author: Hartshorne, J. C. C.

text:
    BEATRICE HARTMAN, PETITIONER-APPELLEE, v. FEDERAL SHIPBUILDING AND DRY DOCK COMPANY, RESPONDENT-APPELLANT.
    Essex County Court Law Division
    Decided February 15, 1951.

      Mr. Morris Edelstein, attorney for petitioner-appellee.

      Messrs. Stryker, Tams & Horner (Mr. John J. Monigan, Jr., appearing), attorney for respondent-appellant.
   Hartshorne, J. C. C.

This case arises on a petition for alleged increased permanent disability to petitioner’s back, 15% compensation having been originally paid, an award of 50% of total having been made November 1, 1949, the final award of total permanent disability having been made October 25, I960.

It stands undisputed that petitioner sustained three compensable accidental injuries to her back while in respondent’s employ. The first occurred January 18, 1943, the second September 14, 1944, the third January 25, 1945. The doctor upon whom respondent principally relies, found she then had a residual right sacroiliac sprain with a sciatic nerve involvement. He agrees this was “not a normal back.”

Nevertheless, petitioner continued in respondent’s employ, but “'due to my condition, I did light lifting and it got so had, that they put me near the bench cutting rubber gaskets” with scissors. When in December, 1945, they assigned her to work on ships, she left the employment because she “wasn’t equal to that kind of work.” Since she previously had been a practical nurse, she turned again to nursing. But, she had been wearing a brace “from the first time that I was injured in the shipyard,” i. e., 1943, though at times she “had to take it oil because the pad in the back irritated * * Her sister Mrs. Kroll adds that since “the very first injury” petitioner “was never able to do heavy work” even around the house, and that she, the sister, had to assist her intermittently in many more war’s both then and thereafter, until now when she has become practically an invalid. In May of 1946, while nursing, she had one, or possibly two, similar back difficulties. “The daughter and I were trying to straighten her (the patient) in bed, and I put my arms out to try and help, and this pain shot across my hack and I just couldn’t do it, and I had to give it up.” Q. “You were trying to lift this patient in bed?” A. “I didn’t even get near her to lift her.” This forced petitioner to give up practical nursing, and she took further medical treatment, being unable to work for some seven months. Thereafter occurred a series of other similar incidents. In December, 1947, when she bent down to the floor to pick up a piece-of paper, she again suffered acute back pains, and was put to bed by Dr. Eederer with fracture boards and a heating pad, being admitted to the hospital in February of 1948. On February 3, 1949, while acting as a baby’s nurse, she had a similar experience simply in removing a milk bottle from a drainboard. Since then her condition has “gotten worse,” to such an extent that on May 16, 1949, she suffered another acute back difficulty simply while attempting to arise from a kitchen chair. Note that the occurrence of all these incidents was not wrung from petitioner on cross-examination, but volunteered by her on direct, apparently as showing the extent of the disability resulting from the accidents on which she based her claim.

That petitioner has for some years been suffering from a chronic back, to use the colloquial, is thus evident. That this chronic back is identical, save in its severity, with her original condition, is also admitted by respondent’s Dr. Watman. His diagnosis after the first three incidents’ was “a right sacroiliac sprain and sciatic nerve involvement.” Q. “And your diagnosis at the conclusion of your examination in 1950 was a right sacroiliac sprain with sciatic involvement?” A. “Yes, the same.” Q. “Exactly the same?” A. “Yes, that’s right,” though, with added severity and more intense neurological symptoms.

Respondent’s doctors unite in their view that the present end result of this serious orthopedic and neurological situation, is due not alone to the back injuries which petitioner suffered while in respondent’s employ, but to those which she suffered thereafter, particularly because of the absence of proof of similar incidents for a year or more from the time she left respondent’s employ, till the above nursing incident of May, 1946. This claim — in the medical sense — is undoubtedly correct. For each of such later incidents clearly worsened petitioner’s back physically, and rendered her more likely to suffer a further injury, even from such normal incidents in life as picking up a piece of paper from the floor, lifting a milk bottle from a drainboard, or getting up from a chair. But the question of legal responsibility for this end result, is totally different from the medical one, of the bodily effect on an end result. The medical profession, interested in treating a body, are concerned solely with the physical and bodily situation giving riso to the bodily result. Note to this effect Dr. Watman’s testimony (Record pp. 362, 370). The legal profession on the contrary, interested in the question of legal responsibility, seeks to ascertain the person who causes the ultimate physical result. TIence, the conclusions of the medical men in this cause, that the present condition of petitioner was, in part at least, due to her back injuries after she left respondent’s employ, has small bearing on the legal question here involved.

The applicable legal principle is that “If a reasonably prudent person innocently aggravates the harmful effect of the original injury, the original wrongful cause continues to the end, and accomplishes the final result.” Selak v. Murray Rubber Co., 8 N. J. Misc. 838 (Sup. Ct. 1930); affirmed, 108 N. J. L. 548 (E. & A. 1932); Randolph v. E. I. duPont de Nemours & Co., 130 N. J. L. 353 (Sup. Ct. 1943). Though '“The chain of physical causation with the compensable injury may be broken by the negligence of the employee,” or his willful act, as an independent intervening cause. Kelly v. Federal Shipbuilding & Dry Dock Co., 1 N. J. Super. 245 (App. Div. 1949); McDonough v. Sears, Roebuck & Co., 127 N. J. L. 158 (Sup. Ct. 1941).

Applying these principles, it would hardly seem negligent for petitioner, forced to earn her own bread and butter, to turn to her original employment of nursing, when she found her previous injuries rendered her incapable of doing the work on shipboard, to which respondent wanted to assign her. Nor would it seem negligent for her, without lifting a patient bodily, to attempt to aid the patient’s daughter, and the patient herself, in changing her position in the bed. A fortiori such incidental daily occurrences as picking a piece of paper from the floor, lifting a milk bottle from a drainboard, or getting up from a chair, can hardly constitute independent intervening causes, sufficient to break the chain of causation running from the original back injuries occurring in respondent’s employ.

Nor is there substance to respondent’s claim that these compensable accidents are made too remote, by the fact that a year or more elapsed between them and the nursing incident. Eor petitioner’s wearing of a brace, inability to do heavy work, and requiring the aid of her sister, all continued, generally, during this period. Surely these previous accidents are “one of the contributing causes without which the injury which actually followed would not have followed.” Newcomb v. Albertson, 85 N. J. L. 435 (Sup. Ct. 1914); Clover, Clayton & Co., Ltd., v. Hughes (1910), A. C. 242; Randolph v. H. L. duPont de Nemours & Co., supra. These subsequent nursing and other incidents, instead of falling into the category of independent intervening causes, such as the act of a patient in burning his own finger with a match despite warnings, as in the McDonough case, supra, would rather seem to be mere manifestations of physical weakness and pain, resulting from the sacroiliac injury suffered while in respondent’s employ. Indeed, in view of the admitted identity of locale and type of injury, from beginning to end, it is quite clear petitioner here does not fall within the line of cases of which Brown v. Allied Plumbing & Healing Co., 129 N. J. L. 442 (Sup. Ct. 1943); affirmed, 130 N. J. L. 487 (E. & A. 1943); and Mack v. M & S Maintenance Co., 4 N. J. Super. 251 (App. Div. 1949), are instances. Indeed, “The fact that the second injury was a wholly independent injury, and not merely an aggravation of a compensable injury, makes no difference in the result, if the second injury is directly connected in a chain of physical causation with the compensable injury.” Kelly v. Federal Shipbuilding & Dry Dock Co., supra; Flanagan v. Charles E. Green & Son, 122 N. J. L. 424 (E. & A. 1939).

In short then, since the series of accidents to petitioner’s back, while in respondent’s employ, directly contributed to her later injuries, and such injuries would clearly not have occurred otherwise, respondent must be considered legally responsible for her increased incapacity resulting therefrom. Since respondent’s physicians frankly admit petitioner is no malingerer, and there is small question on the facts as to her present total incapacity, the award of the Bureau therefor will be affirmed, and a determination may be entered accordingly.


source: Caselaw Access Project

author: Leonard, J. A. D.

license: Public Domain

text:
    MILDRED SCHAFFER AND SIDNEY SCHAFFER, PLAINTIFFS-APPELLANTS, v. GRANIT HOTEL, INC., DOING BUSINESS AS THE GRANIT HOTEL AND COUNTRY CLUB, DEFENDANT-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued February 9, 1970
    Decided April 16, 1970.

      Before Judges Kilkenny, Labeecque and Leonakd.

      Mr. Seymour Margulies argued the cause for appellants (Messrs. Levy, Lemlcen and Margulies, attorneys; Mr. Daniel B. Colurn on the brief).

      Mr. Bichard I. Osirager argued the cause for respondent (Mr. Chester A. Morrison, attorney).
   The opinion of the court was delivered by

Leonard, J. A. D.

Plaintiffs appeal from a judgment dismissing their action for lack of jurisdiction over defendant.

On February 4, 1966 plaintiffs were paying guests at the Granit Hotel, Kerhonkson, New York. The female plaintiff was injured while using a toboggan run maintained by the hotel. She and her husband instituted suit in August 1967 against defendant, which owns and operates the hotel.

Service of process was accomplished by sending a copy of the summons and complaint registered mail, return receipt requested, to defendant at its principal place of business in New York. A New York attorney, not licensed to practice in this State, filed an answer in September. Thereafter New Jersey counsel filed a stipulation extending the time to answer and later an answer. Therein it was asserted, among other contentions, that the Superior Court had no jurisdiction over defendant by reason of deficient service of process.

Defendant subsequently moved for a dismissal of the complaint. After considering the pleadings, pretrial order, affidavits offered by both parties, admissions by plaintiffs, exhibits and defendant’s answers and amended answers to plaintiffs’ interrogatories, the trial court concluded that plaintiffs failed to “disclose sufficient minimum contacts in this case to sustain jurisdiction in this state over the person of defendant.” Thus, the judgment now under attack was entered.

B. B. 4:4-4(d), now part of B. 4:4-4(c)(l), authorizes substituted service of process on a foreign corporation where service cannot be made in any of the other ways listed in that rule, “subject to due process of law, by mailing, registered mail, return receipt requested, a copy of the summons and complaint to a registered agent for service or to its principal place of business, or its registered office.” Amercoat Corp. v. Reagent Chem. & Research, Inc., 108 N. J. Super. 331, 336 (App. Div. 1970). The clear purpose of this rule is “to vest our courts with jurisdiction over foreign corporations to the outer limits permitted by due process.” Id., at 336; Corporate Development Specialists, Inc. v. Warren-Teed Pharmaceuticals, Inc., 102 N. J. Super. 143, 148 (App. Div. 1968).

Since International Shoe [International Shoe Co. v. State of Washington, 326 U. S. 310, 66 S. Ct. 154, 90 L. Ed. 95 (1945)] the law has been that due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend “traditional notions of fair play and substantial justice.” Roland v. Modell’s Shoppers World of Bergen County, 92 N. J. Super. 1, 6 (App. Div. 1966).

Those demands of due process may be met by such contacts of the corporation with the State or the forum as make it reasonable to require the corporation to defend the particular suit which is brought here. Amercoat Corp., supra, at 340; Corporate Development Specialists, Inc., supra, 102 N. J. Super., at 148. There is a steady trend toward expanding the permissible scope of state jurisdiction over foreign corporations and other non-residents. Id., at 149. The application of the rule to each case depends upon the facts in that particular case. Roland, supra, at 6.

In the instant case plaintiffs, residents of this State, made their reservations at defendant’s hotel through the Saddle Brook Rochelle Park Jewish Center (Center). The Center had been taking groups of people to the hotel for winter weekends during the past four or five years. It had been the practice of the Center officials, while at the hotel, to make arrangements for the following year, pending a written contract. Thus, arrangements for the pertinent 1966 weekend were made in March 1965. Thereafter a tentative contract, dated March 15, 1965, was mailed to New Jersey to the chairlady of the event for the- Center. She, in turn, during the spring of 1965 sent a deposit check in the amount of $118, by mail from New Jersey to New York. A final contract was mailed to her on or about May 17, 1966. Needing more rooms she telephoned the hotel from New Jersey “using its direct wire service.” After adding additional rooms to the contract, the agreement was signed by her and returned by mail to the hotel in New York.

Defendant regularly entertains 30-40 similar New Jersey centers each year. Defendant advertises in the Newark Sunday News and in New York papers circulated in New Jersey. Additionally, it advertised in The Jewish News, a New Jersey periodical, on a weekly basis during June, July and August 1966. All of these advertisements note “For reservations: Direct Wire (212).” (Area code for New York City.)

Since we are presently confronted with a service business located in New York State rather than a manufacturer, wholesaler or other type of distributor, defendant’s operations in New Jersey are of a less tangible variety. Nevertheless, it has made economic entry into this State. By use of a continued advertising campaign in the State, in ethnic as well as general newspapers, it has solicited business from our residents. Such solicitation, in and of itself, may be sufficient “contact” to comport with the requirements of due process. Amercoat Corp. v. Reagent Chem. & Research, Inc., supra, 108 N. J. Super., at 340. However, as noted above, defendant engaged in additional and more extensive activities in this forum. Thus, under the entirety of the circumstances here present we find that there exists such minimum contacts between defendant and this State that the maintenance of this suit in this jurisdiction does not offend traditional notions of fair play and substantial justice. We also find that defendant by its actions purposefully availed itself of the privilege of conducting activities within this State, thus invoking the benefits and protection of its laws. Higgins v. American Society of Clinical Pathologists, 94 N. J. Super. 243, 248-249 (App. Div. 1967), rev’d on other grounds, 51 N. J. 191 (1968).

We agree with the logic of and the result reached by the court in Oliff v. Kiamesha Concord, Inc., 106 N. J. Super. 121 (Law Div. 1969). Therein (at 126) the trial court stated that “no justifiable reason is advanced to create a special hallowed niche of immunity from process for the hotel which seeks to profit from the resident of the forum state by repeated and direct approaches to the resident.”

Scheidt v. Young, 389 F. 2d 58 (3 Cir. 1968), which construed our service of process rule, is factually inapposite. Therein the hotel neither indulged in constant newspaper advertising in this State nor did it have continued and systematic contacts with specific groups of our residents for a period of four to five years.

Defendant urges that in personam jurisdiction over foreign corporations should be limited to situations involving a product which ultimately is sold to a consumer in this State, and which caused injuries to that consumer. This contention is without merit. We are not aware of any such limitation to the utilization of service under our “long-arm” rule, i?. R. 4:!r-4(d), now part of R. 4:4-4(e) (1). To the contrary, service has been made thereunder in a variety of other situations. Por example, Resin Research Lab. Inc. v. Gemini Roller Corp., 105 N. J. Super. 401 (App. Div. 1969), and Corporate Development Specialists, Inc. v. Warren-Teed Pharmaceuticals, Inc., supra, 102 N. J. Super. 143, both involved suits upon contracts; in Amercoat Corp. v. Reagent Chem. & Research Inc., supra, 108 N. J. Super. 331, defendant, a New Jersey corporation, filed a third-party complaint against two foreign railroad corporations for breach of contract; Higgins v. American Soc. of Clinical Pathologists, supra, 94 N. J. Super. 243, involved an in lieu proceeding brought by plaintiff against a foreign nonprofit corporation to compel it to renew her medical technology certificate and to reinstate her name on its registry; in Govan v. Trade Bank & Trust Co., 109 N. J. Super. 271 (App. Div. 1970) suit was instituted on a promissory note.

The mere fact that a part of defendant’s activities — advertising in The Jewish News — -occurred subsequent to the date oí plaintiff’s injuries, does not invalidate the service made upon defendant. Such activity occurred prior to the institution of suit and it therefore may be considered in determining whether sufficient “minimum contacts” have been made. See Hoagland v. Springer, 75 N. J. Super. 560, 565 (App. Div. 1962).

Defendant relies upon the following cases decided in our sister states and in the Federal courts involving similar guest-hotel situations: Miller v. Kiamesha-Concord, Inc., 420 Pa. 604, 218 A. 2d 309 (Sup. Ct. 1966); Walter v. Hotel Brunswick, 3 Conn. Cir. 898, 216 A. 2d 212 (5 Conn. Cir. 1965); Turner v. Jack Tar Grand Bahama Ltd., 353 F. 2d 954 (5 Cir. 1965); Miller v. Surf Properties Inc., 4 N. Y. 2d 475, 176 N. Y. S. 2d 318, 151 N. E. 2d 874 (Ct. App. 1958) ; MacInnes v. Founlainbleau Hotel Corp., 257 F. 2d 832 (2 Cir. 1958). The above cases were brought under the “long-arm” statutes of Pennsylvania, Connecticut, Texas and New York. An examination of these cases indicate that under the New York and Connecticut statutes it is necessary to find that the foreign defendant was “doing business” in the traditional sense. Similarly, the Pennsylvania legislature has not chosen to exercise the full extent of jurisdiction. To the contrary, in our State the “long-arm” arises from a rule of court and hence we need not struggle with the oft difficult problems of statutory construction faced by courts with detailed “long-arm statutes.” Roland v. Modell's Shoppers World of Bergen County, Inc., supra, 92 N. J. Super., at 7. Our courts are vested with jurisdiction over foreign corporations to the outer limits permitted by due process. Amercoat Corp. v. Reagent Chem. & Research Inc., supra, 108 N. J. Super., at 336. Consequently the foreign jurisdictions cited above are not controlling.

Finally, we note that defendant does not assert that a trial in this forum would be inconvenient.

Based upon the foregoing reasons, we conclude that the substituted service effected upon defendant pursuant to R. R. 4:4-4(d), now part of R. 4:4-4(c)(l) was valid. The judgment oí dismissal entered by the trial court is therefore reversed and the case is remanded for plenary trial in accordance herewith.


author: Per Curiam.

text:
    T., PLAINTIFF-RESPONDENT, v. H., DEFENDANT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Argued December 8, 1969
    Decided April 15, 1970.
    Before Judges Kilkenny, Labrecque and Leonard.

      Mr. Burrell Ives Humphreys argued the cause for appellant (Messrs. Hofmann & Humphreys, attorneys).

      Mr. William F. Tomplcins argued the cause for respondent (Messrs. Bum, Biunno & Tomplcins, attorneys; Mr. Theodore L. Abeles, on the brief).
   Per Curiam.

The order is affirmed on other factual grounds.


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

text:
    RAYMOND F. MALE, COMMISSIONER DEPARTMENT OF LABOR AND INDUSTRY, STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT, v. ACME MARKETS, INC., A CORPORATION OF NEW JERSEY, DEFENDANT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Argued March 23, 1970
    Decided April 22, 1970.

      Before Judges Kilkenny, Labrecque and Leonard.

      Mr. Thomas J. Brady argued the cause for appellant (Messrs. Milton, Keane & DeBona, attorneys; Mr. Henry J. Byrne, on the brief).

      Mr. Richard C. Camp, Deputy Attorney General, argued the cause for respondent (Mr. George F. Kuglcr, Jr., Attorney General of New Jersey, attorney).
   The opinion of the court was delivered by

Kilkenny, P. J. A. D.

After the new statute Acme changed its policy. It still required its employees at the check-out registers to make good any shortages but, instead of taking them out on payday, it required the employees to reimburse it on some day subsequent to payday. The obligation was the same, but the time of reimbursement was delayed to overcome the statu tory prohibition.

The Commissioner of Labor and Industry challenged the validity of this new policy by seeking a restraint and penalties in the Superior Court, Chancery Division. It was there held that this new policy still violated N. J. S. A. 34:11-4.4, in that if constituted a withholding or diverting of wages for an unauthorized purpose, regardless of the exaction of the money on some day other than payday. In brief, it was deemed to he an attempted circumvention of the statute’s prohibition. The restraint was granted, but the statutory penalties were denied.

In reaching that decision, the Chancery Division reserved to the employer the right to commence legal actions for any loss suffered by reason of the employee’s negligence or defalcation. However, it seemingly limited the employer’s remedy for recovery of shortages to a lawsuit only. It did not, at least expressly, authorize employees to adjust shortages by voluntary action on their part. Perhaps it doubted any such actiom could be “voluntary.”

Acme appeals from the judgment. It maintains that the purpose of the statute is to prohibit the employer from withholding the shortage from the wages on payday only, but does not preclude a store’s policy of requiring employees to make good their shortages on a day subsequent to payday. It reasons that the wages lose their identity as "wages” once they have been paid and are under the employee’s sole control. Moreover, Acme points out that, under its collective bargaining agreement with their Employees’ Union, there is a provision whereby employees agree to liability for their shortages.

The collective bargaining agreement does not conflict with the pertinent statute. If it did, it would, like all other contracts, be subject to the statute. Eor example, if the union agreement authorized a deduction of shortages from wages, such a provision would contravene the law, would violate public policy and be invalid. Thus, the acknowledged liability of employees for shortages, set forth in the Collective bargaining agreement, is something apart from the withholding or diverting of wages to make good shortages, which is prohibited by N. J. S. A. 34:11-4.4.

Shortages are almost invariably due to the negligence or dishonesty of the employee. It is a fundamental rule in the law of agency that an agent or employee is generally liable to his principal or employer for loss sustained by the latter due to the former’s negligence or defalcation. Therefore, the store policy of holding its check-out cashiers liable for their shortages does not contravene public policy or established law. Cf. Restatement, Agency, 2d, §§ 379(1), 382, 401, 402; 3 Am. Jur. 2d, Agency, §§ 199, 201, 202, 215.

If, possibly, a shortage occurs for which the cashier is in no way at fault, for example, a holdup or thievery by a fellow-employee, then presumably the loss would not be a “shortage” in the commonly accepted meaning of that term. If sued, the employee could properly defend on that ground. Moreover, a grievance procedure is provided for in the collective bargaining agreement.

Since there is generally legal liability for a “shortage,” the narrow issue then is how may the employer lawfully collect it. All agree that N. J. S. A. 39 :11-4.4 prohibits the employer from taking it out of wages payable on payday. Uo one disputes that the employer may institute a lawsuit against his employee for loss occasioned by the employee’s negligence or conversion. We agree with the trial court that the employer may not do indirectly or by obvious circumvention what the law directly prohibits. It would be an anomaly for the employer to pay the wages in full on a Friday night and then require the employee to take the money out of the same pay envelope and turn it back to the employer a day or so later to reimburse for the shortage.

The only real difficulty lies in the trial court’s requirement that a lawsuit must be instituted by the employer before he can recover a shortage to which he is legally entitled. We can appreciate the need for a lawsuit where fault for the shortage, or the amount thereof, is in dispute. On the other hand, an employee might readily admit the shortage and his responsibility therefor and be perfectly willing to reimburse for it. He may not need any recourse to wages to make good the loss. Yet, to require a lawsuit in every such case and the additional costs and expenses entailed thereby might only magnify the loss, overcrowd court calendars and be undesirable to all parties concerned. For these reasons, we would not deem a lawsuit the only remedy for recovery of shortages. We realize the difficulty of regarding any reimbursement as “voluntary,” but we would not totally eliminate its possibility.

Except as modified herein, the judgment is affirmed. No costs.


author: Coíteoed, P. J. A. D.

text:
    RICHARD C. SAS, PLAINTIFF-RESPONDENT v. JUNE STRELECKI, DIRECTOR OF MOTOR VEHICLES, DEFENDANT-APPELLANT. JOHN DRAHOS, PLAINTIFF-RESPONDENT, v. JUNE STRELECKI, DIRECTOR OF MOTOR VEHICLES, DEFENDANT-APPELLANT, AND RICHARD C. SAS AND WALTER H. WARD, DEFENDANTS.
    Superior Court of New Jersey Appellate Division
    Argued February 2, 1970
    Decided April 20, 1970.

      Before Judges Coneord, Collister and Kolovsky.

      Mr. Philip Blacker argued the cause for appellant.

      Mr. Stephen E. Barcm argued the cause for respondent Richard C. Sas (Messrs. Wilentz, Goldman ¡& Spitzer, attorneys; Mr. Warren W. Wilentz, of counsel).
   The opinion of the court was delivered by

Coíteoed, P. J. A. D.

This appeal arises out of negligence litigation following a collision between a car being driven south on Crows Mill R'oad in Fords and a car parked on the easterly side of the road. Plaintiffs Sas, the driver, and Drahos, his passenger, sue the defendant Strelecki, as Director of the Division of Motor Vehicles, and Drahos’ complaint joins Sas as a party defendant. Defendant Director is sued under the Unsatisfied Claim and Judgment Fund Act provision authorizing such suit in “hit and run” cases. N. J. S. A. 39:6-78. Plaintiffs’ contention at trial was that while they were traveling late at night a light-colored car came at theirs from the opposite direction and on the wrong side of the road, and that Sas swerved to the left to avoid it and in so doing collided with the parked car. The owner of that car is not a party.

The main issue on appeal is the admissibility of an investigating police officer’s testimony as to statements made to him at the scene of the accident by Sas, Drahos and a local resident, Mrs. Alliegro, and, in relation to the latter, of the admissibility of the officer’s official report of the accident.

Called by Drabos as his first witness, the officer testified he arrived at the scene between five and ten minutes after receiving a radio signal to go to the scene. Over objection c£ the defendant the officer was allowed to state what Sas and Mrs. Alliegro (and, impliedly, Drahos) had told him as to how the accident happened. His account, practically identical with his official report, from which he apparently read, was as follows:

Q. Officer, what did they tell you as to how this accident happened?
A. Driver of vehicle number two [Sas] stated he was travelling south on Crows Mill Road when an unidentified car travelling north on Crows Mill Road swerved into his path forcing him to pul] his steering wheel and causing him to strike [the parked car] which was legally parked at the curb. He stated further that had he not swerved the unidentified vehicle would have hit him. head on.
Q. Officer, is there anything else contained in your report with regard to his statements?
A. Yes, sir, there is.
Q. Will you finish your report?
A. He told me that the vehicle, that the unidentified vehicle was a 1968 White Chevrolet, and after he hit the parked car, the Chevy picked up speed and left the scene.
❖ ::= * * í¡f Hi *
Q. What did the witness tell you with regard to the happening of the accident or with regard to her observations?
* # # * * * * * A. The information given to me by [Sas] and his passenger was backed up by a witness [Mrs. Alliegro] who told me the same thing.

The trial judge admitted this testimony over objection because Sas, Drahos and Mrs. Alliegro were going to testify and because “I think the jury should have the benefit of the comparison.”

Sas, called as a witness by Drahos, and Drahos himself gave testimony as to the accident substantially as recounted in the statements they gave the police officer and set forth above. Mrs. Alliegro testified that she heard the crash outside her door, looked out and saw the “light” car on the wrong side of road. “He hesitated, like he was going to stop and then he took off.” On cross-examination Mrs. Alliegro admitted having signed a statement for an investigator to the effect that “[b]oth cars were in the same direction toward Hew Brunswick Ave” (south). In rebuttal, over objection, Drahos was permitted to offer in evidence the entitrety of the police report as containing a “prior consistent statement” by Mrs. Alliegro, purportedly to rehabilitate her testimony on direct examination.

The jury by a 10-2 vote found for Sas and Drahos against defendant and for Sas in Drahos’ action against Sas. Defendant’s motion for a new trial was denied. Only defendant appeals.

Plaintiffs first offer defense of the admission of the statements given the police officer as spontaneous statements by the declarants and therefore exceptions to the hearsay evidence rfile. It is clear that this was not the basis for admission of the statements by the trial court. Under Evidence Rule 63(4) the declarant must be shown to have been “under the stress of a nervous excitement caused by such perception [of the event which the statement describes or explains], in reasonable proximity to the event, and without opportunity to deliberate or fabricate.” The police officer said he arrived at the scene five or ten minutes after receiving the call on the radio. Considering the probable lapse in time between the accident and the call to police headquarters and the detailed explanation of the accident to the officer by the occupants of the Sas car, it is highly unlikely that the requirement of unreflective spontaneity is satisfied. See Rogalsky v. Plymouth Homes, Inc., 100 N. J. Super. 501, 504 (App. Div. 1968), certif. den. 52 N. J. 167 (1968); Fagan v. Newark, 78 N. J. Super. 294, 303-304 (App. Div. 1963). We will not as an appellate court find these to be spontaneous statements particularly when the trial court has not so ruled.

Justification is next argued for the admissibility of the statements under the exception to the hearsay evidence rule constituted by Evidence Rule 63(13)—“Business entries.” Preliminarily, the offer of the statements and the ruling thereon were not made on the theory of a business entry but simply as declarations to the officer at the scene of the accident. Only during the course of the development of this evidence did it appear that the officer was reading his official report. As statements, the declarations were inadmissible hearsay. As to Sas, the statement was a self-serving one, with the prejudicial vice of buttressing his consistent in-court testimony to follow. Although the testimony was adduced by Drahos, a nominal adversary of Sas, the trial strategy of both these plaintiffs was to pin sole blame for the accident on the “light” car and thereby hold the defendant Director responsible. Sas’ statement was therefore not competent under the “admissions” exception, Evidence Rule 63(7), and Drahos has not so argued either at trial or on appeal. (He filed a letter on appeal subscribing to Sas’ brief). Nor does the statement to the officer by Drahos (implied from the officer’s testimony) qualify under any exception to the hearsay evidence rule.

As to the officer’s testimonial version of what Mrs. Alliegro told him, it is obvious from the foregoing quotation from the testimony that he merely summarized her communication to him in conelusory form. This was doubly objectionable. Cf. Brown v. Mortimer, 100 N. J. Super. 395, 405-406 (App. Div. 1968).

Assuming, arguendo, that since the officer had practically read his report into evidence, his testimony should be evaluated for admissibility as though it were the report which had itself been directly received in evidence, and considering plaintiff’s argument that it was admissible under the business entry exception to the hearsay evidence rule, we find the contention to lack merit.

The crucial portion of Evidence Rule 63(13) (business entries) here involved is “if the sources of information from which it [the writing] was made and the method and circumstances of its preparation were such as to justify its admission.” The language is not essentially different from the comparable part of former Uniform Business Records as Evidence Act, N. J. S. A. 2A:82-35, which Evidence Rule 63(13) replaced as of September 11, 1967. The purpose and proper interpretation of the new provision is substantially the same as the old. Brown v. Mortimer, supra, 100 N. J. Super., at 403. It was held that the Uniform Act reposed “considerable discretion” in the trial judge in passing upon whether the sources of information, method and time of preparation of a business entry justified its admission into evidence. Mahoney v. Minsky, 39 N. J. 208, 218 (1963). However, the Supreme Court has been firm in following the general requirement of the business entry exception to the hearsay evidence rule that where the business entry consists of information supplied the entrant by another, the informant must be shown to have been under a business duty” to supply honest information to the entrant — that being the heart of the rationale of the exception. State v. Taylor, 46 N. J. 316, 330-331 (1966); cert. den. sub nom. Taylor v. New Jersey, 385 U. S. 885, 87 S. Ct. 103, 17 L. Ed. 2d 83 (1966). Because of the absence of any such business duty to ■tell the truth on the part of the informant, the statement included in the business record (a hospital record) involved in Taylor was held to have been admitted erroneously and prejudicially. Apparently to the same effect is State v. Gardner, 51 N. J. 444, 461-462 (1968).

Among other authorities cited in Taylor in support of the position there taken was the leading New York decision of Johnson v. Lutz, 253 N. Y. 124, 170 N. E. 517 (Ct. App. 1930), decided under the Model of Commonwealth Fund Act version of the business entry rule. That case sustained the exclusion of a filed police report concerning an accident between a motorcycle and a truck founded upon information received by the officer from bystanders at the scene. The ground of exclusion was the absence of any duty on the part of the persons supplying the information to the officer analogous to the duty of persons supplying information to the makers of business entries—a duty underlying the rationale of this exception to the hearsay evidence rule (170 N. E., at 518-519).

In Fagan v. Newark, supra, also cited by the Supreme Court in State v. Taylor, supra, as authoritative in connection with the point under discussion, we said:

Where, however, the informant to the entrant of the record is under no duty to anyone to make a truthful account of the facts thus recorded, the record will not be admissible as proof of such facts. Johnson v. Lutz, 253, N. Y. 124, 170 N. E. 517 (Ct. App. 1930) (report of policeman as to accident based on information from bystander witnesses; decided under Model xVct; leading case). Aside from Wigmore, no competent authority in the field and few courts have dissented from this qualification obviously basic to the rationale of the business entry exception. See McCormick, op cit., § 286, pp. 602, 603; McCormick, ‘'Hearsay,’’ 10 Rutgers L. Rev. 620, 629, 630 (1956) ; Maguire, Evidence, Common Sense and Common Law, op. cit., at p. 159; “Revised Business Entry Statutes: Theory and Practice,” op. cit. (48 Colum. L. Rev., at p. 927). Illustrative cases are United States v. Grayson, 166 F. 2d 863 (2 Cir. 1948; per Learned Hand, J.) ; Central Railroad Co. of New Jersey v. Jules S. Sottnek Co., 258 F. 2d So (2 Cir. 1958) ; United States v. United Shoe Machinery Corp., 89 F. Supp. 349 (D. Ct. Mass. 1950). But see Moran v. Pitishurgh-DesMoines Steel Co., 183 F. 2d 467 (3 Cir. 1950).

See the able and comprehensive discussion of this question in Yates v. Bair Transport, Inc., 249 F. Supp. 681 (S. D. N. Y. 1965), in accord with the view here taken.

We thus conclude that the statements to the police officer made by Sas, Drahos and Mrs. Alliegro were not rendered admissible on the theory of incorporation in a business record because they were not under any ‘business duty” to render a truthful account of the accident to the officer. See also Rogalsky v. Plymouth Homes, supra, 100 N. J. Super., at 506. Plaintiffs’ reliance upon the recent decision in Schneiderman v. Strelecki, 107 N. J. Super, 113 (App. Div. 1969), certif. den. 55 N. J. 163 (1969), does not affect our conclusion. Since the court there reversed on other grounds, its remarks as to the admissibility of the police report were not essential, and, indeed, the court indicated that if at the retrial the statement of plaintiff to the officer recorded in his report were found to be a self-serving narrative of past events rather than a spontaneous declaration, it should be excluded. The point of absence of ‘business duty” of the declarant to relate an honest account of the occurrence to the entrant was not considered in the opinion of the court in Schneiderman, and the decision in State v. Taylor, supra, is of course controlling on us in that regard.

We further hold that Drahos did not have the right to offer the police officer’s report as containing a “prior consistent statement” of Mrs. Alliegro to rehabilitate her testimony in chief after the attack upon her credibility on cross-examination through her prior inconsistent statement. See McCormick, Evidence, § 49, at 108 (1954). The rule is that such a prior consistent statement is admissible only where the nature of the attack upon the credibility of the witness tends to show that his testimony is a fabrication of recent date. Evidence Rule 20. And see State v. Neiman, 123 N. J. L. 341, 344 (Sup. Ct. 1939), aff’d o. b. 124 N. J. L. 562 (E. &A. 1940). It is doubtful that the necessary foundation was laid here. The problem was certainly not recognized at trial. In any event, no particular statement of Mrs. Alliegro is set forth in the officer’s report — merely the officer’s conclusion that she told him “the same thing” as Sas and Drahos. Actually, her testimony in chief did not amount to the “same thing,” for she admitted she never saw the accident itself.

Pinal!y, plaintiffs argue that the admission, in effect, of the police report was harmless because the authors of the statements to the officer contained therein were present in court, did testify and were subject to cross-examination. They cite in support Juaire v. Nardin, 395 F. 2d 373 (2 Cir. 1968), cert. den. sub nom. Juaire v. Marshak, 393 U. S. 938, 89 S. Ct. 302, 21 L. Ed. 2d 274 (1968). That decision, while expressing the view (at 379) that “Probably, * * * the best rule is that if the original source (the declarant) is not under a duty to tell the truth, or if the statement of the declarant does not itself come under some established hearsay exception * * *, then the police report; containing that information is inadmissible,” concluded that on the whole case there involved the admission of such a report was harmless error. In part the court relied on the fact that the informants were in court and had testified and that the jury was “fully aware of the limited observation on which” two of the informants had based their statements to the officer (at 379).

The determination of the harmlessness or prejudieiality of incompetent evidence is always peculiarly a matter of appraisal of the circumstances of the particular case. Here defendant was in a particularly disadvantageous and vulnerable position because of the nature of the alleged accident. She had no recourse to the best source of defensive testimony — the driver of the 'light” car. Any undue fortification of plaintiffs’ case would thus tend to exert more than ordinary adverse effect. Here that undue effect obtained because the circumstance of statements by plaintiffs to the police officer at the scene of the accident as to how it happened consistent with their courtroom testimony thereon, would tend to buttress the latter in the minds of the jury. We conclude there was prejudicial error.

We do not agree with defendant’s additional appellate argument that the trial court improperly charged the “emergency doctrine.”

Reversed; costs to abide the event of a new trial.

       Since public institutional records are “business records” within the hearsay exception, Fagan v. Newark, supra, 78 N. J. Super., at 308, the “business duty” to tell the truth required of the informant need not pertain to any “business” as such but must be a duty analogous to the duty of the business employee to furnish honest information to the entrant.

       Discussed in Fagan v. Newark, supra, 78 N. J. Super., at 310-311.

       5 Wigmore, op cit., § 1530a, pp. 391, 392. Notwithstanding Wig-more, it would be astounding to most lawyers to be told that under the Uniform Act voluntary statements made to an investigating policeman after an accident by bystanders not produced in court become admissible because the policeman includes such statements in his report [78 N. J. Super., at 319]


text:
    IN THE MATTER OF THE PRESENTMENT OF THE ESSEX COUNTY GRAND JURY. HUGH J. ADDONIZIO, PETITIONER-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Argued March 9, 1970
    Decided April 23, 1970.

      Before Judges Kilkenny, Labkecqtte and Leonakd.

      Mr. Bernard Hellring argued the cause for appellant (Messrs. Hellring, Lindeman & Landau, attorneys; Mr. Hdwin H. Btern on the brief).

      Mr. Bolert L. Podvey, Assistant Prosecutor, argued the cause for respondent {Mr. Joseph P. Lordi, Essex County Prosecutor, attorney).
   The opinion of the court was delivered by

Kilkenny, P. J. A. D.

Petitioner mayor of Newark appeals from an order made by the assignment judge of Essex County, denying his application to expunge from a presentment returned by the Essex County grand jury all references therein to the mayor. He also* appeals from the denial of his application to examine all the minutes of this grand jury, although he was given permission to examine fully all the minutes relating to him.

We have been advised by the mayor’s attorney that he has received a copy of the mayor’s testimony given on September 17, 1968 before the 15th Essex County grand jury of the 1967 term.

Tlie mayor makes a fundamental challenge as to the propriety of a grand jury making any presentment of the kind herein. We find no merit in this contention. Our present 1947 State Constitution, Art. I, par. 8, expressly provides for the “presentment or indictment of a grand jury.” The word “presentment” therein was construed by our Supreme Court to mean- “presentments of public affairs as they had been known in New Jersey from earliest Colonial times.” In re Camden County Grand Jury, 10 N. J. 23, 65 (1952).

Our Supreme Court has never doubted the power of a grand jury to make a presentment of matters of public concern unaccompanied by indictments. Its 1969 rules contain express provisions regarding presentments. B. 3:6-9. So did the prior rules. B. B. 3 :3—9. The contents of presentments have been challenged on motions to expunge them or parts of them. But the Supreme Court decisions have never questioned the grand jury’s function in this regard. For the history of presentments, see In r<e Camden County Grand Jury, supra. For some 'other cases recognizing the right of a grand jury to make presentments such as that involved herein, see In re Messano, 16 N. J. 142 (1954); In re Monmouth County Grand Jury, 24 N. J. 318 (1957); In re Presentment of Camden County Grand Jury, 34 N. J. 378 (1961); In re Presentment of Essex County Grand Jury, 46 N. J. 467 (1966).

Despite all this, we are asked by the mayor to declare it beyond the power oí a grand jury to return a presentment of the kind involved herein and to declare unconstitutional the rule of our Supreme Court prescribing the procedure to be followed on the return of a presentment. Even were we free to do so—which we are not—we observe no valid meritorious basis for any such declaration of invalidity.

A grand jury, by means oE a presentment, may call to the attention of the public conditions within the county which, in its view, ought to be remedied. All the cases and the rule of court cited above attest thereto. It may not substitute a presentment for an indictment. If the condition complained of and the person or persons involved therein ought properly be the subject of an indictment, the grand jury’s duty is to indict. In re Messano, supra, 16 N. J., at 147; In re Monmouth County Grand Jury, supra, 24 N. J., at 323. A grand jury, in a presentment, may censure a public official for some nonindictable conduct on his part. B. B. 3:3-9(c), now B. 3:6-9, expressly so provides.

B. 3:6-9 (1969) and its predecessor is simply an expression of the rule of law recognized by our Supreme Court in the several cases hereinbefore mentioned. It provides, among other things:

(a) Finding. A presentment may be made only upon the concurrence of 12 or more jurors. It may refer to public affairs or conditions, but it may censure a public official only where his association with the deprecated public affairs or conditions is intimately and inescapably a part of them.

The assignment judge shall examine the presentment. If it appears that a crime has been committed for which an indictment may be had, he must refer the presentment back to the grand jury with appropriate instructions. If a public official is censured, the proof must be conclusive that the condemned matter is inextricably related to non-criminal failure to discharge his public duty.

The condition requiring public attention and noted in the instant presentment was the widespread existence of gambling activities in the City of Newark and the lack of adequate law enforcement to stamp out this evil. It noted that a special gambling squad had been set up by the police director, had done very effective work for about six weeks and then, for some unknown reason, been disbanded. It noted that the mayor had told it that he had not been notified of the disbanding of this special squad and had nothing to do with this action. It suggested that the mayor should seek a dismissal of the police director, against whom an indictment for nonfeasance had been returned, which, following a jury trial, had been dismissed by the trial judge for want of sufficient evidence. The reference in the presentment was to a “n on -criminal” failure on the mayor’s part to discharge his public duty. The grand jury would have the mayor bring about the dismissal of the Director of Public Safety.

The presentment criticized the mayor for a public utterance in which he more or less minimized illegal gambling, in the light of the public recognition of various forms of legal gambling at racetracks and the like. In brief, he played down gambling as a grave evil. It was the grand jury’s opinion that such public utterances by the mayor could have some contributory effect upon a lack of vigorous law enforcement on the local level.

No charge of indictable conduct by the mayor was made in the presentment. At most, there was criticism and public censure. Many people entertain conflicting views as to gambling. Some see in it no evil, while others entertain an opposite view. The broad prohibition in our State Constitution, forbidding the Legislature from enacting laws authorizing gambling (Art. IV, § VII, par. 2), has been modified by amendments to the Constitution, approved at the polls by the people, authorizing gambling at the racetracks, bingo, raffles and boardwalk games of chance. We have presently before our Legislature a proposal to amend the State Constitution further—to convert Atlantic City, which describes itself as “The Playground of America,” into the “Las Vegas of the East.” The averred purpose is to gain additional state revenue.

Thus, the mayor’s admitted and publicly expressed views on gambling did not involve indictable conduct. The grand jury’s expression of opinion as to the potential effect of the mayor’s admitted public utterance on police enforcement of gambling laws was legitimate criticism. There was testimony before the grand jury of illegal gambling of groat magnitude in the city. The mayor is fully aware of those assertions. Censure of the mayor for his public minimizing of violation of the gambling laws did not exceed the permissible censure of a public official, as permitted in a presentment.

We pause to note that various deletions were made by the assignment judge in the language of the presentment, where the language employed was deemed to exceed the bounds of propriety. These deletions safeguarded the mayor from any adverse inference of personal involvement.

We inquired at oral argument of the mayor’s counsel as to what crime, if any, the mayor was being charged with in the presentment. He responded: “N. J. S. A. 2A:135—1.” This statute provides:

A public officer wlio willfully refuses or neglects to perform any duty imposed upon him by law, is guilty of a misdemeanor.

When pressed for a specification of what duty imposed by law the mayor was being charged with having willfully refused or neglected to perform, no specification was presented. In fact, the mayor’s counsel sent us a letter, after oral argument, in which he advised us:

The Petitioner-Appellant did not claim below and does not claim here that the Presentment charges the Petitioner-Appellant with any indictable offense.

In brief, the response to our inquiry at oral argument should have been simply, “None.”

Thus, the facts herein cannot be equated with In re Messano, supra, where the presentment charged an indictable offense and was improperly used by reason thereof. Ultimately, upon a remand to the grand jury in that case, a “no bill” was returned.

Here, the criticism was directed toward the mayor’s attitude regarding gambling in the city. But misconduct in office “is not just an attitude. It is action; or it is non-action with respect to specific incidents.” State v. Jenkins, 136 N. J. L. 112, 113 (Sup. Ct. 1947) (emphasis added).

The mayor argues that the assignment judge erroneously denied him a full and adequate examination of the grand jury minutes and a hearing.

The judgment under review granted the mayor “the opportunity to examine his own testimony before the Fifteenth Essex County Grand Jury of the 1967 Term.” This was the grand jury which returned the presentment, after evidence presented to it on the subject of gambling in Newark. Two prior grand juries had conducted inquiries into gambling activities in Newark and into the effectiveness of the enforcement of the gambling laws. Those juries had found the Newark police department lacking in organization and ill-equipped to wage an effective and vigorous war against organized crime. The instant grand jury found that the circumstances referred to by its predecessors still existed. It recited a multiplicity of facts in support of its conclusions.

The thrust of the grand jury condemnation was directed toward the director of the police department. It pointed to the mayor’s testimony before it that the director’s disbanding the special gambling- squad was “without the agreement of or notification to the Mayor of the City.” In its specific recommendations no mention was made of the mayor specifically. The only possible inferential reference was in that part of recommendation, (i), wherein the grand jury stated, among other things, “it is in the best interest of the public that he [director of the police department] be removed from the position of Director * * There was no recital as to who would do the removing or whether the mayor had the power, by himself and without more, to remove the director.

We appreciate that B. B. 3 :3-9(c), now B. 3:6-9, provides that if a presentment censures a public official and the assignment judge determines not to strike, the censured official “may examine the grand jury minutes fully, under such reasonable supervision as the court deems advisable, and be permitted to introduce additional evidence to expose any deficiency.” But here the assignment judge did strike those passages from the presentment deémed by him to be improper or undue public censure, if such it could be called. Moreover, he gave the mayor the right to examine the minutes so far as they related to him. Those references were to the mayor’s own testimony and his admitted public utterance, of which he had full knowledge. ETo valid reason for a roving examination of all the minutes has been demonstrated.

The order under review is in all respects affirmed.


text:
    STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT, v. DOUGLAS ZOLD, DEFENDANT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Argued April 13, 1970
    Decided April 24, 1970
    Before Judges Coneorb, Collester and Kolovsky.

      Mr. Daniel R. Coburn, Assistant Deputy Public Defender, argued the cause fur appellant (Mr. Stanley C. Van Ness, Public Defender, attorney).

      Mr. Robert L. Messick, Assistant Prosecutor, argued the cause for respondent (Mr. A. Donald Bigley, Camden County Prosecutor, attorney).
   Per Curiam.

The judgment is affirmed for the reasons given by Judge Peel in his opinion denying post-conviction relief. 105 N. J. Super. 194 (Law Div. 1969).

All 'other questions raised are concluded against defendant by the opinion (unreported) of this court affirming the conviction on the direct appeal.

Judgment affirmed.


author: Mountain, J. S. C.

text:
    SYRIAN ANTIOCHIAN ORTHODOX ARCHDIOCESE OF NEW YORK AND ALL NORTH AMERICA, A CORPORATION OF THE STATE OF NEW YORK, PLAINTIFF, v. PALISADES ASSOCIATES, A LIMITED PARTNERSHIP, DEFENDANT.
    Superior Court of New Jersey Chancery Division
    Decided April 13, 1970.

      Mr. J. Mortimer Bubenstein for plaintiff (Mr. Allan M. Harris on the brief; Messrs. Bubenstein, Albert and Louleedis, attorneys).

      Mr. Samuel J. Davis for defendant.

      Mr. Milton Prigoff for intervenors (Messrs. Lebson and Prigoff, attorneys).
   Mountain, J. S. C.

This is a declaratory judgment action in which other incidental relief is sought. On April 7, 1969 plaintiff acquired by deed from defendant Palisades Associates a tract of land in the Borough of Alpine, Bergen County. By the terms of the deed plaintiff-grantee covenanted as follows:

FIRST: That there shall not be erected or maintained on the premises hereinabove described and hereby conveyed any buildings whatsoever except a private dwelling and except a garage appurtenant thereto for use by not more than one family.
SECOND: That no portion of said premises shall be used for any trade or business purposes whatsoever, except as an office or offices of professional persons residing on the premises, nor shall any nuisance on, or any use of, said premises be permitted which shall be noxious or dangerous to health
THIRD: That there shall not be erected any building, fence, wall, advertising sign or other structure or improvement on said premises, nor any exterior addition to, or change or alteration therein, be made, unless and until the plans and specifications therefor, and the grading plan of the plot to be built upon, showing the location of the proposed improvement upon the plot, shall have been submitted to and approved in writing by the Grantor, and a copy thereof, as finally approved, filed permanently with the Grantor. The Grantor shall have, the right to refuse to approve any such plans or specifications or grading plan, or location or the proposed improvement, which are not suitable or desirable in its opinion.
FOURTH: That the said premises shall not be sold without first giving the grantor an option in writing for ten (10) days to purchase the same at the price and upon the same terms offered by the proposed purchaser; and that neither the said premises, nor any part thereof, shall be conveyed, leased or mortgaged without making specific reference in such instrument to the said covenants and restrictions, and conveying, leasing or mortgaging the premises subject thereto, but this requirement shall -not apply to any sale pursuant to a judgment of foreclosure of any mortgage hereafter placed on said premises, nor to the delivery of a deed to a mortgagee in lieu of foreclosure of such a mortgage.
FIFTH: That these covenants and restrictions and each of them are hereby declared and agreed to be, and they shall be, taken and construed as covenants attached to and running with the land, and said covenants and restrictions shall remain in force until * * *.

In October 1969 pursuant to the third covenant set forth above, plaintiff submitted plans to defendant for the erection of a building on the property to be used as the residence and professional office of its archbishop. Defendant refused to give its approval, indicating as reason that some of the neighbors objected. Several landowners in the immediate neighborhood, claiming to be entitled to the benefit of the covenants, have been granted leave to intervene. In fact, the covenants were exacted by defendant from all grantees of property the whole of which was at one time owned by it. It was the common grantor. The existence of a neighborhood scheme is clear, and hence there is no donbt as to the standing of the intervenors to seek enforcement of the covenants.

It is initially argued that the building for the construction of which permission is sought will not he a "private dwelling” and will therefore, both as to its erection and maintenance, be in violation of the first covenant.

Plaintiff proposes to erect a building to be used as the private residence of its archbishop in which he will also maintain professional offices. In addition to providing a dwelling for the archbishop himself, the residence will he occupied by a priest to serve as his personal attendant and by a cook and housekeeper. A personal secretary, who apparently will not live on the premises, will be present about 40 hours a week. There will be eight bedrooms. Those on the first floor, three in number, are designed for the accommodation of the domestic staff. Of those on the second floor, two will be used by the archbishop personally, one by the attending priest and the remaining two as guest rooms for visiting dignitaries. A small chapel is intended for purposes of private devotion and will not be available for public worship. There will be a dining room, dinette, library, kitchen, various utility areas and a three-car garage, as well as the archbishop’s office and an adjoining room for his secretary. As already mentioned, the intervenors contend that the structure will not be "a private dwelling * * * for use by not more than one family.” Eor the reasons set forth below, I do not agree.

A building is no less a private dwelling because it is the residence of one holding a position of prominence in an ecclesiastical hierarchy. It is the use to which the structure is put that is of significance. For there to be a violation of such a covenant, “[t]he house must be used for some other purpose than a residence.” Hunter Tract Imp. Co. v. Corp. of Catholic Bishop, 98 Wash. 112, 167 P. 100, L. R. A. 1918A, 297 (Sup. Ct. 1917). Here the only-permitted use other than as a residence is “as an office or offices of professional persons residing on the premises.” This is the only other use projected bjr plaintiff: the building, in addition to its intended purpose as a private residence, -will contain the professional offices of the archbishop. It hardly needs reminding that “[t]he ministry is one of the * * * professions.” Missionaries of Our Lady of LaSalette v. Village of Whitefish Bay, 267 Wis. 609, 66 N. W. 2d 627, 632 (Sup. Ct. 1954).

The cases presenting this question have generally dealt either with a zoning ordinance or a restrictive covenant prescribing single-family use. A situation similar to that before the court involving a restrictive covenant arose in Hunter Tract Imp. Co., supra. The deed provided that “[njothing but a single detached residence * * * shall be built on any one lot described in this deed and when so built shall be used for residence purposes only.” A group of 12 or 15 members of the Catholic sisterhood of the Hrsulines had taken up residence in a large dwelling house on the property which was subject to the covenant. One room had been altered to become a private chapel where services were held every morning. The court pointed out that restrictive covenants are to be strictly construed and added that “[t]he fact that religious services are held in the house every morning by a priest, or that a small altar has been erected, does not take away from these premises their character as the home or residence of the women who live there.” In Boston-Edison Protective Ass’n v. Paulist Fathers, Inc., 306 Mich. 253, 10 N. W. 2d 847 (Sup. Ct. 1943) the covenantor had agreed that she would “not use or occupy said lots except for a single dwelling house and [for] dwelling house purposes only.” The residence eon-tamed six bedrooms and five smaller rooms, and was occupied by five priests of the defendant order and two servants. As is the case before this court, there were no religious services to which the public was invited, no lectures, nor was any missionary work undertaken. The court held that this utilization of the property did not offend the covenant.

In Village of Whitefish Bay, supra, the premises were zoned for one-family use only. The ordinance defined a family as “one or more individuals living, sleeping, cooking or eating on premises as a single housekeeping unit.” Three priests and two lay brothers were in residence in a 20-room (10-bedroom) dwelling with a private chape!.. The court held that a “family” was not intended to be confined to persons related by blood or marriage, and that there was no violation of the ordinance. A similar result was reached in Carroll v. City of Miami Beach, 198 So. 2d 643 (Fla. App. Ct. 1967), where the ordinance defined “family” in almost identical language and a small group of novices or applicants to a religious order were in residence under the direction of a Mother Superior. See also, Scolt Co. v. Roman Catholic Archbishop, Diocese of Oregon, 83 Or. 97, 163 P. 88 (Sup. Ct. 1917).

Here the proposed structure, appropriately staffed, is to be used by the archbishop as his private residence and will contain his professional offices. All of this is permitted by the express terms of the restrictive covenants.

Plaintiff challenges the validity of the third covenant as imposing an unreasonable restraint upon the use and alienation of its property, principally, it would seem, in that no objective standards are set forth in the covenant to guide defendant Palisades Associates in reaching a determination to approve or disapprove plans, specifications and grading and site proposals. It is urged that this provision gives the grantor-defendant a right of capricious and arbitrary determination which is contrary to public policy and hence unenforceable. In support of this contention plaintiff refers to Mountain Springs Ass’n. v. Wilson, 81 N. J. Super. 564 (Ch. Div. 1963), and Tuckerton Beach Club v. Bender, 91 N. J. Super. 167 (App. Div. 1966). These eases are not in point. They each involved a covenant forbidding alienation to any person who had not or could not become a member of an association made up of property owners. In each case membership could be denied for any reason or for no reason. This type of provision •— only a thinly veiled attempt to support discrimination — is, of course, no longer sanctioned and in each case the covenant was deemed unenforceable.

Here we are faced with a quite different problem. The type of covenant under consideration is in fairly common use, at least in certain parts of the State. Normally the developer-common grantor exacts the covenant from each grantee who will not thenceforth be at liberty to construct or alter any improvement on the conveyed premises without first submitting the proposal to the grantor and securing his written approval. Often, and wisely, this approval is to be in recordable form. The purpose of such a provision is to afford mutual protection to the property owners living in the development against injury, whether taking the form of diminished property values or otherwise, that would result from the construction of a residence or other improvement that was unsightly, in singularly bad taste, discordantly at variance with neighboring homes in architectural appearance, or otherwise offensive to the proposed or developed standards of the neighborhood. The most commonly voiced criticism of such an arrangement is that it is vague, fixes no standards and hence affords the grantor an opportunity to be capricious, unfair and arbitrary.

At this point a distinction should be noticed. We are not dealing with legislation, whether in the form of a zoning ordinance or otherwise, but with a contractual obligation. The requirement that legislation embody objective standards, especially where authority is delegated, finds its basis in constitutional necessities. The Constitution imposes no similar stricture with respect to private compact.

In Urban Farms, Inc. v. Seel, 87 N. J. Super. 177 (Ch. Div. 1965), Judge Pashman approved such a covenant as the one we are considering. In its opinion of affirmance, 90 N. J. Super. 401 (App. Div. 1966), the reviewing court determined, however, that there had been no breach of the covenant and therefore found it unnecessary to pass upon its validity. It did indicate, however, by way of dictum, that if such a covenant is valid, any disapproval must be reasonable and determined in good faith. Elsewhere such covenants have been very generally sustained. The decisions have recognized the inherent desirability of such protective arrangements, but in sustaining them have pointed out that any disapproval must be reasonable and made in good faith. Thus in Hannula v. Hacienda Homes, Inc., 34 Cal. 2d 442, 211 P. 2d 302 (Sup. Ct. 1949), the court considered a covenant which read, “No dwelling house or other house or structure shall be erected until the plans and specifications with the. proposed site therefor have been submitted to and approved by the first party hereto and by Hacienda Homes, Inc., and a written permit issued therefor.” It hold the provision valid, only pointing out that a rejection must be reasonable and the review of any proposal exercised in good faith. A similar result was reached in Kirkley v. Seipell, 212 Md. 127, 128 A. 2d 430 (Ct. App. 1957). Here the covenantor sought to erect metallic, hard-surfaced, permanent awnings and porch covers over windows and porches. The grant- or-covenantee refused approve! upon the ground that this proposed alteration would render the facade of the dwelling unattractive in appearance and would diminish the value of properties nearby. The court sustained the validity of the covenant and found that defendant’s disapproval was reasonable and had been arrived at in good faith. In Winslette v. Keeler, 220 Ga. 100, 137 S. E. 2d 288 (Sup. Ct. 1964), the court sustained a covenant requiring that any construction or alteration must be suitable, in the opinion of the grantor, “as to' conformity and harmony of external design and general quality with existing standards of the neighborhood.”

A very interesting recent decision is Rhue v. Cheyenne Homes, 449 P. 2d 361 (1969). The Supreme Court of Colorado was called upon to consider a covenant which read, “Ho building shall be erected, placed or altered on any lot until the construction plans and specifications and a plan showing the location of the structure shall have been approved by the architectural committee * * An owner of property in whose chain of title the covenant appeared wished to move to the site a 30-year-old Spanish style home with stucco exterior and red tile roof. The development in which the premises were located was 80% improved with modern ranch style and split level homes. The grantor refused approval upon the ground that the proposed improvement, if allowed, would diminish the value of other properties in the neighborhood and would he an unsightly variation from the architectural pattern that had been established. In sustaining the disapproval the court observed :

It is no secret that housing today is developed by subdividers who, through the use of restrictive covenants, guarantee to the purchaser that his house will be protected against adjacent construction which will impair its value, and that a general plan of construction will he followed. Modern legal authority recognizes this reality and recognizes also that the approval of plans by an architectural control committee is one method by which guarantees of value and general plan of construction can be accomplished and maintained.

Iu disposing of the argument that the covenant was against public policy as permitting the developer to exercise an arbitrary and capricious power, the court observed:

While we have here enunciated the proposition that the covenant requiring the approval of the architectural committee before erection of a house in the subdivision is enforceable, we point out that there is a corollary to that proposition which affords protection and due process of law to a purchaser of a lot in the subdivision, namely, that a refusal to approve plans must bo reasonable and made in good faith and must not be arbitrary or capricious.

Other authorities to the same effect include Engvalson v. Webster, 74 So. 2d 113 (Fla. Sup. Ct. 1954); Parsons v. Duryea, 261 Mass. 314, 158 N. E. 761 (Sup. Jud. Ct. 1927); Fairfax Community Association v. Boughton, 70 Ohio Law Abst. 178, 127 N. E. 2d 641 (Ohio C. P. 1955), and Harmon v. Burow, 263 Pa. 188, 106 A. 310 (Sup. Ct. 1919).

The third covenant, for the reasons discussed above, is valid and enforceable. As mentioned earlier in this opinion, plans submitted by plaintiff to defendant were rejected by the latter without any clear specification of the reasons for the rejection being given. Plaintiff is directed to resubmit to defendant its “plans and specifications * * * and the grading plan of the plot to be built upon, showing the location of the proposed improvement upon the plot.” Within 20 days of such submission defendant shall deliver to plaintiff in writing its approval or disapproval. If disapproved, the rejection is to be accompanied by the specific reasons therefor considered in the light of this opinion. The court retains jurisdiction.


author: Wick, J. S. G.

text:
    STEVEN I. BROWNSTEIN, PLAINTIFF, v. FIBERONICS INDUSTRIES, INC., A CORPORATION OF THE STATE OF NEW JERSEY, DEFENDANT
    Superior Court of New Jersey Chancery Division
    Decided April 15, 1970.

      Mr. James Greenberg, court appointed attorney for receiver Stanton D. Ereeman. (Messrs. Greenberg, Shmer elson & Greenberg, attorneys).

      Mr. Richard R. Back for defendants C & S Machinery Company, Inc., and Eloyd A. New and E. W. Thompson, Jr., doing business as Greensboro Wood Products Company.
   Wick, J. S. G.

This is a proceeding to determine certain rights and liabilities for the receiver of an insolvent corporation.

Plaintiff, as a creditor of Fiberonics Industries, Inc., originally brought this action seeking the appointment of a receiver pursuant to N. J. 8. A. 14A :14-2. The complaint was filed in this court on October 14, 1969 and a statutory receiver was appointed after a determination that Fiberonics was insolvent.

On December 17, 1969 the attorney for the receiver obtained an order tot show canse why John Carpenter and Steven Skorupan, doing business as C & S Machinery Company, Inc., hereafter (C & S), and Floyd A. New and E. W. Thompson, doing business as Greensboro Wood Products Company, Inc., (hereafter Greensboro), should not have to account for certain assets that belong to the receivership.

Both G & S and Greensboro contested the order to show cause and the matter was tried in a plenary hearing.

At the hearing the following uncontroverted facts were established. On January 16, 1969 C & S, through its officers Carpenter and Skorupan, signed a contract with Fiberonics Industries, Inc. agreeing to sell certain enumerated machines and parts for $78,930. The terms of payment were that 20%, or $15,786, was payable at the signing of the contract and the balance 30 days after delivery of the completed order. Paragraph 5 of the agreement provides:

RETENTION OF TITEE. Title to above goods to remain in Seller until purchase price has been fully paid in cash. Buyer to sign notes, .not in payment, but as evidence of obligation and ail other papers necessary to place this conlract on record, furnish such waivers, papers and security as requested, keep property fully insured ; policies payable as interests appear and pay all taxes. It is expressly agreed said property shall in no event become a fixture or part of realty. If Buyer should default in any payment, attempt to sell, mortgage or remove property without Seller’s written consent, or become insolvent or in any manner jeopardize Seller’s interest in property, then all payments become immediately due and payable and Seller or his agent without notice or process of law, may enter our premises, make any necessary openings in building and remove property, Buyer to pay all expenses necessary, by default, in which case Seller has the option to consider all payments made as rental or liquidated damages.

C & S completed 99% of its deliveries by May 31, 1969. Except for tbe $15,786 paid in January, no payments have been made to this date of the amount due under the contract.

On August 1, 1969 C & S filed a financing statement with the Secretary of State’s office and the Monmouth County Clerk’s office covering the machinery delivered under the contract.

On October 13, 1969 C & S repossessed all the machinery by paying the landlord $3600 of the rent due him and transporting them back to its Tennessee plant.

In February 1969, Greensboro, acting through Floyd A. New and E. W. Thompson, signed a contract with Fiberonics agreeing to sell one Rouse shaping lathe for $6,500, payable $1,300 at signing and the balance within 45 days after the delivery of the machine. A notation on the agreement indicates that the machine was delivered on March 13, 1969. Paragraph 5 of the agreement provides:

The Seller and Buyer agree that title to the machine in question is to remain with Seller until payment in full of the purchase price. In furtherance of this matter the parties agree to execute a UCO Financing Statement to be filed with the Secretary of State of New Jersey. Payment of preparation and filing of said financing statement is to be borne by Seller. Immediately upon payment in full Seller agrees to execute and deliver to Buyer the proper authority to cancel said financing statement.

On. May 22, 1969 a financing statement was filed with the appropriate offices in this State. A total of $2,050 was paid on the machine. On October 13, 1969 Greensboro, in conjunction with 0 & S, paid the landlord $400 and removed its machine back to its North Carolina plant.

The receiver seeks to have the C & S and Greensboro security interests set aside and the machines returned or, in the alternative, if the sellers’ liens be found to be valid, then to recover Fiberonics’ equity in the repossessed equipment.

Since the two liens have significant factual differences they will be examined separately, taking the C & S situation first.

N. J. 8. A. 14A:14-14 provides:

(1) For flip purposes of this chapter, a preference arises when
(a) a corporation which, while insolvent, and within four months of the commencement of a receivership action by or against it, transfers any property to or for the benefit of a creditor for or on account of an ant ecedent debt; and
(b) the effect of such transfer will he to enable such creditor to obtain a greater percentage of his debt than some other creditor of the same class; and
(c) the creditor receiving or to he benefited by the transfer, or his agent acting with reference thereto, has, at the time when the transfer is made, reasonable cause to believe that the corporation is insolvent.
Í5 tfi >',¡ ip
(4) When a preference has arisen, the receiver may recover the property or, if it has been converted, its value, from any person who has received or converted such property, except a bona fide purchaser from or lienor of the corporation’s transferee for a present fair consideration. Where, however, such bona fide purchaser or lienor has given less than such value, he shall nevertheless have a lien upon such property, but only to the extent of the consideration actually given by him. When a preference is by way of lien or security title, the Superior Court may on due notice order such lien or title to be preserved for the benefit of the insolvent corporation’s estate, in which event the lien or title shall pass to the receiver.

This is a new provision in New Jersey law, having been enacted in 1968. The Commissioners’ comments indicate that it was derived from section 60 of the Federal Bankruptcy Act, 11 U. S. C. A. § 96.

The meaning of the statute is clear that certain transfers may he set aside by a receiver if the prerequisites of N. J. S. A. 14A:14-14(lj are met. N. J. S. A. 12A:9-302(1) requires that a financing statement he filed to perfect a security interest in this case. N. J. S. A. 12A:9-303(1) provides that the perfected security interest arose when the financing statement was filed on August 1, 1969. N. J. 8. A. 14A:14-14(2) (a) states that

* * * a transfer of property other than real property shall be deemed to have been made or suffered at a time -when it became so far perfected that no subsequent lien obtainable by legal or equitable proceedings on a simple contract could become superior to the rights of the transferee; * * *.

Therefore, the filing of the financing statement of August 1, 1969 was a transfer within four months of the commencement of the receivership action. The security interest would have had the effect of giving C & S a greater percentage of its debt than other unsecured creditors. Since the security interest was given for the goods previously delivered, it was for an antecedent debt. The two remaining elements necessary to create a preference are in dispute. They are whether Fiberonies was insolvent on August 1, 1969 and whether 0 & S had reasonable cause to believe the corporation was insolvent.

Prom the proofs submited at trial the court finds that on August 1, 1969 Fiberonics was unable to pay its bills as they came due and could not obtain loans to improve its position. This means it was insolvent in the equity sense, as defined by N. J. 8. A. 14A:14r-l (f)(2).

The seller contends that this definition is not the one that should be used. It argues that N. J. 8. A..14A:14r-14 is taken practically verbatim from section 60 of the Bankruptcy Act and therefore the federal definition should be used. 11 TJ. 8. G. A. § 1(19) is similar to N. J. 8. A. 14A :14r-l (f) (1) and provides:

A person shall be deemed insolvent within the provisions of this title whenever the aggregate of his property, exclusive of any property which he may have conveyed, transferred, concealed, removed, or permitted to be concealed or removed, with intent to defraud, hinder, or delay his creditors, shall not at a fair valuation be sufficient in amount to pay his debts; * * *.

The seller argues that it is this definition which should be applied—the so-called balance sheet test—and not the equity definition.

Because N. J. 8. A. 14A :14-14 is new, this court must attempt to decide which definition the Legislature had in mind when it passed the act. The comments to N. J. 8. A. 14A:14-1 (f) state that:

The cases decided under Chapter 14 of Title 14, however, make it clear that a corporation is insolvent for the purposes of that chapter when it is unable to pay its debts when they mature through its available assets or the honest use of credit. Paragraph (f) codifies the construction placed upon Chapter 14 by the courts.

Since the cases that were decided mainly dealt with the appointment of receivers, the Legislature must have intended the definition to apply to when a receiver should be appointed, as provided by N. J. 8. A. 14A:14—2(2) (a). There is no comment or indication whether it also intended the definition to be applied to setting aside a preference.

The definition section, N. J. 8. A. 14A:14-1, reads that, “As used in this chapter, and unless the context requires otherwise,” the words have the meanings given. Therefore, in the absence of some showing that the Legislature did not intend N. J. 8. A. 14A:14-l(f) (2) to apply to N. J. 8. A. 14A:14—14, or some compelling reason why it should not, it will he assumed that it does apply.

N. J. 8. A. 14:14-2 (now repealed) was a provision for setting aside certain transfers “when any corporation shall become insolvent” and was interpreted by the courts to mean insolvent in an equity sense and not a bankruptcy sense. Schwartz v. Maguire, 131 N. J. Eq. 578 (E. & A. 1942). Since New Jersey has traditionally so defined insolvency in allowing a receiver to set aside certain transfers and nothing to the contrary appears in the new statute, no injustice is done by applying the equitable definition rather than that used in the Bankruptcy Act.

The Court accordingly rules that Fiberonies was insolvent on or before August 1, 1969 as the word is used in N. J. S. A. 14A:UH4(l)(a).

The final remaining issue is a factual one as to whether C & S had reasonable cause to believe Fiberonies was insolvent on August 1, 1969 as required by N. J. S. A. 14A :14-14(1) (c). The court finds that it did on the following facts.

The Agreement provided that C & S be paid in full within 30 days after delivery, which would have been June 30, 1969 and it was not. Financing was attempted through the Industrial Valley Bank and Trust Company of Jenkintown, Pennsylvania, and the National Acceptance Corporation of Chicago, Illinois. In both cases financing was not available to the corporation without personal guarantees. On July 24, 1969 the officers of C & S were informed by the president of Fiberonies and its attorney that they could not sign a statement that the corporation was solvent because it was not then solvent.

C & S claims it relied on representations made by the officers of Fiberonies that it had plenty of orders, that a public stock issue of $750,000 was contemplated, and that a merger was soon to be culminated. It also relied on a balance sheet dated May 20, 1969, which showed that the company had $128,000 allocated to stockholders’ equity. However, the balance sheet also showed current liabilities of $134,584.56 against current assets of $70,639.58, with machinery accounting for $209,084.29 of the remaining assets of $219,414.29.

While the corporation officials may have radiated optimism, all the outward signs showed that the corporation on August 1, 1969 was not healthy and in fact had current liabilities of $64,000 that it could not pay without liquidating the machines on which the business depended. The court finds that there was more than reasonable cause for C & S to believe Fiberonies was insolvent on August 1, 1969.

Accordingly, the receiver, pursuant to N. J. 8. A. 14A:14-14(4), may recover the property from C & S and sell it to pay the creditors of Fiberonics. C & S is entitled to share pro rata in the distribution by the receiver to the extent of its obligations as set out below. C & S is owed $63,144 remaining on the machinery. Since on October 13, 1969 it had the right, by paragraph 5 of its agreement and N. J. S. A. 12A:9-503 and 504, to repossess the goods and add the expenses thereby incurred to the debt, those expenses are properly chargeable against Fiberonics and the receivership. The Court determines these allowable expenses to be $2101.94 for transportation, $1,348 for labor and equipment necessary for repossession, and $2,491 for legal fees. The other expenditures made by C & S are not covered by its agreement or N. J. 8. A. 12A:9-504(1) (a) so are not allowable.

Greensboro perfected its lien in May 1969, over four months from the date of this action, so its transfer may not be set aside. However, Greensboro must comply with the provisions of the Uniform Commercial Code. N. J. S. A. 12A:9-503 permits a secured party to take possession of the collateral (as Greensboro did). While it is possible for a secured party to retain the collateral (as Greensboro has), N. J. 8. A. 12A:9-505(2), which requires that the debtor be given notice must be fulfilled. Since this was not done, the receiver will now be given the option of allowing Greensboro to keep the machine in total satisfaction of its debt or of ordering a sale pursuant to N. J. S. A. 12A:9-504. If the receiver elects to have the sale, Greensboro will be entitled to the $4,450 owed plus 9% interest from March 13, 1969 to October 13, 1969, plus $115 in legal fees, telephone and transportation expenses. Since the debtor will be entitled to about $5,460 upon the sale of a. used machine that is allegedly damaged and cost only $6,500 new, the receiver will probably find it to his advantage not to elect a sale, but this decision is left to him.

Since the landlord had a lien on the machinery by reason of N. J. 8. A. 2A:44-166 that was superior to the security interests he was enforcing by notice of a sale, the payment of $3,600 and $400, respectively, by 0 & S and Greensboro to discharge this lien advances them to the landlord’s position under the principle of subrogation. Brown v. Carpenter, 109 N. J. Eq. 208 (E. & A. 1931), First National Bank of Freehold v. Thompson, 61 N. J. Eq. 188, 193 (Ch. 1901); 83 C. J. S. Subrogation § 36 (1953).-

Judgment will be entered according to this decision, the receiver’s costs to be borne by 0 & S and no costs allowed to Greensboro.


author: Herbert, J. S. C.

text:
    ALLEGHENY AIRLINES, INC., AMERICAN AIRLINES, INC., BRANIFF INTERNATIONAL, DELTA AIR LINES, INC., EASTERN AIRLINES, INC., THE FLYING TIGER LINE, INC., MOHAWK AIRLINES, INC., NATIONAL AIRLINES, INC., NEW YORK AIRWAYS, INC., NORTHEAST AIRLINES, INC., NORTHWEST AIRLINES, INC., PAN AMERICAN WORLD AIRWAYS, INC., PIEDMONT AIRLINES, TRANS CARIBBEAN AIRWAYS, INC., TRANS WORLD AIRLINES, INC., UNITED AIR LINES, INC., PLAINTIFFS, v. ARTHUR J. SILLS, ATTORNEY GENERAL OF THE STATE OF NEW JERSEY, AND SIDNEY GLASER, ACTING DIRECTOR OF THE DIVISION OF TAXATION OF THE STATE OF NEW JERSEY, DEFENDANTS. CITY OF NEWARK AND CITY OF ELIZABETH, INTERVENOR-DEFENDANTS.
    Superior Court of New Jersey Chancery Division
    Decided April 21, 1970.

      Mr. Walter F. Waldau for plaintiffs (Mr. Bexford L. Lyon on the brief; Messrs. Stryker, Tams & Dill, attorneys —• Mr. Roger D. Qhitiurn, District of Columbia Bar, of counsel [Messrs. Cleary, Gottlieb, Steen & Hamilton]).

      Mr. Elias Abelson and Mr. Alan B. Both,stein, Assistant Attorneys General, for defendants.

      Mr. Anthony J. Iulian/i for intervenor City of Newark (Mr. Sam Weiss on the brief).

      Mr. Frank P. Trocino for intervenor City of Elizabeth.
   Herbert, J. S. C.

Plaintiffs assert that Chapter 200 of the Laws of 1969 is unconstitutional. It provides for a “service charge” to be paid for each passenger who departs from a publicly-supported airport located within a municipality or municipalities having a population of 100,000 or more. Newark Airport, consisting of approximately 2,300 acres located partly in the City of Newark and partly in the City of Elizabeth, is the only airport in New Jersey to which the statute now applies. The specified “service” charge is $1 for each passenger hound by plane for a destination within the continental United States, $2 for each passenger leaving for a point outside of the United States, and 50 cents for a passenger leaving by helicopter. These charges are imposed upon the air lines, but paragraph 3 of chapter 200 reads as follows:

Nothing herein shall prevent a passenger air carrier from collecting, directly or indirectly, the service fee payable with respect to each paying- passenger from such passenger.

Chapter 200 also provides for monthly returns and payments to the State’s Director of the Division of Taxation, followed by distribution of the moneys collected to the municipality or municipalities in which the airport lies. Under the statutory formula 80% of revenues produced by the “service fees” at Fewark Airport will be distributed to the City of Fewark and 20% to the City of Elizabeth.

Plaintiffs all operate passenger planes in and out of Fewark Airport under certificates of authority granted by the Civil Aeronautics Board pursuant to 49 U. 8. C. A. § 1371. All of their passenger flights out of Fewark go directly to destinations beyond the limits of Few Jersey and are thus in interstate or foreign commerce.

The Port of Few York Authority, a public body created under an interstate compact between Few York and Few Jersey, operates Fewark Airport. Fewark and Elizabeth do not participate in the management nor do they contribute in any direct way to the cost of operations. The portion of the airport located in Fewark is largely, if not entirely, owned in fee by the city and leased to the Port of Few York Authority under a lease which will end with the year 2016. Under the terms of the lease—which covers the seaport on Fewark Bay as well as the Fewark portion of the airport—the Port Authority pays a substantial rental. The part of the airport in Elizabeth is owned outright by the Authority.

In 1969 approximately 7,130,000 passengers used Newark Airport. About half of these were persons who left by airplanes and helicopters. Eor 1968 the total of passengers was 6,716,584, and for future years substantial increases above the 1969 figure are predicted.

If the charges prescribed by chapter 200 are valid, there will be from that source several million dollars a year available for distribution to the cities.

When first passed and presented to the Governor the act in question was vetoed, unconstitutionally being stated as grounds for the veto. The act then passed a second time on December 1, 1969 and became chapter 200 of the Laws of 1969 without the Governor’s signature.

In support of constitutionality it is argued for the cities that the statute provides for service charges and that municipal services are in fact supplied which benefit the airport, plaintiffs and, at least indirectly, departing travellers who use the airport; also that the charges are reasonable and proper for the benefits received. However, the only services pointed to are conventional ones, such as police and fire protection, a municipal court system to handle complaints arising at the airport, garbage disposal facilities and the like; and even the burden of the two cities in supplying these services is made relatively light by the fact that the Port Authority has its police department and fire fighting force, and rubbish is collected to a considerable extent by individual contractors.

Counsel for the cities also have argued that chapter 200 imposes a valid tax on the business of plaintiffs and that the gauge of the tax—the number of passengers carried out of New Jersey by each airline—is reasonable and proper. They have cited many cases dealing with the power of a State to tax interstate businesses, or property used in interstate commerce. As an example of the authorities from which it is contended that chapter 200 is entitled to approval as an exercise of state taxing power National Bellas Hess v. Illinois, 386 U. S. 753, 87 S. Ct. 1389, 18 L. Ed. 2d 505 (1967), may be mentioned.

I have concluded that the arguments for constitutionality made for the two cities must be rejected. I think the statute is plainly unconstitutional. The amounts which it requires plaintiffs to pay for each of their departing passengers cannot be justified as service charges for the use of municipal facilities or the furnishing of municipal services. Nor can those amounts be justified as a tax on interstate commerce. In a very recent case the Supreme Court of Montana considered and held unconstitutional a statute very much like chapter 200 of the Laws of 1969. Northwest Airlines, Inc. v. Joint City-County Airport Bd., 463 P. 2d 470 (Mont. January 5, 1970). I adopt the reasoning of that case and conclude that the same result is called for here. The Helena Airport which was there involved was municipally operated and financed, so that a stronger argument could be made in support of a reasonable charge by the city for the use of facilities paid for, maintained and manned by it than was made in the present case. Nevertheless, the statute was held unconstitutional, the court citing, among other authorities, Crandall v. Nevada, 73 U. S. (6 Wall.) 35, 18 L. Ed. 745, 746 (1868), and Passenger Cases, 48 U. S. (7 How.) 283, 12 L. Ed. 702 (1848).

In essence, chapter 200 of the Laws of 1969—like the Montana statute which was before the court in Northwest Airlines, Inc.—is nothing but a modern version of the act passed in Nevada more than 100 years ago which purported to levy a tax of $1 upon every person leaving the state by railroad, stage coach or other vehicle engaged in the business of transporting passengers for hire, and which was struck down in Crandall v. Nevada, supra, on the ground that it was an unlawful attempt to interfere with the constitutional right of citizens to travel freely.

A judgment will be entered declaring chapter 200 of the Laws of 1969 unconstitutional and enjoining its enforcement.