author: Lane, J. S. C.

text:
    R. R., A MINOR, BY HIS GUARDIAN AD LITEM, M. R., PLAINTIFFS, v. THE BOARD OF EDUCATION OF THE SHORE REGIONAL HIGH SCHOOL DISTRICT, DEFENDANT.
    Superior Court of New Jersey-Chancery Division
    Decided February 27, 1970.

      ' Mr. James F. Henneberry, Jr. appeared for plaintiffs.

      Mr. 8. Thomas Gagliano appeared for defendant {Messrs. Potter & Gagliano, attorneys).
   Lane, J. S. C.

This matter is before the court on the return day of an order to show cause ordering defendant board of education of the Shore Eegional High School District to show cause 'Vfhy plaintiff E. E., an infant, who is appearing in this suit through his father M. E. as guardian ad litem, should not be readmitted to his regular classes at the high school and given additional instruction to bring him up to the level of his class. The parties have agreed that the court may treat the matter as if cross-motions for summary judgment had been made.

The essential facts are not in dispute. On January 20, 1970 E. E., aged 15, was a sophomore at the high school which is located in West Long Branch, New Jersey. After his dismissal from the high school at the end of the class day, he went to his home in a neighboring municipality, arriving about 3:30 p.m. Finding the door locked and no one at home, E. E. went across the street to the home of W. 0. to see if his parents had left the key to the house there. When E. E. rang the doorbell, L. O., about 15 years old, came to the door and let E. E. in. It is not clear exactly what happened at this point. E. E. alleges that he was provoked into striking L. O. on the back of her head with a piece of wood that he was carrying. He claims that L. O. then picked up a knife and that during the ensuing scuffle in which he tried to get the knife away from her, she was cut in four places. Her version is that R. R. deliberately tried to stab her.

On January 21, 1970 Elbert M. Hoppenstedt, superintendent of the high school, was informed by the principal of the incident. Mr. Hoppenstedt immediately contacted the neighboring municipality’s police department and was read a statement of L. O. which set forth her version of the incident. Based on this information and information from the principal and vice-principal of the school that R. R. had been engaged in less serious conflicts with other students (which E. E. denies), it was decided that E. E. should be suspended until the next meeting of the board of education. There was no specification as to such alleged c<less serious conflicts.” There was no hearing afforded to R. R.

On January 22, 1970 a complaint was signed by a representative of the neighboring municipality’s police department against R. R. alleging a violation of N. J. S. A. 2A:90-1. The complaint was forwarded to the Juvenile and Domestic Relations Court on January 29, 1970. A plea of not guilty was entered on February 25, 1970. The matter is now scheduled before that court for a formal hearing on April 9, 1970.

On January 23, 1970 M. R., R. R.’s father, who had been out of the State on business before this date, called the vice-principal of the high school who informed him of R. R.’s suspension from the high school until further notice. The vice-principal told M. R. that the high school would try to get home instruction for R. R. during the period of his suspension. On his own initiative, M. R. had his son examined on January 26, 1970 by Dr. Frank Husserl, a well-qualified psychiatrist. Dr. Husserl requested that R. R. be examined by Dr. Edward Dengrove. This examination was completed but Dr. Dengrove requested an electroencephalograph. As a result of the report of Dr. Dengrove and the report of the electroencephalograph, which was normal, and based on his examination, Dr. Husserl under date of February 6, 1970 addressed a letter:

To Whom It May Concern:
I have examined the above named [R. R.] in my office on January 26, 1970.
It is my professional opinion that he may return to school without risk to the safety and security of others or himself.

On January 27, 1970 the board of education held its monthly agenda meeting. The matter of the suspension was brought to the board’s attention by Mr. Hoppenstedt. The board had before it a copy of the statement given by L. O. to the Police. After discussion the board decided that R. R. should continue to remain at home indefinitely pending further investigation and the outcome of his trial. Neither E. K. nor his parents were given notice of this meeting. At no time were they given an opportunity to present their position.

The first written notice of the suspension was received by M. E. in a letter dated January 27, 1970 from the principal of the high school:

In view of the events which have taken place this week involving your son [R. R.], he has been suspended from school until such time as we receive a written report from your doctor about [R. R.'l This report will be reviewed and brought to the attention of the Superintendent and the Board of Education for further action. In the meantime, [R. R.l is not to attend school until we notify you that he may return.
While under suspension, [R. R.] may not attend or participate in any school sponsored activities. Enclosed is a statement which you and [R. R.] are to sign indicating he has been abiding by the conditions of his suspension.
Please cali me if you have any questions about [R. R.’s] suspension.

After the board of education’s agenda meeting on January 27, 1970 the superintendent under date of January 28, 1970 wrote to the parents:

After reviewing all of the facts in the case, the Board of Education lias decided that R. R. should continue to remain at home indefinitely pending further investigation and the outcome of his trial. During this period, the Board will furnish R. R. with home instruction in order that he can continue his education without interruption. Mr. Misklow, Guidance Director, will be in touch with you to make arrangements for tutors to come to your home.
We will also want to conduct further testing of R. R. Please arrange to have him in the guidance office on Thursday, February 5th at 10 a.m. for consultation with the school psychologist, Dr. Butler. At a later date we will also make arrangements for R. R. to visit the office of the school psychiatrist.
Tf you llave any questions or wish further information, please call me at 222-9300.

In a telephone conversation on January 28, 1970 the vice-principal told M. E. that this letter superseded the January 27, 1970 letter.

Plaintiffs allege, and it is not disputed, that from the time of the suspension to February 19, 1970, R. R. only received 3 hours and 50 minutes of home instruction. The superintendent in his affidavit seeks to justify that by saying:

' I directed Joseph Misklow, Guidance Director, to arrange for home instruction for the boy, which had been approved by the Board. Mr. Misklow experienced great difficulty in obtaining teachers who would give the boy home instruction because the teachers who were asked to give this instruction were unwilling to go to the boy’s home unless they could be assured that they would not be subject to any violence. This problem was somewhat complicated because it was our understanding that both of the parents of the boy work and that neither would be home while this instruction was going on.

Significantly, no affidavits are submitted from the teachers who were allegedly asked to provide the home instruction.

In an affidavit dated February 23, 1970 the superintendent states:

According to our Guidance Department, R. R. is now receiving home instruction in all five of his major subjects and if he performs satisfactorily in home instruction, his education will not be jeopardized nor will he be faced with the loss of a school year.

In compliance with the superintendent’s letter of January 28, 1970, R. R. was examined by Dr. Butler, the school psychologist on February 5.

On February 18, 1970 without notice to plaintiffs and without affording them a hearing, the board considered the medical reports procured by M. R. and Dr. Butler’s report. Dr. Butler’s report is referred to in the superintendent’s affidavit. The affidavit of the superintendent is equivocal as to whether Dr. Butler was present at the meeting or not. In any event, as to the contents of this report all that is said is:

Dr. Butler’s report stated that the boy did have a great deal of “anger” and that this may have originally been caused by his deafness.

There is no indication that Dr. Butler said anything about E. E. being a danger to himself, to other people or to school property were he to be readmitted to school.

The board refused to readmit E. E. to school and requested that he be examined by Dr. E. Pustrom, the school psychiatrist. Such appointment was arranged for February 23, 1970 but was subsequently canceled on behalf of plaintiffs. The appointment was canceled on the advice of counsel because the complaint had been filed herein and an order to show cause issued.

The court is informed that the board of education again considered the matter on February 25, 1970 and decided to keep the suspension in effect. No hearing was afforded to E. E.

The question before the court is whether public school officials can deprive a student of his right to attend school because of acts committed off school property and totally unrelated to school activities, and, if so, what procedural due process must the school officials afford to the student.

There can be no doubt that the establishment of an educational program requires rules and regulations necessary for the maintenance of an orderly instructional program and the creation of an educational environment conducive to learning. Such rules and regulations are equally necessary for the protection of public school students, faculty and property. The power of public school officials to expel or suspend a student is a necessary corollary for the enforcement of such rules and the maintenance of a safe and orderly educational environment conducive to learning. But public school officials cannot exercise this power where the activity which is the subject of the proposed suspension or expulsion does not materially and substantially interfere with the requirements of appropriate discipline in the operation of the school. Cf. Burnside v. Byars, 363 F. 2d 744 (5 Cir. 1966).

In New Jersey public school officials have the authority to suspend or expel students for events happening out of school hours. Palmyra Board of Education v. Hansen, 56 N. J. Super. 567, 571 (Law Div. 1959); N. J. S. A. 18A:37-2. This court is unable to find a New Jersey decision holding that school officials have the right to expel or suspend a pupil for conduct away from school grounds, but the better view is that school authorities have such a right where such is reasonably necessary for the student’s physical or emotional safety and well-being, or for reasons relating to the safety and well-being of other students, teachers or public school property. See Annotation, “Right to discipline pupil for conduct away from school grounds”, 41 A. L. R. 1312 (1926); Knight v. State Board of Education. 200 F. Supp. 174 (M. D. Tenn. 1961); cf. Stricklin v. Regents of University of Wisconsin, 297 F. Supp. 416 (W. D. Wis. 1969); Marzette v. McPhee, 294 F. Supp. 562, 568 (W. D. Wis. 1968).

Public school authorities have the right to suspend for out-of-school activities in the circumstances stated. The remaining issue is what procedural due process must the school authorities afford to the student.

“It requires no argument to demonstrate that education is vital and, indeed, basic to civilized society. Without sufficient education the plaintiffs would not be able to earn an adequate livelihood, to enjoy life to the fullest, or to fulfill as completely as possible the duties and responsibilities of good citizens.” Dixon v. Alabama State Board of Education, 294 F. 2d 150, 157 (5 Cir. 1961), cert. den. 368 U. S. 930, 82 S. Ct. 368, 7 L. Ed. 2d 193 (1961).

There can be no doubt that such is the policy of the State of New Jersey. The New Jersey Constitution (1947), Art. VIII, § IV, par. 1, provides:

The Legislature shall provide for the maintenance and support of a thorough and efficient system of free public schools for the instruction of all the children in the State between the ages of five and eighteen years.

The Legislature has fulfilled this constitutional mandate by the enactment of Title 18A of N. J. S. A. N. J. S. A. 18A:38-25 requires compulsory education. Pingry Corp. v. Hillside Tp., 46 N. J. 457, 461 (1966).

In State v. Vaughn, 44 N. J. 142 (1965), Justice Sehettino stated:

The education of a child has always been of supreme importance and an ideal which has long been required in our state, [at 145]

N. J. S. A. 18A:37—1 et seq., deals with the discipline of pupils in the public schools. N. J. S. A. 18A:37—4 provides:

The teacher in a school having but one teacher or the principal in all other cases may suspend any pupil from school for good cause but such suspension shall be reported forthwith by the teacher or principal so doing to the superintendent of schools of the district if there be one. The superintendent to whom a suspension is reported or if there be no superintendent in the district, the teacher or principal suspending the pupil shall report the suspension to the board of education of the district at its next regular meeting. Such teacher, principal or superintendent may reinstate the pupil prior to the second regular meeting of the board of education of the district held after such suspension unless the board shall reinstate the pupil at such first regular meeting.

N. J. S. A. 18A:37—5 provides:

No suspension of a pupil by a teacher or a principal shall be continued longer than the second regular meeting of the board of education of the district after such suspension unless the same is continued by action of the board, and the power to reinstate, continue any suspension reported to it or expel a pupil shall be vested in each board.

It is a basic principle of law that there is a strong presumption that a statute is constitutional. A legislative act will not be declared void unless its repugnancy to the Constitution is clear beyond a reasonable doubt. Gangemi v. Berry, 25 N. J. 1, 10 (1957); In re Loch Arbour, 25 N. J. 258, 264-265 (1957). It is the duty of the judiciary to sustain the legislative will if at all possible, piercing through the gloss to the substance of the statute. Two Guys from Harrison, Inc. v. Furman, 32 N. J. 199, 223 (1960). Legislation will be so construed as to sustain its validity. Masters-Jersey, Inc. v. Paramus, 32 N. J. 296, 301 (1960). Where a statute is reasonably open to a constitutional construction it should be so read, State v. Hudson County News Co., 35 N. J. 284, 294 (1961), taking into consideration whether the Legislature would want the statute to succumb or survive constitutional attack. Schmoll v. Creecy, 54 N. J. 194, 202 (1969). In construing a statute the presumption is that the Legislature acted with existing constitutional law in mind and intended to function in a constitutional manner, and the provisions that insure compliance with the Federal or State constitutions need not be specifically spelled out with particularity, but may arise by inference. Lomarch Corp. v. Mayor of Englewood, 51 N. J. 108, 113 (1968).

The action taken by the Shore Regional High School officials meets the literal requirements of N. J. S. A. 18A:37—4 and N. J. S. A. 18A:37-5, but literal compliance without more violates R. R/s constitutional rights to due process of law.

It is generally recognized that with respect to discipline of students in public educational institutions, involving the possible imposition of serious sanction such as suspension or expulsion, the requirements of procedural due process under the Fourteenth Amendment are applicable. Woods v. Wright, 334 F. 2d 369 (5 Cir. 1964); Dixon v. Alabama State Bd. of Educ. 294 F. 2d 150 (5 Cir. 1961), cert. den. 368 U. S. 930, 82 S. Ct. 368, 7 L. Ed. 2d 193 (1961); Marzette v. McPhee, 294 F. Supp. 562 (W. D. Wis. 1968); Moore v. Student Affairs Comm. of Troy State Univ., 284 F. Supp. 725 (M. D. Ala. 1968); Schiff v. Hannah, 282 F. Supp. 381 (W. D. Mich. 1966) (en banc); Esteban v. Central Mo. State College, 277 F. Supp. 649 (W. D. Mo. 1967); Knight v. State Bd. of Educ. 200 F. Supp. 174 (M. D. Tenn. 1961); Annotation, ‘Right of student to hearing on charges before suspension or expulsion from educational institution,” 58 A. L. R. 2d 903 (1958); “Developments in the law—Academic Freedom,” 81 Harv. L. Rev. 1045, 1134-1143 (1968); Seavey, “Dismissal of Students: ‘Due Process,” 70 Harv. L. Rev. 1406 (1957). These procedural due process requirements are applicable to a student attending a public high school. Kelly v. Metropolitan County Bd. of Bd. of Nashville, etc., 293 F. Supp. 485 (M. D. Tenn. 1968).

N. J. S. A. 18A :37—2, N. J. S. A. 18A:37-4 and N. J. S. A. 18A:37-5 must, therefore, be construed to require public school officials to afford students facing disciplinary action involving the possible imposition of serious sanctions, such as suspension or expulsion, the procedural due process guaranteed by the Fourteenth Amendment.

Where public school officials have reasonable cause to believe that a student, by virtue of activities after school hours and off school property, presents a danger to himself, to others or to school property, they may temporarily suspend the student for a short period of time pending a full hearing which will afford such student procedural due process. They must, however, under ordinary circumstances afford the student a preliminary hearing.

In Stricklin v. Regents of University of Wisconsin, 297 F. Supp. 416 (W. D. Wis. 1969), it is held that a preliminary hearing is required prior to the imposition of an interim suspension and before the full hearing on the ultimate issue of suspension or expulsion except in exceptional cases. The court stated:

When the appropriate university authority has reasonable cause to believe that danger will be present if a student is permitted to remain on the campus pending a decision following a full hearing, an interim suspension may be imposed. But the question persists whether such an interim suspension may be imposed without a prior ‘preliminary hearing’ of any kind. The constitutional answer is inescapable. An interim suspension may not be imposed without a prior preliminary hearing, unless it can be shown that it is impossible or unreasonably difficult to accord it prior to an interim suspension. Moreover, even when it is impossible or unreasonably difficult to accord the student a preliminary hearing prior to an interim suspension, procedural due process requires that he be provided such a preliminary hearing at the earliest practical time, [at 420-421]

The preliminary hearing may be completely informal. The student should be given the opportunity to persuade the authority that there is a case of mistaken identity or that there is some other compelling reason why he should not be suspended pending a full hearing.

The nature of the full hearing clearly depends upon the circumstances of the particular case. See Madera v. Board of Education of City of New York, 386 F. 2d 778 (2 Cir. 1967), cert. den. 390 U. S. 1028, 88 S. Ct. 1416, 20 L. Ed. 2d 284 (1968); Scott v. Alabama State Board of Education, 300 F. Supp. 163 (M. D. Ala. 1969); Stricklin v. Regents of University of Wisconsin; 297 F. Supp. 416 (W. D. Wis. 1969); Marzette v. McPhee, 294 F. Supp. 562 (W. D. Wis. 1968); Kelley v. Metropolitan County Bd. of Ed. of Nashville, etc., 293 F. Supp. 485 (M. D. Tenn. 1968); Schiff v. Hannah, 282 F. Supp. 381 (W. D. Mich. 1966); Wright v. Texas Southern University, 277 F. Supp. 110 (S. D. Texas 1967), aff’d 392 F. 2d 728 (5 Cir. 1968); Knight v. State Board of Education, 200 F. Supp. 174 (M. D. Tenn. 1961); Annotation, “Right of student to hearing on charges before suspension or expulsion from educational institution,” 58 A. L. R. 2d 903 (1958); Van Alstyne, “The Student as University Resident," 45 Denver L. J. 582, 593-594 (Special 1968); Note, “Developments in the Law-Academic Freedom,” 81 Harv. L. Rev. 1045, 1134-1143 (1968).

In Dixon v. Alabama State Board of Education, supra, where the court held public school officials must at least exercise fundamental principles of fairness by giving the student subject to dismissal or expulsion notice of the charges and an opportunity to be heard in his own defense, the Court stated:

For the guidance of the parties in the event of further proceedings, we state our views on the nature of the notice and hearing required by due process prior to expulsion from a state college or university. They should, we think, comply with the following standards. The notice should contain a statement of the specific charges and grounds which, if proven, would justify expulsion under the regulations of the Board of Education. The nature of the hearing should vary depending upon the circumstances of the particular case. The case before us requires something more than an informal interview with an administrative authority of the college. By its nature, a charge of misconduct, as opposed to a failure to meet the scholastic standards of the college, depends upon a collection of the facts concerning the charged misconduct, easily colored by the point of view of the witnesses. In such circumstances, a hearing which gives the Board or the administrative authorities of the college an opportunity to hear both sides in considerable detail is best suited to protect the rights of all involved. This is not to imply that a full-dress judicial hearing, with the right to cross-examine witnesses, is required. Such a hearing, with the attending publicity and disturbance of college activities, might be detrimental to the college’s educational atmosphere and impractical to carry out. Nevertheless, the rudiments of an adversary proceeding may be preserved without encroaching upon the interests of the college. In the instant case, the student should be given the names of the witnesses against him and an oral or written report on the facts to which each witness testifies. He should also be given the opportunity to present to the Board, or at least to an administrative official of the college, his own defense against the charges and to produce either oral testimony or written affidavits of witnesses in his behalf. If the hearing is not before the Board directly, the results and findings of the hearing should be presented in a report open to the student’s inspection. If these rudimentary elements of fair play are followed in a case of misconduct of this particular type, we feel that the requirements of due process of law will have been fulfilled, [at 294 F. 2d, at 158-159]

This quotation sets forth the minimum requirements for the hearing. The student may, but need not be, represented by counsel. See Case Comment: “Constitutional Law - Due Process Does Not Require That A Student Be Afforded The Right To Counsel At A Public School Suspension Hearing,” 22 Rutgers L. Rev. 342 (1968). The title of this comment is misleading. The comment argues that there should be a right to employ counsel. This court agrees with the author.

The right to such a hearing has been recognized by the Commissioner of Education of New Jersey. See Scher v. Board of Education, West Orange (N. J. School Law Decisions, January 1 to December 31, 1968, at 92).

Prom the circumstances of this case as presented in the affidavits before the court, if the school officials had reasonable cause to believe R. R. was a danger to himself, to others or to school property by virtue of his after hours off school property conduct the school officials could have suspended him after affording him a preliminary hearing. At the preliminary hearing he could have asserted a case of mistaken identity, extreme provocation, or other compelling justification for withholding the proposed interim suspension. If after this preliminary hearing the school officials had reasonable cause to believe R. R. was a danger to himself, others or school property, he could he suspended but was entitled to a full hearing affording him procedural due process within a short period of time, no more than 21 days. As noted in Dixon, supra, this hearing will vary with the circumstances of each case.

Since his suspension on January 23, 1970 R. R. had not been given either a preliminary hearing or a full hearing. Under the circumstances defendant will be ordered to readmit R. R. to the high school Monday morning, the next school day, and to afford him extra instruction so that he can catch up with his class. The readmission of R. R. will be conditioned upon his submitting to an examination by Dr. Pustrom within ten days.

Should the school officials have reasonable cause to feel that after R. RIs readmission he has given evidence that he is a danger to himself, to others or to school property, they would be at liberty to suspend him after a preliminary hearing. If it is impossible or unreasonably difficult to accord such preliminary hearing prior to an interim suspension, it should be conducted at the earliest practical time after the imposition of the interim suspension. Of course, should such interim suspension occur, R. R. would be entitled to a full hearing as mandated by Dixon, supra. The full hearing should take place not more than 21 days from the suspension.


source: Caselaw Access Project

license: Public Domain

text:
    STANLEY YACKER, RECEIVER FOR MAR BUILDING, INC., PLAINTIFF, v. MARKUS WEINER, MARTIN BLASHINSKY AND MIDDLESEX APARTMENTS, INC., DEFENDANTS.
    Superior Court of New Jersey Chancery Division
    Decided March 6, 1970.

      Mr. Ralph 8. Reuser appeared for plaintiff (Messrs. Reuser & Reuser, attorneys).

      Mr. Barry D. Keith appeared for defendants (Messrs. Keith & Keith, attorneys).
   Lane, J. S. C.

Plaintiff, the receiver of Mar Building Co., Inc. (improperly referred to in the title as Mar Building, Inc.; referred to herein.as Mar), an insolvent construction corporation, seeks to recover monies diverted from the corporation by Marinis Weiner (Weiner) and Martin Blashinsky (Blashinsky), its former officers, and to pierce the corporate veil of Mar so as to hold Middlesex Apts., Inc. (Middlesex), the owner of the realty, responsible for obligations due from Mar to certain creditors. The matter is before the court on final hearing.

Middlesex was formed January 26, 1965. The incorporators were Weiner, Blashinsky and Sarah Bernstein, each of whom subscribed to 60 shares of stock, and Julius and Estelle Green-man who together subscribed to 30 shares. Mar was incorporated January 28, 1965. The incorporators, with equal shares of stock, were Blashinsky, Weiner and Bernstein. The same attorney incorporated both corporations.

Middlesex acquired title to land in Matawan, New Jersey, upon which Mar was to construct an apartment project. A contract was entered into between Mar and Middlesex on March 3, 1965 under which Mar was to do the construction for $680,000. Middlesex obtained from The Dime Savings Bank of Brooklyn a construction and permanent loan in the amount of $825,000. It was the intention of Blashinsky and Weiner to mortgage out the entire job, including the cost of the land, using none of their own money.

The amount paid by Middlesex for the land and other items exclusive of construction was $148,571.20. The total cost of the land and buildings to date was $968,939.42.

As of 1968 the cost of the building had been $806,000. There were, however, $141,153.01 of claims asserted by contractors against Mar for work done in the construction. With the exception of three creditors, these claims have been settled by Middlesex on the basis of 25 cents on the dollar. The three creditors who refused to settle are the receiver of Charles J. Rooney Plumbing & Heating, Inc., Ace-Manzo, Inc. and Manzo Contracting Co., Inc. At the trial of this case defendants not only denied liability but also vigorously contested the validity and amount of the claims of the three creditors.

The theory upon which plaintiff proceeds against Middle-sex is that a fraud was committed at the time the contract was signed with Mar for the construction of the building. It is contended that Blashinsky and "Weiner, the active principals of Middlesex, must have known that the buildings could not possibly have been built for $680,000. Testimony was given by a well-qualified builder that anyone computing the probable cost for the construction of the buildings in 1965 would have arrived at a figure in the neighborhood of $900,000. Defendants sought to counteract that testimony by offering testimony of their own building expert. He testified that $703,000 ($23,000 over the contract price) would have been a valid estimate of costs. That figure, however, did not include anything for organization expenses, legal fees, temporary heat, electricity, salaries, or profit to the corporation. Testimony was also offered by defendants from an accountant who represented one of the investors in Middlesex and Mar and also Middlesex itself. He testified that from his examination of the contracts entered into and estimates that he saw for certain supplies such as lumber, masonry and hardware, the total cost was to have been $680,170. However, in such computation one of the contracts (Weiner Electric Co.) was taken at $10,000 less than its actual figure, and the amounts estimated for some of the suppliers were unreasonably low. Again no consideration was given to organization expenses, legal fees, temporary heat, electricity, salaries, or profit to the corporation. It is perfectly clear to the court that the contract price of $680,000 had no relationship to what the actual cost of construction was going to be. The court discounts the effect of the accountant’s testimony because most of the contracts were entered into well after the contract between Middlesex and Mar and therefore they could not have been in Blashinsky’s and Weiner’s contemplation when the $680,000 contract price was arrived at.

The case presents a situation that all too often is seen. One or more persons organize a corporation to buy land and another corporation to enter into a construction contract which has little or no relationship to estimated costs of the Work to be performed. That contract provides that no stop notices will be filed. The construction company, completely controlled by the people who own the real estate holding company, then enters into subcontracts for a major portion of the work. If the construction company can get away with it, its subcontracts prohibit any recourse to the Mechanics Lien Law. The amount of the general contract is grossly inadequate, the incorporators of the two corporations keeping from the mortgage funds the costs of the land, interest to be paid on the mortgage, organization costs of the landowning corporation and a profit to the incorporators. Inevitably, the construction company becomes insolvent, the subcontractors are not paid, and the incorporators grow fat on the work, labor and materials put in the project by the subcontractors who end with a claim against the insolvent construction corporation.

It is fundamental that a corporation is an entity wholly separate and distinct from the individuals who compose and control it, but the corporate cloak may not be utilized as a subterfuge to justify wrong or perpetuate fraud. Frank v. Franks Inc., 9 N. J. 218, 223-224 (1952); Cohen v. Dwyer, 133 N. J. Eq. 226 (Ch. 1943), aff'd 134 N. J. Eq. 350 (E. & A. 1944); Miller & Dobrin, etc., Co. v. Camden Fire, etc., Assn., 55 N. J. Super. 205, 217 (Law Div. 1959); Schmid v. First Camden National Bank & Trust Co., 130 N. J. Eq. 254 (Ch. 1941).

In Macfadden v. Macfadden, 49 N. J. Super. 356 (App. Div. 1958), certif. den. 27 N. J. 155 (1958), the Appellate Division stated:

In Irving Investment Corp. v. Gordon, 3 N. J. 217, 223 (1949), the court said:
“It is where the corporate form is used as a shield behind which injustice is sought to be done by those who have the control of it that equity penetrates the veil.”
That statement connotes merely that there must be equitable fraud present to permit of such action. Fraud, in the sense of a court of equity, includes all acts, omissions or concealments which involve a breach of a legal or equitable duty, trust or confidence justly reposed, and are injurious to another, or by which an undue or unconscientious advantage is taken of another. Howard v. West Jersey & S. S. R. Co., 102 N. J. Eq. 517 (Ch. 1928), affirmed 104 N. J. Eq. 201 (E. & A. 1929); Riverside Trust Co. v. Collin, 114 N. J. Eq. 157 (E. & A. 1933). Plainly, the facts sustain the conclusion that the use of the corporate form is here fraudulent in the above sense, [at 360]

The subcontractors wbo entered into contracts with Mar were justified in assuming that the general contract was for an amount which reasonably could be expected to cover the cost of the construction of the buildings. Although the Middlesex-Mar contract was filed, it is unreasonable to expect each subcontractor and supplier to compute the cost of the whole job to determine if the general contract price was adequate. In forming Mar and in causing it to enter into a contract for a sum that could not possibly have covered the cost of the construction, Weiner and Blashinsky perpetrated a fraud upon the subcontractors and caused their corporation, Middlesex, to participate in the fraud. An undue and unconscionable advantage was taken by Middlesex of such subcontractors. Middlesex itself apparently recognizes its responsibility. $20,000 was loaned to Mar during the course of the construction by or through the attorney who organized the corporations. This amount was repaid by Middlesex. Middlesex undertook to negotiate with Mar’s creditors and, in fact, settled with them for twenty-five cents on the dollar except the ones involved in this suit. There will be a judgment in favor of the receiver against Middlesex for the amount of the claims of the three creditors involved in this action.

The proof of claim filed by the receiver for Charles J. Rooney Plumbing & Heating, Inc. alleged that there was $16,000 due. Rooney had been engaged to complete the plumbing on five buildings for an agreed sum of $5,000 per building. He completed three of the buildings but failed to complete fully the last two. He testified that he was paid $17,000 and claimed to be owed an additional $8,000. He admitted that he had not done all of the work called for. Defendants produced a series of checks of Middlesex which were dated in the latter part of 1966 and the early part of 1967. They allege that these were payments made to complete the plumbing that Rooney had failed to do. They admitted that some of the checks in 1967 could have been repairs which were never the obligation of Rooney. The total amount of the payments made for plumbing through 1966 to others than Rooney was $2,550.06. Defendants will be allowed a credit in that amount. The claim of the receiver for Rooney is established at $5,449.94, together with interest at 6% from December 31, 1966 through the date of payment.

The claim filed on behalf of Ace-Manzo, Inc. was in the amount of $8,013.15. The defense to that claim is that a portion of the work done by Ace-Manzo, Inc. was to be paid for by the municipality. The evidence shows that the contract was between Ace-Manzo, Inc. and Mar. There may well have been an agreement between Mar and the municipality for reimbursement to Mar by the municipality. Such agreement, however, does not constitute a defense to the Ace-Manzo, Inc. claim. The claim of Ace-Manzo, Inc. is established at $8,013.15, together with interest at 6% from May 2, 1966 to the date of payment.

The proof of claim filed on behalf of Manzo Contracting Co. was in the amount of $15,340. This contractor agreed to black-top certain parking areas at a specified unit price. The agreement between Manzo and Mar was that Manzo was to fine-grade the areas within a tolerance of two inches plus or minus and install four inches of stabilized base, black-top. After the installation, the parking areas began to crack. Manzo sought to explain the breaking up of the areas by saying that there was a water condition and that Mar had agreed to put a top dressing over the stabilized base, which it did not do. It is also alleged that in fact four inches within a tolerance of two inches was put down. The evidence does not support Manzo. The only testimony as to a water condition was that of Manzo himself and an employee. Two independent experts testified on behalf of defendants that there was no water condition. The proof is clear that in many of the areas the stabilized base was less than two inches. The reasonable cost of correcting the condition was $7,500. The claim of Manzo Contracting Co., Inc. will be established at $7,840 together with interest at the rate of 6% from February 17, 1967 to the date of payment.

The claim against Blashinsky and Weiner individually by the receiver is rested upon a different basis. They are charged with wasting Mar’s assets and mismanaging its business. See Knepper, Liability of Corporate Officers and Directors (1969), § 8.13, at 153.

In Cole v. Brandle, 127 N. J. Eq. 31 (E. & A. 1939), the Court of Errors and Appeals adopted the opinion of the vice-chancellor who stated:

* * * Here, defendants as officers of Investment Co., were trustees of corporate assets and as such were bound to administer such trust faithfully for the benefit of creditors as well as stockholders and they are charged with having been unfaithful to their trust in that they misapplied such assets willfully, in fraud of creditors. * * * [at 37]

See also Havey v. Hofmann, 121 N. J. Eq. 523 (Ch. 1937), aff’d o.b. 123 N. J. Eq. 589, 123 N. J. Eq. 590 (E. & A. 1938); Whitfield v. Kern, 122 N. J. Eq. 332 (E. & A. 1937).

Plaintiff contends that Blashinsky and Weiner, as the controlling officers of Mar, caused it to make improper payments. Among the improper payments were loans made to themselves. Such loans were prohibited by the statute in effect at the time, N. J. S. A. 14:8-10. Other expenditures that were made by Mar included $30,000 paid to Blashinsky and Weiner for another building project in which they were interested. A payment of $5,000 was made to the attorney who incorporated Mar. Such payment was clearly excessive for legal services in forming the corporation. The formation of the corporation was rudimentary. The minutes of the first meeting of incorporators were not even complete. It is significant that in the checkbook the stub for the $5,000 check has $450 which is crossed out. Also, through this attorney Mar received a loan of $20,000. Whether the $5,000 is for a legal fee or for a bonus, its payment was gross mismanagement.

Although, as noted above, no figure was considered for salaries in the Middlesex-Mar contract, salaries were in fact taken by Blashinsky and Weiner. Since even under Blashinsky’s and Weiner’s attempted justification of the $680,000 contract figure, no consideration was given to salaries, the taking of salaries by them constituted waste and mismanagement. It is clear that they treated the assets of Mar as though they were their own personal property. There was no attempt to safeguard the assets or capital for the legitimate purpose of the corporation.

As to the withdrawal of $30,000 for the other building corporation, an attempt was made to show that $30,000 had been loaned by three individuals, all of whom were interested in Middlesex, to Weiner for use in the other construction project, but that Weiner improperly devoted the money to Mar, so that the withdrawal of $30,000 from Mar to the other construction project was merely an exchange. During the early part of the construction an accountant by the name of Samuel Pogel maintained the books of Mar. The general ledger was maintained through March 31, 1966. The cash receipts and disbursement book was maintained through November 1, 1966. Testimony offered by defendants as to the $30,000 transaction was at variance with the books. Although Fogel is alive, he was not produced at the trial nor was there any explanation given as to the failure to produce him. Although his office is in New York, he was subject to having his deposition taken. The failure to produce Eogel even though the court had expressed its expectation that he would be produced raises an inference that defendants feared exposure of facts which would be unfavorable to them. State v. Clawans, 38 N. J. 162, 170 (1962). Defendants did offer the testimony of the accountant for Middlesex and for one of the investors in Mar. He had examined Mar’s books in January of 1966. Notwithstanding the fact that he attempted to support the $30,000 alleged “exchange transaction,” he had done nothing about having corrective entries made in Mar’s books. The court accepts as true what is shown by the general ledger and the cash receipts and disbursements book of Mar, as opposed to the self-serving testimony given at the trial on defendants’ behalf. The $30,000 expenditure is carried on the general ledger of Mar as a loan to the other construction project. There is no corresponding entry to show that it was an exchange.

The general ledger shows that the capital stock account of Mar totaled $37,300 made up as follows:

June 1965 $ 9,000 Sarah Bernstein

July 1965 10,000 not traceable

Sep. 13, 1965 8,000 not traceable

Oct. 1965 300 (Markus) Weiner

5.000 Unger

5.000 Uenster

Total $37,300

There is also contained in the general ledger an entry for a loan in the amount of $20,000 to Mar by Eenster. Withdrawals from Mar for loans total $39,131.50. Thus, the entire capital was withdrawn.

In Kleinberg v. Schwartz, 87 N. J. Super. 216 (App. Div. 1965), aff’d o. b. 46 N. J. 2 (1965), the Court stated:

* * * The capital of a corporation is a “trust fund” and the directors, as trustees thereof, may not dispose of it to the prejudice of creditors without an equivalent consideration, and no stockholder is entitled to any share of it until all the debts are paid. * * * [at 223]

The improper payments total $56,831.31 as appears by Schedule A attached hereto. [Schedule A is not printed. It lists the following categories: Salaries to officers, $9,941.98; Loans to officers, $4,500.00; Payments to or on behalf of Middlesex, $1,747.35; Attorney’s fee, $5,000.00; Payments to other construction projects in which Weiner and Blashinsky had an interest, $34,119.00; Miscellaneous improper expenditures, $1,513.98.]

The fact that the claims of the three creditors in suit do not total $56,831.31 does not lessen the liability of Blashinsky and Weiner to the corporation. There undoubtedly are at least claims against Mar for taxes by both the United States and the State of New Jersey as well as the expenses of the receivership proceedings. After the payment of the remaining creditors, the balance of the assets of the insolvent corporation in the hands of the receiver will be distributed in accordance with N. J. S. A. 14:13—8.

There will be a judgment in favor of the plaintiff and against Blashinsky and Weiner individually, jointly and severally, in the amount of $56,831.31 with interest at 6% from September 9, 1966, the date of the last improper withdrawal with costs. There will be a judgment against Middlesex for the amount of the Rooney, Ace-Manzo, Inc. and Manzo Contracting Co: claims with costs. The primary fund from which these three claims are to be paid is the proceeds of the judgment against Blashinsky and Weiner. The plaintiff, however, may proceed against Middlesex without first exhausting its remedies against Blashinsky and Weiner. To the extent that Middlesex pays the plaintiff under this judgment, it will be subrogated to the plaintiff’s judgment against Blashinsky and Weiner.

The attorney for the plaintiff will submit a judgment embodying the views set forth herein within 10 days in accordance with R. 4:42-1.


author: Horn, J. S. C.

text:
    BLANCHE NOBLE ROSS AND IRVIN W. ROSS, HER HUSBAND, PLAINTIFFS, v. BENJAMIN PONEMON, RUTH D. PONEMON, HIS WIFE; ROGER F. KING, PATRICIA F. KING, ROBERT L. HITCHNER, JOANNE HITCHNER, THEIR HEIRS, EXECUTORS, ADMINISTRATORS AND/ OR ASSIGNS, DEFENDANTS.
    Superior Court of New Jersey Chancery Division
    Decided March 10, 1970.

      Mr. J. Pater Bavidow for plaintiffs.

      Mr. Charles Lee Harp, Jr. for defendants Benjamin Ponemon and Ruth B. Ponemon. (Messrs. Archer, Greiner, Hunter <& Read,, attorneys.)

      Mr. Keron B. Chance for defendants Roger P. King and Patricia F. King.

      Air. Bavid L. Horuvitz for defendants Robert L. Hitchner and Joanne Hitchner.

   Horn, J. S. C.

This quiet title action was brought primarily for the purpose of obtaining a judical declaration that a certain tract of land, consisting of .61 acres on which is a small house occupied by plaintiffs, is not subject to a preemptive right of acquisition on the part of defendants Hitchner. Subordinate issues raised by means of counterclaim and crossclaims involve reformation of the preemptive agreement as well as damages and indemnification.

In 1943 plaintiff Blanche Noble Ross was known as Blanche Noble, wife of Ralph Noble. She acquired title by deed to a tract of approximately 29 acres, known as the Swing Tract. This land did not include the .61 acres contiguous to the 29 acres. It did include thereon a larger house which Mrs. Noble and her husband occupied and which was approximately 150 to perhaps 250 feet away from the smaller house.

Mr. Noble was ill. As a result of negotiations, an agreement of sale was entered into between Mrs. Noble, seller, and Benjamin Ponemon, one of the defendants, as buyer. The consideration was $25,250. No formal descriptions were included in the agreement, but it stated that the tract to be acquired thereunder by Ponemon was the “Noble property (formerly Swing property).” It specifically excepted “the small house with approximately V/2 acres; said exception having as its southerly boundary a line running from a linden tree at the edge of Main Street, Eairton, 335 feet westerly to a point at the Eairton Gut.” A land surveyor had been engaged to prepare the description for the 18^2-acre tract to be acquired by Ponemon.

Paragraph 10 of this agreement provided:

It is agreed by both parties that no building shall be erected on the excepted parcel within 60' of the aforementioned southerly boundary.
It is further agreed that the above mentioned buyer shall have first refusal in writing, if and when the portion retained by the seller is put up for sale by her/her heirs, executors, administrators or assigns. Said first refusal price shall be $10,000. * * *

Eor a clearer understanding, reference is made to Exhibit P-27. The land sold to Ponemon is designated. It included parcel A (two acres) on which the larger house is situate. Title to Parcel B (1}4 acres) remained in Mrs. Ross. Title to Parcel C (.61 acres) was obtained by her through the action to quiet title referred to later in this memorandum.

Closing under the agreement with Ponemon took place on June 15, 1957, at which time the sellers, as well as the buyers, were represented by counsel. Although the deed for the 18^-acre tract was executed and delivered, apparently it was agreed that Ponemons’ counsel, Erancis Stanger, would draw the instrument to effectuate the provisions of the agreement of sale granting the preemptive right. Mr. Stanger prepared the description with difficulty from some survey that was provided to him. After it had been prepared it was forwarded to his client Ponemon for review, and probably to Mrs. Noble’s then counsel Harry Adler, likewise for review. No subsequent agreement or discussion was shown to have taken place among the parties to change the terms of the agreement of sale.

However, the description as contained in the subsequently recorded instrument drawn by Mr. Stanger, and which was backdated to June 16, 1957, did not include the .61 acreage with the small house on it.

Thereafter Ponemons and defendants King entered into an agreement, dated September 15, 1958, for the sale of the same land which the Ponemons had acquired. Though the agreement between them made no reference to the preemptive agreement, after the execution of this agreement and prior to the settlement which took place on October 31, 1958, Ponemons’ right, title and interest in said preemptive agreement was assigned to the Kings.

In 1965 the Kings conveyed Parcel A to defendants Hitchner, and a similar agreement of the preemptive rights was likewise delivered.

In or about July 1958 Mrs. Noble brought an action to quiet the title to the .61 acres. A final judgment in her behalf was entered on October 30, 1959. It was duly recorded. None of defendants in the instant action were parties to this action.

After the sale to the Ponemons, Mrs. Ross and her then husband Ralph Noble moved into the smaller house and made certain improvements and repairs. She and her present husband now occupy that house.

In October 1957 Mrs. Noble’s attorney advised a title examiner that the Nobles “would have to get their title matter straightened out forthwith for the dwelling in which they reside in the village of Eairton.”

In June 1965 the Hitchners sent a letter by certified mail to Mrs. Ross, notifying her that they had acquired the King homestead and aslo the option which was first given to Ponemon “and now assigned by Kings to us, wherein the home that you reside in must first be submitted to us for purchase, if and whenever you desire to sell same at a price affixed therein.” Plaintiffs instituted this action on January 30, 1969.

Plaintiffs seek a judicial declaration that it was never intended by the agreement of March 14-, 1957 between Mrs. Ross and Mr. Ponemon that the right given to Ponemon should survive his conveyance of the land. They further contend that such right as was given never included, nor was intended to include, the .61-acre tract with the small house on it, and that this intention is confirmed by the description contained in the instrument drawn by Mr. Stanger.

The two instruments must be read together, and all of the circumstances surrounding the transactions must be considered, in order to determine the intention of the parties. The agreement of March 14, 1957 provides in the printed portion, near the end of it, that it should be binding upon the respective parties as well as their heirs, executors, and administrators. It had been drawn by a layman. The instrument drawn by Mr. Stanger made it very clear that it should be binding upon the heirs, executors, administrators and assigns.

I find that it was in fact the intention of the parties that it was to be binding upon the sellers, Mr. and Mrs. Noble, and also their heirs, executors and administrators even after the disposition of the land by Ponemons.

Mrs. Ross contends that she knew shortly after she acquired the entire tract from her grantor that the .61 acreage was not actually included in that conveyance, and that she did not own it. She argues that having been aware of that fact she could never have intended to include it in the preemptive agreement. The clear wording of the March 14 agreement of sale demonstrates otherwise. The explanation that I find for the description contained in the effectuating agreement prepared by Mr. Stanger is that all concerned at that time assumed that the small house was located on the Swing tract.

Plaintiffs further assert that it could never have been her intention to sell the small tract, together with the house on it, for only $10,000, considering that she expended large sums for improvements and repairs on the small house. But I am satisfied that it was never intended that she should sell merely 1 y2 acres of land for $10,000 when the average price per acre for the other land was, at that time, about $850.

I believe that if there had been an intention to subject only Parcel B to the preemptive agreement, the surveyor at the time would have been directed to prepare a description of that tract. This would have necessitated the preparation of two descriptions and not merely that which was conveyed to Ponemon.

Mrs. Ross was a business woman. I find that Parcels B and C were intended to have been included in the preemptive agreement.

However, plaintiffs further claim that (a) the agreement is unenforceable because it constituted an unreasonable restraint upon alienation, and (b) it is void as in violation of the rule against perpetuities.

I shall first address myself to the reasonableness of the restraint. Conditions or limitations in restraint of a function or affecting the enjoyment of an estate in fee are repugnant to the nature and qualities of fee estate. They must be strictly construed. Drachenberg v. Drachenberg, 142 N. J. Eq. 127, 130 (E. & A. 1947); 73 C. J. S. Property § 13, at 195 (1951).

Similarly in Brace v. Black, 51 N. J. Super. 572 (App. Div. 1958), it was stated that for such restraints to be upheld there must be some reasonable justification that gives a court a basis for declaring that the purposes of the restraint outweighed the policy of defeating unreasonable restraints on alienation.

In Brace v. Black, supra, the court considered the validity of an agreement whereby the title holder granted a right of first refusal to purchase certain premises for $6,500. The Appellate Division held that the fixed price amounted to an unreasonable restraint upon the alienation of property. Cited was the comment, Restatement, Property, § 413, at 2444:

When, by the terms of the restraint, the price at which the estate must be offered to the designated person is fixed or is to be a certain percentage of a third party’s offer, there is substantial curtailment of the alienability of the land. A fixed price is usually set sufficiently low, in the light of possible developments, to enable the designated person to reap the benefits of any increase in value. The use of the percentage form assures the designated person of definite profit without need to speculate on future possibilities. In either case, the owner of the estate will be deterred from attempting to sell his property because of the improbability that he will realize the full market value. This hindrance to alienation brings these provisions within the rules previously stated in Sections 406-411.

The principles are also well stated in 6 American Law of Property, § 26.66, at 508 (1952):

The effect of a preemption as a practical impediment to alienation hinges upon this matter of price. If the preemptive right requires that the property be offered at much less than its value at the time of nroposed sale, there is an obvious check upon alienation, since the owner will retain the property rather than sell it at a great sacrifice. Any preemption exercisable at a fixed price is likely to involve sacrifice to the person bound to offer it, since a fixed price is usually based upon the value of the property when the preemptive provision is executed. It might be held, therefore, that any preemption fixing a price without reference to future increase in value is void as a restraint upon alienation in substance. If the preemptioner must pay the offerer’s price, however, there is no material impediment to alienation.

Each case must be thoroughly examined in the light of all the circumstances to determine whether the objective sought to be accomplished by the restraint is worth the cost of interfering with the freedom of alienation.

If this property is in fact worth in excess of $40,000 today, as testified by plaintiffs’ expert, there is little likelihood of its sale. E'o persuasive facts have been shown to me that would justify my sustaining the validity of the agreement. See also Michalski v. Michalski, 50 N. J. Super. 454 (App. Div. 1958); Wrubel Realty Corp. v. Wrubel, 138 N. J. Eq. 466 (Ch. 1946); Krueger v. Frederick, 88 N. J. Eq. 258 (Ch. 1917). Accordingly I find the restraint to be unreasonable and thus invalid.

The ágreement is also- contrary to the rule against perpetuities. in 6 N. J. Practice (Clapp Wills and Administration, 3 ed.), § 622, at 149, 150 (1962), it is stated that a binding option to purchase property presents special problems, for the equitable interest created by the option does not rest with the giving of the option, but remains contingent upon an uncertain event, namely, the exercise of the option. Hence it is held that an option for the-purchase of land, where the option is specifically enforceable,, is invalid under the rule against perpetuities if it must or may be exercised after the expiration of the period prescribed by the rule. An option which continues over such an extended period may prevent the improvement of property, or, in any event, obstruct its saleability. Cf. Westfield Trust Co. v. Beekman, 97 N. J. Eq. 140, 149 (Ch. 1925).

It has been stated that a preemption of unlimited duration requiring an offer to the preemptioner for a specified sum of money is the most objectionable type of preemption and is void by the weight of authority. 6 American Law of Property, supra, § 26.67, at 510.

If a transaction is invalid by reason of its being in conflict with the rule against perpetuities, such transaction must fall. Litcher v. Trust Co. of N. J., 11 N. J. 64 (1953); In re Lattouf's Will, 87 N. J. Super. 137 (App. Div. 1965).

Accordingly I find that the preemption agreement is void by reason of its being in conflict with the rule against perpetuities.

Plaintiffs are not barred by laches or estoppel from asserting their claims to relief in this action. There has been no inequitable prejudice to any of the parties defendant who make this claim. Regardless of what Ponemon thought concerning whether or not the small tract in question was-included in the preemptive agreement, the fact remains that the agreement put on record, and which the subsequent purchasers must have seen, did not include the small tract. It seems almost inconceivable that any subsequent purchaser would have not caused a survey to be made to ascertain exactly what the description contained in the recorded instrument included. 'In addition to this, the Kings and Hitchners successively took only the right, title and interest that Ponemon obtained with respect to the preemptive agreement. There were no warranties or representations which give rise to a valid claim for damages. I am satisfied that they each purchased and each would have purchased without reference to and without any reliance upon the acquisition of any preemptive right.

I have considered all of the other contentions of the parties. I do not find that they are of sufficient consequence to require discussion.

Accordingly a judgment will be entered declaring that plaintiffs hold title to the premises in question, free and clear of the preemptive agreement. Fo costs.


text:
    GREATER NEW YORK MUTUAL INSURANCE COMPANY, PLAINTIFF, v. FRANK A. AMBROSIO, CONROSE CONSTRUCTION CORP., CARNELL CONSTRUCTION CORP., F. J. WILKES CO., INC. AND ALLEN ZANE, DEFENDANTS.
    Superior Court of New Jersey Chancery Division
    Decided March 25, 1970.

      Mr. Erwin G. Schnitzer for plaintiff.

      Mr. Frederick J. Johnson, Jr. for defendant Frank A. Ambrosio (Mr. Charles B. Klitzman, attorney).

      Mr. Leonard Rosenstein for defendants F. J. Wilkes Co., Inc. and Allen Zane (Messrs Feuerstein, Bachs & Maitlin, attorneys).

      Mr. Jack L. Cohen, attorney for the receiver in chapter XI proceeding under the Bankruptcy Act for Carnell Construction Corp., did not appear.
   Lane, J. S. C.

The complaint in this matter seeks a judgment rescinding a workmen’s compensation insurance policy written by plaintiff insuring defendant Conrose Construction Corp. (Conrose) and a declaratory judgment that plaintiff is not responsible under the policy for any workmen’s compensation award that may be recovered by defendant Frank A. Ambrosio (Ambrosio) against Conrose under a claim petition presently pending in the Division of Workmen’s Compensation. Ambrosio counterclaimed for a declaratory judgment that plaintiff was obligated for such workmen’s compensation benefits as the Division might determine to be due to him either under a policy issued to Conrose or under a policy of workmen’s compensation insurance issued by plaintiff to defendant Carnell Construction Corp. (Carnell) . The matter is before the court on final hearing.

Conrose was a subcontractor on a construction job in Asbury Park; Carnell was the general contractor. Workmen’s compensation insurance for Conrose and certain other subcontractors on the job was arranged for by the controller of Carnell, a Mr. Blackwell. Policy No. 35378 was issued by plaintiff to Conrose covering the period August 24, 1964 to August 24, 1965. The policy was originally written to cover'only the particular Asbury Park job. As a result of a request received from the broker, defendant F. J. Wilkes Co., Inc. (Wilkes), through its agent defendant Allen Zane (Zane), the company cancelled that policy effective July 30, 1965. The reason given for the request for cancellation was that Conrose had finished its work on the job. A proper notice of cancellation was sent to the insured and to the Compensation Eating Bureau. On August 30, 1965 Ambrosio, an employee of Conrose, sustained an accident alleged to have been work-connected, resulting in serious injuries. On September 9, 1965 plaintiff received a communication from Zane requesting the reinstatement of policy No. 35378 as of July 30, 1965 and a renewal as of the expiration date, August 24, 1965. In his communication to the company Zane stated that the request for cancellation had been in error and that there had been no known claims under the policy between July 30, 1965, the date of the cancellation, and September 9, 1965, the date of the request for reinstatement. Zane had received the request for the reinstatement from Blackwell. Blackwell told Zane that the request for cancellation had been made in error; that Conrose was actually still working on the job, and that there had been no known accidents or claims between the date of the cancellation and the request for reinstatement.

In accordance with the request the initial policy was reinstated and the renewal was issued. The renewal policy was subsequently cancelled January 8, 1966 for non-payment of premium.

Plaintiff had not only written a policy for Conrose but also had written a workmen’s compensation policy for Carneli which was in force at the time Ambrosio sustained his accident.

Ambrosio’s connection with Conrose and Carnell is not entirely clear. He testified that at the time of the accident he was employed by Conrose as foreman and “part supervisor” with authority to sign checks. He had been an officer of Conrose a few years before the date of the accident but did not remember if he was a stockholder in 1965. He was not at the time oí the accident an officer of Carnell but later became one. He had been instrumental in obtaining financing for Carnell. His testimony as to his exact status with Conrose and Carnell at the time of the accident was vague, which is understandable in light of the passage of time and the severity of his injuries sustained in the August 30, 1965 accident. Eollowing the accident he was in intensive care for two months. He did not appear to be a well man at the trial. It is clear to the court that Ambrosio was more than an employee of Conrose but his exact participation cannot be determined.

The contention of plaintiff is that it is entitled to rescission because at the time of the request for the reinstatement and renewal of the policy the insured knew that the accident had occurred and did not reveal such fact. There is no doubt that Blackwell, when he made the request for reinstatement, was fully aware of the accident and did not reveal the accident to Zane at that time. It is equally clear that had he revealed the accident, plaintiff would not have acceded to the request for reinstatement and renewal. There is, however, no proof that Ambrosio had anything to do with the request for the reinstatement and renewal. The request came nine days after his accident, at a time when he was in intensive care at the hospital.

In Mallock v. Hollis, 153 Kan. 227, 109 P. 2d 119 (Sup. Ct. Kan. 1941), dealt with a very similar situation. The court held that the policy was void. During the course of its opinion the court stated:

While the propriety of permitting the antedating of insurance policies may be debatable, the legality of the practice is well established, provided, of course, that good faith on both sides is present. Parties to the contract have a right to agree on the beginning as well as the ending of the term covered by the policy. We have found no authority, however, either textbook writer or decided case, where the validity of such a contract is not dependent upon an uncertain and unknown loss. There must be mutuality of risk. There must be no knowledge by either party, undisclosed to the other, at the time the contract is made which destroys the uncertainty of loss as far as he is concerned. This proposition will presently receive further attention.
It is not questioned that insurance policies, being contracts, are subject to the same essential requirements as pertain to contracts generally — meeting of the minds, mutuality, consideration, etc. In insurance contracts “a risk or contingency insured against” is an indispensable factor. Without it the very basis of an insurance contract is absent. 32 C. J. p. 1095. This contingency, or uncertain event, is in the nature of a condition precedent. “A breach of condition precedent renders the policy void at its inception, so that it never attaches.” 3 Cooley’s Briefs on Insurance, 2d Ed., p. 1918.
The distinction between a fraudulent concealment of a loss already suffered, in order to secure insurance coverage of such loss, and fraudulent representations as to other matters which might or might not have led the insurance carrier to refuse the risk, is apparent. If A applies for fire insurance upon a building and fraudulently represents that he has had no fire losses, the policy may be voidable and subject to cancellation by the insurer upon discovery that the insured had had losses under circumstances making the new risk undesirable. But if he applies for insurance knowing that the building has already been destroyed by fire, conceals the fact of the prior loss and secures a policy antedated to cover the time of the loss, the policy is void and no liability ever attaches. It is void because there is no uncertain event, no contingency or risk mutual in character which is the basic factor in insurance contracts. The principle is akin to the rule that “if no insurable interest exists, the contract is void.” 29 Am. Jur. p. 289. There are many cases where antedated fire insurance policies have been upheld where the property insured had been destroyed prior to the application, but the loss was unknown to the insured. The uncertainty was equally present in the minds of both parties. The premium was paid and the liability assumed for the agreed purpose of covering the uncertainty. This class of policy has been especially common in marine insurance providing protection “lost or not lost” of vessels which have previously sailed. But concealment of a known loss obviously destroys the very basis upon which such antedated policy rests. To put it another way: While insurance contracts are not technically wagering contracts, an applicant for insurance stakes his premium payment on the chance that there will be a loss. By the same token, the insurance carrier takes a chance—the heavy odds being represented by the face of the policy as against the' premium — that there will be no loss. But if the applicant knows his house has already burned down, he is taking no chance, and the policy is not merely voidable, but is void. The implied condition, requisite to the contract, is absent.” [109 P. 2d, at 123-124]

See also Commercial Standard Ins. Co. v. Farmers Alliance Mut. Ins. Co., 385 F. 2d 826 (10 Cir. 1967); Lima v. In dustrial Accident Commission, 1 Cal. App. 2d 43, 36 P. 2d 223 (Dist. Ct. of App. Cal. 1934); Annotation, “Antedating policy of insurance as affecting liability for loss that had already occurred,” 132 A. L. R. 1325 (1941).

In Continental Casualty Co. v. Lanzisero, 119 N. J. Eq. 166 (E. & A. 1935), the court held that an automobile liability insurer was entitled to rescind a policy obtained by fraudulent concealment of the fact that an accident had occurred before the application for the policy was made.

• There is no doubt that the reinstatement and the renewal of the workmen’s compensation policy to Conrose was obtained by fraud. The question remains, however, whether this court should grant equitable relief to plaintiff under the circumstances.

If Conrose, Ambrosio’s employer, had no workmen’s compensation insurance at the time of the accident, the general contractor, Carnell, would have been liable for any compensation which might be due to Ambrosio. N. J. S. A. 34:15-79. By virtue of the policy that had been issued to Carnell plaintiff would have been called upon to make compensation payments. The claim petition against Conrose was filed with the Division of Workmen’s Compensation on December 5, 1966. An amended petition was filed April 3, 1968 joining Carnell as a respondent. The insurance company takes the position that there is no liability as to Carnell because the amended claim petition was not filed within two years of the date of the accident, as required by N. J. S. A. 34:15-51. In this position plaintiff is probably correct.

None of the answering pleadings raised the issue of laches. It is not contained in the pretrial order. After the initial hearing in the matter the court felt that it would be a manifest denial of justice if the issue were not raised. Therefore, the court on its own motion amended defendants’ answers and the pretrial order to raise that issue, cf., Douglas v. Harris, 35 N. J. 270, 281 (1961), and afforded plaintiff an opportunity for a hearing on that issue.

The insurance company knew about the accident in October ,1965. At the time it received notice of the accident it must have received information as to the date of the accident. At that time it had sufficient knowledge so that it could have brought a suit for rescission. It did not do so, however, until the complaint in this matter was filed April 15, 1969. At the continued hearing no explanation was given for inaction by the company before it referred the file to its attorney in May 1967. When the attorney received the file he was instructed not to impose an answer because there was a question of coverage. Plaintiff and its attorney knew that they intended to raise a coverage question, yet did nothing concrete to alert Ambrosio of plaintiff’s position until it was too late for him to join the general contractor as a respondent in the workmen’s compensation action within the statutory period.

Conrose is not financially responsible. If plaintiff had brought suit to rescind the Conrose policy within two years of the date of the accident, or even intimated that it was going to do so, Ambrosio would have been alerted to file a claim petition joining Carnell as a respondent. Here there was unreasonable delay on the part of the insurance company, unexplained and unexcused, which has resulted in substantial prejudice to Ambrosio. Under such circumstances the request for equitable relief will be denied on the ground of laches on the part of plaintiff. Good v. Lackawanna Leather Co., 96 N. J. Super. 439, 459 (Ch. Div. 1967); 2 Pomeroy’s Equity Jurisprudence (5th ed. 1941), § 419d, at 177; 3 Id. § 965, at 862. Cf. Merchants Ind. Corp. v. Eggleston, 37 N. J. 114, 130-131 (1962); West Jersey Title, & Guaranty, Co. v. Industrial Trust Co., 27 N. J. 144, 153 (1958); Auciello v. Stauffer, 58 N. J. Super. 522, 530 (App. Div. 1959).

It has been said that in a court of equity the rule of laches is not applied in favor of the perpetrator of a fraud, Gallagher v. New England Mut. Life Ins. Co. of Boston, 19 N. J. 14, 23 (1955). However, Ambrosio, the prejudiced party, was not the perpetrator of the fraud; rather, the perpetrator was Blackwell.

There is another ground for holding that plaintiff must defend Conrose. After policy No. 35378 was issued to cover the one location in Asbury Park, the Compensation Rating Bureau required an endorsement eliminating the restriction of coverage because such restriction was void by reason of N. J. S. A. 34:15-87, which provides:

No policy of insurance against liability arising under this chapter shall contain any limitation of the liability of the insurer to an amount less than that payable by the. assured on account of his entire liability under this chapter, and no provision of such policy shall be construed to restrict the liability of the insurer to any stated business, plant, location, or employment carried on by an assured unless the business, plant, location, or employment excluded by such restriction shall be concurrently separately insured or exempted as provided for in this article.
No such policy of insurance or any indorsement thereon shall insure against any liability whatsoever other than the liability of the employer for compensation under this chapter and for damages imposed by law because of personal injuries, including death at any time resulting therefrom, sustained by his employees.
No action shall be maintained for the collection of premiums on any policy violating any provision of this article. Any policy issued contrary to the provisions of this section shall be construed as incorporating the provisions herein contained. No insurer shall, in action brought upon such policy, plead in defense of such action any provision of such policy which violates any provision of this section.

A second policy (No. WC 1629038295) was issued by plaintiff to Conrose specifically covering a job in Paterson. The term of that policy was from June 23, 1965 to June 23, 1966. As long as policy No. 35378 was in force with the endorsement eliminating the restriction to Asbury Park, policy No. WC 1629038295 did not contravene N. J. S. A. 34:15-87. As soon as policy No. 35378 was cancelled (July 30, 1965), the other policy (WC 1629038295), by virtue of the third paragraph of N. J. S. A. 34:15-87, had to be construed to cover all of Conrose’s activities in New Jersey regardless of the attempted restriction to the project in Paterson. See Raab v. American Casualty Co., 4 N. J. 303, 306 (1950).

There was an attempt by the plaintiff to prove that there was in force another workmen’s compensation insurance policy issued by Liberty Mutual Insurance Company in New York with an all-states endorsement. No credible evidence supported such contention.

There will be a declaratory judgment that Greater New York Mutual Insurance Company is under an obligation to defend the workmen’s compensation claim petition filed by Ambrosio to recover benefits as the result of his accident of August 30, 1965 and to pay any judgment that may be rendered against it. See N. J. S. A. 34:15-84. Of course, there is reserved to plaintiff any defenses that may be available under the Workmen’s Compensation Act, other than lack of coverage. Although the complaint named Wilkes and Zane as defendants, no relief is sought against them. There will be a dismissal. Ambrosio filed a crossclaim against Wilkes and Zane, but the crossclaim does not seek any relief against them. It will, therefore, be dismissed as to them. Costs will be taxed in favor of the defendants.


author: Barger, J. S. C.

text:
    THE STATE OF NEW JERSEY, v. ELLA HOPSON, DEFENDANT.
    Superior Court of New Jersey Law Division
    Decided February 26, 1970.

      Mr. Michael Mitzner, Assistant Prosecutor, for the State {Mr. Leo Kaplowitz, Union County Prosecutor).

      Mr. Jack Wysoker for defendant {Mr. Leonard I. Weinglass, attorney).
   Barger, J. S. C.

This is a motion by defendant to dismiss Ind. No. 353, Jan. Sess. 1968 Term. Defendant is charged with offenses in two counts. The first charges her with inciting, in public, an assault upon a police officer of the City of Linden in violation of N. J. S. A. 2A:148—10 (b), and the second charges an actual assault and battery upon a police officer in the City of Linden in violation of N. J. S. A. 2A:90-4(a).

For the purposes of the motion, the State’s factual contentions are accepted by defendant although the acts and conduct are denied by her in an affidavit.

About September 19, 1968, a demonstration by a substantial number of persons, concerning certain claimed grievances, occurred at the Linden High School, Linden, N. J. Defendant was present at that demonstration and engaged therein. The officer named in the indictment was detailed to duty at the school during the demonstration. During the course of the demonstration defendant’s son was placed under arrest by this officer. Thereupon it is alleged by the State that defendant uttered certain words inciting an assault upon the officer by some of those present. The words, among others, being of the general purport of, “Get the cop,” and “Free the' black boy.” Defendant advances three basic contentions on the motion: (1) That defendant’s conduct, even if proven, would not support a conviction, and such conviction would violate due process. (2) The statutes are vague and overbroad in their language and not drawn to meet legitmate governmental purposes. (3) The grand jury had no evidence before it and is therefore guilty of misconduct, and the statutes axe being unconstitutionally applied to this defendant because of her civil rights activities.

N. J. S. 2A:148-10 reads, in pertinent part, as follows:

“Any person who, in public or private, by speech, writing, printing or otherwise, advocates, encourages, justifies, praises or incites:
b. Assaults upon any of the armed forces of the United States, the national guard, or the police force of this or any other state or of any municipality; or”

The language in the section of the statute with which we are here concerned was construed in State v. Quinlan, 86 N. J. L. 120 (S. Ct. 1914), aff'd, 87 N. J. L. 333 (E. & A. 1914):

The first ground urged in the court below for quashing the indictment is not mentioned or argued here, and was apparently abandoned, and the proposition substituted for it and argued and urged before us is that the indictment is ineffective to charge a crime, because the statute under which it is framed violates the Constitution of this state, in that the statute is uncertain in describing the offense, and therefore void. The argument builded on this head is that, since the Legislature alone has the power to define what shall constitute a crime, it cannot delegate this power to a jury. It is claimed that the Legislature has practically delegated its power, in this respect by leaving to the jury to determine what is meant by “advocate, encourage, justify, praise, or incite,” etc.
This contention is palpably unsound. A plain reading of the statute makes it manifest that it is not open to the attack leveled against it. There is no organic law or rule of sound public policy that requires the Legislature to define the meaning of English words in common and daily use.
Moreover, we think the sense of the statute is clear.
It denounces, as a high misdemeanor, the act of any person who, in public or private, shall be speech, writing, printing, or by any other mode or means advocate, encourage, justify, praise, or incite the killing or injuring of any class or body of persons or of any individual. The Legislature has in express terms defined what shall constitute an offense under the statute. Counsel of plaintiff in error seem to have wholly misconceived its purport. We are unable to discern anything contained therein which leaves ir to a jury, as claimed by the plaintiff in error, to determine what is meant by “advocate,” “encourage,” or “incite.”
This statute, like every other legislative act, is subject to judicial interpretation. When the occasion arises it will become the province of the court to determine what constitutes in law an “incitement” or as the case may be, under the statute, and for the jury to determine the facts tending to establish a breach of the statute, under the law as defined by the court.
The fact that the statute groups together various means by which the end may be accomplished and makes any one of them an offense when done to attain the object denounced by rhe act does not render such statute uncertain and void. Such legislation has received the sanction of a practice extending back to time immemorial, and we need only refer to our crimes act in which there will be found numerous instances of legislation of this sort from the earliest period in the history of this state, down to the present time, and among which may be mentioned statutes relating to arson, burning, forgery, abortion, etc.

Section (a) of the same statute was the subject matter of an opinion in State v. Boyd, 86 N. J. L. 75 (S. Ct. 1914), aff’d, 87 N. J. L. 328 (E. & A. 1915), rev’d on other grounds, 87 N. J. L. 560 (E. & A. 1915). In Boyd one of the contentions advanced as to the unconstitutionality of the statute was that it violated the Fourteenth Amendment (due process of the law and equal protection of the laws), the point being that “inciting” to a crime is void as a matter of uncertainty. There the court pointed out that it could not understand how this argument had anything to do with the Amendment referred to, and this court fails to also understand this contention. Constitutional provisions are not designed to interfere with the reasonable exercise of the police power to enact and enforce laws reasonably required to protect such power and the welfare of the people. Adams Newark Theatre Co. v. Newark, 22 N. J. 472, 479-480 (1956), aff’d, 354 U. S. 931, 77 S. Ct. 1395, 1 L. Ed. 2d 1533 (1957), reh. den., 355 U. S. 851, 78 S. Ct. 8, 2 L. Ed. 2d 61 (1957). If acts denouncing incitement to crime are void, the legal theories and principles behind an accessory before the fact or aiding, abetting or encouraging crime under our statutes would fall and a large part of our criminal law would have to be erased from the books. State v. Boyd, supra, 86 N. J. L. pp. 78-79. The court in Boyd held that the statute did not violate the constitutional rights advanced as contended, including the constitutional right of freedom of speech. Boyd refers to Quinlan and adopts the language of Quinlan in pointing out that the right of freedom of speech is not an absolute right. At common law, incitement to commit a crime was a misdemeanor. State v. Boyd, supra, 86 N. J. L. p. 79. The offense made criminal is the incitement to commit an offense and not the commission of the criminal act itself.

As pointed out in Quinlan, ordinary and common everyday English language is used which can be properly interpreted and defined by the trial court. Whether this defendant understood the language or not is not the test. The test is whether the language is sufficiently clear, definite and certain to be understood by the average person of normal and healthy mind when the issue arose and is not a restriction on constitutional conduct being legally exercised. The Legislature has, in expressed terms, defined what shall constitute an offense under the statute. The words are in daily use. Quinlan held that the words were not uncertain and were not void. State v. Quinlan, supra, 86 N. J. L. p. 123. Many persons are prosecuted under criminal statutes containing equally general standards, and those standards are held to be constitutionally sufficient. Nash v. United States, 229 U. S. 373, 377, 33 S. Ct. 780, 57 L. Ed. 1232, 1235 (1913).

Defendant advanced the argument that the statute does not relate to the incitement of conduct upon an individual, but rather it is directed to such upon the police force as a group. It is true that penal statutes are strictly construed but not to the narrow and strict degree contended by defendant. It is obvious that the framers of the legislation had in mind breaches of the peace and the protection of human life and limb whether of an individual or group. It would be most unusual for a police force as a whole to be involved. The gravamen of the statutory offense lies in the incitement or encouragement of the commission of the offense even though, as pointed out above, there may not be an actual assault. The statute is not a new application of the law, but is declaratory of the common law and directed at certain prohibited conduct which is likely to result in the commission of a criminal offense on police authority. The language has to be read, “assaults upon any of the police force.” The court finds no merit in the argument that this applied solely to the group and not to the individuals thereof. Wright v. Vogt, 7 N. J. 1, 6-7 (1951).

The contentions of defendant seem to assume that constitutional and personal rights are absolute. This is not so, and there are many limitations for the protection of other individuals or the public. When the right harms such it may be restricted. Duratron Corp. v. Republic Stuyvesant Corp., et al, 95 N. J. Super. 527, 533 (App. Div. 1967), certif. den., 50 N. J. 404 (1967). The rights of free speech and freedom of the press are still subject to our laws of slander and libel. Under both the Federal and State Constitutions there is a right to assemble, but again, the right is to peaceably assemble and such right cannot be used for the purpose of creating a breach of peace or to subvert the government. N. J. Const. Art. I, para. 18; U. S. Const. Amend. I; State v. Butterworth, 104 N. J. L. 579, 581 (E. & A. 1928); Thomas v. Casey, 121 N. J. L. 185, 187 (S. Ct. 1938), aff’d, 123 N. J. L. 447 (E. & A. 1939).

That the State, in the reasonable exercise of its police power, may provide for punishment of those who abuse freedom of speech by utterances inimical to the public welfare, and tending to corrupt public morale, incite to crime, or disturb the pubic peace, is not open to question. State v. Klapprott, 127 N. J. L. 395, 400 (S. Ct. 1941).

The statutory provisions of N. J. S. A. 2A :90-4 were held to be not so vague and ambiguous as to render this statute unconstitutional in State v. Grant, 102 N. J. Super. 164, 168 (App. Div. 1968), certif. den., 53 N. J. 62 (1968).

At common iaw it was a misdemeanor for one to incite or to solicit another to commit a misdemeanor or a felony. Such was considered to be prejudicial to the welfare of the community. It goes without saying that to attempt to incite or actually commit an assault upon a police officer is prejudicial to the community and to the administration of law enforcement and criminal justice. State v. Blechman, 135 N. J. L. 99, 101 (S. Ct. 1946). The right to protest does not include a right to disregard statutes reasonably designed to protect the rights of all. State v. Smith, 46 N. J. 510, 521 (1966), cert. den., 385 U. S. 838, 87 S. Ct. 85, 17 L. Ed. 2d 71 (1966).

Defendant alleges that there was misconduct on the part of the grand jury, in that there was no evidence before it linking this defendant to any of the conduct complained of; and further, it is her opinion that the indictment resulted from her civil activities. There is no evidential basis for this argument because an eyewitness, being the officer named in the indictment, testified before the grand jury to the conduct of the defendant and to the language alleged. This is adequate evidence to support the indictment. There is no evidence to support the opinion of the defendant that the indictment was returned simply because of her activities in the cause of civil rights. Such activities are not a defense to criminal activity, if properly proven. Inasmuch as the argument is based solely on defendant’s belief or opinion, and there is no evidence of improper conduct on the part of the grand jury or any enforcement officer, the argument is totally without merit. State v. Smith, 102 N. J. Super. 325 (Law Div. 1968); State v. Price, 108 N. J. Super. 272 (Law Div. 1970).

Whether the words used actually constituted incitement will depend upon the atmosphere and circumstances disclosed by the evidence. This issue cannot be determined on this motion. It is factual in nature and it is common knowledge that certain words spoken in a certain atmosphere or under certain circumstances may be in jest while in and under others may support a criminal charge and conviction. The conduct and words have to be tested and weighed in the light of the circumstances involved. This can only be determined at trial.

The court is satisfied that the wording of the sections of the statutes with which we are here concerned is not indefinite, uncertain or overbroad and follows the general standards set forth in the cases cited by defendant for such statutory language. The statute is a general restatement of the offense as it existed at common law and which has been a part of the law for a very long period of time. The cases cited by defendant in her brief relate to accepted constitutional rights and standards and the general limitations thereof. The court is satisfied that this statute meets those standards and the accepted limitations of such rights. There appears to be no less drastic means available to protect the rights of the public and law enforcement. The statutes are aimed at preventing breaches of peace and assaults which have long been considered proper subjects for governmental regulation and control.

The court finds the statutes to contain reasonable constitutional limitations on the rights referred to and involved. The motion to dismiss the indictment is denied.