author: Schreiber, J. S. C.

text:
    CLAIROL INCORPORATED, A DELAWARE CORPORATION, PLAINTIFF, v. COSMETICS PLUS, A NEW JERSEY CORPORATION, DEFENDANT.
    Superior Court of New Jersey Chancery Division
    Decided July 26, 1974.

      Mr. Albert G. Besser (Messrs. Hannoch, Weisman, Stern & Besser) and Messrs. Gilbert H. Weil and Michael Malkin, of the New York Bar, for plaintiff.

      Mr. David L. Ficksman of the New York Bar for defendant (Mr. Henry Gurshman, attorney).
   Schreiber, J. S. C.

Clairol Incorporated (Clairol), a Delaware corporation, seeks to enjoin defendant Cosmetics Pius, a New Jersey corporation, from selling to retail customers any of plaintiff’s products which are intended for the “professional” market. Cosmetics Plus owns and operates two retail stores, one in Kearny, New Jersey, and one in Rutherford, New Jersey, which sell various cosmetics, including those manufactured by Clairol, to the public.

Clairol has been producing various beauty supply items, primarily hair dyes, shampoos, and the like, for many years. Its products fall into two basic categories: hair coloring and hair care. The hair coloring products, partially composed of coal tar, are used to color or remove color from hair. The hair care category consists of products such as shampoos and hair sprays which are not made from coal tar. The Clairol name is used in connection with each of its hair coloring and hair care items. It has registered the name “Clairol” as well as the names of many other of its products as trademarks or trade names. Large sums have been spent to advertise the Clairol retail merchandise. Some $30,000,000 was expended in 1973 and $500,000,000 over the last ten years.

Distribution of the hair coloring and hair care products is channeled through two streams. One is designated retail, where the product is intended for the user at home. This is accomplished either (a) through some 1100 direct wholesalers which in .turn resell to retail stores, or (b) by making sales to large chain stores or discount houses such as Two Guys from Harrison or Pathmark. The second stream is directed to the beauty salon industry, which has been designated the “professional” trade. Clairol reaches this user by making sales to (a) wholesale beauty supply distributors, (b) chains of beauty salons, and (c) beauty schools. Clairol’s organization is divided into two divisions, retail and professional, to service the respective markets.

Some products sold to the retail and professional trades are identical. Some are sold only for the professional trade and some only for the retail trade. In 1973 retail and professional sales totaled $160,000,000 and $20,000,000, respectively. Broadly speaking, the identical items which are sold for both retail and professional markets may be distinguished between those that are and are not made out of coal tar. The differentiation is significant.

Under N. J. S. A. 24:5-1 no person may distribute or sell a cosmetic which is adulterated, and N. J. S. A. 24:5-11.1 provides that a cosmetic shall be deemed to be adulterated if it contains any poisonous or deleterious substance which may render it injurious to users, provided that this provision shall not apply to coal tar hair dye the label of which bears a legend reading: “Caution — This product contains ingredients which may cause skin irritation on certain individuals and a preliminary test according to accompanying directions should first be made. This product must not be used for dyeing the eyelashes or eyebrows. To do so may cause blindness,” and the label must also bear “adequate directions for sudh preliminary testing.” The Federal Food, Drug and Cosmetics Act has identical provisions. 21 U. C. C. A. § 361(a).

Probably the most important coal tar product sold to both the retail and professional trades is Miss Clairol Hair Color Bath, a liquid which is used to dye hair. Clairol has approximately 13% of tlie retail hair coloring market in the United States. The packaging and labeling of the hair coloring for the professional and retail markets differ. The retail bottle carries the precise language required by the statutes. It is packaged individually in a box on which is printed advice to keep the bottle away from heat and light, a caution with respect to skin irritation and a direction to read instructions enclosed in the box. The instructions concern preliminary skin and color tests, a color chart section, and directions on how to apply Miss Clairol. The shelf life, is about three years, hut this life is reduced sharply if the bottle is removed from the carton. The professional package contains six bottles. The professional bottle does not have the statutory language. Its label refers to the fact that cautionary statements regularly required for sale to nonprofessiouals are not included on the bottle label; it refers to the skin test, and warns against use for dyeing eyelashes or eyebrows. The bottle carries the legend, “professional use only.” Imprinted on the outside carton are the same cautionary statements that appear on the labels of the individual bottles. The legend on the container also warns against exposure of the bottles to heat or light. Inside the package is one small sheet of paper with warnings concerning hypersensitivity and patch test instructions. If one were to purchase one professional bottle, the buyer would not receive the details on how to apply the patch test, specific instructions on how to apply the product, or color data. In the absence of testing or following the instructions in the retail package, use could lead to allergic reactions, green hair, or other disastrous results, any of which would probably have an adverse impact on Clairol’s sales and goodwill. Clairol manufactures 27 colors, five of which are sold only to the professional trade. The remaining 22 are sold to the retail and professional markets. The products are identical.

Some of the other products which are sold to the professional and retail trades come in bottles or containers which áre identical except that a legend such as “professional use,” “professional package” or “professional use only” appears on that destined for the beauty salon market. In some professional items no individual instructions are included as in the retail package. In some the instructions are the same or adequate for both types of use.

The' labeling on products which are sold only to the professional trade varies. In some instances, no language limiting sales'to the professional trade appears on the label. Other products which are sold by Clairol only to the professional trade do carry that notation. Some of the items are sold only to the professional market because of expertise needed in application, which the professional beautician could apply more readily and safely.

■ - Within each group, retail and professional, the price dharged by Clairol is the same. Thus there is no difference in' the price charged to the drug wholesaler who sells to retail stores or to large retail store chains. So, too, the- price charged for professional use, whether it be to the beauty supply distributor or a chain of beauty salons or a beauty school,is the same. However, Clairol charges a substantially different price for the identical product earmarked for the retail trade and that for the professional trade. For example, the price for Miss Clairol Hair Color Bath is $11.76 a dozen for the retail market (if the purchase exceeds 3-5 dozen), whereas the price to the professional outlet is $5.76 a dozen. Clairol does not attempt to fix the prices at which its products are resold, either at the wholesale or the retail level. [Certain factual findings and discussion have been omitted.]

It is with the factual backdrop described above, that plaintiff seeks to enjoin defendant from selling Clairol products which it desires be restricted to the professional trade. Plaintiff does not predicate its case on a breach of contract for there is no contractual relationship between the parties. Counsel stated on summation that plaintiff does not rely upon a theory of equitable servitude. Nor are the concepts of indueing a breach of contract, including the conspiratorial fraudulent misrepresentation rationale, available to it or found under the circumstances 'here.

Plaintiff urges that its cause of action is based in part on N. J. S. A. 56 :4-l which reads as follows :

No merchant, firm or corporation shall appropriate for his or their own use a name, brand, trade-mark, reputation or goodwill of any maker in whose product such merchant, firm or corporation deals, or discriminate against the same by depreciating the value of such products in the public mind, or by misrepresentation as to value or quality, or by price inducement, or by unfair discrimination between buyers, or in any other manner whatsoever, except where such products do not carry any notice prohibiting such practices, and except in the ease of a receiver’s sale or a sale by a concern going out of business.

By its terms the statute is inapplicable where the products do not carry a notice “prohibiting such practices.” Obviously, the statute then would not apply where plaintiff’s products carried no notice or where the label simply bore the legend “professional use” or “professional package.” The only contention made in this respect by plaintiff was that those items which carried the notation “professional use only” satisfied the notice requirement. Guidance as to the nature of the notice required may be found in the case of Ingersoll v. Goldstein, 84 N. J. Eq. 445 (Ch. 1915). There a notice by a manufacturer of watches forbade a sale under various conditions at a price less than that fixed. The court held that, since the statute was to be strictly construed, the notice was ineffective because it forbade a sale for reasons to which the act had no application. Following that approach, one must readily conclude that here the notice did not clearly and explicitly prohibit the sale of the product to home users. To the public the word “professional” may well not mean what Clairol intended. The notice would have to spell out that the sale of the product other than to certain described persons was prohibited, and it has not met the statutory requirement.

Even if the notice were sufficient plaintiff would be unable to meet the remaining statutory requirements. It relies upon the proscription to “discriminate against the same product by depreciating the value of such products in the public mind * * To that end it contends that defendant has discriminated against Clairol’s goodwill by depreciating the value of its products in the public mind. But defendant has not advocated that the Clairol product is poor or not as good as a competitive brand. The opinion was voiced by Mr. Shea, Clairol’s Vice President, that by not leaving the professional product in the same package, which is true as to Miss Clairol Hair Color Bath but not other items, the goodwill image is adversely affected. This does not establish, and plaintiff has not shown by a fair preponderance of the evidence, that defendant intended to harm or discriminate against Clairol products. The statute does not support plaintiff’s cause of action.

There is no doubt but that a manufacturer may create goodwill associated with his business. This may be accomplished in a number of ways — sales and prompt and adequate servicing over a long period of time under identifiable names or trademarks to satisfied customers. Advertising on a broad scale may produce goodwill in a much shorten period of time. In any event, the manufacturer may develop a property interest in that goodwill which is evidenced by the name or trademark placed on the product. When that has occurred, the courts have not hesitated to protect that property interest. In J. B. Liebman & Co., Inc. v. Leibman, 135 N. J. Eq. 288 (Ch. 1944), the court wrote:

The law guards the goodwill of a business and will protect the owner — and the public — against unlawful injury through unfair competition. Williamson Candy Co. v. Ucanco Candy Co., D. C. 3 F. (2d) 156, 158; L. Martin Co. v. L. Martin & Wilckes Co., 75 N. J. Eq. 39, 71 A. 409; affirmed, 75 N. J. Eq. 257 ; 72 A. 294 . . . One who adopts a trade-name for use in his business and builds upon it public goodwill, acquires a property interest in both the trade-name and the good-will which equity will protect. Robert H. Ingersoll & Bros. v. Hahne & Co. (Court of Chancery), 89 N. J. Eq. 332; 108 A. 128. [at 292]

In American Shops, Inc. v. American Fashion, etc., Inc., 13 N. J. Super. 416 (App. Div. 1951), the court made the following comment:

Good-will is an intangible value. As an economic phenomenon it more or less fixes the competitive position of a business in the market; as a matter of accounting and appraisal it is an element of the valuation of a business; legally it represents a pecuniary interest recognized as a property right and, as such, entitled to protection, [at 424]

Chief Justice Weintraub wrote for a unanimous court in Great Atl. & Pacific Tea Co. v. A & P Trucking Corp., 29 N. J. 455 (1959) :

There being no competition, the question arises whether plaintiff may nonetheless be granted relief. Defendants do not seriously contend that today equity will act only when the litigants compete for the same customer. Early holdings to that effect, reflected for example in National Grocery Co. v. National Stores, 95 N. J. Eq. 588 (Ch. 1924), affirmed 97 N. J. Eq. 360 (E. & A. 1925), have yielded to a demand for a higher level of commercial morality and to the needs of a changing economy. Huge sums are expended in advertising both the product and the producer. Goodwill is a sensitive asset, particularly vulnerable today by reason of mobility of population and the media of mass communication, [at 457-458]

In Red Devil Tools v. Tip Top Brush, 50 N. J. 563 (1967), Justice Jacobs on behalf of a unanimous court wrote that plaintiff’s long and prior use of a trademark in connection with its business gave it certain well recognized common law rights, which included the right to restrain unfair trade practices by a noncompetitor which might endanger the goodwill it had established through many years of advertising and service. Professor Chafee commented in his article, “Equitable Servitudes on Chattels,” 41 Harv. L. Rev. 945 (1928):

Each ambitious seller by expensive advertising and a vast network of dealers creates in the public the habit of expecting a well remembered product of supposedly high uniform quality in uniform guise at a uniform price for a uniform quantity. Irregular and unauthorized departures from uniformity in any respect tear this pattern of thought and emotion which has been woven with so much trouble and cost

The attitude toward legitimate protection of goodwill is evidenced by enforcement of restrictive covenants where the sale of a business is involved. Justice Jacobs, in Solari Industries, Inc. v. Malady, 55 N. J. 571 (1970), noted:

• * * * Though noncompetitive agreements were at one time flatly outlawed, it is now well recognized that they do have a proper place and are enforceable under appropriate circumstances. Thus a seller’s incidental noncompetitive covenant, which is designed to protect the good will of the business for the buyer, is freely enforceable in the courts, [at 576]

Defendant contends that the manufacturer is only entitled to protection when three requirements are satisfied: (1) there is a palming off of his product as that of another, (2) competition exists between the parties, and (3) deception of the consumer is practiced. No such straitjacket exists. Deception of the consumer alone constitutes a sufficient basis for relief. Whenever goodwill is being or has been damaged without any justification, and in the absence of an equal or superior right, the owner thereof is entitled to relief. The existence of such an action under modern conditions to protect the consumer and the rights and property of persons can no longer be questioned. 2 Callman, Unfair Competition, Trademarks and Monopolies (3 ed. 1968), § 84.2.

That ClairoFs goodwill would be subject to injury and harm by permitting defendant to distribute many of the professionally marked merchandise to the public is obvious. Insofar as the coal tar products are concerned — Lady Clairol Hair Color Bath — the sales not only violate the New Jersey and United States laws (N. J. S. A. 24:5-1 et seq. and 21 U. S. C. A. 361(a)), but pose a threat to public health and safety. The absence of the individual instruction sheets may also compound the user’s difficulty. Clearly, Clairol’s goodwill is at stake. Clairol has successfully obtained injunctive relief in other jurisdictions to protect that goodwill where its professional hair coloring product was being sold to the retail trade. Clairol Inc. v. L. H. Martin Value Center, Inc., 40 N. Y. Misc. 2d 875, 244 N. Y. S. 2d 210 (Sup. Ct. 1963); Clairol Inc. v. Peekskill Thrift Drug Corp., 141 U. S. P. Q. 147 (N. Y. Sup. Ct. 1964), aff’d p. c. 25 A. D. 2d 496, 267 N. Y. S. 2d 476 (App. Div. 1966); Clairol Inc. v. Sarann Co., 146 U. S. P. Q. 726 (Pa. C. P. 1965). To the same effect Revlon, Inc. v. Regal Pharmacy, Inc., 29 F. R. D. 169 (E. D. Mich. 1961).

Clairol’s goodwill will also be unduly injured with respect to products which it proposes to offer only to the professional trade and not to the public. Some of these require physical dexterity in application (in the absence of which injury — both physical and emotional — may result), or instructions on utilization (in the absence of which untoward consequences may occur). In this group, products sold only to the professional trade, are concentrates bearing the same name but not the same composition as a retail counterpart. To permit the public to buy the concentrate would constitute a fraud and deceit since it is not the same as the one which has been advertised to the public.

The only category where Clairol’s goodwill would not be affected is where the professional and retail products and instructions are the same. No justification exists for this dichotomy except Clairol’s desire to have two prices to compete with or capture the beauty salon business.

The principle that the owner has a right to protect the goodwill attached to his product is not, as indicated above, unfettered. Courts have historically recognized that restraints on alienation of personalty may be invalid. These two doctrines may conflict, for contractual attempts (as here by Clairol) to restrict the immediate purchaser’s resale of its goods unquestionably involve a restraint of trade. It is necessary, therefore, to examine the nature, extent and applicability of the restraint of trade doctrine.

The vice chancellor in Ingersoll v. Goldstein, supra, wrote that, at common law, when chattels were sold "with conditions restricting the sale thereof, the title passes, but the conditions, being against public policy are void.” Reliance for that broad proposition was mistakenly placed on Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U. S. 373, 31 S. Ct. 376, 55 L. Ed. 502 (1911). There plaintiff, a manufacturer of medicines, sold its products to wholesalers and certain retailers under contracts which fixed the resale price. Defendant, a noncontractual wholesaler, was charged with inducing contract purchasers to violate the minimum prices on sales to the defendant. Chief Justice Hughes held that the retail price fixing was illegal and, after noting that generally a restraint upon alienation is invalid, wrote:

With respect to contracts in restraint of trade, the earlier doctrine of the common law has been substantially modified in adaptation to modern conditions. But the public interest is still the first consideration. To sustain the restraint, it must be found to be reasonable both with respect to the public and to the parties and that it is limited to what is fairly necessary, in the circumstances of the particular case, for the protection of the covenantee. Otherwise restraints of trade are void as against public policy. As was said by this court in Gibbs v. Baltimore Gas Co., 130 U. S. [396] p. 409, 9 S. Ct. 553, 32 L. Ed. 979, “The decision in Mitchel v. Reynolds, 1 P. Wms. 181; S. C., Smith’s Leading Oases, 407, 7th Eng. ed.; 8th Am. ed. 756, is the foundation of the rule in relation to the invalidity of contracts in restraint of trade; but as it was made under a condition of things; and a state of society, different from those which now prevail, the rule laid down is not regarded as inflexible, and has been considerably modified. Public welfare is first considered, and if it be not involved, and the restraint upon one party is not greater than protection to the other party requires, the contract may be sustained. The question is, whether, under the particular circumstances of the case and the nature of the particular contract involved in it, the contract is, or is not, unreasonable. Rousillon v. Rousillon, 14 Ch. D. 351; Leather Cloth Co. v. Lorsont, L. R. 9 Eq. 345.”
“The true view at the present time,” said Lord Macnaghten in Nordenfelt v. Maxim-Nordenfelt &c. Co., 1904, A. C. p. 565, “I think, is this: The public have an interest in every person’s carrying on his trade freely: so has the individual. All interference with individual liberty of action in trading, and all restraints of trade of themselves, if there is nothing more, are contrary to public policy, and therefore void. That is the general rule. But there are exceptions: restraints of trade and interference with individual liberty of action may be justified by the special circumstances of a particular case. It is a sufficient justification, and indeed it is the only justification, if the restriction is reasonable — reasonable, that is, in reference to the interests of the parties concerned and reasonable in reference to the interests of the public, so framed and so guarded as to afford adequate protection to the party in whose favor it is imposed, while at the same time it is in no way injurious to the public.” [at 406-407, 31 S. Ct. at 384]

Vice-Chancellor Lane, in Ingersoll & Brother v. Hahne & Co., 89 N. J. Eq. 332 (Ch. 1918), viewed Dr. Miles Medical Co. v. John D. Park & Sons Co. as permitting reasonable restraints of trade. He concluded, in a case involving price fixing by a manufacturer, where it offered to sell the, product with no price limit provided the manufacturer’s name did not appear, that restrictions upon the resale of an article to protect the manufacturer’s goodwill were reasonable and accordingly valid. He wrote:

* * * it is now well settled that restraints which are reasonable in the absence of statute are valid. It is also well recognized that a person has a property interest in his trade-name and goodwill, and will, even in the absence of statute, be protected against injury to that trade name and goodwill, [at 335]
*■ «• Complainant does not seek to retain any right in the article itself; it merely seeks to restrain the use of its trade-name and goodwill, except under conditions fixed by it. It may permit the purchaser of the article to use its trade name and goodwill under such conditions as it sees fit. It has an interest, in addition to that of mere protection to its trade name and goodwill, for it guarantees the article sold, and scrupulously performs its guarantee, maintaining a large and expensive repair department for this purpose, [at 830-337]

That restraints of trade should not act as an automatic bar where there is reasonable justification for the restrictions became well settled in New Jersey. Irving Investment Corp. v. Gordon, 3 N. J. 217 (1949). The flexibility of the standard and remedy afforded a means to protect the public — and the owner of the goodwill or trade name. The two principles — protection of goodwill and unrestricted alienation of personalty could be substantially accommodated by limiting restraints to those which were fair and reasonable. Cf. Whitmyer Bros., Inc. v. Doyle, 58 N. J. 25 (1971).

In addition to measuring the reasonableness of Clairol’s restraints, it is also, necessary to test them under the New Jersey Antitrust Act and the Sherman Act. N. J. S. A. 56:9-l et seq. and 15 U. S. C. A. § 1. Since the New Jersey Antitrust Act must “be construed in harmony with ruling judicial interpretations”' of the federal statute, primary consideration must be directed to the federal law. Section-1 of the Sherman Act reads:

Every contract, combination in the form of trust * * * or conspiracy in the restraint of trade or commerce among the several states, or with foreign nations is declared illegal.

In United States v. Topco Associates, 405 U. S. 596, 92 S. Ct. 1126, 31 L. Ed. 2d 515 (1972), Mr. Justice Marshall declared:

Antitrust laws in general, and the Sherman Act in particular, are the Magna Carta of free enterprise. They are as important to the preservation of economic freedom and our free enterprise system as the Bill of Bights is to the protection of our fundamental personal freedoms. And the freedom guaranteed each and every business, no matter how small, is the freedom to compete — to assert with vigor, imagination, devotion, and ingenuity whatever economic muscle it can muster, [at 610, 92 S. Ct. at 1135]

Judicial scrutiny of the impact of the Sherman Act must be made in the light of this philosophy. Restraints fall into two categories, horizontal (which involve agreements among competitors) and vertical (which concern agreements between persons of different economic levels, such as the producer and the wholesaler). Horizontal restraints to fix prices or' territories have been held to constitute per se violations. United States v. Sealy, Inc., 388 U. S. 350, 87 S. Ct. 1847, 18 L. Ed. 2d 1238 (1967); United States v. Topco Associates, supra.; United States v. Addyston Pipe & Steel Co., 85 F. 271 (6 Cir. 1898), aff’d 175 U. S. 211, 20 S. Ct. 96, 44 L. Ed. 136 (1899). In the instant case there is a vertical restriction (the producer’s attempt to limit the customer to whom the wholesaler may sell). Defendant contends that under the principles enunciated in United States v. Arnold, Schwinn & Co., 388 U. S. 365, 87 S. Ct. 1856, 18 L. Ed. 2d 1249 (1967), the Clairol restraints are per se violative of the Sherman Act. Arnold, Schwinn & Company (Schwinn) was charged with violation of section 1 of the Sherman Act because of its methods of distribution. Schwinn manufactured and sold bicycles, parts and accessories. The bicycles were distributed through 22 franchised wholesalers and to some 5,000 to 6,000 franchised retailers. Distributors and retailers were permitted to sell competitive brands. Each franchised dealer was to purchase Schwinn bicycles exclusively from the distributor authorized to serve the particular area in which he was located. The dealers could only sell to consumers and not to unfranchised dealers. The distributors could only sell to franchised Schwinn retailers in their assigned territories. Schwinn’s franchising policy was brought about in part b} its desire to provide “the best service for Schwinn bicycles” by selecting retailers whom it had found competent to repair and maintain bicycles. The court posed the issue to be whether the distribution and sales restrictions had an impact in the marketplace which illegally restrained trade. It noted that a manufacturer may select its immediate customers without violating the Sherman Act. The court reasoned and concluded that:

* * * Under the Sherman Act, it is unreasonable without more for a manufacturer to seek to restrict and confine areas or persons with whom an article may be traded after the manufacturer has parted with dominion over it. * *' Such restraints are so obviously destructive of competition that their mere existence is enough. If the manufacturer parts with dominion over his product or transfers risk of loss to another, he may not reserve control over its destiny or the conditions of its resale, [at 379, 87 S. Ct. at 1865]
* *• # * * * * *
* * * Once the manufacturer has parted with title and risk, he has parted with dominion over the product, and his effort thereafter to restrict territory or persons to whom the product may he transferred — whether by explicit agreement or by silent combination or understanding with his vendee — is a per se violation of Sec. 1 of the Sherman Act. [at 382, 87 S. Ct. at 1867]

Interpretation of the Schwinn case has led to divergent points of view. “Territorial Restrictions and Per Se Rules — A Reevaluation of the Schwinn and Sealy Doctrines,” 70 Mich. L. Rev. 616 (January 1972). On the one hand, some courts have applied the principle that any restraints imposed by the manufacturer-seller with respect to the buyer’s resale fall within the Schwinn proscription. An example is United States v. Glaxo Group Limited, 302 F. Supp. 1 (D. D. C. 1969). Glaxo and I.C.I., both British corporations, owned certain patents with respect to grisofulvin, an antibiotic. I.C.I. executed a sales contract under which the purchaser was not permitted to resell grisofulvin in bulk without I.C.I.’s permission. I.C.I. required this condition “to ensure uniform standards of health and safety in the preparation of a final product throughout the world.” The court held that even though the motive was laudable, the Schwinn principle applied — the restraint on alienation was per se unlawful. The Glaxo interpretation has been followed in Eastex Aviation, Inc. v. Sperry & Hutchinson Co., 367 F. Supp. 868, CCH Trade Reg. Reports #74,854 (E. D. Tex. 1973); Dobbins v. Kawasaki Motors Corp., 362 F. Supp. 54 (D. Or. 1973); United States v. Eaton Yale & Towne, Inc., CCH Trade Reg. Reports #73,889 (D. Conn. 1972). The majority of the commentators adopt this view. B. Bock, Antitrust Issues in Restricting Sales Territories and Outlets (1967); Kittelle, “Territorial and Customer Restrictions Through Consignment or Agency — Schwinn or Sin?”, 12 Antitrust Bull. 1007 (1967).

On the other hand, in Tripoli Co. v. Wella Corp., 425 F. 2d 932 (3 Cir. 1970), cert. den. 400 U. S. 831, 91 S. Ct. 62, 27 L. Ed. 2d 62 (1970), Judge Gibbons held for the majority of the court that not all restraints on territory in which or retailers to whom a wholesaler could resell were invalid under the Schwinn holding. Defendant Wella Corp. manufactured some 50 cosmetic items for the professional trade, two of which were also sold to the public consumer through retail outlets. Plaintiff Tripoli Co. had been a wholesale distributor of beautj supplies and a customer of defendant for over 30 years. When Wella Corp. learned that plaintiff had also entered into the retail business and was selling to the retail trade products earmarked for the professional, it refused to sell to plaintiff. Tripoli Co. sued to force defendant to continue offering its products and contended that Wella Corp.’s policy of restricting resale of its professional beauty care products to professional beauticians after title passed constituted a per se violation of the Sherman Antitrust Act. The Circuit Court rejected this conclusion and noted that Schwinn must be read in the legal and factual context of territorial restraints on distributors and restrictions on retailers with respect to a bicycle, a product so simple that most ultimate consumers are children. The court pointed out the following sentence in the Schwinn ease with emphasis on two words indicated:

“* * * Under the Sherman Act, it is unreasonable without more for a manufacturer to seek to restrict and confine areas or persons with whom an article may be traded after the manufacturer has parted with dominion over it.”

The Circuit Court concluded that here there was more because, among other things, some of the professional bottles did not contain labels required by the Federal Food, Drug & Cosmetic Act of 1938 nor the individual instruction sheets, and that the two retail items were not identical to their professional counterparts. The court pointed out that a restraint to prevent a wholesaler from reselling products to nonprofessional users must be tested by a standard of reasonableness. It rationalized that either protecting the public from harm or the manufacturer from potential product liability was a sufficient lawful purpose to justify the sales restrictions.

The Tripoli interpretation, namely, that the “without more” has substantive significance in a customer restriction matter, was seemingly adopted in Good Investment Promotions, Inc. v. Corning Glass Works, 493 F. 2d 891 (6 Cir. 1974). There, Corning Glass Works (Corning) had supplied cooking ware to the plaintiff, a trading stamp company, under a contract. When Corning discovered that plaintiff was redeeming stamps issued at supermarkets, to which Corning objected, Corning terminated the contract. Plaintiff charged a violation of the federal antitrust law because Corning was attempting to control the cooking ware after the sale. Plaintiff’s motion for summary judgment, granted by the District Court, to the effect that there was a per se violation in accordance with the Schwinn case, was reversed. The Circuit Court ruled that the “without more” had substantive effect. It commented that the record in Schwinn elaborately described the total market interaction and inter-brand competition, whereas in the ease before it there was no information to the effect that Corning insisted upon observance of customer limitations. The court opined that because of factual disputes a record had to be made, particularly in light of Coming’s assertion that everyone, including plaintiff, could continue to buy cooking ware from Coming’s distributors without any limitation on resale rights. Cf. Carter-Wallace, Inc. v. United States, 449 F. 2d 1374, 196 Ct. Cl. 35 (Ct. Cl. 1971), which the plaintiff also relies upon. Carter-Wallace interpreted Schwinn as being applicable where the vendor attempted to exercise complete control over the vendee’s use of the product, but where all purchasers could buy a drug at the same price or certain buyers at a lower price on condition that on resale the drug be used in combination with other drugs, then the per se Schwinn rule would not be pertinent and reasonableness of the restraint would be considered. It is submitted that this reasoning lies in the; face of Schwinn — for all that a manufacturer would have to do is set up two price schedules which would result in a market for only one. Schwinn could set a much higher price for bicycles which could be resold to any retailer and a much lower price to franchised dealers. The end result would be exactly what Schwinn sought to do. See LaFortune v. Ebie, 26 Cal. App. 3d 72, 102 Cal. Rptr. 588 (Ct. App. 1972), where the Tripoli rationale was used to apply a reasonableness test to a territorial restriction.

Analysis of the language and reasoning in the Schwinn decision in the light of the dissenting opinion casts grave doubt upon the validity of the Tripoli rationale. First, the court’s conclusion at the end of the opinion contains no limitation on the doctrine that once the manufacturer has parted with dominion over the product, his effort to restrict “persons to whom the product may be transferred — whether by explicit agreement or by silent combination or understanding with his vendee — is a per se violation of § 1 of the Sherman Ad.” The words “without more” appear in a sentence in the midst of the discussion and may be deemed to mean simply that nothing more need be shown to establish a violation of the Sherman Act other than the manufacturer’s restrictions over “persons with whom an article may be traded after the manufacturer has parted with dominion over it.” See discussion in Kugler v. Koscol Interplanetary, Inc., 120 N. J. Super. 216, 245 (Ch. Div. 1972), wherein fhe court questioned Tripoli’s “narrow reading of Schwinn.’’ Second, the Tripoli case holds that protection of the publi from harm or the manufacturer from potential product liability serves a sufficient factual basis to distinguish Schwinn. The Tripoli court, in a footnote in which it distinguishes G'axo. writes that “We are not convinced, however, that the Supreme Court intended, for example, that an automobile manufacturer using wholesale intermediate sellers must permit distribution of automobiles through beauty parlors or barber shops rather than through dealers offering appropriate pre-sale and post-sale service.” (425 F. 2d at 936). But this issue was before the Schwinn court. Mr. Justice Stewart in his dissenting opinion pointed out that Schwinn developed its franchise system by selecting dealers who could properly service its bicycles. Bicycles, he noted, are in constant need of maintenance. He also commented that the rule adopted by the majority struck down Schwinn’s policy of ensuring that franchised dealers not sell to unfranchised retailers, because that would subvert the purpose of the whole distributional scheme, namely, to assure proper service. The relationship between proper servicing of a bicycle and public safety is obvious. Danger to the public, particularly children, in riding an improperly maintained or repaired bicycle may well be substantially greater than if a person utilizes a shampoo which does not have the precise ingredients contemplated or the color of the hair dye is not the same as that expected. The factor of public safety was before the court and one must assume that the majority had given that due consideration.

Plaintiff attempts to distinguish Schwinn, Sealy, Glaxo and Eoscot because all are linked to an ultimate impairment of price competition. None of the rationales in those cases concerned the price impact. In Topeo the Supreme Court removed any doubt that price fixing was a necessary ingredient. Plaintiff also lays great stress on the fact that the Schwinn opinion approvingly referred to White Motor Co. v. United States, 372 U. S. 253, 83 S. Ct. 696, 9 L. Ed. 2d 738 (1963). This approval was made only in sanctioning the franchising of distributors and retailers by the manufacturer and in approving control over the goods where the manufacturer has retained ownership. Plaintiff’s reliance is misplaced. White Motor Go. can stand for nothing more. As Mr. Justice Stewart noted, by holding the restriction on the franchised dealer not to sell to unf ran chi seel retailers illegal per se, the court had repudiated the White Motor Co. decision. See Bork, “The Eule of Eeason and the Per Se Concept,” 74 Yale L. J. 775, 778 (1965), where the author predicted the demise of the White Motor Go. case unless the court were to reexamine its approach to restraints of market (other than price) trade.

The language in the Schwinn ease, in the light of the Court’s pronouncement in Topco, requires that under the Sherman Act vertical restraints imposed by the manufacturer on the buyer must fall. The broad policy enunciated in Schwinn, that the manufacturer, after sale, may not restrict persons to whom the product may be transferred, is not to be frustrated by the manufacturer’s motive to protect its goodwill.

Although the manufacturer may not exercise control over the product once it has yielded dominion, title and risk, the purchaser is not justified in thereafter using unlawful means or methods in its distribution and sale. The retail seller is under obligations to the public to disclose material facts, to refrain from misrepresentations, fraud and deceit, and to comply with various statutes, such as the Uniform Securities Law (N. J. S. A. 49:3-47 et seq.) and the Consumer Praud Act (N. J. S. A. 56:8-1 et seq.). It is clear that the defendant’s sale of Clairol’s coal tar products in professional containers violates the New Jersey and federal laws. N. J. S. A. 24:5-1 and 21 U. S. C. A. § 361(a). The Lady Clairol Hair Color Bath professional bottles do not bear the appropriate required labels. Defendant’s sale thereof violates the federal and state acts. Nor are the directions and instructions which accompany the retail bottle included with each professional counterpart. Purther, the warning on the individual bottle carton to keep the bottle in a cool place away from heat and light is missing. Under these circumstances, defendant should not be permitted to sell to the retail trade the professional bottles of Miss Clairol Hair Color Bath. To do otherwise would constitute a fraud on the public by failing to disclose information which the manufacturer has made available for the public’s protection and welfare. Accordingly, defendant will be prohibited from selling the professional Miss Clairol Hair Color Bath bottle unless it places upon and affixes to each bottle a suitable label on which is imprinted the language required by the federal ■and state statutes and unless with each bottle it delivers to the purchaser at the time of the sale a duplicate of the instructions which accompany the retail bottles. In addition, defendant must include with each sale a notice to the effect that the bottle had been produced by Clairol and sold for the professional beauty salon trade; that defendant had inserted its label on the bottle and included an individual instruction sheet; that the life of the contents is shortened by not having been shielded from the light by an individual box, and that the entire procedure was done without plaintiff’s approval. In this manner the public will be completely and fully advised as to what has occurred, of the manufacturer’s directions and warnings, and to whom it may look for redress in the event of injury or damage. The label, instructions and notice shall be submitted to the court for its approval. Cf. Chanel, Inc. v. Casa Flora Co., 100 N. J. Super. 19 (App. Div. 1968); Clairol, Inc. v. Cody’s Cosmetics, Inc., 353 Mass. 385, 231 N. E. 2d 912 (Sup. Jud. Ct. 1967). No inference is to be drawn that Clairol’s instructions insofar as responsibility to a third person is concerned are adequate. D’Arienzo v. Clairol, 125 N. J. Super. 224 (Law Div. 1973).

Some Clairol products are sold only to the professional trade. Defendant conceded that it should not sell those which require particular skill to apply, in the absence of which damage or injury may occur to the consumer. Another group in the professional only category is comprised of shampoo concentrates. These products have retail counterparts in name which chemically are not the same as the professional package. If the retail user were to follow the instructions on the bottle, she would have no problems. Yet, to permit the retail public to purchase the professional package under the same name would be misleading, since the products are not identical. Accordingly, sales by defendant of these items may only be made if accompanied by an appropriate notice, in which is indicated the difference in the retail counterpart, the fact that Clairol had not sold the concentrate for the general public, and that the sale was being made to the consumer without Clairol’s approval. A third group in this category require instructions which are found only in the Clairol Professional Encyclopedia which is made available to beauty salons. To have Ihe public use these ignorant of the color effect or appropriate method of application could well have a deleterious public effect. Here again, defendant must supply a proper notice with each sale, which would include all necessary instructions, the fact that Clairol had not sold the product for public consumption, and that the sale was being made to the consumer without Clairol’s approval. A fourth group consists of five shades of Lady Clairol hair colorings. These are sold to hairdressers to afford them a greater number of shades. These coal tar products require the warnings referred to above under the federal and State laws. In addition, instructions for application and use are not affixed to each bottle. The labeling, instructions and notice referred to above for Miss Clairol Hair Color Bath are equally pertinent here. A fifth group in this category consists of items where the instructions on the package are adequate for the consumer as well as the public. In this instance there appears to be no need for a special notice or other literature.

A third category consists of products sold to the retail and professional trades, where the items are identical and where the instructions on the professional bottle or jar are the same as or adequate for the consumer. No sound basis exists for the restriction of goods which fall in this group, and no restraint is warranted against the defendant’s sale of these items.


source: Caselaw Access Project

author: Rosenberg, J. S. C.

license: Public Domain

text:
    MICHAEL B. NETLUCH AND MARTA NETLUCH, PLAINTIFFS, v. MAYOR AND COUNCIL OF THE BOROUGH OF WEST PATERSON, A MUNICIPAL CORPORATION OF NEW JERSEY, AND PLANNING BOARD OF THE BOROUGH OF WEST PATERSON, DEFENDANTS.
    Superior Court of New Jersey Law Division
    Decided August 26, 1974.

      Mr. Anthony M. Cerasani for plaintiffs.

      Mr. Philip H. Mizzone, Jr. for defendants.
   Rosenberg, J. S. C.

The matter before this court is a challenge to an amendment of the West Paterson zoning ordinances. The plaintiffs are taxpayers and residents of the municipality and ask this court to declare the amendment invalid.

The area in question is known as a “B” residence district and the applicable ordinance prior to the amendment provided:

In residence “A” [and residence “B”] districts no building or premises shall be used, and no building or other structure shall be built, altered or erected, to be used for any purpose other than that of * tin 4«, s}s 4c
c. Any form of horticulture, including the sale of farm products on properties where produced except the keeping of livestock and all other animals except household pets.

On November 28, 1973 the municipal council of West Paterson caused to be introduced Ordinance No. 73-7 entitled, “AN ORDINANCE TO AMEND CHAPTER XXII OP THE ORDINANCES OE THE BOROUGH OE WEST PATERSON WHICH IS KNOWN AS ‘THE ZONING ORDINANCE OE THE BOROUGH OE WEST PATERSON/ ADOPTED DECEMBER 29, 1972.” This amendment to section 22-5.1 (c) provided that

Any form of horticulture, including the sale of farm products on properties where produced except the keeping of livestock and all other animals except household pets and horses or ponies kept for non-commercial purposes providing said horses and ponies are kept on property which has a minimum lot size of one acre or more and said horses or ponies are kept in a building no part of which is closer than 20 feet to any dwelling on the same plot or within 50 feet of any property line. [Emphasis supplied]

It is to be noted that the amendment explicitly allowed the keeping of horses and ponies while the original ordinance appears to preclude livestock. We need not consider the connotation of any phrases in the original ordinance, for such' construction has not been placed properly in issue before this court. All the parties ask is a determination of whether the amendment to the ordinance is valid. The invalidity of the amendment is basically premised, as we may surmise from plaintiff’s brief, on the existence of self-interest by one of the councilmen in its passage. In contemplating the grounds for determining the ordinance’s invalidity, we find only one valid basis for striking down the ordinance, to wit: the self-interest of Councilman May in its passage.

On November 28, 1973 the amendment was introduced for consideration by a vote of five in favor and one opposed. The affirmative votes included that of Councilman May. It is noteworthy that the minutes of the council meeting of November 28, 1973 indicate that the mayor of West Paterson, who is a voting member of the council, stated that he thought the ordinance was tailor-made for the benefit of one member of the council who sat in on its preparation. He further stated that he did not think it was fair to the community to adopt the amendment with such great speed, in that it was the end of the year and evidently a new council was to be seated. On December 12, 1973 the statutory public 'hearings were held on the adoption of the amendment, at which diverse views of a small percentage of the townspeople were heard. On December 28, 1973 the amendment was passed by a vote of five in favor of passage, one against and Councilman May’s abstention. It is to be noted that May had not abstained on the introduction of the amendment, though he was interested as the owner of horses in the outcome. The ordinance that was passed contained additions from the original proposed on November 28, 1973. The additions were directed to certain requirements as to quartering and cleaning the horses. No public hearing was held as to the additions, nor were they caused to be published.

Neither party presented any witnesses at trial, leaving all facts and inferences to be drawn from the minutes of the council meetings. It is difficult to understand plaintiffs’ hesitancy to carry their burden further than a mere reliance on the council records.

The issue squarely before this court is whether an amendment to a zoning ordinance is to be declared invalid because a voting member of the municipal council who had a direct interest in its passage was one of those who caused it to be introduced for consideration, though abstaining from voting on its passage.

At the outset, it is to be noted that this court has neither been directed to nor can it discover a case wherein an interested member of a municipal council has merely voted to introduce an ordinance but abstained from voting on its passage, and the ordinance was subsequently attached on the basis of self-interest. Thus, the case must be decided upon its unique set of facts superimposed on the existing law in New Jersey.

It is clear that the public is entitled to have their representatives perform their duties free from any personal or pecuniary interest that might affect their judgment. Bracey v. Long Branch, 73 N. J. Super. 91, 96 (Law Div. 1962). Consequently, self-interest of a public officer in a matter in which he has a direct voice may invalidate municipal action. The purpose of this rule is prophylactic, that is, to prevent the possibility of an official in a position of self-interest to deviate from his sworn public trust. McNamara v. Saddle River, 64 N. J. Super. 426, 429 (App. Div. 1960). Perhaps the leading case espousing the doctrine that an ordinance is voidable when tainted with self-interest is Pyatt v. Mayor, etc., Dunellen, 9 N. J. 548 (1952). There, ordinances were set aside which vacated a public street that abutted the property of the corporate employer of two of the couneilmen of a municipality. It was opined that where a council uses a process calling for the exercise of discretion by the governing body, that process, according to the weight of conflicting public considerations, is judicial in nature. Therefore, ordinances are voidable if any one of the councilmen who participated as a quasi-judge was disqualified by reason of private interest at variance with the impartial performance of his public duty. Aldom v. Roseland, 42 N. J. Super. 495, 501 (App. Div. 1956).

Accepting, therefore, the premise that self-interest may invalidate an ordinance, we turn to the question of the quantum of self-interest required for the tainting. There is no mathematical formula from which precise values can be ascertained, and thus whether a particular self-interest is sufficient for tainting purposes depends on the facts and circumstances in each case. Griggs v. Princeton Borough, 33 N. J. 207, 219 (1960); Van Itallie v. Franklin Lakes, 28 N. J. 258, 268 (1958). It also appears that it is not an actual conflict of interest which is decisive, nor whether the public official succumbs to the temptation, but rather whether there is a potential for conflict. Aldom v. Roseland, supra, 42 N. J. Super. at 502. Applying these principles to the instant case, this court finds that the municipal council of West Paterson, and more specifically Councilman May, certainly did not place the proverbial cart before the horse, the cart in this case being West Paterson. It appears that Councilman May was to be a direct beneficiary of the amendatory ordinance, as evidenced by the remarks of Mayor Bauman stated earlier in this opinion. It therefore appears to this court that a potential for conflict or actual conflict is present inferentially. No evidence of denial or justification has been presented by defendants on this point. However, as stated earlier, the case is novel since May did not vote on the passage of the amendatory ordinance, but rather on its introduction. Surely it is not illogical to say that were it not for the introduction, the ordinance could never have been passed. It is true that there would be no pecuniary gain to May by the passage of this ordinance; however, money cannot buy what an unfavorable zoning ordinance prohibits.

The personal or private interest which disqualifies may be identified generally as one which is different from that which the public officer holds in common with members of the public. Aldom v. Roseland, supra at 507. Obviously, in the instant case at least plaintiffs have views differing from May’s regarding the keeping of horses.

It is noted that May’s vote in the introduction or passage would not be necessary for a majority. This, of course, is clearly immaterial. Aldom v. Roseland, supra at 507.

If we are to give credence to the quoted language of the court in Pyatt, supra, 9 N. J. at 557, stating that infection of the concurrence of the interested person spreads, then perhaps the infection of a tainted introduction led to a tainted passage.

This court, therefore, is of the opinion that the amendatory ordinance is invalid for reasons of self-interest.

Submit an order accordingly.


author: Per Curiam.

text:
    STATE OF NEW JERSEY, PLAINTIFF-APPELLANT, v. ETHAN KURLAND, DEFENDANT-RESPONDENT.
    Superior Court of New Jersey Appellate Division.
    Argued May 28, 1974—
    Decided September 3, 1974.

      Before Judges Collesteb, Lynch and Michels.

      Mr. L. Steven Pessin, Deputy Attorney General, argued the cause for appellant (Mr. William F. Hyland, Attorney General of New Jersey, attorney).

      Mr. Gerald B. Hanifan argued the cause for respondent.
   Per Curiam.

By leave granted, the State appeals from an order suppressing evidence seized by the police pursuant to a search warrant.

On March 20, 1973 the American National Bank & Trust Company in Phillipsburg was held up by a man armed with a revolver wearing a ski mask and an army field jacket. lie escaped with $8,819 in a blue and white Dodge automobile.

The search warrant was issued on March 23, 1973 by the judge of the Phillipsburg Municipal Court. The warrant authorized the search of defendant’s home at 37 Colby Street and his Dodge automobile. The warrant was executed on the same day and police seized among other things, an army fatigue jacket and defendant’s passbooks in Yew York banks showing deposits made of $6,137 on March 20, 1973 and $1,000 on March 21, 1973. They also seized his blue and white Dodge automobile bearing Wisconsin registration plates.

Defendant was indicted for armed robbery, two counts for assault with an offensive weapon and one count for unlawful possession of a revolver. He pleaded not guilty to the indictment and thereafter moved to suppress the evidence seized by the police. The court held that the affidavit upon which the search warrant issued was legally insufficient and granted the motion to suppress. This appeal followed.

The affidavit was made by Detective Sergeant Charles S. Erdie who alleged he had probable cause to believe that in defendant’s residence and automobile there would be found, among other things, clothing worn by the suspect in the bank robbery, a revolver and money obtained during the robbery. The affidavit, in pertinent part, states:

3. That the facts tending to establish the ground for this application and the probable cause of my belief as aforesaid, are as follows:
On March 20, 1973 at approximately 11:27 A. M. a lone white male described as being approximately 5'7" tall, 140 to 150 lbs., dark hair and wearing army field jacket and ski mask held-up the American National Bank of Phillipsburg, New Jersey main branch located at So. Main and Market St.’s at which time he was armed with a snub-nosed black revolver and was carrying a shopping bag marked Lord & Taylor, bag was green in color with black lettering. Witness to robbery observed suspect to leave area in an automobile described at time of robbery as a Dodge with white top and blue bottom, possibly four door with dirt covered rear license plate which obscured the description of the said plate at time. Taken during robbery was monies in amount of $8,819.00 which included $2,000.00 in recorded $20.00 bills kept as bait money in tellers drawers.
Initial investigation indicated that suspect familiar with the town of Phillipsburg in that he caused a report to be made minutes before the robbery that three bombs were planted in three different schools within the town of Phillipsburg and further the caller mentioned the town Manager by name and requested “Mr. Curtis” and “three uniformed officers to meet him at the Hillerest Shopping Center” situated on opjmsite side of town from bank in question. Further investigation showed the suspect, Ethan Kurland had an account with the bank in question and believed familiar with said bank; also that on March 22, 1973 at approximately 10:30 P.M. an auto, described in this warrant as 1965 Dodge owned by Ethan Kurland, was located parked alongside the home of his parents at 37 Colby St. where he is known to be staying at this time and that observation of said auto shows that rear license plate was wiped clean to extent that numbers and letters on said plate were wiped free of road dirt while remainder of plate was dirty. It is to be noted that local newspaper carried story day of robbery that auto in question possibly bore N. J. Iieg. but that plate was covered with dirt and illegible and also that auto was Dodge with white top and blue bottom; also that investigation revealed that on date of robbery, March 20, 1973 at approximately 9:15 A.M., suspect Ethan Kurland called Hertz Rental T/A Lennox Garage of 25th Street, Palmer Township, Penna. and requested to rent a car for couple of hours and that he needed same immediately and was informed they could not produce car for him on this short notice, this coupled with the fact that an inquiry with Wisconsin University shows subject withdrew from said school on February 9, 1973 subsequent thereto did return to the home of his parents, Alfred and Dorothy Kurland at said 37 Colby Place, prior to March 20, 1973.

In granting the motion to suppress the trial judge indicated he was troubled by the lack oí identification of the sources of the information contained in the affidavit. He held that there was no suggestion of a reliable informant or a recital of the underlying circumstances required by Aguilar v. Texas, 378 U. S. 108, 84 S. Ct. 1509, 12 L. Ed. 2d 723 (1964). The State’s contention on this appeal is that the affidavit set forth sufficient probable cause to justify issuance of the warrant.

The affidavit in this case obviously was poorly drawn. It resembles more a report of a police investigation than the form of an affidavit upon which a search warrant should issue. Moreover, there would appear to be no reason why the identity of the informants should not have been disclosed.

However, it is well settled that affidavits for search warrants should be tested and interpreted by municipal court judges' and courts in a common sense and realistic fashion and without a grudging or negative attitude. They are normally drafted by nonlawyers in the midst and haste of a criminal investigation. United States v. Ventresca, 380 U. S. 102, 108, 85 S. Ct. 741, 13 L. Ed. 2d 684 (1965); United States v. Harris, 403 U. S. 573, 577, 91 S. Ct. 2075, 29 L. Ed. 2d 723 (1971). Once the judge has made finding of probable cause on the proof submitted and issued the search warrant, a reviewing court should pay substantial deference to his determination and it will not be upset on appeal unless there is clearly no support for that conclusion. State v. Kasabucki, 52 N. J. 110, 117 (1968); and see, State v. Mark, 46 N. J. 262, 273 (1966).

A fair reading of the affidavit indicates that the affiant was informed by an eyewitness to the-robbery that the witness observed the suspect leaving the scene of the crime in a two-tone blue and white Dodge automobile with the rear license plate obscured by dirt. The warrant-issuing judge could reasonably have concluded that the affiant or other police officers learned that an automobile of that description was owned by defendant; it was observed parked outside defendant’s home the day following the robbery, and that the numbers on the license plate had been wiped clean while the remainder of the plate was dirty. The judge could also reasonably have concluded that other facts contained in the affidavit were ascertained by the affiant during the police investigation.

We are not here concerned with a report given to the affiant by the traditional police informer. The information concerning the suspect’s escape in the blue and white Dodge automobile with the dirt covered license plate was provided by an eyewitness to the crime.

Probable cause for issuance of a search warrant may rest on reasonable trustworthy information from an informant. United States v. Harris, 403 U. S. 573, 91 S. Ct. 2075, 29 L. Ed. 2d 723 (1971). When information is provided by a cooperative citizen, or an informant not from the criminal milieu, there is less need for establishing credibility of the informant. An ordinary citizen who reports a crime has been committed in his presence stands on a much different ground than, a police informer. He is a witness to a crime who acts with an intent to aid the police in law enforcement because of his concern for society. He does not expect any gain or concession in exchange for his information. A citizen-informer of this type usually would not have more than one opportunity to supply information to the police, thereby precluding proof of his reliability by pointing to previous accurate information which he had supplied. We hold that when information is provided by a citizen-informer his prior reliability need not be established as a prerequisite for issuance of a search warrant. See generally, State v. Lakomy, 126 N. J. Super. 430, 435 (App. Div. 1974) (involving a “stop and frisk”); State v. Paszek, 50 Wis. 2d 619, 184 N. W. 2d 836, 843 (Sup. Ct. 1971); Erickson v. State, 507 P. 2d 508, 517-518 (Alaska Sup. Ct. 1973); People v. Guidry, 262 Cal. App. 2d 495, 68 Cal. Rptr. 794, 796 (D. Ct. App. 1968); In re Boykin, 39 Ill. 2d 617, 237 N. E. 2d 460 (Sup. Ct. 1968) (arrests without warrant).

Moreover, the “underlying circumstances” necessary to enable the warrant-issuing judge independently to judge the validity of the informant’s statements were established by the fact that the eyewitness' personally observed the commission of the crime (see State v. Perry, 59 N. J. 383, 392 (1971) and State v. Paszek, supra, 184 N. W. 2d at 841-842) and were supported by the subsequent police investigation.

The order suppressing evidence is reversed.


text:
    CHARLIE COLLINS CHEVROLET, PLAINTIFF-APPELLANT, v. MARY ZEBROWSKI, DEFENDANT-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Submitted September 3, 1974—
    Decided September 3, 1974.

      Before Judges Conford, Lora and Alucoex.

      Messrs. Rosenblum & Rosenblum, attorneys for plaintiff-appellant (Mr. Edward G. Rosenblum, on the brief).

      Messrs. Lamb, Hutchinson, Thompson & Ghappel, attorneys for defendant-respondent (Mr. Lawrence J. Finnegan, on the brief).
   Per Curiam.

Plaintiff-landlord appeals from so much of the judgment for possession in this summary dispossess action, entered August 14, 1974, as postpones the issuance of a warrant for removal until October 15, 1974. We are in agreement with plaintiff’s contention that the county district court was without jurisdiction so to defer the warrant for removal. ■

Defendant conducts a licensed tavern in the property, occupying same as a month-to-month tenant. She did not dispute the fact of termination of the tenancy by due notice from the. landlord, but requested a delay in the issuance of a warrant for removal on the ground that she needed time to sell the liquor license and would not be able to transfer it if not in actual use in a going business. The latter assertion was not substantiated, but the matter is not relevant in any event. The trial court had no authority to defer the warrant.

The jurisdiction and powers of a county district court in a summary dispossess proceeding are strictly statutory. N. J. S. A. 2A:18-53 et seq.; and see, Vineland Shopping Center, Inc. v. DeMarco, 35 N. J. 459 (1961); Ivy Hill Park Section Five, Inc. v, Handa, 121 N. J. Super. 366 (App.. Div. 1972). Except for the provision that no warrant, of removal shall issue until the expiration of three days after entry of judgment for possession, N. J. S. A. 2A:18-57, the statute contemplates that ordinarily judgment for possession will be entered forthwith in favor of a prevailing landlord when the action comes on for trial and that the warrant for removal will issue in due course thereafter. Ibid. The essence of a tenancy action is the speedy restoration of his property to the landlord, see Vineland Shopping Center, Inc. v. DeMarco, supra 35 N. J. at 463; and we cannot infer any right in the trial court to withhold the premises from the landlord on any theory of hardship to the tenant unless there is a statutory basis therefor.

The only legislation extant bearing upon the suspension of the warrant for removal in a tenancy action that is cited to us is N. J. S. A. 2A:42-10.6. This allows relief to a tenant of premises “used for dwelling purposes” up to six months after entry of judgment for possession where hardship is shown consisting of the unavailability of other dwelling accommodations. Since the provision is not applicable to a tenant of commercial premises it cannot support the action of the trial court in this case.

The judgment is modified to exscind the direction for the suspension of the warrant for removal and the matter is remanded to the county district court with directions for the issuance of the warrant for removal forthwith.


text:
    STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT, v. ROBERT M. POLLARA, DEFENDANT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Argued September 3, 1974
    Decided September 13, 1974.

      Before Judges Coneord, Lora and Allcorn.

      Mr. Gerald D. Miller argued the cause for the appellant (Miller, Hochman, Meyerson & Miller, attorneys).

      Mr. Russell M. Cottrell, Assistant Prosecutor, argued the cause for the respondent (Mr. James M. Coleman, Jr., Prosecutor of Monmouth County, attorney; Mr. Edward A. Mac Duffle, Jr., Assistant Prosecutor, on the brief).
   Per Curiam.

Defendant, charged by indictment with the possession of a controlled dangerous substance, i. e., a species of amphetamine, appeals from an order of the Superior Court, Law Division, denying his motion to suspend the criminal proceedings pursuant to N. J. S. A. 24:21-27.

The cited section, part of the Now Jersey Controlled Dangerous Substances Act (L. 1970, c. 226, am. by L. 1971, c. 3), provides that persons not previously convicted of a drug-related offense, who are charged with or convicted of an offense under certain sections of the act, including possession of amphetamines, may in the discretion of the court have their prosecutions suspended and be placed under supervisory treatment. If the terms of suspension and treatment specified by the court are complied with by defendant, he is free of the stigma of criminal conviction. Availability of the proceedings is dependent on the court determining “in its discretion” either that (1) defendant’s presence in the community or in a civil treatment center or program will not pose a danger to the community, or (2) the terms and conditions of supervisory treatment will be adequate to protect the public and will benefit defendant by serving to correct any dependence on or use of controlled substances which he may manifest. N. J. S. A. 24:21-27, subd. c.

Defendant’s application, along with that of a codefendant (not here an appellant), came on to be heard before the assignment judge of Monmouth County. It was disclosed to him that defendants were found in possession of a package of pills (108 in number) in a truck and that defendant had no prior involvement in criminal activity of any kind. Upon inquiry by the judge, the prosecutor stated he had no objection to suspension of the proceedings under section 27. The court ordered the preparation of probation reports on defendants and carried the motions to another date at which they were disposed of by another judge, and adversely to both defendants.

A probation report for defendant was prepared prior to the adjourned hearing date, but the transcript of the proceedings on that day does not indicate that the judge knew of or gave any consideration to its contents in rendering his determination.

Ascertainment of the reasoning of the judge in denying the instant application requires resort both to the transcript of the proceedings in which he denied the similar application of the co-defendant and to that in the instant case, which was heard immediately after the denial of the other. The judge expressly stated that the instant ruling was for the same reasons as those he gave in denying the motion of the codefendant.

The sum and substance of the court’s attitude on the companion application was that he disagreed with the policy of the statute in declaring that a conditional discharge of proceedings against a defendant, whether or not he had pleaded to or been convicted on the current charge, “shall not be deemed a conviction for the purposes of determining whether a second or subsequent offense has occurred” under the provisions of N. J. S. A. 24:21-29, calling for enhanced punishment of repetitive drug offenders. This was thought by the judge to represent a denial of “due process” to the State, curable only by the court’s refusal to entertain section 27 proceedings unless defendant pleaded guilty or was convicted. Ho such contention was made by the prosecutor, and we regard it as a totally unwarranted subversion of the salutary legislative intent in enacting this provision. A judge is free to disagree with the policy of a statute but not to refuse to apply it in good faith, unless he finds it unconstitutional, not here the ease. Moreover the court erred in assuming that if conditional discharge under section 27 were granted after a plea of guilty or a conviction, a conviction of a subsequent offense would be visited with multiple offender consequences. It clearly would not, as the^ statute stands.

The probation report of this 25-year-old defendant indicates he is employed in a responsible position at a substantial salary and that, although separated from his wife, he lives with his mother and supports a young son. He has no past criminal record but admits to some prior marijuana smoking. It is incumbent upon the motion judge to make a Iona fide determination as to whether this defendant satisfies one or the other of the statutory criteria for conditional discharge found in N. J. S. A. 24:21-27, subd. e., and specified above. In so doing, while the court is entitled to consider the prima facie case adduced by the prosecutor in relation to the details of the offense charged, he should also take into account defendant’s apparently favorable probation report. He must not weigh against defendant his refusal at this time to enter a plea on the charge.

Reversed and remanded for reconsideration of the motion.


text:
    WILLIAM C. SCHWEIZER, T/A SCHWEIZER BROTHERS EXCAVATING CONTRACTORS, PLAINTIFF-APPELLANT, v. WILLIAM MAC PHEE, DEFENDANT-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Submitted September 10, 1974—
    Decided September 26, 1974.

      Before Judges Matthews, Fkitz and Botteh.

      Messrs. Norton & Kalac, attorneys for appellant (Mr. Peter P. Kalac, on the brief).
    Respondent did not file a brief.
   Per Curiam.

Plaintiff William C. Sehweizer, trading as Sehweizer Bros. Excavating Contractors (Sehweizer), appeals from the involuntary dismissal of his complaint in contract against defendant William MaePhee (MaePhee).

The essential facts are not the subject of any substantial dispute. In June 1970 MaePhee hired Sehweizer to undertake some earth removal. It seems that in the course of the work some damage occurred to MacPhee’s property by virtue of the collapse of a wall. MacPhee charged Schweizer with negligence causing this damage and sued him for $5,700. The complaint was filed September 16, 1970. This action was defended, apparently by an insurance carrier, and settled before judgment.

On September 11, 1972 Schweizer sued MacPhee in contract. While no specific proof appears in the record, it is apparent that at the time MacPhee instituted his suit in 1970 his obligation to Schweizer was liquidated or capable of being ascertained by calculation. MacPhee’s complaint there asserts performance by Schweizer and Schweizer’s ahswer admits it did the work.

The trial judge held that B. 4:7-1 applied, and that plaintiff’s claim was foreclosed by his failure to assert it in the 1970 litigation. We agree.

The clarity of the command of the rule is to be recognized in this paraphrase: while a party may counterclaim against an opposing party whether or not his claim arises out of the same transaction or occurrence, if his debt or demand is liquidated or capable of being ascertained by calculation, he must assert it or he “shall thereafter be precluded.” No exceptions appear in this mandatory language, although concededly the rule may be relaxed as a discretionary matter. B. 1:1—2. The sweeping import of the injunction is to be seen from the inclusion in the requirement of the assertion of claims to be “set off.” Those words of art expressly signify claims which “need not arise out of the same transaction or contract.” Folkenstern v. Herman Kussy Co., 137 N. J. L. 200, 202 (E. & A. 1948). Obviously the rulemakers intended to provide for the disposition of all claims between parties as early and as expeditiously as possible, and, in the ease of liquidated claims, the first time around.

Such is consistent with the announced policy of judicial administration in Hew Jersey. Only a few years into our new practice which followed upon the 1947 Constitutional Convention, Justice Jacobs noted that, “ [B] y this time it must be well known that our courts are firmly committed to the enlightened policy which points generally to the joinder of all matters in controversy between all of the parties in a single proceeding for just and expeditious disposition at one time and place.” Korff v. G and G Corp., 21 N. J. 558, 567 (1956) (emphasis added); cf. Applestein v. United Board & Carton Corp., 35 N. J. 343, 356 (1961). Falcone v. Middlesex County Med. Soc., 47 N. J. 92, 94 (1966), teaches us why in its acknowledgment of "elemental considerations of fairness to the other party and the urgent need for eliminating the delay and wastage incident to the fragmentation of litigation.” See, also, the cogent discussion of compulsory procedure by Justice Burling in Massari v. Einsiedler, 6 N. J. 303 (1951).

The fact that the debt here came precisely within the language of the rule in that it was liquidated or capable of being ascertained by calculation calls the rule into play and is dispositive. It also serves to distinguish Humble Oil & Refining Co. v. Church, 100 N. J. Super. 495 (App. Div. 1968) (the sole ease cited in appellant’s brief in support of his appeal); Klotz v. Lee, 36 N. J. Super. 6 (App. Div. 1955), certif. den. 19 N. J. 334 (1955) and app. dism. 21 N. J. 148 (1956); Rossum v. Jones, 97 N. J. Super. 382 (App. Div. 1967), and Reardon v. Allen, 88 N. J. Super. 560 (Law Div. 1965), all automobile negligence matters involving personal injuries and property damage.

The argument below — not reiterated here where only the holding of Humble Oil is forwarded — that the rule, if applicable, should be relaxed, was considered by us. Since such relaxation is discretionary with the trial judge (R. 1: 1-2), we have reviewed the matter to the end of examining the exercise of discretion below in the refusal to relax the rule. Beyond the proposition of law that in matters of discretion such as this reversal will follow only in cases of a clear abuse thereof, Braelow v. Klein, 100 N. J. L. 156, 158 (E. & A. 1924); Lorgan v. Palmer, 8 N. J. Misc. 205, 206 (Sup. Ct. 1930); Wimberly v. Paterson, 75 N. J. Super. 584, 607 (App. Div. 1962), certif. den. 38 N. J. 340 (1962), we are satisfied that nothing in the record presented by plaintiff suggests an urgent need for relaxation. The mere faet that an insurance carrier was interested in the 1970 action, and even the fact that probably its counsel defended, in no way demonstrates the inability of plaintiff to comply with the rules of court. Nothing below demonstrates that counsel in that action was incapable of or prevented from asserting the Schweizer claim.

If the rules are to mean anything at all, their application must be the common occurrence, and relaxation the exception. Eor this to depend on situational experience, absent compelling equities, is to substitute the ad hoc judgment of the trial court for the considered plan of the Supreme Court in its rule-making capacity. This we will not do.

Affirmed. No costs.

       We assume this was the relief granted, from that which appears in the transcript where, as a matter of fact, the judge below granted a motion that had not yet been made, following which counsel said, “I so move,” without further elucidation. While the notice of appeal, reproduced in the appendix, appeals from the action of the trial court “dismissing the Complaint,” it also appeals from the action of the trial court “denying any and all relief.” In flagrant disregard of B. 2:6-1 (a) (S), appellant has not reproduced the judgment appealed from in his appendix.

       There was no testimony below. The judge below sought and received leave from counsel to “consider this complaint” without reference to whether he was speaking of the 1970 pleadings or the complaint before him for trial. In any event, we may take judicial notice of the 1970 pleadings reproduced in appellant’s appendix. ISvid. It. 9(2) and 12(2).


text:
    ANNA E. RICHARDS ET AL., PLAINTIFF-APPELLANT, v. THE UNION BUILDING AND CONSTRUCTION CORP. ET AL., DEFENDANT-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued September 16, 1974—
    Decided September 30, 1974.

      Before Judges Collester, Lora and Handler.

      Mr. Seymour B. Kleinberg argued the cause for appellant.

      Mr. Peter A. Piro argued the cause for respondent (Messrs. Haskins, Bobottom & Hack, attorneys).
   Per Curiam.

T3ie trial judge determined that plaintiff Eichards’ negligence action against defendant Union Building and Construction Corporation was precluded by N. J. S. A. 2A:14-1.1. Plaintiff appeals from the grant of summary judgment to defendant.

The pertinent part of the cited statute reads:

No action * * * in tort, * * * to recover damages * * * for bodily-injury or wrongful death, arising out of the defective and unsafe condition of an improvement to real property, * * * shall be brought against any person performing * *■ * construction of such improvement to real property, more than 10 years after * * * construction.

There is no genuine dispute as to the material facts. Plaintiff’s husband had a fatal automobile accident on December 22, 1970. She tiled her complaint against defendant on December 12, 1972. A September 19, 1956 contract required defendant to widen the portion of the highway where the accident occurred. Defendant completed this work on August 20, 1957 and the Department of Transportation accepted it on October 21, 1957. Later, under a different contract, defendant performed work on another portion of the highway. It completed this work on December 6, 1960 and the Department of Transportation accepted it on January 25, 1963.

The Department of Transportation accepted defendant’s work on the portion of the highway where the accident occurred more than ten years before the accident. Defendant’s work on other portions of the highway was accepted less than ten years before the accident occurred but still more than ten years before plaintiff’s complaint was Bled.

It is settled that road construction is an improvement to real property within the meaning of N. J. S. A. 2A:14-1.1. Rosenberg v. North Bergen, 61 N. J. 190, 198 (1972). We are of the view that a contractor who performed work on a portion of a highway accepted more than ten years before the occurrence of an accident thereon is not liable for injury resulting from its negligence in performing the work simply because sometime within ten years of the accident it performed work on a different portion of the same highway.

In any event, a cause of action does not arise if the complaint is not actually filed within ten years of completion and acceptance of the work. The statute provides: “No action * * * shall be brought * * * more than 10 years after * * * construction.” Thus, under N. J. S. A. 3A:14-1.1 the date of the accident is not critical. The operative time is that of the filing of the complaint. Since plaintiff did not file her complaint until more than ten years after the acceptance by the Department of Transportation of the last work performed by defendant on any portion of the highway, there was no sustainable cause of action. Summary judgment in favor of the defendant was properly granted.

Affirmed.


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

text:
    NORMA HONEYWELL AND JANICE WESTDYK, PLAINTIFFS-APPELLANTS, v. BRUCE C. BUBB AND MARILYN B. BUBB, HIS WIFE, DEFENDANTS-RESPONDENTS.
    Superior Court of New Jersey Appellate Division
    Argued September 10, 1974—
    Decided September 30, 1974.

      Before Judges Caeton, Crane and Kole.

      Mr. Neil I. Kilstein argued the cause for appellants (Messrs. Kreiger, Karas & Kilstein, attorneys).

      Mr. Henry Ramer argued the cause for respondents (Messrs. Gaeta and Gaeta, attorneys).
   The opinion of the court was delivered by

Carton, P. J. A. D.

Plaintiffs Norma Honeywell and Janice Westdyk appeal, pursuant to leave granted, from an order of the Chancery Division denying their motion to enter judgment in accordance with the terms of a settlement agreement allegedly agreed upon by the parties.

Plaintiffs, who are sisters, brought action against their brother, defendant Bruce C. Bubb, and his wife Marilyn, to set aside a conveyance of real property from the late Evelyn W. Bubb, mother of the parties, to defendants as tenants by the entirety. After a pretrial conference held in June 1973 the case was scheduled for trial on the following October 2. Prior to actual commencement of the trial the parties agreed upon a settlement and its terms were spread upon the record. Thereafter defendant Bruce C. Bubb advised his attorney that he would no longer honor the settlement and retained other counsel to represent him. Whereupon plaintiffs moved for entry of judgment on the settlement. The presiding judge denied this motion, restored the matter to the trial calendar, and disqualified himself from hearing the case.

The conveyance took place in September 1911. The real estate conveyed by the deed comprised the bulk of decedent’s estate. About four months earlier decedent had executed a will dividing her estate equally among her three children. Decedent died on January 23, 1912. In their action plaintiffs sought to set aside the deed made by decedent on the ground of undue influence by defendant Bruce Bubb and to obtain an accounting from him in his capacity as executor of decedent’s estate.

Plaintiffs and their brother, defendant Bruce G. Bubb, were in court when the case came on for trial. Defendant Marilyn Bubb was not present. However, the record indicates she was in telephone communication with her attorney. After settlement negotiations involving offers and counter-offers, an agreed figure of $25,000 was arrived at in full settlement of all of plaintiffs’ claims relating to the real estate and their interest in the estate of their late mother. The real estate involved had a value estimated at somewhere between $50,000 and $60,000.

The record shows that the trial judge asked that the terms of the settlement be placed on the record. It also shows that plaintiffs’ counsel made a brief statement as to the nature of the action and the terms of the settlement. Defendants’ counsel was present at the counsel table and concurred with the statement of settlement as presented by plaintiff’s counsel. Defendant Bruce C. Bubb was sworn as a witness. He was examined by his own attorney, by plaintiffs’ counsel and by the court, during the course of which examination he acknowledged that he fully understood the terms of the settlement and concurred with it. Plaintiffs were not sworn as witnesses but were present in court and acknowledged their understanding and acceptance of the settlement. The court then indicated that a formal stipulation of dismissal or order should be submitted for the record. However, when plaintiffs’ counsel prepared the stipulation he was informed that defendants refused to abide by its terms. The proceedings to confirm the settlement and the present appeal followed.

At the hearing before the court on December 5 in proceedings on a motion by defendants to set aside the settlement, the court commented:

Based upon the information I have before me * * *, it was a good settlement — I am very reluctant to set the matter aside. However, you [defendant] raised a point which I cannot permit to remain without being aired fully. You have raised a question concerning the Canons of Ethics, and I will not permit the situation to remain settled when you have challenged the settlement because of the potential or possible infringement of those Canons.
I will set the matter aside, very reluctantly I might say * * *, for the reasons I have enunciated. * * *

Thus the court took no exception to the ostensible fairness of the settlement reached below, but rather found that ethical considerations embodied in DR5-101(B) and DR5-102(A) were so compelling, in his opinion, as to warrant trial of the issues involved and disposed of in the settlement agreement.

DR5-101(B) relates to the obligation of a lawyer to refuse employment when his interest may impair his independent professional judgment. It provides:

A lawyer shall not accept employment in contemplated or pending litigation if he knows or believes that he or a lawyer in his firm ought to be called as a witness, except that he may undertake the employment, and he or a lawyer in his firm may testify:
(1) If the testimony will relate solely to an uncontested matter.
(2) If the testimony will relate solely to a matter of formality and there is no reason to believe that substantial evidence will be offered in opposition to the testimony.
(3) If the testimony will relate solely to the nature and value of legal services rendered in the case by the lawyer or his firm to the client.
(4) As to any matter, if refusal would work a substantial hardship on the client because of the distinctive value of the lawyer or his firm as counsel in the particular case. [Emphasis added].

DB5—102(A), pertaining to the withdrawal of counsel when he becomes a witness, provides:

If, after undertaking employment in contemplated or pending litigation, a lawyer learns or believes that he or a lawyer in his firm ought to be called as a witness on behalf of Ms client, he shall withdraw from the conduct of the trial and his firm, if any, shall not continue representation in the trial, except that he may continue in the representation and he or a lawyer in his firm may testify in the circumstances enumerated in DB.5-101 (B) (1) through (4).

The record below reveals that the deed was drafted by Eobert P. Alliegro, defendants’ attorney. This attorney represented them up to and including the period of settlement negotiations. Aside from the insubstantial argument that the $25,000 settlement figure of record is per se unreasonable, defendants’ rejection of the settlement is predicated on the theory that attorney Alliegro, because of a concern for his own potential involvement in the controversy in which he had represented defendants, unduly influenced their acquiescence in the settlement. The basis for the attorney’s alleged impropriety is said to rest in DE5-101 (B) and DBS-102 (A) which preclude a lawyer from accepting employment in a case in which the lawyer may be required as a witness and require a lawyer to withdraw if he does become a witness. This circumstance, they argue, coupled with the allegedly inconseionable circumstances surrounding the settlement, warrants setting it aside.

We do not agree. Embedded in our jurisprudence is the principle that the settlement of litigation ranks high in our public policy. Judson v. Peoples Bank & Trust Co., 25 N. J. 17, 35 (1957), cited with approval in Jannarone v. W. T. Co., 65 N. J. Super. 472, 476 (App. Div. 1961), certif. den. sub nom Jannarone v. Calamoneri, 35 N. J. 61 (1961). As the court said in Carlsen v. Carlsen, 49 N. J. Super. 130 (App. Div. 1958),

Since stipulations in court made by attorneys when acting within the scope of their authority are enforceable against their clients certainly, stipulations by attorneys and their clients before the court and in the record must, a fortiori, be enforceable. * * * [at 137]

Thus, barring fraud or other compelling circumstances, our courts strongly favor the policy that the settlement of litigation be attained and agreements thereby reached, be honored. See DeCaro v. DeCaro, 13 N. J. 36, 41-42 (1953), where the court found that appellant therein had failed to establish fraud, mutual mistake, undue haste, pressure or unseemly conduct in settlement negotiations.

Moreover, courts will not ordinarily inquire into the adequacy or inadequacy of the consideration underlying a compromise settlement fairly and deliberately made. Clarkson v. Kelly, 49 N. J. Super. 10, 18-19 (App. Div. 1958). In the present case, the trial judge expressed the opinion that, apart from the disciplinary rule considerations, it was a “good settlement” and one that he set aside “very reluctantly.” Thus, the precise question presented is whether a settlement which appears otherwise beyond reproach should be invalidated solely because of a possible infraction of disciplinary rules governing the conduct of the lawyer involved.

Our research discloses no judicial decisions or opinions of the Advisory Committee on Professional Ethics which have specifically considered the duties of a lawyer conducting pretrial settlement negotiations who is likely to be a witness at trial. Compare Opinions No. 233, 95 N. J. L. J. 206 (3/9/72) and No. 251, 96 N. J. L. J. 234 (2/22/73). The relevant ethical considerations set forth in the American Bar Association’s Code of Professional Responsibility (F.D. 7/1/69), EC5-9 and EC5-10, focus on the related question concerning the conflicting responsibilities which may arise from acting in the capacity of both witness and trial counsel. However, the same general principles would seem to apply.

It would seem that at least the appearance of a conflict of interest may be created if an attorney likely to be called as a trial witness plays an active role in the pretrial settlement conferences. For example, in recommending approval of a particular settlement, he might be open to the charge that he was motivated to sacrifice his client’s interest to avoid any question as to a later development in the case which might bring him in conflict with the disciplinary rules cited above; or to avoid giving potentially embarrassing testimony at trial, or to retain the benefits accruing from representing a client which might be lost if other trial counsel were required.

The attorney here did make arrangements for substitute trial counsel, which suggests that he recognized the possibility, if not the likelihood, he would be needed as a trial witness. Under these circumstances, it would have been preferable in the spirit, if not the letter, of the rules referred to, for the attorney to refrain from active participation in the settlement negotiations.

However, the substantial question before us is whether the settlement agreed upon by the parties was unfair or achieved in such a manner as to justify refusal to enforce it. In view of the strong policy favoring the settlement of controversies, the refusal to enforce the settlement should not obtain because of a possible infraction of the disciplinary rules referred to unless there is some basis for concluding that the attorney’s conduct had an adverse impact on the settlement. Absent circumstances indicating that his conduct may have improperly influenced the course of settlement negotiations to the detriment of his clients’ interests, we see no valid basis for disturbing a settlement otherwise fair. We find nothing in the record before us to support a conclusion that the settlement was so tainted. The facts that the court (1) approved the settlement when the parties agreed to it, (2) caused its terms to be spread on the record, and (3) reiterated the view that it was a fair one when the court later denied plaintiffs’ motion to confirm it, point to the contrary. We see no basis in the record for a plenary hearing on whether the settlement should be enforced.

The order appealed from is reversed and the matter remanded for entry of judgment in accordance with the terms of the settlement agreed upon. No costs.


text:
    STATE OF NEW JERSEY, IN THE INTEREST OF A., A JUVENILE.
    Superior Court of New Jersey Appellate Division
    Submitted September 16, 1974—
    Decided September 30, 1974.

      Before Judges Collestek, Loka and Handles.

      Mr. Stanley C. Van Ness, Public Defender, attorney for appellant (Mr. Steven Zamrin, Assistant Deputy Public Defender, of counsel and on the brief).

      Mr. William F. Hyland, Attorney General of New Jersey, attorney for respondent (Mr. George H. Henningsen, Deputy Attorney General, of counsel and on the brief).
   Per Curiam.

A., a 17-year-old juvenile, pleaded guilty to a complaint charging him with delinquency in violation of N. J. S. A. 2A :4-14 et seq. by having in his possession “an offensive weapon, to wit: a Uniwerk, Vulcanic .22 caliber toy pistol” when he reported to a group therapy session at the Camden County Probation Office. He was committed to the Youth Correction Center at Yardville for an indeterminate term.

Before accepting the plea the judge directed that testimony be presented concerning the charge. The evidence showed that A. reported for the group therapy session accompanied by G., his brother, and J., a friend. The latter two juveniles were told to wait in the hallway while A. attended the session. Shortly thereafter J. entered the office, pointed a gun at Norman Helber, a probation officer, and Andrew Amon, an investigator, and threatened to shoot them. Both Helber and Amon were frightened because they were unaware that the gun was a toy. J. was persuaded by G. and Amon to leave the office while Helber called the police. When the police arrived they recovered the gun J. had displayed. Upon learning that A. had another gun they proceeded to search him and discovered that A. had thrown his gun out of the window. A. admitted that he had acquired possession of the two toy guns, which resembled real guns, and that he had given J. the gun used to threaten the probation officers.

A. appeals, contending the court erred in accepting his guilty plea. He alleges that possession of a toy gun is not a criminal act if committed by an adult and therefore was not an act of juvenile delinquency under N. J. S. A. 2A :4-14. While possession of a toy gun by an adult is not a crime we think it is clear that A.’s conduct was an act of juvenile delinquency. N. J. S. A. 2A:4-14(2) (m) proscribes “Deportment endangering the morals, health or general welfare of said child.” The toy guns brought by A. and J. to the probation office resembled deadly weapons. They were sufficiently realistic to frighten the probation officers and resulted in a call for police assistance. The brandishing of the gun by J. which the probation officers believed was a real weapon could have provoked retaliatory action by the police against both J. and A., hence the juvenile’s welfare was endangered.

The juvenile, who was represented by counsel at the hearing, was well aware of the misconduct charged and the trial judge properly ascertained all the facts in an evidentiary hearing before the guilty plea was accepted. While the complaint could have been more artistically phrased, the failure to set forth the charge with greater specificity was not a ground for dismissal of the complaint since the juvenile was not misled thereby to his prejudice. R. 5:8-1. See State in the Interest of A. R., 57 N. J. 71 (1970).

We conclude that under the circumstances of this case the trial judge did not err in accepting the juvenile’s guilty plea. Accordingly the judgment of juvenile delinquency is affirmed.