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Schoharie County Cooperative Dairies Inc. v. Eisenstein

Decided: November 7, 1952.


Eastwood, Goldmann and Francis. The opinion of the court was delivered by Francis, J.c.c.


[22 NJSuper Page 504] The complaint herein charged that defendant and others conspired to perpetrate a fraud upon appellant for the purpose of extorting money from it. At the trial, after appellant's evidence had been introduced,

respondent's motion for judgment was granted. The reasons assigned by the trial court were: (1) that no evidence had been adduced to show fraudulent representations by respondent; and, (2) that appellant was aware that the money paid respondent was to be used for an unlawful purpose; consequently, being in pari delicto , no recovery could be had.

Basically the complaint sounds in fraud and the trial seems to have been conducted on that theory. In such an action the plaintiff must establish certain elements as a prerequisite to the right of recovery. It must appear: (1) that the person sued made false representations to the plaintiff as to present or past material facts, (2) that he knew they were false when made, (3) that he made them intending the plaintiff to act upon them, (4) that the plaintiff did act in reliance upon them and, (5) that damage resulted therefrom. Williams v. De Fabio , 3 N.J. Super. 182 (App. Div. 1949); Byard v. Holmes , 34 N.J.L. 296 (Sup. Ct. 1870); Restatement of the Law of Torts, sec. 525.

The course of our review of the action of the trial court in granting the motion for judgment for respondent is charted by certain fixed principles. The evidence and all of the inferences deducible therefrom must be taken in the light most favorable to the plaintiff's claim and if upon an examination so guided the minds of reasonable men might differ as to whether or not the elements referred to have been demonstrated, the problem must be submitted to the jury for determination. Gentile v. Public Service Coordinated Transport , 12 N.J. Super. 45 (App. Div. 1951).

The proof showed that appellant corporation, Schoharie County Cooperative Dairies, Inc., is a dairy cooperative made up of about 500 farmers. At the time of the events under consideration these farmers were producing about 132,000 quarts of milk daily. This milk was processed by Schoharie and sold to the Middletown Milk and Cream Company of Middletown, New York, which in turn sold it at retail in various places, including the City of Newark.

Schoharie held a permit from the Board of Health of the City of Newark to sell its milk in the city. This privilege of selling the milk is spoken of in the record at some times as resulting from the holding of a permit and at others as the result of being on the list of dealers whose milk is approved for sale.

Prior to May 1950 in the departmental structure of the city the board of health was in the department of public affairs and the deputy director of that department was one Ira Goodman. Joseph Connolly was assistant health officer in charge of the food, drug and cosmetic division of the department of health, and David Morgan was acting chief inspector of the division. Morgan's duties were to advise and consult with Connolly in the enforcement work of the division.

Some time shortly after March 20, 1950 Connolly was told by Goodman that Richard F. Powell, one of the inspectors, was to act as his advisor and consultant in milk matters. Thereupon Morgan ceased acting as such. Powell and the respondent Eisenstein, who was in the milk business, had been friends for 25 years or more and visited at each other's home.

In the latter part of May 1950 Schoharie was given notice of a hearing before Assistant Health Officer Connolly as to the revocation of its permit to sell milk or to have its milk sold in the city. In 11 years of operation none of its permits had ever been suspended previously. On May 24 the hearing was held and appellant was represented there by counsel engaged by Middletown Milk and Cream Company. Before the hearing took place, for some reason not appearing in the record, Goodman told Connolly to "hold his decision up" and this was done. However, thereafter Goodman instructed him to revoke the permit and on May 26 Connolly directed the health officer to send a letter to Schoharie notifying it of the revocation.

On Thursday, May 25, Edward O. Mather, president of Middletown Milk and Cream Company, received a telephone call from Eisenstein, whom he had known since 1938.

Eisenstein asked Mather to come to his office in New York City to see him and said that it was particularly important. Mather agreed to do so the following morning. At about 9 A.M., Friday, May 26, he arrived at the office and, after some general conversation, Eisenstein remarked that it looked as though Mather's company was in trouble in Newark. Mather agreed, then asked if he had any thoughts about it and Eisenstein replied that the best thing to do was to hire an attorney, but not the one who represented his company at the hearing. On asking for suggestions Eisenstein said he would think about it over the weekend and call Mather on Monday. And he told Mather to keep his name "out of the picture." This same afternoon, on Mather's return home, he told Dr. Kenneth A. Shaul, president of Schoharie, of the conversation but, as requested, withheld Eisenstein's name. Mather was advised by an official of the Middletown company that the secretary of the board of health had notified him that telegrams were going out taking Schoharie's name off the approved dealer list.

On Monday morning, around 9:30, Eisenstein called Mather, suggested as the proper attorney to engage, Edward T. Miller of Newark, and in answer to Mather's inquiry said the fee "in the Cobbleskill matter" would be $7,500. The expression, "in the Cobbleskill matter," was used because, according to Mather, "there was another case that had been taken off the approved list." This information was communicated to Shaul who took the matter up with his board of directors; then later in the afternoon drove to Mather's office with a check for $7,500 made out to Miller. Eisenstein was called ...

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