author: Meanor, J. A. D.

text:
    STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT, v. CLARENCE EDWARD PREWITT, DEFENDANT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Submitted March 11, 1974—
    Decided March 29, 1974.

      Before Judges Conford, Handler and Meanor.

      Mr. Stanley C. Van Ness, Public Defender, attorney for appellant (Mr. Steven Zamrin, Assistant Deputy Public Defender, on the brief).

      Mr. William F. Hyland, Attorney General of New Jersey, attorney for respondent (Mr. George F. Kugler, Jr., former Attorney General of New Jersey, and Mr. Alfred J. Luciani, Deputy Attorney General, on the brief).
   The opinion of the court was delivered by

Meanor, J. A. D.

Defendant was indicted in six counts as follows:

Count I: attempted breaking and entering with intent to steal while armed, contrary to N. J. S. A. 2A :94-l, 2A :85-5 and 2A :151-5;

Count II: possession of a pistol without a permit, contrary to N. J. S. A. 2A :151-41.

Count III: resisting arrest, contrary to N. J. S. A. 2A: 85-1;

Count IV: assault with intent to kill while armed, contrary to N. J. S. A. 2A:90-2 and 2A:151-5;

Count V: possession of burglary tools, contrary to N. J. S. A. 2A:94-3, and

Count VI: assault with an offensive weapon, namely, a pistol, contrary to N. J. S. A. 2A :90-3.

Defendant pleaded guilty to counts one through four. There was no recommendation save that counts V and VI would be dismissed at the time of sentence. The sentences were as follows:

Count IY: for assault with intent to kill, ten-year indeterminate term at the Youth Correctional Institution Complex and a consecutive five-year indeterminate term because of the commission of the offense while armed, N. J. S. A. 2A:151-5.

Count I: for attempted breaking and entering with intent to steal, a three-year indeterminate term at the same institution and, because of the commission of the offense while armed, another three-year indeterminate term, these sentences to be consecutive to each other and to the sentences imposed under Count IY.

Counts II and III: suspended six-month concurrent terms to the Mercer County Workhouse.

Counts Y and YI were dismissed.

Defendant was thus sentenced to confinement within the Youth Complex to consecutive indeterminate terms aggregating 21 years.

We wish to note that the letter brief of the Public Defender fails to mention that the sentences were indeterminate. This is a significant omission because of the entirely different consequences of an indeterminate sentence as distinguished from a minimum-maximum term to the New Jersey State Prison.

The defendant was age 17 at the time of sentence. His record begins at age six, and at the time of the offenses in question he was on probation from a burglary conviction in New York. Obviously, incarceration was required.

The argument advanced here is that consecutive indeterminate terms aggregating 21 years are excessive and a reduction is sought. To answer this contention we must explore, briefly, the nature of an indeterminate sentence to the Youth Complex.

The Youth Correctional Institution Complex consists of those institutions set forth in N. J. S. A. 30:4-146.1. The exact institution in which one sentenced to an indeterminate term will be confined is an administrative, not a judicial decision. Only indeterminate terms may be given to the Youth Complex. Those who qualify for sentence there are male offenders between 15 and 30 years of age who have not previously been confined in the New Jersey State Prison or in a like institution of another state. N. J. S. A. 30 :4— 147; State v. Pallitto, 107 N. J. Super. 96 (App. Div. 1969), certif. den. 55 N. J. 309 (1970).

Pursuant to N. J. S. A. 30 :4-148 an indeterminate term is understood to be for a maximum of five years. This will not be so in only two instances. First, where the offense for which sentenced carries a maximum penalty of less than five years, that lesser maximum will control. Second, where the offense for which sentenced carries a higher maximum, the court “for good cause shown” may impose a higher maximum up to the number of years provided as penalty for the offense in- question.

Since the understood maximum of five years can only be increased “for good cause shown,” when a court undertakes such action, in addition to giving reasons for the sentence imposed, the court should also state the reasons that constitute the “good cause” for raising the maximum.

There is, however, one error in the sentence under review which must lead to a partial remand. Courts have no power to reduce the statutorily understood máximums on an indeterminate term. In re Nicholson, 69 N. J. Super. 230 (App. Div. 1961). N. J. S. A. 2A :151-5 provides for an additional penalty for one who commits or attempts to commit certain enumerated crimes while armed. One of these crimes is assault with intent to kill, N. J. S. A. 2A: 90-2, which provides for a maximum penalty of 12 years. Thus, the-sentencing court was empowered under N. J. S. A. 30 :A-148 to mete out the ten-year maximum indeterminate term given for this offense. N. J. S. A. 2A :151-5 provides that a first offender committing one of the named offenses while armed shall, in addition to the sentence, for the offense in question, be punished “for not less than oné nor moré than' 10 years” because of the commission of the offense while armed.

When, under N. J. S. A. 2A :151-5 the court below specified that in addition to the ten-year maximum indeterminate term for assault with intent to kill there would be a consecutive five-year indeterminate term because of the commission of the offense while armed, the court was simply pointing out that the understood maximum of N. J. S. A. 30 :4-148 was being given with no increase “for good cause shown” as might have been done.

' When the court sentenced for attempted breaking and entering it was said that the indeterminate term there given would carry a three-year maximum. Breaking and entering with intent to steal is defined as a high misdemeanor, N. J. S. A. 2A :94—1. N. J. S. A. 2A :85-5 provides that an attempt to commit an indictable offense is a misdemeanor. State v. Wilson, 112 N. J. Super. 581 (App. Div. 1971). The misdemeanor penalty is á maximum of three years’ imprisonment. N. J. S. A. 2A :85-7. In stating that there would be a three-year maximum on the indeterminate term given for attempted breaking and entering the court was merely calling attention to what the statutes required.

When sentencing under N. J. S. A. 2A :151-5 because of attempted breaking and entering while armed, the trial court imposed a consecutive indeterminate term with a maximum of three years. This act was beyond judicial authority. As stated above, courts may not decrease the statutorily required maximum terms under N. J. S. A. 30: 4-148. In re Nicholson, supra. The only time the maximum on an indeterminate term -will be less than five years is where the maximum penalty for the offense in question is less than that. Under N. J. S. A. 2A :151-5 commission of one of the named offenses while armed carries an additional penalty of from one to ten years for a first offense. Thus, in the absence of an increase in the five-year maximum “for good cause shown” pursuant to N. J. S. A. 30 :4-148 the five-year maximum of that statute must control.

Under these circumstances we affirm the sentences imposed except for the sentence given under Count I pursuant to N. J. S. A. 2A :151-5. This we vacate and remand for imposition of an indeterminate term with the statutory five-year maximum. We leave to the sentencing judge on remand the decision whether this term shall be consecutive to the other sentences or whether it and the throe-year maximum indeterminate term given for attempted breaking and entering under Count I shall be concurrent with each other but consecutive to the sentences imposed under Count IV.

We should add that these consecutive indeterminate terms do not mean that this defendant must serve a substantial period of confinement before parole eligibility arises, as might be the ease with a comparable State Prison sentence. Parole from an indeterminate term to the Youth Correctional Institution Complex is under the control of the board of trustees of that Institution, N. J. S. A. 30 :4-148 ; 30 :4-106; 30 :4-l.l(n), and parole release may occur at any time. Thus, this defendant may be paroled at any time or may be confined for a lengthy period depending upon his susceptibility to rehabilitation.

Remanded for re-sentence on Count 1 pursuant to N. J. S. A. 30 :4-148 and N. J. S. A. 2A :151-5.

      Mandatory minimum sentences, sometimes contained in our statutes, are inapplicable when the sentence is indeterminate. State v. Hopson, 60 N. J. 1 (1971), adopting dissenting opinion reported at 114 N. J. Super. 146 (App. Div. 1971). Hopson overruled State v. Ammirata, 104 N. J. Super. 304 (App. Div. 1969), and that portion of State v. Pallitto, supra, which followed Ammirata.

      The issue of the illegality of the sentence given under Count I pursuant to N. J. S. A. 2A :151-5 has not been raised. However, we have the duty to note and correct an illegal sentence. State v. Sheppard, 125 N. J. Super. 332 (App. Div. 1973).


source: Caselaw Access Project

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

license: Public Domain

text:
    HOUSING AUTHORITY OF THE CITY OF BAYONNE, PLAINTIFF-RESPONDENT, v. HELEN ISLER, DEFENDANT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Argued March 11, 1974—
    Decided April 5, 1974.

      Before Judges Conford, Handler and Meanor.

      Mr. William E. McAlvanah argued the cause for the appellant (Mr. Timothy, K. Madden, Director Hudson County Legal Services, attorneys).
    . Mr. James T. O’Sallaran argued the cause for the respondent. ■
   The opinion of the court was delivered by

Conford, P. J. A. D.

Defendant, a tenant of an apartment of plaintiff Bayonne Housing Authority (Authority), appeals from a judgment of dispossess entered pursuant to the provisions .of N. J. S. A. 2A :18-53. It is unclear whether the proceedings were premised' on paragraph (a) or paragraph (c) of that section. We conclude that whichever is regarded as operative here, the judgment must be set aside for absence of jurisdiction in the county district court.

Paragraph (a) allows dispossess where the tenant holds over after expiration of his term and written demand for possession is served. Paragraph (c) applies in four types of situations of which (1) is where the tenant is so disorderly as to destroy the peace and quiet of other tenants in the house, and (4) is where the tenant commits any breach of a lease provision which the agreement stipulates gives the landlord a right of reentry therefor. In any case falling under paragraph (c) the landlord must serve a written notice of termination of the tenancy upon the tenant, stating the cause of the termination and a demand for removal within three days of service of the notice.

Plaintiff landlord is a public housing agency financed in part by the Eederal Government through the United States Department of Housing and Urban Development (HUD). As such it is subject to and bound by federal laws pertaining to HUD and its regulations specifying the rights and duties of the tenants and the housing authority as to rent, maintenance, manner of occupancy by tenants and termination of such occupancy, among other things. Brown v. Milwaukee Housing Authority, 471 F. 2d 63 (7 Cir. 1972); Milwaukee Housing Authority v. Mosby, 53 Wis. 2d 275, 192 N. W. 2d 913 (Sup. Ct. 1972). See also, Lee v. Elizabeth Housing Authority, 119 N. J. Super. 72 (Cty. Ct. 1972).

Plaintiff had apparently been having trouble with defendant in relation to complaints by other tenants of annoying actions by defendant and her children. It wrote her requesting that she appear before a tenant grievance board of the Authority on February 27, 1973. At that time a hearing was conducted during which testimony was given concerning her actions and she denied the charges. At the conclusion of the hearing she was given an adverse oral decision. Neither the content of the notice to appear nor the precise nature of the decision was established beyond the fact that the board “asked” the defendant “to vacate.”

On March 13, 1973 defendant was served with a written notice signed by the executive director of the Authority calling upon her to vacate by March 20, 1973 and stating that her “tenancy [was] being terminated” for the reason that she and her children were violating the lease by “unreasonable disturbance” of other tenants in various specified respects. The tenancy complaint was filed in the county district court on May 10, 1973. The foregoing facts were stated in the complaint and it was alleged therein that defendant’s actions constituted a breach of the lease.

HUD has issued an administrative circular, RHM 7465.8, containing “requirements and recommendations to be reflected in tenant dwelling leases for low-rent public housing projects.” Included is a detailed specification of the mandated subject-matter content of tenant leases, including the circumstances under which management may terminate the lease and the attendant procedure. The parties hereto entered into a lease which appears to ns to comply with the circular. In paragraphs 5, 7 and 9 management agrees:

5. To give Tenant thirty (SO) days written notice prior to termination of this lease. Such written notice shall be in clear and understandable terms, and shall include the following:
a. a full statement of the reason for the action, including reference to applicable regulations and the alleged facts upon which the action is based and
b. a statement of the Tenant’s right to a hearing and the means by which a hearing may be obtained.
c. all grievances or appeals arising under this lease shall be in accordance with the grievance procedure which the Management has in effect at that time.
& * $ * *
7. To terminate this Lease or evict Tenant for no other reason than the following:
a. Non-payment of rent
or
b. serious intentional destruction of the apartment
or
c. serious interference with the rights of the other tenants
or
d. income that exceeds the maximum allowable for public housing residents.
*• ****•*«» *
9. Tenant is entitled to a hearing whenever he feels aggrieved by Management action in conducting inspections, collecting or adjusting rents, imposing extra charges, scheduling evictions, or denying transfers. [Emphasis supplied]

It is evident that although plaintiff’s notice to defendant purported to terminate the lease, 30 days’ notice, as required by paragraph 5, was not given. Moreover, part of the required content of such a notice was omitted therefrom. These facts were fatal to plaintiff’s substantive right to terminate the lease through the instrumentality of that notice. Consequently there was no termination of the lease for purposes of the hold-over provision of either paragraph (a) or paragraph (e) (4) of N. J. S. A. 2A :18-53. The requirement in the latter paragraph of a three-day notice of removal to the tenant is in addition to and not in substitution of whatever notice is substantively necessary to effect a termination of the lease by the private lease agreement of the parties. Moreover, it is settled that the parties may (subject to public policy limitations) contract by lease agreement for periods of notice of termination of tenancy different from those specified in the dispossess statute which will be binding on them. Pennsylvania B. Co. v. L. Albert & Son, Inc., 26 N. J. Super. 508 (App. Div. 1953), cert. den. 13 N. J. 361 (1953).

As to plaintiff’s contention that it was prosecuting this dispossess for misconduct of defendant, under paragraph (c) (1) of the statute, which does not require termination of the lease or any particular period of notice beyond the statutory three-day removal notice, this assertion is belied by the content of the notice actually served, which recites, as already noted, that the Authority is terminating the lease because of conduct violative of the terms of the lease. The text of the notice, moreover, is consistent with a recognition that the lease in paragraph 7(c) specifies that one of the exclusive grounds of termination is “serious interference with the rights of the other tenants” — substantially the grievance of the landlord herein. However, plaintiff’s case for termination of the lease on that ground is impaled on the spike of the mandatory requirement in the lease of a 30-day notice for termination by reason of any of the three permissible grounds specified in paragraph 7 of the lease, including (c).

The facts that the tenant was afforded a grievance hearing prior to service with the notice of termination and that the trial court heard the merits of the complaints of the landlord against defendant anew will not save the proceedings below from the jurisdictional infirmity inherent in the void notice of termination of tenancy.

For the stated reason, we need not explore defendant’s additional assertion of denial of due process in connection with HUD’s administrative decision to institute the proceedings to evict.

The judgment of possession is reversed, but without costs.


author: Kole, J. S. C.,

text:
    BEECH FOREST HILLS, INC., AND MORCAL, INC., CORPORATIONS OF NEW JERSEY, PLAINTIFFS-APPELLANTS, v. BOROUGH OF MORRIS PLAINS, DEFENDANT-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Submitted December 17, 1973—
    Decided April 8, 1974.

      Before Judges Handler, Meanor and Kole.

      Messrs. Halberstadter and Halbertstadter, attorneys for appellants (Mr. Sanford Halberstadter, of counsel and on the brief).

      Mr. John E. Hughes, attorney for respondent.
   The opinion of the court was delivered by

Kole, J. S. C.,

Temporarily Assigned. Plaintiffs-landowners (hereinafter plaintiff) appeal from a judgment awarding them compensation, purportedly in accordance with Lomarch v. Mayor of Englewood, 51 N. J. 108 (1968). The events in the case arose prior to that opinion.

Our review of the record below satisfies us that, except as hereinafter stated, essentially the court’s findings and conclusions are adequately supported by the evidence and the applicable law. Thus, we find no basis for disturbing, among others, its findings that the planning board or borough had not acted in bad faith and did not intentionally seek to deprive plaintiff of the use of its land without just compensation prior to the express reservation of the park area made on October 5, 1966; that the fair market value of plaintiff’s property so reserved for park purposes was $175,000 between the period October 5, 1966 — October 5, 1967; that, except for real property taxes, all expenses and other damages claimed by plaintiff should not be awarded, and that the appropriate period for determining the amount of compensation to be allowed is the one-year period of the actual reservation set forth in the final subdivision approval of October 5, 1966. We, however, do not agree with the court that the 6% rate of return on the fair market value of the property is a reasonable measure of just compensation under the facts and, accordingly, have made our own finding with respect thereto. State v. Johnson, 42 N. J. 146, 161-162 (1964).

We will set forth those facts found by the court below and otherwise disclosed by the record that are material to our disposition of the appeal.

Application for preliminary approval of the subdivision was made April 29, 1964. It was proposed that the premises in question be subdivided into 25 building plots.

After a regular meeting of August 11, 1964, in which Mr. Cali, plaintiff’s principal participated, the planning board, on August 18, 1964, by resolution gave preliminary subdivision approval. In accordance with a suggestion of Cali at the August 11 meeting, the August 18 resolution stated, among other things, that it was understood by the applicant that the borough was interested in purchasing a portion of the land and that the granting of the preliminary approval would not affect its value; that the determination of such value would be made as if no application for subdivision approval had been filed; that no improvements would be installed in the proposed park area for a period of six months from the date of approval, and that the approval would not preclude the planning board from amending the master plan to reserve the land for park purposes. As indicated by the court below, the purpose of the six month period agreed upon was to enable the parties to agree upon a price for the borough’s purchase of the property.

No definitive action was taken by the municipality until after the six months had expired. At a meeting of the planning board of February 9, 1965 Cali and his attorney questioned whether the land would be used for park purposes or would be acquired by condemnation within a year. Cali, however, agreed to give the planning board until the meeting of March 9, 1965 to determine what course of action it wished to pursue with respect to the proposed park land. Notwithstanding the objections of the plaintiff and its counsel, the master plan was revised on March 9, 1965 to indicate that the land in question was being reserved for park purposes. At that meeting plaintiff’s attorney advised the board that, in his opinion, if the master plan amendment were effected and litigation ensued, either the amendment or the existing subdivision ordinance requiring improvements to be made before final subdivision approval would result in confiscating his client’s land. There was also a discussion indicating that plaintiff, upon a showing of hardship, might obtain relief from the prior improvements portion of the ordinance when it applied for final subdivision approval.

On October 5, 1966 final subdivision approval was granted by resolution without requiring the installation of the improvements otherwise required by the ordinance, “it being understood that said final approval shall be solely for the purpose of allowing the statutory period of one year to commence running” as to park lands reserved thereon by the borough so that it could purchase or otherwise acquire the property pursuant to N. J. S. A. 40 :55-1.20. The resolution •further provided that the final subdivision map would state that the owner did not thereby intend to dedicate the land to public use.

On August 17, 1967 a borough ordinance- was adopted providing for the acquisition for park purposes of two tracts of land, one of which was that of plaintiff. After its rejection at a referendum on November 7, 1967, the ordinance was rescinded on December 14, 1967. On January 9, 1968 plaintiff appeared before the planning board requesting, among other things, an extension of time to comply with the requirement that it install improvements within one year before final approval. On March 12, 1968 the board extended the improvements period to October 5, 1968, thereby in effect not charging plaintiff with the one-year reservation made October 5, 1966.

Lomarch was decided on January 22, 1968, after plaintiff’s request for the extension but over two months before it was granted by the board.

The complaint was filed on November 5, 1969 seeking damages by way of just compensation under the New Jersey and Pederal Constitutions, as well as “incidental damages.” It claims that, although the statute established the right of the municipality to reserve lands for a period of one year after final subdivision approval, defendant, through delays and other devices, precluded the final subdivision of the land and the utilization thereof for a period of approximately three years. It further alleges that by reason of the reservation plaintiff was required to install a road at greater expense in order to develop the building lots adjacent to the reserved land; was delayed in developing the land; was obliged to duplicate construction work, engineering, planning and sales promotion, and to pay interest and taxes for an extended period of time, while being precluded from utilizing its land; and suffered other damage.

Although the borough filed an answer, its failure to answer interrogatories resulted in an order suppressing its defenses. The court later refused to vacate this órSer but in so doing specifically found that there was no contumacious conduct by defendant borough. By order of December 14, 1971 it entered a default and provided for the method of trying the issues at the hearing on the entry of a default judgment. It permitted defendant to cross-examine plaintiff’s witnesses with respect to issues of liability; precluded the defendant from offering any evidence on liability, and permitted defendant to participate by way of cross-examination and offering evidence on the question of damages.

Plaintiff contends that in adopting this procedure the court committed error. We disagree. The court properly exercised its discretion in this respect. Reilly v. Perehinys, 33 N. J. Super. 69 (App. Div. 1954); Douglas v. Harris, 35 N. J. 270 (1961); Interchemical Corp. v. Uncas Printing & Finishing Co., Inc., 39 N. J. Super. 318 (App. Div. 1956); Fox v. Fox, 76 N. J. Super. 600 (Ch. Div. 1962) ; Perry v. Crunden, 79 N. J. Super. 285 (Cty. Ct. .1963); Johnson v. Johnson, 92 N. J. Super. 457 (App. Div. 1966); Metric Investment, Inc. v. Patterson, 98 N. J. Super. 130 (Law Div. 1967), aff’d 101 N. J. Super. 301 (App. Div. 1968); R. 4:43-2(b). See also, Annotations, 8 A. L. R. 3d 1070 (1966) and 15 A. L. R. 3d 586 (1967).

Lomar ch’s option concept injected a novel problem of proof as to market value. As the record below plainly shows and the court found, none of the experts was able to appraise the fair market value of an option, never having encountered this type of situation before. The difficulty in thus determining just compensation, as well as the court’s finding that defendant’s conduct was not contumacious, amply justified the proof procedure used below. Thus, there is no substance in plaintiff’s argument that defendant was afforded special consideration because of its status as a municipality and plaintiff was thereby deprived of due process and equal ..protection of the laws.

Plaintiff argues that the taking took place over three years ago and it should be awarded just compensation, including consequential damages, for that entire period. We find no merit to the argument.

Plaintiff had consented to the delay until March 9, 1965 to permit acquisition of the land for park purposes. Hence, it cannot claim a taking or damages up to that date. Its subsequent inaction, except for voicing objections and impliedly threatening to sue for confiscation of its property at the March 9, 1965 meeting, constituted acquiescence by it in the procedure adopted by the municipal officials at and after that meeting. Any delay thereafter was a consequence of that inaction and the course it voluntarily chose to pursue. Additionally, the borough officials were found to have acted in good faith. Thus, there is no basis for concluding that plaintiff is entitled to damages, either by way of just compensation for an eminent domain taking or otherwise, alleged to have resulted from municipal action occurring prior to October 5, 1966, the date of final subdivision approval. See Gregory Manor v. Clifton, 53 N. J. Super. 482 (App. Div. 1959); Woodside Homes, Inc. v. Morristown, 26 N. J. 529 (1958); Colonial Oaks West, Inc. v. East Brunswick Tp., 61 N. J. 560, 566 (1972); Lake Intervale Homes, Inc. v. Parsippany-Troy Hills, 28 N. J. 423, 430-431 (1968); Yardville Estates v. Trenton, 66 N. J. Super. 51, 63 (App. Div. 1961) ; Brazer v. Mountainside, 55 N. J. 456 (1970) ; West Park Ave. Inc. v. Ocean Tp., 48 N. J. 122 (1966); S. S. & O. Corp. v. Bernard Tp. Sewerage Authority, 62 N. J. 369, 387 (1973); Deerfield Estates, Inc. v. East Brunswick Tp., 60 N. J. 115, 131 (1972); J. D. Land Corp. v. Allen, 114 N. J. Super. 503 (App. Div. 1971). See also, generally, E. Rutherford Industrial Park v. State, 119 N. J. Super. 352 (Law Div. 1972); Jersey City Redev. Agency v. Bancroft Realty Co., 117 N. J. Super. 418 (App. Div. 1971).

We have noted plaintiff’s charges of arbitrary delays and conduct by the municipal officials in connection with the park reservation and the obtaining of a subdivision approval that would permit it to build. But these are business risks that a builder must assume unless, instead of acquiescing in the municipal action, it seeks an early judicial declaration that such action is illegal. Practical and economic considerations may make that procedure inadvisable from the builder’s standpoint. But where, as here, there is no showing of knowingly unlawful conduct by the municipal officials, these considerations do not dispense with the necessity of seeking such relief before a, claim for damages beyond those authorized in Lomarch may be sustained against the municipality. Under such circumstances, the municipality is entitled to a decision on the legality of its official action before the event rather than to be burdened thereafter with an unresolved claim. See Colonial Oaks West, Inc. v. East Brunswick Tp., supra, at 61 N. J. 566-567; West Park Ave., Inc. v. Ocean Tp., 48 N. J. supra at 130; Deerfield Estates, Inc. v. East Brunswick Tp., supra; Lake Intervale Homes, Inc. v. Parsippany-Troy Hills, supra; Gregory Manor v. Clifton, supra. See also, 9 McQuillin, Municipal Corporations (3d ed. rev.), § 26.98.

The taking here occurred on October 5, 1966, the date of final subdivision approval. Lomarch indicates the temporary nature of the taking and governs the measure of compensation therefor where, as here, the proposed municipal acquisition does not take place. Under the statute, N. J. S. A. 40:55-1.20, since the borough had not purchased or instituted condemnation proceedings for the reserved park lartd by October 5, 1967, plaintiff was no longer bound by the reservation and the temporary taking was terminated as of that date. The delay occasioned by the November 7, 1967 referendum and the rescission on December 14, 1967 of the park land ordinance is beyond the compensable option period. The court below correctly limited the damages for the taking to the value of an option for the property for one year after October 5, 1966, together with real estate taxes paid during that time.

Since under the proofs there was no better method available for evaluating the option here involved, the court below sensibly adopted the “most feasible approach” of appraising the market value of the land and then allowing a fair return on the value thus found. State v. Willett Holding Co., 62 N. J. 59, 72 (1972); State v. Mehlman, 118 N. J. Super. 587, 591 (App. Div. 1972). This approach, as indicated by plaintiff’s expert Boyle, in effect results in a determination of the reasonable rental value of such property during the applicable period. See United States v. General Motors Corp., 323 U. S. 373, 65 S. Ct. 357, 89 L. Ed. 311, 156 A. L. R. 390 (1945); United States v. Petty Motor Co., 327 U. S. 372, 379, 66 S. Ct. 596, 90 L. Ed. 729 (1946); United States v. Westinghouse Elect., etc., Co., 339 U. S. 261, 70 S. Ct. 644, 90 L. Ed. 816 (1950). See also, Almota Farmers Elevator & Whse. Co. v. United States, 409 U. S. 470, 93 S. Ct. 791, 795, fn. 2, 35 L. Ed. 2d 1 (1973).

Both the valuation of the land and the return therefrom must take into account the use for which it has a commercial value in the immediate present or reasonably in the near future. State v. Gorga, 26 N. J. 113 (1958).

Plaintiff’s property and the return therefrom had to be valued as subdivided lots. This use was considered by the court below in arriving at a land value of $175,000 for the period of one year involved. There is substantia] evidence supporting that determination. See Trenton v. Lenzner, 16 N. J. 465 (1954), cert. den. 348 U. S. 972, 75 S. Ct. 534, 99 L. Ed. 757 (1955); State v. Mehlman, supra, at 590.

We conclude, however, that the court below did not take into account the use to which the land reasonably could be put when it adopted a 6% per year rate of return. The experts’ proofs ranged from a return of 6% to 11%, exclusive of taxes, insurance and administrative costs. Boyle, plaintiff’s expert, testified that the net yield should be 10%. Our review of the record, in light of the property’s use, satisfies us that the proper net return is 9% per year. We so find in order to arrive at a just result. State v. Johnson, supra; State, by Comm’r of Conservation v. Vacation Land Inc., 92 N. J. Super. 471, 478 (App. Div. 1966); State v. Wemrock Orchards, Inc., 95 N. J. Super. 25, 32 (App. Div. 1967), certif. den. 50 N. J. 92 (1967).

We agree with the court below that neither principal nor interest on mortgages on the land is an element of compensation under Lomarch or in the present factual context. The land value found by the court was based on unencumbered property purchased at a fair market price for cash. The return we allow thereon is likewise based on a cash sale. This represents the full value of the option here involved. Thus, principal and interest paid on mortgages encumbering the land because plaintiff did not buy it entirely for cash is of no relevance in determining the worth of the option.

The court correctly refused to award the legal and accounting fees claimed as part of the carrying charges of the property, since the proofs thereof were inadequate. We express no view as to whether such charges are part of the compensation allowable under Lomarch as part of the option price.

Plaintiff seeks additional consequential damages as part of the just compensation due it for the temporary taking: (1) the damage and cost of remedying the damage to plaintiff’s remaining lands, including the cost of installing improvements claimed to have been necessitated by the taking “which would not otherwise have been required,” and (2) increased costs and loss of business profits — i. e., “damage caused by interruption of plaintiff’s business operations directly resulting from the temporary taking of the land which was the business inventory itself.” We hold that the damages claimed are not allowable under Lomarch for a temporary taking where the acquisition or condemnation of the reserved property is abandoned and, in any event, they are too speculative to be considered proper elements of just compensation for that kind of taking. See United States v. Petty Motor Co., supra; State v. Williams, 65 N. J. Super. 518, 524-527 (App. Div. 1971); State v. Mehlman, supra; Arlen of Nanuet Inc. v. State of New York, 26 N. Y. 2d 346, 310 N. Y. S. 2d 465, 258 N. E. 2d 890 (Ct. App. 1970). Cf. Englewood v. Veith Realty Co., 50 N. J. Super. 369 (App. Div. 1958); 11 McQuillin, Municipal Corporations (3d ed. rev.), § 32.31; 9 McQuillin, id., §§ 32.92(b), 32.92(c) ; 6 Nichols, Law of Eminent Domain (rev. 3d ed.), § 26.45; Yonkers, by Kelly, Comm’r of Public Works v. A. & J. Cianciulli, Inc., 117 N. Y. S. 2d 792 (Sup. Ct. 1952); E. Rutherford Industrial Park v. State, supra 119 N. J. Super. at 371-373.

The court below awarded interest from October 5, 1967. IJnder the circumstances here presented we deem it just to allow interest from October 5, 1966, the date of temporary taking, on the value of the option awarded to plaintiff. Jersey City Redev. Agency v. Bancroft Realty Co., 117 N. J. Super. 418, 424 (App. Div. 1971); State v. Nordstrom, 54 N. J. 50 (1969); Duncan Hood Corp. v. Summit, 105 N. J. L. 583 (E. & A. 1929). Cf. Wayne Tp. v. Ricmin, Inc., 124 N. J. Super. 509 (App. Div. 1973).

In view of the foregoing, the computation of the award is as follows: the value of the option for the one year commencing October 5, 1966 is $15,750 (9% of $175,000) ; the tax reimbursement for the period is $1,039.27; the total amount of the judgment is $16,789.27, together with interest thereon from October 5, 1966 at 6% per annum, and costs of suit. A judgment to that effect shall be entered by the court below. 3s!o costs to either party.

      The court inadvertently referred to plaintiff as “defendants” in making this finding.

      The court below erroneously referred to this meeting as occurring on August 11. Plaintiff contends that the August 18 meeting was not public. Apparently this is undisputed. However, no prejudice was suffered by plaintiff by reason of its private nature. Cali was informed promptly of the resolution granting preliminary subdivision approval and thereafter commenced the final planning and development of the project. In any event, at the August 11 meeting he was advised of the substance of the proposed resolution and that there would be a meeting of the board to consider it on August 18.

        Lomarch, supra, 51 N. J. 108, involved N. J. S. A. 40 :55-1.32, which is part of the Official Map and Building Permit Act, N. J. S. A. 40 :55-1.30 to 1.42, inclusive. The present case concerns 21. N. J. S. A. 40 :55-1.20, part of the Planning Act, N. J. S. A. 40 :55-1.1-1.29. Although there is a distinction between the two statutes (see Kligman v. Lautman, 53 N. J. 517, 534 (1969)), the provisions of N. J. S. A. 40 :55-1.20 and N. J. S. A. 40 :55-1.32 are so alike that Lomarch is applicable to the present situation.
      There does not appear to be any specific provision in the Planning Act similar to that in the Official Map and Building Permit Act, N. J. S. A. 40 :55-1.38, providing for board of adjustment or municipal relief where the reservation precludes a reasonable return to the owner unless a building permit is issued. It is arguable that the 1967 amendment to N. J. S. A. 40 :55-1.38 (L. W&l, c. 288, § 2) intended such relief where there was a master plan rather than an official map. We need not determine this issue.'or whether the court below was in -error when it concluded that plaintiff could have availed itself of the provisions of N. J. S. A. 40 :55-1.38. See Kligman, supra at 535, fn. •2. Our determination is in no way predicated on plaintiff’s failure to ■seek such relief at the municipal level.

      Present counsel did not represent the borough at the time of this default.

      Plaintifll relies on the principle, generally applicable to condemnation proceedings, that where part of lands is taken, compensation is allowed for diminution in value to the remainder resulting from the taking. State v. Mehlman, supra at 590; State v. Speare, 86 N. J. Super. 565, 572-573 (App. Div. 1965), certif. den. 45 N. J. 589 (1965). In our view,. the measure of compensation established in Lomareh for a one-year taking does not contemplate allowing the severance damages awarded in a partial taking. To the extent, if at all, that such cases as Yonkers, by Kelly, Comm’r of Public Works v. A. & J. Cianciulli, supra, appear to suggest the contrary with respect to a temporary taking, we conclude that they are inapplicable to a taking by way of reservation pending acquisition or condemnation under Lomareh.

      Although interest on the amount of taxes should be allowed only from October 0, 1907, in view of the nominal amount involved we are awarding interest on the total judgment from October 6, 1966.


author: Allcorn, J. A. D.

text:
    CITY OF TRENTON, A MUNICIPAL CORPORATION OF NEW JERSEY, APPELLANT, v. MERCER COUNTY BOARD OF TAXATION AND THE DIVISION OF TAX APPEALS, DEPARTMENT OF THE TREASURY, STATE OF NEW JERSEY, RESPONDENTS.
    Superior Court of New Jersey Appellate Division
    Argued January 14, 1974—
    Decided April 10, 1974.

      Before Judges Leonard, Allcorn and Crahay.

      Mr. George T. Dougherty argued the causes for the appellant (Mr. Robert A. Gladstone, attorney).

      Mr. Richard H. Saxe, Deputy Attorney General, argued the causes for the respondent (Mr. George F. Kugler, Jr., Attorney General, attorney).
   The opinion of the court was delivered by

Allcorn, J. A. D.

In these consolidated appeals the City of Trenton challenges the validity of both the 1972 and 1973 equalization tables prepared and confirmed by the Mercer County Board of Taxation.

Initially, we find no merit to the contention of the city that the use by the county board of the ratios determined and fixed by the Director of the Division of Taxation for the comparable periods for the distribution of school aid was improper because the Director’s ratios were based on "multi-year” averaging of sales. Newark v. Essex Cty. Bd. Taxation, 124 N. J. Super. 76, 80 (App. Div. 1973), certif. den. 63 N. J. 566 (1973).

The city next contends that the Director’s tables for both years were further infected because the sales data used in the calculation of his ratios for Trenton included current year sales of residential properties which were F.H.A.-financed. The same argument was made below. It was rejected by the Division on the appeal of the 1972 table; but on the appeal of the 1973 table the Division determined that certain specified current sales that were E.H.A.-financed should be eliminated, and directed the table to be revised by recalculating Trenton’s ratio omitting said sales — the case of Newark v. Essex Cty. Bd. Taxation, supra, having been decided subsequent to the Division decision on the 1972 table, but prior to its decision on the 1973 table.

There would appear to be little question but that, in the sale and purchase of residential properties which are financed by loans guaranteed by E.H.A. there frequently are imposed as conditions to the sale and to the grant of the loan various extraordinary charges such as points to the lender, purchaser’s closing costs, etc., payable in whole or substantial part by the seller. Such extraordinary charges necessarily reduce the net amount received by the seller on account of the stated price and, pro tanto, the market value of the property. And, assuming that no such extraordinary charges are laid on the seller in non-F.H.A.-financed sales, then the use of the E.H.A.-financed sales at their stated or contract prices in the calculation of the ratio between assessed values and sales prices necessarily results in something less than a true and accurate ratio.

Given these circumstances, the appropriate remedy in the present cases is difficult both of conception and of design. Should E.H.A.-financed sales of residential properties be excluded in computing the current year sales ratio? If so, should all such sales be excluded without regard to the existence and proportion of the extraordinary charges, or only those sales in which the extraordinary charges exceed a fixed, arbitrary percentage of the stated purchase price? Or, should F.H.A.-financed sales of residential properties be included in computing the current year sales ratio •—■ all at the stated contract price, except those sales as to which the affected municipalities establish the fact and the amount of extraordinary charges borne by the sellers, in which cases the stated contract prices would be reduced accordingly and included in the computation as so adjusted.

Simplistically, accuracy best could be achieved by a complete exclusion of all E.H.A.-financed residential sales. The adoption of this course would have the advantage of eliminating the need for the affected municipalities to search out and compile the various data relating to the extraordinary charges in each sale. Questions of reliability of such data aside, the difficulties encountered and the time and effort expended in acquiring it are considerable. And the measure of success would be something less than satisfactory. The inability of the city here to obtain such data for any more than 56 out of a total of 159 such sales speaks for itself. Notwithstanding the advantages cited, however, there has been expressed an understandable concern, not unfounded, that if all E.H.A.-financed sales were to be excluded, there might well be an insufficient number of usable sales remaining in some communities to form a dependable base on which to determine a reliable ratio.

In the consideration of partial exclusion rather than total exclusion as the purgative, we are faced at the outset with the question of what the determinant shall be. Should all sales in which the payment of seller-borne extraordinary charges is established be excluded, without regard to the proportion they bear to the stated sales prices ? Or should there be excluded only those sales in which the extraordinary charges constitute a substantial or significant percentage of the stated sales prices — and, if so, where is the line to be drawn ?

Quite obviously, there is no uniformity in the amounts or the proportions of the extraordinary charges imposed. No better evidence of this can be had than the proofs submitted by the city in its challenge to the 1972 table. As earlier in-cheated, the city introduced a list of 159 sales of E.H.A.financed residential properties occurring in Trenton in the years 1970 and 1971. Of these 159 sales the city was able to obtain and to submit the details (street address, seller, purchase price and “financing fee”) of some 56 — approximately one-third. An analysis of such data reveals that, in terms of percentage of purchase price, the “financing fee” ranged between 0% and 11.625%. In tabular form, the breakdown by whole percentage points was as follows:

Financing Fee as Expressed
in Percentage of Purchase Price Number of Sales
0% 2
0 1.0% — 1.99%
1 2.0% — 2.99%'
6 3.0% — 3.99%
4 4.0% — 4.99%
2 5.0% — 5.99%
12 6.0% — 6.99%
14 7.0% — 7.99%
7 8.0% — 8.99%
4 9.0% — 9.99% '
2 10.0% — 10.99%
2 11.0% — 11.99%
56

If the foregoing is at all representative, it is at once apparent that the number of E.H.A.-finaneed sales in which there were no such extraordinary charges is exceedingly small — 2 out of 56, or 3.5%. Equally apparent is the fact that if the exclusionary line is drawn at any point above zero, some measure of distortion necessarily occurs. Eor, whether the extraordinary charges amount to 1% or 12% of the stated contract price, or some intermediate percentage, the inclusion of the sale at the stated contract price in computing the ratio between assessed value and sales price introduces an inaccurate factor which, in turn, will be reflected in the ratio produced.

In the light of the foregoing, on balance, it would appear that the public interest would be best and most equitably served by computing the ratio between assessed value and current year sales by including all current year sales of residential properties financed by E.H.A. loans (not otherwise disqualified) at the stated contract prices — except those sales in which the taxing district establishes the fact and the amount of extraordinary charges paid by the seller, in which event the stated contract prices shall be reduced accordingly and the sales included in the computation at the prices so adjusted. By the use of such method of procedure, the number of usable sales is not diminished to any extent whatever and there is no weakening of the sales base— both principal concerns in the use of either of the exclusionary methods. At the same time the distortions that necessarily inhere in the fixing of an arbitrary point at and above which sales would be excluded and below which they would be included (without adjustment), also are entirely eliminated.

Consequently, the determinations of the Division of Tax Appeals in both of the appeals with regard to the treatment of the E.H.A. sales must be reversed, and both cases remanded so that the tax equalization table for each of the years 1972 and 1973 may be revised by the Division in accordance with the views herein set forth —• after a hearing or hearings, on notice to the county tax board and to all municipalities. Elementary fairness, as well as the assurance of apportionment of the county tax burden in a manner as nearly accurate as possible, requires that at said hearings any municipality so desiring be given the opportunity to submit evidence to establish the requisite factors for the adjustment of the purchase price of any current year E.Il.A. sales in the respective municipalities which were included by the Director in computing his current year ratio of assessed value to true value.

. We are satisfied also that it was improper for the county board to apply the Director’s page 8 formula to all of the municipalities in computing the 1972 equalization table. The whole purpose of that formula is “to produce equalized valuations in the new tax year for revalued [or reassessed] districts which will correspond in method of determination with the equalized valuations for non-revalued [and non-reassessed] districts resulting from use of the Director’s ratios as applied to such districts in the ordinary course by county boards.” Willingboro Tp. v. Burlington Cty. Bd. Tax., 62 N. J. 203, 222 (1973).

In view of the fact that two municipalities had revalued or reassessed for that year, the application of the page 8 formula to all municipalities completely defeated the purpose for which said formula was designed, and could not help but result in a distortion as between the ratios of the revalued and reassessed districts and the remaining districts. Contrary to the contention of the county board, a general increase in the level of assessed values from 50% to 100% in all Mercer County taxing districts does not constitute a reassessment within the comprehension of the page 8 formula.

Accordingly, the determinations of the Division of Tax Appeals on the appeals of the tax equalization tables promulgated and confirmed by the Mercer County Board of Taxation for each of the years 1972 and 1973 are reversed; and both causes are remanded to the Division for new hearings and redeterminations of the tax equalization tables for each of said years, consistent with this opinion. If, following said redetermination, any municipality whose proportionate share of county taxes is increased for either or both years shall make timely application therefor, the Division is authorized to direct appropriate reimbursement among the municipalities in annual installments or otherwise as may seem just.

      And, occasionally, in part by the broker.

      Compare, Newark v. Essex Cty. Bd. Taxation, supra.


author: Consodine, J. S. C.

text:
    ELIZABETH C. WERTLAKE, PLAINTIFF, v. PAUL T. WERTLAKE, DEFENDANT.
    Superior Court of New Jersey Chancery Division
    Decided April 3, 1974

      Mr. Gary S. Lewis for plaintiff (Messrs. Rothbard & Lewis, attorneys).

      Mr. Edward S. Snyder for defendant.
   Consodine, J. S. C.

Defendant seeks by motion to vacate an alimony order of this court. Wife’s cross-motion seeks increased child support and alimony. In answer thereto defendant asks arbitration pursuant to a provision of the property settlement agreement incorporated into the final judgment. This provision provides that any financial claim or dispute should be arbitrated under the rules of the American Arbitration Association.

The role of arbitration in a matrimonial action has never been considered before by the courts of this State.

“Arbitration” is the substitution by consent of the parties of another tribunal for the tribunal provided by ordinary process of law. Eastern Engineering Co. v. Ocean City, 11 N. J. Misc. 508, 167 A. 522 (Sup. Ct. 1933). Arbitration is claimed to provide a summary and inexpensive method of settling disputes. Fagliarone v. Consolidated Film Industries, Inc., 20 N. J. Misc. 193, 26 A. 2d 425 (Cir. Ct. 1942), aff'd 131 N. J. L. 315 (E. & A. 1944). Nothing could be more summary and inexpensive than our practice in matrimonial cases — notice of motion and affidavits.

Although it was held in an old English case that the terms of separation between husband and wife could be arbitrated, Soilleux v. Herbst, 2 Bos. & Pul. 444 (1801), covenants to arbitrate were originally frowned upon. William C. Blanchard Co. v. Beach Concrete Co., 121 N. J. Super. 418 (Ch. Div. 1972), as attempts to oust the jurisdiction of the courts.

Generally today, however, settlement of controversies by arbitration is favored by the courts. Machine Printers Beneficial Ass’n v. Merrill Textile Print Works, 12 N. J. Super. 26 (App. Div. 1951).

The Arbitration Act of 1923, L. 1923, c. 134 (N. J. S. A. 2A :24-1 et seq.) provides a complete scheme covering the subject. Keppler v. Terhune, 88 N. J. Super. 455 (App. Div. 1965).

N. J. S. A. 2A:24-1 provides:

A provision in a written contract to settle by arbitration a controversy that may arise therefrom [submitted] pursuant to section 2A :24- 2 of this title * * * shall be valid * * * except upon such grounds as exist at law or in equity for the revocation of a contract.

We pass over whether the controversy was submitted in accordance with N. J. S. A. 2A:24-2.

In Sommer v. Mackay, 10 N. J. Misc. 644, 160 A. 495 (Sup. Ct. 1932), it was held that our Arbitration Act, supra, did not infringe upon the jurisdiction of the Chancery Court over specific performance of contracts. However, it has long been recognized that the State has a special interest in matrimonial actions, as distinguished from its general interest in having every case rightly decided. Armour v. Armour, 138 N. J. Fq. 145 (E. & A. 1946).

Our Superior Court has original jurisdiction in all causes. This includes jurisdiction in equity matters. Roberts v. Roberts, 106 N. J. Super. 108 (Ch. Div. 1969). The Superior Court has constitutional jurisdiction over all causes within the jurisdiction of the former Supreme Court and' the former Court of Chancery, subject only to express alterations thereof contained in the 1947 State Constitution. Abbott v. Beth Israel Cemetery Ass’n, 13 N. J. 538 (1953). Jurisdiction to adjudicate under the parens patriae doctrine was in the former Court of Chancery, and now reposes in the Superior Court, Chancery Division. In re Stevens, 37 N. J. Super. 130 (App. Div. 1953). See 4 Pomeroy, Equity Jurisprudence (1941 ed.) § 1303.

Courts in other states have held valid provisions for the arbitration of disputés over alimony. Re Mesmer’s Estate, 94 Cal. App. 97, 270 P. 732 (D. Ct. App. 1928); Stratton v. Stratton, 77 Me. 373 (Sup. Jud. Ct. 1885); Carter v. Carter, 109 Mass. 306 (Sup. Jud Ct. 1872); others have held valid similar provisions concerning the support of the wife and child; Eaton v. Burns, 31 Ind. 390 (Sup. Ct. 1869); Masterson v. Masterson, 22 Ky. Law Rep. 1193, 60 S. W. 301 (Ct. App 1901); Robinson v. Robinson, 296 N. Y. 778, 71 N. E. 2d, 214 (Ct. App. 1947); Du Pont v. Du Pont, 40 Del. Ch. 290, 181 A. 2d. 95 (Ch. 1963). New York courts even uphold arbitration over questions of child custody and. visitation; Sheets v. Sheets, 22 A. D. 2d 176, 254 N. Y. S. 2d 320, 18 A. L. R. 3d 1257 (App. Div. 1964); see Annotation, 18 A. L. R. 3d 1264; although the latest New York cases have limited Sheets, see Agur v. Agur, 32 A. D. 2d 16, 298 N. Y. S. 2d 772 (App. Div. 1969), and criticized it, Nestel v. Nestel, 38 A. D. 2d 942, 331 N. Y. S. 2d 241 (App. Div. 1972).

It is generally agreed that arbitration is ill-adapted for the delicate balancing of the factors composing the best interest of the child in custody and visitation questions. The judicial process is more broadly gauged and better suited to protecting these interests. Nestel v. Nestel, supra.

The power to make orders touching the care and custody of children is inherited and inherent in our Superior Court, Clemens v. Clemens, 20 N. J. Super. 383 (App. Div. 1952), and may not be abrogated by statute, Lavigne v. Family & Children’s Soc., 38 N. J. Super. 559 (App. Div. 1952), reh. den. 19 N. J. Super. 401, rev’d 11 N. J. 473 (1953), nor a fortiori by agreement of the parties.

Clearly such matters are not subject to arbitration.

Since the State is parens patriae to children, and since the support, education and welfare of children is the exclusive concern of the courts so that parties can make no permanent binding contract with respect to those matters, child support is not arbitrable. Lindey, Separation Agreements and Ante-Nuptial Contracts, § 29—14 (1967).

The conscience of equity will not permit the present needs of children to be limited by the agreement of the parties. Gulick v. Gulick, 113 N. J. Super. 366 (Ch. Div. 1971).

Finally, although Schlemm v. Schlemm, 31 N. J. 557 (1960), modified the view prevailing at the time of the enactment of our Arbitration Act, namely that a spouse’s obligation to render suitable support — a state policy — arises out of the status of wedlock and is in no sense contractual, O’Hara v. O’Hara, 137 N. J. Eq. 369 (E. & A. 1945) and consequently could not come under the act’s provisions, alimony under our statutes remains perpetually subject to modification by Chancery. N. J. S. A. 2A :34-23. To effectuate this purpose the court’s power to act on modification must not be impaired. Greenberg v. Greenberg, 99 N. J. Eq. 461 (Ch. 1926). Schiff v. Schiff, 116 N. J. Super. 546 (App. Div. 1971) is not to the contrary.

Therefore I hold that that portion of the final judgment providing for arbitration is invalid and unenforceable.


author: Dwyer, J. S. C.

text:
    ARMIN CORPORATION, T/A LEVEX POLYMERS, PLAINTIFF, v. LAWRENCE W. KULLMAN, DEFENDANT.
    Superior Court of New Jersey Law Division
    Decided April 5, 1974.

      Mr. Leonard J. Felzenberg for plaintiff (Messrs. Kronisch & Felzenberg, attorneys).

      Mr. Martin G. Margolis for defendant (Messrs. Margolis & Bergslein, attorneys).
   Dwyer, J. S. C.

Plaintiff Armin Corporation (Armin), trading as Levex Polymers, is suing the guarantor of a corporate book- account'based upon goods sold-and delivered. Lawrence Kullman is the guarantor and Productivity Systems, Inc. (Systems) is the corporation whose debt Kullman was guaranteeing. The book account was set up on the basis that no interest was charged the corporate debtor (i. e., Systems) when payments on the account were overdue. Kullman,signed the guaranty on March 26, 1973 in consideration of the extension of credit by Armin to Systems. On May 7, 1973 $1,100 was charged to the account; on May 16, 1973 $1,339.60, on June 6, 1973 $1,360 and on June 21, 1973 $340. Thus, as of June 21, 1973 Systems owed from Armin a total of $4,139.60 on the principal debt.

The guaranty signed by Kullman was general, guaranteeing payment of all extensions of credit as and when Systems defaulted. In the event that Kullman did not pay “promptly,” the agreement provided for a 20% allowance for the attorney’s fees of any collection attorney involved, and for interest at the rate of 1J4% a month of the unpaid balance from the date of the default.

Armin sued Kullman on the guaranty on August 3, 1973; Kullman filed an answer contesting the sums due on October 12, 1973. The answer was struck for failure to answer Interrogatories on January 8, 1974. Default was entered by the Clerk on February 26, 1974. On March 22, 1974 Armin moved for entry of final judgment by default. The court has reserved decision on this motion in order to resolve an issue of. law. Metric Investment Co., Inc. v. Patterson, 98 N. J. Super. 130 (Law Div. 1967), aff’d 101 N. J. Super. 301 (App. Div. 1968).

The issue confronting the court is whether or not the interest charged on the guaranty was usurious, in violation of N. J. S. A. 31:1—1 as amended effective December 20, 1973, which sets a statutory maximum on interest received of 9.5%, and in violation of the 8% ceiling set by the predecessor statute. The issue is of novel impression in New Jersey.

22 Am Jur., “Guarantor’s liability for interest,” §.76, -reads as follows:

A guarantor may be charged with interest on the principal sum either because: (1) interest was a part of the primary obligation and the guaranty contract, properly interpreted, guaranteed both' the principal sum plus Interest; or (2) the guarantor did not pay the creditor the amount guaranteed as that amount became legally due under the guaranty contract and interest is properly chargeable, under applicable rules of law, on that amount. In the first case, interest is payable because it was guaranteed as a part of the underlying obligation ; in the second case, interest is payable because the guarantor! has not paid a debt which has matured as against the guarantor.

Thus, the nature of the guaranty and the transactional source of the interest that is being sought will determine the applicability of the usury laws to the interest charges. It is clear that N. J. S. A. 31:1-6 precludes a corporate debtor from asserting the defense of usury to any action brought against it on an obligation executed by the corporation. Feller v. Architects Display Bldgs., Inc., 54 N. J. Super. 205 (App. Div. 1959). It is also well established in the decisions in New Jersey that an individual guarantor of a corporate obligation falls within the ambit of N. J. S. A. 31 :l-6, i. e., cannot assert the defense of usury, at least as to interest on the principal debt, which interest itself the individual has undertaken to guarantee. Fine v. H. Klein, Inc., 10 N. J. Super. 295 (Cty. Ct. 1951); Liebers v. Plainfield Spanish Homes Bldg. Co., 108 N. J. Eq. 391 (Ch. 1931), and Commercial Funding Corp. v. Melroy Const. Co., 106 N. J. Fq. 11 (Ch. 1930). Those decisions are, of course, distinguishable from eases wherein the loan is not a true corporate borrowing and therefore the individuals are allowed to assert the defense of usury. Gelber v. Kugel’s Tavern, Inc., 10 N. J. 191 (1952), and In re Greenberg, 21 N. J. 213 (1956).

In this caso the transaction was a true corporate borrowing for goods sold and delivered; there is no basis in the evidence for a finding that the corporate debtor was set up as a mere corporate shell for a loan to Kullman. Thus Kullman would clearly be proscribed from asserting the defense of usury to interest charged on the corporate debt, were there any interest being charged on that corporate debt. Here, however, the interest being charged is assessed against the guaranteed sum, i. e., the debt, after it has matured into an obligation of the guarantor. That is, the transactional source of the obligation to pay interest is the guarantee itself, and not the debt guaranteed. The obligation to pay interest is the individual undertaking of the guarantor for the forebearance of his debt, it having matured into the obligation of the guarantor upon the default of the corporation. The guarantee here would obligate Kullman to pay interest from the date of default (July 1, 1973) to present at a rate of iy2%. At an annual rate this would be 18% simple annual interest.

The court holds that the obligation to pay interest, insofar as the obligation arises from the debt of the guarantor after it has come into existence upon the default of the corporate debt, is the kind of obligation to which N. J. S. A. 31:1—1 applies, and to which the corporate exception of N. J. S. A. 31 :l-6 does not apply. The court so holds because of the nature of the obligation itself, and because it is the policy of this State, as set forth in earlier decisions, to restrict the application of N. J. S. A. 31:1—6 so that “sympathetic sweep might be given to the State’s policy against usury.” In re Greenberg, supra at 220, and cases cited therein.

The court finds that the 18% simple annual interest rate charged against Kullman under the provisions of the guaranty was and is usurious, since the legal interest rate at the relevant times here never exceeded 9.5%. Under N. J. S. A. 31:1~3, therefore, Armin must forfeit all interest on the sum sought and its recovery is limited to “the amount or value actually lent, without interest or costs of the action.” See Pick v. Brand, Inc., 135 N. J. L. 526 (Sup. Ct. 1947), and Bennett v. Hadsell, 23 N. J. Eq. 174 (Ch. 1872).

As to the provision for 20% attorney’s fees, that is proper here and does not infect the guaranty with usury, since it is merely a charge for reasonable expense of collection. Alcoa Edgewater No. 1 Federal Credit Union v. Carroll, 44 N. J. 442 (1965). Since defendant herein is in default, no evidence has been introduced demonstrating that 20% here would be unreasonable. As plaintiff has drafted and served the complaint, served interrogatories, moved to strike the answer, obtained entry of default and moved for final judgment for default, this percentage does not seem unreasonable, even were the collection process to end here.

Judgment is ordered in favor of Armin and against Kullman for the principal debt of $4,139.60 and attorney’s fees of $827.92, making a total judgment of $4,967.52.

      Plaintiff has suggested that Ferdon v. Zarriello Bros., 87 N. J. Super. 124, 143 (Law Div. 1965), resolves the question of the applicability of the usury laws to individual guarantors of corporate obligations. While that opinion is not binding on this court, it would appear that the case is inapposite here, since Judge Botter’s comments there were directed to usury in the underlying obligation, whereas here we are concerned with usury in the guaranty itself. Moreover, insofar as the court there suggests that usury laws are not applicable to individual guarantors of corporate debts since they are not likely to be overcome by financial need, that notion is arguably appropriate where, as there, the guaranty was subsequent to the extension of credit; here, however, the guaranty preceded the extension of credit, and the guaranty was signed only by the president of the account debtor. The latter circumstances do not warrant excluding Kullman from the usury laws, as financial need can indeed be behind a guaranty of a corporate debt; this is expecially true in light of the fact that the usury laws contain no exception as to interest charged under the guaranty itself, and that it is the declared policy of the state to give sympathetic sweep to such laws. In re Greenberg, supra at 220.

      See N. J. S. A. 31:1-1 which has imposed a 9.5% ceiling upon such interest since December 20, 1973, and its predecessor L. 1953, e. 150, § 1, amended by L. 1968, c. 55, § 1. and L. 1972, c. 99, § 1, which imposed an 8% ceiling from June 6, 1968 to December 20, 1973.

      For an illuminating discussion of the phrase “without interest,” as included in N. J. S. A. 31 :l-3, see a note at 6 Rutgers L. Rev. 568 entitled, “The Penalty for Usury in New Jersey ■— Forfeiture of All Interest?” As is there observed, the lender has been allowed to retain the legal interest where usurious interest or premium has already been paid at the time of suit. However, where, as here, no payments of a usurious nature have been made by the buyer, the precedent in New Jersey is that lender may recover only the principal amount, and no interest at all.


author: Michels, J. S. C.,

text:
    ALBERT BELARDINELLI, INDIVIDUALLY AND LOCAL 560, INTERNATIONAL BROTHERHOOD OF TEAMSTERS, PLAINTIFFS-APPELLANTS, v. WERNER CONTINENTAL, INC., DEFENDANT-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued January 21, 1074
    Submitted for Determination March 25, 1974
    Decided April 4, 1974.

      Before Judges Collester, Lynch and Michels.

      Mr. Thomas A. DeClemente for appellants (Mr. Mario M. Polcari, attorney).

      Mr. Herbert New for respondent (Messrs. Brenner, New & Brenner, attorneys).
   The opinion of the court was delivered by

Michels, J. S. C.,

Temporarily Assigned. This is an appeal by plaintiffs Albert Belardinelli and Local 560, International Brotherhood of Teamsters (union) from a judgment of the Chancery Division upholding an arbitrator’s award which found that there was just cause for the discharge of Belardinelli from his employment with defendant Werner Continental, Inc. (Werner). The action arises under section 301(a) of the Labor Management Relations Act of 1947, 29 U. S. C. § 185, by virtue of which this court has concurrent jurisdiction with the federal courts. The substantive law to be applied under this act is federal law which the courts must fashion from the policy of our national labor laws. See Standard Motor Freight, Inc. v. Local Union No. 560, 49 N. J. 83, 86 (1967); Textile Workers Union v. Lincoln Mills, 353 U. S. 448, 456, 77 S. Ct. 912, 1 L. Ed. 2d 972 (1957); Newark Wire Cloth Co. v. United Steelworkers of Amer., 339 F. Supp. 1207, 1209 (D. N. J. 1972).

Plaintiff was employed as a driver with Werner, an interstate motor carrier, for approximately 17^ years and was a member of Union Local 560. Plaintiff was dispatched by Werner to Eood Pair to pick up a load of cartons. When he arrived at the shipping dock he refused to load the cartons onto his truck by means of an electric jack as requested by the shipper because he never loaded cargo with an electric jack and apparently was concerned with his safety. He immediately called an official of the union, during which time he tied up the shipping dock. Food Fair, angered by the delay, denied him the load, and he returned to Werner’s terminal with an empty truck. As a result ol this incident plaintiff was discharged by Werner the next day. Following his discharge the union lodged a grievance with Werner and being unable to settle the dispute at the grievance level, the union and Werner submitted the matter to final and binding arbitration in accordance with their bargaining agreement. The submission presented to the arbitrator by the union and Werner stated as follows:

Did Mr. Belardinelli quit Ms job? If not, was he discharged for just cause? If neither, what shall the remedy be?

The arbitrator held that since there were no previous timely warnings given to plaintiff by Werner as required by the bargaining agreement, plaintiff should have been continued in service until the matter was heard at arbitration. The arbitrator further held that even though the bargaining agreement did not permit immediate discharge for the offense here involved, just cause existed for the discharge of plaintiff. The arbitrator upheld the discharge of plaintiff and awarded him back pay from the date of his discharge to the date of the arbitration award. The Chancery Division confirmed the award, from which judgment this appeal was taken.

Plaintiffs contend that the arbitrator’s award was beyond the authority expressly conferred upon him by the bargaining agreement and that the award, therefore, should be set aside.

The bargaining agreement involved is the National Master Freight Agreement and New Jersey-New York Area General Trucking Supplemental Agreement (agreement). Article 47 of the agreement sets forth the basis upon which an employee may be discharged or suspended. Section 1, in pertinent part, provides:

The Employer shall not discharge nor suspend any employee without just cause and the written notice of discharge or suspension must set forth the specific reason (s) for such action. In respect to discharge or suspension, the Employer shall-give at least one warning notice of the specific complaint against such employee, in writing, and a copy of the same to the Union and the shop steward, except that no warning notice need be given to any employee before he is discharged or suspended if he is discharged or suspended for any of the causes listed in Section 2 below or suspended for theft of time. The Employer shall not discipline any employee without just cause based upon valid written warning notices sent within the applicable time periods set forth hereinafter. No disciplinary notice shall be considered valid unless it is in writing, has been delivered to the employee, personally or by certified mail to the address given to the Employer by the employee or his job steward and sent certified mail to the Union, and sets forth therein in full the specific grounds and circumstances upon which it is based. No warning letter or letter of suspension shall be considered valid unless issued by the Employer within seven (7) days, excluding Saturdays, Sundays, and holidays, from the date the Employer knew of or reasonably should have become aware of the specific grounds and circumstances upon which it is based.

Section 2 referred to above enumerates the only causes for immediate discharge of an employee, none of which is here involved.

Article 46 of the agreement sets forth the grievance procedure and union liability thereunder. Section 1(1) sets forth the power conferred upon the arbitrator appointed in accordance with the provisions of this Agreement as follows:

(1) The decisions of the Joint Bocal Committees, Joint Area Committee, the Eastern Conference Joint Area Committee and the arbitrators appointed in accordance with the procedures set forth herein shall be final and binding on all parties involved, and employee (s) affected. Such Committees or arbitrators shall not be empowered to add to or subtract from this Agreement or render any decision in conflict with the Agreement or which modifies this Agreement in any way. Such Committees or arbitrators may, in cases involving disciplinary action including discharge, sustain any discharge or suspension or disciplinary action or modify such discharge, suspension or disciplinary action as they may deem just and equitable.

We recognize the fundamental concept that the merits of an arbitration award will not be reviewed by the courts. See United Steelworkers v. American Mfg. Co., 363 U. S. 564, 80 S. Ct. 1343, 4 L. Ed. 2d 1403 (1960); United Steelworkers v. Warrior & G. Nav. Co., 363 U. S. 574, 80 S. Ct. 1347, 4 L. Ed. 2d 1409 (1960); United Steelworkers v. Enterprise Corp., 363 U. S. 593, 80 S. Ct. 1358, 4 L. Ed. 2d 1424 (1960). However, we recognize that where an arbitration award does not draw its essence from the bargaining agreement it will not be enforced by the courts. See United Steelworkers v. Enterprise Corp., supra; Ludwig Honold Mfg. Co. v. Fletcher, 405 F. 2d 1123, 1128 (3 Cir. 1969).

The proper standard for judicial review of an arbitrator’s award was aptly stated in Brotherhood of Railroad Train, v. Central of Ga. Ry. Co., 415 F. 2d 403, 411-412 (5 Cir. 1969), cert. den. 396 U. S. 1008, 90 S. Ct. 564, 24 L Ed. 2d 500 (1970), as follows:

In the arbitration context, an award “without foundation in reason or fact” is equated with an award that exceeds the authority or jurisdiction on the arbitrating- body. To merit judicial enforcement, an award must have a basis that is at least rationally inferable, if not obviously drawn, from the letter or purpose of the collective bargaining agreement. The arbitrator’s role is to carry out the aims of the agreement, and his role defines the scope of his authority. When he is no longer carrying out the agreement or when his position cannot be considered in any way rational, he has exceeded his jurisdiction. The requirement that the result of arbitration have “foundation in reason or fact” means that the award must, in some logical way, be derived from the wording or purpose of the contract. This Court in Safeway Stores v. American Bakery Workers Local 111, (5 Cir. 1968), 390 F. 2d 79, 81, 82, has recently announced the standard for review of an arbitrator’s award: “[l]f the award is arbitrary, capricious or not adequately grounded in the basic collective bargaining contract, it will not be enforced by the courts.” . . . On its face the award should ordinarily reveal that it finds its source in the contract and those circumstances out of which comes the “common law of the shop.”

The United States Supreme Court in United Steelworkers v. Enterprise Corp., supra, at 597, 80 S. Ct. at 1361, has stated with respect to the role of the arbitrator:

When an arbitrator is commissioned to interpret and apply the collective bargaining agreement, he is to bring his informed judgment to bear in order to reach a fair solution of a problem. This is espeeially true when it comes to formulating remedies. There the need is for flexibility in meeting a wide variety of situations. The draftsmen may never have thought of what specific remedy should be awarded to meet a particular contingency. Nevertheless, an arbitrator is confined to interpretation and application of the collective bargaining agreement; he does not sit to dispense his own brand of industrial justice. He may of course look for guidance from many sources, yet his award is legitimate only so long as it draws its essence from the collective bargaining agreement. When the arbitrator’s words manifest an infidelity to this obligation, courts have no choice but to refuse enforcement of the award.

The above-quoted language of the Enterprise case has often been applied by the federal courts to invalidate awards of arbitrators which were found to “manifest an infidelity” to the collective bargaining agreement from which the arbitrator derived his authority.

Thus, in Local 342, United Automobile, A. & A. I. Wkrs. v. T. R. W., Inc., 402 F. 2d 727 (6 Cir. 1968), cert. den. 395 U. S. 910, 89 S. Ct. 1742, 23 L. Ed. 2d 223 (1969), a proceeding to enforce an- arbitrator’s award directing the reinstatement of certain employees, the award had directed that the discharge penalty applied by the .employer should be set aside because the procedure followed lacked “fundamental fairness”. The court found that the collective bargaining contract clearly gave the employer the right to discharge any employees striking in violation of the contract, and that the language of the contract was unambiguous, not requiring interpretation by the arbitrator. The contract, moreover, provided, as in the instant case, that the arbitrator should not have the power to add to, subtract from or modify its terms. The Court, therefore, held, citing Enterprise as controlling:

The conduct of the arbitrator * *■ * constituted the addition of terms to a negotiated contract that was neither unclear nor incomplete. [402 F. 2d at 730]

It was declared by the court that

* * * It can be assumed that the contract provision which allowed the selective discharge of some of the participants in a walkout was the product of bargaining and that the company gave some quid pro quo to get it. An arbitrator should not be permitted to nullify it. [at 731]

An arbitration award was again set aside and declared void and unenforceable in Dorado Beach Hotel Corp. v. Union de Trabajadores, etc., 317 F. Supp. 217 (D. P. R. 1970), on the ground that it ignored the express provisions of the collective bargaining agreement. There, the arbitrator had held that the time limitation provisions of the local statute of limitations were applicable to the processing of the grievance in question despite the existence of an express provision of the contract providing for a different time limitation. The court held that since the statute only applied to judicial actions and not to the processing of grievances through the arbitration procedure established by a collective bargaining agreement, the express contract provisions regarding the time limitations controlled, and the arbitrator had impermissibly altered these contract provisions. The court concluded (at 224) that the award of the arbitrator does not draw its essence from the collective bargaining agreement.

Similarly, in Nuest v. Westinghouse Air Brake Company, 313 F. Supp. 1228, 1236 (S. D. Ill. 1970), the court held, among other things, that the portion of the arbitrator’s award directing the reinstatement of the plaintiff “without any back pay” was void and unenforceable. There, again, the collective bargaining agreement provided that the arbitrator should have no power to add to, subtract from or modify the terms of the agreement and further specified that any Bmp'oyee found by the grievance and arbitration procedure to have been unjustifiably discharged must be “reinstated and compensated for time lost.” It was held by the court, again citing Enterprise:

The awards by the arbitrator that the plaintiff was unjustifiably discharged and must be restored to employment “but without back pay” are patently inconsistent, tinder the clear terms of that agreement quoted above. In the latter determination, the arbitrator clearly deviated from the unambiguous terms of Section 2(c) of the agreement and went .beyond the scope of his powers as limited by the agreement. The parties accepted the reinstatement award, and the latter determination constitutes an infidelity to the arbitrator’s obligations on the face of his award. Accordingly, that part of the award is void and unenforceable. * * * [at 1236]

Under the clear and unambiguous language of section 1 of Article 47, an employee shall not be discharged without just cause. Except for those causes expressly enumerated in section 2 of Article 47 for which an employee may be immediately discharged, an employee may not be discharged without receiving a prior warning of the specific complaint by his employer. Since Belardinelli’s offense was the refusal to accept a work assignment, it was not one of the enumerated causes for immediate discharge, and Werner could not discharge Belardinelli without prior written warning. The construction that we place upon the discharge provisions of the Agreement is the same construction placed by our Supreme Court upon the discharge provisions of an earlier New Jersey-New York Area General Trucking Agreement, which appear to be substantially similar, in Standard Motor Freight, Inc. v. Local Union No. 560, supra. While the court was there concerned with the question of whether the circumstances of the termination of plaintiff’s driver constituted a matter of discharge arbitrable by one procedural route provided by the bargaining agreement, or whether it should follow another procedural course, the court commented on the discharge provisions as follows:

* * * Article 10 deals with discharge of employees. It generally provides no employee shall be discharged “without just cause” and then specifically designates certain offenses as the only causes for “immediate discharge”. Refusal to accept a work assignment is admittedly not one of these offenses. With respect to other offenses, the employer may only give the employee a warning notice, which remains in effect for a specified number of months. Apparently a repetition of the same offense, or commission of another, within that period would furnish then a basis for discharge. The employee involved here had not received a warning notice prior to the incident in question.
sjt * sj; sh s¡t *
sj * * [2']7z.e facts seemingly did not meet the Article 10 requirements for a valid immediate discharge, so it can well be imagined that the employer used the “voluntary quit” characterization and then urged that that classification was encompassed within “a matter of discharge.” [49 N. J. at 93; Emphasis added]

The language of the Supreme Court certainly supports our construction of the discharge provisions of this agreement.

The award of the arbitrator upholding Belardinelli’s discharge cannot be said to draw its essence from the agreement entered into between the union and Werner. On the contrary, the arbitrator’s award is totally unsupported by and not even rationally inferable from the express terms of the agreement. The effect of the award was to add an additional ground for immediate discharge for which the parties had not bargained and which is not contained in their Agreement. This clearly was in violation of the express provisions of Section 1, Article 46 referred to above. Accordingly, the arbitrator’s award was beyond his jurisdiction and authority and will not be enforced by this Court.

For the foregoing reasons the judgment of the Chancery Division confirming the arbitration award is reversed, and the award is set aside and declared null and void. The matter is remanded to the court below with directions that it enter judgment setting aside the arbitration award and reinstating Belardinelli as an employee of Werner in accordance with the opinion of this court, and determine, after a hearing, the amount of back pay to which he would be entitled from the date of his discharge.

Reversed and remanded.