Case Name: GEORGE M. HODGSON, PLAINTIFF-RESPONDENT, v. LEROY APPLEGATE AND CLARA E. APPLEGATE, DEFENDANTS-APPELLANTS
Court: New Jersey Superior Court, Appellate Division
Jurisdiction: New Jersey
Decision Date: 1959-03-20
Citations: 55 N.J. Super. 1
Docket Number: 
Parties: GEORGE M. HODGSON, PLAINTIFF-RESPONDENT, v. LEROY APPLEGATE AND CLARA E. APPLEGATE, DEFENDANTS-APPELLANTS.
Judges: 
Reporter: New Jersey Superior Court Reports
Volume: 55
Pages: 1–35

Head Matter:
GEORGE M. HODGSON, PLAINTIFF-RESPONDENT, v. LEROY APPLEGATE AND CLARA E. APPLEGATE, DEFENDANTS-APPELLANTS.
Superior Court of New Jersey Appellate Division
Argued December 15, 1958
Decided March 20, 1959.
Before Judges Goldmann, Freund and Haneman.
Mr. Joseph M. Alsofrom argued the cause for defend an ts-appellants.
Mr. Martin L. Haines argued the cause for plaintiff - respondent (Mr. Howard G. Stackhouse, attorney; Messrs. Dimon, Haines & Bunting, of counsel; Mr. Dominick J. Ferrelli, of counsel and on the brief).

Opinion:
The opinion of the court was delivered by
Freund, J. A. D.
Plaintiff George M. Hodgson, lessee of a two-bay service station in Woodland Township, Burlington County, brought this action to recover damages from the defendant-lessors, LeKoy Applegate and his wife, Clara E. The defendants were unable to deliver possession of the premises to plaintiff because the present operator of the service station, Herbert A. Cooper, exercised an option • to renew his lease. The action was brought upon the theory that defendants were liable for breach of lease and for fraudulent non-disclosure of Cooper's option to renew. A jury of the Burlington County Court returned a verdict for plaintiff in the amount of $8,500, and a judgment was entered accordingly on April 9, 1958.
I.
On May 13, 1958, 34 days after the entry of the judgment, defendants served notice of a motion to set aside the judgment upon the following grounds:
" that the said judgment was obtained by fraud and that the defendant has since obtained newly-discovered evidence, which would probably alter the judgment, and on the further ground, as specified under R. R. 4:62-2(a), (b), (c) and (f)."
On June 5, 1958, 57 days after the entry of the judgment, defendants filed an amended notice of motion to vacate which included two further reasons for setting aside the April 9 judgment: (1) that there was "basic error committed in the record" in that an improper measure of damages had been employed at the trial, and there was no evidence to support the claim of fraud; and (2) there were "basic error [s] in the Court's charge to the jury." The hearing on the motion to vacate was postponed until June 18, 1958, at which time the county judge denied the application. The defendants appeal from the denial of this motion.
Hodgson's complaint contained three counts: the first sought damages for loss of profits resulting from defendants' inability to perform the contract of lease; the second, for compensatory damages suffered as a result of reliance upon the Applegates' representations that they were the owners of the premises in question when in fact there was an outstanding lease to Cooper; the third, for punitive damages based upon the malicious failure to disclose the prior lease. The defendants filed a counterclaim for rescission and reformation of the plaintiff's lease, but the court dismissed it upon the rendition of the jury verdict.
The Cooper lease ran for one year, beginning on May 15, 1956, and contained an option to renew for nine additional years, to be exercised by notice on or before April 1, 1957. Before November 1956 defendants had some differences with Cooper respecting the payment of rent and of other obligations. Believing that he would vacate on or before the expiration of the initial term, they apprised the plaintiff that they were interested in leasing the premises to him and his sons, who operated service stations at other locations.
On November 2, 1956 plaintiff and defendants' signed the following memorandum:
"This agreement between LeRoy Applegate & Clara his wife as the lessors & George E. Hodgson, Thomas B. Hodgson, Lester Hodgson, and William Hodgson, the lessees, hereby agree to lease the Gulf Refining Station owned by the Applegates to the Hodgson boys, the leasees (sic), for a term of ten years at the rate of $200 per month minimum, and the gallonage under or above at the rate of three quarters of one cent per gallon.
A deposit of $10.00 is to bind this agreement until a permanent lease is drawn. Possession to be granted as soon as present tenant has vacated the property but it is the understanding that this date will not exceed the date of April 1, 1957.
Signed by
LeRoy Applegate /s/
Clara E. Applegate
Attested by
John Middleton /s/
Eor
George M. Hodgson /s/
GEORGE M. HODGSON"
Plain tiff's attorney proceeded to prepare the permanent agreement, and on November 10, 1956 the lease was signed and executed by plaintiff and defendants. It recited that it was "for the term of ten years from the date of possession on (sic) which shall he on or before April 1, 1957."
At the trial, which commenced on April 7, 1958 and lasted for three days, plaintiff contended that defendants had represented that Cooper's lease was for a one-year term, that they had not mentioned Cooper's option, and that plaintiff was unaware of it. In this respect plaintiff was corroborated by John Middleton, a realtor who had drawn and witnessed the memorandum quoted above, and by plaintiff's attorney who had drawn the lease and attended to its execution. Defendants testified, however, that they had informed plaintiff and his attorney of Cooper's option and that Cooper had been in default in the payment of obligations under the lease. They claimed that the attorney had said Cooper could bo evicted and that the attorney offered to prosecute such proceedings on defendants' behalf. Subsequently, when defendants sought to employ him to bring an eviction action, he refused because of conflict of interest. Defendants brought dispossess proceedings which terminated in Cooper's favor, and he exercised the option of renewal. Therefore, defendants were unable to deliver possession to plaintiff.
The insertion in the lease of April 1, 1957 as the date of possession, defendants explained, was intended as a protection to plaintiff so that when Cooper decided to vacate the premises plaintiff's possession could not be put off until "20 years from now, or something like that." Defendants vigorously denied that by consenting to plaintiff's inclusion of a specific date they intended to make any representation that there was no option in Cooper's favor. Thus LeRoy Applegate testified :
"Q. Mr. Applegate, there is a date, April 1, 1957, on this lease. Did you tell either Mr. Stackhouse or Mr. Hodgson or Mr. Middleton that the Cooper lease expired on April 1, 1957? A. I explained to them thoroughly it was one-year with an option of nine, and my wife explained the same thing to them. We both told them. They have got no argument on that.
Q. So the date of April 1st, 1957 was pulled right out of the air? A. He said, 'We've just got to put some date onto it, so it would be sometime.' "
Corroborative of the defendants' version that Hodgson had not been misled is the fact that Cooper's one-year term did not expire until May 15, whereas plaintiff was promised possession on April 1. Properly instructed, the jury could have inferred that not only the defendants but the plaintiff, who admitted that he "certainly knew" Cooper had a lease, had expected Cooper to vacate, whatever his rights, and, therefore, that plaintiff would have entered into a lease even had he known the true facts as to Cooper's option.
To prove damages, plaintiff attempted on the second day of the trial, through Cooper's testimony, to show his earnings from the operation of the gas station so as to provide a guide by which the jury could measure plaintiff's own lost profits. He was asked how many gallons of gasoline he sold monthly or yearly, but his estimates, based on memory, were vague and contradictory. He could not estimate his expenses. He attempted to refer to a paper which purported to reflect the gallon age sold, but it was not in his handwriting and he did not know when or by whom the figures had been transcribed. An objection to his use of the paper was sustained. Cooper's most significant testimony pertaining to profits from the gas station was that he was able to live off that station and that his "living costs are somewhere in the neighborhood of between 8 and $9,000.00 a year." He had income from other sources but he "derived 95% or 90%, possibly, of all the income from the gasoline station." He did not recall how much income tax he had reported for 1957 and had no idea how much he had earned.
Plaintiff also attempted to prove lost profits by introducing evidence of the profits of his son's service station in Pemberton, U. J., about seven miles from the station tenanted by Cooper. The son's accountant testified that the Pemberton station showed a net profit of $12,906.92 for a 10%-month period during 1957. The accountant's records, however, were based upon gross sales, and he could not estimate that proportion of the gross income of $78,507.26 attributable to sales of gasoline and that attributable to minor repairs and sales of accessories. In addition, there was little evidence to indicate that the stations were comparable. Cooper's station is in a rural area and most of the sales are to transients; the other is in a small town and apparently has a more steady clientele.
The trial judge submitted the ease to the jury after a relatively brief charge. Pie instructed that the action was one for "alleged misrepresentations" by defendants concerning the "term and option" in Cooper's lease. Aside from the matter of burden of proof, this statement of the issues constituted the entire charge as to what was necessary to establish defendants' liability, notwithstanding that plaintiff had pleaded and presented, in addition to the fraudulent misrepresentation theory, a clear case of breach of contract. When the jury returned to the courtroom with a question, the judge replied: "You are only concerned with whether or not there was a misrepresentation to induce the signing of the memorandum and the lease." However, neither in the original charge nor in the supplemental instruction did the trial judge instruct as to the essential elements which are required to make a fraudulent representation actionable. On the question of substantive liability, the charge was woefully inadequate.
On the subject of damages the judge charged that plaintiff sought "to recover his loss by not being able to take possession by reason of the prior lease, and that is where you may have some difficulty." The jury was instructed to evaluate the similarity between the gas station at Pemberton and Cooper's station and to consider the "statements of Mr. Cooper as to what he has done in that station by way of business. Again, no actual figures, but his approximation." The court summarized: "So, this matter of damages I necessarily must leave entirely in your hands (We note at this point that this charge, particularly the statement that it was on the issue of damages where the jury would have some difficulty and the last-quoted instruction that the issue of damages would be left entirely to the jury, could well be construed as the practical equivalent of a directed verdict for plaintiff on the issues of substantive liability — and this although no motion had been made therefor and although the proofs clearly indicated such issues were for the jury.)
At the conclusion of the charge, the judge asked if there were any exceptions, and defense counsel answered: "The charge is satisfactory, your Honor." As noted, the jury returned a verdict of $8,500 for the plaintiff. Ho motion for a new trial was made by defense counsel within the ten-day period as provided in R. R. 4:61-2, and no appeal was taken from the judgment entered on the verdict.
II.
Defendants then engaged another attorney (present counsel) who moved to set aside the judgment under R. R. 4:62-2. At the hearing on the motion, defendants' newly retained counsel argued the merits of the court's charge, contending that there was no evidence to support a case of fraud, and that the measure of recovery for fraud was limited to plaintiff's deposit of $10. He also contended that the case was tried on the theory of breach of lease, and that the measure of damages is the difference between the value of the lease at the time of the making thereof and the rent reserved. The court declined to consider these contentions as a basis for an application to vacate the judgment on the ground that these are matters pertaining to errors of law to be raised on appeal.
In support of the claim of newly discovered evidence, defendants presented the testimony of Frederick T. Crowley, the accountant for Cooper, and the testimony of the defendant, Mrs. Applegate, concerning conversations with Crowley, to show that Cooper had testified falsely as to his earnings from the gas station. Crowley is a resident of Pennsylvania and happens to be the accountant for both Cooper and the Applegates. On May 14, 1958, when he came into this State, he was subpoenaed to testify at the hearing on the motion to vacate on June 18: Crowley testified that between April 3 and 5, 1958 he had told defendant LeRoy Applegate that Cooper had in fact suffered a loss from his operation of the station in 1956. At the time, Crowley promised to appear at the trial and so testify. On the morning of the trial's third day, April 9, 1958, however, he telephoned defendants at 1:30 or 8:00 A. m. and advised them that his conscience would not permit him to breach his confidential relationship with Cooper. At that time lie had not informed defendants of the amount of Cooper's loss, but after being subpoenaed on May 14, Crowley did show them a statement, signed by Cooper, that his 1956 loss was $13,400. He had Coopers 1956 income tax records and business statements with him at the hearing, but the court would not permit defendants to examine them and would not receive them in evidence.
Clara Applegate, the next witness at the hearing on the motion, categorically denied that she had learned from Crowley prior to the trial that Cooper had sustained a loss in 1956. She stated that on April 4, 1958 (Good Friday) Crowley "wasn't able to answer you on anything," and that the first time she spoke to Crowley on the subject of Cooper's loss was on the evening of the second day of the trial, April 8, 1958. Mrs. Applegate implied there was no reason to consult Crowley as to Cooper's possible losses until Cooper took the stand and testified thal he had made a profit at the gas station, and that as soon as he did. she telephoned Crowley to ascertain the facts. She testified that Crowley told her on April 8, 1958 that Cooper liad a loss, the amount of which was not then disclosed, and that he promised to testify ihe next morning. On the next morning, however, Crowley called and advised that he would not testify. She admitted having knowledge of the loss on April 9, but explained that she conceived it to be the function of defendants' trial counsel to bring the situation to the attention of the court.
Defendants' attorney then announced that Cooper was in the courtroom in response to a subpoena but that he should not be called to give testimony which might be self-incriminating. Cooper, however, voluntarily testified at the request of the court. He said he could not recall whether his income tax return disclosed a profit or loss; he declared he had other sources of income beside the gasoline station in question; and he declined to examine the tax returns which were in the courtroom. Thus, it appeared that in 1956 Cooper might have reported a loss of $13,400 and not a profit of $8,000 or $9,000 as he implied in his testimony. However, whether the operation of the gas station resulted in a profit or loss was not established because the income tax return also included his other ventures. Reference to the income tax records or to Cooper's books (which had been subpoenaed and which were outside in his automobile) would have revealed the facts, but the court's ruling prevented ascertainment thereof.
III.
Defendants appeal from the order denying their motion to set aside the judgment, charging generally that the order was an abuse of the discretion vested in the trial judge under R. R. 4:62-2. The rule, so far as is here pertinent, reads as follows:
"On motion, with briefs, and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order or proceeding for the following reasons: (a) mistake, inadvertence, surprise, or excusable neglect; (b) 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 Rule 4:61 — 2; (c) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party; (d) the judgment or order is void; (e) the judgment or order has been satisfied, released, or discharged, or a prior judgment or order upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment or order should have prospective application; or (f) any other reason justifying relief from the operation of the judgment or order. The motion shall be made within a reasonable time, and for reasons (a), (b) and (e) not more than 1 year after the judgment, order or proceeding was entered or taken."
Fumerous grounds are presented in support of the claim that the verdict of $8,500 for plaintiff was the product of "basic error" (defendants' terminology) or "mistake" in the conduct of the trial and in the charge, R. R. 4:62-2(a), including: (1) defendants' evidence that plaintiff and his attorney at the time of the execution of the Hodgson lease were on notice of defendants' outstanding lease to Cooper, was never rebutted, and therefore there could have been no justifiable reliance on the alleged misrepresentation to the contrary; (2) the real understanding of the parties was that the Hodgson lease was to be subject to the rights of the tenant in possession; (3) the anticipated profits in the present case were too remote, speculative, and problematical to afford a measure of damages for breach of lease or for fraud; (4) plaintiff was required to elect his remedy because breach of contract and fraudulent misrepresentation theories are inconsistent; (5) the trial judge deprived defendants of due process of law and trial by jury by failing to submit their counterclaim to the jury; (6) failure to charge on breach of lease; and (7) failure to charge on the component elements of fraud or misrepresentation. In addition, defendants urge that Crowley's testimony as to Cooper's loss in 1956 was newly discovered evidence which would probably have altered the judgment and which could not have been discovered in time to move for a new trial. R. R. 4:62-2(6).
IY.
We deal with the last-mentioned contention first. To warrant disturbance of the judgment on the ground of newly discovered evidence, the party seeking relief must demonstrate that the new evidence is material to the issues tried, that it has in fact been discovered since the former trial and could not, by the exercise of due diligence, have been discovered before such trial or in time to move for a new trial under R. R. 4:61-2, and that it probably would change the result if a new trial were granted. R. R. 4:62-2(6); State v. Bunk, 4 N. J. 482, 486 (1950); State v. Richter, 21 N. J. 421, 424 (1956); State v. Emery, 27 N. J. 348, 357 (1958); Cheel Construction Co. v. Lubben, 35 N. J. Super. 198, 203 (App. Div. 1955); 49 C. J. S. Judgments § 273, p. 493; Restatement, Judgments, § 126 (d).
It is a reasonable assumption that the testimony of Crowley and Mrs. Applegate as to Cooper's having sustained a loss in his operation of the gasoline station in 1956 probably would have altered the judgment. The testimony adduced at the hearing on the motion, however, reveals a sharp conflict between the defendants and their witness Crowley as to the date when the latter advised the defendants of the fact of Cooper's loss. Yet, even accepting Mrs. Applegate's version of the affair, it appears that the defendants had the information on the second day of the trial and knew on the morning of the third day of trial that Crowley had reconsidered his promise to testify. These matters should have been brought to the attention of the court, either by moving for a continuance during which an effort could have been made to have Crowley's deposition taken in Pennsylvania or by having Cooper's records subpoenaed. Moreover, although Crowley' was an out-of-state resident, Pennsylvania, like New Jersey, has no statute changing the common-law rule that communications between client and accountant are not privileged (consult 97 C. J. S. Witnesses § 255, p. 742; 8 Wigmore, Evidence (3d ed. 1940), § 2286, p. 537, n. 14), and defendants could have had his deposition taken pursuant to R. R. 4:18-2 during the pretrial stage of the proceedings.
Defendants seek to excuse their failure to make use of pretrial discovery procedures by arguing that there was no reason to examine Crowley since "defendants had a right to believe that Cooper, the tenant in possession, would tell the truth at the trial," and "no amount of diligence can anticipate perjury." This contention, although enjoying surface allure, cannot be sustained. R. R. 4:62-2(&) contemplates the very situation that confronted defendants in providing that relief is granted only when the new evidence could not have been discovered in time to move for a new trial under R. R. 4:61-2, i. e., ten days after the entry of' the verdict. The defendants "discovered" the alleged fraud and perjury during the trial, and, although they were not apprised until sometime in May that Cooper's 1956 tax return actually showed a loss to the extent of $13,400, their failure (and that of their trial counsel) to act within the following ten-day period on the basis of the limited information concededly known to them at that time did not rise to the level of "due diligence" required by the rule. Since the situation with respect to Cooper's business losses was in fact discovered by defendants, we need not consider whether or not it "could have been discovered" within the meaning of the rule. There was no abuse of discretion in refusing to set aside the judgment for this reason. Shammas v. Shammas, 9 N. J. 321, 330 (1952); Smith v. Smith, 17 N. J. Super. 128 (App. Div. 1951); Minter v. Bendix Aviation Corp., 26 N. J. Super. 268, 271 (App. Div. 1953), reversed on other grounds, 24 N. J. 128 (1957).
The foregoing is equally applicable to the defendants' claims that the judgment was the product of fraud or perjury. As to whether R. R. 4:62-2(c) applies where the fraud or misrepresentation is not legally attributable to the adverse party, see 7 Moore's Federal Practice (2d ed. 1955), par. 60.24[5], pp. 253-54.
V.
We are, however, persuaded that the judgment sought to be vacated was ihe product of a perfunctory handling of the case by defendants' trial attorney and of basic error by the judge in the conduct of the trial and in the charge to the jury. Wo have already had occasion to discuss the inadequacy of the charge on the substantive issues of breach of lease and misrepresentation and the fact that the charge, read as a whole, strongly implies that the jurors need not concern themselves with the liability aspects of the case. None of the essentials of fraud as set forth in such cases as Fischetto Paper Mill Supply, Inc. v. Quigley Co., 3 N. J. 149, 152-53 (1949), Trustees of Columbia University v. Jacobsen, 53 N. J. Super. 574, 577 (App. Div. 1959), and Byard v. Holmes, 34 N. J. L. 296 (Sup. Ct. 1870), can be found in the charge, and this omission was especially prejudicial in view of the defendants' contention that they expected Cooper not' to exercise his option to renew. Not only was the defendants' intention to deceive in issue, but it was also open to the jury to find that plaintiff, had he known that Cooper held the- option, might have entered into the lease agreement notwithstanding knowledge of that fact. Moreover, the failure to charge at all on the alternative breach of lease theory, while normally prejudicial only to the plaintiff, in this case resulted in a determination of liability unsupported by any rule or principle of law.
YI.
As to that portion of the charge dealing with damages, the trial judge referred to the evidence offered by plaintiff —the profits at the Pemberton station and Cooper's testimony as to his business income — as factors to be considered in the measurement of the gains that might have accrued to plaintiff from defendants' promised performance. At the hearing on the motion to vacate and on this appeal from the denial thereof, defendants' present counsel challenges the propriety of a recovery based upon lost profits. The argument is that such hoped-for gains are too remote, speculative, and problematical, especially since the earnings of any particular service station vary widety, depending upon the quality of the service rendered by each individual entrepreneur.
In an action by a lessee against a lessor for failure to deliver possession, the tenant is in general entitled to recover the difference between the rental value of the premises and the rent reserved under the lease. Weiss v. Revenue Building & Loan Ass'n., 116 N. J. L. 208, 211 (E. & A. 1935); Adrian v. Rabinowitz, 116 N. J. L. 586, 591 (Sup. Ct. 1936). Where profits to be derived from the conduct or operation of a business on the demised premises are a factor in arriving at the rent to be paid by the tenant or in arriving at the value of the term, and this is in the contemplation of the parties at the time of the making of the lease, recovery may be had for lost profits if the evidence affords a basis for estimating the damages with reasonable certainty.
"If the business is one that has already been established a reasonable prediction can often be made as to its future on the basis of its past history. Evidence as to its past expenditures and receipts and of the conditions under which the business was carried on is frequently held to afford a sufficiently certain basis for a verdict awarding damages for profits prevented." 5 Corbin, Contracts (1951), § 1023, p. 128.
"Doubts are generally resolved against the party committing the breach of contract." Restatement, Contracts, § 331(1), comment (c), p. 517.
See also Rempfer v. Deerfield Packing Corp., 4 N. J. 135, 144 (1950); Stanley Co. v. Hercules Powder Co., 16 N. J. 295, 314-15 (1954); Tessmar v. Grosner, 23 N. J. 193, 203 (1957); Casler v. Weber, 27 N. J. Super. 396 (App. Div. 1953); Apex Metal Stamping Co. v. Alexander & Sawyer, Inc., 48 N. J. Super. 476, 482 (App. Div. 1958); McCormack, Damages (1935), § 29, p. 107 et seq.
The "benefit-of-the-bargain" rule may also obtain in computing damages in actions for fraud or deceit. Zeliff v. Sabatino, 15 N. J. 70, 74 (1954). And, insofar as such an action implicates an element of moral obliquity on the part of the defendant, it has been suggested that a lesser degree of certainty will be tolerated than in cases where the breach did not involve bad faith. See 5 Corbin, op. cit., supra, § 1020, p. 111, and § 1021, p. 118.
Evidence of the profits at the Pemberton station, although of little probative value, was a proper factor for the jury to consider. "In a few cases, the evidence of the record of profits of other business enterprises similarly situated may come in." McCormick, op. cit., supra, § 29, at p. 108. See also Stanley Co. v. Hercules Powder Co., supra, 16 N. J. at p. 315: 5 Corbin, op. cit., supra, § 1022, p. 123, text at n. 89. It was, of course, incumbent upon the trial judge to instruct the jury to evaluate the similarities and differences between the two stations, once he had permitted evidence of the Pemberton operation to be admitted.
While we reject the notion that Cooper's past earnings were not a proper measure of damages, we are convinced that the method by which plaintiff attempted to prove Coopér's profits could not have been more unsatisfactory. As discussed earlier, Cooper's testimony was extremely vague and contradictory. In substance, the impression conveyed was that he draws 90% to 95% of his "living expense" from this particular business and that his "living expense" in 1956 and 1957 was "in the neighborhood of $8,000 to $8,500 a year." (The last-mentioned sum is the amount of the verdict.) In view of the uncertainty with which Cooper himself testified, we think the bare instruction, " you have the statements of Mr. Cooper as to what he has done in that station by way of business," was inadequate, especially when it is considered that Cooper said during his testimony that out of the $8,500 figure came other "things that I have to pay including my salary and my food and my travel, and my business, and so on." In our judgment, fairness to the defendants required a precautionary instruction as to the deficiencies and qualifications inherent in, and the weight to be accorded to, Cooper's estimates.
VII.
Without considering the other grounds for reversal presented by the defendants, what has been said thus far indicates such an extreme departure from the proper functioning of the adjudicative process in the trial court as to compel the conclusion that the defendants will be the victims of a manifest injustice if the judgment is permitted to stand. We have no doubt that had the judgment in question been the subject of an appeal under R. R. 2:2-1, the proper method of reviewing errors of law by the court in the trial of a cause, it would have been reversed under R. R. 1:5-3 (c). The question is whether, under the circumstances of this case, defendants are to be deprived of similar relief because of their failure to move for a new trial within the ten-day period after the entry of the verdict, B. B. 4:61-2, because oí their failure to appeal directly from the judgment within the 45-day period allowed by R. R. 1:3 — 1 (5), and because of their failure lo apply for a 30-day extension of the time lor appeal under R. R. 1:27B(d). Plaintiffs position on this phase of the ease is that to permit defendants to complain of trial errors through the use of R. R. 4:62-2 would defeat the mandatory provisions of R. R. 1:27B(c) and (d) by indirection.
There is no doubt that R. R. 4:62-2 is not, under ordinary circumstances, an appropriate vehicle by which trial errors of the kind here complained of may be reviewed. Many of the authorities suggest that subsection (a) of the rulo, which permits relief from a judgment on the grounds of "mistake," must be construed as limited to mistakes of fact, not of law, lest other provisions of the rules fixing time limitations upon motions for new trials and upon appeals he emasculated. Mayflower Industries v. Thor Corp., 17 N. J. Super. 505, 511-12 (Ch. Div. 1952); 49 C. J. S. Judgments § 280(5), and (e)(2), pp. 501, 508.
"As a general rule, no appeal will lie where the matter raised by the appeal from an order vacating or refusing to vacate the judgment, decree or order could have been raised by an appeal from the original judgment, decree or order." 4 C. J. S. Appeal & Error § 132(b), p. 420.
Hudson Bus Transp. Co. v. Board of Pub. Util. Com'rs., 131 N. J. L. 576, 578 (Sup. Ct. 1944). See also 3 Barron and Holtzof, Federal Practice and Procedure, § 1322, p. 395. commenting on the corresponding Federal Rule 60(5). Cf. In re Nuese's Estate, 15 N. J. 149, 158-159 (1954).
The leading authority sustaining defendants' position that "mistake" as used in R. R. 4:62-2 (a) and F. R. C. P. 60(5) (1) encompasses judicial error is 7 Moore's Federal Practice (2d ed. 1955), par. 60.22[3], pp. 237-38, where it is said:
"Tet if the Rule is construed to authorize a motion for relief from a judgment because of judicial error, then an appeal will subsequently lie from a final decision on the motion for relief, and appeal time will have been indirectly extended, at least where the alleged judicial error involved in the appeal from the 60(b) decision is the same that could have been raised on appeal from the original judgment. On the other hand, we believe that there should be sufficient flexibility in the Buies so that the district court has the power under 60(b) (1) to grant relief for error of law apparent, on motion made within a reasonable time."
After defining a "reasonable time" as not exceeding the time for appeal from the original judgment, Professor Moore concludes:
"So limited, a motion for relief under 60(b)(1) does not unduly affect the sound principle of finality, nor the general principle that 60(b) is not a substitute for appeal."
Eor reasons to be discussed infra, it is not necessary for us to decide which is the preferable view. Having in mind that relief under R. R. 4:62-2 rests within the sound discretion of the trial judge and is to be dispensed or withheld according to equitable principles (see, e. g., Goldfarb v. Roeger, 54 N. J. Super. 85, 92 (App. Div. 1959)), we eschew an attempt to set forth with any particular degree of specificity the precise meaning of the concededly broad terms of subsection (a). And any effort to mark the outer limits of the catch-all provision in subsection (f), providing for relief for "any other reason justifying relief from the operation of the judgment or order," would similarly defeat the manifest purpose of the rule to ensure a discretionary appraisal of the facts of the particular case. Furthermore, under the circumstances of the case, we find it unnecessary to decide whether the trial judge properly exercised his discretion in refusing to set the judgment aside for reasons cognizable under R. R. 4:62-2. Although we are not compelled to make such a determination, it is clear that the trial judge's ruling was based upon the strictest possible interpretation of the rule in every respect.
VIII.
Nevertheless, this is not a case of a flagrant, deliberate, or even unexplained violation of the rules governing the time for appeals. It will be remembered that when defend ants served notice of the motion to vacate on May 13, 1958, 34 days after the entry of the judgment, they still had 11 days in which to appeal directly from the judgment itself. R. R. 1:3-1 (5). Defendants' present counsel had been retained on or about April 30, 1958. His clients informed him that the judgment entered against them on April 9 was the product of Cooper's false testimony. Thinking this was the only ground for having the judgment set aside, counsel (who says he "had not the slightest idea as to what was contained in the trial records or in the proceedings" because he did not receive a transcript from the court reporter until May 19) proceeded with the utmost speed to bring the matter to the attention of the trial court by the motion to vacate. The return date of the motion was May 23. (There was an adjournment to June 18.) The time for appeal expired on May 24. Thus counsel had five days, from May 19 to 24, to examine a compendious transcript and record, detect plain errors (and we agree these are more difficult to find when one does not "know what he is looking for"), evaluate the prospects for a reversal on the newly discovered evidence ground as opposed to the ground of plain error, and, if the latter appeared more cogent, to abandon the motion to vacate by filing a notice of appeal (thereby depriving the trial court of jurisdiction). Consider also that counsel obviously believed that the trial errors could be reviewed in an R. R. 4:62-2 proceeding as well as on a direct appeal (see above), and therefore that the choice to proceed in the trial court would not involve any foreclosure of the defendant' right to present such grounds for reversal upon an appeal from the order denying the motion to vacate. Moreover, present counsel may well have reasoned that if a direct appeal were taken, the appellate court would only remand the matter to the trial court in any event for the taking of Crowley's testimony as to Cooper's business losses. Finally, it may have occurred to counsel, as it has io us, that the motion to vacate on the ground of newly discovered evidence might have the effect of tolling the time for appeal from the original judgment.
IX.
The last point requires amplification. Under R. R. 1:3-3 (f), the time for appeal is tolled by a motion for a new trial under R. R. 4:61, by a motion for amendment of the judgment under R. R. 4:53-2, or by a motion for judgment under R. R. 4:51-2. If a motion under R. R. 4:62-2 to set aside a judgment were also specifically enumerated therein, there would have been no question in this case but that the defendants, who filed a notice of appeal on the sixth day following the order denying the motion (i. e., on what would have corresponded to the fortieth day after the entry of the judgment), could have appealed from the judgment itself after the trial court's refusal to set it aside.
We perceive no persuasive argument for distinguishing in civil cases between a motion for a new trial and one to set aside a judgment in respect to whether or not the time for appeal is tolled. As stated, such a distinction is in effect made under the present rule, R. R. 1:3 — 3 (f). Certainly there is no basis for treating an R. R. 4:62-2 motion differently in cases where it is made within the ten-day period following the entry of the judgment. It is, of course, true that giving litigants the opportunity to toll the time for appeal by moving to vacate allows them to extend the time within which to appeal. But parties who would arbitrarily employ the tactic are presently able to accomplish the same result by moving for a new trial within the ten-day period. The most workable solution, in our judgment, would be to provide for the tolling benefit where the motion to vacate is brought in good faith and not for the purpose of delay.
A comparable situation was presented in State v. Petrolia, 37 N. J. Super. 326 (App. Div. 1955), reversed on other grounds 21 N. J. 453 (1956). Petrolia was a criminal case in which the defendant's notice of appeal was filed one month beyond the three-month period specified in R. R. 1:3-1 (a). The defendant contended that his motion for a new trial on the ground of newly discovered evidence under R. R. 3:7-11 (a), even though not within the prescribed ten-day period, was entitled to the tolling benefit granted by R. R. l:3-3(c). The Appellate Division noted that under the present state of the rules the time for appeal continues to run despite the pending motion, and that the proper procedure is to file the notice of appeal and at the same time apply for a remand of the record so that the trial court can hear the newly discovered evidence. While the court granted the State's motion to dismiss the appeal, it nevertheless proceeded to consider the merits of the appeal. The Supreme Court, in reversing on the merits, 21 N. J. 453, held that the motion had no tolling effect, but that since R. R. 1:3-3 (c) was subject to "misinterpretation even by astute counsel," the merits of the appeal would, as a matter of justice, be considered.
We are of like persuasion in the present case, which, inasmuch as it deals with R. R. 4:62-2 instead of with R. R. 3:7-11 (a), is also a case of first impression. Indeed, in civil litigation, we see nothing to be gained by pressing parties into an election of procedural remedies — parties who have good grounds for appeal but who instead of engaging in the procedure recommended in State v. Petrolia, supra, 37 N. J. Super. 326, choose for financial or other reasons to proceed in the first instance under R. R. 4:62-2. The present state of the rules might well be re-examined in the light of the foregoing.
X.
We have not overlooked the fact that when the trial court denied defendants' motion on June 18, 1957, there were still five days remaining of the 30 days beyond the normal 45-day limit in which this court may permit the filing of an appeal. R. R. 1:27B(d). Had defendants applied for this extension, it undoubtedly would have been granted, and had the appeal been filed promptly thereafter, it would have been submitted within the extended period permitted by the rule.
That the defendants did not do so is, of course, again attributable to counsel's belief that he would obtain an appellate review of the merits of the case on the appeal from the denial of the motion to vacate.
As we noted above, there are reasonable grounds for doubt as to the scope of the relief available under R. R. 4:62-2, and defendants' interpretation is not an inconceivable one. We have refrained from passing on the validity of this interpretation, but we do feel that counsel's misconstruing the rule, if he did so, should not deprive defendants of an appellate review of the April 9 judgment which clearly could have been obtained but for his misunderstanding (again assuming it was a misunderstanding). This is not to say that ignorance of a rule will excuse non-compliance therewith. Rather, we say that in the particular circumstances here present, when the defendants refrained from appealing from the judgment itself under R. R. 2:2-l because counsel had reasonable grounds to believe that the merits would be reviewed on an appeal from the denial of the motion under R. R. 4:62-2, we shall not construe the rules so strictly as to deny defendants a consideration of the merits. Cf. Bucuk v. Edward A. Zusi Brass Foundry, 49 N. J. Super. 187, 214 (App. Div.), certif. denied 27 N. J. 398 (1958).
XI.
In view of the fact that defendants could have appealed to this court at the time of the motion to vacate but did not for the reasons discussed above, the policy in favor of terminating litigation is not present in this case. To the contrary, the only perceptible public interest involved is the obvious social gain that attends the setting aside of an indefensible judgment. Procedural rules are not inviolate. See, e. g., Martindell v. Martindell, 21 N. J. 341, 349 (1956). If we make them so, we shall have lost sight of the directive that:
" whether a rehearing shall be accorded depends upon, not whether those rules, designed in the main to prevent injustice, have been observed, but whether, in fact, injustice has been done." Sheridan v. Van Winkle, 43 N. J. L. 579, 584 (Sup. Ct. 1881).
We are satisfied that, under the particular circumstances oí this case, justice will best be served by considering defendants' present application as an appeal from the original judgment. Por the errors outlined earlier in this opinion, the cause is remanded to the county court for a trial de novo on all issues. Let a mandate issue accordingly.