations themselves are without any legal foundation, and consequently should not be, and cannot legally be, enforced by defendant.

The regulations toward which this complaint is directed are:

3 :3.5 Political Activity — Members of tbe investigative staff shall not exhibit any election posters, signs or cards on any vehicle used in connection with their duties in the Prosecutor’s Office.
3:3.5-1 Members of the investigative staff shall not work at the polls without special permission of the Prosecutor.
3:3.5-2 An employee during the hours of duty shall not engage in political activity; nor shall he at any other time participate in political activities so as to impair his usefulness in the position in which he is employed.
3:3.5-3 The duties of a law enforcement officer are fundamentally inconsistent with running for and serving in a political or elective office. Therefore, no assistant prosecutor, detective or investigator shall be permitted to run for elective office or primary while serving in any of the foregoing positions within the Mercer County Prosecutor’s Office.

(1) As for the constitutional argument, plaintiff says that he has a constitutional right to run for public office, N. J. Const. (1947), Art. I, par. 2, assuming he meets the qualifications of the Constitution itself, N. J. Const. (1947). Art. IV, § I, par. 2. Defendant does not disagree with that premise but takes the position that if plaintiff wishes to do that, he will do it in some other capacity than as a detective working for the Prosecutor of Mercer County. Prom a constitutional standpoint I cannot see how those regulations are unreasonable or illegal, or unconstitutional for that matter. Similar prohibitions are in effect in other areas of public employment. The Hatch Act, for one, with respect to federal employees, 5 U. S. C. A. § 7234, and the Rules of Court, R. 1:17 — 1, with respect to court personnel, are just two examples of the restrictions that can constitutionally be placed on the political activities of persons involved in public employment. See N. J. S. A. 11:17-2, and 5 C. F. R. § 733.122. The constitutionality of those laws and rules has been upheld, so that I cannot find in this case any basis for ruling that the regulations promulgated by defendant are unconstitutional.

(2) Similarly, it seems to me that the regulations are reasonable. We are not talking here about a file clerk, and I do not mention that occupation in any derogatory sense, but we are not talking about an occupation that involves a nine-to-five employment with no contact with the public, with simply ordinary clerical work. We are talking about an occupation that is, first of all, not regulated by any time restrictions: a county detective is on call; he can be working 24 hours a day; he can work seven days a week if he is assigned to a particular case or a series of cases; but even be-yoncl that, we have the problem of the type of duties of a detective in the Prosecutor’s Office as contrasted with the approach that a candidate for political office has to make to the general public. I cannot see how those two situations are compatible.

First, the detective-candidate may find himself torn between the legitimate demands of his employment for his time, energies and diligence, and those same legitimate demands of his campaign. It is foolhardy to expect that anything as absorbing and exhausting as a political campaign could have other than a deleterious effect upon the quality and quantity of the work performed by the campaigner. Second, a detective is required by the terms of his employment to investigate the activities of persons in the community, to probe into their backgrounds and associates, to elicit information from others concerning them and, at times, to apprehend them. The success of many of his efforts may depend upon secrecy and confidentiality. Yet, the political candidate must strive to solicit funds, cultivate friends, keep a high public profile, speak out on public issues, project a desirable image and appeal for the support of the widest possible spectrum -of the public. The areas of possible conflict are myriad. Third, a county detective is directed by statute to aid the prosecutor in the enforcement of the criminal laws, including the election laws. Surely, the potential conflicts for any candidate, even a perfectly honest one, are patent.

I find nothing unreasonable about the regulations. Consequently, I rule that the restrictions are, and the regulations are, valid and enforceable, and will enter judgment in favor of defendant.


author: Gaynor, J. C. C.,

text:
    WINSLOW, COHU & STETSON, INC., PLAINTIFF, v. SIDNEY DANIEL SKOWRONEK, DEFENDANT.
    Superior Court of New Jersey Law Division
    Decided August 8, 1975.

      Mr. L. Phillips Hoyt for plaintiff (Messrs. Hoyt, Jeffers & Weiland, attorneys).

      Mr. William, W. Lanigan for defendant.
   Gaynor, J. C. C.,

Temporarily Assigned. Plaintiff seeks to recover the value of securities which were erroneously and inadvertently registered in defendant’s name and delivered by plaintiff to defendant. The complaint sounds in unjust en-righment, conversion and wrongful possession. Defendant does not deny the receipt of the higher-valued securities but contends that there was no conversion or wrongful possession, that plaintiff’s claim is barred by the statute of limitations or laches, and further, that plaintiff’s loss is the result of its own mistake and negligence which precludes recovery.

There is no dispute as to the factual pattern giving rise to the present litigation. The uneontr over ted facts disclose that in 1967 defendant maintained a brokerage account with plaintiff and in November of that year requested plaintiff to purchase 100 shares of the common stock of Engelhard Minerals and Chemical Corporation. The purchase was made at a price of 41-7/8 a share, or a total of $4,187.50, which was paid by defendant. In pursuance of this purchase for defendant, plaintiff sent a 100-share certificate to the transfer agent with instructions to register the certificate in the name of defendant. Through plaintiff’s inadvertence the certificate forwarded'to the transfer agent was a 100-share certificate of the higher-valued Engelhard Minerals and Chemicals Corporation $4.25 cumulative convertible preferred stock. This, certificate was registered in defendant’s name, and on December 4, 1967 plaintiff delivered it to defendant. In September 1972, as the result of an independent audit, the error was discovered by plaintiff, and defendant was thereupon requested to return the certificate for the 100 shares of preferred stock or its money equivalent. However, defendant had sold the stock in February 1972 and refused to accede to plaintiff’s demand for the return of the stock or its money value. Defendant had sold the stock at a price of $141 a share, thereby realizing the gross amount of $14,100. The dividends paid on the preferred stock while in the possession of defendant totaled $1,806.35. Defendant was notified of the error by a telephone message on or about September 13, 1973 and a confirming letter mailed on September 30, 1973. The market value of the 100 shares of common stock on those dates was $6,077 and the cash dividends paid from December 1967 to that date on the common stock amounted to $390.95. All of the factual evidence was submitted by plaintiff, no testimony being offered by defendant.

Plaintiff contends that, under these facts, there was a conversion by defendant of the preferred stock and, as the injured party, it is entitled to recovery of the stock certificate, if defendant still has it, or money damages for the wrongful conversion. If the latter remedy is applicable, plaintiff asserts that the damages recoverable -is the highest intermediate value of the securities between the date of delivery of the certificate to defendant, being the alleged date of conversion, and the date of judgment, plus the dividends received by defendant during this period. Plaintiff acknowledges that defendant would be entitled to a setoff for the value of the common stock and accumulated dividends thereon. Alternatively, plaintiff contends that it is entitled to recover under the concept that defendant has been unjustly enriched as a result of the mistake committed by plaintiff, thereby giving rise to a constructive trust in favor of plaintiff as to the money realized from the sale of the securities.

Defendant contends that he was not guilty of converting the subject securities inasmuch as he obtained them lawfully and had divested himself of their possession prior to the demand made by plaintiff. Further, that plaintiff was not the owner of the securities nor did it have such other interest in the property as to support a claim of conversion. Defendant also asserts that plaintiff’s action is one for breach of contract and therefore barred by the four-year limitation set forth in N. J. S. A. 12A:2-725. Additionally, defendant claims that the defenses of waiver, estoppel and laches are applicable and preclude any recovery by plaintiff.

We have not been directed to, nor has onr research disclosed, any New Jersey decision involving circumstances similar to the present case. This may be due to a scarcity of such inadvertent mistakes on the part of brokerage houses, or the accepted realization on the part of their customers that they are not entitled to a windfall because of such inadvertencies. However, the question has been presented in cases arising in other jurisdictions. In National Security Corp. v. Hochman, 313-S. W. 2d 776 (Mo. Ct. App. 1958), a subrogated surety sought to recover the amount paid to a stockbroker because of the delivery to a customer of a wrong certificate of stock. The customer- had placed an order for the purchase of 300 shares of 1<¡: par value stock of Federal Uranium Corporation which was executed by the broker. By a clerical error the broker caused to be issued and delivered to the customer 300 shares of 25^5 par value stock of the company. The broker made demand for the return of the mistakenly issued stock, which was refused even though still in the possession of the customer. In affirming a judgment for plaintiff, the court held that the refusal of the customer to return the securities after being notified of the error constituted a conversion. It was also suggested that the brokers would have a right in equity to recover possession of the stock.

Similarly, in Firemen’s Fund Ins. Co. v. Trippe, 402 S. W. 2d 577 (Mo. Ct. App. 1966), the court upheld a verdict in favor of a broker who had inadvertently transferred and delivered to defendant a security of higher value than that ordered. In that case defendant customer placed an order for the purchase of 500 shares of American Investors Corporation at a price of $1.50 a share. The order was consummated and in the process of causing a certificate to be transferred to defendant a clerk mistakenly forwarded a certificate for 500 shares of American Investment Corporation, a higher priced stock. Upon discovering the error the broker demanded the return of the stock. Although the stock had been sold by defendant prior to such demand, the court found that the evidence supported the inference that defendant knew that he had received the wrong stock prior to its sale. The act of disposing of the stock with the knowledge that it was not that which was originally ordered was deemed to be such an unauthorized act of dominion over the stock as to constitute a conversion thereof.

In the earlier case of Newburger v. Weaver, 300 Pa. 163, 150 A. 298 (Sup. Ct. 1930), the equitable right of a broker to recover stock mistakenly delivered to a customer was upheld. The customer had ordered the broker to purchase 100 shares of the “now” stock of Cities Service Company and paid the purchase price to the broker. The purchase was made as directed; however, through a mistake 100 shares of the higher priced “old” stock of the company was delivered to the customer. Upon discovering the mistake the broker demanded the return of the stock which was refused. The court affirmed an order directing the customer to return the stock received by him and the delivery of the correct stock by the broker, with a proper adjustment of dividends.

See also, 12 Am. Jur. 2d, Brokers, § 133 at 876; and Somerville Nat’l Bank v. Hornblower, 293 Mass. 363, 199 N. E. 918 (Sup. Jud. Ct. 1936). In the above-cited cases the refusal of the recipient to return the securities which were mistakenly delivered after notification of the mistake and demand for the return, or the exercise of ownership rights after knowledge of the mistaken transfer, were considered as the factors giving rise to a conversion.

These essential elements are not present in the instant case. The proofs do not disclose knowledge of the error by defendant prior to the notice in September 1972, at which time the securities were no longer in his possession, nor does the evidence support an inference of prior knowledge on the part of defendant. The demand then made for the return of the securities was thus ineffectual and the action of defendant could not be considered as a refusal to comply with the demand. Under the circumstances of this case, a timely demand and a failure to thereupon return the securities would be necessary requirements to support a claim of conversion. See Mueller v. Technical Devices Corp., 8 N. J. 201 (1951). These elements not being present, there was no conversion.

However, it is our opinion that the concepts of undue enrichment and restitution are applicable to the factual situation presented by this case. It is a general rule that a payment of money under a mistake of fact may be recovered, provided that such recovery will not prejudice the payee. This rule is grounded upon considerations of equity and fair dealing. It is considered unjust enrichment to permit a recipient to retain money paid because of a mistake, unless the circumstances are such that it would be inequitable to require its return. Great American Ins. Co. v. Yellen, 58 N. J. Super. 240 (App. Div. 1959); 66 Am. Jur. 2d, Restitution and Implied Contracts, § 119 at 1055. This is so notwithstanding that the mistake is unilateral and a consequence of the payor’s negligence, or that the payee acted in good faith. Great American Ins. Co. v. Yellen, supra. While these principles have been applied to cases between stockbrokers and their customers involving payment of the proceeds of a mistaken sale of securities (see 48 A. L. R. 3d 513), we discern no reason why they are not equally applicable to a delivery of stock certificates which were mistakenly purchased or mistakenly transferred. A person who receives a voluntary benefit is liable to make restitution if the circumstances of its receipt or retention are such that, as between the two persons, it would be unjust for the recipient to retain the benefit. Brick Tp. v. Vannell, 55 N. J. Super. 583 (App. Div. 1959); Hirsch v. Travelers Ins. Co., 134 N. J. Super. 466 (App. Div. 1975); Restatement, Restitution, § 1 (1937).

Defendant raises the defenses of laches, waiver and estoppel. The basis of these defenses is the long period of time elapsing between the delivery of the securities and the demand for corrective action, together with the fact that the situation was created by plaintiff’s own inadvertence and negligence. Further, that the exercise of reasonable diligence and control by plaintiff in transacting its business should have disclosed the error within a short time alter it occurred. Although the error in the transfer and delivery to defendant of the wrong security was not discovered for almost five years, the audit which revealed the mistake had been commenced a year or two prior to the discovery and defendant was notified of the error promptly upon its discovery. The laches claimed by defendant basically relates to the long lapse of time before the error was discovered by plaintiff. Assuming that plaintiff should have known of the error shortly after its occurrence through the exercise of reasonable care and diligence in running its business, there is no evidence that its failure to do so was prejudicial to defendant. The lapse of time, in and of itself, will not give rise to laches unless the failure to assert one’s rights within a reasonable period of time results in prejudice to the defending party. Kohler v. Barnes, 123 N. J. Super. 69 (App. Div. 1973); 30A C. J. S. Equity § 116. In any event, plaintiff acted promptly after it discovered the mistaken transfer and delivery. Additionally, the evidence does not support the defenses of waiver and estoppel. No proof was offered to show any voluntary and intentional relinquishment by plaintiff of its claim, nor of any conduct which should estop it from asserting its claim against defendant.

Inasmuch as we consider that the disposition of this case is governed by the equitable principles of unjust enrichment and restitution, we need not be concerned with the issue of the statute of limitations. However, if applicable, we do not consider that the limitation set forth in N. J. S. A. 12A:2-725 is controlling.

In view of our conclusion that there was no conversion of the mistakenly delivered securities, the measure of damages enunciated in Kaplan v. Cavicchia, 107 N. J. Super. 201 (App. Div. 1969), is not applicable. Rather, the benefit received by defendant resulting from the erroneous transfer and delivery of the securities is the appropriate extent of a recovery by plaintiff. According to our findings, defendant benefitted in the amount of $8,023, being the added amount received from the sale of the preferred stock over that which would have been received from a sale of the common stock, and in the amount of $1,715.30, being the difference between the dividends received and those payable on the common stock.

Judgment will therefore be entered in favor of plaintiff in the sum of $9,738.30, with interest from the date of the judgment to be entered and without costs.


author: Per Curiam.

text:
    ERNEST SMITH, ET AL., PLAINTIFFS-APPELLANTS, v. THE CITY OF NEWARK, ET AL., DEFENDANTS-RESPONDENTS.
    Superior Court of New Jersey Appellate Division
    Argued June 16, 1975
    Decided June 30, 1975.

      Before Judges Leonard, Seidman and Bischoff.

      Mr. Frank B. O’Neill argued the cause for appellants (Mr. Irvin L. Solondz, attorney).

      Mr. Theodore A. Winard, Assistant Attorney General, argued the cause for respondent Civil Service Commission (Mr. William F. Hyland, Attorney General of New Jersey, attorney; Mr. John F. Shoosmith, Jr., Deputy Attorney General, on the brief).
   Per Curiam.

Plaintiffs appeal from a judgment dismissing their amended complaint for failure to state a claim upon which relief can be granted. The opinion of the trial court, reported at 128 N. J. Super. 417 (Law Div. 1974), gives the procedural history and factual background in detail. Both will be but briefly restated here.

Plaintiff Ernest Smith, a resident of Newark and employed by that city as a fireman, took a competitive examination for the position of fire captain. He placed Ho. 61 on the list of those who passed. 35 promotions to captain have since been made from it. Plaintiff instituted a class action on behalf of resident firemen who successfully passed the examination and were placed on the list. The complaint alleged that many of those who were on the list did not meet the residency requirements of N. J. S. A. 40:47-3, N. J. S. A. 40:47-5 and the requirements of Hewark Municipal Ordinance 2:14-1, then in effect. Plaintiff sought a judgment (1) declaring all promotions from the list of nonresident firemen void; (2) directing the City of Hewark to terminate the employment of all captains or those on the promotion list who did not satisfy residency requirements of the statutes and the ordinance hereinbefore cited, and (3) directing that plaintiff be appointed to the position of fire captain.

While this litigation was pending the Legislature enacted L. 1972, c. 3, § 1 to § 10 (N. J. S. A. 40A:14-9.1 to 9.8; N. J. S. A. 40A:14-10.1 and N. J. S. A. 40A:14-13), which abolished retroactively municipal residency requirements for appointment, continued employment or promotions for municipal firemen.

Thereafter, pursuant to leave granted, plaintiff filed an amended complaint in which he challenged the constitutionality of L. 1972, c. 3, on multiple grounds and, further, contended that certain of the persons promoted from- that promotion list and others on the list had obtained their promotions or their positions on the list by fraud in that they falsely certified and represented their places of residency. Plaintiff argues that had they not done so, he would have been advanced on the promotion list and promoted to the position of captain, and that this fraud deprived him of employment opportunities.

Prior to a hearing on the amended complaint the litigation was restructured. The class action feature of the complaint and amended complaint was stricken and four defendants, who were on the promotion list, were realigned as parties plaintiff.

The case now presented to us involves only the rights of these five plaintiffs.

Defendant Civil Service Commission moved to dismiss plaintiffs’ amended complaint for failure to state a cause of action by virtue of the provisions of L. 1972, c. 3. Plaintiffs resisted the motion, arguing the statute was unconstitutional and, in any event, not retroactive.

Plaintiffs contend here, as they did before the trial court, that the statute in question is unconstitutional in that it violates:

(1) N. J. Const. (1947), Art. IV, § 7, par. 7, which provides that no general law shall embrace any provision of a private, special or local character;

(2) N. J. Const (1947), Art. IV, § 7, par. 9(5), in that it constitutes a private, special or local law creating, increasing or decreasing the emoluments, term or tenure rights of public officers or employees;

Thomas J. Wasik — 46
Luciano J. Miele — 48
Michael S. Miele — 49
Walter W. Carroll, Jr. — 50

(3) N. J. Const. (1947), Art. IY, § 7, par. 9(8), in that it grants an individual an exclusive privilege and immunity ;

(4) N. J. Const. (1947), Art. IY, § 7, par. 9(13), in that it constitutes a private, special or local law regulating the internal affairs of municipalities;

(5) N. J. Const. (1947), Art. IY, § 7, par. 3, which prohibits the Legislature from passing any bill impairing the obligation of contracts or depriving a party of any remedy for enforcing a contract which existed when the contract was made; and,

(6) N. J. Const. (1947), Art. YII, § 1, par. 2, which provides that appointments and promotions in the Civil Service shall be made according to merit and fitness alone.

Plaintiffs also contend the court below erred in interpreting the repealing statute as being retroactive. .

We reject these contentions as being without merit, essentially for the reasons expressed by the trial judge in his reported opinion, Smith v. Newark, supra.

This brings us to plaintiffs’ final contention that it was error for the trial judge to rule that the statute in question cured the alleged fraud of defendants and immunized them from its consequences.

On a motion to dismiss a complaint for failure to state a claim upon which relief can be granted, all facts alleged in the complaint and the legitimate inferences drawn therefrom are deemed admitted. Heavner v. Uniroyal, Inc., 63 N. J. 130, 133 (1973); J. H. Becker, Inc. v. Marlboro Tp., 82 N. J. Super. 519, 524 (App. Div. 1964). It must, therefore, be assumed that, consistent with the allegations of the amended complaint, certain firemen seeking promotion to the position of captain falsely and fraudulently certified they were residents of Newark when, in fact, they were not, and had they not so certified, plaintiffs would have been advanced on the promotion list and received a promotion.

It is clear that unless the statute in question has abolished it, plaintiffs possess a cause of action. The issue thus is whether the Legislature, by passage of the statute, intended to and did deprive plaintiffs of their existing cause of action.

While the statute may be given retroactive application in some respects, it does not follow that it deprived plaintiffs of their cause of action then in litigation. A nonresident who truthfully disclosed his nonresidence on his application for promotion cannot now be deprived of his position by virtue of the statute, for he has committed no fraud in that respect. However, nonresidents who falsely certified they were residents and by doing so adversely affected the positions of plaintiffs on the list are not protected by the statute from the consequences of their actions. We underscore the fact that what we here say has reference only to the five plaintiffs herein who had actions pending at the time the statute in question was enacted.

We hold that assuming, without deciding, the Legislature has the power to vitiate retroactively a cause of action for fraud, on the facts now before us we see no evidence of any intent to do so. Such an intention must be clearly expressed in order to affect pending litigation. A & B Auto Stores of Jones St., Inc. v. Newark, 59 N. J. 5, 22 (1971); O’Neill v. Hoboken, 73 N. J. L. 189 (Sup. Ct. 1906); N. J. S. A. 1:1-14 and 1:1-15.

The judgment dismissing the amended complaint is reversed and the case remanded for a hearing on the allegations in plaintiffs’ amended complaint respecting the existence of fraud and the rights of plaintiffs, if any, to relief.

       Plaintiffs also rely on violations of Civil Service Regulation 4:1-8.8, which provides in pertinent part: “(a) In order to qualify for open competitive examination, an applicant must: * * * 5. File an application for examination on the form furnished by the Commission, setting forth fully and truthfully all information required * * *”

       The additional parties plaintiff and their positions on the list are as follows:


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

text:
    MILLICENT H. FENWICK, DIRECTOR OF THE NEW JERSEY DIVISION OF CONSUMER AFFAIRS, COMPLAINANT-RESPONDENT, v. KAY AMERICAN JEEP, INC., RESPONDENT, AND JOSEPH FRIEDMAN, T/A FRIEDMAN ASSOCIATES, RESPONDENT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Argued March 4, 1975
    Decided September 5, 1975.

      Before Judges Kolovsky, Lynch and Allcorn.

      Mr. Donald T. Okner argued the cause for the appellant (Messrs. Margolis & Bergstein, attorneys).

      Mr. Douglas J. Harper, Deputy Attorney General, argued the cause for respoudent (Mr. William F. Hyland, Attorney General, attorney; Mr. Stephen Skillman, Assistant Attorney General, of counsel).
   The opinion of the court was delivered by

Allcorn, J. A. D.

In July 1973, under the authority delegated to him to “promulgate such rules and regulations * * * as may be necessary” to “accomplish the objectives and to carry out the duties prescribed” by the Consumers Fraud Act, N. J. S. A. 56:8-1 et seq., the Attorney General adopted a set of rules “concerning motor vehicle advertising practices.” 5 N. J. R. 152 (2), 5 N. J. R. 290 (b); N. J. A. C. 13:45A — 2.2. Among the motor vehicle advertising practices declared to be “unlawful” by those rules was the following (N. J. A. C. 13:45A-2.2(a) (2) :

ii. The failure in any price advertisement to disclose * * *:
% sjo
(4) The Iona fide odometer reading of any specifically advertised * * * used car. * * *

So far as here pertinent, a “price advertisement” is defined as “any advertisement [of a motor vehicle] in which a specified price is stated”. N. J. A. C. 13:45A-2.1.

Appellant Joseph Friedman owns and operates an advertising agency under the firm name Friedman Associates. Among his clientele during the period critical to this proceeding were some 30 to 35 separate retail automobile dealers, for whom he prepared and delivered to local newspapers for publication advertisements numbering an estimated “100 individual ads per day”. The essential factual details to be included in the advertisements were supplied to • Friedman Associates by the respective automobile dealers, from which the advertisements would be prepared by a member of the Friedman staff and then delivered by the latter to the newspaper for publication.

On December 14, 1973, there was published in the Newark Star Ledger, under the name of Kay American Jeep, an advertisement offering for sale a used motor vehicle for a stated price. The advertisement, concededly prepared by Friedman Associates on behalf of Kay, did not set forth the odometer reading of the advertised vehicle. As a result the Division of Consumer Affairs issued its complaint and notice of hearing to Kay American Jeep, charging a violation of N. J. A. C. 13:45A-2.2(a) (2) (ii) (4) in failing “to disclose the BONA FIDE Odometer reading of any specifically advertised * * * used motor vehicle” in “a price advertisement”.

At the hearing held March 13, 1974 Mr. Friedman appeared in company with a representative of Kay American Jeep, both without counsel. After consenting to the joinder of himself as a party respondent to the proceedings, Friedman admitted to the hearing officer that the offending advertisement had been prepared by Friedman Associates; that the odometer reading of the advertised vehicle had in fact been furnished to Friedman Associates by Kay, and that the omission of the odometer reading from the advertisement was due entirely to the oversight of Friedman Associates. The representative of Kay corroborated Friedman. Ho other witnesses were called by either side.

At the conclusion of the hearing the hearing officer found both Kay American Jeep and Mr. Friedman “guilty of violating the rule [regulation]”, and by order of March 15, 1974 assessed a fine of $150 and $50 costs against them jointly and severally, and directed that each “thereafter cease and desist from failing to disclose in any price advertisement for a used motor vehicle * * * the bona fide odometer reading of said motor vehicle”. The present appeal from that order has been taken by respondent Joseph Friedman.

It is the contention of the respondent Friedman that there can be no violation of the act or the implementing regulations in the absence of intent, and inasmuch as it is uncontroverted that the omission of the odometer reading was inadvertent, the finding and order of the Division must be reversed. The Division takes the position that the language of the act, as well as the policy underlying it, make manifest a legislative purpose to prohibit the proscribed conduct and impose liability without regard to intent.

Manifestly, the design of the Consumer Fraud Act is to protect the consumer against imposition and loss as a result of fraud and fraudulent practices by persons engaged in the sale of goods and services. Kugler v. Romain, 58 N. J. 522 (1971). The pertinent portion of the controlling section of that act is found in N. J. S. A. 56 :8-2, and provides :

The act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or with the subsequent performance of such person as aforesaid, whether or not any preson has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice • * * *

In the context of this language it is plain that, however the fraud or fraudulent conduct may be designated or characterized, if it consists of or rests upon “concealment, suppression, or omission of any material fact”, the nondisclosure must be “knowing * * * [and] with intent that others rely” thereon. Ibid. As a consequence, the nondisclosure of a material fact unknowingly and by reason of inadvertence does not constitute an unlawful practice under the Act.

Notwithstanding this clear expression of legislative intent the dissent suggests that, by virtue of the authority delegated to the Attorney General to promulgate regulations, he may declare the unknowing and inadvertent nondisclosure of a material fact to constitute an “unconscionable commercial practice.” The argument overlooks (and does not touch upon) the fact that such an interpretation would nullify absolutely and render completely meaningless the clause of the statute relating to fraud and fraudulent conduct arising out of the “knowing, concealment, suppression, or omission of any material fact.” The phrase “unconscionable commercial practice” has no special properties. In consumer goods transactions “unconscionability must be equated with the concepts of deception, fraud, false pretense, misrepresentation, concealment and the like * * * stamped unlawful under N. J. S. A. 56 :8-2.” Kugler v. Romain, supra at 544.

The legislative history of the Consumer Eraud Act supplies further evidence of the intent of the Legislature. As originally introduced, the portion of the section with which we are here concerned provided (Senate Bill No. 199, § 2) :

The act, use or employment of any deception, fraud, false pretense, misrepresentation, concealment, suppression, or omission of any material fact by any person in connection with the sale or advertisement of any merchandise, whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice; * * *.

Significantly, the concealment, suppression or omission of any material fact was constituted an unlawful practice without regard to knowledge or intent.

On passage in the Senate, however, the bill was amended in several respects, including the qualifications that the concealment, suppression or omission of any material fact had to be knowing and with intent that others rely thereon, in order to constitute an unlawful practice. As amended the pertinent portion road as follows (Senate Committee Amendments to Senate No. 199 — the added language being underlined, the deleted language being bracketed) :

The act, use or employment ly any person of any deception, fraud, false pretense, misrepresentation, or the knowing concealment, suppression, or omission of any material fact [by any person] with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise, whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice; * *

The critical significance of the amendments needs no elaboration; it is manifestly self-evident.

However broad the authority of the Attorney General to “promulgate such rules and regulations * * * as may be necessary” to effectuate the purpose and policy of the act, N. J. S. A. 56:8-4, it does not extend to or authorize the promulgation of any regulation that would nullify and run counter to the express language and specific limitations of the statute from which that authority stems.

Cases such as Dept. of Health v. Concrete Specialties, Inc., 112 N. J. Super. 407 (App. Div. 1970), and Grant Lunch Corp. v. Driscoll, 129 N. J. L. 408 (Sup. Ct. 1943), aff’d o. b. 130 N. J. L. 554 (E. & A. 1943), cert. den. 320 U. S. 801, 64 S. Ct. 431, 88 L. Ed. 4814 (1944), involving violations of air pollution control regulations and alcoholic beverage regulations dealing with sales to minors, respectively, are not here apposite. In neither instance did the underlying statutory authority expressly require that the proscribed conduct be “knowing” and intentional, as here. N. J. S. A. 26 :2C — 1 et seq.; N. J. S. A. 33 :1-1 et seq. Likewise the cases of State v. Elmwood Terrace, Inc., 85 N. J. Super. 240 (App. Div. 1964), and State v. Kinsley, 103 N. J. Super. 190 (Cty. Ct. 1968), aff’d 105 N. J. Super. 347 (App. Div. 1969), involving, respectively, violation of an ordinance requiring dwellings to be heated to a minimum temperature and violation of a water pollution statute — knowledge and intent were not specific prerequisites as in the statute here under review. See, generally, State v. Savoie, 67 N. J. 439 (1975).

This disposition of the appeal makes it unnecessary to consider and to pass upon the other grounds urged for reversal.

Accordingly, so much of the order of the Division of Consumer Affairs as finds the respondent Joseph Friedman, individually and trading as Friedman Associates, to have violated N. J. A. C. 13:45A-2.2 (a) (2) (ii) (4), assesses a penalty of $150 and costs of $50 against him, and directs that he "thereafter cease and desist” from the same conduct, is reversed, and the cause is remanded to the Division of Consumer Affairs with directions to dismiss the complaint as against respondent Joseph Friedman.

Kolovsky, P. J. A. D.

(dissenting). Separate complaints filed in the Division of Consumer Affairs (Division) charged two automobile dealers, Kay American Jeep, Inc. and Arrel Datsun, respectively, with having violated a regulation which makes it an unlawful motor vehicle advertising practice to fail to include in an advertisement for sale of a used automobile the bona fide odometer reading of the automobile. See N. J. A. C. 13 :45A-2.2 (a) (ii) (4). Each complaint sought assessment of a penalty of $200, entry of a cease and desist order and costs.

Appellant Friedman conducts the advertising agency which had prepared the copy and placed the advertisements in a newspaper on behalf of each of the dealers. In each case he appeared with the dealer at the scheduled hearing and consented to being added as a party defendant to the complaint.

That the odometer reading had been omitted from the advertisements was conceded. The defense offered was that the omission was not intentional but rather resulted from the negligence of someone in appellant’s office, in one case appellant himself.

The Division rejected the proffered defense. An order was entered in each ease finding that the charged violation had been proven and ordering that the respective dealers and appellant Friedman “jointly and severally and in the alternative” pay a penalty of $150 and $50 costs and cease and desist from violating the regulation in the future.

Friedman, but not the dealers, filed a notice of appeal in each ease. Since each appeal and the majority opinions therein involve identical issues, this dissenting opinion will apply to both appeals.

The majority concludes that a violation of the cited regulation cannot be established unless it be shown that the failure to include the odometer reading was deliberate rather than due to inadvertence or negligence.

I disagree.

“The subject of consumer fraud has emerged as a major problem of our commercial scene. Being unequal to the vendor, the consumer is easily overreached.” Riley v. New Rapids Carpet Center, 61 N. J. 218, 224 (1972). To remedy and alleviate that problem, our Legislature adopted statutes whose purpose is to protect the consumer against deceptive and improper practices.

Among them was L. 1960, c. 39 — “An Act concerning consumer fraud, its prevention, and providing penalties therefor” (hereafter the Consumer Fraud Act). The act, now N. J. S. A. 56:8-1 et seq., has been amended over the years to expand the protection afforded the consumer. Concomitantly, the governmental machinery provided for enforcement and regulation has been upgraded and expanded.

Power to promulgate rules and regulations "to accomplish the objectives and to cany out the duties prescribed by [the Consumer Fraud Act],” regulations "which shall have the force of law,” was granted to the Attorney General by N. J. S. A. 56:8-4. There can be no question but that "the Legislature intended to confer on the Attorney General the broadest kind of power to act in the interest of the consumer public * * *.” Kugler v. Romain, 58 N. J. 522, 537 (1971).

Acting pursuant to the power thus granted, regulations have been adopted outlawing specific practices, in various types of business, thus delineating specific standards of conduct with which persons engaged in those businesses must comply.

Among the practices so regulated are those involved in the advertising of motor vehicles for sale. Under N. J. A. C. 13 :45A-2.1, the regulations apply to an "advertiser,” defined in pertinent part as:

* * * any person as defined by N. J. S. A. 56:8-1(d) who in the ordinary course of business is engaged in the sale or financing of motor vehicles or who in the course of any 12-month period offers more than three motor vehicles for sale, lease or rental, or who is engaged in the brokerage of motor vehicles whether for sale, lease or rental, and who directly or indirectly initiates, requests, or causes an advertisement to be made for motor vehicles; * * *

N. J. A. C. 13 :45A-2.2 begins with a paragraph declaring that:

(a) Without limiting any other practices which may be unlawful under the Consumer Fraud Act, N. J. S. A. 56:8-1 et seq., the following motor vehicle advertising practices shall be unlawful thereunder :

and then continues with a listing and description, in seven separate sections, oí various unlawful advertising practices. Included therein, as section 2 (ii), is:

The failure in any price advertisement to disclose any of the following :
(1) The year, make and model, and the series if such advertised motor vehicles have a designated series;
(2) Whether the motor vehicle is new or used;
(3) Whether the motor vehicle has been used as a demonstrator, executive, police or fire vehicle, or passenger vehicle for lease, rental or hire, when such prior use is known or should have been known by the advertiser;
(4) The bona fide odometer reading of any specifically advertised demonstration, executive or used motor vehicle. The advertiser may rely on his seller’s affidavit or certification as to milage at the time the advertiser took possession of the motor vehicle provided such reliance is in good faith.
s- * * [The remaining subsections relate for the most part to new motor vehicles.'!

The reasonableness of the requirement that the Iona fide odometer reading he set forth is beyond dispute. The number of miles an automobile has been driven is of critical importance in evaluating the worth of the automobile —• a fact recognized by the Motor Vehicle Act and regulations adopted by the Division of Motor Vehicles (See N. J. S. A. 2A:17050.1 et seq. prohibiting the downward alteration of “the mileage registering instrument of a used motor vehicle”; see also, N. J. A. C. 13 :21-5.8 and 5.9 requiring a seller of a used motor vehicle to certify in writing at the time of sale the truth of the mileage appearing on the odometer of the vehicle.)

The regulation here involved — mandating the inclusion in the advertisement of the odometer reading of the vehicle — establishes a standard of conduct with which advertisers must comply, under pain of penal sanctions, regardless of intent or moral culpability. The regulation falls within the class of "strict liability” penal statutes and regulations which a legislature or an authorized administrative agency may adopt to eliminate the social or economic problems with which they are concerned. Cf. Dept. of Health v. Concrete Specialties, Inc., 112 N. J. Super. 407 (App. Div. 1970); Grant Lunch Corp. v. Driscoll, 129 N. J. L. 408, 411 ( Sup. Ct. 1943), aff’d 130 N. J. L. 554 (E. & A. 1943), cert. den. 320 U. S. 801, 64 S. Ct. 431, 88 L. Ed. 484 (1944); State v. Elmwood Terrace, Inc., 85 N. J. Super. 240, 246-247 (App. Div. 1964); State v. Kinsley, 103 N. J. Super. 190 (Cty. Ct. 1968), aff'd o. b. 105 N. J. Super. 347 (App. Div. 1969).

Apposite is what was said in Grant Lunch Corp. v. Dris-coll, supra, in rejecting a contention that a liquor dealer should not have been penalized because one of his clerks inadvertently had sold a bottle of liquor below the minimum price fixed by a regulation of the Division of Alcoholic Beverage Control:

Although the sale was not accomplished in purposeful violation of the regulations it was such an act as would have been avoided had the prosecutor’s clerks performed their duty; and in any event it was a flat violation of lawful regulations duly promulgated and fully grounded in the statute. [129 N. J. L. at 410-411]

The majority finds the cited cases inapposite because, in their view, N. J. S. A. 56:8-2 mandates that before one may be found guilty of violating the regulation in question, it must be shown that he did so knowingly and intentionally.

I find no such mandate in N. J. S. A. 56 :8-2 nor do I find therein any legislative intent to limit the broad powers granted the Division to delineate standards of conduct or permissible commercial practices to which those who advertise used automobiles for sale must adhere.

N. J. S. A. 56:8-2 provides in pertinent part:

The act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice; *' * [Emphasis added]

The majority’s interpretation ignores that the word “knowing” appears only after the word or (which I have italicized) and applies only to the conduct thereinafter referred to. The word “knowing” does not appear in, nor does it have any application to, the preceding provision of the section proscribing “the act, use or employment by any person of any unconscionable commercial practice;, deception” etc.

The omission of the word “knowing” from the provision just quoted is cogent evidence that the Legislature intended that, irrespective of the offender’s intent, it is unlawful to use or employ an “unconscionable commercial practice.”

Were there no prior enunciated governing and controlling standard of conduct, the issue of whether particular conduct constitutes an unconscionable commercial practice might present a factual issue. Here, however, there is no room for debate; a preexisting regulation seeking to compel truth in advertising has declared that the failure to include the odometer reading, as well as the other required information, in the advertisement is an unlawful “motor vehicle advertising practice.”

I find no justification in the statute or elsewhere for the interpretation adopted by the majority which would impose on the Division, in its efforts to protect the consumer, the almost impossible task of showing an intentional failure to comply with one or more of the myriad regulations it has adopted to eliminate improper commercial practices, regulations of which all in the regulated business have been forewarned.

The majority’s disposition of the appeal made it unnecessary for them to consider the remaining points advanced for reversal. Those points challenged the propriety of imposing liability on an advertising agency — as distinguished from its client, the dealer — for a violation of the regulation. Appellant contends that his advertising agency is not an “advertiser” as that word is defined in N. J. A. C. 13 :45A-2.1, and that if it is deemed so to be, the regulation and the underlying statute unconstitutionally discriminate against advertising agencies because of the exemption granted by the regulation and the statute (I quote from the regulation) :

* * * to the owner or publisher of newspapers, magazines, publications or printed matter wherein such advertisement appears or to the owner or operator of a radio or television station which disseminates such advertisement when the owner, publisher or operator has no knowledge of the intent, design or purpose of the advertiser.

There is no substance to appellant's constitutional contention. Further, there is no reason for us to reach or decide, on the present record and without a full development of the scope of appellant's activities, whether he is an advertiser within the meaning of that term as defined in the regulations.

That issue was neither raised nor explored at the hearing before the Division. On the contrary, at the hearings before the Division appellant took the position that if any penalty were imposed, it should be imposed against him not against his customer, the automobile dealer, since it was his agency which was responsible for the omission.

I would affirm the order of the Division in each case.

       TJnder the original act the powers oí enforcement and regulation were assigned to the Attorney General. By L. 1967, c. 23 (N. J.

        S. A. 52:17B-5.6 et seq.) his functions, powers and duties under the act were directed to be exercised by him through a bureau then established in the Division of Law, the Office of Consumer Protection, headed by an executive director appointed by and serving at the pleasure of the Attorney General. The Attorney General’s powers and duties were transferred in 1971 to the newly created Division of Consumer Affairs in the Department of Law and Public Safety. N. J. S. A. 52:17B-120, 124. N. J. S. A. 52:17B-120 provides that “the division shall be under the immediate supervision of a director who shall administer the work of the division under the direction and supervision of the Attorney General.” The director is appointed by the Governor with the advice and consent of the Senate, and serves at the pleasure of the Governor.


author: Bilder, J. S. C.

text:
    MARILYN A. YOUNG, GENERAL ADMINISTRATRIX AND AD-MINISTRATRIX AD PROSEQUENDUM OF THE ESTATE OF STANLEY M. YOUNG, DECEASED, AND MARILYN A. YOUNG, INDIVIDUALLY, PLAINTIFFS, v. HENRY J. KING, SUN IL CHONG AND NORTH HUDSON HOSPITAL ASSOCIATION, A CORPORATION OF THE STATE OF NEW JERSEY, DEFENDANTS.
    Superior Court of New Jersey Law Division
    Decided June 5, 1975.

      Mr. Francis X. Dorrity for plaintiffs.

      Mr. John W. Reinman for defendants Drs. King and Chong (Messrs. Lamb, Hutchinson, Chappell, Ryan & Hartung, attorneys).

      Mr. Justin B. Parkerton for defendant North Hudson Hospital Association (Mr. Edward E. Kuebler, attorney).
   Bilder, J. S. C.

This is a motion by a plaintiff in a medical malpractice action to compel a defendant hospital to produce the records of four hospital committees —■ the Medical Eecords and Audit Committee, the Tissue Committee, the Infection Control Committee, and the Medical Council — insofar as they refer to the patient and incident which are the subject matter of this suit. The codefendant doctors join in plaintiff’s application.

The basic suit is a medical malpractice death action brought against a hospital and treating doctors in which it is alleged that the decedent died as a result of a staph infection which he contracted while a patient in the hospital and which was not diagnosed or treated properly.

Initially it should be noted that plaintiff does not seek information concerning other patients or other incidents but limits his request to those parts of the minutes of the aforementioned committees concerning the treatment rendered to plaintiff’s decedent daring his hospitalization and concerning his death. Plaintiff also specifically excludes any request for the records of the Htilization Be view Committee. Sec N. J. S. A. 2A:84A — 22.8.

Defendant hospital resists the demand on the ground that the requested records are protected by the patient-doctor privilege, N. J. S. A. 2A:84A-22.2, and the further ground that N. J. S. A. 2A:84A — 22.8 inferentially includes all review committees.

As to the first ground, since the request is limited to this patient’s records so that no third parties are involved, the privilege does not apply. See Osterman v. Ehrenworth, 106 N. J. Super. 515 (Law Div. 1969).

As to the second ground — the application of N. J. S. A. 2A:84A-22.8 — the Utilization Review Committee is a specific committee, a word of art so to speak. It is an integral part of the utilization review plan required in order to qualify under the Social Security Act and thus participate in federal and state funded programs. See 42 U. S. C. A. 1395x et seq.; N. J. S. A. 30:4D-1 et seq. The Legislature provided special protection to such committees and their members in order to encourage “willing participation” and “thus effectively to implement the provisions of Medicare and other health care measures.” Statement accompanying Senate Bill 559 (L. 1970, c. 313).

Our rules of civil procedure provide for the broadest discovery, and any information that may lead to discovery of admissible evidence is discoverable unless privileged. R. 4:10-2. This includes records of hospital committees where it does not impinge upon a third-party patient-doctor privilege. See Gureghian v. Hackensack Hospital, 109 N. J. Super. 143 (Law Div. 1970), where the court ordered production of a report of the Perinatal Mortality Committee of the Department of Obstetrics and Gynecology. The specific and special protection the Legislature has afforded utilization review committees by N. J. S. A. 2A:84A-22.8 should not be broadened to include other committees and thus frustrate our discovery rules.

Motion granted subject to appropriate protection against the discovery of privileged matter.


author: Di Martino, P. J. D. C.

text:
    WORKMAN’S AUTOMATIC MUSIC SERVICE, INC., A PENNSYLVANIA CORPORATION, PLAINTIFF, v. NEW COLONY DINER, INC., DEFENDANT.
    District Court — Camden County
    August 19, 1975.

      Mr. Francis E. Malloy for plaintiff.

      Mr. Steven D. Weinsten for defendant (Mr. Lewis Katz, a professional corporation).
   Di Martino, P. J. D. C.

This matter is presently before the court on an application to direct the clerk to issue a warrant for removal of the tenant.

The factual background is important to a determination of this issue. Plaintiff landlord instituted a dispossess proceeding under N. J. S. A. 2A:18-53(b) for nonpayment of rent due and owing through May 1975 in the amount of $3,624.97. Thereafter the landlord made a motion for summary judgment, alleging that there was no substantial issue of fact and that it was entitled to a judgment as a matter of law. On the return day of the motion it was noted by the court that the tenant did not file counter-affidavits, but upon request of counsel continued the motion for one week to permit the filing of an affidavit. On August 8, 1975 the court denied the application for summary judgment and scheduled the trial for August 12, 1975.

Prior to trial counsel stipulated that the complaint be amended to include allegations that the rents for June, July and August were also not paid, and these months were also to be considered as part of the cause of action.

Testimony was received and the court determined that defendant was in arrears in the amount of $6,246.38 and accordingly granted judgment for possession in favor of plaintiff.

There is no dispute that on August 15, 1975 the tenant offered a cashier’s check for the full amount of the arrear-ages plus costs, and the landlord refused to accept the tender.

On August 18, 1975 the court was advised of the tender. The tenant then deposited the amount of the arrearages plus costs with the clerk of the county district court.

The reason that the amount involved is so substantial is because the demised premises are commercial and involve a diner. The position of the tenant is that by the payment of the proceeds into court the proceedings must cease because of the provisions of N. J. S. A. 2A:18-55. That statute provides that where the ground upon which possession is sought is nonpayment of rent, the tenant may cause the proceedings to cease because of loss of jurisdistion by payment to the clerk of the county district court “on or before the entry of final judgment.”

The tenant herein relies upon the language of County Judge Meanor in Academy Spires, Inc. v. Jones, 108 N. J. Super. 395 (Law Div. 1970), as follows:

Since under N. J. S. A. 2A:18-57, a warrant for possession may not issue for three days after judgment for possession, the tenant as a practical matter has three days in which to pay the amount he is in default in order to remain in possession.

This issue does not appear to have been decided by any appellate court of our State. Succinctly stated, the issue is whether the rent can be paid within three days of the entry of final judgment in order to remove the court’s jurisdiction.

Two observations are appropriate. First, the language in Academy Spires was not necessary to the determination of any issue in that case and was, therefore, dictum. Secondty, N. J. S. A. 2A:18-55 expressly provides for payment to be made “on or before entry of final judgment.”

Final judgment in the present case was entered on August 12, 1975. However, the warrant could not issue until August 18, 1975 (because the appropriate time for issuance would be extended since it fell on Saturday and Sunday.)

The judge in the Academy Spires case relied on Saveri-ano v. Saracco, 97 N. J. Super. 43 (App. Div. 1967), for the decision referred to above. A reading of that case does not support the conclusion that the payment of rent can be made within three days after entry of final judgment. In that case, after the court heard the testimony, it entered judgment for possession with the direction, “Warrant not to issue; Hold.” Defendants thereupon immediately paid to the clerk the rent in question and costs. The court later ordered the issuance of the warrant but stayed it pending appeal.

The Appellate Division reversed. The court based its reversal on its interpretation of the word “on” in the statute. The court stated that

* * * it does no violence to tke statute or to its interpretation to read the word “on” in its usual sense and to hold it to mean that where there is a final judgment of dispossession, and defendant, while court is still in session, immediately after judgment pays the disputed rent plus costs to the clerk, the statute (N. J. S. A. 2A:18-55) has been satisfied. [Emphasis supplied]

This language and this interpretation certainly cannot be stretched to permit payment the next day or, as in the present ease, on the fourth business day after the entry of final judgment. This is so despite the policy reflected in cases dealing with summary proceedings of the type here involved that a forfeiture is to be avoided where the rent and costs have actually been paid. That view applies only where payment is made “on or before entry of final judgment.” Saveri-ano v. Saracco, supra; Vineland Shopping Center, Inc. v. DeMarco, 35 N. J. 459 (1961); Seidel v. Cahajla, 129 N. J. L. 314 (Sup. Ct. 1943).

In Newark Housing Authority v. West, 132 N. J. Super. 229 (App. Div. 1975), the court held that in a summary proceeding to dispossess a tenant for nonpayment of rent, the court could not stay the issuance of a warrant to permit the tenant to pay the arrearages over a period of time. The language employed by the court quite clearly indicates that in a dispossessi proceeding for nonpayment of rent under N. J. S. A. 2A:18-53, “once a default has been established and judgment for possession has been entered, the county district court is without jurisdiction to stay the issuance of the warrant for removal,” with an exception not here pertinent.

This court concludes that unless the rent is paid before the entry of final judgment or while the court is in session on the day of judgment, the landlord is entitled to possession pursuant to judgment. The tender to the landlord or payment into court thereafter does not vitiate the judgment.

The warrant will issue.


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

text:
    HOUSING AUTHORITY OF THE CITY OF NEWARK, ETC., PLAINTIFF-APPELLANT, v. COMMISSIONER, DEPARTMENT OF INSTITUTIONS & AGENCIES, ET AL., DEFENDANTS-RESPONDENTS. HOUSING AUTHORITY OF THE CITY OF NEWARK, ETC., APPELLANT, v. ANN KLEIN, COMMISSIONER DEPARTMENT OF INSTITUTIONS & AGENCIES, RESPONDENT.
    Superior Court of New Jersey-Appellate Division
    Submitted June 10, 1975
    Decided June 30, 1975.

      Before Judges Carton, Crank and Kole.

      Messrs. Friedman & D’Alessandro, attorneys for appellant Housing Authority of the City of Newark (Messrs. Edward G. D’Alessandro and Michael F. Lombardi on the brief).

      Mr. William F. Hyland, Attorney General of New Jersey, attorney for respondent Commissioner of the Department of Institutions and Agencies (Mr. Stephen Stillman, Assistant Attorney General, of counsel; Ms. Joan W. Murphy, Deputy Attorney General, on the brief).

      Mr. William Tamburri, attorney for respondent Essex County Welfare Board, filed a statement relying on brief of Commissioner of the Department of Institutions and Agencies.

      Mr. Milton A. Buck, attorney for respondent Division of Public Welfare of the City of Newark, filed a statement relying on brief of Essex-Newark Legal Services Project.

      Messrs. J. Michael Callan and, Harris David (Essex County Legal Services Project), attorneys for intervenorsrespondents Ruby Leverett, Verna Barnhill, Helen Mitchell, Nora Elliot and Julia Smith, individually and on behalf of all others similarly situated (Mr. Michaet C. Parks on the brief).
   The opinion of the court was delivered by

Carton, P. J. A. D.

These consolidated appeals from a judgment of the Superior Court, Chancery Division, and from an administrative determination by the Commissioner of the Department of Institutions and Agencies involve proceedings arising out of a rent strike in housing projects under the control of the Housing Authority of the City of Newark. Plaintiff Authority is a public corporation created according to N. J. S. A. 55 :14A — 1 et seq. At the time this action was brought the Authority was operating 23 basic housing projects in Newark. (Defendants are the municipal, county and state agencies responsible for administration of various programs of public assistance.)

In April 1970 many of the tenants in the various projects began a rent strike. The rent strike was a protest against the allegedly uninhabitable conditions of the housing projects.

Of the 12,720 families in Authority-operated housing projects, 5,297 receive some form of public assistance. 2,729 of these families were, as of August 2, 1973, delinquent in the payment of monthly rentals. Total arrearages for all tenants amounted to about $6,000,000. Of this sum $2,500,000 represented delinquencies accumulated by the 2,729 tenant families on welfare.

Plaintiff’s complaint describes the critical situation which had come about. Because of the curtailment of revenues the difficulties of maintaining operation of the various projects have been aggravated. Suppliers oí vital services were owed in excess of $3,000,000 and the Authority was unable to make necessary repairs. This, in turn, provided the tenants with an excuse to continue to withhold rentals. The Federal Government failed to provide assistance because the amount of funds available from the Department and Urban Development is fixed as a maximum deficit — assuming payment of rentals.

Plaintiff sought direct payments from the Essex County Welfare Board. When that Board informed it that it was not possible to make such payments, plaintiff brought the Chancery action in September 1973 against the Department of Institutions and Agencies, Essex County Welfare Board and the Division of Public Welfare of the City of Newark. In that action it sought determinations that nonpayment of rent by a tenant receiving public assistance, any part of which was represented by shelter needs, constitutes a misuse of public assistance funds and that such nonpayment of rentals to the Authority was a substantial factor in contributing to the critical situation facing it and was detrimental to the best interests of all public assistance dependents in the various projects. On this basis plaintiff requested an order compelling defendant welfare agencies to turn over as a “vendor” or “protective payment,” either directly to the Authority or other person as the court shall appoint as a “vendor” or “protective payment,” the portion representing shelter needs of every public assistance grant due and to become due to any delinquent tenant.

Various welfare recipients were permitted to intervene, individually and on behalf of others similarly situated. After oral argument Judge Kimmelman, on March 11, 1974, dismissed the complaint on the ground that plaintiff had failed to exhaust any administrative remedy which it may have through the Department of Institutions and Agencies for appropriate relief under these compelling circumstances. In doing so Judge Kimmelman observed, among other things, that the Commissioner should give consideration to formulating a method whereby the shelter grant will be made to serve its intended purpose. He suggested that an independent fiscal agent might be utilized to receive such funds on behalf of the tenants and disburse them for the mutual benefit of the tenants and the Authority, or, alternatively, that the services of a judicially-appointed rent receiver could be engaged to insure that the withheld rentals be used to provide necessary services and make needed repairs under the court’s supervision.

In April 1974 plaintiff proposed to Commissioner Klein of the Department of Institutions and Agencies that she meet with representatives of the United States Departments of Health, Education and Welfare (HEW) and Housing and Urban Development (HUD) to discuss the relief sought in the Chancery action and the suggestions made by Judge Kimmelman. Early in May Commissioner Klein advised plaintiff that her department had given serious consideration to plaintiff’s proposal, icbut would decline to adopt it both for legal and policy making considerations in the absence of a court order to the contrary.” Hence the present appeal.

As to the Chancery Division action, we conclude that Judge Kimmelman correctly dismissed plaintiff’s action for failure to exhaust administrative remedies. It is clear that at the time plaintiff commenced its action it had broached its proposal only to the Essex County Welfare Board, and then 'only by an exchange of correspondence. It should have requested a final determination by the Commissioner of Institutions and Agencies before seeking judicial relief. In any event, the issue is moot since plaintiff did later pursue its remedy to the Commissioner of Institutions and Agencies after the court’s ruling, and she declined to grant the relief requested. It is her determination with which we are now concerned.

The central issue is whether welfare payments may be paid to the Authority to compensate it for delinquent rent payments. Determination of that issue must be decided on the basis of the applicable state and federal laws. Conflicting questions of public policy as to whether welfare tenants should be allowed to have a “free ride” at public expense and whether the Authority may use the welfare system to combat a rent strike are tangential to this issue and should play no part in determination of this legal issue.

The record indicates that tenants receive assistance in the form of Old Age Assistance (OAA), Aid to Families with Dependent Children (AFDC), Aid to the Blind (AB), and Aid to the Permanently and Totally Disabled (APTD). The vast majority of delinquent welfare tenants receive public assistance in the form of AFDC.

State participation in a federally-supported categorical assistance program is voluntary. However, a state choosing to participate must comply with the terms of the federal legislation and regulations promulgated by HEW and must secure HEW approval of its plan for implementation of the program. Hausman v. Dept. of Institutions and Agencies, 64 N. J. 202, 206-207 (1974), cert. den. 417 U. S. 955, 94 S. Ct. 3083, 41 L. Ed. 2d 674 (1974).

The settled interpretation of welfare was stated in Goldberg v. Kelly, 397 U. S. 254, 90 S. Ct. 1011, 25 L. Ed. 2d 287 (1970):

S' * * We have come to recognize that forces not within the control of the poor contribute to their poverty. This perception, against the background of our traditions, has significantly influenced the development of the contemporary public assistance system. Welfare, by meeting the basic demands of subsistence, can help bring within the reach of the poor the same opportunities that are available to others to participate meaningfully in the life of the community. At the same time, welfare guards against the societal malaise that may flow from a widespread sense of unjustified frustration and insecurity. Public asistance, then, is not mere charity, but a means to “promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity. [397 U. S. at 265, 90 S. Ct. at 1019, 25 L. Ed. 2d at 297]

Thus, the AFDC program was established for the purpose of helping the parents or relatives of needy children “attain or retain capability for the maximum self-support and personal independence consistent with the maintenance of continuing parental care and protection.” 42 U. S. C. A. § 601 (Title IVA of the Social Security Act). This approach is adopted in the companion state statute, N. J. S. A. 44:10-1 (a)(3). Regulations promulgated pursuant to N. J. S. A. 44:10-1 et seq. emphasize this “independence” factor:

In public assistance the principle of assistance by money payments is based on the concept of affording every needy person the fullest reasonable opportunity to plan for himself, to decide what use of his assistance payment will best serve his interests, and to make his purchases through the normal channels of exchange, enjoying the same rights and discharging the same responsibilities as to other members of the community. [N. J. A. C. 10:81-18.1; emphasis supplied]

To achieve these objectives AFDC benefits are made in the form of “money payments.” 42 U. S. C. A. § 606(b). As explained in 45 CFR § 234.11(a),

Federal financial participation is available in money payments made under a State plan under Title I, IV-A, XIV, or XVI of the Social Security Act to eligible families and individuals. Money payments are payments in cash, checks or warrants immediately redeemable at par, made to the grantee or his legal representative with no restrictions imposed by the agency on the use of the funds. [Emphasis supplied]

Restrictions may be placed on the use of payments when the state agency has reason to believe that the money is not being used in the best interests of the child. In such a case protective payments may be authorized. 42 U. S. C. A. § 605. Thus, 45 CFR § 234.60 provides for protective and vendor payments for dependent children. Under (a) (1), if a state plan for AFDC provides for protective and vendor payments for other than (WIN) cases, it must meet the requirements of paragraphs (2) through (11).

Two of these requirements are particularly relevant here. Subsection (3) requires the establishment of criteria to determine under what circumstances payments will be made in whole or in part directly to another individual who is concerned with the welfare of the child or a person furnishing food, living accommodations or other goods, services or items to or for the child or relative. Subsection (7) requires the establishment of standards for selection of protective payee “with the selection of a protective payee being made by the recipient, or with his participation and consent, to the extent possible.” It specifies that

The selection will not include: the executive head of the agency administering public assistance; the person determining financial eligibility for the family; special investigative or resource staff, or staff handling fiscal processes related to the recipient; or landlords, grocers, or other vendors of goods or services dealing directly with the recipient. [Emphasis supplied]

Similar protective payments are provided for the aged, blind, or disabled in 45 CFR § 234.70.

The federal scheme thus envisions situations where the relative of the dependent child is unable to manage funds. In such cases, after the relative has been found unable to manage the funds under pre-established standards, protective payments may be arranged. However, the relative must be given every opportunity to decide to whom the protective payments are made. Moreover, landlords are expressly excluded as potential protective payees. The regulations could not conceivably have been meant to cover a situation such as that at bar whereby tenants willfully withheld rentals pursuant to Berzito v. Gambino, 63 N. J. 460 (1973), in order to secure the standard of housing as set forth in 42 U. S. C. A. § 1401 et seq.

The New Jersey regulations are consonant with the federal regulations and with N. J. S. A. 44:10 — 3(h), which assures that the payments will be terminated if the dependent child is not properly maintained. The state definition of “money payments” includes (1) “Unrestricted payments,” checks drawn to the order of the recipient or his legally appointed guardian and immediately available for his unconditional use; (2) “Restricted payments,” checks drawn to the recipient or guardian which are subject to some condition; (3) “Vendor payments,” checks drawn to the order of a person who has provided goods or services to or for the client. N. J. A. C. 10:81-18.2. N. J. A. C. 10:81-18.3 states that the federal definition of “money payments” is limited to the State’s definition of unrestricted money payments. N. J. A. C. 10:81 — 18.4 emphasizes the fact that federal participation is limited to unrestricted payments or payments “to the vendor of a medical service for the recipient, provided the payment is for a class of medical service specially authorized in the State Plan.” To qualify for federal matching funds as unrestricted, a money payment must be drawn to the order of the recipient or guardian and payment must be made without direction that the recipient must use his money in a specified way. See N. J. A. G. 10:81 — 18.4(c).

N. J. A. C. 10:81-18.21 et seq. adheres to 45 GFB § 234.60 in setting standards for payment by incompetent recipients and defines the term “incompetent.” N. J. A. C. 10:81-18.21(a) states that:

The principle of: money payments presumes that the person is physically and mentally able to manage his personal affairs. It is recognized, however, that some persons otherwise eligible, cannot be effectively provided for through the issuance of cash payments, either because they are legally barred from endorsing checks or because otherwise inadequate to manage their own affairs.

See also, N. J. S. A. 44:11-1 which defines “functionally incompetent” as “subject to a mental, physical or emotional condition which renders the individual incapable of receiving and utilizing payments of public assistance in a manner conducive to the health and well-being of himself and his dependents.”

N. J. A. C. 10:91-18.23 authorizes assistance to be provided for incompetent persons by payment to a protective payee. N. J. A. C. 10:81 — 18.25(b) forbids the appointment as protective payees of vendors of services for recipients, stating that, “'No person shall be appointed a protective payee when such appointment would raise questions of conflict of interest.” N. J. A. C. 10:81-18.28 provides that the protective payee be selected, so far as possible, with the participation of the recipient. “The major personal criterion for selection of a protective payee is an interest in being of service to the recipient so as to work with him in a way that preserves, strengthens and helps develop his ability to make decisions and to manage his own assistance program.”

Clearly, here, as under the provisions of 45 CFR § 234.60, the Housing Authority could not possibly qualify as a protective payee. Bather, the protective payee is expected to come from one of these sources: the immediate family and other relatives and friends; a person previously appointed to act on behalf of the client by another state or federal benefit-paying agency, and staff members of voluntary agencies. N. J. A. C. 10:81-18.28(c).

Plaintiff further argues that the flat grant system utilized by the New Jersey welfare system specifically takes into account three separate need categories: (1) personal and household needs, (2) shelter and (3) special circumstances. This fact lends no support to plaintiff. That a definite portion is allocated for shelter does nof mean that that portion can be summarily extracted and paid over to the Housing Authority. The shelter allocation is an average based on statewide calculations. Indeed, the fact that the shelter grant is a constituent part of the flat grant indicates a desire “to give welfare recipients more control over their lives by eliminating second-guessing on expenditures by paternalistic welfare workers.” See N. J. Welfare Rights Org. v. Cahill, 349 F. Supp. 501, 504 (D. N. J. 1972), aff'd 483 F. 2d 723 (3 Cir. 1973).

Alternatively, plaintiff bases its argument on two recently promulgated federal regulations. 45 CFR § 234.75 provides:

Kent payments to pubiie housing agencies.

At the option of a State, if its plan approved under title I, X, XIV, or XVI of the Social Security Act so provides, Federal financial participation under such title is available in rent payments made directly to a public housing agency on behalf of a recipient or a group or groups of recipients of OAA, AB, APTD or AABD. Such Federal financial participation is available in rent payments only to the extent that they do not exceed the amount included for rent under the State’s standard of assistance to the amount of rent due under applicable law, whichever is less.

45 CFR § 234.120 states that:

Federal financial participation.

Federal financial participation is available in assistance payments made under a State plan under title I, IV-A, X, XIV or XVI of the Social Security Act to any family or individual for periods beginning with the month in which they meet all eligibility conditions under the plan and in which an application has been received by the agency. Such assistance payments include:

(a) Money payments (titles I, IV-A, X, XIV and XVI, see § 234.11 of this chapter) ;
(b) Protective and vendor payments for dependent children (title IV-A, see §234.60 of this chapter) ;
(c) Protective payments for the aged, blind, or disabled (titles I, X, XIV, and XVI, see § 234.70 of this chapter) ;
(d) AFDC foster care payments (title IV-A, see § 233.110 of this chapter) ;
(e) Vendor payments for institutional services in intermediate care facilities (titles I, X, XIV and XVI) but only in a State that did not, as of January 1, 1972, have an approved plan under title XIX of the act, and only until such State has a plan in effect. (See § 234.130 of this chapter) ;
(f) Emergency assistance to needy families with children (title IV-A, see § 233.120 of this chapter) ;
(g) Vendor payments for home repairs (titles I, IV-A, X, XIV and XVI, see § 233.20(c) of this chapter) ; and
(h) Kent payments to public housing agencies (titles I, X, XIV and XVI, see § 33^.75 of this chapter). [Emphasis supplied]

Titles I, X, XIV and XVI refer to the assistance plans of OAA, AB, APTD and AABD. (These plans, dealing with aid to the aged, blind or disabled and for medical assistance to the aged, were replaced by a completely federally-funded program effective January 1, 1974. See 42 U. S. C. A. § 1381 et seq.; N. J. S. A. 44:7-85. Thus, the relevancy of 45 CFR § 234.120(h), even to those delinquent tenants who are recipients of aid from programs other than AFDC, is moot.)

Title IV-A pertains to AEDO. The gist of plaintiff’s argument here is that the regulation must be construed so as to apply to AEDC because Title IV-A is mentioned in the introductory paragraph. Such a construction is absurd. The introduction mentions all the aid programs which could conceivably be covered by the regulation. Each specific subparagraph is then directed at specific programs. Thus, subparagraph (b) deals with protective payments to dependent children and refers to Title IV-A (AFDC) and 45 CFR § 234.60. Subparagraph (c) deals with protective payments for the aged, blind or disabled and refers to Titles I, X, XIV and XVI and 45 CFR § 234.70. Subparagraph (h) deals with rent payments to public housing agencies and refers only to Titles I, X, XIV and XVI and to 45 CFR § 234.75, which, in turn, deals only with those aid programs and not with AFDC. Thus, plaintiff’s argument that 45 CFR § 234.120(h) allows for payments of AEDC funds to housing authorities is devoid of merit.

We deem none of the cases relied upon by plaintiff to be apposite to the circumstances of this case.

We see no reason to comment on plaintiff’s remaining arguments, except the contention that the regulations are arbitrary because they do not provide for nonmedical vendor payments while providing for medical vendor payments. This argument was not raised in the pleadings below and need not be decided. In any event, we find it to be without merit. We observe that direct payment for medical care is specifically permitted under 42 U. S. C. A. § 606(b). We also observe that the Equal Protection Clause does not necessarily require that a regulation apply equally to different persons. Consequently, the tenant’s right to withhold rent under certain circumstances may well provide a rational basis for different treatment of medical payments and rental payments.

In sum, we conclude that there exists no federal or state regulation that would allow the court to order the Department of Institutions and Agencies to pay delinquent rentals directly to the Housing Authority. The determination of the Commissioner of Institutions and Agencies is therefore affirmed.