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

text:
    FAMILY FINANCE CORPORATION, A CORPORATION OF NEW JERSEY, APPELLANT, v. CHRISTOPHER A. GOUGH, DEPUTY AND ACTING COMMISSIONER OF BANKING AND INSURANCE OF NEW JERSEY, RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued October 2, 1950
    Decided October 19, 1950.

      Before Judges Jacobs, Eastwood and Bigelow.

      Mr. Walter F. Waldau argued the cause for the appellant (Messrs. Stryker, Tams & Horner, attorneys).

      Mr. Oliver T. Somerville, Deputy Attorney General of New Jersey, argued the cause for the respondent (Mr. Theodore D. Parsons, Attorney General of New Jersey, attorney).

      Mr. Sol D. Kapelsohn argued the cause for North Jersey Finance Service, Inc. (Messrs. Kapelsohn, Lerner, Leuchter & Beitman, attorneys).

      Mr. Max Mehler argued the cause for Auto Loan Company, et al., amici curice.

   The opinion of the court was delivered by

Jacobs, S. J. A. D.

The appellant Family Finance Corporation appeals from the denial of its application for a license to opéralo a small loan business at 66 Hudson Street, Hobo-ken, New Jersey.

Appellant's application for license was duly filed and, in accordance with R. S. 17:10-5, notice thereof was published in a newspaper and served upon all licensees having places of business in Hudson County. Objection to the license was filed by North Jersey Finance Service and thereupon the respondent issued notice that a hearing on the application would be held at the Department of Banking and Insurance. No testimony was introduced at the hearing but the respondent announced that he would permit the applicant and the objector to file briefs and that he would consider the matter. There was no dispute in the briefs which were thereafter filed as to the responsibility and general fitness of the applicant; however, there was serious dispute as to whether the granting of the application would promote the convenience and advantage of the community within the contemplation of R. S. 17:10-5. On this disputed issue the objector pointed out that it had been operating its business in Hoboken for thirty years, its licensed premises were adjacent to those sought to be licensed by the applicant, and another licensee had been operating at a nearby locality in Hoboken for the past four or five years. It urged that, considering their past business experiences and the limited population and unfavorable industrial prospects of Hoboken, the issuance of an additional license was not only unnecessary to meet any demands but would also create a situation in which there was a surplus of lenders competing for insufficient business. On the other hand the applicant urged that in addition to its population Hoboken serves large numbers of persons residing elsewhere, its industrial prospects were good, and the issuance of the license sought would directly promote the convenience and advantage of the community.

Upon the filing of the application and wholly independent of the aforedescribed hearing, the respondent conducted an investigation in accordance with R. 8. 17 :10-5(b). A report submitted by Principal Examiner Moore to Mr. James M. Sullivan, Chief of the Consumer Credit Division of the Department of Banking and Insurance, embodied the results of interviews with representatives of the local banking institutions, an analysis of the outstanding loan balances of the two licensees and the population in Hoboken, and the conclusion that the community was being served adequately. Mr. Sullivan’s memorandum to the respondent analyzed the service rendered by the licensees and the population in Hoboken which he compared with the service rendered and the population in other communities and concluded that “We do not feel that any individual in Hoboken lacks access to a properly licensed agency to meet his consumer credit demands and, until such time as Hoboken shows a return to normal activity and sufficient growth to warrant the probability that the issuance of an additional license will not affect in any way the present service now afforded in this community, we recommend that the application for a license be denied at this time.”

Shortly following the receipt of Mr. Sullivan’s memorandum the respondent denied the application upon the simple finding that the issuance of the license will not promote the convenience and advantage of the community. There was no accompanying opinion setting forth any basic factual findings. Thereafter counsel for the applicant requested that the denial be set aside and that a further hearing be granted “at which we may submit formal proof and additional evidence and be informed of any findings of fact made.” This request was denied and thereupon appeal from the denial of the application for license was taken to this Court. In support of its appeal the appellant contends, primarily, that the Small Loan Law (B. 8.17:10-1 et seq.) may not be construed to authorize the Commissioner to limit the issuance of licenses to otherwise qualified applicants and if it is so construed it is unconstitutional and, secondarily, that the Acting Commissioner erred in failing to make basic findings of fact and in relying upon a policy of limitation which was not embodied in a rule filed with the Secretary of State under. Article Y, section IY, paragraph 6 of the New Jersey Constitution.

The small loan business has long been the subject of study, legislation and judicial determination. See Gallert, Hilborn and May, Small Loan Legislation (Russell Sage Foundation, 1932); Hubachek, Annotations on Small Loan Laws (Russell Sage Foundation, 1938); 8 Law and Contemporary Problems (Winter, 1941). New Jersey was one of the five large industrial states which early adopted general acts designed to regulate and control the business of making small loans. Thus P. L. 1914, c. 49 provided for the licensing of small loan companies and granted power to the Commissioner of Banking and Insurance to reject an application for license because of lack of character or fitness of the applicant. In 1916 the Bussell Sage Foundation submitted its first draft of a Uniform Small Loan Law which adopted the regulatory philosophy of the New Jersey act and some of its provisions.

Despite the requirements in the New Jersey act, numerous companies obtained licenses and towards the close of 1928 there were 437 in operation. Sullivan, in his article on “Administration of a Regulatory Small Loan Law,” 8 Law and Contemporary Problems, supra, pp. 146, 147, states that this “large influx of capital led to unethical lending practices, overextension of credit and other extremes.” In 1929 the Legislature, acting pursuant to a report of the Joint Legislative Commission to investigate the Department of Banking and Insurance (see P. L. 1928, pp. 791, 811), reduced radically the rate chargeable by small loan companies. P. L. 1929, g. 293. This apparently resulted in withdrawal or threatened withdrawal of many of the licensees and in 1931 the Legislature appointed a commission to inquire into the regulation of the small loan business (see P. Jj. 1931, p. 1265). In 1932 a majority of this commission recommended that the rate be increased and that the Commissioner of Banking and Insurance be given discretionary powers with respect to the granting of small loan licenses.

In the meantime, further drafts of the Uniform Small Loan Law had been issued by the Bussell Sage Foundation. The fourth draft provided, in effect, as did the earlier drafts, that an applicant could demand a license upon paying the fee, filing the bond, and meeting ministerial requirements. However, the fifth draft'issued in 1932 departed from the earlier drafts by imposing additional requirements, including the need for a finding by the Commissioner that the granting of the application will promote the convenience and advantage of the community. In discussing this departure Hubachek, supra, at p. 54 says:

“Where competition was too intense events demonstrated that the public interest was not well served. ‘There is a tendency for excessive competition to increase costs of lending, and consequently to restrain competitive rate reductions.’ There was evidence that some licensees were not operating efficiently or were inadequately financed, either condition obstructing attainment of the objectives of the law. Stock promoters, without practical experience or realization of the commercial importance of fair dealings with borrowers, entered the business to its detriment.
“To meet these conditions the recommended system of licensing was changed in 1932. The Commissioner was given fact finding powers the exercise of which permitted wide discretion. The standards established applied both to the qualifications of the applicant and to the conditions in the community where the business was to be conducted.”

In 1932 our Legislature adopted the change in the fifth draft and provided (P. L. 1932, c. 62, p. 98) that the license shall be issued if the Commissioner finds, in addition to requirements relating to character and fitness, financial responsibility and net worth, that the granting of the license will promote the convenience and advantage of the community. Following this enactment the Commissioner apparently put into effect what might be described as a general policy of limitation, under which new licenses were not issued unless the Commissioner found that they would promote the convenience and advantage of the communitj’', particularly in the light of its population and estimated “loan capacity.” In his 1941 article Sullivan, supra, pp. 148, 149, expressed the opinion that the policy “contributed to the elimination of unethical business practices, unfair competition, overextension of credit; and has a tendency to increase efficiency, reduce costs of operation and thereby encourage voluntary rate reduction which, after all, is most beneficial to the borrowing public’s welfare.” Although there have been subsequent pertinent enactments no change in the administrative policy has been made; P. L. 1949, c. 109 seems to have strengthened it by continuing the provision for a finding that the granting of the license will promote the convenience and advantage of the community and by adding the requirement that the filing of the application be followed by notice of its pendency, published in a newspaper and served upon all other licensees in the count, and by hearing if objection is filed. Cf. Interstate Commerce Commission v. Parker, 326 U. S. 60, 65, 89 L. Ed. 2051, 2058 (1945); Cino v. Driscoll, 130 N. J. L. 535, 540 (Sup. Ct. 1943).

In the light of its history, purpose and context (Tappan Washington Memorial Corporation v. Margetts, 9 N. J. Super. 212 (App. Div. 1950)) we have little doubt that the present provision of the Small Loan Law was intended to and does afford to the Commissioner power to limit the number of licenses in a community by declining to issue an additional license therein in the absence of a showing that the granting of the additional license will promote the convenience and advantage of the community within the contemplation of R. S. 17:10-5. The absence of any language referring specifically to the limitation of licenses would not appear significant in view of the Legislature’s use of the convenience and advantage clause which is comparable to that used in other regulated fields where limitations of licenses or franchises prevail. R. S. 17:9A-1 et seq. (banking); R. S. 48 :2 — 1 et seq. (public utilities) ; Hohorst v. Marion Bus Transportation Co., 5 N. J. Super. 279 (App. Div. 1949); Fornarotto v. Board of Public Utility Commissioners, 105 N. J. L. 28 (Sup. Ct. 1928). Cf. Hudson Bergen County Retail Liquor Stores Ass’n. v. Board of Commissioners, 135 N. J. L. 502 (E. & A. 1947). The appellant suggests that the general standard furnished by the convenience and advantage clause is inadequate and that the accompanying delegation to the Commissioner is, therefore, unconstitutional. In Como Farms, Inc., v. Foran, 6 N. J. Super. 306, 312 (App. Div. 1950), this Court had recent occasion to refer to authorities, both state and federal, which have sustained standards of equal generality; we are satisfied that within these authorities the standard in the Small Loan Law, read in context and with regard to the nature of the business being regulated, adequately bridles the Commissioner’s power and furnishes a legally sufficient standard to guide him. See Kelleher v. Minshull, 11 Wash. 2d 397, 119 P. 2d 302 (1941); Weer v. Page, 155 Md. 86, 141 A. 518 (1928); Equitable Loan Society v. Bell, 339 Pa. 449, 14 A. 2d 316 (1940). Cf. In the matter of the Arbitration Between New Jersey Bell Telephone Company and Communications Workers of America, New Jersey Traffic Division No. 55, CIO, 5 N. J. 354 (1950); Abelson’s, Inc., v. New Jersey State Board of Optometrists, 5 N. J. 412 (1950).

The appellant contends that the convenience and advantage clause, as construed and applied, deprives it of its liberty and property in violation of Article I of the New Jersey Constitution and the Fourteenth Amendment of the Federal Constitution. The constitutional propriety of regulating the small loan 'business in the public interest has been uniformly sustained. See Kelleher v. Minshull, supra; Hubachek, supra; 149 A. L. R. 1425 (1943); 40 Am. Jur., p. 696 (1942). Cf. State v. Guida, 119 N. J. L. 464 (E. & A. 1938). In Maellaro v. Madison Finance Co. of Jersey City, 130 N. J. L. 140, 143 (Sup. Ct. 1943); affirmed, 131 N. J. L. 160 (E. & A. 1944), the court referred to the New Jersey Act as a regulation of the small loan business in the public interest having as its object “the eradication of the abuses and evil practices that had attended” its conduct. The Commissioner, acting within the appropriate statutory delegation, has evidently adopted a general policy of limitation upon the view that unrestricted competition may discourage voluntary rate reductions and may bring the return of many undesirable practices including discouragement or rejection of small but unprofitable loans and encouragement of larger but perhaps unnecessary and socially undesirable loans. This determination of policy may not be stricken down by the courts in the absence of any showing that it does not constitute reasonable regulation of the small loan business which admittedly is clothed with a public interest and is constitutionally subject to regulation. Cf. State Board of Milk Control v. Newark Milk Co., 118 N. J. Eq. 504, 523 (E. & A. 1935). See Weer v. Page, supra; Kelleher v. Minshull, supra.

We are satisfied that the appellant’s attack on the construction and validity of the convenience and advantage clause of the Small Loan Law must fail. We are likewise satisfied that there is no merit to its contention that the Commissioner was obliged, under Article V, section IV, paragraph 6 of the New Jersey Constitution, to file a statement of his general limitation policy with the Secretary of State. That paragraph refers to the filing of formal rules and regulations which are intended to have binding force on the general class of persons affected thereby (cf. Cino v. Driscoll, supra, at p. 540); it does not apply to a departmental course of conduct, such as the Commissioner’s general policy of limitation, which was not fixed, did not constitute a hard and fast rule, and was not intended to have binding effect. See Securities and Exchange Commission v. Chenery Corporation, 332 U. S. 194, 202, 91 L. Ed. 1995, 2002 (1947); rehearing denied, 332 U. S. 783, 92 L. Ed. 367 (1947). It may be noted that, unlike that contained in the Federal Administrative Procedure Act (5 U. S. C. A., § 1001 et seq.), there is no legislative provision in New Jersey for the filing or publication of departmental “statements of general policy.”

The appellant contends that the respondent erred in failing to make basic findings of fact. It is clear that where the governing statute contains express or implied requirement for such findings they must be present to sustain the administrative agency’s order. See Pennsylvania Railroad Co. v. New Jersey State Aviation Commission, 2 N. J. 64 (1949); In the matter of the Arbitration Between New Jersey Bell Telephone Company and Communications Workers of America, New Jersey Traffic Division No. 55, CIO, supra. The problem is more troublesome where legislative requirement is absent. See Gellhorn, Administrative Law, Cases and Comments (2d ed. 1947), pp. 729-761; Feller, “Prospectus for the Further Study of Federal Administrative Law,” 47 Yale L. J. 647, 665 (1938). It is generally recognized that in such situation no findings are necessary to support rules and regulations which are deemed legislative in nature. See In re Port Murray Dairy Co., 6 N. J. Super. 285, 293 (App. Div. 1950). However, when dealing with administrative action which affects a named party and is adjudicatory in nature (Philadelphia Co. v. Securities and Exchange Commission, 175 F. 2d 808, 816 (D. C. Cir. 1948); judgment vacated, 337 U. S. 901, 93 L. Ed. 1715 (1949)), there is authority which expresses, in comprehensive language, the view that it must be accompanied by basic findings of fact sufficient to support it. Elite Dairy Products, Inc., v. Ten Eyck, Inc., 271 N. Y. 488, 3 N. E. 2d 606 (1936); Petition of New York Water Service Corporation, 283 N. Y. 23, 27 N. E. 2d 221 (1940). Cf. In the matter of the Arbitration Between New Jersey Bell Telephone Company and Communications Workers of America, New Jersey Traffic Division No. 55, CIO, supra. See Feller, supra, at p. 666:

“It would profit us little to try to find a rational constitutional basis for the requirement. It should suffice that the practical basis is sound enough. The requirement is an excellent one. The advantages of carefully drawn findings are immense. They induce a sense of responsibility on the part of the administrative officer; their formulation aids immeasurably in the formulation of the decision; they limit the issues to be decided on review and save the time of litigants and the courts. All these advantages flow from findings carefully drawn; if they are merely perfunctory they are completely useless.”

In Colorado Wyoming Gas Co. v. Federal Power Commission, 324 U. S. 626, 634, 89 L. Ed. 1235, 1241 (1945), the court stressed the importance of clear and complete basic findings of fact by the administrative agency as an aid on judicial review. In New Jersey review of final action or decision by a state administrative agency is available in the Appellate Division and the pertinent court rules contemplate that, insofar as practicable, the review should be on a complete record before the agency. Cf. Rules 3:81 — 8, 9, 13. While we recognize that care ought be taken to avoid retarding the administrative process with its acknowledged advantages by the imposition of rigidly formal procedures, we doubt that a general requirement that findings accompany an adjudicatory order affecting a named party will have any disquieting or other than helpful effects. Cf. Feller, supra.

Without attempting further expression of general doctrines which may perhaps be applicable to the diverse types of administrative proceedings which prevail under varied statutory provisions, we have reached the conclusion that, under the particular circumstances presented in the instant matter, the applicant should have been afforded further hearing and basic findings of fact upon the denial of its application. It must be borne in mind that at no time during the hearing was it advised of the limitation policy or the issues it was required to meet. No legal proofs whatever were introduced and the reports upon which the respondent relied, although they contained nothing of a confidential nature, were never made part of the hearing nor was the applicant ever afforded an opportunity to challenge any of the factual findings therein; apparently the applicant was not aware of their existence until they were filed in this court as part of the respondent’s record pursuant to Rule 3:81 — 8. Cf. Pennsylvania Railroad Co. v. New Jersey State Aviation Commission, supra, at p. 72; Davis, “Official Notice,” 62 Harv. L. Rev. 531, 560 (1949). The decision denying the application contained no basic findings of fact and although it was expeditiously followed by request for further hearing and findings of fact this was denied. Cf. Central Home Trust Co. v. Gough, 5 N. J. Super. 295, 301 (App. Div. 1949). The issues were of importance to the public as well as the parties and the further hearing and findings would not have entailed any significant burden or delay. Under the circumstances it seems to us that fairness to the applicant dictated that its request be granted; in any event, we believe that the interests of justice will best be served by remanding the matter to the Commissioner for supplemental hearing during which such proof as may be material may be introduced and made part of the record by the Department, the applicant, the objector and other interested parties. Thereafter the Commissioner will be in proper position to render his considered judgment together with appropriate findings of basic facts which may be set forth in an opinion or otherwise. Cf. Petition of New York Water Service Corporation, supra; Perpente v. Moss, 293 N. Y. 325, 56 N. E. 2d 726 (1944). See Radice v. New Jersey Department of Labor and Industry, 4 N. J. Super. 364, 368 (App. Div. 1949).

The decision of the respondent is reversed and the matter is remanded to the Department of Banking and Insurance for further proceedings in accordance with this opinion.


source: Caselaw Access Project

author: William J. Brennan, Jr., J. A. D. Jacobs, S. J. A. D., Bigelow, J. A. D.,

license: Public Domain

text:
    WILLIAM H. HARKER, HOWARD G. WINTLING AND HARRY J. DUNN, IN THEIR OWN RIGHT AND FOR AND ON BEHALF OF ALL OTHER MEMBERS OF INDUSTRIAL UNION OF MARINE AND SHIPBUILDING WORKERS OF AMERICA, LOCAL NO. 1; AND INDUSTRIAL UNION OF MARINE AND SHIPBUILDING WORKERS OF AMERICA, LOCAL NO. 1, AN UNINCORPORATED ASSOCIATION, PLAINTIFFS-RESPONDENTS, v. JAMES C. McKISSOCK, ROBERT RULON, HERMAN SCHOMBER, ADOLPH F. PRYZWARA, THOMAS W. SAUL, JOHN J. KNOWLES, ROBERT E. KAVANAGH, WILLIAM R. ANDERTON, LESTER INVESTMENT COMPANY, A CORPORATION; AND SHIPBUILDERS EDUCATIONAL SOCIETY, A CORPORATION NOT FOR PROFIT, DEFENDANTS-APPELLANTS, AND NEW YORK SHIPBUILDING CORPORATION, ET AL., DEFENDANTS.
    Superior Court of New Jersey Appellate Division
    Argued August 21, 1950
    Decided October 25, 1950.

      Bigelow, J., dissented.

      Before Judges Jacobs, Bigelow and Wm. J. Brennan, Jr.

      Mr. F. Morse Archer, Jr., argued the cause for defendants-appellants (Messrs. Boyle, Archer & Greiner, attorneys).

      Mr. M. H. Goldstein (of the Philadelphia Bar) argued the cause for plaintiffs-respondents (Mr. Barney B. Brown, attorney).

      Mr. Albert B. Melnik argued the cause for defendant-counterclaimant, Industrial Union of Marine and Shipbuilding Workers of America.
   The opinion of the court was delivered by

William J. Brennan, Jr., J. A. D.

On September 28, 1948, a meeting of approximately 700 members of Local No. 1, Industrial Union of Marine and Shipbuilding Workers of America, an unincorporated association, voted, with eight dissenting, to terminate the local’s affiliation with the defendant national union. This suit, brought in the Chancery Division of the Superior Court, resulted.

The individual plaintiffs are local members who allege that the attempted secession was not legally effective and that the local remains a national union affiliate. The principal defendants, who are appellants here, are the individuals composing the local’s official board in office at the time of the secession, and who continued thereafter to administer its affairs and property. The other defendants are the national union, New York Shipbuilding Corporation, employer of the local’s members at its Camden yard, and the several depositaries of the local’s funds and the holders of its properties.

The national union is a cross-appellant. Its answer joined in plaintiff’s prayers for relief and added a counterclaim, dismissed by the trial court, alleging that if the secession was effective the national union is entitled to the local’s property.

Temporary injunctive relief was denied. Harker et al. v. McKissock et al., 1 N. J. Super. 510 (Ch. Div. 1948). Plaintiffs prevailed at the trial and obtained the judgment under appeal restraining the official board’s -continued administration of the local’s affairs and directing them to account for its assets, and granting incidental injunctive relief against the national union and the other defendants; and, as mentioned, dismissing the national union’s counterclaim.

The trial court had no doubt of the local’s power under the agreement to terminate the affiliation with the national union, but held that in the absence of a contract provision authorizing such action by majority vote, the power could be exercised only by unanimous vote.

The local was formed in 1933 to represent the shipbuilding employees at the Camden yard and its chief activity since that time has been and continues to be the improvement through collective bargaining of the wages, hours and working conditions of the members of the local employed by New York Shipbuilding Corporation. The local had functioned for more than a year as an unaffiliated labor union when in September, 1934, it sponsored, and with two other shipyard workers unions from Chester, Pennsylvania, and Wilmington, Delaware (with which it had collaborated from the outset while all three were getting established), formed the national union for the purpose of spreading organization of industrial (as opposed to craft) unions throughout the shipbuilding industry. This is expressed in the preamble to the national union constitution:

“Recognizing that ei-ai't unionism, as practiced in the past, lias been proved during the course of history to be both ineffective and dangerous to the interests of the workers, the Industrial Union of Marine & Shipbuilding Workers of America advocates and practices the program and tactics of militant industrial unionism based on the principle of One Industry — One Union.”

It seems quite clear that the purpose of the affiliation was separate from, and not paramount, but subordinate, to the objects which gave birth to the local, although also in aid of those objects. A reading of the national union’s constitution and the local’s by-laws and the proofs that the local over the years and to the time of withdrawal largely handled all relations with the employer manifest that the local did not surrender its autonomy or independence to administer its own affairs and manage its assets to accomplish its original and chief purpose of advancing the welfare of its members as employees of New York Shipbuilding Corporation. The plaintiffs and the national union point to provisions of the local’s amended by-laws mentioning the national union, but we find in them nothing to support the notion that the local surrendered its autonomy and became, as plaintiffs and the national union contend, a mere creature and dependent of the national union. On the contrary, we read the references as only such as might be expected to give effect to the alliance while it exists, and not as impairing or restricting in any real sense the local’s freedom of action to run its own affairs as it had before the affiliation and to retain its assets to further its members’ interests in their relation with the employer, as the proofs show was in fact done by the local.

The members did not become members of the national union. They remained members of the local. The property of the local did not become the property of the national union. This property was and is the product of dues and initiation fees paid by the members to the local and is of very substantial value. The local’s only financial obligation to the national union is the payment of a per capita tax assessed against and paid by the local and not by its members.

In our view the national union is simply a federation of autonomous locals. The relationship lacks the features which spell out a single integrated structure of which the locals are mere constituent parts, as in Federation of Insurance Employees, et al. v. United Office and Professional Workers of America, C. I. O., _ R. I. _, 74 A. 2d 446 (Sup. Ct. of R. I. 1950); and Brown v. Hook, 79 Cal. App. 2d 781, 180 P. 2d 982 (Cal. App. 1947).

The facts surrounding the alliance and its origin have a striking resemblance to those considered in State Council of Jr. O. U. A. M. of New Jersey v. National Council of Jr. O. U. A. M. of North America, et al., 71 N. J. Eq. 433 (Ch. 1906); appeal dismissed, 79 N J. Eq. 193 (E. A. 1911). There the state council of a beneficial association was incorporated in Hew Jersey prior to the organization and incorporation of a national council, and the state council had played a part in the organization of the national council. The state council disaffiliated from the national council following a disagreement on policy. The national council attempted to set up a new state council and was restrained at the suit of the state council which was held to be fully autonomous and free to withdraw from the alliance and to continue possessed of its property as the only state council authorized to function in Hew Jersey. The national council unsuccessfully contended that the state council was an integral part of the national council and inextricably intertwined and combined with it because of the references to the national council in the state council’s constitution and the recognition of the national council’s existence and authority, and of the facts that the state council had uniformly, by its delegates, taken part in the deliberations and proceedings of the national council and had paid to the national council the tax imposed by that body. The plaintiffs and the national union make substantially the same argument in this case, and we think it is equally ill-founded.

The alliance and its incidents are said to be a matter of contract. Thus it is held that whether a local union has power to withdraw is to be discovered in the contract formed by the constitution of the national union and the by-laws of the local union, considering also the surroundings under which the contract was made and the objectives which the parties sought to attain. International Union of United Brewery, Flour, Cereal, Soft Drinks and Distillery Workers of America, C.I.O., et al. v. Becherer et al., 142 N. J. Eq. 561; affirmed, 4 N. J. Super. 456 (App. Div. 1949); cert. den., 3 N. J. 374 (1949); Cameron v. International Alliance of Theatrical Stage Employees, etc., 119 N. J. Eq. 577 (E. & A. 1935). See, however, suggested alternative theories in a Note, “The Legal Consequences of Labor Union Schisms,” 63 Harvard Law Review 1413 (June, 1950).

We may concede that a local union may lawfully contract to become a mere constituent of a national union or, also, no doubt, by its conduct in relation to the national union, be estopped to deny the contrary. The important determinant is not necessarily whether the local or the national union was organized first; their agreement and the history of their relations under it, with emphasis perhaps on the time at or near the schism, are also relevant. If the proofs showed that the national union carried on the bulk of the local’s organization and negotiation activities and exercised substantial control of the details of the administration of the local’s affairs and funds, the local could scarcely make a pretence of autonomy.

That, however, is not this case. Here, as we see it, the local not only retained but continued its complete autonomy after the alliance and was empowered at any time at its free will and pleasure, although of course-in a lawful manner, to dissolve the alliance and to resume its original independent existence with all its consequences. We think the local’s power to disaffiliate is recognized in article IY, section 22 of the national union constitution which provides that “upon the dissolution, suspension, expulsion or termination of affiliation of any local,” the local’s assets shall automatically become the property of the national union. We are not impressed with the argument that this clause should be interpreted to inhibit diaffiliation because of the severity of the forfeiture penalty; the section plainly connotes recognition that the power exists; the penalty is nothing more than a strong sanction which it was doubtless hoped would operate to discourage exercise of the power.

The constitution, we should note, does not contain a provision familiar in many such instruments continuing the affiliation of the subordinate body when that is desired by a stated number of members, frequently seven or ten. Such provisions have been interpreted by some courts to have the effect of denying the majority the power to terminate the affiliation. See Liggett v. Koivunen, 227 Minn. 114, 34 N. W. 2d 345 (1949).

We consider next the trial court’s holding that although the local had power to disaffiliate, the power could not be exercised except by unanimous vote of the membership. There is no such requirement in either the national union constitution or the by-laws of the local. The local’s affairs are ruled under the by-laws by a majority vote, except only that a two-thirds vote is required to approve investment changes or to approve expenditures from- the local’s emergency funds. A majority vote is all that is required to elect officers, amend the by-laws, to vote to start and terminate strikes, and to approve or reject collective bargaining agreements; while the record does not disclose the vote at the time, we suppose that the original affiliation in 1934 and the by-law amendments which gave it effect required only majority action. Only the most cogent reasons would support a proposition that a unanimous vote is needed to terminate this affiliation, at best incidental to the basic objectives of the local’s existence, when majority action suffices to control major decisions directly related to those objectives.

We have carefully examined the authorities relied upon by plaintiffs and the national union as precedents for the requirement of a unanimous vote. Many, like Brown v. Hook, supra, did not involve the question but were decided on contract provisions which expressly or as interpreted denied the subordinate body the power to disaffiliate. The rest turn on facts, not present here, which we think of controlling importance, 1hat the attempt of the majority in each of those cases was not simply to disaffiliate and to carry on in an unaffiliated status, but to transfer the members and property of the subordinate body to another similar organization to the extinguishment of the former, or to divert its property to some other purpose. Altmann v. Benz, 27 N. J. Eq. 331 (1876); Great Council, etc., v. Mohican Tribe, etc., 92 N. J. Eq. 593 (Ch. 1921); Harris v. Geier, 112 N. J. Eq. 99 (Ch. 1932); Knights of Pythias v. Germania Lodge No. 50, 56 N. J. Eq. 63 (Ch. 1897); Schubert Lodge, etc., v. Schubert Kranken, etc., 56 N. J. Eq. 78 (Ch. 1897); United Public Workers v. Fennimore, 6 N. J. Super. 589 (Ch. Div. 1950); Low v. Harris, 90 F. 2d 783 (C. C. A. 7, 1937); O’Neill v. Delaney, 158 N. Y. S. 665 (Sup. Ct. 1909); M. & M. Wood Working Company v. Plywood & Veneer Workers Union No. 102, 23 F. Supp. 11 (D. C. Ore. 1938); Seslar v. Union Local 901, Inc., 87 F. Supp. 447 (D. C. Ind. 1949).

These decisions it seems to us are not authority that a unanimous vote is required to effect disaffiliation when, as here, the entity remains alive and continues to function for its declared purposes and its property is retained in the con-tinning control of the body and is devoted by it to its defined objects. On this state of facts, there being nothing contrary in the agreement, a majority vote is sufficient to effect a withdrawal. Vilella et al. v. McGrath et al., 136 Conn. 645, 74 A. 2d 187 (Sup. Ct. Errors 1950). This is the view implicit in the decision in the Becherer case, supra, although it would appear the issue was not directly raised.

Logic supports this conclusion. This local is an organization whose membership was numbered in many thousands during the wartime shipbuilding boom and still aggregated 3,394 at the time of the secession. The membership is necessarily continuously undergoing change according to the needs of the Camden yard for. employees. The virtual impossibility of a unanimous vote on almost any subject is apparent. The difference between an organization of this character and a religious or fraternal order of relatively small and stable membership is obvious; dues-paying labor union membership very often is in obedience to union security clauses in collective bargaining agreements requiring such membership as a condition of employment; there is such a requirement in the contract between this local and New York Shipbuilding Corporation; this suggests the question whether membership in such circumstance is as voluntary as in the case of the religious or fraternal society. A requirement for unanimous vote to terminate an affiliation under the circumstances presented in this case is unrealistic, certainly not in step with the practices of our day in the government of labor unions, and has the practical effect of denying the existence of the power to disaffiliate. Such a principle cannot be justified where autonomy is evident and the disaffiliation does not involve the death of the subordinate body or the diversion of its property or funds from the trusts for which the membership created them.

Plaintiffs and the national union argue that in any event the resolution of September 38, 1948, was not lawfully adopted because the notice of that meeting was legally insufficient to advise the membership of its purpose. A discussion of this point requires an outline of the events leading up to the meeting.

The discord between the local and the national union grew out of a practice of the national, finally objected to by the local, of affiliating locals of workers in fields unrelated to the shipbuilding industry. The national union had admitted locals of attendants at mental hospitals, gas station attendants, fertilizer workers, railroad workers, watchmakers, workers in plumbing supply manufacturing, social service workers and turnkeys in federal penitentiaries. The dispute came to a head at a national union convention in February, 1948, when the local’s delegates fought unsuccessfully to prevent the seating of delegates of metal workers locals. The delegates’ position was that the practice was a departure from the principle “One Industry — One Union,” and a violation of the national constitution creating a threat to the shipbuilders’ control of their union. The secession step followed, initiated in July, 1948, by petition of 1,029 local members demanding a general membership meeting to act on a proposal to withdraw from the national union. The local’s by-laws require the holding of such a meeting upon petition of 100 members.

A meeting attended by more than 2,000 members was held in an open air hall park on July 30tli and referred the matter to the official board for study and later report to the membership. The official board gavo thought to the several problems entailed in the proposal, one of which of evident importance was the effect of disaffiliation upon the local’s collective bargaining agreement with New York Shipbuilding Corporation. The board concluded to attempt a compromise with the national union and proposed that the constitution of the national union he amended to establish autonomous divisions of shipyard workers, railroad workers and metal workers, under a plan to assure the protection of the interests of the shipj-urd workers. The national union made no response to the proposal which meanwhile the official board had reported upon at general membership meetings held on August 19th and September 16th. The last meeting had voted to hold another membership meeting on September 28th to act on the proposed local budget for the ensuing period. The official board on September 24th, after discussion with the strategy committee of the local, decided to amend the agenda of the September 28th meeting to add the matter of disaffiliation. The board caused an amended notice of the meeting to be posted. The notice contained no mention of disaffiliation specifically but the subject was intended to be covered by the wording “discussion and action upon a report by the Official Board regarding current problems of the local.”

The appellants contend that this wording, together with certain loudspeaker announcements made on September 28th, sufficiently advised the membership that disaffiliation was the subject intended to be discussed and acted upon, and argue that the attendance of 700, which was five or six times larger than the average attendance at meetings, shows that this is so. The trial court thought, however, and we concur, that the notice was inept for the purpose. But see Harker v. McKissock, supra, at p. 529. While technical nicety is not necessary, the notice must state what is fairly intended in order to bring to the meeting the members who are interested in the proposed action, particularly when that action is of the extraordinary nature of disaffiliation. Vilella v. McGrath, supra; and see Height v. Democratic Women's Luncheon Club of N. J., Inc., 131 N. J. Eq. 450 (Ch. 1942); Randolph et al. v. Mount Zion Baptist Church of Newark, N. J., et al., 139 N. J. Eq. 605 (Ch. 1946).

The irregularity, however, was cured by subsequent ratification by the membership of the disaffiliation resolution. An assembly may ratify airy action which it has the power to authorize in advance, in which case the ratification relates back to the date of the action ratified. Page v. Asbury Methodist Episcopal Church, 78 N. J. Eq. 114 (Ch. 1910). We have already stated our view that the local had power to disaffiliate; it follows that the membership could ratify the action taken at the September 28th meeting.

Ratification was accomplished in a formal manner at a meeting held December 1, 1948, the stated purposes of which, as appears in the notice thereof, included the purpose “to discuss and by appropriate action to reaffirm the disaffiliation of Local No. 1 from the National Union.” The vote at this meeting to adopt the ratification resolution was unanimous with one member present abstaining. There is also evidence of other acts of the membership disclosing that the large majority favor disaffiliation; a membership meeting on October 21st adopted extensive revisions of the by-laws to implement the disaffiliation; there were proofs that over 90% of the membership signed ratification petitions dated October 7th; most of the local’s officers who led the secession movement were returned to office in elections held in January, 1949; in July, 1949, the membership at a referendum by secret ballot voted to affiliate the local with International Brotherhood of Boilermakers, Iron Shipbuilders and Helpers of America, American Federation of Labor; and, finally, we are advised in the briefs of both sides that after the entry of the judgment on appeal a certification election was conducted by the National Labor Relations Board and the local, as a Boilermakers’ affiliate, defeated, by a vote of 2,373 to 1,706, the group sponsored by plaintiffs and the national union.

There remains for consideration the national union’s cross-appeal that if the secession succeeded its counterclaim was improperly dismissed and it is entitled to judgment awarding it the local’s property under article IV, section 22, previously mentioned, of the constitution of the national union which reads in full as follows:

“Upon the dissolution, suspension, expulsion or termination of affiliation of any Local or Division from this Union, the Charter, Seal, and all monies, books and property of that Local or Division shall automatically become the property of the G. E. L. and the Officers of that Local or Division shall be responsible for their immediate transfer to the G. E. B.”

There would be no question of the seceding local’s right to the property except for this clause. Schweitzer v. Schneider, 86 N. J. Eq. 88 (Ch. 1916); affirmed, 86 N. J. Eq. 256 (E. & A. 1916). We are thus called upon to decide whether the clause is enforceable. The Note, supra, 63 Harvard Law Review, at page 1416, comments that “There has been a long history of judicial hostility to forfeiture clauses in union schisms.” This apparently has been based on the view that the enforcement of such clauses has a confiscatory effect. Scott v. Donohue, 93 Cal. App. 126, 129, 269 P. 455, 457 (1928).

We are not told whether the clause was bargained over at the time of the affiliation in 1934. Cf. Moyer v. Butte Miners’ Union, 232 F. 788 (D. Mont. 1916). At the time of the schism, however, the membership was almost entirely of employees of New York Shipbuilding Corporation who were required under the collective bargaining agreement between that company and the local to maintain dues-paying membership as a condition of employment. This suggests some doubt whether membership at that time was completely voluntary; at least the probability is that the members’ interest lay largely in the features of membership affecting employment rights and status and not in the details of affiliation.

The effect of enforcement upon the freedom of choice of representatives assured by law to the local members as employees of New York Shipbuilding Corporation is another factor. We have noted that the local’s status as exclusive representative has again been confirmed following the entry of the judgment on appeal at a certification election conducted by the National Labor Relations Board under the applicable federal statute. The members of this local as employees of New York Shipbuilding Corporation are guaranteed by federal law and our State Constitution (Art. I, par. 19) the right to organize and bargain collectively and with that right a corollary freedom of choice of their representatives. The consequence of depriving the local of its property are obvious. The local’s representative status over the years has been given substance and vitality through the'possession and use of the funds and property contributed by its members for the purposes of the representation. The loss of these funds and property would threaten impairment, if not the throttling, of the local’s performance of its representative functions and its organizing and bargaining ability. The inevitable result may be a deterrent effect on the employees’ right of a free choice of representatives. This suggests the question, should the clause be viewed as an illegal impediment to the exercise of the employees’ assured freedom of choice where their contract of employment requires their membership in the local and enforcement of the clause threatens to incapacitate the local from performing the very duty for which it was constituted ?

But we need not pursue the matter so far. We have emphasized that the property of this local is the product of dues and initiation fees contributed by its members, and that it has at all times been and still is being devoted by the local to the discharge of its function as collective bargaining agent of the members as employees of New York Shipbuilding Corporation. The trust in which the property is held and its continued application to the purposes thereof have been clearly shown. These facts establish that the clause as phrased is plainly unenforceable under the principles laid down in State Council of Jr. O. U. A. M. of New Jersey v. Enterprise Council No. 6, 75 N. J. Eq. 245 (E. & A. 1909); Grand Court of Foresters of America v. Court Cavour No. 133 et al., 82 N. J. Eq. 89 (Ch. 1913); affirmed, 83 N. J. Eq. 343 (E. & A. 1914), which hold that forfeiture clauses such as this will not be enforced where the assets sought to be forfeited were contributed by the members to be used for their own purposes and benefit, and not for the purposes of being turned over to another organization for the benefit of other persons, when neither that organization nor other persons are under any obligation to hold the assets for the purposes for which they had been contributed, and when, as we have said is the ease here, the assets are in fact being retained in the continuing control of the body and its members and are being devoted by it to its defined objects. “Forfeitures are not favored. They certainly will not be enforced where enforcement must incapacitate the corporation from performing the very duty for which it was constituted.” Grand Court, etc., v. Court Cavour, etc., supra, 82 N. J. Eq., at p. 96. The same may be said of an unincorporated association. See Schweitzer v. Schneider, supra, and International Union, etc., v. Becherer, supra, 4 N. J. Super. 456.

Neither section 22 nor any other clause of the constitution obligates the national union to employ the forfeited property for the benefit and purposes of the local's members; as far as appears the property goes into the general fund of the national union subject to be disposed of according to its rules. This is the feature which distinguishes the section from the forfeiture clause enforced in State Council v. Sharp, 38 N. J. Eq. 24 (Ch. 1884), concerning which decision it was said in the Enterprise Council case, supra, at pages 255-256:

“The case differs very materially from State Council v. Sharp, 38 N. J. Eq. (11 Stew.) 24, where the complainant’s constitution provided that the amount received by the state council upon dissolution of the subordinate council should be appropriated for' the assistance and support of the widows and orphans of members of the subordinate council, and that if there were no such widows and orphans, the amount should be invested and paid in case of reorganization to the subordinate council. In that case the subordinate council disbanded and undertook to divide up its funds, contrary to the scheme under which they had been raised, and the state council was seeking to enforce the trust created by the contributors to the fund, not as in the present case to work a forfeiture of the rights of the cestui que trust.”

The national union urges that Fidelity, etc., Co. v. Brotherhood of Painters, etc., 120 N. J. Eq. 346 (E. & A. 1936), is authority that the forfeiture clause is enforceable. That case is not in point. The local there was not autonomous but a constituent and, as the court said, was “defunct” as a consequence of action duty taken by the international union which created it.

The judgment on the complaint is reversed, and is affirmed on the counterclaim. No costs will be allowed appellant on the appeal.

Jacobs, S. J. A. D.,

concurring. I agree there was power to disaffiliate without unanimous vote and that although the original notice of meeting may have been defective there was sufficient ratification by subsequent events. I am troubled, however, by the conclusion that the contractual language in article IV, section 22 to the effect that upon termination of affiliation the local’s property shall automatically become that of the national is not to be given any effect. Courts ordinarily enforce the contractual undertakings of adults and, in the absence of compelling public policy to the contrary, this would lead to enforcement of the terms of the article. Cf. United Public Workers of America v. Fennimore, 6 N. J. Super. 589 (Ch. Div. 1950). However, I bow to the apparently controlling views expressed by our court of last resort in State Council v. Enterprise Council No. 6, 75 N. J. Eq. 245 (E. & A. 1909); Grand Court v. Court Cavour, 82 N. J. Eq. 89 (Ch. 1913); affirmed, 83 N. J. Eq. 343 (E. & A. 1914).

Bigelow, J. A. D.,

dissenting. A court should not refuse to enforce a contract except on very clear grounds, for our whole economy — our American system — is built primarily upon contractual obligations voluntarily assumed.

The men who constitute Local No. 1, which was formerly affiliated with the Industrial Union of Marine and Shipbuilding Workers of America, agreed for a sufficient consideration that upon the happening of a certain event, all money and property of the Local should become the property of the Industrial Union. The event has happened and the promissors are unwilling to yield effect to their agreement. The event upon which the transfer of title would become effective was “the dissolution, suspension, expulsion or termination of affiliation” of the local with the union. The provision is applicable, of course, not only to Local No. 1, but to any local. The object of this and related provisions of the constitution of the union was to give stability to the organization of shipyard workers in the Delaware valley, or wherever the union might extend. Members of a local would think twice before seceding or taking action that might lead to expulsion and so bring about the loss of all property of their local. This object, or the means selected for accomplishing it, does not seem at all contrary to public policy.

Are the judgments of our late court of last resort in State Council, Jr. O. U. A. M. v. Enterprise Council, 75 N. J. Eq. 245 (1909), and Grand Court v. Court Cavour, 82 N. J. Eq. 89; affirmed, 83 N. J. Eq. 343 (1914), controlling? It may be noted in the first place that these cases relate to fraternal societies. Labor unions cannot well be classified with religious or fraternal organizations, and it is hazardous to assume that decisions concerning the latter settle the law as to labor unions.

As I read the opinion of Justice Swayze in State Council v. Enterprise Council, enforcement of the forfeiture clause was denied for two main reasons, neither of which applies -to the instant case: First, forfeiture would strip the subordinate council of the property which it held for the purpose of carrying out the object for which it had been incorporated by the State of New Jersey and such stripping would be illegal. Second, the basis of the forfeiture was the action of the State Council itself, namely, the dissolution of the relation between it and Enterprise Council, and to give effect to such a forfeiture “would be contrary to the fundamental principle which prevents one from being a judge in his own cause.” We may note that Local No. 1 in the suit before us is not a corporation, and also that the breaking of the bond between it and the general union was not the work of the latter, but was done by the local itself. In Grand Court v. Court Cavour the subordinate lodge was a corporation, the forfeiture was alleged to result from a resolution of the Grand Court dissolving Court Cavour, and the decision was rested upon the authority of the Enterprise case.

A decision which seems to me to be more nearly controlling is Fidelity, etc., Co. v. Brotherhood of Painters, 120 N. J. Eq. 346 (E. & A. 1936), an interpleader between the general union and a local whose charter had been revoked and the local expelled. Chancery, on the authority of the two cases which I have been discussing, decided in favor of the local, but on appeal the forfeiture clause was given full effect and the fund was awarded to the general union. See to the same effect United Public Workers v. Fennimore, 6 N. J. Super. 589 (Ch. 1950), and a decision from another jurisdiction— an early one in this branch of the law — Brotherhood of Railroad Trainmen v. Williams, 277 S. W. 500 (Ky. 1925).

In my opinion, the judgment on the counterclaim as well as on the complaint should be reversed.


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

text:
    WILLIAM EVTUSH, Sr., ADMINISTRATOR AD PROSEQUENDUM OF THE ESTATE OF WILLIAM EVTUSH, Jr., DECEASED, PLAINTIFF-APPELLANT, v. THE HUDSON BUS TRANSPORTATION CO., INC., A CORPORATION, GEORGE R. MEYER AND JAMES HADDON, DEFENDANTS-RESPONDENTS. THELMA G. BEASLEY, ADMINISTRATRIX AD PROSEQUENDUM OF THE ESTATE OF CONNELL BEASLEY, DECEASED, AND THELMA G. BEASLEY, GENERAL ADMINISTRATRIX OF THE ESTATE OF CONNELL BEASLEY, DECEASED, PLAINTIFF-APPELLANT, v. THE HUDSON BUS TRANSPORTATION CO., INC., A CORPORATION, GEORGE R. MEYER AND JAMES HADDON, DEFENDANTS-RESPONDENTS.
    Superior Court of New Jersey Appellate Division
    Argued October 2, 1950
    Decided November 1, 1950.

      Before Judges McGeehan, Jayne and Wm. J. Brennan, Jr.

      Mr. Meyer Pesin argued the cause for appellants (Mr. Hiram Elfenbein, on the brief).

      Mr. Reynier J. Wortendyke, Jr., argued the cause for respondents (Messrs. Wortendyke & Leonard, attorneys).
   The opinion of the court was delivered by

McGeehan, S. J. A. D.

These cases were tried together in January, 1950, in the Hudson County Court, Law Division, and in each case a judgment of no cause of action was entered in favor of defendants upon jury verdict. The question presented is whether the trial court erred in admitting, over objection of the plaintiffs, the testimony of defense witnesses whose names were not divulged in defendants’ answer to interrogatories.

These death actions arose out of a collision between a motorcycle and a bus, which occurred on October 20, 1946, at about 9 :30 i>. M. on County Road, Secaucus. A bus owned by defendant Hudson Bus Transportation Co. and driven by defendant George R. Meyer, and a motorcycle driven by decedent Connell Beasley, on which decedent William Evtush, Jr., was riding, were proceeding in a northerly direction, and another bus owned by defendant Hudson Bus Transportation Co. and driven by defendant James Had don was proceeding in a southerly direction, when the motorcycle and the southbound bus collided as the motorcycle was passing or attempting to pass the northbound bus. Connell Beasley and William Evtush, Jr., were killed instantly in the collision. Both actions charged that the deaths were caused by tire negligence of the defendants.

The Evtush suit was first tried on March 1, 1948, and resulted in a nonsuit at the end of the plaintiff’s case. Shortly thereafter, the Evtush action was reinstituted.

The Beasley suit was first tried on April 5, 1949, and resulted in a dismissal at the end of the plaintiff’s case. The judgment of the County Court in the Beasley case was reversed and a new trial ordered. Beasley v. The Hudson Bus Transportation Co., Inc., 5 N. J. Super. 181 (App. Div. 1949).

In January, 1949, attorneys for plaintiffs served the defendants with interrogatories and defendants’ answer was served on February 4, 1949. The interrogatories demanded: “State the name or names and address or addresses of any witnesses to the accident in which defendants were involved and upon whom said defendants intend to rely.” Defendants George R. Meyer and James Haddon answered: “We are two of the defendants in the above entitled action named, have read the interrogatory propounded by the plaintiff to the defendants therein, have personal knowledge of the facts to which said interrogatory relates, and are authorized to make and verify the answer thereto. We were eye-witnesses to the occurrence to which the interrogatory refers and we intend to rely upon our testimony on the trial of this case. We do not, however, know what, if any, other witnesses there were to the occurrence referred to, nor do we know upon whom, if anyone, in addition to ourselves, our attorney intends to rely.” At the oral argument, counsel for defendants conceded that the answer to the interrogatory as made by Meyer and Haddon was intended to bind all the defendants.

Interrogatories are authorized by Rule 3 :33, which provides : “* * * any party may serve upon any adverse party written interrogatories to be answered by the party served or, if the party served is a public or private corporation * * * by any officer or agent, who shall furnish such information as is available to the party. * * * The interrogatories shall be. answered separately and fully in writing under oath. * * * Interrogatories may relate to any matters which can be inquired into under Rule 3 :26-2 * * The latter Rule, in describing the permissible scope of examination, provides that “the deponent may be examined regarding any matter, not privileged, which is relevant to the subject matter involved in the ponding action * * * including * * * the identity and location of: persons having knowledge of relevant facts.”

The interrogatory propounded is somewhat ambiguous. Standing alone, it leaves in doubt whether the demand is for the names and addresses of any witnesses to the accident known to the defendants, and also the names of such of these witnesses upon whom the defendants intend to rely, or merely for the names and addresses of the witnesses to the accident upon whom the defendants intend to rely. However, the answer of the defendants, “We do not, however, know what, if any, other witnesses there were to the occurrence referred to, nor do we know upon whom, if anyone, in addition to ourselves, our attorney intends to rely,” shows clearly that the defendants construed the demand as being a demand for the names and addresses of witnesses to the accident and a further demand for the names and addresses of such of these witnesses upon whom the defendants intended to rely.

Under our Pules, the plaintiffs had the right to make their first demand, namely, for the names and addresses of witnesses to the accident, and were entitled to a full and truthful answer disclosing such names and addresses as were known to the defendants at the time of the answer. Schwartz v. Public Service Coordinated Transport, 64 A. 2d 477 (Essex Cty. Ct. 1949), not officially reported; cf. cases construing the comparable federal rule gathered under Federal Rules Service, Findex 33.316. Our conclusions are based solely on the plaintiffs’ first demand and the defendants’ answer thereto. No question as to the plaintiffs’ right to make their second demand, namely, for the names and addresses of the witnesses to the accident upon whom the defendants intend to rely, is before us and therefore we express no opinion thereon. See Rules 3:33 and 3:30 — 2; compare McNamara v. Erschen, 8 F. R. D. 427, 12 F. R. S. 395 (D. Del. 1948), with Kling v. Southern Bell Telephone & Telegraph Co., 9 F. R. D. 604, 13 F. R. S. 596 (S. D. Fla. 1949); see cases gathered in Federal Rules Service, Findex 26b.22.

At the trial the defendant James Haddon testified that he took the names and addresses of. a few passengers in his bus at the time of the collision and turned them over to the corporate defendant. On their case the defendants called Howard Barker as a witness. As soon as it appeared that Barker had been a passenger on one of the busses on the evening of the collision, the plaintiffs’ attorney objected to further testimony by Barker or any other witness to the accident called by the defendants whose name was not divulged in the answer to interrogatories, until plaintiffs were given opportunity to cross-examine as to how and when the defendants got the name of the witness; and further objected to the admission of testimony by Barker or any other witness to the accident called by the defendants whose name was not divulged in the answer to interrogatories, if it appeared that the defendants had the name of the witness to the accident at the time of answering the interrogatories. The court below overruled this objection. Defendants later called James Bischoff as a witness. Bischoff testified that he was a passenger in the defendants’ bus at the time of the collision and gave testimony concerning it. On cross-examination, Bischoff admitted that he gave his name and address to the bus driver after the accident. Plaintiffs’ attorney objected to the admission of the testimony of this witness on the ground that it appeared that the defendants had his name and address when the interrogatories were answered and had failed to divulge it, but his objection was overruled. Both witnesses Barker and Bischoff gave testimony prejudicial to the plaintiffs.

The purpose of the broad discovery provided under our new Rules is well stated in the comment to Buie 3:26-l in the Tentative Draft of the Rules: “a party is given a wide latitude in securing such discovery as he may need concerning the details of the evidence so that the outcome of the case will depend less upon Surprise testimony and the maneuverings of counsel and more upon the merits of the issues.” If the defendants, in their answer, had divulged the names of the known witnesses to the accident, the plaintiffs would have had an opportunity before trial (1) to investigate their background in order to discover any discrediting matter which might exist, (2) to learn their version of the collision, and (3) to ascertain from them the names and addresses of any other witnesses to the accident known to them. In failing to disclose the names and addresses of the witnesses to the accident which were known to them at the time of the answer to the interrogatory, the defendants not only failed to comply with the obligation imposed upon them by our Buies, but also deprived the plaintiffs of substantial rights.

Since the answer stated that Meyer and Haddon were the only witnesses to the accident then known to the defendants, the plaintiffs had the right to go to trial relying on the inability of the defendants to produce any witness to the accident known to them at the time the answer was made, other than Meyer and Haddon. The court below, in permitting the defendants to introduce testimony of such undisclosed witness at the trial, committed error injuriously affecting the substantial rights of the plaintiffs. In fact, the plaintiffs found themselves in a worse plight than under our former Buies. While, under our former Buies, the plaintiffs did not have the right to demand from the adverse party the names and addresses of witnesses, they still had a measure of protection in the event of surprise witnesses for the defense, in their right to submit to a voluntary nonsuit and later reinstitute the suit (R. S. 2:27-235; Malone v. Erie R. R. Co., 90 N. J. L. 350 (Sup. Ct. 1917)), thus preserving the opportunity to investigate the background of the surprise witnesses to discover any discrediting matter which might exist. This protection is no longer available under our present Rules (Rules 3:41-1, 3:41-2).

A trial court has a duty to protect the substantial rights of the parties, and although our new Buies provide no explicit penalty for an untrue answer to an interrogatory, we think the court has implicit power to impose such penalty as the circumstances of the particular case warrant, in order to insure that substantial justice will be done. Cf. Rule 3:37, Refusal To Make Discovery: Consequences. Because of the action taken by the court, the defendants never had an opportunity to prove any extenuating circumstances which might exist — such as mistake, inadvertence, excusable neglect, or honest misunderstanding. Regardless of extenuating circumstances, however, the plaintiffs were at least entitled to the declaring of a mistrial.

The judgments are reversed and new trial granted.


text:
    OTMAR J. PELLET, APPELLANT, v. DEPARTMENT OF CIVIL SERVICE, STATE OF NEW JERSEY, BOARD OF COMMISSIONERS OF THE MAYOR AND COUNCIL OF THE CITY OF HOBOKEN AND STEPHEN E. MONGIELLO, DIRECTOR OF REVENUE AND FINANCE, RESPONDENTS.
    Superior Court of New Jersey Appellate Division
    Argued October 16, 1950
    Decided November 1, 1950.

      Before Judges Jacobs, Eastwood and Bigelow.

      Mr. Edward A. Markley argued the cause for the appellant (Messrs. Markley & Broadhurst, attorneys).

      Mr. E. Norman Wilson argued the cause for the respondents (Mr. Dominick R. Rinaldi, attorney).
   The opinion of the court was delivered by

Jacobs, S. J. A. D.

This is an appeal from an order of the Department of Civil Service which sustained Hoboken’s abolition, by ordinances passed on December 21, 1948, of the positions of assistant corporation attorney and assistant city attorney and directed that appellant’s name be placed upon a re-employment list for certification and appointment to the position of assistant corporation attorney or comparable position as vacancies occur.

The position of assistant corporation attorney in Hoboken was originally established by ordinance in 1907. In 1935 the appellant was appointed as assistant corporation attorney and he continued after the adoption of an ordinance in 1943 which created a Law Department to consist of a corporation attorney, an assistant corporation attorney, a clerk, and such legal assistants and other employees as shall be deemed necessary by the Director of Revenue and Finance. When a new board of commissioners was elected in May, 1947, the Law Department included seven legal assistants in addition to the corporation attorney and the appellant, assistant corporation attorney. These legal assistants received salaries ranging between $2,000 and $3,000 per year and the appellant as assistant corporation attorney received salary of $4,300 per year. He said his functions were “generally to assist the Corporation Attorney in the performance of his duties” and indicated that the more important matters were handled by him whereas the legal assistants received designated subordinate assignments. He engaged in the private practice of law but stated that he devoted as much time as was required in the performance of his public duties. Upon the adoption by Hoboken of the Civil Service Act in 1946 his position came under its protection. Camden v. Civil Service Commission, 129 N. J. L. 354, 358 (Sup. Ct. 1943); affirmed, 130 N. J. L. 532 (E. & A. 1943). But cf. P. L. 1948, c. 121.

In June, 1947, the new board of commissioners adopted two ordinances, the first repealing the 1943 ordinance creating the Law Department, and the second creating the position of assistant city attorney with annual salary of $6,250. This was accompanied by action which purported to dismiss the appellant as assistant corporation attorney and to appoint Charles J. De Eazio, Jr., as assistant city attorney with annual salary of $6,250, but in due course the Civil Service Commission ordered that the appellant be restored to the pay and title undertaken to be given to Mr. De Eazio. A writ of certiorari to review this order was dismissed in Hoboken v. Civil Service Commission, 137 N. J. L. 73 (Sup. Ct. 1948); affirmed, 137 N. J. L. 728 (E. & A. 1948).

In the meantime, Mr. De Eazio’s purported occupancy of the position of assistant city attorney terminated on December 31, 1947 (cf. De Fazio v. Mayor and Council of City of Hoboken, 9 N. J. Super. 486 (Law Div. 1950)), when he was appointed as magistrate and thereupon there was no attorney assisting the city attorney. On January 20, 1948, an ordinance was passed creating the positions of legal assistants to the city attorney with salary of $2,500 to $3,500 per annum. Messrs. William Gottlieb and E. Norman Wilson, who had been legal assistants in the Law Department prior to the election of the new board of commissioners in 1947, were thereafter appointed as legal assistants from a list of eligidles duly certified by the Department of Civil Service. Each receives the annual salary of $3,000 and they have been performing the required legal work to assist the city attorney.

Subsequent to the decision by the Court of Errors and Appeals on September 3, 1948 (Hoboken v. Civil Service Commission, supra), there was a conference in which Stephen E. Mongiello, Director of Revenue and Finance of Hoboken, and the appellant participated. The Director states that he suggested that the appellant resume work at the salary he was receiving when dismissed; the appellant testified that he told the Director “that under the Civil Service order I was entitled to be reinstated as Assistant City Attorney at a salary of $6,250, or whatever the amount was, and I was not interested in any other proposition.” In November, 1948, the appellant filed an action in the Law Division seeking restoration to the pay and position of assistant city attorney and the sum of $10,118.58 for back pay, plus interest and costs. On December 21, 1948, the board of commissioners adopted two ordinances, the first repealing the 1907 ordinance which created the position of assistant corporation attorney and the second repealing the 1947 ordinance which created the position of assistant city attorney. Thereafter the Director of Revenue and Finance notified the appellant to report for duty as legal assistant at the annual salary of $3,000 per year. Cf. R. S. 11:22-10; Kraibuehler v. Civil Service Commission, 134 N. J. L. 97, 100 (Sup. Ct. 1946). However, the appellant rejected the tendered position of legal assistant.

In January, 1949, the Law Division granted summary judgment directing that the appellant be restored to the pay emoluments, title and position undertaken to be given to Mr. De Fazio and that he receive back pay in the sum of $10,275 plus costs. On appeal, the Appellate Division sustained the award of back pay but reversed the judgment insofar as it restored the appellant to the pay emoluments, title and position undertaken to be given to Mr. De Fazio on the ground that, in the light of the ordinances dated December 21, 1948, the proper forum to contest the appellant’s removal thereunder was the Department of Civil Service. Pellet v. Hoboken, 4 N. J. Super. 259 (App. Div. 1949). Thereupon appeal was taken to the Department of Civil Service and hearing was held. At this hearing the Director of Revenue and Finance testified to the economy effected in the Law Department and the bona fides of the ordinances adopted by the city on December 21, 1948. On March 7, 1950, the Department rendered its order which sustained the city’s action and the present appeal is from this order.

It must be borne in mind that the issue before us no longer relates to the displacement of the appellant as assistant corporation attorney by Mr. De Fazio as assistant city attorney. That has been definitively adjudicated to have been improper, the appellant has received back pay for the period of his improper displacement, he would admittedly be entitled to the position of assistant city attorney which Mr. De Fazio purported to occupy if that position were still in existence, and he will presumably be entitled to occupy it hereafter in the event it is recreated. However, that position, along with the appellant’s original position of assistant corporation attorney, has been abolished by duly enacted ordinance avowedly adopted in the interests of governmental economy and efficiency. Good faith in the adoption of the ordinance will be presumed and, unless there is a sufficient showing of bad faith, the abolition of the position will withstand claim under the Civil Service Act. See Hunziker v. Kent, 111 N. J. L. 565, 567 (Sup. Ct. 1933); Pellet v. Hoboken, supra. Evidence that other motives in addition to governmental economy and efficiency were present is not particularly significant if, in fact, the position is useless and its abolition is in the public interest. See Kessel v. Civil Service Commission, 130 N. J. L. 618, 619 (Sup. Ct. 1943). In Santucci v. Paterson, 113 N. J. L. 192, 195 (Sup. Ct. 1934), Mr. Justice Heher expressed the thought that "It would be absurd to hold that a needless position must be continued in existence because an ulterior purpose influenced or played some part in its abolition.” On the other hand, the abolition must not be merely colorable or a device for circumventing an employee’s civil service protection while retaining his position in substance. Hunziker v. Kent, supra; Newark v. Civil Service Commission, 112 N. J. L. 571 (Sup. Ct. 1934); affirmed, 114 N. J. L. 185 (E. & A. 1935); Mattia v. Newark, 122 N. J. L. 557 (Sup. Ct. 1939).

In the instant matter the city’s position takes the following form. When the new board of commissioners took office the Law Department was heavily overstaffed and its abolition in June, 1947, resulted in substantial economy. Although Mr. De Fazio’s designation as assistant city attorney with annual compensation of $6,250 to displace the appellant as assistant corporation attorney with annual compensation of $4,300 was improper, final adjudication to that effect did not occur until September, 1948. In the meantime and pending the litigation Mr. De Eazio withdrew, resulting in provision by ordinance for legal assistants at salaries not exceeding $3,500 per annum and the employment of two legal assistants, each now receiving $3,000 per annum, from the civil service list of legal assistants eligible for re-employment. These two legal assistants, in conjunction with the city attorney, adequately performed the required work and displayed to the satisfaction, of the Director that there was no real need for an intermediate superior position such as assistant city attorney or assistant corporation attorney. The Director considered that a staff as then constituted would be more efficient and economical than the staffs as constituted earlier and the practical effect of the city’s ordinances was to permit the continuance of that type of staff, namely, the city attorney plus two legal assistants’ positions, one of which was offered in good faith to the appellant.

The appellant contends that the city’s conduct was simply subterfuge and was designed not to effect governmental economy and efficiency but rather to deprive him of his civil service protection. On the record before us we are not prepared to accept that view. Undoubtedly the original thought was to have Mr. De Eazio replace him and to circumvent his civil service protection at that time. When Mr. De Fazio withdrew, however, the situation changed; no one was performing the required legal work and it became necessary that steps be taken to see that the day to day subordinate legal work of the city attorney’s office be done. At this juncture the determination to provide for legal assistants and to employ two persons certified by the Department of Civil Service was within the exercise of the city’s judgment. When the appellant later obtained favorable decision from the Court of Errors and Appeals the city attorney’s office was being conducted with the aid of two legal assistants and upon the city’s decision thereafter to abolish the position of assistant city attorney at $6,250 per annum as unnecessary, he was admittedly offered appointment as legal assistant at $3,000 per annum. See R. S. 11:22-10; Kraibuehler v. Civil Service Commission, supra. In this connection the Director has stated that there was no need for three legal assistants and it was not his intention to have more than two, but that if the appellant had returned as legal assistant one of the other assistants, junior in service, would have been displaced.

In the light of the foregoing we find ourselves unable to accept the appellant’s contention that he is now entitled to be restored to the position of assistant city attorney at $6,250 per annum. An order from this court to that effect would impose upon Hoboken a seemingly unnecessary position at a substantial rate of compensation. If such action were necessary to vindicate the wholesome and important public policy underlying the Civil Service Act, we should not hesitate to take it. Cf. Viemeister v. Board of Education of Prospect Park, 5 N. J. Super. 215, 218 (App. Div. 1949). However, the Department of Civil Service found nothing contrary to the letter or purposes of its governing act and our view is in accord. The fact that the city acted against the public interest in 1947 by creating the position of assistant city attorney at $6,250 per annum and appointing Mr. De Eazio thereto in defiance of the Civil Service Act is no reason for perpetuating the wrong. Considering all of the circumstances the appellant may properly be said to have received such civil service protection as may reasonably be afforded to him consistent with the ever present goal of attainment of governmental efficiency and economy.

The order of the Department of Civil Service is affirmed.


author: Wm. J. Brennan, J. A. D.

text:
    JOSEPHINE V. KROLAK, ADMINISTRATRIX AD PROSEQUENDUM OF THE ESTATE OF MICHAEL KROLAK, DECEASED, PLAINTIFF-APPELLANT, v. CHICAGO EXPRESS, INC., A CORPORATION, DEFENDANT-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued October 16, 1950
    Decided November 2, 1950.

      Before Judges McGeehan, Jayne and Wm. J. Brennan, Jr.

      Mr. John T. Keefe argued the cause for appellant (Mr. Joseph J. Takacs, attorney).

      Mr. Charles A. Rooney argued the cause for respondent.
   The opinion of the court was delivered by

Wm. J. Brennan, J. A. D.

Plaintiff appeals from a judgment entered in Middlesex County Court for defendant Chicago Express, Inc., on its motion at the end of plaintiff’s case. The substantial question is that of deviation by a servant from the scope of employment.

Defendant is a freight carrier by truck. One Lunney was its employee as the driver of a tractor-trailer unit and was paid by the trip. On August 27, 1948, Lunney left St. Louis, Missouri, with a load of frozen poultry for delivery at defendant’s terminal in Philadelphia, Pennsylvania; he arrived at that terminal between ñve and six o’clock, Sunday afternoon, August 29th, and found it closed.

Lunney lived in New York City; he telephoned there from Philadelphia and learned that his wife was sick. He backed the loaded trailer against a door of the terminal “so nobody could steal the poultry;” he then detached the tractor and drove it to his New York home where he arrived about ten o’clock that night. He was very tired but was concerned about the poultry because “I hadn’t iced it on the way through;” he decided to return to Philadelphia that same night “to get the truck there by eight o’clock in the morning” “so they can deliver the load of poultry, so it would not go bad.”

Plaintiff’s decedent, Michael Krolak, was Lunney’s next door neighbor in New York City. Lunney testified: “I was too tired to drive there,” “I asked him if he would go back to Philly with me, drive me back, I was tired.” Krolak agreed and before they left Lunney paid him ten dollars for the service.

They drove from New York en route to Philadelphia until they came to a diner in Raritan Township where they stopped and ate. A short time after they left the diner, about five o’clock on the morning of August 30th, and while riding on Route 25 near New Brunswick, the trailer collided with another vehicle, turned over, caught fire, and Krolak was burned to death. The testimony is in sharp conflict whether Lunney or Krolak was driving at the time; this question is immaterial to the present appeal.

When the presumption from a servant’s operation of his master’s motor vehicle that he is operating it within the scope of his employment is overcome by proof that is either uncontradicted or not reasonably subject to a contradictory interpretation, the trial judge should not submit the issue to the jury but on proper motion should order judgment entered for the owner. Coopersmith v. Kalt, 119 N. J. L. 474 (E. & A. 1937), and cases cited therein.

The evidence in this record shows nothing which required a jury determination whether Lunney at the time of the accident was using the tractor in his employer’s business. It was controverted whether Lunney’s use of the tractor to go to his home was a permissive use; he admitted that it was in violation of a posted instruction, but testified he had not been reprimanded when he took it home on other occasions ; however, if the use was permissive, this alone does not supply a basis for the master’s liability; even an habitual use allowed by the master does not of itself subject him to liability to third persons for injuries caused by the servant’s negligence; the master is liable only when at the time of the accident “the instrumentality is being used by the servant for the purpose of advancing the employer’s business or interests, as distinguished from the private affairs of the servant.” Restatement, “Agency” (1933), § 238, comment b; Coopersmith v. Kalt, supra. Lunney’s engagement to transport the poultry was completed when he arrived at defendant’s Philadelphia terminal; plaintiff concedes that Lunney’s use of the tractor to drive to New York was in nowise connected with or incidental to his engagement or connected in any way with his employment; she argues, however, that Lunney re-entered his master’s service when he and Krolak left Kew York for Philadelphia. She says in her brief that Lunney’s purpose in going back to Philadelphia was “to pick up the master’s trailer after it was unloaded and bring it back to the master’s Hew York terminal;” this statement has no support whatever in the proofs. It may be, however, the evidence warrants the inference that his trip compensation embraced not only the transportation of the poultry from St. Louis to Philadelphia, but also the unloading of the freight; if so, we fail to see how that service could begin before his arrival at the terminal where he left the trailer. A permissive use to engage on his own business, if proved, is a fact to be considered in determining when he re-entered his master’s service; nevertheless, “he cannot re-enter it, however much he desires it, until he is within the flexible limits of employment.” Restatement, supra, § 237, comment a. His incidental task, that of unloading the trailer, and the use of the tractor for the purpose, if such use was required, could begin only upon his arrival at the terminal where he had left the trailer; certainly Lunney did not enter upon that service at the moment he left New York, nor had the service begun at the point the accident happened near New Brunswick. Cf. Tildesley v. Joline, 131 N. J. L. 179 (E. & A. 1943).

The case of Shefts v. Free, 105 N. J. L. 577 (E. & A. 1929), is directly in point. There a passenger in the master’s car, driven by the servant, sued the master for injuries suffered when the car was in collision with another. The servant had been directed by the master to take the car to a garage four blocks from the master’s home. The servant drove to the garage, passed it and proceeded to a drug store ten blocks further to purchase some medicine for his own use. After procuring the medicine he immediately started back to the garage and was within a block of it when the collision occurred. The direction of a verdict for the master on the ground that the servant was still engaged in his own enterprise when the accident occurred and that the activity was totally disconnected from that of the master, was sustained by the Court of Errors and Appeals.

The cases cited by plaintiff are not to the contrary. Two of the cases are of the class holding that when a servant driving on his master’s business detours for his own purposes before arriving at the place appointed for the completion of his trip, and then resumes the journey to that place, there is at least a question for the jury whether in returning to the service he re-enters the employment. Restatement, supra, § 237, comment a. In Sanford v. Charles H. Totty Co., 110 N. J. L. 262 (E. & A. 1933), the servant was bound from the State of Connecticut to Madison in this State and detoured to make a stop at Rutherford to see a friend; the friend not being available, he proceeded to drive from Rutherford to Madison and the accident occurred on the way. In Ferris v. McArdle, 92 N. J. L. 580 (E. & A. 1919), the servant was a chauffeur and his master’s car was garaged at a place beyond the servant’s home; the servant detoured en route to the garage to go to his home for supper; the accident happened before he reached his home; there was proof that he habitually made the detour and that the practice was known to and acquiesced in by his employer. The other cases plaintiff relies on concerned factual situations in which the return to the master’s employment was evident or no issue of deviation was involved. In Fullmer et al. v. Scott-Powell Dairies, Inc., 111 N. J. L. 44 (E. & A. 1933), it was clear that at the time of the accident the servant had returned to and was actively engaged upon his employer’s business after having stopped at a restaurant. In Axford v. Purity Bakeries Corp., 112 N. J. L. 594 (E. & A. 1934), the accident occurred while the servant was driving along the “precise route that his duty required him to follow.” Yanowitz v. Pinkham, 111 N. J. L. 448 (E. & A. 1933), involved the plaintiff’s status as the master’s invited'guest. In Spence v. Maier, 137 N. J. L. 284 (Sup. Ct. 1948); affirmed, 1 N. J. 36 (1948), the delivery of bread after hours to fill orders taken during the work day was the servant’s customary practice.

There was evidence that Lunney on several occasions parked the tractor between trips in front of his home where Krolak saw it and that Lunney cleaned and cared for it on those occasions.

This proof merely supported the presumption that Lunney was acting in behalf of his employer in having the tractor in Mew York when he hired Krolak. It does not, as contended by plaintiff, estop defendant to deny that such use on the Sunday night in question was within Lunney’s scope of employment; the presumption, as we have said, may be overcome, and it was, by the proofs that the use was for Lunney’s own purposes unrelated to his employment.

There was also testimony that Lunney on one previous occasion had hired Krolak as a helper on a trip from New York to St. Louis and that Lunney had put Krolak’s name on a St. Louis manifest; there are no proofs of the significance of putting the name on the manifest or that this came to the attention of any one in authority for defendant. Lunney did say also that he had once hired a man to help unload the trailer in Cleveland and had paid him five dollars for which he had been reimbursed by defendant. This testimony did not raise a jury question of apparent authority in Lunney to hire Krolak, as contended by plaintiff; evidence of knowledge by defendant of Lunney’s conduct required to justify the creation of an apparent authority is lacking, cf. Mesce v. Automobile Association of New Jersey, 8 N. J. Super. 130 (App. Div. 1950); the frailty of the proof is apparent and the scintilla rule does not obtain in this State. Van Genderen v. Paterson Wimsett Thrift Co., 128 N. J. L. 41 (E. & A. 1942). In addition, the evidence more clearly points to an employment understood by Krolak to be for Lunney’s own purposes; Lunney was tired and paid Krolak to relieve or spell him on the drive to Philadelphia. One who is riding as a guest in a vehicle with permission by a servant of the owner may, of course, be a guest of the servant and not of the owner. See Yanowitz v. Pinkham, supra. The facts are not within Paiewonsky v. Joffe, 101 N. J. L. 521 (E. & A. 1925) and Fullmer et al. v. Scott-Powell Dairies, Inc., supra, relied on by plaintiff, because in each of those cases there were clear proofs of the master’s knowledge of the servant’s practice to invite passengers and of the connection of the practice with, and advantage to, the master’s business.

Plaintiff contends finally that the court erred in sustaining objections to questions asked of Lunney as to his express authority to employ drivers and helpers. This has no merit, as Lunney, the plaintiff’s witness, had previously testified he had never received any express instruction from his employer on the subject.

The judgment is affirmed with costs.


text:
    HERMAN WEINSTEIN, INDIVIDUALLY AND TRADING AS MERIT REALTY CO., PLAINTIFF-APPELLANT, v. MATTHEW WEINSTEIN, DEFENDANT-RESPONDENT. HERMAN WEINSTEIN, TRADING AS MERIT REALTY CO., PLAINTIFF-APPELLANT, v. MATTHEW LOIBL, DEFENDANT-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued October 9, 1950
    Decided November 8, 1950.

      Before Judges McGeehan, Jayne and Wm. J. Brennan, Jr.

      Mr. Dominick F. Pachella argued the cause for appellant (Mr. Herbert Fenster, attorney).

      Mr. Albert S. Gross argued the cause for respondents.
   The opinion of the court was delivered by

McGeehan, S. J. A. D.

The plaintiff, a real estate and business broker, sued defendant Matthew Weinstein for brokerage commissions, on the sale to Matthew Loibl of Matthew Weinstein’s liquor store business located at 275 Main Street, Hackensack, and sued defendant Loibl for breach of contract. Motions for involuntary dismissal made at the end of plaintiff’s case were granted and plaintiff appeals from the judgments entered thereon.

It was stipulated that, prior to November 22, 1948, the defendant Weinstein had promised the plaintiff a commission of ten per cent if he produced somebody to purchase the defendant’s business, and that defendant Loibl purchased the business from defendant Weinstein for $18,750 in February, 1949. Burchill, a salesman for plaintiff, testified that defendant Loibl came to plaintiff’s place of business on November 22, 1948, to inquire about the various liquor store businesses advertised by .the plaintiff; that after discussion, he gave Loibl particulars of two or three places, including the Weinstein liquor store; and that Loibl then signed an agreement, which provided:

“* * * In consideration of services rendered and confidential information given to me by Merit Realty Co. as to tbe businesses or properties mentioned herein and entrusted to me as a prospective buyer, I hereby agree not to conclude any sale, or give a deposit, or take possession of, or have any interest whatsoever in any of the businesses or properties mentioned, without first informing Merit Realty Co., and further to make provision for the full payment of ten per cent of the purchase price as commission to be paid by seller. Should I fail to comply with any of the terms of this agreement, I shall be liable to Merit Realty Co. for the full commission which they would have earned from the seller.
“The undersigned hereby acknowledges a receipt of a copy of this agreement, and further agrees to recognize Merit Realty Go. as the sole and only Broker, and that no sale shall be concluded until the commission in full has been paid to Merit Realty Co.
“Properties or Businesses Submitted by Merit Realty Co.
“275 Main St., Hackensack * * *."

He testified, further, that he suggested to Loibl that they go and look at the stores, but Loibl insisted that he would like to go at his own leisure, and that it was arranged that Loibl was to do so and later get in touch with the plaintiff.

Loibl, who was called as a witness by the plaintiff, testified that on November 24, 1948, which was two days after the signing of the agreement, he visited the "Weinstein liquor store at 275 Main Street, Hackensack, fox the first time, and that he bought the store later. In cross-examination, Loibl testified that when he went to the Weinstein store on November 24th “Mr. Marks sent me there;” that Marks was a broker and “I bought a business from him before;” that he visited the store several times thereafter but always in company with Marks or one of Marks’ associates; and that the closing in February, 1949, took place in the office of Marks. There was no proof that the plaintiff had ever communicated with the defendant Weinstein from the time Loibl signed the agreement on November 22, 1948, until the purchase by Loibl in February, 1949.

The court below granted the dismissal in the Matthew Weinstein case on the ground that there was conflict in the plaintiff’s proofs on the question whether the plaintiff was the efficient and procuring cause of the sale; and granted a dismissal in the Loibl ease on the ground that the agreement signed by Loibl was a contract of guaranty, and since there was no indebtedness from the defendant Weinstein, the ease against Loibl fell.

The plaintiff argues two grounds for reversal: (1) the trial court erred in weighing the evidence, and (2) there was evidence from which the jury could find that plaintiff was the procuring or efficient cause of sale.

Our courts have stated and restated the test to be applied on a motion for dismissal at the end of plaintiffs case, which is that all evidence adduced by the plaintiff, and every legitimate inference therefrom, must be considered in the light most favorable to plaintiff’s claim; and if such evidence or inferences would support a verdict for the plaintiff, the motion should be denied. Pirozzi v. Acme Holding Company of Paterson, 5 N. J. 178, 185 (1950); Cropanese v. Ontell, 2 N. J. Super. 120 (App. Div. 1949).

The court below, in holding that the plaintiff failed to make a prima facie case against Weinstein, based it on the finding that Loibl’s testimony, “Mr. Marks sent me to the store,” brought about a conflict in the plaintiff’s proofs on the question of efficient and procuring cause of the sale, which required a dismissal. Standing alone, the fact that there may be some conflict in the plaintiff’s proofs will not justify a dismissal. As was said in Hopper, Ex. v. Smith, 70 N. J. L 403 (Sup. Ct. 1904): “But even if the two witnesses could be regarded as in conflict it would not justify a nonsuit. The question whether the cause of action was established was one for the jury.”

The respondent argues that the dismissal should be affirmed on the ground that there was no evidence from which the jury could have found that the plaintiff was the efficient and procuring cause of the sale. This argument is based on the premise that proof of introduction of buyer and seller by the authorized broker, and of a sale to such buyer, is never sufficient to make out a prima facie ease without evidence of further negotiations on the part of the broker which result in the ultimate sale. The premise is false. “The law is firmly settled in this state that a real estate broker earns his commission when he secures a buyer on the seller’s terms, either as originally propounded or as settled by agreement between the seller and buyer.” Houston v. Siebert, 129 N. J. L. 468, 472 (E. & A. 1943). “An agent is an 'effective cause’ * * * when his efforts have been sufficiently important in achieving a result for the accomplishment of which the principal has promised to pay him so that it is just that the principal should pay the promised compensation to him.” Restatement, Agency, § 448, comment (a). The question is “whether, under the peculiar conditions of the given case, the agent was the efficient cause of the sale; and where there is real doubt upon that point, such doubt must be solved by the jury.” Houston v. Siebert, above.

We think that the evidence at the close of the plaintiffs case, together with the legitimate inferences which the jury was entitled to draw therefrom, considered in the light most favorable to the plaintiff’s claim, was legally sufficient to support a finding that the plaintiff was the efficient and procuring cause for the sale. We conclude that the court below should have denied the motion to dismiss and called upon the defense for proof in support of its contention to the contrary. Cf. Kelly v. Hicks, 9 N. J. Super. 266 (App. Div. 1950).

The reversal in the case against Matthew Weinstein leads to a reversal in the case against Loibl if we assume, as did the court below, that Loibl’s agreement was one of guaranty. Since neither brief questions this assumption of the court below, we express no opinion thereon.

The judgments under appeal are reversed.