author: Conrord, S. J. A. D.

text:
    IN THE MATTER OF THE ESTATE OF ANNA G. DUNNING.
    Superior Court of New Jersey Appellate Division
    Argued June 10, 1968—Decided
    August 20, 1968.
    Before Judges Conford, Labrecque and Fulop.

      Mr. Richard 8. Hyland argued the cause for appellant Elva Dunning, executrix of the estate of Charles R. Dunning (Messrs. Hyland, Davis <& Reberhenny, attorneys).

      Mr. Peter E. Driscoll argued the cause for respondent Elizabeth E. Beckham, executrix of the estate of Anna G. Dunning (Messrs. Archer, Greiner, Hunter & Bead, attorneys; Mr. John G. Womack, on the brief).
   The opinion of the court was delivered by

Conrord, S. J. A. D.

Defendant Elva Dunning is the surviving spouse and executrix of the estate of Charles Dunning, deceased, he being one of three conditional legatees named in the will of their mother, Anna Dunning, to share equally in the assets to be passed under the residuary clause thereof. The other two are plaintiff Elizabeth E. Beckham, executrix of that will, and Archibald E. Dunning. This matter comes to us. on defendant’s appeal from an order of the County Court directing distribution of the residuary estate in equal shares to plaintiff and Archibald Dunning.

A detailed exposition of the pertinent facts is necessary for a full understanding- of defendant’s appellate arguments.

The will here involved made specific provisions for the three children of testatrix, the residuary clause thereof, paragraph THIRD, providing:

“All the rest, residue and remainder of my estate, I give, devise and bequeath absolutely and in fee to my issue per stirpes. In the event that any child of mine predeceases me or dies prior to receiving his or her share of my estate, without leaving issue surviving, then the share of the child so predeceasing shall be divided, per stirpes, between my surviving children and issue of deceased children.”

At her death on September 16, 1966 testatrix’ residuary estate consisted of shares of stock in the Philadelphia National Bank, valued at $7,590, and several bank accounts, worth in the aggregate approximately $17,000. The will was probated and plaintiff qualified as executrix September 37, 1966. She made partial distribution of the residuary estate in November 1966, delivering to each of the other two of testatrix’ children, including defendant’s decedent, and to herself, a one-third share of the stock certificates. Charles’ shares, at his request, were made out to himself and his wife jointly. A New Jersey transfer inheritance tax return and a fiduciary income tax return were filed by plaintiff shortly thereafter, each .representing that testatrix’ three surviving children were testamentary beneficiaries.

On May 9, 1967 plaintiffs attorney forwarded to her several copies of a release, refunding bond and an informal account; the attorney directed that in advance of distribution of the remainder of.the residuary estate each of the three ehildren-beneficiaries should execute a release and refunding bond, which recited receipt of $5,234.58, and give written consent to the informal account. Pursuant to her brothers’ requests, plaintiff “took [the documents] to [her] office [in Philadelphia] and photostated everything they wanted photostated. * * * [She] took them home with [her], put them together, took them to the office, and mailed them in the post office the following day.” Although plaintiff had received the documents from her attorney on May 10, 1967, they were not mailed to her brothers until May 18, 1967. The delay was due in part to “household duties. I do all my own work. That comes first.”

Charles Dunning received and read the papers on Friday, May 19, 1967, but although he was satisfied with them he did not sign them, as he was at that time preoccupied with plans for a family wedding scheduled for the next day. Charles and his wife attended the wedding on Saturday, May 20, 1967, and shortly after their return home Charles suffered a massive coronary attack and was taken to Delaware County Memorial Hospital in Pennsylvania, where he was placed in the intensive care unit. Plaintiff received a call from Elva Dunning at 11 p.m. that night, May 20, advising of Charles’ illness. She was told he was not allowed to receive any visitors but his wife.

By Sunday morning, May 21, 1967, Charles’ condition had taken a turn for the better; he was laughing and joking and crhe asked [Elva] to bring in the papers so that he could sign [them, but she] just wouldn’t do it, [because of his condition J.” Sunday evening Elva telephoned plaintiff again and this time told her she could visit her brother the next day, Monday the 22nd. Plaintiff did visit that day but did not bring with her the estate check for Charles’ share because, she said, “why would I bother a man as ill as that with a check ?” and she “never gave the check a thought.” Plaintiff said she did not expect Charles to die; her other brother, Archibald, had had a similar attack several years before and had recovered completely.' Charles, still hospitalized, suffered a second heart attack on Monday evening; May 22, 1967, and at 12:10 a.m., Tuesday morning, May 23, 1967, he died, without leaving issue.

Plaintiff learned of Charles’ death by telephone at 1 a.m. Tuesday morning (May 23), and during the day she paid a condolence call to Elva at her home. While there she told Elva that her attorney had asked her to have Elva return the release and refunding bond, as the papers would “have to be all changed.” Plaintiff testified that in the late evening of that same Tuesday she made out checks to herself and to Archibald Dunning, each passing a one-third share in the residuary estate bank accounts. She numbered Archibald’s check as number 9 and her own as number 11. The stub for check 10 was marked void. Plaintifl testified this was because there had been some kind of error on that check, but she could not remember specifically what. It was not her intention, she said on cross-examination, to make that check out to Charles.

Plaintiff in due course filed a complaint in Camden County Court, Probate Division, seeking approval of her first and final account and an order of distribution “directing that the remaining estate assets be distributed in accordance with paragraph THIRD of the will to the two surviving children of ANNA G-. DUNNING, deceased.” Defendant contested the proposed distribution, asserting that she in her representative capacity was entitled to a one-third share of the residuary estate. After hearing the. arguments of counsel the County Court entered judgment as requested by plaintiff.

The court reasoned and concluded that: (1) Charles Dunning had predeceased actual payment of his gift (delivery of the estate check), and that with clauses of the type of paragraph THIRD here, actual payment of the legacy is the measure of receipt, i. e., it is actual payment which the conditional legatee must survive in order for his gift to vest; (2) the equitable principle of constructive delivery, regarded in In re Laise’s Estate, 18 N. J. Super. 395 (App. Div. 1952), as invocable on a certain showing to avoid lapse of a gift notwithstanding the conditional legatee’s death preceded actual distribution of his share, would not be applicable here for “there was no evidence adduced which would indicate that Elizabeth E. Beckham did not act with due diligence as executrix or that she engaged in any untoward activity which would demonstrate purposeful delay of the settlement of the estate * *

Much litigation has taken place over testamentary gifts which condition vesting on the event of the beneficiary’s surviving to receive the gift or to distribution or payment thereof, or words of similar import. See Annotation, 142 A. L. R. 136 (1943). The editor of the cited work summarizes the cases (at p. 137) to reflect the view that in the absence of a clear indication that the testator intended that there should be an indefeasible vesting only if the legatee should survive to an actual receipt of the request, the courts will predominantly construe the gift over as having reference to death before the gift is de jure payable, rather than before actual receipt.

One New Jersey case seems to follow the foregoing approach, Rusch v. Melosh, 133 N. J. Eq. 502 (Ch. 1943), affirmed o. b. 134 N. J. Eq. 409 (E. & A. 1944). There the testator gave his wife a gift of certain realty and one-fourth of his personalty in lieu of dower, but subject to the condition that should she die “prior to the distribution of my estate” her share should fall into the residuary estate. Testator died October 17, 1937. The date of probate does not appear. The wife died July 30, 1941. There was some litigation by and against the estate, bnt the court found that by April 1, 1940 the amount of assets in the estate had been determined, all creditors fully paid, and the executors were in a position to have filed their inventory and final accounting. It further concluded that nothing transpired from that date until the wife’s death which would have prevented such filing. “I believe those records could and should have been filed.” (133 N. J. Eq., at p. 505). It was deemed appropriate to apply the maxim that equity regards as - done that which should have been done (Ibid.).

But the opinion in Bmch then proceeded to shift its rationale to the thought that the testator should be regarded as having intended that “distribution” would take place at the end of the one-year statutory period (now 18 months after probate, N. J. 8. 3A :25-l) by which legacies were payable, regardless of whether circumstances developed in the interim which might prevent actual distribution within that period (at pp. 507-508).

Two much earlier decisions of our courts give comfort to the concept that in a clause of the type here involved constructive receipt of the testamentary gift prior to the death of the donee will be adjudicated when the gift is administratively ready for distribution prior to such death. Miller v. Colt, 32 N. J. Eq. 6 (Ch. 1880), affirmed o.b. 33 N. J. Eq. 362 (E. & A. 1880); Joseph v. Utitz, 34 N. J. Eq. 1 (Ch. 1881). The tenor of these opinions, both by Chancellor Runyon, is that the stated criterion would be applicable without regard to the length of time which transpired after testator’s death and before the donee died; but any such reading of the eases must take into account the circumstance that in each ease donee’s death in fact occurred later than the then one-year statutory period for payment of legacies. Cf. Cook v. McDowell, 52 N. J. Eq. 351 (Ch. 1894); Bonnell v. Bonnell, 47 N. J. Eq. 540 (Ch. 1890), both hostile to the idea of defeasance of the conditional donee’s bequest by death prior to actual distribution.

In the most recent New Jersey case on the point, In re Laise’s Estate, supra (18 N. J. Super., at p. 339), the court read the Miller, J oseph and Busch cases as controlled by the fact of lack of due diligence in administration and settlement of the respective estates.

In Laise where the testamentary language couching the condition read, “In the event of the death of my mother * * * prior to the distribution to her of her one-third equal part * * and death took place after the expiration of the ' statutory distribution period, but there was no default of diligence in administration, the court held that other provisions of the particular will made manifest the intention of the testator that the event of “distribution” in the critical clause had reference not to the date of expiration of the statutory period for distribution but solely the time when distribution could have been made in the exercise of due diligence in settling the estate. There being no assertion of absence of due diligence, the court affirmed an adjudication of lapse of the gift.

See for a discussion of all the cases 6 N. J. Practice (Clapp, Wills and Administration) § 661, pp. 202-04 (1962).

The foregoing review indicates that there has been no reported New Jersey case, and the parties have cited none elsewhere, clearly holding for constructive receipt by a donee in the case of a comparable clause where the donee died before actually receiving the gift and earlier than expiration of the statutory period for payment of legacies. In In re Powers’ Estate, 98 N. Y. S. 2d 457 (Surrog. Ct. 1950), affirmed O’Malley’s Will, 278 App. Div. 638, 103 N. Y. S. 2d 122 (App. Div. 1951), the court held there was a lapse where the conditional donee lived only six weeks after probate of the will. But it did not there appear that the estate was ready for distribution prior to donee’s death. A possibly different result was arrived at in In re Estate of Taylor, 66 Cal. 2d 855, 59 Cal. Rptr. 437, 428 P. 2d 301 (Sup. Ct. 1967). Probate was November 26, 1963; the conditional donee died March 15, 1965. She was ill and had been asking the executor for distribution for some time. A hearing on the executor’s petition for distribution had been set for March 29, 1965. The court held that the estate could easily have been distributed before the donee’s death and therefore the donee’s interest would be adjudicated vested notwithstanding a statute providing that a condition precedent in a will shall prevent vesting until the condition is substantially fulfilled except where fulfillment is impossible.

We find it unnecessary here to determine whether, as a general rule (absent a clear indication of the testator’s intention, one way or the other, from the will or extrinsic circumstances), constructive receipt by the conditional donee will be adjudicated short of the 18-month statutory period merely for the reason that the estate was, or should have been, ready for distribution prior to the donee’s death.

Preliminarily, we cannt say that there is sufficiently clear indication of the testatrix’ actual intent. The testamentary clause itself, while it sounds in tones arguably inferential of an intent to keep the residuary estate in the blood line of the testatrix, does not strongly persuade us that in a juncture such as was here actually presented the testatrix would have wanted to defeat her son’s obvious desire that his widow take his share, practically in his hands before his untimely death. The clause is a fairly standard per stirpes disposition. There are no extrinsic circumstances indicative of hostility or unfriendliness between testatrix and Charles’ wife. We may assume that the natural propensities of the average parent include the furtherance of a son’s normal desire for the financial protection of his wife after his death. Note that Charles immediately put the bank shares earlier distributed to him in the joint names of himself and the defendant.

But the cornerstone of our conclusion that Charles’ gift should not be deemed to have lapsed is the fact that the mechanics for its transmission to him was in actual course of operation, by the initiative of the executrix, well before his death. Her attorney had instructed her to pay it out. All that remained to be done was an exchange of a signed refunding bond and release for a check. The bond and release had been sent to Charles for execution. He was satisfied with the documents. Plaintiff and brother Archibald got their checks the very day of Charles’ death. Solicitude for Charles’ condition when stricken by the heart attack was the reason advanced by plaintiff for not bringing him the estate check she was about to disburse to him and may have already drawn. (“Why would I bother a man as ill as that with a check?”) Yet that very solicitude turned out to become the causative instrumentality for the here asserted voiding of Charles’ inheritance when death suddenly followed the remission in his condition. We cannot believe that in this peculiar set of circumstances a defeat of the bequest would subserve either the interests of justice or the wishes of the testatrix could they be known. We hold-that in legal contemplation, for purposes of construction of the will, Charles received the bequest prior to his death.

Judgment reversed.

       The court said the “normal’- period for estate administration is seven months. 98 N. Y. S. 2d, at p. 459.


source: Caselaw Access Project

author: Per Curiam.

license: Public Domain

text:
    JERSEY DOWNS, INC., A CORPORATION OF THE STATE OF NEW JERSEY, PLAINTIFF, v. THE DIVISION OF NEW JERSEY RACING COMMISSION, DEPARTMENT OF THE TREASURY, STATE OF NEW JERSEY, DEFENDANT.
    Superior Court of New Jersey Appellate Division
    Argued August 23, 1968
    Decided August 27, 1968.

      Before Judges Ooneord, Lewis and Collester.

      Mr. Charles J. Milton argued the cause for plaintiff (Messrs. Milton, Keane & DeBona, attorneys; Messrs. David P. Donnelly and John Wefiing, on the brief).

      Mrs. Marilyn L. Schauer, Assistant Attorney General, argued the cause for defendant (Mr. Arthur J. Sills, Attorney General of New Jersey, attorney; Mr. Blias Abelson, Deputy Attorney General, of counsel; Messrs Samuel D. Bornstein and Stephen Weiss, Deputy Attorneys General, on the brief).
   Per Curiam.

This appeal has been brought to review the refusal of the New Jersey Bacing Commission to process for consideration an application by appellant filed July 31, 1968 for an original permit to conduct a harness race meeting in the Township of North Bergen, County of Hudson. The refusal was based on the advice of the Attorney General that under N. J. S. A. 5 :5-39.1 the Commission was without authority in the matter.

The cited section of the racing law provides, among other things, “that the same public question [whether race meetings shall be permitted in a county] shall not be submitted to the legal voters of the same county oftener than once in five years.” A referendum occasioned by a provisional permit granted appellant by the Commission in 1967 for a harness race meeting in the Town of Secaucus, Hudson County, was defeated at the general election that year as a result of an adverse poll thereon by the voters of Secaucus, although approved by the voters of the county at large. This had the effect of defeating the 1967 application, as the statute requires a county referendum as a condition of ratification of any provisional original permit granted by the Commission, and further declares that in the event that a majority of the votes cast in either the county or the municipality where the race meeting is proposed to be held shall have been cast against the public question the provisional license shall be cancelled. N. J. 8. A. 5:5-39.1.

Appellant has mounted several constitutional attacks against the statute as interpreted by the Attorney General, and initially suggests these questions can be avoided if the statutory five-year moratorium aforementioned is held not applicable on the ground that the proposed 1968 referendum would concern a different “public question,” because involving a track in a different municipality from Secaucus. This approach cannot be indulged as the statute itself (N. J. 8. A. 5:5-39.1) frames the public question for all such referenda as:

“Símil . . . (insert running race meetings or harness race meetings, as the, case may he) be permitted in the county of . . . (insert name of county)?”

The statutory intent is thus seen to be to pose to the county voters the question whether the county should have a race meeting, whether of the “running” or “harness” variety. The fact that only the proposition of a Secaucus meeting was pending before the Commission is irrelevant to the correctness of the thesis that it was the object of the Legislature to have the county voters determine whether there should be a race meeting in the county. Also irrelevant to the issue as to what public question the voters were passing upon is the circumstance that the Legislature in the same statute ordained for itself (not leaving the matter to the voters, whether of Secaucus or the county) that the pending application should be denied if a majority of the voters, either of the town or of the county, should vote against the public proposition (i. e., whether the race meeting should be permitted in the county).

We also disagree with appellant’s argument that unless • the previously discussed contention is accepted the statute is rendered unconstitutional because it “gives the Town of Secaucus a veto power over Hudson County in determining whether a question concerning harness racing should be placed on the ballot within the next five years.” This effect, so it is argued, amounts to a delegation of legislative power in contravention of the Constitution.

Preliminarily, neither side disputes that no improper delegation of legislative power occurs by mere reason of the fact that a general statute renders its incidence in a subordinate governmental jurisdiction subject to popular referendum of the voters therein. Paul v. Gloucester County, 50 N. J. L. 585 (E. & A. 1888); Noonan v. Hudson County, 52 N. J. L. 398 (E. & A. 1890); Two Guys from Harrison, Inc. v. Furman, 32 N. J. 199, 231 (1960). But appellant contends that here there is the fatal flaw that the Legislature has delegated to the Secaucus voters the determination whether or not there shall be a five-year moratorium in the entire county.

We are satisfied that the Attorney General provides the dispositive answer to the contention when he points out that it is the Legislature itself, and not the voters of Se-caucus, which has established the moratorium. There is not a word about any moratorium in the public question voted upon by the Secaucus voters—which question, as noted above, is, by express direction of the Legislature, whether there shall be a harness race meeting in Hudson County. The distinct identity and nature of the five-year hiatus in referenda declared by the Legislature, as contrasted with the nature and object of the particular referendum held in 1967, is highlighted by the circumstance that under the statute the moratorium applies whether or not the initial referendum carries. There is an absolute, unqualified prohibition of a submission to the voters of “the same public question” more often than once in five years. In other words, there could not be a referendum for a race meeting anywhere in Hudson County for five years even if the 1967 referendum had passed. We find no merit in appellant’s argument that the moratorium is intended to apply only in the event of a defeat of the initial referendum.

It is of course true that by virtue of the concomitantly operative legislative cancellation of a provisional permit in the event of a defeat of the public question by the voters of either the municipality or the county, the practical effect of the defeat of the question by the Secaucus voters in 1967, in combination with the legislative prohibition of a referendum in a county more often than once every five years, was to preclude any other race meeting in the county for five years. But this is a far cry from condemning the statute on the asserted constitutional ground that the Legislature has left it to the Secaucus voters to vote upon and determine the question, as formulated by appellant’s brief, whether “the voters of Hudson County [shall] be faced with a public question during the next five years concerning the running of a harness race meeting.” This was not the question posed to the Secaucus voters in 1967, either in form or substance. The statute itself absolutely forbade any further referenda for five years, regardless of how the 1967 referendum came out. Even were the statute construed (improperly—we believe) as imposing the moratorium only in the event of a defeat of a referendum, it would still be unsound to say that the voters of Secaucus, rather than the Legislature, had decided the question of the incidence of the moratorium.

The out-of-state cases cited by appellant are all plainly distinguishable on their facts and require no discussion.

We point out, incidentally, that appellant makes no argument (indeed, concedes the contrary) that there was any invalidity in the statutory provision for cancellation of the 1967 permit by reason of the adverse poll of the Secaucus voters.

Appellant next urges that the statute arbitrarily creates two classes of voters, county voters and Secaucus voters, and gives the latter “veto power” over the former, thereby depriving the former of the equal protection of the laws. Passing the question whether appellant has status to assert the rights of Hudson County voters, the underlying assumption in the argument is that the 1967 referendum “implicitly” posed to the voters the question whether a five-year moratorium should be imposed on race meetings in all of Hudson. We have already indicated our conclusion that this assumption is without foundation. The argument therefore falls.

Apart from the narrow basis for appellant’s argument just discussed, there is no other tenable ground for the position that there was anything invidious, unreasonable or arbitrary about the legislative policy decision for a five-year hiatus between county referenda on horse-race meetings. The business of racing and the legalized gambling attendant thereupon are strongly affected by a public interest, and close legislative regulatory supervision is highly appropriate. State v. Garden State Racing Ass’n, 136 N. J. L. 173, 175 (E. & A. 1947). It was not irrational for the Legislature to give the people of a county a five-year respite between referenda for the establishment of a new racetrack, with all that such an enterprise entails. There is a heavy presumption of validity of the statute, and we do not find it overcome in respect of the argument advanced hy appellant.

Finally, appellant argues that the statutory moratorium, as allegedly triggered by the result of the 1967 referendum, is unconstitutionally violative of the “one man-one vote” principle of the Fourteenth Amendment adjudicated in Reynolds v. Sims, 377 U. S. 533, 84 S. Ct. 1362, 12 L. Ed. 2d 506 (1964), and subsequent decisions along that line. It is asserted that the vote of one Secaucus voter outweighs that of 22 voters elsewhere in the county.

Assuming that the principle of Reynolds v. Sims would in an appropriate instance apply to popular referenda, we are clear that it does not have any pertinence here. We have already been at pains to demonstrate that the Secaucus voters were not vested by the Legislature with the responsibility of deciding whether or not the moratorium should take effect—that this was a policy decision embedded in the statute. The voters of Secaucus were not, by virtue of the statute, placed in any more powerful or determinative position than those of any other municipality in the county insofar as concerns the possibility of race meetings in years subsequent to the initial referendum year. As already noted, appellant elsewhere in its brief expressly concedes the reasonableness of the legislative cancellation of the 1967 permit on the contingency of the adverse poll in the municipality most directly affected. We see no other respect in which there is by virtue of this statute any violation of the “one man-one vote” principle.

The determination of the Racing Commission is affirmed.

        Senate, Bill No. 681 of the 1968 legislative session would have afforded an opportunity for a second application and referendum for a harness track in the same municipality the year following a referendum defeat, but it has failed of passage thus far.


author: Mintz, J. S. C.

text:
    UNITED STATIONS OF NEW JERSEY (US), A CORPORATION OF NEW JERSEY, AND NICHOLAS DEL SPINA, PLAINTIFFS, v. GETTY OIL COMPANY, A DELAWARE CORPORATION, SHELL OIL COMPANY, A DELAWARE CORPORATION, ATLANTIC RICHFIELD COMPANY, A DELAWARE CORPORATION, ALL DOING BUSINESS IN NEW JERSEY; HUMBLE OIL AND REFINING COMPANY, A NEW JERSEY CORPORATION; CLIFTON CREECH, t/a CLIFF’S AUTO SERVICE, INDIVIDUALLY AND AS REPRESENTATIVE OF A CLASS OF RETAIL MOTOR FUEL DEALERS ENGAGING IN SHELL OIL COMPANY’S "AMERICANA” GAME; GEORGE W. SCHUTZ, t/a WERNER’S AUTO SERVICE, INDIVIDUALLY AND AS REPRESENTATIVE OF A CLASS OF RETAIL MOTOR FUEL DEALER’S ENGAGING IN ATLANTIC OIL COMPANY’S “MATCH THE RED BALL” CONTEST; MATTHEW DEROSA, t/a DEROSA FLYING A, INDIVIDUALLY AND AS REPRESENTATIVE OF A CLASS OF RETAIL MOTOR FUEL DEALERS ENGAGING IN GETTY OIL COMPANY’S “MAKE MONEY” CONTEST; AND PETER BONAGURA, t/a REDWOOD ESSO SERVICE CENTER, INDIVIDUALLY AND AS REPRESENTATIVE OF A CLASS OF RETAIL MOTOR FUEL DEALERS ENGAGED IN HUMBLE OIL AND REFINING COMPANY’S "WILD CARD TIGERAMA” CONTEST, DEFENDANTS.
    Superior Court of New Jersey Chancery Division
    Decided August 1, 1968.

      Mr. Donald M. Weilzman for plaintiff Nicholas Del Spina (Messrs. Qlucksman •& Weilzman, attorneys).

      Mr. William P. Reiss for defendant Getty Oil Company (Messrs. Pitney, Hardin <& Kipp, attorneys).

      Messrs. William Simon and Paul E. d’Hedouville of the District of Columbia Bar, for defendant Shell Oil Company (Messrs. Howrey, Simon, Baher <& Murchison, attorneys) and Mr. Verling 0. Enteman for defendants Shell Oil Company and Clifton Creech.

      Mr. Francis E. P. McCarter for defendant Atlantic Rich-field Company (Messrs. McCarter & English, attorneys).

      Mr. James J. McLaughlin for defendant Humble Oil and Eefining Company (Messrs. McLaughlin, Dawes & Abbots, attorneys).

      Mr. Michael D. Loprete for defendant George W. Schütz (Messrs. Mattson, Madden, Potito d Loprete, attorneys).

      Mr. John L. Moore for defendant Matthew De Eosa (Messrs. Moore d Howell, attorneys).

      Messrs. Robert 0. Garofalo and Paul A. Oolwell, Jr. for defendant Peter Bonagura (Messrs. Ryan, Foster d Garofalo, attorneys).
   Mintz, J. S. C.

Plaintiff Nicholas Del Spina operates a Mobil filling station at 460 Main Street, Orange, N. J. His complaint alleges that retail service station dealers are conducting certain giveaway contests in violation of N. J. S. A. 56 :6-2(/) which provides that:

“It shall be unlawful for any retail dealer to use lotteries, prizes, wheels of fortune, punch-boards or other games of chance, in connection with the sale of motor fuels.”

The theory of plaintiff’s suit is that defendants, by promoting and conducting contests which he claims are in violation of the law, are engaging in unfair competition to his injury. His complaint seeks injunctive relief against the named major oil and refining companies and against the named retail dealers, individually and as class representatives for service station dealers throughout the State conducting such giveaway contests and selling motor fuels for said named oil companies.

Prior to trial Del Spina moved for summary judgment which was denied. The opinion rendered in connection with the disposition of that motion is reported as United Stations of New Jersey v. Kingsley, 99 N. J. Super. 574 (Ch. Div. 1968). Therein I held that plaintiff, as a retail dealer, could maintain a common law action of unfair competition against his competitors if he could prove that their conduct violated N. J. S. A. 56:6-2 (/) and was injurious to him. Thus, any possible injunctive relief would be territorially limited to those defendants operating in plaintiff’s competitive area; the scope of the alleged classes of retail dealers would be similarly delimited.

Since the filing of my opinion on plaintiff’s summary judgment motion, defendants Peter Bonagura and Matthew De Rosa have been joined as parties defendant in the capacities of individuals and class representatives of retailers in the competitive area who conduct giveaways and sell products of the Humble Oil and Refining Company (hereinafter Humble) and Getty Oil Company (hereinafter Getty), respectively. De Rosa purchased a Getty station from Anthony Recchia during the course of the litigation and was substituted for him as a defendant. At the trial the action against defendant Schütz, individually and as class representative for retail dealers in plaintiff’s competitive area selling motor fuels distributed by Atlantic Richfield Company (hereinafter Atlantic), was stayed because of his present military service. The complaint of United Stations of New Jersey and the counterclaim filed against it and co-plaintiff Del Spina have been dismissed.

In the approximately 16 months since the filing of the complaint the giveaway contests therein referred to were discontinued for varying intervals and then replaced by other games. Getty’s “Plying Aces” was superseded by “Make Money.” Atlantic’s “Match The Red Ball” was replaced by the current “On The Go.” Humble’s “Tigerama” was replaced by “Winning Ticket.” Shell Oil Company (hereinafter Shell) terminated “Americana” on May 31, 1967 and reactivated it for the period August 25 to November 30, 1967. Its third promotion, “Spell Americana,” started February 1, 1968 and terminated the first week in June 1968. Shell represented at the trial that if it suffers competitive losses as a result of this discontinuance, it proposes to start another type of game.

As I noted in my earlier opinion:

“The contests sponsored by the respective oil companies are the same in principle. No contest requires the public to purchase any merchandise as a condition for participation and no retail service station operator is required to conduct a contest sponsored by his oil company. The oil companies sell to willing retail service station operators quantities of contest tickets or slips and supply these dealers with other promotional materials. Although the profusion of the games has given birth to numerous contest forms, generally if a contestant obtains matching tickets or slips he is entitled to a prize. The lesser cash and consumer goods prizes are paid or dispensed by the retail dealer who is reimbursed by his oil company. The larger prizes are paid or dispensed directly by the sponsoring major oil companies. In most instances the distribution of contest slips is restricted to licensed drivers who enter the retailers’ premises and ask for them, although some companies instruct their participating retailers to issue slips to any service station visitor who requests them.” 99 N. J. Super., at p. 579.

The testimony developed at the trial confirms that observation. Furthermore, participants are required to appear at retail service stations to collect their prizes if they win. Additionally, in some contests one can now become a winner by merely obtaining a single ticket with a winning symbol, and some dealers have apparently arranged for game pieces to be given away at locations other than their own premises. It is undisputed that the various giveaway contests involve no skill on the part of players; winners are determined by pure chance.

On the motion for summary judgment defendants urged that because of the “no purchase necessary” feature of their contests, the contests were not “games of chance” under the intendment of the statute. At trial defendants did not press the point that without consideration—cash or other valuable thing—their contests could not be so classified. The statute of which N. J. 8. A. 56:6-2(/) forms a part is entitled “An act to regulate the retail sale of motor fuels,” N. J. 8. A. 56:6-17. Thus, the purpose of this whole statute is regulation of competitive practices in the retail motor fuel business, and it is from this standpoint that the provision’s prohibition of “games of chance” should be viewed. In my earlier opinion (at p. 586) I quoted from 1 Callmann, Unfair Competition, Trademarks and Monopolies (3d ed. 1967), §31, p. 1056, where the author stated that from a competitive aspect, consideration in a lottery or the like is not only an insignificant element but its absence renders the game device much more effective in attracting attention. For that reason I conclude that despite the “no purchase necessary” feature of defendants’ contests, they are “games of chance” within the meaning of N. J. S. A. 56:6-2(f).

Assuming arguendo that consideration is required under N. J. S. A. 56:6-2 (/), it must be noted that the definition of a lottery in the criminal Lottery Act, N. J. S. 2A :121-6, does not control the trade regulatory provision at issue. 99 N. J. Super., at pp. 585-586. In requiring the participant to visit the retail dealer’s premises, the dealer receives consideration in the expectation that this lure will result in an increase in his motor fuel sales. See Lucky Calendar Co. v. Cohen, 19 N. J. 399 (1955). As will hereinafter appear, this expectation has frequently been fulfilled.

Defendants stress that even if their giveaways are “games of chance,” the fact that participants need not purchase motor fuel in order to enter the contests proves they are not operated “in connection with the sale of motor fuels.” They argue that the only w&j to accord meaning to this phrase is to construe N. J. S. A. 56:6-2 (/) so that the only illegal giveaways in the motor fuel industry are those in which participation is conditioned upon a sale of motor fuel. Moreover, it is their position that the principal purpose of the giveaway promotions it not to effect immediate increases in retail gasoline sales but to attract prospective customers to the stations where they majr be exposed to the service rendered by the respective dealers. If the service rendered the visiting motorist is good, the dealer has a chance to gain a regular customer.

The testimony by Robert L. Berg, Shell district manager for Newark, that the purpose of the games was to stimulate fuel sales, supports plaintiff’s allegation that the “no purchase necessary” feature is a mere shield for the fundamental connection of these games with motor fuel sales. The fact that participating dealers were instructed to gauge their requisitioning of game pieces by the number of gallons of gasoline they usually pumped provides still further support of this link. The proofs also indicate that the respective oil companies, at meetings during which the games were introduced to their New Jersey dealers, emphasized the prospective increases in motor fuel sales to be gained through the use of such contests. This same desire of the sponsoring oil companies to rapidly stimulate motor fuel sales is further evidenced in Atlantic’s “Dealer’s Guide”, distributed as instructions for its “Match the Red Ball Game.” On page 4 the oil company states to its dealers that its giveaway

‘“MATCH THE RED BALL’ is designed to produee SUBSTANTIAL INCREASES IN STATION TRAFFIC AND VOLUME after the first 2-3 introductory weeks.
Experience indicates that you can expect increases of AT LEAST:
50% IN TRAIPFIC
40% IN GALLONAGE”

And on page 5:

“In this promotion running out of envelopes means stopping the promotion temporarily in your station (s). In all probability, customers will go elsew-here and the lost momentum will be very difficult to regain.” (Emphasis supplied)

I am satisfied that the principal purpose of the respective giveaway contests is to effect for the participating dealer an immediate increase in motor fuel sales, to the detriment of his competitor’s business.

The experience of dealers with the games, especially at their inception in 1966 and 1967, confirmed these expectations of the games’ direct and immediate effect on motor fuel sales. Berg of Shell testified that at the outset of the games certain of his company’s dealers enjoy gallonage increases up to 60%, in good measure caused by the games. Representatives for the other oil companies also testified to increases in gallonage when the games are being conducted by their dealers. Leo H. Bilse, a Shell dealer in Orange, testified that on several occasions motorists drove into his service station at a time when he was not sponsoring a giveaway contest and that upon observing that his competitor across the street advertised a game, they left his station without making a purchase and drove into the competitor’s station where they bought motor fuel. Even defendant Clifton Creech, a Shell dealer in West Orange, admitted that when a dealer is not using a game promotion, some of his customers will leave for a station that is using one.

Thus, to some degree the goal of increasing sales set for these games has been accomplished—especially when competitors did not also offer offsetting giveaways—because of the apparent affection of a goodly segment of the public for the games and their willingness to patronize only dealers who conduct them. However, when all or most of the major oil companies sponsor such contests, the games have a somewhat neutralizing effect. When a major oil company discontinues its game, it experiences losses and is competitively forced to reinstitute a giveaway contest. The experience of the individual dealer, who can only use a game when his supplier offers him one, is generally to the same effect.

The history of the games reveals that both suppliers and dealers have become involved in the dilemma caused by giveaways that trade regulatory statutes are intended to obviate. 1 Oallmann, op. cit., § 31, p. 1057. Berg frankly admitted that Shell has no desire to run these giveaway contests—that it does so strictly as a defensive measure to avert sales losses it might incur if it did not operate a game. He also stated that the avergae retail dealer is competitively forced to conduct the giveaway contest lest he suffer a loss of business to those dealers who do so. This observation was confirmed by Francis J. Murphy, an Atlantic dealer in West Orange. He testified that though he considered that the “games are a disgrace to the oil industry” and had declined Atlantic’s second contest, he was “hurting for gallonage” because of his competitors’ giveaways and was impelled to accept Atlantic’s third game offering.

Defendants’ reliance upon the “no purchase necessary” feature as a bar to a finding that the games are used “in connection with the sale of motor fuels,” is untenable. In addition to proof of the purpose and result of the games, the testimony by dealers, including defendants Creech and Bonagura, was that the occasions were rare, or relatively few, when game pieces were distributed by them to non-purchasers of motor fuel. Furthermore, this development was probably anticipated by the sponsoring oil companies. For instance, on page 6 of Atlantic’s “Dealer’s Guide”, dealers were told:

“While it is essential that every station visitor receive an envelope— regardless of whether or not they make a purchase—don’t worry about giving out a lot of envelopes to people who might not intend to do business with you. Experience indicates that the occasional person who stops in for a ‘free’ envelope will probably be back as a customer within the week.”

On page 7 the dealer is advised to pass out envelopes containing the game piece to nondrivers, including children, “But don’t be concerned about this. It won’t happen often and it is good business in the long run. Children generally show envelopes to their praents [parents] and you can expect to see some of these parents at the pumps.”

Getty points to evidence that some of its dealers have distributed game pieces at such places as parking lots, rather than at their premises, for the purpose of showing the lack of “connection” between the games and motor fuel sales. A circular, to which is attached an envelope containing two game pieces, urges recipients to “HHEEY! TABLE THIS CIECULAE WITH YOH TO YOUE PAETICIPATING FLYING A DEALER” to obtain a matching ticket or a prize. The extent of these promotional activities away from the service stations was not indicated, and I cannot assume that it is of any substantial nature.

I am satisfied that defendants’ games as presently used at the service stations, notwithstanding the “no purchase necessary” rule, constitute “games of chance” inextricably connected with the sale of motor fuels. N. J. S. A. 56:6-2 (/), part of an enactment designed to regulate competitive practices in the motor fuel industry, generally seeks to discourage such competitive devices of temptation. By prohibiting these, the legislation protects members of this volatile trade from being forced to accede to the use of these potent, but ethically controversial, competitive devices. As noted earlier, the absence of a requirement of a purchase for participants makes these games of chance even more effective as a trade diverting technique. The fact that participants need not pay in order to participate in a game of chance did not stop the court in State v. Berger, 126 N. J. L. 39 (Sup. Ct. 1941), from affirming a motion picture theatre operator’s conviction under the then prevailing Gaming Act, B. S. 2:135-1 (now N. J. S. 2A :112-1 et seq.). The court said:

“In reaching the stated result we have not overlooked the fact that some 25 or 30 persons were permitted to enter the lobby and play the game without having purchased a ticket of admission. On the contrary, our result is strengthened thereby. For however ingenious, the stated circumstance is nothing other than a subterfuge, a brazen artifice employed for the clear purpose of thwarting the enforcement of the criminal law. The law reaches beyond the outer form and takes hold of the substance of the thing in issue, and consequently no dressing, however adroit, can make legal that which is illegal.” (at p. 43)

Accord, Furst v. A. & G. Amusement Co., 128 N. J. L. 311, 314 (E. & A. 1942). See also Featherstone v. Independent Service Station Ass’n of Texas, 10 S. W. 2d 124 (Tex. Civ. App. 1928); Glover v. Malloska, 238 Mich. 216, 213 N. W. 107, 52 A. L. R. 77 (Sup. Ct. 1927); Jones v. Smith Oil & Refining Co., 295 Ill. App. 519, 15 N. E. 2d 42 (App. Ct. 1938).

I reject the argument that to include “no purchase necessary” giveaways under the ban of N. J. 8. A. 56:6-2 (/) would render nugatory the so-called plain meaning of the statutory phrase “in connection with sale of motor fuels.” This court, like that in State v. Berger, supra, will not be diverted in its construction of the statutory language by mere window-dressing, such as the “no purchase necessary” feature, and will not permit such an element, insignificant in theory and practice, to thwart the statutory purpose.

Defendants argue that somewhat similar promotions have been conducted over the years with approval of the administrative agency charged with the enforcement of the subject statute, and that I should respect this approval. Administrative construction of the relevant statute is entitled to great weight, especially when such construction is substantially contemporaneous with the enactment of the statute and is followed for many years. Essex County Retail Liquor Stores Ass’n v. Newark Board, etc., 64 N. J. Super. 314 (App. Div. 1960); Pringle v. N. J. Dept. of Civil Service, 45 N. J. 329 (1965). However, where that interpretation conflicts with the court’s view of the plain meaning of the language used and the statutory purpose, the court should not hesitate to reject it. Safeway Trails, Inc. v. Furman, 41 N. J. 467, 483 (1964); Kingsley v. Hawthorne Fairies, Inc., 41 N. J. 521, 528 (1964).

In reaching my conclusion that the giveaway contests are violative of N. J. S. A. 56 :6-2 (/), I am also mindful of the First Assistant Attorney General’s opinion of August 1, 1966 given to the Motor Fuels Tax Bureau of the Division of Taxation to the effect that the giveaway promotions “do not appear to be violations of N. J. S. A. 56:6-2 (/). All of the promotions as presently undertaken provide that a participant need not purchase motor fuel. You have not furnished any facts or reports which would indicate a situation to the contrary.” However, he further stated therein that “The applicable law in this regard is not clear or free from doubt * *

The First Assistant Attorney General’s opinion is, of course, entitled to consideration, but as above indicated he expressed his opinion with some reservation and did not have the benefit of the voluminous testimony presented in this case as to the use of the games. Under all the stated circumstances and with due deference for their views, I reject the construction of the subject statute as made by the administrative agency and the First Assistant Attorney General.

Getty urges that N. J. 8. A. 56:6—2 (/) is arbitrary, discriminatory and unreasonable, in violation of the equal protection and due process clauses of the Fourteenth Amendment of the United States Constitution and N. J. Const. (1947), Art. I, par. 1. It is asserted that this subsection, bears no reasonable relation to the purpose for which the act (N. J. 8. A. 56:6-l to 17) was adopted, unless it is interpreted to prohibit only those promotions which require a purchase of motor fuel for participation. Furthermore, Getty argues that insofar as this subsection singles out the retail motor fuel industry, it is unreasonable, unfair and discriminatory.

Initially, it is to be observed that there is a strong presumption of constitutionality of the statute, and the party asserting invalidity must overcome that presumption. Where regulation of a particular type of business is involved and the allegation of unconstitutionality is predicated upon a charge of discrimination, courts uniformly sustain the law if any reasonably conceivable basis exists for separate treatment and if the treatment is not arbitrary or unreasonable. Fried v. Kervick, 34 N. J. 68 (1961); Nebbia v. People of State of New York, 291 U. S. 502, 54 S. Ct. 505, 78 L. Ed. 940 (1934).

It is argued that the essential purpose of N. J. 8. A. 56:6-2 is to prevent destructive price wars, and that it is upon this premise that the constitutionality of subsection 2(e) was upheld in Fried v. Kervick, supra. Subsection 2(e) forbids the use of “rebates, allowances, concessions, or benefits” so as to permit sales below posted prices. Getty contends that subsection 2(f) prohibits another possible means of selling below posted prices, through the use of lotteries and games of chance, and that this subsection has no meaning unless it is construed to forbid giveaway contests only where participation in the games is conditioned upon a purchase of motor fuels. It asserts that if subsection 2(f) is not so construed, then “in connection with the sale of motor fuels” has no meaning and the subsection loses all reasonable relation to the statutory purpose of the legislation, namely, the prevention of price wars. However, in enacting the legislation the Legislature had in mind not only the many problems associated with price wars but also the “various unfair and fraudulent practices engaged in by dealers in selling gasoline to the consuming public.” Fried v. Kervick, supra, at p. 81. As already observed, the legislation of which N. J. S. A. 56:6-2 (/) is a part, is entitled “An act to regulate the sale of motor fuels.” N. J. S. A. 56 :6-17. Hence, the title suggests that the statute is regulatory in nature, and not merely concerned with price alone to the exclusion of all other factors. Subsection 2(g) and (h) of the subject statute are not concerned with the problem of price wars, but in setting other standards of fair competition. Likewise, the Legislature has determined that giveaway contests constitute an unfair means of competition by retail dealers, and in its wisdom by subsection 2 (f) has banned what it considers an unwholesome and perhaps destructive competitive practice.

The evidence indicated that various giveaway promotional contests are used in several other industries. It is asserted that by singling out the retail motor fuel industry, N. J. S. A. 56:6-2 (/) is unreasonably discriminatory. Substantially the same argument was made and rejected in Fried v. Kervick, where the court held that the motor fuel industry was of sufficient importance to be the subject of specific legislation. The Legislature has the authority to regulate an evil associated with any business which for the public good justifies the particular measure of control. “The Legislature is presumed to know the needs of the people and it may draw distinctions based upon degrees of evil without being arbitrary.” Fried v. Kervick, supra, at p. 75. The court there (at page 75) made the further observation that “N. J. S. A. 56 :6-2(e) within its own framework is not discriminatory; it applies equally to all retail gasoline dealers operating in the State.” The same is true for N. J. 8. A. 56:6-2 (f). I conclude that subsection 2 (f) constitutes a reasonable exercise of the police power.

Defendants further argue that plaintiff should be denied equitable relief since his testimony was in several areas incredible, and because he may have threatened a witness respecting his proposed testimony. Plaintiff’s testimony was occasionally contradicted during the course of trial and his credibility on some issues may have been impaired, but not to the extent that should lead me to conclude that he is wholly unworthy of belief and so unclean as to be undeserving of equitable relief. The testimony respecting the alleged threats to the witness Robert E. Pines, Jr. was pure hearsay and of no probative force. Hence, I conclude that plaintiff’s conduct should not debar him from equitable relief.

As was noted earlier, plaintiff’s right to injunctive relief against his competitors for their unfair competition is conditioned upon his proving that their conduct of the giveaway games injured or are likely to injure him. 99 N. J. Super., at pp. 587-588. About two years have passed since the inception of the games, so that if these games were to injure plaintiff’s business, loss would already have appeared. Plaintiff’s proofs show that before he participated in Mobil’s initial giveaway contest in the fall of 1966, he was pumping an average of 26,000 to 27,000 gallons of gasoline monthly. During the period of his participation, he experienced an increase in sales. Upon his discontinuance of the game, plaintiff’s gallonage declined, and the trend con-tinned downward while competitors conducted games to where his gallonage has leveled to an average of approximately 22,000 gallons monthly.

Defendants attempt to rebut this prima facie showing of loss due to the games by contending that plaintiff’s deficient methods of operation, increase of his gasoline prices and other changes of conditions are just as likely causes of plaintiff’s recent loss of gallonage. It is also charged that plaintiff has suffered no injury during this period because his overall business at the Main Street location, which includes a car wash and trailer rental service, has shown increased profits.

There has been no substantial change in plaintiff’s operation of his service station or in the quality of his service in the past two years. Also his overhead has remained the same. Although plaintiff did raise his retail price of gasoline, so did his competitors, and throughout the past two years his prices have been consistent with theirs. Hence, it cannot be said that plaintiff’s price increase in any way contributed to his loss of gallonage. As for his gain in profits while losing gallonage, it may be inferred that to some extent his gallonage loss deprived him of an opportunity to earn even greater profits.

Since plaintiff’s complaint against the use of the giveaways is grounded on a common law theory of unfair competition, the injunctive process must only issue against those defendants who wrongfully compete with him or those who directly aid such wrongful competition. Defendants Bonagura, a Humble dealer, Creech, a Shell dealer, and De Rosa, a Getty dealer, argue that they cannot be enjoined because they are not plaintiff’s competitors

Bonagura’s service station is situate at 486 Prospect Avenue, West Orange, N. J., just beyond a 1%-mile radius from plaintiff’s station. He testified that when the Humble dealer located on Main Street, one block from plaintiff’s station, stopped using a Humble contest and he continued to conduct one, his business increased. Bonagura formerly also operated a Shell station on Main Street, one block from plaintiffs, where he says he attracted customers from the “top of the hill” in West Orange where he is presently located. Commuter traffic patterns tend to corroborate the inference that there is some competition for trade between stations in West Orange at the “top.of the hill” and those in Orange in the “valley.” It appears that local as well as transient trade may have bypassed or is likely to bypass plaintiffs station in order to obtain a game piece at Bonagura’s present station. Therefore, he must be deemed a competitor of plaintiff.

The service station of defendant Creech is located at 1 Harrison Avenue, West Orange, adjacent to the Montclair line, a distance of perhaps two miles from plaintiff’s location. Some traffic to the business centers of Orange and Newark may likely pass or come reasonably close to the Creech station as well as plaintiff’s. The sharing by Del Spina and Creech of a Mr. De Gange, a valued customer of Creech, for a period from 1965 through 1967, lends further support to a finding that they are competitors.

Defendant De Rosa’s service station is located on the corner of Scotland Road and Central Avenue in Orange, about one mile from paintiff’s station. Motor traffic is to some extent common to both stations, and this defendant must be deemed plaintiff’s competitor.

Therefore, defendants Bonagura, Creech and De Rosa, as individual station operators, are enjoined from unfairly competing with plaintiff by using the games.

Undoubtedly, there are service stations supplied by defendant oil companies closer to plaintiff which conduct giveaways that afford keener competition to plaintiff than do those of defendants Bonagura, Creech and De Rosa. Presumably many of these dealers are fellow members with Del Spina in United Stations of New Jersey, originally a co-plaintiff in this action, and the reluctance to join them as defendants is understandable. Plaintiff tried to employ the technique of the class suit—-naming classes of Getty, Shell, Humble and Atlantic dealers and De Rosa, Creech, Bonagura and Schütz as class representatives—to effectuate an injunction against all the unnamed dealers for these oil companies located in his undetermined competitive area. Whether the individual defendant dealers are properly designated class representatives was left unresolved on the motion for summary judgment. This is a spurious class action, and so the class suit device fails to achieve the result sought by plaintiff. The rights sought to be enforced by plaintiff against the respective classes are “several and there is a common question of law or fact affecting the several rights and a common relief is sought.” B. B. 4:36-l(e). As stated in 2 Schnitzel• and Wildstein, N. J. Buies Service, p. A IV-1136, 1137:

“* * * [a judgment in a spurious class action] concludes only those who come or are brought into the proceeding, individually or by intervention. Zaleski v. Local 401. 9 N. J. Super. 206, 209 (App. Div. 1950), citing Professor Moore’s description of such proceedings as ‘an invitation to become a fellow traveller in the litigation, which may or may not be accepted’ by intervention. See N. J. Used Car Trade Ass’n v. Magee, 1 N. J. Super. 371 (Ch. Div. 1948), where used car dealers and an association of such concerns sought an injunction against enforcement of an unconstitutional statute * * *, the injunction granted was limited to the persons who appeared as plaintiffs * *

See also Conover v. Packanack Lake Country Club, 94 N. J. Super. 275, 279 (App. Div. 1967). Hence, no injunction could have bound any member of the respective classes Bonagura, Creech and De Eosa were alleged to represent and no injunction will issue against these three dealers .as class representatives.

Defendant major oil companies stress that N. J. S. A. 56:6-2 (/) applies only to retail dealers and that they are not retail dealers or agents for retail dealers. They refer to my earlier opinion in which I indicated that injunctive relief if granted to plaintiff against his competing neighboring retailers would give him the complete relief to which he would be entitled. But, after hearing the testimony and reviewing the applicable law, I am impelled to the conelusion that for his most effective relief plaintiff is entitled to an injunction against the defendant major oil companies.

The testimony indicated that the dealer exercises complete control over his own service station business and that his participation in the games from a legal point of view is purely voluntary. Realistically, however, as Berg testified, it has been thought a competitive necessity for one major oil company to sponsor such giveaway contests to combat another’s, and for the average dealer to participate in the game promoted by his oil company. The dealer obtains the game pieces from his oil company at charges varying from one cent to two cents a piece. The oil company supplies him with free advertising material for the game to be displayed at the dealer’s service station. As already noted, Getty, Shell and Humble stations give minor cash prizes to the winners for which the oil companies reimburse the dealers. Where the prize exceeds $5 or $10, as the case may be, an oil company representative for Getty or Humble appears at the dealer’s service station and personally presents the winner with a company check. Shell apparently remits its check to the dealer for delivery to the winner. A supplier of the Atlantic contest’s major prizes delivers them to the dealer and is in turn reimbursed by Atlantic. The oil companies’ indispensable involvement in the giveaway contests is obvious. Although the statute, N. J. S. A. 56 :6~2(f), upon which plaintiff’s unfair competition claim is based, is directed against only retailers, it is apparent that defendant oil companies are in fact the moving force in the violation of the statute and the unfair competition against plaintiff. Clearly, then, such activities in the conduct of the giveaway games in plaintiff’s competitive area should be enjoined. Accordingly, the most appropriate relief against defendant oil companies it to enjoin them from the further issuance of game pieces or from participating in any way in the issuance of game pieces to the service station dealers within plaintiff’s competitive area.

It is difficult to define plaintiff’s competitive area with any degree of precision. The testimony indicated that some motorists will by pass a service station not using a game and go out of their way to patronize a service station dispensing one. There were varied estimates given respecting plaintiff’s competitive area, but it would appear that his essential competition is confined to the municipalities of Orange and West Orange. The oil companies will be enjoined from supplying retail dealers with game pieces in those municipalities.

In reaching this conclusion, I have considered the special reasons advanced by Atlantic why it should not be enjoined. It urges that Del Spina in his deposition testified that he could not specifically ascribe any of his loss of business to Atlantic’s game. At the trial Del Spina testified that he could not pinpoint his losses to any one gamp, since he does not know to which service stations his customers have been diverted. There are Atlantic service stations located in plaintiff’s competitive area. Hence, it is likely that plaintiff has lost and will continue to lose some patronage to these service stations using Atlantic’s games. Atlantic also contends that it should not be enjoined because there is no class representative defendant for its dealers presently before the court. But as already noted, no injunction will issue as against any class representative for any oil company. Furthermore, there was testimony respecting Atlantic’s direct involvement and participation in the contests with its dealers. Thus Atlantic is in the same position as the other defendant oil companies, and will be subject to the same injunctive process to the extent indicated.

I am mindful that several oil companies and their retail dealers, which are presently sponsoring and using giveaway contests in plaintiff’s competitive area, are not defendants in this litigation. As a consequence of this deficiency, and the limited injunctive relief granted, many dealers may continue to use the games to the disadvantage of those enjoined, or to the disadvantage of those dealers in Orange and West Orange who no longer can obtain game pieces. I am, however, hopeful that this decision respecting the illegality of these games of chance will quickly lead to uniform respect for, and enforcement of, the law.


author: Botter, J. S. C.

text:
    ELIZABETH A. SALSMAN (FORMERLY ELIZABETH A. ODGERS) INDIVIDUALLY AND AS ADMINISTRATRIX OF THE ESTATE OF ARTHUR J. ODGERS, DECEASED, PLAINTIFF, v. NATIONAL COMMUNITY BANK OF RUTHERFORD, A BANKING CORPORATION OF THE STATE OF NEW JERSEY. DEFENDANT AND THIRD-PARTY PLAINTIFF, v. HAROLD BRESLOW AND THE FIDELITY AND CASUALTY COMPANY OF NEW YORK, THIRD-PARTY DEFENDANTS.
    Superior Court of New Jersey Law Division
    Decided June 7, 1968.

      Mr. James L. R. Lafferty and Mr. James L. McXeon, Jr. for the plaintiff (Messrs. Lafferty, Rowe, McMahon •& Mc-Xeon, attorneys).

      Mr. William R. Morrison for defendant (Messrs. Morrison, Lloyd & Griggs, attorneys).

      Mr. Louis Auerbacher, Jr. for third-party defendant The Fidelity and Casualty Company of New York.
   Botter, J. S. C.

Plaintiffs, payee and special indorsee of a check, sue defendant collecting bank for applying the proceeds of the check to the account of an attorney, Harold Breslow, who improperly indorsed the check. The parties have waived trial by jury and have submitted to the court the issue of defendant’s liability based upon various stipulations, depositions, affidavits and admissions. Defendant has sued third-party defendants Harold Breslow, who has defaulted, and The Fidelity and Casualty Company of New York, for indemnification on a bond. The third-party action is not presently before the court.

In May 1965 plaintiff Elizabeth A. Odgers (now Elizabeth A. Salsman) retained an attorney, Harold Breslow, to handle matters arising out of the death of her husband, Arthur J. Odgers. Breslow was recommended to Mrs. Odgers by her personal physician, Dr. S. It is stipulated that Breslow enjoyed a good reputation in the community at that time. Arthur J. Odgers had been an officer and stockholder in a company in which he had a one-third interest. He participated in the company’s profit-sharing plan and had designated his wife as sole beneficiary. In payment of benefits under the plan, Mrs. Odgers received a cashier’s check of the First National City Bank made out to her order in the amount of $159,770.02. The check is dated August 13, 1965. Breslow then informed Mrs. Odgers that the check was not hers but belonged to the estate and that the proceeds must be held in a separate account for payment of taxes and other purposes. Mrs. Odgers was told by Breslow that the cheek “must be put in the estate account of Arthur Odgers.” Breslow testified that at no time did he indicate or inform Mrs. Odgers that the money was to go or would go into his attorney’s trust account.

Breslow wrote on the back of the cashier’s cheek “Pay to the order of Estate of Arthur J. Odgers.” He requested Mrs. Odgers to indorse the check in this fashion, and she did so. Under this special indorsement, when he was no longer in the presence of Mrs. Odgers, Breslow wrote, “Estate of Arthur J. Odgers—for deposit Harold Breslow, Trustee.” Under this purported indorsement Breslow’s secretary then wrote, “For deposit Harold Breslow Trustee.” Mrs. Odgers had no knowledge of the subsequent indorsements. The check was then sent by mail to defendant National Community Bank of Butherford for collection, and the proceeds were collected and deposited in Breslow’s’ general trustee account. Defendant bank did not inquire into the authority of Breslow to indorse the checks for the estate. There was no estate account in defendant’s bank, although Mrs. Odgers had qualified as administratrix of the estate on July 9, 1965.

From August 1965 until March 1966 Mrs. Odgers inquired of Breslow on many occasions as to the status of the profit-sharing funds. She was anxious to have the funds invested so that she could use the income for current expenses. Breslow put her off with a variety of delaying tactics and misrepresentations. Ultimately he told her the funds were invested in Treasury notes. As time passed Mrs. Odgers became more suspicious and began to investigate the disposition of the funds. In March 1966 she called defendant bank to get information concerning the alleged Treasury notes. The bank advised her that there was no record of an account for the estate of Arthur J. Odgers. Mrs. Odgers then contacted another attorney and he assisted her in further investigation. She obtained a copy of the original check from the First National Bank in New York City. She took the check to several lawyers for their advice. An appointment was then made with Breslow for March 30. On that date, at his office, Breslow confessed to Mrs. Odgers and her present husband, Salsman, that he had appropriated the funds to his own use, but that he had some money left in his account. They immediately took Breslow to defendant bank where he paid over to Mrs. Odgers funds which were still in his account. Later that day Mrs. Odgers and Salsman went to Salsman’s attorney who called defendant concerning the matter. Attached to exhibit DN-1 is a copy of a letter dated April 1, 1966 sent by an attorney on behalf of Mrs. Odgers to defendant demanding reimbursement of the funds received on collection of the check. Mrs. Odgers was also advised to file a criminal complaint against Breslow, and she did so promptly. Breslow has since pleaded guilty to the charge of embezzlement and misappropriation of funds (N. J. S. 2A:102-5) and is presently serving a prison sentence. He also resigned from the New Jersey Bar. In April 1966 Mrs. Odgers started an action against Breslow and on June 3, 1966 obtained a judgment in her favor. Some monies were recovered by execution on that judgment. The balance not yet recovered is $117,437.43.

Defendant bank contends that it is not liable under any provision of the Uniform Commercial Code; that Mrs. Odgers was negligent, that she ratified the acts of Breslow, and that N. J. 8. 3A :41-7 exonerates the bank for any misapplication of funds by Breslow. The bank contends that Breslow had the power to negotiate the check as agent or fiduciary under N. J. 8. 12A :3-117, that the bank became a holder in due course of the check, and that N. J. 8. 12A :3-406 bars recovery because of the alleged negligence of Mrs. Odgers in substantially contributing to the making of an unauthorized endorsement. The bank also relies on N. J. 8. 12A :3-404 to claim that Mrs. Odgers ratified the unauthorized signature of Breslow. It apparently contends that Mrs. Odgers ratified the application that Breslow pretended to make of the monies, but in its brief concedes that she did not ratify his embezzlement (i. e., personal use) of the funds.

In the absence of defenses such as negligence, estoppel or ratification, the payee of a cheek is entitled to recover against a bank making collection from the drawee based upon a forged or unauthorized indorsement of a check. Gast v. American Casualty Co. of Reading, Pa., 99 N. J. Super. 538 (App. Div. 1968); Teas v. Third National Bank and Trust Co., 125 N. J. Eq. 224 (E. & A. 1939); Passaic-Bergen Lumber Co. v. United States Trust Co., 110 N. J. L. 315 (E. & A. 1933); Buckley v. The Second National Bank of Jersey City, 35 N. J. L. 400 (Sup. Ct. 1872). This has been the established law throughout the country and continues to be the rule in states which have adopted the Uniform Commercial Code. Gresham State Bank v. O. & K. Construction Co., 231 Ore. 106, 370 P. 2d 726, 372 P. 2d 187, 100 A. L. R. 2d 654 (Sup. Ct. 1962); Harry H. White Lumber Co., Inc. v. Crocker-Citizens National Bank, 253 A. C. A. 423, 61 Cal. Rptr. 381 (D. Ct. App. 1967); Ervin v. Dauphin Deposit Trust Co., 84 Dauph. 280, 38 Pa. Dist. & Co. 2d 473 (C. P. 1965); Mackey-Woodward, Inc. v. Citizens State Bank of Cheney, 197 Kan. 536, 419 P. 2d 847 (Sup. Ct. 1966); Aetna Casualty & Surety Company v. Lindell Trust Co., 348 S. W. 2d 558 (Mo. App. 1961); SafT-Boom Corporation v. Union National Bank of Little Rock, 236 Ark. 518, 367 S. W. 2d 116 (Sup. Ct. 1963); E. Moch Co. v. Security Bank, 176 App. Div. 842, 163 N. Y. S. 277 (App. Div. 1917), affirmed 225 N. Y. 723, 122 N. E. 879 (Ct. App. 1919); Annotation, fiBight of check owner to recover against one cashing it on forged or unauthorized indorsement and procuring payment by drawee,” 100 A. L. R. 2d 670 (1965). See also Stone & Webster Engineering Corp. v. The First National Bank & Trust Company of Greenfield, 345 Mass. 1, 184 N. E. 2d 358, 99 A. L. R. 2d 628 (Sup. Jud. Ct. 1962).

The cheek in question was indorsed by the payee, Mrs. Odgers, to the order of the estate of Arthur J. Odgers. There was no valid indorsement thereafter by the estate of Arthur J. Odgers. N. J. 8. 12A:3-110(1) (e) provides that an instrument may be payable to the order of “an estate, trust or fund, in which case it is payable to the order of the representative of such estate, trust or fund * * The cheek was not indorsed by the administratrix of the estate, the only person who had authority in law to indorse the check. Breslow was not a trustee of the estate, and the purported indorsement for the estate by “Harold Breslow, Trustee” was unauthorized and ineffective. Breslow' testified that he never told plaintiff that he would act as her agent. His purported indorsement was not authorized as the agent for the administratrix nor as a representative of the estate. See N. J. 8. 12A :1-201 (35) and N. J. 8. 12A :3-403. In Teas v. Third National Bank and Trust Co., supra, 125 N. J. Eq., at p. 227, similar indorsements were made. The checks in that case were payable to the order of Rutherford Teas, ancillary executor, and to the order of the estate of Elizabeth M. Teas. The checks were indorsed by the attorney for the estate in the name of the payee followed by “Joseph H. Carr, atty.” The attorney, Joseph H. Carr, had also signed his own-name individually under that indorsement. The court held that the indorsements were unauthorized and that the depositary, collecting bank was liable to the executor. In Passaic-Bergen Lumber Co., supra, the court held that a rubber stamp indorsement of the name of plaintiff corporation was an unauthorized indorsement where it was applied to a check by a branch manager of the corporation whose by-laws required all checks to be signed by a treasurer and a vice-president. The check in question was thereafter indorsed and deposited to the credit of another corporation controlled by the branch manager. The court held the depositary bank liable to the plaintiff on the ground that the unauthorized indorsement did not pass title to the checks.

The check in question could not be negotiated without an authorized indorsement of the special indorsee, the estate of Arthur J. Odgers. N. J. S. 12A :3-202(l) and 204(1). N. J. S. 12A :3—404(1) provides that “Any unauthorized signature is wholly inoperative as that of the person whose name is signed unless he ratifies it-or is precluded from denying it * * There is no evidence in this case which shows a ratification by Mrs. Odgers of the conduct of Breslow; there has. been nothing shown to preclude her from denying the indorsements in question, and there is no evidence of any negligence on her part which contributed to the misapplication of the funds. See Oast v. American Casualty Co. of Reading, Pa., supra; Passaic-Bergen Lumber Co., supra, 110 N. J. L. at pp. 318-319; Uniform Commercial Code, N. J. 8. 12A :3-404, comment 3, and N. J. 8. 12A :3-406. In the Passaic-Bergen Lumber Co. case, supra,'the court held that to constitute ratification the person to be bound must, with full knowledge of all the material facts, express an intent to ratify the unauthorized acts or transactions. Upon discovery of Breslow’s fraud Mrs. Odgers took prompt action against him and gave prompt notice to the bank. -Batification has not been shown here. See Teas case, supra, 125 N. J. Eq., at p. 229.

Mrs. Odgers had relied upon an attorney who was then reputable. She followed his instructions and was not negligent in assuming that the check would be deposited into the estate account after she had indorsed it to the order of the estate. Mrs. Odgers was educated and intelligent. From this, however, we cannot infer that she knew that the check would be indorsed by the attorney on behalf of herself as administratrix of the estate. N. J. S. 12A :4-205 empowers a bank to supply a missing indorsement of its customer in order to deposit a check in the account of that customer. Under that section a check is deemed indorsed when a depositary bank states on the check that it was deposited by a customer or credited to his account. Although she had not signed signature cards as administratrix in order to open such an account, Mrs. Odgers cannot be held negligent on the theory that she should have suspected that the check might not have been deposited in an estate account. Mrs. Odgers made repeated inquiries concerning the funds and was given various explanations by Breslow as to their disposition and as to her inability to deal with them at that stage in the administration of the estate. Her conduct was not unreasonable or imprudent.

Receiving the funds without a proper indorsement and crediting the funds to one not entitled thereto constitutes a conversion of the funds. A holder is one who receives an instrument which is indorsed to his order or in blank. N. J. 8. 12A :1—201(20). The bank cannot be a holder, or a holder in due course (N. J. 8. 12A:3-302), without a valid indorsement of this check by the estate of Arthur J. Odgers. Stone & Webster Engineering Corp., supra. N. J. 8. 12A :3-419(l)(c) provides that an instrument is converted when it is paid on a forged indorsement. N. J. 8. 12A :1-201(43) provides that an unauthorized signature or indorsement is one made without authority (actual, implied or apparent) and includes a forgery. See the Teas case, supra, where the court in 125 N. J. Eq., at p. 227 said: “There is no substantial difference between an unauthorized endorsement and a forged endorsement, the result being the same in so far as concerns the passing of title.” The use of the word “forged indorsement” as constituting a conversion under N. J. 8. 12Ü. :3-419 (1) does not preclude the finding of conversion where the unauthorized signature does not constitute a forgery in the strict sense. If the Uniform Commercial Code fails expressly to include unauthorized indorsements other than forgeries in this conversion section, the law may reach the same result by implication from the Code and by general principles. See N. J. 8. 12A :1-103, which provides: “Unless displaced by the particular provisions of this Act, the principles of law and equity, including the law merchant * * * or other validating or invalidating cause shall supplement its provisions.” See Stone & Webster Egineering Corp., supra. See also 1 Anderson's, Uniform Commercial Code, §3-419.3, p. 688 (1961), where the author states that the enumeration by the Code of specific acts constituting a conversion is not exclusive and the general principles of law relating to conversion of property remain in force, citing §1-103.

N. J. S. 12.4:3-419(3) clearly implies the liability of a depositary or collecting bank in conversion when it deals with an instrument or its proceeds on behalf of one who is not the true owner, where the bank does not act in accordance with “reasonable commercial standards.” Defendant did not act in accordance with reasonable commercial standards. See Gresham State Bank v. O & K Construction Co., supra, where the court judicially noticed that reasonable commercial standards of a businessman requires an inquiry as to an agent’s authority to make an indorsement of a check, although the duty to inquire is not absolute, and one may rely upon apparent authority. In the Teas case, supra, the Court of Errors and Appeals held (125 N. J. Eq., at p. 228) that a depositary bank was derelict in its duty to the check’s payee in failing to inquire as to an attorney’s right to indorse the check and place the proceeds in his own account to his own credit. The court held that the form of the cheeks, payable to an executor and to an estate, put the bank on notice that the attorney had no power to do what he did, and that the bank’s breach of its duty to make appropriate inquiry rendered it liable to the payee. In Slavin v. Passaic National Bank and Trust Co., 114 N. J. L. 341 (E. & A. 1935), the court held a bank liable to a payee for accepting an unauthorized indorsement of the priest-treasurer of a church corporation without inquiring as to his authority to make the indorsement.

It may be noted also that the defense of negligence substantially contributing to the making of an unauthorized signature (N. J. S. 12A :3-406) has been held unavailable to one who pays an instrument under circumstances which do not conform to reasonable commercial standards of the payor’s business, such as the failure to make inquiry as to the authority to indorse. Gresham, State Bank case, supra. Section 3-406 provides that one whose negligence substantially contributes to the making of an unauthorized signature is precluded from asserting the lack of authority against' a holder in due course or drawee or other payor “who pays the instrument in good faith and in accordance with the reasonable commercial standards of the drawee’s or payor’s business.”

In the present case there are sufficient facts to justify the conclusion that defendant bank is liable regardless of how we view the conduct of Mrs. Odgers in giving the check to Breslow. The bank was negligent in allowing funds to be deposited in Breslow’s attorney’s trust account without inquiry as to his authority to indorse the check as trustee on behalf of the estate. There were no circumstances to suggest any apparent authority in Breslow to do this. Moreover, the indorsement purportedly made on behalf of the estate was a “for deposit” indorsement, a restrictive indorsement. N. J. S. 124 :3-205(c). This is another fact which should have alerted the bank to a misapplication of the funds.

N. J. S. 124:3—206(3) requires a depositary bank to apply the proceeds of the check in a manner which is consistent with a restrictive indorsement. Uniform Commercial Code, N. J. S. 124:3-205, comment 2; New Jersey Study, comments 1 and 5, and Uniform Commercial Code N. J. S. 124:3-206, comment 5. See also N. J. S. 124:3-603(1) (b) which provides that a depositary bank is not discharged from liability where payment of an instrument is made in conflict with the terms of a restrictive indorsement. N. J. S. 124 :3-419(3) and (4) clearly imply liability in conversion when a depositary bank fails to honor a restrictive indorsement, even though made by a party who is not that bank’s immediate transferor. See also N. J. S. 124 :4-205(2), which implies that a depositary bank is deemed to have notice of a restrictive indorsement by an indorser who is not the bank’s immediate transferor. Thus, even if the indorsement for the estate had been authorized, defendant bank would be liable for failing to deposit the proceeds to the credit of the estate as required by that indorsement.

Defendant bank contends that plaintiff must elect to sue in her own name, as payee of the check, or in her name as administratrix of the estate,- the special indorsee. This court, however, need not determine whether the proceeds of the profit-sharing plan should have been paid to Mrs. Odgers individually, as the designated beneficiary, or to the estate. Defendant has no appropriate concern with that choice. The check was made payable to Mrs. Odgers and was indorsed by her to the estate. Both Mrs. Odgers and the estate have sufficient interest in the proceeds to bring this action, and the bank is liable to both. On payment of the loss to plaintiffs jointly it will be up to Mrs. Odgers and the estate to determine the proper disposition of the funds.

Other statutory provisions relied upon by defendant are patently inapplicable. The bank contends that N. J. 8. 3A :41-9 of the Uniform Fiduciaries Law protects it against misapplication of funds by Breslow. But to exonerate the bank it must be shown that Breslow came into possession of the funds as a fiduciary. In referring to the indorsement of checks by a fiduciary the statute expressly provides, “if he is empowered to indorse such checks.” Since Breslow had no right to the funds, was not a fiduciary of the estate and was not authorized to indorse cheeks on behalf of the estate, the bank cannot claim the protection of this statute. Cf. Strong v. City National Bank of Philadelphia, 355 Pa. 390, 50 A. 2d 323 (Sup. Ct. 1947). Murner v. First National Bank of Passaic County, 94 N. J. Super. 293 (App. Div. 1967), is distinguishable. There a testamentary trust had been established under the will of Charles Nazzaro, deceased, and trust accounts had been opened in the name of a trustee of the estate. In those circumstances the court held that the bank was protected against the alleged misappropriation of the testamentary trustee. In the case at hand decedent died intestate. Neither Breslow nor Mrs. Odgers was a trustee of the estate. There was no testamentary trust, and no trust account had been established at defendant bank.

As noted above, the bank has made claim on a bond issued by third-party defendant The Fidelity and Casualty Company of New York. The bond covers losses to the bank through forgery of a check and other causes not relevant here. A motion for summary judgment has been brought in that action following receipt of my letter opinion in this primary action. The bank there contends that if Breslow’s indorsement was unauthorized, it constitutes a forgery within the broad definition of that term. See State v. Berko, 75 N. J. Super. 283, 290-291 (App. Div. 1962). It has been noted that there was no trustee of the estate of Arthur J. Odgers, although Breslow pretended by his signature to be such a trustee. The narrow definition of forgery is said to be the false making or alteration of an instrument in writing with intent to defraud so as to make it appear to be that of one other than the person actually making it. State v. Berko, supra. The broad definition of forgery is said to apply in the majority of jurisdictions. That definition is the false making of any writing in a fictitious or assumed name. Forgery has also been defined as the false making of any writing which, if genuine, might apparently be of legal efficacy. Ibid.; State v. Ruggerio, 43 N. J. Super. 156, 159 (App. Div. 1956), affirmed 25 N. J. 292 (1957) ; Annotation, “Forgery: use of fictitious or assumed name,” 49 A. L. B. 2d 852 (1956). Thus, the signature of Breslow as a fictitious trustee may be held to be a forgery which would obligate the bank to plaintiffs for conversion under N. J. S. 12A :3-419(l) (a). However, because argument has not yet been heard on the motion for summary judgment in the third-party action, I have not decided whether Breslow’s signature as “trustee” of the estate constitutes a forgery within the meaning of the Uniform Commercial Code or the bond. It is sufficient to hold that the bank is liable for paying the instrument on an unauthorized indorsement, whether or not a forgery; that the alleged negligence of Mrs. Odgers cannot excuse the bank, since the bank did not comply with the reasonable standard of making inquiry into Breslow's authority to sign for the estate as a trustee; that, in any case, Mrs. Odgers was not negligent, and that even if the indorsement had been authorized the bank is liable for violating a restrictive indorsement.

For the foregoing reasons judgment shall be entered in favor of plaintiffs against defendant bank in the sum of $117,437.43, plus interest and costs.