text:
    GENERAL MOTORS CORP., ETC., PLAINTIFF-APPELLANT, v. JAMES H. BLAIR, ETC., DEFENDANT-RESPONDENT. GENERAL MOTORS CORP., ETC., PLAINTIFF-APPELLANT, v. JAMES H. BLAIR, ETC., DEFENDANT-RESPONDENT. EDWARD JACKSON, COMPLAINANT, v. HYATT BEARING, ETC., RESPONDENT-APPELLANT, v. JAMES H. BLAIR, ETC., DEFENDANT-RESPONDENT. STEVE THOMPSON, COMPLAINANT, v. GENERAL MOTORS CORP., ETC., RESPONDENT-APPELLANT, v. JAMES H. BLAIR, ETC., RESPONDENT. RUBY J. PLUMMER, COMPLAINANT, v. DELCO-REMY, ETC., RESPONDENT-APPELLANT, v. JAMES H. BLAIR, ETC., RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued January 7, 1974
    Decided July 25, 1974.

      Before Judges Handles, Meanor and Kole.

      Ms. Virginia D. Fenton argued the cause for appellant General Motors Corporation (Messrs. Carpenter, Bennett & Morrissey, attorneys; Mr. Thomas L. Morrissey, of counsel; Ms. Virginia D. Fenton and Mr. Alan B. Ziegler on the brief).

      Ms. Judith Musicant, Deputy Attorney General, argued the cause for respondent James H. Blair, Director of the Division on Civil Rights {Mr. William F. Hyland, Attorney General of New Jersey, attorney; Mr. George F. Kugler, Jr., former Attorney General, of counsel; Ms. Virginia Long Annich, Deputy Assistant Attorney General, of counsel and on the brief).
   The opinion of the court was delivered hy

Handler, J. A. D.

These are consolidated appeals which challenge the validity of the interrogatory default procedure rule promulgated by the Division on Civil Rights. N. J. A. C. 13:4-8.3. The appeals, on leave granted, arise from the attempted application by the Director of the Division of this rule against appellant (General Motors) in three separate cases of alleged employment discrimination. The respective complainants, Edward Jackson, Ruby J. Plummer and Steve Thomas, had been employed at different plants and by different divisions of General Motors. Each was fired from work and filed a complaint in the Division on Civil Rights, alleging that the discharge was on account of race. Shortly after the filing of the complaints the Division in each case served a set of interrogatories upon the respective divisions of General Motors as the respondents. In the Plummer case, the complaint had been filed some months earlier than the other two complaints, and the interrogatories served on the respondent were answered. Upon receipt of the answers, however, the Division served supplemental interrogatories on General Motors. Thereafter in each case General Motors filed a motion to strike the interrogatories, which was denied by the Director. In addition, a petition for a declaratory judgment that the interrogatory default procedure rule was inapplicable was filed in each case and was also denied.

We consider first whether the interrogatory default procedure rule falls within the scope of the rule-making power of the Division on Civil Eights. A detailing of this rule is in order. It provides that if the Director of the Division on Civil Eights determines that a complaint “must be resolved expeditiously,” interrogatories may be issued to the respondent; if the respondent then fails to answer or to file a motion to strike the interrogatories, the Director is required to enter an order extending time to answer for an additional ten days and at the same time notify respondent that a default shall be entered upon the failure to answer the interrogatories within this extended time period. N. J. A. C. 13:4-8.3 (a)(1)(2). If answers are not forthcoming, a formal entry of default is entered based upon a supporting affidavit. N. J. A. C. 13:1—8.3(c) (4) (d). Upon the entry of default the rule states that “matters regarding which questions were asked [shall be] taken as established for the purposes of the case in accordance with the claim of the complainant,” and all defenses shall be suppressed. N. J. A. O. 13:4-8.3(c) (1) (3). Upon notice to respondent a default hearing is scheduled for the purpose of receiving complainant’s proofs of the allegation of discrimination. N. J. A. C. 13:4-8.3(e) (g). The hearing examiner assigned to the matter shall proceed on the default order and supporting affidavit and shall receive “any other evidence proffered by the complainant and shall determine if the facts established by the complainant and admitted by respondent constitute an act of discrimination, and if so, the amount of damages or other recommended relief.” N. J. A. C. 13:4-8.3(h). No proofs offered by the respondent at the hearing shall be admissible in evidence. Id. The Director after the recommendation of the hearing examiner shall enter a final order and, if discrimination has been found, the Director’s order shall provide appropriate relief. N. J. A. C. 13:4-8.3(i) (j).

General authority for the promulgation of rules is found in the Law Against Discrimination. N. J. S. A. 10:5-8(g) prescribes that: “The Attorney General shall: Adopt, promulgate, amend, and rescind suitable rules and regulations to carry out the provisions of this act.” Further, N. J. S. A. 10:5-18 states that the Attorney General “shall establish rules of practice to govern, expedite and effectuate” the procedure of the Division. This general authority would permit the adoption of procedural rules relating to discovery and the expedition of hearings in appropriate eases. In addition to this authority, further support may be found in the Division’s broad investigatory powers. N. J. S. A. 10:5-8 (h) and (i) and N. J. S. A. 10:5-14.

General Motors takes the position that the Law Against Discrimination requires judicial enforcement of all investigatory orders and that the interrogatory default procedure rule counters this particular statutory mandate. It relies in part, on the statutory language of N. J. S. A. 10:5-14.1, viz:

At any time after the filing of any complaint the Attorney General may proceed against any person in a summary manner in the Superior Court of New Jersey to compel compliance with any of the provisions of this act, or to prevent violations or attempts to violate any such provisions, or attempts to interfere with or impede the enforcement of any such provisions or the exercise or performance of any power or duty thereunder.

And N. J. S. A. 10:5-19 which states:

Observance of an order of the director issued pursuant to the provisions of this act may be enforced by a civil action brought by the director in the Superior Court to obtain such relief as may be necessay to effectuate the terms of said order.

These statutory provisions have primary reference to the direct enforcement of the act itself as well as to the implementation ■ of Division orders entered pursuant to the act. Their objective is to enable the Director to secure full compliance with the act and the complete effectuation of the particular terms and conditions of his orders. These provisions do not suggest, however, that direct judicial enforcement is the stole redress available to accomplish the aims of an administrative order, especially one which is provisional, procedural or interlocutory in nature.

General Motors also points to the language of N. J. S. A. 10:5-8(i) which provides:

The Attorney General shall:
In connection with any investigation or hearing held pursuant to the provisions of this act, subpoena witnesses, compel their attendance, administer oaths, take the testimony of any person, under oath, and, in connection therewith, require the production for examination of any books or papers relating to any subject matter under investigation or in question by the division and conduct such discovery procedures which may include the taking of interrogatories * * * as shall be deemed necessary by the Attorney General in any investigation. The Attorney General may make rules as to the issuance of subpoenas by the director. The failure of any witness when duly subpoenaed to attend, give testimony, or produce evidence shall be punishable by the Superior Court of New Jersey in the same manner as such failure is punishable by such court in a case therein pending.

This section contemplates judicial enforcement of subpoenas. It also recognizes that compliance with ancillary discovery orders in connection with an investigation or hearing may be induced through the contempt powers of the court. There is no requirement to be implied in this provision, however, that information to be gained through interrogatories must be obtained by the issuance of a subpoena or must be elicited, directly or indirectly, by invoking judicial contempt procedures. It is reasonably clear that, in the absence of a subpoena, the statute does not mandate judicial enforcement of demands for answers to interrogatories. N. J. S. A. 10:5-8(i) may be viewed as providing a judicial mechanism whereby the Director may issue subpoenas and indeed require answers to interrogatories pursuant to administrative demand therefor. The section should not be interpreted, however, as obligating the Director to seek through judicial means answers to interrogatories when this may not be fitting relief or the only redress sought. In the case of International Union United Automobile, etc., Workers of America v. National Labor Relations Bd., 148 U. S. App. D. C. 305, 459 F. 2d 1329 (1972), it was noted:

It is, of course, always possible for the opposing party to seek enforcement of the subpoena in court. But enforcement against a really intransigent party can be costly and time consuming, particularly in administrative proceedings whore the enforcement process is of necessity collateral to the main case. [148 U. S. App. D. C. 305, 459 F. 2d at 1338-1339]

In a particular case the Director may conclude that appropriate relief is the swift resolution of the controversy, based upon an expedited hearing in which proofs addressed to the complaint are received and a determination made thereon. And in that situation an apt sanction to accomplish that end, as envisaged by the interrogatory, default procedure rule, may be the imposition against the recalcitrant respondent of a default, with its consequences of the suppression of defenses, the exposure to adverse inferences, and the loss of the right to present affirmative evidence.

In N. J. Builders, Owners and Managers Ass’n v. Blair, 60 N. J. 330 (1972), the court remarked upon the exceptionally strong legislative statement of concern about the adverse effects of discrimination not only on rights of individuals but on the “institutions and foundation of a free democratic society.” Id. at 335. It concluded that “the literal prohibitions” in the statute did not forbid the use of “a rational approach toward fulfilling the responsibility with which the agency has been charged.” Id. at 336. Justifying an apparent derogation of the literal wording of the statute, the court, went on:

Moreover we think it fair to assume that the need for such a rule as we are here considering probably did not occur to the draftsman of the Law Against Discrimination; and furthermore we think it fair to entertain the belief that had such a need been foreseen, appropriate provision for such a rule would have been forthcoming. The emergence after enactment of problems and situations not anticipated by the legislative imagination calls upon the judiciary for a sympathetic response consonant with what one may presume the legislature would have said had it indeed spoken, [at 339]

See also Zahorian. v. Russell Fitt Real Estate Agency, 62 N. J. 399 (1973); Polk v. Cherry Hill Apartments, Inc., 62 N. J. 55 (1972); Jackson v. Concord Co., 54 N. J. 113 (1969); Fraser v. Robin Dee Day Camp, 44 N. J. 480 (1965); Levitt & Sons, Inc. v. Division Against Discrimination, 31 N. J. 514 (1960), app. dism. 363 U. S. 418, 80 S. Ct. 1257, 4 L. Ed. 2d 1515 (1960). We conclude, therefore, that the interrogatory default procedure rule is not ultra vires the legislative grant of power under the Law Against Discrimination.

It also contended that the rule constitutes a usurpation of the judicial function and is contrary to the constitutional doctrine of separation of powers. Supplementing this point is the additional argument that the constitutional standards of due process are breached by this procedure. It is pointed out that the rule does not permit judicial intervention and, because in its application there are merged investigatory powers with adjudicative authority, there is no realistic opportunity for a hearing at any stage on the critical issues with respect to the decision to apply the rule in the first instance and the adequacy of the time allowed initially to answer the interrogatories. Finally, it is argued, the effect of the rule is to eliminate a hearing on the merits.

When prosecutorial and adjudicative functions are concentrated in the same body and exercised in a quasi-judicial setting there is an increased danger that resultant dispositions may be arbitrary. Our court has demonstrated its awareness of this basic problem of undue merger of functions in many administrative agencies. E. g. N. J. State Bd. of Optometrists v. Nemitz, 21 N. J. Super. 18, 37 (App. Div. 1952). See also, 2 Davis, Administrative Law, § 13.02 at 181-182 (1958).

The interrogatory default procedure rule, however, provides a respondent with reasonable procedural safeguards including notice and a meaningful opportunity to be heard. N. J. A. C. 13:4-8.3 (a) prescribes that a default shall be entered only if a respondent fails to answer or file a motion to strike after having been served with interrogatories and given notice of the consequences of a failure to answer. The rule provides for the avoidance of the entry of a default. Thus, a respondent may file a motion to strike interrogatories within the time to answer, which motion may be granted; if it is not, then a default may be pursued along the steps already outlined. N. J. A. C. 13:4-8.3 (b). The Director may also, upon the denial of a motion to strike interrogatories, “enter any other appropriate order.” Id. After the entry of a default but before the default hearing, the respondent may petition the Director to vacate the default and to reopen the case provided respondent by affidavit shows “good cause” and furnishes “full and complete answers to all interrogatories.” N. J. A. C. 13:A-8.3(f). If the default is vacated, then the matter proceeds in the normal fashion to investigation, finding of probable cause, conciliation or public hearing (which rights were otherwise deemed to have been waived by respondent’s original failure to answer the interrogatories. N. J. A. C. 13:4-8.3 (c) (2)). N. J. A. C. 13:A-8.3 (g). Additionally the Director may relax the application of its rule in the interest of justice. N. J. A. C. 13:4-1.2(b).

The interrogatory default procedure rule is not dissimilar to the court procedures providing that a complaint, counterclaim or answer shall be stricken upon a party’s failure to serve timely answers to interrogatories.R. 4:23-5. This sanction comes into play upon an ex parte application indicating that the adversary has not served answers within the time allowed by R.4:17-4(b). The Division’s rule does require that a time period for answering the interrogatories be fixed by the Director. The rule further mandates an automatic ten-day extension beyond this time period before a respondent is considered in default. Thus a respondent must be accorded a reasonable period of time initially in which to answer and may be entitled to more if granted an extension, and in any event would be allowed ten more days to file answers. Similarly, R.4:23-2 provides the sanctions for failure to comply with an order compelling discovery and includes, among other things, the making of an adverse inference against the recalcitrant party regarding the withheld information; the prohibiting of that party from introducing designated evidence or supporting designated claims; rendering a default judgment against that party or a citation for contempt. Douglas v. Harris, 35 N. J. 270 (1961).

The most telling criticism of the default rule is lack of an early opportunity for judicial determination of the propriety of the interrogatories or a review of the consequences of a failure to answer, as there is in the New Jersey court rules, R. 4:17 — 5. But due process does not require resort to a judicial tribunal prior to the instituting of sanctions against a party for failure to comply with an informational demand in an administrative agency. International Union, United Automobile, etc., Workers of America v. National Labor Relations Bd., supra; Princeton First Aid v. Division on Civil Rights, 124 N. J. Super. 150 (App. Div. 1973); see, e.g., N. J. S. A. 54:2-15. See Note, “Use of Contempt Power to Enforce Subpoenaes and Orders of Administrative Agencies,” 71 Harv. L. Rev. 1541 (1958); Benton, “Administrative Subpoena Enforcement,” 41 Tex. L. Rev. 874, 895-902 (1963). See also, Note, “Discovery in Federal Administrative Proceedings,” 16 Stanf. L. Rev. 1035, 1076 (1964). Moreover, should a respondent fail to obtain initial relief through the Division or be unsuccessful in obtaining interlocutory judicial review, an appeal is always available to respondent after a final determination by the Director. The review on such an appeal would canvass the entire proceeding including the fairness and propriety of the procedure under which a default was entered. Since any interim order of the Director in the course of an administrative hearing is subject to judicial scrutiny on an appeal from a final determination, the Director has not by this rule arrogated to himself the exercise of final judicial power. Cf. David v. Vesta Co., 45 N. J. 301, 326-327 (1965). Consequently, we do not perceive that the interrogatory default procedure rule as adopted is lacking in reasonable standards to insure administrative due process or that it trenches upon the constitutional separation of governmental powers.

The interrogatory default procedure rule was adopted pursuant to N. J. S. A. 52:14B-4(b), which provides that a rule “prescribing the organization or procedure of an agency” may be adopted at any time without prior notice or hearing. General Motors contends that the interrogatory default procedure rule is not such a rule of procedure and that therefore it is invalid for want of a hearing prescribed in N. J. S. A. 52:14B-4(a). It relies on Brown v. Heymann, 62 N. J. 1, 17 (1972), where the court said that the Administrative Procedure Act “requires notice with respect to rules which affect members of the public” or “operate directly upon members of the public,” in contradistinction to rules of procedure.

The interrogatory default procedure rule does not “operate directly upon members of the public.” This phrase suggests gwasi-legislative or substantive regulations governing conduct of the public which is subject to administrative regulation. Such an administrative rule under the Administrative Procedure Act would be substantive in the sense that it embraces an “agency statement of general applicability and continuing effect that implements or interprets law or policy * * * N. J. S. A. 52:14B-2 (e). A rule of this kind must be adopted upon notice and hearing. By contrast, a rule may describe “the organization, procedure or practice requirements” of the agency. Id. Indeed, with respect to such rules, each administrative agency is required to exercise its rule-making powers, i. e. fiadopt rules of practice setting forth the nature and requirements of all formal and informal procedures * * N. J. S. A. 52:14B-3(2). In our view, the interrogatory default procedure rule appertains to practice or procedure and was validly promulgated without prior notice or hearing. N. J. S. A. 52:14B-4(b).

Finally, General Motors contends that the interrogatory default procedure rule was improperly invoked and applied in the three cases here under consideration. It is noted that the Director apparently applies this rule in every employment ease, on the assumption that every such complaint requires expedition and the triggering of the rule. The Director, however, has not promulgated a rule of general applicability that employment discharge cases as a class shall be expedited and shall automatically be subject to the interrogatory default procedure rule. It is stressed on his behalf that discrimination is subtle and insidious and requires inventive countermeasures such as this rule. This would not appear, however, to justify the wholesale application of the interrogatory default procedure rule every time a worker is fired and files a complaint with the Division. There may be cases where to do so would be arbitrary or unfair and inappropriate. An action for a declaratory judgment under N. J. S. A. 52:14B-8 before the administrative agency in a proper case should be available for an early resolution of this question.

Additionally, it is emphasized that the interrogatories propounded by the Director in these particular cases are extremely numerous and complex and appear to range far beyond the circumstances involved in the firings of the individual complainants. While interrogatories need not be circumscribed by the narrow allegations of the complaint, they should nevertheless be reasonably limited to the end that a fair adjudication may obtain. We are also mindful of the argument that the Director arbitrarily fixed too short a time within which respondents were required initially to answer these cumbersome and complicated interrogatories.

The issues thus raised cannot be resolved satisfactorily on the record of these consolidated appeals. In light of these potentially serious questions, we remand the matters to the Director to permit respondents to seek a declaratory ruling from the Director as to why expedition is required in each ease and in conjunction therewith to renew their motions to strike the interrogatories (in whole or in part) and to fix a reasonable time within which to answer any interrogatories which are not stricken.

Accordingly, we uphold the validity of the interrogatory default procedure rule as promulgated hut reverse the actions of the Director in denying respondents' motions to strike and for a declaratory judgment as to the applicability of the rule, and remand the matters for further proceedings thereon. We do not retain jurisdiction. No costs.


source: Caselaw Access Project

author: Per Curiam.

license: Public Domain

text:
    CONTINENTAL CAN COMPANY, A CORPORATION, HORN HARDART COMPANY, A CORPORATION, NEW YORK SUSQUEHANNA AND WESTERN RAILROAD COMPANY, PLAINTIFFS-APPELLANTS, v. HUDSON FOAM LATEX PRODUCTS, INC., DEFENDANT-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued June 11, 1974
    Decided July 29, 1974.

      Before Judges Kolovsky, Erity and Crane.

      Mr. Allan Maitlin argued the cause for appellants (Messrs. Feuerstein, Sachs & Maitlin, attorneys; Mr. Leonard Rosenstein, on the brief).

      Mr. Robert J. Murphy argued the cause for respondent (Messrs. Vaccaro, Osborne & Curran, attorneys; Mr. Robert D. Curran, of counsel).
   Per Curiam.

The procedural foundation for this appeal, and the facts on which the litigation itself is predicated, are adequately articulated in the published opinion of the trial court. Continental Can Co. v. Hudson Foam Latex Prod., Inc., 123 N. J. Super. 364 (Law Div. 1973). We supplement only to fill the gap between there and here. We denied plaintiffs’ motion for leave to appeal. The Supreme Court, on plaintiffs’ application, granted leave and directed that we hear the appeal.

As is apparent from the opinion below, the question is whether a prior judgment against defendant, predicated on its negligence, in an action by other parties plaintiff legally positioned as are plaintiffs here, should estop defendant from again trying in this action the same issue of its negligence. In view of the disparity between Reardon v. Allen, 88 N. J. Super. 560 (Law Div. 1965), and Desmond v. Kramer, 96 N. J. Super. 96 (Cty. Ct. 1967), and the fact that there is no appellate opinion in New Jersey directly settling the point, the court below was concerned with whether mutuality of estoppel is required before collateral estoppel may be invoked. It is not entirely clear, however, whether the judge reached the result he did because he believed Reardon, requiring mutuality, to be the better rule, or because he felt there was an unfairness in the previous trial.

If it was the latter, we disagree with him. There is simply no support in the record for his statements that:

In the prior action defendant Hudson was denied the opportunity to fully litigate the issue of its negligence (or freedom therefrom). Hudson was unable to present any testimony as to the measures taken by it to guard against fire and resultant damage to goods on the premises. [123 N. J. Super, at 372]
* So ^ * * * .3
In the instant ease there is no doubt that Hudson did not fully litigate the matter in the prior action due to the trial judge’s denial of an adjournment, a circumstance beyond Hudson’s control, lid. at 873]

The fact is that after the matter had been adjourned some 18 times over a period of more than two years (substantially all of which adjournments were at the request of counsel for Hudson), during which period the answer of Hudson had on one occasion been suppressed for its failure to comply with the rules, the assignment judge — quite justifiably, it would appear ■— finally determined that Hudson’s excuses had worn thin. The soundness of his discretion in denying further adjournment is amply demonstrated by his comments on the record which disclose that Hudson had been given an opportunity to document the reasons for even further adjournment, and failed to produce. The rationality of his judgment in refusing to be persuaded to further adjournment is graphically depicted in his dealing with the “unavailability” of a corporate witness whose “illness” Hudson utilized as a reason for the adjournment:

* * * It just appears that Mr. Oscar Shuftman’s knowledge would not be that important in this case. However, that is not the basis for the Court refusing to continue the matter. I am not satisfied as to the alleged illness of Mr. Oscar Shuffman. I am not satisfied as he sits here in court, that he is not able to testify. In addition, of course, there is the deposition which previously was taken.

We specifically find, contrary to the findings below, that rather than Hudson’s being “denied” the opportunity to litigate its negligence, it avoided the opportunity on every occasion it could including the last when the matter was tried. We are completely satisfied it had every fair opportunity to defend.

We turn to the troublesome mutuality problem. Both Reardon and Desmond intelligently and comprehensively present the cases for the opposing views. Each can and does cite respectable authority for its position. Without demeaning the obvious common sense which could be made to appear for each view in any given set of circumstances, we say only that in our judgment policy considerations inherent in the doctrine of collateral estoppel forbid that its dependency rely on any one test, including the test of mutuality. Whether collateral estoppel should apply depends — as the cases cited in both Reardon and Desmond acknowledge — on many factors, all of which are considered because they contribute to the greatest good for the greatest number so long as fairness is not sacrificed on that altar. We see no reason why “mutuality of estoppel,” sanctified only by antiquity, should dictate from a preemptive position. It must be considered, along with all the other pros and cons. But the final result must be a sum of all the integers, and not a product of zero simply because one of the many numbers multiplied together is zero.

We have considered the facts of the instant case in that light. We are convinced that Hudson has had an ample and fair opportunity to defend its position on liability. While we are loath to and will not penalize it for its obstructive and dilatory tactics in the first action, we think it should not be allowed to capitalize on them.

Reversed. Remanded for trial on damages alone.


text:
    STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT, v. PAUL B. SMITH, DEFENDANT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Argued June 17, 1974
    Decided August 2, 1974.

      Before Judges Handler, Meanor and Hole.

      Mr. Michael Suffness, Assistant Deputy Public Defender, argued the cause for appellant (Mr. Stanley C. Van Ness, Public Defender, attorney).

      Mr. Thomas P. Simon, Assistant Prosecutor, argued the cause for respondent (Mr. Karl Asch, Union County Prosecutor, attorney).
   Per Curiam.

Prom two sources the Elizabeth, New Jersey, police received information that narcotics were being dispensed from an apartment occupied by one Robert Jackson located at 1065 Magnolia Street. One source of information was an anonymous telephone call; the other was an informer whose information had in the past led to arrests. Detective Arne Highsmith began a surveillance of the premises in an effort to garner sufficient factual data for a search warrant. While waiting in an unmarked car parked on the same side of the street as the building being watched, High-smith saw a vehicle stop and double park on the opposite side of the street. While his two companions waited in the car defendant exited therefrom and entered the building which consisted of a store on the first floor and apartments on the two floors above. Highsmith recognized defendant and knew that he had an ■ arrest record for narcotics violations. The detective also had information that Smith was currently a narcotics user and that he had been seen recently in areas under surveillance in connection with narcotics investigations.

When defendant entered the building Highsmith drove past the building in an effort to see which apartment Smith entered. He was unable to ascertain this, made a U-turn and stopped opposite the building at a point behind the double-parked car which was awaiting defendant’s return. Smith remained in the building 10 to 15 minutes and then reentered the double-parked car. While occupying the rear seal Smith glanced around furtively. Since he was of the opinion that Smith had made a purchase of narcotics, Highsmith radioed for help while he followed the vehicle in which defendant, still looking about suspiciously, was a passenger. The vehicle was stopped, defendant was ordered out of it and a no neon-sensual search revealed heroin concealed in one of his shoes.

Defendant’s motion to suppress was denied and the propriety of that ruling is the only issue raised on this appeal.

The forceful search of defendant undertaken here cannot be justified as a search incident to an arrest, for Highsmith conceded that defendant was not under arrest at the time of the search. The arrest of defendant was subsequent to and dependent upon the search. Thus, this warrantless search can only be justified if it was made on probable cause under exigent circumstances that, as a practical matter, prevented expenditure of the time necessarily consumed in obtaining a warrant. State v. Hannah, 125 N. J. Super. 290 (App. Div. 1973).

We deal first with the matter of exigent circumstances, for we have no doubt that such existed here. If there was probable cause to search Smith, promptness in acting thereon was essential, for the time expended to obtain a warrant would probably have permitted Smith to escape or consume the heroin or both. Seo State v. Hannah, supra, which finds an exigent circumstance present because of the mobility of the automobile. See also, State v. Williams, 117 N. J. Super. 372 (App. Div. 1971), aff’d o. b. 59 N. J. 535 (1971).

There is no mathematical precision to the concept of probable cause. The shorthand test is whether under the circumstances a prudent man would be warranted in the belief that a crime probably is being committed. While that belief may not rest on raw suspicion, it may rest on hearsay which has the aura of trustworthiness. Too, in determining whether probable cause exists, the specialized experience of the police may be taken into account. Here, Detective High-smith had participated in over 1,000 narcotics arrests. Valuable discussions of probable cause from which the above principles are drawn may be found in State v. Kasabucki, 52 N. J. 110, 116-117 (1968); State v. Ebron, 61 N. J. 207 (1972); Adams v. Williams, 407 U. S. 143, 92 S. Ct. 1921, 32 L. Ed. 2d 612 (1972) and Brinegar v. United States, 338 U. S. 160, 69 S. Ct. 1302, 93 L. Ed. 1879 (1949).

Here we believe that Detective Highsmith had probable cause to believe that Smith had made a purchase of narcotics and was illegally in possession of them at the time of his exit from the premises under surveillance. Had there been no exigent circumstance, Highsmith could have obtained a warrant to search Smith based on the information in his possession. Since there was no realistic possibility of obtaining a search warrant without risking a probability of the disappearance of defendant and destruction of the object of the search, Highsmith was justified in proceeding to search without a warrant and to arrest on the basis of the search.

The combination of factors known to .Highsmith, none of which alone would have provided a proper foundation for a finding of probable cause, when considered in toto, justify his search. The informant’s information had an added manifestation of reliability since this person had in the past supplied information leading to arrests. State v. Perry, 59 N. J. 383 (1971). See also State v. Ebron, 61 N. J. 207 (1972). The anonymous phone call, while not entitled to great weight, gives added credence to the idea that narcotics were being dispensed from 1065 Magnolia Avenue. Defendant’s known narcotics record; his recent presence in areas being investigated for narcotics activity; his presence at 1065 Magnolia Avenue for a period just long enough to make a narcotics purchase and his furtive glances after exiting under the circumstances would warrant an experienced police officer to believe that Smith had probably made a purchase of narcotics. State v. McNair, 60 N. J. S (1972); State v. Gray, 59 N. J. 563 (1971). With probable cause to search, High-smith was justified in doing so without a warrant under these exigent circumstances. We believe that this result is supported by the following cases from other jurisdictions, all of which uphold searches under exigent circumstances prior to arrest. State v. Gerke, 6 Wash. App. 137, 491 P. 2d 1316 (Ct. App. 1971); State v. Goings, 184 Neb. 81, 165 N. W. 2d 366 (Sup. Ct. 1969); State v. Hazelwood, 209 Kan. 649, 498 P. 2d 607 (Sup. Ct. 1972); State v. Dixon, 5 Or. App. 113, 481 P. 2d 629 (Ct. App. 1971), cert. den. 404 U. S. 1024, 92 S. Ct. 690, 30 L. Ed. 2d 674 (1972); State v. Diaz, 3 Ore. App. 498, 473 P. 2d 675 (Ct. App. 1970); State v. Murphy, 3 Or. App. 82, 471 P. 2d 863 (Ct. App. 1970); Holt v. Simpson, 340 F. 2d 853 (7 Cir. 1965); Lavato v. People, 159 Colo. 223, 411 P. 2d 328 (Sup. Ct. 1966) and cf. People v. Simon, 45 Cal. 2d 645, 290 P. 2d 531 (Sup. Ct. 1955).

Some of the above cases proceed on the rationale that where the arrest and search occur close together in point of time and in reality constitute a single transaction, it does not matter if technically the search preceded the arrest. See State v. Doyle, 42 N. J. 334, 343 (1964). However, the fact remains that these cases are authority for the validation of a search made under exigent circumstances upon probable cause prior to arrest. We think that this is a more appropriate analysis and hold that a search without a warrant may be made if probable cause exists therefor and exigent circumstances are present which, as a practical matter, preclude expenditure of the time necessary to obtain a warrant because of a probability that the suspect or the object of the search will disappear, or both. The exigent circumstances theory better fits this type of case than does an analysis that attempts to fit a pre-arrest search into the category of a search incidental to an arrest. The latter approach seems to us to carry a built-in logical inconsistency. Our holding here is not contrary to State v. Scharfstein, 79 N. J. Super. 236 (App. Div. 1963), aff'd 42 N. J. 354 (1964) or In re State in Interest of D.S., 63 N. J. 541 (1973) adopting dissenting opinion 125 N. J. Super. 278, 283 (App. Div. 1973). In Scharfstein a search was made on nothing more than an anonymous tip. In In re State in Interest of D.S. the search was made on no greater a foundation than that young males were congregating on a corner in an area noted for narcotics activity. As the facts here show, Detective Highsmith was possessed of information that provided a basis for probable cause to believe that defendant was in possession of narcotics.

Affirmed.


author: Kimmelman, J. S. C.

text:
    EVANS-ARISTOCRAT INDUSTRIES, INC., A NEW JERSEY CORPORATION, PLAINTIFF, v. CITY OF NEWARK, A MUNICIPAL CORPORATION, DEFENDANT AND THIRD-PARTY PLAINTIFF, v. PORT AUTHORITY OF NEW YORK AND NEW JERSEY, A CORPORATION, THIRD-PARTY DEFENDANT.
    Superior Court of New Jersey Chancery Division
    Decided July 17, 1974.

      Messrs. Hellring, Lindeman & Landau, attorneys for plaintiff (Mr. David Landau, appearing).

      Mr. Jonathan Kohn, attorney for defendant and third-party plaintiff City of Newark.

      Mr. Francis A. Mulhern and Hugh H. Welsh, attorneys for third-party defendant Port Authority of New York and New Jersey.

      Mr. William F. Hyland, Attorney General of New Jersey, intervenor (Mr. Robert S. Schulman, Deputy Attorney General, appearing).
   Kimmelman, J. S. C.

At issue ¡here is the extent to which the Port Authority of New York and New Jersey (Port Authority) may be subjected to injunction suits sanctioned by the Attorney General of New Jersey pursuant to the discretion vested in him by N. J. S. A. 32:1-161 to waive that agency’s sovereign immunity from suit.

The precise question is whether a private litigant, plaintiff Evans-Aristocrat Industries, Inc., shall be permitted to amend its complaint to assert a mandatory injunction claim against the third-party defendant Port Authority. The Attorney General of New Jersey has moved to intervene in this action for the express purpose of lending his name in order to enable plaintiff to litigate its injunction claim against the Port Authority. Resolution of the issue depends upon an interpretation of N. J. S. A. 32:1-61 which waives the sovereign immunity of the Port Authority in suits, actions or proceedings for orders or decrees restraining, enjoining or preventing the Port Authority from committing or continuing to commit any act or acts only where the Attorney General of Now York or the Attorney General of New Jersey brings such suit, action or proceedings in his discretion on behalf of any person or persons who requests him to do so.

The issue arises in the context of the following factual background as alleged by plaintiff:

1. The Port Authority leases from defendant City of Newark (city) land used and occupied in the operation of Newark International Airport.

2. The lease documents between the city and the Port Authority require the latter, in connection with the expansion of the airport facilities recently undertaken and now being completed, to relocate any existing water main, sewer or drainage ditch deemed necessary, with the proviso that the city approve plans and specifications for any such relocated or redesigned facility.

3. Earthwork, filling and grading undertaken and performed incident to the expansion of the airport is alleged to have altered established drainage patterns in the southeastern sector of the city known as the Waverly District of the municipal sewerage system.

4. In connection with such expansion work the Port Authority constructed a pumping station designed to facilitate the drainage in the Waverly District and to prevent flooding. The pumping station was to assist the preexisting Waverly drainage ditch in carrying water collected from the Waverly District through the airport premises for discharge into Newark Bay.

5. Plaintiff operates a manufacturing plant at 768 Frelinghuysen Avenue in the City of Newark, within the Waverly District area intended to be served by said pumping station.

6. Subsequent to the commencement of the expansion of the airport facilities and following the construction of the pumping station, plaintiff’s plant was flooded and substantially .damaged on two different occasions, first in August 1967 and again in August 1971.

7. Plaintiff attributes the flooding and resultant damage to the alteration of the previously established Waverly District drainage pattern; to the clogging of the Waverly drainage ditch with debris allowed to accumulate by reason of inadequate maintenance; and to the failure by the city and the Port Authority to properly construct a pumping station with adequate capacity to serve the Waverly District.

8. Initially, plaintiff instituted this action against the city for damages caused by the flooding conditions and for a mandatory injunction seeking corrective action.

9. The city impleaded the Port Authority as a third-party defendant seeking contribution in the event the city was called upon to respond in damages.

10. Plaintiff now moves to amend its complaint in order to assert its claim for mandatory injunctive relief against the Port Authority. The Port Authority objects to the amendment against it on the grounds that it is immune from injunction suits except where brought by either the Attorney General of New Jersey or New York pursuant to the provisions of N. J. S. A. 32:1—161.

In this posture of the case, the Attorney General of New Jersey moves to intervene on behalf of the plaintiff with the express intendment that plaintiff’s claim against the Port Authority may be heard on the merits, subject, however, to two qualifications: first, the Attorney General does not intend to conduct any discovery or require time to prepare for trial, and second, the Attorney General does not take nor will he take any position as to the merits of the case.

The Port Authority is “a body corporate and politic,” N. J. S. A. 32:1-4, created by interstate compact between the States of New Jersey and New York, N. J. S. A. 32:1-1 et seq.; McKinney’s Unconsol. Laws of New York, § 6401 et seq., with the approval of Congress. 42 Stat. 174. It is fully owned by the compacting states, Commissioner of Internal Revenue v. Shamberg’s Estate, 144 F. 2d 988, 1000 (2 Cir. 1944), cert. den. 323 U. S. 792, 65 S. Ct. 433, 89 L. Ed. 631 (1945), and has been variously defined as “an instrumentality or agency of the two states,” N. J. S. A. 32:1-25; McKinney’s Unconsol. Laws of New York, § 6451, a joint agency of sovereign states, Marmor v. Port of New York Authority, 203 Misc. 568, 116 N. Y. S. 2d 177, 178 (Sup. Ct. 1952), and an arm and agency of both states. Bush Terminal Co. v. City of New York, 282 N. Y. 306, 26 N. E. 2d 269 (Ct. App. 1940); Port of New York Authority v. J. E. Linde Paper Co., 205 Misc. 110, 127 N. Y. S. 2d 155, 158 (Mun. Ct. of City of New York 1954).

Prior to 1951 the Port Authority was cloaked with absolute sovereign immunity from suit. Port of New York Authority v. Weehawkin Tp., 27 N. J. Super. 328, 333 (Ch. Div. 1953), rev’d on other grounds, 14 N. J. 570 (1954); Trippe v. Port of New York Authority, 14 N. Y. 2d 119, 249 N. Y. S. 2d 409, 198 N. E. 2d 585 (Ct. App. 1964). In that year, by joint enactment of the legislatures of both New York and New Jersey, see McKinney’s Unconsol. Laws of New York, § 7101 et seq. and N. J. S. A. 32:1-157 et seq., prospective consent to suits, actions or proceedings at law or in equity was given with one specific exception as contained in N. J. S. A. 32:1-161 and its New York counterpart as follows :

The foregoing consent does .not extend1 to suits, actions or proceedings for judgments, orders or decrees restraining, enjoining or preventing the Port Authority from committing or continuing to commit any act or acts, other than suits, actions or proceedings by the Attorney-General of New York or by the Attorney-General of New Jersey — each of whom is hereby authorized to bring such suits, actions or proceedings in his discretion on behalf of any person or persons whatsoever who requests him so to do * * *.

Although the legislative history pertinent .to the waiver of the Port Authority’s immunity from suit is meager, the intended purpose in preserving immunity- from injunction suits unless sanctioned by the Attorney General of either state is readily apparent and easily understood. As an instrumentality or agency of New York and New Jersey, the Port Authority was created to effectuate a mutual pledge of cooperation in the future planning and development of the port district. N. J. S. A. 32:1-25; McKinney’s Unconsol. Laws of New York, § 6451. That development is not to be impeded or frustrated by injunction suits brought at the option of private party litigants for whatever reason to them seems proper. Manifestly, the Port Authority is not to be delayed in pursuit of its public mission, with the resultant diversion of its resources, time and attention, unless and until there has been an initial screening of the merits of an injunction suit by a responsible public official. Thus, the legislatures of New Jersey and New York have delegated to their respective Attorneys General the duty to screen proposed injunction suits with the discretionary authority to bring or institute such suits on behalf of any person or persons requesting them so to do. Their discretion is to be exercised with a view to the merits • of the controversy. Unless the Attorney General regards the suit as sufficiently compelling, the action is not to be instituted. This evident legislative policy accords with the judicial policy inherent in civil court rules such as R. 1:4-8 and Fed. R. Civ. P. 11, both oí which generally regard the signature of an attorney on a pleading brought by him as constituting a certification that to the best of his knowledge, information and belief there is good ground to support the pleading and that it is not interposed for delay. Any other construction of the parallel statutes would defeat their purpose and subject the Port Authority to a profusion of obstructive litigation, groundless or otherwise.

The courts view of N. J. S. A. 32:1-161 as above expressed harmonizes with the view expressed by the New York courts in Lewis v. Lefkowitz, 32 Misc. 2d 434, 223 N. Y. S. 2d 221, 223 (Sup. Ct. 1961), aff’d 17 A. D. 2d 778 (App. Div. 1962), and comports with the decree of the New Jersey Supremo Court in Moonachie v. Port of New York Authority, 38 N. J. 414 (1962), that:

Since tlie Authority is an instrumentality of New York and New Jersey, it is eminently desirable, of course, that the path of judicial decision in the courts of the two states be a common one. [at 425]

The qualifications or conditions interposed by the Atiorney General on his motion to intervene in this action evokes these observations:

(a) The Attorney General has not initially brought this action on behalf of a person who requested him so to do.

(b) He seeks to intervene solely to provide a “vehicle” for plaintiff’s assertion of a claim for injunctive relief against the Port Authority because he believes that a political subdivision of the State of New Jersey such as the Port Authority should be responsive to the public and because he believes plaintiff deserves “its day in court.”

(c) He intends to take no position on the merits of the case.

(d) He will file no other pleadings and will take no further action with respect to the course or conduct of the litigation.

It is at once apparent that the Attorney General’s proposed procedure would relieve a private litigant from the bar of the statute, delegate to that litigant the responsibility for the conduct of the injunction litigation, and at the same time remove himself from the merits of the controversy and from the effect his signature on the pleadings would have pursuant to R. 1:4-8.

In the court’s view such limited role on intervention would do violence to the legislative purpose which motivated the enactment of N. J. S. A. 32:1 — 161. Totally lacking here is a positive position on the merits of the controversy. This is clearly called for by the initial screening process required by the Legislature when it reposed discretion in the Attorney General whether or not to bring an injunction suit on behalf of any person. Furthermore, bringing suit on behalf of a person implies that the Attorney General will be the moving party and will conduct the litigation in his own name. That element is likewise lacking. His participation, if any at all, will be minimal. In short, the Attorney General may not abdicate these responsibilities to a private litigant, although his motives be lofty, and still he in compliance with the statute.

Other arguments raised by plaintiff concerning the joinder of individual Port Authority commissioners as skirting the bar of the statute and the unconstitutionality of the statute itself are plainly without merit. Nor may it claim the right to sue for specific performance as a third-party beneficiary of a contract (lease) between the city and the Port Authority. At best plaintiff was an incidental beneficiary who acquired no enforceable rights under the lease. Gold Mills, Inc. v. Orbit Processing Corp., 121 N. J. Super. 370, 373 (L. Div. 1972); Springfield Tp. v. N. J. Highway Dept., 91 N. J. Super. 567, 578 (L. Div. 1966).

For the foregoing reasons plaintiff’s motion to amend its complaint to assert a claim for injunctive relief against the Port Authority and the motion of the Attorney General to intervene are denied.


author: MacKenzie, J. J. D. R. C.,

text:
    ROBERT RAMSHARDT, PLAINTIFF, v. ELEANORA BALLARDINI, a/k/a ELEANORA RAMSHARDT, DEFENDANT.
    Superior Court of New Jersey Chancery Division
    Decided July 22, 1974.

      Mr. James M. Cerra for plaintiff (Messrs. Maraziti, Maraziti and Cerra, attorneys).
   MacKenzie, J. J. D. R. C.,

Temporarily Assigned. Plaintiff Robert Ramshardt seeks an annulment pursuant to N. J. S. A. 3A:34-1(d), alleging that the marriage had been entered into between the parties but that there was “a lack of mutual assent to th emarital relationship.” Defendant failed to appear or otherwise defend herself although she was personally served with process.

The facts are uncontested. Robert Ramshardt, then age 22 years, and Eleanora Ballardini, then age 33 years, entered into a ceremony of marriage on June 23, 1973, approximately one month after they met. Robert married Eleanora as a favor to defendant’s' brother, his close friend. Ballardini explained that his sister Eleanora, an Italian citizen in the United States on a visitor’s visa, was about to be deported to Italy, but that if plaintiff went through the marriage ceremony defendant' would be able to remain in- this country. It is alleged, and the court finds, that “plaintiff’s sole purpose in agreeing to marry the defendant was to prevent her deportation and he did not intend to live with her as man and wife or to consummate the marriage.” Defendant’s intention was the same. In fact, she continued to live with her three children and their father who was also an Italian national. At no time since the marriage ceremony did plaintiff and defendant cohabit or live together as man and wife.

As expressed by the court in Minder v. Minder, 83 N. J. Super. 159 (Ch. Div. 1964), the law in New Jersey is clear that:

Mutual consent of competent parties to assume a marital status is essential to a marriage in New Jersey. A marriage lacking at its inception the contractual element of mutual consent is totally void and not merely voidable, [at 164]

See also United States v. Rubenstein, 151 F. 2d 915, 919 (2 Cir. 1945), where the court stated, in dictum:

It is quite true that a marriage without subsequent consummation will be valid; but if the spouses agree to a marriage only for the sake of representing it as such to the outside world and with the understanding that they will put an end to it as soon as it has served its purpose to deceive, they have never really agreed to be married at all.

See also, McClurg v. Terry, 21 N. J. Eq. 225 (Ch. 1870).

It is clear that in this case, although the parties.intended a valid marriage ceremony, they in no way intended a valid “marital relationship,” to use the words of N. J. S. A. 2A:34-1(d). Accordingly, the marriage herein may be deemed void, and if the plaintiff is not barred by the doctrine of unclean hands, the judgment of annulment may be granted.

The Reform Divorce Law of 1971, N. J. S. A. 2A:34—1 et seq., abolished the defense of unclean hands as it pertained to actions for divorce, but it remains valid with reference to annulments. Although neither party raised unclean hands in this uncontested action, the court is obliged to raise it sua sponie where, “after weighing the equities and the interests of justice and public policy, it believes that plaintiff should not receive the relief requested.” Hansen v. Fredo, 123 N. J. Super. 388, 391 (Ch. Div. 1973). As pointed out, however, in B. v. S., 99 N. J. Super. 429 (Ch. Div. 1968):

“Unclean kands” is not a doctrine to be applied automatically and mechanically; it allows room for equitable considerations arising out of time, place and circumstance, [at 434]

The burden of showing the circumstances and considerations must be placed on plaintiff, and he must show “his innocence of any intentional violation of law.” Tonti v. Chadwick, 1 N. J. 531, 536 (1949). In this ease plaintiff has made the necessary showing. Shortly after the marriage plaintiff repented and filed with the Immigration and Naturalization Service of the United States Department of Justice a sworn statement wherein he set forth the facts which were proven to the court. In that affidavit plaintiff affirmed, as he did in court, that “I know that what I did was wrong and I want to straighten it out.” Defendant was subsequently deported. This court finds that justice would not be served by imposing the doctrine of unclean hands under these circumstances, noting the statement of the Appellate Division in Warrender v. Warrender, 79 N. J. Super. 114 (App. Div. 1963) that:

Certainly, if one of tke guilty parties quickly repented and made application to repair tke wrongdoing, there cannot well be imagined any good reason against permitting it to be done, [at 122]

Judgment of annulment granted.


author: Petrelia, J. C. C.,

text:
    SAMUEL SPORN, PLAINTIFF, v. CELEBRITY, INC., A BODY CORPORATE, DEFENDANT.
    Superior Court oí Netv Jersey Law Division
    Decided May 3, 1974.

      Mr. Barry D. Epstein for plaintiff (Messrs. Boardman & Epstein, attorneys).

      Mr. Barry I. Croland for defendant (Messrs. Shavick, Stern, Schotz, Steiger & Croland, attorneys).
   Petrelia, J. C. C.,

Temporarily Assigned. Plaintiff sued for wrongful discharge from his New Tork employment in violation of an alleged oral one-year employment contract and claimed damages of $9,750 for five months5 salary and $700 as unreimbursed expenses. The jury found in favor of plaintiff on all issues, including the term of the contract being not more than one year.

Defendant moved pursuant to B. 4:49 and B. 4:50 on several grounds for a new trial and for certain other relief, including mitigation of damages as a matter of law, i. e. (1) reduction of the jury award by the amount of New York unemployment compensation benefits received by plaintiff, and (2) for deduction of federal withholding and social security taxes. There was no jurisdictional issue presented and the applicability of New York law was not raised before or during trial. Defendant, after trial, argued that New York law applies to the question of offset or mitigation of damages on a New York unemployment contract.

(The issues raised on the motion for a new trial have been considered by the court and denied in an oral decision. Except for the matters herein, the discussion of those issues has been omitted.)

One legal issue appears novel in New Jersey and warrants consideration. That is, whether the defaulting or breaching party to an employment contract can, in addition to the usual mitigation of damages, require, as a matter of law, abatement or mitigation by the amount plaintiff received from unemployment compensation. Application of the “collateral source rule” to funds received from unemployment compensation by a wrongfully discharged employee in a contract action does not appear in any New Jersey reported opinion and has been scantily commented on elsewhere.

Although Evid. B. 9(3)(a) would allow judicial notice of New York law, the court was not furnished with an adequate or timely basis for taking notice of New York law and has applied the law of the forum. Under Evid. R. 9(3) the court can apply New Jersey common law and public policy. See Donnelly v. United Fruit Co., 75 N. J. Super. 383, 397 (App. Div. 1962), aff’d 40 N. J. 61 (1963), and Breslin v. Liberty Mut. Ins. Co., 125 N. J. Super. 320, 326 (Law Div. 1973). Donnelly held that New Jersey law governed where an employee sued for wrongful discharge, and challenged the refusal of his employer to arbitrate his claim, and for inducing him to resign by means of an unfulfilled promise, and the New York law was not pleaded or notice thereof given at or before the pretrial conference.

Parenthetically, New York has apparently not dealt specifically with the issue of whether unemployment compensation benefits received by employees may be offset against an employee’s claim for damages. Hence this court can look to New Jersey law. The general New York mitigation rule is stated in Silinsky v. State-Wide Ins. Co., 30 App. Div. 2d 1, 289 N. Y. S. 2d 541, 546-547 (App. Div. 1968): “It is the policy of New York to prevent double recoveries and unjust enrichment by an injured party.” But even if it is concluded New York would probably apply that general minority rule as to collateral payments on mitigation, this court need not follow it if the public policy of the State of New Jersey would be violated.

New Jersey follows the majority rule in the United States today, that receipt of benefits from a source collateral to the defendant, while lessening the effect of the financial losses of plaintiff, will not diminish damages otherwise recoverable from the wrongdoer in tort cases. Thus, for example, gratuitous medical care, continued salary or wage payments, proceeds from insurance policies, or welfare and pension benefits, are not taken into account in computing damages. Benefits from such collateral sources conferred on the victim of a tort have not been applied in mitigation against the gross amount of damages recovered. Long v. Landy, 35 N. J. 44, 55-56 (1961) (insurance benefits); Cornish v. North Jersey St. Ry. Co., 73 N. J. L. 273 (Sup. Ct. 1906) (insurance benefits); Skillen v. Eagle Motor Co., 107 N. J. L. 211 (Sup. Ct. 1930) (gratuitous payments by relatives); Rusk v. Jeffries, 110 N. J. L. 307 (E. & A. 1932) (pension benefits). See also, Kurta v. Probelske, 324 Mich. 179, 36 N. W. 2d 889, 893 (Sup. Ct. 1949) (unemployment compensation); Annotation, “Receipt of Public Relief or Gratuity as Affecting Recovery in Personal Injury Action,” 19 A. L. R. 2d 557 (1951); Annotation, “Collateral Source Rule,” 75 A. L. R. 2d 885 (1961); and cf. Note, “The Mitigating Effect on Damages of Social Welfare Programs,” 63 Harv. L. Rev. 330 (1949).

There are two lines of opinion as to whether unemployment compensation should diminish a contract damage award. Defendant relies on the Wisconsin case of Dehnari v. Waukesha Brewing Co., 21 Wis. 2d 583, 124 N. W. 2d 664, 669-671 (Sup. Ct. 1963) (contract action), in arguing for sueh mitigation. See also United Protective Workers v. Ford Motor Co., 223 F. 2d 49 (7 Cir. 1955).

The reasons generally stated for requiring such damage mitigation may be summarized as follows:

1. That the theory of damages is to provide compensation and make plaintiff whole, that is, to put him in the same position he would have been had there been no breach (the usual rule under the contract measure of damages) or to restore him as nearly as possible to where he was before the injury (the tort measure of damages).

2. That refusing to allow mitigation would allow plaintiff to make a profit above that which he would have been entitled to had there been no breach.

3. That the damages would exceed the compensatory measure of damages unless mitigation was allowed.

4. That where compensation is from unemployment compensation “insurance” purchased by defendant-employer alone (as is the ease in New York) or where the employer’s share (as in New Jersey where both employer and employee contribute) can be calculated or determined, there would be no reason to refuse mitigation as to the amount paid by the employer since it is to that extent a benefit purchased by the employer to benefit the employee.

5. That unemployment benefits are paid not from a collateral source but from a fund supported by the employer who has in effect purchased insurance for those of his employees who might be discharged or otherwise unemployed and that mitigation is not incompatable with unemployment compensation statutes which have as their purpose tiding the worker over a temporary period of unemployment.

6. That recovery of compensatory damages would reward plaintiff for losing his job. Obviously this would not apply where the job loss was not due to plaintiff’s fault.

The contrary view is expressed in Lambert v. Equinox House, 126 Vt. 229, 227 A. 2d 403 (Sup. Ct. 1967) (unemployment compensation in employment contract).

The reasons generally stated against requiring such damage mitigation in an employment contract case may be summarized as follows:

1. That in addition to providing compensation, there is a “punitive” aspect where a defendant has wrongfully, though not necessarily willfully, breached a contract and that defendant must pay, rather than the general public. This is an aspect of the collateral source rule which recognizes as one of the consequences a punitive aspect, but not necessarily considered as punitive damages.

2. That to allow mitigation would result in a windfall to defendant and that it is better to allow plaintiff to profit than to lighten the obligation of a defendant by the reduction of '.his liability.

3. That defendant should not profit from a benefit administered by the State as a socially desirable program.

4. That even in workmen’s compensation a tortfeasor cannot obtain reduction for benefits paid under a state compensation plan, although by statute the employer’s workmen’s compensation insurance carrier may get subrogation in any third-party action.

5. It would be inconsistent to relieve the contract-breaking employer of responsibility for his actions. (It could be argued, however, that once the discharged employee has received the benefits to which he is entitled, the liability of the employer for wrongful discharge should he tried at the suit of either the employer or the compensation fund, and the judgment applied to reimbursement of the fund with any excess of recovery going to the employee. This would be a policy question for the legislature.)

6. That to allow such mitigation would vitiate the purpose of unemployment compensation legislation in New Jersey, and since there is no provision for subrogation in New Jersey, this would make it less expensive for employers to breach a contract as to persons covered by such program, than it would for those not covered by unemployment compensation.

7. That payments from the unemployment compensation fund should not be regarded as wages received from employment.

It is submitted that the rationale applied in a case involving the breach of an employment contract, which also may have fault elements, should be the same as applied in a tort action. The philosophy requiring mitigation of damages is the same. McGraw v. Johnson, 42 N. J. Super. 267, 274 (App. Div. 1956). Mitigation is always a matter to be considered where contract damages are in issue. Roselle v. LaFera Contracting Co., 18 N. J. Super. 19, 28 (Ch. 1950). In Miele v. McGuire, 31 N. J. 339, 350 (1960), referring to public employees, it was held that contract damages may be mitigated by actual earnings or by that which could have been earned elsewhere. The Miele case does not consider collateral source items that might reduce the judgment, such as unemployment compensation or federal income tax deductions. In Roselle v. LaFera Contracting Co., supra, (18 N. J. Super, at 28), the standard for measuring damages and mitigation in a breach of employment contract dispute was stated to be the difference between the wrongfully discharged employee’s salary for the term, less any wages the employee earned from other employment or that he could have earned if he had used proper effort to secure an alternative position. In applying this standard, the court did not contemplate further deductions for collateral payments to the claimant. Industrial Union of Marine and Shipbuilding Wkrs. v. American Dredging Co., 202 F. Supp. 940, 944 (E. D. Pa. 1961), applied the same standard and also did not discuss mitigation by reason of plaintiff’s receipt of social welfare benefits.

In Busik v. Levine, 63 N. J. 351 (1973), app. dis. 414 U. S. 1106, 94 U. S. 831, 38 L. Ed. 2d 733 (1973), a Challenge to the validity of R. 4:42-11 (6) on several grounds, including the denial of equal protection by granting prejudgment interest in tort eases only, the court recognized a distinction between tort actions and other types oí actions:

To begin with, tort actions are a distinctive class of litigation having a special impact upon the administration of the judicial system in terms of volume . . . Further, problems of this kind may be met in stages or on the basis of intensity. Hence it is no solid objection that a rule, whether announced in a judicial opinion or in a rule of court, does not go as far as it might. Finally the adoption of the rule does not foreclose holders of other unliquidated claims from contending the circumstances which attend their scene are so like the circumstances here involved that interest should also be allowed them. (Citations omitted). (03 N. J. at 374).

The opinion also referred to liquidated claims and held that the former rule distinguishing liquidated and unliquidated claims was outdated as far as interest on judgments was concerned. Busik v. Levine, supra at 358-359. This approach signifies that judicial rules of practice can be expanded to meet necessity as the occasion arises and that contract and tort judgments can be treated similarly.

Cases from other jurisdictions which reject such contract mitigation do so on the basis that the benefits received were* intended to alleviate the, distress of unemployment, not to diminish the amount which a defaulting or breaching employer must pay as damages iu making whole a wrongfully discharged employee. Lambert v. Equinox House, Inc., supra; Billetter v. Posell, 94 Cal. App. 2d 858, 211 P. 2d 621, 623 (D. Ct. App. 1919); Bang v. International Sisal Co., 212 Minn. 135, 141, 4 N. W. 2d 113, 116 (Sup. Ct. 1942). N. J. S. A. 43:21-2 declares the policy:

As a guide to the interpretation and application of this chapter, the public policy of this state is declared to be as follows: economic insecurity due, to unemployment is a serious menace to the health, morals, and welfare of the people of this state. Involuntary unemployment is therefore a subject of general interest and concern which requires appropriate action by the legislature to prevent its spread and to lighten its burden which now so often falls with crushing force upon the unemployed worker and his family. The achievement of social security requires protection against this greatest hazard of our economic life. This can be provided by encouraging employers to provide more stable employment and by the systematic accumulation of funds during periods of employment to provide benefits for periods of unemployment, thus maintaining purchasing power and limiting the serious social consequences of poor relief assistance. The legislature, therefore, declares that in its considered judgment the public good, and the general welfare of the citizens of this state require the enactment of this measure, under the police powers of the state, for the compulsory setting aside of unemployment reserves to be used for the benefit of persons unemployed after qualifying periods of employment.

As stated in. Sweeney v. Bd. of Rev., 43 N. J. 535, 539 (1965), and numerous other cases: “The Unemployment Compensation Law seeks to ameliorate the impact of involuntary unemployment.”

Defendant relies on a second line of authority for the contrary view, that damages are to he regarded as compensatory only and that the collateral source rule is inapplicable in contract controversies. See Dehnart v. Waukesha Brewing Co., supra, and United Protective Workers of America v. Ford Motor Co., supra. In contrast, the present case involves wrongful contract breaking, the antithesis of the policy sought to be fostered by the Yew Jersey Unemployment Compensation Act which penalizes employers with high unemployment rates or high turnover with increased contributions to the fund.

Dehnart and United Protective Workers are not absolute in their holding and are distinguishable. Dehnart v. Waukesha Brewing Co., supra (124 N. W. 2d at 670) relies on United Protective Workers v. Ford Motor Co., supra (223 F. 2d at 53), which stresses the distinction between the philosophy of damages in tort as punitive and in contract as compensatory. The jury in this case found not a good faith breach of an employment contract due to an erroneous interpretation, but a wrongful breach justifying the award of full damages.

Furthermore, United Protective Workers refers to the discretion of the N. L. R. B. to deduct unemployment compensation payments in any case where it would best effectuate the purposes of the act. The public policy of the New Jersey act is to help achieve a measure of social security by relieving economic insecurity due to involuntary employment through no fault of the employee. Bogue Elec. Co. v. Bd. of Review, 21 N. J. 431, 435 (1956). The Unemployment Compensation Law is designed to serve the general public interest and not alone the interest of the unemployed and is to be liberally construed to further its remedial and beneficent purposes. Campbell Soup. Co. v. Bd. of Review, 13 N. J. 431, 436 (1953). The spirit and intent of the law is to allow benefits to alleviate the misfortunes of unplanned disruptions in employment, including the circumstances of plaintiff in this case. If unemployment benefits are to be deducted from any judgment awarded, it would become a deterrent for individuals in plaintiff’s situation to sue for damages and provide an incentive for an employer to deliberately breach a contract and gain the benefits of the collateral source payments.

The court, therefore, concludes that the reasons for denying mitigation are more persuasive and that an employer should not have a benefit conferred upon him when he is the wrongdoer, although he partially paid for the unemployment benefits (or, perhaps fully paid for them in New York). In no event should he receive the benefit of that share of the payments attributable to any contributions of the employee. Compare the discussion in Long v. Landy, supra (35 N. J. at 56), with regard to disability insurance in tort actions. Reducing recovery by the amount of the benefits received by plaintiff would be granting a windfall to defendant by allowing him an undeserved credit on his own wrongdoing from a source never so intended. In balancing these conflicting principles New Jersey courts have tended to permit what might appear as a form of double recovery by a plaintiff under such circumstances rather than allow reduction of the damages to be paid by the defendant wrongdoer. As stated in Theobald v. Angelos, 44 N. J. 228 (1965):

* * * the law does not frown upon a greater satisfaction if there is no threat to the public interest or unfair advantage taken of another. So an injured party may recover fully from a tortfeasor for personal injuries notwithstanding that much of his loss was covered by contractual arrangements, such as for example an accident or life insurance policy. * * * In any event the tortfeasor must discharge his obligation in full; the problem of over-satisfaction in such circumstances concerns only the parties to the contract and perhaps also the State itself, [at 239; citations omitted]

If the concern is to prevent a windfall to the employee, then the remedy would appear to lie in legislative action to provide a system of subrogation or reimbursement of the appropriate government agency. See Note, 63 Harv. L. Rev. at 336.

Defendant’s motion to reduce said award of wages owed by amounts received from unemployment compensation payments is denied.

      The court need not decide item (2), whether the jury award for salary was eomx>ensation or salary subject to federal withholding and FICA amounts, since the parties agreed plaintiff would assume responsibility for paying any taxes required by law.

      New York unemployment benefits are paid entirely by employer contributions, while in New Jersey the employee also contributes. Compare N. Y. Labor Law §§ 570, subd. 1 and 570, subd. 6 (McKinney’s Consol. Laws, c. 31, 1965), and N. J. S. A. 43:21-7(e). The employer’s experience usually affects the rate of employer contribution under the law.

      N. J. S. A. 34:15-40.


text:
    JOHN FASINO AND CHERYL FASINO, TR/A SEVEN ELEVEN STORE NO. 11461, PLAINTIFFS-RESPONDENTS, v. MAYOR AND MEMBERS OF THE BOROUGH COUNCIL OF THE BOROUGH OF MONTVALE, A MUNICIPAL BODY CORPORATE OF THE STATE OF NEW JERSEY, DEFENDANT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Submitted November 7, 1973
    Decided November 19, 1973.
    Before Judges Halpern, Matthews and Bisc.tiopf.

      Messrs. Randall, Randall & McGuire, attorneys for appellant.

      Mr. William, Sellinger, attorney for respondents.
   Per Curiam.

The judgment is affirmed for the reasons expressed in the opinion of Judge (now Justice) Pashman in the Law Division. 122 N. J. Super. 304.

Affirmed.


author: Lynch, J. A. D.

text:
    LAKEWOOD TOWNSHIP MUNICIPAL UTILITIES AUTHORITY, A MUNICIPAL BODY, PLAINTIFF-RESPONDENT, v. SOUTH LAKEWOOD WATER COMPANY, A NEW JERSEY CORPORATION, DEFENDANT-APPELLANT. SOUTH LAKEWOOD WATER COMPANY, A NEW JERSEY CORPORATION, PLAINTIFF-APPELLANT, v. LAKEWOOD TOWNSHIP MUNICIPAL UTILITIES AUTHORITY, A MUNICIPAL BODY IN THE COUNTY OF OCEAN, DEFENDANT-RESPONDENT. SOUTH LAKEWOOD WATER COMPANY, A NEW JERSEY CORPORATION, PLAINTIFF-APPELLANT, v. LAKEWOOD TOWNSHIP MUNICIPAL UTILITIES AUTHORITY, A MUNICIPAL BODY, AND THE TOWNSHIP OF LAKEWOOD, IN THE COUNTY OF OCEAN, STATE OF NEW JERSEY, A MUNICIPAL BODY, DEFENDANTS-RESPONDENTS.
    Superior Court of New Jersey-Appellate Division
    Argued June 10, 1974
    Decided July 17, 1974.

      Before Judges Collester, Lynch and Michels.

      Mr. Frank R. Ciesla argued for appellant (Messrs. Giordano, Halleran & McOmber, attorneys).

      Mr. James J. Jeck argued for respondent Township of Lakewood.

      Mr. Alan J. Pogarsky argued for respondent Lakewood Township Municipal Utilities Authority.
   The opinion of the court was delivered by

Lynch, J. A. D.

In these consolidated cases South Lakewood Water Company (water company), appeals from various orders entered in the Law Division, arising out of the exercise by the Lakewood Township Municipal Utilities Authority (Authority) of an option granted to the Township of Lakewood (township) under a 1962 township ordinance to purchase the physical assets of the water company. Separate suits were instituted respectively by the Authority (Docket No. L-2085-73PW — hereafter “case 2085”), and by the water company (Docket No. L-1829-73PW — hereafter “case 1829”). Said suits were consolidated and appear here as Docket No. A — 1231—72. A third suit (Docket No. L-11181-73PW — hereafter “case 11181”) was instituted by the water company against both the Authority and the township. It is here as Docket No. A-1386-73. All appeals have been consolidated.

In case 2085 the Authority filed a complaint against the water company alleging that, having been organized by the townsh p pursuant to N. J. S. A. 40 :14B-1 et seq., it lawfully exercised an option to purchase the water company’s a.sets as referred to in the 1962 ordinance; that the water company rejected its offer of $1,690,000; that the Authority had appointed Howard T. Bosen (Bosen) as its “arbitrator” pursuant to the ordinance; that the water company had appointed John Fellows as its “arbitrator,” and prayed that (a) a third arbitrator be designated and (b) for a declaration that the ordinance, properly construed, established the valuation procedure to be that of “arbitration,” as distinguished from “appraisement.” The water company’s motion to dismiss the complaint in case 2085 was denied by the trial judge.

In case 1829, the water company filed a complaint against the Authority, asserting that, while the Authority had purport d to exercise the option, it was the township which had the opt on and not the Authority. The complaint further asserted that the appointment of Bosen by the Authority was invalid. The water company sought a judgment declaring that the exercise of the option by the Authority was inva'id.

By way of a second count in case 1829, the water company alleged that, assuming that the Authority did have the right to appoint an “appraiser,” the obligation was to appoint a “qualified” appraiser, and Rosen was not qualified. The water company thereupon sought a declaration that the Authority be directed to appoint a qualified appraiser. The Authority’s motion to dismiss the complaint in 1829 was granted by the trial judge.

In case 11181, the water company filed a complaint against both the Authority and the township wherein it alleged that since, by order of October 15, 1973, the trial judge had ruled that (a) the Authority had the right to exercise the option, and (b) the right to select Rosen as an “arbitrator,” it followed that the water company had an obligation to two independent bodies, namely, both the Authority and the township. Since that was so, the water company sought a declaration that: (a) both the Authority and the township would be bound by the decision of a board of “appraisers”; (b) on transfer to the Authority of its assets, the water company would be entitled to be paid by both the Authority and the township; (c) participation by the water company in the arbitration proceedings would satisfy the company’s “arbitration” obligations, and (d) both the Authority and the township would be bound by the decision of the board of arbitrators and would be bound .to pay the award of the “majority” of the board of appraisers.

The various allegations and contentions made in these three suits generated the issues which were decided by the trial court and here can be reduced on this appeal to: (1) whether the Authority had the right to exercise the option to purchase the company’s assets; (2) whether the 1962 ordinance, properly construed, provided that the valuation process shall be by “arbitration” proceedings or “appraisement,” and whether the appointment of Rosen was valid, and (3) whether both the township and the Authority would be bound to pay for the company’s assets and, if so, whether a declaration to that effect should be made at this time.

Said issues were disposed of by the trial court by orders dated October 15, 1973, December 5, 1973 and January 16, 1974 (in cases 2085 and 1829), and February 8, 1971 (in case 11181).

In its appeal the water company contends that the trial court erred in (1) holding that the Authority had the right to exercise the option; (2) designating the valuation proceedings as “arbitration” rather than “appraisement,” and in holding that the appointment of Eosen was valid, and (3) refusing “at this time,” as the trial court said, to determine whether both the township and the Authority would be liable to the water company for payment of its assets.

I.

The right of the Authority to exercise the option.

On November 27, 1962 Lakewood passed an ordinance granting the water company a franchise to supply water for the township. Section 8 of the ordinance provided:

The Township of Lakewood shall have an unlimited continuing option to purchase all of the assets of the South Lakewood Water Company or its successors and assigns. It is understood that this option is irrevocable. The option to purchase shall include all of the assets of the South Lakewood Water Company, including land, plants (whether softening, aeration, aeration treatment or otherwise), wells, pumping stations, collecting reservoirs, basins, plant equipment, pumping equipment, general equipment, transmission mains and accessories, service pipes, meters, fire hydrants, and any other tangible assets together with any and all franchises, water diversion rights and any other rights which may be the property of the South Lakewood Water Company. The option shall not include any equipment or assets required solely for the operation of a water company outside of the Township of Lakewood. The purchase price shall be the value of the physical assets of the corporation. No allowance of any kind shall be made for the goodwill or friendship of the said corporation or for any intangible asset or assets of the corporation in [sic] the event that the parties cannot agree on the purchase price in accordance with the above formula then and in the [sic] event the purchase price, pursuant to the above mentioned formular [sic] shall be determined Tty a hoard of three disinterested, competent appraisers, one to be appointed by the Township of Lakewood, one to be appointed by the South Lakewood Water Company or its succes sots or assigns, and the third to be appointed by two arbitrators so appointed. The decisions of a majority of the Board of Appraisers shall be binding upon the parties. The selection of the Board of Appraisers shall be made within ten days after written notice shall be served upon the South Lakewood Water Company that the Township Committee of the Township of Lakewood desires to exercise said option.
The option to purchase the assets of the South Lakewood Water Company shall be binding upon the South Lakewood Water Company, the successor's and assigns. It is further understood and agreed that in the event that the South Lakewood Company should desire to sell its water company the Township of Lakewood shall have the first option to purchase same upon the same terms and conditions as the South Lakewood Water Company is willing to sell to a third party. In the event that the Township of Lakewood does not exercise said option, it is understood and agreed that the continuing option to purchase as herein provided shall still remain in full force and effect and shall be binding upon all of the successors of the South Lakewood Water Company. [Emphasis supplied]

On appeal the water company argues that it is totally, unreasonable to rule, as the trial court did, that the Authority had the right to exercise the option and at the same time refuse to determine “at this time” that the township would still be liable for the purchase price of the company’s assets. It is contended that the company should be entitled . to rely on the credit of the township rather than that of the Authority alone, and that the effect of the trial court’s ruling is to permit the township to avoid its obligations under the 1962- ordinance.

The township created the Authority for the purposes set forth in N. J. S. A. 40:14B-1 et seq. While it did not expressly assign to the Authority the option to purchase, N. J. S. A. 40:14B-20(5) provides that a municipal authority may:

[i]n the name of the municipal authority but for the local unit or units and subject to the limitations of this act, * * * acquire by purchase, gift, condemnation or otherwise, or lease as lessee, real property and easements therein, necessary or useful and convenient for the purposes of the municipal authority, and subject to mortgages, deeds of trusts or other liens, or otherwise, and * * * hold and * * * use the same, and * * * dispose of property so acquired no longer necessary for the purposes of the municipal authority; * * *. [Emphasis supplied]

The Authority is the alter ego of the municipality in providing water and sewer service. Darrah v. Eversham Tp., 111 N. J. Super. 62, 65 (App. Div. 1970). It is an agency and instrumentality of the municipality creating it. Jordan v. Zidel, 40 N. J. 244, 248 (1963). See also Camden County v. Pennsauken Sewerage Auth., 15 N. J. 456 (1954). Therefore, even though there was no express formal assignment by the township to the Authority of the right to exercise the option, the right passed to the Authority by virtue of the cited statute. The trial court’s action to the same effect is therefore affirmed.

II

Should there he a declaration “at this time” as to whether (a) the township and (6) the Authority is liable to pay for the assets of the Water Company?

(a)

As to the township

As to the township, appellant contends that the trial court’s refusal to declare “at this time” that the township will be liable for the purchase of the company’s assets, in effect, relieves the township of its obligations pursuant to the ordinance. We disagree. As we have noted, all that the trial court did was to refuse to rule on that issue “at this time.” The court’s reasoning was that when the time comes to pay for the assets of the water company, the Authority may be able to satisfy that obligation. In that event, since the company will have been paid, the issue as to the township’s liability would be academic. If, on the other hand, the Authority was unable to satisfy the obligation, the issue as to the township’s liability could then be. determined. We agree with the trial court’s view and affirm its action in that respect.

00

As to the Authority

The unqualified exercise of an option creates a binding, bilateral executory contract of sale. West Caldwell v. Caldwell, 26 N. J. 9, 26 (1958).

In Castle Creek Water Co. v. Aspen, 146 F. 8 (10 Cir. 1906), it was held that once a municipality had notified a water company that it intended to exercise its option to purchase its assets, a binding contract was in effect and the municipality could not then refuse to go through with the arbitration provided for in the contract. See also Camden Sewer Co. v. Mayor, etc., of Salisbury, 166 Md. 436, 171 A. 75 (Ct. App. 1934); Rockport Water Co. v. Inhabitants of the Town of Rockport, 161 Mass. 279, 37 N. E. 168 (Sup. Jud. Ct. 1894).

Since we have held that the Authority had the right to exercise the option, it is clearly liable to pay for the purchase of the water company’s assets. We see no reason for withholding adjudication to that effect. The trial court erred in refusing to determine “at this time” the liability of the Authority. In that respect, the trial court’s action is reversed.

Ill

Were the valuation proceedings “arbitration” or “appraisement” ? Was the appointment of Bosen valid?

The Authority in its suit (case 2085) requested a decision from the Law Division that the proceedings contemplated were “arbitration” rather than “appraisement.” On the other hand, the water company, in the second count of its case 1829, sought a declaration in effect that the valúation proceedings were “appraisement.” The trial judge held that the proceedings were “arbitration” and ultimately Messrs. Kosen, Conway and Weisenfeld constituted the board of arbitration to determine the value of the water company’s property.

The distinction between “arbitration” and “appraisement” is significant. It is pointed out in 5 Am. Jur., Arbitration and Award, § 3 at 520, 521:

An agreement for arbitration ordinarily encompasses the disposition of the entire controversy between the parties upon which award a judgment may be entered, whereas an agreement for appraisal extends merely to the resolution of the specific issues of actual cash value and the amount of loss, all other issues being reserved for determination in a plenary action before the court. Furthermore, appraisers are generally expected to act on their own skill and knowledge ; they may reach individual conclusions and are required to meet only for the purpose of ironing out differences in the conclusions reached; and they are not obliged to give the rival claimants any formal notice or to hear evidence, but may proceed by ex parte investigation so long as the parties are given opportunity to make statements and explanations with regard to matters in issue. Arbitrators, on the other hand, must meet together at all hearings, they act quasi-judicially and may receive the evidence or views of a party to the dispute only in the presence, or on notice to, the other side, and may adjudge the matters to be decided only on what is presented to them in the course of an adversary proceeding.
Whether the procedures required are those of an arbitration or of an appraisal is to be found from the intent of the disputants or from the character of the questions and issues to be answered, or both. However, where the agreement so contemplates, the results of an appraisal may be just as binding as the award of arbitrators.

In Sanitary Farm Dairies v. Gammel, 195 F. 2d 106, 113 (8 Cir. 1952), it was held that where parties to a contract, before a dispute and in order to avoid one, provide for a method of ascertaining the value of something related to their dealings, the provision is one for an appraisement and not for arbitration. In that case a stockholder brought suit against a corporation for specific performance of a contract to repurchase common stock. The contract gave the stockholder an option, without limitation in time, to resell the corporation stock at a set value. The agreement provided that in the event of the inability of the parties to agree upon eanrngs an audit should be made by an independent auditor and that his determination on earnings would be controlling. The stockholder exercised the option but was unwilling to accept the determination of earnings made by the accountants employed by the company, and the parties then selected Ernst & Ernst to make an audit for the purposes of the contract. The issue, of course, was the nature of the proceedings, the court concluding that under the circumstances of that case an appraisal was involved and under Minnesota law the appraisal is conclusive upon the parties.

A somewhat similar result was reached in Pintard v. Irwin, 20 N. J. L. 497, 509 (Sup. Ct. 1845), wherein Justice Carpenter, in delivering one of the opinions in the case, noted that under the agreement there involved an appraisal of value was intended by the parties. The court there distinguished between appraisement and arbitration, pointing out that the submission did not have the final ending of the controversy as its immediate object. It was but the reference of a collateral fact — the submission of a particular question, forming only a link in the plaintiff’s case. The appraisement substituted the judgment of the referee in the place of evidence, leaving the controversy open, and while it may be that the report was necessary as a part of plaintiff’s case, a recovery could not be had on the appraisement alone. The court also pointed out that while the appraisement had several of the characteristics of an arbitration, it still fell short of the principal feature, which is the ending of the controversy. The court noted that an appraisement could be likened to the purchase of an article under an agreement to pay what another party says it is worth. In Pintará, the parties had entered into a lease of the premises with the understanding that if the premises were sold,_ plaintiff, who had planted and cultivated the land, should be remunerated, not by the repayment of his expenses but by the payment of one-half of the appraised value. The parties, then submitted the controversy to appraisers whose evaluation was binding upon the parties as an “appraisement.”

Our more modern cases point out that since a submission to arbitration is essentially a contractual matter, the parties are bound to the extent of their contract. The courts also hold that arbitration is favored by our courts and that arbitration should be compelled in proper situations. In Keppler v. Terhune, 88 N. J. Super. 455 (App. Div. 1965), the contract involved was a lease with an option to the lessee to purchase the land at any time for the fair market value. The lease further provided that if the parties could not agree as to the fair market value, then the land would be appraised by a competent real estate expert and if the appraisal would not be satisfactory to both parties, each party would then choose “an Arbitrator,” and submit the matter to arbitration. In Keppler the owner argued that the determination of the fair market value of land was not an issue arbitrable under the statute. The court disagreed and held that it did constitute an arbitrable issue under the provisions of our arbitration statute, N. J. S. A. 2A:24—1 et seq. But the issue was whether arbitration was preferable to litigation — not whether it should rather be “appraisement” which would, if binding, avoid litigation.

In Omaha v. Omaha Water Co., 218 U. S. 180, 30 S. Ct. 615, 54 L. Ed. 991 (1910), the issue was whether a contract between a municipality and a water company for the purchase and sale of a water works system which provided that the property was to pass “at an appraised valuation which shall be ascertained by the estimate of three engineers,” contemplated an appraisal or an arbitration. The court held that it was an “appraisal.” It said :

An arbitral ion implies a difference, a dispute, and involves ordinarily a hearing and all thereby implied. The right to notice of hearings, to produce evidence and cross-examine that produced, is implied when the matter to be decided is one of dispute and difference. But when, as here, the parties had agreed that one should sell and the other bny a specific thing, and the price should be a valuation fixed by persons agreed upon, it cannot be said that there was any dispute or difference. Such an arrangement precludes or prevents difference, and is not intended to settle any which has arisen. This seems to be the distinction between an arbitration and an appraisement. though the first term is often used when the other is more appropriate.

It is true that there is some ambiguity in the language of the 1962 ordinance here involved with respect to whether “arbitration” or “appraisement” was contemplated. It speaks of “appraisers,” “two arbitrators,” and twice refers to “Board of Appraisers.” In Annotation, “Arbitration to Fix Price or Damages,” 157 A. L. R. 1286 (1945), the general rule of construction of contracts for the proposed purchase or sale of property is said to be: if all differences between the parties have been resolved and all matters adjusted except the price to be paid, the selection of a third person or persons to determine the price, in the absence of indications to the contrary, is held to contemplate a reliance on the individual judgment of such person or persons, particularly if they are selected because of their special knowledge of the subject matter, and so creates duties ministerial in nature as distinguished from judicial, and indicates an act of “appraisal” rather than “arbitration.”

We conclude that the ordinance here, directing the selection of “competent” appraisers is to be construed as an act of “appraisement” rather than “arbitration.” The order of the trial court directing that the Authority has the right to select one “arbitrator” of its choice, holding that Rosen is a “qualified arbitrator to serve in the arbitration proceedings herein” and that he and Fellows be directed to select a third “arbitrator” to complete the makeup of the “Board of Arbitrators,” is reversed.

CONCLUSION

It is ordered:

(1) The Authority had the right to exercise the option under the 1962 ordinance and the Law Division’s order of October 15, 1973 to that effect and dismissing count I in ease 1829 is affirmed.

(2) The order of October 15, 1973, insofar as it provided that Rosen is a “qualified arbitrator” and dismissing count II in case 1829, is reversed. We make no ruling as to Rosen’s qualification in the event that he is hereafter appointed as an “appraiser.”

(3) The orders of October 15, 1973 and January 16, 1974, insofar as they hold that the valuation proceedings contemplated by the 1962 ordinance were to be “arbitration” proceedings, and directing that three arbitrators be appointed and that they proceed to evaluate the water company’s assets, are reversed, and it is ordered that three qualified appraisers be appointed to conduct an “appraisement” of the assets pursuant to the ordinance. Accordingly, the said orders, insofar as they deny the motion of the water company to dismiss the complaint in Case 2085, are reversed and the complaint therein is dismissed.

(4) The order of the Law Division in case 11181, entered on February 8, 1974, in refusing “at this time” to declare that the township would be liable for the purchase price of the water company’s assets is affirmed.

(5) The action of the Law Division in refusing to determine “at this time” that the Authority would be liable for the purchase price of the assets is reversed and it is adjudged that it would be so liable pursuant to the terms of the 1962 Ordinance.

(6) Cases 1829 and 11181 are remanded to the Law Division for proceedings in accordance with the views expressed herein.

We do not retain jurisdiction.

      The distinction between Township and Authority creates an issue in this ease.

      As will be seen, whether an “arbitrator” or “appraiser” was to be appointed is another pivotal issue.

      It appears that no formal order to this effect was entered, but the court’s oral determination evinces this intent.