author: Carton, J. A. D.

text:
    FISHER-STEVENS, INC., APPELLANT-CROSS-RESPONDENT, v. DIRECTOR, DIVISION OF TAXATION, RESPONDENT-CROSS-APPELLANT. MERIT MAILERS, INC., APPELLANT-CROSS-RESPONDENT, v. DIRECTOR, DIVISION OF TAXATION, RESPONDENT-CROSS-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Argued November 6, 1972
    Decided December 11, 1972.

      Before. Judges Lewis, Carton and Mintz.

      Mr. Joseph H. Sharlitt, of the District of Columbia bar, admitted pro hac vice, argued the cause for appellants-cross-respondents (Messrs. Apruzzese & McDermott, attorneys).

      Mr. Harry Haushalter, Deputy Attorney General, argued the cause for respondent-cross-appellant (Mr. George F. Kugler, Jr., Attorney General of New Jersey, attorney; Mr. Stephen Skillman, Assistant Attorney General, of counsel; Messrs. Herbert K. Glickman and Harry Haushalter, Deputy Attorneys General, on the brief).
   The opinion of the court was delivered by

Carton, J. A. D.

This is an appeal from a judgment of the Division of Tax Appeals holding the New Jersey Sales and Use Tax, N. J. S. A. 54:32B-1 et seq., applicable to a portion of the appellants’ business, which involves activities commonly known as “direct mailing services.”

Such services include the maintenance of mailing lists of members of various occupations such as physicians, attorneys, teachers, etc., and institutions such as hospitals and schools. Upon direction of its customers, appellants Eisher-Stevens, Ine. and Merit Mailers, Inc. utilize these mailing lists to prepare mailing labels in order to send advertising material, supplied by the customers, to the individual persons on the mailing lists. In addition to keeping their mailing lists .current and preparing the mailing labels, appellants fold and insert into mailing envelopes the advertising material supplied by their customers. In accordance with postal regulations, they also sort the envelopes by geographic areas and bag and tie them before the envelopes are placed into the United States mail.

All of the direct mailing services performed by appellants which are involved in this case take place at New Jersey locations. At the hearing in the Division, Robert J. Atkins, president of Eisher-Stevens, estimated that approximately 45% of a typical billing charge is allocated to selecting a mailing list and printing and applying the mailing labels. Approximately 30% is devoted to folding and inserting the advertising material into envelopes. The remaining 25% pertains to the sorting, typing and bagging of the envelopes.

Of the volume of mail processed by Eisher-Stevens, an estimated total of 96% is for delivery to addresses outside of New Jersey. About 85% of its business is on order of customers outside the State of New Jersey.

Warren Grover of Merit Mailers described his organization’s business practices as substantially the same as those of Eisher-Stevens. Merit Mailers, however, sends only about 40% of its mailings out-of-state.

In 1970, the Sales and Use Tax Act was amended. A new section was added, applying the Sales and Use Tax to an additional service heretofore not taxed:

Sec. 3. * * * there shall be paid a tax of 5% upon:

# * * * * * *
(b) The receipts from every sale, except for resale, of the following services:
* * * * * * * *
(5) Advertising services except advertising services for use directly and primarily for publication in newspapers and magazines * * *. [N. J. S. A. 54:32B-3 (b) (5)]

The State Division of Taxation has maintained, since the passage of this amendment, that mailing services such as are performed by the appellants are subject to the cited portion of the act as “advertising services.” By a letter of September 11, 1971 it gave Eisher-Stevens notice that this interpretation was final.

Eisher-Stevens and five other direct mailing organizations filed petitions of appeal with the Division of Tax Appeals, which, after a hearing, approved the agency’s ruling except as to appellants’ “sort-tie-bag” services on mail to out-of-state addresses. These services were held not liable to the tax.

THE TAX STATUTE

The Division of Tax Appeals concluded that appellants’ activities were subject to the tax as “advertising services” under section 3(b)(5) of the statute and as “processing” under section 3(b)(1). Appellants argue that their activities are neither advertising services nor processing.

Direct mailing services were clearly intended by the Legislature to be included in the term “advertising services.” This is apparent from the legislative history of the amendment and the normal interpretation of the word “advertising.”

Courts may freely refer to legislative and contemporaneous construction for whatever aid they may furnish in ascertaining the true intent of legislation. N. J. Pharmaceutical Ass’n v. Furman, 33 N. J. 121, 130 (1960).

On April 27, 1970 an amendment was introduced in the Senate version of the bill revising the Sales and Use Tax Act which specifically excepted direct mailers from the term “advertising services”:

(5) Advertising services except advertising services for use directly and primarily for publication in newspapers and magazines, or when performed in connection with the addressing, inserting and mailing of direct mail advertising materials.

The failure of the Legislature to enact this version strongly indicates that direct mailing services were intended to be taxed, not, as the appellants would argue, that direct mailing is so clearly removed from advertising services that such an exception was considered unnecessary.

In support of their argument that “advertising services” does not apply to their operations, appellants also note the deletion in 1970 of former section 8(v) of the Sales and Use Tax Act:

Sales * * * of catalogs, sales price lists, point of purchase advertising, sales pamphlets or handbills, commonly known as commercial advertising, when produced upon special order of the purchaser.

They argue that the addition of “advertising services” in the same legislation was meant to replace exactly this list of formerly exempted services and not any more. This argument is frivolous. These exemptions apply only to “the tax on retail sales imposed under subsection (a) of section 3.” N. J. S. A. 54:32B-8. Section 3(a) applies to sales of tangible personal property, all of which, except for the enumerated categories, is taxable. Direct mailers are subject to the tax under section 3(b), which enumerates certain services to which the statute applies.

Websters Third New International Dictionary (Unabridged 1966) defines advertising as “the action of calling something (as a commodity for sale, a service offered or desired) to the attention of the public esp. by means of printed or broadcast paid announcements.” Under this definition appellants’ activities would qualify as advertising services. They are intimately involved in “calling something to the attention of the public,” whether it be a product for sale or civil defense regulations. The term “advertising services” should not be limited to the creative services provided by advertising agencies and consultants. Dissemination is as essential as creation in advertising. The direct mailers, not unsurprisingly, work closely with the advertising agencies. The president of Eisher-Stevens testified that 10 to 20% of his firm’s business was done on order of such agencies.

Although the point was not argued or briefed in the court below, it found direct mailing services to be taxable under section 3(b)(1) of the statute, which includes the “processing” of tangible personal property. This holding was superfluous since appellants’ business was held to be taxable because it involved “advertising services.”

The Director of the Division of Taxation, pursuant to statutory authorization (N. J. S. A. 54:32B-24(1)), has promulgated a regulation elaborating upon the meaning of the term “processing.” The regulation reads as follows:

Manufacturing or processing — means the performance of an operation or series of operations, the object of which is to place the items of tangible personal property in a form, composition or character different from that in which it was acquired. The change in form, composition or character must be a substantial change and it must result in a transformation of property into a different or substantially more usable product. [N. J. A. C. 18:24-25(b)(1)].

The item of personal property here is the brochure or flyer given by the advertiser to the direct mailing company. That item is then folded, placed in an envelope, addressed, sealed, sorted, bagged and mailed. This operation does not appear to represent a substantial change in form, composition, or character. Nor does it appear to transform the property into a different or substantially more usable product. Elyers and brochures do not have to be mailed; they can be handed out. The Division of Tax Appeals’ interpretation of “processing” is therefore of doubtful validity as an additional basis for application of the tax. We note that it is also apparently inconsistent with the agency’s informal determinations rendered prior to 1970 holding that “addressing services” were not subject to the tax.

TEE POSTAL POWER

Appellants next argue that because the Postal Rate Commission, when establishing postal rates, must take into account “the degree of preparation.of mail for delivery into the postal system performed by the mailer and its effect upon reducing costs to the Postal Service,” U. S. C. A. 39 § 3622(b)(6), the imposition of the state sales tax on their services constitutes a direct interference with an exclusively Federal Government function.

One inevitable effect of the imposition of the sales tax upon the appellants’ services will be to increase their cost to their customers. Along with a multitude of other economic factors, this may have an effect on the use of the U. S. mails for commercial purposes and thereby affect postal rates.

Where, however, the effect of state taxation on the cost of postal service is remote, the United States Supreme Court has held that the state tax is not invalid. In Alward v. Johnson, 282 U. S. 509, 51 S. Ct. 273, 75 L. Ed. 496 (1930), the court upheld a California tax on gross receipts of a trucking company despite the fact that the company carried mail under contract with the Federal Government.

In Oklahoma Tax Comm’n v. Texas Co., 336 U. S. 342, 69 S. Ct. 561, 93 L. Ed. 721 (1948), the court reviewed the problem of state taxation of business organizations involved with Federal Government activity generally. Citing Alward, it rejected a claim of immunity in the following language:

But, so far as concerns private persons claiming immunity for their ordinary business operations (even though in connection with governmental activities), no implied constitutional immunity can rest on the merely hypothetical interferences with governmental functions here asserted to sustain exemption, [at 365, 69 S. Ct. at 573]

Appellants are not instrumentalities of the Federal Government. They neither deliver the mail nor perform any service the post office would otherwise have to perform. Appellants’ services are not mandatory upon mail advertisers. Their customers could address, fold, sort-tie-bag and mail their own advertisements and, in fact, would escape the sales tax by doing so. Indeed, appellants’ relation to the Federal Government is more remote than the trucking company in the Alward case and a decline in the volume of their business would only hypothetically interfere with the postal service.

INTERSTATE COMMERCE

The court below concluded that appellants’ sort-tie-bag operations in compliance with postal service regulations for out-of-state mail were not taxable by the State because “the imposition of a use [sic] tax on their service is so directly connected to an act of interstate commerce, as to be burdensome.” On the other hand, the court below found their folding and inserting operations to be intrastate in nature and taxable. The appellants challenge this determination on the basis that all their operations should be tax exempt as interstate commerce; the state agency cross-appeals on the basis that, despite the involvement in interstate commerce, all appellants’ services should nevertheless be taxable.

Involvement in interstate commerce is not enough to relieve a business from its just share of the state tax burden. The United States Supreme Court, in a recent examination of the effect of state taxation on interstate commerce, said:

[i]t was not the purpose of the commerce clause to relieve those engaged in interstate commerce from their just share of state tax burden even though it increases the cost of doing the business. * * * Even interstate business must pay its way, * * * as is evidenced by numerous opinions of this Court. [General Motors Corp. v. Washington, 377 U. S. 436, 439, 84 S. Ct. 1564, 1567, 12 L. Ed. 2d 430 (1964)]

However, to avoid inhibition of interstate commerce the court has held invalid state taxes that expose the business to the possibility of multiple burdens, i. e., double taxation of the same income, property, etc. General Motors Corp. v. Washington, supra, at 440, 84 S. Ct. 1564.

Appellants’ activities here are not subject to multiple taxation. The record shows that their operations take place entirely within the borders of this State. No other state could justifiably tax the sale of their direct mailing services. Appellants contend to the contrary that states in which the mailed advertising material is received could impose a use tax on such flyers or brochures, but this argument misconceives the nature of the sale with their customers. The direct mailers are not selling a product which is transported across state lines and whose use can later be taxed; they are selling a service which is entirely performed within the State. The “service” does not go through the mails.

A case cited by the Division of Taxation appears particularly cogent here. In Federal Compress & Warehouse Co. v. McLean, 291 U. S. 17, 54 S. Ct. 267, 78 L. Ed. 622 (1934), the court affirmed the validity of a Mississippi tax levied on the operation of a cotton compress. This was an activity prerequisite to the shipping of the cotton through interstate commerce. The court, recognizing this factor, stated that:

Most articles, before their shipment in interstate commerce, have had work done upon them which adapts them to the needs of commerce and prepares them for safe and convenient transportation, but that fact has never been thought to immunize from local taxation either the articles themselves or those who have manufactured or otherwise prepared them for interstate transportation, [at 21, 54 S. Ct. at 269]

EQUAL PROTECTION

Finally, appellants argue that taxing direct mailing services but not “advertising services for use directly and primarily for publication in newspapers and magazines,” N. J. S. A. 54:32B-3(b) (5), or users of billboard space or broadcasting air time, is an unreasonable legislative classification and thereby contravenes the Fourteenth Amendment’s equal protection clause.

The State’s power to make a classification such as the one in question is undoubted. State legislatures, in matters of taxation or exemption therefrom, may make distinctions of degree having a rational basis, and when subjected to judicial scrutiny they must be presumed to rest on that basis if there is any conceivable state of facts which would support it. Carmichael v. Southern Coal and Coke Co., 301 U. S. 495, 57 S. Ct. 868, 81 L. Ed. 1245 (1936); Schwartz v. Essex County Board of Taxation, 129 N. J. L. 129, 132-133 (Sup. Ct. 1942), aff’d 130 N. J. L. 177 (E. & A. 1943). The fact that appellants compete with those furnishing advertising services in newspapers and magazines does not preclude the State from exempting the latter from the sales tax. Louis K. Liggett Co. v. Lee, 288 U. S. 517, 53 S. Ct. 481, 77 L. Ed. 929 (1934).

The' exemption to services provided for newspapers and magazines was clearly to favor those media. Newspapers and magazines perform a public service by informing the public on current events and analyzing those events in a manner not possible through other media. The Legislature is justified in not wishing to subject this service to the additional burdens of this tax.

In other jurisdictions where the issue of favoring newspapers and magazines for tax purposes has been questioned on equal protection grounds, the courts have consistently upheld the validity of such legislation. See Business Statistics Organization, Inc. v. Joseph, 299 N. Y. 443, 87 N. E. 2d 505 (Ct. App. 1949); Giragi v. Moore, 49 Ariz. 74, 64 P. 2d 819, 110 A. L. R. 320 (Sup. Ct. 1937), app. dism. 301 U. S. 670, 57 S. Ct. 946, 81 L. Ed. 1334 (1937); Long v. Poulos, 234 Ala. 149, 174 So. 230 (Sup. Ct. 1937); In re Assessment of Sales Tax Against Knapp, 185 Okl. 584, 95 P. 2d 92 (Sup. Ct. 1939).

Further support for the validity of a classification favoring newspapers and magazines over advertising can be found in the postal rate structure. Newspapers and magazines are sent as second-class mail under the most favorable rates. Most advertising flyers go third-class, which is less favorable. Such material is specifically excluded from second-class. 39 U. S. C. A. § 4354. The Supreme Court in Lewis Publishing Co. v. Morgan, 229 U. S. 288, 33 S. Ct. 867, 57 L. Ed. 1190 (1912), affirmed the constitutionality of this preference.

Appellants also contend that direct mailers will suffer tax burdens not imposed upon users of billboard space and radio and television air time. The Sales Tax Bureau, in a notice of revisions to the tax issued soon after the 1970 amendments, stated that the tax did not apply to such advertising space or air time. Appellants’ argument again misconceives the direct mailers’ role in the advertising scheme. The exemption for communication is equivalent to the one for transportation. Admittedly, billboard space and broadcasting time are not taxable under the Sales and Use Tax Act, but advertising services in connection with the two are. The actual transportation of advertising flyers is not taxable, but the appellants’ service in preparation for it is.

We hold that all sales of appellants’ direct mailing services performed in this State, including the sort-tie-bag services on mail to out-of-state addresses, are subject to the Sales and Use Tax. N. J. S. A. 54:32B-1 et seq.

The judgment of the Division of Tax Appeals is affirmed as modified.

      The Assembly Committee on Taxation held a public hearing on January 28, 1970 to consider the proposed amendments to the sales tax statute, at which John J. Owens, executive vice-president of Clark-O-Neill, Inc., a New Jersey direct mailing company, testified. Owens, who was accompanied by other representatives of the New Jersey direct mailing industry, including Robert Atkins of Fisher-Stevens, appeared in the capacity of principal spokesman for his industry. Owens’ testimony clearly indicates that it was his belief, and thus that of the industry which he was representing, that the direct mailing industry was providing an advertising service and would thereby be subject to the tax by the enactment of N. J. S. A. 54:32B-3(b) (5). Owens’ purpose in testifying before the committee was to point out the hardship the amendment would cause to his industry by pritting the New Jersey direct mailers at a competitive disadvantage in relation to the mailers of neighboring states. Of course, appellants’ previous activities in seeking to be specifically exempted from N. J. S. A. 54:32B-3(b) (5) do not preclude them from now arguing that they are not advertising services, but it does strongly indicate that the plain meaning of the term includes direct mailers.


source: Caselaw Access Project

license: Public Domain

text:
    DOROTHY ANSLINGER, ADMINISTRATRIX AD PROSEQUENDUM OF THE ESTATE OF ALFRED ANSLINGER, AND DOROTHY ANSLINGER, ADMINISTRATRIX OF THE ESTATE OF ALFRED ANSLINGER, PLAINTIFF-APPELLANT, v. MARTINSVILLE INN, INC., A NEW JERSEY CORPORATION; FRANK L. GRIER II, McLEAN TRUCKING COMPANY, A FOREIGN CORPORATION DOING BUSINESS IN NEW JERSEY, AND CHESAPEAKE & OHIO RAILROAD CO., A FOREIGN CORPORATION DOING BUSINESS IN NEW JERSEY AND t/a CABOOSE CLUB, DEFENDANTS-RESPONDENTS.
    Superior Court of New Jersey Appellate Division
    Argued October 24, 1972
    Decided December 11, 1972.

      Before Judges Lewis, Carton and Mintz.

      Mr. Richard J. Levinson argued the cause for appellant {Messrs. Levinson, Conover, Fink and Axelrod, attorneys; Mr. Andrew M. Rockman, of counsel).

      Mr. Herbert C. Klein argued the cause for respondent, Martinsville Inn, Inc. (Messrs. Krieger and Klein, attorneys; Messrs. Herbert C. Klein and William J. Pollinger, on the brief).

      Mr. Charles A. Delehey argued the cause for respondents, Prank Grier, II and McLean Trucking Company (Messrs. Lenox, Giordano, Devlin and Barlow, attorneys).

      Mr. Charles W. Hutchinson argued the cause for respondent, Chesapeake & Ohio Railroad Co. (Messrs. Lamb, Blake, Hutchinson & Dunne, attorneys).
   The opinion of the court was delivered by

Carton, J. A. D.

The administratix ad prosequendum of the estate of Alfred Anslinger appeals from a judgment of involuntary dismissal granted at the close of her case against the various defendants. Defendants are Martinsville Inn, which operates an establishment under that name at which decedent attended a dinner meeting of the Earitan Valley Traffic Club on the night he died; McLean Trucking Company, whose employees and guests occupied a table at that meeting; Grier, one of McLean’s salesmen, and Chesapeake & Ohio Eailroad Company, t/a Caboose Club.

Plaintiff’s proofs were to the following effect: Anslinger was killed on the night of October 9, 1969 when the automobile he was driving ran into the rear of a truck. Earlier that evening he had attended the dinner meeting at the Inn as a guest of McLean. Anslinger was traffic manager for Carter-Wallace, a concern which did a considerable business with McLean.

Anslinger arrived at the Inn about 6:30 p.m. and sat at the table reserved for McLean’s employees and their guests. In accordance with, its usual practice for affairs of this kind, the Inn served full bottles of liquor with setups at each of the tables and the guests helped themselves. Three bottles of liquor were purchased for the McLean table at which there were three McLean employees and seven guests.

There was an open bar from 6 to 7 p.m. Dinner was served shortly afterwards.

There was proof that Anslinger had three or four drinks at the table before 10 p.m. and, according to one witness, had had too much to drink by that time. There was proof indicating also that Anslinger had been table-hopping and had other drinks. At about 11 p.m. defendant Grier noticed that Anslinger appeared to be “tight.” By that Grier meant that Anslinger was rational, slurring his words, but not incoherently, although obviously he had been drinking.

Anslinger invited Grier to go to the “Caboose Club,” an informal association of railroad traffic representatives formed for the purpose of jointly entertaining business contacts. The club was meeting that night at the Red Bull Inn, some five miles away. Grier accepted the invitation because Anslinger was a good customer and because he felt somebody ought to stay with him.

Anslinger and Grier left the Martinsville Inn around 11:30 or midnight. In answer to interrogatories, the Martinsville Inn said that an employee at the door observed all the departing guests and saw “no outward observations of anyone being intoxicated.”

Anslinger backed into another car in the parking lot and Grier suggested he leave a note. Anslinger refused and pulled away. Grier followed him to the Red Bull.

There was more to drink at the Caboose Club, which met in a separate suite at the Red Bull. Anslinger continued to imbibe. James Mitchell, a sales representative of defendant Chesapeake & Ohio Railroad Co., described Anslinger’s condition there as “bombed.” Anslinger became belligerent at the gathering and said he was going home despite urgings that he not drive. A scuffle ensued over Anslinger’s keys and by the time he left the suite Anslinger had taken off his coat and shirt. The scuffle continued in the parking lot and Anslinger appeared to collapse in his car. Grier made another unsuccessful effort to convince Anslinger not to drive but could only get his consent to let Grier follow him home. Before they pulled out of the parking lot, Grier pulled alongside Anslinger, got out of his car and reached into Anslinger’s car to put the gearshift in park position. Ans-linger was in a stupor and did not respond to Grier’s suggestion they get a room.

Anslinger pulled out onto U. S. 22 and drove drunkeniy in the direction away from his home. Grier flashed his lights and attempted to get Anslinger to follow him onto an exit ramp but Anslinger continued down the highway and rammed into the roar of a truck around 2:20 a.m. Anslinger died as a result of the crash.

Plaintiff contends that the trial court erred in refusing to submit the ease to the jury as to each defendant listed above. Her theory of liability as to defendant Martinsville Inn is that the Inn became liable for damages because it served decedent alcoholic beverages after he became intoxicated.

State Eegulation No. 20 of the Alcoholic Beverage Control Commission prohibits a licensed liquor dealer, such as the Martinsville Inn, to “sell, serve or deliver or allow, permit or suffer the sale, service or delivery of any alcoholic beverage, directly or indirectly * * * to any person actually or apparently intoxicated, or allow, permit or suffer the consumption of any alcoholic beverage by any such person in or upon the licensed premises.” Eor purposes of determining civil liability this regulation may be taken to have the full force of law. Soronen v. Olde Milford Inn, Inc., 46 N. J. 582, 590 (1966). A violation thereof may constitute negligence by the tavern owner. Rappaport v. Nichols, 31 N. J. 188 (1959).

In Rappaport our Supreme Court held that a tavern owner was liable in damages for the injuries caused by an intoxicated minor who was illegally served liquor by the defendant tavern owner. Soronen followed and extended the Rappaport doctrine, holding that the defense of contributory negligence was not available to tavern owners who served minors or visibly intoxicated individuals.

The prerequisites for liability of tavern owners under these cases appear to be three-fold: (1) the patron must be intoxicated; (2) the tavern owner or its employee must know or should have known he was intoxicated and (3) the tavern owner must serve liquor to the intoxicated person.

Defendant Martinsville Inn did not serve drinks individually to the Raritan Traffic Club on the night of the accident, but, as is common with group affairs, served whole bottles of liquor with setups to each table. The language of Regulation 20 above quoted, however, appears broad enough to apply to such method of service. Serving whiskey by the bottle constitutes one method of allowing the consumption of liquor, and if by intoxicated persons would be a violation of the regulation. Certainly a licensee cannot absolve himself from all responsibility simply by adopting this method of service. This is so although this method of service may not permit the waiter the same opportunity for observing the customer’s condition as that of a bartender serving over the bar.

We are of the opinion that such a responsibility exists even if the regulations were not so broadly worded. Eor example, a licensee could not avoid responsibility by serving whole bottles on the tables and leaving the room unattended. Permitting consumption by an intoxicated person would, we think, be the equivalent of serving him. Plaintiff would not therefore be barred from establishing negligence on the part of the Inn.

However, the burden is cast upon plaintiff of satisfying the jury, not only that the decedent was intoxicated, but also that defendants knew or should have known from the circumstances that decedent was intoxicated when the service occurred. Soronen v. Olde Milford Inn, Inc., supra, 46 N. J. at 593. The trial judge, in granting the Inn’s motion for involuntary dismissal, ruled that plaintiff did not meet this burden.

[T]here is no testimony in this case from which a jury could reasonably infer that the Martinsville Inn * * * knew or should have known of Mr. Anslinger’s condition. * * * [T]here is not sufficient evidence for a jury of reasonable men and women to reach the result of knowledge or should have known, the test established in the Soronen case. * * *

We agree with the trial judge’s assessments of the proofs on this issue. Decedent was described as having had too much to drink, “tight,” or “feeling his oats.” However, there was no proof that his conduct was of a rowdy or boisterous nature while he was in the Inn, or that he acted in such a manner as to draw attention of the Inn’s employees to anything unusual in his condition. There, of course, was no proof that any employee actually knew decedent was intoxicated. On the other hand, the Inn affirmatively asserted in its response to plaintiff’s interrogatory that one of its employees stood at the door and observed all of the departing guests, none of whom exhibited any signs of intoxication. Significantly also, as Grier testified, Anslinger drove capably on the trip to the "Rod Bull—a journey of several miles over a dark and winding mountain road.

Accepting as true all evidence on plaintiff’s behalf and giving it the benefit of all favorable inferences as we are required to do, there was, in our opinion, insufficient evidence to sustain a judgment in plaintiff’s favor. The motion for involuntary dismissal was accordingly properly granted. R. 4:37-2; see Dolson v. Anastasia, 55 N. J. 2 (1969).

Plaintiff’s argument as to the liability of the remaining corporate defendants is that corporate businesses should be held to the same standard as licensed tavern owners with respect to liability for damages caused by a customer to whom they served alcoholic beverages. On this theory they argue that these defendants owed decedent a duty of reasonable care. The argument proceeds that the same reasons for imposing a special liability on liquor licensees applies to those who serve alcoholic beverages in the course of their business. The foundation underlying this theory is that both occupations are risk-creating and the cost of injury due to such risk can be widely spread through price mechanisms.

In the present case the meetings of the Raritan Traffic Club and the Caboose Club were only p-wasi-business in nature. Good fellowship appears to have been of importance, as well as the generation of future business. To hold business enterprises liable for the actions of drunken guests at their social affairs leads into extremely difficult questions of deciding what is business and what is social. Imposition of liability in such a situation would require not merely a considerable extension of the doctrine originated in Bappaport, but a departure from the theory which gave rise to the policy expressed therein. We are not persuaded that present social-economic conditions warrant this expanded concept of liability.

In any event, plaintiff would not be entitled to prevail under the circumstances revealed by the record in this case. It is clear that decedent’s own conduct bars any recovery against these defendants. There can be no dispute that decedent’s drunkenness led directly to his involvement in the fatal accident. Voluntary drunkenness ordinarily constitutes contributory negligence. We see no reason why that defense should not be applicable insofar as these defendants are concerned. See Bageard v. Consolidated Traction Co., 64 N. J. L. 316, 322 (E. & A. 1899); Tabor v. O’Grady, 59 N. J. Super. 330, 339 (App. Div. 1960). See Rappaport, supra, 81 N. J. 188 at 205.

The record reveals even less reason for holding McLean’s employee, Grier, liable. There is no substance to plaintiff’s arguments that his actions should render him responsible as a volunteer for decedent’s safety. Specifically, plaintiff seems to argue that Grier was negligent in permitting Ans-linger to drive his automobile.

The duties of a volunteer are described, in pertinent part, in Restatement, Torts 2d, § 314A at 118 (1965) :

* * * * * * * *
(4) One who is required by law to take or who voluntarily takes the custody of another under circumstances such as to deprive the oilier of his normal opportunities for protection is under a similar duty to the other.

Under this standard defendant Prank Grier does not qualify as a volunteer. The requisite “custody” was never present. Custody implies some greater degree of control by the volunteer and reliance upon that control by the person in custody. Por example, in the leading case on the duties of volunteers in this State, Barbarisi v. Caruso, 47 N. J. Super. 125 (App. Div. 1957), a grandmother was held negligent in looking after her seven-year-old grandchild. Other New Jersey cases relied upon by plaintiff have no bearing on the present situation. Even the case characterized by plaintiff as nearest to the one at hand, McDonough v. Buckeye S. S. Co., 103 F. Supp. 473 (N. D. Ohio 1951), aff’d 200 F. 2d 558 (6 Cir. 1952), showed a greater degree of control and reliance. There, a drunken sailor was being held by a security guard until a shipmate volunteered to escort him back. On the way the drunken sailor fell, the second sailor left, and the drunk rolled into the water and drowned.

Grier never assumed custody. We reject as unrealistic the suggestion that Grier should have physically overwhelmed the smaller decedent because by his expressions of concern he had assumed responsibility for the decedent’s safety. Expressions of concern do not make a volunteer. Defendant McLean correctly points out the undesirability of such a rule. If concerned persons were to be held liable for the actions of the object of their concern, they might well avoid even the mildest intervention. We do not believe it would serve the public interest thus to discourage members of the public from attempting to assist drunken drivers. In this case it appears that Grier did everything humanly possible to prevent decedent from operating his automobile.

Affirmed.


author: Per Curiam.

text:
    TOWNSHIP OF HANOVER, A MUNICIPAL CORPORATION OF THE STATE OF NEW JERSEY, ET AL., PLAINTIFFS-RESPONDENTS, v. THE TOWN OF MORRISTOWN, A MUNICIPAL CORPORATION OF THE STATE OF NEW JERSEY, ET AL., DEFENDANTS, AND THE NATIONAL BUSINESS AIRCRAFT ASSOCIATION, INC., A CORPORATION OF THE STATE OF NEW YORK, ET AL., APPLICANTS FOR INTERVENTION AS INTERVENOR-DEFENDANTS-APPELLANTS.
    Superior Court of New Jersey Appellate Division
    Argued December 5, 1972
    Decided December 19, 1972.

      Mr. Walter F. Waldau argued the cause for appellants (Messrs. Stryker, Tams & Dill, attorneys; Mr. Rexford L. Lyon, on the brief).

      Mr. Edward F. Broderick, Jr. argued the cause for defendants amicus curiae in support of appellants’ position (Messrs. Broderick & Grather, attorneys).

      Mr. Harry L. Sears argued the cause for respondents (Messrs. Young & Sears, attorneys).
    Before Judges Labrecque, Kolovsky and Matthews.
   Per Curiam.

The order denying appellants’ application for intervention is affirmed since we agree with the trial court, substantially for the reasons set forth in its opinion reported at 118 N. J. Super. 136 (Ch. Div. 1972), that the application for intervention was untimely.

The application for intervention was made not only after final judgment was entered following a lengthy trial, but also after the time to appeal from the judgment had expired. Intervention after final judgment, let alone after the time to appeal therefrom has expired, is unusual and not often granted. 3B Moore’s Federal Practice, ¶ 24.13 [1] at 526 (1969). “One seeking to intervene after final judgment must meet an especially heavy burden.” 59 Am. Jur. 2d, Parties, § 167 at 601 (1971).

While such intervention may be allowed “where it is the only way to protect the intervener’s rights,” Moore’s Federal Practice, supra, at 527, that is not the situation in this case.

If, as appellants contend, rights granted them by federal law relating to air travel are being illegally interfered with at the Morristown Airport, they can bring an independent action to enforce and protect those rights. There is no justification for authorizing, at this late date, relitigation of a case which has already been tried and decided and whose only effect, as against whatever rights appellants may have, would be by way of stare decisis rather than by way of res judicata or collateral estoppel.

Affirmed.


author: Consodine, J. S. C.

text:
    ROBERT A. TUCKER, PLAINTIFF, v. ELAINE B. TUCKER, DEFENDANT.
    Superior Court of New Jersey Chancery Division
    Decided December 11, 1972.

      Mr. Albert G. Besser for plaintiff (Messrs. Hannoch, Weisman, Stern and Besser, attorneys).

      Mr. Everett M. Scherer for defendant (Messrs. Riker, Danzig, Scherer and Brown attorneys).
   Consodine, J. S. C.

The parties were married in mid-1962. Plaintiff abandoned defendant and their two children nearly seven years later. Defendant sued plaintiff for statutory support and maintenance 11 months thereafter, seeking a total in excess of $66,000 per year. Judgment, after trial, was entered in her favor in June 1971. It awarded $18,250 tax free for her support and that of the children, plus carrying charges on the marital residence and miscellaneous other expenses. The judgment of $18,250 was subsequently increased by the Appellate Division to $21,050.

Plaintiff, in this action, sued Ms wife for divorce on the separation ground, N. J. S. A. 2A:34-2(d). Defendant counterclaimed on the desertion ground, N. J. S. A. 2A:34-2(b), and sought alimony, support and equitable division of the property acquired by plaintiff during the marriage, N. J. S. A. 2A:34—23.

Plaintiff is a corporate executive with sizeable assets yielding income separate from his earnings. His total gross income for the years 1962 through 1969 was $1,015,882, Of this total $326,056 was earned income. The balance came from gifts, from original or converted assets owned by Mm prior to the marriage, or from trust payments under the provisions of a trust set up by his deceased father. Additionally, he also owns non-income yielding assets.

During the period that the parties lived together their total living cost (capital expenditure and day-by-day expense) exceeded plaintiff’s earned income. His investments in that time were reinvestment of funds from property owned prior to marriage.

Plaintiff had been previously married. His former wife has remarried. Support of their children (plus other expenses incurred for them) is approximately $20,000 per year.

The proofs raise questions involving the amendatory legislation to the divorce, alimony and maintenance law of our State, L. 1971, c. 212, as amended by L. 1971, c. 217, effective September 13, 1971, N. J. S. A. 2A:34-1, §§ 3, 7, 8, 10, 20 and 23.

Both parties argue construction of the statutory language in N. J. S. A. 2A:34-23, supra, that the court may award an equitable distribution of property “acquired by them or either of them during the marriage” (emphasis added).

Plaintiff argues that the marriage ceased on the date of abandonment and that any division of his assets should be as of that date. Defendant contends that the date of the entry of judgment in the separate maintenance action should be the cut-off date for division. The language of the statute would seem to equate the date of division of marital assets with the date of divorce since then the marriage is formally and finally ended.

A search for the legislative history of the property distribution clause of N. J. S. A. 2A:34-23 is unrewarding. The Divorce Law Study Commission which was the original source of Assembly Bill 1100 (1971 Regular Session) did not mate any recommendations with respect to the distribution of property in the original draft of the legislation. Although the property question was alluded to in the public hearings before the Commission, the final report of the Commission specifically left the problem to further study by successor commissions. See Report of Divorce Law Study Commission at 97. The bill itself, which was introduced in the Assembly on May 14, 1970 and ultimately passed by that House with minor amendments on Eebruary 1, 1971, contained no mention of division of property acquired by the parties during marriage.

The language which ultimately became the last paragraph of N. J. S. A. 2A:34-23 was added by the Senate Judiciary Committee prior to passage of the bill by that body on March 25, 1971. (See second official copy reprint of Assembly Bill 1100, 1971 Regular Session). The Assembly, in concurring in the Senate amendments, made no change in the language of that section, nor were there any suggested amendments of that section by the Governor in his conditional veto message. The bill was reenacted in accordance with the Governor’s recommendations by the legislature, and was approved on June 14. 1971 as chapter 212 of the Laws of 1971.

Research of the legislation of other states leads to the conclusion that the pertinent portions of N. J. S. A. 2A :34-23 here involved were not grounded in any laws enacted in other jurisdictions but was rather the product of original draftsmanship by the Senate Judiciary Committee. Since that Committee kept no minutes and issued no report we have no guidance from it as to the construction of the language of this section.

That the language of the statute—“acquired * * * during the marriage”'—is ambiguous seems apparent, because of the contrary opinions of the parties in this litigation, a literal reading of the words and the doubt of the court, each of the four interpretations requiring a different conclusion.

The amendatory legislation set a three-month waiting period before a complaint could be filed in extreme cruelty N. J. S. A. 2A:34-2(c). A waiting period in the instant case would not be inappropriate to the legislative intent. Plaintiff might well have returned to defendant after the abandonment. He did not file suit in statutory separate maintenance seeking a judgment setting support and maintenance for defendant and the children. Defendant apparently hoped in vain for a return of her errant spouse, but finally 11 months thereafter, hope failing, filed a complaint for separate maintenance and support.

It seems that at this stage the die was cast and the marriage was dead as far as both parties were concerned.

The entire philosophy underscoring N. J. S. A. 2A:34-23 is based upon a partnership concept, i. e., even though one spouse holds title, the property is the fruit of the labors of both. The old law, denying to the wife a participation in property built up over the years in her husband’s name alone, while she stayed home as housewife or chatelaine, bore and attended their children, entertained, etc., and thus helped her husband amass such property, was regarded as inequitable.

Hence our courts declined to transfer property from one spouse to another in a divorce proceeding, taking the view that the statute with respect to alimony limited it to money payments, and not judicial awards of a gross sum. Parmly v. Parmly, 125 N. J. Eq. 545, 547 (E. & A. 1939), citing with approval Calame v. Calame, 25 N. J. Eq. 548 (E. & A. 1874).

But when the marriage has permanently fallen apart and the parties are not even living together, it cannot be said that the “partnership” is continuing or that the wife is still contributing to the husband’s income-producing abilities.

In re Osicka Estate, 1 Wash. App. 277, 461 P. 2d 585 (Ct. App. 1969), supports this practical approach for determining the parameters of marriage “partnership” property rights. There suit was brought by a wife against her husband’s estate for a division of his property. The parties had been separated for some j'-ears without court action between them. The court held that property acquired during permanent separation of the parties was the husband’s separate property and was not subject to division because the “community” (i. e., partnership) no longer existed. Washington is a community property state. See also MacKenzie v. Sellner, 58 Wash. 2d 101, 361 P. 2d 165 (Sup. Ct. 1961).

To take the date of divorce as the statute implies, would be to reduce the language to an absurdity. Hypothetically, should a spouse of days or weeks or months or a few years, whose husband separated from her in modest means and thereafter acquired a fair-sized fortune by his own efforts, share therein in a subsequent divorce action as of the date of divorce?

Uecessarily a court, in exercising its discretion to make an award to effectuate an equitable distribution of property acquired during the marriage, predicates such a judgment on many factors, not all of which occur in every case.

Painter v. Painter, 118 N. J. Super. 332, at 335 (Ch. Div. 1972) sets out from varied sources a compendium of determinative factors in equitable division of property acquired during marriage and also a compendium of exclusions of property from such division (at 336). See also Capozzoli v. Capozzoli, 121 N. J. Super. 285 (App. Div. 1972).

Sister states — more particularly, community property jurisdictions—apply strikingly similar criteria in delineating which properties are subject to equitable division by the court upon divorce. California excludes “all property owned by the husband before marriage, and that acquired afterwards by gift, bequest, devise, or descent, with the rents, issues, and profits thereof * * *." Cal. Civ. Code § 5108. See also Wash. Rev. Code, § 26.16.010; N. M. Stat. § 57-3-5; Nev. Rev. Stat., ch. 123.130; Idaho Code § 32-903; Ariz. Rev. Stat. § 25-213.

There is no question, on the testimony, that the living expenses of plaintiff and defendant exceeded the. plaintiff’s earnings between the date of marriage and the date of abandonment. The excess came from plaintiff’s capital assets or their income, both nondistributive. In this regard see Price v. Price, 217 Cal. App. 2d 1, 31 Cal. Rptr. 350 (D. Ct. App. 1963).

During the viable period of the marriage plaintiff and defendant became tenants by the entirety of the marital residence and of a farm property. In neither instance did defendant contribute towards the purchase or the furnishings. Her interests were gifts from plaintiff. Trotta v. Trotta, 103 N. J. Super. 295 (App. Div. 1968).

The marital home, with improvements made at the time of purchase, cost $173,000. The parties agree that its market value today is $130,000. The furnishings cost $60,000. There is a realty mortgage of $42,000.

The farm property is valued by the parties at $320,000, subject to a mortgage of $58,200. The furnishings costáis,000.

Defendant and the children live in the marital home. Plaintiff lives on the farm and there raises horses in a side-business of very substantial size.

Since the date of the separation plaintiff has paid amortization of mortgages on both properties. He is entitled to credit therefor in the adjustments to the date of final judgment herein. In the marital disenchantment of that period he would not have intended the payments as gifts; they were protective of his own investment and its possible loss by foreclosure. No credits will be allowed for tax or interest payments because plaintiff has had substantial benefit thereof on his income tax returns.

Both parties desire to have the marital residence transferred to defendant. Defendant also seeks the total net equity in the farm property.

On all of the facts it seems to me that this court should exercise its discretion to effectuate an equitable distribution of that part of the property acquired by them during the marriage and up to the date of the institution of the separate maintenance suit by (1) transferring title to the marital residence, free and clear of mortgage lien, to defendant; (2) by transferring title to the farm property to plaintiff, and (3) by directing that the congruent provisions of the final judgment of separate maintenance be incorporated in this judgment as decided herein so long as defendant (not re-married) and the two children occupy the residence, except that when each child reaches the age when certain trusts set up by plaintiff for their individual benefit (infra) yield monies in sufficient amount for the maintenance of each child, the maintenance set herein shall be reduced or eliminated.

Plaintiff’s other assets, with a single exception, grew out •of original (or converted) investments owned prior to the marriage.

The single exception involves the division of proceeds under the incentive compensation and pension plans of his employment. Under the former he has been the- recipient of certain units of stock and of cash credits, title to which would not vest in him for several years and which, even though vested in him, are not payable for about 20 years or on total disability.

Payments under the pension plan are similarly limited as to payment. There is no vesting of any interest in the pension plan at the present time.

Stock units and cash credits that vested prior to the date of marriage or subsequent to the filing of the separate maintenance action are not susceptible of equitable distribution. In re Osicka Estate and MacKenzie v. Sellner, supra. Those that vested between those two dates are properly subject to equitable distribution.

Neither Painter, nor any other New Jersey decision under N. J. S. A. 2A:34-23, has dealt with pension or incentive compensation plans. There is both statute and case law elsewhere among our sister states, in many instances the decisional law is applicable to consideration of both plans.

The California rule as to pension plans was set forth in Williamson v. Williamson, 203 Cal. App. 2d, 8, 11, 21 Cal. Rptr. 164, 167 D. Ct. App. 1962):

Pensions become community property, subject to división in a divorce, when and to the extent that the party is certain to receive some payment or recovery of funds. To the extent that payment is, at the time of the divorce, subject to conditions which may or may not occur, the pension is an expectancy, not subject to division as community property.

In Williamson the wife had appealed from the divorce judgment on grounds that she had not been awarded enough money and property. In particular, she contended that the husband’s interest in a fire and police pension fund was subject to division. The terms of the fund provided that the husband would receive certain benefits in the event he was retired for disability, or after 20 years service. It made no provision for the withdrawal of any funds prior to the occurrence of any one of those two contingencies. The court applied the above-quoted rule and held that the -husband’s interest in the pension fund was not subject to division.

See v. See, 64 Cal. 2d 778, 51 Cal. Rptr. 888, 415 P. 2d 776 (Sup. Ct. 1966), clearly illustrates that this same rule is applicable to profit-sharing trusts. While the court held that the husband’s interest in these trusts was subject to division, its holding was based upon a finding that the husband’s interests were “irrevocable,” i. e., subject to no contingencies.

In Texas the same rule is followed as in California. Angott v. Angott, 462 S. W. 2d 73 (Tex. Civ. App. 1970), is clearly illustrative of this point. The court based its holding of divisability upon a finding that defendant husband had a “vested” right to benefits at the time of divorce. While he had not' actually retired at that time, he was eligible to do so and to receive benefits, at his own discretion. See also, Taylor v. Taylor, 449 S. W. 2d 368 (Tex. Civ. App. 1969); Busby v. Busby, 439 S. W. 2d 687 (Tex. Civ. App. 1969), aff’d 457 S. W. 2d 551 (Tex. Sup. Ct. 1970); Webster v. Webster, 442 S. W. 2d 786 (Tex. Civ. App. 1969). Other states follow this same rule. See Edwards v. Edwards, 74 Wash. 2d 268, 444 P. 2d 703 (Sup. Ct. 1968); Morris v. Morris, 69 Wash. 2d 506, 419 P. 2d 129 (Sup. Ct. 1966); Le Clert v. Le Clert, 80 N. M. 235, 453 P. 2d 755 (Sup. Ct. 1969).

Analogous to other types of property, only those pension and profit-sharing rights which actually “vested” during marriage are subject to division. See Benson v. Los Angeles, 60 Cal. 2d 355, 33 Cal. Rptr. 257, 384 P. 2d 649 (Sup. Ct. 1963), where an ex-wife was denied a widow’s penson because the pension did not “vest” until the contingency upon which payment of it depended (death of the ex-husband), and the plaintiff was already divorced at the time death occurred. See also, Cheney v. City and County of San Francisco, 7 Cal. 2d 565, 61 P. 2d 754 (Sup. Ct. 1936).

Where a portion of those “vested” rights was earned before marriage, that portion is excluded from division. In Busby, supra, a divorce action where the wife claimed a portion of her husband’s Air Force disability retirement benefits, the husband had been in the Air Force for 20 years, and therefore his benefits were “vested.” However, he had been married to plaintiff during only a part of his 20 years of service. The court there evolved a formula to suit the facts.

Defendant should participate in the proceeds of the stock units and cash credits under the incentive compensation plan that vested between the date of the marriage and the date of filing the complaint in separate maintenance when those proceeds are made available to plaintiff, subject to income and any other taxes in her hands. That participation will be of the then value of the stock and cash credits that vested in the period of the marriage, as decided supra.

Defendant is not entitled to participation in any pension proceeds paid to plaintiff on age attainment or disability, since none of these is now vested.

Lastly, there is the question of alimony and support of the two children. Support and maintenance were set by the Appellate Division at $21,050 a year, undivided. Defendant now seeks to increase this amount by $10,000 a year.

There are various trusts by various trustors for the benefit of plaintiff’s children from both marriages. We are here concerned only with the two children of this marriage. Each of the two children has $1,306,000 in trusts for her. Three of the trusts created by plaintiff are charitable ten-year trusts which now throw off about $1,300 a year over and above the neceessary charitable contributions. This excess is paid to defendant for the support of the children.

In 1976, at the expiry of the first trust, $5,280 a year will become available for the benefit of the older child. A year later, on similar occurrence, $7,155.50 yearly may be used for the benefit of the younger child. In 1978 there will be available for the benefit of both children the further sum of $5,500 per year. Defendant is trustee under all three instruments.

Defendant testified that her experience over a 12-month period showed the excess of expenses over support and maintenance to be $1,130.94. Against this she would presently have a throw-off from the two charitable trusts in excess of that amount.

No reason has been offered to grant alimony and support in excess of the amount granted so recently for proper support and maintenance. Alimony will be in the amount of $14,000 a year. Support of the children will he at $3,525 each a j^ear. B. 4:79-9(a). These payments will be direct to defendant. Support will be reduced and finally extinguished as moneys become available from all the ten-year trusts. See supra.

Defendant also requests that a divorce (on the ground of desertion) be awarded to her only and that plaintiff (seeking divorce on the ground of separation) be denied a dual judgment. She premises this request on (1) the fact that plaintiff was the guilty party by virtue of the abandonment, and (2) the psychological lift such action would be to her ego.

N. J. S. A. 2A:34-2 sets up the causes of divorce. One of these is desertion; another is separation. N. J. S. A. 2A:34-7 in part states that if both parties make out grounds for divorce, a judgment may be granted to each. N. J. S. A. 2A:34-23 gives the court discretion (except where judgment is granted solely on the ground of separation) to consider the proofs in determining an amount of alimony that is fit, reasonable and just. It would seem that this would allow a court in its discretion to increase alimony because of misconduct by the husband. Desertion would not seem to be misconduct requiring an increase in alimony.

Plaintiff’s primary and corroborative proofs have satisfied the three conditions for a separation divorce—-residence in this State for a period of one year prior to the filing of the complaint; living separate and apart in different habitation(s) from defendant for at least 18 months, and that there is no reasonable prospect of reconciliation. There is no reason on that record why he should not be granted a divorce. The same is true of defendant’s cause of action in desertion.

Fault, under our statute, is not a basis for an increase in the equitable division of property acquired during the marriage; that is only true of alimony. N. J. S. A. 2A:34-23.

While there is authority to the effect that a court can consider the loss of self-confidence of a wife in the equitable distribution of property acquired during the marriage because of the divorce action against her, Carson v. Carson, 50 Hawaii 182, 436 P. 2d 7 (Sup. Ct. 1967), there is no authority for denying a dual divorce to the offending spouse because to do so would give the other spouse a psychological lift. I will not be the first in this court to unlock Pandora’s box.

Divorce to each party against the other, with judgment in other regards in accordance with this opinion.


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

text:
    STATE OF NEW JERSEY, BY THE COMMISSIONER OF TRANSPORTATION, PLAINTIFF, v. P. & C. REALTY CO., INC., ET AL., DEFENDANTS.
    Superior Court of New Jersey Law Division
    Argued October 13, 1972
    Decided December 4, 1972.
    As Amended January 8, 1973.

      Mr. George F. Kugler, Jr., Attorney General of New Jersey, for plaintiff (Mr. Robert J. Bossolt, Deputy Attorney General, appearing).

      Messrs. Brennan, Susser and Piper, for defendant P. & C. Eealty Co., Inc., (Mr. Herbert Susser appearing).
   Crane, A. J. S. C.

This is a condemnation matter in which the State has taken a parcel of property and a building owned by defendant in Paterson, New Jersey. The building was used as a clothing factory and contained sewing and pressing machinery suitable for such a purpose. Defendant has brought this motion requesting the court to instruct the condemnation commissioners to award damages by evaluating the premises as a functional unit, including the machinery.

It has been stipulated that the machinery is the kind usually used in clothing manufacture, that it is not unique or complex, is movable and has in fact been moved to another location. The State concedes for the purposes of this motion that the building and the machinery as used prior to the condemnation did constitute a functional unit but it contends it has an option to pay for the machinery or moving expenses and it has announced its election to pay for moving expenses.

Counsel agree that the facts in this case are almost identical to those in the matter of Housing Authority of Clementon v. Myers, 115 N. J. Super. 467, 480 (App. Div. 1971). In that case it was held that where a condemnee had removed machinery at his own expense from a building theretofore operated as a functional unit he was entitled to the value of the functional unit, including the machinery, or to the value of the land and building plus the expense of moving the machinery, at the option of the condemnor.

On behalf of the eondemnee it is now argued that the option available to the condemnor under the Myers case is no longer available in view of the adoption of the Eminent Domain Act of 1971, N. J. S. A. 20:3-1 et seq. Specifically, it is argued that the term “property,” as defined in N. J. S. A. 20:3-2(d), requires inclusion of the value of the machinery. In short, it is argued that the adoption of the statute has modified the rule of the Myers case in such a way as to deny the condemnor the option of paying for the value of the machinery or the cost of moving.

In order for the condemnee’s point of view to prevail, the Court would have to find that the machinery in question fits within the definition of property found in N. J. S. A. 20:3-2(d):

“Property” means land, or any interest in land, and (1) any building, structure or other improvement imbedded or affixed to land, and any article so affixed or attached to such building, structure or improvement as to be an essential and integral part thereof, (2) any article affixed or attached to such property in such manner that it cannot be removed without material injury to itself or to the property, (3) any article so designed, constructed, or specially adapted to the purpose for which such property is used that (a) it is an essential accessory or part of such property; (b) it is not capable of use elsewhere; and (c) would lose substantially all its value if removed from such property.

First of all, the fact that the machinery has been removed militates against defendant’s position. If the machinery was an “essential and integral part” it undoubtedly would not have been removed. The fact of its removal negates a conclusion that “it cannot be removed without material injury to itself or to the property.” And its nature and character as well as the fact of removal indicate it “is capable of use elsewhere,” and that it would not “lose substantially all its value if removed.” Consequently, the machinery has not been shown on the basis of the stipulation to come within the definition of property as set forth in N. J. S. A. 20:3-2(d).

The condemnee stresses the point that its plant operated as a “functional unit.” The phrase seems to have first appeared in our case law in the opinion of the Supreme Court in State v. Gallant, 42 N. J. 583, 590 (1904). The concept is expressed in the following language:

The value of a factory containing industrial equipment employed in the business for which the property is being used is ordinarily greater than that of an empty and idle building. Such equipment in place adds more to the value of the realty than its second-hand salvage value separated from the premises. An owner, who is under no duress, and where the building and machinery are a functional unit, would undoubtedly sell only at a price which would reflect that increased value. Where, therefore, a building and industrial machinery housed therein constitute a functional unit, and the difference between the value of the building with such articles and without them, is substantial, compensation for the taking should reflect that enhanced value. This, rather than the physical mode of annexation to the freehold is the critical test in eminent domain cases. See Harvey Textile Co. v. Hill, 135 Conn. 686, 67 A. 2d 851 (Sup. Ct. Err. 1949); Jackson v. State, supra [213 N. Y. 34, 106 N. E. 758]

Myers, supra, followed Gallant in making use of the phrase and applying the concept of the “functional unit.” The Legislature, however, in enacting N. J. S. A. 20:3-2(d) chose not to use the phrase. It chose instead other defining language which, as we have concluded above, does not fit the factual situation at hand.

The fact that the machinery has been removed is most significant, as we have pointed out above. Defendant seeks to have this fact ignored and requests an instruction to the condemnation commissioners requiring them to include the value of the machinery in their award. Such a result would unjustly enrich the landowner, for he would receive compensation for the machinery while still retaining possession of it. Such a result has not been permitted by any eases of which we are aware. Neither Harvey Textile Co. v. Hill, 135 Conn. 686, 67 A. 2d 851 (Sup. Ct. Err. 1949), nor Jackson v. State, 213 N. Y. 34, 106 N. E. 758, L. R. A. 1915D, 492 (Ct. App. 1914), upon which reliance was placed in Gallant, supra, contemplated such a result. In Harvey Textile the lower court was reversed because it failed to permit the inclusion of moving expenses in the total award. In Jackson v. State the trial court was specifically directed by the Court of Appeals to develop the facts concerning the removal of certain items of machinery at the new trial and make findings of fact thereon. In neither case was there any suggestion that the landowner should be compensated for the value of the machinery while at the same time being permitted to remove it. Removal of the machinery after the taking is certainly a circumstance which may properly be shown to the trier of the facts. Cf. N. J. Highway Authority v. Wood, 39 N. J. Super. 575, 582 (App. Div. 1956), certif. den. 21 N. J. 551 (1956).

It does not follow, of course, that defendant is precluded from recovering reasonable moving expenses as part of the compensation to be awarded by the commissioners.

The rule of the Myers ease has not been abrogated in any sense by the enactment of the Eminent Domain Act of 1973. The rationale of the case was not dependent solely upon statutory construction. Rather, it was founded upon notions of fundamental fairness in the light of “contemporary realities” in interpreting the constitutional phrase “just compensation” as it appears in N. J. Const. (1947), Art. 1, par. 20. “The Legislature cannot in any event constitutionally mandate the payment of less than 'just compensation’ as the courts determine that to be.” Myers, supra, 115 N. J. Super. at 479. Moreover, the term “compensation” has been defined by the statutes as meaning “the just compensation which the condemnor is required to pay and the condemnee is entitled to receive according to law.” N. J. S. A. 20:3-2(h). Undoubtedly the Legislature had in mind the thought that the phrase “according to law” would include judicial decisions as well as legislative enactments. Cf. Seatrain Lines v. Medina, 39 N. J. 222, 230 (1963). Moreover, the legislature left undisturbed the provisions of N. J. S. A. 27:7—58 et seq. which require the State Department of Transportation to pay to “a person displaced by a transportation project * * * actual reasonable expenses in moving * * * his business * * *." N. J. S. A. 27:7-60. See also N. J. S. A. 20:4-4.

In this case the State has indicated its willingness to pay the reasonable expense of moving the machinery. The condemnation commissioners will thus be instructed to make a finding wilh respect to such reasonable expenses and to include them in their award of compensation to be made pursuant to the provisions of N. J. S. A. 20:3-12(g).


author: Horn A. J. S. C.

text:
    HOWARD WALLACE, JR., PLAINTIFF, v. CITY OF BRIDGETON, A MUNICIPAL CORPORATION OF THE STATE OF NEW JERSEY, DEFENDANT.
    Superior Court of New Jersey Law Division
    Decided December 14, 1972.

      Mr. Michael Brooke Fisher for plaintiff (Messrs. Kleiner, Moore & Fisher, attorneys).

      Mr. Allan H. Harbert for defendant.
   Horn A. J. S. C.

This matter is before me on motion of defendant City of Bridgeton to dismiss plaintiff’s complaint in lieu of prerogative writs upon the ground that it does not state a claim against defendant upon which relief can be granted. R. 4:6-2(e). Parenthetically, it should be noted that another description of defendant’s motion is that the Superior Court lacks jurisdiction over the subject matter of plaintiff’s complaint. R. 4:6-2(a). Alternatively, the motion seeks summary judgment in favor of defendant city upon the ground there exists no genuine issue as to any material fact and defendant is entitled to judgment as a matter of law. R. 4:46-2; Judson v. Peoples Bank and Trust Co. of Westfield, 17 N. J. 67 (1954).

The facts relevant to this present motion can be stated quite simply. Plaintiff, a sergeant in the Bridgeton Police Department, was served on August 16, 1972 with charges against him for neglect of duty in that he had failed to answer a call. Notice that a departmental hearing would be conducted on September 16, 1972 was accompanied by the charges. The hearing, without stenographic record, was held on September 26, 1972, at which time the hearing examiner, Director of Police and Eire of the City of Bridgeton, sustained the charges and suspended plaintiff for five days.

The gravamen of plaintiff’s complaint is that he was denied a fair and impartial hearing.

Plaintiff seeks either a trial de novo before the Superior Court, or a reversal of the departmental decision and a remand for a new hearing to be stenographically recorded.

Defendant’s principal legal argument is that plaintiff is attempting to appeal a departmental hearing decision by way of a complaint in lieu of prerogative writs and that such procedure is prohibited under the laws of New Jersey. Specifically, defendant asserts that since the City of Bridge-ton is a civil service municipality, any review of a departmental hearing would be pursuant to provisions under Title 11 and not pursuant to N. J. S. A. 40A.14-150 (“Review of Disciplinary Convictions in Don-Civil Service Municipalities”) .

It further contends that since N. J. S. A. 11:2A—1 provides that

No employee of the State, or of any county, municipality or school district of the State shall be suspended, fined, or demoted more than 3 times in any 1 year, nor for more than 5 days at any 1 time, nor for a period of greater than 15 days in the aggregate in any 1 year or discharged without the same right of appeal to the [Civil Service] commission, * * *

the negative implication is presented that there exists no right of appeal where punishment is of a lesser degree than that specified in N. J. S. A. 11:2A-1.

Thus, the problem reduces itself to the jurisdictional question of whether the implication embodied in N. J. S. A. 11:2A-1 prohibits this court from reviewing the proceedings leading to plaintiff’s suspension.

Actions in lieu of prerogative writs are established pursuant to the New Jersey Constitution (1947), Art. VI, § V, par. 4, and implemented by R. 4:69. R. 4:69-1 provides that relief formerly available by prerogative writs and not available under R. 2:2-3 is to be sought by way of complaint in the Superior Court, Law Division. R. 4:69-5 provides that, unless it is manifest that the interest of justice requires otherwise, prerogative writ actions shall not be maintainable as long as there exists a right of review before an administrative agency.

N. J. S. A. 11:2A—1 seemingly precludes any right of administrative review on the part of plaintiff and consequently the exhaustion requirement of B. 4:69-5 is met. Ward v. Keenan, 3 N. J. 298 (1949).

Chief Justice Vanderbilt, in Ward v. Keenan, supra, explored the purposes in synthesizing the prerogative writs into one action mandated by the Constitution, concluding that such actions are a valuable means of safeguarding individual rights against abuse of discretion upon the part of public officials and governmental bodies.

The same liberal construction is espoused in In re Senior Appeals Examiners, 60 N. J. 356 (1972), where it is stated that “in New Jersey judicial review of administrative agency determinations has the support of a special constitutional provision (art. VI, sec. 5, para. 4) which largely immunizes it from legislative curbs.” (at p. 363)

Defendant city asserts that there exist good policy reasons for the enactment of certain “legislative curbs.” For this proposition defendant adopts the statement in the two-page opinion of Murley v. Raritan Tp., 117 N. J. L. 357 (Sup. Ct. 1936). There, suspensions of police officers were considered to be of such frequent occurrence and of such petty nature that they did not merit judicial review and a trial de novo.

However, Murley was discredited in Board of Police Com’rs. of Leonia v. Olson, 101 N. J. Super. 565 (App. Div. 1968). In this case a patrolman in a non-civil service municipality was given a reprimand and a two-day suspension for using “ ‘unnecessary force in handling of a prisoner/ ” Upon appeal pursuant to N. J. S. A. 40:47-10, now superseded by N. J. S. A. 40A:14-150, the County Court dismissed the appeal, holding that the right of review to the County Court existed only where removal was the penalty and not when it was suspension. The County Court placed major reliance upon Murley, supra,. In overruling the County Court by finding jurisdiction, the Appellate Division said, concerning Murley:

But Murley arose under a prior version of tlie act granting tenure to policemen. That version limited the right to review to eases in which the officer was “removed from office or employment.” Whatever the merits of the policy considerations referred to in the quotation from Murley, and the County Court obviously deemed them persausive, decision as to the policy of tenure statutes is for the Legislature, not for the courts. Cf. N. J. S. A. 11:2A-1. [101 N. J. at 568]

In West New York v. Bock, 38 N. J. 500, 516 (1962), the present philosophy of tenure for civil service employees, permitting dismissal only upon express charges and full proof thereof, is described as being "totally at variance with the original concept.”

Of course, if one restricts the holding of Board of Police Com'rs. of Leonia v. Olson, supra, to the principle that review for suspensions only exists in non-civil service municipalities (N. J. S. A. 40A:14-150), whereas it fails to exist in civil service jurisdictions unless the severity requirements of N. J. S. A. 11:2A-1 are shown, such a distinction, argued for by defendant, raises the question of denial of equal protection. Does there exist a rational classification to permit the claimed distinction? Are municipal employees in civil service cities so fairly treated as to deny them in certain cases the right to review of administrative action in the civil service structure itself'as well as in the courts ?

Defendant claims support from dictum in Wildwood v. Neiman, 44 N. J. Super. 209 (App. Div. 1957). In that opinion it is true that Judge Goldmann wrote that “N. J. S. A. 40:47-10 expressly excludes appeals where the municipality is operating under the provisions of Title 11, Subtitle 3 of the Revised Statutes (the Civil Service Act), * * *." (at p. 212). I construe this as meaning no appeal until the administrative remedies are exhausted.

Other courts have made certain that the case comes before the County Court from a city not operating under Title 11: Mt. Olive Tp. Comm. v. Vital, 11 N. J. Super. 608 (Cty. Ct. 1951); Inhabitants of Plainfield v. O’Driscoll, 14 N. J. Misc. 343 (Com. P. 1936), and Jamesburg v. Hubbs, 6 N. J. 578 (1951).

Upon reading N. J. S. A. 40:47—10 and its successor, N. J. S. A. 40A:14-150, it is evident that there exists no express exclusion of a civil service employee’s resort to the courts, but only an implied one. This distinction became overshadowed by the facts in Wildwood v. Neiman, supra, in that the city patrolman was dismissed from his job. Instead of seeking complete and plenary review under the Civil Service Act, e. g., N. J. S. A. 11:25—3 (summary review by verified petition to the Civil Service Commission), N. J. S. A. 11:25-4 (summary review by proceedings in lieu of prerogative writs), and N. J. S. A. 11:22-38 and 39 (application to Civil Service Commission for investigation of charges on which the order of removal was based), the patrolman by-passed these full and complete review remedies available and sought review in the County Court under N. J. S. A. 40:47-10. In essence, the patrolman had failed to exhaust those administrative remedies fully available under the act.

On the other hand, plaintiff in the present case has no administrative remedies to exhaust. Without resort to the court he may not contest the validity of his suspension, albeit for only five days.

Such denial was held to be improper in a ease very similar to the present proceeding. Perrapato v. Rose, 83 N. J. Super. 245 (App. Div. 1964). In that case, plaintiff chief of police was suspended for five days by the mayor on the ground that an employee of a public utility was working at the chief’s house during regular hours. After submitting a letter to the mayor stating that he was unaware of the worker’s presence, the chief was notified by the mayor that he was suspended. Uo formal charges were served on plaintiff and he was not afforded a hearing.

Plaintiff brought an action in lieu of prerogrative writs and. the trial court granted his motion for summary judgment on the ground the suspension violated N. J. S. A. 40:47-6 (now 40A:14-147, and the statute under which plaintiff Wallace is now seeking relief). Basically the statute provides the procedural mechanism for the hearing of charges. As an aside, it is interesting to note that the third paragraph of N. J. S. A. 40:47—6, expressing the intent of the statute as being to give each person against whom charges are preferred a fair trial, was deleted in the adoption of N. J. S. A. 40A:14-147.

Defendant in Perrapato, supra, asserted that N. J. S. A. 40:47—6 was inapplicable because the town had adopted the Civil Service Act and the mayor had based his decision upon Civil Service Rule 58, implemented by N. J. S. A. 11:2A-1, the rule allegedly prohibiting review under certain situations.

Thus, the issue in Perrapato was framed:

The primary question before us, then, is whether N. J. S. A. 11:2A-1, which by negative implication denies a civil service employee the right to secure review before the Civil Service Commission of the brief suspensions mentioned in the statute, precludes such an employee who is a member of the police department in a municipality which has adopted the Civil Service Act from seeking judicial relief from a suspension which allegedly violates N. J. S. A. 40:47-6. We hold it does not. [83 N. J. Super. at 248-249]

Reasoning that the adoption oi the Civil Service Act did not completely supersede the second act (N. J. S. A. 40:47-6), the court held the two must be read in pari materia. Construing N. J. S. A. 11:2A—1 narrowly, the court hold it did not purport to deprive the employee of judicial relief, but at most a right of review before the Civil Service Commission.

And, further the court stated:

*' * * We cannot impute to the Legislature an intent to deprive policemen of the right to seek judicial relief from suspensions which allegedly violate N. J. S. A. 40:47-6, merely because N. J. S. A. 11:2A-1 purports, and then only by implication, to deny civil service employees (including police officers) review by the Civil Service Commission where the suspension is of the limited character specified. [Ibid. at 249]

A distinction between Perrapato, supra, and the present case is the fact that in the latter plaintiff Wallace received a hearing on the merits, whereas in the former no notice or opportunity to be heard was afforded. However, plaintiff Wallace is still alleging that he was denied a fair and impartial hearing within the meaning of N. J. S. A. 40A:14-147. In some cases it may be a very small step from no hearing at all to one that is unfair and partial. Who will decide ?

Akridge v. Barres, 118 N. J. Super. 557 (Ch. Div. 1972), also supports plaintiff’s position. There, plaintiff was permitted to seek injunctive relief in the Chancery Division, although the court said the complaint could have been brought in the Law Division as a proceeding in lieu of prerogative writs. Factually, Abridge involved a patrolman contesting the imposition of a five-day fine for failure to abide by a special order of the Chief of Police of Newark (Civil Service Act applying) pertaining to the regulation of beards and hairstyles. The court rejected defendant’s argument that plaintiff had failed to exhaust his administrative remedies, on the ground that plaintiff was precluded from seeking administrative relief by reason of N. J. S. A. 11:2A-1.

Although defendant avers that a holding contrary to its views will swamp the courts with similar actions, and in any event the penalty imposed is minor, I must disagree. I believe that up to 15 days a year suspension cannot be considered as negligible, especially when it undoubtedly will also affect promotions and other benefits. We may not weigh injustice against the work load with which the courts must contend. The scales of justice are unsuitable for such balancing.

Accordingly, defendant’s motion is denied.


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

text:
    HENRY SZPERA, a/k/a HENRY SZPARA, PETITIONER-RESPONDENT, v. MOHICAN REFINING CORP., RESPONDENT-APPELLANT. ELEANOR SZPARA, PETITIONER-RESPONDENT, v. MOHICAN REFINING CORP., RESPONDENT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Argued October 31, 1972
    Decided December 20, 1972.

      Before Judges Labrecque, Kolovsky and Matthews.

      Mr. Gerald W. Conway argued the cause for appellant (Messrs. Schreiber, Conway, Reisman & Michals, attorneys).

      Mr. Thomas E. Weinstock argued the cause for respondent (Messrs. Bendit, Weinstock & Sharbaugh, attorneys).
   The opinion of the court was delivered by

Labrecque, P. J. A. D.

In August 1968 Henry Szpera filed a petition with the Division of Workmen’s Compensation for review and modification of a judgment which had been entered in his favor on June 12, 1944. On September 8, 1969, while that proceeding was pending, Szpera died and, thereafter, his widow, Eleanor, filed a dependency petition for death benefits. The petitions were consolidated for trial and awards made in the Division for both revision and lifetime benefits on the petition filed by Szpera, and dependency benefits on the petition filed by his widow. The employer, Mohican, appealed to the County Court which affirmed both judgments. Mohican’s appeal to this court challenges only the refusal of the Division and the County Court to give it a credit, pursuant to N. J. S. A. 34:15-40, against the award made in response to Szpera’s petition for modification of the 1944 judgment, for the amount of a third party recovery in the sum of $18,500 which Szpera obtained during his lifetime as a result of an automobile accident in which he sustained injury to his right leg.

On January 21, 1942 Szpera sustained work connected thermal burns to various parts of his body, including his right leg. A claim petition was filed and jrzdgment was entered in his favor on June 12, 1944 for total permanent disability benefits amounting to 400 weeks of compensation. Sometime thereafter Szpera became sufficiently rehabilitated to be able to work as a self-employed welder and at the expiration of the 400 week period his benefits were reduced to the statutory minimum of $7.50 per week, which Mohican’s insurance carrier continued to pay him during his lifetime. In his deposition, which was received in evidence at trial, Szpera testified that although he had suffered burns to 35 to 40% of his body in the 1942 accident, the injury to his right leg was the most serious. After his initial hospitalization and treatment were completed (in 1943 or 1944) he was not treated by any doctor until February 1966. During this 22 year period, however, his right leg never healed but he continued to suffer periodic breakdowns of the scar tissue involving swelling and ulceration of the leg. During this period he treated his leg himself with ointment and bandages. This condition continued until February 8, 1966, when his truck was struck and jolted by another vehicle as he was attempting to enter it. He fell to the ground, scraping his right leg, including that portion which had been injured in the 1942 accident, in the process.

Following the 1966 accident the condition of decedent’s leg worsened, and the swelling and ulceration which developed caused him to seek medical aid. On April 10, 1966 he was hospitalized and underwent surgery to the right leg. In December 1966, upon the surgical excision of an ulcer and the insertion of a skin graft, a laboratory examination disclosed the presence of cancer cells. Decedent’s condition was diagnosed as a Marjolin ulcer, a cancerous growth (epidermoid carcinoma) known to develop in the scars of burned areas in the skin after chronic irritation or breakdowns. The cancer continued to spread, notwithstanding further surgery on April 29, 1967, May 17, 1967 and in March, 1969. He died six months later.

At the trial in the Division, Dr. Meijer, who performed the 1966 operations, testified that there was causal relationship between the development of the Marjolin ulcer and the original 1942 burns. He was of the belief that the Marjolin ulcer in all probability was already present in its early stages at the time of the accident, and while he could not exclude the 1966 accident from plajung some part in the acceleration or exacerbation of what he felt was a cancerous condition, he was of the opinion that even without the 1966 accident the cancer would have developed— probably one or two or three years later.- In his opinion, if decedent had not developed the old burn scars from his 1942 injuries, cancer would not have developed from the 1966 accident.

Dr. Hudoclc, a cancer specialist who operated on decedent in April and May 1967, was of the opinion that without the existence of the original burns the cancer would never have developed. While he could not specifically state that the cancer existed prior to February 1966, he believed that it existed to some degree and that the trauma suffered in the accident aggravated and exacerbated it.

Dr. Carter, who performed extensive surgery on decedent in 1969, testified that there was direct causal relationship between the 1942 injury and the cancer, and that the repeated breakdowns in the burned area were “infinitely more significant” in causing the condition than was the 1966 accident. He opined that the 1966 accident played a “very secondary and irrelevant part” in the development of the skin cancer.

Respondent’s expert, Dr. Lewis, testified, in response to a hypothetical question, that the cancer was caused by a combination of the earlier burn injuries and the trauma suffered in the 1966 accident. In his view it was improbable that the cancer existed prior to February 1966, although he conceded that decedent was more prone to the development of malignancy at that time because of his underlying burns.

The judge of the County Court found (as did the judge of Compensation) that Szpera’s 1942 burns were the cause of the development of the cancerous condition in 1966. He did not entirely exclude the 1966 accident but found that it was, at most, “really a superimposed accident, and, of itself, questionable as to the degree it effected [sic] the preexisting condition.” (Emphasis added.) He agreed with the Division’s finding which held Mohican responsible for 95% of the cost of the extensive medical and hospital treatment which followed the 1966 accident. He found that decedent’s action against the party allegedly responsible for the 1966 accident had resulted in a recovery of $18,500 but that Mohican was not entitled to a credit for any part of that sum.

As noted, Mohican challenges only the denial of its asserted right to reimbursement pursuant to N. J. S. A. 34:15-40. The pertinent part of that statute provides as follows:

Where a third person is liable to the employee or his dependents for an injury * * the existence of a right of compensation from the employer or insurance carrier under this statute shall not operate as a bar to the action of the employee * * % nor be regarded as establishing a measure of damage therein. In the event that the employee or his dependents shall recover and be paid from the said third person or his insurance carrier, any sum in release or in judgment on aceount of his or its liability to the injured employee or his dependents, the liability of the employer under this statute thereupon shall be only such as is hereinafter in this section provided. (Emphasis added.)
* * *
(b) If the sum recovered by the employee or his dependents from the third person or his insurance carrier is equivalent to or greater than the liability of the employer or his insurance carrier under this statute, the employer or his insurance carrier shall be released from such liability and shall be entitled to be reimbursed, as hereinafter provided, for the medical expenses incurred and compensation payments theretofore paid to the injured employee or his dependents less employee’s expenses of suit and attorney’s fee as hereinafter defined. (Emphasis added.)

The judge of the County Court concluded that Mohican was entitled to credit under the statute “only where a successful action results in a third party recovery or a third party settlement for the same compensable injury.” (Emphasis added.) He noted that there was no language in the statute which implied entitlement for any injury which might he proximately related, aggravated, or superimposed on the compensable injury.

In holding that the statute permitted credit only where the third party recovery or settlement was for the same compensable injury the judge of the County Court appears to have relied principally upon Schmidt v. Revolvator Company, 46 N. J. Super. 232 (Cty. Ct. 1957). In that case, however, reimbursement was sought out of monies received in settlement of a suit for damages arising out of a malpractice claim against a physician for his negligent treatment of a compensable injury, and the recovery for medical malpractice was for an injury subsequent to and independent of the injury for which compensation was awarded. See Bello v. Comm’r of Dept. of Labor and Industry, 56 N. J. 41, 47 (1970).

Here the 1966 injury to decedent involved the same leg injured in the 1942 accident, and the symptoms were generally in the same area and of the same character. Actually, while the County Court Judge appears to have been unable to arrive at a determination as to the extent to which decedent’s previous condition was aggravated in 1966, so far as the record before us reveals, the only injuries for which the settlement of $18,500 was made were to the right leg— in the form of hematoma, swelling, ulceration and precipitation, aggravation and exacerbation of cancer. He himself testified he suffered no other injuries “that amounted to anything outside of a shakeup.”

While neither side has cited a case in which our courts have dealt directly With the issue presented, we believe that the rationale expressed by our Supreme Court in the cited case of Bello v. Comm’r of Dept. of Labor and Industry, supra, is applicable and controlling. In that case the injured workman petitioned for workmen’s compensation benefits for disability caused by toxic encepholopathy, resulting from his work connected exposure to deleterious gases. Prior to his employment he had been under some disability by reason of a number of non-eompensable preexisting pathological conditions, including a respiratory one and some cardiovascular disability. At the trial he was found to be totally and permanently disabled, the court finding that 25% of his disability was attributable to his preexisting condition and 75% to his work connected condition. The issue before the court was whether the Two Per Cent Fund (Fund) (N. J. S. A. 34:15-95.1) was entitled to credit out of a third party recovery of $30,000, to the extent of the benefits allowed Bello, for 25% of his disability, from the Pund. It was there urged, in effect, that if there could have been no recovery in the third party suit for the injuries for which the Pund — as distinguished from the employer — was being held liable, the Pund was not entitled to reimbursement for such injuries. The court, after discussing Schmidt v. Revolvaior and a number of other apparently similar holdings, held:

In none of these eases was the holding of the court bottomed up-on ihe thesis that an employer’s right to reimbursement was limited to the extent that the injury or damage for which he is liable under the Compensation Act, is identical with the injury or damage for which a third-party tort-feasor is liable to the employee. To the contrary, reimbursement for compensation payments has been continuously allowed by the Department of Labor and Industry out of the entire third-party judgment or settlement without such a limitation. This construction of the statute by the department is entitled to great weight, (cites omitted) (at 48)

And further:

The prevailing rule in the United States “refuses to place an employee’s third-party recovery outside the reach of the employer’s lien on the ground that some or all of it was accounted for by damages for pain and suffering.” (2 Larson, Workmen’s Compensation Law § 74.35 (1969). See Bumbarger v. Bumbarger, 190 Pa. Super. 571, 155 A. 2d 216 (Sup. Ct. Pa. 1959).
Therefore it must be concluded that employer and insurer reimbursement and credit under N. J. S. A. 34:15-40 is not limited to the compensable items for which there was also a third-party recovery. It is based on the total amount of the third-party recovery regardless of the component elements. See United States v. Hayes, 254 F. Supp. 849 (W. D. Ky. 1966); Cole v. Morris, 409 S. W. 2d 668 (Mo. 1966). The Fund should be similarly entitled to reimbursement and credit, (at 50 and 51)

We hold that Mohican should have been allowed reimbursement, and so much of the judgment below as denies reimbursement must be set aside. We are convinced that it was the legislative intention in enacting N. J. S. A. 34:15-40 that payments by way of benefits under the Workmen’s Compensation Act be subject to credit or reimbursement in the event of a recovery by the employee against a third-party tortfeasor based upon the total amount thereof. This is so even though the third-party recovery may include items, such as pain and suffering, which are not compensable under the Workmen’s Compensation Act. Where, as here, the recovery against a third party involves a claim for aggravation of a previous, compensable condition, the employer paying compensation for the total effect of the aggravation upon the preexisting condition is entitled to reimbursement from the third-party recovery to the extent of the amount thereof less the employee’s expenses of suit and attorney’s fees as defined in N. J. S. A. 34:15-40 (b), (d). Bello, supra, at 50-51.

The judgment of the County Court is modified accordingly and, as modified, the matter is remanded for further proceedings in conformity with this opinion.