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State v. General Restoration Co.

Decided: June 1, 1964.


For reversal -- Chief Justice Weintraub, and Justices Jacobs, Francis, Proctor, Hall, Schettino and Haneman. For affirmance -- None. The opinion of the court was delivered by Schettino, J.


On April 11, 1961 the Hudson County Grand Jury indicted appellants and others charging them with violating N.J.S. 2A:98-1(h) in that they conspired to pervert and obstruct the laws of New Jersey by allegedly making a contract without complying with the bidding requirements of N.J.S.A. 18:6-25. The indictment named as defendants: (1) General Restoration Co., Inc., a corporation of the State of New York, which was the corporation with which the allegedly illegal contract was made and Barnett Levine, its president; (2) Louis Pangaro, an architect employed by the Jersey City Board of Education on a consulting basis; (3) John S. Romanowski, Business Manager of the Jersey City Board of Education and (4) George Schwartz, Augustus A. Tomauioli, Dorothy Martin, Benjamin B. Potwardoski, Arthur H. Esterly, Edmund Szymanski and John F. Sheehan, members of the Jersey City Board of Education at the time the contract was executed.

At the end of the State's case, defendants moved for acquittal. The trial court denied the request as to all defendants except the board members and, as to them, reserved its ruling. At the end of defendants' case, the trial court granted the motion for acquittal as to all board members except John F. Sheehan, the president of the board. The case was submitted to the jury which found all defendants retained in the case guilty. Appeal was taken to the Appellate Division and we certified the cause before argument there.

The following basic facts are clear. Pangaro was retained by the board as a part-time architect for which he received an annual retainer. His employment agreement did not obligate him to prepare plans and specifications or to supervise construction. On May 14, 1959 Pangaro was instructed by the board to prepare plans and specifications for the waterproofing of Public School No. 34. In the summer of 1959 the board advertised for bids on this work. On August 27, 1959 the board and Pangaro entered into a written contract providing that Pangaro would be hired to supervise the contemplated work and would be compensated for his services at a rate not to exceed six percent of the contract cost. The bids were received at the board's public meeting of September 10, 1959. General submitted the lowest bid, $15,700, and was awarded the contract on September 16, 1959. No question has ever been raised with reference to the propriety of this contract.

The specifications annexed to the contract provided that monthly payments on account would be made on the basis of 85% of the work performed and materials stored on the site at the time of certification by the architect, and that upon "substantial completion" of the contract, the contractor would be entitled to 90% of the contract price, with the 10% balance payable 30 days after "final completion and acceptance." The specifications contained the usual provision authorizing the board to alter the contract by adding or deleting work.

The specifications also provided, inter alia, that whenever the contractor, in performing his work, encountered steel lintels he would be required to expose each lintel to its full depth by removing the mortar or other material separating the upper surface of the lintel from the brick or stone above it, scrape and clean it free from rust "as thoroughly as possible," waterproof it, and then reseal the exposed area. A lintel is the upper horizontal member of the frame of a window or door aperture which supports the brick, stone or building superstructure above it.

A purchase order was issued to General on October 26, 1959 authorizing General to begin work immediately. The contract

called for completion of the work by November 19, 1959 but the record shows that the work had not been completed by that date.

N.J.S. 2A:98-1 provides in part: "Any 2 or more persons who conspire: * * * h. To commit any act for the perversion or obstruction of justice or the due administration of the laws -- Are guilty of a conspiracy and each shall be punished, * * * as for a misdemeanor."

The State claimed that defendants had plotted to avoid the bidding requirement of N.J.S.A. 18:6-25 which provides in part: "No contract for the repairing of an existing schoolhouse at a cost of more than $2,000.00 shall be entered into without first advertising for proposals therefor." The purpose of this statute is to obtain the lowest bid which advertising and uninhibited competition can produce, i.e., to secure competition and to guard against favoritism, improvidence, extravagance and corruption: "Statutes directed toward these ends are for the benefit of the taxpayers and not the bidders. * * *" Hillside Tp., Union County v. Sternin, 25 N.J. 317, 322 (1957); see also State v. LaFera, 35 N.J. 75, 82 (1961), and City of Asbury Park v. Hoek, 38 N.J. 213, 231 (1962).

During the pendency of this appeal the State has seen fit to alter the theory upon which it is claimed the convictions before us can be sustained. At the outset of this case (as revealed in the indictment) it was the State's position that the alleged conspiracy was born and nurtured in January of 1960 when all the defendants purportedly got together to "amend" a contract which was already completed. But by the end of the case the State had shifted its approach. It was argued in summation (and again in reargument before us) that Pangaro had so drafted the specifications in May of 1959 that the need for lintel replacement would be made known only after the original contract was entered into but before completion. The State theorized that Pangaro hoped, at the time he drafted the specifications, that an "amenable" contractor would submit the lowest bid on the repair job and that Pangaro, Romanowski, all the members of the board and the contractor

would then amend the contract (using the provision which allowed such alteration) and share the profits.

The State sought to show that the original contract had in fact been completed before the time the defendants, other than General and Levine, say they became aware of the need for lintel replacement. It also sought to show that the need for lintel replacement was obvious long before the original repair work was done. In this respect the State introduced the testimony of Barnett Levine given to the Grand Jury. It is asserted that the testimony shows conclusively that the need for replacement became obvious very soon after General began work under the original contract. But as we read this grand jury testimony it is not at all clear as to just when the need for replacement became obvious to Levine or his subordinates. (The prosecutor contended before the trial court that the jury could construe Levine's grand jury testimony as an admission by Levine that he knew new lintels were needed "as soon as he went on the job" but conceded "I agree it's not heavy" proof.)

Other than Levine's grand jury testimony on this point, the State offered no evidence except the inferences that might be drawn from the many documents put in evidence that any defendant knowingly sought to avoid the bidding statute by using the device of altering the original contract. Not a shred of proof was presented to show that any defendant benefited pecuniarily ...

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