author: Simmill, J. S. C.

text:
    BOROUGH OF NEPTUNE CITY, ET AL., PLAINTIFFS, v. BOROUGH OF AVON-BY-THE-SEA, DEFENDANT.
    Superior Court of New Jersey Law Division
    Decided March 8, 1971.

      Mr. Robert V. Carton for plaintiff (Messrs Carton, Nary, Witt & Arvanitis, attorneys).

      Mr. Thomas J. Spinello for defendant.
   Simmill, J. S. C.

Defendant Borough of Avon-by-the-Sea (Avon) is a municipality bordering on the Atlantic Ocean. It owns the beach, boardwalk and other facilities east of Ocean Avenue, the street which comprises an ocean-view drive and which runs through Avon’s entire length, a distance of some seven blocks. Avon extends westerly to approximately the right of way of the New York and Long Branch Railroad Co., some seven blocks from Ocean Avenue.

Neptune City abuts Avon on the west. It has no oceanfront.

Judicial notice is taken that for many years the beaches on the North Jersey shore were open beaches, but with the advent of automobile traffic and the ever-increasing number of vacationers, the beaches and bathing facilities became overcrowded and the beachfront municipalities began to take steps to limit the congestion by regulating the use of the beach facilities and by charging fees. In Kirsch Holding Co. v. Manasquan, 24 N. J. Super. 91 (App. Div. 1952), the charging of fees was held invalid absent legislation authorizing same, and this led to the adoption of N. J. S. A. 40 :61— 22.20, which provides as follows:

The governing- body of any municipality bordering on the Atlantic ocean, tidal water bays or rivers which owns or shall acquire, by any deed of dedication or otherwise, lands bordering on the ocean, tidal water bays or rivers, or easement rights therein, for a place of resort for public health and recreation and for other public purposes shall have the exclusive control, government and care thereof and of any boardwalk, bathing and recreational facilities, safeguards and equipment, now or hereafter constructed or provided thereon, and may, by ordinance, make and enforce rules and regulations for the government and policing of such lands, boardwalk, bathing facilities, safeguards and equipment; provided, that such power of control, government, care and policing shall not be construed in any manner to exclude or interfere with the operation of any State law or authority with respect to such lands, property and facilities. Any such municipality may, in order to provide funds to improve, maintain and police the same and to protect the same from erosion, encroachment and damage by sea or otherwise, and to provide facilities and safeguards for public bathing and recreation, including the employment of lifeguards, by ordinance, make and enforce rules and regulations for the government, use, maintenance and policing thereof and provide for the charging and collecting of reasonable fees for the registration of persons using said lands and bathing facilities, for access to the beach and bathing and recreational grounds so provided and for the use of the bathing and recreational facilities, but no such fees shall be charged or collected from children under the age of 12 years. •

Pursuant to the powers granted by this statute Avon adopted an ordinance which provided, among other things, for the registration and issuance of badges to those who desired to avail themselves of the beachfront and water. The fee therefor, insofar as it affects this case, was set at $10 for the season; the fee for monthly badges was set at $7. On February 24, 1970 the ordinance was amended, and this set the fee for monthly badges at $10. The nub of the present controversy is that part of the section in the amending ordinance which reads as follows:

Season badges shall be sold to and only for the use of persons who are residents or taxpayers of the Borough of Avon and the members of their immediate family who are members of and reside in the same household unit.
For the purpose of this ordinance a resident shall include any person living within the territorial boundaries of Avon for not less than 60 consecutive days in the calendar year in which a badge is requested. A taxpayer is a person who owns real estate in the Borough of Avon, legal title to which is recorded in said person’s name.

The effect of this ordinance is that residents and taxpayers , of Avon may purchase a season badge for $10. All others must purchase monthly badges at $10 a month or $20 for the season. The present complaint attacks the validity of the amendment on the ground that it discriminates against the residents of Yeptune City in regard to access and use of the bathing beaches of Avon. Individual persons residing in Neptune City joined as parties plaintiff, perhaps out of an abundance of caution.

Plaintiffs contend that the decisions found in the case law of New Jersey prohibit a municipality from discriminating on the basis of residence; that such discrimination is prohibited by the Equal Protection Clause of the 14th Amendment, and that plaintiffs’ access to navigable waters is being hindered, contrary to the common law. Defendant argues that both case law and the United States Constitution allow discrimination on the basis of residence where there is a reasonable basis for doing so, and it contends that the special burdens which Avon bears because of its proximity to a beach, the lure of which transcends municipal boundaries, justifies a different and higher rate of admission for nonresidents.

As authority for their position plaintiffs cite Thompson v. Ocean Grove, 55 N. J. L. 507 (Sup. Ct. 1893); Morgan v. Orange, 50 N. J. L. 389 (Sup. Ct. 1888), and Jersey City v. Chasan, 81 N. J. L. 315 (Sup. Ct. 1911). In Thompson and Morgan the court struck down ordinances which imposed a higher license fee on nonresident peddlers than on residents. Similarly, in the Jersey City case the court held that requiring a three-month residency period prior to granting a driver’s license to operate a horse-drawn vehicle was unlawful. The rationale in all three of these cases was derived from Muhlenbrinck v. Long Branch Commissioners, 42 N. J. L. 364, 369 (Sup. Ct. 1830), where the court held that imposing such a hindrance on nonresidents for the benefit of residents is a restraint of trade, tending toward monopoly, and hence illegal.

In Nutley v. Brandt, 12 N. J. Misc. 670 (Sup. Ct. 1934), the court invalidated an ordinance which required a nonresident to obtain a permit to distribute circulars because, among other things, the ordinance assumed that all nonresidents were evildoers and this assumption was unreasonable. Hence, none of these cases is dispositive of the question posed here.

In Brindley v. Lavallette, 33 N. J. Super. 344 (Law Div. 1954), the court struck down an ordinance prohibiting nonresident use of the beach saying:

* * * [Discrimination against non-residents in an ordinance invalidates it, excepting possible special circumstances which would justify the discrimination, [at 349]

Erom these cases the rule of law appears to be that an ordinance cannot unreasonably discriminate against nonresi- • dents, and if it does so it is void. Conversely, if there is a reasonable basis for differentiating between residents and nonresidents, the ordinance is valid.

Such a rule disposes of the plaintiffs’ “equal protection” argument. It is settled law in New Jersey that if there is a reasonable basis for the recognition of separate classes, and the disparate treatment of these classes has a rational relation to the object sought to be achieved by the lawmakers the Constitution is not offended. N. J. Chap. etc. v. State Bd. of Planners etc. 48 N. J. 581, 601 (1967). Hence, if the proofs demonstrate that there exists differences between the residents of Avon and the residents of Neptune City which reasonably call for a discriminatory fee structure, the residents of Neptune City cannot complain that a constitutional infirmity exists.

Plaintiffs’ contention that their common law right of access to navigable waters precludes interference by Avon is without merit. Assuming that such a right exists, there is no doubt but that it can be circumscribed by the Legislature. “The Legislature has the power, absolute and unlimited, to regulate, abridge or vacate public rights in tidal waters. * * *” Schultz v. Wilson, 44 N. J. Super. 591, 597 (App. Div. 1957).

By enacting N. J. S. A. 40:61-22 the Legislature has exercised its power. The real issue is not whether fees can be enacted but whether these fees must be applied equally to all persons.

At the trial plaintiffs’ expert testified that because of the direction of the “littoral flow” (underwater movement of sand caused by the action of the ocean), endemic to this section of the Atlantic, and absent interference by man, the beach at Avon would eventually be destroyed by erosion. This condition can be ameliorated only by the construction of groins and jetties which interrupt the natural degenerative process by retarding the littoral flow, thus trapping the sand on the beach. Since 1929 the State of New Jersey has expended $377,386 to construct devices for the two-fold purpose of containing the erosion and maintaining sand-free access to the navigation channel of the Shark Eiver bordering Avon on the south. Por this latter reason the State in 1969, with the assistance of the Corps of Engineers, transported 252,000 cubic yards of sand from Belmar beach (on the opposite bank of the Shark Eiver) to Avon, thus widening and protecting the beach while eliminating a potential source of obstruction in the navigation channel. Had it not done so one of the major outlets to the ocean, Shark Eiver, might well have become unfit for ingress from and egress to the sea, thereby working a hardship on the sportfishing industry which uses the inlet for this purpose. The Belmar side of the inlet is built up to the end of the jetty, some 500 feet seaward of the jetty on the Avon side. So, while Avon gained sand on its beach, it did so by its fortuitous location; the principal objective was the maintenance of the channel of the inlet. Avon did not request this windfall and should not be chargeable with it. Avon is also the gratuitous recipient of sand obtained when the channel is periodically dredged by the State. This benefit will continue to accrue to Avon and will serve to impede the inevitable erosion.

Mindful of the need for groins and jetties, Avon has also since 1929 expended approximately $144,167, to construct them. In 1963 the jetties were improved at a cost of $95,656, which was borne 50% by the State, 10% by Monmouth County and 45% by Avon. Despite these facts there can be little doubt that without the State’s assistance the beach at Avon, and possibly Avon itself, would long ago have perished under the onslaught of tides and waves. Plaintiffs argue that since the State is in large measure responsible for the beach’s existence, the citizens of the State are entitled to access to that beach on the same footing as the citizens of Avon.

In contrast, however, Avon introduced evidence which showed that $190,184 expended in 1969 from the municipal budget was allocable to the operation of the beachfront. When revenues derived from the beach were compared to expenses a net loss of approximately $50,000 was realized and absorbed by the resident taxpayers. During the season which runs from June to September, resident population increased from 1850 to 5550. A total of 32,741 admission badges were sold to residents and nonresidents. As a result of this influx of people an extra policeman and police car, otherwise unnecessary, are required.

Municipal court is conducted twice instead of once a week. Additional space, employees and lifeguards must be provided to cope with the flood of cars and people. Traffic is congested, and parking spaces near the beach are almost nonexistent, necessitating more police.

Maintenance and reconstruction of the boardwalk, indispensable to proper operation of the beach, is the sole responsibility of the borough. Because of the risk inherent in this wooden structure, insurance carriers require that an extra fire engine pumper be kept on hand at all times.

Plaintiffs objected to much of this evidence, especially that portion in which municipal officials were forced to make allocations of amounts aggregated in line items to the beachfront operations. The court, however, found that these offieials had the knowledge and expertise to arrive at estimates which competently reflect expenses attributable to the beach, and most of them would not be incurred but for the beach. The bulkhead which protects the road and the sidewalk has deteriorated. The boardwalk is partially depreciated. When these need to be replaced it will be at the expense of Avon.

From the foregoing it is evident that Avon bears an economic burden directly related to the attraction of its beach. This burden is unique and is visited upon its taxpayers primarily by nonresidents, who enjoy Avon’s recreational facilities at a price bearing little relationship to the cost of providing them. The court recognizes that the State is in large measure responsible for the beach’s existence, but it also recognizes that any beachfront is an asset to the entire State, and in the absence thereof the economy of the entire State would suffer. However, the State’s undertaking compounds Avon’s plight because it not only makes the beach more alluring but it also invites more intensive use, thus increasing the services Avon is required to provide. While Avon is thus adversely affected, the citizenry as a whole reaps a benefit because a great natural resource is preserved. In addition, the beach, in conjunction with all the beaches along the shore, is a thriving tourist industry which provides financial rewards enjoyed by thousands of citizens far removed from the seacoast municipalities.

Avon, because of its fortuitous location, is charged with the responsibility of administering this> natural resource for all our citizens. However, the court is of the opinion that Avon should not alone bear the disproportionate cost of the administration. After considering the equities on both sides the court finds that cogent and compelling justification exists for the establishment of a differential fee schedule based on residence. As long as the disparity is reasonable and bears a rational relationship to the expenses of operation the law is not offended.

For these reasons judgment will be entered for the defendant.

       This figure is derived from P-3. It represents the difference between total cost and the State’s contribution.

       This totals 10% — obviously an error in the proofs.


source: Caselaw Access Project

author: McKenzie, J. D. C.

license: Public Domain

text:
    LILIAS BERZITO, PLAINTIFF, v. VINCENT GAMBINO, DEFENDANT.
    District Court Union County
    Decided March 5, 1971.

      Mr. Nicholas J. Schuldt, of the Union County Legal Services for plaintiff.

      Mr. Joseph J. Triarsi for defendant (Messrs. Pisano and Triar si, attorneys).
   McKenzie, J. D. C.

Presented to the court in this case is the question whether a tenant may recover from the landlord all or a portion of the rent paid in full during a period when the landlord had breached his warranty of habitability.

In June 1968 plaintiff rented from defendant the first-floor apartment at 608 Montgomery Street, Elizabeth, New Jersey. When the second-floor tenants moved out in September she requested permission from the landlord to move to that apartment, which had an extra room. Defendant agreed to rent the second floor to her for $35 a week, furnished. No lease was executed.

On June 18, 1970, following a trial for the summary dispossession of plaintiff on defendant's complaint for nonpayment of rent, this court found that the landlord had breached the warranty of habitability. The court thereupon reduced the rent to $75 a mouth, retroactive to February 23, 1970, covering the period during which plaintiff had failed to pay rent.

Plaintiff now seeks to recover rent paid prior to February 23, 1970, alleging that the landlord’s default in the performance of his obligation continued through the entire period of the tenancy and therefore he was not entitled to the rent monies previously paid in full. The landlord, on the other hand, counterclaims for the rent remitted by the court.

The initial question which arises is whether the findings of the court in the dispossess suit are res adjudicaia in the present case. Since the prior proceeding was summary in nature, and afforded to the litigants no right of appeal on the merits, they are not bound by the prior ruling and are entitled to a full hearing on the matters raised. Academy Spires, Inc. v. Jones, 108 N. J. Super. 395 (Law Div. 1970) ; Van Vlaanderen Machine Co. v. Fox, 95 N. J. L. 40 (Sup. Ct. 1920).

Having heard the matter de novo, including additional evidence not presented in the summary proceeding, the findings of the court remain substantially the same. While the landlord attempied during trial to minimize the number and extent of defects in plaintiff’s apartment, and attributed the problems largely to the habits and conduct of plaintiff and her children, the court finds that the premises were in fact substantially uninhabitable. Even an incomplete and undetailed enumeration of the conditions encountered by the tenant demonstrates this finding of the court: few screens, some ripped; no storm windows; missing windows boarded up; gaps in window panes, sash and door frames; no radiators in two of the four rooms; holes in floors and walls; falling plaster; bathtub resting on wooden blocks; inoperable electric fixtures; sewage backup in cellar, and infestation by roaches and rodents. As an example of how one problem aggravated another, the regulator for the oven, which was a main source of heat, had to be replaced, but the gas company refused to do so until the roaches had been exterminated. In addition, the furniture with which the apartment was furnished was discarded by the tenant without objection from the landlord.

The court further finds that the efforts of the landlord to remedy these conditions were feeble and tardy, and then only made when prodded by the court and municipal authorities.

In Marini v. Ireland, 56 N. J. 130 (1970), a dispossess suit for nonpayment of rent, it was held that there is an implied covenant by a landlord that the demised premises shall be and remain free of latent defects in its vital facilities so as to be suitable for habitation. The question raised is whether this rule is to be applied in a suit on contract for the rent, as contrasted with a suit to evict the tenant summarily. While a distinction must be recognized between the two forms of relief, Marini and its predecessor, Reste Realty Corp. v. Cooper, 53 N. J. 444 (1969), clearly engraft onto the rental agreement a covenant by the landlord, a default in the performance of which will bar his claim for payment of the rent in full, not only in a dispossess suit but also in an action for the rent itself. Not only is this hornbook contract law, but to hold otherwise would create an obvious anachronism.

As to the tenant’s claim for a portion of the rent, it should be noted that in Marini and Reste Realty Corp., as well as in Academy Spires v. Jones, supra, 108 N. J. Super. 395 and Academy Spires v. Brown, 111 N. J. Super. 477 (Cty. D. Ct. 1970), the application of the rule was limited to situations involving latent defects or failures of performance by the landlord which took place after the letting. See also in other jurisdictions, Lemle v. Breeden, 462 P. 2d 470 (Hawaii Sup. Ct. 1969); Javins v. 1st Nat'l Realty Corp., 428 F. 2d 1071 (D. C. Cir. 1970); Pines v. Perssion, 14 Wis. 2d 590, 111 N. W. 2d 409 (Sup. Ct. 1961).

Here the defects for the most part existed and were obvious to plaintiff at the time she rented the premises. May a tenant who is a victim of the critical shortage of urban housing enter into a rental agreement, accept possession of the premises, and thereafter require the landlord to render the demised premises suitable for habitation although their condition is known at the time of the letting? It would seem that the answer must be in the negative. One who agrees in effect to accept the premises “as is” should not be allowed to obtain an agreement from the landlord as to the rent to be paid, take possession, and then require repairs and improvements by the landlord. See Reste, Realty Corp. v. Cooper, supra, 53 N. J. at 455; Friedman v. Tappan Development Corp., 22 N. J. 523 (1956); Seire v. Police and Fire Pension Comm’n of Orange, 4 N. J. Super. 230 (App. Div. 1949); Upper Greenwood Lake Property Owners Ass’n v. Grozing, 6 N. J. Super. 538 (Ch. Div. 1949).

An opposite conclusion would not be of economic benefit to the tenant in any event. A landlord obliged to make improvements to the premises would be entitled to increase the rent substantially, so that the tenant in most cases would be obliged in turn to seek other living quarters.

However, this question need not be resolved in the present case. Here the tenant testified, and the court finds, that the landlord specifically promised plaintiff when she moved to the second floor that ho would make the premises “liveable,” and agreed to make specific repairs. Thus we have here an express covenant rather than an implied warranty of habitability.

Inherent in the agreement of the landlord to make the premises “liveable” would be the alleviation of many of the conditions mentioned. As already stated, he failed to take the necessary steps to accomplish this, but the tenant continued to pay the weekly rent in full for a period of almost a year and a half. Did she thereby waive the breach by the landlord? I think not.

“Waiver” is the voluntary and intentional relinquishment of a known right. Crawford v. Winterbottom, 88 N. J. L. 588 (Sup. Ct. 1916); Williston on Contracts (3d ed. § 678). Our Supreme Court has recommended sympathy to the plight of the tenant, and caution in applying the rule of waiver. Reste Realty Corp. v. Cooper, supra, 53 N. J. at 461. Considering the virtual absence in the Elizabeth area of vacant housing available to low-income families with children, which is plaintiff’s situation, it cannot be said that plaintiff voluntarily relinquished her claim. With no husband, and thus solely responsible for the welfare of her children, plaintiff went along for months hoping that defendant would perform, and not in a position to make an issue of his failure to do so. In addition, of course, during the rental period in question plaintiff’s right to withhold rent under the circumstances had not been clearly established by our courts, so that she could not be held to have knowingly waived the same.

There having been a partial failure of consideration, plaintiff is entitled to recover as damages the loss of her bargain: the difference between the value of the premises in their actual condition and the rent paid. See Giumarra v. Harrington Heights, 33 N. J. Super. 178 (App. Div. 1954), aff’d 18 N. J. 548 (1955).

The court previously held the fair rental value of the premises was $75 a month during the period then in question. The same conditions which existed then prevailed during the period now in issue. Lack of adequate heat during cold months would be balanced by insect and ventilation problems experienced in warm weather.

Defendant would be entitled, within the intention of the parties, to approximately one month to complete the repairs and improvements promised to make the premises habitable. For the period November 1968 through February 1970 the fair rental value was a total of $1,200. The landlord received $2,380. Plaintiff is entitled to a judgment in the sum of $1,180.

The court recalls from the original proceeding that the plaintiff was a welfare recipient during the period in question, and as such received from the Union County Wei-fare Board an allotment which included the rent in full which she paid to the landlord. If so, the rent monies to be refunded hereunder should properly be paid to the Union County Welfare Board and not plaintiff herself. The amount of the judgment shall be paid into court, the ultimate disposition of the monies to abide the outcome of such application as may be made by said parties, unless they can agree on the terms of a consent order.


author: Mountain, J. A. D.

text:
    WILLIAM DEAN, PLAINTIFF-APPELLANT, v. UNIVERSAL C. I. T. CREDIT CORPORATION, DEFENDANT-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued February 22, 1971
    Decided March 15, 1971.

      Before Judges Goldmann, Leonard and Mountain.

      Mr. William Dean argued the cause Pro Se.

      Mr. Martin J. Cohen argued the cause for respondent (Messrs. Green, Lasky and Cohen, attorneys).
   The opinion of the court was delivered by

Mountain, J. A. D.

Plaintiff appeals from an order granting defendant’s motion for summary judgment. Both in the court below and on this appeal he appears pro se.

On May 20, 1968 plaintiff entered into an installment sales contract with Don DeMar Motors, Inc. to purchase a new 1968 Plymouth Pury, 4 door sedan. The cash price of the vehicle — the amount the seller would have charged had he, received an immediate payment for the full purchase price — was $3,289.50. Plaintiff’s trade-in allowance on his old car together with a cash down payment totaled $831.50, leaving a balance of $2,498. To this were added the following:

Sales tax $ 78.00
Insurance premium 169.00
Credit Life insurance 38.17
Time price differential 411.15
$ 696.32

Thus the time balance — the amount still to be paid in installments over the life of the contract — was $3,154.32.

According to defendant, it thereafter received a total of $1,218.68 in monthly installments. Plaintiff believes that more than this was paid. In September 1969 — the exact date is in dispute •— defendant repossessed the vehicle, basing its right to do so upon a claim that plaintiff was in default. Sometime thereafter plaintiff initiated this action. The complaint is inartistically drawn but may be said to set forth a claim that the repossession was improper since there was no default. Belief is sought in the form of damages, or in the alternative by specific restoration of the parties to their respective positions before the repossession —■ the ear to be returned to plaintiff and his contractual obligation to make monthly payments to continue as before. He also demands that personal property, in the car when it was taken by defendant, be returned to him. Defendant’s answer asserted that a default existed at the time of repossession and that all personal property found in the car had been returned.

Thereafter defendant moved for summary judgment, the motion being accompanied by a supporting affidavit. Plaintiff filed no responsive affidavit but appeared in court in opposition to the motion. Ho point seems to have been made of his failure to file an affidavit nor did the judge direct that this be done. Bather, plaintiff was allowed to present his case orally but not under oath. While we do not approve this practice nor believe it should be encouraged, it was perhaps excusable under the circumstances here present. In any event we choose to overlook this failure on the part of the plaintiff and, like the trial court, will treat plaintiff’s oral statements as if properly made under oath. In so doing, we reach the conclusion that defendant’s motion should have been denied. Plaintiff’s statement of alleged facts countered defendant’s claims in at least two important respects. He first insisted that upon the day the car was repossessed he was not in default, claiming he had made all required payments, and secondly that defendant had agreed that certain payments need not have been made punctually. On the argument before us he produced a letter from defendant, which at least to some extent supported this latter claim. Of course on motion for summary judgment the materials presented by the party against whom the motion is made will be treated with indulgence. Judson v. Peoples Bank & Trust Co. of Westfield, 17 N. J. 67, 75 (1954). Accordingly we reverse and remand for a full trial.

Since at the trial the judge will be called upon not only to consider the testimony of the parties, but also to scrutinize the particular contract before the court, we deem it appropriate to comment briefly upon some of its terms as well as upon certain alleged conduct on the part of defendant.

The contract between the parties, couched in the form of a security agreement, was clearly drafted having in mind the provisions of the Retail Installment Sales Act of 1960, N. J. S. A. 17:16C-1 et seq., no reference to which, however, appears anywhere in the record or in any brief. This act was saved from repeal when the Uniform Commercial Code was adopted, N. J. S. A. 12A:10-104, and was expressly given precedence over the later legislation in case of conflict.

A transaction, although subject to this chapter, is also subject to the provisions of those statutes set forth as saved from repeal by this subtitle in Section 12A:10-104 and in case of conflict between the provisions of this chapter and any such statute so saved from repeal, the provisions of such statute control. [N. J. S. A. 12A :9-203 (2)]

See also N. J. S. A. 12A :9-201.

N. J. 8. A. 17:16C-22 provides that,

No retail installment contract shall be signed by any party thereto when such contract contains blank spaces to be filled in after such contract has been signed; * * *.

N. J. 8. A. 17:16C-23 states that,

A copy of the retail installment contract shall be furnished by the retail seller to the retail buyer at the time the retail buyer signs the contract except that such copy need not contain the signature of the retail seller.

Plaintiff tells us that lie signed the contract in blank and was given only a copy which, except for two insertions ■ — • one erroneous — was no more than the printed form which required many insertions to be complete. This document forms part of the record before us. If these statements are true, there would appear to have been a violation of each of the statutory provisions last cited. Defendant has as yet had no opportunity to respond to these charges, which are not, at least in the first instance, directed against it. They are rather directed initially against Don DeMar Motors, Inc., the retail seller, which is not presently a party to this suit. The importance of compliance with these protective provisions is evidenced by other sections of the same statute. We assume that the retail seller, Don DeMar Motors, Inc., is licensed as a motor vehicle installment seller and that defendant is licensed as a sales finance company. N. J. S. A. 17 :16C — 2. It will be noted that violations such as plaintiff alleges occurred here, if proven, may be ground for suspension or revocation of license in respect of either type of licensee. N. J. S. A. 17:160-10.

We turn to a brief consideration of the contract itself. It is the kind of document often used in this type of transaction — a two-page form most of which is in very fine print, requiring a number of insertions for its completion. That it was prepared by defendant is obvious and not disputed. A legend referring to defendant appears on the first page and the “Dealer’s Assignment” on the second page sets forth, in print, “Universal C. I. T. Credit Corporation” as assignee. We hasten to add that we find nothing inherently wrong in the fact that a particular form of retail installment contract is prepared by a sales finance company and distributed for use to individual retail sellers, whether of motor vehicles or of other products. The extent of this practice is such as to permit of its being judicially noticed. We do, however, find fault with various particular contractual provisions.

In very small type appears the following,

If Seller assigns this contract, Seller shall not be assignee’s agent for receipt of payments or for any other purpose. No agreement, representation or warranty shall he binding on assignee unless stated herein. Customer will settle all claims, set-offs and defenses against Seller directly with Seller, and not assert them against assignee.

This clause is essentially similar to a provision considered in Unico v. Owen, 50 N. J. 101, 123 (1967). The effort on the part of the draftsman in each case is to bestow upon the assignee of the contract the same privileged position to which the holder in due course of a negotiable instrument is entitled. As Justice Erancis observed in Unico,

* * * we consider that the clause is an unfair imposition on a consumer goods purchaser and is contrary to public policy.
The plain attempt and purpose of the waiver is to invest the sale agreement with the type of negotiability which under the Negotiable Instruments Law would have made the holder of a negotiable promissory note a holder in due course and entitled to recover regardless of the seller-payee’s default. [TJnieo v. O-wen at 123-4]

While we readily concede that all of the facts and circumstances present in TJnieo may not exist here — for instance, the relationship between defendant and the retail seller here is almost certainly less close than was the relationship between distributor and fmancer in TJnieo — nevertheless we read the opinion in that case to hold that such a clause as that quoted above, at least in the area of consumer sales, will not be enforced. 50 N. J. at 125; N. J. S. A. 12A :9-206 and 12 A :2-302.

Elsewhere in the contract it is said that,

Customer [plaintiff] assigns to holder any insurance proceeds related to persons or property including return or unearned premiums, for application to the unpaid balance. Customer directs any insurer to pay holder directly and appoints holder as attorney-in-fact to indorse any draft. * * *.

The last sentence in this clause is also unenforceable as in violation of N. J. S. A. 17:160-37, which stipulates that,

No retail installment contract or separate instruments executed in connection therewith shall contain any power of attorney to confess judgment or any other power of attorney. [Emphasis supplied]

[o] We further note that upon default (without notice and without the interposition of any grace period) insurance may be cancelled; that “Time is of the essence,” and that upon default the maturity of the unpaid balance may be instantly accelerated. While the potentiality for hardship is apparent, these provisions seem not to violate any statute.

At the time defendant moved for summary judgment it also moved for leave to file a counterclaim for whatever deficiency might be due, and the motion was granted. This places in issue the propriety of whatever steps may have been taken by defendant following repossession. We allude to this phase of the ease because, as mentioned below, it will probably come before the court at the trial.

The contract states that,

Customer shall be barred from claiming that collateral, when repossessed, contained anything not included herein, unless he notifies holder by registered mail within 5 days of repossession.

If taken literally, this clause would prevent the retail buyer from claiming valuables that might be contained in the glove compartment or trunk of a repossessed car were he not to move with the degree of expedition required by the provision quoted. This clause is unconscionable and should not be enforced. N. J. 8. A. 12A:2 — 302. Personal property that may be found in a motor vehicle at the time of repossession forms no part of the financer’s collateral.

The contract further states that,

It is agreed that collateral is the subject of widely distributed standard price quotations and is customarily sold in a recognized market * * *

This is an effort to come within the favor of N. J. 8. A. 12A:9-504(3), as is also true of the further clause that,

* * * the collateral may be sold, leased, or otherwise disposed of, with or without notice, publicly or privately, with or without having the collateral at the sale, and holder may acquire the collateral at any such disposition. Sale to a dealer is a commercially reasonable disposition. If prior notice of disposition of collateral is required, 5 days’ notice is reasonable.

It appears from what we have been told that the collateral has been sold following repossession. The effect, if any, tO' be given by the trial court to these provisions must be studied in the light of the actual facts as they may be found, having in mind the terms of N. J. S. A. 12A:9-501 to 12A:9-507. Particular attention should be given N. J. S. A. 12A:9-505(1) since it would appear that somewhat more than “sixty per cent of the cash price” has been paid.

Plaintiff should be allowed to amend his complaint and defendant its answer and counterclaim to set forth any relevant facts, claims or defenses that may have occurred or arisen since the filing of the complaint.

The case is reversed and remanded for further proceedings not inconsistent with this opinion.


author: Per Curiam.

text:
    BERGEN COUNTY BOARD OF TAXATION, PLAINTIFF-APPELLANT, v. BOROUGH OF BOGOTA, ET ALS, DEFENDANTS-RESPONDENTS. BOROUGH OF FAIRVIEW, CITY OF GARFIELD, CITY OF HACKENSACK, PETITIONERS-APPELLANTS, v. BERGEN COUNTY BOARD OF TAXATION AND THE DIRECTOR OF THE DIVISION OF TAXATION, RESPONDENTS.
    Superior Court of New Jersey Appellate Division
    Argued February 22, 1971
    Decided March 15, 1971.

      Before Judges Goldmann, Leonard and Mountain.

      Mr. Ralph W. Chandless argued the cause for City of Garfield, appellant and respondent (Messrs. Chandless, Weller and Kramer, attorneys; Mr. Chandless, on the brief).

      Mr. Joseph C. Zisa argued the cause for City of Hackensack, appellant and respondent (Mr. Lawrence Garofalo, attorney and on the brief).

      Mr. V. Michael Rossi argued the cause for Borough of Eairview appellant, and respondent (Mr. V. Michael Rossi, attorney and on the brief).

      Mr. Richard M. Conley, Deputy Attorney General, argued the cause for Bergen County Board of Taxation and Director of the Division of Taxation, respondents and appellants (Mr. George F. Kugler, Jr., Attorney General of New Jersey, attorney; Mr. Stephen STcillman, Assistant Attorney General, of counsel; Mr. Conley, on the brief).
   Per Curiam.

On August 18, 1967 the Bergen County Board of Taxation (Board) issued orders to 27 municipalities directing each of them to revalue all real property with respect to the tax year 1969 pursuant to N. J. S. A. 54:4^-23 and 27. Seven of the taxing districts failed to do so and the Board instituted an action in lieu of prerogative writs to compel compliance. After suit had been commenced, consent orders for revaluation were entered as to four of the defendant municipalities. The suit went forward against the remaining three taxing districts, resulting in a decision in their favor on the ground that the Board’s orders had been issued without first securing the approval of the Director of the Division of Taxation (Director) pursuant to N. J. S. A. 54:3 — 14 and 54:3 — 16. Bergen County Board of Taxation v. Bogota, 104 N. J. Super. 499 (Law Div. 1969).

Thereafter the Board immediately secured the approval of the Director with respect to new orders otherwise similar to those previously issued, reserving, however, its right to challenge the need for such approval by the Director. The taxing districts at once appealed to the Division of Tax Appeals contesting the validity of these new orders. At the hearing before the Division the taxing districts introduced no testimony, although invited and given opportunity to do so, but rested upon their legal position that the Board’s action was unauthorized. The Division found in favor of the Board.

Appeals from the Law Division judgment and from the judgment of the Division of Tax Appeals followed and were consolidated for argument before us.

The authority of the Board to issue an order directing a taxing district to revalue is challenged by the three municipalities. They argue that N. J. S. A. 54:3-16 gives county boards of taxation supervision and control over local assessors and that in their exercise of this supervisory power the county tax boards may, if an assessor is failing in his duties, complain to the Director to have him dismissed under N. J. S. A. 54:1-36 to 39. This,'they say, the Board has not done. They appear to argue that no other avenue is open to the Board to achieve the desired result. We do not agree.

The Board here has shown no desire to remove any assessor but seeks only to compel the defendant municipalities to do whatever may be necessary to secure the taxation of all property in the respective districts at its taxable value. In this effort the Board is seeking to fulfil a responsibility allocated to it by the Legislature and which it was empowered to accomplish by statutory grants of power other than that to which defendants make reference. This power is to be found in two other sections of Title 54 which read as follows:

Each county board of taxation shall secure the taxation of all property in the county at its taxable value as prescribed by law, in order that all property, except such as shall be exempt by law, shall bear its full and just share of taxes. PV. J. S. A. 54:3-13]
The county board may adjourn from time to time in the discharge of its duties, and may, after investigation, revise, correct and equalize the assessed value of all property in the respective taxing districts, increase or decrease the assessed value of any property not valued at its taxable value, assess property omitted from any assessment, as provided by law, at its taxable value, and in general do everything necessary for the taxation of all property in the county at its taxable value. [N. J. S. A. 54:4-47]

We interpret these statutes as reposing in the several county boards of taxation the obligation and responsibility to see that all property within each county shall be taxed at its legally determined taxable value and as delegating to the several boards whatever power may be deemed appropriate to the accomplishment of this important purpose. As long as the exertion of power by a county board can be reasonably and sensibly related to the effectuation of this end, and be not otherwise objectionable, these statutes afford adequate basis for its assertion.

The boards are not, as the taxing districts would have us hold, relegated to moving against particular tax assessors via the Director. As a practical matter such course would normally be rather ineffectual. In many municipalities the task of determining the true value of each piece of real estate within the district and thereafter continually making the many changes needed to maintain current accuracy far transcends the ability of a single assessor or board of assessors. Where this is so, a program of revaluation must, from time to time, be undertaken. The fundamental issue was really set at rest by the decision in Board of Taxation of Essex County v. Belleville, 92 N. J. Super. 338 (Law Div. 1965), aff’d 95 N. J. Super. 327 (App. Div. 1967), which is substantially on all fours with this case.

It should be borne in mind that the kind of comprehensive revaluation to which the taxing districts so strenuously object has become a commonplace of municipal fiscal practice as well as having been very much in the legislative consciousness. Note, for instance, N. J. S. A. 40A:4-53(b) empowering a municipality to adopt an ordinance authorizing a special emergency appropriation for the purpose of preparing and executing a complete program of revaluation of real property for the use of the local assessor, and N. J. S. A. 54:3-26, limiting what is otherwise the effect of the “freeze?’ statute to a period terminating “with the tax year immediately preceding the year in which a program for a complete revaluation of all real property within the district has been put into effect.”

For the reasons set forth by Judge Simpson in Bergen County Board of Taxation v. Bogota (above, 104 N. J. Super. at 504-507), we agree that orders issued by county boards of taxation directing municipal revaluation should have the prior approval of the Director. Since this approval has now been secured as to the orders under review this issue is presently moot.

Defendants further complain that they were not accorded a hearing by the Director before he approved the orders submitted by the Board. We do not think that a hearing at that stage of the procedure was either necessary or appropriate. Certainly a municipality is entitled at some point to be heard as to whether the order of the Board seeking to compel revaluation is proper. Such an opportunity is available by direct appeal from the order of the particular county board of taxation to the Division of Tax Appeals. N. J. S. A. 54:2-85. In this case, as is set forth above;, the taxing disftricts were given ample opportunity to present facts and arguments before the Division of Tax Appeals. That they chose to forego this opportunity cannot now afford them a basis for complaining that they have not been heard. The approval of the Director is ministerial and supervisory in nature. The appropriate forum for a full evidentiary hearing is the Division of Tax Appeals.

. The Law Division judgment as well as the judgment of the Division of Tax Appeals are affirmed.


author: Lane, J. A. D. Halpern, J. A. D.

text:
    STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT, v. ARTHUR C. HOPSON, JR., DEFENDANT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Argued February 17, 1971
    Decided March 16, 1971.

      Before Judges Kilkenny, Halpern and Lane.

      Mr. Herbert I. Waldman, Assistant Deputy Public Defender, argued the cause for appellant (Mr. Stanley O. Van Ness, Public Defender, Attorney; Mr. Gerald T. Foley, Jr., Deputy Public Defender, of counsel and on the brief).

      Mr. Joseph A. Fusco, Assistant Prosecutor, argued the' cause for respondent (Mr. Joseph P. Lordi, Essex County Prosecutor, Attorney; Mr. David 8. Baime, Assistant Prosecutor, of counsel and on the brief).
   The opinion of the court was delivered by

Lane, J. A. D.

Defendant pleaded guilty to an indictment for possession of heroin (N. J. S. A. 24:18-4). He was sentenced to the New Jersey Keformatory for Males at Yard-ville for a minimum term of 3 years and fined $25. He appeals contending that the sentence was illegal and excessive.

The initial contention that the sentence was illegal is based upon N. J. S. A. 30 :A-148, which provides that a sentence to the reformatory may not impose a minimum period of detention. This point has been decided adversely to the defendant in State v. Pallitto, 107 N. J. Super. 96 (App. Div. 1969), certif. den. 55 N. J. 309 (1970), and State v. Ammirata, 104 N. J. Super. 304 (App. Div. 1969).

■ Defendant further argues that at any rate the imposition of a 3 year minimum to the commitment to the reformatory is illegal.

N. J. S. A. 30 :4-148 deals with sentences to the reformatory :

The courts in sentencing to the reformatory shall not fix or limit the duration of sentence, but the time which any such person shall serve in the reformatory or on parole shall not in any case exceed five years or the maximum term provided by law for the crime for which the prisoner was convicted and sentenced, if such maximum be less than five years; provided, however, that the court, in its discretion, for good cause shown, may impose a sentence greater than five years, but in no ease greater than the maximum provided by law, and the commitment shall specify in every case the maximum of the sentence so imposed. The term may be terminated by the board of managers in accordance with its rules and regulations formally adopted.

N. J. S. A. 24:18-47 establishes the punishment for narcotic violations. In part it provides:

Any person as in this chapter defined * * *
(c) Who violates any other provision hereof shall be guilty of a high misdemeanor and shall be punished as follows:
(1) for a first offense, by a fine not exceeding $2,000.00 and by imprisonment with hard labor, for a term of not less than 2 years nor more than 15 years; * * *

This court in State v. Ammirata, supra, discussed the relationship between N. J. S. A. 30 :4-148 and N. J. S. A. 24:18-47(c)(1) :

We find that N. J. S. A. 30:A-148 and N. J. S. A. 24:18-47 do conflict. How can they be reconciled? Three possible constructions may be suggested: (1) narcotics violators may not be sentenced to the reformatory, (2) they may be sentenced to the reformatory for the minimum required by N. J. S. A. 24:18-47(c) (1), as urged by the State, or (3) as defendant argues, they may be sentenced to the reformatory, but in that case no minimum may be fixed. [104 N. J. Super, at 307]

The Court adopted the second of the three possible constructions, stating:

We reject defendant’s argument that no minimum may be fixed if the commitment is to the reformatory, for that would ignore the plain direction of N. J. S. A. 24:18-47 to impose a minimum. It must be noted that N. J. S. A. 24:18-47 was amended three times (L. 1952, e. 90; L. 1964, e. 293; L. 1966, c. 313) between the date of the enactment of N. J. S. A. 30:4 — 148 (L. 1951, O. 335) and the date of defendant’s offense. That being so, we must obey N. J. S. A. 24:18-47. Therefore, we hold that every commitment whether it be to a reformatory or any other correctional institution, must he for the minimum fixed hy 24:18-47. [Emphasis supplied.] [104 N. J. Super, at 308]

It is accepted as a matter of legislative policy that the control of offenders who may be sentenced to a reformatory under N. J. S. A. 30 :4-147 lies “in correction and rehabilitation, rather than retribution.” State v. Horton, 45 N. J. Super. 44, 46 (App. Div. 1957). The theory behind N. J. S. A. 30:4-148 is to allow discretion to the Board of Managers to terminate a sentence if the offender responds favorably to social rehabilitation. State v. Horton, supra, at 46-47. Such an enlightened program is seriously interfered with when minimum sentences can be fixed at the discretion of the Court. In sentencing under N. J. S. A. 24:18-47(c) (1) a minimum sentence of 2 years is required, not because of the discretion of the Court, but rather because of the legislative mandate. We do not read N. J. S. A. 24:18-47(c) (1) to allow any more interference with the social philosophy behind reformatory confinement than absolutely required.

The sentencing Court had no discretion in the matter. In sentencing the defendant to the reformatory, it was required to impose a 2 year minimum. The minimum can be neither more nor less than the 2 years mandated by the legislature.

The sentence, therefore, was illegal because of the 3 year minimum imposed. We will exercise our original jurisdiction and sentence the defendant to the Youth Reception and Correction Center, Yardville, for a minimum of 3 years and impose a fine of $35.

Defendant further argues that the sentence, even though it may be reduced to a 3 year minimum as we have done, would be excessive. We have carefully considered the presentence report. We are firmly of the opinion that the sentence which we have imposed is reasonable, particularly in view of the well recognized horrendous effect that heroin has upon an individual and upon our society.

The judgment of conviction is modified to provide that defendant be sentenced to the Youth Reception and Correction Center, Yardville, for a minimum of 3 years and fined $35.

Halpern, J. A. D.

(dissenting). Unquestionably, a conflict exists between N. J. S. A. 30:4-148 and N. J. S. A. 34:18-47. Under the former statute, a minimum may not be fixed when sentencing to a reformatory. Under the latter statute, when sentencing a first offender under the Uniform Narcotic Drug Law, it is mandatory to impose “* * * a fine not exceeding $3,000 and [by] imprisonment with hard labor, for a term of not less than 3 years nor more than 15 years; * * *.”

In Ammirata, supra, the court held that a reformatory sentence for a narcotic drug violation "must be for the minimum [2 years] fixed by 24:18-47.” It reconciled the patent conflict between 30:4^148 and 24:18-47 by theorizing that the Legislature, by its silence in subsequent amendments to 24:18-47, expressed its intent to have the mandatory minimum under 24:18-47 supersede the prohibition on imposing minimum sentences under 30:4-148. See State v. Lavender, 113 N. J. Super. 576 (App. Div. 1971) where Ammirata was discussed, and held inapplicable to a bookmaking sentence under N. J. S. A. 2A:112-3, and that N. J. S. A. 30:4-155 mandated that sentences to Clinton Reformatory for Women could not contain a minimum term.

The A mmirata result was adopted in Pallitto, supra, and is being followed by the majority of this court. In my mind such construction is unwarranted. It is contrary to the approved and recognized philosophy that reformatory sentences are designed to correct and rehabilitate the offender, rather than to seek retribution. Horton, supra; see American Bar Association Standards, Approved Draft, 1968, Sentencing Alternatives and Procedures § 3.2.

The Legislature provided that only persons between the ages of 15 and 30 are eligible for confinement to a reformatory, if convicted of an offense punishable by imprisonment in the State Prison, and if never previously confined in a State Prison. (N. J. S. A. 30:4-147). Unquestionably, the Legislature, for about 70 years has felt that such persons had a better chance to be rehabilitated under an indeterminate sentence and returned to society as a useful member thereof, than persons not in that category. In re Marlow, 75 N. J. L. 400 (S. Ct. 1907). If the Legislature intended to break away from this long-standing philosophy of reformatory sentencing, it would have done so by specifically creating an exception in narcotic offenses. This is precisely what it did in enacting N. J. S. A. 2A:168-1, wherein it empowered courts to generally suspend prison sentences imposed except for violations of the Uniform Narcotic Drug Law (N. J. S. A. 24:18) — with the further exception that the sentences of first narcotic offenders could be suspended.

With due respect to the courts in Ammirata and Pallitto, and the majority of this court, I do not believe the Legislature intended to mandate a two year minimum when imposing a reformatory sentence under N. J. S. A. 24:18-47(c) (1). I see no objection, legal or otherwise, to the court in the instant case imposing an indeterminate reformatory term without a minimum. We must assume that the Board of Managers of the reformatory is cognizant of the Legislature’s intent as expressed in N. J. S. A. 24:18-47 and would consider it in granting parole, as well as the best interests of the defendant and the public. Such construction is more compatible with the aims and purposes of the Legislature.

If my views are erroneous, and the majority’s determination that the sentence must be for a two year minimum is correct, then I see nothing illegal in the three year minimum imposed on defendant. N. J. S. A. 24:18 — 47 (c) (1) mandates a term of “not less” than two years — if a minimum must be imposed, then such minimum may be more than two years, and the three year minimum imposed on defendant was valid.

I would modify the reformatory sentence so as to make it indeterminate pursuant to N. J. S. A. 30 :4r-148, without fixing a minimum.

         Ammirata was decided in January 1969. On inquiry made of the Superintendent of the Youth Reception and Correction Center at Yardville, where all males sentenced to a Reformatory are processed, I was advised that despite Ammirata, for the calendar years 1969 and 1970, of 847 males sentenced to reformatories for narcotic violations only 461 were given minimum sentences. This means that 46% were not given minimum sentences. This results in not only lack of uniformity in reformatory sentencing and processing, but in different and probably unequal treatment in releasing prisoners. Prisoners confined with stated mínimums can be released only by the State Parole Board pursuant to its rules. N. J. S. A. 30 :4-123.5 and N. J. S. A. 30:4-l23.10. Prisoners confined for indeterminate terms, without stated mínimums, are eligible for release by the institution’s Board of Managers from the day they are confined. N. J. S. A. 30:4-148, N. J. S. A. 30:4-106 and N. J. S. A. 30:4-113.


text:
    STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT, v. JOSEPH FRANCIS VASSALLUZZO, DEFENDANT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Supplemental Opinion decided March 11, 1971.

      Before Judges Goldmann, Leonard and Mountain.

      Mr. Harry A. Qoldenberg, assigned attorney, argued the cause for appellant.

      Mr. Solomon Forman, Pirst Assistant Prosecutor, argued the cause for respondent {Mr. Robert N. McAllister, Jr., Atlantic County Prosecutor, attorney; Mr. Ernest M. Curtis, Assistant Prosecutor, on the brief).
   The opinion of the court was delivered by

Mountain, J. A. D.

This is intended to supplement our earlier opinion in this case, State v. Vassalluzzo, 113 N. J. Super. 140 (App. Div. 1971).

Defendant points out in a letter to the court that the prior opinion did not cover all issues raised on the appeal. Although this is true, there were no issues raised which were not fully and carefully considered. In view of defendant’s inquiry, however, we add the further comment set forth below.

Defendant’s first point is that the trial court lacked a proper presentence report. We note the affidavits supporting this contention that were filed with the court. We find no inadequacy in this respect. There is no requirement that the Probation Department exhaust all possible sources of information in the preparation of its report.

In defendant’s reply brief he challenges the severity of the sentence imposed. We in our earlier opinion concluded that the sentence was “neither manifestly excessive nor unduly punitive and seems fittingly responsive to the crime.” (113 N. J. Super, at 143) See State v. Hicks, 54 N. J. 390, 391 (1969).

Defendant’s allegations of police brutality and of failure to be advised of his rights are similarly groundless due to the lack of any evidence supporting these contentions. Additionally it is urged that an illegal grand jury indicted defendant. In the absence of supporting evidence, this contention is also without substance on appeal.

Next it is contended that defendant was without the effective assistance of counsel at trial. This claim is again without foundation. The record does not disclose such incompetence as “to thwart the fundamental guaranty of a fair trial,” State v. Dennis, 43 N. J. 418 (1964) or “to make the trial a farce or mockery of justice.” State v. Woodard, 102 N. J. Super. 419, 429 (App. Div. 1968).

It is further argued that there was an excessive lapse of time between conviction and sentence. The delay here is not of the magnitude contemplated by the proscription in B. 3:21-4 (a) of “unreasonable delay.”

Finally, it is assigned as error that the trial court denied a motion to reduce sentence. What has been said above disposes of this argument.

In summary, we have carefully examined the trial record and all briefs submitted and have concluded that there is no reversible error.


author: Labrecque, J. A. D.

text:
    THE J. B. WILLIAMS CO., INC. (SUCCESSOR TO LANDERS, FRARY & CLARK), PETITIONER-APPELLANT, v. SIDNEY GLASER, ACTING DIRECTOR OF DIVISION OF TAXATION, RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued February 8, 1971
    Decided March 18, 1971.

      Before Judges Sullivan, Collester and Labrecque.

      Mr. John M. Newman argued the cause for appellants (Messrs. Porzio, Bromberg & Newman, attorneys).

      Mr. Alfred L. Nardelli, Deputy Attorney General, argued the cause for respondent (Mr. George F. Kugler, Jr., Attorney General of New Jersey, attorney; Mr. Stephen Shillman, Assistant Attorney General, of counsel).
   The opinion of the court was delivered by

Labrecque, J. A. D.

Petitioner J. B. Williams Co., Inc., as successor to Landers, Frary & Clark (the taxpayer), appeals from a decision of the Division of Tax Appeals affirming the Corporation Tax Bureau’s assessment of deficiencies against Landers, Frary & Clark for the years 1962, 1963 and 1964, under and pursuant to the New Jersey Corporation Business Tax Act (N. J. S. A. 54:10A-1 et seq.).

The facts were stipulated as follows:

(1) The J. B. Williams Company, Inc. is the successor corporation to Landers, Erary & Clark due to a statutory merger on May 31, 1965. A copy of the certificate of merger is attached hereto as Exhibit A. [Exhibit omitted]
(2) Landers, Erary & Clark (referred to herein as Landers) was up to May 31, 1965, a foreign corporation duly organized and existing under the laws of the State of Connecticut with its principal office and place of business located in New Britain, Connecticut.
(3) Landers’ registered agent in the State of New Jersey during the years in question was' Seymour Cipnick, 290 Jelliff Avenue, Newark, New Jersey.
(4) Landers engaged in the business of manufacturing and selling small electrical appliances. Manufacturing facilities were maintained in New Britain, Connecticut; Thomaston, Connecticut and Port Smith, Arkansas. In addition, Landers maintained sales offices and employed salesmen in various parts of the United States.
(5) Landers employed Wheeling Transportation, Inc., 1235 Central Avenue, Hillside, New Jersey for the temporary storage pending sale of some of its products in Wheeling’s public warehouse located in Port Newark.
(6) Landers management, general business office, accounting functions, order receipt and acceptance, billing and maintenance of accounts receivable records were conducted at its principal place of business within the State of Connecticut.
(7) The following table shows petitioners’ activity in New Jersey.
1962 1963 1964
Receipts' where merchandise was shipped from New Jersey warehouse to New Jersey customers
$ 2,016,618 $ 983,982 $ 912,943
Receipts where merchandise was shipped from New Jersey warehouse to customers located outside of New Jersey
$38,815,747 $31,815,406 $21,910,640
Total receipts of company
$44,851,227 $43,138,593 $32,367,914
(8) Landers owned no property located within New Jersey other than the merchandise stored in the public warehouse.
(9) Landers’ activity within New Jersey consisted of the storage of inventory in the Wheeling public warehouse and the shipment of said inventory to customers by common carrier.

The taxpayer’s return for 1962 recited that it had a warehouse and office in this State. Those for 1963 and 1964 made mention only of a warehouse.

The Corporation Tax Bureau accepted the returns as filed with the exception of the allocation of accounts receivable. In its return the taxpayer had included as a New Jersey asset includable in the allocation factor only those accounts receivable attributable to shipments from the New Jersey warehouse to customers located within the State. The Bureau assessed the tax on the basis of all the products shipped from the New Jersey warehouse, regardless of destination.

N. J. S. A. 54:10A-2 authorizes the assessment of an annual franchise tax to be paid by each corporate taxpayer. N. J. S. A. 54:10A-5(b) requires that the tax be computed on “that proportion of its entire net worth as the average value of its total assets in this State during the period covered by its report is to the average value of its assets everywhere during such period (for the purpose of which there shall be included as within this State * * * the entire amount of the intangible personal property of foreign corporations as would have a business situs within this Stale for the purpose of a property tax) muitiplied by the following rates * * (Emphasis added). To implement N. J. 8. A. 54:10A-5(b) the Division promulgated Regulation 16:10-4.350(c)(2), which provided that accounts receivable of a corporation were allocable to New Jersey “(2) when resulting from sales from a stock of goods located or maintained in this State.”

Under the cited statute, if, as here, the corporation maintained a regular place of business outside of the State, it could, for the tax years in question, calculate its net worth allocable to New Jersey on the basis of the greater of two allocation formulae, one of which was the “total assets formula” contained in N. J. S. A. 54:10A-5(b) above. That formula was arrived at by dividing the total assets in New Jersey by the total assets everywhere. The sole question here is whether the taxpayer was required to include as New Jersey assets that portion of its accounts receivable attributable to sales of goods which were shipped from its warehouse in New Jersey to customers outside the State.

The main thrust of the taxpayer’s argument is directed to the contention that the Director’s regulation is at variance with the statute, which requires that only personal property having a “business situs” within the State be included in the allocation. It contends that the accounts receivable in question did not have a business situs in New Jersey and, alternatively, that the regulation is unconstitutional.

Initially we note that N. J. S. A. 54:10A-5 was first enacted in 1945 and that although the Division of Taxation did not publish its Regulation 16:10-4.350(e) (2) until January 1, 1959, the Corporation Tax Bureau had included the substance of it as part of the instructions printed on its tax return forms and had construed the statute in the manner here challenged since its enactment. Such a continuous practical interpretation of a statute by an administrative agency over a period of years without interference by the Legislature is evidence of its conformity with the legislative intention. Pringle v. N. J. Dept. of Civil Service, 45 N. J. 329, 333 (1965) ; Bello v. Comm’r of Dept. of Labor and Industry, 56 N. J. 41, 48 (1970).

Wholly aside, we see no inconsistency between the regulation and the statute.

The taxpayer urges that the statute was intended to apply, at most, only to intangible personal property actually managed and controlled in New Jersey. We do not so read it. It broadly provides for taxation of all intangibles which acquire a “business situs” in New Jersey. It is well established that accounts receivable and other intangible personal property may acquire a situs for purposes of taxation at some place other than the technical domicile of the owner. Determination of whether intangibles have acquired such a business situs frequently depends upon whether or not they are integral parts of the business conducted by their owner in the State. Newark Fire Ins. Co. v. State Bd. of Tax Appeals, 307 U. S. 313, 319, 59 S. Ct. 918, 83 L. Ed. 1312 (1939); First Bank Stock Corp. v. Minnesota, 301 U. S. 234, 237, 57 S. Ct. 677, 81 L. Ed. 1061 (1937); Household Finance Corp. v. State Bd. of Tax Appeals, 119 N. J. L. 230, 232 (Sup. Ct. 1937).

In finding that the accounts receivable had a situs here, the judge of the Division of Tax Appeals determined that the tangible personal property of the petitioner located within this State was the true subject matter of its business, and that the transportation of such subject matter, its billing and the resulting accounts receivable were all closely interwoven and linked together.

Here the taxpayer was confronted with the presumption of correctness which attached to the finding of the Division, and carried the burden of establishing that the accounts receivable in question did not acquire a situs in New Jersey. F. W. Woolworth Co. v. Director of Div. of Tax., 45 N. J. 466, 482 (1965).

We conclude that the stipulated facts afforded ample evidentiary support for a finding that the taxpayer’s accounts receivable had become an integral part of the business conducted by it in New Jersey, and therefore were includable in the statutory formula. Parke, Davis & Co. v. Atlanta, 200 Ga. 296, 36 S. E. 2d 773, 163 A. L. R. 976 (Sup. Ct. 1946). They demonstrated that its business operation in New Jersey was a substantial part of its overall business, i. e., 89% in 1962, 76% in 1963 and 70% in 1964. Under its method of doing business, New Jersey was used as a storage and assembly point for a substantial portion of its inventory. The goods remained in New Jersey until shipped out pursuant to orders from customers. It is reasonable to assume that as goods were shipped out other goods were shipped in to replace them. New Jersey’s highways were used in transporting the goods to the warehouse and in thereafter transporting them to their ultimate destination within or without the State. While the goods remained here they enjoyed the benefits of New Jersey’s laws, including N. J. S. A. 54:4r-3.20 which exempted them from tangible personal property taxes while stored in a public warehouse, and the protection of its law enforcement agencies.

In Parke, Davis & Co. v. Atlanta, supra, the taxpayer was a Michigan corporation with general sales offices in Michigan. It had a branch office in Maryland from which sales were made to customers in Georgia and other southeastern states. Although the taxpayer sold all of its products through salesmen, all orders were subject to acceptance at its sales office in Maryland. When an order was accepted a shipment was made to the purchaser from the most convenient storage warehouse. One such warehouse was located in Atlanta, Georgia. The stockkeeper in charge of the Atlanta warehouse had no authority to accept orders for goods or make collections, and did not do so. All customer accounts receivable were kept and taxed in Michigan at 1/10% of their value. The taxpayer had neither sales offices nor sales managers in Georgia. Upon such a state of facts the Georgia Supreme Court held that the accounts receivable which grew out of the shipments delivered from the Atlanta warehouse were, regardless of their delivery destination, taxable in Georgia as being connected substantially with some business transacted in that state by the taxpayer. While in some respects the facts in Varice, Davis differ from those here present, i. e., the warehouse was owned by the taxpayer and shipments therefrom did not involve such a substantial portion of the taxpayer’s business as here, we find the principle enunciated there to be equally applicable to the stipulated facts here.

We find no merit to the taxpayer’s challenge to the constitutionality of either N. J. S. A. 54:10A-5(b) or Regulation 16:10-4.350(c) (2). A similar point was raised in Parke, Davis & Co. v. Atlanta, supra, where the court held:

LTJhe enforcement of a tax upon the credits would not be contrary to the guaranty of the due process [clause] or equal protection of the law as expressed in the fourteenth amendment of the Constitution of the United States or paragraphs 2 and 3 of section 1, of article 1 of the Constitution of Georgia, notwithstanding that the credit of the customers may have been passed upon and the books of account kept by the corporation at a point without the state. [36 S. E. 2d at 780.]

We do not read Wheeling Steel Corp. v. Fox, 298 U. S. 193, 56 S. Ct. 773, 80 L. Ed. 1143 (1936), as holding, as defendant contends, that “intangible properties must be actually managed and controlled within the State of New Jersey to make them eligible for taxation.”

Wholly aside, the issue before us is not whether the taxpayer is amenable to payment of the corporate business tax. It has filed its return and paid what it conceives to be the amount due from it under the statute. In its return for each year it also impliedly conceded that its goods stored in New Jersey should be allocated as New Jersey assets for purposes of the franchise tax. On the issue of constitutionality the distinction between accounts receivable derived from the sale of goods stored in New Jersey to New Jersey customers, and those derived from sales to customers outside the State, escapes us. The goods were not in transit; they had come to rest and were awaiting sale and shipment to customers — wherever they might be.

We find no merit to the remaining points raised.

Affirmed.

       Section (b) was later repealed by L. 1968, c. 250, § 2, effective August 16, 1968.


text:
    PORTAGE INSULATED PIPE COMPANY, PLAINTIFF-APPELLANT, v. ANTHONY COSTANZO, BARBARA COSTANZO AND LUCILLE COSTANZO, DEFENDANTS-RESPONDENTS.
    Superior Court of New Jersey Appellate Division
    Argued March 1, 1971
    —
    Supplemental briefs submitted March 15 and 22, 1971
    Decided March 31, 1971.

      Before Judges Oonford, Kolovsky and Carton.

      Mr. Russell H. Hulsizer argued the cause for appellant.

      Mr. Edward J. Toy argued the cause for respondents.
   Per Curiam.

We conclude from our examination of the record that the trial court erred in granting defendants’ motion to dismiss at the close of the plaintiff’s case.

Contrary to what the trial court ruled, the evidence offered by plaintiff, together with the legitimate inferences therefrom, of. R. 4:37-2(b), could sustain a finding that Allstate Plumbing Corporation was insolvent in 1966 when $28,000 of its funds were used to pay debts allegedly due and owing to its officers and stockholders, the defendants herein. The evidence offered on plaintiff’s case if it did not mandate at least permitted an inference that the corporation was unable to meet its pecuniary liabilities as they matured by means of available assets or the honest use of credit. Cf. Whitfield v. Kern, 122 N. J. Eq. 332, 344-345 (E. & A. 1937).

If the corporation was insolvent, then the payments totalling $28,000 made to defendants were unlawful preferences which may be recovered for the benefit of the corporation’s creditors. See N. J. S. A. 14:1A-2. When a corporation becomes insolvent a quasi-trust relationship arises between its officers and directors on the one hand and its creditors on the other. Whitfield v. Kern, supra, 122 N. J. Eq. at 340-342. The officers and directors, in their capacity as trustees of the insolvent corporation, may not prefer one creditor over another, and have a special duty not to prefer themselves. Rogosin v. City Trust Co. of Passaic, 107 N. J. Eq. 79 (Ch. 1930); Schmidt v. Perkins, 74 N. J. L. 785, 788 (E. & A. 1907).

An action to set aside or recover such preferences, if brought by a single creditor instead of by a receiver or trustee in bankruptcy of the corporation, must be brought for the benefit of all the creditors of the corporation. See Central-Penn National Bank v. N. J. Fidelity, etc., Co., 119 N. J. Eq. 265, 271-272 (Ch. 1935); Landis v. Sea Isle City Hotel Co., 53 N. J. Eq. 654 (E. & A. 1895).

The creditor may not, as plaintiff here has done, bring an action at law to recover from the beneficiaries of the preferential payments only the amount due on the judgment which the creditor had recovered against the corporation. Thompson-Houston Electric Co. v. Murray, 60 N. J. L. 20, 22 (Sup. Ct. 1897).

However, until the question was posed by us at oral argument and supplemental briefs ordered, defendants had no objection to the procedures heretofore adopted by plaintiff. In view thereof, we are satisfied that justice requires that plaintiff be permitted, following our remand, to have this action transferred to the Chancery Division and to file an amended complaint in which, for the benefit of itself and all other creditors of Allstate, it may seek recovery from the defendants of the $28,000 in preferential payments received by them.

The judgment is reversed and the cause remanded for further proceedings consistent with this opinion.


author: Herbert, J. S. C.

text:
    ROBERT L. CLIFFORD, COMMISSIONER OF INSURANCE OF THE STATE OF NEW JERSEY, PLAINTIFF, v. CONCORD INSURANCE COMPANY, A NEW JERSEY CORPORATION, DEFENDANT.
    Superior Court of New Jersey Chancery Division
    Decided March 15, 1971.

      Mr. James J. Sheeran, for plaintiff.

      Messrs. Theodore A. Winard, Deputy Attorney General, J eróme O. Eisenberg, for defendant.
   Herbert, J. S. C.

Plaintiff brought this action under N. J. S. A. 17:30-l “for an order granting him possession of the property and business of” defendant. The statute goes on to provide that the Commissioner “retain possession until the company resumes business or its affairs are finally liquidated as hereinafter provided.” An order granting possession was signed June 12, 1970.

Chapter 30 of Title 17 says little in a direct way about the principles to be applied and procedures to be followed in liquidating or rehabilitating an insurance company placed in the Commissioner’s charge. However, there is a provision (N. J. S. A. 17:30-2) that:

Upon taking possession of an insurance company, the same procedure shall be followed, so far as may be, as in the case of banks and trust companies of which the commissioner takes possession for similar causes * * *.

The same section from which this language is taken also provides:

The company may, with the consent of the commissioner, resume business at any time after the taking of possession upon conditions approved by him.

The powers of the commissioner to take possession of and administer the affairs of banks are to be found in N. J. S. A. 17:9A-266 et seq.

Defendant Concord Insurance Company has moved for an order (a) restraining the plaintiff from putting into effect a decision to liquidate the defendant, and (b) authorizing the plaintiff to. proceed with a plan for liquidation of defendant in conjunction with the creation of a new insurance company which would assume certain liabilities of defendant and take over certain of its assets. The argument on the motion centered about an opinion given by the Attorney General to the Commissioner to. the effect that the Commissioner has no legal power to approve of the proposed plan because that plan would involve the use of moneys from the “Motor Vehicle Liability Security Fund” created pursuant to N. J. 8. A. 39:6 — 93 et seq.

I can only refer in a general way to the advice given by the Attorney General to the Commissioner. I have not seen the Attorney General’s opinion. He takes the position that until an opinion has been approved for publication it is confidential material. Whether that position is sound in this context or not, it was made clear at the oral argument that the Attorney General has advised the Commissioner against approval of the plan by reason of the fact that it would, if carried out, leave claims against defendant Concord unpaid which claims would then be payable out of the Motor Vehicle Liability Security Fund (N. J. S. A. 39:6-100).

It has been argued for Concord that the existence of the Motor Vehicle Liability Security Fund and the possibility of claims being asserted against it should not put the Commissioner in a rigid position where his only choices are complete liquidation on the one hand (which may, of course, throw more or less heavy liabilities upon the Fund) or a rehabilitation which will pay all claims in full or provide adequate security outside of the Fund for their ultimate payment. I doubt that Title 17, Chapter 30; Title 17, Chapter 9A and Title 39, Chapter 6 when read together should be construed to limit the Commissioner’s power so strictly. I can conceive of situations in which he would need more flexibility if he is to use sensible business judgment. However, my conclusion is that the defendant’s motion must be denied and my reasons for this are to be found in Chapters 9A and 30 of Title 17. Before stating those reasons it is desirable to describe the plan submitted to the Commissioner, and on which plaintiff’s motion is based.

The plan is outlined in a letter dated December 17, 1970 which is part of the moving papers and attached to the affidavit of Mr. Arthur D. Lerner as Exhibit D-3. In its principal aspects the plan contemplates formation of a new insurance company with paid-in capital and surplus of not less than $600,000; assumption by the new company of defendant’s liability to pay to its policyholders claims for damages to their own automobiles and the like (called first-party claims); assumption by the new company of all defendant’s liabilities on its total unearned premium liability reserve on December 31, 1970; assumption by the new company of liability for commissions payable; transfer to the new company of assets of the defendant which are described in the letter of December 17, 1970 as capital stock of Lenox Einance Company, agents’ balances, marketable securities and negotiable bonds, all of these having a total value of $1,016,000.

Claims which arose prior to December 31, 1970 against defendant’s policyholders are not provided for by the plan. Presumably some of those claims have already been reduced to judgment, others are in suit and others are not yet in litigation. Whether a claim of this type is asserted by a present or former policyholder of defendant under the terms of his policy or by a plaintiff who has recovered a judgment, still unpaid, against a policyholder who caused that plaintiff injury by the negligent operation of an insured automobile seems unimportant for present purposes. The injured party who has a claim against an insured motorist also has an interest in the motorist’s policy. N. J. S. A. 17:28-2; In re Estate of Gardinier, 40 N. J. 261, 265 (1963). Being unprovided for by the plan, the claims in this class would become, payable out of the Motor Vehicle Liability Security Eund, but that would be an incidental effect, and if approval of the plan could he otherwise supported, would be no more objectionable in my view than the burden thrown upon the Eund by a full liquidation so disappointing in its outcome that only a small dividend, or no dividend at all, could be paid.

My basis for denying the motion is the absence of anything in Chapter 9A and 30 of Title 17 to empower the Commissioner to scale down claims, fail to provide for any claim or group of claims or otherwise do anything, short of full liquidation, except to approve of a rehabilitation plan which will provide for payment of all claims in full or in a percentage to which all claimants have agreed. In short, Chapters 9A and 30 are not like the modern Eederal Bankruptcy Act which lays down conditions for requiring a non-assenting creditor to accept less than the full amount of his claim, or less than immediate payment, even though the debtor corporation reorganizes.

Liquidation should not have to mean a public auction sale. A private offer to acquire assets of an insurance company in the charge of the Commissioner might hold more promise for creditors than an auction. Here, however, nothing would be paid to the Commissioner for the benefit of every claimant; only certain liabilities, not all, would be assumed in return for the transfer of assets otherwise available for sale by the Commissioner. The proposed plan would eliminate as charges against the new company the claims of an important group of creditors and, because it contemplates transfer of valuable assets, would leave the members of that group in a poorer position to realize anything from the properties of Concord than they would have occupied without the plan. The power to approve of such a plan is not in my judgment included in the powers to rehabilitate and liquidate conferred by Chapters 9A and 30 of Title 17.

I do not overlook the fact that a reorganization which scales down, postpones or even eliminates debts can be based upon the assent of creditors. Can assent be assumed, or is it really necessary, if the affected creditors are to be paid in full from some source other than the resources of the corporation to be reorganized? In the present case there are two negative responses to this: The statute says that no claim of $100 or less shall be paid from the Fund and greater claims are subject to a deduction of $100 (N. J. S. A. 39:6-100); and the same section provides that after a claimant has been paid the State Treasurer “as custodian of the fund shall be entitled to a valid claim against an insolvent insurer, or its liquidator, rehabilitator, conservator, receiver, or trustee in bankruptcy in an amount equal to the liabilities of such insolvent insurer paid from the fund, less the net payments paid into the fund by such insolvent insurer.” Thus payment to a claimant from the fund does not eliminate his claim, but after leaving $100 of it unsatisfied, merely shifts its ownership to the Treasurer. There is no showing here that the Treasurer has waived his rights of subrogation or has been asked to do so in anticipation of the execution of the proposed plan. If claims to which the Treasurer would be subrogated are to be adjusted or eliminated by a plan of reorganization, his assent appears to be necessary. Although his power to collect items to which he has been subrogated under the statute should be construed to encompass the power to compromise, I can find nothing in the statutes to justify a construction which would give the Treasurer the power to relinquish entirely claims which would otherwise have some substantial money value even though the relinquishment might be sought for the purpose of furthering some socially desirable end such as continuing an insurance business which has made protection available to a class of car owners who would find it difficult to obtain policies of insurance from other sources. Also, there is possibly a third negative answer to the question stated above: The statute (N. J. S. A. 39:6-94) makes the Motor Vehicle Liability Security Eund available only “for the purpose of securing the benefits under policies of motor vehicle liability insurance on account of claims from accidents occurring within or without this State”; so it appears that there are or may be claims against Concord which will not be paid under the proposed plan and will not be taken care of (subject to a $100 deduction) by payment from the Eund.

Defendant’s motion is denied.


author: Feller, J. S. C.

text:
    WILLIE WILSON, PLAINTIFF, v. UNITED STATES LINES, DEFENDANT.
    Superior Court of New Jersey Law Division
    Decided March 16, 1971.

      Mr. Arthur N. D’ltalia for plaintiff (Messrs. Chasan, Leyner & Holland, attorneys).

      Mr. Elmer J. Bennett for defendant (Messrs. Carpenter, Bennett & Morrissey, attorneys; Mr. William S. Jeremiah on the brief).
   Feller, J. S. C.

This is a motion for summary judgment in favor of defendant United States Lines (hereinafter referred to as U. S. Lines) and against plaintiff Willie Wilson, and a cross-motion for an order striking defendant’s first separate defense predicated upon the validity of a release executed by plaintiff. Both sides have submitted affidavits and briefs.

The facts reveal that plaintiff Willie Wilson is a truck driver for Harbor Motor Express, Inc. Pursuant to his employment he made a pickup at U. S. Lines in Port Elizabeth. While there Wilson was detained and subsequently arrested for possession of stolen property following the discovery of tires belonging to U. S. Lines on the truck he was driving, which truck was owned by Harbor Motor Express, Inc. Plaintiff Wilson, in effect, denied the charge.

On or about May 15, 1970, a few days before the scheduled preliminary hearing on this charge in the Elizabeth Municipal Court, Wilson went to U. S. Lines to request that the charges against him be dropped. It was decided that U. S. Lines would drop its complaint if, as asserted by defendant, the stolen tires were returned, payment was made to U. S. Lines for damage to the tires, and a general release of any and all claims arising out of the arrest for any claim of false arrest, malicious prosecution or abuse of process was signed by Wilson. Plaintiff denies any previous agreement to the release or any discussion of this at this time. Wilson asserts it was not until May 18, 1970, at the preliminary hearing, that he first learned of these prior conditions. However, at the time immediately preceding the hearing all parties agreed to these terms and the release was given and the complaint dismissed.

The facts do not reveal, nor does plaintiff assert, that there was any fraud perpetrated upon him in the execution of this release. In fact, it appears that Wilson had legal advice with respect to his initial claim arising out of his arrest, as well as advice from his employer at the time of the release signing.

Wilson then filed a complaint against U. S. Lines for malicious prosecution and malicious abuse of process. Defendant in its answer asserted as an affirmative defense the release which Wilson had given it. On the basis of this release defendant now moves for summary judgment. Plaintiff opposes the motion and files a cross-motion for an order striking this defense.

Plaintiff in his cross-motion also requests that B. 1 :l-2, which permits the relaxation of the rules where, among other things, simplicity of procedure is best served, be employed so that his cross-motion may be heard simultaneously with the motion for summary judgment in violation of R. 1:6-3. R. 1:6-3 requires motions to be filed no later than eight days before the time set for hearing. With this request the court has complied, for it does appear that simplicity of procedure would be served and no unjust result would be created.

With respect to the cross-motion for an order striking defendant’s first separate defense predicated upon the validity of a release, executed by plaintiff, it is the opinion of this court that the motion should be granted. The defense of release and the respective motions of the parties in connection with this defense raises the question of the validity of the release.

First, this court questions the substantive validity of the release. Is an agreement to forebear prosecuting a criminal offense in exchange for the forebearanee of a civil claim a valid agreement? This is a question of law to be decided.

It is fundamental law that a release is valid when dealing with the forebearanee of a litigant’s civil rights. United & Glove Rubber Manufacturing Co. v. Conard, 80 N. J. L. 286 (E. & A. 1910). However, this court is of the opinion that an agreement to forebear prosecution of a criminal case is void as against public policy.

Frequently, an agreement relating to the suppression of criminal prosecutions is one of the terms in a settlement with the victim of a crime. Such settlements, which usually involve compensation by the offender (or by someone acting in his interest) for the injuries resulting from the crime, or restitution of the property wrongfully appropriated, are made with the understanding that the offender is not to be prosecuted. The making of such an arrangement is void as against public policy.

The general principle that such agreements are void has never been doubted. With the possible exception of offenses the prosecution of which may not be regarded as essential to the public welfare, such agreements are illegal and promises made in consideration thereof are unenforceable. See 17 Am. Jur. Contracts, 2d, § 202 at 571-572.

In Jourdan v. Burstow, 76 N. J. Eq. 55 (Ch. 1909), the court was faced with the question of whether a man who conveyed property in satisfaction of an admitted embezzlement can recover it back simply because the written agreement which he entered into with his employers to make restitution contained a clause against prosecution. The court, in refusing to permit recovery, said in part (at 55), “Such an agreement is plainly illegal, and its performance could not be compelled.” See also Slater v. Gittleman, 104 N. J. Eq. 172 (E. & A. 1928).

In the present case the release was given by Wilson in return for the forebear anee by U. S. Lines not to prosecute its criminal complaint. Although it is admitted that other consideration was given in exchange for the promise, we are not concerned with that because Wilson did not furnish the consideration. Here, as in Jourdan, supra, this court cannot enforce such an agreement or give any other legal effect to it. This would include using it as a defense in this action. It is illegal and its allegation as a defense must be set aside.

Other jurisdictions have dealt with this problem and have resolved it in like fashion. In Wolf v. Perkins, 254 Mass. 10, 149 N. E. 691 (Sup. Jud. Ct. 1925), an action was brought by the payee of a negotiable promissory note against his son and defendant Perkins as co-maker. At the close of the evidence the trial judge directed a verdict for plaintiff, subject to Perkins’ exceptions. Plaintiff’s son was arrested for larceny of automobile tires. The case was disposed of by payments made by plaintiff to the people from whom the tires were stolen and to the courts for costs. He was reimbursed for part of these payments and received a note for the balance signed by defendants. The note was renewed from time to time and reduced by payments until the balance due was represented by the note upon which the action was based. One of the defenses considered by the court was that the note was given for an illegal consideration. The court said:

A note given under such circumstances is based upon an illegal consideration. * * * Such agreements are against public policy anfi cannot be enforced, [at 692]

Defendant states that the validity of the release is determined by the conduct of the parties, and unless unfair or unconscionable conduct is shown, the release will be enforced. See Wojcik v. Pollock, 97 N. J. Super. 319 (Law Div. 1967). However, this court is not attacking the procedural irregularity of the release, but its substantive validity, the underlying consideration.

Defendant next raises the point that an essential ingredient of the compounding of the felony is the actual commission of the felony. In Slater v. Gittleman, supra, 104 N. J. Eq. at 174, the court said that in Ball v. Ball, 79 N. J. Eq. 170 (E. & A. 1911), it was held that an agreement to compound a criminal offense where no violation of the criminal law had occurred (though believed otherwise by the parties) was not illegal inasmuch as the actual commission of a criminal offense was an essential ingredient ■of the illegal compact. Embezzlement was there admitted. However, this court disagrees with the Slater decision on this point since a careful reading of Ball, shows that such a holding was obiter dictum, therefore apparently leaving this point one of first impression.

The rule supported by most of the authorities on the subject is that an agreement to suppress a criminal prosecution is illegal, whether the person charged is innocent or guilty. Therefore, an instrument given in consideration of suppressing a criminal prosecution is void as between the parties, without reference to the guilt or innocence of the threatened individual. 17 Am. Jur. 2d, Contracts, § 204 at 574.

In Union Exchange National Bank of New York v. Joseph, 231 N. Y. 250, 131 N. E. 905 (Ct. App. 1921), the court held:

The rule that notes given to prevent threatened prosecution of a -relative for criminal misappropriation of funds are void for duress or •compounding a felony, and that, both parties being wrongdoers in .stifling a charge of crime, payments made on such notes cannot be recovered, is not affected by the possible innocence of accused, at ‘least where the charge of crime is not made in bad faith, nor by the fact that the prosecution had not been actually initiated but merely •threatened.

It is therefore this court’s opinion that plaintiff’s claim •of innocence does not affect his instant motion.

Defendant argues that because plaintiff initiated the discussion leading to the signing of the release, he reaped its benefits of this release and is now estopped from arguing its validity. Does defendant reasonably believe that a man who contends that he is innocent of any wrongdoing would act any differently than plaintiff?

Defendant further asserts that its bona fide belief that it had a claim against plaintiff, even if in fact no crime had been committed by plaintiff, was sufficient consideration for the release. However, for the reasons set out supra this court must reject the argument upon the theory that the forebearanee of prosecuting a criminal claim is unlawful and therefore unenforceable by this court, whether plaintiff is guilty or not.

As for defendant’s motion, in order that a motion for summary judgment may be granted it must appear that no genuine issue of fact exists. Judson v. Peoples Bank & Trust Company of Westfield, 17 N. J. 67 (1954). In view of the fact that this court must grant plaintiff’s cross-motion striking defendant’s affirmative defense of release, the basis upon which defendant’s motion for summary judgment rests, a genuine issue of fact arises which necessitates the denial of that motion.

Defendant’s motion for summary judgment is denied and plaintiff’s motion to strike the affirmative defense of release granted.