text:
    New Jersey Department of Labor, Workmen’s Compensation Bureau.
    MICHAEL BOGDANSKI, PETITIONER, v. HENRY TOMAN, RESPONDENT.
    Decided April 24, 1940.
    For the petitioner, Joseph F. Holland.

    For the respondent, James J. Skeffington.

   The petitioner in this case originally worked for Mr. Henry Toman from the fall of 1936 until March of 1937, when he started working for the Hoffman Beverage Company. It appears that prior to that time he received approximately $15 per month from Mr. Toman. He testified that about March of 1937 he started to work for the Hoffman Beverage Company full time and from that time on he worked for Mr. Toman during his spare time and without any regularity, as a handyman and general houseworker, that is, he would wash the dishes or drive Mrs. Toman to go shopping or cut the grass, and generally make himself useful in and about the house; that sometimes he would sleep there and other times he would go home to his mother’s house. He testified that there was no regularity about the remuneration which he received from Mr. Toman but that Mr. Toman would usually give him in cash whatever he felt the services that ■he rendered were worth, taking the cash from his pocket. He testified that he was employed by the Hoffman Beverage Company as a brewery worker and received $42 a week from them. His attention was called to a statement which he had made on September 22d, 1939, wherein he had stated in part that he received no definite salary from Mr. Toman after securing his full-time job with the Hoffman Beverage Company because of a Brewers’ Union rule forbidding the holding of any other job for pay at the same time. He denied having made this part of the statement and said definitely that the Brewers’ Union to which he belonged had no such rule. He further testified that on Monday, September 11th, this being his day off, he had been at the Toman house and had cleaned the rugs and cut the grass and at about eight p. m. he had washed the dishes when Mrs. Toman took her dog out on a leash across the street to an empty lot, and there she took the dog off the leash and a little later he heard a commotion as if dogs were fighting and he thereupon ran across the street to the vacant lot where the noise came from and there saw the Toman’s dog and the dog of a neighbor fighting. He testified that he started to separate them and in the scuffle he received three rather deep scratches on the second finger of his right hand. After the dogs were separated he noticed blood coming from his finger and he subsequently put some mercurochrome on it and went to Dr. H. Cassini. Dr. Cassini cauterized the scratches. A few days later his finger still bothered him and he reported the matter to the board of health, and as the finger was then troubling him he was sent to Dr. Clements, who disarticulated his second finger.

There is no question about the extent of the disability. It is apparent that the petitioner has lost the second finger of his right hand.

The petitioner called to the stand Mr. Henry Toman, who testified that prior to working for the Hoffman Beverage Company, the petitioner had worked for him and that after he received a full-time job, the petitioner frequently came around his home and while there was no agreement between him and the petitioner as to pay, the petitioner did little odd jobs about the house for himself and his wife and he gave him what he considered to be tips or gifts of money, which would amount roughly to about $5 a week. Mr. Toman testified that there was a rule of the Brewers’ Union which forbid any member working at any job for pay outside of their brewers job and that Mr. Bogdanski is a member of that union and could not hold another job. Mr. Bogdanski’s union membership dated from August of 1937. Mr. Toman testified that he was home and in the house on September 11th talking with Mr. Bogdanski when he heard the dogs fighting in the vacant lot and Mr. Bogdanski ran across the street to separate them and in so doing he received a scratch on the second finger of his right hand. His finger bled and Mr. Toman took charge of the dog and Mr. Bogdanski went to the office of Dr. Cassini. A few days later Mr. Bogdanski again came to the home of Mr. Toman and stated that his finger was giving him trouble and that it was dead feeling and the petitioner thereafter went to the board of health and later to Dr. Clements of 15 Washington street, Newark, and Dr. Clements sent him to St. James Hospital on Wednesday, September 20th, where his finger was amputated.

Mr. Walter Ruhnke, the business agent of the Brewers Union, of which Mr. Bogdanski is a member, was then called to the stand by the respondent and he testified that the petitioner was a member of the Brewers’ Union at the Hoffman Beverage Company and that there was a rule of the union which prohibited any member of that union from working at any other job for pay while working as a member of that union and that Mr. Bogdanski as well as all other members of the union knew of the existence of that rule and were supposed to abide by it.

There is no dispute as has heretofore been indicated as to the nature and extent of the disability. There is a dispute as to the question of liability, and after carefully considering all the testimony adduced before me, I am satisfied that there was no contract of employment existing between Mr. Toman and the petitioner at the time that he sought to separate the dogs that were fighting. It is elementary that the Workmen’s Compensation act only applies where there is an exist-

ing and valid contract of employment at the time of the alleged occurrence. Moreover, there is a grave question of credibility injected into the case because of the státement by the petitioner with respect to the rule of conduct prohibiting him from having any other gainful employment at the time that he was regularly employed as a member of the Brewers’ Union. Further there also arises the question as to whether or not the petitioner was a volunteer at the time that he attempted to stop the dog fight. As has been pointed out by our courts in previous cases, if the injury can be seen to have followed as a natural incident of his work and to have been contemplated by a reasonable person familiar with the whole situation as the result of an exposure occasioned by the nature of the employment, then it arises out of the employment, but by the same token, it excludes an injury which cannot fairly be traced to the employment as the proximate cause and which comes from a hazard to which the workman would have been exposed apart from the employment. The causative factor must be peculiar to the work and not common to the neighborhood; it must be incidental to the character of the business and not independent of the relation of master and servant. In this instance I feel that the act of the petitioner in attempting to separate the dogs that were fighting in the vacant lot was an act separate and apart from his duties for Mr. Toman, assuming that there was a legal and enforceable contract of employment in existence at the time, so that considering all of the circumstances attending this particular case I am satisfied and find as a fact that the petitioner has failed to sustain the burden of proving that he suffered an injury as the result of an accident arising out of and in the course of his employment coming within the provisions of the Workmen’s Compensation act.

$ H: $ $ >Jc s¡{ sjc

John C. Wegner,

Deputy Commissioner.


source: Caselaw Access Project

license: Public Domain

text:
    New Jersey Department of Labor, Workmen’s Compensation Bureau.
    CAROLINA FASSI, PETITIONER, v. EARL M. HOLBROOK, T/A INDUSTRIAL MAINTENANCE CO., RESPONDENT.
    Decided April 24, 1940.
    For the petitioner, James Giuliano.

    For the respondent, Homer F. James (Charles W. Broadhurst, of counsel).
   In the case sub judice, petitioner claims compensation for herself and her son, Henry, alleging total dependency.

It is agreed that decedent while in the employ, met with an accident arising out of and in the course of his employment.

Eespondents denj’ dependency. There is also a question of rate involved.

Petitioner testified that she was married but had been separated from her husband sixteen years. That including Alfred, the deceased, there were seven children, none of whom contributed in any way to her support except the decedent. Her husband, who resided in Hew York at the time of trial, did not in any way either voluntarily or by court order, make any contribution. The decedent, Alfred, she testified, gave her $10 weekly, paid the rent of $25 per month, purchased food supplies when home and occasionally bought clothing for the youngest son, Henry. Prior to his living home, decedent had been in the army twelve years.

Occupying the front room of the apartment where petitioner resided was one Professor Antonio Gianelli. While the renting arrangements were $25 per month including board, the economic conditions now existing had apparently played havoc with his profession and her receipts from that source were on a “catch as catch can” basis. Occasionally petitioner would receive a few dollars for taking care of baby in neighborhood.

Respondent endeavored to on cross-examination, show that petitioner’s husband had left her due to Professor Gianelli and that she had assumed his name and that a meretricious relationship existed. This was most vigorously denied. Henry, son of petitioner and brother of decedent, corroborated mother’s testimony as to contributions.

Other witnesses were called who testified to having seen decedent purchase foods from butcher and grocer for the household. They further testified as knowing petitioner only by name of Mrs. Passi.

One Jean Pranznero, the fiance of decedent, admitted that marriage was contemplated by decedent and her but no date was set as decedent’s first thought was his mother’s support and his brother obtaining a job. She further admitted that some funds were being saved by both in preparation of a wedding day.

Professor Antonio Gianelli, the alleged Romeo, testified as to his relationship with the petitioner. The professor who had at one time been the Metropolitan’s leading guitarist, bemoaned the fact that swing, jazz and canned music had replaced the classical and that depression had reduced his means of livelihood to the extent that his obligations to petitioner were met by a proportion of Ms earnings which were very meager as a whole. He vigorously denied that any other relationship existed between petitioner and himself other than that of merely the renting of the front room designated by him as the “studio.”

Respondent testified to average earnings of decedent. He alleged that he paid petitioner sixty cents per hour when he worked; that average week was five to five and one-half days and that in case of rain or no work, petitioner was not paid.

Respondent then introduced other testimony with respect to the friendship of the professor and petitioner endeavoring to show that she had on occasions been introduced as his wife.

This testimony as well as that offered in rebuttal by petitioner was to some extent immaterial to the issue. Rebuttal testimony was also offered relative to the wage received by decedent.

There was testimony by one Mario Fassi relative to statement made by him to investigator for respondents’ insurance carrier to effect that decedent, Alfred, did not support mother but paid her $5 per week for room and board. Witness denied making such statement.

Two questions present themselves: first, wages received by decedent; second degree of dependency.

The rate question can be readily determined. From testimony petitioner received sixty cents per hour. Based upon an eight hour day, five and one-half days per week, decedent’s weekly wage would be $26.40.

As to dependency:

There is no question in my mind that petitioner contributed to his mother’s and brother’s support. Letters introduced in evidence received at intermittent periods, reflect the fact that at various times he had sent her $10 and on one occasion $5. In the latter instance he expressed his regrets as to his inability to send more.

But can a person be a full dependent on more than one person at the same time ?

Petitioner’s husband is living. Both morally and legally he is under a duty to support her and his son, Henry. Our appellate courts have held that regardless of whether or not widow is a member of her spouses’ household, she is a full dependent: Schmidt v. Stanton Forging Co., 104 N. J. L. 471; 142 Atl. Rep. 4; Cassaro v. Peerless Color Co., 14 N. J. Mis. R. 92; 182 Atl. Rep. 477; Alexander v. Cunningham Roofing, 11 Atl. Rep. (2d) 41; as to children: Comparri v. James Readding, Inc., 121 N. J. L. 591; 3 Atl. Rep. (2d) 802.

What effort she has made to establish her rights to support by the husband is not reflected in the testimony whether such rights exist or do not exist is not for determination at this time but the fact remains in my opinion that she cannot lift the burden from one and place it on another in order to meet any exigency that may arise.

Almost from the enactment of the act the question of dependency has been a factual one. Considering all the facts in the case, the contribution of $10 per week, the purchase of clothing for his brother, food for the house, payment of rent, as against decedent’s preparedness for the future as to his marriage, his disbursements for his own needs, all being deducted from a maximum salary of $26.40 and a reflected average earning of much less than that leads me to the conclusion that the petitioner and the son Henry, are partial dependents.

On what basis compensation should be allowed can only be computed by a careful consideration of the contributions. Considering everything in my opinion $15 per week would be maximum.

% Hi ij« Sji SJ? }£

It is further ordered, that in case of death of either or both dependents before expiration of payments due, award will be modified accordingly.

John C. Wegner,

Deputy Commissioner.


author: Quinn, President.

text:
    State Board of Tax Appeals.
    SCHENLEY DISTRIBUTORS, INC., PETITIONER, v. STATE TAX COMMISSIONER, RESPONDENT.
    Decided April 23, 1940.
    For the petitioner, Milton B. Seasonwein and Burnett G. Gladstone.

    For the respondent, David T. Wilentz (by William E. Osborne, Jr.)

   Quinn, President.

This petition is before us for determination upon an agreed statement of facts substantially in the following tenor. The petitioner is a New York corporation, duly qualified to transact business in this state. During the period of the several transactions hereinafter referred to, it was the holder of a plenary export wholesale license issued by the New Jersey Alcoholic Beverage Control. It sells distilled spirits and wines, both wholesale and retail. Upon seven specific occasions during the period, September 22d, 1938, to March 21st, 1939, petitioner sold varying quantities of alcoholic beverages, some to American Export Lines and others to American President Lines, under consignment in each ease to a steamship operated by one of the purchasers, delivery being made at their respective piers in this state. In each case the liquor delivered was actually placed on shipboard and consumed as part of the ships’ stores on the high seas. Inquiry by the board discloses that the steamship lines do not hold licenses permitting the sale or dispensation of alcoholic liquors on shipboard while in port, and that, in fact, there was no such consumption, or intended consumption within the territorial coniines of the state.

Each of the deliveries described above was taxed under R. S. 54:4-3-1 by the acting director of the Beverage Tax Division of the State Tax Department. Petitioner protested the assessments thus levied, and now appeals to this board therefrom, assigning two principal grounds of appeal: (a) the transactions in question are excluded from the operation of the statute by R. S. 54:43-2; (b) if there is any doubt about the effect of section 54:43-2, as thus contended for, such doubt should be resolved against the tax in order to avoid the presumably unintended effect of an unconstitutional tax on exports. The statute, so far as is material, follows:

“54:43-1. There are hereby levied and imposed upon any sale or delivery within this state of alcoholic beverages intended ultimately for consumption the following excise taxes:” (stating rates).

“54:43-2. Ho tax imposed by this subtitle shall be payable on any sale of alcoholic beverages by any licensed manufacturer or by any licensed export wholesaler for resale and consumption outside of this state, or directly for consumption outside of this state, when said sale is accompanied by the actual transportation of such beverages out of this state * * *

Before considering the first of the two contentions urged by petitioner, that being, in our view, conclusive of the issue presented, it may be observed that there is some doubt, in the existing state of the authorities, as to the soundness of the second argument, that based on constitutionality. It has been held that the mere transportation out of the country of a commodity is not an “export” whore the same is consumed in use on the transporting vessel. Swan & Finch Co. v. United States, 190 U. S. 143. Prom tire tax standpoint the essence of an export transaction appears to consist in that the attendant sale of the commodity is “for the account and risk” of an ultimate consignee out of the country, whether or not title thereto passed in this country. Spalding and Bros. v. Edwards, 262 Id. 66. And see Texas and N. O. R. Co. v. Sabine Tram Co., 227 Id. 111 (1926); Carson Petroleum Co. v. Vial, 279 Id. 95 (1929). In two very recent cases, however, the United States Supreme Court left open the question as to whether a local tax on sales of fuel oil as ships’ stores for vessels engaging in foreign shipping constituted an unconstitutional levy upon exports. McGoldrick v. Gulf Oil Corp.; McGoldrick v. Compagnie Generale Transatlantique, both decided March 25th, 1940.

It is to be noted, however, that taxation in the exercise of the proper police powers of the states over traffic in intoxicating liquors is entitled to a breadth of scope sufficient to accomplish reasonably the purpose of regulation, although there result an incidental interference with interstate or foreign commerce in such commodities of a character which would invalidate siich taxation, as applied to the ordinary subject-matter of commercial transport. Ziffrin v. Reeves, 84 L. Ed. 107 (United States Supreme Court, 1939). And see Kidd v. Pearson, 128 U. S. 1; Geer v. Connecticut, 161 Id. 519; Rippey v. Texas, 193 Id. 504; Sligh v. Kirkwood, 237 Id. 52.

Por the reason last stated, if the State of Hew Jersey undertook to tax such transactions as here concern us, we think no constitutional consideration would stand in the way. But we are of the opinion that in section 54:43-2 the legislature has expressly excluded these sales from the tax. There was undoubtedly in each instance a sale by a licensed export wholesaler to a purchaser, under circumstances clearly envisaging consumption outside of the state. And the sales which, under the Uniform Sale of Goods law (R. S. 46:30-25), were not consummated until the delivery of the merchandise on the piers, were in each case accompanied by the actual transportation of the beverages out of the state. Nothing in the act requires such transportation to take place instantaneously upon delivery in order for the section to become operative. It is enough that it was within the unmistakable contemplation of both parties to the consignments and that it invariably took place shortly after each delivery. Nor it is material that the purchaser, by some remote chance, might divert the liquors sold to use within the state. Tax legislation should be interpreted with an eye to realities instead of to conjectural contingencies. In consonance with the general rule, the courts of this state hold that where a taxing statute expressly excludes a class (whether of persons or transactions) from its operation, it will be strictly construed against the government and in favor of the citizen. Public Service Co-ordinated Transport v. State Board of Tax Appeals (Supreme Court, 1935), 115 N. J. L. 97. Accord: McFeeley v. Commissioner, 296 U. S. 102; Old Colony Railroad Co. v. Commissioner, 284 Id. 552; Burnet v. Niagara Falls Brewing Co., 282 Id. 648; U. S. v. Updike, 281 Id. 489.

The assessments appealed from are, for the foregoing reasons, set aside and canceled.


author: Herr, A. M.

text:
    Grace Strong Hughes, complainant, v. Frank L. Hughes, defendant.
    [Decided April 24th, 1940.]

      Mr. Jacob R. Mantel, for the complainant.

      Messrs. McCarter, English & Egner (Mr. Conover English), for the defendant.
   Herr, A. M.

Complainant secured a décree of absolute divorce against defendant in the State of Nevada in the year 1921 and files this bill for alimony under C. S. R. S. 2:50-87; N. J. S. A. 2:50-87, enacted on May 25th, 1938, and effective as of the date of its enactment.

Complainant filed a similar bill in February, 1938, which this court sustained against a motion to strike, holding that the statute then in effect, B. S. 2:50-87, authorized the court to decree alimony in a plenary suit where complainant had secured her divorce in a foreign jurisdiction. The order entered on that decision was reversed by the Court of Errors and Appeals. Hughes v. Hughes, 125 N. J. Eq. 17; 1 Atl. Rep. (2d) 888. Complainant’s present bill, therefore, rests solely upon the amendment of 1938.

The bill contains certain allegations respecting the award of alimony in Nevada in the year 1921, and subsequent modifications thereof, litigation between the parties in the State of New York in the year 1929, and a settlement effected in the year 1931 by payment of a lump sum and the execution and delivery of a release. It charges that the release was fraudulently obtained and is void, and sets up the prior litigation of the parties in this court.

Defendant is entitled to have stricken from the bill, as impertinent and improper, those allegations contained in paragraphs 6 to 14 thereof as to the amount of alimony decreed by the Nevada court, the modifications thereof, the arrearages accrued, defendant’s failure to pay the same, complain aiit’s financial situation in the year 1931 and the claimed invalidity of the release. In this suit the court is concerned only with the present needs of complainant and the present faculties of defendant. It may be that these matters will be relevant as evidence at final hearing, but such allegations are not properly included in the pleadings. As to the allegations respecting the release and its invalidity the law is settled that the parties are incompetent to contract respecting alimony not yet accrued. Parmly v. Parmdy, 125 N. J. Eq. 515; 5 Atl. Rep. (2d) 789; Kirschbaum v. Kirschbaum, 125 N. J. Eq. 558; 5 Atl. Rep. (2d) 798. Hence the question whether such a contract exists or not is irrelevant to the issue and impertinent as a part of the pleading. Obviously such allegations ought not to be retained in the bill as a basis for relief against the possible effect of the release if set up in defense of any action at law which complainant may institute for alimony arrearages. If the law court be incompetent to deal with such a defense, resort may doubtless be had to this court at the proper time, but by means of an independent proceeding. The question is not germane to the prayer of the present suit that the court fix and decree alimony.

To the extent above stated, therefore, the allegations contained in the bill will be stricken, leaving it strictly a bill for alimony under the amendment, based upon the present needs of complainant and the present faculties of defendant.

But defendant also moves to strike the bill as a whole upon the ground that the amendment cannot properly be given a retroactive operation to the extent of including cases wherein foreign divorce decrees were entered prior to May 25th, 1938, the date upon which the amendment was enacted and became operative, and that since complainant’s divorce decree was secured in Nevada in the year 1921 this court is without jurisdiction to decree relief upon her bill. The argument advanced is that under well-settled rules of statutory construction every legislative enactment must be held to operate prospectively only, except where the language clearly shows a different intent, and that the language of the amendment in question may reasonably be construed as intending to limit its operation so as to exclude cases in which divorce decrees were entered prior to its enactment, particularly in view of the fact that the amendment is the first and only statute empowering the court to award alimony following a foreign divorce decree.

Such is unquestionably one of the well-established rules of statutory construction, resort to which may be had in an effort to discover an otherwise obscure legislative intent. But where the purpose of the legislature is apparent without resort to technical rules of construction, there is no need or justification for recourse to such rules, particularly where their application would lead to a strained or unnatural construction of the statute.

As the statute stood before the amendment, it provided that “Pending a suit for divorce or nullity, or after decree of divorce, the court of chancery may make such order touching the alimony of the wife * * * as the circumstances * * * shall render fit, reasonable and just * * In place of this language the amendment substituted the following: “Pending a suit for divorce or nullity, brought in this state or elsewhere, or after decree of divorce, whether obtained in this state or elsewhere, the court of chancery may make such order touching the alimony of the wife * * * as the circumstances * * * shall render fit, reasonable and just * * *

If defendant’s contention were to prevail the court would be powerless to grant alimony following Hew Jersey divorce decrees entered prior to May 25th, 1938. Since the amendment supersedes the prior statute, and is therefore the only statutory authority presently existing for the award of alimony in any case, and since the court’s authority to decree alimony rests solely upon the statutory law, we would be obliged to hold that thousands of subsisting alimony orders in favor of former wives divorced in Hew Jersey are void because of the repeal of their statutory foundation. Had the amendment dealt solely, or at least disjunctively, with cases arising under foreign divorce decrees the argument might have some weight, but the amendment couples the two classes of divorces, domestic and foreign, and places them in one category. So far as Hew Jersey divorce decrees are concerned, the provisions of the prior statute are not disturbed by the amendment. It is settled beyond the need to cite authority that applications for alimony may be made at any time after entry of a divorce decree in this court. By placing foreign divorce decrees in the same category as our own the legislature could not have intended otherwise than to include within the operation of the amendment all cases based upon foreign as well as domestic divorce decrees, without regard to the date of their entry. The clear legislative purpose in enacting the amendment was to empower this court to decree alimony to former wives who have secured divorce decrees abroad at any time heretofore as well as to those former wives who have secured divorce decrees in Hew Jersey at any time heretofore. Alimony is but the means of enforcing the continuing duty of support which the husband owes to his wile and of which he is not permitted to absolve himself by his own misconduct, even though such misconduct has resulted in dissolution of the marriage.

Advisory Master Grosman, in the unreported decision in Carter v. Carter (Docket 131, page 543, January 2d, 1940), came to the same conclusion. Among other things he wrote: “The single effect of the 1938 enactment is to place the foreign decree on a parity with our own decrees, subjecting it to the enforcement in accordance with the public policy of our state. The duty of a husband to support his wife and children is universal. If he fails to do so, the doors of this court are open for redress. To hold otherwise would make Hew Jersey a haven for all husbands who may elect to desert their families. Such men may not evade their responsibilities by fleeing to our jurisdiction while their innocent wives and children suffer in destitution.”

For the above reasons defendant’s application to strike the bill (except for the allegations contained in paragraphs 6 to 14, inclusive) will be denied.

Complainant’s application for alimony and suit moneys pendente Ute is resisted on the further ground that since there is no express provision in the amendment permitting the court to grant ad interim, relief that power must necessarily be lacking in the court. This contention is overruled for the reasons stated in and upon the authority of Levy v. Levy, 17 N. J. Mis. R. 324.

Upon careful consideration of the proofs presented on complainant’s motion, however, it is my judgment that her application for pendente lite relief must be denied upon the merits. It appears that defendant is a man of seventy-five years of age, in a seriously impaired condition of health, without present employment or reasonable expectation of future employment, without property or income or the hope of securing either, an object of charity. Complainant is not a resident of New Jersey, and is not likely to become a public charge in New Jersey. Under such circumstances the court is not justified in ordering ad interim relief: the proofs on this motion, if established by evidence at the final hearing, must necessarily lead to the dismissal of the bill. Complainant’s present application will therefore be denied.


author: Smith, Joseph L., S. C. C.

text:
    HARRY M. VEIX, PLAINTIFF, v. SENECA BUILDING AND LOAN ASSOCIATION OF NEWARK, NEW JERSEY, DEFENDANT.
    Decided December 21, 1939.
    Editok’s Note: This case is now printed at the request of the court because of the decision in the same case resulting from an application for reargument. See Veix v. Seneca Building and Loan Association, 18 N. J. Mis. R. 280.
    For the plaintiff, Walter P. Reilly.

    For the defendant, Francis P. Meehan.

   Smith, Joseph L., S. C. C.

This matter comes on a motion of the plaintiff to strike the answers and the separate defenses of the defendant upon the ground that they are in part sham and in part insufficient in law.

The complaint alleges that the plaintiff purchased ten prepaid shares of the defendant company for $2,000, on October 7th, 1931, and that on April 19th, 1932, the plaintiff gave the defendant written notice of the withdrawal of the said shares, and thereafter, again demanded payment of the withdrawal values of his said shares and the interest due thereon. The plaintiff therefore claims $2,000 with interest.

The complaint anticipated the defense, setting forth that the defendant claims to be operating under B. S. 17:12-49 and 17:12-50, and their respective sources and amendments, being the laws of 1932, chapter 92, section 1, and chapter 102, section 1, and the laws of 1935, chapter 59, sections 10 and 11, and the laws of 1936, chapter 118, section 4. The plaintiff, in his complaint, alleges that these acts are unconstitutional in so far as they might affect the plaintiff’s rights.

The answer sets forth that the defendant is operating under Order No. 1-A, issued by the Commissioner of Banking and Insurance on March 14th, 1933, made pursuant to the act of March 10th, 1933, and further, that the various acts of the legislature set forth in the plaintiff’s complaint, in anticipation of the defense, are not unconstitutional; thus, the motion resolves itself into the question of the constitutionality of the various acts of the legislature regulating the manner of payments of the withdrawal values of shares of building and loan associations, in so far as they might affect the plaintiff’s rights, and delegating powers to the Commissioner of Banking and Insurance under which the restrictive orders were issued. It is contended by the defendant that as to the first phase of the question presented, namely: the alleged unconstitutionality of the act of the legislature as an abrogation of contractual rights, the case of Bucsi v. Longworth Building and Loan Association, 119 N. J. L. 120, is controlling. It is true that our Court of Errors and Appeals, in that case, held Pamph. L. 1932, ch. 102, to be a constitutional legislative enactment. However, by the very reasoning used in that case, the decision would not apply to the present situation, involving as it does, a demand for payment of prepaid shares after proper notice. In discussing the abrogation of the rights of a shareholder, the court, in the Bucsi case, supra, stated (at p. 125) :

“But the statutory right of a member to withdraw from membership and to receive the withdrawal value of his shares and the statutory privilege to sue for the amount if not paid within the time named in the statute, is based upon and forms a part of the general plan that each member is entitled to equal participation in the assets, and the statute does not contemplate that the privileges named shall he exercised to defeat equal participation, hut that the spirit of the statute being equal participation, the paramount equity is equal participation at all times “ (Italics mine.)

Because of the equality of participation among shareholders, and. the endeavor to preserve this equality, the exercise of the police power was considered a reasonable one. In the present case, however, the plaintiff was the holder of prepaid stock, as above noted. His certificate recites that the shares shall bear interest at six per cent, per annum, and that the shares may be called in and cancelled at any time, by the association, upon payment of the par value and accrued interest; that in the event of surrender or cancellation, the owner shall receive no more and no less than the par value and accrued interest. It appears then, that the plaintiff, as a holder of prepaid shares, was not a participant in the assets of the association, either in time of liquidation, or in its profits.

The court, in the Bucsi case, supra, further recognizes this difference on page 133, and stated :

“The appellant argues that the statute also provides for a preference to holders of matured shares over withdrawing shareholders. The statute gives a priority to a matured shareholder but it only recognizes a preference which the matured shareholder had as a creditor. This court held in Cunningham v. Mutual Building and Loan Association, 72 N. J. L. 175, 180, that when the maturity of shares has been declared in the manner prescribed by the scheme of the constitution of the association, and that it had been recognized by the association by its officers that thereafter a holder of the matured shares became a creditor of the association, entitled to receive the money, provided the funds arising from the appropriation of one-half the receipts of the association should be sufficient for such payment.
“The statute works no apparent change in the status of a matured shareholder and the preference necessarily only applies to the shareholders whose shares have been matured in the prescribed manner and who have filed the statutory notice prior to the notice of withdrawal. It leaves the status of the parties unchanged.”

The position of the present plaintiff is even stronger than that of the matured shareholder. As a holder of prepaid shares, the obligation between him and the company was definite and limited. He was, in view of the decision in the Bucsi case, supra, as this court understands it, a creditor, and to apply the provisions of the legislative act in question to the case of the present plaintiff, would be unconstitutional. It appears therefore, that the restrictive provisions of chapter 102, laws of 1932, cannot constitutionally be applied as against a withdrawing shareholder of prepaid shares in a solvent association.

The next question which arises is whether or not the refusal of the defendant company to make the payment in question is justified, under the restrictive orders of the Commissioner of Banking and Insurance. These restrictive orders were issued under the laws of 1933, chapters 48, 166, 258 and 381, and their amendments and supplements. All of these, in essence, give the Commissioner of Banking and Insurance the power “from time to time to make orders for the purpose of conserving the assets of the building and loan associations of this state, which orders shall have the same force and effect as law and be binding on any and/or all building and loan associations of this state, whereby: (a) to regulate the method of paying the withdrawal value and/or maturity value of shares of any and/or all of such associations.” The constitutionality of a similar power granted to the Commissioner of Banking and Insurance, with respect to title companies, was raised in Smith v. National Commercial Title and Mortgage Guaranty Co., 120 N. J. L. 75. In that case, the court found that under the plan approved by the commissioner, those dissenting from the plan, as did this plaintiff, were not barred from their rights. Therefore,' the court was not strictly called upon to decide the constitutionality of the act granting the powers. However, the court did recognize that the issue “would be seriously involved with constitutional entanglements.” (Page 81.)

In the case of Mayor and Council of the City of Hoboken v. J. H. Thayer Martin, Stale Tax Commissioner, et al., 122 N. J. L. 264; 4 Atl. Rep. (2d) 697, decided by our Court of Errors and Appeals, the court found certain powers granted to the State Tax Commissioner as unconstitutional, in that they failed to set up a basic plan or standard to guide or control the State Tax Commissioner in doing the act which he was authorized to do. This same defect is apparent in the legislation sub judice.

In Panama Refining Co. v. Ryan, 293 U. S. 388, opinion by Chief Justice Hughes, holding section 9-c of the InTRA unconstitutional, the court said (at p. 415) :

“Section 9(c) does not state whether or in what circumstances or under what conditions, the President is to prohibit the transportation of petroleum, or petroleum products produced in excess of the State’s permission. It establishes no criterion to govern the President’s course. It does not require any finding by the President as a condition of his action. The Congress in 9(c) thus declares no policy as to the transportation of the excess production. So far as this section is concerned, it gives to the President an unlimited authority to determine the policy and to lay down the prohibition, or not to lay it down, as he may see fit.”

And again, in Schechter Corp. v. United States, 295 U. S. 495, Mr. Justice Cardozo (at p. 55), in his concurring opinion, laid down the rule (at p. 551) :

“This court has held that delegation may be unlawful though the act to be performed is definite and single, if the necessity, time and occasion of performance have been left in the end to the discretion of the delegate.”

Judged by these rules, the delegation of power in the present case is unlimited, indefinite and uncontrolled, and therefore an unconstitutional delegation of power.

Eor these reasons, the answer of the defendant attempting to justify the refusal of payment, by force of the statutes and orders hereinabove discussed, does not set forth a legal defense and is therefore insufficient in law, and will be stricken.

An order will be entered accordingly.


text:
    HARRY M. VEIX, PLAINTIFF, v. SENECA BUILDING AND LOAN ASSOCIATION OF NEWARK, A CORPORATION OF THE STATE OF NEW JERSEY, DEFENDANT.
    Decided April 17, 1940.
    For the plaintiff, Walter P. Reilly.

    For the defendant, Francis P. Meehan.

   Smith, Joseph L., S. C. C.

This comes on defendant’s application for an order to reargue the motion filed by the plaintiff to strike the answer of the defendant, the application having been made upon the ground that the opinion of this court heretofore rendered on the 21st day of December, 1939, is contrary to law. The gist of defendant’s argument is that the observations made by this court in its said opinion, to the effect that the prepaid shareholder such as the plaintiff in the present case, does not enjoy equality and mutuality with other shareholders, and that therefore, application of chapter 102, laws of 1932, and amendments, to prepaid shareholders, would be unconstitutional, is contrary to law; that the prepaid shareholder stands on the same footing and on terms of equality and mutuality with other shareholders, and further, that the constitutionality of the legislation in question, the laws of 1932, chapter 102, in so far as it applies to prepaid shares, has been passed upon and sustained by our Court of Errors and Appeals in the cases of Rocker v. Cardinal Building and Loan Association, 119 N. J. L. 134, and Veix v. Sixth Ward Building and Loan Association, 123 Id. 356.

In observing the distinction between prepaid shareholders and holders of other types of shares, we are not attempting to define relative rights and positions of the various types of shareholders, and it will serve no useful purpose, so far as the present problem is concerned, to deny or assert that prepaid shareholders are creditors, or preferred shareholders, or even that their position is inferior to the position of other shareholders. We note the distinction only as it becomes relevant to the question of the constitutionality of the act under discussion, following the rationale of the opinion given in the case of Bucsi v. Longworth Building and Loan Associalion, 119 N. J. L. 120.

Under the principle of that case the findings that building and loan associations are affected with public interest, and that the legislation in question was “for an end that is, in fact, public” were not considered the full and complete justification for the statute which concededly abrogates contractual rights. The Court of Errors and Appeals in the Bucsi case, supra, considered the element of public interest as justification for the exercise of police power, but further than this, it recognized the need for fairness and reasonableness in the exercise of that power; adopting the language of Mr. Justice Roberts, in the case of Treigle v. Acme Homestead Association, 297 U. S. 189, 197; 80 L. Ed. 575; 56 Sup. Ct. Rep. 408 (at p. 126 of 119 N. J. L.) (italics ours) :

“Though the obligations of contracts must yield to a proper exercise of the police power (Home Building and Loan Association v. Blaisdell, 290 U. S. 398; 78 L. Ed. 415; 54 Sup. Ct. Rep. 531), and vested rights cannot inhibit the proper exercise of police power (Nebbia v. New York, 291 U. S. 502; 78 L. Ed. 940; 54 Sup. Ct. Rep. 505), it must be exercised for an end which is in fact public and the means adopted must be reasonably adapted to the accomplishment of that end and must not be arbitrary or oppressive.

And then again (at p. 130), the court stated that obligation on contracts must yield to a proper exercise of the police power. It is obvious then, that the existence of public interest, did not, in and of itself, justify any and all legislative abrogation of contractual rights. Such legislation in order to be valid, must not only have for its purpose the safeguarding of public interest, but must accomplish that purpose by proper, fair and reasonable means. The court, in the Bucsi case, found the fulfillment of this second requirement in the effect of the statute to promote and continue- an already existing plan or scheme of equal participation of mutuality between shareholders. Thus, on page 125 of the opinion, the court says:

“But the statutory right of a member to withdraw from membership and to receive the withdrawal value of his shares and the statutory privilege to sue for the amount if not paid within the time named in the statute, is based upon and forms a part of the general plan that each member is entitled to equal participation in the assets, and the statute does not contemplate that the privileges named shall be exercised to defeat equal participation, but that the spirit of the statute being equal participation, the paramount equity is equal participation at all times.” (Italics ours.)

Undoubtedly, when building and loan associations first came into being, mutuality and equality in participation of profits was not only the paramount but the necessary feature of these institutions and in the absence of statutory authority the power to issue prepaid shares was disputed as contrary to the central idea of mutuality and equality. The statutory authority granted to these associations to issue prepaid shares makes these prepaid shares legal, but does not put them on a basis of mutuality and equality. Originally, building and loan associations were not intended to be investment companies ; they were not meant as depositaries for large investments; they were planned to permit wage earners to put their small savings there, to co-operate in the investment and to share equally in the assets, profits and losses. We note that in the earlier instances permitting the issuance of prepaid shares, these shares kept the feature of equality and mutuality. Thus, in People, ex rel. Fairchild v. Preston (N. Y.), 35 N. E. Rep. 979, the court, sustaining the validity of fully paid shares observes (italics ours) :

“The certificate provides that ‘upon prepaid stock there shall be paid at the time of the subscription, dues to the amount of <$60, and the holder thereof shall bo entitled to receive, out of the profits apportioned thereto, semi-annual dividends in cash, up to the rate of six per cent, per annum; the profits apportioned to such stock, over and above such dividends, shall be credited thereto and payable with the stock at Us maturity.’ It does not prevent or defeat equality or mutuality among the members.”

Thus, prepaid shares as originally permitted, had their participation in all profits. Under the terms of the certificate in the present case, the holder of a prepaid share was limited once and for all, to his six per cent, interest, and to the withdrawal of the par value, irrespective of any increase in assets or profits made by the company to the benefit of other shareholders.

We observe this, not to dispute the legality of prepaid shares but to note that to the extent that prepaid shares of the type involved in the present case, were permitted, deviation was made from the original idea of equality and mutuality.

We cannot ignore or avoid this diversity of interest among the shareholders during the solvency and operation of an association by pointing to decisions and statutes which imposed an equal standing as to losses and debts in the event of insolvency. It was pointed out that under the laws of 1925, chapter 65, it was provided that “all members shall occupy the same relative status as to debts and losses of such association.” This, obviously, does not give an equal participation in the assets and profits; it contemplates assumption of losses in the event of insolvency and liquidation.

This diversity of rights between prepaid shareholders and others was noted by Yice-Chancellor Stein in Newark 21 Building and Loan Association v. Zuckerberg, 115 N. J. Eq. 579. In that case, the defendant, the mortgagor, holding installment shares in the complainant company, the mortgagee, demanded that in ascertaining the credit to be given upon her shares, toward the payment pro tanto, of the mortgage, the losses be assessed as against all members of the association including the prepaid shareholders. Vice-Chancellor Stein, recognizing the difference in status between the prepaid shareholders and others said (at p. 582), (italics ours) :

“I. The prepaid shareholders paid full value for their shares and were not given the right to participate in the profits of the association derived from, premiums, fines, withdrawal penalties and interest on the association’s investments. The association agreed to pay such shareholders a fixed dividend in lieu of participation in the general profits of the association.
* * * ❖ * * *
“The certificate issued by the association to its prepaid shareholders provides that such shares shall bear interest at five per cent., and may be called in and canceled at any time upon notice and payment of the par value and interest to the date of cancellation, and that beyond the payment of five per cent, interest such shareholders ‘shall not further participate in the general earnings of the association/
“The installment stockholders enjoy many possible advantages which are denied to the prepaid shareholders. They participate in all of the profits of the association and this expedites the maturity of their stock and profitable winding up of their financial venture. The profits on their investment depend upon the time the association runs, while the holders of paid-up shares obtain their profits in stipulated interest as the time proceeds. In both instances it is a ease of profit upon money invested in the stock of the association—the common fund which constitutes the capital of the association. They constitute, therefore, simply a different class of stockholders. Latimer v. Equitable Loan and Investment Co., 81 Fed. Rep. 776; Towle v. American Building and Loan Association, 75 Fed. Rep. 938. That paid up shareholders are a different kind of shareholder from that of the installment shareholder clearly appears in section 74 of the act of 1925, chapter 65, ‘that no member shall hold paid-up shares in any such association of a value in excess of two percentum of the liability of such association for dues on installment shares, and in no case shall a member hold paid-up shares in any such association of a value in excess of twenty-five thousand dollars.’ From this limitation, however, are accepted “paid-up shares that received by a person by will or under the statute of distribution, or held as collateral security.’ No such limitation is imposed upon installment shareholders.
“The complainant association in the instant case, by authority of the statute and under its constitution, entered into agreement with its paid-up shareholders whereby these members waived participation in the general profits of the association in consideration of the payment of interest at the rate of five percentum per annum,. They had no interest in the profits set up on the boohs which were transferred to the reserve account.
“Much stress was laid in support of the proposition that prepaid shareholders should contribute pro rata by way of an assessment or by withholding future dividends or interest, toward the reserves required by the department because of that portion of section 74. which provides that ‘all members shall occupy the same relative status as to debts and losses of such association.’ I cannot construe this language to mean that losses should be borne proportionately out of profits in the case of installment shareholders and out of capital in the case of prepaid shareholders. The language of the section can only have application in case the capital is impaired and the association is insolvent for there are no losses to which the prepaid shareholder can be held to contribute until all the profits are dissipated.”

The diversity of interest, and inequality in participation between prepaid shareholders and others, during the operation of a solvent company were neither disputed nor passed upon in the cases of Fitzgerald v. Stale Mutual Building and Loan Association, 7(5 N. J. Eq. 137, and Moore v. Conover, 123 Id. 61. In the Fitzgerald case, the holder of full paid stock claimed the status of a creditor, and a preference in the distribution of the assets of the company in liquidation because of insolvency. Such preference was denied. Likewise, in the Moore case, the court denied the status of a bondholder to a full paid shareholder of an insolvent company taken over by the Department of Banking and Insurance. Whether we designate or refuse to designate a prepaid shareholder as a creditor, preferred shareholder, or for that matter, an inferior shareholder or by any other given name, the fact remains that during the solvent operation of a company, he is not on a basis of equality and mutuality, and the effect of the statute in question is not to promote, as to him, such an equality.

What then, was the effect of the statute on the rights of the prepaid shareholder ? That a radical change has been effected in the rights and privileges of all withdrawing shareholders was stated in the Bucsi case, supra (see page 126 of Report) but more than that, and peculiar to the holder of prepaid shares, the effect of the statute is to deprive him of his limited contractual rights, without, at the same time, granting him mutuality and equality with the other shareholders in the participation in profits, or in benefits that are expected to result to the association as a whole, by the operation of the act, by conservation of the assets of the association.

It appears then, that the prepaid shareholder, lacking the equality and mutuality with others, in the participation in profits, and being denied such equality and mutuality in the benefits to be derived under the act, the effect of the statute is not to continue an existing equal participation, or to promote such equality; therefore, under the very principle of the Bucsi case, so far as prepaid shareholders are concerned, the statute in question does not evince a proper, fair and reasonable exercise of police power.

In connection with the above observations, it will be profitable to refer to the case of Cohen v. Swink, 3 S. E. Rep. (2d) 471, a decision of the Supreme Court of Appeals of Virginia, rendered June 12th, 1939. The case is not completely analagous with the present situation, and is not cited as authority to be necessarily relied upon, but rather for observations made therein which are worthy of note. The gist of the holding is, that a prepaid shareholder, having sacrificed his rights to a proportionate share of the income and having been confined to a specified rate of interest and a guaranty of the payment of that sum, stands upon a different footing from the rest of the shareholders, and is in the position of, as the court designates, a (/Mast-creditor. The suit in the said case was in equity, to distribute the assets of an insolvent building and loan association. Plaintiff was the holder of certain full paid certificates and claimed preference in payment. There were no outside creditors so that the dispute was between the shareholders of the company as to preference, if any. As stated above, the case is not cited as authority for the contention that in the distribution of the assets of an insolvent company, prepaid shareholders in Hew Jersey are entitled to preference. That it dehors the issue. The important point is the reasoning and the logic in the differentiation.

The Virginia court, in the Cohen case, supra, discusses at length the history of the company and its endeavors to weather the depression era by various schemes. It appears that originally the association was a typical building and loan association, established on the basis of mutuality and equality. Then the company became more or less of an investment house, with people investing large sums for a definite rate of interest, with the right of withdrawal on thirty days’ notice. The company found it profitable to use these moneys in its business and divided the proceeds among those shareholders who had an equality basis. Finding the going hard, during the depression, it solicited among its certified holders to convert their certificates to a new issue, whereby they would give up their definite rate of interest and share in the profits equally. The great majority of the shareholders converted theirs to the new type. The plaintiff held on to the old certificates. It appears then that here it was the old type of shareholder in the company that had a definite rate of interest and the holders of the new shares participated equally in its profits. While it was fair weather for building and loan associations to earn large yields upon their investment, these new shareholders received the benefits, and when the company went on the rocks, they expected the old shares to take the losses equally with them, although deprived of equality in profits previously.

Keferring to the holders of the old certificates, the court (at p. 473), says: “They were investors, and were, in turn, perhaps gííasi-creditors.” And referring to the so-called dividends which were paid these investors, the court states that they are misnamed dividends, but were in fact, interest.

It further appears that in 1932 the legislature in Virginia enacted a Building and Loan act which provided among other things, that where, in an emergency, payment of withdrawals of shares in the usual course, were prevented, the shareholders would not be creditors. The act was passed after plaintiff had acquired her old type certificates.

On page 475, the Virginia court said:

“We do not perceive that it is necessary for us to determine whether or not the appellants were creditors and, if so, were they such ab initio, or gwasi-creditors after the maturity of their withdrawal notices, during the solvency of the association, or were members of the association, or stockholders of different classes.”

And again, on page 476, the court states :

“About ninety per cent, of the holders of certificates carrying absolute and vested rights were exchanged for a new species of security which clothed the association with advantages and control which had not theretofore existed. This placed, of course, the holders of the ‘new certificates’ in a different class and relation from that which they had previously occupied. In their old status they could only derive a profit of six per cent. In their new, they stood to enjoy such profits as would be earned by the association, however large they might be. This they evidently evaluated as a substantial consideration. They now contend, through the receiver, that they are entitled to share equally with the holders of the certificates of the character of those which they traded away.”

It further appears that in the lower court, the Chancellor, attempting to effectuate the doctrine of equality and mutuality, had given to holders of the old certificates, the same standing as the holders of the new certificates, in the division of the assets of the insolvent company. Criticising this, the appellate court, on page 476 states:

“The learned Chancellor, for whose judgment we have great respect, overruled the report of the commissioner and held that when insolvency overtakes the company the rights of the members and stockholders must be governed by the ‘supreme rule of equality and mutuality/ This is undoubtedly the case as among the holders of the ‘new certificates/ but their contracts are not now at all identical with those of the holders of the ‘old certificates/ among whom is the appellant, Mrs. Lena Cohen. When the differences in their contractual relations are noted, the application of the ‘supreme rule of equality and mutuality’ would, be abortive of the principle and it would be destructive of itself. Equality, as equity perceives it, cannot be had by taking the rights which one has, for the benefit of another who is not entitled to enjoy them. Equality without justice is non-existent.” (Italics ours.)

And finally, at page 478, the Virginia court said:

“One who purchases from a building and loan association ‘fully paid stock/ upon which he is to receive a ‘guaranteed dividend’ at a named rate per cent., payable at fixed times, and who is not entitled to ‘participate in further profits/ is, though his right to demand payment is not to become absolute until he shall, after the expiration of a stated period, have given a specified notice, nor until there shall be in the treasury of the association a sufficiency of assets derivable from a designated source to pay him in full, in all substantial respects a creditor of the association, and entitled.to be dealt with as such in an equitable distribution of its assets; and this is so, without regard to the above-mentioned conditions as to payment, if such distribution be brought about without fault on the part of the holder of such ‘stock.’ ”

Accordingly, the terminology by which wo designated the various types of shareholders is abortive. We cannot ignore their difference in rights, and an absolute unconditional application of equality would be, as the Virginia courts said, equality without justice, an equality achieved by taking the rights of one for the benefit of another.

As to the further point raised that the plaintiff in the present case is bound by the amendments of the constitution of the association, pursuant to the 1932 act, it will be noted that the plaintiff had given his notice of withdrawal on April 19th, 1932, and the laws of 1932, chapter 102, did not become effective until thereafter, to wit., April 22d, 1932. An amendment of the constitution of the defendant company, could not deprive the plaintiff of his vested rights.

In Sautter v. Supreme Conclave Improved Order of Heptasophs (Court of Errors and Appeals), 76 N. J. L. 763, Mr. Justice Voorhees said (at p. 767) :

"* * * It is very generally, if not universally held that these benefit certificates, like other contracts, confer a vested interest upon the member which may not be impaired by a subsequent amendment, even though the power to amend be reserved in general terms. If the member’s stipulation to comply with all by-laws thereafter enacted could be construed to relate to a by-law that reduced the benefit from $5,000 to $2,000, it must also relate to a by-law canceling the benefit certificate entirely, a result wholly unjust and absurd. This stipulation must be construed as referring only to reasonable by-laws and amendments adopted in furtherance of the contract, and not to such as would overthrow it or materially alter its terms.”

And in Coghlan v. Improved Order of Heptasophs (Supreme Court), 86 N. J. L. 41, Mr. Justice Trenchard said (at p. 47):

“* * * The rule is established in this state that an agreement by an applicant, to be bound by after-enacted by-laws refers only to such by-laws as tend to further the subsistence of the contract between the association and the member, and not such by-laws as defeat or impair the contract. O’Neil v. Supreme Conclave, supra; Poole v. Supreme Circle, 85 Atl. Rep. 821; affirmed, 80 N. J. Eq. 259.”

This rule in Hew Jersey is applied in various states in respect to building and loan certificates.

In Interstate Building and Loan Association v. Wooten, 113 Ga. 247; 38 S. E. Rep. 738 (Georgia, 1901), the court held (at p. 741):

“* * * Where one, on joining a building and loan association, voluntarily consents that it may subsequently alter, amend, or repeal then existing by-laws in so far as they relate to the plan upon which its business shall be transacted * * * his privilege of withdrawing therefrom upon those terms would immediately become a vested right, which could not be defeated by its tardily undertaking, by means of a change subsequently effected in its by-laws, to recall the offer thus voluntarily made by it. What has just been said is to be understood as applying to such stockholders only as are commonly known as ‘non-borrowers’ or ‘investors.’ * * *”

See, also, Latimer v. Investment Co., 81 Fed. Rep. 77, and Kelly v. Republic Building and Loan Association, 34 S. W. Rep. (2d) 924.

It is stated that the issue herein raised has already been passed upon by our Court of Errors and Appeals, in the case of Rocker v. Cardinal Building and Loan Association, supra, and Veix v. Sixth Ward Building and Loan Association, 123 N. J. L. 356; 8 Atl. Rep. (2d) 350.

The facts of the Rocker ease are more fully set forth in the report in 13 N. J. Mis. R. 397, and from this it appears that the certificate issued to the plaintiff in that case, did not materially affect the holder’s rights to equal participation in profits and assets; it did not violate or deviate from that principle of equality and mutuality, the continuance and promotion of which was considered to be the justification of the act of 1932. The terms of the certificate in the Rocker case, as stated in the opinion of Judge Cleary, on page 398 of 13 N. J. Mis. R., show that the plaintiff received “profits” and not “interest,” as in the present case, and that he expressly waived profits over and above six per cent., in return for a guaranty of such profits; and that he was entitled to “maturity value” of the shares, as against the “face or par value,” in the present case. So that, as to the type of the certificates involved, in the Rocker case, it may very well be said that the effect of the law's of 1932, chapter 102, was to continue and promote the principle of equality and mutuality.

As to the case of Veix v. Sixth Ward Building and Loan Association, supra, reported November 18th, 1939, after the briefs in the present case were submitted, this court has examined the pleadings, as well as the briefs submitted in that case, and it appears that the point now made, namely: the failure of the 1932 act to have the effect of promoting or continuing any equality or mutuality, so far as prepaid shares are concerned (and therefore, under the reasoning of the Bucsi case, supra, the unconstitutionality of the act, so far as prepaid shares are concerned) was never raised. The plaintiff, in the Sixth Ward case, supra, argued that the act was unconstitutional as to all types of shares, basing his argument mainly upon the decision in the case of Triegle v. Acme Homestead Association, supra. However, since that decision had previously been considered by our Court of Errors and Appeals, in the Bucsi case, supra, the plaintiff’s arguments in the Sixth Ward case naturally were held untenable. In the Sixth Ward case, the plaintiff sought to overrule the Bucsi case decision, whereas, in the present case, this court, accepting the rule of the Bucsi case, applied its reasoning to the particular facts herein involved and held the 1932 act unconstitutional, so far as prepaid shares are concerned. It appears then that the issue raised in the present case was not passed upon by our Court of Errors and Appeals in either of the two cases above mentioned.

Eor these reasons, the decision of the court hereinbefore made, will stand unchanged.


author: Rosecrans, C. P. J.

text:
    Warren County Orphans Court.
    IN THE MATTER OF THE ESTATE OF PALMER T. HELLER, DECEASED.
    Decided May 10, 1940.
    For the executor, William P. Tollman.

    For the heirs-at-law, Lewis 8. Beers.

    For the next of kin, James B. Haddock, Jr.

   Rosecrans, C. P. J.

The question involved arises upon an application for distribution, and the meaning of the sixth paragraph of the decedent’s will is the subject-matter in dispute. It reads as follows:

“I give, bequeath and devise all the rest, residue and remainder of my estate to such person or persons who would by law inherit the same; and direct that my executor hereinafter named shall convert my said estate to cash and I hereby empower and authorize him to sell my real and personal property and to sign and execute a deed or deeds for my said real estate to the purchaser or purchasers.”

It is contended for the heirs-at-law that this paragraph is a mandate to the executor to apportion the residue consisting of proceeds from sale of real estate among the heirs-at-law while the next of kin seek a distribution of such residue limited to them. Was there an equitable conversion? If so, the residue should be distributed to those entitled to the personalty. If no such conversion was effected the proceeds would retain the status of realty and descend to the heirs-at-law.

“The court’s main concern is not so much what the testator meant to say as it is to determine what he meant by what he did say.” New Jersey Title Guarantee, &c., Co. v. Dailey, 123 N. J. Eq. 205, 210; 196 Atl. Rep. 703.

Where, in a will, words have been omitted which are obviously necessary to express the real meaning, it is the duty of the court to suppty such omitted words. Maxwell v. Maxwell, 122 N. J. Eq. 247, 251; 193 Atl. Rep. 719. It would seem that by adding after the semi-colon the words, “and for this purpose,” the real intent of the testator would be apparent. The language of Vice-Ordinary Backes in Traverso v. Traverso, 99 N. J. Eq. 514, 519; 133 Atl. Rep. 705; affirmed, sub nom. *Traverso v. McMillen, 101 N. J. Eq. 308; 137 Atl. Rep. 919, is apropos:

“The testator’s idea was that the division of the corpus should be in liquid assets, and to that end directed that all his real estate be sold for the purpose of distribution, and under well-recognized principles the proceeds are deemed to be personal property.”

Under the title “Equitable Conversion” the following statement of the law is set forth in A. L. I., Restatmeent-Trusts 332, § 131:

“(1) If real property is held in trust and by the terms of the trust a duty is imposed upon the trustee to sell it and hold the proceeds in trust or distribute the proceeds, the interest of the beneficiary is personal property.”

(See “Illustrations” No. 3, under that section.)

Of course, an executor is not a trustee but they are both fiduciaries (A. L. I. Restatement-Trusts, § 6) and the same principle of equitable conversion would apply.

Since there is a specific direction that the executor shall convert the remainder of the estate into cash, the proceeds of the realty will be deemed to be personal property and the entire residue should be distributed to the next of kin of the testator pursuant to the statute governing distribution of personalty.

Let a decree be presented by the executor accordingly.


text:
    State Board of Tax Appeals.
    CITY OF NEWARK, PETITIONER, v. HOUSEHOLD FINANCE CORPORATION, RESPONDENT.
    Decided May 7, 1940.
    Eor the petitioner, James F. X. O'Brien (by Vincent J. Oasale).

    Eor the respondent, Burnett & Trelease (by Charles C. Trelease).

   Quinn, President.

The petitioner taxing district levied for the year 1938 an assessment for personal property taxes upon respondent in the sum of $197,400. Upon appeal to the Essex County Board of Taxation, the assessment was reduced to the sum of $10,000, and the taxing district now prays, before this board, for a restoration of the levy as originally made.

Respondent is a Delaware corporation, with executive offices in Chicago, Illinois, and is engaged in the city of Newark, as well as elsewhere, in the “small loan” business, operating in that taxing district from three local offices. Erom the record before us, it is clear that upon the assessing date for the year in question, the company held unsecured loans receivable at its Newark offices, in the aggregate of $190,963.25, cash in the amount of $6,511.40, and office furniture and equipment having a true value of $8,143.84. Although respondent is a foreign corporation, taxable “for the amount of capital usually employed in this state in the doing of such business” (i. e., business done in this state), Pamph. L. 1918, ch. 236, § 305; N. J. S. A. 54:4-19), the intangible property referred to has obtained a business situs in this state, and is properly assessable to respondent in the city of Newark. Household Finance Corp. v. State Board of Tax Appeals (Supreme Court, 1937), 119 N. J. L. 230; 196 Atl. Rep. 219.

The substantial question presented for determination upon this appeal, however, is whether respondent was entitled to a deduction from the amount of its intangible property listed with the assessors of the city of Newark, of a debt due and owing from it to the Fidelity Union Trust Company, a New Jersey banking corporation, in the sum of $260,000, on the assessing date. If not, the original assessment must be reinstated. Section 305, eit. supra, specifically dealing with the taxation of foreign corporations, contains no express proviso permitting any deduction of debts from the “capital employed,” upon which the tax is leviable. Nor is there any specific indication in Section 303 (N. J. S. A. 54:4-14), providing for the deductibility of debts, generally, as to whether its scope is intended to extend to foreign corporation taxpayers. As found in N. J. S. A. 54:4-14, the statute follows:

“After making the valuation of the personal property for which a person shall be assessed the assessor may deduct therefrom all debts bona fide due and owing from such persons to creditors residing in the state, but no such deduction shall be made unless the debtor shall make claim therefor in writing under oath and therein set forth the debts owing by him, when incurred, to whom owing and where the creditor resides, the total amount of personal property of the claimant, including debts owing to him from solvent debtors, and also that no part of the debt was incurred for the purpose of reducing the taxes of the claimant, and that the stated value of the personal property of the claimant includes not only that to which he holds title or possession, but also that to which any other person holds title or possession for the claimant, whether in trust or not. A claim on behalf of a corporation shall be subscribed and sworn to by the president or principal officer.”

After careful consideration of the authorities, we must conclude that foreign corporations are not within the intent of the act, and further, that if they were, the debt with which we are here concerned could not in any event be deducted, under the particular facts presented.

In Household Finance Corp. v. State Board of Tax Appeals (Supreme Court, 1937), 119 N. J. L. 230; 196 Atl. Rep. 219, the Supreme Court had before it on certiorari the 1936 personal property assessment levied by the city of Newark against this respondent. The court was there primarily concerned with the right of a foreign corporation to exemption from taxation of that part of its capital employed in this state, which consisted of loans secured by chattel mortgages, and the issue was determined in favor of such allowance. N. J. S. A. 54:4-l 9.1. With respect to a claim for the deduction of a debt, in the sum of $300,000, owing to a New Jersey creditor, the court held that the taxpayer had not strictly complied with the conditions precedent, contained in section 303, respecting the filing of its claim for the deduction, and it was therefore disallowed. In any event, the more fundamental question, as to the general right of a foreign corporation to such a deduction, does not appear to have been argued before the court, and is not adverted to in the opinion. The court did, however, make the following observations (at p. 235):

"It should be marked that the portion of the $300,000 debt allocated to the Newark offices was, on the assessment date, but $20,731.91. This amount, therefore, is all that can be deducted, if in fact, anything at all should be deducted.”

A review of the testimony adduced before the board at the hearing in the present case leaves no doubt of the fact that no part of the $260,000 debt for which deduction is claimed in this ease was "allocated” to respondent’s business at its Newark offices. The debt represents the total of three loans, in the sums of $40,000, $140,000 and $80,000, made on September 27th, 1937, from the Fidelity Union Trust Company. While respondent’s books show these transactions as loans made by the 605 Broad street, 744 Broad street and 17 Academy street offices of the company, respectively, the borrower, in each instance, was actually Household Finance Corporation, respondent herein. No mere book entries can make these transactions local, rather than home office business, if the facts belie such characterization. Each of the loans was on a ninety-day note and the funds were immediately transmitted to the Chicago headquarters of the corporation. What their ultimate disposition was, does not appear, but it is clearly established that they were not used in any aspect of the Newark business of the company. Cross-examination of an assistant treasurer of the respondent by counsel for the petitioner taxing district brought out that these moneys were not even needed in the Newark offices of the company. At the maturity of the notes, they were paid in full by an advance of funds from the Chicago headquarters of the company. In this view of the situation, we find it impossible to say that the debt in question was “allocated,” under any reasonable or realistic construction of that term, to the Newark business of the respondent corporation. See Household Finance Corp. v. City of Newark (State Board), June 13th, 1939. To the extent that rules governing localization for tax purposes of credits owned by a foreign corporation may be deemed properly analogous to the present problem of local “allocation” of debts, it is clear that these debts should be regarded as attributable to the executive offices of the company in Chicago, where the decision to incur them was made, where the proceeds were returned, where, presumably, the proceeds were used, where it was decided to repay them, and whence came the funds for that purpose. See Wheeling Steel Corp. v. Fox, 208 U. S. 193 (at p. 212); General Motors Corp. v. City of Linden (State Board), filed September 12th, 1939; affirmed (Supreme Court, 1940), 124 N. J. L. 212. Compare the language of a New York court in referring to a debt of a foreign corporation taxpayer as not having been shown to be incurred, “in respect to the specific assets which are found within the state.” People, ex rel. Manhattan Silk Co. v. Miller, 125 App. Div. 296; 109 N. Y. Supp. 829; and see 2 Cooley, Taxation (1924), § 919.

The deductions must be disallowed, moreover, for failure of literal and strict compliance with section 303, in that the statement of claim filed by the respondent with the city does not set forth “the total amount of personal property of the claimant,” as required by the section, but only its tangibles, cash, and loans receivable in this state. The Supreme Court has held that this proviso must be strictly complied with (Household Finance Corp. v. State Board of Tax Appeals, supra (at p. 236), and, literally construed, requires a specification by the corporation of all of its property, including that located without the state as well as that situated here. The Court of Errors and Appeals so held, in a precisely parallel situation, in State, Tatem v. McChesney (1871), 35 N. J. L. 548. The court tiiere rejected the contention urged on behalf of an individual non-resident taxpayer, who sought a deduction for debt, but who had filed a claim setting forth only personalty situated in blew Jersey (under the act of 1866), that the object of the statute, as applied to non-residents, did not require a construction of the provision governing statements of claim for deductible debts, which would make it necessary for the taxpayer, literally, to set forth his total real and personal estate, as specifically required by the act. The court said (at p. 550) :

“* * * it is clear that courts have no power to dispense with clear and positive directions of a statute because the usefulness of such directions does not appear, and because they occasion unnecessary trouble.”

Respondent’s statement of claim having failed to set forth its personal property situated out of the state, it has failed to comply with the clear directions of the statute, and its claim for deduction must, for this additional reason, be disallowed.

And, finally, it is our considered opinion that our taxing statutes, taken as a comprehensive whole and in the light of the history of the sections under consideration, do not under any circumstances contemplate the allowance of deductions for debts in favor of foreign corporation taxpayers. Section 305 of the Tax act of 1918, providing for the taxation of both domestic and foreign corporations, is now constituted by N. J. S. A. 54:4-18 and 54:4-19.

These read as follows:
“54:4-18. Corporations of this state shall be regarded as residents and inhabitants of the taxing district where their chief office is located, and their personal property shall be taxed the same as that of an individual, except as in this chapter otherwise provided,.
“54:4-19. All corporations regularly doing business in this state and not being corporations thereof shall be assessed and taxed for and in respect of the business so done by them, and all such companies other than insurance companies, shall be assessed for the amount of capital usually employed in this state in the doing of such business, and not otherwise taxed as real property or tangible personal property by virtue of this chapter. The assessment shall be made in the taxing district where the business is most usually carried on and transacted.” •

The verbiage of N. J. S. A. 54:4-19 may be traced back to section 19 of the Tax act of 1866, which, in substance, provided:

“That all corporations regularly doing business in this state and not being corporations of this state, shall be assessed and taxed for and in respect of the business so done by them and transacted in this state * * *” (the section then provides for .the regulation of agents of foreign insurance companies) “and all other corporations not incorporated by this state, and agents doing business in this state as aforesaid, shall be assessed for the amount of capital usually employed in this state in the doing of such business not otherwise taxed by virtue thereof.”

Section 15 of the same act required the assessment of domestic corporations for the full amount of their capital stock paid in and accumulated surplus, and in the case of corporations having no capital stock, for their assessment for the full amount of their property and assets, without any deduction for debts and liabilities. Section 20 of the act, as noted hereinabove, allowed a deduction of debts from the taxable estate of individuals. It is fairly presumable, however, that under the act it was not intended that foreign corporations should have the right of such deduction, where it was specifically denied to domestic corporations for purposes of estimating their taxable property and assets. The capital of a corporation, in the most general sense of such a designation, connotes “the fund with which it transacts its business, and embraces all its property, real and personal, constituting the assets of the corporation.” Wetherbee v. Baker (Court of Errors and Appeals, 1882), 35 N. J. Eq. 501, 505. The express proviso in section 19 of the act of 1866, for the assessment of the amount of “capital employed” by foreign corporations in this state, therefore, would appear to have constituted a clear direction for the taxation in this state of the entire fund with which such corporations did business in the state, entirely without reference to the existence of any debts owing by the corporation.

By a supplement to section 105 of the Corporation act of 1875, Pamph. L. 1878, p. 61, it was enacted that the real and personal estate of every domestic corporation should bo taxed in the same manner as is that of individuals. By this proviso, and its reiteration thereafter in the Tax act of 1903 chapter 208, page 394, section 16) and in the General Tax act of 1918, section 305, there was secured to domestic corporations the clear right enjoyed by individual taxpayers to deductions for debts. We cannot help but regard it as significant that on the other hand the formula for the assessment of foreign corporations remained substantially unchanged from what it was under the act of 1866, at which time, as noted above, it cannot be supposed to have contemplated a right of deduction for debts not then accorded even to domestic corporations. In this connection see State, Tatern v. McChesney, cit. supra, cited above in another connection, which held that under section 20 of the act of 1866, nonresident individuals were not entitled to deductions for debts.

Some stress has been laid by respondent on the argument that section 305 should be construed to allow the deduction claimed, as otherwise there would be occasioned an unconstitutional denial of the equal protection of the laws, guaranteed under the Fourteenth Amendment to the United States Constitution, to the foreign corporation thus deprived of a tax advantage accorded to domestic corporations. Hanover Fire Insurance Co. v. Carr, 272 U. S. 494. While we, as1 an inferior statutory tribunal, do not ordinarily presume to express any views with respect to the constitutionality of legislation before us, we may observe that we do not regard the point as well taken, as applied to the situation before us. Foreign corporations are taxable in this state with respect to such of their intangibles only as have acquired a business situs here, whereas domestic corporations are subject to taxation in this state for all of their intangibles, including those which have assumed business situs elsewhere. Cream of Wheat Co. v. County of Grand Forks (1920), 253 U. S. 325; Newark Fire Insurance Co. v. State Board of Tax Appeals (Supreme Court, 1936), 118 N. J. L. 525; 193 Atl. Rep. 912; (1939), 307 U. S. 313. The framework of the tax base set up by the legislature for application to domestic corporations, as judicially construed, is not comparable with that enacted for the taxation of foreign corporations, as it was in the Illinois situation adjudicated by the Supreme Court in the Hanover Fire Insurance Co. case. In these circumstances, we do not concur in the view urged, that for this state to allow domestic corporations a deduction, against their taxable intangibles, of debts owing to creditors residing in New Jersey, while denying it to foreign corporations, against their capital employed in the doing of business here, constitutes a denial of the equal protection of the laws, as to the latter.

For any of the foregoing reasons, respondent is not entitled to the deduction for debts herein claimed, and the judgment of the Essex County Board of Taxation will therefore be reversed, and the assessment ordered restored to the sum of $197,400.


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    New Jersey Department of Labor, Workmen’s Compensation Bureau.
    JOHN ANSON WILSON, PETITIONER, v. TRENT HAT CORPORATION, RESPONDENT.
    Decided May 2, 1940.
    For the petitioner, Abe Silverstein.

    For the respondent, Arthur Mead.

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The petitioner contends that on January 27th, 1939, by reason of his employment on a mixing machine, he inhaled dust and poisons and as a result sustained mercury poisoning causing necessity for medical treatment and temporary and permanent disability.

The respondent denied that the petitioner suffered any disability as a result of a compensable accident or occupational disease under the New Jersey Workmen’s Compensation act and denied that it was requested to supply medical service.

In support of his claim the petitioner testified with respect to his work which he did, the conditions under which he worked, the products which he was called upon to handle and the development of certain complaints and symptoms so that he had to cease his work January 27th, 1939. He further testified with respect to the medical treatment which he received and the number of examinations which he underwent. He also testified with respect to the development of his complaints and as to his present complaints.

On his behalf Dr. Jacob Silverstein testified that the petitioner was sent to him for treatment on February 23d, 1939, at which time he took a history and submitted specimens for laboratory examinations by a Mr. Asen. He also sent the petitioner to have an examination and diagnosis with respect to a condition of the petitioner’s mouth. The laboratory findings reported the presence of mercury and the doctor undertook palliative treatments for a condition which he considered to be mercury poisoning of a chronic nature. At the same time the doctor made an X-ray test to determine whether or not there was any tuberculosis of the chest and although there was a hylar thickening he ruled out tuberculosis. He rendered treatment for a period of approximately six months. Subsequently laboratory examinations were made by Mr. Asen in November of 1939 which tests were negative for mercury.

íj< # íji % ❖ i|:

Dr. Roth, dentist, testified with respect to his findings from an examination of April 7th, 1939, and enumerated findings which he stated were diagnosed as stometitis which in his opinion from the history was caused by mercury. Lay witnesses testified in support of the petitioner’s contention and other medical testimony was introduced.

On behalf of the respondent records of the City Hospital were introduced in evidence and Dr. Wo jack testified with respect to history, examinations and findings made by him at the City Hospital. He stated in his opinion there were no findings to indicate mercury poisoning and enumerated the various complaints and history of sjunptoms given to him while the petitioner was a patient at the City Hospital.

Dr. Rathgeber testified that he was the plant physician and examined the petitioner in June of 1936 when the petitioner sought employment. He testified with respect to findings at that time and also testified that he examined the petitioner in March, 1939, at which time he made a diagnosis of vincentis infection of the mouth and expressed his opinion that the petitioner was not suffering from mercurial poisoning.

Dr. Brown testified with respect to blood and urine examinations made under his direction in March, 1939, and stated that he did not find evidence of mercury.

Dr. Lewis testified with respect to an examination made by him in September of 1939. He enumerated a great number of findings and referred to possible diagnosis indicated from the findings. When presented with a hypothetical question based upon the facts in the case, he stated in his opinion the petitioner did not have evidence of any permanent disability as a result of mercurial poisoning although from an assumption of some of the findings there could have been a temporary episode of mercury poisoning.

Dr. Dowd testified with respect to examinations made by him and enumerated findings indicating that there were a number of conditions involving the respiratory system, anatomical deformity, and congenital defects. He stated in his opinion the petitioner did not have any permanent disability as a result of mercurial poisoning.

Further testimony was introduced on behalf of the respondent and both parties rested.

I have considered the evidence before me and I have considered the medical reports introduced in evidence and the various exhibits and I am of the opinion that the petitioner in connection with his work for the respondent, while working as a mixer, was exposed to products which contained mercury and as a result he sustained mercurial poisoning. It appears from the testimony of Dr. Silverstein that the condition was considered by him to be a chronic condition yet it also appears that from a number of the findings that there was symptomatology of a recent or acute condition. I mention this fact because it appears that the petitioner previous to his employment with the respondent, had worked in a hat factory for approximately five years, had then obtained some outside employment for approximately a year and had then been employed by the present respondent.

I am satisfied that the petitioner did suffer acute mercury poisoning from his employment with the respondent when he worked as a mixer. I am further satisfied that the condition was such that medical treatment was required and it does appear that mercury was eliminated and there was improvement of his general physical condition. As a complication in considering his physical condition, it appears that he had congenital defects and pre-existing constitutional conditions which to a large measure contributed to the petitioner’s subnormal health and ability: He appears to have a respiratory defect, a congenital defect present, evidence of an old rickets and organic neurologic signs indicative of spinal degenerative conditions.

I am satisfied that he does, however, have a disability as a result of mercury poisoning apart from these other conditions. These other conditions heretofore mentioned are unrelated to the mercury poisoning although they do contribute to the petitioner’s disability, but were not aggravated or accelerated by same.

I find that the petitioner has sustained temporary disability from January 27th, 1939, to September 5th, 1939. I find the petitioner sustained permanent disability as a result of mercurial poisoning in the amount of twenty per cent, of total.

On the question of medical treatment, it appears that there was a duplication of treatment. It appears that the petitioner was sent to Dr. Silverstein and Dr. Silverstein undertook to and did treat the petitioner and checked up on his physical condition with respect to tuberculosis and other possible conditions. It appears that the respondent did have examinations in an endeavor to place itself in a position to try to determine the diagnosis in this case but treatment as rendered by Dr. Silverstein was necessary and proper and is, therefore, properly chargeable against the respondent. The petitioner was examined by Dr. Hirschberg on February 15th at his office and the doctor subsequently undertook treatment but there was no authorization for such treatment and the petitioner is therefore, responsible for same to the maximum amount of $50 as provided for in the Workmen’s Compensation act. There is to be no charge against the respondent for this medical treatment owing to same being unauthorized.

It is, therefore, ordered, * * * that judgment be

entered in favor of the petitioner and against the respondent. *******

John C. Wegner,

Deputy Commissioner.