Driscoll v. Burlington-Bristol Bridge Co.

• Decision Date: 05 December 1950
• Docket Number: No. C--346,BURLINGTON-BRISTOL,C--346
• Parties: DRISCOLL, Governor, et al. v.BRIDGE CO. et al.
• Court: New Jersey Superior Court

Page 545

10 N.J.Super. 545

77 A.2d 255

DRISCOLL, Governor, et al. v. BURLINGTON-BRISTOL BRIDGE CO. et al.

No. C--346.

Superior Court of New Jersey

Chancery Division.

Dec. 5, 1950.

Walter D. Van Riper, Special Counsel to the Atty. Gen., Newark, and Theodore D. Parsons, Atty. Gen., of the State of New Jersey, for the plaintiffs (Paul N. Belmont, Newark, of counsel).

Robert L. Hood, Newark, and Thomas D. Begley, Burlington, for the defendants Burlington County Board of Freeholders and Burlington County Bridge Com'rs and others.

Milton M. Unger, Newark, for the defendant Sarjem Corp. and others. (Milton M. & Adrian M. Unger, Newark, attorneys).

Donald B. Kipp, Newark, for the defendants Chemical Bank & Trust Co. and B. J. Van Ingen & Co., Inc. (Pitney, Hardin & Ward, Newark, attorneys).

Thomas M. Farr, Camden, for the defendant Buckley Securities Corp. (Norcross Farr & Schantz, attorneys).

George W. C. McCarter, Newark, for the defendant Stranahan, Harris & Co., Inc. (McCarter, English & Studer, Newark, attorneys).

James D. Carpenter, Jersey City, for the defendant Bacon, Stevenson & Co. and others (Carpenter, Gilmour & Dwyer, Jersey City, attorneys).

Harold A. Price and Edward L. C. Vogt, Morristown, for the defendant Estabrook & Co. and others (Schenck, Price, Smith & King, attorneys).

Alfonse F. Spiegel, New York City, for the defendant Tripp & Co. (Harrison & Roche & Darby, Newark, attorneys).

Edward A. Markley, Jersey City, for the defendant Fitzgerald & Co. (Markley & Broadhurst, Jersey City, attorneys).

FREUND, J.S.C.

This proceeding was brought by the Governor and the Attorney General of the State of New Jersey on behalf of the people of the State, for rescission of the purchase of two toll bridges across the Delaware River from Burlington County, New Jersey, to points in Pennsylvania.

On the morning of October 22, 1948, the Board of Chosen Freeholders of Burlington County, by resolution, created the Burlington County Bridge Commission, a public body, and appointed three bridge commissioners. Minutes after their appointment and organization, these bridge commissioners, without notice to the public, without independent investigation, without independent appraisal, without negotiation or bargaining, without independent counsel or advice, adopted a resolution for the purchase of the two bridges at a price of $12,000,000 to be derived from the issuance of revenue bonds. The same day, in the City of New York, they closed the transaction. The sellers of the bridges, without investing a single dollar, realized a net profit of about $2,000,000. The various stages of the entire transaction down to the smallest detail were planned by the sellers prior to the creation of the Commission. One of them arranged the selection of the Commissioners. The sellers' attorney prepared all the papers and documents including the Commission's resolutions, even before the Commissioners were appointed. They made the financial arrangements for the Commission. Though this transaction, the subject of this litigation, was formally initiated and concluded by the Commission on the first day of its existence, the arrangements for it by the defendants had extended for a period of about two years, and involved many persons. The proofs establish a course of conduct replete with chicanery on the part of the sellers and those acting on their behalf.

Viewed in the large and applying legally sanctioned standards relevant to the conduct of governmental affairs to the unconstradicted facts, the conclusion is inescapable that the transaction contravenes sound public policy. From the evidence it cannot be sustained.

The facts are these:

The Burlington-Bristol Bridge was constructed in 1931 and was owned by the Burlington-Bristol Bridge Company. The Tacony-Palmyra Bridge, constructed in 1929, was owned by the Tacony-Palmyra Bridge Company. Both companies were incorporated under Chapter 247, P.L.1925, R.S. 48:5--13 et seq., N.J.S.A. This statute reserved to the State of New Jersey the right in conjunction with the Commonwealth of Pennsylvania to acquire the bridges five years after their completion at a prescribed cost formula, and provided for their reversion to the State without cost after 50 years. Appropriate federal laws pertinent to interstate bridges empowered acquisition by New Jersey or Pennsylvania or any political subdivision thereof. Under the cost formula the two bridges would have become available in 1951 for approximately $5,000,000. However, the enactment of Chapter 401, P.L.1947, R.S. 48:5--18, N.J.S.A., eliminated the State's right of acquisition of the bridges if they became the property of a public body.

Chapter 318, P.L.1946, R.S. 27:19--26 et seq., N.J.S.A., authorized each county board of freeholders to create a bridge commission with power to acquire bridges, subject to the approval of the freeholders, and the consent of an adjoining state, and to issue bonds secured by the revenue from such bridges. In 1948, this statute was amended by deleting the requirement for the consent of the adjoining state, Chapter 288, P.L.1948, R.S. 27:19--28, N.J.S.A.

The legislative background of this case is more fully stated in the opinion of Judge Jacobs in Haines v. Burlington County Bridge Commission, 1 N.J.Super. 163, 63 A.2d 284 (App.Div.1949).

The stock of the Burlington-Bristol Bridge Company from its incorporation in 1928 had been owned by a small group in Pittsburgh, Pennsylvania. The defendant, Theodore R. Hanff, had been for many years a bridge painting contractor and because of his extensive experience in this business, was familiar with the operation of toll bridges and bridge companies. He knew the owners of the bridge company stock. From time to time, he had had transactions with the defendants, Ketcham and Nongard, of Chicago, dealers in bridge securities. In the latter part of 1946, he proposed to them and others of the defendants that they become associated in purchasing the stock of the Burlington-Bristol Bridge Company with the idea of selling it to a public agency. A syndicate was formed, composed mainly of Thomas J. Christensen, a municipal bond dealer; Rickard Parks, an investment security dealer; Robert K. Bell, counsel for a Bridge Commission; and Clifford R. Powell, counsel and former director of the Burlington-Bristol Bridge Company, all of whom are defendants. Hanff was authorized by the syndicate to purchase the stock for not more than $1,500,000. He negotiated with the Pittsburgh stockholders a purchase of their stock at a price of $1,350,000, requiring no cash investment. A loan in the amount of $1,000,000 secured by a purchase money mortgage encumbering the bridge was obtained and the balance of the purchase price, $350,000, was represented by notes of the bridge company secured by the pledge of the stock. The syndicate, however, was required to pay into the company $25,000 for working capital.

Each member of the syndicate had his role to play: Hanff, the negotiations with the Pittsburgh stockholders; Ketcham & Nongard, the financing of the purchase, by securing the $1,000,000 mortgage on the bridge; Christensen and Parks were to have sold preferred stock, but this became unnecessary when the sellers accepted notes. Bell's contribution was to be in the rendition of advice in the acquisition and operation of the bridge. Powell's task--and he so testified--was the sale to Burlington County. On cross-examination, he said, 'I became interested in getting the bridge to present it to Burlington County.'

Since 1914 Powell has been a lawyer with offices in Mount Holly, the county seat of Burlington County. He served in the State Legislature as Assemblyman and subsequently for three terms as Senator. In 1937, he was a candidate for the Republican nomination for Governor of the State. For years he had been generally recognized as the Republican leader of Burlington County. His law firm represented 15 of the 35 municipalities comprising the county, and he had been counsel to the Burlington-Bristol Bridge Company since its incorporation. In addition to his professional and political activities, he had been active in the military service and had been Commanding General of the National Guard. Powell's disclaimer of political influence is, in the light of the known facts, disingenuous, to say the least. His financial contribution to the undertaking was one-fourth of the total sum of $25,000 advanced to the bridge company by the syndicate as working capital; his real contribution consisted of his influence. Its potency was demonstrated in the following episode: The right to acquire the two bridges was reserved to the State by Chapter 247, P.L.1925, R.S. 48:5--22, 23 and 24, N.J.S.A. This statutory reservation came to the knowledge of the syndicate after Hanff had completed his arrangements for the purchase of the Burlington-Bristol stock, in the course of Ketcham & Nongard's negotiations for the mortgage. It was necessary to remove this right of the State, lest the whole plan of the syndicate be frustrated. Accordingly, Albert McCay, an Assemblyman from Burlington County, Powell's law partner, introduced a bill, later enacted into law as Chapter 401, P.L.1947, R.S. 48:5--18, N.J.S.A., providing that if a public agency acquired the bridges, the State's right of acquisition would be extinguished. To ensure its passage, Powell wrote to the Senator from Burlington County asking his support of the legislation. In the letter dated April 4, 1947, Powell said that the legislation 'permits our local bridge companies to sell their bridges either to a private individual or corporation or to a public bridge commission. This is only a permissive act, and it is desired by the Burlington-Bristol Bridge Company.' Significant is the omission of any reference to the further provision which expressly eliminated the State's right to acquire the bridges.

After the enactment of this necessary amendment, the syndicate...