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In re Wellhofer

Decided: September 28, 1951.

IN THE MATTER OF THE SWORN APPLICATION OF MRS. WILLIAM G. WELLHOFER AND OTHER FREEHOLDERS OF THE CITY OF ATLANTIC CITY, IN THE COUNTY OF ATLANTIC, FOR A SUMMARY INVESTIGATION INTO THE MUNICIPAL EXPENDITURES OF THE SAID CITY


On petition for payment of fees, &c.

Woods, J.s.c.

Woods

The question to be resolved is: Are the petitioners entitled to reasonable compensation for services, including counsel fees and out-of-pocket expenditures, allegedly incurred in connection with the recent summary investigation into municipal expenditures of the City of Atlantic City.

The court will answer both with respect to such services performed before the order made and after the order made for a summary investigation by Justice Eastwood.

Counsel have entered into a stipulation signed by the court dealing with amounts to be assessed against the City of Atlantic City and the right of appeal dependent upon the court's ruling. Also, although two distinct causes are here involved, both are to be resolved under the question raised.

Petitioners are Drusilla T. Maxwell, who appears as the administratrix c.t.a. under the will of her deceased brother, Thomas D. Taggart, Jr., and Stephen L. Valore, Esq.

Drusilla T. Maxwell seeks to recover for the estate of her brother the earned and reasonable value of the services which he rendered in connection with the recent investigation, from its beginning until its conclusion, into the financial affairs of the City of Atlantic City, plus his out-of-pocket moneys expended by him, namely $521.04, during said investigation.

Stephen L. Valore seeks to recover the earned and reasonable value of his services for the period beginning with the preparation for the invocation of R.S. 40:6-1, on behalf of the qualified petitioning freeholders whom he and Taggart represented, until the then Supreme Court, by former Justice Eastwood and by former Chief Justice Case, determined that in the light of all the proofs adduced the ends of justice would best be served by a summary investigation into the financial affairs of the City of Atlantic City as requested by the applicants, the qualified freeholders.

In June, 1948, Mr. Justice Eastwood appointed Harold W. Bennett, Esq., and Edmund D. Bowman as experts to prosecute the investigation. Thereafter, Justice Eastwood and later Judge Frank T. Lloyd, Jr., appointed by court order William G. Freeman, Esq., Nathaniel Rogovoy, Esq., and Lynwood Lord, Esq., to aid in the investigation. It is conceded that neither Thomas D. Taggart, Jr., nor Stephen L. Valore were ever appointed by court order, or otherwise, to represent the 34 freeholders of the City of Atlantic City, who filed their affidavit agreeable to R.S. 40:6-1. On the moving papers the name of Thomas D. Taggart, Jr., Esq., only appeared.

After the investigation was concluded, Judge Frank T. Lloyd, Jr., on August 17, 1950, signed an order discharging the freeholders' bond as provided under R.S. 40:6-2, in which appear the words that the investigation into the affairs of the City of Atlantic City was "clearly justified."

We assume jurisdiction by virtue of the authority as raised and declared in North Bergen Township v. Gough , 107 N.J.L. 424, 154 A. 113 (Sup. Ct. 1931).

The court heard counsel in oral argument and it now has before it briefs.

Counsel for the petitioners argues: (1) Taggart and Valore furnished services; (2) that such services were performed for the freeholders, and that (3) such services were necessary. All these assertions must be conceded. He then raises the question: Does the statute provide for the compensation claimed? Pertinent to the point raised counsel quotes the third paragraph of R.S. 40:6-1 which reads as follows:

"The costs incurred under this section shall be taxed by the justice, and upon his order be paid by the disbursing officers of the county or municipality whose expenditures may have been investigated."

No exception is taken by this court to the definition of "costs" as presented by petitioners' counsel.

We note, too, that the "costs incurred" under this section "shall be taxed by the justice," and "upon his order be paid by the disbursing officers of the county or municipality whose expenditures may have been investigated."

At oral argument this court asked counsel for precedents for establishing petitioners' claims. The answer by brief is: "Diligent research of counsel has uncovered neither precedent supporting petitioners' claim, nor a precedent which would justify the Court in denying the relief sought." Counsel, moreover, concedes that the issue is one of "novel impression both in this State or in any other state where a similar statute is in force." Counsel argues, therefore, "That this court is free to adopt the view which in its judgment will best and most effectively promote the fair and just administration of justice and that view which may be most consonant with a proper and liberal interpretation of this remedial legislation."

It is apparent, however, that petitioners' claims for costs are predicated on the third paragraph of R.S. 40:6-1, and

that this claim is resisted by respondent's counsel under the Rules of Practice and Procedure of this court as set forth in Rule 3:54-7, and particularly under subdivision (d) which reads as follows:

"No fee for legal services, shall be allowed in the taxed costs, or otherwise, except:

(d) or as provided by these rules with respect to any action, whether or not there is a fund in court, but the authority, heretofore vested in the Court of Chancery for the granting of counsel fees in causes generally, is hereby superseded."

Petitioners' adversary contends that the claims for fees and costs must rise or fall according to the rules; that subdivisions (a), (b) and (c) have no application to the subject matter, and that the petitioners' rights or claims must be comprehended in subdivision (d).

It is plain, too, that counsel for petitioners does not claim under Rule 3:54-7, and to persuade this court, differentiates proceedings by way of "investigation" from "actions," and argues that the Rule 3:54-7 has special reference to "a limited number of actions -- a limited type of proceedings between plaintiffs and defendants in which a court may award fees." (Italics the court's.) Counsel asserts: "It does not attempt to preclude the allowance of fees in matters such as the instant one which is not an action and which is not a proceeding between a plaintiff and a defendant."

Both counsel agree that the issue under consideration grows out of an investigation and not an action. They cite In re Wellhofer , 137 N.J.L. 165 (Sup. Ct. 1948), Hoboken v. O'Neill , 74 N.J.L. 57 (Sup. Ct. 1906).

Counsel for petitioners contends that Rule 3:54-7 is inapplicable to our case, and further by deductive reasoning insists that "If the construction contended for by the City be sustained, then there will have sounded the death knell of this statute just as clearly and just as effectively as if the legislature had wiped it off the statute books. It is difficult to imagine, much less conceive, that the Supreme Court

could possibly have intended any such construction ...


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