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Manning Engineering Inc. v. Hudson County Park Commission

Decided: July 26, 1977.


For vacating judgment -- Chief Justice Hughes, Justices Mountain, Pashman, Clifford and Schreiber and Judge Conford. Opposed -- None. The opinion of the court was delivered by Pashman, J.


[74 NJ Page 117] Plaintiff commenced this lawsuit to collect the balance of a fee allegedly due for engineering services performed under a contract with the defendants, the Hudson

County Park Commission ("Park Commission") and the County of Hudson ("County"). Following this Court's decision affirming and modifying in part the judgment in favor of plaintiff, Manning Engineering, Inc. v. Hudson Cty. Park Comm'n and County of Hudson, 71 N.J. 145 (1976), the defendants petitioned to reopen the judgment on the ground that the contract had been awarded to plaintiff in return for certain illegal activities of the president, director and 25% shareholder of that corporation, Frank G. Manning.

Apart from the alleged illegality in the procurement of the contract. the facts surrounding the contract negotiations are fully set forth in our prior decision. As we noted there, the contract in question stemmed from a proposed park development on the Hackensack River in Jersey City. The Park Commission, which was responsible for planning the project, passed a resolution in June 1965 authorizing plaintiff to prepare various plans and specifications and to make surveys for the project. The engineering firm began work immediately. On October 13, 1965, the parties executed a formal contract under which plaintiff agreed to perform such services. The agreement was ratified by a resolution of the County Board of Freeholders on the next day.

Plaintiff received $138,365.00 in payments for services rendered in connection with the project. However, in August 1968 Manning learned that another engineer had been hired to continue work on the development. As a result, he submitted a bill to the Park Commission, demanding payment of the remainder due his firm under the contract, $251,894.10. After instituting suit for this amount, plaintiff recovered a judgment for $134,522.37, plus 6% interest from the date when plaintiff filed his bill with the County. The Appellate Division affirmed and the decision was presented to this Court on petitions for certification by the defendants and cross-petition of the plaintiff. 69 N.J. 75 (1975). We affirmed the award of payments under the contract, but modified the lower courts' judgments to delete the award of pre-judgment interest. 71 N.J. at 159.

Our decision was announced on September 16, 1976. We were first advised on October 5, 1976 of the illegality in the procurement of the contract. At that time defendants filed a motion seeking to have the prior judgment set aside on the ground that Manning had been awarded the contract in question in return for his role as a conduit for illegal "kickbacks." Counsel for the County argued that defendants first became aware of Manning's role in this illegal scheme upon learning that Manning had revealed his activities in collecting "kickbacks" for John V. Kenny while testifying at the federal "Hudson Eight" trial in 1971.*fn1 Counsel explained that, although Manning had testified in 1971, the attorney for the County was supplied with a transcript of these proceedings on June 4, 1976, and that this "testimony was not in the possession of the County prior to June [4,] 1976 nor was the defense attorney aware that Frank Manning had testified . . . at any time prior to [that] date."

Since neither this Court nor the lower courts had previously dealt with the question raised in the petition for reopening the judgment, we remanded the case to the trial court to receive evidence and make findings of fact concerning the relationship, if any, between Manning's illegal activities and the award of the contract.*fn2 The trial court conducted a hearing

on this issue and found that Manning's role as a "conduit between the extorters and extortees" was a "significant element" of the consideration for awarding the contract to his engineering firm. As a result, we ordered that the matter be reopened.



A. Application of R. 4:50-1

We are satisfied that authority exists under R. 4:50-1 for reopening the judgment in this case.*fn3 Although defendants applied for this relief two years and seven months after the trial court rendered a judgment in favor of plaintiff, the interests at stake and the truly extraordinary nature of the circumstances presented convince us that relief under the rule is appropriate.

R. 4:50-1 allows a court to "relieve a party or his legal representative from a final judgment, order or proceeding" whenever necessary to prevent a manifest denial of justice. The rule is designed to reconcile the strong interests in finality of judgments and judicial efficiency with the equitable notion that courts should have authority to avoid an unjust result in any given case. Hodgson v. Applegate, 31 N.J. 29, 43 (1959); Scheck v. Houdaille Construction

Materials, Inc., 121 N.J. Super. 335, 345 (Law Div. 1972).

Specifically, subdivision (b) of the rule provides for relief whenever there is "newly discovered evidence which would probably alter the judgment, order or proceeding and which by due diligence could not have been discovered in time to move for a new trial under R. 4:49";*fn4 subdivision (f) applies where there is "any other reason justifying relief from the operation of the judgment or order." The only limitation under the rule is expressed in R. 4:50-2, which states that a motion for such relief "shall be made within a reasonable time, and for reasons (a), (b) and (c) of R. 4:50-1 not more than one year after the judgment, order or proceeding was entered or taken." Thus, the one-year limitation applicable to subsection (b) of the rule does not apply to subsection (f), and relief pursuant to that section need only be made "within a reasonable time." Palko v. Palko, 73 N.J. 395, 401 (1977).

It is clear that subdivision (b), standing alone, does not provide a sufficient basis for reopening the judgment in this case. While that section is addressed to the situation where newly discovered evidence is presented after a judgment has been rendered, it is limited by the one-year limitation embodied in R. 4:50-2. It also requires that the evidence upon which reopening is sought be such that it could not have been discovered "by due diligence" in time to move for a new trial under R. 4:49. In the instant case, we entertain serious doubts as to whether defense counsel's conduct satisfied the demands of this section. Counsel readily admitted at oral argument that Manning's testimony at the 1971 Hudson Eight trial was widely publicized. He even commented that he didn't "think anybody could have existed in Hudson County in 1971 and not known from headlines in the paper that Manning was

testifying before the federal court at that time." While conceding his general awareness of Manning's role in collecting money for various Jersey City officials, counsel insisted he did not know until June 1976 that Manning had been awarded the contract in question in return for this illegal activity. He asserted that Manning's testimony had been brought to his attention for the first time by a member of the Attorney General's office with whom he had been working for some time. When asked why he failed to come forward with this information in June while the matter was still pending before this Court, he responded that he was prevented from doing so by his heavy case load at that time.

Nevertheless, we conclude that relief should be available under subsection (f) of the rule. This section is considerably broader in scope than the former provision. We have repeatedly noted the broad parameters of a court's discretion under subsection (f), and that a court should have authority under it to reopen a judgment where such relief is necessary to achieve a fair and just result. As we stated in Court Invest. Co. v. Perillo, 48 N.J. 334 (1966):

Such a motion under (f) is addressed to the discretion of the trial court. That discretion is a broad one to be exercised according to equitable principles, and the decision reached by the trial court will be accepted by an appellate tribunal in the absence of an abuse of its discretion. No categorization can be made of the situations which would warrant redress under subsection (f). As Justice Proctor noted in Hodgson v. Applegate, 31 N.J. 29, 41 (1959), the very essence of (f) is its capacity for relief in exceptional situations. And in such exceptional cases its boundaries are as expansive as the need to achieve equity and justice.

[48 N.J. at 341]

See also Palko v. Palko, supra.

However, subsection (f) should not be taken as a way of circumventing the more stringent requirements of subsection (b); it should be available only where truly exceptional circumstances are present. Thus, it has been stated, both under R. 4:50-1(f) and the identical federal rule, F.R. 60(b)

(6), that relief may be granted only where the court is presented with a reason not included among any of the reasons subject to the one-year limitation, including "newly discovered evidence." See Doyle v. Chase Manhattan Bank, 80 N.J. Super. 105, 125 (App. Div.), certif. den. 40 N.J. 508 (1963) (R. 4:50-1); Ackermann v. United States, 340 U.S. 193, 71 S. Ct. 209, 95 L. Ed. 207 (1950) (F.R. 60(b)).

We are convinced that the circumstances in this case warrant relief under subsection (f); the importance of preventing a fraud upon the public certainly must serve to distinguish this case from others which might arise involving newly discovered evidence under subsection (b). Chief Justice Vanderbilt underscored the independent duty of a court in ruling on a public contract in Driscoll v. Burlington-Bristol Bridge Co., 8 N.J. 433 (1952), cert. den. 344 U.S. 838, 73 S. Ct. 25, 97 L. Ed. 652, reh. den. 344 U.S. 888, 73 S. Ct. 181, 97 L. Ed. 687 (1952), when he said:

When public officials do not . . . conduct themselves and discharge their duties [in a way which is impervious to corrupting influences], their actions are inimical to and inconsistent with the public interest, and not only are they individually deserving of censure and reproach but the transactions which they have entered into are contrary to public policy, illegal and should be set aside to the fullest extent possible consistent with protecting the rights of innocent parties.

[8 N.J. at 475]

We must be all the more concerned with such transactions when, as here, it is this Court itself which is responsible for enforcing, albeit unknowingly, such a corrupt and illegal agreement.

While there is a strong likelihood that the critical evidence in this case could have been brought forward earlier had counsel exercised "due diligence," that fact alone should not foreclose the Court from reopening the judgment. Our primary concern here is not with the conduct of counsel, but with ensuring that the public entities which he represents and the

taxpayers whose interests they serve are not deprived of a just determination.

Even where a lawyer was not representing a public entity, courts have found that resort to the analogous provision in F.R. 60(b)(6) was permissible where counsel's behavior was so grossly negligent that a client did not have a chance to fairly litigate the issues underlying a judgment. See Klapprott v. United States, 335 U.S. 601, 613-14, 69 S. Ct. 384, 389-390, 93 L. Ed. 266, 276-77 (1949) (Black, Douglas, JJ., separate opinion), modified 336 U.S. 942, 69 S. Ct. 398, 93 L. Ed. 1099 (1949); Chief Freight Lines Co. v. Local Union No. 886, 514 F.2d 572, 576-77 (10 Cir. 1975); Steuart, Inc. v. Matthews, 117 U.S. App. D.C. 279, 329 F.2d 234, 235-36 (1964), cert. den. 379 U.S. 824, 85 S. Ct. 50, 13 L. Ed. 2d 35 (1964); Barber v. Turberville, 94 U.S. App. D.C. 335, 218 F.2d 34 (1954); King v. Mordowanec, 46 F.R.D. 474, 477-78 (D.R.I. 1969); Lucas v. City of Juneau, 20 F.R.D. 407, 410-11, 17 Alaska 75 (D. Alaska 1957); In re Cremidas' Estate, 14 F.R.D. 15, 17, 14 Alaska 234 (D. Alaska 1953); 7 Moore's, Federal Practice para. 60.27[2] at 365-69 (1975). But see Cline v. Hoogland, 518 F.2d 776, 778 (8 Cir. 1975).

Defendants' conduct in this case, in holding back their defense of illegality through several years of litigation in the Law Division, Appellate Division and Supreme Court, and advancing it on a motion to reopen the judgment only after finally losing their appeals based on other defenses, constitutes, in our opinion a rank abuse of the judicial process of this State and deserves the severest condemnation. It is simply incredible that all or most of the members of the Board of Freeholders and the Park Commission, and their attorneys, did not know of that well publicized testimony all during this litigation. Counsel's petition to reopen the judgment stated that he had not been aware that Manning testified, see ante at 119. This is contradicted by his statements at oral argument. See ante at 122.

In any event, since we find that reopening the judgment under R. 4:50-1(f) in this case is warranted because of the public policy to prevent recovery of damages for breach of an illegal public contract executed by plaintiff as part of a fraudulent scheme, we need not decide whether counsel's conduct, standing alone, would have satisfied the requirement of "exceptional circumstances" implicit in R. 4:50-1(f).*fn5

B. Factual Basis for Reopening the Judgment

The trial court's findings clearly indicate the propriety of reopening the judgment in this case. Both the circumstances surrounding the award of the contract to Manning and his own testimony in the "Hudson Eight" case support the trial judge's finding that Manning received the park project in return for his faithful service to John V. Kenny, former Mayor of Jersey City, as a conduit for illegal kickbacks. While the trial judge found that Manning's role in this

illegal scheme may not have been the sole consideration for the contract, his finding that it was "a significant element" is sufficient to warrant reopening the judgment.

Manning was the main witness at the hearing upon remand. He testified freely as to his role in retrieving illegal kickbacks for John V. Kenny; he characterized himself as "the channel through which [contractors] made their payoffs on all of their contracts," or alternatively, as a messenger, collector, or an "intermediary between the extorters and the extortees." In particular, he admitted, both in the hearing upon remand and in the "Hudson Eight" trial, that he had been involved in extorting payments in return for contracts from Gerard Engineering Inc. from June 1964 until 1968. In addition to collecting the kickbacks from this firm, he also relayed Kenny's demand that it pay 20% on the first three contracts and 10% thereafter. The trial judge summarized Manning's involvement in the scheme as follows:

During the week beginning on Monday, June 22, 1964, Manning picked up $4,800 from James Dolan of Gerard Engineering Inc. and delivered it to John V. Kenny. The delivery was made in an office on the first floor of Pollack Hospital in Jersey City. It was split into two parts. In the presence of Manning, Kenny delivered one envelope to Thomas Flaherty, President of the City Council, who had been called to the office and was told it was from Gerard Engineering Inc. This is the first time Frank Manning admits having picked up kickback ...

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