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Matter of Moresh

Decided: October 22, 1936.


MR. WILLIAM BOORSTEIN, for Complainant. (MR. JULIUS LICHTENSTEIN, of counsel).

MR. DANIEL O'REGAN, Prosecutor of the Pleas.

MR. FRANK G. SCHLOSSER, Assistant Prosecutor of the Pleas.

MR. LOUIS J. COHEN, Assistant Attorney General, for Carl K. Withers, Commissioner of Banking and Insurance.



ON BILL, &c.




The petitioner was engaged in the glazing business in the city of Bayonne, County of Hudson, and State of New Jersey, from about the year 1911 up to the filing of the petition herein. In the year 1933, he entered into contracts with his customers in the said city whereby, for a sum of money, he agreed with and obligated himself to them, for a certain period, "to service the glass store front in the premises of said customers, which service consisted of (1) repairing store front glass by tightening bars or clamps to keep the glass in firm condition, and (2) to replace all store front glass broken in the said premises." The petition says that the business of "service contracts is limited solely to properties located in the City of Bayonne and only to such persons as are specially chosen by the petitioner."

The defendant, the Prosecutor of the County of Hudson, says that the complainant's "service" business is one of insurance and is being conducted in violation of the provisions of the Insurance Laws of the state of New Jersey. He, in consequence, submitted the facts to the Grand Jury of Hudson County for its consideration, and the petitioner was indicted by that body at the December term, 1934, for an alleged violation of the provisions of the Insurance Act. The indictment is based upon the statute entitled "An Act to provide for the regulation and incorporation of insurance companies and to regulate the transaction of insurance business in this state," P.L. 1902, p. 407, as amended and supplemented. Section 88 of said act was amended by P.L. 1928, p. 396, and it now provides that:

"No person or firm nor any company organized under the laws of this State or of any other State or foreign country, himself, itself or themselves, or by his, its or their brokers, agents, solicitors, surveyors, canvassers or other representatives of whatever designation, nor any such broker, agent, solicitor, surveyor, canvasser or other representative, shall solicit, negotiate or effect any contract of insurance of any kind, including all kinds of insurances described in this act, or sign, deliver or transmit, by mail or otherwise, any policy, certificate of membership or certificate of renewal thereof, or receive any premium, commission, fee or other payment thereon, on any property or thing, or on the life, health or safety of any person, or maintain or operate any office in this State for the transaction of the business of insurance, or in any manner, directly or indirectly, transact the business of insurance of any kind whatsoever, within this State, unless such company, person or firm, shall be authorized to do the same under the provisions of the laws of this State. Any person, firm or company violating any of the provisions of this section shall be guilty of a misdemeanor."

Section 89 of said act provides (P.L. 1902, p. 446):

"The penalty for each violation of this act, except any failure of any company to file an annual statement, shall be five hundred dollars and all costs of suit; all penalties provided by this act shall be sued for and collected by the commissioner of banking and insurance in an action upon contract in the nature of an action for debt in the name of the state; the first process against any person may be a capias ad respondendum, and any person against whom any judgment shall be obtained shall be committed to the county jail until such penalty and costs are paid; one-half of such penalty, when recovered, shall be paid by the commissioner of banking and insurance to the local firemen's relief association in the city, town or township wherein the violation was committed, if there be such an association therein, and if not, then to be paid in equal shares to the several firemen's relief associations in the county wherein the violation occurred; and, if none exist in the county then to be paid to the said commissioner, to be distributed by him pro rata to each of the firemen's relief associations in the state, as other funds are by law distributed by him to such associations, and the other half to the said commissioner for the use of the state; and the necessary expenses for enforcing the provisions of this act, when not otherwise provided for, shall be paid by said commissioner out of the fines so collected and the fees and taxes paid by insurance companies of other states and foreign countries."

The commissioner of banking and insurance, the petition alleges, has threatened to institute proceedings against the petitioner under this last mentioned section (89) for the recovery of penalties therein mentioned because of his execution of all such service contracts.

The petitioner contends he is within his rights to enter into the related contract and argues that the quoted sections 88 and 89 of the insurance act, as far as they purport to prohibit or forbid an individual from transacting the business of insurance and to provide penalties for the transacting thereof, are unconstitutional and void; and, he alleges that the proposed trial of the indictment by the Prosecutor of the Pleas of Hudson County will result in irreparable injury to him and to his business. Upon the filing of the petition herein, an order to show cause was issued to (1) enjoin the prosecution of criminal proceedings under section 88 of the insurance act, and of the civil proceedings by the commissioner of banking and insurance for recovery of the penalties provided in section 89 of said act for violation of the provisions of section 88 thereof; and (2) for a declaratory judgment to determine (a) the constitutionality of the insurance act so far as the same attempts to prohibit individuals from carrying on the insurance business, and (b) for a construction of the insurance act to determine whether the business of the petitioner is actually within the meaning of the act.

At the time of the argument on the order to show cause, it was stipulated by counsel that the instant case was to be considered and decided by the court upon the verified petition filed herein and the briefs then filed, and to be filed, by the petitioner and both defendants.

It is contended that the right to earn a living is a property right. That point has been affirmatively decided by our courts. It has been most recently settled in an opinion of the Court of Errors & Appeals in the case of Cameron v. International Alliance T.S.E., 118 N.J. Eq. 11, 176 Atl. 692. The petitioner is unquestionably vested with this property right. That it applies to the issue, there is no doubt in my mind. The petitioner charges that the statute under which he was indicted is invalid, and because of such invalidity, he is not barred from engaging in the insurance business; and that when the state interferes with his right to so engage, it interferes with his vested property right to earn a living. There is force to his argument. If the statute cannot be sustained, then the state's action in prosecuting under it cannot be sustained. The defendants question the jurisdiction of this court and say the petitioner, under the facts, is not in the proper forum. I disagree with them. The complainant comes to the right tribunal. Vice Chancellor Church in Brex v. Smith, 104 N.J. Eq. 386, 146 Atl. 34, in discussing the right of a court of equity to enjoin a public official from proceeding with a criminal action, said:

"The prosecutor contends that a court of equity has no jurisdiction, because it cannot enjoin a public official, stating that this court cannot stay or interfere with a criminal proceeding. In the first place, this statement is too broad, for the courts have held that under certain circumstances this may be done in criminal cases. In Ex Parte Young, 209 U.S. 123, 28 S. Ct. 441, 52 L. Ed. 715, 15 L.R.A. (N.S.) 932, 14 Ann. Cas. 764 (to cite but one), the United States Supreme Court said, after citing numerous cases: 'These cases show that a court of equity is not always precluded from granting an injunction to stay proceedings in criminal cases.' * * *

"In Royal Baking Powder Co. v. Emerson (C.C.A. 8th Cir.) 270 F. 429, a suit was brought in equity to enjoin the prosecutor of the pleas from proceeding against the Royal Baking Powder Company for violation of a state statute. The Circuit Court of Appeals said at page 432:

'It is true that the general rule is that courts of equity will not enjoin criminal prosecutions. The exception is that where property rights are involved, and it is claimed seriously and in good faith that the act of the prosecutor is not authorized by law, equity can act. * * * Truax v. Raich, 239 U.S. 33, 37, 36 Sup.Ct. 7, 60 L. Ed. 131, L.R.A. 1916D, 545, * * *. This lack of legal authority may arise because the act is within an invalid statute, or because it is not authorized by a valid statute. In either case the act is without legal sanction, is not protected by the official status of the prosecutor, and can be restrained. The complainant alleges a multiplicity of threatened prosecutions, and irreparable injury thereby through destruction of a valuable good will in an established trade brand; that such prosecutions are arbitrary, capricious, and unreasonable, and therefore not within nor authorized by the statutes, but violative of appellant's rights, under amendment 14, section 8, of article 1, and article 6 of the national Constitution. These contentions are apparently urged seriously and in good faith. They support the jurisdiction of the court.'"

The Vice Chancellor cited these cases to support his point: Ex Parte Young, 209 U.S. 123, 52 L. Ed. 714, 28 S. Ct. 441; Truax v. Raich, 239 U.S. 33, 60 L. Ed. 131, 36 S. Ct. 7. To these may be added David and Farnum Manufacturing Co. v. Los Angeles, 189 U.S. 207, 47 L. Ed. 778, 23 S. Ct. 498; Tyson and Brother etc. v. Banton, 273 U.S. 418, 71 L. Ed. 718, 47 S. Ct. 426; Dobbins v. Los Angeles, 195 U.S. 233, 49 L. Ed. 169, 25 S. Ct. 18; Philadelphia Co. v. Stimson, 223 U.S. 604; Panama Refining Co. v. Ryan, 79 L. Ed. 223; 14 Ruling Case Law 434, section 136; Thompson v. ...

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