author: Handler, J. A. D.

text:
    STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT, v. PAUL J. HANLY, SR., AND JOHN K. HANLY, DEFENDANTS-APPELLANTS. STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT, v. JOHN K. HANLY, DEFENDANT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Argued October 1, 1973—
    Decided April 1, 1974.

      Before Judges Conford, Handler and Meanor.

      Mr. Gregory B. Reilly argued the cause for appellants in A-896-72 (Messrs. Lowenstein, Sandler, Brockin, Kohl & Fisher, attorneys; Mr. Harold Rainer on the brief).

      Mr. Irving Vogelman argued the cause for appellant in A-1719-72 (Messrs. Brown, Vogelman & Ashley, attorneys; Mr. Raymond A. Brown of counsel).

      Mr. Frank L. Holstein, Deputy First Assistant Prosecutor argued the cause for respondent (Mr. Geoffrey Gaulkin, Huddon County Prosecutor and Mr. Edwin H. Stern, Special Deputy Attorney General, Acting Hudson County Prosecutor, attorneys; Mr. Mart Vaarsi, Deputy Attorney General on the brief).
   The opinion of the court was delivered by

Handler, J. A. D.

In each of these consolidated cases it is contended that the trial court erroneously instructed the jury with respect to the requisite mental state required as an element of the crime charged under N. J. S. A. 2A :135-3. In the ease in which both John and Paul Hanly are defendants (A-896-72), they were found guilty of the first count of a six-count indictment. The gravamen of the first count was that John Hanly, while holding the county office of Superintendent of the B. S. Poliak Hospital, and defendant Paul Hanly, knowingly and willfully obtained and assisted in obtaining approximately $6,002.21 for Paul Hanly and one Euby Lee McLeod, which moneys were not lawfully and justly due these individuals in that no services were rendered by them to or for the hospital. The remaining counts of the indictment similarly charged defendant John Hanly and his wife Virginia Hanly with obtaining county moneys for Hanly and other named individuals, which moneys were not lawfully and justly due because no services were furnished the hospital in exchange fox these payments. The jury acquitted Virginia Hanly on these remaining charges but was unable to reach a verdict with respect to her husband. In the companion case (A-1719-72) it was charged in two counts that John Hanly, while holding the same office knowingly and willfully obtained for one Teresa Monti approximately $6,276.01 and for one Eose Alviani approximately $5,211.86, in county funds, which were not lawfully and justly due these persons because neither had rendered services to or on behalf of the hospital. Hanly was convicted on both counts under this indictment.

I

The crime involved in both cases is set forth in N. J. S. A. 2A :135-3, viz:

Any person holding a public office, position or employment of this State or of a county, municipality, or school district, who willfully and knowingly obtains, or counsels, aids, assists, or procures in obtaining for any other person from the State, or from any such county, municipality, or school district, any money, notes, bonds, scrip, securities or other thing of value not lawfully and justly due to such person holding a public office, position or employment of this State or of a county, municipality, or school district or such other person at the time of obtaining the same, is guilty of a high misdemeanor.

In the case involving both Hanlys (A-896-72) the State presented evidence that Mrs. McLeod never set foot in the State of New Jersey and never worked for Poliak Hospital. The State showed that Mrs. McLeod, who resided in Florida, worked for Paul J. Hanly, Sr. as a domestic in his home at Bal Harbor, Florida, for part of the time that she was on the payroll of Poliak Hospital and received payroll checks of the hospital. Testimony was also elicited with regard to the issuance of the checks for these persons and the procedures involving certification by John Hanly of “payroll exception sheets” which were used at the inception, termination, time of salary increment or time of absence of any of the employees. The defense adduced evidence to establish the good character of the defendants and to establish facts showing the past practice with respect to the use of domestics by superintendents of Poliak Hospital.

The other case involved-payments made to Rose Alviani and Teresa Monti for “no show” jobs at Poliak Hospital. Much the same testimony as was introduced in the first ease with regard to payroll procedures, the payroll exception sheet and authorizations of John K. Hanly was introduced at this trial. Teresa Monti, who had, prior to the time that this trial took place, pleaded guilty to a violation of N. J. S. A. 2A :135-3, testified for the State.

In the trial of A-1719—72 the judge instructed the jury as follows:

You will note that the statute requires that the person charged with the crime willfully and knowingly obtained or aided or assisted in obtaining the moneys for this other person from the County of Hudson. By knowingly and willfully, those two elements, the law requires that the intent---that the defendant intended to act as is charged. In other words, he must do so intentionally. You must determine whether the acts were performed with full knowledge of the facts in a conscious or purposeful manner without legal justification or excuse and that the acts, for example, were not the result of negligence, mistake or inadvertence, because that would be just the opposite of knowledge and willfulness. In other words, if the defendant did what was charged as the result of negligence, mistake or inadvertence, he could not be guilty under this statute. He must do it with knowledge, and he must do it willfully and it must have been performed by him with his free and untrammeled will.
Now, once it is shown that the defendant John Hanly, and shown beyond a reasonable doubt, intended to act in a manner which is proscribed by the statute, it is immaterial that he did not believe that his conduct violated the law, nor is it essential for the State in this ease to prove that the defendant had a corrupt motive or that he profited personally. So long as he violated the statute knowingly and willfully, he’s guilty of the offense.
Therefore, to summarize, the State must prove beyond a reasonable doubt in order to secure a conviction as to the first count (1) that Teresa Monte obtained the salary from Hudson County without performing any work therefor; (2) that the defendant John Hanly, as Superintendent of the hospital, obtained, or aided or assisted in obtaining for her the moneys from the County which were not due her; and (3) that he did so knowingly and willfully. As to the second count, (he State must prove the same elements beyond a reasonable doubt so far as they pertain to Rose Alviani. And unless the State proves each of these elements which I have just outlined for you as the particular charge under Count 1 and Count 2, the defendant would be entitled to a verdict of not guilty.

It is contended that this instruction and that given in the other case, were defective in that they omitted as an essential element for the commission of the crime, “specific intent,” “consciousness of wrongdoing” or the “corrupt intent to violate the law.” Defendants in A—896-72, for example, argue that “[t]he statute clearly requires consciousness on the part of the defendant that the moneys he obtained were not lawfully and justly due. This is just another way of saying that the defendant acted with consciousness and knowledge that his acts were in violation of the law and done in bad faith.” (Emphasis added). Defendant in the other case states essentially the same point, i. e., “[The court’s charge] eliminates from the jury’s consideration the crucial issue of whether defendant Hanly knew that the payments were not lawful, or whether his participation was in any way corrupt or done in bad faith with consciousness that such action constituted a violation of the criminal law.” His contentions in this respect are reflected in specific requests to charge, offered at the trial, to the effect that a defendant “would not be guilty of the criminal offense * * * unless he is either conscious of the fact that what he is doing constitutes a violation of the law * * and that “[t]he crime charged * * * requires proof of specific intent * * * [i. e.,] that the defendant knowingly did an act which the law forbids, purposely intending to violate the law.”

It is clearly within the competence of the Legislature to make the doing of an “act criminal or penal, regardless of a corrupt or criminal purpose or even knowledge of the illegal character of the act.” State v. Lobato, 7 N. J. 137, 149 (1951); State v. Gibson, 92 N. J. Super. 397 (App. Div. 1966). Likewise, it is within the legislative province to prescribe the degree of culpability required in order to establish the violation of a given statutory prohibition. Cf. State v. Lambertson, 110 N. J. .Super. 137 (App. Div.), certif. den. 56 N. J. 479 (1970).

The immediate precursor of N. J. S. A. 2A :135-3, L. 1898, c. 235, § 169, proscribed essentially the same conduct covered in the current enactment but did not specifically contain the language that such actions be performed “willfully and knowingly.” Thus, as first conceived this statute was susceptible of an interpretation which would sanction absolute criminal liability without a requirement of a corrupt or criminal intent or purpose. Cf. Halsted v. State, 41 N. J. L. 552 (E. & A. 1879); State v. Crowley, 39 N. J. L. 264 (Sup. Ct. 1877).

Significantly, the statute was amended in 1.960 to modif}' the word “obtains” with the adverbs “willfully and knowingly.” L. 1960, c. 97, § 1. These changes, defendants contend, evince a legislative intent that the proscribed criminal act requires the element of moral culpability, that is, a “corrupt intent to violate the law.”

Defendants rely on Cutter ads. State, 36 N. J. L. 125 (Sup. Ct. 1873). The court construed the forerunner of our extortion statute, N. J. S. A. 2A :105-1, and held that a public official could not be convicted under that statute without knowledge that payments he received were illegal. Id. at 126. The extortion statute construed in Cutter appears to have been reiterative of the common law. State v. Begyn, 34 N. J.

35, 46 (1961).

Reliance is also placed on Morissette v. United States, 342 U. S. 246, 72 S. Ct. 240, 96 L. Ed. 288 (1962). It was held that under 18 U. S. C. § 641, which prohibits knowing conversion of federal property, defendant was entitled to assert as a defense his mistaken belief that the property he took was abandoned. The particular statute was found to be a codification of the common law offense of larceny and thus was held to require the same mens rea as the common law offense. See Gutter ads. State, supra 36 N. J. L. at 127.

Here, taking the quoted charge, the trial court in A-1719-72 did convey to the jury that defendant must be shown to have obtained or assisted in the obtaining of moneys with the knowledge that the moneys were not lawfully or justly due. The charge in the other case did not similarly indicate to the jury that such knowledge was essential. To the extent that this charge did not advise the jury that knowledge by defendants that the moneys were not lawfully or justly due was essential, that error is harmless beyond a reasonable doubt in light of the evidence. The record demonstrates convincingly, in both cases, that payments to the recipients, as charged in the respective indictments, were not in exchange for any services rendered the hospital nor otherwise authorized, and that defendants obviously knew this.

What was not charged in these cases was the additional element that defendants were required to know or be conscious that their conduct was a violation of the law. Cf. State v. Pruser, 127 N. J. L. 97 (Sup. Ct. 1941). Contrary to the thesis advanced by defendants, it would appear that the purpose of the 1960 amendment was to foreclose strict criminal liability which could be imposed without regard to a defendant’s mental state, as where a defendant through accident, inadvertence, mistake or ignorance performed the prohibited act. The possibility of such a conviction was effectively eliminated by requiring that, to be criminal, the proscribed act be performed by one with knowledge and willfulness, that is, by one who is acting with volition rather than accidentally, and with full knowledge of all of the operative facts.

In Morss v. Forbes, 24 N. J. 341 (1957), the court held that a statute prohibiting willfull and malicious acts did not require a specific purpose to violate the law:

The ordained inquiry is whether the act condemned was committed with a full knowledge of the facts, in a conscious and purposeful manner, without legal justification or excuse. It must not be the produce of inadvertence or negligence or any state of mind other than a free and untrammeled will. This is the definition of criminal intent embodied in the words “willfully and maliciously,” as used in this statute. The accused must intend to act in the way proscribed by the statute, but it is immaterial that be does not know or believe his conduct violates the law.
Even positive belief that the act is lawful should not exempt the doer from criminal responsibility. Consciousness of unlawfulness is not essential. * * * If ignorance were a good defense, the administration of the penal law would again depend upon the well-nigh impossible ascertainment of hazy and amorphous mental conditions and opaque logic. When, with a clear knowledge of all the facts, one deliberately and intentionally does an act in violation of a positive law, cognizant of its existence, he cannot be excused on the basis that his animating desire was essentially praiseworthy. * * * Id. at 359.

In State v. Lambertson, supra, the court ruled that N. J. S. A. 2A :135-8 did not require a specific intent or consciousness on the part of defendant that his acts were unlawful. Cf. State v. Boncelet, 107 N. J. Super. 444, 451-452 (App. Div. 1969). See also, State v. Russell, 119 N. J. Super. 344, 351 (App. Div. 1972).

These considerations militate against the construction urged by defendants, that is, that their obtaining of moneys for other persons must have been accomplished with a consciousness on their-part that this violated the law. It cannot be overemphasized that the censured conduct appertains to public officials, who are “under an inescapable obligation to serve the public with the highest fidelity.” Driscoll v. Burlington-Bristol Bridge Co., 8 N. J. 433, 474, cert. den. 344 U. S. 838, 73 S. Ct. 75, 97 L. Ed. 652, reh. den. 344 U. S. 888, 73 S. Ct. 181, 97 L. Ed. 687 (1952). Public officials are charged with the obligation to lawfully perform fundamental duties of their office. Cf. State v. Weleck, 10 N. J. 355, 366-369 (1952).

The charges herein, in light of the evidence, fairly placed before the jury the questions of whether defendants obtained or assisted in obtaining county funds with the knowledge that these moneys were not lawfully or justly due and whether they undertook these acts purposefully. The court properly -and adequately charged, in accordance with the standards enunciated in Morss v. Forbes, supra, that, in order for the crime to be established, it must be shown that the acts were committed with full knowledge of the facts and in a conscious and purposeful manner, with the intent to act in the way proscribed by the statute, rather than from inadvertence or negligence. Specific intent in the sense of consciousness of wrongdoing, or a purpose to violate the law or a corrupt motive was not essential.

II

Several other issues are raised by defendants in case A-896-72. It is asserted that defendants were deprived of a fair trial and effective representation of counsel because of the court’s failure to apprise defense counsel prior to their summations of its charge on the meaning of criminal intent.

The root of this complaint was counsels’ expectation that the court would instruct the jury as it had in a previous trial which ended in a mistrial. The trial judge there charged that consciousness of wrongdoing was required. There was thus a dramatic shift in the opinion of the court on the critical issue of the meaning of knowledge. Counsel undoubtedly relied on the position expressed in the earlier trial and programmed their summations accordingly.

It is to be emphasized that under these circumstances elemental courtesy and fairness should move the trial court to notify counsel in advance that the court has changed its views with respect to the elements of the crime so that counsel would have the opportunity to argue the point and prepare and try their case accordingly. VTe, nevertheless, conclude that the court’s failure in this respect does not warrant a reversal.

Counsel may, of course, explain propositions of law to the jury if this is reasonably necessary for a proper understanding of the evidence. Cf. State v. Hipplewith, 33 N. J. 300, 315 (1960); Annotation, “Counsel’s Right in Criminal Prosecution to Argue Law or to Read Lawbooks to the Jury,” 67 A. L. R. 2d 245 (1959). Counsel does not have the right, however, to 'project or persist in a mistaken presentation of the controlling legal principles. United States v. Sawyer, 143 U. S. App. D. C. 297, 443 F. 2d 712, 714 (1971). Cf. State v. Hipplewith, supra; State v. Ernst, 32 N. J. 567, 574 (1960), cert. den. 364 U. S. 943, 81 S. Ct. 464, 5 L. Ed. 2d 374 (1961). Moreover, counsel is not entitled to rely upon the rulings in a previous trial. Franklin Discount Co. v. Ford, 27 N. J. 473, 492 (1958); Allaire v. Allaire, 39 N. J. L. 113 (E. & A. 1876); See Miller v. Linde, 33 N. J. Super. 41, 45 (App. Div. 1954). Thus, while counsel were disarmed by the court’s turnabout here, our examination of the record convinces us that this circumstance did not have any determinative impact on the jury’s deliberations or divert it from a full and proper consideration of the evidence governed by correct legal principles.

Another argument is that the trial court erroneously eliminated from the jury’s consideration certain evidence bearing upon defendants’ state of mind. It is contended that there was evidence relating to previous payments to domestic servants of hospital superintendents for personal services which were not performed at the hospital itself; and that with respect to count I of the indictment, such evidence would permit an inference that defendants reasonably' believed that Ruby Lee McLeod, the domestic servant of Paul Hanly, who was the Commissioner of Institutions and Agencies, could be paid as a hospital employee for personal services rendered to Paul Hanly’s family' at their Elorida home.

The trial court properly rejected this theory since there was no credible or relevant evidence in the nature of a eustom or practice which could otherwise be applied to domestics working for Paul Hanly in Elorida. A court is not obliged to charge a defense based upon such feeble evidence. Cf. State v. Artis, 57 N. J. 24, 30 (1970), remanded 60 N. J. 60, cert. den. 408 U. S. 942, 92 S. Ct. 2849, 33 L. Ed. 2d 766 (1972).

A further argument is made that the statute by its inclusion of the phrase “not lawfully and justly due,” is unconstitutionally vague on its face and as applied. It is suggested that only by construing the statute so as to require “consciousness of wrongdoing” may it be spared from constitutional infirmity. The statute including the phrase “not lawfully and justly due,” has long been in force. L. 1898, c. 235, § 169. This and comparable statutes have been the subject of judicial application. State v. McGovern, 84 N. J. L. 444 (Sup. Ct. 1913); State v. Codington, 80 N. J. L. 496 (Sup. Ct. 1911), aff'd 82 N. J. L. 728 (E. & A. 1911). See, e.g., State v. Crowley, supra. The courts have consistently upheld statutes drafted in relatively general terms, where, as here, the forbidden conduct was sufficiently specified. See, e.g., State v. Hudson Cty. News Service, 35 N. J. 284 (1961); State v. Joas, 34 N. J. 179 (1961). We are of the view that the statutory prohibitions of N. J. S. A. 2A :135-3, inclusive of the phrase “not lawfully and justly due,” adequately forewarned defendants that the conduct related in the indictment would expose them to criminal sanctions.

Defendants contend that the trial court failed to instruct the jury as to the meaning of the term “not lawfully and justly due.” We point out that defendants made no request to charge in this regard nor did they raise any objection to the sufficiency of the charge on this account.

While the court did not furnish the jury with any separate definition of the term “justly due,” the indictment itself specified that it was the failure to render any services for the hospital which was the basis for the charge that moneys paid to Paul Hanly and Euby McLeod were not justly due. It reasonably emerges from the charge that the jury was required to consider whether any services had been rendered to or on behalf of the county by these individuals and, in this sense, determine whether such moneys were justly due them.

The trial court explained to the jury that a use of county funds for the employment by a superintendent of household help at his private home outside the confines of the hospital building is unlawful when not authorized by the county board of freeholders. Defendants assert that by its instruction the court preempted the jury from determining an ultimate issue of fact, namely, whether the payments were unlawful. We disagree. The court left to the jury the fact question of whether such payments actually occurred. Its instruction that such payments ■—• if they occurred — were unlawful did not trench upon the jury’s domain since this involved a question of law properly settled by the court. Cf. State v. Schneider man, 20 N. J. 422 (1956). We are also satisfied that the State sustained its burden of proof that such payments were not lawfully or justly due by introducing evidence that there was no official authorization therefor, especially in the absence of proofs to the contrary. Cf. State v. Blanca, 100 N. J. Super. 241, 248 (App. Div. 1968).

Another contention is that count I of the indictment failed to charge a crime, an issue not raised below. Their argument is that the indictment must charge not only that such funds were not lawfully and justly due “to such other person,” i. e., Paul J. Hanly and Ruby Lee McLeod, but also were not lawfully and justly due the public official himself, i. e., John K. Hanly. The point is without merit.

N. J. S. A. 2A :135-3 specifically prohibits two types of conduct: (1) an official who obtains money not lawfully and justly due to said official, or (2) an official who counsels, aids, assists or procures in obtaining money not lawfully and justly due to another person. Count I of the indictment charges clearly that Ruby Lee McLeod and Paul J. Hanly Sr., with the aid of John K. Hanly, received moneys not lawfully and justly due them, in that they obtained hospital payroll checks without rendering services in return for these payments. It was not required that the indictment further specify that the moneys received by Paul Hanly and Ruby McLeod were not otherwise lawfully and justly due John Hanly. Compare State v. Codington, supra, 80 N. J. L. at 496-499, with State v. McGovern, supra, 84 N. J. L. at 445.

Defendants contend that the court erred in denying their motion for acquittal on count I in that there was no evidence that John Hanly “knowingly and willfully” participated in the distribution of the checks to Kuby McLeod other than his signature of the payroll exception sheet certification. The point is without substance. There was ample evidence for submission of the case to the jury. Dolson v. Anastasia, 55 N. J. 2 (1969); State v. Mayberry, 52 N. J. 413 (1968), cert. den. 393 U. S. 1043, 89 S. Ct. 673, 21 L. Ed. 2d 593 (1969) ; State v. Franklin, 52 N. J. 386 (1968).

Finally, it is urged that the trial judge erred in denying defendants’ motion that he disqualify himself. We find this contention meritless.

Affirmed.


source: Caselaw Access Project

author: Michels, J. S. C.,

license: Public Domain

text:
    JEAN FIVEHOUSE, PLAINTIFF-APPELLANT, v. PASSAIC VALLEY WATER COMMISSION, DEFENDANT-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued November 26, 1973—Submitted for Determination March 25, 1974—
    Decided April 2, 1974.

      Before Judges Collester, Lynch and Michels.

      Mr. Jack Ballan argued the cause for appellant.

      Mr. Jerome C. Eisenberg argued the cause for respondent (Messrs. Clapp & Eisenberg, attorneys; Mr. Stephen H. Roth on the brief).
   The opinion of the court was delivered by

Michels, J. S. C.,

Temporarily Assigned. Plaintiff instituted this action against defendant Passaic Valley Water Commission contending that it had violated her rights by refusing to grant her longevity pay computed on the basis of her prior municipal employment with the City of Paterson and with the Paterson Housing Authority in accordance with the provisions of N. J. S. A. 40A :9-5 (formerly N. J. S. A. 40 :11-5).

Plaintiff was employed by the City of Paterson from 1941 to 1952, and thereafter by the Paterson Housing Authority from 1952 until 1959. In 1959 plaintiff passed a Civil Service examination and was certified by the New Jersey Department of Civil Service to be eligible for a position with defendant, and thereafter was appointed by defendant and commenced employment on September 9, 1959.

Defendant inaugurated a longevity pay program which became effective in 1970. In fixing plaintiff’s longevity pay, defendant only included her years of employment with it. It did not include the prior years with the City of Paterson and the Paterson Housing Authority. If plaintiff’s seniority rights commenced as of September 15, 1959, as defendant contends, she is entitled only to the 3% longevity rate which she already receives. If her seniority rights should be considered to commence in 1941, when she was first employed by the City of Paterson, as she contends, plaintiff would be entitled to a 4% longevity rate as of January 1, 1970 and to a 6% longevity rate as of July 1, 1971. The court below held that longevity should be determined from the time plaintiff entered defendant’s employ, and not computed on the basis of her prior municipal employment with the City of Paterson and Paterson Housing Authority. In reaching this result the court reasoned that N. J. S. A. 40A :9-5 was designed to protect employees who are involuntarily transferred rather than those who, like plaintiff, voluntarily leave their employment with one department exposition of municipal or county government and obtain employment in another department or position of government. Plaintiff appeals, contending that the trial court erred in construing the act .to apply solely to involuntary transfers.

N. J. S. A. 40A :9-5 provides as follows:

Whenever heretofore or hereafter a transfer has been or shall be effected by appointment, assignment or promotion of a municipal employee to any other department or position in municipal employment, or to a position or department of the county government; or of a county employee to any other position or department in county employment, or to a department or position of a municipal government, in counties of the first or second class, the period of such prior service in said county or municipal employment, for any purpose whatsoever, shall be computed as if the whole period of employment of such employee had been in tbe service of the department, or in the position, to which the said employee had been transferred.

Recently onr court in Libby v. Union Cty. Bd. Freeholders, 125 N. J. Super. 471 (App. Div. 1973), rejected the argument that N. J. S. A. 40 :11-5 (now N. J. S. A. 40A :9-5) applies only in the event of an involuntary transfer and held that when a municipal employee leaves his employment and is immediately thereafter appointed to a position in county government such appointment is within the intent and meaning of N. J. S. A. 40A :9-5. Consequently the similar argument advanced by defendant and relied upon by the court below does not provide a proper basis for failing to include prior municipal service in computing longevity in this case. However, we are of the view that the result reached by the court below was correct and said judgment should be affirmed, but on another ground.

Defendant is a public agency created pursuant lo N. J. S. A. 40 :62—108 ei seq., and consists of several municipalities, including the City of Paierson. Pursuant to the provisions of N. J. S. A. 40 :62-150.1 the names of all of the employees of defendant are certified to the Civil Service Commission, and by virtue of N. J. S. A. 40 :62-150.2 employees of defendant certified to the Civil Service Commission are subject to all of the provisions of Revised Statutes, Title 11, Subtitle 3 with respect to tenure, classification and compensation. The statute obviously does not subject the employees of defendant by its express language or spirit to the provisions of N. J. S. A. 40A :9—6. This latter statute which is here involved is part of Title 40, not Title 11.

Seniority rights do not exist at common law. 51 C. J. S. Labor Relations § 14 at 587 (1967); Markham v. American Motors Corp., 22 Wis. 2d 680, 126 N. W. 2d 753, 758 (Sup. Ct. 1964). An employee has no inherent right to seniority in service, and can have only such rights as may, be based on a contract or on a statute. Palizzotto v. Local 641, 67 N. J. Super. 145, 152 (Ch. Div. 1961), aff'd 36 N. J. 294 (1962); Walker v. Pennsylvania-Reading S. S. Lines, 142 N. J. Eq. 588, 600 (Ch. 1948).

It is a well settled rule of statutory construction that a statute in derogation of common law is ordinarily strictly construed. Dacunzo v. Edgye, 19 N. J. 443, 451 (1955); Foy v. Dayko, 82 N. J. Super. 8, 12 (App. Div. 1964). Statutes are to be construed with reference to the: common law, and a statute which is claimed to impose a duty or to establish a right which was not recognized by the common law will be strictly interpreted to avoid such change. Carlo v. Okonite-Callender Cable Co., 3 N. J. 253, 265 (1949). To effectuate a change in the common law, the legislative intent to do so must be clearly and plainly expressed. DeFazio v. Haven S. & L. Ass’n, 22 N. J. 511, 519 (1956).

Applying the rule of strict statutory construction which we deem to be appropriate in this case because the statute changes the common law concerning seniority, it is our view that plaintiff was not an employee of a municipal or county government protected by the provisions of N. J. S. A. 40A :9-5. Employment by defendant does not constitute employment by a department or position in municipal or county government so as to bring plaintiff within the purview and meaning of N. J. S. A. 40A :9-5. The benefits conferred by this act are extended solely to municipal employees who are transferred to positions in municipal or county government and to county employees who are transferred to positions in county or municipal government. The application of the act (N. J. S. A. 40A:9-5) must be limited to what the Legislature intended by the express language of the statute. We cannot rewrite or interpret the' statute to apply to transfers to any departments or positions in other government or public employment.

Our former Court of Errors and Appeals, in Brickett v. Lagay, 134 N. J. L. 1, 3 (E. & A. 1946), held in a somewhat analogous situation that the Passaic Valley Sewerage Commission, a public agency created by N. J. S. A. 58 :14-1 et seq., was not a part of the government of New Jersey or a municipal body within the intendment of N. J. S. A. 38 :16—1, which provided tenure to honorably discharged veterans holding employment in the government of the State, county or municipality. The court’s reasoning, which is persuasive and applies with equal force to this case, was as follows:

The legislature, by R. S. 38:16-1, supra, clearly intended to limit the provisions of the statute to persons holding “employment, office or position” -within certain limited fields of governmental activity, as expressly stated in the statute. The provisions of R. S. 38:16-1, supra, must be limited in their application to what is specifically in-intended by the legislature which enacted the statute. We cannot enlarge or write in that which the legislature has not seen fit to include.
It seems clear that the legislature, for what it considered good and sufficient reasons, did not intend to protect any of appellants’ employees against removal; certainly we must assume so in the absence of a definite expression to the contrary. In the absence of such expression, it is to be assumed that the provisions authorizing the removal of employees at the pleasure of the appellants prevail in all cases. If the veterans’ tenure provisions of R. S. 38:16-1, supra, were to be all embracive, why the restrictive clauses? The employees of all municipalities are employees under the government of the state and receive their compensation from the state, in the broad sense •adopted by the Supreme Court. If the phrase “under the government of this state” is subject to this broad interpretation, why the restrictive provision for counties and municipalities, for the latter are also arms and agencies of the state for the purposes of local government.

We note that while counsel for the parties may have stipulated that "defendant is a public corporation which is subject to the seniority benefit provisions of N. J. S. A. 40 :11-5, where applicable,” we are not bound by any such stipulation or concession relating to the interpretation of this statute. Tibbs v. Boemi, 109 N. J. Super. 200, 204 (App. Div. 1970), aff’d per curiam 55 N. J. 531 (1970); Schulz v. State Board of Education, 132 N. J. L. 345, 349 (E. & A. 1944); Know The Facts, Inc. v. Ryan, 48 N. J. Super. 453, 456 (Ch. Div. 1958).

For the reasons set forth above, the judgment below is affirmed.


author: Per Curiam.

text:
    MARY R. OBST, PLAINTIFF, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, DEFENDANT-RESPONDENT, AND UNSATISFIED CLAIM AND JUDGMENT FUND BOARD, AND RAY J. MARINI, DIRECTOR OF THE DIVISION OF MOTOR VEHICLES OF THE STATE OF NEW JERSEY, DEFENDANTS-APPELLANTS.
    Superior Court of New Jersey Appellate Division
    Argued January 7, 1974—Submitted for Determination March 18, 1974—
    Decided April 3, 1974.

      Before Judges Collester, Lynch and Michels.
    No one argued the cause on behalf of appellants (Messrs. Shapiro, Brotman, Eisenstadt & Capizola, attorneys; Mr. Michael D. Capizola, on the brief).

      Mr. William R. Powers, Jr., argued the cause for respondent (Messrs. Moss & Powell, attorneys).
   Per Curiam.

The judgment of the Chancery Division is affirmed essentially for the reasons set forth in the opinion of Judge Bisehoff.

However, we deem it appropriate to point out that with respect to the holding of the court below, that plaintiff is left to pursue her rights against the Unsatisfied Claim and Judgment Fund Board, plaintiff is a “qualified person” within the meaning of N. J. S. A. 39 :6-62. The term “qualified person” is defined by N. J. S. A. 39 :6-62, as follows :

“ ‘Qualified person’ means a resident of this State or the owner of a motor vehicle registered in this State or a resident of another State, territory, or Federal district of the United States or Province of Canada or of a foreign country, in which recourse is afforded, to residents of this Stale, of substantially similar character to that provided for by this act; provided, hotvever, that no person shall he a qualified person where such person is an insured under a policy provision providing coverage for damages sustained hy the insured as a result of the operation of an uninsured motor vehicle in a form authorized to he included in automobile liability policies of insurance delivered or issued for delivery in this State, pursuant to the provisions of, or any supplement to, chapter 28 of Title 17 of the Revised Statutes or in a form substantially similar thereto.” (Emphasis added).

The court below found that plaintiff did not meet the requirements of corroboration and reporting to the police as required by the uninsured motorist endorsement to the policy of insurance issued to her hy State Farm Mutual Automobile Insurance Company, and that she did not have any right to recover on that endorsement. Thus, the uninsured motorist endorsement issued to plaintiff did not provide coverage to her for the damages she sustained as a result of the operation of an uninsured motor vehicle, and therefore she was not a person insured under any such policy of insurance. Accordingly, plaintiff does not fall within the statutory exclusion to the definition of "qualified person” set forth in N. J. S. A. 39 :6—-6S and is entitled to maintain her action against the Director of Motor Vehicles pursuant to the provisions of N. J. S. A. 39 :6-78.

Affirmed.


text:
    HARTFORD INSURANCE COMPANY, PLAINTIFF-APPELLANT, v. ALLSTATE INSURANCE COMPANY AND THE AMERICAN ARBITRATION ASSOCIATION, DEFENDANTS, AND JOSEPH YUHAS, DEFENDANT-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued November 19, 1973—Submitted for Determination March 18, 1974—
    Decided April 2, 1974.

      Before Judges Collester, Lynch and Michels.

      Mr. John G. Rathman for appellant (Messrs. Kirkpatrick and Rathman, attorneys).

      Mr. Paul E. Anderson for respondent (Messrs. Kovacs, Anderson, Horowitz and Rader, attorneys).
   The opinion of the court was delivered by

Michels, J. S. C.,

Temporarily Assigned. Plaintiff Hartford Insurance Company (Hartford) appeals from a grant of summary judgment in favor of defendant Joseph Yuhas (Yuhas). Yuhas was injured in an automobile accident while a passenger in a vehicle owned and operated by Cecelia Satoli which collided with an uninsured vehicle. The Satoli vehicle was insured by Allstate Insurance Company (Allstate) and Yuhas was insured by Hartford. Both the Hartford and Allstate policies contained uninsured motorist coverage endorsements issued pursuant to the provisions of N. J. S. A. 17 :28-l.l, and each contained the minimum statutory limits of $10,000 per person and $20,000 per accident.

Yuhas instituted an arbitration proceeding against Hartford and Allstate under the arbitration provisions of the uninsured motorist coverage issued by each, to recover damages for the personal injuries he sustained as a result of the accident. The arbitrator, at the conclusion of the hearing, entered an award in favor of Yuhas and against Hartford and Allstate in the sum of $10,000 each, or a total of $20,000. Allstate paid the $10,000 awarded Yuhas. Hartford refused to pay, contending that recovery was barred by reason of the “other insurance” clause contained in its uninsured motorist coverage endorsement, and instituted this declaratory judgment action. The “other insurance” clause provides:

With respect to bodily injury to an insured while occupying a highway vehicle not owned by the named insured, this insurance shall apply only as excess insurance over any other similar insurance available to such insured and applicable to such vehicle as primary insurance, and this insurance shall then apply only in the amount by which the limit of liability for this coverage exceeds the applicable limit of liability of such other insurance.
Except as provided in the foregoing paragraph, if the insured has other similar insurance available to him and applicable to the accident, the damages shall be deemed not to exceed the higher of the applicable limits of liability of this insurance and such other insurance, and the company shall not be liable for a greater proportion of any loss to which this coverage applies than the limit of liability hereunder bears to the sum of the applicable limits liability of this insurance and such other insurance.

Hartford contends that under the express language of the aforesaid clause, the uninsured motorist coverage of the insured’s (Yuhas) own policy operates as excess coverage and applies only if its coverage is more extensive than the primary coverage afforded by Allstate, and then only for the amount of such excess. Since the Allstate and Hartford policies contained the identical limits of liability, Hartford argues that its coverage does not apply, and Yuhas was not entitled to stack or pyramid the policies, but rather was limited in his recovery to $10,000 — the amount of the Allstate coverage.

The trial court rejected this argument and granted Yuhas’ motion for summary judgment, holding that Hartford was also liable to Yuhas under its uninsured motorist coverage. The trial court relied on the opinion of the Chancery Division in McFarland v. Motor Club of Amer. Ins. Co., 120 N. J. Super. 554 (Ch. Div. 1972). In McFarland the court held the same “other insurance” clause that is contained in the Hartford policy here involved to be violative of public policy and invalid, stating:

N. J. S. A. 17 :28-1.1 sets a minimum recoverable amount but does not limit the total recovery. Defendant’s “other insurance” clause should be read only so as to avoid dual recoveries; N. J. S. A. 17 :28-1.1 itself states this limitation. Where an insured’s loss exceeds the limits of one policy, he may proceed against other available policies. The insurance company is, of course, free to dispute the validity of the asserted claim. But this court will not permit an insurer to escape its statutorily imposed liability by including in its policy a limiting clause which prevents the insured from receiving coverage he has paid for. Insofar as the “other insurance” clause under consideration purports to do so, it is violative of public policy and is invalid. [at 563]

The court reached this result by concluding that the general purpose of the Motor Vehicle Security Responsibility Law (N. J. S. A. 39 :6-23 to 60), the Unsatisfied Claim and Judgment Fund Law (N. J. S. A. 39 :6-61 to 91) and the Motor Vehicle Liability Security Fund Law (N. J. S. A. 39 :6-92 to 104), is “to provide victims of automobile accidents with financially responsible people to look to for damages,” and since the “other insurance” clause limits the amount that an insured may recover under the uninsured motorist coverage, such clause conflicts with public policy. We disagree.

At the outset it should be noted that uninsured motorist coverage is offered in New Jersey by legislative mandate. N. J. S. A. 17 :28-l.l, then in effect, provided in pertinent part as follows:

No automobile liability policy or renewal of such policy, of insurance insuring against loss resulting from liability imposed by law for bodily injury or death, sustained by any person arising out of the ownership, maintenance or use of a motor vehicle shall be delivered or issued for delivery in this State with respect to any motor vehicle registered or principally garaged in this State unless coverage is offered in- connection therewith, in limits for bodily injury or death set forth in section 9 of chapter 174 of the laws of 1952 ( O. 39:6-69), . . . under provisions approved by the Commissioner of Banking and Insurance, for payment of all or part of the sums which the insured or his legal representative shall be legally entitled to recover as damages from the operator or owner of an uninsured automobile, * * *.

N. J. S. A. 39 :6—69 provided for the application for payment of a judgment at the time the Hartford policy was issued in the maximum amounts of $10,000 for injury or death to one person (now $15,000), and $20,000 for injury to or death of more than one person in any one accident (now $30,000). The limits contained in N. J. S. A. 39 :6—69 are the limits required for the uninsured motorist coverage issued in this State in accordance with N. J. S. A. 17 :28-1.1. The policy issued by Hartford to Yuhas contained those limits. Cf. Alístate Ins. Co. v. McHugh,, 124 N. J. Super. 105, 111 (Ch. Div. 1973), aff’d per curiam 126 N. J. Super. 458 (App. Div. 1974).

Our review of the pertinent statutes does not indicate that the Legislature required that any different limits be contained in policies of insurance providing uninsured motorist coverage. The conclusion reached in effect in McFarland, that the general purpose of the Motor Vehicle Security Besponsibility Law, the Unsatisfied Claim and Judgment Eund Law and the Motor Vehicle Liability Security Eund Law gives rise to a public policy that prohibits the insurance companies from limiting their liability under this type of coverage, is not supported by the language of those statutes and ignores the very purpose for which N. J. S. A. 17 :28-1 et seq. was enacted.

The legislative purpose in establishing the Eund was to provide a measure of relief to persons who sustain losses or injuries inflicted by financially irresponsible or unidentified operators of motor vehicles where such persons would otherwise be remediless. See Exum v. Marrow, 112 N. J. Super. 570, 574 (Law Div. 1970). The purpose in providing for the issuance of uninsured motorist coverage by insurance companies for such accidents pursuant to N. J. S. A. 17 :28—1.1 and prohibiting persons having such coverage from proceeding against the Eund pursuant to N. J. S. A. 39 :6-62 was to relieve the Eund of some of the financial burden relating to claims against uninsured motorists. See Hannan v. Employers Commercial Union Ins. Co., 117 N. J. Super. 485, 489 (Law Div. 1971). There is nothing in any of these acts which requires that the insurers issuing policies in accordance with N. J. S. A. 17 :28-1.1 provide unlimited coverage so that victims of accidents could be made whole. Had this been the legislative intent, the Legislature could readily have required limits of liability in excess of those set forth in N. J. S. A. 39 :6—69.

Furthermore, the legislation permitting the issuance of uninsured motorist coverage in this State was approved and became effective on January 2, 1969. This coverage has been and is still being offered in this State in the form approved by the Commissioner of Insurance. See Obst v. State Farm Mut. Auto. Ins., 123 N. J. Super. 60 (Ch. Div. 1973), aff'd per curiam 127 N. J. Super. 458 (App. Div. 1974); Allstate Ins. Co. v. McHugh, supra. To date the Commissioner has not -withdrawn approval of the uninsured motorist coverage endorsement or deleted therefrom or changed in any way the “other insurance” clause. It must be presumed, therefore, that he did not consider the uninsured motorist endorsement, including the “other insurance” clause contained therein, unfair or inequitable, or that it was against public policy. Cf. Smith v. Motor Club of Amer. Ins. Co., 54 N. J. Super. 37, 43-44 (Ch. Div. 1959), aff’d per curiam 56 N. J. Super. 203 (App. Div. 1959), certif. den. 30 N. J. 563 (1959); Busch v. Home Ins. Co., 97 N.J. Super. 54, 57 (App. Div. 1967).

The validity of “other insurance” clauses of the type here involved has come under judicial scrutiny in other courts. While there does not appear to be unanimity of opinion (See Annotation, “Uninsured Motorists — ‘Other Insurance’ ”, 28 A. L. R. 3d 551 (1969)), there is much persuasive authority upholding the validity of such clauses. See, e. g., Whitmire v. Nationwide Mutual Ins. Co., 254 S. Car. 184, 174 S. E. 2d 391 (Sup. Ct. 1970); Long v. U. S. Fire Ins Co., 236 So. 2d 521 (La. Ct. App. 1970), writ refused 256 La. 864, 239 So. 2d 362 (Sup. Ct. 1970); Harris v. Southern Farm Bureau Cas. Ins. Co., 247 Ark. 961, 448 S. W. 2d 652 (Sup. Ct. 1970); Tindall v. Farmers Automobile Mgmt. Corp., 83 Ill. App. 2d 165, 226 N. E. 2d 397, 28 A. L. R. 3d 546 (App. Ct. 1967); Globe Indemn. Co. v. Baker’s Estate, 22 App. Div. 2d 658, 253 N. Y. S. 2d 170 (App. Div. 1964) (no discussion of the effect of any statutory provision); Burcham v. Farmers Ins. Exchange, 255 Iowa 69, 121 N. W. 2d 500 (Sup. Ct. 1963) (no discussion of the effect of any statutory provision); Lyon v. Hartford Acc. and Indemn. Co., 25 Utah 2d 311, 480 P. 2d 739 (Sup. Ct. 1971).

Contra, Safeco Ins. Co. of America v. Jones, 286 Ala. 606, 243 So. 2d 736 (Sup. Ct. 1970); Sparling v. Allstate Ins. Co., 249 Or. 471, 439 P. 2d 616 (Sup. Ct. 1968); Harleys ville Mut. Cas. Co. v. Blumling, 429 Pa. 389, 241 A. 2d 112 (Sup. Ct. 1968); Bryant v. State Farm Mut. Automobile Ins. Co., 205 Va. 897, 140 S. E. 2d 817 (Sup. Ct. App. 1965); Sellers v. U. S. Fidelity & Guar. Co, 185 So. 2d 689 (Fla. Sup. Ct. 1966).

In Putnam v. New Amsterdam Cas. Co., 48 Ill. 2d 71, 269 N. E. 2d 97 (Sup. Ct. 1970), the court considered the public policy argument and dismissed it, although noting that plaintiffs were probably not in a position to present the argument, the uninsured motorists statute not having been passed until after their accident. The court stated:

* * [W]e should consider the effect of plaintiffs’ proposal that the policies should be “stacked” to allow full compensation. If such were mandated as a matter of public policy, motorists would be in the unusual position of preferring that any injuries sustained be at the hands of uninsured motorists rather than motorists who comply with the Financial Responsibility Law. In the case before us, for instance, plaintiffs have already recovered from their host’s policy the amount they would have received had the tortfeasor been insured t o the extent required by statute; but plaintiffs plead that they should be entitled to greater compensation, as a matter of public policy or legislative dictate, by virtue of the fact that the tortfeasor was not only a careless driver, but a financially irresponsible one as well.
The question of public policy it seems to us, is largely manufactured. Construing an insurance contract accurately and giving it the effect which its language clearly commands, is not ipso facto a breach of public policy merely because it disappoints the innocent victim of an uninsured motorist. Whether an excess-escape clause in an uninsured motorist endorsement is violative of the statutory requirements for such coverage, rests upon a determination of legislative intent. With the recent trend toward compulsory uninsured motorist coverage, this question has understandably been posed in various contexts elsewhere. While there is some split in authority, the courts have generally reasoned that the legislature’s intent in requiring such insurance is satisfied by coverage which assures that the insured will fare equally well whether the tortfeasor is insured or not. [at 104-106; citations omitted]

Putnam was followed and approved by the Iowa Supreme Court in Morelock v. Millers’ Mut. Ins. Ass’n of Illinois, 49 Ill. 2d 234, 274 N. E. 2d 1 (Sup. Ct. 1971), which was decided after Illinois’ uninsured motorist statute was passed.

Accordingly, we are of the view that the “other insurance” clause contained in the Hartford policy is not invalid or violative of any public policy of New Jersey. We expressly overrule the holding in the McFarland case and will enforce the “other insurance” clause in accordance with its plain and unambiguous language, thereby precluding the stacking or pyramiding of this type of coverage. For the foregoing reasons, the summary judgment granted below in favor of Yuhas is reversed, and the matter remanded to the trial court with the direction that judgment be entered in accordance with the views expressed in this opinion.


author: Seidman, J. A. D.

text:
    GEORGE F. KUGLER, JR., ATTORNEY GENERAL OF NEW JERSEY, PLAINTIFF-APPELLANT, v. EDWARD H. TILLER, DEFENDANT-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued February 20, 1974—
    Decided April 1, 1974.

      Before Judges Carton, Lora and Seidman.

      Mr. John De Cicco, Deputy Attorney General, argued the cause for appellant (Mr. William, F. Hyland, Attorney General of New Jersey, attorney; Mr. George F. Kugler, former Attorney General of New Jersey, on the brief).

      Mr. Barry M. Epstein argued the cause for respondent (Messrs. Reibel, Isaac, Tannenbaum & Epstein, attorneys).
   The opinion of the court was delivered by

Seidman, J. A. D.

The Attorney General of New Jersey brought this action in lieu of prerogative writs under N. J. S. A. 2A :81-17.2al and 4 to remove defendant Edward EL Tiller from his office as a member and director of the Board of Chosen Freeholders (Board) of Union County for allegedly refusing to testify before the grand jury of that county in an investigation being conducted into matters directly relating to his office. Both parties moved for summary judgment. Defendant’s motion was granted and the complaint was dismissed with prejudice. Plaintiff appeals. For reasons to be detailed later, we reverse and remand for a plenary hearing.

It appears that in June 1973 and prior thereto the Attorney General was conducting an investigation before the Union County grand jury concerning appointments made by the Board since 1968. Defendant was informed prior to June 4 that he was the target of the investigation and was subpoenaed to appear before the grand jury on that date. Although what transpired there will be discussed at greater length herein, it is sufficient at this point merely to note that defendant “elected” not to testify, and two days later these proceedings were instituted.

The issue to be resolved seems to be one of first impression in this State and arises from N. J. S. A. 2A :81-17.2al and 4, the first section of which is as follows:

It shall be the duty of every public employee to appear and testify upon matters directly related to the conduct of his office, position or employment before any court, grand jury or the State Commission of Investigation. Any public employee failing or refusing to so appear and to so testify shall be subject to removal from his office, position or employment.

Section 17.2(a)(4) provides:

If any public employee has subjected himself to removal as provided in section 2 *' *' * of this act [2A :81~17.2(a) (1)], a proceeding may be instituted to effect such removal in the Superior Court by the Attorney General or a county prosecutor of this State by proceeding in lieu of prerogative writ.

Defendant argues, as lie did below, that since he was not asked specific questions directly relating to the performance of his duties, his refusal to testify could not produce his removal from office. The Attorney General, on the other hand, contends that defendant’s affirmative declaration that he would not testify warrants his removal under the statute.

The trial judge upheld defendant’s position, reasoning as follows:

In the strictest sense, Tiller did not refuse to testify. He merely asserted that it was not his intention to testify. He was.never put to the test. 1-Ie was never actually called upon to testify by having a direct question put to him. The bare assertion that he did not elect to testify should not be construed to be a failure or refusal to testify under the statute. * * *■
The application of this statute, as I have indicated, works a forfeiture of office, and consequently the statute should be strictly construed. Such a construction requires that a question “directly related to the conduct of the office, position or employment” be asked of the official, and the official must refuse to answer the question in order for the statute to be applied. This was not done in this case, and therefore Director Tiller is not in violation of the statute.

In our view, the trial judge’s conception of' the statute was unduly narrow and restrictive and, moreover, not in accord with what we conceive to be the plain statutory purpose and intent to hold public officials accountable for the performance of their office. We have no quarrel with the principle that forfeitures are to be strictly construed. Ben Ali v. Towe, 30 N. J. Super. 19, 23 (App. Div. 1954); 3 Sutherland, Statutory Construction (3 ed. 1943), §§ 5603, 5604. But a statute should not be interpreted so as to produce an unreasonable or absurd result.

There is no problem of self-incrimination under the statute. It was adopted in 1970 following the repeal of its predecessor, N. J. S. A. 2A :81—17.1 and 2, which had provided for the forfeiture of office and other rights in the case of a public official who refused to testify on the ground of self-incrimination. The invalidity of such provision was foreshadowed in Garrity v. New Jersey, 385 U. S. 493, 87 S. Ct. 616, 17 L. Ed. 2d 562 (1967). In Gardner v. Broderick, 392 U. S. 273, 88 S. Ct. 1913, 20 L. Ed. 2d 1082 (1968), it was held as a matter of federal constitutional law a public official could not be discharged solely because he asserted the privilege against self-incrimination or refused to sign a waiver of immunity. To the same effect, see Uniformed Sanitation Men Ass’n, Inc. v. Comm’r of Sanitation of New York City, 392 U. S. 280, 88 S. Ct. 1917, 20 L. Ed. 2d 1089 (1968). Gardner, however, left the way open for the elimination of the constitutional defect where a public official testified “without being required to waive his immunity with respect to the use of his answers or the fruits thereof in a criminal prosecution of himself.” 392 U. S. at 278, 88 S. Ct. at 1916.

The statute involved here accomplishes that result by providing for “use immunity”; that is, the testimony of a public employee before any court, grand jury or the State Commissioner of Investigation, and the, evidence derived therefrom, cannot be used against such public employee in a subsequent criminal proceeding, except that the public employee may be prosecuted for perjury committed while so testifying. N. J. S. A. 2A :81-17.2a2.

Without such immunity the problem is one. of striking a balance between the legitimate public interest in the accountability of public officers and their right to be silent. State v. Falco, 60 N. J. 570, 583 (1972). In such eases the constitutional right against self-incrimination ordinarily prevails. But where self-incrimination is no longer at stake, the public interest becomes paramount and the officer may subject himself to dismissal from office if he refuses without justification to account for the performance of his public trust. Uniformed Sanitation Men Ass’n, Inc. v. Comm’r of Sanitation of New York City, supra.

Under the statute here involved the public official’s obligation is to 'appear and testify with respect to "matters directly related to the conduct of his office, position or employment.” The court below, in ruling that specific questions had to be asked and the answers refused in order for .the removal provisions of the statute to be invoked, placed strong emphasis on three cases: People v. O’Dowd, 8 A. D. 2d 468, 188 N. Y. S. 2d 651 (App. Div. 1959); Gardner v. Murphy, 46 Misc. 2d 728, 260 N. Y. S. 2d 739 (Sup. Ct. 1965) and Slochower v. Bd. of Higher Education of New York City, 350 U. S. 551, 76 S. Ct. 637, 100 L. Ed. 692 (1955). Gardner and Slochower are inapposite. Both hold that the summary removal of a public officer for refusing to answer questions in a. lawful inquiry violates due process. That issue is not present here.

O’Dowd does not support the trial judge’s conclusion that as a matter of law specific, relevant questions have to be put to a recalcitrant public official as a prerequisite to a proceeding for his removal from office. In that ease the attorney general, invoking a pertinent provision of the state constitution,'filed a complaint to remove from office a public official who had refused to answer certain questions before a grand jury which were claimed to be relevant to the conduct of his office. Actually, the issue was whether the allegation in the complaint that defendant refused to answer, standing alone, was enough to support the cause of action. In denying defendant’s motion for dismissal the court held that as a matter of pleading the complaint was sufficient. Whether the questions asked were irrelevant or improper were matters for the trial court to determine.

In his oral opinion the trial judge in the present case queried, “But unless obviously questions are asked, how is the court to determine whether the defendant’s assertion that he elects not to testify is a willful and contumacious breach of duty or is a justified refusal based upon valid reasons?” The short answer is that a witness before a grand jury may not make himself the final judge of whether he should submit to interrogation. See, for example, In re Addonizio, 53 N. J. 107, 116 (1968); State v. Craig, 107 N. J. Super. 196, 198 (App. Div. 1969), certif. den. 55 N. J. 169 (1969).

We need not consider the case of a public official who- refuses to answer questions which he deems, in the language of Gardner v. Broderick, supra, to be not “specifically, directly, and narrowly relating to liis official duties.” We assume that if the Attorney General or county prosecutor wished in such case to compel the witness to answer, on pain of being held in contempt, he could present the matter to the court immediately and seek a direction to answer. Cf. In re Schwartz, 134 N. J. L. 267, 270 (E. & A. 1940); In re Pillo, 11 N. J. 8, 17 (1952); In re Boiardo, 34 N. J. 599, 602 (1961) ; In re Boyd, 36 N. J. 285, 286 (1962). Alternatively, ho may invoke the statutory removal procedure, in which case the issue of relevancy can be presented to and decided by a court of competent jurisdiction. See People v. O’Dowd, supra.

Here, however, defendant unqualifiedly declared his intention not to testify. We find nothing in the wording of the statute from which it can fairly be concluded that, despite such declaration, specific, relevant questions must still be put to the witness. It seems evident to- us that an election not to testify, absent explanation or excuse, is implicitly a refusal to respond to any and all questions which may be propounded in the grand jury room. Cf. Enrichi v. United States, 212 F. 2d 702, 704 (10 Cir. 1954). The futility of proceeding, nevertheless, to interrogate the witness is apparent. We hold that in such circumstances the blanket refusal to testify is, without more, sufficient cause for the institution of removal proceedings. Consequently, defendant’s motion for summary judgment in the instant case should not have been granted.

It does not follow, however, as plaintiff urges, that on the facts here present summary judgment should have been entered in his favor. In a proceeding under N. J. S. A. 2A :81-17.2a4 the Attorney General or county prosecutor, as the case may be, has the usual burden of proving the cause of action. That burden, however, is met in a ease such as the one before us by a showing that defendant was subpoenaed to testify before the grand jury (or, where applicable, the court or State Commission of Investigation) on matters directly related to the conduct of his office and that he .refused to testify. It is then incumbent upon defendant to come forward and explain or otherwise justify his refusal.

Of course, this does not preclude the entry of summary judgment if there is no genuine issue as to a material fact. Judson v. Peoples Bank & Trust Co. of Westfield, 17 N. J. 67, 73 (1954). But it is the movant’s burden to exclude any reasonable doubt as to the existence of any genuine issue of material fact, and all inferences of doubt are drawn against the movant in favor of the opponent of the motion. The papers supporting the motion are closely scrutinized and the opposing papers indulgently treated. Id. at 74-75.

We have carefully examined the record in the light of these well-established principles and are satisfied that genuine issues of material fact exist which should be resolved at a plenary hearing.

Defendant contends he was never informed that the inquiry concerned matters directly related to his office, although he acknowledges being notified prior to his appearance before the grand jury that he was a target of the investigation. We note that neither his affidavit nor that of the deputy attorne3r general conducting the investigation reveals a clear and specific disclosure to defendant of the precise scope and purpose of the inquiry or of a prospective interrogation of defendant regarding the conduct of his office. It should not be assumed or inferred on a motion for summary-judgment that he had such knowledge. What he knew or understood, particularly after consulting his attorney, will have to be developed at a trial. The issue of credibility is ordinarily for the trier of fact. Judson v. Peoples Bank & Trust Co. of Westfield, supra, at 75.

Further issues of fact are raised by defendant’s claim that he was not advised of his rights and duties under the public employees statute. He contends that he appeared on the return day of the subpoena prepared to testify, but chose not to do so, after conferring with counsel, when the deputy attorney general warned him that everything he said could be used against him. He states that in spite of his refusal to sign a proffered waiver of immunity, the deputy attorney general, "in effect,” requested an oral waiver. He further alleges that he "was told by his attorney the statutory immunity was inapplicable since he would not be granted immunity even though he was a target of the investigation.

A somewhat different version is given by the deputy attorney general, who avers that when the written waiver of immunity was refused he anounced his intention to have defendant testify without such waiver and that, after a 45-minute conference with counsel, defendant “elected not to testify.”

Defendant was then called before the grand jury and .«worn. Unfortunately, the interrogation was so perfunctory, inconclusive and inadequate as to be of very little value. After a few preliminary questions during which the deputy ati orney general stated that they were “in the process of conducting an investigation into appointments made by the officials in Union County to county jobs,” this colloquy ensued:

Q. Have you discussed with your attorney the fact that you have been informed that you are a target of this investigation? A. I have.
Q. And, has your attorney explained to you that you have a right not to testify? A. He has.
Q. And, has he explained to you that if you do testify, everything you say can and will be used against you in a court of law? A. I elect not to testify.
Q. Mr. Tiller, has your attorney also discussed with you a statute, 2A :81-17,' 2A1 [sic], the duty of employees to appear and testify, the Public Employees Statute? A. He has.
Q. And, having your duties in mind under that statute, will you testify? A. I elect not to testify.

The questioning of defendant was patently equivocal. The warning that defendant’s testimony could be used against him was erroneous and contradictory in view of the statutory provision for use immunity. Moreover, the questions and answers do not reveal exactly what advice defendant received after discussing the statute with his attorney, or what he understood his duties or obligations to be or what the consequences might be if he refused to testify.

Defendant is entitled to an opportunity to present whatever facts he has to explain or justify his refusal to testify. The trial judge will then have to resolve the disputed issues and determine, upon a consideration of all the evidence, whether a case has been made for defendant’s removal from office.

Reversed and remanded for trial.


author: Antell, J. S. C.

text:
    ALLSTATE INSURANCE COMPANY, PLAINTIFF, v. HOWARD SAVINGS INSTITUTION, GOOD DEAL SUPERMARKETS, INC., AND TITAN SUPERMARKET ASSOCIATES, DEFENDANTS.
    Superior Court of New Jersey Chancery Division
    Decided March 22, 1974.

      Mr. Marvin A. Sachs for plaintiff (Messrs. Feuerstein, Sachs & Maitlin, attorneys).

      Mr. Robert A. Scanlon for defendant Howard Savings Institution (Messrs. Lynch, Booth, Kenny, Scanlon & Dougherty, attorneys).

      Mr. Theodore W. Geiser for defendant Titan Supermarket Associates (Messrs. McElroy, Connell, Foley & Geiser, attorneys) .
   Antell, J. S. C.

This is an action for declaratory relief by an insurance carrier seeking adjudication of its nonliability to defendants who were named as loss payees on a fire insurance policy and proof of loss. Defendants counterclaim for judgment in the amount of damage by fire to the insured building. The controversy arises from the issuance by plaintiff of its draft in settlement of loss in the amount of $200,682.82 payable only to- the tenant of the insured premises and the fire adjuster who settled the claim. Omitted therefrom were the names of defendants who are the owner and the first mortgagee of the property. The term employed by plaintiff to explain its conduct is “inadvertence,” and the stakes ip this proceeding are dramatically signified by the tenant’s advent into bankruptcy after depositing the moneys in its general account.

The three propositions on which plaintiff rests its claim are that (1) defendants are barred from recovering under the policy by reason of conduct amounting to waiver or laches; (2) assuming their right to recover, recovery is limited to only that portion of the $200,682.82 settlement allocable to building damage, exclusive of moneys paid to the tenant for damage to “contents,” and (3) in the event of recovery by the mortgagee, plaintiff is entitled to an assignment of the mortgage and the mortgagee’s rights thereunder. The last of these is significant in that, for reasons 'to be explained, if allowed it would diminish the owner’s recovery under the policy by the amount of the outstanding mortgage balance, now approximately $90,000.

On March 25, 1959 Suss Leaf New Jersey, Inc., then the owner of premises at 393 Main Street, Chatham, entered a 21-year net-net lease with Good Deal Supermarkets, Inc. On August 7, 1959 Suss Leaf mortgaged the property to defendant Howard Savings Institution and on December 1, 1960 sold the premises to defendant Titan Supermarket Associates, a partnership. The conveyance was made subject to the Howard mortgage, but no formal novation was ever entered into by the interested parties. Suss Leaf also assigned the Good Deal lease to Howard on August 7, 1959 and to Titan on December 1, 1960. Paragraph 42 thereof obliges Good Deal to secure and maintain for the benefit of all parties fire and liability insurance.

Plaintiff’s policy covering the premises against loss by fire was issued June 23, 1971, to expire June 23, 1972. In it the insured is described thus:

Good Deal Supermarkets, Inc., and/or its affiliated and subsidiary companies are now or may thereafter be constituted as their respective I/M/A., 550 Division St. Elizabeth, N. J.

The loss payable clause of the policy provides:

Subject, to the provisions of the mortgage clause attached hereto, loss, if any, on building items shall be payable to: 1st mtgee: Howard Savings Institution 768 Broad St. Newark, N. J. and National State Bank of Elizabeth, 68 Broad St Elizabeth, and Titan Supermarket Assoc. Chrysler Building, East 666 3rd St. N. Y. N. Y. A/T/I/M/A.

It is stipulated that by “A/T/I/M/A” is meant “as their interest may appear.”

By a general change endorsement the name of Eirst National was removed as a loss payee on August 2, 1971. No explanation was given why defendant Titan was not specifically described in the foregoing clause as owner.

On April 12, 1972 an extensive fire damaged the building. The resulting loss was adjusted by Good Deal through the Sarasohn Co., Inc., a public fire adjuster. On June 24, 1972 it submitted its proof of loss executed by Good Deal as “owner,” and naming defendants Howard and Titan as co-loss payees.

It is timely here to note that paragraph 30 of the lease imposes upon Good Deal the duty to restore the building in the event of fire in the following terms:

If during the term of this lease the buildings or any of them erected on the demised premises be totally or partially destroyed by any cause whatsoever, there shall be no abatement of rent and the Tenant shall, at its own expense, repair, replace, rebuild and/or restore the said buildings with all reasonable diligence. The Landlord agrees that any insurance proceeds payable under the policies required herein to be maintained by the Tenant shall be used to reimburse the Tenant for, or to pay, as herein provided the costs and expenses incurred in the repairing, replacing, rebuilding and restoration of any damage to property on the demised premises in respect of which such insurance proceeds are payable, or any loss of use of the said premises.

In connection therewith, during the weeks and months following the fire, before and after issuance of the draft, Jeffrey Aidekman, Esq., house counsel for Good Deal, regularly conferred with Messrs. Kranzdorf or Lotterman, managing partners in Titan and respectively members of the Pennsylvania and New York Bars, about the progress of restoration and the payment of rent. Aidekman repeatedly assured them that Good Deal not only intended to meet its obligations under paragraph 30 of the lease but that in fact restoration was actually already in progress. Such assurances were in fact given in writing under dates of June 6, August 14 and September 20, 1972 to Titan and Howard.

The extent to which Titan was then being deceived by Good Deal can be appreciated only in retrospect. The Good D~al chain was then in serious financial difficulty and was freely utilizing the mechanics of naked fraud in order to prolong its survival. The most audacious falsehoods were relied on to neutralize any show of militancy by Titan in the protection of its interests. One such incident was testified to by Mr. Kranzdorf wherein, as he recounted, he, visited the premises in July 1972 to check on the status of the work which, as he had been told, was in progress. Finding the premises locked and no sign of activity evident, he returned to his office and telephoned Jeffrey Aidekman for an explanation. Aidekman, in response to this demand, was able to convince Kranzdorf that he had misinterpreted the facts, that although the doors were locked, the workmen were inside carrying on interior repairs, but so silently as to be inaudible from the outside. Actually, no repairs were either made on the building or intended to be made, and the financial circumstances of Good Deal deteriorated so badly that it was decided in September 1972 not to reopen that location under any circumstances.

On August 25, 1972, a Friday, plaintiff issued two drafts dated August 28, 1972, one in the amount of $200,682.82 payable to Good Deal Supermarkets, Inc. and Sarasohn Co., Inc., reciting that it was in payment for building damage, and a separate draft in the amount of $72,178 to the same payees covering contents. Both were picked up by the insurance broker servicing Good Deal on that day and negotiated August 28. On August 25 Sam Aidekman, the president of Good Deal, sent a letter to Titan which noted, in passing, that Good Deal had “already received the settlement from the insurance company.” That letter was received by Titan August 29. The larger of the two instruments, however, was paid that same day and the funds irretrievably commingled with Good Deal’s receding cash flow. It is parenthetically observed that Jeffrey Aidekman’s letter of August 31, 1972 indicates the involvement of several insurance carriers in covering different aspects of the loss, and the August 25 letter is unclear as to which one was intended.

The management of Titan was “stunned” to learn that plaintiff had issued its draft without including thereon either of the defendants as loss payees. The discussions between Good- Deal and Titan intensified and were now broadened to include, in addition to late payment of rent and building repairs, Titan’s demand that the proceeds of the insured fire loss be deposited in escrow. Jeffrey Aidekman continued his course of deception, reaffirming Good Deal’s fidelity to the lease and conjuring up visions not only of a restored building, but one restored “to a condition better than it was prior to the fire.” Titan continued to work toward a resolution of the dispute even after it learned of Good Deal’s intention not to reopen the Chatham store. Its purpose was to'salvage what it could from a failing situation, and in response to Aidekman’s request that they listen to certain concrete proposals he was prepared to offer, they met with him on February 20, 1973. Apart from vague references to third parties who might be interested in taking over the property, he offered nothing. He was simply procrastinating further. Discussions terminated and counsel was engaged.

During this same interval a lively dialogue was also underway between Good Deal and plaintiff. At least by September 8, 1972 the fact that plaintiff had issued the draft erroneously had become a subject of concern within that company. This is shown by an internal memorandum of that date. On numerous dates thereafter plaintiff’s representatives repeatedly told Jeffrey Aidekman that defendants’ names had been mistakenly omitted from the $200,682.82 draft and implored him either to return the money or to provide some hope of indemnification to plaintiff in the event of loss. In contrast to the mendacity with which he tranquillized Titan, he frankly told plaintiff that although he was sympathetic it was “impossible” to return the money or to give indemnification. By December 1, 1972 plaintiff mailed to Jeffrey Aidekman an indemnification form to be executed by Good Deal and Titan. The request was ignored. During this period there was a complete absence of communication between plaintiff and defendant.

Defendant Howard first learned of the fire on August 1, 1972, and the fact that the draft had been issued without including the names of defendants did not come to the attention of this defendant until its receipt of a letter to this effect dated January 29, 1973 from plaintiff.

Plaintiff’s argument that the $200,682.82 draft embraced damage to both building and contents and that defendants’ recovery, if any, should therefore be limited to such portion thereof as can be specifically allocated to building damage will be dealt with first.

The draft in question is specifically earmarked in “payment for loss to building from fire loss on 4-12-72,” and at the time of its issuance there was also issued a separate draft for $72,178.00 in “payment for loss to contents from fire loss on 4-12-72.” The factually descriptive testimony of Mr. Sarasohn, who adjusted the fire loss for Good Deal, leaves no doubt that the damage covered by the larger draft was exclusively to the building and did not extend to “contents.” In light of all the evidence plaintiff’s contention to the contrary is a frivolous afterthought.

Plaintiff’s demand for an allowance in the amount of the adjuster’s fee will be dismissed. This issue was nowhere dealt with in the evidence or the pretrial order.

The claim of equitable estoppel is predicated upon defendants’ apparent failure to act more aggressively upon learning that the draft had been issued incorrectly in the name of Good Deal. It is argued that the alternatives available to the defendants included instituting suit, either against Good Deal or Allstate, calling the loan and, in ways not made clear by the plaintiff, taking a firmer stance with Good Deal. By failing to do so, plaintiff contends, defendants forfeited their rights on principles of waiver and laches. It is further argued that Titan had committed itself to a course of reliance upon the expectation that Good Deal would restore the premises, was therefore content to allow Good Deal to keep the proceeds, and that this decision constituted a waiver of its rights under the policy.

Waiver involves the intentional relinquishment of a known right. That the party Charged with waiver knew his rights and deliberately intended to relinquish them must affirmatively appear. West Jersey Title, etc., Co. v. Industrial Trust Co., 27 N. J. 144, 153 (1958); “It is a voluntary act, and implies an election by the party to dispense with something of value, or to forego some advantage which he might at his option have demanded and insisted on.” Geo. F. Malcolm, Inc. v. Burlington, etc., Co., 115 N. J. Fq. 227, 232 (Ch. 1934).

It is requisite to waiver of a legal right, that there be “a clear, unequivocal, and decisive act of the party showing such a purpose or acts amounting to an estoppel on his part”; “A waiver, to be operative, must be supported by an agreement founded on a valuable consideration, or the act relied on as a waiver must be such as to estop a party from insisting on performance of the contract or forfeiture of the condition.” [West Jersey Title, & Co. v. Industrial Trust Co., supra 27 N. J. at 152-153, citing Aron v. Rialto Realty Co., 100 N. J. Eq. 513, 517-518 (Ch. 1927), aff’d per curiam 102 N. J. Eq. 331 (E. & A. 1928)]

Even where an “intentional relinquishment” has occurred we are cautioned that this is not, by doctrinal standards, necessarily effective.

A contract right or other chose in action, as a rule, can no more he relinquished than created without consideration or a sealed instrument. A release or an accord and satisfaction is the ordinary way by which contractual rights are effectively relinquished. [5 Williston on Contracts (3d. ed. 1961), § 678 at 240]

Uothing has been shown to authorize the belief that either of these defendants voluntarily elected to surrender its right to recover from plaintiff the damage loss to which it was entitled under the policy. All that appears is that plaintiff mistakenly paid the wrong payee, that after the draft was issued, Titan tried to repair the situation on the premise that Good Deal was going to meet its lease obligations. If this had happened defendants might not have pursued their claim against plaintiff. Unknown to Titan, Good Deal was playing out a strategy of deceit, and for this reason Titan’s sanguine expectations were defeated. It will not be inferred from this that defendant deliberately formed an intent to relinquish its redress under the insurance policy, and in connection therewith it is specifically found that Titan at no time acquiesced in Good Deal’s continued possession of the proceeds.

It is noted that plaintiff makes no claim of waiver arising out of a contract based upon valuable consideration.

The claim of waiver cannot prevail.

The claim of laches is equally without merit. Laches is an equitable defense. The party urging its application must show that his adversary, without explanation or excuse, delayed in asserting a claim now stale, that the delay was unreasonable under the circumstances, and that it “visited prejudice upon the party asserting the delay.” Mitchell v. Alfred Hoffmann, Inc., 48 N. J. Super. 396, 403 (App. Div. 1958), certif. den. 26 N. J. 303 (1958). See also, West Jersey Title, etc., Co. v. Industrial Trust Co., supra 27 N. J. at 153; Markey v. Bayonne, 24 N. J. Super. 105, 118 (App. Div. 1958); Riverton Country Club v. Thomas, 141 N. J. Eq. 435, 448 (Ch. 1948), aff’d 1 N. J. 508 (1948); Stroebel v. Jefferson Trucking & Rigging Co., 125 N. J. L. 484, 487 (E. & A. 1940).

Haches involves more than mere delay, mere lapse of time. To deserve that category, the delay must be for a length of time which, unexplained and unexcused, is altogether unreasonable under the circumstances, and has been prejudicial to the party asserting it or renders if. very doubtful that the truth can be ascertained and justice administered.” Stroebel v. Jefferson Trucking & Rigging Co., 125 N. J. L. 484, 487 (E. & A. 1940). “The mere passage of time, of course, does not constitute laches.” Finley v. United States, 130 F. Supp. 788. 796 (D. O. D. N. J. 1955). “It is Hornbook law that laches consists of two elements: Inexcusable delay in commencing a suit and prejudice to the respondent resulting from such delay. The Court should consider the equities of the case and not rely merely upon the lapse of time.” Id. supra, at 794.
Where no one has been misled to his harm in any legal sense by the delay, and the situation has not materially changed, the delay is not fatal. Haches in legal significance, is not mere delay, but delay that works a disadvantage to another. So long as parties are in tiie same condition, it matters little whether one presses a right promptly or slowly, within limits allowed by law; but' when, knowing his rights, he takes no steps to enforce them until the condition of the other party has, in good faith, become so changed that he cannot be restored to his former state, if the right be then enforced, delay becomes inequitable and operates as an estoppel against the assertion of that right. [2 Pomeroy’s Equity Jurisprudence (5th ed. 1941), § 419(d) at 177-79]

And see 19 Am. Jur. Equity, § 498 at 343-344; Hinners v. Banville, 114 N. J. Eq. 348, 357 (E. & A. 1933); Gahn v. Gahn, 30 N. J. Super. 427, 430 (Ch. 1954); Hill Dredging Corp. v. Risley, 18 N. J. 501, 537 (1955); Johnston v. McKenna, 76 N. J. Eq. 217, 229 (Ch. 1909), aff’d 77 N. J. Eq. 555 (E. & A. 1910); Farr v. Hauenstein, 69 N. J. Eq. 740, 742 (Ch. 1905); Holzer v. Thomas, 69 N. J. Eq. 515, 521 (Ch. 1905).

Perhaps if Titan had perceived and acted upon Good Deal’s deceptions earlier than it did, plaintiff might also have sooner moved into action. But it is not at all clear what success this would have had. When Titan learned Good Deal had received the settlement draft,- the instrument had already been paid. Even had Titan’s notice of that occurrence been instantaneously transmitted to plaintiff, plaintiff’s position would have been no better that it was at any later time. In any event, plaintiff actually discovered its own mistake within a week or ten days after notice was received by Titan, and its representatives were already studying the possible consequences of their error. When they spoke with Aidekman he frankly told them that he would not return the money and that he would not provide them with indemnification. Having made a gargantuan error, and with unmistakable evidence before them of Good Deal’s intention to retain its benefits, plaintiff nevertheless temporized and made fruitless telephone calls and meaningless written requests for indemnification. It failed to open talks with defendants and remained essentially inert. If Titan was irresolute, it was because they were under the spell of Aidekman’s siren song. He was a member of the bar dealing with other lawyers and they had no reason to assume that he would dishonor himself as he did. But no such explanation can be found for plaintiff’s failure to act. It knew what it was facing, and after weighing its options chose to sit back and gamble on the chance that time would favorably transform the situation. The initiative clearly lay with plaintiff, not with its loss payees as to whom it had been delinquent, and the rule applies that when both parties are at fault in contributing to delay, neither can assert laches against the other. Mitchell v. Alfred Hoffmann, Inc., supra 48 N. J. Super, at 403; 30A C. J. S. Equity § 114 at 34; 27 Am. Jur. 2d Equity, § 154 at 690. Whatever delay occurred caused no prejudice to plaintiff and resulted at least in part from plaintiff’s acquiescence and contributions , thereto.

Plaintiff’s final defense under the policy is addressed to the failure to designate Titan in the policy as. owner, not as mortgagee. The erroneous description, however, constitutes neither a legal nor an equitable impediment to recovery. The recital of the loss payees’ names “as their interest may appear” forms notice to and recognition by the insurer of Titan’s interest in the property, whatever it might be. Commercial Union Fire Ins. Co. v. Marshall, 18 F. 2d 457, 458 (6 Cir. 1927), cert. den. 274 U. S. 760, 47 S. Ct. 769, 71 L. Ed. 1338 (1927); Firemen’s Ins. Co. v. Brooks, 32 F. 2d 451, 452 (6 Cir. 1929).

Plaintiff’s contention that if Titan had been correctly shown on the policy as owner, it would have properly allocated the proceeds thereunder to each of the assureds under the various coverages provided, has also been considered. But whether the insurer by whose awesome misfeasance these circumstances were created would have been any more fastidious in its attention to detail under the hypothesized facts than under the facts presented is not indicated by the evidence and is a speculation we will not pursue. In either case defendants’ right to payment is the same, and the central unalterable fact is that the right has not been satisfied.

Plaintiff’s request for an assignment of the Howard mortgage upon payment of that defendant’s claim is bottomed upon the standard mortgagee clause contained in the policy which, so far as applicable, provides:

Whenever the Company shall pay the mortgagee (or trustee) any sum for loss under this policy and shall claim that, as to the mortgagor or owner, no liability therefor existed, the Company shall, to the extent of such payment, be thereupon legally subrogated to all the rights of the party to whom such payment shall be made, under all securities held as collateral to the mortgage debt, or may at its option pay to the mortgagee (or trustee) the whole principal due or to grow due on the mortgage with interest accrued and shall thereupon receive a full assignment and transfer of the mortgage and of all such other securities; but no subrogation shall impair the right of the mortgagee (or trustee) to recover the full amount of said mortgagee’s (or trustee’s) claim.

Plaintiff argues that tbe foregoing clause entitled it to an assignment of tbe mortgage since it enjoys a policy defense against Suss Leaf, the original mortgagor. Its purpose is to capitalize on tbe unique circumstance that tbe mortgagor, Suss Leaf, is not insured under the policy although the owner, Titan, is. Plaintiff’s position is that its right to assignment of tbe mortgage is disjunctively conditioned upon its nonliability to either the mortgagor “or” the owner, and it may therefore proceed on the mortgage even though at the expense of the owner to whom it is fully liable under the policy. The novel question presented is whether the mortgagee clause should be read so literally as to permit the result argued for.

That the insurer is entitled under this provision to an assignment of mortgage instruments upon settlement of the mortgagee’s loss where there is no liability under the policy to the “mortgagor or owner” is settled. 44 Am. Jur. 2d, Insurance, § 1833; 46 C. J. S. Insurance § 1209 at 156; Appleman, Insurance Law and Practice, § 4072 (1972); Lawrence v. Union Ins. Co., 80 N. J. L. 133, 135 (Sup. Ct. 1910). Were the rule otherwise the uninsured mortgagor or owner would, in the event of loss, receive the gratuitous benefit of a mortgage reduction without having borne his fair share of the cost of coverage. Here, no gratuitous benefit is involved since the owner was covered and the mortgagor had no interest in the property. But the question remains whether, under the language of the clause and the facts presented, the separate identities of owner and mortgagor should allow foreclosure of the mortgage by the insurer.

It does not appear that the relief requested is necessary to advance the underlying purpose of the clause in this case. Titan was named as a loss payee on the policy and the building was fully insured to the extent of $310,000, well in excess of the mortgage balance, approximately $110,000 at the time of the fire. The phrase, “mortgagor or owner,” was chosen by the insurance carrier and it should not be read so as to allow a carrier to enjoy the benefit of a windfall from this chance separateness of mortgagor and owner, absent any evidence of unfair dealing on the part of the insured. The language of the clause has elsewhere been liberalized to permit a more equitable construction than its strict terms required. In Loewenstein v. Queen Ins. Co., 227 Mo. 100, 127 S. W. 72 (Sup. Ct. 1910), the court observed that as to that part of the clause reading, “Whenever this company * * * shall claim that, as to the mortgagor or owner, no liability therefor existed * * etc. (emphasis supplied) :

Literally it means that, when the company pays the debt, if it should claim that it is not liable to the mortgagor, then it is not liable, fat 76]

On that basis the cited language was read to require proof of such nonliability and it was held that the insurer’s mere “claim” thereof was not sufficient.

It is a cardinal rule in the construction of contracts and statutes that the conjunctions “and” and “or” are frequently used interchangeably, Tunkel v. Filippone, 4 N. J. Super. 107, 110 (App. Div. 1949); Howard v. Harwood’s Restaurant Co., 25 N. J. 72, 88 (1957); Chicago Land Clearance Comm’n v. Jones, 13 Ill. App. 2d 554, 142 N. E. 2d 800, 803 (App. Ct. 1957); 3 Corbin On Contracts, § 542 at 126-127, n. 85.25 (1960); 17 Am. Jur. 2d, Corn-tracts, § 283; 1A Sutherland, Statutory Construction (4th ed. 1972), § 21.14. Under the circumstances of this case the phrase “mortgagor or owner” will be read to contemplate that the owner and the mortgagor are one and the same as “mortgagor and owner.” A more literal reading of the phrase would be incompatible with the equities presented. Consistently therewith, defendant Titan, the owner who took title to the building subject to the mortgage, who was bearing responsibility for mortgage payments since 1960, and who even since the date of the fire reduced the mortgage balance by some $20,000, will be regarded for the purposes hereof as the owner and equitable mortgagor.

The conclusion herein formulated appears to conform with the reasoning of the court and the result reached in United Stores of America, Inc. v. Firearm’s Fund Ins. Co., 420 F. 2d 337 (8 Cir. 1970). There, under a net-net lease the lessee of a department store building procured fire insurance policies in which it was named as the insured and in which the mortgagee was named as a loss payee. Omitted entirely from the policies were the names of the owners-lessors who were also the mortgagors. Following settlement of a fire loss the carrier paid the mortgagee and thereafter sought to exercise its subrogated rights under the mortgage. In the view of the court the essential question was “whether the insurance policies were procured for the benefit of the lessor-mortgagor.” If so, it reasoned, no right of foreclosure accrued to the insurer. It was categorically stated that “the mere fact that the policy does not name the owner or mortgagor as an insured is not alone sufficient to entitle the insurer to subrogation.” The allowance of subrogation appears to be governed by whether the policy was obtained for the sole benefit of the mortgagees or for the benefit of others. The consequence ensuing upon that determination are delineated by the court (at 340) in the following language which the court finds persuasive in the ease at hand:

Where, as here, the policyholder does not acquire the fire insurance for the sole benefit of the mortgagee and the mortgagee neither procures the issuance of the insurance nor pays the premiums, acceptance of those insurance proceeds by the mortgagee after a loss carries with it the concomitant obligation to apply them for the purpose or purposes for which the policyholder obtained the coverage. In this case, those purposes are satisfied by the application of the proceeds to reduce the mortgage indebtedness. This application extinguishes the mortgage indebtedness to the extent of the payment to the mortgagee and nothing further remains of that part of the indebtedness which can be assigned to the insurer pursuant to its subrogation clause.

An order for judgment should be presented denying plaintiff’s claim for relief in all respects and entering judgment on the counterclaim in favor of counterclaimants Titan Supermarket Associates and Howard Savings Institution jointly in the amount of $200,682.82, either consented to as to form or on five days’ notice.


author: Petrella, J. C. C.,

text:
    LOUIS ESPIN, PLAINTIFF, v. ALLERGAN PHARMACEUTICAL, INC., DR. VINCENT CARTER, JR. AND ENGLEWOOD CLIFFS PHARMACY, INC., DEFENDANTS.
    Superior Court of New Jersey Law Division
    Decided December 14, 1973.

      Mr. Harry H. Chandless, Jr., for plaintiff.

      Mr. Neil Reiseman, for defendant, Englewood Cliffs Pharmacy, Inc. (Messrs. Conway, Reiseman & Michals, attorneys), and also argued case for other defendants.
   Petrella, J. C. C.,

Temporarily Assigned. By order of the Assignment Judge of October 11, 1973, this matter was put on the inactive list because of plaintiff’s inability or unwillingness to submit to an eye examination.

Defendants on this motion now seek to dismiss the complaint or in the alternative toll the running of prejudgment interest allowed by Rule 4:42-ll (b).

The Court denies the motions to dismiss on the ground that R. 1:13—7 allowed a six month period on the inactive list and the Order of October 11, 1973 did not require an eye examination on a specific date but allowed placing the case on the inactive list until the plaintiff submitted to the examination, or, implicitly, such period allowed by the rules expired.

The Court rules do not expressly provide for the tolling of interest during the period plaintiff is unable or unwilling to prosecute his case. The purpose of the allowing of prejudgment interest is to discourage defendants from deferring payments of awards or settlements to injured plaintiffs. Busik v. Levine, 63 N. J. 351 (1973). Since the rule is for the benefit of plaintiffs it is only fair and equitable that where a plaintiff is unable or unwilling to proceed with his case, the court may exercise its inherent power to suspend the running of such interest where defendant is not at fault. See R. 1 :l-2.

Application of the prejudgment interest rule in its literal form would neither promote fairness in administration nor prevent an injustice under the circumstances.

Accordingly, the motion to suspend the running- of prejudgment interest for the period the case remains on the inactive list pursuant to the aforementioned order is granted.