author: Wick, J. S. C.

text:
    MAURICE S. FAYMAN AND FLORENCE FAYMAN, HIS WIFE, PLAINTIFFS, v. TRUSTEES OF BURLINGTON COLLEGE, A NON-PROFIT CORPORATION ORGANIZED UNDER THE LAWS OF THE STATE OF NEW JERSEY, AND ELSIE F. SLATER, DEFENDANTS.
    Superior Court of New Jersey Chancery Division
    Decided October 16, 1968.

      Mr. Richard D. Ehrlich lor plaintiffs.

      Mr. Martin L. Haines for defendants (Messrs. Dimon, Haines eC Bunting, attorneys).
   Wick, J. S. C.

Plaintiffs Maurice S. Eayman and Dlorence Dayman instituted this suit to compel the trustees of Burlington College and Elsie D. Slater, the principal of St. Mary’s Hall, to issue the school transcript of grades of a former student, Samuella Dayman, the daughter of plaintiffs. Defendants filed a counterclaim for damages of $425 based on an alleged breach of a reenrollment contract entered into by the parties. Upon the payment of $425 into court plaintiffs secured the transcript. The parties now seek a determination of liability on the reenrollment contract and of the right of a private school to withhold a student’s transcript record. The material facts are set forth below.

Prior to 1967 Samuella Dayman attended St. Mary’s Hall, a non-profit, private school operated by defendant trustees, for approximately six years. In the Spring of 1967 her father Maurice Dayman submitted a signed reenrollment contract to have his daughter readmitted the following Dali. At the same time he made a $50 deposit which was “required to reserve a place in the school.” This was done notwithstanding a desire on the part of Samuella not to reenroll. It was not until September 1967 that Mr. Dayman notified the school that he was withdrawing his daughter from St. Mary’s and requested a release from his enrollment contract. The trustees refused to cancel the contract for the reason that a place had been saved for Samuella until the opening of school and that it was now too late to secure a satisfactory replacement for her. (The school policy does, however, allow for withdrawals prior to July 1).

As a result of Fayman’s failure to pay the tuition demanded, the trustees refused to issue an official transcript of Samuella’s grades until payment was received.

The first issue involves the liability for tuition resulting from Eayman’s alleged breach of the enrollment agreement. The court finds that there was a valid and enforceable contract between Maurice S. Fayman and defendant trustees whereby St. Mary’s Hall was to reenroll Samuella as a student, to reserve a place for her and to furnish her with schooling for the year 1967-68; plaintiff Fayman in turn paid the $50 enrollment fee and bound himself to pay tuition of $900 for the year. The court also finds that he breached this agreement. There was insufficient evidence presented to prove anjr oral modification of that agreement. Furthermore, the court does not find any justifiable'ground upon which Fayman may avoid his obligation. This is particularly true where neither Mr. nor Mrs. Fayman made any definite statement with regard to Samuella’s withdrawal until September' 1967. For these reasons the court holds Fayman liable to pay Samuella’s tuition; however, since defendant has complied with its legal duty to mitigate damages by obtaining a replacement for .Samuella in the -second ■ semester, the damages of $425 are for the first semester only. Tabor Academy v. Schwartz, 129 N. J. L. 390 (E. & A. 1943); Bergman v. Bouligny, 82 A. 2d 760 (D. C. Mun. App. 1951).

The parties also seek a determination as to the right of a private school to withhold issuance of a' student’s transcript covering school performance for past years- in a case where a parent has breached an enrollment contract for a subsequent year. It'is plaintiffs’ contention -that the fulfillment of all obligations- under the past enrollment contracts entitles them to a transcript for those- years. For several reasons the - court feels -this argument' i's without merit. -

Dirstly, in the absence of a demonstration of unreasonable or arbitrary action on the part of the private school or trustees, this court is not in a position to compel issuance of the transcript. 47 Am Jur., Schools, §§ 221, 229; 34 Am. Jur., Mandamus, § 206. See also Strank v. Mercy Hospital of Johnstown, 376 Pa. 305, 102 A. 2d 170 (Sup. Ct. 1954); 383 Pa. 54, 117 A. 2d 697 (Sup. Ct. 1955). Moreover, in this ease the party seeking equitable relief has breached the contract and thus by equitable standards comes into court with “unclean hands.” Secondly, the court should look to the contract in order to determine the rights and obligations of the private school in relation to the parents of the student. The contract here under consideration contains no express provision regarding transcripts. Even assuming the school was under an implied obligation to make the transcript of grades available to the parents upon request, the court would find that performance of this obligation is conditional upon the parents’ fulfillment of all past and present obligations under the contract. Therefore, once the new agreement (for 1967-68) became binding upon Dayman, the school’s right to withhold the transcript in the event of a breach of contract became fixed. Dayman’s refusal to pay the tuition due constituted a breach. At that point it was immaterial that the transcript concerned prior years for which payment had been received. Dayman, by virtue of his execution of the new contract, was a party to an obligation which was continuing in nature. The court also notes that the withholding of the transcript is the only means short of litigation by which the school can enforce the obligations due.

In accordance with the foregoing opinion, the trustees of Burlington College should be awarded a judgment for $425.


source: Caselaw Access Project

author: Lora, J. S. C.

license: Public Domain

text:
    HENRY A. MCCANNA, DOROTHY BELLE POLLACK, A. MILTON BELL, LAMAR JONES, BORIS S. BIERSTEIN, BOARD OF EDUCATION OF THE TOWNSHIP OF TEANECK, IN THE COUNTY OF BERGEN, SHIRLEY YOST, PETER E. STOKES, AND MARJORIE A. STOKES, PLAINTIFFS, v. ARTHUR J. SILLS, ATTORNEY GENERAL OF THE STATE OF NEW JERSEY, CARL L. MARBURGER, COMMISSIONER OF EDUCATION OF THE STATE OF NEW JERSEY, THE NEW JERSEY STATE BOARD OF EDUCATION, ABRAM A. VERMEULEN, DIRECTOR, DIVISION OF BUDGET AND ACCOUNTING OF THE STATE OF NEW JERSEY, JOHN A. KERVICK, TREASURER OF THE STATE OF NEW JERSEY, ARCHIE F. HAY, JR., SUPERINTENDENT OF SCHOOLS OF BERGEN COUNTY, NEW JERSEY, BOARD OF EDUCATION OF THE BOROUGH OF CLOSTER, IN THE COUNTY OF BERGEN, BOARD OF EDUCATION OF THE TOWNSHIP OF RIVER VALE, IN THE COUNTY OF BERGEN, AND THE BOARD OF EDUCATION OF THE PASCACK VALLEY REGIONAL SCHOOL DISTRICT, IN THE COUNTY OF BERGEN, DEFENDANTS.
    Superior Court of New Jersey Chancery Division
    Decided November 8, 1968.

      Mr. Robert D. Gruen for plaintiffs (Mr. Morton R. Govitz appearing).

      Mr. Arthur J. Sills, Attorney General of New Jersey, for defendants Arthur J. Sills, Attorney General of New Jersey, Carl L. Marburger, Commissioner of Education of New Jersey; The New Jersey State Board of Education; Abram A. Vermeulen, Director, Division of Budget and Accounting of New Jersey; John A. Kerviek, Treasurer of New Jersey, and Archie F. Hay, Jr., Superintendent of Schools of Bergen County, New Jersey. (Mr. Stephen G. Weiss, Deputy Attorney General, appearing).

      Messrs. Burke, Sheridan & Hourigan, for defendant Board of Education of Closter.

      Messrs. Parisi, Evers & Greenfield, for defendants Board of Education of River Vale Township and Board of Education of the Paseaek Valley Regional School District.
   Lora, J. S. C.

Plaintiffs bring this action alleging that chapter 74 of the Laws of 1967, as amended by chapter 29 of the Laws of 1968, The School Transportation Law, is unconstitutional in that it is violative of the First Amendment to the United States Constitution, made applicable to the states by the Fourteenth Amendment, in that it affects the establishment or advancement of religion.

The statute, in pertinent part, states:

“Whenever in any district there are pupils residing remote from any schoolhouse, the board of education of the district may make rules and contracts for the transportation of such pupils to and from school, including the transportation of school pupils to and from school other than a public school, except such school as is operated for profit in whole or in part.
When any school district provides any transportation for public school pupils to and from school pursuant to this section, transportation shall he supplied to school pupils residing in such school district in going to and from any remote school other than a public school, not operated for profit in whole or in part, located within the State not more than 20 miles from the residence of the pupil [provided] the per pupil cost of the lowest hid received does not exceed $150.00 and if such bid shall exceed said cost then the parent, guardian or other person having legal custody of the pupil shall be eligible to receive said amount toward the cost of his transportation to a qualified school other than a public school, regardless of whether such transportation is along established public school routes.”

This has been codified in N. J. S. 18A :39—1 which, in pertinent part, is identical with the above-quoted statute.

The case was submitted to the court on cross-motions for summary judgment based upon a written stipulation of facts with exhibits annexed.

The facts show that as of April 1967, 363,560 students were enrolled in New Jersey nonpublic schools, grades kindergarten through twelfth. Of this number, 332,519 students attended 644 schools operated under the auspicies of the Roman Catholic Church. Therefore, 91.4% of the total nonpublic school population attended Roman Catholic schools. 88,782 students, or 26.6% of the Roman Catholic school population, lived two miles or more from the schools they attended. Of that number 69,656 were transported to school by bus. This bus transportation was provided by 47 Roman Catholic schools, hut counsel were unable to determine if the parents paid for the same. Bus transportation to 327 of the Catholic parochial schools was provided directly by parents. (Plaintiff's contend that said schools are now relieved at least of an administrative burden.)

During the 1967-68 school year the Board of Education of Teaneck Township transported 462 students to and from private schools, and of that total 402 students, or 87.01%, were transported to parochial schools run by various religious societies or groups. During this same school year defendant Pascack Yalley Regional High School District Board of Education transported a total of 295 students to private schools at an average per pupil cost of $198.89. It also transported 741 public school pupils at an average per pupil cost of $114.98. The facts also show that the boards of education of Closter and Teaneck made expenditures in excess of $150 per pupil for the purpose of transporting pupils to private schools. Teaneckfs cost for transporting 1,196 public school students to and from school was $51.73 per pupil during the 1966-67 school year. In 1965-66 the average per pupil cost was $57.90, and in 1964-65 it was $55.06.

The parochial schools have a course of education which is substantially the same as that of the public schools in New Jersey. However, the curriculum in each of these schools includes certain courses concerned with the tenets of the various religions sponsoring said schools, and organized sectarian prayer is included in the curriculum. Some of the faculty of these schools consist of Roman Catholic clergy, nuns, Protestant clergy and Jewish clergy.

In 1947 the United States Supreme Court upheld the constitutionality of N. J. S. A. 18:14-8, the predecessor of the statute here under consideration, in Everson v. Board of Education of Ewing Tp., 330 U. S. 1, 67 S. Ct. 504, 91 L. Ed. 711, affirming 133 N. J. L. 350 (E. & A. 1945). The continuing vitality of that decision was assured by the Supreme Court this year in the case of Board of Education of Central School District No. 1 v. Allen, 392 U. S. 236, 242, 88 S. Ct. 1923, 20 L. Ed. 2d 1060 (1968), wherein the court relied on the principles of Everson in upholding a New York law which made textbooks available to private school students on an equal basis with public school students. The majority opinion therein stated:

“Of course books are different from buses. Most bus rides have no inherent religious significance, while religious books are common.” (at p. 244, 88 S. Ct., at p. 1927)

And Mr. Justice Douglas in his dissenting opinion noted:

“Whatever may be said of Everson, there is nothing ideological about a bus.” (at p. 257, 88 S. Ct., at p. 1933)

Mr. Justice Black, also dissenting, said:

“It is not difficult to distinguish books, which are the heart of any school, from bus fares, which provide a convenient and helpful general public transportation service. * * * a general and nondiscriminatory transportation service in no way related to substantive religious views and beliefs.” (at pp. 252-253, 88 S. Ct., at p. 1931.)

Plaintiffs contend, however, that Everson is not dispositive oí the issues herein for the reason that N. J. S. 18A :39-1 is not identical with N. J. S. A. 18 :14-8 which was under consideration in that case. The current statute differs from the former in that it does not restrict the bussing of private school students to established public school routes, and in that the former statute did not provide for a $150 maximum per pupil assistance, which the evidence establishes is more than the average cost of bussing public school students.

The criteria for decision in the present case were set down by the United States Supreme Court in School District of Abington Township v. Schempp, 314 U. S. 203, 83 S. Ct. 1560, 10 L. Ed. 2d 844 (1963):

“The test may be stated as follows: What are the purpose and the primary effect of the enactment? If either is the advancement or inhibition of religion, then the enactment exceeds the scope of legislative power as circumscribed by the Constitution. That is to say that to withstand the strictures of the Establishment Clause there must be a secular legislative purpose and a primary effect that neither advances nor inhibits religion. Everson v. Board of Education.” (at p. 222, 83 S. Ct., at p. 1571)

Mr. Justice White prefaced his application of the Schempp test in Allen by stating that

“* * * This test is not easy to apply, but the citation of Everson by the Schempp Court to support its general standard made clear how the Schempp rule would be applied to the facts of Everson." Board of Education v. Allen, supra, 392 U. S., at p. 243, 88 S. Ct., at p. 1927.

Thus, the United States Supreme Court has approved of Everson as complying with the Schempp test.

In accordance with the Schempp test, plaintiff’s argument is two-pronged. First, they contend that the purpose of N. J. S. 18A :39—1 is to aid religion through aid to parochial schools. Secondty, they argue that the primary effect of the statute is to support religion.

Plaintiffs seek to substantiate their position that the Legislature passed the bill for the purpose of aiding religion by inferences sought to be drawn from circumstances surrounding enactment. Initially, they point to the fact that most of the individuals who supported passage of the statute at public hearings were clergymen of various religions. Secondly, they maintain that a religious purpose is shown by the very fact that more than 91% of all nonpublic school students in New Jersey attend schools which are operated under the auspices of various religions. Finally, it is plaintiff’s position that the language of the statute itself clearly demonstrates that the Legislature was concerned with aiding schools rather than students.

This court may not find an improper legislative purpose behind N. J. S. 18A :39-1 unless it be clearly shown, and the statute will be presumed to be constitutional in the absence of convincing proof to the contrary. In re Loch Arbour, 25 N. J. 258, 264, 265 (1957); WHYY, Inc. v. Berry, 25 N. J. 1, 10 (1957). Additionally, our courts do not probe the motives of the Legislature in order to seek to establish an improper purpose. Two Guys From Harrison, Inc. v. Furman, 32 N. J. 199, 266 (1960); Grand Union Co. v. Sills, 43 N. J. 390 (1964), and Kasser Distillers Product Corp. v. Sills, 85 N. J. Super. 351, 356 (Ch. Div. 1964).

No strong conclusion may be reached from the fact that clergymen supported the passage of N. J. S. 18A :39-1. These men may have simply been interested in the welfare of the students who attend the private schools which are run by their respective religions. (Nevertheless, there were those who spoke against the bill at public hearings.) Also, the mere fact that more than 91% of the private school students in New Jersey attend church-run schools does not establish a prohibited purpose. The statute is not couched in terms which could be read as providing for a religious test in determining which students are entitled to bussing aid. The statute provides transportation assistance to any student attending a private school in New Jersey which is not run for profit if he resides between two and 20 miles from the school to which he seeks transportation provided the public school district in which he resides engages in the transporting of public school students. There is certainly no religious test contained therein.

Plaintiffs further base their argument that the Legislature was here concerned with and intended to aid schools and not students on the fact that under N. J. S. 18A :39-1 transportation aid is not given to pupils who attend private, profit-making schools, or to those who, while residing in New Jersey, attend private schools outside the State. They urge these exclusions as being indicative of the underlying motive of L. 1967, c. 74, and L. 1968, c. 29, and they reason that if the Legislature was truly concerned with child welfare and child benefits, it would bave seen to it that such benefits were extended to all children. The limitation contained in L. 1968, c. 29 is a maximum expenditure of $150 per pupil.

Insofar as the exclusion of students attending schools operated for profit is concerned, it may well be that the legislators concluded that parents or guardians who could afford such schooling would not find the cost of transporting their children to and from the schools of their choice prohibitive and would not be “deterred by cost from ensuring that their children travel to and from school by a safe method of transportation.” Rhoades v. School District of Abington Tp., 424 Pa. 202, 226 A. 2d 53, 66, 71, 77 (Sup. Ct. 1967), where the identical issue (the profit v. non-profit dichotomy) was raised by the plaintiffs therein, and where six of the seven justices agreed that the exclusion of profit-making schools did not' violate either the Eirst or the Fourteenth Amendments, and only one justice was of the opinion that the exclusion reached federal constitutional dimensions and that the exclusion of children attending private profit-making schools was without rational basis if the statute was really intended to promote the safety and welfare of children. On appeal the United States Supreme Court ruled per curiam that Rhoades presented no substantial federal question. 389 U. S. 11, 88 S. Ct. 61, 19 L. Ed. 2d 7 (1968).

I note, parenthetically, that information requested by the New Jerse}' Attorney General from the 21 county school superintendents revealed only 8 such schools in 4 counties. The other county superintendents had no information on private profit-making schools available. However, it would appear that the number of such schools in New Jersey is minimal, and it follows that the number of such children not qualif3nng for transportation benefits is inconsequential. And, as the late Justice Musmanno pointed out in Rhoades, if the Legislature is advised that there are some students who are endangered by travel hazards who are not covered by the statute, it can and may include them by appropriate amendment. However, as he further stated:

“It is no reasonable argument to say that because a statute does not make provision for a hypothetical minimal hazard, it should ignore a proved multiple peril.” (226 A. 2d, at p. 66)

In Everson, Mr. Justice Black, in a footnote, alluded to the exclusion of children who attend profit schools but did not discuss the issue since it had not been raised below. 330 U. S., at p. 4, 67 S. Ct. 504, 91 L. Ed. 711 (1947). Tt is clear that ho was contemplating the applicability of the Fourteenth Amendment’s equal protection clause. However, in the case at bar plaintiffs have, specifically and unqualifiedly abandoned any claim under the Fourteenth Amendment.

Additionally, plaintiffs urge this court to adopt; Mr. Justice Jackson’s reasoning in his dissenting opinion in Everson in which he said ho could see no reason for denying benefits to children attending profit-making schools if the law’s objective was to aid all children. He was of the opinion that only children attending public or private Catholic schools were aided and that children “are not allowed to be aided if they attend private secular schools or private religious schools of other faiths.” Id. 330 U. S., at p. 21, 67 S. Ct., at 514.

This court is respectfully constrained to question the accuracy of any such conclusion with respect to the present case for, as demonstrated above, there are many New Jersey children attending private secular schools and private nonOatholic parochial schools who are participating in the benefits of N. J. S. 18A :39—1.

As defendants point; out, there are several other exclusionary aspects of the statute; no child who attends a private school, profit or non-profit, is entitled to transportation if he lives (a) within 2 miles of the school and is in an elementary grade; (b) within 2.5 miles of the school and is in a secondary grade; (c) more than 20 miles from the school regardless of grade level; (d) in a district which provides no transportation for its public school students; (e) in a district which only transports handicapped children pursuant to N. J. S. 18A :46—23; (f) in a district which only provides transportation to children attending public vocational school, or (g) at such a distance that it; would cost in excess of $150 to transport him to school.

But for one to contend that these exclusions establish an improper legislative intent within the comprehension of the First Amendment would be clearly erroneous. It does not follow that because the Legislature did not provide transportation for all students that it intended the schools and not the pupils to be the beneficiaries of the statute.

By the same reasoning, the exclusion of students attending private schools outside the State does not demonstrate the Legislature’s concern with schools rather than students. New Jersey transports its public school students only within the State. The thrust of the law is portal-to-portal for safety reasons. It may have been this fact alone which prompted the exclusion and also no transportation to state lines. (It might be pointed out that there is no reason to believe that the great majority of out-of-state private schools attended by our. students are not parochial schools. While the court was presented with no evidence in this regard, it was stipulated that over 91% of the private school students in the United States attend schools operated under the auspices of the Roman Catholic Church.)

The court finds that plaintiffs have failed to establish that the purpose of N. J. S. 184 :39-1 is the advancement of religion, in contravention of the First Amendment. The court further concludes that the exclusion of children attending the few private, profit-making schools and out-of-state schools from the benefits of N. J. S. 184 :39-1 was a valid and proper exercise of legislative discretion and gives rise to no inference that as a result of this de minimis exclusion the Legislature has evinced an intention to aid sectarian schools.

Plaintiffs also argue that the primary purpose and effect of the statute is the advancement of religion. It is apparent that the primary effect of the statute involved in Everson was to benefit the student recipients of the transportation aid. See Abington School Dist. v. Schempp, supra. Therefore., the primary effect of the current statute can only be the same unless rendered otherwise by the differences between the statutes already alluded to. Plaintiffs contend that while private school students were given equal benefits under the prior law by virtue of the fact that they were bussed along established public school routes, these students now may travel special routes to private schools and hence are being given greater benefits and opportunities and can attend any schools of their choice within 20 miles. The benefit being bestowed on the students by the State, however, is not a bus ride, per se; it is the transportation to and from their schools. Special bus routes may be required in order to confer equal benefit on students since not all private schools are located on these public school lines, which, of course, are set with respect to the locations of the public schools. In any event, Í cannot conceive that the primary purpose of benefiting the students, found in Everson, has been altered by the adoption of different bus routes.

Plaintiffs have submitted to the court the New Jersey State Department of Education report on school bus accidents in the State of New Jersey for the period July 1, 1962 through June 30, 1,967. It is their position that the statistics in the report cast some doubt on the assumption that school busses provide a safe method of transportation for children. However, the figures for that five-year period show that an average of 350,000 students were transported to and from school by bus each year; that a total of 270,000,000 miles were traveled, and yet less than 73 students received injuries due to school bus accidents. While the court was not supplied with any data against which to compare or assess these figures, it seems unlikely that school bus transportation is as dangerous as other means of transportation. See e. g. Rhoades, supra, 226 A. 2d 53, 57.

hi any event, plaintiffs misconceive the “child benefit theory” if they construe it as simply involving the safety of children in traveling to and from school. The benefit involved also encompasses convenience of access to school and the assurance of their arriving at school.

Everson made it perfectly clear that the transportation of'students to parochial schools serves a public purpose. 330 U. S., p. 7, 67 S. Ct. 504, 91 L. Ed. 711; Cochran v. Louisiana State Board of Education, 281 U. S. 370, 50 S. Ct. 335, 74 L. Ed. 913 (1930). Then, too, under N. J. S. 18A :39-1 no nonpublic school child can be .transported unless the school - district in which he resides is transporting public school children. It is, obvious, therefore, that the law does not .primarily benefit parochial school students..

The constitutionality of. N. J. S. A. 18:14-8 was challenged as recently as 1967. See Fox v. Board of Education of West Milford Tp., 93 N. J. Super. 544 (Law Div. 1967), where defendant board of education contracted for the transportation of parochial school students along special bus routes. The court there held the contract invalid as being beyond the scope of the statute which provided for the bussing of private school students along established public school bus routes. However, Judge Larner did not find the statute to be. unconstitutional. Concerning the effect of the establishment of separate bus routes for parochial schools on the constitutionality question, he stated:

.. “And the mere fact that the contracts in West Milford cover routes established specifically for parochial school children and involve payments to an independent contractor cannot serve as a distinguishing springboard to avoid the binding effect of Everson on the broad constitutional issue. I must therefore conclude that the legislation contained in N. J. S. A. 18:14-8 and the bus transportation contracts do not violate the First Amendment of the Federal Constitution.” (at p. 558)

While the decision, in Fox is not necessarily binding on this court, I believe it to be correct.

Under N. J. S. 18A :39—1, students attending private schools may receive transportation up to 20 miles each way. While this distance in many instances is greater than that to which public school students are entitled; since they must attend public schools in' the district in which they reside, tills fact has no significance with respect to the First Amendment question. It was stipulated by plaintiffs at trial that their attack on the constitutionality of N. J. S. 18A :39-1 was directed exclusively and solely to the alleged contravention of the First Amendment’s mandate and was not predicated on any theory or concept of discrimination under the Fourteenth Amendment.

It is further contended by plaintiffs that the providing of transportation to parochial school students will encourage students to attend these schools who otherwise would not. But the fact that some children may attend parochial schools who might not otherwise do so does not lend substance to plaintiffs’ claim that N. J. S. 18A :39—1 advances religion. Mr. Justice Black said in Everson:

‘‘It is undoubtedly true that children are helped to get to church schools. There is even a possibility that some of the children might not be sent to the church schools if the parents were compelled to pay ilieir children’s bus fares out of their own pockets when transportation to a public school would have been paid for by the State.” (330 U. S., at p. 17, 67 S. Ct., at p. 512.)

This language was quoted in pertinent part with approval by the United States Supreme Court in Allen, supra; 392 U. S., p. 242, 88 S. Ct. 1923, 20 L. Ed. 2d 1060 and Everson disposed of this contention, as observed by Mr. Justice Frankfurter in McGowan v. State of Maryland, 336 U. S. 420, 467, 81 S. Ct. 1101, 1153, 6 L. Ed. 2d 393 (1961).

It has not been demonstrated to this court that the introduction of special bus routes and a maximum assistance of $150. can or does alter the primary purpose of the transportation legislation or embodies any religious test upon the granting of transportation benefits.

For the reasons expressed, it is this court’s conclusion that plaintiffs’ contentions that N. J. S. 18A:39-1 violates the establishment clause of the First Amendment to the United States Constitution is without merit, and summary judgment dismissing the complaint should be entered in favor of the defendants.

       Prior to its amendment by L. 1968, c. 29, N. J. S. A. 18A :39-1 did not provide for a maximum per pupil expenditure.


author: Lane, J. S. C.

text:
    SIDNEY HUBSCHMAN, PLAINTIFF, v. JOSEPH BRODA AND ELEANOR BRODA, HIS WIFE, DEFENDANTS.
    Superior Court of New Jersey Chancery Division
    Decided November 14, 1968.

      Mr. Allan Shoopuh attorney for plaintiff.

      Mr. Paul R. Williams, Jr. attorney for defendants.
   Lane, J. S. C.

The complaint seeks foreclosure of a real estate mortgage securing a bond of defendants to plaintiff in the sum of $109,000. Defendants admit there was a default under the mortgage but dispute the amount due, alleging usury. The matter is before the court on final hearing.

Defendant Joseph Broda, being in need of $100,000, approached -James Bucetola to see if Bucetola could obtain for Broda a loan from plaintiff in the amount of $100,000. Bucetola demanded $9,000 for his services. Closing of the loan took place on December 16, 1965, at which time plaintiff advanced $109,000, this amount being secured by the bond and mortgage in question. By cheek dated December 17, 1965, Joseph Broda paid $9,000 to Bucetola Bros., James Bucetola’s contracting concern.

The mortgage was for a period of one year at the rate of 6% interest payable quarter-annually. During that one-vear period Broda made four interest payments, each in the amount of $1,635. At the expiration of the one year he was unable to raise the monejr io pay off the mortgage. He approached plaintiff, who granted an extension of three months for an additional consideration of $5,000. At the end of the extension period defendants were still unable to raise the money to pay the mortgage and a second extension of three months was granted by plaintiff for an additional consideration of $5,000. Upon the expiration of the second extension, defendants still being unable to pay the' mortgage,, this action was instituted. •

. Plaintiff denies that' he knew Eucetola- was paid $9,-000 Jor procuring the Joan.-. Eucetola is in the contracting business. I-Iis relationship -with plaintiff apparently ■ started when he constructed a large store for plaintiff’s former business — Two Guys Erom Harrison. The relationship between plaintiff and Eucetola was shown to be very close. Plaintiff had discounted $45,000 worth of notes for Eucetola as long ago as 1963. Eueetola’s company had done construction for plaintiff and was engaged-in'business ventures with trusts set up for plaintiff’s children and controlled by plaintiff. '-During their relationship plaintiff had loaned Fucetola or his company approximately $250,000. In connection with' an apartment project in Spring Lake, Eucetola’s company assisted in supervising under an oral contract, as a result of which $25,000 was paid. Although plaintiff testified that during the two-month period preceding the trial he had spoken to Eucetola twice, Eucetola testified that they had spoken at least once a week. At the time of the hearing there was $165,000 outstanding from Fucetola’s company to plaintiff.

Eucetola was present at the closing of the loan. During the closing, Joseph Broda, Eucetola and plaintiff excused themselves from the room and conferred privately. Having due regard for the credibility of the witnesses, the court finds as a fact that that conference concerned the payment of $9,000. Plaintiff and Eucetola were not credible.

Additional support for the finding that' plaintiff at least knew that $9,000 was being paid in connection with the loan is given by a memorandum sent to defendants by or on behalf of plaintiff. That memorandum says in part:

“Balance
$109,000.00 12-16-67
5,000.00 Points for extension to 2-14-67
$114,000.00 12-16-67 bal.”

This clearly indicates knowledge on the part of plaintiff that the amount actually retained by Joseph Broda was not $109,-000 but rather $100,000.

Although Joseph Broda contends that plaintiff in fact received the $9,000 through Eucetola’s company, it is not necessary that the court make that finding. In Ahrens v. Kelly, 88 N. J. Eq. 119 (Ch. 1917), affirmed 89 N. J. Eq. 586 (E. & A. 1918), the court in an action to foreclose a mortgage held the transaction usurious, saying:

“It was further contended that in case the transaction was tainted with usury, Albanesius, who negotiated the loan, was the agent of Kane, and not of Ahrens, the complainant, and that he (Ahrens) knew nothing about the arrangement between Kane and Albanesius, and that if the former had any reemdy it was by suit against the latter for illegal brokerage. The facts developed at the hearing satisfied me that the complainant, Ahrens, knew all about the Kane transaction with Albanesius, and that he must be held accountable within the rule laid down by Vice-Chancellor Van Fleet in Borcherling's Ex'r v. Trefz, 40 N. J. Eq. 502, ‘that to taint a contract with usury it is not necess.ar.v that the illegal interest or bonus shall have been taken by the lender himself, but if it be shown that the illegal consideration was paid to some other person than the lender, pursuant to the terms of the contract of loan, with the knowledge of the lender, the contract must be declared usurious.’ This view has been numerously followed.” (at p. 121)

This holding appears to be in accord with the majority rule. See Annotation, 52 A. L. R. 2d 703, 748 (1957).

The facts surrounding the Ahrens case are strikingly similar to the facts in this case. At the very least here, in accordance with the terms of the contract of loan, an illegal consideration was paid, to the knowledge of plaintiff. The payment of the illegal consideration was in violation of R. S. 31:1—1. In re Greenberg, 21 N. J. 213, 219 (1956).

In addition, the two payments of $5,000 for extensions of the due date rendered the extensions usurious and will be deemed to have been payments on the principal debt. See Heilos v. State Land Co., 113 N. J. Eq. 239, 242 (Ch. 1933).

Defendants initially urged that by reason of the fact that the loan was usurious, all payments made should be credited to principal and that plaintiff should not be allowed to retain any interest whatsoever under R. S. 31:1—3. Defendants now admit that that provision is applicable not to interest that has already been paid within the legal limit but rather only to interest unpaid. In D’Onofrio v. Galliotto, 118 N. J. Eq. 271 (1935), the Court of Errors and Appeals, in modifying a.decree'of the Court of Chancery, stated:

“The decree erroneously gives credit to the defendants for the full amount of interest, legal as well as illegal, already paid to the complainant on the usurious loan. The statutory provision (An act against usury, 4 Comp. St. p. 5705 § 2) is that in suits to collect under a usurious contract ‘the amount of value actually lent without interest or costs of suit may be recovered and no more,’ and there are numerous decisions in consonance therewith. But of course the lender does not sue to recover that which has already been paid to him. The pertinent words of the statute as to payments made before the bringing of suit appear in the same section and are: * * if any premium or illegal interest shall have been paid to the lender, the sum or sums so paid shall be deducted from the amount that may be due as aforesaid and recovery had for the balance only.’ ‘The sum or sums so paid’ manifestly are premium or illegal interest. Interest up to and including six per centum per annum on the amount actually lent is not illegal; consequently the deduction to be credited on that account is the usurious interest paid in excess of that percentage. Kohn v. Kelly, 76 N. J. Eq. 132, and cases therein cited; Frankel v. Major, 9 N. J. Misc. 96; Colleran v. Wall, 116 N. J. Eq. 284. Interest paid on so much of the mortgage amount as represented bonus and not money loaned was illegal and is to be applied as a credit if in conjunction with other interest moneys it totalled to more than 6 per centum per annum of the real sum.” (at pp. 274-275)

The original mortgage debt, therefore, after deducting the $9,000 illegally exacted, was $100,000. During the first year there was paid $6,540 as interest at 6% on the $109,000. Plaintiff was only entitled to be paid, during that period interest at $6,000. There will, therefore, be credited to the principal sum of $100,000 the sum of $540. In addition, the two payments of $5,000 each for the mortgage extension will be .applied to principal. In fact, however, notes were given. On February 14, 1967 defendant paid $4,000 on the first note. On March 6, 1967 he paid another $4,000. Notwithstanding that plaintiff testified he unilaterally applied •$1,000 to the note given for the first extension, $1,480 to interest and $1,510.20 on account of principal, this court finds that there was no such allocation at the time of payment. Therefore, this entire $4,000 will be deemed to have been paid on account of the extensions and not for any interest. The $8,000 paid for the extensions will be applied in reduction of principal. There is, therefore, due under the mortgage $91,460 ($109,000 less $17,540) for which plaintiff may have a judgment for foreclosure without interest, without costs and without counsel fees. The judgment will declare the notes cancelled and order plaintiff to deliver them to the defendants within ten days.


author: Triarsi, J. D. C.,

text:
    ROBERT TOKER AND MILDRED TOKER, DOING BUSINESS AS BUDGET ASSOCIATES OF NEW JERSEY, PLAINTIFFS, v. JEFFREY OTTO PERL, ALSO KNOWN AS JEFFERSON OTTO PERL, AND DIANE PERL, DEFENDANTS.
    Superior Court of New Jersey Law Division
    Decided November 13, 1968.

      Mr. Charles B. Turner, attorney for plaintiffs.

      Mr. Ronald B. Rosen for defendants (Mr. George M. Chamlin, attorney).
   Triarsi, J. D. C.,

(temporarily assigned). This is a suit for a deficiency under an installment sales contract made between defendants and People's Foods of New Jersey, Inc. assignor of the plaintiffs.

On September 5, 1966 an agent of People’s Foods. Inc. arrived at defendants’ home for a prearranged appointment. The ensuing interview, which lasted about three hours, centered around food plans that could be arranged by People’s Foods. For the first 2>y2 hours no mention was made of a freezer. However, sometime within the last half-hour of the interview, when it became apparent that the plan called for the purchase of 18 weeks of food at a time, defendants mentioned that they had no facilities to store such a large quantity of food. The agent replied that a freezer was included in the food plan.

Following the explanation of the food plan, and when Mrs. Perl was out of the room, the agent presented three forms to defendant husband and asked him to sign them. He was informed that the documents were the agreed-upon plan for 18 weeks of food.

The forms were placed before defendant, one on top of the other, leaving visible only the signature line on the lower two forms. The top page was the food plan contract. Whim Mrs. Perl returned she also signed the three forms which were presented to her in the same manner as they had been presented to her husband.

The agent left the house around midnight, at which time defendants retired for the evening. The next morning defendants examined the papers they had signed and discovered that in addition to the food plan they liad signed a financing application and an installment contract for a freezer.

Defendants immediately attempted to cancel the freezer contract. However, all communications with People’s Foods proved fruitless. Thereafter both the freezer and a quantity of food were delivered to defendants’ residence.

In addition to the unwanted freezer, defendants found that the quality and quantity of food delivered was not in conformity with the contract nor the representations made to them. After People’s Roods failed to rectify this, defendants ceased making payments on the freezer.

All of these undeniable facts were established from the wholly credible evidence offered by defendants. Plaintiffs did not offer any evidence in contravention.

Sometime after the signing of the contract plaintiffs, who trade under the name of Budget Associates of New Jersey, were assigned the installment contract. They, in turn, assigned the contract to the Community National Bank and Trust Company of Richmond, with recourse.

At trial defendants presented an expert witness who testified that the freezer delivered by People’s Roods had a maximum value of $300. The installment contract signed by defendants provided for a purchase price of $799.95, sales tax of $24, group creditor life insurance of $16.93 and a credit service charge or time-price differential of $252.08. The total price of the freezer was $1,092.96, to be paid in 36 monthly installments of $30.36.

It has been stipulated that plaintiffs are subject- to any defenses defendants may allege against their assignor, People’s Roods.

Defendants allege fraud in the procurement of the contract by the agent of People’s Roods, and also that the contract is unconscionable under N. J. S. 12A :2-302.

It is beyond contention in this State that a knowing misrepresentation by one party as to the contents of a contract amounts to fraud. Such a contract may be voided on the theory that the defrauded party never agreed to the terms of the contract. McDonald v. Central Railroad Co. of New Jersey, 89 N. J. L. 251 (E. & A. 1916).

In the present case it is the opinion of this court that People’s Roods defrauded defendants when it procured their signatures on the freezer contract. Their agent led defendants to believe that the freezer was included in the price for the food plan. Nowhere in the record is there any evidence that defendants ever knew they were signing an installment contract for a freezer.

Plaintiffs, however, contend that the failure of defendants to read what they were signing contributed to their own misfortune. It is therefore plaintiffs contention that defendants should be estopped from alleging fraud because of their own negligence.

This court docs not disagree with plaintiffs’ statement of the law. It agrees with it. N. J. Mortgage & Investment Co. v. Dorsey, 60 N. J. Super. 299 (1960), affirmed 33 N. J. 448 (1960). However, this court is constrained to apply the doctrine of the late Mr. Justice Frankfurter in United States v. Bethlehem Steel Corp., 315 U. S. 289, 62 S. Ct. 581, 86 L. Ed. 855 (1942), as adopted by our own Supreme Court in Unico v. Owen, 50 N. J. 101 (1967). He said:

“* # * [Tjlio. courts will not permit themselves to be used as instruments of inequality and injustice!.] Does any principle in our law have more universal application than the doctrine that courts will not enforce transactions in which the relative positions of the parties are such that one lias unconscionably taken advantage of the necessities of the other?” (at p. 111-112)

See also Henningsen v. Bloomfield Motors, Inc., 32 N. J. 358 (1960). If this court were to hold that defendants were negligent and therefore estopped from alleging fraud, it would permit itself to be used as an instrumentality of “inequality and injustice.”

The fads in Westfield Investment Co. v. Fellers, 74 N. J. Super. 575 (Law Div. 1962), are remarkably similar to the facts of the case at bar. There, too, defendants signed a conditional sales contract for a freezer in the belief that they were signing a food plan contract. And there also the court felt that plaintiffs’ actions were fraudulent.

It is also the opinion of this court that the exorbitant price of the freezer makes this contract unconscionable and therefore unenforceable. N. J. S. 12A :2-302 provides:

“(1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made, the Court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.”

Although the courts of this State have never been asked to apply this section of the Uniform Commercial Code to the price term of a contract, our sister state of New York has recently held that “excessively high prices may constitute unconscionable contractual provisions within the meaning of section 2-302 of the Uniform Commercial Code. Central Budget Corp. v. Sanchez, 53 Misc. 2d 620, 279 N. Y. S. 2d 391, 392 (Sup. Ct. 1967). See also Frostifresh Corp. v. Reynoso, 52 Misc. 2d 26, 274 N. Y. S. 2d 757 (Sup. Ct. 1966), reversed on other grounds, 54 Misc. 2d. 119, 281 N. Y. S. 2d 964 (App. Div. 1967), where the issue of fraud was not before the court but the contract was not enforced according to its tenor solely on the grounds of unconscionability.

The conscience of this court is shocked by the price .imposed upon these defendants for the freezer. The testimony in court valued the freezer at no more than $300. The price charged was in excess of 2pá times the maximum value. The time-price differential alone almost equalled the value of the freezer. In the light of these facts, this court is constrained to hold the price in this contract unconscionable.

It is therefore the opinion of this court that the contract is unenforceable because it was procured by fraud and is unconscionable.


author: Labrecque, J. A. D.

text:
    PETITION OF PUBLIC SERVICE COORDINATED TRANSPORT FOR APPROVAL TO COMBINE THE PORT NEWARK BUS ROUTE No. 4 (P.U.C. ROUTE-FILE No. 310-348) AND THE ORANGE BUS ROUTE No. 21 (P.U.C. ROUTE-FILE No. 457-348) TO BE KNOWN AS THE ORANGEPORT NEWARK BUS ROUTE No. 21 (P.U.C. ROUTE-FILE No. 457-348) PUBLIC SERVICE COORDINATED TRANSPORT, PETITIONER-RESPONDENT, AND INDEPENDENT BUS OWNERS’ ASSOCIATION, ETC., ET AL., RESPONDENTS-APPELLANTS.
    Superior Court of New Jersey Appellate Division
    Argued November 4, 1968
    Decided November 25, 1968.

      Before Judges Gatjlkiki, Collestee and Labreoque.

      Mr. Paul J. O’Neill argued the cause for appellants Independent Bus Owners’ Association, etc., and others.

      Mr. Thomas J. McGlusTcey argued the cause for respondent Public Service Coordinated Transport (Mr. Richard Fry ling, attorney).

      Mr. Arthur J. Sills, Attorney General, filed a statement in lieu of brief on behalf of respondent Board of Public Utility'Commissioners (Mr. William Gural, Deputy Attorney General, of counsel).
   The opinion of the court was delivered by

Labrecque, J. A. D.

Appellants, competing independent bus operators on the West Orange, Springfield Avenue, South Orange Avenue and Roseville bus routes (the independents), appeal from a decision of the Board of Public Utility Commissioners (the Board) approving the petition of Public Service Coordinated Transport (Public Service) to combine its No. 21 Orange bus route with its No. 4 Port Newark bus route into a through route to be known as No. 21 Orange-Port Newark bus route.

Previous to the filing of its petition Public Service held permits to operate 50 buses on the Orange line between the Mississippi Avenue loop in West Orange and the Pennsylvania Station in Newark, and 20 buses on the Port Newark line between its Roseville garage (at 14th Street) and Newark Airport and Port Newark. The petition sought approval of the operation of the two lines as a single one, thereby eliminating passenger changes for Orange line passengers destined for points east of Pennsylvania Station, Newark, and passengers from Port Newark whose destinations were points west of 14th Street. The application was opposed by the independents, some of whom gave transfers to passengers traveling east of Pennsylvania Station.

At the hearing testimony was received from Public Service’s traffic manager and six public witnesses. The independents called no witnesses. The examiner reported that the combination of the two lines, providing direct service from West Orange to Port Newark, was in the public interest and better met the requirements of public convenience- and necessity, and recommended approval. The independents filed exceptions which were, after hearing, disallowed by the Board. The present appeal is from the Board’s order granting the application.

We first dispose of the contention by Public Service that appellants were without sufficient standing to oppose the application. In Public Service, etc., Transp. v. Newark-Elizabeth, etc., Ass’n, 3 N. J. 118, 122-125 (1949), on which it relies, the application involved only the substitution of a similar number of one type of vehicle for another type, and while the objecting independent bus operators had some slight private interest in the action, there was not the slightest public interest to harmonize with it. See Elizabeth Federal S. & L. Ass’n. v. Howell, 24 N. J. 488, 503-504 (1957). Here the potential adverse affect of the proposed change in operation upon the portion of appellants’ revenues derived from passengers carried by them destined for points west of 14th Street, and east of Pennsylvania Station, cannot be said to be beyond the pale of the public’s interest in safe, adequate and solvent mass transit. Cf. id., at pp. 501-503. We hold that appellants had standing to oppose the application and maintain the present appeal. N. J. S. A. 48:4-11.

I

Appellants first contend that the proofs adduced failed to establish that the proposed combination “is necessary and proper for the public convenience and properly conserves the public interests.” R. S. 48:2-14. We arrive at a contrary conclusion.

The Board has jurisdiction to pass upon service or operating changes such as the present one. N. J. S. A. 48:2—13; R. S. 48:2-14. Where the Board has passed on a question within its jurisdiction, its finding should not be reversed unless unwarranted in law or unfounded in fact, or unless a discretionary power has been plainly abused. Hud son Bus, Transp. & Co. v. Board of Public Util. Com’rs, 131 N. J. L. 576, 579-580 (Sup. Ct. 1944); Hohorst v. Marion Bus Transp. Co., Inc., 5 N. J. Super. 279, 282 (App Div. 1949). Here we find the conclusions of the Board to be adequately supported by the proofs. The testimony of five of the six public witnesses pointed up the need for through service between the points indicated, and the inconvenience of changing buses at either 14th Street or Pennsylvania Station. The sixth public witness was of the opinion that operational difficulties would slow up the service if the lines were combined.

Edgerton, Public Service’s traffic manager since 1960, testified concerning the increase in the number of passengers using the airport, the advantages which would accrue to the public because of the through service, and the inconvenience attached to the change of buses necessitated by the present method of operation. He also testified that the company’s Roseville garage and terminal had been condemned for a new highway, thus doing away with the waiting room used by passengers changing from one line to the other and compelling passengers to make the transfer in the open. He also cited the economic advantage to the company which would follow the decrease in layover time which would result from the combination.

Although they produced no witnesses in opposition, appellants urge that the order should be set aside because the applicants’ proofs, while adequate to demonstrate that the proposed through service would be a “convenience” to the traveling public, failed to establish that it was a “necessity.” In general, the words “necessary and proper” mean appropriate and adapted to carrying into effect a given object. Cf. Martin’s Executors v. Martin, 20 N. J. Eq. 421, 428 (Ch. 1870). In the ease of service changes such as the one here proposed the test is public convenience and necessity. In re New Jersey & New York R. Co., 12 N. J. 281, 289 (1953). However, necessity need not be shown in the sense of essential or absolutely indispensable but the predominating and controlling element is the factor of public need for the proposed service. Cf. Pennsylvania R. Co. v. Bd. of Public Utility Com'rs, 11 N. J. 43, 51 (1952). It is sufficient if the proposed service be found to be reasonably requisite to serve the public convenience, Abbott v. Public Utilities Comm., 48 R. I. 196, 136 A. 490 (Sup. Ct. 1927), and conserves the public interests. R. S. 48:3-14.

Hero the Board was vested with a degree of expertise which placed it in a favorable position to judge from the testimony referred to whether the requisite test had been met. In re Greenville Bus Co., 17 N. J. 131, 137 (1954). We may not substitute our judgment for that of the Board but are confined to determining whether the evidence before it furnished a reasonable basis for its action. Id., at p. 138. We are satisfied that it did.

II

Appellants next urge that since Public Service had not obtained municipal consents to extend the operation of route No. 21 east beyond Pennsylvania Station, or of route No. 4 west beyond 14th Street, the Board was without jurisdiction to permit through service. Not so. We are here concerned only with a service change whereby through service was authorized over two routes for which Public Service presently held municipal consents. The application was not for an extension of or increase in service, but for a combination or coordination of routes already authorized. The number of buses to be operated on each segment of the route remained the same, i. e., 50 buses on No. 21 and 20 on No. 4. There was to be no change in fares, scheduling or routing. The municipalities along the route were not deprived of their right to object to the through operation since any objections they may have had could have been presented at the hearing before the Board. Here there was none.

III

• Defendants’ remaining point may be summarized thus: Since the applicant’s consents to operate the No. 21 line were derived from its original franchises under the Traction Act, and its consents for the No. 4 line were derived from the so-called “Kates” Act, L. 1916, c. 136 (now N. J. S. A. 48:4-1 et seq.), the Board was without jurisdiction to approve through service by means of a combination of the two routes.

Public Service Coordinated Transport is a successor to Public Service Railway Company and Public Service Transportation Company. The former was organized under the provisions of the Traction Act of 1893, L. 1893, c. 172, and the No. 21 (Orange) bus line is the outgrowth of a street railway line formerly operated by it between West Orange and Newark. By virtue of N. J. S. A. 48:15-41, first enacted in 1934, authority was given to substitute trolley buses or trackless trolleys (here in the form of “all service” vehicles) in lieu of electric street cars. These were deemed to be buses for the purposes of traffic regulation and taxation. N. J. S. A. 48:15-43.2. Thereafter, by virtue of L. 1946, c. 71 (now N. J. S. A. 48:15-41), Public Service was permitted to operate buses in lieu of trolley buses, conditioned only upon approval of the Board.

.The Kates Act provided an alternative means of securing the right to operate buses over public streets. It required that applicants first obtain the consents of the municipalities through which the auto bus was to be operated. N. J. S. A. 48:4-3. Companies organized under the Traction Act desiring to operate buses could also proceed under L. 1925, c. 244, R. S. 48:15-37 (permitting direct operation of bus lines), or L. 1928, c. 52, R. S. 48:15-38 (permitting buses in substitution for street railway service), upon obtaining municipal consents therefor. See Public Service, etc., Transp. v. Newark-Elizabeth, etc., Ass’n, supra, 3 N. J., at pp. 125-126.

We hold that the Board was vested with jurisdiction to order that service on Routes 21 and 4 be combined for purposes oí operation so as to afford through service, notwithstanding the diverse origins of the municipal consents for their operation.

Appellants would have us hold that the Board was required to apply different service standards, based upon the origin of their rights to operate, to bus lines operating under its jurisdiction. They cite no authority which so holds and we know of none. We are told that in a number of prior decisions the Board has entered orders permitting the combination of bus lines which originally had been street railway lines with bus lines operating under the Kates Act. Such an interpretation by an administrative agency carries great weight in the resolution of any ambiguity in the statute setting forth its powers. In re Borough of Glen Rock, 25 N. J. 241, 246 (1957).

Wholly aside, however, it appears clear that the Board was not precluded from entering the challenged order. By statute it is given general supervision and regulation of, and jurisdiction and control over all public utilities, their equipment, franchises and facilities. N. J. S. A. 48:2-13. These include both street railways and bus lines. Ibid. The Board is authorized to require that the operators of bus lines render safe, adequate and proper service to the public and that their equipment be maintained in such condition as to enable this to be done. N. J. S. A. 48:2-23. It may compel just and reasonable connections with other lines. Atlantic Coast Elec. R. Co. v. Public Utility Board, 92 N. J. L. 168, 175-176 (E. & A. 1918). Further, in respect to coordinated bust and street railway operations (such as were those of Public Service), R. S. 48:15-40 provides that:

“Whenever, in order to serve the public convenience, any street railway or traction company is lawfully operating autobusses in conjunction with its street railway, lines, and its autobusses and street railway lines are operated by such company as a co-ordinated system of street transportation, such company as to such system shall be deemed in all respects and for all purposes to be a single public utility furnishing a single service subject to the supervision and regulation, jurisdiction and control of the board of public utility commissioners; * * (Emphasis added)

In the preamble to the foregoing section (L. 1928, c. 52) the Legislature recited that when street cars and buses “are lawfully operated by the same companjq efficiency and economy and the interests of the public will be best promoted through a complete .coordination and unification of the two utilities so that the same may be considered in all respects as one and operated as such under the regulation of the Board * * *.” We cannot .believe that the Legislature intended that the authority thus vested in the board was to terminate when the operator of a coordinated transit-system substituted buses for street cars.

Additionally, we perceive no reason or logic which supports appellants’ contention. Whether a bus line be operated under the Kates Act or in lieu pf street railway operation under the Traction Act, the carrier’s obligation is the same, i. e., to furnish safe, adequate and proper service at a fare to be fixed by the Board. In line with this obligation, “in lieu” bus operation may be permitted over streets other than those covered by -the carrier’s street railway franchise. N. J. S. A. 48:15-43.3. Appellants urge that since, where buses are substituted for street ears, the statute provides that service by bus shall be considered as compliance with the company’s railway franchise, R. S. 48:15-43, and authorizes the Board to permit the resumption of street ear service over the route, N. J. S. A. 48:15-42, the practical result of the Board’s decision here is to authorize the extension of the street railway service formerly operated between West Orange and the Pennsylvania Station to the airport and Port Newark. Not so. The decision permits no more than the operation of buses (limited to 20) over the Port Newark section of the proposed route. It does not •— and could not — permit the resumption of any type of railway service to the airport over streets for which the applicant had no franchise, unless municipal consents were first obtained. N. J. S. A. 48:15-29.

Affirmed.


author: Kramer, Paul R., J. C. C.

text:
    STATE OF NEW JERSEY, v. ROSARIO BONGIORNO AND SAMUEL ZORN, DEFENDANTS.
    Superior Court of New Jersey Law Division—Criminal
    Decided November 18, 1968.

      Mr. John Harrison, Assistant County Prosecutor for the State of New Jersey.

      Mr. Barry T. Parker for defendants (Messrs. Parker, McGay cC- Griscuolo, attorneys).
   Kramer, Paul R., J. C. C.

(temporarily assigned). This is a motion to suppress evidence, namely, allegedly obscene magazines or booklets seized from two defendants as they traveled through the State of New Jersey from New York to Maryland.

The State contends that on April 10, 1968, at about 1:48 R. m., Trooper Talpas of the New Jersey State Police was patrolling the New Jersey Turnpike in Mount Laurel Township, Burlington Countjr, when he saw a 1968 blue Plymouth sedan with New York license plates. This car was proceeding in a southerly direction and riding low in the rear.” Defendant Zorn was the operator of the vehicle and defendant Bongiorno a passenger. It ultimately appeared that Zorn had borrowed the vehicle from one Varrone, who had rented it from the Kenny Car Rental System. The trooper stopped the vehicle for a routine check and was shown the proper license and ownership papers.

At this point the testimony becomes divergent, with defendants contending that the trooper peremptorily ordered the trunk opened, after which he seized the keys, opened the trunk and began ripping open unmarked cardboard cartons. I have concluded, on the basis of my observation of defendants and the manner in which they testified, that they were not telling the truth and that • Trooper Talpas merely questioned them as to why the ear was riding so low in the rear, whereupon defendant Zorn attempted to bluff his way out of the situation and be on his way as soon as possible. The trooper’s testimony was that Zorn, in his efforts to persuade him that he was a legitimate businessman and should be released, volunteered that he had “art magazines,” said “Look, I’ll show you,” and then opened the trunk. I find that he himself opened one of the cardboard cartons and proffered the three exhibits to the officer.

Zorn selected three of the publications at random, which publications are as follows:

(1) Girls in Love. This is a paperback book which details the lesbian relationship of Suzotte and Liz, her paramour. In addition to textual material detailing love-making, both homosexual and heterosexual, there are numerous colored photographs showing numbers of women wrestling, whipping-one another or lying about embracing. In most of these photographs the breasts are exposed, the positions are suggestive, and the women wear only panties, stockings and shoes.

(2) Grey Huff, No. 4 DSI. This is a publication, evidently directed toward the homosexual market, consisting mostly of large photographs (colored and uncolored) of nude males with no attempt to either emphasize or hide the genitalia. Some sophistication is attempted, with brief one-or two-page articles on obscenity and punishment for homosexual crimes, and there are purportedly humorous short stories dealing with homosexuality.

(3) Jet Set, vol. 3. This is a magazine showing only nude females, all of whom are in suggestive positions with legs spread so as to accentuate the female sex organ.

The trooper testified that upon scanning the magazines by the side of the road he “thought they were obscene,” advised defendants that he had never seen anything like them and would not want any member of his family to see them, whereupon he took defendants to the nearest barracks. They were held there a short period of time until the chief of the Burlington County detectives arrived. Chief McConnell declared the publications obscene and defendants were advised they were under arrest.

Having determined that there was no initial search in view of Zorn’s desire to convince the trooper that he was a legitimate businessman dealing with art magazines, the court is now met with the difficult problem as to whether a valid arrest was made (either by the side of the New Jersey Turnpike when defendants were directed to accompany the trooper, or later at the barracks when Chief McConnell declared the publications obscene and used formal arrest language), and whether the search at the barracks was lawful.

I find and determine that the arrest and search were reasonable under the facts here presented. I cannot accept the principle that under no circumstances may a police officer ever arrest when confronted with extreme examples of ffiiardcore pornography.”

Defense counsel has argued capably the point that normally there should be judicial intervention in obscenity cases before either an arrest or a search may be accomplished. He contends that in view of the First Amendment, the right against unreasonable search and seizure protected by the Fourth Amendment requires higher procedural standards in such matters. It is argued that when obscene materials are shown to a police officer, he may never arrest and then search unless he has first gone to the nearest magistrate or court where the judicial mind can apply the delicate standards governing obscenity as laid down by our courts. Counsel cites State v. Parisi, 76 N. J. Super. 115 (Cty. Ct. 1962), as authority for his argument.

I cannot quarrel with the opinion of then County Court Judge Matthews.' In that case the arrest and subsequent search were held unlawful in a situation where the detective made purchases of various publications from a' newsstand. He would then take -his purchases home, read them, determine whether the publications were -obscene and, if so, proceed back to the newsstand for the' arrest and search.

It seems to me that the desirable alternative of having á' judge make the initial determination as to obscenity requires such a holding — where there is ample opportunity for the police officer to present the materials to a judge. Incidentally, there is no indication in Parisi as to the nature of the publications, i. e., whether they were the more innocuous girlie magazines or whether, as here, the publications pictured graphically and in color homosexuality and sado-masochism, as well as close-ups of the female sex organ.

In his supplemental memorandum defense counsel cites as authority both State v. Hudson County News Co., 41 N. J. 247 (1963), and Marcus v. Search Warrant of Property, 367 U. S. 717, 81 S. Ct. 1708, 6 L. Ed. 2d 1127 (1961). However, here again the courts were not dealing with cases involving motor vehicles. On the contrary, these cases represent instances where the police had obtained a search warrant but then carried out their search on the basis of their own ad hoc decisions. More specifically, in Hudson County News, Justice Proctor had before him a case where the detectives entered the defendant’s warehouse with their search warrant and upon viewing thousands of magazines and books stacked on the floor, spent 2hours selecting some 700 magazines which they considered obscene. There again there was no indication as to the degree of obscenity.

Similarly in the Marcus case, a police officer, while executing a search warrant used not only the list of obscene publications which was the basis of the issuance of the warrant but also exercised, while in defendant’s place of business, individual discretion in making determinations as to which other publications were to be seized.

An extensive and recent study of the subject is set forth in 5 A. L. R. 3d 1196 (1966), which deals with the ease of United States v. Arthur A. Peisner, 311 F. 2d 94, 5 A. L. R. 3d 1196 (4 Cir. 1962). Peisner at first blush might seem to present fads somewhat similar to those in the instant case. There defendant’s automobile was halted by New Jersey State Trooper on the Turnpike pursuant to information from the P.BE that defendant was contemplating interstate transportation of obscene literature. When the trooper observed packages or cartons wrapped in brown paper as well as loose books (there was no indication in the opinion as to the nature of the books), he determined that probable cause existed, arrested the occupants and searched the car.

The significant distinction between our case and Peisner is that in Peisner the FBI had had defendant under surveillance for an extended period of time. They had considerable background information concerning not only his activities but, further, had in their possession copies of obscene materials taken from defendant’s premises as early as five months previously. In short, they had ample opportunity to obtain a search warrant. Furthermore, the Circuit judge very carefully sets forth the following:

“Though safeguards are necessary to protect the products of a free press in accord with the dictates of the First Amendment, we are not prepared to say that there must have been a prior determination of obscenity by a judicial officer to constitute probable cause for a search for and seizure of particular publications thought to be obscene. However, as a minimal requirement, we deem it essential that some qualified, individual, aware of the proper test of obscenity as formulated and announced in Roth v. United States [354 U. S. 476, 77 S. Ct. 1304, 1 L. Ed. 2d 1498], supra, should have made a determination prior to search and seizure that a particular publication meets that test. * * *” (311 F. 2d, at p. 105, 5 A. L. R. 3d, at p. 1210; italics supplied)

Iji the present ease Trooper Talpas acted reasonably. He escorted the two men to the barracks and then, instead of relying upon his own determination or that of the officer in charge at the barracks, he called the chief law enforcement officer of the county, namely, Chief McConnell of the Burlington County Detectives. The latter then formalized the arrest and conducted the search of the remaining materials in the car. In view of this, and in light of State v. Boykins, 50 N. J. 73 (1967), which considers as a factor making for the reasonableness of the arrest or search the fact that the search was of an automobile — can it be said that either the arrest or the search in this case was unreasonable? I conclude not.'

To hold otherwise would be to say that on a crowded street an unidentified person might walk up to a police officer, exhibit to him photographs of the most indescribable filth, announce that he was about to sell them and then go about his business. The situation here is not much different. An automobile proceeding on one of our high-speed throughways is stopped because the officer suspects some sort of contraband. Photographs, as described above, are exhibited to the officer, yet defendant Zorn now contends that, after admitting to the officer that he was a magazine dealer transporting the books for sale, the latter should have turned his back and permitted defendants to go on their way. I cannot agree.

Por the reasons set forth above, the motion is denied.


author: Per Curiam.

text:
    HELEN B. BRYAN, INDIVIDUALLY AND AS EXECUTRIX OF THE ESTATE OF JOHN S. BRYAN, DECEASED, PLAINTIFF-APPELLANT, v. HENRY JEFFERS, JR., AND HENRY W. JEFFERS, III, DEFENDANTS-RESPONDENTS, AND NEW JERSEY MANUFACTURERS INSURANCE COMPANY, ETC., ET AL., DEFENDANTS.
    Superior Court of New Jersey Appellate Division
    Argued November 18, 1968
    Decided December 3, 1968.

      Before Judges Coxeord, Kilkexxy and Leoxakd.

      Mr. Herman W. Kapp argued the cause for appellant (Mr. Albert TF. Seaman, of counsel).

      Mr. Robert K. Monaghan argued the cause for respondents (Messrs. Schneider & Morgan, attorneys).
   Per Curiam.

We do not agree with the contention of plaintiff that the exception for “intentional wrong” in the statute eliminating tort liability, as between persons in the same employ, where the injury sued for is compensable by workmen’s compensation, N. J. S. A. 34:15-8, is equatable with “gross negligence,” or similar concepts importing constructive intent.

Our discussion of the background against which the cited provision of the Workmen’s Compensation Law was adopted by amendment in 1961 (L. 1961, c. 2) in Miller v. Muscarelle, 67 N. J. Super. 305, 321 (App. Div. 1961), certification denied 36 N. J. 140 (1961), demonstrates there was a strong legislative reaction against the previous practice of workmen suing fellow employees, even those in supervisory eapaoilies. after recovery of compensation against the common employer. It was there pointed out that in practical effect such actions often subject the employer itself to an indirect burden of liability to the injured employee beyond that scheduled by the workmen’s compensation act. Ibid. The policy objective sought by the 1961 amendment would not be attained if the exception for “intentional wrong” were construed to leave open a loophole for such actions against fellow employees in the guise of claims for “gross negligence.” We think the Legislature intended the words “intentional wrong,” in this context, to have their commonly understood signification of deliberate intention. Compare 2 Larson, Workmen’s Compensation Law, § 69.20, pp. 161-62, dealing with employer-misconduct statutes, where willful intent to cause injury is'held to require a showing of deliberate intention rather than gross negligence.

In view of the foregoing we need not consider whether there was a common-law liability of defendants to the decedent in respect of the dangerous condition of the autoclave, on thé fact situation here shown and the legal principles concerning duty laid down in relation thereto in Miller v. Muscarelle, supra (67 N. J. Super., at p. 331).

Judgment affirmed.


author: Matthews, J. S. C.

text:
    WILLIAM KUBECK, PLAINTIFF, v. CONCORD INSURANCE COMPANY, A CORPORATION; FLAHERTY, SHEEDY & RYAN, INC., A CORPORATION OF THE STATE OF NEW JERSEY; THOMAS M. FLAHERTY, JOHN J. SHEEDY AND JOHN P. RYAN, DEFENDANTS, AND ESTATE OF JOHN C. PERS, ROBERT RADUMSKY, MICHAEL ZVINAKIS, AGNES REA, MICHAEL E. COBB, COUNTY OF HUDSON AND/OR PUBLIC SERVICE ELECTRIC & GAS COMPANY, PROPER, NECESSARY OR INDISPENSABLE PARTIES TO THIS SUIT.
    Superior Court of New Jersey Chancery Division
    Decided November 25, 1968.

      Mr. Leon Miroff for plaintiff (Mr. Hyman Tobin, attorney) .

      Mr. James F. McGovern, Jr., attorney for defendant Concord Insurance Company (Mr. John P. Doran, appearing).

      Mr. Allan Maitlin for defendant Flaherty, Sheedy & Ryan, Inc. (Messrs. Feuerstein cG- 8achs, -attorneys).'
   Matthews, J. S. C.

In- this action plaintiff seeks a .judgment directing defendant Concord Insurance Company to reinstate a certain automo'bile'liability insurance policy issued to 'him by Concord in July of 1966, and to require .Concord to defend him against certain claims asserted by third parties for damages arising out of an automobile accident. Claims for alternate relief have been asserted against Flaherty, Sheedy & Ryan, Inc., fhe broker who placed the policy in question, and against the principals of that corporation, Thomas M. Flaherty, John J. Sheedy and John R. Eyan, individually. Subsequently, by leave of court the complaint was amended to include defendants Pera, Eadumsky, Zvinakis, Rea, Cobb, County of Hudson and Public Service Electric & Gas Company as persons being interested in the action in that each had a damage claim against plaintiff arising out of the automobile accident aforementioned.

I find the following facts. Plaintiff, who was then 22 years of age, purchased a new motor vehicle during the month of July 1966. During the course of negotiations with the automobile dealer over the method of financing the purchase he was advised that he would have to have both collision and liability insurance coverage. At the suggestion of the automobile dealer, and accompanied by one of its representatives, plaintiff went to the offices of defendant Flaherty, Sheedy & Eyan, Inc. (hereinafter broker) for the puryuse of obtaining the insurance. At the broker's he conferred with defendant John Eyan, one of its principles. Eyan advised plaintiff that he would place his insurance • with defendant Concord Insurance Company in Newark and that the annual premium would amount to $283. Shortly thereafter plaintiff completed the purchase of the motor vehicle and received an automobile liability insurance policy issued by defendant Concord through defendant broker. No bill accompanied the policy. During the latter part of August 1966 plaintiff received a communication from the broker reminding him that the premium was due on the Concord policy. Plaintiff immediately called the broker and talked to Ryan. He informed Eyan that he had misunderstood him at their meeting and that he thought the liability insurance premium would be included' in the monthly car payments, as the collision in.suranee was included. Ryan then offered to finance the liability insurance premium in the event plaintiff could not make the payment due at that time. Plaintiff informed Ryan that he would pay the premium in full immediately, and shortly thereafter sent to the broker a money order in the amount of $283, representing full pa3unent. Payment was received September 3, 1966.

On October 6, 1966 Concord mailed a notice of cancellation to plaintiff, to be effective October 16, 1966. The notice of cancellation contained a rubber-stamped legend advising the recipient to see his broker immediately. On receipt of the notice of cancellation plaintiff called Ryan. Ryan advised him to come into the office the next day. Plaintiff did so. After seeing the notice of cancellation, Ryan informed plaintiff that he did not understand why the policy was to be cancelled. Ryan then, in plaintiff’s presence, dialed a number on the telephone and apparently talked to someone in the Concord office in Newark. After Ryan hung up he informed plaintiff that his policy was still in effect and that the notice of cancellation was due to a clerical error. He further informed plaintiff that he would personally see to the reinstatement and that the same should be effective in approximately one week. When plaintiff did not hear from Concord as to the reinstatement after the expiration of a week, he called Ryan again. Ryan informed plaintiff over the telephone that he was going to Newark personalty and that he would cheek on it. Hearing nothing, after the expiration of another week or so plaintiff called Concord directly. He was connected with the underwriting department, where someone informed him that his policy had been cancelled at the request of his broker. After talking to Concord plaintiff immediately got in touch with Ryan and thereafter went to the broker’s office. He informed R3ran of his telephone conversation with Concord and Ryan ostensibly again called Concord in his presence. During that telephone conversation Ryan stated to the person at the other end of the telephone that he had not requested the policy to be cancelled. After Ryan hung up, he wrote out a statement on a sheet of the broker’s stationery, stating that the policy in question was still in effect. During the month of December 1966 plaintiff was involved in an automobile accident in New York State. Hpon returning home he immediately called Concord to report the accident. Since it was after business hours, the recipient of the call, upon ascertaining that no one was injured, advised plaintiff to call back in the morning or get in touch with his own broker. Plaintiff called Ryan the next morning, and then a few days later went to the broker’s office. At that meeting Ryan helped plaintiff fill out a New York accident form and informed him that- he would notify Concord of the accident. Plaintiff was apparently faultless in the New York State accident since his vehicle was repaired by the insurance company covering the other vehicle involved in the accident.

In January 1967 plaintiff again went to see Ryan, accompanied by a friend who had some knowledge of the insurance industry. Plaintiff and his companion informed Ryan that they could not understand why no formal reinstatement had been received from Concord despite the representations that had been made by Ryan. Ryan again called Concord in the presence of plaintiff and his companion. After a conversation on the telephone he hung up and informed both plaintiff and his companion that plaintiff was still insured by Concord. Ryan also informed plaintiff and his companion that he could not understand why the reinstatement had not been sent by Concord.

Again, early in February 1967, plaintiff called Ryan to remind him that he had not received formal reinstatement of the policy. Ryan told plaintiff that he was going to Newark to attend to the matter personally. On February 27, 1967 plaintiff was involved in a motor vehicle accident in which one person was killed and two others were injured. Concord, on being informed of the accident, refused to defend on the ground that its policy had been cancelled on October 16, 1966. :

There is no question but that defendant broker received the premium payment of $283 from plaintiff on September 3, 1966. At the trial Ryan conceded the receipt of the premium and also that a bookkeeping error originating in his office had included plaintiff’s policy on a list of policies to be cancelled which was mailed to Concord at the end of September 1966. Despite this concession, Ryan concedes that no written request was made by him or his firm to Concord for the reinstatement of plaintiff’s policy.

Defendant Concord, through one of its representatives, informed me at trial that it does not sell insurance directly to the insured public. All matters dealing with the payment of premiums are confined by relationships between the company and brokers, such as defendant broker. In short, no direct contact is ever had between Concord and an insured relative to the payment of premiums. In this regard, evidence was introduced to show that Concord subsequently sued defendant broker for a number of premiums claimed to be due to it from the broker, including the earned portion of the premium due on plaintiff’s policy. That suit was terminated by a compromise lump sum payment covering all of the claimed premiums in that action.

Concord’s position in this matter may be stated simply. It contends that since it cancelled the policy in question, it is free of any obligation under the contract. Further, once it had cancelled the contract, no actions of the broker could have any effect on the status of the policy.

The resolution of this problem lies in the construction of the provision of N. J. S. A. 17:22-6.2a (L. 1966, c. 50, § 1). The statute reads as follows:

“Any insurer which delivers in this State to any insurance broker a contract of insurance (other than a contract of life insurance, or life, accident or health insurance) pursuant to the application or request of such broker, acting for an insured other than himself, shall be deemed to have authorized such broker to receive on its behalf payment oí any premium which is due oil such contract at the time oí its issuance or delivery or payment of any installment of such premium or any additional premium which becomes due or payable thereafter on such contract, provided such payment is received by such broker within 90 days after the due date of such premium or installment thereof or after the date of delivery of statement by the insurer of such additional premium.”

There are no New Jersey eases construing these statutory provisions.

The State of New York has a statute (§ 121, Insurance Law, McKinney’s Consol. Laws, c. 28) which is the same as ours, except for the parenthetical insertion in our statute which excludes life insurance and health and accident insurance from its provisions. The New York statute was cited in Standard Accident Insurance Co. v. Roth, 28 Misc. 2d 1080, 213 N. Y. S. 2d 721 (Sup. Ct. 1961) and Lezak v. National Grange Mutual Insurance Co., 233 N. Y. S. 2d 607 (Sup. Ct. 1962). In Standard Accident the insured failed to pay the second installment of his premium to the company, and the company sent a notice of cancellation directly to the insured. The insured then sent the amount of the second installment to the broker, who failed to remit. The New York Supreme Court found that there was no authority under the statute giving the broker the power to extend the time of payment of a premium, or to reinstate a policy which had been cancelled by the insurer.

In Lezak plaintiff obtained an automobile liability insurance policy from the defendant through a broker. A second renewal policy was issued after expiration of the first. As the term of the renewal policy was drawing to a close, plaintiff sought another renewal. For the second renewal plaintiff drew a check in the amount of the required premium to the order of the broker. The broker deposited the insured’s check into his account and forwarded his own check to the company. Upon receipt of the check defendant issued the second renewal of the policy. Approximately one month later its broker’s check was returned to the defendant for insufficient funds. Thereupon defendant issued a notice of cancellation, to plaintiff. Plaintiff was thereafter involved in an automobile accident and the company refused to defend on the grounds that the policy had been cancelled. The New York court found in favor of the company. In interpreting the statute, the justice stated that the authority of the broker to act in his dual capacity extended only to the period in which the policy remained in force and after its delivery to him. The statute, according to the justice, necessarily excluded the period between which the broker is engaged by the prospective insured to secure policies of insurance and the receipt of the policy of the insured by the broker. During this interval, it was the New York court’s opinion, the broker is in privity solely with his customer and did not establish a privity with his insurance company until the company impliedly consented to the collection of the premium by the broker by delivery of a policy of insurance to him.

I believe all the facts and the reasoning stated by the court in both the New York cases are clearly distinguishable from the facts presently before me.

In Zak v. Fidelity-Phenix Insurance Company, 58 Ill. App. 2d 341, 208 N. E. 2d 29 (App. Ct. 1965), affirmed on other grounds, 34 Ill. 2d 438, 216 N. E. 2d 113 (Sup. Ct. 1966), the courts of Illinois had before them a case factually strikingly similar to those presently before this court, except for the misappropriation of the premium by the broker found in that case. In Zak the Appellate Court held that the provision for cancellation of the policy,- no matter how broadly phrased therein, could not be used to circumvent the Illinois statute (which is substantially the same as our statute) enacted to protect the insuring buying public, where it was shown that the sole reason for cancellation of the policy was the nonpayment of premium which, in fact, the insurance broker had misappropriated for his own use. On appeal to the Supreme Court of Illinois, that court did not pass on the reasons asserted by the intermediate appellate court, but confirmed the liability of the insurance company on the grounds of estoppel.

There is no question but that the New Jersey statute, N. J. S. A. 17:22-6.2a, was enacted to protect the insurance buying public from the misappropriation, conversion, or other misconduct of an insurance broker in those instances where an insurer uses the broker to effect the delivery of the policy of insurance and to collect the premiums due for it. The statute clearly creates a principal-agent relationship between the insurer and the broker in those instances where the insurer uses the broker to deliver a policy of insurance and collect and remit premiums due thereon. Under the facts hereinabove set out, the event which caused the cancellation of the policy in question was the failure of the broker to remit to the insurance company the premium paid by the insured to it. The broker here was in fact entrusted with the delivery of the policy to the insured and, under the avowed practice of the insurer, was responsible for the collection of the premium from plaintiff and the payment of same to the insurer. Plaintiff performed all that was required of him. A breakdown in the chain of events occurred by the failure of the broker to remit the premium paid by plaintiff to Concord and, in addition, by mistakingly directing the cancellation of the policy for nonpayment of premium. All of these events took place in the course of the broker acting as agent for the insurance company under the provisions of the statute in question. The breakdown in the chain of events illustrates the very type of situation the Legislature had in mind when it enacted the statute in question as a protection for the insurance buying public.

Concord contends, however, that it had an absolute right to cancel the policy in question, for any reason. Therefore, since the policy was cancelled by notice to the insured, no insurance was in effect at the time of the accident. Certainly, it must be recognized that the power of cancellation reserved in a policy of insurance is a contractual arrangement entered into between insurer and the insured. I find, however, that with respect to cancellation of a policy for nonpayment of premium where in fact the premium has been collected by the broker as statutory agent for the insurer, such right of cancellation is to be circumscribed by the statutory provisions. In short, the burden of ascertaining whether the premium has in fact been paid must be placed on the insurer and not on the insured. This conclusion is borne, out strikingly by the facts in this case. Despite the fact that plaintiff was informed directly (on his own inquiry) by Concord that his policy had been cancelled, he was constantly reassured by defendant broker that that advice was a mistake and that his policy was reinstated. All of these reassurances came within the context of plaintiff’s knowledge that he had in fact paid a full year’s premium to the broker and that the broker had in turn delivered a policy of insurance to him. It is also apparent that the sole reason for the cancellation of the policy was alleged nonpayment of premium. Under these circumstances it would be grossly inequitable to find that the insured is placed in a position of having his policy cancelled because of the negligent act of the agent of the insurer. N. J. S. A. 17:22-6.2a.

One further observation should be made. No reason other than the alleged failure to pay premiums existed for the cancellation of the policy in question. Defendant insurance company would have itself placed in the position of one receiving a windfall because of the acts of its agent in failing to remit the premium and mistakingly ordering cancellation of the policy. The elimination of such a windfall cannot, under any stretch of the imagination, be regarded as prejudicial to the insurer.

It is my conclusion, therefore, that equity demands that I declare the cancellation of the policy in question, stated to be effective as of October 16, 1966, to be void and unenforceable. Accordingly, absent cancellation, the policy in question was in effect on February 27, 1967, the date of the accident mentioned above.