author: Fulop, J. S. C.

text:
    KENNETH HARTMANN, AN INFANT, BY HIS GUARDIAN AD LITEM, EDWARD R. HARTMANN, AND EDWARD R. HARTMANN AND ELIZABETH L. HARTMANN, INDIVIDUALLY, PLAINTIFFS, v. MAPLEWOOD SCHOOL TRANSPORTATION CO., A NEW JERSEY CORPORATION, BOARD OF EDUCATION, TOWNSHIPS OF MAPLEWOOD AND SOUTH ORANGE, AND T. WILLIAM VAIL, DEFENDANTS.
    Superior Court of New Jersey Law Division
    Decided June 18, 1969.

      Mr. Arnold L. Eoster for plaintiffs (Messrs. Sheviclc & Ravich, attorneys).

      Mr. Harold I. Braff for defendant Board of Education (Messrs. Braff, Litvah & Ertag, attorneys).

      Mr. Hugh J. O’Gorman for defendant Maplewood School Transportation Co. (Messrs. Gunneen & O’Gorman, attorneys).
   Fulop, J. S. C.

This is an action for a declaratory judgment. Plaintiffs move for summary judgment in their favor and defendant Board of Education, Townships of Maplewood and South Orange, moves for summary judgment in its favor. The other defendants have filed no brief, but defendant Maplewood School Transportation Co. joins in plaintiffs’ contentions.

The case arises as follows. On May 3, 1966 the infant plaintiff Kenneth Hartmann, then 15 years of age and a resident of Maplewood, was a pupil in the school system operated by the defendant Board of Education of South Orange and Maplewood (hereinafter “board of education”). By arrangement between the defendant board of education and the Summit Board of Education plaintiff and other pupils attended special classes for slow learners at the Summit Junior High School. Defendant Maplewood School Transportation Co. (hereinafter “bus company”) transported the children under a contract with defendant board. On the day in question a bus carrying plaintiff and other pupils and operated by defendant Vail, an employee of the bus company, left the roadway on Broad Street in Summit and struck a tree. The infant plaintiff was hopelessly crippled for life.

Plaintiffs instituted an action in this court for damages for the injuries and per quod damages against the same parties who are defendants in this action. The negligence action is still pending awaiting trial. The bus company is insured against liability to the limits of $100,000 for each person injured and $300,000 for each accident. The insurer has offered the full amount of its policy coverage, i. e. $100,000, to plaintiffs in settlement. The board of education has indicated no interest in contributing toward settlement.

Plaintiffs and their attornejrs believe that the damages far exceed $100,000. They believe that neither the bus company nor Yail has assets sufficient to respond to a substantial judgment in excess of the policy amount. They seek to persuade the board of education to contribute to settlement. The purpose of this action is to establish that the board of education is legally liable under N. J. S. 184 :16-6 to indemnify Yail for any sum recovered against him by plaintiffs. Plaintiffs reason that if they recover a judgment against Yail in excess of insurance coverage, and if it is uncollectible against Yail and the bus company, they may reach Yail’s cause of action for indemnification and compel payment by the board of education. They argue that if the right of Yail to indemnity is established now, the board of education will be persuaded to contribute to the settlement of the negligence action.

I have grave doubt about the appropriateness of the declaratory judgment procedure. However, in view of the decision in LeFelt v. Nasarow, 71 N. J. Super. 538 (Law Div. 1962), affirmed o. b. 76 N. J. Super. 576 (App. Div. 1962), certification denied LeFelt v. Aetna Ins. Co., 39 N. J. 86 (1963), I shall deal with the merits.

N. J. S. 184:39-2 empowers each board of education to provide transportation for pupils by a bus or buses owned by it or, in the alternative, to enter into contracts for such transportation. N. J. S. 184 :39-6 requires that liability insurance covering every bus transporting pupils and the drivers thereof to limits prescribed by the State Board of Education be provided by the local board as to its buses, or by the contractor as to buses operated under contract. Defendant board chose to contract for the transportation. The bus company provided the required liability coverage. Yail was an employee of the bus company.

The statute relied upon by plaintiffs is N. J. S. 184 :16—6, which reads as follows:

“Indemnity of officers and employees against cmil action.
Whenever any civil action has been or shall be brought against any person holding any office, position or employment under the jurisdiction of any board of education, including any student teacher, for any act or omission arising out of and in the course of the performance of the duties as such office, position, employment or student teaching, the board shall defray all costs of defending such action, including reasonable counsel fees and expenses, together with costs of appeal, if any, and shall save harmless and protect such person from any financial loss resulting therefrom; and said board may arrange for and maintain appropriate insurance to cover all such damages, losses and expenses.”

This statute is the current form of a series of statutory provisions for the protection of school employees. The first of these was L. 1937, c. 125, which required boards of education to furnish counsel and defray designated legal expenses for "Any teacher, school nurse, school dentist, principal, supervisor, supervising principal, superintendent or janitor in any of the public schools of this State, against whom an action in damages is instituted for any act or acts arising out of, or in the course of his or her employment, * * *” L. 1938, c. 311, required every school board "to save harmless and protect all teachers and members of supervisory and administrative staff from financial loss arising out of” any claim for damages for negligence or other act resulting in accidental bodily injury incurred while the employee was acting within the scope of his employment or under the direction of the board. The board was given the option to provide insurance or furnish the protection out of its own funds.

The statement accompanying the 1938 bill read as follows :

“STATEMENT.
The matter of teacher liability for accidents resulting to pupils under school control has been much discussed during the past two or three years. It is the belief of many teachers that they may be held financially responsible, if a child slips in a classroom or gymnasium and becomes injured or if accidents happen to children while participating in manual training or similar types of activities. Cases of other states have been cited to show that teachers may be liable for injuries due to alleged negligence by temporarily leaving a classroom or leaving defective playground apparatus available, by the use of which a child is injured. This feeling of liability and the fact that teachers may lose their savings of a number of years because of suits brought against them for injuries has caused much perturbation of mind and has resulted in the belief that boards should protect them against such liability resulting in the course of their duties. The New Jersey legislature in 1937 provided that boards of education should pay the counsel fees for teachers who are sued for injuries resulting from other than corporal punishment. The New York legislature in 1937 adopted an act almost identical to the above bill.”

The 1938 statute became N. J. S. A. 18:5-50.4. It was amended by L. 1955, c. 85, and again by L. 1965, c. 205 and L. 1967, c. 167. The provision was incorporated as N. J. S. 18A :16-6 in the revision of the school laws effective January 11, 1968.

The statement accompanying the 1955 bill read as follows :

“STATEMENT.
The purpose of this bill is to give protection to every person holding office, position or employment under the jurisdiction of a board of education from financial loss arising from alleged negligence or other act happening in the discharge of his duties and within the scope of his employment. P. L. 1938, c. 311 presently protects teachers and members of the supervisory and administrative staff from such financial loss arising from personal injury. Other employees including janitors who maintain and repair the grounds and buildings have no such protection and their compensation is not such as to imply that they have been paid or are paid to assume such risks. The bill also extends protection to all persons holding office, position or employment under the jurisdiction of a board of education from financial loss arising from a claim for damages to property. Courses in driver education and teachers and other employees who must travel by car from school to school make such protection necessary. At least one suit is pending against a school board employee otherwise unprotected and hence the bill is drafted to apply to any judgment entered after the act becomes effective.”

These statutes have been construed to be for the sole benefit of the school employees covered. They have not created a new cause of action against a school hoard for the negligence of its servants, although recent decisions have recognized such a claim in some instances. However, even where the cause of action is solely against the employee, the statute operates to make the entire assets of the school district available to satisfy a judgment obtained against the employee. Titus v. Lindberg, 49 N. J. 66 (1967). Tripus v. Peterson, 11 N. J. Super. 282 (Cty. Ct. 1950). Hare v. Pennell, 37 N. J. Super. 558 (App. Div. 1955); Falcone v. Board of Education, Newark in Essex County, 17 N. J. Misc. 75, 4 A. 2d 687 (C. P. 1939).

No case hts been cited or found extending the right of indemnification to any person not an employee of a school board. The present statute does expressly include student teachers who are not employees. With that understandable exception, the terms of the statute and the purposes revealed by the legislative statements above quoted show a consistent purpose to provide protection against liability only to school employees of all classes. This is consistent with the practice in private industry. It is not unlike fringe benefits, such as hospitalization and medical service insurance frequently provided to employees. All are designed to render the employment desirable and permit the retention and recruiting of personnel, a purpose not applicable to the employees of contractors.

A person “holding any office, position or employment under the jurisdiction of” a board and performing the duties thereof, means a person who is employed by the board in any such capacity. It does not mean one employed by anyone else while doing work for the board. Words must be taken in context and the statute must be construed in conformity with its objectives. Surely the employee of a building, plumbing, electrical or excavating contractor doing work in or at a school would not be entitled to indemnification by the board for liability incurred.

Plaintiff’s argue that Vail was an employee under the jurisdiction of the board of education because the board had a degree of supervisory power over the persons employed by the bus company to drive school buses under the contract. The board may investigate the character of each driver and those disapproved may not be employed. N. J. S. 18A :39-18 and 19. Drivers must comply with health regulations applicable to board employees. The board designates the pupils to be transported and the times and places. State regulations prescribe safety rules to be followed by drivers and safety standards for the buses.

The supervisory powers referred to are police powers exercised to protect school children, a class of persons in whom the state has a special interest and who are especially vulnerable to physical injury, disease, and moral corruption. The board of education is acting in its public rather than in its proprietary capacity in enforcing these laws and regulations. The day to day operation of the buses, the assignment of drivers to particular trips, and all other details of supervision of the manner in which the work is performed are in the hands of the contracting bus company, subject only to the legal regulations and designation of the specific transportation to be performed. The bus company pays the drivers.

There is no proof in this case that defendant bus company was not a bona fide independent contractor. There is no proof that under the special facts of the case Vail was acting under the direct control and direction of the board as to the details of the manner in which he rendered his service. If it were established that Vail was in fact a servant of the board, or of both the board and the bus company, then the Board may be liable to plaintiffs under the common law doctrine of respondeat superior. The statute relied upon here does not create or negate such a relationship. Such a factual and legal complex should not be dealt with in this action for a declaratory judgment. If the facts warrant, they should be presented and determined on oral proof in the pending negligence action.

Plaintiffs also argue that the board of education had a nondelegable duty to transport the children under its supervision with safety. They cite Jackson v. Hankinson, 94 N. J. Super. 505 (App. Div. 1967), modified at 51 N. J. 230 (1968), and cases dealing with nondelegable duties in other situations. The duty of the board of education is that of reasonable care. The suggestion is that the board should be held liable for the negligence of the employee of an independent contractor because the board would be liable if its own employee were operating the bus. It is said that the board should not be permitted to avoid vicarious liability by choosing to contract for the transportation. But N. J. S. 18A :39-2 and 6 expressly permit the board to do so and require insurance coverage. The State has an interest in safeguarding school funds for the benefit of all the children of the district which may outweigh its interest in providing unlimited recovery for an injured child and his parents. It is not unusual to provide limited coverage. Tor instance, a person injured by negligence in a hospital is limited to recovery of $10,000 by N. J. 8. %A. :53A-8, and one injured by the negligence of an uninsured motorist or a hit-and-run driver may not recover more than $10,000 from the Unsatisfied Claim and Judgment Tund (N. J. S. A. 39 :6-73). Here $100,000 was provided. It would be a usurpation of legislative functions for a court to hold that the board can not avoid liability by contracting for the transportation and securing the required insurance coverage from the bus company, when the Legislature has provided for just that. However, the issue of the direct liability of the board to plaintiffs is an issue in the negligence action. The declaratory judgment procedure is not available to preempt or anticipate the decision of the court in another pending action.

The only matter that can with any degree of justification be determined by declaratory judgment in this action is that on the face of N. J. S. 18A :16-6, in the light of its history, a driver of a bus employed by one under contract with a board of education to transport school children is not entitled to be indemnified by the school board for liability incurred in that employment.

Plaintiffs’ motion is denied. Defendant’s motion for summary judgment is granted.


source: Caselaw Access Project

author: McGowan, J. C. C.

license: Public Domain

text:
    THE STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT, v. IRVING L. BANDER, DEFENDANT-APPELLANT.
    Monmouth County Court Law Division — Criminal
    Decided June 17, 1969.

      Air. Thomas J. Smith, Assistant Prosecutor, for the State (Mr. Vincent P. Keuper, Monmouth County Prosecutor).

      Air. Daniel J. O’llern for defendant-appellant (Messrs. Abramoff, Apy and O’llern, attorneys).
   McGowan, J. C. C.

Defendant was convicted in the Municipal Court of the City of Asbury Park of violating N. J. 8. 2A:170-78; particularly, he was convicted of practicing law without having a license to do so while engaged as a real estate agent or broker.

The complaint charges defendant with engaging in the practice of law by drafting and preparing a contract for the sale of real property and advising the prospective purchaser under said contract as to the terms and details of the contract and procuring the execution of it.

The matter is before this court on an appeal from such conviction and has been heard de novo in this court on the record, there having been a transcript of the proceedings below. See R. R. 3:10-10(a.).

A reading of the transcript of the proceedings below indicates that the facts are for all practical purposes undisputed and uncontested. I find the facts to be that at the time of the alleged offense, defendant was a licensed real estate broker with his office in Asbury Park, New Jersey, and acting in such capacity prepared a contract of sale for certain real estate therein described and which contract has been marked in evidence. Thereafter, he forwarded it to the sellers, who were actually his principals and resided in Michigan. Subsequently, the contract was executed by the sellers and forwarded to their New Jersey attorney for review. At the suggestion of this attorney the contract was amended in certain particulars and returned to defendant’s office where it was executed by the buyers. There is some question as to whether or not defendant himself was actually present at the time of the execution. Euth Lane, an employee, testified that defendant was not present and that she supervised the execution of the contract. She also confirms that the contract was originally dictated to her by defendant and that she had typed it previously. In any event, it is clear, and I so determine and find, that the buyers did not have the advice of a lawyer with respect to the contract up to and including the execution of the contract.

The acting magistrate, after hearing the evidence, in a written opinion found and determined that the preparation of the contract for the sale of land constituted the practice of law. He further found and determined that defendant was guilty of violating N. J. S. 2A :170-78, which prohibits any one from practicing law who is not licensed to do so. This was done notwithstanding the language of subparagraph (d) of N. J. S. 2A:170-81, which allegedly protects and authorizes a licensed real estate broker to draw deeds, bonds, mortgages, leases or releases, agreements or assignments, by way of exception to the general prohibition in the N. J. S. 2A :170-78, on the ground that subparagraph (d) of N. J. 8. 2A: 170-81 is unconstitutional.

At the hearing on the appeal before this court, it was stipulated that the preparation of a contract of sale constitutes the practice of law, and indeed this would seem to be supported by the holdings in N. J. State Bar Ass’n v. North ern N. J. Mortgage Associates, 22 N. J. 184, 196 (1956); Jeffcott v. Erles, 84 N. J. Super. 70, 74 (Cty. D. Ct. 1964); State ex rel. Reynolds v. Dinger, 14 Wis. 2d 193, 109 N. W. 2d 685 (Sup. Ct. 1961).

Therefore, the sole question before this court at this time is whether the preparation of the contract by a licensed real estate broker is authorized by subparagraph (d) of N. J. S. 2A :170-81. This statute enumerates certain exceptions to N. J. S. 2A :170-78 which makes it a disorderly persons offense for any person not licensed as an attorney at law to engage in the practice of law in this State. Defendant’s contention is that he comes within the exception contained in subparagraph (d) of N. J. S. 2A :170-81 which reads that the provisions of this article shall not apply to:

“d. The drawing of deeds, bonds, mortgages, leases, releases, agreements or assignments by a licensed real estate broker or any one employed by him”

and that this allows him to practice law within certain areas without fear of prosecution.

The determination of this question of necessity involves the determination of the validity of the so-called exception portion of the statute. 'The court is mindful of the fact that a statute is cloaked with a strong presumption of constitutionality and that no Legislative act should be declared unconstitutional and void unless its repugnancy to the applicable constitutional provisions is clear beyond a reasonable doubt. To declare a statute unconstitutional is a judicial power to be delicately exercised, and particularly is this true at the trial level. Neeld v. Automotive Products Credit Association, 21 N. J. Super. 159 (Cty. D. Ct. 1952); Legg v. County of Passaic, 122 N. J. L. 100 (Sup. Ct. 1939), and State v. Ulesky, 100 N. J. Super. 287, 295 (Cty. Ct. 1968), reversed on other grounds 54 N. J. 26.

Art. YI, § II, par. 3 of the New Jersey Constitution (1947) provides as follows:

“The Supreme Court shall make rules governing the administration of all courts in the State and, subject to law, the practice and procedure in all such courts. The Supreme Court shall have jurisdiction over the admission to the practice of law and the discipline of persons admitted.”

It is thus patently apparent that the exemption provision of the statute above recited is diametrically in conflict with the provisions of the New Jersey Constitution above cited, as opposed to the more common situation where it is necessary to interpret the provisions of a statute, for one reason or the other, to determine whether the provisions thereof are repugnant to a constitutional provision beyond a reasonable doubt. Since the conflict is clear, it is the court’s opinion that even though it is at the trial level, the court is duty bound to decide the issue.

It is now well settled in our State that the Supreme Court has exclusive jurisdiction over the practice of law. N. J. State Bar Ass’n v. Northern N. J. Mortgage Associates, supra. Justice Jacobs, speaking for the court in New Jersey State Bar Ass’n v. Northern N. J. Mtge. Associates, 32 N. J. 430, 436 (1960), citing the same case as reported in 22 N. J. 184, 198, supra, holds that while the Legislature may adopt a statute which penalizes the unlawful practice of law (N. J. S. 2A -.lTO-IS), it may not constitutionally authorize the practice of law by any one not duly admitted to the bar by the Supreme Court. Also see In re Baker, 8 N. J. 321, 336 (1951).

In the case of Jeffcott v. Erles, supra, Judge Wood referring specifically to N. J. S. 2A :170—81 (d), held that such exception is in violation of Art. VI, § II, par. 3 of the Constitution, as clearly established by Chief Justice Vanderbilt’s opinion in N. J. State Bar Ass’n v. Northern N. J. Mortgage Associates, supra, 22 N. J., at p. 198.

A situation similar to the instant case is found in State ex rel. Reynolds v. Dinger, 14 Wis. 2d 193, 109 N. W. 2d 685 (1961). In that case, the Supreme Court of Wisconsin had before it a regulation of the Wisconsin Real Estate Brokers Board which, allowed brokers to perform certain functions, among which were to fill in standardized contract forms. The attorney general brought an original action to declare such rule invalid as being an infringement upon and an usurpation of the inherent and exclusive power of the Supreme Court of Wisconsin. The majority held that since the brokers did not charge for preparing such legal documents which had become incidental to the broker’s usual and ordinary business, it would not determine that this enlarged the practice of law previously permitted and which had not been theretofore prohibited by the Supreme Court. There was a Wisconsin statute involved which, among other things, defined the practice of law as being an appearance in or out of court for compensation or receiving pecuniary reward for giving professional legal advice not incidental to or in accordance with such person’s usual or ordinary business. The court further determined that while it had the full control over the practice of law, it could, if it wished, in the public interest void any rule, law or regulation by whomever promulgated if it appeared to the court to interfere with the court’s control of such practice. The court concluded that the rule in question constituted a practice by laymen which it had already long permitted, and if and when they had a change of heart, they could readily alter the situation. A reading of the majority opinion and of the Wisconsin statute referred to indicates that the atmosphere in Wisconsin and the attitude in New Jersey are vitally different, because it clearly suggests that in Wisconsin there had been long acquiescence on the part of the court and bar of that state in permitting laymen to practice law incidental to such laymen’s usual or ordinary business. It is the opinion of this court that such is not and has not been the situation in New Jersey. It is to be noted that even if such acquiescence or lethargy does exist, it can not clothe the practice of law in this State by laymen with validity. See to same effect State Bar of Arizona v. Arizona Land Title and Trust Co., 90 Ariz. 76, 366 P. 2d 1 (Sup. Ct. 1961), and Justice Hallows dissent in Dinger, supra.

Initially the framers of the 1947 New Jersey Constitution demonstrated that the public interest demands and requires that the practice of law should and must be regulated by the Supreme Court, and by the Supreme Court alone. The practice of law is a function which should be performed in the public interest only by those who have received training and experience therein in the manner and method prescribed by the Supreme Court. Defendant has argued that a real estate broker is required to take certain courses and an examination to become qualified as a real estate broker, and among these courses is one in drawing contracts for the sale of property, deeds and other instruments permitted in the section of the statute above-mentioned. In the trial below in the municipal court the testimony of the president of the county real estate board was offered to the effect that it was his opinion that by reason of such training real estate brokers were qualified for such purpose. A mere inspection of the requirements of the real estate board and of the requirements of the Supreme Court with respect to the practice of law indicates such thinking to be specious and detrimental to the public interest. Real estate transactions today involve matters which should be expertly handled with respect to numerous facets, the least of which are the construction of contracts, deeds, covenants and restrictions; knowledge of the law for fixing closing dates; knowledge with respect to details and terms of numerous and different kinds of mortgages now involved, and knowledge of numerous other items which it would serve no purpose to elaborate on, except to say that only the qualified should be advising the public with respect to same. Our courts have said this in other language on numerous occasions, as Justice Jacobs stated in New Jersey State Bar Ass’n v. Northern N. J. Mtge. Associates, supra, 32 N. J. 430, wherein he reiterated the view of the late Chief Justice Vanderbilt set forth in 22 N. J. 195:

“The privilege o£ engaging in the practice of law is strictly confined to individual attorneys who have been duly licensed upon proper showings of character and competency and who are at all times subject to rigid rules of conduct.” (at p. 436.)

It is the opinion of this court that defendant is guilty of violating N. J. 8. 2A: 170-78. I further determine his activity as above outlined constituted the unlawful practice of law and that he cannot defeat or absolve his guilt by relying on the so-called exemption statute N. J. S. 2A :170-81 (d), for I further find this so-called exemption provision to be unconstitutional and a nullity. The Legislature’s action in passing this statute, arbitrarily and unjustifiably divested the exclusive authority given to the Supreme Court of this State by our Constitution.


author: Per Curiam.

text:
    WILLIAM H. CROWE, JR., ET AL., PLAINTIFFS-RESPONDENTS, CROSS-APPELLANTS, v. MAYOR AND COUNCIL OF THE TOWNSHIP OF SPARTA, DEFENDANT-APPELLANT, CROSS-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued June 9, 1969
    Decided July 1, 1969.

      Before Judges Coneokd, Kilkenny and Leonard.

      Mr. J ohn B. Knox argued the cause for respondents-cross-appellants (Messrs. Morris, Downing & Sherred, attorneys).

      Mr. Francis E. Bright argued the cause for appellanteross-respondent (Messrs. Dolan & Dolan, attorneys).
   Per Curiam.

We are not entirely satisfied with the reasoning of the trial court that the rate schedule fixed by the sewer rate ordinance is invalid because fixed to recover the capital cost of the sewer improvement project.

In the first place, the stipulation of facts indicates that as a result of discussions with sewer users before enacting the ordinance, the governing body decided to reduce the rates originally projected, and the final rate schedule reflects that policy decision. One cannot confidently conclude that the municipality, when actually enacting the ordinance, expected any substantial return of capital to ensue therefrom. Actual experience, as seen infra, bears this out.

Secondly, we are not as clear as was the trial court that the case of River Edge Homes, Inc. v. Borough of River Edge, 130 N. J. L. 376 (Sup. Ct. 1943), is authority for prohibition of sewer rates designed to recapture cost of system construction as distinguished from expense of current maintenance. River Edge forbade only an assessment for special benefits when the project had been built as a general municipal improvement. Cf. Jersey City, etc., Auth. v. Housing, etc., Jersey City, 40 N. J. 145, 149 (1963). A municipality has plenary statutory power to charge for the use of sewerage facilities, N. J. S. A. 40:63—7, subject only to the general restriction against patent unreasonableness. Plaintiffs’ real grievance here is the amount of the charges, contended to be unduly high as compared with sewer rates charged by other municipalities. The general fiscal situation and the peculiar requirements and costs in respect of the sewerage system of a particular municipality render comparisons of rates with those in another municipality of dubious value, at best, in determining reasonableness of the former.

But whether or not River Edge, supra, should be construed to proscribe sewer rates designed to recapture original cost and financing incidental thereto where a sewer project has been constructed as a general municipal improvement, we have concluded that the validity of this ordinance can and should be sustained on the basis that the municipality is not here actually recovering such original capital costs. In this regard, we entertain the view that even if historic cost in such a case as this cannot legally be recaptured through rates (a question we leave open) reasonable depreciation is an expense which may be considered in fixing the rates charged. A depreciation charge is for the purpose of accumulating a fund to replace the existing plant, not to pay for its historic cost. We think the municipality has implied power to include depreciation in the rate base, within N. J. S. A. 40:63-7. (This section, which grants power to fix “charges” and “rents,” also authorizes the governing body to “enlarge, increase, extend, review, alter, replace * * *” the sewer system.)

According to a stipulation below as to proofs defendant would adduce without contradiction, for the period in question, 1964 to 1967 inclusive, the rates charged the users yielded about $6,400 annually except for 1967 when they were $5,648.70. Operating expenses were about:

1964— $4900

1965— $4300

1966— $4900

1967— $5000

Reasonable depreciation would have been at least $3,257 per year.

It is thus obvious that the rates charged do not produce an unreasonable or excessive yield. Whether, or what part of, the expense of operation of this system should be imposed on the taxpayers of the municipality at large as opposed to the sewer system users, is a matter for the reasonable legislative judgment of the governing body. We find the sewer rate ordinance valid insofar as the rate schedule is concerned, and generally, with the one exception to be noted.

Defendant concedes that the provision for a “tap-in” fee is invalid, and that severable portion of the ordinance is herewith declared invalid, the remainder of the ordinance being upheld.

In view of the foregoing conclusions, we need not address ourselves to the validity of the alternative “equitable” remedy afforded defendant by the trial court.

Reversed and remanded for the entry of judgment consonant with this opinion. No costs.


author: Pee Curiam.

text:
    LOUIS SCHWARTZ, PLAINTIFF-APPELLANT, v. BOARD OF ALDERMEN OF THE CITY OF PATERSON, FRANK J. SCIRO, CITY CLERK OF THE CITY OF PATERSON, ALDERMAN DANIEL J. KONING, ALDERMAN HARRY E. GARDINER, ALDERMAN DOMINICK DE MARCO, ALDERMAN WILLIAM HICKS, ALDERMAN JOSEPH CURTIN, ALDERMAN JAIME AVALO, ALDERMAN JOHN R. PATTERSON, ALDERMAN JOHN J. PETRONE, ALDERMAN HARRY MORERE, ALDERMAN PAUL OTAVIO, ALDERMAN NATHAN PELLER AND CITY OF PATERSON, DEFENDANTS-RESPONDENTS.
    Superior Court of New Jersey Appellate Division
    Argued June 16, 1969
    Decided June 30, 1969.

      Before Judges Sullivan, Eoley and Lewis.

      Mr. Louis Schwartz argued the cause for appellant (Messrs. Schwartz & Schwartz, attorneys).

      Mr. Joseph A. LaCava argued the cause for respondents (Mr. William A. Feldman, on the brief; Mr. Joseph L. Conn, City Counsel, attorney).
   Pee Curiam.

Plaintiff appeals from a final judgment in favor of defendants dismissing his amended complaint which sought to compel the reapportionment of the wards of the City of Paterson. 104 N. J. Super. 495. The suit was bottomed on the “one-man one-vote” principle enunciated in Reynolds v. Sims, 377 U. S. 533, 84 S. Ct. 1362, 12 L. Ed. 2d 506 (1964), specifically made applicable to municipal governments in Avery v. Midland County, 390 U. S. 474, 88 S. Ct. 1114, 20 L. Ed. 2d 45 (1968).

The present government of the City of Paterson consists of a mayor and board of aldermen, and several legislatively created municipal boards. To date, the electorate in Paterson has not availed itself of the opportunity to adopt a more modern, efficient typo of municipal government. See N. J. S. A. 40:69A—1 et seq.

Prior to 1907 the Paterson municipal government consisted of a mayor and board of aldermen. In that year legislation was enacted creating three boards; a board of finance, a board of public works, and a board of fire and police commissioners, with members appointed by the mayor. Most of the governmental powers formerly exercised by the board of aldermen were transferred to and vested in these new boards. At a later date the Legislature also created a special municipal excise board with power to license and regulate liquor establishments, thereby removing such power from the board of aldermen.

At the present time the board of aldermen consists of 11 members, one elected from each of the city’s 11 wards. It has limited governmental powers and may exercise authority only in those areas not controlled by the aforementioned boards.

It is undisputed that the wards in Paterson are badly malapportioned as to population. According to the 1960 census, the population of the 4th ward is more than 20,000 persons and exceeds the combined population of the 6th, 7th, and 8th wards. Despite the foregoing, each ward elects one member to the board of aldermen. The trial court recognized that “there is very clearly a decided malapportionment” of the wards, but refused to grant the relief sought on the ground that the Paterson board of aldermen did not “possess general powers of government” and therefore the election of these officials did not come under the mandate of Reynolds, supra, and Avery, supra.

We conclude that the trial court took too limited a view of the powers and functions of the Paterson board of aider-men. It is true that over the years most of the powers of municipal government formerly exercised by the board of aldermen have been transferred to specially created boards. However, the board of aldermen possesses all of the powers, vested in the governing body by law, which have not been delegated to these boards. This includes numerous licensing and regulatory powers and even the power to increase or decrease the number of wards, or change the lines and boundaries thereof. R. S. 40:44-1 et seq.

The board of aldermen is the only elected body in the city government and is the only governing body as such in Paterson.

It is a manifest dilution of a citizen’s right to equal representation on the board of aldermen, and a denial of equal protection of the laws, to have one alderman elected from each ward despite the gross disparity in population in the several wards. Eeapportionment is required under Reynolds, supra, and Avery, supra.

The judgment herein is reversed and the cause remanded to the trial court with direction that reapportionment of the wards in the City of Paterson be ordered to the end that each alderman be elected from a ward as nearly equal in population to each other ward as is feasible. The trial court is to retain jurisdiction in the matter so that it can implement its judgment as needed, and grant such further or different relief, not inconsistent with this opinion, as may be appropriate.


author: Per Curiam. Carton, J. A. D.

text:
    FORT LEE SAVINGS & LOAN ASSOCIATION, A NEW JERSEY CORPORATION, PLAINTIFF, v. JOSEPH R. LIBUTTI, a/k/a JOSEPH R. LIBUTTI, JR. AND JOANNE LIBUTTI, a/k/a JOAN LIBUTTI, HIS WIFE, DEFENDANTS, AND MITCHELL, HUTCHINS & CO., INC., A DELAWARE CORPORATION, DEFENDANT-APPELLANT, AND JOSEPH LIBUTTI AND EDITH LIBUTTI, HIS WIFE, JOSEPH DESIERVO AND VIOLA DESIERVO, HIS WIFE, PEOPLES TRUST CO. OF BERGEN COUNTY, A CORPORATION OF NEW JERSEY, HORIZON HOUSE MANAGEMENT CORP., A NEW JERSEY CORPORATION, AND ALLEN CARPET SHOPS, INCORPORATED, A NEW JERSEY CORPORATION, DEFENDANTS-RESPONDENTS.
    Superior Court of New Jersey Appellate Division
    Argued May 26, 1969
    Decided June 30, 1969.

      Carton, J., dissented.
    Before Judges Goldmann, Kolovsky and Carton.

      Mr. Richard B. Goldsmith argued the cause for appellant (Messrs. Williams, Gardner, Oaliri, Miller & Otley, attorneys).
    Respondents did not file a brief.
   Per Curiam.

On December 3, 1964 defendants Joseph R. LiButti and Joanne LiButti, husband and wife, executed a purchase money bond and mortgage to secure a loan of $42,000 at 6%. They defaulted, in installment payments and, following a foreclosure judgment entered July 17, 1967, the property was ordered sold. The sale resulted in a surplus of $18,440.12, which was deposited with the court.

The LiButtis were tenants by the entirety of the property in question. Defendant Mitchell, Hutchins & Co., Inc., had recovered a judgment on April 27, 1964 in the amount of $5,570.49 and costs against Joseph LiButti — this prior to the execution of the bond and mortgage mentioned. Mitchell, Hutchins applied to the court for payment of its judgment out of the surplus. That application was eventually denied on the basis of Servis v. Dorn, 76 N. J. Eq. 241 (Ch. 1909), and the decision of this court in Dorf v. Tuscarora Pipe Line Co., Ltd., 48 N. J. Super. 26 (1957) (dictum, at page 32).

In Servis Vice-Chancellor (later Chancellor) Walker held (76 N. J. Eq., at page 243) that surplus money arising from a foreclosure sale of real property held by the entirety “stands in the place of the land itself in respect to liens thereon or vested rights therein.” The holding of that case has withstood the test of time. See Morris v. Glaser, 106 N. J. Eq. 585, 592 (Ch. 1930), affirmed o.b. 110 N. J. Eq. 661 (E. & A. 1932); Vineland S. & L. Ass’n v. Felmey, 12 N. J. Super. 384, 392 (Ch. Div. 1951); Danes v. Smith, 30 N. J. Super. 292, 301—302 (App. Div. 1954). See also, 4 Pomeroy, Equity Jurisprudence (5th ed. 1941), § 1167, p. 495; 7 N. J. Practice (Clapp, Wills and Administration) (3d ed. 1962), § 1781, p. 521, and Annotation, “Estate by entirety in personal property,” 64 A. L. R. 2d 8, 60 (1959).

We agree with the Chancery Division judge that Mitchell, Hutchins is not presently entitled to satisfaction of its judgment out of the principal of the surplus monies. The principal will be held under the control of the court to await severance of the estate by the death of Joseph or Joanne LiButti, “when it will or will not become available * * * accordingly as the judgment debtor [Joseph] survives or dies before the other tenant by entirety [Joanne].” Servis v. Dorn, above, 76 N. J. Eq., at page 245.

Affirmed.

Carton, J. A. D.

(dissenting). Eor an indefinite period, possibly stretching into the distant future, the challenged order removes from the reach of the judgment creditor the husband’s share of that fund which in justice ought to be applied against his valid indebtedness. Inasmuch as the ultimate ownership of the proceeds of sale is made to depend upon the hazard of survivorship inherent in tenancies by the entirety, that order compounds the injustice by making any expectation of recovery highly fanciful. It establishes an exception to the salutary rule that tenancies by the entirety may not exist in personal property and by means of a fiction extends in new form a type of tenancy whose values has been widely questioned even so far as it applies to real property. Furthermore, it imposes upon the court system an unwarranted burden of administering the funds and supervising their investment until such time as one of the spouses dies.

At the time of the foreclosure of the mortgage resulting in the $18,000 “surplus,” the LiButti property was encumbered by other mortgages totaling $48,000 and by four other judgment liens in the amount of $8,000. The existence of this imposing lien indebtedness against the property eliminated for all practical purposes any reversionary interest either the husband or wife may have had in that surplus. These circumstances underscore the inherent injustice and the utter unreality of the entry of an order which consigns the funds to the legal and economic limbo of “await (ing) the severance of the estate [by the entirety] by the death of Joseph and Joan C. LiButti.”

The majority has concluded that the doctrine of stare decisis compels this result. In doing so it adverts to the pronouncement of Vice-Chancellor Walker in Servis v. Dorn, 76 N. J. Eq. 241 (Ch. Div. 1909), that surplus money arising from a foreclosure sale of real property held by the entirety “stands in the place of the land itself in respect to liens upon or vested rights therein.”

The philosophy behind this general statement, as it applies to a variety of situations where real property has been converted to personalty, is set forth in Morris v. Glaser, 106 N. J. Eq. 585 (Ch. Div. 1930), affirmed o.b. 110 N. J. Eq. 661 (E. & A. 1932) :

“* * * The proceeds retain the character of real estate for the purposes of succession. Oberly Lerch, 18 N. J. Eq. 346. The theory upon which such surplus proceeds are held to be land is that the surplus usually arises because more land is sold than is necessary, in one ease, to pay the debts of decedent; in another (foreclosure), than is necessary to satisfy the mortgage debt; and in partition, because the land is impossible of division and for practical purposes it has been converted into money. But in each case the money stands for the land and the rights therein are determined as though the court were dealing with the land itself. Upon an application for distribution of such surplus moneys, the division amongst those entitled is, in effect, an equitable partition of the land for which the money stands. The excess, though in the form of money, remains, as before, impressed with the character of the land. Cooke v. Dealey, 22 Bear. 396. Such money passes by succession on ‘the principle that money impressed with the character of land remains such until it is accepted as money by its absolute owner of sufficient capacity to make such election.’ Oberly v. Lerch, supra. * * *” (at pp. 592-593)

The generality that the surplus money stands in the place of the land itself, although acceptable as a general proposition, does not provide a valid foundation for the conclusion reached in Servís.

Granted that surplus monies may in a sense be said to stand in the place, that is, replace the real property. Granted too that there is a valid reason for making a distribution of the surplus as between the former owners on the basis of their respective rights in the real property as they existed at the time their interests in the real property ceased and for preserving the order of priorities of the creditors who obtained liens on the property.

A far different thing it is to say that the proceeds of the mortgage foreclosure sale are for all purposes to be treated as real property and cannot be distributed and must be held in abeyance out of the reach of creditors until the marriage terminates. Such a conclusion rests upon the pure fiction that somehow the tenancy by the entirety which exists in the real property is born anew and becomes infused into the proceeds of sale and that that unique status, with all its ancient incidents, abides in the proceeds for the indefinite future.

The estate by the entirety has been described as a “remnant of other times” which rests upon the “fiction of a oneness of husband and wife.” See dissenting opinion of Chief Justice Weintraub in King v. Greene, 30 N. J. 395, 413 (1959). The social purpose of the tenancy by the entirety seems to be to solidify the marital status by encouraging and protecting home ownership and to protect and insulate the institution of marriage from the onslaught of creditors. Upon death of one of the spouses, it assures the survivor, normally the wife, possession of a home free and clear of the individual indebtedness of the other.

But whatever social purpose this tenancy was designed to serve in the interest of married parties and whatever the reasons for its continued existence in this State, there is no justifiable basis for extending it to the personal property which replaces it. To indulge in the further fiction necessary to achieve such a result serves no useful purpose and acts to frustrate justice. Furthermore, it runs counter to the policy of this State against recognizing the existence of tenancies by the entirety in personalty. Central Trust Co. v. Street, 95 N. J. Eq. 278 (E. & A. 1923); Brown v. Havens, 17 N. J. Super. 235, 238 (Ch. Div. 1952). See Annotation, “Estates by entirety in personal property,” 64 A. L. R. 2d 8, 31 (1959).

Nor can such a doctrine be justified on the theory that the survivorship rights of husband and wife continue because the surplus monies are the product of an involuntary conversion and thus become a substituted res standing in place of the property. This aspect of equitable conversion also has its genesis in the general concept that the proceeds of the sale stand in the place of the real property and that the property, although in fact converted into personalty, must be treated as not converted. See 4 Pomeroy, Equity Jurisprudence (5th ed. 1941), § 1167, p. 495, where the author more aptly describes this type of conversion as “conversion by paramount authority.” This doctrine has been applied to the distribution of the proceeds of condemnation proceedings. Dvorken v. Barrett, 100 N. J. Super. 306 (App. Div. 1968), affirmed o.b. 53 N. J. 20 (1968).

But it can have no logical application to a mortgage foreclosure. Mortgagors, in executing mortgages, must certainly be held to have understood both that they must pay the amount which the mortgage secures and that their interest in the property may be cut off by foreclosure and sale of the property in the event of a default. The foreclosure and sale are steps in a process entirely consensual in its origin and nature. Compare Dorf v. Tuscarora Pipe Line Co., Ltd., 48 N. J. Super. 26 (App. Div. 1957).

A trend toward distinguishing the involuntary conversion cases evidenced in this State in Dorf has proceeded much further in the courts of New York. In Hawthorne v. Hawthorne, 13 N. Y. 2d 82, 242 N. Y. S. 2d 50, 192 N. E. 2d 20 (Ct. of App. 1963), the court limited the involuntary conversion theory to condemnation proceedings and found that the proceeds of a fire insurance policy on realty held by the entirety was a voluntary conversion and therefore severable as jointly held personal property. Although recognizing the loss as one resulting from accidental causes and therefore involuntary, it held that the money existed only as the result of entering into a personal contract of insurance and did not arise as a matter of law. The court cited with approval Franklin Square Nat. Bank v. Schiller, 202 Misc. 576, 119 N. Y. S. 2d 291 (Sup. Ct. 1950), which held that after a foreclosure sale of property held by the entirety the proceeds were payable in equal shares to the husband and wife as tenants in common. By way of dictum, in Hawthorne the court stated that the proceeds of a foreclosure of real property held by the entirety would be treated as personalty. The court commented:

“Putting aside the change in the use of realty, it is incontrovertible that a decision that ties up money, allowing only division of interest, is a serious impediment to its enjoyment.” (242 N. Y. S. 2d, at p. 53, 192 N. E. 2d, at p. 22).

The validity of Servis was questioned recently in In re Ved Elva, Inc., 260 F. Supp. 978 (N. J. D. C. 1966). The court held that the sale of property by a trustee as an asset of the bankrupt husband and wife destroyed the right of survivor-ship in the debtor-husband which the petitioner-creditor could have sold before the fee title vested in the trustee. It rejected the petitioner’s claim that his judgment lien, obtained prior to the bankruptcy, was transferred to the proceeds of sale, and refused to follow the doctrine stated in Servis, commenting:

“Since King v. Greene, supra, a half century after Servis, when tenancy by the entirety in New Jersey received a new and full analysis, it is improbable that ancient incidences and equitable fiction as imposed in Servis would be so extended.” (at pp. 982-983)

Keeton, in describing the function of the judiciary in maintaining a proper balance in the law between the need for stability and continuity and flexibility to meet conditions, says:

“The judiciary is, then, on the one hand a guardian of the law’s continuity, stability, evenhandedness, and predictability and on the other hand a participant in creative evolution that keeps laws contemporary and viable.” Robert E. Keeton, “Venturing to do Justice” (1969).

This obligation of the judiciary has often been recognized by the courts of this State. The basic principles were restated by Justice Jacobs in Schipper v. Levitt & Sons, Inc., 44 N. J. 70 (1965) :

“The law should be based on current concepts of what is right and just and the judiciary should be alert to the never-ending need for keeping its common law principles abreast of the times.” (at p. 90)

A doctrine which renders surplus monies in foreclosure proceedings against property owned by the entirety immune from the claims of the individual spouse until the marriage ends is out of step with the times. It ignores the modern economic life about us. Contrary as it is to ordinary concepts of justice and founded as it is on legal fiction, it should be discarded as a reproach to our judicial system. We must not “reverence gray-headed doctrines; though feeble, decrepit and within a step of dust, and on this account maintain opinions which have nothing but our charity to uphold them.” Joseph G-lanvill, “The Vanity of Dogmatizing” (1661).

The following comment of Justice Holmes is singularly pertinent to the situation before us:

“It is revolting to have no better reason for a rule of law than that it was laid down in a time of I-Ienry IV. It is still more revolting if the grounds upon which it was laid down have vanished long since, and the rule simply persists from blind imitation of the past.” Holmes, “Path of the Law,” 10 Harv. L. Rev. 467, 469 (1897).

Accordingly, I would reverse the order entered in the Chancery Division.

       Of the slightly less than $25,000,000 paid into court pursuant to N. J. S. 2A :15-73, 74 and maintained in trust funds, the great bulk represents the proceeds of various condemnation proceedings in some 4,000 separate accounts. About $2,000,000 is distributed among 1700 additional accounts maintained under a general trust category, and the remainder of about $500,000 in about 200 accounts representing funds held in connection with liquidations of building and loan associations. The exact amount deposited and kept in trust funds representing surplus monies from foreclosures and the number of accounts required to be administered in connection with such funds cannot readily be ascertained from available statistics. However, it seems safe to assume the amount of money and the number of accounts of this nature to be more than nominal even in these prosperous times when relatively few mortgage foreclosures occur.


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

text:
    HERMAN H. DIERKSEN AND JESSIE M. DIERKSEN, HIS WIFE, PLAINTIFFS-APPELDANTS, v. EVELYN ALICE ALBERT AND ANDREA J. ALBERT, JR., HER HUSBAND; PETER D. ALBERT, KATHERINE ALBERT AND JEANNE LOUISE ALBERT; AMERICAN CYANAMID COMPANY, A CORPORATION OF THE STATE OF MAINE; AMERICAN TELEPHONE & TELEGRAPH COMPANY, A CORPORATION OF THE STATE OF NEW YORK; CHAS. PFIZER & CO., INC., A CORPORATION OF THE STATE OF DELAWARE; CONSOLIDATED EDISON COMPANY OF NEW YORK, INC., A CORPORATION OF THE STATE OF NEW YORK; GULF OIL CORPORATION, A CORPORATION OF THE COMMONWEALTH OF PENNSYLVANIA; AND SAFEWAY STORES, INCORPORATED, A CORPORATION OF THE STATE OF CALIFORNIA, DEFENDANTS-RESPONDENTS.
    Superior Court of New Jersey Appellate Division
    Argued May 27, 1969
    Decided July 1, 1969.

      Before Judges Coneord, Kilkenny and Leonard.

      Mr. Milton T. Lasher argued the cause for appellants (Messrs. Hennessy & Hennessy, attorneys).

      Mr. George Warren, guardian ad litem, pro se, argued the cause for respondents.
   The opinion of the court was delivered by

Coneord, S. J. A. D.

Plaintiffs sue for a judicial declaration revesting full title in them to certain corporate securities previously placed by them in the name of their daughter, Mrs. Albert, who has disappeared and whose whereabouts are unknown. The Chancery Division refused the relief sought, but held that Mrs. Albert was a trustee of the stock, and directed the designation of a substituted trustee to carry on her duties as such.

In November 1962 plaintiffs contemplated transferring certain securities to their daughter and son, and expressed their intention in a memorandum to them reading as follows:

“ ALAN AND EVELYN
As gifts of corporate stock are made, start a separate savings account with dividends from stock, and deposit all dividends in this savings account.
Dividends and bank interest in the account will be subject to income tax payments. All such payments to come from account.
During July of each year remit an amount in multiples of $100 so that balance in account is between $100 and $200. Remittances to be made to H. H. D. [plaintiff husband]. Upon death of H. H. D. remittances to be made to J. M. D. [plaintiff wife].
Make a will. One section of will to list the number of shares in each Company, These to be willed to H. H. D. and J. M. D. share and share alike., In case of death of either H. H. D. or J. M. D. all stock to be willed to survivor. Upon death of both H. H. D. and J. M. D., your ownership and control of stock become absolute. However it is our wish that you give consideration to passing this stock on to your direct descendants as it has bean done for 4 generations.
As additional gifts are made, revise will to list new additions. 'll. II. D. or J. M. D. may decide in future to dispose of some of the stock and or l>ny additional stock in same or different companies. All proceeds and charges to go thru account,.
The remittances are to be accruanees of dividends and bank interest only and not the proceeds of sale of securities unless otherwise advised.
Expenses of will to come from account.
Keep records.
Nov. 12, 1962” (emphasis by the court)

Certain of the securities were subsequently delivered to Mrs. Albert and registered in ber name. She also executed a will in accordance with the memorandum.

On September 28, 1965 Mrs. Albert, who had been living in Canada with her husband and children, disappeared and has not since been heard from. She last sent her parents dividends from the account in August 1965. In March 1965 Mr. Dierksen visited his daughter to help salvage her marriage. At the suggestion of his son-in-law, the shares of stock were redelivered by Mrs. Albert to Mr. Dierksen as “safer” in his custody.

The trial court construed the arrangement as an express trust and held plaintiffs could not revoke it in the absence of the reservation of a power by the plain tiff s-settlors to do so. This is undoubtedly good law, generally speaking, if an effective trust was created. But note the parallel of the terms of this memorandum with the instrument involved in Trenton Banking Co. v. Howard, 187 A. 569, 571 (Ch. 1936), affirmed 121 N. J. Eq. 85 (E. & A. 1936), which provided: “The grantor reserves the right to add to or decrease said fund from time to time as she may desire.” It was held that this clause “no doubt” comprised the right to revoke the trust, either in whole or in part. It is clearly inferable from the third-from-the-last paragraph of the instant memorandum that plaintiffs reserved the right to direct a sale of any of the shares and have the proceeds reraitted to them (as well as to add shares to the trust). Even if this is a trust, therefore, plaintiffs had the power under Howard to revoke it.

However, we conclude the language of the memorandum and surrounding circumstances repel any proper conclusion that a trust was created. It is true that no particular form of words is necessary to create a trust so long as the intent to create the relationship which the law denominates a trust is found to exist, in all the circumstances, and the other legal requisites therefor are satisfied. See Wolf v. Wolf, 136 N. J. Eq. 403, 404-405 (E. & A. 1945). But it is equally true that a donative transfer which fails as a valid gift because of the absence of one of the essential elements of a gift inter vivos will not be saved by construing the transaction as a trust. 1 Scott on Trusts (3rd ed. 1967), § 31, pp. 243-44. Restatement of Trusts 2d, § 31 and comment a.

The essential elements of a valid inter vivos gift are: (a) donative intent, (b) actual delivery of the subject matter, and (c) donor must strip himself absolutely and irrevocably of all dominion and control over the subject matter of the gift. In re Dodge, 50 N. J. 192, 216 (1967); Swayze v. Huntington, 82 N. J. Eq. 127, 133 (Ch. 1913), affirmed o. b. 83 N. J. Eq. 335 (E. & A. 1914).

The donative feature of the instant transaction was the delivery of the securities to Mrs. Albert, with the intent that she should have a future absolute interest in what was left of them in her possession should she survive both grantors, her parents. But dominion, control and right of disposition of the subject matter of the gift was substantially retained by grantors for their lifetimes. Not only were they to receive all net income from the securities and reversion of title should Mrs. Albert predecease them, but they reserved the right to direct sale of any of the securities and to receive the proceeds of such sales should they so advise Mrs. Albert. These features clearly precluded the existence of the third element above referred to as requisite for a valid gift, i. e., absolute surrender of dominion and control by the donor. The rights of no third person intervening, plaintiffs had the right to return of the subject matter of the transfer, vis a vis the transferee.

Looked at another way, a gift of an equitable interest in property (here, Mrs. Albert’s putative future interest in the stock) must contain the same elements as a legal gift —those specified above. As well stated in Annotation 96 A. L. R. 383, 384 (1935), “a gift of the equitable or beneficial title must be as complete and effectual in the case of a trust as in the gift of the thing itself in a gift inter vivos. There must be an executed gift of the equitable title, without any reference to its taking effect at some future time.” Applying that rule in this State is Bendix v. Hudson County National Bank, 142 N. J. Eq. 487, 490 (E. & A. 1948). See also Frazier v. Hudson, 279 Ky. 334, 130 S. W. 2d 809 (Ct. App. 1939); Eschen v. Steers, 10 F. 2d 739 (8 Cir. 1926). Cf. Whittingham v. Lighthipe, 46 N. J. Eq. 429, 432-433 (Ch. 1890).

In most respects, the relationship between parents and daughter in this case is more assimilable to that of principal-agent rather than settlor beneficiary-trustee beneficiary. Mrs. Albert’s subjection of herself to the detailed direction and control of plaintiffs as to these shares of stock partakes of the agency relationship, but her vestment with title (though nominal) was a trust characteristic. Scott says that in such a case “it is the agency relationship which predominates, and the principles of agency, rather than the principles of trust, are applicable.” 1 op cit., § 8, p. 79. As an agency relationship, it was terminable at any time at the will of the principal.

We conclude that plaintiffs are entitled to a declaration revesting in them full ownership of the stock.

Eeversod; no costs.


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

text:
    STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT, v. SHIRLEY ANNE RISDEN, DEFENDANT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Argued June 9, 1969
    Decided July 1, 1969.

      Before Judges Golbmanit, Kolovsky and Caeton.

      Mr. Martin L. Haines argued the cause for appellant (Mr. James Logan, Jr., attorney).

      Mr. Myron H. Gottlieb, Assistant Prosecutor, argued the cause for respondent (Mr. Martin J. Queenan, Burlington County Prosecutor, attorney).
   The opinion of the court was delivered by

Goldmann, S. J. A. D.

Defendant was indicted for the murder of her husband Darrell. There were two trials, the first abruptly terminated by the declaration of a mistrial (see In re Logan, 52 N. J. 475 (1968)) and the second resulting in a verdict of guilty of murder in the first degree with recommendation of life imprisonment. The prosecution had not sought the death penalty. Defendant unsuccessfully moved for a new trial. This appeal followed.

I

On May 31, 1967 defendant returned to her Bordentown, U. J. home from a visit to relatives in Cincinnati. At about 3:30 or 4 p.m. of that day she and her baby visited a friend, Victoria Darnell, who confirmed defendant’s suspicions that Darrell had been seeing a girl named Julie during her absence. Mrs. Darnell testified she told defendant that Darrell and Julie had been to a drive-in movie with her and her husband, and that the two had been “making out” — “petting real mad” — while there. Upon hearing this, defendant ran out of the house with the baby.

Lorraine Bulanowski, defendant’s next-door neighbor, testified that she heard three shots from the Risden home at about 4 p.m. Some ten minutes later defendant came into her house with the baby and asked if she would watch the child for an hour or so. Mrs. Bulanowski inquired of defendant whether she fired the shots, and she said she had. Defendant then ran out of the place and drove off in an automobile the Risdens had borrowed while their car was being repaired at Art’s Body Shop in Bordentown.

According to prosecution witness Hermit Messer, defendant drove into his gas station shortly after 4:30 p.m. and parked in front of a car in which were seated Gary Harold, a friend of her husband’s, and Julia Ann Bagley. She got out of her car, pointed the gun at them, asked where her husband was, threatened to shoot if they interfered with her, and repeated the threat to Messer, who was told to keep his mouth out of her business. Upon driving away she told the trio that she was looking for her husband and his girlfriend, and if they saw Darrell to tell him she was going to kill him. Messer’s testimony was confirmed by Harold and Miss Bagley.

The testimony of Betty W. Hann completes the basic story as to the circumstances of the murder. She was passing Art’s Body Shop on her way home at about 5 p.m. when she heard yelling. She stopped, turned and saw defendant, who was “hollering.” After a moment or so Mrs. Hann started up the street, heard shots, turned around again, and saw Darrell Bisden on the ground. Defendant was shaking a gun at him, telling him not to move. Mrs. Hann heard her say “You won’t get away with it,” calling him a “two-timing son-of-a-bitch.”

Meantime, police officer Allen had driven upon the scene. Defendant told him not to get out of his car or she would shoot herself. She backed away from the body, began to cry, and then put the gun to her shoulder, fired and fell.

Both defendant and her husband were taken to St. Erancis Hospital in Trenton. He died on the operating table. Defendant remained in the psychiatric ward until her subsequent release on June 19, 1967.

Defendant disclaimed any recollection as to what had occurred between the time she ran down the steps of the Darnell home until she awoke at the hospital, except that she vaguely remembered stopping at the Bulanowski home and leaving the baby there.

The defense was temporary insanity. The only expert medical witness called by defendant in support of her claim that she was insane when she shot her husband was Dr. Harrison F. English, an associate in psychiatry at St. Erancis Hospital. He had been called in to see her on June 1, 1967 and arranged for her transfer to the psychiatric ward as a precaution against possible attempts at suicide. He saw her on seven occasions during her 19 days at the hospital. He testified that she was suffering from a mental illness, a “depressive reaction,” at the time of the shooting, and that she did not then know “what she was doing and not knowing what she was doing, she couldn’t have known whether it was right or wrong.” At the time of her discharge on June 19 it was felt that she had recovered from the mental illness found present on May 31.

II

In her brief defendant advances ten points in support of her argument for a new trial. We need consider only those basic to our reversal.

We agree with defendant that prejudicial error was committed in permitting Dr. Julio C. Del Castillo, a psychiatrist on the staff of the Trenton State Hospital, to testify as he did.

Defendant was at the State Hospital from Eebruary 29 to March 22, 1968. She had been sent there by the trial judge with the consent of defense counsel when the sheriff reported that she was acting strangely at the county jail. In doing so the trial judge told the prosecutor and defense counsel, in defendant’s presence, that

“* * * there may be some beneficial purpose served by having the defendant removed for a thorough physical and emotional or neurotic mental examination to determine whether in fact her current state is such to render it unlikely that she is in a position to cooperate with her counsel in the prosecution of her case by way of defense, and the preparation of the same in the orderly and proper fashion that is to be expected when the same is reached in accordance with the trial schedule * *

Defense counsel concurred that it might be desirable to take whatever steps were necessary by way of physical or mental examination “to see if she is suffering from any mental disease or physical problem which needs action immediately.” He continued:

“However, your Honor, I certainly would desire that it be specified that the results of these tests not be used in any way in the trial on the merits unless it is found that she is in such mental condition that she cannot stand trial at this time.”

To this the trial judge replied that his primary purpose was to be certain that defendant could cooperate with counsel and properly present her defense and participate in the hearing; otherwise, there could be no hearing. When the judge informed defense counsel that he could object, he replied that he did not object providing the examination was “for the purposes that your Honor has recited.” Defendant was then asked whether she had any objection to such an examination, and her reply was that she had none so long as her trial was not postponed.

It is abundantly clear from the foregoing that the examination was for the limited purpose of testing defendant’s ability to stand trial. This is buttressed by the trial judge’s order of February 28, 1968 committing defendant to the Trenton State Hospital “for a complete mental, physical and neurological examination and diagnosis, pursuant to the provisions of R. S. 30 :4-82, to determine her ability to stand trial and cooperate with counsel.”

Dr. DelCastillo conducted the prescribed examination while defendant was at the State Hospital. In presenting him as a rebuttal witness, the prosecutor informed the court that he intended to use Dr. DelCastillo not merely for the limited purpose of determining defendant’s mental condition at the time of his examination, but also for the purpose of determining her condition at some earlier date. Despite defense counsel’s strenuous objection, the trial judge permitted Dr. Del-Castillo to testify without restriction that his testimony be limited to defendant’s condition at the time of the examination and her ability to stand trial and cooperate with counsel. The reasons for the position taken by the trial judge appear in what he said in the course of the colloquy following defense counsel’s objection. Contrary to what clearly appears from the record, the judge believed that there was a “great measure of ambiguity” in the discussion attending the arrangement to have defendant examined at the State Hospital.

Again, contrary to the record, the judge observed that

“ * * * defense doctor, Dr. English, has an expressed opinion that this Defendant was suffering a mental illness at the time of. the incident in question and continues to suffer a state of mental illness currently in an improved condition as against a complete recovery or words of that nature. I think his choice of words was that he preferred to view this as an improved condition as against complete clearance.
And, in light of those circumstances it appears to me that it is ever so more pertinent to have an expression to meet the observation of conclusion of continued mental disease and that it is quite pertinent and it is in the interest of somewhat fundamental justice that the inquiry be made as to what the continuing condition of this Defendant is. * * *”

The trial judge’s memory of Dr. English’s testimony was not accurate. Dr. English had testified that at the time of defendant’s discharge from the hospital on June 19 “it was felt that she had recovered from her depression.” He was then asked whether at the time of her discharge she had “recovered from the mental illness that you found to be present on May 31,” and the answer was, “Yes.” Later, on cross-examination, the following testimony was given:

“Q. Is she cured of this illness, this insanity?
A. We don’t use the word ‘cured,’ we say improved because people can always get a return of a condition. If a person has, for example, someone has schizophrenia and they have a remission of their symptoms we say they are improved, not cured because their symptoms might return, but at the present time I believe we could say she has recovered. I like the term recovered better than cured.
Q. Does she still have the disease?
A. No. She still has the type of personality that she has, but I don’t think she has the disease, no, or at least I didn’t think so when she left the hospital. I haven’t seen her since then except just now.”

Of further significance is the fact that Dr. H. Edward Yaskin, who testified for the State, when asked if he had an opinion with regard to defendant’s mental condition on the day of the trial, answered, “I haven’t examined the lady as of today, so I will not give any impression of opinion.” Consequently at the time Dr. DelCastillo was called to the witness stand, the only psychiatric opinion available was that defendant did not have any continuing insanity: she was free of any insanity she might have previously suffered.

The trial judge’s final reason for permitting the Del-Castillo testimony was that to exclude it would be contrary to the underlying philosophy that no “legitimate source of qualifying or relevant material to ascertain the defendant’s state of mind” should be kept from the jury’s consideration, “particularly where the defense psychiatrist says there is a continuing condition of the disease.” The judge went on to say: “Further, it is a pertinent inquiry as to the defense of insanity in connection with one of the alternate verdicts that are available to the jury, they must determine what is her present state of mind.”

In the course of his testimony Dr. DelCastillo was asked whether, as a result of his examinations of defendant at the State Hospital, he was “ever able to reach an opinion as to whether she had amnesia at any time.” Over defense counsel’s objection he was permitted to answer, “I may say that in the first day of the interview I had with her she appeared as having a good memory and no defects in memory whatsoever.” At no time while she was at the hospital did she show any sign of mental disease. He said he could not make a medical determination as to whether she had amnesia on May 31, 1967, the date of the murder. Under further questioning by the prosecutor he stated that defendant did not show any memory impairment. He said he had examined her on more than one occasion with regard to the events of May 31. In reply to the question, “Now, what can you tell us with regard to her memory on the first occasion you questioned her with regard to May 31, 1967?” he answered, “She had good memory.” All this testimony was given despite defense counsel’s repeated and vigorous objections. Finally, on cross-examination, Dr. DelCastillo said that he had found defendant sane while she was at the State Hospital, with no evidence of psychosis.

As stated, the only purpose of having Dr. DelCastillo examine defendant was so that he might testify, if necessary, as to whether she was capable of standing trial, cooperating with her counsel, and properly presenting her defense. Accordingly, unless her counsel challenged her ability to do so, or the trial judge wanted to be satisfied in his own mind that she could, the doctor should not have been called at all.

Dr. DelCastillo’s testimony was not proper rebuttal. The trial judge knew, from what the prosecutor said, that the witness would he used for more than the limited purpose of testifying to defendant’s mental condition at the time he examined her. He nonetheless ruled, contrary to the express stipulation which led to defendant’s commitment and examination at the Trenton State Hospital, that the prosecution might explore defendant’s mental condition at an earlier date, and this for the reasons he expressed and with which we find ourselves in disagreement. By allowing the doctor to testify as he did, the jury was permitted to infer that since defendant was sane at the time of the trial, she probably was sane at the time of the murder. Dr. DelCastillo’s testimony was patently prejudicial to defendant’s cause, for it challenged the testimony of defendant’s expert, Dr. English, that she had no memory of the crucial events. It gave credence to the State’s position that defendant was sane at the time she killed her husband.

We find no specific mention of Dr. DelCastillo’s testimony in the charge given the jury. The trial judge referred generally to the psychiatric testimony, adding, “There is, you certainly have noted, a conflict of medical testimony and medical opinion and it is your responsibility to determine the credibility to he accorded thereto.” However general the trial judge’s comment on the psychiatric testimony, it helped validate Dr. DelCastillo as a witness. We conclude that the admission of the doctor’s testimony constituted reversible error.

Ill

We find reversible error in the trial judge’s preventing lay witnesses from testifying as to defendant’s appearance and reactions on the afternoon of the murder. We agree with defendant that in view of the insanity defense, it was important to give the jury a first-hand account of defendant’s mental and emotional attitudes and reactions at a time close to the homicide itself. Such testimony was also of significance with respect to whether defendant was guilty of some lesser degree of homicide than first degree murder.

It has long been the law of this State that a lay witness “may state facts and express an opinion in respect to the sanity of a defendant.” Clifford v. State, 60 N. J. L. 287, 289 (Sup. Ct. 1897); State v. Deegan, 133 N. J. L. 263, 270 (E. & A. 1945); and see Gretowski v. Hall Motor Express, 25 N. J. Super. 192, 196 (App. Div. 1953). The State so concedes but contends that the testimony of the lay witnesses was properly excluded because it would have diluted the testimony of the medical experts. We find no validity to that argument. Evidence Rule 56 runs directly contrary to the ruling of the trial judge. It reads:

“(1) If the witness is not testifying as an expert his testimony in the form of opinions or inferences is limited to such opinions or inferences as the judge finds (a) may be rationally based on the perception of the witness and (b) are helpful to a clear understanding of his testimony or io the determination of the fact in issue.
(3) Testimony in the form of opinions or inferences otherwise admissible under these rules is not objectionable because it embraces the ultimate issue or issues to be decided by the trier of the fact.”

The report of the New Jersey Supreme Court Committee on Evidence stated, in connection with the then proposed text, now officially adopted, that

“The test of Rule 56(1) is that a lay opinion should be admitted where it is rationally based on the witness’ personal perception and where it is helpful to a clear understanding of the testimony or to the determination of the fact in issue. * *”

And see 7 Wigmore on Evidence (3d ed. 1940), § 1974, p. 113.

The trial judge repeatedly excluded testimony by lay witnesses descriptive of defendant’s appearance and reactions at the critical time in question, for the reason that it represented a “conclusion.” Thus, Gary Harold was not allowed to describe how defendant looked to him at the gasoline service station when she pointed the gun at him. The trial judge rejected defendant’s offer of proof that in a statement Harold had given a detective he described her appearance as “Wild, mad. I was afraid to try to talk to her. Ho telling what she would do. Just wild, crazy.”

The judge would not permit Mrs. Hann, who witnessed the shooting, to use the word “hysterically” in describing defendant. There was a like ruling to the use of the word “hysterical” when she was cross-examined. Officer Allen was not permitted to testify on cross-examination by the defense that when he saw defendant she was “in a rage” and “shaking all over.”

The descriptions of defendant sought to be given by the several lay witnesses were at least as significant as the experts’ testimony in helping the jury determine whether she was insane at the time of the murder and, if not, whether the verdict should be first or second degree murder or manslaughter.

IY

In light of our reversal, defendant’s argument addressed to the manner in which the voir dire was conducted requires no further comment than that on the retrial the procedure called for by State v. Manley, 54 N. J. 259 (1969), will be followed.

The claim that the report and testimony of Dr. Yaskin, psychiatrist for the State, were received in a manner and under circumstances highly prejudicial to defendant may also be summarily disposed of. Defense counsel now has the report and therefore will not be disadvantaged, as he claims he was at trial, by the fact that the report was not made available to him although it had been in the hands of the prosecutor from the very beginning of the trial and was used by him in cross-examining defendant and her expert, Dr. English. In using the report at the retrial of this case, the prosecutor must follow the injunction found in State v. Obstein, 52 N. J. 516 (1968), where the court said:

“A cautionary admonition must be given with regard to psychiatric examinations obtained by the State. Having in mind that the accused’s statements to the doctors are admissible solely on the mental competency issue and not at all on guilt, they cannot be used by the prosecutor as avenues of further investigation on the issue of guilt. Any inculpatory evidence derived from such a source cannot be admitted at the trial.” (at page 531)

We are of the opinion that the prosecutor’s use of the Yaskin report in cross-examining Dr. English and defendant skirted the limits of this admonition.

Defendant also contends that the admission of the testimony of Sister Claire Jerome, of St. Erancis Hospital, violated the Miranda rules and the patient-physician privilege. Sister Jerome was in the emergency room of the hospital when defendant was brought in. She was permitted to testify, over objection, that when she asked defendant for her name and “How did this happen?” defendant gave her name as Shirley Risden and said that she had shot her husband and herself. Sister Jerome noted this on the emergency report. Of course, what Sister Jerome said threw doubt on defendant’s testimony that she did not remember the shooting incident. However, the testimony was properly allowed.

Miranda v. Arizona, 384 U. S. 436, 86 S. Ct. 1602, 16 L. Ed. 2d 694 (1966), does not apply. Defendant was not in police custody and what Sister Jerome asked was not a custodial interrogation. As for the claim that the patient-physician privilege was violated, there are two answers: (1) Sister Jerome did not stand in the relation of physician to defendant as patient, and (2) the patient-physician privilege was not created until July 19, 1968, when N. J. S. 2A :84A-22.2 became effective. Defendant was found guilty on May 31, 1968.

Y

We find no occasion to deal in detail with defendant’s remaining arguments since there must be a retrial. We find without substance the claims addressed to the charge and the prosecutor’s alleged improper interruption of defense counsel during summation. We further conclude that defendant was not denied her right to a fair trial because the trial was held before the same judge who had held defense counsel in contempt of court during the course of the initial trial.

The judgment of conviction is reversed and the case remanded for a new trial.


text:
    NATIONAL PREMIUM BUDGET PLAN CORPORATION, A CORPORATION OF THE STATE OF MICHIGAN, PLAINTIFF-APPELLANT, v. NATIONAL FIRE INSURANCE COMPANY OF HARTFORD, A CORPORATION OF THE STATE OF CONNECTICUT, LOUIS J. MARTONE, EDWIN M. ROTHBERG, AND PRICE AGENCY, A PARTNERSHIP COMPOSED OF LOUIS J. MARTONE AND EDWIN M. ROTHBERG, AS CO-PARTNERS, DEFENDANTS-RESPONDENTS.
    Superior Court of New Jersey Appellate Division
    Argued May 12, 1969
    Decided July 3, 1969.

      Before Judges Ooneord, Kilkenny and Leonard.

      Mr. Andrew 8. Polito argued the cause for appellant (Messrs. Mattson, Madden, Polito & Loprete, attorneys).

      Mr. Mark D. Lamer argued the cause for respondent National Eire Insurance Company of Hartford (Messrs. Budd, Lamer, Kent & Gross, attorneys).

      Mr. Victor E. D. King argued the cause for respondent Edwin M. Rothberg (Messrs. King and King, attorneys; Mr. Victor B. King, of counsel).
   Per Curiam.

The nature of the action, the issues and the general factual background are fully delineated in the opinion of the trial court. 97 N. J. Super. 149 (Law Eiv. 1967).

Plaintiff sued defendants (“National Eire” and Edwin M. Rothberg) for damages sustained on loans it made to finance premiums on insurance policies supposedly issued by National Eire when the loan moneys were feloniously misappropriated by one Martone, insurance agent for National Eire. Eight of the loans were placed by Martone as the agent who purportedly wrote the policies, and two by Price Agency (for which Martone and Eothberg had once filed a partnership certificate) as purported writing agent.

National Eire was sued on theories of respondeat superior for Martone’s fraud as agent, and for its own negligence through acts of office employees. Eothberg was sued on the theory of liability of a partner for acts of a copartner assertedly done within the scope of the partnership business.

The decision of the court, sitting without a jury, on the facts and the law, was for defendants National Eire and Eothberg. (Martone was also a defendant, but does not appeal from the judgment against him.)

We have concluded the judgments should be affirmed, although we do not necessarily agree with all of the findings or inferences of fact or all the conclusions of law set forth in the very lengthy opinion of the trial court.

We address our attention to the appellate arguments.

I

Plaintiff’s major contention as against National Eire was that the latter is liable on principles of respondeat superior for the fraud of its agent Martone. Martone was an ordinary insurance agent for National Eire. We are satisfied he was not its agent when arranging premium loans in connection with its policies. Eor that purpose he was the agent alone of his insureds, and he was also acting on his own behalf to obtain the advantages flowing therefrom. True, National Eire encouraged all its agents to arrange for financing premiums for insureds needing such financing since this was good for the business of both the company and the agent. But it is one thing for the company to encourage such activity by its agents, another for it to get into the premium financing field on its own account. We agree with the trial court’s conclusion that there was neither express nor implied agency of Martone for National Eire in the former’s premium financing activities.

Nor do we find liability against National Eire on the principle of apparent agency. National Eire did not knowingly (or at all ) voluntarily place Martone in such a situation that a prudent person, conversant with business usages in relation to premium financing, would be justified in assuming that Martone had authority to act for it in arranging such loans. See C. B. Snyder Realty Co. v. Nat’l Newark, etc., Banking Co., 14 N. J. 146, 154 (1953). Moreover, plaintiff did not rely on any such apparent agency, a requisite for application of the principle. Restatement, Agency 2d, § 265, p. 575 (1958). Its reliance was, as the trial court justifiably found, solely on the verification acknowledgment cards it sent out to the company.

Plaintiff belabors the point that unjustified reliance on the misrepresentation by the plaintiff-victim is not a proper basis for the defense of contributory negligence to an action for fraud and deceit. This is generally so, but is beside the point of the present issue, i. e., whether National Eire is vicariously liable as principal for another’s fraud on the theory of apparent agency. In that special context, reliance by the third person on the apparency of the asserted agency is ordinarily essential for liability.

II

Plaintiff alternatively relied on the theory of National Eire’s direct negligence (1) through the acts of its mail clerks in turning over plaintiff’s letters addressed to the company, concerning premium loans, to Martone; and (2) in inadequately supervising such clerks so as to permit such occurrences. The trial court never explicitly passed on this question, obviating it by its conclusion that plaintiff was barred from recovery on this theory by its own contributory negligence.

The facts, in our opinion, could well have supported a finding that there was actionable negligence, considered apart from the defense of contributory negligence. However, we need not develop that thought as we agree that there was contributory negligence on the part of plaintiff which played a causative role in its loss and that this factor barred the action in its negligence aspect.

We do not agree with all of the subsidiary findings of basic fact and as to factual inferences upon which the trial court relied in arriving at the general conclusion of contributory negligence (e. g., plaintiff’s failure to inquire of the Hew Jersey Department of Banking and Insurance as to Mar-tone’s status or authority; what the verification procedures'of one of plaintiff’s leading competitors were). But we do conceive that as to most of such findings there is enough in the record to support them on review, and that on the= whole, in composite, they warranted a factual conclusions that plaintiff’s damage was the proximate result of its own imprudent conduct, even assuming that some of the circumstances relied on below, taken in isolation, would not necessarily imply negligence.

Plaintiff also argues that events occurring after the making of the “loan” transactions on which it sustained losses are not imputable to its knowledge, as of the time of such transactions, insofar as such knowledge is material to the issue of contributory negligence. However, we find the court’s ultimate conclusion of contributory negligence to be justified on the basis of plaintiff’s knowledge and activities even as of the date of the first fraudulent transaction on which it took a loss (January 1962). (Martone had by then put through some ten previous fraudulent transactions, but he ultimately paid those off in full.)

Eor example:

(a) In January 1960, when Martone submitted his first fraudulent transaction, the premium financed was $17,170, almost eight times larger than any other Hational Eire premium financed by plaintiff through any agent in any state.
(b) Martone instructed plaintiff to send all the assured’s mail directly to his agency.
(c) Although the verification card was purportedly signed by C. E. Perrin, “Supervisor, Acct’s. Dept,” (actually a forgery), it was postmarked Newark (branch office) rather than Hartford (home office). This arguably should have made plaintiff wonder why a supervisor of the accounts department was stationed in a branch or service office; moreover, this was the first verification card ever returned to plaintiff by National Eire from an office other than Hartford or Chicago (their principal regional executive offices).

Martone then submitted two wholly legitimate transactions, both for premium amounts less than $1,000 and with acknowledgment cards signed by an underwriter, but not postmarked at all. He followed this with an “illegitimate” transaction in which a policy was issued (and paid off in full by him) but never delivered to the assured. The premium on this contract was below $2,000 and the verification card was signed by an underwriter and returned from Hartford. Thus, this transaction and the two legitimate ones preceding it followed the normal pattern as to size of loan and origin of verification established on National Eire contracts other than those produced by Martone.

On December 5, 1960 Martone submitted his second fraudulent loan application, which was the first of an uninterrupted string of 18 such contracts before his fraud was discovered. Again, this contract differed from the norm and arguably should have alerted plaintiff in that:

1. The premium financed was $11,250, almost 6 times greater than any other non-Martone, National Eire contract.
2. The premium amount was also much greater than usual for Martone’s policies. Only the first fraudulent transaction had been for a comparably high amount.
3. As in the first fraudulent transaction, the assured’s mail was to be sent c/o L. Martone, and the possibility of interception pursuant to a fraudulent scheme or of the nonexistence of an actual assured was debatedly apparent.
4. The policy was described as casualty although National Eire had previously merged with Continental Casualty Co. and had stopped writing casualty after the merger.
5. Most importantly, the verification card was signed by William A. Bray, Manager, and was postmarked East Orange. This was only the second time that any card concerning National Eire policies had been returned from an office other than Hartford or Chicago and the very first time any card was signed by a person purporting to bo merely a manager.

The next transaction, submitted almost exactly one month later, was again for an unusually high amount (over $12,-000); again it was requested that mail be sent c/o L. Martone Agency, and again there was a verification card signed by Manager Bray and postmarked East Orange. Moreover, the purported signature of Bray was wholly and obviously dissimilar to that on the preceding card. Had plaintiff compared the signatures, its suspicion might well have been aroused.

The remainder of the fraudulent transactions which were fully paid off (and are thus not in suit) contained similar departures from the norm in amount of premium, postmarked on the verification card, and “signature” by Manager Bray. In addition, on one of these the signature on the verification card was W. E. Bray, whereas Bray’s middle initial on all previous cards had been “A,” and the first name had always been spelled out. Since most men do not forget their middle initials, and since most businessmen keep their business signature constant, it could reasonably be found that this should have concerned plaintiff and prompted further inquiry.

Other matters which might have warned plaintiff of danger were: (1) the similarity of addresses of the assureds to Martone’s address (on all but one of the fraudulent transactions not in suit the assured’s mailing address was either •512 Park Ave., 616 Park Ave., or a post office box), (2) the nonsequential and relatively random numbering of policies supposedly written within a short time of each other by the ■same agent; (3) the fact that Nicholas Martone and Louis Martone signed two of the contracts for company assureds; (4) the fact that all payments on all of these high-premium contracts were made by Martone rather than the assured, although plaintiff’s general experience was that assureds paid the premiums directly 80% of the time, and (5) the fact that virtually no payments were made on time and numerous late notices and preliminary cancellation notices had to be sent out by plaintiff.

From the above discussion it is clear that plaintiff could reasonably have been found by the trial court, as fact-finder, to have been forewarned of danger well before the consummation of any of the transactions now in suit, and thus properly adjudged, even as of that time, lacking in the prudence of an ordinary person engaged in the same business under the circumstances.

The subsequent accumulation of further indicia of carelessness by plaintiff throughout the year of the fraudulent loss-transactions (January 1962 to January, 1963), is catalogued in the trial court’s opinion, 97 N. J. Super., at pp. 172-180. We are in substantial agreement with it.

We thus sustain the trial court’s conclusion of contributory negligence as a defense to the action in its negligence aspects.

Ill

Plaintiff urges that, in respect of the two loans submitted to it under the purported aegis of Price Agency, defendant Rothberg was personally liable for the fraud of his partner Martone.

The trial court appears to have decided this claim against plaintiff on the ground that no partnership between Eothberg and Martone ever existed. We affirm on the alternative grounds either that no partnership came into existence or that if it did, it had been terminated by implicit agreement of the supposed partners and total cessation of partnership operations well before the loan applications here involved were presented to plaintiff. The findings of fact by the trial court in relation to the partnership, 9 N. J. Super., at pp. 169-171, are found supported by the proofs, and as a matter of law they support either of the alternative conclusions stated above. See N. J. S. A. 42:1-29, 33, 35. See Silberman v. Angert, 101 N. J. Eq. 477 (Ch. 1927); Lang v. Hexter, 137 N. J. Eq. 100 (Ch. 1945), affirmed 138 N. J. Eq. 478 (E. & A. 1946).

Plaintiff argues also that Eothberg can be held under the theory of partnership by estoppel, arising from the public filing of the trade name (partnership) certificate, pursuant to N. J. S. A. 42:1-16. While this section, on its face, appears to harbor some ambiguity in relation to whether the plaintiff must have relied on the public filing, cf. West Side Trust Co. v. Gascoigne, 39 N. J. Super. 467 (App. Div. 1956), we have concluded that a proper construction of the statute renders such reliance a requisite of liability. We are so persuaded by the cogent analysis of this section of the Partnership Act by Judge Larner in Reisen Lumber & Millwork Co. v. Simonelli, 98 N. J. Super. 335, 339-343 (Law Div. 1967) (decided subsequent to the trial court’s decision in the instant matter), which we herewith approve and adopt. Eeliance by plaintiff’ on the public filing being absent here, Eothberg cannot be held by plaintiff on any principle of partnership by estoppel.

Judgments affirmed.