author: Bigelow, J. A. D.

text:
    ALFRED OGDEN AND OTHERS, PLAINTIFFS-APPELLANTS, v. CHARLES STERNICK AND ANOTHER, ETC., DEFENDANTS-RESPONDENTS.
    • Superior Court of New Jersey Appellate Division
    Argued November 6, 1950
    Decided November 22, 1950.

      Before Judges Jacobs, Eastwood and Bigelow.
    Mr. Richard J. Conglelon argued the cause for the appellants (Messrs. Young, Shanley, Foehl & Fisher, attorneys).

      Mr. Saul Cohen argued the cause for the respondents.
   The opinion of the court was delivered by

Bigelow, J. A. D.

Plaintiffs, who grow apples at Kinder-hook, New York, sold to defendants, who are produce merchants in Newark, 5,155 boxes of apples which were then in cold storage on plaintiffs’ farm. The total agreed price was $15,229, f. o. b. storage. Defendants took out of storage 2,242 boxes but refused to remove the rest. Defendants paid or deposited with plaintiffs various sums which have been credited on the apples withdrawn, leaving a balance on hand of $1,860. The sale was made in the fall. Toward the end of December, the plaintiffs noticed that defendants’ apples were beginning to show signs of deterioration and plaintiffs considered that they should be removed from storage very soon. They urged defendants to take and pay for the apples, but the defendants were unwilling to do so at that time, and eventually, during the latter part of February and early March, plaintiffs resold the apples to other parties for $2,928. On these facts, which are the subject of the first count, the plaintiffs demand judgment for the balance of the contract price.

It appeared, however, from the evidence presented by the plaintiffs themselves that the contract between the parties permitted the defendants, at their option, to leave the apples in storage until May 1st.

At the close of plaintiffs’ case, defendants moved that the first count of the complaint be dismissed and that judgment be entered in their favor on the counterclaim for the balance of the money deposited with plaintiffs, less, however, the amount claimed by plaintiffs on their second count. Judge Prancis, in granting the motion, stated the facts and the law with admirable clarity:

“The Court: The defendants move for dismissal of the first count of the complaint on the ground that the plaintiffs’ proof has failed to show any breach by the defendants of the agreement on which the claim set forth in that count is predicated.
“The evidence discloses that the parties agreed, the plaintiffs to sell and the defendants to buy at fixed prices, a large quantity of apples then in the plaintiffs’ cold storage warehouse. xVs part of the agreement plaintiffs undertook to keep the apples in storage at the defendants’ risk and subject to their delivery call for the season, which meant until the May following the contract.
“The agreement further was that the defendants would pay for the apples as they were taken from the place of storage and delivered to them. Likewise, it was agreed that the defendants would make a deposit against the purchase price of the apples, which deposit was to be held by the plaintiffs as the apples were being withdrawn at intervals and then applied against the last delivery.
“It appears from the plaintiffs’ proof that in January or February of 1948 the apple market was rapidly declining, and that plaintiffs’ manager noticed some deterioration in the stored apples. Bo he talked to one of the defendants about moving the apples, that is, taking delivery of the remainder of them. The defendants took some, represented by a purchase price somewhat in excess of $3,000. The apples included by this' sum were not paid for on delivery. However, the plaintiffs concede that they were delivered on the mutual understanding that the price would be charged against the $6,000 deposit. The plaintiffs communicated with the defendants requesting them to move the remainder of the apples out of storage and to pay for them. In their letters also they demanded payment of the $3,000 representing the price of the last deliveries. Finally they advised the defendants that if this sum were not paid and the remaining boxes of apples accepted for delivery the remainder would be sold for the account of the defendants. Upon receiving no word from the defendants the plaintiffs sold in the open market the remainder of the apples and sustained the loss represented by the first count of this complaint.
“Now, when this contract was made between the parties for the apples then in storage, under the law the title, the ownership to them, passed to the defendants. From that time on, as the agreement indicates, the boxes of apples were to remain in storage subject to the buyers’ delivery call and payment, and at the buyers’ risk for the season or until Hay, 3948. The buyer had the right to leave them all there and take delivery on the very last day of the season if he saw fit to run the risk, and the plaintiffs having made the agreement had no right to demand the removal or acceptance of delivery prior to that time, at least in the absence of a breach of the contract by (he defendants.
“When the plaintiffs wrote the letters and the telegram to the defendants demanding removal and payment, defendants hud been guilty of no breach of the agreement and, therefore, plaintiffs had no legal right to demand that defendants take immediate delivery and make immediate payment therefor. So when the plaintiffs sold the remaining boxes, as (hey put it, for the defendants’ account, they became guilty of a breach of the contract themselves and not entitled to recovery for any loss suffered by them through such sale.
“It has been suggested that the plaintiffs were holding the apples as security for the balance of the purchase price, and when they saw the deterioration in the market and in the condition of the apples they had the right to protect themselves by demanding that the defendants accept delivery and make payment, and in default thereof to sell in the open market. But there was no such provision in their contract and it cannot be implied or read into the contract. The law cannot make a better contract for the parties than they made themselves.
“Under the agreement the security the plaintiifs had was not apples but money, §6,000 on dejiosit. That they permitted some of it, that is, some of the $0,000 to be used by the defendants does not help them nor create a breach of the agreement by the defendants.
“Accordingly, the motion of the defendants for dismissal of the plaintiffs’ claim as represented by the first count of the complaint will be granted.
“So far as the second count is concerned which deals with tire item of §324, that stands uncontradicted at the moment.
“Since I have taken the view that it was not the defendants but the plaintiffs who breached this contract the defendants are entitled to a judgment on their counterclaim for the balance that remained on deposit with the plaintiffs as of the lime of the sale of the apples-by the plaintiffs.
“Is there any dispute as to the amount which was then on deposit?
“Mr. Cohen: The complaint sets forth $1,860.
“The Court: Tí $3,860 represents the. balance due exclusive of the §324, and the defendants claim §1,536 now, that will, in effect, give credit for the §324.
“T will grant the motion for judgment on the counterclaim in favor of the defendants and against the plaintiffs in the amount of §1,536.”

The plaintiffs appeal and place their reliance on the Uniform Sales Law. R. S. 46:30 — 1 et seq. and especially section G7(1):

“Where the goods are of a perishable nature, or where the seller expressly reserves the right of resale in case the buyer should make default, or where the buyer has been in default in the payment of the price an unreasonable time, an unpaid seller having a right of lien or having stopped the goods in transitu may resell the goods. He shall not thereafter be liable to the original buyer upon the contract to sell or the sale or for any profit made by such resale, but may recover from the buyer damages for any loss occasioned by the breach of the contract or the sale.”

The plaintiffs were unpaid sellers; they had a right of lien; the apples were of a perishable nature, and, therefore, they contend they had a statutory right to sell the apples, even though the defendants were not in default and had a right under the contract to leave the apples in plaintiffs’ storage plant for two months longer. We do not so construe the statute. The seller cannot resell unless the buyer is in default. Even though the buyer is in default, the seller cannot resell unless the default has continued an unreasonable length of time, or unless the seller has expressly reserved the right of resale, or unless the goods are of a perishable nature. Power to enforce a lien by sale although the owner is nowise in default, would be so extraordinary that, in the absence of express words to that effect, the statutory power should be limited to cases in which there has been a default. Schwartz v. King, etc., Co., 93 N. J. L. 111 (Sup. Ct. 1919); State v. Packard Bamberger & Co., 123 N. J. L. 180 (Sup. Ct. 1939). Again, the legislative intent is made clear by the last clause of the section which provides that after the resale, the seller may recover “damages for any loss occasioned by the breach of the contract or the sale.” There must be a breach, or the resale is not authorized.

The same result is reached in this case by treating the plaintiffs’ agreement that defendants might defer removing the apples and paying for them until May, as a waiver of any statutory right of resale that might otherwise be considered to exist.

The judgment is affirmed with costs.


source: Caselaw Access Project

author: McGeehan, S. J. A. D.

license: Public Domain

text:
    HERMAN A. HIRSCHBERG, PLAINTIFF-APPELLANT, v. DEWEY A. GLATTLY, DEFENDANT-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued October 16, 1950
    Decided November 22, 1950.

      Before Judges McGeehan, Jayne and Wm. J. Brennan, Jr.

      Mr. Hymen D. Goldberg argued the cause for plaintiff-appellant (Mr. Peter Cohn, attorney).

      Mr. A. Leo Bohl argued the cause for defendant-respondent (Mr. Joseph J. De Luccia, on the brief).
   The opinion of the court was delivered by

McGeehan, S. J. A. D.

The plaintiff, a former tenant, sought to recover damages from the defendant in an action on deceit for an alleged wrongful dispossession. The complaint was dismissed by the Passaic County Court at the end of the plaintiff’s case.

On ox about July 1, 1948, the defendant purchased the property which contained four apartments, all of which were controlled housing accommodations. The plaintiff occupied a three and one-half room apartment therein from April, 1947, until shortly before January 2, 1949. On August 23, 1948, the defendant served plaintiff with a written demand for possession, demanding that the plaintiff vacate on October 1, 1948, and stating: “Possession of said premises is demanded in good faith for the purpose of immediate use thereof by myself pursuant to the rules and regulations of the Housing Expediter and ox the O. P. A.” The plaintiff continued in possession after October 1, 1948.

On November 17, 1948, the defendant instituted a dispossess proceeding in the Clifton District Court, and in his affidavit stated that “he seeks in good faith to recover the possession of the housing accommodations occupied by the said Herman Ilirschberg for the immediate and personal use and occupancy as housing accommodations for the said deponent.” On the return day, November 30, 1948, both parties consented in open court to the entry of the following judgment: “Judgment in favor of the plaintiff and against the defendant for possession. Warrant of Removal to issue January 2, 1949.” The defendant moved into the apartment on or about January 2, 1949, after the plaintiff had vacated.

A tenant has an action on deceit against his landlord for a wrongful dispossession if the tenant does not seek to attack the judgment of dispossession but merely the fraudulent means used by the landlord to obtain possession of the premises. Lyster v. Berberich, 3 N. J. Super. 78 (App. Div. 1949). To support such an action, the tenant must prove (1) that the landlord made some representation of a material fact to the tenant, meaning that the tenant should act upon it; (2) that such representation was false and that the defendant, when he made it, knew it to be false; and (3) that the tenant, believing such representation to be true, acted upon it and was thereby injured. Plimpton v. Friedberg, 110 N. J. L. 427, 428 (E. & A. 1933); Lyster v. Berberich, above.

The applicable provision of the Federal Housing and Rent Act of 1947 is section 209(a), as amended in 1948 (1948 Public Law 464, c. 161, § 204), which authorizes eviction of a tenant when “the landlord seeks in good faith to recover possession of such housing accommodations for his immediate and personal use and occupancy as housing accommodations, or for the immediate and personal use and occupancy as housing accommodations by a member or members of his imrnedate family * *

Accepting as true all evidence which supports the view of the plaintiff, and giving him the benefit of all legitimate inferences which might be drawn therefrom, as the court below was required to do in passing on the motion to dismiss (McKinney v. Public Service Interstate Transport. Co., 4 N. J. 229 (1950)), we conclude that the plaintiff failed to make out a prima facie case.

There was testimony by the defendant that he intended throughout to use only one room of the three and one-half room apartment for his own personal use and occupancy and intended to rent the remaining rooms. When he took possession on or about January 2, 1949, he moved into the apartment with the only furniture he owned, namely, a bedroom set. Eor two and one-half months he was the sole occupant of the apartment, and thereafter he occupied one room and rented two and one-half rooms as a furnished apartment to a person not a member of his family.

The plaintiff argues that this testimony would support a finding that the defendant’s representations, in his demand for possession and in his affidavit in the dispossess proceeding, were false and that the defendant knew that they were false when he made them. The plaintiff assumes that, under the language of the Housing and Kent Act, the defendant could evict the plaintiff only if he needed and intended to use the whole of the apartment solely for his own personal use and occupancy or that of a member or members of his immediate family. No authority for such construction is cited to us. We note that in Klein v. Fields, 32 A. 2d 398 (Mun. Ct. of App. D. C. 1943), the court, in construing the District of Columbia Emergency Kent Act in a dispossess proceeding, found that the landlords “sought the possession of the property in good faith for their immediate use and occupancy as a dwelling,” although the testimony was that the landlords desired to occupy the premises as a dwelling for themselves, their daughter and two grandchildren, and intended to rent out any unneeded rooms to others. Cf. H. Kauffman & Sons Saddlery Co. v. Miller, 72 N. Y. S. 2d 911 (Sup. Ct. 1947); but see Barker v. Sharp, 38 N. W. 2d 221 (Sup. Ct. Minn. 1949), also a dispossess proceeding.

The plaintiff further assumes that the defendant, in making his representations in a paraphrase of the language of the Housing and Kent Act, represented that he needed and intended to use the whole of the apartment solely for his own use and occupancy. In the absence of any controlling authority for the coustruetion of the Housing and Rent Act urged by the plaintiff, and in the absence of any evidence that the defendant’s representations were not made in good faith, there is aro support for this second assumption relied upon by the plaintiff.

We conclude that the evidence was insufficient to support a finding that the -defendant made a false representation which he knew to be false when he made it.

At the trial the plaintiff offered in evidence certain excerpts from a deposition of the defendant. The court ruled that the plaintiff could'not offer excerpts from the deposition without introducing the entire deposition. The. court below erred in so ruling.

Rule 3:26-4 provides: “At the trial * * * any part or all of a deposition, so far as adanissible under the rules of evidence, may be used in accordance with any one of the following provisioais: * * * (b) The deposition of a party * * * may be used by an adverse party for aaay purpose. * * * (d) If only part of a deposition is offered in evidence by a party, an adverse party may require him to offer all of it which is relevant to the part offered, and any party may offer any other parts. * * *” Under this rule a party may offer a part of a deposition of an adverse party in evidence. However, opposing counsel may require him to offer, in addition to the excerpts chosen, all which is relevant to that part offered, but not necessarily the complete deposition. As stated by Pike aiad Willis, iaa discussing the corresponding federal rule:

“Rule 26 permits the editing of depositions in either case, but with the qualification that if A introduces part of a deposition, his opponent B may. require A to introduce other relevant parts. Thus, B avoids the danger of making the deponent his own witness when his only object is to complete the picture given by A. (Presumably he also has the advantage of placing the whole picture before the court or jury at one time, rather than piecemeal.) On the other hand, B is free to use other parts of the deposition in support of his own case.” (“The New Federal Deposition-Discovery Procedure,” 38 Col. L. Rev. 1179 and 1436, November and December, 1938.)

The court below also ruled that the plaintiff, by introducing part of the defendant’s deposition, made the defendant a witness for the plaintiff and the plaintiff was bound by his testimony, and in so ruling the court erred. Buie 3 :SG — 6 provides that "The introduction in evidence of the deposition or any part thereof for any purpose other than that of contradicting or impeaching the deponent makes the deponent the witness of the party introducing the deposition, but this shall not apply to the use by an adverse party of a deposition as described in paragraph (b) of Rule 3:26-4.” The latter rule provides : “The deposition of a party * * * may be used by an adverse party for any purpose.” In the Tentative Draft of the Buies, it was said that “where the examining party uses the deposition of the adverse party on the trial, he does not make the latter his witness. This * * * is an important provision, for the examining party would usually refrain from introducing into evidence his deponent’s deposition unless he could impeach it.”

While we find that the court below erred in the two rulings discussed, the errors did not injuriously affect the substantial rights of the plaintiff (Rules 1:2-20(b) and 4:2-6). In determining whether the plaintiff made out a prima facie case, we considered no part of the deposition received in evidence through the error of the court below, but only such parts thereof as were favorable to the plaintiff’s claim.

The judgment is affirmed.


author: Pee Cueiam.

text:
    EDWARD J. GALBIERCZYK, Jr., BY HIS GUARDIAN AD LITEM, JOHN ROMANITION, PLAINTIFF-APPELLANT, v. EDWARD A. GALBIERCZYK, Sr., MARY F. GALBIERCZYK, AND MARY BRENNER, INDIVIDUALLY AND AS ADMINISTRATRIX OF THE ESTATE OF SAMUEL BRENNER, DECEASED, DEFENDANTS-RESPONDENTS.
    Superior Court of New Jersey Appellate Division
    Argued November 6, 1950
    Decided November 14, 1950.

      Before Judges McGeehan, Jayne and Wm. J. Brennan, Jr.

      Mr. Lawrence Friedman argued the cause for appellant.

      Mr. Jack L. Cohen argued the cause for respondents.
   The opinion of the court was delivered

Pee Cueiam.

Judge Stein, by whom this action was heard and considered, resolved that the evidence introduced on behalf of the plaintiff was insufficient in its probative persuasiveness to establish either a constructive or resulting trust.

We are in accord with his conclusion.

We observe in the record, however, a stipulation entered into at the trial between counsel for the plaintiff-appellant and the defendants-respondents “that the checks drawn to the Federal Housing Administrator for the sums of $68.64 and $77.16 were made in connection with the purchase of the house.” The trial judge in the oral statement of his conclusions remarked that “there were two checks made to the Federal Housing Administrator for the sums of $68.64 and $77.16 and that is all there is by any direct proof of money that went into this house.”

In this situation this court will exercise its jurisdiction to direct that the judgment be amended to contain a provision that the plaintiff shall have a lien upon the premises for the sum of $145.80 with interest, prior and superior to the existing lien of the defendant Mary Brenner. Const., art. VI, § V, par. 3. Rules 1:4-10, 4:4-7.

The judgment in all other respects is affirmed. Ho costs.


author: William J. Brennan, Jr., J. A. D.

text:
    IN THE MATTER OF THE ESTATE OF JOSEPH GOTCHEL, DECEASED.
    Superior Court of New Jersey Appellate Division
    Argued October 23, 1950
    Decided November 2, 1950.

      Before Judges McGeehan, Jayne and Wm. J. Brennan, Jr.

      Mr. Edward V. Martino argued the cause for appellant.

      Mr. Edward A. Tanski argued the cause for respondent.
   The opinion of the court was delivered by

William J. Brennan, Jr., J. A. D.

The judgment of the Camden County Court, Probate Division, is not printed in appellant’s appendix. Appellant’s counsel stated at the oral argument he assumed the judgment was entered as. a matter of course by the County Clerk and did not appreciate his responsibility in that circumstance to incorporate a copy of it in the appendix he filed with this court. This is not an acceptable explanation in face of the plain and unambiguous provision of Bule 1:3 — 1 which makes explicit the obligation of appellant that he “shall print as part of his appendix in all causes the judgment, order or determination appealed from or sought to be reviewed or enforced.” In addition, this court has previously had occasion to direct the attention of the bar to this requirement. Dilione v. Vogel's Department Store, 2 N. J. Super. 85 (App. Div. 1949). Appellant has supplied the court, since the argument, with a copy of the judgment entered March 23, 1950. We might well dismiss the appeal, but inasmuch as it was fully argued we shall accept it. We are not to be understood, however, after this further reminder, to be disposed to do so oil all future occasions.

The appeal requires a determination whether the County Court property affirmed the order oE the Surrogate of Camden County admitting to probate the will, executed in due form September 8, 19-49, of Joseph Gotchel, who died October 24, 1949, at the age of 78; appellant contends the will is void because of lack of testamentary capacity in the testator and because of undue influence alleged to have been exerted upon testator by his son, Peter Gotchel, the sole beneficiary under and executor oE the will.

Joseph Gotchel, of foreign birth, came to this country in 1907. He lived in Camden and made his living as the proprietor of a neighborhood store in the dwelling which was his home. He spoke little English but used the Russian tongue and could speak and understand some Polish. He apparently prospered moderately; ho owned his home; and store and some other property.

Peter always lived with his father, as did his wife Harriet from the time of her marriage to Peter in 1935. Decedent had three other children, Harry, the contestant, and Laura, both of whom were married and maintained their own homes and survived him, and Rose, a daughter who had died August 19, 1949, just two months before the testator’s death.

The proofs show that the testator was unquestionably enfeebled physically for some months before his death by the infirmities of old age; his decline was particularly rapid after the death of Rose, whose loss caused him great shock and grief.

Harry contends his father was of unsound mind when he executed his will on September 8, 1949, only twenty days after the death of Rose, and that, in any event, a confidential relation existed between Peter and his father creating a presumption of undue influence casting upon Peter the burden of proof to show the absence of such influence, which burden, Harry argues, Peter did not meet.

The applicable legal principles are fully discussed and considered in Mr. Justice Ackerson’s opinion for the Supreme Court in Gellert v. Livingston, 5 N. J. 65 (1950), and accordingly no elaboration of them is required. See also In re Anna Filo’s Will, deceased, 9 N. J. Super. 146 (App. Div. 1950).

The testator is presumed to have been of sound mind when he executed his will. Harry completely failed to sustain the burden upon him to prove the contrary. The, old gentleman was forgetful at times, untidy in his personal dress and habits, absent minded, mislaid things, committed errors in making change for purchases in his store, and on the occasion of his daughter’s burial on August 24th seemed not to recognize members of his family and old friends; this last is plainly explicable by his grief in his daughter’s loss; the other lapses are common to many, young or old, and certainly understandable in one of his years. “Old age and failure of memory do not of themselves necessarily take away a testator’s capacity,” Gellert v. Livingston, supra, 5 N. J. at p. 77. He was physically but not mentally enfeebled; the proofs show he was fully capable of comprehending his property, its disposition, the natural objects of his bounty and the significance of what he was doing when he made his will, which time, of course, is the point at which his testamentary capacity is to be tested.

Undue influence must be such as to destroy the testator’s “free agency” and to constrain him to do what he would not otherwise have done in the disposition of his property. In re Neuman’s Estate, 133 N. J. Eq. 532 (E. & A. 1943). The person asserting it normally has the burden to prove clearly its existence. It is not presumed solely from the existence of a confidential relationship between testator and beneficiary, although “slight circumstances” or indicia of undue influence in addition to a confidential relationship will shift the burden to the beneficiary to show its absence. Gellert v. Livingston, supra, 5 N. J. at p. 71.

So, standing alone, the fact of Peter’s long residonee with his father did not raise the presumption; this fact may have supplied an inference of motive and opportunity, but motive and opportunity alone do not constitute sufficient proof. “It must be made evident that the motive was pursued and the opportunity actually so employed as to destroy the free agency.” In re Anna Filo’s Will, deceased, supra. The appellant, Harry, contends that the burden shifted to Peter because Harry proved in addition to the existence of the confidential relationship that (a) in 1945 a purchase money mortgage was taken in Peter’s name when the father sold a house; (b) in the summer of 1949 the father gave Peter’s wife $2,110 in cash; (c) the father expressed fear of Peter because Peter beat him. There was ample evidence to justify the trial court’s finding that the inferences sought to be drawn by appellant from these proofs were completely refuted. The 1945 purchase money mortgage was one of two such mortgages taken by the father in the name of one of his children; the other, apparently taken before 1945, was in Rose’s name; the interest on both mortgages was received by the father in his lifetime, collected usually by Peter’s wife, Harriet, and turned over to the father; as the proofs stand, the inference is the transaction was one intended and fully understood by the father. The $2,110 was given not to Peter (he was at sea at the time) but to Harriet, and she used some of it to pay the father’s taxes and bills; it also appeared the old gentleman hoped he would avoid income taxes by giving the money to Harriet. The proofs of the alleged beatings are meagre and, while not expressly denied by Peter when ho testified, too unsubstantial to credit in light of the other proofs in the record of the long standing affection between Peter and his father; too, one of the witnesses who testified the father told him Peter had beat him was the divorced husband of the, deceased daughter, Rose, and he admitted an unfriendly feeling for Peter because of Peter’s interference when Rose and the witness had their disagreement.

If, however, we should accept Harry’s contention that the circumstances, unfavorable to Peter, make a case which raises the presumption, the proofs offered by Peter, as the trial court found, completely rout the presumption and show that the will was initiated by decedent and expresses his testamentary design. We need not stand alone on Peter’s categorical denial that he influenced his father. See In re Eatley’s Will, 82 N. J. Eq. 591 (Prerog. 1913). Rose had died intestate. The resultant difficulties in the handling of her estate troubled the father and his family. Laura visited him on Labor Day and asked him why he didn’t make a will, because in handling Rose’s affairs, she said, “Pop, I have so much trouble, why don’t you make a will that this won’t happen again.” The father spoke to Peter a few days later, on September 8th, and told him he wanted to make a will “because of the trouble with Rose’s property.” He asked Peter to accompany him to the office of Edward A. Tanski, a member of the Hew Jersey bar, who had known the decedent and his family for upwards of thirty years; they went, at the father’s suggestion, first to the office of his doctor and then to Mr. Tanski’s office. Mr. Tanski speaks both Russian and Polish and the conversation between him and the testator, overheard by Mr. Tanski’s law clerk who also speaks Russian and Polish, was in those languages. Peter asked whether he should stay and was told by the father, “Stay here.” The father told Mr. Tanski his desire to make a will leaving everything to Peter after providing for his funeral expenses. Mr. Tanski testified that the testator, while visibly enfeebled physically, manifested no deterioration of his mental powers and conversed intelligently about all details. Mr. Tanski drafted the will while the testator waited and in the presence of his law clerk translated it from English to Russian and Polish, interrogating the testator as he did so until satisfied that the will fully expressed the testator’s desire and intent. The will was executed by the decedent and attested by Mr. Tanski and his law clerk. Peter remained silent throughout.

It is claimed that Peter suppressed the will and failed to divulge to either Harry or Laura the disposition made by it. Harry adinits, however, Peter did tell him before their father’s death that a will had been executed but did not tell him its contents. Peter admitted frankly that he said nothing about the provisions of the will because he apprehended Harry and Laura would be displeased. This is understandable; and certainly it is not abnormal conduct on the part of the beneficiary in light of the other circumstances shown in the record.

The father seems not to have said anything to Harry or Laura about the will; he did, however, tell four friends and neighbors of many years standing all about it. He told Andrew Ponoch, a friend for 38 years, on the day the will was executed that he had made a will leaving everything to Peter and, when Ponoch asked why he did not provide for Harry, “He told mo he lilies Peter’s wife and children, she keeps me when I am sick and she telephones the doctor, she brings me medicine and coffee, and keeps house and the store and that is the reason I signed;” “He said Harry comes about once a month to see me,” and Laura “maybe a couple of weeks she come.”

He told Martha Bagdonas, who lived across the street and had known the decedent for 35 years, who testified, “He always say my daughter-in-law (Harriet) was good to me;” that she asked him what he was going to do with the store and house and he said, “I am going to leave it to my son Pete and my daughter-in-law.”

He told John Lanske, a friend of decedent from the time the latter came to this country in 1907, about two weeks before his death, “He told me he signed the house for Pete.”

lie told Katarina Russo, his next door neighbor for 26 years, who testified he “talked with me about Harriet, how good she is and she like the children and Pete * * * he say she is so good to me, she live all her life with me, and work for me and everything. He like her very much.”

It is said the will is an unnatural one because no provision is made for Harry or Laura. The disposition is not anomalous in the circumstances proved “because of equal logic and reason is the inference that it was induced by the influence of kind intentions and care, naturally producing affection and good will.” In re Anna Filo’s Will, deceased, supra.

The judgment under review is affirmed, with costs.


author: Stein, J. S. C.

text:
    23 WILLIAM ST. CORP., A NEW JERSEY CORPORATION, PLAINTIFF, v. JOSEPH BERGER AND ROTH-SCHLENGER, INC., A NEW JERSEY CORPORATION, DEFENDANTS.
    Superior Court of New Jersey Chancery Division
    Decided November 16, 1950.

      Messrs. Fast & Fast (Mr. Herman L. Fast appearing), attorneys for the plaintiff.

      Messrs. Osborne, Cornish & Scheck (Mr. Harry V. Osborne appearing), attorneys for defendant, Roth-Schlenger, Inc.

      Mr. Samuel Roessler, attorney for defendant, Joseph Berger.
   Stein, J. S. C.

The issue in this case involves a right of way granted in a deed from Eliza Johnes Sanders to John S. Guerin, dated June 28, 1892, and recorded in Deed Book Y 26 at page 595 of Deeds for Essex County. The interior premises to which the right of way is appurtenant are now owned by the defendant Berger and leased to the defendant RothSchlenger, Inc. The servient tenement is owned by the plaintiff, who claims that the easement is being put to excessive use and is being used for the benefit of premises other than the dominant tenement.

The grant of the right of way is in the following language: “This conveyance is made granting unto the said John S. Guerin his heirs and assigns a right of way over the alley way leading from William Street and described in deed (G. 15-64).”

The deed referred to in this grant (G 15-64) conveyed the tract adjoining the alley on the west, and contains the only recorded description of the alley as an alley or right of way, as follows: “This conveyance is made subject to the right of way of James H. Lent his heirs and assigns over a portion of the above described premises 8 feet 9 inches in width and next adjoining said Lent’s property, as by reference to deed (P 14-269) will more fully appear.” This description did not give the length of the alley and failed to indicate that the alley is, in fact, wider than 8 feet 9 inches at its inner end. The earlier deed referred to (P 14-269) also lacked any description but granted an easement in the following words: “With the right and privilege of ingress and egress * * * in and over an alley or passageway situate and adjoining on the east, the premises hereby conveyed * * However, at the hearing the location and description of the right of way was not in dispute, and the alley is described by metes and bounds, although not as an alley or right of way, but as the second tract in the deed into the plaintiff’s grantors (N 113-547), as follows: “SECOND TEACT: All the right title and interest of the parties of the first part hereto in and to and expressly subject to the rights of others therein the following described property: Beginning in the Northerly line of William Street at a point therein distant 58.10 feet Easterly from the Northeasterly corner of William Street and Halsey Street, thence (1) along the said Northerly line of William Street South 60 degrees East 8.83 feet; thence (2) North 31 degrees 27 minutes East 78.02 feet; thence (3) North 62 degrees 46 minutes West 14.17 feet; thence (4) South 23 degrees West 35.08 feet to the Northeasterly corner of the house standing on the land now or formerly of James H. Lent; thence (5) South 31 degrees 15 minutes West along the Easterly side of said house 42.50 feet to the Northerly side of William Street and the place of Beginning.”

So it appears that the alley is 8.83 feet wide at its entrance on William Street, 78.02 feet in length, and 14.17 feet in width at the back, as is shown on the diagram submitted in evidence and annexed to this opinion as a part thereof.

In 1870 one Mackin conveyed to one Bell a tract (Deed Book G 15, page 64), including in the description the alleyway in question, as shown on the attached diagram, and reciting that “this conveyance is made subject to the right of way of James II. Lent, his heirs and assigns over a portion of the above described premises 8 feet 9 inches in width and next adjoining said Lent’s property, as by reference to deed (P 14-269) will more fully appear.” No deed other than this contains any description of the alley or right of way, as such, by metes and bounds, but the subsequent conveyance by Bell to Sanders in 1884 (Deed Book M 22, page 143) was expressly “made subject to the right of way of James H. Lent his heirs and assigns over a portion of the above described premises as described in the last mentioned deed from Mackin to Augustus W. Bell.”

On June 28, 1892, Sanders conveyed to Guerin the premises now owned by Berger, as outlined on the diagram annexed hereto- (Deed Book Y 26, page 595). This deed contains the grant of the right of way in this case, in the following language: “This conveyance is made granting unto the said John S. Guerin his heirs and assigns a right of way over the alleyway leading from William Street and described in deed (G 15-64).” In February, 1924, Guerin conveyed the same tract to Guthrie (Deed Book 0 69, page 586), “together with a right of way over an alley leading from William Street and as described in (G 15-64),” and Berger is now the owner thereof, as well as of the adjacent Guthrie land adjoining these premises on the west and facing on Halsey Street. The Halsey Street frontage 60 feet in width, entirely built upon, is the first tract described in the deed to Berger, which was introduced in evidence.

In 1900, Sanders conveyed to Schumann the premises now owned by the plaintiff (Deed Book Q 33, page 462), expressly “subject to the right of way of the owner of the property on the west his heirs and assigns to the alley on the above described premises to the depth of his lot as conveyed in deed (P 14-269) and also subject to the right of way over said alley of John S. Guerin his heirs and assigns as conveyed in deed (Y 26-595).”

On October 18, 1949, the devisee of Schumann conveyed the same land to Rosengarten and Abeles (both officers of the plaintiff corporation), but described the premises as two tracts (Deed Book N 113, page 547). The second tract described in the deed is the alleyway, which although not referred to as such is described by metes and bounds, as shown on diagram annexed hereto. The second tract was conveyed “expressly subject to the right of others therein,” and both tracts were conveyed expressly “subject to the easements and grants contained in (G 15-64, P 14-269 and Y 26-595).” The subsequent conveyance to the plaintiff on January 12, 1950, described the entire premises, including the alley, as a single tract, “subject to easements of record affecting said premises as recorded in (G 15-64, P 14-269 and N 113-595).”

According to the agreed statement of facts and the testimony the Berger premises have been used “on and off,” but almost continuously, as a parking lot ever since 1924, and Eoth-Schlenger, Inc., the present lessee, has used the premises for that purpose since sometime in the mid-thirties, but not as a public parking lot on which anyone may park upon payment of a fee. Some neighbors have been permitted to park in the lot as a convenience, for which they pay a monthly charge, but otherwise the lot is used solely for the free parking of cars of customers of the Eoth-Schlenger store at the corner of William and Halsey Street, while such customers are at the store or while accessories purchased at the store are installed on their automobiles.

There exists no means of direct access between the Berger lot and the Eoth-Schlenger store, and customers parking on the lot must leave by -way of the alley and walk along William Street to the store. Nor is there any direct access between the lot and the remaining tract owned by Berger, facing on Halsey Street, and the alley is the sole means of ingress and egress to and from the lot.

Testimony was adduced by the plaintiff to the effect that some 80 or 90 cars use the alley daily, and that Eoth-Schlenger customers and employees occasionally block the passageway. However it appears that Eoth-Schlenger endeavors to keep the alley unobstructed and that cars of customers and tenants using the plaintiff’s building on occasion also block it.

The plaintiff also demands damages. There was some testimony as to damage to a sign and to plaintiff’s building which it was said was caused by the cars using the driveway and the lot, but whether the damage had been done by Eoth-Schlenger customers or by customers of the plaintiff was not established. nor was evidence offered to establish the amount of such alleged damages.

The deed creating the easement in favor of the land now owned by the defendant Berger and leased to Eoth-Schlenger, Inc., imposes no limitation or restriction on the extent of the use to which the right of way may be put. The owner of the dominant tenement, Berger, may therefore use the alleyway as a general way for all purposes to which the dominant tenement may be devoted, and this although the land over which the right of way passes belongs to the plaintiff, the right of way is the property of Berger, the owner of the dominant tenement and may be used not only by him and his employees, but by persons having occasion to transact business on his property, whether it be used on foot or by vehicles.

In Reichert v. Gill, 112 N. J. Eq. 510 (Ch. 1933), where the right of way was created in the words “that a strip of land five feet front and rear * * * shall be kept open as an alleyway by the parties to these presents, their heirs and assigns forever,” the Vice-Chancellor said, quoting from Shreve v. Mathis, 63 N. J. Eq. 170 (Ch. 1902):

“The last point made by the defendant is his claim that the right of way is over a private alley, and that the use to be made of it must be as a footway for the owners, and not as a foot and wagonway for themselves and such as may have business with them. The agreement for the way contains no specifications of any particular manner in which the alley should be used. It imposes no limitations on the extent of the use. It is declared that it shall be a free and unobstructed right of way over a private alley. Any use consistent with the use of a way is within the agreement. A footway, a wagonway, a passage for horses or other animals are all permissible uses of a way * * *. Nor is the owner of the way limited to its use by himself in propria persona. The way belongs to him as his property.”

Vice-Chancellor Fielder in National Silk Dyeing Co. v. Grobart, 117 N. J. Eq. 156 (Ch. 1934), which involved a controversy over a right of way held:

“The fact that in the inception of the easement the Post tract may have been vacant land and the Taylor tract had but a single dwelling bouse thereon, would not confine its use to what may have been its original purpose. No limitation was placed on the extent of the use of the lane as appurtenant to the two tracts and the lane was therefore available as a general way for all purposes to which the dominant tracts might be devoted. * * *
“I cannot agree with defendants’ contention that complainant’s excessive use of the easement since 1921-1922 has worked a forfeiture of the easement. The easement is a property right which cannot be taken from complainant in a summary way and equity abhors forfeiture.”

The right of way being appurtenant to the property of Rerger, he had a right to lease the dominant tenement together with the right of way to Roth-Schlenger, Inc., who as lessee, acquired the dominant tenement together with the right to use it for any lawful purpose.

In the instant case the right of way is used as a means of ingress to and egress from the dominant tenement alone, for the sole benefit of the dominant tenement in connection with a purpose to which it is lawfully put by the tenant thereof, namely the parking of vehicles. It is impossible to pass beyond the dominant tenement to the premises occupied by Roth-Schlenger, Inc., without repassing over the right of way and along a public street.

Complaint is dismissed.


author: Smith. J. C. C.

text:
    STATE OF NEW JERSEY, PLAINTIFF, v. JOSEPH A. NERI, DEFENDANT.
    Somerset County Court Law Division
    Decided October 26, 1950.

      Mr. Benjamin Gordon argued the cause for the defendant.

      Mr. Leon Gerofsky, Assistant Prosecutor, Somerset County, argued the cause for the State.
   Smith. J. C. C.

(orally, after hearing arguments of counsel). The statute under which this defendant is indicted, R. 8. 2 :138 — 9 requires, in order to hold a defendant charged with its violation guilty of the charge, that he “shall cause the death of another by driving any vehicle carelessly and heedlessly in willful or wanton disregard of the rights or safety of others.”

Some reference has been made to gross negligence in the arguments of this motion and in the memorandum presented by counsel for the defendant, citing cases which apparently arose out of indictments for manslaughter rather than indictments under the statute referred to, and in which cases the court was specifically considering what constituted gross negligence. I think it is to be noted, however, that the statute itself does not use the term “gross negligence” at all, but requires of the defendant, in order to sustain a conviction, that he be guilty of some act or acts incident to the driving of the vehicle as a result of which he could- be found to have been guilty of driving “carelessly and heedlessly in willful or wanton disregard of the rights or safety of others.”

It has been held by our courts that there is a distinction between gross negligence and willful and wanton disregard of the rights and safety of others. The test is the intent with which the act is committed. To constitute willfulness, there must be design, purpose, intent to do wrong and inflict injury. To constitute wantonness, the party doing the act, or failing to act, must be conscious of his conduct, and, without having the intent to injure, must be conscious, from his knowledge of existing circumstances and conditions that his conduct will naturally and probably result in injury. See Eatley v. Mayer, 9 N. J. Misc. 918 (Hudson Cty. Circ. Ct. 1931); affirmed, 10 N. J. Misc. 219 (Sup. Ct. 1932), and also Staub v. Public Service Railway Company, 97 N. J. L. 297 (1922), the latter case being an opinion by the -Court of Errors and Appeals; Iaconio v. D'Angelo, 104 N. J. L. 506 (E. & A. 1928).

In the case of Rose v. Squires, 101 N. J. L. 438 (Sup. Ct. 1925); affirmed, 102 N. J. L. 449 (1926), the Court of Errors and Appeals stated that in order to amount to willful or wanton misconduct the wrongful act willfully done must be “of such a nature that the injury complained of is (to the wrongdoer) the obviously natural result to be expected therefrom. This is so because the law presumes that a wrongdoer intends what he know;s, or should know, to be the natural consequence of his wrongful act.”

In State v. Reitze, 86 N. J. L. 407 (Sup. Ct. 1914), Chief Justice Gummere, speaking for the Supreme Court, said at page 409, * * * “it is clear as is said by Dr. Wharton, in his work on Criminal Law (section 1003), that where death is the result of an occurrence unanticipated by the defendant, but which arose from his negligence or inattention, his criminal responsibility depends on whether or not the injury which caused the death was the regular, natural and likely consequence of defendant’s conduct. If it was, then the defendant is subject to indictment. If it was not, he cannot be properly charged with a penal offense.”

While it may be true that violations of the provisions of the Motor Vehicle Law are elements which may and probably should be taken into consideration in a case of this character, mere violations of regulatory statutes are not sufficient to make a person criminally liable for death. See Estell v. State, 51 N. J. L. 182 (Sup. Ct. 1889); State v. Dugan, 84 N. J. L. 603, at 607 (Sup. Ct. 1913); affirmed, 85 N. J. L. 730 (E. & A. 1914); State v. Reitze, supra, at 408.

As I have already indicated, the statute under which the defendant has been indicted does not use the term “gross negligence.” I think it’s not necessary, therefore, to discuss or decide what acts may constitute gross negligence. It seems clear to me that the State’s proofs in this case are not of such character as to suggest that the acts or conduct of the defendant were such that he must be presumed to have known, or to have been conscious, that his acts or conduct were such that the death of Elliott would naturally and probably result from his acts.

The grade on which the defendant parked his truck, according to tlxe testimony, does not appear to have been a sharp or severe grade. The brakes on his truck were found to have been ixx excellent condition. It was iixdicated by the testimony that the vibration, if it was the vibration, which caused the truck to move, would have caused the truck to move so slightly and slowly at first as to make its movement imperceptible. It is suggested, also, from the testimony of Police Captain Barrett, that there was not any real fault on the part of the driver in thus parking his truck, but that it was just an unfortunate condition of having parked on a slight incline. There is nothing in the case to suggest that the defendant was conscious, or should have been conscious, that the parking of his truck on this slight incline, even with its motor running and otherwise in violation of the provisions of the Motor Vehicle law would naturally and probably result in the truck moving down the slight grade, gaining momentum and subsequently causing the death of or injury to the person or property of another, or, as was said by the courts in some of the cases above referred to, that such would be the obviously natural result to be expected from his acts or the regular and likely consequence of his conduct.

I am of the opinion that the State’s proofs have failed to establish a prima facie case against the defendant and I am therefore constrained to grant the defendant’s motion for a judgment of acquittal. The motion, therefore, will be granted.


author: Drewen, J. C. C.

text:
    CLARA JEWELL, PLAINTIFF, v. ST. PETER’S PARISH, A RELIGIOUS CORPORATION, DEFENDANT.
    Hudson County Court Law Division
    Decided November 27, 1950.

      Mr. Louis J. Venezio, attorney for plaintiff.

      Messrs. Winne & Banta (Mr. George Winne appearing), attorneys for defendant.
   Drewen, J. C. C.

Defendant moves for summary judgment of dismissal, the contention being that the effect of certain admissions made by plaintiff pursuant to Buie 3 :56 — 3 is such that, in the language of the Rule, “there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment as matter of law.”

The complaint alleges that on or about July 23, 1949, plaintiff, as defendant’s invitee, went upon defendant’s premises during the progress there of “entertainment, games and amusements, and other social affairs” under defendant’s auspices; and that while there she was injured by a fall on a stairway, the fall having been caused by the faulty condition of the stairway, of which condition defendant’s negligence was the proximate cause.

The admissions upon which the motion is predicated are that defendant is a Roman Catholic Church and that at the time of the accident and injury alleged plaintiff was its invitee in consequence of her having paid the required fee for admission to a social activity sponsored by defendant and held under its control and direction in one of its church buildings. Defendant urges that since it is thus admittedly a charitable institution within the meaning of the law it is, in the circumstances described in the complaint, immune from any claim for damages resulting from negligence on the part of its servants or agents. Authority for this proposition is sought in the case of Bianchi v. South Park Pres. Church, infra. It is my view that neither that case nor any other on the subject in this State supports the motion, but rather that, on factual contrast, all such decisions are against it.

The principle to which defendant’s contention is directed is well recognized and in different degrees is established in the jurisdictions of the several states and of the United States. In some of these the immunity accorded to eleemosynary institutions against claims of the kind in question is absolute, while in New Jersey it is qualified. The rule in this State is that benefit to the plaintiff, derived from the charity that is sued, is the sine qua non of the latter’s immunity. Where such benefit has been shown legally to have existed when the claim accrued immunity has been enforced, otherwise it has been as uniformly denied. Our decisions may be said to fall into two groups, one comprising claims for damages against hospitals and the other comprising claims for damages against churches. (Rose v. Raleigh Filkin Foundation, 25 N. J. Misc. 311 (Sup., Ct. Circ. 1947); affirmed, 136 N. J. L. 553 (E. & A. 1948); Boeckel v. Orange Memorial Hospital, 108 N. J. L. 453 (Sup. Ct. 1932); affirmed, 110 N. J. L. 509 (E. & A. 1933); D’Amato v. Orange Memorial Hospital, 101 N. J. L. 61 (E. & A. 1925); Simmons v. Wiley Methodist Epis. Church, 112 N. J. L. 129 (E. & A. 1934); Kolb v. Monmouth Memorial Hospital, 116 N. J. L. 118 (E. & A. 1936); Fair v. Atlantic City Hospital, 25 N. J. Misc. 65 (Atl. Cty. Circ. Ct. 1946); Bianchi v. South Park Pres. Church, 123 N. J. L. 325 (E. & A. 1939); Woods v. Overlook Hospital Ass'n., 6 N. J. Super. 47 (App. Div. 1949)).

In the Bianchi case, on which defendant relies, the plaintiff was a member of a Girl Scout troop for which the defendant church had provided meeting quarters in rooms that were part of the church premises. Having attended a meeting of the troop, plaintiff, while on her way out of the building, was in the act of descending a stairway when, because of darkness there prevailing and resulting, as alleged, from negligent acts and omissions of defendants servants and employees, she fell and was injured. The Court of Errors and Appeals found that the qualifying benefit moving from defendant to the plaintiff was proved and held the church corporation immune from the suit.

The existence of the benefit in the Bianchi case stands in sharp contrast to the absence of any similar or corresponding element in the present case. In the Bianchi case the court, by a careful appraisal and interrelating of one institution with another, bares the true affinity between them and so ascertains that the plaintiff was affected by the benefit upon which its decision turns.

By way of declaring the character of defendant as eleemosynary or charitable within the juridical sense of those terms, the court extols the work and influence of the church as a primary factor in the case, and with respect to the activities and aims of the Girl Scout movement says they “are plainly classable as a secondary church function in aid of its (the church’s) primary purpose.” The court previously says: “The' Scout movement has its genesis in the associations fostered by church and community groups in the early part of the twentieth century whose objective was the training of the youth in right living and exemplary citizenship and thus to develop and ennoble character to the enrichment of society as well as the good of the individual.” So it is, though plaintiff herself was not a member of the defendant church, that the Girl Scout movement and the church are brought within a single focus of high moral and civic good, to the plaintiff as an individual and to the community in general. The opinion Anally declares that in these circumstances “it is of no consequence that the scout members paid dues and the troop itself made a donation to the defendant society for” the use of the rooms in which the troop meetings were held.

This court could not adopt the view advanced by defendant on this motion without expanding the principle of the Bianchi decision, to say nothing of our other decisions of like import, so drastically as to impute to it an authority entirely beyond its manifest holding. There is nothing whatever in the facts before me to show a relation between the parties here beyond that resulting from plaintiff’s payment of the required fee for the privilege of participating in “a social activity,” without more, as set forth in the admissions. What this gives to the plaintiff is not the status of defendant’s beneficiary, on a parity of standards like those to which the Bianchi case adheres, but rather the status, if anything, of defendant’s patron. So far as the complaint and the admissions show, what attracted plaintiff to defendant’s building and there engaged her is essentially unrelated to defendant’s institutional life and work, and in itself is such as to have required in the way of sponsoring and auspices nothing beyond the merely secular. Needless to say, the result would be different were plaintiff’s presence upon defendant’s premises at the time of the claimed injury shown to bear relation to the church’s primary function, not accidentally only but essentially and in the nature of things, a relation comparable to that between the entities with which the Bianchi decision is concerned.

What we are dealing with here is a doctrine whose designed effect is the frustration, in certain cases, of claims for damages, notwithstanding the validity of the claims otherwise, and without reference to aught that touches the merits of either the claimant or the claim. Certainly a thing of that kind should not be applied loosely. At any rate, I am convinced it should not be applied here, where the facts deviate unmistakably, as I think, from the conditions required for rendering defendant immune.

The motion for summary judgment is denied.


text:
    CARL BRESNICK AND ANOTHER, PARTNERS, ETC., PLAINTIFFS-RESPONDENTS, v. FRANKLIN CAPITAL CORPORATION AND OTHERS, DEFENDANTS-APPELLANTS.
    Superior Court of New Jersey Appellate Division
    Argued October 2, 1950
    Decided November 22, 1950.

      Before Judges Jacobs, Eastwood and Bigelow.

      Mr. Harry Green argued the cause for the respondents.

      Mr. Elmer O. Goodwin argued the cause for the appellants Franklin Capital Corporation and Franklin Mortgage and Title Insurance Company.

      Mr. Milton M. Unger argued the cause for the appellant Franklin Washington Trust Company (Messrs. Milton M. and Adrian M. Unger, attorneys).
   The opinion of the court was delivered by

Bigelow, J. A. D.

This is an appeal from a final judgment of the Chancery Division enjoining the Franklin Capital Corporation and its two subsidiaries from putting into effect a plan of reorganization, — using that term in a^atherjmoad^ sense. TheTTJajnial Corporation owns all the capital stock of' the Franklin Mortgage and Title, Insurance, Company and five-eighths of the common stock of the Franklin Washington Trust .Company.""During Hie past 20 years, the first two corporations have paid no dividends, and the last has paid none on its common stock. It has outstanding $500,000 of preferred stock held by the Reconstruction Finance Corporation, and can pay no common dividends until the preferred stock be retired. The plan, consummation of which has been restrained, provides that the Mortgage Company dissolve and, with the proceeds of its assets, that the Capital Corporation purchase new common stock of the Trust Company and so enable it to retire the preferred stock. The management hoped that thereupon the two surviving companies would resume the payment of dividends. The learned judge of the Chancery Division was of the opinion that what the plan proposes is in substance a merger of the Mortgage Company and the Trust Company, without authority of law, and furthermore that the plan is unfair to the Capital Corporation and inequitable. 6 N. J. Super. 579.

The business of the Mortgage Company falls into twobranches, of which the minor one is insuring land titles. It has issued a large number of title policies in past years and Company falls into two is subject thereon to a contingent liability. It also has built up a small title plant, worth perhaps $5,000. How much of an income it receives from this branch of the company’s business does not appear, but there are intimations that this part of the income is inconsiderable. Part of the plan of reorganization involves the transfer of the title plant to the New Jersey Eealty Title Insurance Company, and the payment to it of $25,000 in consideration whereof the New Jersey company would assume the Franklin company’s liability on the title guarantees. Neither the latter company nor the Franklin Washington Trust Company would continue the title business. The New Jersey Eealty Title Insurance Company is in no way connected with the Franklin Washington group. This part of the plan is not seriously attacked.

The other branch of the Mortgage Company’s business consists in finding mortgage investments for insurance companies and other institutions and servicing the mortgages as agent of the investors. An important part of the reorganization plan provides for turning over this business to the Trust Company, without consideration, except that that company would buy at par all the mortgages held by the Mortgage Company and also the home office building of the Mortgage Company at a price set by an independent appraisal. Nothing is allowed for the “going concern value” or good will of the mortgage business.

The remaining assets of the Mortgage Company, as well as the consideration to be paid by the Trust Company — perhaps $750,000 in all — would be used first to satisfy liabilities of the Mortgage Company, and the balance, estimated at around $500,000, would pass on dissolution of the Mortgage Company to the Capital Corporation as sole stockholder. The Trust Company would then offer $500,000 of new stock to its stockholders pro raía,, and the Capital Corporation would take its quota, $312,500, and as much of the rest of the issue as might be unsubscribed for. Lastly, the Trust Company would retire its preferred stock and so reach a position in which it would be allowed to pay dividends.

The respondents contend that the plan which we have outlined is within the condemnation of Riker v. United, Drug Co., 79 N. J. Eq. 580 (E. & A. 1912). In that suit, it appeared that the directors of the defendant, which was a corporation of New Jersey, had procured the organization of a company of the same name under the laws of Massachusetts. It was proposed that the New Jersey company would transfer all its assets to the Massachusetts company and would dissolve and that the Massachusetts company would assume the other company’s debts and would pay for the property by issuing its own stock directly to the stockholders of the New Jersey company. Chief Justice Gummere said of the proposal:

“Manifestly, the prime purpose of the scheme outlined in this communication is not the winding up of the New Jersey corporation and the distribution of its assets, or the proceeds of the sale thereof, among its stockholders, but the absorption of that company by the Massachusetts corporation, the transfer not only of its assets but of its business, to that corporation, and the future carrying on of that business by the Massachusetts corporation under the name of the defendant company. The scheme, in its essence, whatever it may be in form, is not a plan for the reorganization of the New Jersey company, nor even for the winding up of its business and its dissolution within the meaning of the latter word as used by our Corporation Act, but is a scheme for its merger into or consolidation with the Massachusetts corporation.”

The court applied the rule that recourse may not be had to statutory procedures in order to accomplish illegal or unauthorized corporate purposes. It characterized the scheme as a fraud on our statute, and held that it invaded the rights of the complainants as minority stockholders of the New Jersey company. Unless legal authority to do so is reserved to it, a corporation cannot, without the consent of all its stockholders, sell or even lease its assets and business as a whole and invest the stockholders’ capital in other enterprises. Kean v. Johnson, 9 N. J. Eq. 401 (Ch. 1853). That was what was unlawfully attempted and was prohibited in Riker v. United Drug Co. Assuming for the moment that the plan now under review is in essence the same as the one that was the subject of the Biker suit, we may observe that there are here no non-, assenting stockholders; no one’s rights are invaded. The complainants have stock in neither the Mortgage Company nor the Trust Company, but only in the Capital Corporation. That corporation, in addition to the shares of the other two companies, owns valuable real estate and a sizeable portfolio of “marketable stocks.” From the plaintiffs’ standpoint, the plan proposes that their company dispose of its investment in the Mortgage Company and increase its investment in the Trust Company. There is no illegality, or lack of authority here, and no necessity for the unanimous approval of the Capital Corporation’s stockholders.

We have not considered how P. L. 1931, c. 288, now R. S. 14:3-5 bears on the present controversy. See R. S. 14:2-8 and 17:18-1. See also Berger v. U. S. Steel Corp., 63 N. J. Eq. 809, at 825 (E. & A. 1902) and Allen v. Francisco Sugar Co., 92 N. J. Eq. 431 (E. & A. 1921).

The differences between the scheme condemned in the Bilcer case and the plan now before us must not, however, be ignored. The Franklin Washington Trust Company is not buying all the assets of the Mortgage Company, and is assuming none of its debts; the Mortgage Company’s assets or their proceeds are being distributed to its sole stockholder, the Capital Corporation. No de facto merger is proposed. Cf. Light v. National Dyeing, etc., Co., 140 N. J. Eq. 506 (Ch. 1947); Butler v. New Keystone Copper Co., 93 A. 380 (Del. 1915). We are satisfied that the reorganization plan is not illegal, and turn to the question whether it is unfair.

In most litigation in which corporate action is assailed as inequitable, the specific charge is that the majority stockholder are using their power in a manner unfair to minority stockholders. But in the present instance, the complainants, in behalf of the Capital company, assert that that corporation, as the controlling stockholder of the Trust Company, is acting with too much liberality toward the minority stockholders of the Trust Company. That is to say, that the Capital Corporation is causing the good will or organization value which attaches to the mortgage servicing business now carried on by the Mortgage Company, to be transferred to the Trust Company without receiving any value in return. Thereby, it is charged, the minority stockholders of the Trust Company, with three-eighths of its stock, will receive as a gift three-eighths of the good will. It is true, of course, that the plaintiffs are minority stockholders of the Capital Corporation, but their interest in the matter in controversy is identical with that of the majority. They do not allege that they are discriminated against, or are in any way oppressed.

The plaintiffs urged, and the trial Division applied, the rule that transactions between corporations having common directors should be scrutinized closely. Robotham v. Prudential Insurance Co., 64 N. J. Eq. 673 (Ch. 1903); Pierce v. Old Dominion Copper Co., 67 N. J. Eq. 399 (Ch. 1904). The rule grows from the fact that such directors have a divided allegiance and may be tempted to disregard the welfare of one or other of the corporations. It has little relevancy to the instant case. The Capital Corporation owns all the stock of the Mortgage Company and chooses all the directors of that company. In transactions between the two companies, there is no divided loyalty, for we may assume the directors are. concerned primarily to serve the company that appoints them and that owns all the stock of the other. The Capital Corporation has power, by virtue of holding a majority of the stock, to appoint also all the directors of the Trust Company. There are only two directors common to these two companies. If the reorganization plan was under attack by minority stockholders of the Trust Company, we would hold the companies to strict proof that the minority were not being treated unfairly.' But when the corporation having the control is said to have been overreached, the circumstance that two of the men whom it put on the Trust Company’s board, are also members of its own directorate, seems inconsequential.

The chairman of the board of the Capital Corporation owns individually some shares in the Trust Company but this fact is not even mentioned by plaintiffs. And in fact the chairman holds 17 per cent of the outstanding stock of the Capital Corporation and only one per cent of the Trust Company stock, so that his personal interest is served by a bargain that fayors the Capital Corporation rather than the Trust Company. The attack on the transaction is not founded on any specific charge of bad faith. But rather it is the charge that the management of the Capital Corporation is stupid. “Questions of policy of management, of expediency of contracts or action, of adequacy of consideration not grossly disproportionate, of lawful appropriation of corporate funds to advance corporate interest, are left solely to the honest decision of the directors if their powers are without limitation and free from restraint. To hold otherwise would be to substitute the judgment and discretion of others in the place of those determined on by the scheme of incorporation.” Ellerman v. Chicago Junction Rys., etc., Co., 49 N. J. Eq. 217, at 232 (Ch. 1891), followed in numerous cases of which one of the latest is Grubman v. American General Corp., 130 N. J. Eq. 607 (E. & A. 1941). “The law does not require infallibility or the impossibility of error or mistake in directors; it requires that they shall act as reasonable men and in good faith toward their stockholders.” Casson v. Bosman, 137 N. J. Eq. 532 (E. & A. 1946). See also Hodge v. Cuba Co., 142 N. J. Eq. 340 (Ch. 1948). But if, indeed, the directors propose to give away, without any compensating advantage to their company, valuable assets, we have a breach of trust.

The original impetus for retiring the preferred stock of the Trust Company came from officials of the Federal Reserve System. From this it is argued that the directors of the Capital Corporation shirked their responsibility and made no decision themselves as to the wisdom of such action. The conclusion is not justified by the premise. The directors formally resolved that the retirement of the stock — and the whole plan — was for the best interest of the Capital Corporation and its stockholders, and there is no reason to doubt that they so believed. 'We assume that the advice given by the Federal Reserve officials was given much weight by the directors, hut we perceive no impropriety in that circumstance. Indeed, it clearly appears that the retirement of the Trust Company’s preferred stock would greatly benefit the Capital Corporation, and that the only practical way of accomplishing this end is to use the assets of the Mortgage Company. There is no suggestion in the case that the Trust Company could pay, or would be permitted by the Banking Department and other supervisory agencies to pay, for good will or going concern value. The modification urged by plaintiff's to the plan proposed by the management, is the sale of the capital stock of the Mortgage Company to an outside interest. Plaintiffs profess themselves willing to pay for the stock $50,000 more than the Capital Corporation will realize through dissolution. That would be around $550,000. Since the Capital Corporation has five-eighths of the Trust Company stock, the higher offer would yield net to the Capital Corporation $18,500 more than the plan which was adopted. But it seems that the Trust Company is already carrying on a mortgage business of the same sort conducted by the Mortgage Company. The defendants say that the enlargement of the Trust Company’s mortgage department which will result from acquiring the other company’s business, will produce economies and a larger profit, both in dollars and in percentage of receipts, and make the plan which they have proposed more advantageous to the Capital Corporation than would be the sale to someone else, even at the higher figure. That argument is at least plausible; we cannot say that it is unsound.

The learned judge of the Chancery Division thought that competitive bids should have been sought for the assets of the Mortgage Company. But the law does not require this course and discretion in the premises is vested in the directors. The learned judge found that the plaintiffs’ offer showed the inadequacy of the consideration to be paid by the Trust Company and “hence, unfairness is amply demonstrated.” We disagree. There is not the slightest proof of “gross inadequacy” of price. The business judgment of the directors of the Capital Corporation in this whole matter appears to have been a reasonable one and not at all tainted with inequity or unfairness.

Furthermore, the stockholders of the Capital Corporation approved the action of their directors by a vote of 327,324 shares to 41,413. The notice of the meeting and the accompanying documents set forth the plan fully and gave all the information that the most exacting critic could desire. There is not even a hint in the case that fraud or bad faith motivated the majority stockholders; the minority is not oppressed or wronged. In such a situation, said Vice-Chancellor Backes in Bingham v. Savings Investment & Trust Co., 101 N. J. Eq. 413 (Ch. 1927), “a court of equity ought not to interfere. In guarding the rights of the minority, care should be taken not to injure the interests of the majority.” Affirming the dismissal of the bill in that suit, the Court of Errors and Appeals, speaking through Chief Justice Gum-mere, said, “It cannot reasonably be expected that the court is impressed with the belief that the complainants and their fellow-stockholders will suffer any substantial injury by the consummation of the scheme, and that unless it appears that the, proposed action is without legal authority, this court should see to it that this overwhelming majority of shareholders are not deprived of their rights by the very few dissentients.” 102 N. J. Eq. 302 (1928).

The power of stockholders specifically to authorize or ratify contracts, such as the one here contemplated, is not open to question in the absence of fraud or oppression. Helfman v. American Light & Traction Co., 121 N. J. Eq. 1, at 14 (Ch. 1936). Our law confides to a majority of the stockholders and to their appointees, the directors, power to determine what action shall be taken by the corporation, within the scope of its charter. Gifford v. N. J. Railroad Co., 10 N. J. Eq. 171 (Ch. 1854). A court has no authoritjr to interfere except to prevent ultra vires action, breach of trust or fraud. No such elements appear in the case before us.

The judgment enjoining the consummation of the plan of reorganization will be set aside, and judgment for the defendants entered with costs on the appeal as well as in the Chancery Division.


text:
    THE STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT, v. FRANK J. SHIPLEY, ET AL., DEFENDANTS-APPELLANTS. THE STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT, v. JAMES J. KINNEALLY, DEFENDANT-APPELLANT. THE STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT, v. GEORGE F. BARTELL, HAROLD HARRINGTON, EDMUND D. JENNINGS, JAMES J. KINNEALLY, ROBERT McCURDY AND FRANK J. SHIPLEY, DEFENDANTS-APPELLANTS.
    [Indictment Nos. 244, 245, 246, 247, 248 — Procuring illegal registrations]
    [Indictment No. 249 — Subornation ol perjury]
    [Indictment No. 250 — Conspiracy]
    Superior Court of New Jersey Appellate Division
    Argued November 6, 1950
    Decided December 6, 1950.

      Before Judges McGeehan, Jayne and Wm. J. Brennan, Jr.

      Mr. David I. Stepacoff and Mr. Richard F. Green argued the causes for appellants (Messrs. John F. Ryan, David I. Stepacoff and Richard F. Green, attorneys).

      Mr. H. Russell Morss, Jr., argued the causes for respondent (Mr. Edward Cohn, Union County Prosecutor).
   The opinion of the court was delivered by

McGeehan, S. J. A. D.

The appeals in these cases were consolidated for hearing. They bring up for review orders of the Union County Court denying defendants’ motions to dismiss seven indictments (Nos. 244 to 250, inclusive) and orders denying defendants’ motions for the reopening of argument on the motions to dismiss the indictments and for leave to take depositions. When the applications for leave to appeal (Rule 4:5) were made, the Prosecutor of the Pleas consented to the granting thereof. Cf. State v. Helms, 14 N. J. Misc. 564 (Sup. Ct. 1936).

Indictment Eos. 244 to 248, inclusive, each charge an individual defendant, in several counts, with procuring illegal registrations. Since Count I of Indictment Eo. 248 is typical of the counts in all these indictments, the arguments are addressed to it. This count charges: “on the 22nd day of September, 1949, in the City of Rahway, in the County of Union * * * the said City of Rahway then and there being a municipality having permanent registration pursuant to the provisions of the laws regulating elections * * * George E. Bartell unlawfully, knowingly, corruptly, and willfully did counsel and procure the name of John Paskowitz, Jr., to be registered on the registry list of the First Election District of the Fifth Ward of the said City of Rahway for the next ensuing general election to be held on Tuesday, the 8th day of Eovember, 1949, * * * the said John Paskowitz, Jr., then and there not being entitled to vote in the aforesaid election district at the said next ensuing general election for the reason that he * * * would not have been a resident of the State of Eew Jersey for a period of one year next before said election * * * and the said George P. Earteil then and there well knowing that he, the said John Paskowitz, Jr., was not entitled to vote in the aforesaid election district” for the reason given.

B. 8. 19 :34-20, in pertinent part, provides that: “Whoever * * * shall willfully counsel, procure, aid, advise, assist or abet in the registering of the name of any other person on the registry list of any election district or precinct, knowing such other person is not entitled to vote therein * * * shall be guilty of a misdemeanor and punishable by a fine of five hundred dollars, or imprisonment in state prison for the term of three years, or both.”

The initial attack is that the indictments “fail to charge a crime, in that they allege that the defendants registered certain persons for the general election of 1949, whereas in fact and in law the alleged registrations could only be permanent registrations.” That the registrations were permanent registrations does not alter the fact that they were also registrations for the next ensuing general election. B. 8. 19 :31-o, which sets forth the requirements for registration, provides: “Each person, who at the time he applies for registration resides in tire district in which he expects to vote, who will be of the age of twenty-one years or more at the next ensuing general election, who is a citizen of the United States, and who, if he continues to reside in the district until the next general election, will at the time have fulfilled all the requirements as to length of residence to qualify him as a legal voter, shall, unless otherwise disqualified, be entitled to be registered in such district * * * The registrant when registered as provided in this title shall be eligible to vote at any election subsequent to such registration * * If John Paskowitz, Jr., was registered on September 22. 1949, as charged, such registration was a registration for the next ensuing general election, which was held on November 8, 1949.

The next challenge is that the indictments fail to charge a crime “in that whereas the statute tests eligibility to vote as of election day, the indictments charge that the persons registered were, as of earlier dates, then and there not entitled to vote.” This challenge is frivolous. The indictments state that the persons were registered “then and there not being entitled to vote in the aforesaid election district at the said next ensuing general election * * *.” (Italics ours.) R. S. 19:31-5 requires that the registrant, at the time of registry, must be one who will, if he continues to reside in the district until the next general election, at that time have fulfilled all the requirements as to length of residence to qualify him as a legal voter. A violation of this requirement is clearly charged. Cf. State v. Nugent, 77 N. J. L. 80 (Sup. Ct. 1908).

The indictments are said to be defective because they charge that the persons registered were not entitled to vote; whereas the proper test is whether they were entitled to be registered. The indictments clearly charge the procuring of an illegal registration in violation of R. S. 19:34-20 (above). State v. Nugent, above.

An attempt was made below, and is renewed here, to have the indictments dismissed on the ground that, in a collateral proceeding, after the general election of 1949, for the striking of names from the permanent registration rolls of Union County, the names of sixteen of those alleged in the indictments to have been illegally registered were struck from the list, while the names of three were not struck. On a motion to dismiss, the facts stated in the indictment as constituting the offense must be taken as true. State v. Tachin, 92 N. J. L. 269, 277 (Sup. Ct. 1919); affirmed, 93 N. J. L. 485 (E. & A. 1919); writ of error dismissed, Tachin v. State of New Jersey, 254 U. S. 662, 65 L. Ed. 463 (1920); 42 C. J. S., Indictments and Informations, § 214. The motion to dismiss will be denied unless the indictment on its face appears incapable of supporting a judgment of conviction. State v. Riggs, 91 N. J. L. 456 (Sup. Ct. 1918). Since this challenge sought only to question the facts stated in the indictments, it was improper on a motion to dismiss.

Indictment No. 249 is an indictment of one of the appellants for subornation of perjury. It is challenged on the ground that it “fails to charge a crime in that the alleged soliciting of perjury or false swearing did not pertain to a fact material to the issue before the Court.” The indictment charges that the testimony alleged to be false was known to the defendant to be so and was “on a matter material to the issue then being tried.” The materiality of the statement alleged to be false may either appear on the face of the indictment by an examination of the alleged false testimony in its relations to the issue on trial, or its materiality may be averred in the indictment, and such averment of materiality is sufficient. State v. Voorhis, 52 N. J. L. 351 (Sup. Ct. 1890); State v. Beard, 25 N. J. L. 384 (Sup. Ct. 1856). Where, as here, there is an averment of materiality, and nothing on the face of the indictment to positively show immateriality, the motion to dismiss should be denied and the State permitted to put in evidence to prove the materiality. 2 Wharton’s Criminal Law, § 1570 (12th ed. 1932).

Indictment No. 250 is an indictment for conspiracy. It charges that the defendants “unlawfully and corruptly did combine, unite, confederate, conspire and bind themselves by an agreement among themselves to pervert and obstruct the due administration of the aforesaid laws regulating elections by unlawfully, knowingly and corruptly removing from the office and custody of the City Clerk of the said City of Itahway, original and duplicate copies of permanent registration and record of voting forms * * * entrusted to the custody of the aforesaid City Clerk of the City of Rahway * * * for the purpose and with the intent * * * of unlawfully, knowingly and corruptly causing and procuring various and sundry persons then and there residing in the City of Rahway not then and there legally registered to vote, to assign and affix their signatures to the above described permanent registration and voting record forms and to register to vote at the next ensuing general election * * * at various places in the said City of Rahway other than the aforesaid office of the City Clerk of the City of Rahway and at times other than during office hours of the said City Clerk * * * thereafter returning the said, permanent registration and voting record forms to the said office and custody of the said City Clerk of the City of Rahway; thereby unlawfully and corruptly causing and procuring the names of the aforesaid applicants for permanent registration to be inserted and included in the permanent registry lists * * *• contrary to the provisions of R. S. 2:119-1h * * The indictment also alleges overt acts done in furtherance of the execution of the conspiracy.

R. S. 2:119 — 1 provides: “any two or more persons who shall combine, unite, confederate, conspire or bind themselves by oath, covenant, agreement or other alliance: * * * h. To commit any act for the perversion or obstruction of justice or the due administration of the laws — Shall be guilty of a conspiracy * * *.” Whatever perverts or turns from its true end or purpose the administration of the election laws is within the provisions of this section. State v. McDevitt, 84 N. J. L. 11 (Sup. Ct. 1913); affirmed, 85 N. J. L. 731 (E. & A. 1914); Moschell v. State, 53 N. J. L. 498 (Sup. Ct. 1891); affirmed, 54 N. J. L. 390 (E. & A. 1892). R. S. 19:31-6 provides: “the members of the county board may, and the commissioner or a duly authorized clerk or clerks acting for him shall * * * receive the application for registration of all eligible voters who shall personally appear for registration during office hours, at the office of the commissioner or at such other place or places as may from time to time be designated by him for registration * * *.” B. S-. 19:31-7 provides: “* * * the respective municipal clerks or their duly authorized clerk or clerks in all municipalities, with the exception of those municipalities in which the county seat of such county is located, shall also be empowered to register applicants for permanent registration at their respective offices * * * in the manner indicated above, subject to such rules and regulations as may be prescribed by the commissioner * * These sections prescribe the persons by whom and the times and places at which registrations are authorized, and this indictment presents with reasonable certainty all the facts necessary to render the offense judicially apparent. Therefore, it should not be dismissed. State v. Ellenstein, 121 N. J. L. 304 (Sup. Ct. 1938).

The defendants’ last point is that the court erred in denying their motions to reopen argument on the motions to dismiss the indictments and their motions for leave to take depositions. Since no reason is advanced to support the claim of error, there is nothing before us for consideration.

The orders under appeal are affirmed.


author: Jacobs, S. J. A. D.

text:
    EASTERN ACCEPTANCE CORPORATION, A CORPORATION, PIAINTIFF-APPELLANT, v. WILLIAM KAVLICK AND CLARA KAVLICK, DEFENDANTS-RESPONDENTS.
    Superior Court of New Jersey Appellate Division
    Argued November 27, 1950
    Decided December 6, 1950.

      Before Judges Jacobs, Eastwood and Bigelow.

      Mr. Alan V. Lowenstein argued the cause for the appellant (Messrs. Riker, Emery & Danzig and Albert B. Melnik, attorneys. Mr. George H. Callahan, on the brief).
    Ho appearance for respondents.
   The opinion of the court was delivered by

Jacobs, S. J. A. D.

This is an appeal from a judgment for defendants entered in the Camden County District Court.

Under date of January 10, 1948, the defendants executed and delivered a promissory note in the sum of $590.04 to the order of J. Eothman, Contractors. The note was endorsed and delivered to the plaintiff before maturity and for value. The endorsement was in the following form:

“Pay to the order of
EASTERN ACCEPTANCE CORPORATION WITHOUT RECOURSE
except that the undersigned indorser warrants that the undersigned has furnished and installed all articles and materials and has fully completed all work which constitutes the consideration for which this note was executed and delivered by the maker.
,T. ROTHMAN, Contractors
By J. ROTHMAN
(Dealer)
Title Owner”

The District Court found that there had been a failure of consideration between the payee and the makers of the note but also found that when the plaintiff purchased the note “it had no notice or knowledge of the defenses of the defendants.” Nevertheless it entered judgment for the defendants on the ground that since the note had been transferred to the plaintiff by a qualified endorsement it remained subject to all defenses between the payee and the makers.

It is well recognized that an endorsement “without recourse” is not restrictive under section 36 of the Uniform Negotiable Instruments Act (R. S. 7:2-36) but is a qualified endorsement which, under section 38 (R. S. 7:2-38), does not impair the negotiable character of the instrument. 5 U. L. A. (Part 1) p. 478 (1943). Its purpose is simply to exempt the endorser from liability for payment of the instrument in the event it is dishonored at maturity and its presence does not indicate that the endorser’s title may be defective. Packard v. Woodruff, 57 Pa. Super. 176 (1914); Standard Acceptance Corporation v. Chapin, 277 Mass. 278, 178 N. E. 538 (1931); Worth Saving Bank v. Foster, 175 Minn. 293, 221 N. W. 12 (1928); Lincoln Inv. Co. v. Metros, 257 Mich. 215, 241 N. W. 166 (1932); Exchange Bank v. Scholz, 49 Cal. App. 2d 232, 121 P. 2d 526 (1942). In the Packard case Judge Kephart, in rejecting the contention that the use of the words “without recourse” puts subsequent holders on inquiry as to defenses existing between prior parties, expressed the view that “the purpose of the Negotiable Instruments Act, as it relates to an indorsement of this character placed upon an instrument, was to make the instrument as freely negotiable as it would have been had the indorsement been placed thereon without qualification.”

In the light of the authorities we are satisfied that the plaintiff was not precluded from becoming a holder in due course of the note because the endorsement was without recourse. The remaining question is whether there were any other circumstances which constituted notice to the plaintiff of any infirmity or defect. Cf. Robertson v. Budzier, 229 Mich. 619, 201 N. W. 949 (1925), with Merchants’ National Bank of Indianapolis v. Branson, 165 N. C. 344, 81 S. E. 410 (1914). The note represented payment to the contractor of the purchase price of heating equipment installed by him; however, under the prevailing view, mere knowledge of that fact or the possibility that the contractor might later default in his stipulated performance would be immaterial. United States v. Hansett, 120 F. 2d 121, 122 (2d Cir. 1941). See B. A. C. Corp. v. Cirucci, 131 N. J. L. 93, 96 (Sup. Ct. 1944); Fabrizio v. Anderson, 62 A. 2d 314 (Mun. Ct. of App. D. C. 1948); 100 A. L. R. 1357 (1936). When the note was delivered to the plaintiff no default whatever existed to its knowledge and the endorser warranted that there had been full performance on his part; there were somewhat similar warranties in West Side Trust Co. v. Krug, 117 N. J. L. 102 (E. & A. 1936) and Coffin v. May, 104 N. J. L. 347 (E. & A. 1928), where the endorsees were determined to be holders in due course. Cf. R. S. 7:2-65.

Section 56 of the act (R. S. 7:2-56) provides that to constitute notice of an infirmity in the instrument or defect in the title of the person negotiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect or “knowledge of such facts that his action in taking the instrument amounted to bad faith.” In Rice v. Barrington, 75 N. J. L. 806, 807 (E. & A. 1908), the court stated that this provision “establishes the rule that proof of circumstances calculated merely to arouse suspicion will not defeat recovery on a negotiable note taken for value before maturity.” See also Mutual Finance Corp. v. Dickerson, 123 N. J. L. 62, 65 (Sup. Ct. 1939); First National Bank of Springfield v. DiTaranto, 9 N. J. Super. 246, 253 (App. Div. 1950). Assuming, solely for present purposes, that there may have been grounds for suspicion in the instant matter, it seems clear that the aggregate circumstances, considered in their light most favorable to the defendants, fell far short of establishing any bad faith on the part of the plaintiff within the terms of section 56.

We have concluded that the plaintiff was a holder in due course and that the District Court’s ruling to the contrary was erroneous. R. S. 7:2-52. As a holder in due course it was not subject to the defense of failure of consideration available between the payee and makers. R. S.7:2-57; R. S. 7:2-28; Lear v. Altschuler, 2 N. J. Misc. 746 (Sup. Ct. 1924); Warren v. Dilkes, 3 N. J. Misc. 1239 (Sup. Ct. 1925).

Keversed, without costs, and with direction that judgment for plaintiff be entered in the District Court.