On certification to the Superior Court, Appellate Division.
For affirmance -- Chief Justice Vanderbilt, and Justices Heher, Oliphant, Burling and Brennan. For reversal -- None. The opinion of the court was delivered by Vanderbilt, C.J. Heher, J., concurring in result.
The problem before us arises out of a proceeding by 49 freeholders of Jersey City for a summary investigation into the financial affairs of Jersey City pursuant to R.S. 40:6-1, the propriety of which was upheld by this court in Tiene v. Jersey City, 13 N.J. 478 (1953). Judge Haydn Proctor is the supervising judge of the statutory investigation and the respondent, Samuel A. Larner, is the expert appointed to prosecute the investigation. The appellants, Harry J. Thourot and Peter LaMort, are witnesses subpoenaed by this expert.
The appellants are partners in an engineering firm bearing their names. Thourot is also the mayor of Union City in Hudson County and the County Engineer of Hudson County. LaMort is also in charge of the engineering department of the City of Union City.
Clyde Potts Associates, a New York firm of engineering consultants, had received two contracts in connection with the construction of a sewerage project and the reconstruction of a water main -- one from the Jersey City Sewerage Authority and another from the City of Jersey City. The sewerage contract provided for the ultimate payment to them of $1,400,000. The water main contract provided for the payment of $47,500. In 1950, on two separate occasions, Thourot entered into agreements with Clyde Potts Associates whereby he was to receive in exchange for his engineering services a percentage of the engineering fees received by Potts from these two contracts. From the sewerage contract Thourot was to receive $410,000; at the time of the hearings herein he had actually received $171,500 from this source. From the water main job he actually received $12,370.54.
Late in 1953 the expert took up as a subject of his investigation the Jersey City-Potts-Thourot relationship. In November of that year Thourot and LaMort were served with
subpoenas duces tecum in this proceeding. Judge Proctor denied motions by these witnesses to quash the subpoenas and by order dated December 22, 1953 directed them to appear before the expert on the day designated therein
"to testify to all and singular of what they may severally know in the Sworn Application of Julia Tiene and the Other Freeholders of the City of Jersey City for a Summary Investigation into the Municipal Expenditures of Jersey City and not to depart from said hearing unless so directed by Samuel A. Larner, and it is further ordered that the said Peter LaMort and Harry Thourot bring with them and produce all bank statements, cancelled checks and check books for the years 1950, 1951, 1952 and 1953, any cash receipt and cash disbursements books, all payroll records, time records, time books, copies of income tax returns for the years 1950, 1951 and 1952, any general ledgers for those years, and copies of all work papers, drawings, plans, contracts involving work done on behalf of Clyde Potts Associates for the years of 1950, 1951, 1952 and 1953."
From this order these witnesses prosecuted an appeal to the Appellate Division of the Superior Court and applied for a stay of the commanded appearance. The Appellate Division denied the stay on January 15, 1954 but granted the appellants time to apply to this court for such stay. The subsequent motion for leave to appeal to this court from the order of January 15, 1954 was denied. The appellants then filed their brief on the appeal in the Appellate Division, but on a motion by the expert the appeal was dismissed by the Appellate Division on April 12, 1954.
After the dismissal of the motion for leave to appeal to this court the actual appearance by these witnesses before the expert was delayed because they were subpoenaed as witnesses in the case of Schlossberg v. Jersey City Sewerage Authority, a taxpayers' suit to set aside the entire sewerage contract award, considered by this court in 15 N.J. 360 (1954). Thereafter the expert sought to have these witnesses comply with the subpoenas previously served on them as well as the order of Judge Proctor of December 22, 1953. These witnesses, having now retained new counsel, made a motion before Judge Proctor for modification of his order "by limiting the scope thereof to matters relating to the municipal expenditures of the City of Jersey City" and vacating the
said order to the extent inconsistent with the "aforesaid limitation" and to restrain and enjoin
"Samuel A. Larner, Expert, his aides or any other person acting under his authority, from requiring or in any way attempting to require Harry J. Thourot and Peter LaMort to testify or produce records before Samuel A. Larner, Expert, in relation to any matter other than matters relating to the municipal expenditures of the City of Jersey City."
On the hearing of this motion Judge Proctor ruled that before deciding the motion the witnesses should be permitted to voluntarily appear before the expert, without being subjected to the hazards of criminal contempt, in the course of which appearance the exact boundaries of the issue with respect to relevancy of the evidence sought could be concretely determined, after which the court would make its decision. The witnesses did appear and testified, but refused to produce certain documents concerning their private financial records. The matter was then resubmitted and reheard before Judge Proctor on November 22 and 23, 1954. In an oral determination on the latter date Judge Proctor denied the witnesses' motion and on January 6, 1955 signed an order to that effect and declaring his previous order of December 22, 1953 to be in full force and effect without modification except as to the date on which appearance was directed.
The witnesses appealed to the Appellate Division of the Superior Court from this order and we have certified the appeal on our own motion.
On the hearings before the expert prior to the resubmission of the motion for modification Thourot himself revealed that the entire expense for the total operation of his office covering not only the two jobs mentioned but for all engineering jobs undertaken during the period involved (1950-1953) was approximately $15,000. Included in this amount were two cash expenditures totalling $7,000 -- $4,000 to Peter LaMort who when asked if he deposited this sum in his bank account testified:
"No I brought it home and put it in the box (strongbox),"
and $3,000 to an engineer named "Darling" who Thourot testified had worked for him. In this connection we find the following:
"Mr. Larner: He asked you to pay him in cash?
Mr. Larner: Wasn't it peculiar to you?
The Witness: No, sir. Not with that fellow, because --
Mr. Larner: Where did you get this cash?
Mr. Larner: You had it around the office?
The Witness: I think it was ...