On appeal from the former Court of Chancery.
For affirmance -- Chief Justice Vanderbilt, and Justices Case, Heher, Wachenfeld, Burling and Ackerson. For reversal -- None. The opinion of the court was delivered by Wachenfeld, J.
Appeal is taken from a decree directing the City of Bayonne to pay the respondents Eugene W. Goodwillie the sum of $5,000 and Harper Holt $3,084.70, with interest from November 15, 1939, on assigned claims.
In February, 1937, the appellant entered into a written agreement with The Central District, Inc., a New Jersey corporation, concerning a ship-to-rail industrial terminal to be constructed by the city and financed through a United States PWA outright grant of $1,785,000 and a municipal
bond issue for $2,430,000. Under the agreement the corporation undertook to convey certain of its land to the city and to assume whatever costs were incurred to perfect title through condemnation proceedings. Central District further agreed to supervise the construction of the project and to provide "such engineering, administrative and legal services as may be necessary" in connection with the work, all to be done under the supervision of the PWA and subject to and in conformance with its rules and regulations. Upon completion of the terminal, Central District agreed to operate the project under a fifty-year lease.
The city in return agreed to devote all moneys received from the grant and bond issue to the construction of the terminal and to deposit them in a special "Construction Account" and to pay therefrom all the legal and engineering services, administrative and overhead expenses incurred by the company.
The terminal was constructed and in the course thereof Central District furnished legal, engineering and other preliminary services and took possession under the lease in the early part of 1939. On November 15, 1939, it assigned the claim for legal services to the law firm rendering them and the firm in turn re-assigned it to Goodwillie; on the same date the company assigned the claim for preliminary overhead and administrative expenses to Holt. Notice of the assignments was given to the city the following day. At the time, funds in the construction account apportioned under agreement with PWA, the city and Central District provided $6,396.45 for legal services and $104.81 for preliminary expenses and overhead, although subsequently on May 22, 1940, the city received from PWA $12,040.42 additionally for the latter.
On January 1, 1940, Central District defaulted in its rental payments because of the bankruptcy of the Central Railroad of New Jersey and the latter's inability to purchase bonds of the corporation, the proceeds of which were to be used to pay the rental. The city evicted the lessee and shortly thereafter the United States Government took over the terminal
by condemnation, paying $5,350,000, resulting in a substantial profit to the city.
The city thereupon appropriated all unpaid balances in the construction account toward the unpaid rent and refused to pay on the assignments, setting up three separate claims.
The first arose from a separate contract between the corporation and the city providing for reimbursement by it to the city for amounts expended in the construction of a railroad crossing which would give access to the terminal. The work was completed by January, 1939, eleven months before ...