author: Seidman, J. A. D. Bischoff, J. A. D.

text:
    EDWARD L. MOUNT, PLAINTIFF-APPELLANT, v. THE TRUSTEES OF THE PUBLIC EMPLOYEES’ RETIREMENT SYSTEM OF THE STATE OF NEW JERSEY, DEFENDANT-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued January 20, 1975
    Decided March 5, 1975.

      Before Judges Leonard, Seidman and Bischoff.

      Mr. Henry A. Hill, Jr., argued the cause for appellant (Messrs. Mason, Griffin & Pierson, attorneys; Mrs. Susan F. Baxendale on the brief).

      Miss Prudence H. Bisbee, Deputy Attorney General, argued the cause for respondent (Mr. William, F. Hyland, Attorney General of New Jersey, attorney).
   The opinion of the court was delivered by

Seidman, J. A. D.

This appeal presents two issues, both seemingly of first impression in this jurisdiction. At least, counsel have not brought to our attention any reported case on all fours with the matter before us, and our own research has disclosed none.

One issue is whether, in the case of a public employee who retired and is receiving a pension under a retirement system, and is thereafter indicted for offenses allegedly committed during his employment, the trustees of the retirement system may, upon notice and after a hearing, suspend further pension payments pending a determination of the indictment. The other, assuming the existence of the power to suspend, is what must be shown at the hearing to warrant such suspension.

Edward L. Mount was employed by the County of Mercer as county engineer from January 1, 1949, until June 19, 1973, when, having attained the age of 68, he applied for and was awarded a retirement allowance under the Public Employees’ Retirement System of New Jersey N. J. S. A. 43:15A-6 et seq. By virtue of his having been in public service for more than 50 years, including prior employment with the City of Trenton, his pension amounted to $1574.53 per month.

On September 16, 1974 Mount was indicted by a federal grand jury sitting in Newark. One count of the indictment charged him, as county engineer, with extorting the sum of $8,000 from Barrett Paving Company, Inc., a contractor, during the period of 1968 through 19'70, in violation of 18 U. S. O. A. §§ 1951 and 1952. In three additional counts it was alleged that he filed false income tax returns for the respective years of 1968, 1969, and 1970.

Upon becoming aware of the indictment, the secretary of the retirement system notified Mount by letter dated September 30, 1974 that since the indictment “leaves open the question of whether or not the retirement allowance which has been granted to you is based upon honorable service, a requisite for such retirement,” his status would have to be reconsidered by the board of trustees; that it was “very possible” the board would suspend future pension payments pending the outcome of the indictment, and that should the board take that action he would be advised after the October 15 meeting.

There is no need to recount in detail the somewhat tangled procedural history thereafter. It is sufficient simply to note the filing of a verified complaint in Chancery Division of Superior Court seeking to enjoin the board of trustees from taking any action with respect to the pension payments until a final determination of the indictment, the denial of a temporary restraint by the Chancery Division judge, the filing of a motion for leave to appeal, and the application to us for a temporary stay pending the outcome of the motion. These matters all became moot when the board of trustees, at a hearing on October 29, 1974, at which Mount’s counsel were present, voted to suspend the pension pending disposition of the criminal charges. An appeal as of right was filed from that determination. R. 2:2-3 (a) (2). We heard the appeal on an accelerated basis pursuant to B. 2:9-2.

Appellant contends that (1) the procedure followed by the board violated due process in that the State was required to go beyond the indictment and present substantial evidence in support of the charges in order to justify any interruption of the pension payments; (2) he was entitled to be advised of the specific charges against him; (3) he was deprived of .his Sixth .Amendment right to confront and cross-examine witnesses; (4) the indictment was not prima facie evidence of dishonorable service, and (5) the board had no authority to suspend the pension payments absent a conviction, and (6) public policy would not be served by the suspension. The response of the deputy attorney general is that (1) the board has authority to suspend pension payments pending termination of criminal proceedings against a pensioner for alleged offenses occurring during his employment which would constitute dishonorable service, and (2) the board’s procedure conformed to the requirements of due process of law.

A public employee’s pension rights and benefits are based upon and fall within the scope of a relevant pension statute. Feher v. Bd. of Trustees, Pub. Emp. Retirem. Syst., 68 N. J. Super. 391, 397 (App. Div. 1961). In this case the applicable statute is the Public Employees’ Retirement System of New Jersey, N. J. S. A. 43 :15A-6 et seq., which is administered by a board of trustees appointed pursuant to N. J. S. A. 43 :15A — 17.

It has been said that pensions to public officers are mere gratuities bestowed by the sovereign in recognition of previously rendered meritorious service. Watt v. Franklin Mayor and Council, 21 N. J. 274, 279 (1956). A “more modern concept” is that pensions are a form of delayed salary compensating the employee for faithful service. See Id., Salz v. State House Comm’n, 18 N. J. 106, 111—112 (1955); Bd. of Trustees, etc. v. Warren Cty. Bd. of Freeholders, 87 N. J. Super. 187, 194 (Law Div. 1965), aff’d 47 N. J. 132 (1966). However, in Spina v. Consol. Police, etc., Pension Fund Comm’n, 41 N. J. 391, 401 (1964), former Chief Justice Weintraub, writing for the court, stated that “[w]e think there is no profit in dealing in labels such as ‘gratuity,’ ‘compensation,’ ‘contract,’ and ‘vested rights.’ None fits precisely, and it would be a mistake to choose one and be driven by that choice to some inevitable consequence.” He said further:

Government’s contribution to a pension fund has several facets. In part it compensates for services already rendered. It is also a reward for services to be rendered over the required minimum number of years, but the employee has no right to be continued in employment for enough years to earn it. In both respects the contribution seems compensatory, at least as of the time of eligibility for retirement. Yet it can be viewed also as noncompensatory payment to further the public employer’s own interests, i. e., to permit the employer to release an aged servant who cannot decently be let out if he is unable to meet the necessities of life.
* * Hr * # Hr #
As to the employee’s contribution, it seems to be a sum already earned.
* * Hft * * Hr Hit
In these circumstances, it seems idle to sum up either the public’s or the employee’s contribution in one crisp word. We have no doubt that pension benefits are not a gratuity within the constitutional ban against the donation of public moneys. * *’ * And we thinh the employee has a property interest in an existing fund which the State could not simply confiscate. * * * [at 401-402]

We see no compelling reason to delve further into the nature of a pension or the rights secured to the pensioner. It seems self-evident that a retirement allowance cannot arbitrarily be denied a public employee who qualifies therefor under an existing statutory system. See Ballurio v. Castellini, 29 N. J. Super. 383 (App. Div. 1954). A public employee qualifies for a pension upon satisfying three basic requirements: age, length of service, and honorable service. See Plunkett v. Hoboken Pension Comm’rs, 113 N. J. L. 230, 232-233 (Sup. Ct. 1934), aff’d 114 N. J. L. 273 (E. & A. 1935); Walter v. Trenton Police & Fire, etc., 120 N. J. L. 39 (Sup. Ct. 1938); Ballurio v. Castellini, supra; Hozer v. State, etc., Police & Firemen’s Pension Fund, 95 N. J. Super. 196, 199—200 (App. Div. 1967), certif. den. 50 N. J. 285 (1967).

Honorable service is a sine qua non of the grant of a pension. Plunkett v. Hoboken Pension Commr’s, supra, 113 N. J. L. at 232. It is that service which is characterized by or in accordance with principles of honor, and one so serving “is scrupulously upright, and shows a fine regard for obligations as to conduct.” Id. at 233. A pension is an indueement to conscientious, efficient and honorable service. Ballurio v. Castellini, supra, 29 N. J. Super. at 389; Fromm v. Bd. Directors of Police, etc., Retirem. Syst., 81 N. J. Super. 138, 142 (App. Div. 1963); Hozer v. State, etc., Police & Firemen’s Pension Fund, supra, 95 N. J. Super. at 199. To bestow it upon one “whose record oí public service is marred by a conviction for malfeasance in office would be to place a premium upon dishonesty and inefficiency” and 'ffiurden the taxpayer with the necessity of providing for one who has betrayed the trust imposed upon him.” Walter v. Trenton Police & Fire, etc., supra, 120 N. J. L. at 42.

That the statute here involved does not by its terms make honorable service a condition precedent to the grant of a pension is of no consequence. It is settled law that such requirement is implicit therein. Ballurio v. Castellini, supra, 29 N. J. Super. at 389; Fromm v. Bd. Directors of Police, etc., Retirem. Syst., supra, 81 N. J. Super. at 142; and see, Pfitzinger v. Bd. of Trustees, etc., Retirem. Syst., 62 N. J. Super. 589, 598-599 (Law Div. 1960).

Unquestionably, if a public employee were convicted of the crimes which are the subject-matter of the indictment here, he would forfeit his claim to a pension. Where an intent to defraud is an essential element of an offense, as it is in the case of falsifying federal tax returns, moral turpitude is involved. Berardi v. Rutter, 42 N. J. Super. 39, 48 (App. Div. 1956), aff'd 23 N. J. 485 (1957). The crime of extortion is equally reprehensible, particularly where it entails misconduct in public office. Both charges are inconsistent with honorable service. Cf. Fromm v. Bd. Directors of Police, etc., Retirem. Syst., supra, 81 N. J. Super. at 144-145.

Thus, although a public employee has rendered honorable service for the length of years required for retirement and has attained the requisite age, nevertheless, if prior to retirement the employee is guilty of misconduct of a disqualifying character, his pension is forfeited. Plunkett v. Hoboken Pension Commr’s, supra, 113 N. J. L. at 233-234. This is so because, as the court said in Ballurio v. Castellini, supra, the utility of the requirement for honorable service.

* * * would be destroyed if a person who is properly subject to discharge because of guilt of a crime involving moral turpitude can be said to have an indefeasible claim to a pension simply because be has served the required length of time and reached the necessary age and happens to win a headlong race to file his application for retirement before the public authorities can try him on the charges pending against him arising from such crime, [at 389, of 29 N. J. Super.]

These policy considerations obtain even though a pension award has actually been made. It is neither final nor conclusive and is subject to reconsideration thereafter by the granting authority in an appropriate case. It is generally established that, in the absence of some legislative restriction, administrative agencies have the inherent power to reopen, modify or rehear orders that have been entered, provided that the power is exercised reasonably and with reasonable diligence. Ruvoldt v. Nolan, 63 N. J. 171, 183 (1973).

The applicability of such power to a pension award was recognized in McFeely v. Bd. of Pension Com’rs, 1 N. J. 212 (1948). In that ease plaintiff, the police chief of Hoboken, was retired by the board of pension commissioners. Thereafter, the board, having been reconstituted as the result of a change of political control, rescinded the pension grant and declared the applicant unqualified because of indictments returned prior to the grant which accused the applicant of nonenforeement of the gambling laws and conspiracy to “oppress” and “persecute” other members of the police force. Although the rescission of the pension grant was set aside because the action was taken without affording a hearing and giving notice, the court said:

*' * * [I]t is implicit iu the statute that, in aid of the performance of tbeir duty to determine the existence of the prerequisite condition of honorable service, these tribunals may, and in most cases should, certainly so where the offense charged involves moral turpitude, stay action upon the pension claim awaiting tlie trial or other disposition of a pending indictment against the claimant; and, possessing as they do, in analogy to the authority of courts of general jurisdiction at common law, the inherent power of reconsideration, they may also, in the exercise of a sound discretion, vacate a pension grant and suspend further action on the claim until a pending indictment against the claimant is finally determined.
This power arises by necessary implication to serve the statutory policy. Inadvertent or premature or clearly erroneous action is not put beyond corrective measures by the tribunal itself * * * The exercise of the power is conditioned only upon the giving of reasonable notice to the parties and adequate opportunity to be heard, and the requirement that the action taken shall rest upon reasonable grounds and be in no sense arbitrary * * [at 218].

We are aware that the factual setting in McFeely differs somewhat from that in the instant case. There indictments were actually pending when the pension application was approved. The grant, in such circumstances, was clearly premature and improvident and warranted the board’s exercise of its inherent power to take requisite corrective action. In the present case, Mount had already been awarded a retirement allowance and was receiving his monthly installments when he was indicted and the quality of his prior service came under scrutiny as a result. Although we have found no reported case in this State which deals directly with this kind of situation, we cannot believe that the board would be powerless to act, for, if that were so, the effect would be to reward a transgressor whose misdeeds fortuitously do not come to light until after his retirement on pension.

The indictment of a public employee, whether before or after retirement, particularly where alleged misconduct in office is involved, casts a substantial shadow over the employee’s right to a pension. The question of honorable service, an essential prerequisite to a pension, arises immediately. If the public employee is still in office, action on his pension application can properly be deferred until the' disposition of the criminal charges. Ballurio v. Castellini, supra, 29 N. J. Super. at 394. Such action would undoubtedly have been taken in the present case had the allegations of misconduct been made while the pension application was pending. Since no accusations were leveled against Mount at that time, the board was justified in assuming that his service had been honorable. But this is clearly not tantamount to a binding determination of that prerequisite. Except where there is a dispute over that issue and a resolution thereof, the board's approval of a pension application, as a matter of common sense, signifies no more than the absence of any indication of possible dis-_ honorable service. We are convinced that the board in this case acted properly and diligently in questioning Mount's continued entitlement to his pension after learning of the indictment. The crucial question which remains for consideration is the propriety of the action taken, i. the suspension of pension pajnnents pending the disposition of the indictment.

Pounded upon the premises that he is presumptively innocent of any wrongdoing and the indictment is not prima facie evidence of dishonorable service, appellant advances the argument that his pension payments cannot be interrupted without a full evidentiary hearing at which the State would be obliged to present substantial evidence in support of the charges of misconduct. He contends further that without such hearing the board had no authority to suspend his pension payments prior to conviction. In our view, neither assertion is sound.

We are not concerned here with whether the indictment, standing alone, may support a revocation of the pension grant. The board's purpose was only to suspend further payments pending resolution of the criminal charges. In Trap Rock Industries, Inc. v. Kohl, 59 N. J. 471 (1971), the court said:

An indictment of course is not proof of its own allegations in the criminal trial itself, see State v. Orecchio, 16 N. J. 125 (1954). In the criminal trial, the indictment is the very charge to be made out, and it would deny the accused’s right of confrontation to give the indictment any evidential value whatever. But this is not to say that an indictment is nothing at all, even within the criminal process. The indictment will suffice to warrant the arrest of the accused and to hold him to or even without bail. For an indictment, far from being a mere allegation, constitutes a finding by a grand jury that a basis exists for subjecting the accused to a trial, with the intermediate restraints upon his freedom we just mentioned.
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An indictment, State or Federal, is hardly a neutral fact for all purposes. In the area of our present concern, it cannot be said that an indictment has no meaning. On the contrary, the indictment means that a basis exists to believe the charge if the evidence on hand is not explained or contradicted. * *• [at 487-488]

Applying the above concept to the case before us, the indictment here represents a prima facie basis for a belief that the pensioner’s prior service may have been dishonorable, thereby, if the charges are proven true, forfeiting his right to the pension. In such case Trap Rock Industries, Inc. v. Kohl, supra at 488, teaches us that there are but two alternatives: a suspension pending the resolution of the criminal charge or an immediate trial before the board of the issue of dishonorable service. The latter course, which would be in effect be a trial of the offenses alleged in the indictment, is neither appropriate nor feasible. The board is simply not equipped for that purpose. The evidence might not be available to it, and, if it were, the right to a fair trial in the criminal case might be infringed by the prior trial and decision in the administrative hearing. Trap Rock Industries, Inc. v. Kohl, supra.

Appellant’s reliance upon Goldberg v. Kelly, 397 U. S. 254, 90 S. Ct. 1011, 25 L. Ed. 2d 287 (1970), is misplaced, since that case holds that welfare benefits to which a recipient is entitled cannot be terminated without a pre-termination evidentiary hearing. The issue of suspension was not involved therein.

There seems to be no reasonable or practical ground why the procedure of suspension ought not to be available to the board. The power of suspension is by no means uncommon. The implied power in the State and its subdivisions to suspend its employees or officers pending disposition of indictments or other charges where the public interest so requires has long been recognized. Trap Rock Industries v. Kohl, supra, 59 N. J. at 489. Admittedly, once a pension is granted the grantee can be expected to place some reliance on the money he is to receive. But reliance is insufficient, for example, to prevent the termination of a pension. McFeely v. Board of Pension Com’rs, supra. It is readily apparent that every pension application and every pension grant is subject, as the case may be, either to a deferral of further action or reconsideration if facts become known which bear on the issue of honorable service. To require the board, in cases where pensions have been granted, to wait the disposition of criminal charges before proceeding further is, we think, inappropriate. The board of trustees are fiduciaries and therefore have a duty to protect the fund and the interests of all beneficiaries thereof. They must exercise due care, diligence and skill in administering the trust. 54 Am. Jur., Trusts, § 321 at 255. It would not serve the statutory policy to pay out moneys to those not entitled thereto. If the board were compelled to continue pension payments until the issue of guilt or innocence is determined in the criminal proceedings, it would then be obligated to recoup the funds theretofore paid to a pensioner found guilty of a charge which establishes prior dishonorable service. The likelihood of reimbursement in such case is highly problematical. The suspension of payments pending the outcome of the criminal case will be at least permit the board to retain and thereby preserve the moneys which would otherwise have been expended. If the grantee is exonerated, he will be paid what is due him. Upon balancing the statutory policy of safeguarding pension funds against the temporary economic hardship suffered by a pensioner under indictment who is later acquitted, we are convinced that the latter must give way to the former.

Of course, the board cannot suspend a pension without notifying the pensioner and affording him an opportunity to be heard.. But, as we indicated earlier herein, a lull evidentiary hearing of the type urged by appellant is not required unless revocation of the pension is sought. The presentation of the indictment, if that is the reason for the proposed action, is, in our view, a sufficient prima facie basis for suspension where, as here, the indictment on its face charges offenses which, if true, would denote dishonorable service prior to retirement. The pensioner may, if he wishes, seek to establish that the charges, even if true, occurred outside his public trust or that they do not amount to dishonorable service. To the extent petitioner considers that his right to a fair criminal trial would not bo infringed thereby, he may also come forward and explain or contradict the charges: or he majr show, if he can, that it would not disserve the public interest to continue the pension payments notwithstanding the indictment. See Trap Rock Industries, Inc. v. Kohl, supra.

We have carefully examined the record in the case before us and conclude that the board correctly suspended appellant’s pension payments pending the disposition of the indictment. A valid basis existed for the suspension and, moreover, the requirements of due process of law were satisfied. At the meeting of October 29, 1974 the deputy attorney general offered into evidence a copy of the indictment and reserved the right, if necessary, to present further evidence at the close of such case as might be presented by Mount’s attorneys. The latter, though accorded the right to do so, presented no facts, choosing, instead, merely to argue in opposition to the legal contentions advanced by the deputy attorney general and to challenge the board’s power to suspend the pension payments.

In passing we note briefly that Mount has recently been examined by two physicians selected by the United States District Court for the purpose of determining whether he is mentally competent to stand trial. We are informed that the physicians have advised the court that although Mount could probably understand the nature of the proceedings against him. he was not mentally competent to assist in his own defense. It also appears that a motion will soon be made in the District Court to have Mount judicially declared incompetent to stand trial, and it is anticipated that the matter would probably then be placed on the inactive list. These developments have no bearing on our consideration of the issues now before us. If counsel are of the view that the suspension might be affected thereby, they are at liberty to bring the facts to the attention of the board at the proper time with a request for reconsideration of the suspension.

Affirmed.

Bischoff, J. A. D.

(dissenting). I agree with the majority holding that where a retired public employee receiving a pension under a retirement system is thereafter indicted for offenses allegedly committed during his employment, the trustees of the retirement system may, upon notice and after a hearing, suspend further pension payments pending determination of the indictment. I am, however, compelled to dissent from the conclusion that the proceedings of October 29, 1974 constituted a hearing upon which the trustees could base a suspension of plaintiff’s pension payments.

The proceedings on that date consisted of the reading of the federal indictment into the record, after which the State rested. Plaintiff did not present any evidence but noted that a plea of not guilty to the indictment had been entered. After hearing legal arguments the trustees voted to suspend further pension payments to plaintiff. In reaching the conclusion that such a proceeding complied with due process requirements, the majority places heavy reliance on the case of Trap Rock Industries, Inc. v. Kohl, 59 N. J. 471 (1971), cert. den. 405 U. S. 1065, 92 S. Ct. 1500, 31 L. Ed. 2d 796 (1972). I believe basic factual differences make that decision inapposite.

The only issue involved in that case was whether the suspension of the asserted privilege of a corporation to submit bids for work to be performed for the State Department of Transportation was proper. Trap Rock Industries had been suspended from bidding on contracts to be awarded by that department for the reason that Michael J. Stavola, president, chairman of the board of directors and principal stockholder of the corporation, had been indicted for bribery. At a hearing afforded the corporation on the suspension the indictment was placed in evidence and the plea of not guilty noted on the record. The corporation thereafter declined to offer any testimony and refused to consent to an examination of the grand jury testimony. The Supreme Court held that the hearing did not violate basic principles of due process and the suspension was affirmed. However, it was specifically noted that the right of the corporation to do business with others was in no way abridged.

Without attempting to place a label on plaintiff’s interest in the retirement fund as either a “vested right” or a “contractual right,” Spina v. Consol. Police, etc., Pension Fund Comm’n, 41 N. J. 391, 401 (1964), the following pertinent facts should be noted.

It is conceded that plaintiff meets the statutory requirements for a pension of age (69 years) and years of service (50 years), and throughout his years of service he made the necessary monetary contributions to the pension fund.

The majority states that the trustees have a fiduciary duty to protect the fund and all beneficiaries thereof. That is unquestionably so, but it applies to both granting as well as suspending a pension. The trust fund theory espoused by the majority is equally applicable to both situations. It is reasonable to assume that the duty of exercising due care, diligence and skill imposed on the trustees in the management of the fund was undertaken by them prior to granting plaintiff a pension and a determination made that his service was honorable. This administrative determination is entitled to a presumption of validity. Elizabeth v. Sullivan, 125 N. J. Super. 569, 574 (App. Div. 1973).

The majority opinion, citing the Trap Rock Industries case, concludes that the proceeding of October 29 met necessary due process requirements because plaintiff was afforded an opportunity to establish that the charges, if true, occurred outside of his public service or were not dishonorable in nature, and he could explain or contradict the charges if he desired to do so.

Such a conclusion, fully justified in the Trap Rock Industries case, is totally inapplicable here. That case involved a corporation possessing no right against self-incrimination. N. J. Builders, etc. v. Blair, 60 N. J. 330, 340-341 (1972); Weehawken Tp. Bd. of Health v. N. Y. Central R. R., 10 N. J. 284 (1952).

The suggestion that plaintiff come forward with some explanation or contradiction if he is to continue to receive pension payments and obtain funds needed for his very existence and required medical attention, at the very least places a chilling effect on the exercise of his constitutional privilege against self-incrimination.

Plaintiff has pleaded not guilty to the indictment. It is difficult to see how he could otherwise contradict naked charges without any facts having been produced to support them. So, too, it is difficult to envision what type of explanation could be offered in the absence of evidence tending to demonstrate wrongdoing, fault or dishonorable service on his part. To shift to plaintiff the burden of coming forward with evidence when none has been presented against him does violence to basic principles of fundamental fair play.

The conclusion of the majority, anchored as it is only in the uncertainties of an indictment, tramples underfoot the presumption of innocence. Neither a single witness nor a shred of evidence has been presented to question the finding of “honorable service” which was a sina qua non of his pension award.

In Goldberg v. Kelly, 397 U. S. 254, 90 S. Ct. 1011, 25 L. Ed. 2d 287 (1970), the Supreme Court held that a recipient of welfare benefits was entitled to an evidentiary hearing before benefits could be terminated. The court noted (at 262, n. 8, 90 S. Ct. at 1017), that society today is structured around many entitlements, the most important of which now flow from the government. One of those referred to was “pension rights.”

That court mentioned (at 263, n. 10, 90 S. Ct. at 1018) a variety of circumstances where summary action is justified. However, the illustrations there noted, where such action is permitted, are far different from the situation now before us.

The majority opinion brushes aside the case of Goldberg v. Kelly as inapposite because it dealt with termination rather than suspension of benefits. Prom a practical standpoint it makes little difference to plaintiff whether his pension benefits are suspended until trial or terminated. Trial may not be held for years. The record discloses that plaintiff is in poor health' and, as the majority notes, there exists a serious question as to when, if ever, he will be able to assist in the preparation of his case for trial. Moreover, the court in Trap Rock Industries considered the case of Goldberg v. Kelly and, in holding it inapplicable, did not rely on any difference between suspension and termination but did recognize a deep-seated distinction between a “blacklisted contractor” on the one hand and the “extreme need of the individual” on the other. This distinction, our Supreme Court noted, was sufficient to require an evidentiary pre-termination hearing before a determination of “continued welfare eligibility” could properly be made. Trap Rock Industries, Inc. v. Kohl, supra, 59 N. J. at 492. Seasons mandating an evidentiary hearing in determining “continued welfare eligibility” apply as well to a situation where “continued pension eligibility” is involved.

Even though due recognition is given to the principle that courts are sensitive to policy considerations related to diversion of public funds for statutorily unwarranted pensions, Ruvoldt v. Nolan, 63 N. J. 171, 185 (1973), and to the further principle that illegal depletion of pension trust funds is not to be countenanced on the principle of an estoppel based on administrative error in the original grant of a pension, Tubridy v. Consolidated, etc., Pension Comm’n, 84 N. J. Super. 257, 263 (App. Div. 1964), still a suspension should not be based on a silent record. If the conclusion that an evidentiary hearing is required before suspension is accepted, then it follows that while an indicted person is subject to certain adverse consequences within the criminal process which flow from the act of the grand jury, Trap Rock Industries, Inc. v. Kohl, supra, 59 N. J. at 487, the indictment itself has no evidentiary value. It does not establish the truth of the charges nor the presence of sufficient legal proof thereof. It proves nothing and does not in any degree deprive an accused of the presumption of innocence. State v. Orecchio, 16 N. J. 125, 132 (1954). Apart from the indictment, nothing is present in the record to support the action of the suspension.

In my opinion plaintiff has not been afforded the hearing to which the majority agrees he is entitled. It follows that the suspension of pension payments, under the circumstances here present, constitutes a violation of due process and basic principles of fundamental fairness.

I would reverse.


source: Caselaw Access Project

author: Per Curiam.

license: Public Domain

text:
    LOCUSTWOOD CEMETERY ASSOCIATION, PETITIONER-APPELLANT, v. TOWNSHIP OF CHERRY HILL, RESPONDENT-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued January 21, 1975
    Decided March 6. 1975.

      Before Judges Halpern, Crahay and Ackerman.

      Mr. David L. Horuvitz argued the cause for appellant (Messrs. Horuvitz & Perlow, attorneys; Mr. Theodore Henry Ritter, on the brief).

      Mr. M. Donald Forman argued the cause for respondent.
   Per Curiam.

Locustwood Cemetery Association (Locust-wood) appeals from a final judgment of the State Division of Tax Appeals which essentially denied to Locustwood a real property tax exemption from an assessment of $283,200 for the year 1972 under N. J. S. A. 8A:5-10, which provides in pertinent part that

Cemetery companies shall be exempt from the payment of any real estate taxes on land dedicated for cemetery purposes * * *.

The record before us is brief, consisting of a factual stipulation between the parties and the testimony of the chairman of the board of trustees of Locustwood. It reflects that Locustwood’s original certificate of incorporation was filed in the year 1907 under the name of Eernwood Cemetery Association. The name was changed to Loeustwood Cemetery Association in 1923. Until 1972 Locustwood’s lands were never taxed and they had since 1907 been used exclusively in the interment of dead bodies. Over the many years interments had been conducted regularly and uninterruptedly, and as of 1972 approximately 10,000 bodies had been received. The land area comprised approximately 67 acres.

It was further agreed that Loeustwood had conformed with the mandatory provisions of the New Jersey Cemetery Acts, both past and present. R. S. 8:2-1 et seq. and N. J. S. A. 8A:1-1 et seq. The specific conformances by Loeustwood with statutory requirements set out in the stipulation need not be recited, our attention not being invited to any violations.

Without specificity the stipulation observed that “In one or more years there has been an excess of receipts over disbursements” and then posed this “Query For Determination” (we view the “Query” as essentially a forecast of the sole issue addressed to us):

AVhere, in the light of the foregoing stipulations, in one or more years there has been an excess of receipts over disbursements, whether this fact takes away the cemetery exemption as provided in N. J. S. A. 8A:5-10 ?

The Division of Tax Appeals felt that it did. On this record we are satisfied that it did not and reverse.

The Division judge held that “in all respects the taxpayer [Loeustwood] qualified [for the exemption] with the exception of profit,” noting that there were “substantial profits to the ilssociation in the years 1967, 1968 and 1969.” Deceived into evidence was a statement of receipts and disbursements from operations by Loeustwood covering the years 1963 through 1972. It reflected that in some of those years there were losses and that in others receipts were greater than expenditures. By computation, the average of receipts in excess of disbursements in the stated years was $919.

While the record is not clear, it appeared that in the years 1967, 1968 and 1969 Loeustwood enjoyed certain capital gains which were attributed by its chairman as having been generated by the sale of some cemetery property to an adjacent hospital. It was stated, without documentation but also without refutation, to have been an installment sale with payouts of $39,000 in 1967, $53,000 in 1968 and $37,000 in 1969.

It was also developed, again without precision, that there was income from Locustwood’s perpetual care fund, the corpus of which approximated $150,000. The record is silent as to what the income was in any given year from that fund. However the testimony, not rebutted, was emphatic that none of the income was ever distributed but rather was used for cemetery operations.

At the outset, it is settled that tax exemptions are not favored and that the burden of proving tax exempt status is upon the claimant since all property in the State is required to bear its equal share of the public taxation burden. Bloomfield v. Academy of Med. of N. J., 47 N. J. 358 (1966); In re Kuebler, 106 N. J. Super. 13 (App. Div. 1969); West Ridgelawn Cemetery v. State Bd. of Tax Appeals, 124 N. J. L. 284 (Sup. Ct. 1940), aff’d 125 N. J. L. 274 (E. & A. 1940). Cemeteries, however, since they facilitate the proper and necessary disposition of human remains —a subject matter charged with public welfare and health — are accorded tax exemptions, Ewing Cemetery Ass’n, Inc. v. Ewing Tp., 126 N. J. L. 610 (Sup. Ct. 1941), having been classified as qmsi-public services or charitable institutions. Terwilliger v. Graceland Memorial Park Ass’n, 35 N. J. 259 (1961). On the other hand, where there has been a showing of private profit, tax exemptions have been held forfeited. West Ridgelawn Cemetery v. State Bd. of Tax Appeals, supra.

Here it appears that the Division judge resolved the issue of exemption against Loeustwood since there was evidence of (1) “substantial income” from a perpetual care fund, (2) an undisclosed'“profit” from the sale of property, and (3) an annual average excess of receipts over disbursements. The cited reasons, singly or in concert, in our view do not rebut the taxpayer’s claim for its long standing exemption.

First, we are satisfied that the Division erred in treating as “profit” the translation by Locustwood of its real property - — ■ clearly a capital asset -— into dollars by the sale of it to an adjacent hospital. It does not appear that any of these funds are distributed to anyone and certainly not for profit.

Next, the mere fact that there may be income in so-called “perpetual care funds” (N. J. S. A. 8A:4-2, “Maintenance and Preservation Fund”), does not cause a forfeiture of the exemption. Income in such funds is legislatively contemplated and specifically exempted. See N. J. S. A. 8A:5-11.

Finally, we hold — as appellant contends — that the mere excess of receipts over disbursements in certain years of operation by a nonprofit cemetery corporation where there has been no distribution of the excess, whatever*, or where the monies have been held by the corporation to be expended as needed for cemetery purposes, does not remove the lands of the nonprofit cemetery corporation dedicated for cemetery purposes from the real property exemption conferred by the New Jersey Cemetery Act, N. J. S. A. 8A :5-10. In San Gabriel Cemetery Ass’n v. Los Angeles County, 49 Cal. App. 2d 624, 122 P. 2d 330 (D. Ct. App. 1942), a taxing authority took a position generally as that addressed to us by respondent municipality. The court there rejected the argument holding that

The word “profit” does not mean financial benefit that accrues to the association through the sale of burial space at a price in excess of its cost where such gain is used for the upkeep of the cemetery property. The word “profit” “ * * means net earnings the benefits of which accrue directly or indirectly to the stockholders or members of the association. [49 Cal. App. 2d at 126; 122 P. 2d at 332]

The record here does not reflect that any of the excess of receipts over disbursements, whatever their source, were utilized as improper distributions to any member of Locust-wood, e. g., that cemetery assets were expended and disguised in tbe form of salaries or other emoluments to employees, association officers or directors not reasonably commensurate with their duties. Albeit in a different statutory and factual setting, we find Judge Kilkenny’s observations in Trenton v. N. J. Div. of Tax Appeals, 65 N. J. Super. 1 (App. Div. 1960) instructive:

If the college [Eider College] does show operational surpluses for some years, the crucial inquiry is, “Who gets the money?” If we can trace it into someone’s personal pocket, as the raison d’etre of the school, then, even though the form of operation is that of a so-called “non-profit” organization, the college is not entitled to tax exemption, despite its educational function. Town of Montclair v. State Board, etc., 86 N. J. L. 497 (Sup. Ct. 1914), affirmed 88 N. J. L. 374 (E. & A. 1915). Such an enterprise is commercial. But when we find, as here, that the surpluses, if any, go back only into the maintenance, expansion, and development of the school and its facilities, and that no individual can obtain anything more than just compensation for services, either presently or in the future, and that the funds of the institution cannot possibly be diverted to non-institutional uses, there cannot be said to be a profit-motive in the operation of the school. In granting tax exemption to the “colleges * * * not conducted for profit,” the State does not demand that no “profit” shall be made in any year, but rather that the real purpose of the school’s existence shall not be the making of money, [at 12]

In support of his holding the Division Judge relied on Terwilliger v. Graceland Memorial Park Ass’n, 35 N. J. 259 (1961); Frank v. Cloverleaf Park Cem. Ass’n, 29 N. J. 193 (1959); Di Cristofaro v. Laurel Grove Memorial Park, 43 N. J. Super. 244 (App. Div. 1957), and Clifton v. State Bd. of Tax Appeals, 133 N. J. L. 379 (E. & A. 1945). Those authorities do not govern this record. Terwilliger, Frank and Di Cristofaro were not tax eases and essentially involved actions wherein the sale of memorial markers and plaques was deemed to be ultra vires cemetery associations’ corporate powers and emjoinable.

Clifton was a tax exemption case with a tortured history and (not noted below) was terminated by Clifton v. State Bd. of Tax Appeals, 136 N. J. L. 213 (E. & A. 1947). Clifton finally disallowed a tax exemption noting that

The burden of proving facts which would entitle the claimant to exemption has not been met. Rather, the corporate setups, the interlocking management and directorates, coupled with the inadequate books of account and a total absence of testimony as to the disposition of profits of the various corporations, point toward a studied effort to operate ‘the cemetery for profit under the guise of the non-profit association contemplated by the Rural Cemetery Act.’ [136 N. J. L. at 216]

We perceive no Clifton taint in this matter. Nothing fairly suggests a “studied effort” to operate Locustwood for profit under the guise of a nonprofit association.

Accordingly, we conclude that the taxpayer had sustained its petition for a tax exemption for the year 1912.

Reversed.


author: Handler, J. A. D.

text:
    TRAP ROCK INDUSTRIES, INC., A NEW JERSEY CORPORATION, APPELLANT, v. ALAN SAGNER, COMMISSIONER OF THE DEPARTMENT OF TRANSPORTATION, RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued January 20, 1975
    Decided March 12, 1975.

      Before Judges Lora, Handler and Tarleton.

      Mr. Justin P. Walder argued the cause for appellant (Messrs. Schapira, Steiner & Walder, attorneys).

      Mr. Roy A. Heimlich, Deputy Attorney General argued the cause for respondent (Mr. William P. Hyland, Attorney General of New Jersey, attorney; Mr. Stephen Shillman, Assistant Attorney General of counsel; Mr. Richard L. Rudin, Deputy Attorney General, on the brief).
   The opinion of the court was delivered by

Handler, J. A. D.

On November 23, 1971 the New Jersey Supreme Court decided Trap Rock Industries, Inc. v. Kohl, 59 N. J. 471 (1971), cert. den. 405 U. S. 1065, 92 S. Ct. 1500, 31 L. Ed. 2d 796 (1972), wherein it upheld the decision by the Commissioner of Transportation, John C. Kohl, temporarily suspending Trap Eock as a qualified bidder on contracts to be awarded by the Department of Transportation (D. O. T.) until such time as Michael Stavola divested himself of all his interest in the corporation. The suspension was based on an indictment against Michael Stavola for conspiring to bribe ■ and offering a bribe to a member of the State Police to intercede in Stavola’s behalf concerning another indictment against him for assault and battery of a police officer and obstruction of justice. As a result of Stavola’s later conviction, proceedings to debar Trap Eock were brought before the Commissioner on March 16, 1972 and Trap Eock was barred for a period of five years from bidding or furnishing materials on D. O. T. contracts or on contracts with any political subdivision utilizing state funds, ox from entering into any subcontracts for work or materials on such projects. This decision was upheld by the Supreme Court in Trap Rock Industries, Inc. v. Kohl, 63 N. J. 1 (1973).

On June 14, 1973 a hearing was held before the Commissioner to determine whether Michael Stavola had completely divested himself of his interest in Trap Bock and whether the corporation should be reinstated as a qualified bidder on government contracts. Following the hearing the Commissioner rendered a decision upon findings and conclusions and issued a reinstatement order on June 29, 1973.

It is not disputed that Trap Bock thereafter met the prequalification standards in accordance with N. J. S. A. 27: 7-35.1 el seq. and D. O. T. regulations, and became authorized or classified as a qualified bidder on state projects in excess of $25,000,000, and since August 1973 engaged in and completed several substantial public projects as a prime contractor and a subcontractor. It is further stated, without dispute, that on July 1, 1974 D. O. T., under its current Commissioner, Alan Sagner, continued Trap Bock’s classification as an eligible bidder on public projects for the period July 11, 1974 to July 31, 1975.

On August 8, 1974 D.O.T. received bids for the resurfacing of Route 287. Trap Rock was the lowest bidder at $2,464,161.45 and was awarded the contract. The contract document was sent to Trap Rock on August 30, 1974. It was executed and then returned by Trap Rock to D.O.T. on September 6, 1974 for the Commissioner’s signature.

At this time — specifically on September 5, 1974 —- Trap Rock entered a guilty plea in the United States District Court for the District of New Jersey to a federal indictment which had been returned against the corporation on May 31, 1973. The indictment charged the corporation with unlawfully making a false federal income tax return for the fiscal year ending February 28, 1970. Trap Rock was alleged to have made a payment of $15,000 to former Governor Ca-hill’s political campaign and deducting that payment from its income tax return as an advertising expense. Trap Rock was convicted on its guilty plea and sentenced to pay a fine of $3500.

On September 25, 1974 Trap Rock was instructed by D.O.T’s project engineer to discontinue work immediately on the Route 287 project. Two days later, on September 27, 1974, upon informal oral notice a hearing was scheduled for Monday, September 30, 1974. Although there is a controversy as to the expected scope of the hearing, its salient purpose was to determine whether the Commissioner should reject Trap Rock’s bid and refuse to execute the contract because of the federal conviction. The authority for this possible action was N. J. S. A. 27:7-35.8, which provides that the Commissioner may reject a bidder at any time prior to the “actual award of a contract, where there have been developments subsequent to the classification of such bidder, which in the opinion of the commissioner would affect the responsibility of the bidder.”

At the hearing the view was expressed on behalf of D.O.T that the objective of the proceeding was not only to determine whether the Commissioner should execute the contract relating to the Route 287 project because of Trap Rock’s guilty plea to the federal indictment, but also whether Trap Rock should be debarred generally as an eligible bidder. Counsel for Trap Rock took the position that hearing was restricted to the question of whether the contract relating to the Route 287 project ought to be executed by the Commissioner in light of the guilty plea to the federal indictment and with respect to this question, whether the present ownership and management of Trap Rock were in any way responsible for the conduct giving rise to the federal indictment against the corporation.

By letter dated October 9, 1974 the Commissioner informed Trap Rock of his decision not to sign the proposed contract for the Route 287 project and to debar Trap Rock from further bidding on D.O.T. projects. The Commissioner stated that a formal determination would he forthcoming. On November 22, 1974 Commissioner Sagner issued his formal decision debarring Trap Kock from bidding on D.O.T. projects and from subcontracting or supplying materials on any local contract involving D.O.T. funds. He concluded that Trap Eock Tacked the moral integrity necessary to deal” with D.O.T. Necessarily, the Commissioner determined that, under N. J. 8. A. 27:7-35.8, the guilty plea was a development subsequent to the classification of Trap Eock as a qualified bidder and that this did affect its responsibility as a bidder.

Trap Eock contends initially that the Commissioner was in error because the indictment to which Trap Eock pleaded guilty had been returned on May 31, 1973, approximately turn weeks before the June 14, 1973 hearing before Commissioner Kohl, and that the pendency and circumstances of the federal indictment “'were known to and had been considered and rejected by Commissioner Kohl as a basis for debarring Trap Eock.”

The record of the June 14, 1973 hearing conducted by Commissioner KohL is bereft of any reference to the federal indictment of May 31, 1973 or to any of the circumstances surrounding the commission of the federal offense. There is, likewise, no finding of fact or conclusion expressed in the determination of June 29, 1973 or other circumstance which would generate a necessary inference or impel the deduction that the former Commissioner had actually investigated, considered, evaluated and rejected the federal indictment as a factor bearing upon his decision to reinstate Trap Eock as an eligible bidder. Thus, the issue, not having been litigated by the prior administrative decision, should not be foreclosed in a later proceeding. 2 Am. Jur. 2d, Administrative Law, § 503 at 314 (1962); cf. 1B Moore’s Federal Practice, § 0.443(4) at 3913 (1965). The post-appeal affidavits (which have been included in the appendix but are not properly part of the record on appeal) reveal, at most, private knowledge of the federal charge by the former Commissioner, which is not otherwise disclosed of record in the proceedings before him. This may not, therefore, be relied upon to vary or contradict that record. 2 Am. Jur 2d, supra, § 503 at 315. Consequently, the matters related therein cannot be considered to have been a ground or basis for the prior determination. Cf. Elizabeth Federal S. & L. Ass’n v. Howell, 24 N. J. 488 (1957); Mazza v. Cavicchia, 15 N. J. 498 (1954); N. J. State Bd. of Optometrists v. Nemitz, 21 N. J. Super. 18, 28-29 (App. Div. 1952).

Accordingly, the federal indictment of May 31, 1973, and the guilty plea thereto by Trap Rock on September 5, 1974, were under N. J. S. A. 27 :7 — 35.8 a subsequent development which the Commissioner was entitled to investigate in order to determine its impact upon the present responsibility of Trap Rock as a bidder on D.O.T. projects.

It is clear from the record developed at the hearing below that the present owners and principals of Trap Rock were not personally involved in the activities which were the basis for the federal indictment against the corporation in May 1973. The three witnesses who appeared at the hearing of September 30, 1974, Joseph Stavola, William Stavola and Martin Epstein, through their combined testimony indicated that the present and sole stockholder of Trap Rock is Joseph and William Stavola, Inc.; its directors were Joseph Stavola, William Stavola, George Conway and Melville Keever; and Joseph and William Stavola were its officers. None of these individuals was an officer of Trap Rock in 1969, the time of the events leading to the federal indictment.

The testimony indicated that Joseph and William Stavola had no management decision-making powers in Trap Rock during the fiscal year ending February 1970. Neither Joseph nor William Stavola worked “inside” in a supervisory or managerial position during that period of time. The individuals directly responsible for the unlawful transaction were Michael Stavola and David Mendelson, the former assistant secretary-treasurer of Trap Rock whose connection with the corporation was terminated in December 1972. William Stavola, Joseph Stavola and Martin Epstein testified that they had never communicated with anyone concerning any political contributions to the 1969 Cahill campaign or payments to Writers Associates. All three further confirmed that they had no knowledge that in 1969 a payment had been made by Trap Pock to Writers Associates. Moreover, these individuals had not conferred with Mendelson or Michael Stavola with reference to the decision to enter a guilty plea on behalf of the corporation to the federal indictment.

In the face of essentially nncontradicted evidence, the Commissioner observed:

It seems to me that the guilty plea entered by Trap Rock Industries, Inc. to the Federal indictment and its resulting conviction indicate, at least in the absence of any explanation, that the corporation lacks the moral integrity necessary for it to be considered a responsible entity with which the Department of Transportation should contract. Moreover, it does not seem to me to make sense to say, in the face of a corporate criminal conviction, that if it be shown that the criminal activities of the corporation were directed by persons who no longer control or are associated with it, the stain on the corporate integrity may be ignored or has been eradicated and that the Department of Transportation must deal with the corporation as if it had not been convicted of any offense.

In the converse situation — where the principal of a corporation was individually charged with the commission of a crime — it was held by our Supreme Court that the corporation, as a legal or juridical entity, must be deemed to mirror the moral attributes of the individuals who inspire its actions.

* * * A corporation, as such, has no moral character. The moral responsibility of a corporation is one and the same with the responsibility of the individuals who give it direction * * *. [Trap Rock Industries, Inc. v. Kohl, supra, 59 N. J. at 482]

Cf. Benson Parking Corp. v. O’Connell, 31 Misc. 2d 1037, 220 N. Y. S. 2d 1010 (Sup. Ct. 1961); Metropolitan Motors v. State, 39 N. J. Super. 208, 213 (App. Div. 1956); Florence Meth. Church v. Florence Tp. Committee, 38 N. J. Super. 85 (App. Div. 1955).

By parity of reasoning, where, as here, corporate derelictions can be isolated and fixed to particular persons, the corporation’s lack of moral responsibility in that situation should be synonymous with the moral, defects of the responsible individuals. If, as a consequence, the corporation has purged itself of the offending individuals and they are no longer in a position to dominate, manage or meaningfully influence the business and operations of the corporation, the responsibility of the corporation should then be assayed, not upon the moral infirmities of the removed malefactors, but upon the integrity of the persons who remain in ownership and control of it. We hold, therefore, that the Commissioner erred to the extent that he gave determinative weight to the proposition that Trap Rock as a corporate entity must be regarded as lacking in moral integrity because a guilty plea had been entered on its behalf to the charge of a crime, which was itself founded upon the past deeds of individuals no longer associated with the corporation.

The crux of the Commissioner’s decision was that one of the individuals responsible for the corporate criminal acts, Michael Stavola, had not disassociated himself sufficiently from the corporation so as to insulate the corporation from his personal lack of integrity. He also concluded that the present corporation, as a legal instrumentality, was the “same” as that which existed in 1969. The questions of the sufficiency of the severance of Michael Stavola from the corporation and, by implication, the continuity of corporate identification, were, as noted, the subject of the administrative proceeding before the former Commissioner in June 1973, and this issue was duly adjudicated by him, after a full hearing, resulting in the reinstatement of Trap Rock as a qualified bidder.

Appellant takes the position that under the doctrines of collateral estoppel or res judicata the present Commissioner was not entitled to engage in a re-examination and a second adjudication of many of the facts and issues previously resolved by the former Commissioner in determining that Michael Stavola had adequately removed himself from the corporation and that Trap Rock was qualified to act as a responsible bidder.

A satisfactory resolution of the issue thus posed cannot be found in any formulaic application of the principles of collateral estoppel or res judicata, or, by analogy, the rules for relief from judgments or grant of new trials governing our courts. R. 4:50; R. 4:49. The application of res judicata, collateral estoppel and kindred doctrines in the setting of an administrative proceeding is tempered by recognition that a particular administrative agency may have continuing regulatory responsibilities over the areas within its jurisdiction. The exercise of some of its supervisory functions in a gmsi-judicial manner, such as administrative hearings and adjudications, may be an incident to, rather than the essence of, its primary administrative authority. It is fitting, therefore, that, subject to statutory restrictions, such an administrative agency, in appropriate circumstances, have the power to reassess or reconsider its actions in order to perform fully its responsibilities as a regulatory body. Ruvoldt v. Nolan, 63 N. J. 171, 183 (1973). In this sense, the power to reconsider, to rehear and to revise determinations may be regarded as inherent in administrative agencies. Mackler v. Camden Bd. of Education, 16 N. J. 362, 369 (1954); cf. In re Plainfield-Union Water Co., 14 N. J. 296, 305 (1954). This power to reappraise and modify prior determinations may be invoked by administrative agencies to protect the public interest and thereby to serve the ends of essential justice. Handlon v. Belleville, 4 N. J. 99, 106-107 (1950); see, Trap Rock Industries, Inc. v. Kohl, supra, 63 N. J. at 4-5 (“The Commissioner assures us he will act whenever he has reason to believe that action is warranted.”)

It does not follow, however, that in exercising the necessary and appropriate power to reconsider the status of a contractor as an eligible bidder the Commissioner was free to disregard completely issues that were fully and fairly resolved prior thereto. The power to reconsider must be exercised reasonably, with sound discretion reflecting due diligence, and for good and sufficient cause. Ruvoldt v. Nolan, supra; Burlington Cty. Evergreen Pk. Mental Hosp. v. Cooper, 56 N. J. 579, 600 (1970); Handlon v. Belleville, supra; compare Churchill Tabernacle v. Federal Communications Common, 81 U. S. App. D. C. 411, 160 F. 2d 244 (D. C. Cir. 1947); cf. Morton v. Clark Tp. Mayor & Council, 102 N. J. Super. 84 (Law Div. 1968), aff'd 108 N. J. Super. 74 (App. Div. 1969); 2 Am. Jur. 2d, Administrative Law, § 2.28 (1962); also, Jaffee, Judicial Control of Administrative Action, c. 19 at 715-720 (1965).

Merely because the Commissioner has — and should exercise — the power to reappraise the eligibility of a qualified contractor in light of meaningful subsequent developments, as he is authorized to do by virtue of N. J. S. A. 27: 7-35.8, does not mean that a relitigation of previously resolved issues is fair, appropriate or necessary. Even in the context of a reopened hearing in an administrative agency proceeding there is a proper use of res judicata or, more precisely, collateral estoppel. These principles should be invoked discriminately to serve the ends of administrative justice. Cf. Lubliner v. Paterson Bd. of Alcoholic Beverage Control, 33 N. J. 428, 437-438 (1960); 2 Cooper, State Administrative Law, 507 (1965). A balancing of such factors as new developments or even new evidence of old developments, the advantages of repose, party reliance, the thoroughness of the earlier decision and the showing of illegality, fraud, mistake and the like should be considered, 2 Davis, Administrative Law Treatise, § 18.09 at 607 (1958); also, Ruvoldt v. Nolan, supra.

In reaching his decision Commissioner Sagner reviewed and relied upon the evidence presented at the prior hearing. This included Michael Stavola’s testimony that in the event of default he would sue on the promissory notes and would not try to recover his. stock. The Commissioner reasoned that nothing in the agreement, which had since been executed, prevented Michael Stavola, in the event of a default, from recovering his stock in Trap Eock by obtaining a judgment against Joseph and William Stavola, Inc. and then, in order to satisfy his judgment, by levying on the stock. This conclusion, however, was clearly speculative and directly contrary to the conclusions reached by Commissioner Kohl on the same evidence. There was, moreover, no basis for any suggestion that the divestment of Michael Stavola had not in fact occurred in accordance with earlier representations and the closing documents. And, as pointed out by the appellant, there is adequate power in the Commissioner to take prompt remedial action in the event Michael Stavola attempted to reacquire ownership or control of the corporation. Cf. Trap Rock Industries, Inc. v. Kohl, supra, 63 N. J. at 4-5.

Commissioner Sagner also considered the status of Martin Epstein as the independent accountant for Trap Eock, the Michael Stavola enterprises, and the individual Stavolas. Epstein was characterized as “a link in the chain of continuity between Trap Eock Industries, Inc., which was controlled by Michael J. Stavola and the present Trap Eock Industries, Inc.” There was, however, no finding of culpability on the part of Epstein. Nor was it demonstrated that Michael Stavola has exercised, through Epstein, any meaningful control or influence over the business operations of the corporation.

We similarly view the consideration given by the Commissioner of the fact that Melville Keever was on Trap Bock’s board of directors at the time Michael J. Stavola owned the corporation, and continued as a director at the time of the hearing. Keever, according to the testimony, remained on the board in order to assist in the transition of the corporation and because of her experience in management procedures and her familiarity with the business of the corporation. Mo evidence was presented at the hearing to support the inference drawn by the Commissioner that Keever was Michael Stavola’s nominee on the board of directors of Trap Rock.

Commissioner Sagner made reference in his opinion to the land and equipment leases by Trap Rock from Delaware River, a company wholly owned by Michael J. Stavola. It was noted that the rental charges for both the equipment and the land leased by Trap Rock from Delaware River had not increased in the time period of approximately 14 months between the decision of Commissioner Kohl and the hearing of September 30, 1974 and, therefore, fair rental value was not being paid by Trap Rock to Delaware River.

The relationship between Michael Stavola, Delaware River and Trap Rock, however, was treated by Commissioner Kohl. There was no substantial new evidence adduced at the hearing below to demonstrate that fair rentals were not in fact being paid by Trap Rock for the equipment and land leased from Delaware River. It was also emphasized that Michael Stavola personally owned the land upon which Trap Rock’s executive offices are located and that, since late 1972 or early 1973, Trap Rock has paid rent therefor under a new lease. That factor, however, in the context of Trap Rock’s overall relationship with Michael Stavola and Delaware River, while relevant, does not add significantly to the evidence considered by Commissioner Kohl.

In sum, it does not appear that any of the additional evidence presented to or considered by the Commissioner in the proceedings below, as it related to the relationship between Michael J. Stavola and Trap Rock, was significant or substantial when compared with evidence before Commissioner Kohl. Mor has it been shown that the evidence in the prior proceedings was not adequately developed and carefully evaluated in reasonable measure in relation to the issues to be determined therein. What is revealed by the record here is that the current Commissioner views the matter in a different and stricter light than his predecessor. The determination of the former Commissioner, however, has not been shown to have been illegal, mistaken, careless or the product of ignorance, or influenced in the slightest by fraud or deception. We do not perceive, therefore, under all of the circumstances, good cause to justify a recanvassing and reconsideration by the Commissioner of the factual issues resolved in the previous proceedings, or to sanction the reversal of the earlier determination that Michael Stavola had removed himself sufficiently from the corporation and was no longer in a position to dominate or influence the corporation’s business activities, and that Trap Eock, accordingly, wa,s, from the standpoint of moral responsibility, eligible to engage in business with D. O. T. as a qualified bidder.

It is also argued by Trap Eock that the Commissioner failed to give sufficient notice of the scope of the hearing and, more particularly, it was not made aware that the matters specifically determined by Commissioner Kohl would be the subjects of inquiry before the Commissioner. It is asserted that because it was unable to prepare and marshall evidence on these issues, it was denied due process. Appellant was not entitled to a detailed recitation of the acts and omissions which would support the Commissioner’s claim of a lack of moral responsibility. Cf. Trap Rock Industries, Inc. v. Kohl, supra, 59 N. J. at 485-486. Nevertheless, it was entitled to be forewarned of the theory upon which the Commissioner was proceeding and a reasonable opportunity to confront the assertions against it. N. J. S. A. 27:7-35.8; N. J. A. C. 16 :65-1.2(m) ; cf. Mal-Bros. Contracting Co. v. Kohl, 113 N. J. Super. 144, 147 (App. Div. 1971). In light of our decision, however, the issue need not be further addressed.

Appellant raises certain other questions. It is argued that under principles of equitable estoppel the Commissioner was precluded from determining to debar Trap Eock generally as well as refusing to execute the contract for the Eoute 287 project. This position is based upon Trap Rock’s reliance in good faith upon the prior determination of June 29, 1973 reinstating it as a qualified bidder, as a result of which it incurred substantial financial obligations; and further that, despite D. O. T. standard specifications. § 1.3.1 that an award is not binding until the contract has been executed by the Commissioner, Trap Rock had commenced the work under its contract with the approval of and under the supervision of the Commissioner and D. O. T.

An additional contention is that the decision of the Commissioner is contrary to the explicit provisions of N. J. S. A. 27:7-35.8, which enables the Commissioner to reject a bid only if this is prior to the actual award of the contract; and none of the circumstances which occasioned the rejection of the bid entailed developments which occurred subsequent to Trap Rock’s qualification as an eligible bidder or affected adversely its responsibility as a bidder. Einally, it is asserted that the determination of the Commissioner to debar Trap Rock was arbitrary and fundamentally unfair.

Because of the grounds developed in this opinion, we consider it unnecessary to resolve these additional contentions.

Accordingly, the decision of the Commissioner in refusing to execute the contract and in debarring appellant is reversed.

      We are informed that Ms. Keever has terminated her relationship with Trap Koek.


author: Crane, J. A. D.

text:
    STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT, v. LEONARD FARIELLO, DEFENDANT-APPELLANT.
    Superior Court of New Jersey-Appellate Division
    Argued February 19, 1975
    Decided March 12, 1975.

      Before Judges Carton, Crane and Kole.

      Mr. Frank R. Krack argued the cause on behalf of appellant (Mr. Stanley C. Van Ness, Public Defender, attorney; Mr. David R. Arrajj, Assistant Deputy Public Defender, of counsel and on the brief).

      Mr. Richard W. Berg, Deputy Attorney General, argued the cause on behalf of respondent (Mr. William F. Hyland, Attorney General, attorney).
   The opinion of the court was delivered by

Crane, J. A. D.

Defendant was convicted of possession of marijuana, possession of marijuana with intent to distribute, maintaining premises which were resorted to by persons for the purpose of unlawful distribution of marijuana and possession of a dangerous knife. lie was sentenced to concurrent indeterminate sentences at Yardville.

On this appeal defendant contends that the trial court erred in denying his motion to suppress evidence. The search which led to the discovery of the evidence was authorized by a search warrant which had been issued on the basis of a supporting affidavit of a State Police detective supple-merited bjr oral statements made by the detective to the judge. Defendant initially qiiestions whether the oral statement was under oath. We are persuaded that there was sufficient basis for the finding of the trial judge that the oral statement was given under oath. Of more substantial significance is the contention that the contents of the supplementary oral statement should not be considered because no transcript or summary of the oral testimony was filed, as is required by R. 3 :5-6. There is nothing improper in the judge’s conduct in eliciting information in addition to that contained in the affidavit. State v. Mark, 46 N. J. 262, 274 (1966); State v. Clemente, 108 N. J. Super. 189, 197 (App. Div. 1969), certif. den. 55 N. J. 450 (1970). However, in State v. Stolzman, 115 N. J. Super. 231 (App. Div. 1971), testimony which was not preserved as required by the rule was held to be inadmissible on a motion to suppress. See also, State v. Bisaccia, 131 N. J. Super. 270 (App. Div. 1974).

While we agree that compliance with the requirements of R. 3 :5-6 is desirable, we do not agree that a search conducted pursuant to a warrant supported by evidence sufficient to constitute probable cause must be invalidated because the issuing magistrate failed to document fulty the evidence upon which the search was authorized.

It is true that a burden upon the administratipn of justice is created by the failure of the judge issuing the warrant to file a transcript or a summary. The failure however is not of constitutional dimension. Cf. United States ex rel. Washington v. Yeager, 448 F. 2d 87 (3 Cir. 1971), cert. den. 404 U. S. 967, 92 S. Ct. 345, 30 L. Ed. 2d 287 (1971). Neither the Fourth Amendment of the United States Constitution nor the provisions of Article I, paragraph 7 of the New Jersey Constitution impose any such requirement. The obligation of making a record of the supporting factual allegations is entirely created by rule of court. Application of an exclusionary rule may have been necessary as a means of forcing police officials to comply with constitutional guarantees against unreasonable searches. See Mapp v. Ohio, 367 U. S. 643, 81 S. Ct. 1684, 6 L. Ed. 2d 1081 (1961); State v. Bisaccia, 58 N. J. 586 (1971); State v. Kasabucki, 52 N. J. 110 (1968). The warrant in the present case was issued at about 11 P.M. at the home of the issuing judge. In view of this circumstance and the evidence we have detailed below, we see no necessity to exclude consideration of information supplied to the judge who issued the search warrant merely because that judge failed to comply fully with a court-made rule. See State v. Clemente, supra, 108 N. J. Super. at 198. The provisions of the rule have sometimes been regarded as directory. State v. Harris, 98 N. J. Super. 502, 504 (App. Div. 1968), certif. den. 51 N. J. 396 (1968). We believe that the conclusion in Stohman injects an atmosphere of rigidity in an area requiring a degree of flexibility. Our conclusion, however, should not be construed as approval or con-donation of the failure of the issuing judge to comply with R. 3 :5 — 6. The duty of full compliance remains clear.

We turn now to an examination of the sufficiency of the facts upon which the warrant was issued. We approach our task with the realization that we must pay substantial deference, as did the trial judge, to the finding of probable cause by the issuing judge. State v. Perry, 59 N. J. 383, 393 (1971); State v. Kasabucki, supra, 52 N. J. at 120 (1968). We are not, as defendant suggests, required to weigh the factual accuracy of the assertions of the officer making application for the warrant. State v. Petillo, 61 N. J. 165, 174 (1972) , cert. den. 410 U. S. 945, 93 S. Ct. 1393, 35 L. Ed. 2d 611 (1973).

The affidavit recited that the officer had reason to believe that drugs were located on the premises; that officers of the .New Jersey State Police had occasion to check the contents of an army-type duffle bag found in a vehicle under the control of residents of the property; that the duffle bag contained numerous plastic bags weighing approximately one pound apiece containing a green vegetable substance identified as marijuana. In addition, the detective told the judge issuing the warrant that the vehicle in which the marijuana had been found had been sold to a neighbor as a junk vehicle for parts and that the neighbor noticed that the trunk had a brand new hasp on it which made him suspicious. The police found some bags containing vegetation residue in the trunk and the neighbor found the duffle bag in the car. The officer also stated that defendant and one of the other residents had records of arrests for narcotic offenses and that neighbors had observed an unusual amount of vehicular traffic to and from the premises ait all hours of the day and night.

We have no doubt that the information supplied to the issuing judge, when considered in its totality, was sufficient to generate a well-founded suspicion that a crime was probably being committed at the premises. State v. Ebron, 61 N. J. 207 (1972); State v. Waltz, 61 N. J. 83, 87 (1972).

Defendant next contends that his convictions for possession of marijuana and maintaining premises to which persons resorted for the purpose of distributing marijuana merged with the conviction for possession with intent to distribute. The State contends that since various quantities of marijuana, marijuana residue and hashish were found in several locations, the drugs were possessed for varying purposes. No such distinction was made when the items were offered in evidence. We are persuaded, under the circumstances in which the evidence was admitted at the trial, that the charge of possession was a lesser included offense in the charge of possession with intent to distribute. State v. Ruiz, 127 N. J. Super. 350 (App. Div. 1974); State v. Wilkinson, 126 N. J. Super. 553 (App. Div. 1973), certif. den. 63 N. J. 562 (1973). Cf. State v. Williams, 129 N. J. Super. 84 (App. Div. 1974). We are not persuaded, however, that merger has occurred with respect to the offenses of possession with intent to distribute and maintaining premises which were resorted to by persons for the purpose of distribution. Here there are elements of each offense which are separate and distinct. In order to prove the offense of maintaining it was necessary for the State to prove that defendant exercised control over the premises. No such showing was required to prove the possession with intent to distribute charge. The proof required to sustain the charges is not identical. State v. Craig, 48 N. J. Super. 276, 279 (App. Div. 1958).

Defendant further contends that his conviction under N. J. S. A. 24:21-35 (a) should be reversed since the statute does not charge a criminal offense. It was held in State v. Blackman, 125 N. J. Super. 125 (App. Div. 1913), that the statute by itself does not spell out a crime. However, in Blackman the cause was remanded to the trial court with instructions to permit the indictment to be amended by including reference to N. J. S. A. 2A:130-2 and 3 before proceeding to trial. R. 3 :1-4 permits amendments to correct errors of form or the description of the offense provided the amendment does not charge a different offense or prejudice defendant in his defense on the merits. Under the factual situation of this case, reference to N. J. S. A. 2A:85-1 is appropriate. N. J. S. A. 24:21-35 (a) does state that the keeping of premises which are resorted to for the unlawful distribution of controlled dangerous substances shall constitute the keeping of a common nuisance. That was an indictable offense under the common law. Mayor, etc., Alpine Borough, v. Brewster, 7 N. J. 42, 49-50 (1951); State v. Rodgers, 91 N. J. L. 212, 215 (E. & A. 1917); State v. Crusius, 57 N. J. L. 279, 282-283 (Sup. Ct. 1894). Common law indictable offenses are denominated misdemeanors by the terms of N. J. S. A. 2A:85-1. Thus, the indictment should properly charge that the buildings or premises were maintained as a common nuisance contrary to the provisions of N. J. S. A. 24:21-35 (a) and N. J. S. A. 2A:85 — 1. Wo find no prejudice to defendant in adding the words “as a common nuisance” and reference to N. J. S. A. 2A:85-1 in the indictment. Defendant’s defense on the merits could not be affected nor would the State’s proof be required to differ in any respect. Accordingly, pursuant to our authority under R. 2:10-5, we direct that the indictment be amended by adding the words “as a common nuisance” after the word “premises” and the words “and N. J. S. A. 2A:85-1” after “N. J. S. A. 24:21-35(a).”

Defendant further contends that the trial court failed to give an adequate instruction with regard to the charge of possession of a dangerous knife. We have examined the record and note that ultimately the judge, at defendant’s request, charged the jury in accordance with the language of State v. Edwards, 120 N. J. Super. 46 (Law Div. 1972). We find no error possessing the capacity of bringing about an unjust result. The charge ultimately given was consistent with the holding of State v. Green, 62 N. J. 547 (1973), which was decided after the trial in this matter.

Defendant’s final contention relates to the contents of a gray metal box which was introduced in evidence for the purpose of demonstrating defendant’s connection with the premises. Because we were not able to determine precisely what had been included in the exhibit we remanded the matter to the trial court before oral argument. We are satisfied from the findings of the trial judge that no probation report or probation booklet was in the box when it was presented to the jury. The trial judge also found as a fact that defendant had an adequate opportunity to check the contents of the box with his attorney. The box contained many items of a personal nature, including letters, poetry and other writings of an intimate nature. No objection to their admission in evidence was made, however, and we are not persuaded that their submission to the jury had the capacity of bringing about an unjust result.

We find no plain error. State v. Macon, 57 N. J. 325 (1971); State v. LaPorte, 62 N. J. 312 (1973). Defendant’s final contention that the performance of his trial counsel was so inadequate as to deprive him of the effective assistance of counsel is also without merit. While it may have been better trial strategy to object to the admission of the items in question, we cannot say that the absence of such an objection indicates” that counsel was inadequate. State v. Bentley, 46 N. J. Super. 193, 203 (App. Div. 1957). Wo do not find that the trial was a farce or a mockery of justice. State v. Edge, 57 N. J. 580, 593 (1971).

The judgment of conviction for possession of marijuana is vacated. In all other respects the judgment is affirmed.