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Seidel v. Greenberg

Decided: December 24, 1969.


Ackerman, John A., J.s.c.


This matter was tried by the court without a jury. It presents novel questions as to whether the perpetrators of a crime are liable in a civil action for damages to an innocent person who was thereafter subjected to criminal prosecution for the commission of such crime.


The facts are not in dispute in any material aspect and the following summary contains the court's findings with reference thereto. On March 20, 1963 a $300,000 fire destroyed the buildings and stock in trade of the Malgreen Lumber and Supply Co. of Newark, New Jersey, and also destroyed adjoining property. Defendants to this action, Abe Greenberg and Manya Greenberg, his wife, were the sole or principal stockholders of said corporation and were the principal officers in charge of its business, which consisted of the operation of a retail lumber yard. It has been established that the Greenbergs conspired with one Nathaniel Wallace to have the premises of Malgreen burned to collect the insurance thereon, and that Wallace acted as the "go between" and arranged for the actual burning of the premises by one Clarence Moore, the "torch." Wallace was a carpenter and for a number of years had done business with the Greenbergs and with Malgreen. Some of the conferences between the Greenbergs and Wallace in planning the crime took place in the office at the premises of Malgreen during the period between October 1962 and the time of the fire. Plaintiff Michael Seidel, was the company credit manager and bookkeeper and had served as one of its key employees for a number of years. His duties required him to be inside and

he was usually in the company's office. Shortly before the fire, negotiations had been entered into, if not completely consummated, between the Greenbergs, who had become progressively less active in the management of the business (it is claimed that Mrs. Greenberg was in Florida from December 1962 until after the fire), and seven key employees, including plaintiff, whereby the net profits of the business for the year starting in January 1963 were to be divided pursuant to a profit-sharing plan under which Abe Greenberg was to receive 20% thereof and the seven employees 80% thereof, with plaintiff's share to be 20%.

On June 17, 1963, about three months after the fire, the Greenbergs and plaintiff were arrested and charged with arson to defraud insurance companies and conspiracy to commit arson. Similar charges were filed against Wallace and Moore.*fn1 Immediately following his arrest plaintiff was booked, fingerprinted, photographed, detained overnight in jail and released on $10,000 bail fixed by Chief Magistrate Castellano, who scheduled a hearing for June 25, 1963, which date was subsequently postponed until July 9, 1963. Newspaper publicity attended the arrests and preliminary hearing and, among other things, a news article appeared in the Newark Evening News on June 18, 1963, which contained plaintiff's name and his residence address in Newark and his picture, together with an account of his supposed involvement in the arson scheme. The Greenbergs denied any involvement as, of course, did plaintiff. The Greenbergs had their own attorney. Plaintiff had his own attorney, whose services were arranged for, in part at least, by the Greenbergs and the

Greenbergs agreed to pay for such counsel. At no time did the Greenbergs admit to plaintiff or to the law enforcement authorities their complicity in the matter.

On July 9, 1963, at the hearing before the chief magistrate, both Wallace and Moore pleaded innocent, waived hearing, and were held over for the grand jury. The attorneys for the Greenbergs and for plaintiff moved to dismiss the complaints against their clients on the ground that the accusations made against them by Wallace and Moore were not admissible in evidence. The chief magistrate announced that he would reserve decision on the motions for several days. News articles to that effect appeared in the Newark newspapers on July 10, 1963. On July 12, 1963 the chief magistrate dismissed the complaints against the Greenbergs and plaintiff. In a Newark Evening News article published on that date the public was advised that the complaints were dismissed because the chief magistrate had ruled that "the State has failed to produce prima facie evidence in this case and I therefore must dismiss it," and that "He said the only way in which the Greenbergs and Seidel were implicated was through remarks made by two prisoners as they were being brought into police headquarters * * *," and that "At that hearing Castellano upheld objections to any testimony about statements made to police by the pair involving the Greenbergs because they were not made in the presence of the Greenbergs."

On December 9, 1963 Wallace and Moore were indicted by the grand jury on charges of arson and burning to defraud insurance companies. Newspaper articles to that effect appeared in the Newark Evening News on December 9 and 10, 1963, which reported the indictments against Wallace and Moore and again recounted the charges against the Greenbergs and plaintiff and the dismissals thereof and the reasons for such dismissals as previously reported. The December 9 article included plaintiff's name and residence address in Newark, as well as those of the Greenbergs, and reported again, with reference to the earlier dismissals, that "Magistrate Castellano said at the hearing that the State

failed to produce ' prima facie ' evidence against the three. He observed that the only way that the three were implicated was through remarks made by Wallace and Moore, who told police they had a deal to set the fire. The Magistrate ruled out any statement made to police by Wallace and Moore because they were not made in the presence of the Greenbergs." Each of the news articles also referred to remarks made by the Essex County prosecutor with respect to the inconclusive nature of the investigation and the effect of the indictments against Wallace and Moore. The news article of December 10, 1963 quoted the prosecutor as stating that "I don't know that these indictments will end our investigation of the matter," and that "the grand jury was restricted from complete investigation because 'certain people' could not be called as witnesses for legal reasons. He declined to name the individuals."

Wallace and Moore were subsequently convicted of the charges against them. On May 3, 1965 the Greenbergs were indicted on four counts charging them with setting fire to and burning the Malgreen buildings, goods and chattels, while insured, to defraud the insurance companies, of burning the buildings of Malgreen, of burning goods and chattels with intent to injure Malgreen, and of conspiring with Wallace and Moore to set fire to and burn the buildings, goods and chattels at the yard with intent to prejudice and defraud insurance companies. The Greenbergs were tried in the Essex County Court, Law Division, convicted on all counts and sentenced on February 9, 1967. On July 1, 1968 their convictions were affirmed by the Appellate Division of the Superior Court.

In June 1965, shortly after the Greenbergs were indicted but before their trial and convictions, plaintiff instituted this action against the Greenbergs and against Malgreen. The complaint charged the individual defendants with negligence in setting the fire and, alternatively, with committing arson and with "a willful and malicious tort" and "willful and deliberate acts against the interest of the plaintiff." Although

not artistically framed, the gravamen of the complaint is that the Greenbergs willfully and deliberately caused the fire, as a result of which plaintiff was arrested on a warrant of the Newark arson squad and charged with having conspired with defendants and others to have caused the fire. It is alleged that plaintiff was booked, fingerprinted, photographed, detained overnight in prison and subsequently released on bail; that his photograph appeared in the Newark Evening News in an article including him in the conspiracy and charging him with the crime of arson; that he was humiliated and degraded, caused to suffer physical and mental pain, loss of income and earnings, caused to have his privacy invaded and his name and reputation scandalized, and caused to incur medical and legal expenses and loss of employment. There were prayers for both compensatory and punitive damages. In a separate count plaintiff alleged that the Greenbergs promised to reimburse him for legal expenses incurred as the result of the charges against him, and he sought recovery of counsel fees in the amount of $2450 expended in connection with the proceedings against him. In another count it was alleged that plaintiff was under a profit-sharing agreement with defendant corporation which was negligently or willfully interfered with by the individual defendants, as the result of which plaintiff lost income to which he otherwise would have been entitled.

An answer was filed on behalf of defendants, generally denying the allegations of the complaint and reserving the right to move to strike the complaint on the ground that it failed to state any claim upon which relief could be granted.

At the trial, since the Greenbergs had in the meantime been convicted, plaintiff proceeded on the theory that the Greenbergs were guilty of deliberate and criminal acts in causing the fire rather than that they were guilty of negligence in causing the fire. The claims against Malgreen as a corporate entity were not pursued. Pursuant to Evidence Rule 63 (20), evidence of the final judgments adjudging the Greenbergs guilty of the offenses for which they were convicted was received

in evidence. The Greenbergs did not testify or offer any evidence to negate their guilt of said offenses.

Reference has heretofore been made to some of the findings of fact by the court. On the evidence adduced, it is clear that the Greenbergs committed willful and criminal acts in causing the fire to be set in order to defraud insurance companies, and that they conspired with Wallace and Moore to that end. It is clear that plaintiff had no part in said conspiracy and is entirely innocent thereof, and that defendants at all times have known of his innocence. It is clear that plaintiff has suffered the shame, humiliation and damage to reputation which one innocent of crime suffers when he is falsely accused and prosecuted therefor, and that he has suffered mental distress and physical pain and loss of income as a result thereof. Although it is clear that the most intense distress and humiliation undoubtedly occurred during the three-week period when the charges were made and pending against him, it is probable, and I find as a fact, that he suffered distress when news articles in December 1963 resurrected publicly the fact of the charges against him. And it is perfectly apparent that his vindication, upon the dismissal of the charges against him, was a cloudy one and has remained cloudy to date in view of subsequent events, including the subsequent indictment and conviction of the Greenbergs. It is perfectly clear that the Greenbergs, who were arrested with plaintiff and knew of the charges against him, were fully cognizant of the prosecution against him and the distress that he was being subjected to.

It is also perfectly clear that although the Greenbergs willfully caused the fire to occur, they never intended that their criminal acts and conspiracy should become known. Quite the contrary. They did not specifically intend that plaintiff, or any one else, be accused of criminal acts or subjected to any prosecution. They did not themselves make any accusations against him which set the proceedings in motion against him or caused their continuance. It is also clear that at no time did the Greenbergs, who knew of their own complicity

and that plaintiff was in no way involved, come forward to establish plaintiff's innocence or to endeavor to stop the proceedings against him on the ground that he was innocent. At no time, even after their convictions, have they come forward to clear his name. Finally, it is clear that if defendants had not performed their criminal acts and caused the fire to be set, plaintiff would not have suffered the injuries and damages for which relief is sought.


No direct precedent for plaintiff's action has been found in any reported case. In view of the rather perfunctory trial briefs filed by counsel, the court required supplemental briefs to be submitted. Neither the efforts of counsel nor extensive research by the court have brought to light any precedents on all fours.

Upon analysis, the claims asserted by plaintiff may be said to bear analogy to conventional theories for recovery for malicious prosecution, for invasion of privacy, for invasion and interference with contractual rights and prospective economic gain, for outrageous acts causing mental distress, for fraud and misrepresentation, for defamation, and for breach of contract. No case has been found in which it was held that one who commits a crime may be held civilly liable to an innocent person who was prosecuted criminally for the commission of such crime in the absence of the filing of charges or the making of accusations by the perpetrator of the crime which set the processes of the criminal law in motion against the plaintiff. Nor has any case been found which held that in such circumstances relief would be denied. The grievous damages and injuries which plaintiff has suffered are clearly those which one who has been the subject of a conventional malicious prosecution normally suffers. Is plaintiff entitled to recover from these defendants or is he to be denied relief?

It is axiomatic that the simple fact that his action does not fit into a nicely defined or ...

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