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NONGARD v. BURLINGTON CTY. BRIDGE COMMN.

June 29, 1955

Richard C. NONGARD, Tuthill Ketcham and Rowland H. Murray, individually and as partners, trading as Ketcham & Nongard, Plaintiffs,
v.
BURLINGTON COUNTY BRIDGE COMMISSION, a body politic, David J. Connelly and William H. Wells as Receivers, Defendants



The opinion of the court was delivered by: FORMAN

The plaintiffs in this action are Richard C. Nongard, Tuthill Ketcham and Rowland H. Murray, all of Chicago, Illinois, individually, and as partners trading as Ketcham and Nongard. The defendants are the Burlington County Bridge Commission, a public body corporate and politic of the State of New Jersey, and David J. Connolly and William H. Wells, of New Jersey, Receivers appointed by the Superior Court of New Jersey, to collect judgments entered in the case of Driscoll v. Burlington-Bristol Bridge Co., 10 N.J.Super. 545, 77 A.2d 555, as modified in 8 N.J. 433, 86 A.2d 201.

In the first court of their complaint the plaintiffs allege that the jurisdiction of the court over the action is founded on diversity of citizenship and the existence of a federal question arising under the 14th Amendment of the Constitution of the United States, Section 1, and that the amount in controversy exceeds $ 3,000. They further allege that an actual controversy exists between the parties and they sue to secure a declaration of plaintiffs' rights and 'legal relationships' with respect to the matter in controversy under Sections 2201 and 2202 of Title 28 U.S.C. (the Declaratory Judgment Act) and for other relief.

 They also recite in the first count of their complaint that in December 1946 they engaged with others in a commitment to purchase all of the stock outstanding of the Burlington-Bristol Bridge Company which owned a toll bridge over the Delaware River between Burlington, New Jersey and Bristol, Pennsylvania; that in October of 1947 the purchase was completed and that on October 22, 1948, the Burlington-Bristol Bridge Company became the owner of all of the outstanding stock of Tacony-Palmyra Bridge Company which owned a bridge across the Delaware River between Palmyra, New Jersey and Tacony, Pennsylvania; that on that day their group sold to the defendant, the Burlington County Bridge Commission, all of the stock for $ 12,000,000, which was financed by the issuance by the Bridge Commission of $ 12,400,000 of bonds which the plaintiffs' partnership, Ketcham and Nongard, purchased, granting to B. J. Van Ingen & Co., Inc., a one-half interest therein; that they financed the transaction by borrowing from the Chemical Bank and Trust Company of New York the sum of $ 12,422,866.40, for which they pledged the bonds they acquired; that thereafter they formed a syndicate of investment dealers as underwriters to purchase and distribute the bonds of the Bridge Commission hypothecated with the Chemical Bank and Trust Company; that the loan of the Bank to Ketcham and Nongard and B. J. Van Ingen & Co., Inc. was cancelled with the proceeds of a new loan to the Bond Syndicate and the entire issue of the bonds was pledged for that loan; that in said transaction the plaintiffs' partnership, Ketcham and Nongard, advanced and loaned to the Bridge Commission the sum of $ 1,240,000 which loan was represented by bonds of the defendant Bridge Commission in the same amount of $ 1,240,000; that on December 3, 1948, a civil action was commenced in the Chancery Division of the Superior Court of New Jersey against the plaintiffs and others to rescind the said sale; that on December 29, 1950, the said Court gave a final judgment holding that the sale of said stock should be rescinded and ordered the Commission to return the bridges to the Burlington-Bristol Bridge Company and the members of the plaintiffs' group to return $ 3,050,347 less a sum paid by them which had inured to the benefit of the bondholders; that it was further held that the bondholders were subrogated to the rights of the mortgage or other lienholders to the extent that the money was used to discharge the same; that a lien should be granted on all revenues of the bridges until the aforesaid bonds shall be repaid; that the State of New Jersey had the right to acquire the bridges under applicable statutes and that receivers should be appointed to collect the judgments; that on review of the said judgment by the New Jersey Supreme Court, on January 21, 1952 the judgment of the Superior Court was modified, among other things, in the following respects: that the Bridge Commission should retain title to the bridges; that the plaintiffs' group should repay to the Bridge Commission the gross sum of $ 3,050,347, received by them with interest from October 22, 1948, without deduction therefrom of legitimate expenses and set-offs which inured to the benefit of all the bondholders; that the obligation to repay the sum was made joint and several as to plaintiffs, Tuthill Ketcham and Richard C. Nongard and others, but was made several as against still other remaining members of the original syndicate in the amount which each had respectively received; that Ketcham and Nongard were declared not holders in due course and that the bonds that evidenced the loan made by the plaintiffs to the Bridge Commission in the sum of $ 1,240,000 were null and void except to the extent that the Chemical Bank and Trust Company had an interest therein as pledgee; and that to the extent that the Bridge Commission might be required by the Chemical Bank and Trust Company as a pledgee in due course to pay the amount due on the said bonds, the Bridge Commission would be subrogated to the rights of the Bank against Ketcham and Nongard; that by requiring the members of plaintiffs' group to return the moneys received by them to the Bridge Commission, yet decreeing that the Bridge Commission should retain title to the bridges, constituted a confiscation and condemnation of their property for public use without just compensation and that therefore the said judgment is void as the unlawful taking of property without due process of law, in violation of the 14th Amendment to the Constitution of the United States, Section 1, and contrary to the Constitution of the State of New Jersey, Article 1, par. 20 and to the statutes of the State of New Jersey, namely, R.S. 20:1-1 et seq., N.J.S.A. R.S 48:5-13 et seq, N.J.S.A.; that the opinion and judgment of the Supreme Court was not responsive to the pleadings and appeal papers and could not have been foreseen by the plaintiffs; that the Supreme Court of New Jersey did not act as a court of review but as a court of original jurisdiction and that even though the plaintiffs and others petitioned for review, they had no notice that the court would consider taking and confiscating their bridges without affirming the aforesaid sale or providing them with an opportunity to present evidence and to be heard, as is required in in rem proceedings, and thus were denied an opportunity to object to the action of the court; that the declaration by the Supreme Court that the bonds in the sum of $ 1,240,000 held by plaintiffs, Ketcham and Nongard, evidencing the loan made by the plaintiffs to the Bridge Commission, were null and void, without making provision for the repayment to Ketcham and Nongard for the consideration paid for said bonds although the plaintiffs in the aforesaid action of Driscoll v. Burlington-Bristol Bridge Co., admitted that the plaintiffs herein had put up their own money for said bonds and that they were entitled to recover for the same, was a confiscation of the property of the plaintiffs for the benefit of a public agency without just compensation; that the petition of plaintiffs' group for a rehearing by the Supreme Court was denied, as was a petition for certiorari to the United States Supreme Court. 344 U.S. 838, 73 S. Ct. 25, 97 L. Ed. 652.

 The prayer of the plaintiffs on the first count is (1) for a declaratory judgment to the effect that the adjudication of the Supreme Court of New Jersey on January 21, 1952, and the judgment of the Superior Court pursuant thereto, are wholly invalid and void; (2) that the defendant be restrained from taking any proceedings for the collection of the judgment; and (3) for other relief.

 In the second count of their complaint the plaintiffs repeat the jurisdictional and background allegations contained in the first count and charge that although on October 27, 1948, the plaintiffs loaned $ 1,240,000 and the defendant Bridge Commission received it and benefited thereby, it has refused to honor the said bonds on the ground that they are null and void and has refused to return to the plaintiffs the money, wrongfully retaining it and thereby unjustly enriching itself; wherefor the plaintiffs demand judgment against the Bridge Commission in the sum of $ 1,240,000 with interest from October 27, 1948.

 In the third count of their complaint the plaintiffs again repeat the jurisdictional and background allegations contained in the first count and charge that although the plaintiffs paid for bonds in the sum of $ 1,240,000 and although the Bridge Commission received the money, it has failed to deliver valid bonds therefor or to return the said sum of $ 1,240,000 paid by them for said bonds, causing a failure of consideration, by reason of which the plaintiffs demand judgment against the Bridge Commission in the sum of $ 1,240,000 together with interest from October 27, 1948.

 The defendant receivers, Connolly and Wells, answered denying, among other things, the loan or payment to the Bridge Commission in the sum of $ 1,240,000. The Bridge Commission in its answer admitted, among other things, that the plaintiffs had purchased bonds from it and paid therefor the sum of $ 1,240,000, but denied liability to deliver the bonds or return the money.

 All of the defendants moved to dismiss plaintiffs' action on the ground that all the matters and issues raised in this action had been settled and rendered moot by the proceedings brought in the Superior Court of New Jersey and finally determined by the New Jersey Supreme Court by its opinion modifying the judgment of the Superior Court (as heretofore mentioned). They also moved for a summary judgment upon the ground that there is no genuine issue of fact and the defendants are entitled to judgment as a matter of law.

 The motions were heard upon affidavits, briefs and oral argument of the parties.

 The plaintiffs resist the motions on the ground that the Supreme Court of New Jersey decided issues not presented to it, constituting a condemnation of the private property of the plaintiffs for public use without just compensation, and that the judgment entered pursuant to its action was violative of the 14th Amendment to the Constitution of the United States.

 The plaintiffs contend that the Supreme Court of New Jersey 'changed the cause of action, in effect from one of recision to a suit for the proceeds of a sale in breach of trust' and that they had no notice that the theory of the cause of action brought by the plaintiffs against them, or the remedy, would be changed. Consequently they had no opportunity to present evidence against the new cause of action or to minimize the damages to be assessed against them. They argue that they could have shown that the true value of the bridges was $ 13,000,000 and that the New Jersey Supreme Court arbitrarily assumed as accurate the estimate of the plaintiffs in the suit in the state court that the bridges were worth only $ 5,000,000. These actions by the New Jersey Supreme Court they submit resulted in a confiscation of the property of the plaintiffs for public use in violation of the constitutional rights of the plaintiffs.

 The plaintiffs cited a number of cases as authority for their propositions:

 (1) That a judgment is void and can be collaterally attacked where the court goes beyond the issues presented to it, Munday v. Vail, 1871, 34 N.J.L. 418; Reynolds v. Stockton, 1891, 140 U.S. 254, 11 S. Ct. 773, 35 L. Ed. 464; Eisenlohr, Inc., v. Kalodner, 3 Cir., 1944, 145 F.2d 316; Windsor v. McVeigh, 1876, 93 U.S. 274, 23 L. Ed. 914;

 (2) That a decree in so far as it undertakes to decide issues not made by the pleadings is void and a court is without jurisdiction to pass upon questions not submitted to it for decision, Osage Oil & Refining ...


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