author: Fusco, J. S. C.

text:
    STATE OF NEW JERSEY, PLAINTIFF, v. ANTHONY FALCETANO, DEFENDANT.
    Superior Court of New Jersey Law Division
    Decided October 20, 1969.

      Mr. Richard, Slavitt appeared for the State (Mr. Joseph P. Lordi, Essex County Prosecutor, attorney).

      Mr. Martin Greenberg, attorney for defendant.
   Decision clarifying order directing psychiatric examination of witness.

Fusco, J. S. C.

Defendant moved for a clarification of an order entered in this court on October 10, 1969, ordering a psychiatric examination for a witness in a murder case who is decedent’s son.

It is defendant’s contention that defense counsel should be allowed to speak with the psychiatrist before the examination is conducted, to discuss the nature of the charges in the case (there are two indictments, one charging defendant with murder and one charging him with assault with intent to kill the witness in question), the circumstances surrounding the homicide, and the history and background of the witness.

The State, on the other hand, has argued that the order, as written, is sufficiently specific and complete to allow for an adequate and comprehensive examination of the witness. The State opposes the request of defense counsel to confer with the psychiatrist before the examination is begun.

Counsel for the witness, appointed by the court, did not appear although notified of motion.

Defendant’s arguments are not persuasive on this matter. The psychiatrist should not make his determination based on what the lawyers—either prosecution or defense— represent to him to be the material facts of this case. He must make a complete and comprehensive physical and mental examination of the witness and come to his conclusions about the witness’ competence, as a witness, as a result of those examinations, coupled with his background of psychiatric knowledge.

Just as “battles of experts” are looked upon with disfavor, so should “battles of counsel” be looked upon similarly in a situation such as this, where the potential for influence and suggestion is strong. A situation in which one party or another tries, in effect, to sell a ‘Till of goods” to an examining medical officer is to be avoided at all costs.

The explanation for this is clear. A psychiatrist should make his examinations, his observations and, ultimately, his determinations, in as objective an atmosphere as is possible. A psychiatric examination requires an atmosphere that is conducive to freedom of expression on the part of the one examined. Cf. Durst v. Superior Court, 222 Cal. App. 2d 447, 35 Cal. Rptr. 143, 147, 7 A. L. R. 3d 874 (App. Ct. 1964).

Without [sufficient] neutrality * * *, if [the psychiatrist] gets swept up in the emotional currents, he cannot maintain that balance of patience, curiosity, empathy, tolerance and mobility of thinking that he needs. Schafer, “On the Nature of the Therapuetic Relationship,” in Katz, Goldstein & Dershowitz, Psychoanalysis, Psychiatry and Law, 722-723 (1907).

On the other hand, counsel are partisans. That is, in fact, their sworn duty. See Canons of Professional Ethics, Canon 5. In such a situation the opportunity for suasion, be it subtle or unconscious, is great. It has been noted that the influence of outsiders at a psychiatric examination can cause the one being examined “consciously or unconsciously, to guard, alter or disguise" his responses.” Cf. Kelley v. Smith & Oby Co., 129 N. E. 2d 106, 109 (Ohio Com. Pl. 1954).

Alter the psychiatrist has prepared his report the court will determine the competence of the witness in a hearing in advance of trial, outside the presence of the jury. That the mental qualification of a person to be a witness is a matter lying within the discretion of the trial judge is not open to question. State v. Franklin, 52 N. J. 386, 399 (1968); State v. Butler, 27 N. J. 560, 602 (1958).

In addition, our Buies of Evidence provide for a procedure to be followed under Buie 7,

Except as otherwise provided in these rules or by other law of this State, (a) every person is qualified to be a witness * *
Buie 8(1) provides for a preliminary inquiry into the qualifications oí a witness by a judge :
When the qualification of a person to be a witness * * * is in issue, that issue is to be determined by the judge. In his determination the rules of evidence shall not apply except for Rule 4 or a valid claim of privilege, * * * The judge may hear and determine such matters out of the presence or hearing of the jury. *■ * S;

The judge is further directed by Bule 17, which states:

A person is disqualified to be a witness i£ the judge finds that (a) the proposed witness is incapable of expressing himself concerning the matter so as to be understood by the judge and jury * * *, or (b) the proposed witness is incapable of understanding the duty of a witness to tell the truth. * * *

The official explanation of this rule notes that,

This rule qualifies Rule 7(a) and goes to the competence of the witness to testify at all. Issues of mental capacity (e. g., insanity * * ®) are tested by this rule and are decided by the judge under Rule 8. N. J. Rules of Evidence, Annotated by the Study Commission of the N. J. Legislature, 15 (1968) [hereinafter cited as Annotated Rules],

At the hearing contemplated by Buie 8(1), the psychiatrist may be called and both sides may examine him, if they so desire. In addition, if there is further information which counsel feel should be brought before the psychiatrist, that information should be brought to the attention of the court at this preliminary hearing. Once a determination is made at the preliminary hearing, that, in effect, concludes inquiries as to this issue. The psychiatrist will not be called to testify in court before the jury.

Of course, the determination by the judge at the preliminary hearing should not be construed to limit the right of the party to introduce before the jury evidence relevant to the weight or credibility of the testimony. Buies of Evidence, Buie 8(1). Additionally, a ruling allowing the witness to testify does not bar challenges to the weight of the testimony. Annotated Bules, supra.

The order previously handed down by this court is therefore clarified to the extent that it is now ordered that counsel for the prosecution and counsel for defendant should not communicate with the psychiatrist prior to his examination or his original determination.


source: Caselaw Access Project

author: Pee Cueiam.

license: Public Domain

text:
    FIRST NATIONAL STATE BANK OF NEW JERSEY, A CORPORATION ORGANIZED UNDER THE BANKING LAWS OF THE UNITED STATES, PLAINTIFF-RESPONDENT, v. CARLYLE HOUSE, INC., A NEW JERSEY CORPORATION, ET AL., DEFENDANTS, AND ACME PLASTERING CO., INC., ARCTIC CONTRACTING CORP. AND ESSEX IRON WORKS, INC., DEFENDANTS-APPELLANTS.
    Superior Court of New Jersey Appellate Division
    Argued November 10, 1969
    Decided November 17, 1969.
    Before Judges Goldmark, Lewis and Matthews.

      Mr. Seymour Margulies argued the cause for appellants (Messrs. Levy, Lemken and Margulies, attorneys for Acme Plastering Co., Inc. and Arctic Contracting Corp.; Messrs. Cohn and Turk, attorneys for Essex Iron Works, Inc.; Mr. Margulies and Mr. Sanford Schneider, on the brief).

      Mr. Bertram M. Light, Jr. argued the cause for respondent.
   Pee Cueiam.

The Chancery Division judgment is affirmed for the reasons stated in Judge Mintz’ well-considered opinion, 102 N. J. Super. 300.


author: Sullivan, P. J. A. D.

text:
    STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT, v. EDWARD A. BURT, DEFENDANT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Argued October 20, 1969
    Decided November 14, 1969.
    Before Judges Sullivan, Carton and Halpern.

      Mr. Arthur Penn, Assistant Deputy Public Defender, argued the cause for appellant (Air. Stanley G. Van Ness, Public Defender, attorney).

      Mr. I. Michael Heine, Assistant Prosecutor, argued the cause for respondent (Mr. A. Donald Bigley, Camden County Prosecutor, attorney).
   The opinion of the court was delivered by

Sullivan, P. J. A. D.

Defendant was convicted of murder in the second degree in the shooting death of Kobert (Shorty) Owens. This appeal, prosecuted on his behalf, does not challenge the sufficiency and adequacy of the State’s proofs. Bather, it is contended that numerous prejudicial trial errors were committed which deprived defendant of his right to a fair trial and require that the judgment of conviction be set aside and a new trial granted.

The State’s witness Everline Adams testified that she was a long-time friend of Owens and on the day in question left her home in Philadelphia to visit him. When she arrived at Owens’ home in Camden, she found Owens and defendant sitting at the dining room table. The three sat around the table for about an hour talking, drinking and listening to records.

Mrs. Adams then went to the bedroom on the second floor. While there she heard the sound of a scuffle, a groan and a shot from a gun. She heard another shot and heard someone fall to the floor. Defendant then came upstairs to the bedroom with a gun in his hand and told Mrs. Adams that he was going to kill her just like he killed Owens. After taking five dollars from her he raped her. He then forced her to accompany him to a car parked about three blocks away from the house. Defendant drove her around for a while and ultimately let her out at a bus station.

Later that same night a police officer of the Borough of Clementon, investigating a report of a broken window at premises of the Trio Tire Co., found defendant hiding in a stack of tires. A gun, later identified as the murder weapon, was in defendant’s right front pocket.

Defendant’s first point is that his constitutional right to remain silent was eroded by the following trial incident.

After the State had rested its ease, the defendant took the witness stand in his own behalf and testified that the shooting death of Owens was accidental. His testimony was to the effect that he had been drinking with Owens, that an altercation developed, and that Owens took a gun out of his pocket and pointed it at defendant. While struggling with Owens in an effort to take the gun away from him, the gun was accidentally discharged twice and Owens was killed. On cross-examination, defendant was asked if he had ever told the police that the shooting was accidental to which he replied “no sir.”

The following day counsel for defendant told the court that the foregoing cross-examination might have created the impression in the minds of the jury that defendant was under some obligation to say something to the police. He therefore asked the court to instruct the jury at that time that defendant had no obligation to tell the police anything.

In the colloquy which followed the court stated that the cross-examination was proper and that no curative instruction was needed. The trial judge said that in his charge to the jury at the end of the case, he would appropriately charge the jury that “no burden exists upon the defendant.”

At the conclusion of the trial the prosecutor, in his summation, referred to the credibility of defendant’s story as follows:

He never told the police he accidentally shot Shorty Owens, never, at least up until the time he was lodged in Camden County Jail, and yet he is here, sitting here today asking you to believe this story. If this was an accidental shooting why didn’t he go and say “I just accidentally shot somebody.”

Defendant’s argument is that the aforesaid cross-examination and prosecutor’s comments sought to draw the inference that the story of an accidental shooting had been fabricated after the event. This, argues defendant, was a violation of his constitutional right to remain silent, since he was under no duty or obligation to give any explanation to the police.

We conclude that no violation of defendant’s constitutional rights was involved. The thrust of the prosecutor’s remarks was not that defendant had remained silent after he had been arrested but rather that if the shooting had been accidental, as defendant claimed, the normal reaction would have been to so indicate to the police at the earliest opportunity. This was legitimate argument for the State to make.

The State, in its main case, made no reference whatever to defendant’s remaining silent after he had been arrested and charged with the murder. However, when defendant waived his right to remain silent, took the witness stand in his own defense, and for the first time said that the shooting had been accidental, he thereby subjected himself to cross-examination as to the credibility of his story. This involved consideration of whether the story had been fabricated after the shooting. Defendant’s failure to tell anybody at the time that the shooting of Owens was accidental was relevant to the issue of the credibility of his courtroom testimony and was permissible. Sharp v. United, States, 410 F.2d 969 (5 Cir. 1969); United States v. White, 377 F.2d 908 (4 Cir. 1967), cert. den. 389 U. S. 884, 88 S. Ct. 143, 19 L. Ed. 2d 180 (1967); May v. State, 211 So. 2d 845 (Miss. Sup. Ct. 1968); State v. Zappia, 8 Ariz. App. 549, 448 P. 2d 119 (1969); cf. State v. Fioravanti, 46 N. J. 109, 116-118 (1965), cert. den. 384 U. S. 919, 86 S. Ct. 1365, 16 L. Ed. 2d 440 (1966). But see: United States v. Brinson, 411 F. 2d 1057 (6 Cir. 1969). The balance of the Court’s opinion dealing with additional points raised by defendant is omitted from publication.


author: Kilkenny, P. J. A. D.

text:
    NOBERO CO., PLAINTIFF-RESPONDENT, v. FERRO TRUCKING INC., DEFENDANT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Argued October 20, 1969
    Decided November 18, 1969.

      Before Judges Kilkenny, Labreoque and Leonard.

      Mr. Ralph G. Mesce argued the cause for appellant.

      Mr. Richard J. Sauerwein argued the cause for respondent (Mr. John D. Leslie, Jr., attorney).
   The opinion of the court was delivered by

Kilkenny, P. J. A. D.

Plaintiff landlord sued defendant tenant for damage to the tenanted building in Hillside, Hew Jersey, which resulted from a fire allegedly caused by defendant’s negligence. The case was tried before a jury. After 12 minutes of deliberation it returned a unanimous verdict in favor of plaintiff for $17,000, the stipulated amount of the damage. Defendant timely appealed the judgment based upon the verdict.

Reversal is sought on two grounds. First, defendant contends that the trial court erred when it allowed into evidence, over objection, testimony by Fire Captain Mateer of the Hillside Fire Department that, in his investigation of the fire, he was told sometime after the fire by one of two employees of defendant, who were in the building when and where the fire occurred, that the fire was caused, in essence, by the use of gasoline, which the fire captain concluded was a “careless use of gasoline.” The fire captain was unable to identify which one of the two employees made this statement to him.

The second claim of reversible error is that the trial court abused its discretion in allowing plaintiff’s attorney to lead unduly plaintiff’s witness, Fire Captain Mateer, in the critical area adverted to above, over defendant’s repeated objections thereto.

The record discloses the following facts. During the early afternoon of July 12, 1966 a fire broke out at the premises owned by plaintiff and leased to defendant for the garaging and maintenance of its trucks. Vincent Haddeo, a foreman or maintenance supervisor in the employ of defendant for 15 years, and Walter Marcin, a mechanic in the employ of defendant for nine years, were the only two persons in the garage occupied by defendant immediately prior to and at the time the fire began. There was “just one” vehicle in the garage, “a tractor.” There was no trailer attached to it. Defendant owned the tractor.

The tractor had been in the garage three to four weeks. It was there for a complete overhaul — “transmission, rear, tires, brakes.” Marcin testified, “Everything was completed outside of the tail light. All we had to do was take it outside and adjust the governor on it.” That would have been the next job. The vehicle had been painted inside the garage; it had remained within the building during the three or more weeks of the complete overhaul.

At the time of the fire Marcin was replacing the tail light; he had started to take off the old tail light. It was to be replaced by a new assembly, which was on the floor “right alongside of” Marcin. He had only started “to twist one bolt” when he saw the fire. Haddeo was on the right side of the truck. Marcin could see only his feet. Marcin testified that he was in the back of the tractor, in a “squatted” position, when he saw “a big ball of flame” coming, moving across the floor toward them, from the left front of the building, “as you look at the front from inside the building back toward the left front of the truck.” Marcin described the floor as “clean as a whistle” and the ball of fire as being “about two feet.” He yelled to Haddeo, “Eire on the deck,” jumped up, and he and Haddeo ran for the fire extinguisher to try to put it out. Hot succeeding, both men ran and called the fire department. Marcin called from “next door” and Haddeo phoned from the “back room” of the garage.

Neddeo testified that immediately prior to the fire he was “in the process of removing what is called a pressure sensitive stencil, this is self-adhesive.” He was half-way through the removal of that on the right door when the fire took place. He denied telling Captain Mateer that he had washed the truck down with gasoline. He explained, “In the trade you don’t use solvent, and gasoline is a solvent, to remove over-spray or anything from a vehicle, you can’t even use soap and water, not only gasoline.” This is so, said Haddeo, “because it will dull the finish or probably lift it from the metal which it has been sprayed onto.”

Marein stated in his testimony that he ££believed” there was one five-gallon can of gasoline, which was kept toward the front of the building ££by the door.” He “believed” that it was in the building .on the day of the fire. The can had a “screw top.” Marein testified that he knew the top was screwed on. The gasoline was used primarily for emergency calls “when a truck breaks down and runs out of gas.” It was also used “sometimes” for washing parts. Marein testified that neither he nor Uaddeo had washed any parts that day in gasoline. While admitting that he smoked cigarettes, Marein swore that he was not smoking at the time when he was working behind the truck. The tractor itself had a gasoline tank on it.

The foregoing summary of the testimony of Marein and Uaddeo, the only two occupants of the garage when the fire began, leaves unanswered the question, “Who started or what was the cause of the fire?” Their actions, immediately before the ball of flame was first seen — Marein’s removing a tail light assembly preparatory to its replacement with a new one and Naddeo’s work effort at the right door in removing a pressure sensitive stencil, self-adhesive — do not establish a causal relationship to the fire. Yet, the fire did occur and these employees of defendant were the only two persons in the building at the time.

There was only 'one other witness, namely, Eire Captain Mateer. The testimony of this witness, objected to by defendant in certain critical areas hereinafter discussed and admitted over objection, was crucial to a finding of liability. We shall first summarize it and then discuss the propriety of its admission by the trial court.

Captain Mateer testified that he was in the firehouse about a block or two away from the scene of the fire, on the same street but on the opposite side thereof, when, at about 2 :28 p.m., a pedestrian entered the firehouse and informed him that “there was a truck on fire down the street,” pointing eastward. Assuming it was a fire in the street, he left the firehouse on an engine pumper, along with the driver and one other fireman on the rear step. Usually a full crew consists of five, but the vacation time and a man out sick left the captain undermanned, with only two fire fighters besides himself.

As the fire-fighting trio pulled from the set-back firehouse into the street, the captain could see down the street to Eerro’s garage and observed the cinder block building fully involved in fire. He could see smoke and flames coming from the building. As he approached he observed Naddeo coming out of the building in the smoke and fire, falling, “actually being blown out of the building.” Naddeo fell into the street, picked himself up and “ran toward my engine.” Mateer went to Naddeo immediately. He asked Naddeo “if there was anyone else in the building.” Naddeo answered, “No.” In his report of fire the fire captain noted also, “He [Naddeo] told me everyone was out but there was a tractor and a lot of gasoline in the building.” (Emphasis added).

Captain Mateer did not ask Naddeo anything else at this point. His sole concern, he said, was to extinguish the fire, to save life and property. It took approximately a half-hour to extinguish the fire. But the captain was at the scene “for three hours.” He stated that he talked “to all employees in the company” during that time. The captain testified that there were three employees there during the three hours — Marein, Naddeo and “a third kid,” described by him as “a thin boy, tall thin kid.” The third person was never further identified and did not appear as a witness at trial. The captain’s reference to this hoy is directly at variance with the testimony of Marcin and Naddeo that they were the only two persons in the building when the fire started.

The captain testified that he spoke to Naddeo “about his condition, he was burned. I told him to get a doctor, I was a little bit concerned.” Naddeo did not feel that this was immediately necessary. Mateer was positive that he spoke to both Marcin and Naddeo but, except in the particulars hereinabove mentioned, he did not specify when, during his three hours’ presence the critical conversation hereinafter adverted to took place.

Captain Mateer was then asked if Marcin or Naddeo had told him what occurred. He knew that “one of them” had told him, but he could not recall “which of the two” it was. Defendant’s attorney thereupon objected to the captain’s further testifying as to the conversation, since he was unable to identify the particular employee who made the statement. Defendant’s objection was argued outside the presence of the jury. Plaintiff’s attorney was permitted to place on the record his proffer of proof. The trial court overruled the objection, ruling that

* * * any admission testified to by either employee concerning this fire and their work at that particular time is admissible and is authorized and within the scope of their employment so, to speak. There is no question in my mind concerning admissibility; the question is whether or not you are being disadvantaged by the failure of the plaintiff to identify the person alleged to have made the admission. [Emphasis added]

The trial judge found no disadvantage, in that there were only two employees involved and defendant had the power to produce them and ask them whether they made the statement to which the captain was about to testify.

Upon the return of the jury the question was posed again by plaintiff’s attorney to Mateer as to what “either of these gentlemen had said when inquiry was made as to what had occurred or what happened.” Mateer testified “one” of them said:

They had stenciled the name of the trucking firm on the door of the truck and there was an over-spray of paint on another section of the truck and they were washing it off with gasoline * * * there was a flash of fire and the fire developed.

The next day the captain made up his customary report and set forth therein as the cause of the fire: “Careless use of gasoline.” He interpreted this to mean “to use gasoline for any purpose other than to run a cumbustible engine.” The report gave no details and recited no reason for the conclusion, “Careless use of gasoline.” Nor did the report contain the statement allegedly made by “one” of the two “employees that they were using gasoline” to wipe down over-spray.

After Captain Mateer had testified, Marcin was recalled. He admitted having had a conversation with the captain on July 12, 1966, but he stated that he did not tell the captain he had washed the truck down with gasoline, or any part of the truck. He explained that there was a new paint job on the truck and “if we used gasoline on that paint it would take the gloss right oil it.” The truck had been wiped down “with dry rags.” This testimony coincided with that of Naddeo, noted above, in its denial that Captain Mateer had been told that the truck had been washed down with gasoline and in its explanation why gasoline would not be used on a newly painted truck.

I

The trial judge admitted the statement to the fire captain on the ground that it was an “admission” by an agent (someone of the only two) and was, therefore, admissible against defendant principal. He noted that allowing this evidence did not disadvantage defendant because it could, as it did, call both of the two employees to deny making the statement. Additionally, both testified as to why gasoline would not have been used for the stated purpose.

The general rule in this State has been that, absent a "res gestae” declaration, “The admissions of an agent bind a principal only when within the scope of the agency or when they are authorized by the principal.” Hansen v. Eagle-Picher Lead Co., 8 N. J. 133, 145 (1951). No claim is made that the statement made to the fire captain, sometime within the three hours while he was at the scene, was a spontaneous utterance to justify its admissibility under the “res gestae” exception. In Hansen statements made by defendant’s superintendent and by its personnel manager after the accident were held to be inadmissible because they were “not shown to have been authorized or made during the performance of the duties of their employment; that they relate to the employer’s business is not enough.” If Hansen still governed, a similar result would be mandated here, because there was no proof that Marcin, a mechanic, or Naddeo, a maintenance supervisor, had been authorized, expressly or impliedly, to make any admission against their employer’s interest. Nor did either make the alleged statement “during the performance of their duties.”

In Cafone v. Spiniello Construction Co., 42 N. J. Super. 590, 604-606 (App. Div. 1956), we acknowledged the rule laid down in Hansen but noted that it was not necessary to prove that the agent had “express” authority to make the admission. We ruled that statements made by an agent are admissible in evidence against _ the principal, stating: “If they are ordinary incidents of the position occupied by the agent, authority ought to be implied.” (At 605). In that case statements made by the president and part owner of defendant to the police, who were conducting an investigation into an accident in the course of the company’s operation, were held to have been made within the apparent ambit of his agency and, therefore, admissible.

In Carter v. Public Service Coord. Transport, 47 N. J. Super. 379 (App. Div. 1957), we deemed inadmissible as an admission against defendant bns company a statement by a bus driver. We relied upon the rule laid down in Hansen v. Eagle-Picher Lead Co., supra. The statement related to the bus driver’s knowledge of plaintiff’s pregnancy, because of its bearing upon his exercise of reasonable care in preparing for her boarding the bus. But we noted (at 385) that “Bule 63(9) of the Uniform, Rules of Evidence would render the statement admissible, since it related to a matter within the scope of the agent’s duty and was made while the driver was still employed as agent.” Rule 63(9) had not yet been adopted in New Jersey in 1957, when the Garter case was decided. Por that reason, we felt compelled to follow the exclusion required by such cases as Hansen, supra.

Since then we have adopted, as part of our new rules of evidence, R. 63(9). These new rules were put in force on September 11, 1967. The trial of the instant ease took place on October 38, 1968, thereby making the new rules of evidence applicable. R. 63(9)(a) represents a departure from New Jersey law as represented by Hansen v. Eagle-Picher Lead Co., 8 N. J. 133, 145—146 (1951), and Carter v. Public Service Coord. Transport, 47 N. J. Super. 379 (App. Div. 1957). See Comment on R. 63(9) (a) in Report of the New Jersey Supreme Court Committee on Evidence (March 1963), at 165. The comment points out that the old rule excluding the admission by the agent had been severely criticized by outstanding scholars and in recent cases, citing Martin v. Savage Truck Line, 121 F. Supp. 417 (D. D. C. 1954), and Grayson v. Williams, 256 F.2d 61 (10 Cir. 1958). R. 63(9) (a) adds as a safeguard to protect against vengeful or vindictive accusations that the statement be made while the employment relationship continues. That safeguard was present in the instant case.

We view R. 63(9) (a) as sanctioning the admissibility of admissions made by agents when they are made before termination of the employer-employee relationship and when they relate to matters within the performance duties of the agent. The new rule is based upon the necessity of arriving at the truth, common sense and public policy. “To continue the old restriction would be to immunize all principals from statements made by their working agents and employees who transact their business and who get into the accidents.” See Comment on B. 63 (9) (a), referred to above. The rule tends to guarantee the trustworthiness and reliability of the vicarious admissions.

We conclude that the trial court ruled correctly in admitting the statement made by an agent of defendant to the fire captain in the course of his investigation, with reference to the employees’ having washed off the over-spray of paint with gasoline, immediately before the fire. It matters not which one of the employees made the admission. Both denied it. Credibility was for the jury.

II

Defendant next contends that plaintiff’s witness, Captain Mateer, was unduly led by questions addressed to him and permitted to answer leading questions, over allegedly repeated objections by defense counsel.

However, we would not regard the challenged leading as a basis for reversal herein. True, there was some leading, but it became necessary because of the captain’s reference to the presence of three employees during his three hours at the scene, when there were only tivo employees of defendant in the premises at the time of the fire. While leading questions are generally not permitted on the direct examination of one’s own witness, there is an area of permissible leading, within the discretion of the trial judge, to avoid confusion, to clarify testimony, or otherwise to bring out the truth in serving the cause of justice. Williams v. Guerreri, 136 N. J. L. 60, 61 (Sup. Ct. 1947). We do not find herein any abuse or mistaken exercise of discretion by the trial judge as to this aspect of the case. Hor, as plaintiff points out in its brief, did defendant’s attorney make the claimed “repeated objections” on the ground that the questions were “leading.” Objections were based on other grounds, such as lack of identity of the particular employee who made the alleged statement to the fire captain. See Shutka v. Pennsylvania R. R. Co., 74 N. J. Super. 381, 404 (App. Div. 1962). An objection to testimony should be accompanied by the grounds therefor. R. R. 4:47 (now R. 1:7-3).

Ill

We note that defendant has made no claim that the verdict was against the weight of the evidence. Perhaps this was due to the fact that no motion for a new trial was made.

The judgment is affirmed.


author: Caeton, J. A. D.

text:
    BERNADINE BOYD AND ALLEN BOYD, HER HUSBAND, PLAINTIFFS-RESPONDENTS, v. WALTER WAYNE STEELE, DEFENDANT-APPELLANT, AND GLORIA STEELE, SAMUEL THOMPSON AND W. E. NEILL ASSOCIATES, DEFENDANTS.
    Superior Court of New Jersey Appellate Division
    Argued October 6, 1969
    Decided November 20, 1969.

      Before Judges Sullivan, Caeton and Halpekn.

      Mr. Kenneth J. Dawes, Jr. argued the cause for appellant (Messrs. McLaughlin, Dawes & Abbotts, attorneys).

      Mr. Mario A. Iavicoli argued the cause for respondents (Messrs. Bollen and Batof, attorneys).
   The opinion of the court was delivered by

Caeton, J. A. D.

Defendant Walter Steele appeals from an order requiring the Unsatisfied Claim and Judgment Fund Board to pay $10,000 to plaintiff Bernadine Boyd in partial satisfaction of an uncollected $70,000 judgment in her favor for personal injuries.

Plaintiff, a passenger in an automobile operated by Steele and owned by his wife, defendant Gloria Steele, sustained serious personal injuries when the automobile ran off the highway and struck a house. She brought action to recover for her injuries against the Steeles and also against defendants W. E. Neill Associates, the alleged employer or master of Walter Steele, Samuel Thompson, the operator of another automobile involved in the collision, and Colonial Pipeline Co. Bernadine’s husband, Allen Boyd, joined as a party plaintiff in that action seeking to recover damages representing expenses incurred in caring for Ms wife and for loss of her services and consortium.

Since the vehicle in which the Steeles were riding was uninsured, defense on their behalf was undertaken through the Eund. W. E. Neill Associates was defended by attorneys for their insurance carrier.

During the course of the trial, the trial judge granted judgments of involuntary dismissal with prejudice as to all defendants except Walter Steele. Before the jury determination, but after the dismissal of the action against W. E. Neill Associates, the latter’s insurance carrier, through their attorneys, settled Allen Boyd’s claim for loss of Ms wife’s services and consortium for $22,000.

The trial continued against Walter Steele, resulting in the verdict in favor of Mrs. Boyd.

The record leaves much to be desired as to the basis of the husband’s settlement. It appears that Mr. Boyd, as a consideration for the payment, executed a convenant not to sue W. E. Neill Associates and that he would not appeal. Mrs. Boyd presumably did not execute a similar convenant. Plaintiff has offered no explanation as to why her claim was not also settled by the same defendant. Yet, she did not appeal despite the severity of her injuries and the likelihood her judgment would be largely uncollectible. Rather than remand the matter to take proofs as to the understanding of the parties concerning the settlement in order to clarify whether Mrs. Boyd may have, in fact, benefited from the settlement, we have concluded that we should decide the case on the basis of the legal issue involved.

The Fund’s position is that the statute in terms fixes a maximum limit of $10,000 which may be paid from the Fund when only one person has sustained personal injuries in a single accident and that the settlement of the husband’s claim for an amount in excess of that maximum constituted full payment “by way of settlement” of her claim against the Fund under N. J. 8. A. 39 :6—70 (m) and N. J. 8. A. 39:6—71.

The trial court rejected this approach and adopted the view that since the law recognizes a man’s relational interest in his wife and gives him a cause of action against one who negligently invades that interest, the husband’s claim must be treated as separate and apart from that of his wife. On this basis the trial court concluded that the settlement of the husband’s case was not a payment within the purview of the statute and should not be deducted from her claim.

Eesolution of the question posed requires an interpretation of the pertinent statutory provisions in the light of the policies underlying the Fund Law. Its purpose has been stated as not to make every claimant whole, but to provide some basic measure of relief from the injured person’s absorption of the entire economic loss occasioned by the accident. See Dixon v. Gassert, 26 N. J. 1 (1958); Wormack v. Howard, 33 N. J. 139 (1960). Although the statute is to be liberally construed to advance the remedy it affords, due regard must be given to the protection of the Fund against fraud and abuse. Wharton v. Knox, 98 N. J. Super. 61 (App. Div. 1967).

N. J. S. A. 39 :6-69, in pertinent part, provides that the judgment creditor may apply to the court

* * * for an order directing payment out of the fund, of the amount unpaid upon such judgment for bodily injury or death, which does not exceed * * *'
(a) The maximum amount or limit of $10,000, exclusive of interest and costs, on account of injury to, or death of, 1 person, in any 1 accident * * *.

The intent of the Legislature to limit the exposure of the Unsatisfied Claim and Judgment Fund to $10,000 for the injury of any one person in one accident is thus clearly and precisely delineated. That such is the legislative intent finds further support in N. J. S. A. 39:6-73, which mandates that no order shall be made for payment and the treasurer shall make no payment out of the Fund in excess of $10,000, exclusive of interest and costs on account of injury to, or death of, one person in any one accident.

Consequently, where the wife is the person injured, the maximum exposure of the Fund is $10,000 irrespective of whether derivative claims may arise from her bodily injuries. The husband’s claim here is a derivative one and arises from his relationship to his wife. The husband himself was not involved in the accident and was not physically injured. He would have no claim against the uninsured defendant were it not for the personal injuries sustained by his wife, and this is so notwithstanding the fact that the law recognizes that relational interest and gives him a separate cause of action against one who negligently invades it. Patusco v. Prince Macaroni, Inc., 50 N. J. 365 (1967).

In the analogous case of Jones v. Williams, 53 N. J. Super. 16 (App. Div. 1958), an infant and his father each recovered judgments in excess of the statutory maximum, the boy for his personal injuries and the father for his consequential damages for loss of services. We held that the father and son could not be deemed two separate claimants against the Fund for the purpose of permitting each to collect $5,000, but that the Fund’s exposure was limited to the then total maximum of $5,000. The court said:

Subparagraph (a) of section 69 plainly makes the determinant of the applicability of the $5,000 maximum limitation the fact of injury (or death) of “one person” “in any one accident” (emphasis supplied). Only where “more than one person” is injured (or dies) “in any one accident” does the $10,000 limitation apply. Subparagraph (b). Only one person was injured in the single accident which is the foundation for the present judgments and claims. Therefore the $5,000 limitation is applicable regardless of whether or not the claims of both plaintiffs are properly deemed compensable out of the fund, [at 19]

The court went on to say:

The same result has been arrived at elsewhere under comparable statutes on the theory that both the direct and the consequential injury claims are founded upon “one injury.” [Id.]

The reasoning in J ones is apposite to the present situation. Had the husband’s claim for his loss of his wife’s services and consortium not been separately settled by W. E. Neill Associates and proceeded to judgment, submission of both claims to the Eund on the theory that each was entitled to receive the statutory maximum would present exactly the same question that was before the court in Jones and would compel the same result. The circumstance that the husband, instead of proceeding to judgment against W. E. Neill Associates, settled his derivative claim and received payment through a third-party defendant does not justify a different result or serve to increase the maximum exposure permitted by the statute.

Although not directly applicable to the present situation, we note that similar language in the limitation clause of an automobile liability insurance policy has been held to place a limit on the total amount recoverable by both the wife who sustained the bodily injuries and the husband for his derivative loss. Williams v. State Farm Mut. Auto. Ins. Co., 99 N. J. Super. 377 (Law Div. 1968), aff’d 104 N. J. Super. 403 (App. Div. 1969), aff’d 54 N. J. 580 (1969). And see annotation, 13 A. L. R. 3d 1228 (1961).

We turn now to the contention that the provisions of N. J. S. A. 39 :6—70 and 11 support the conclusion that the settlement of the husband’s claim was not a payment within the meaning of the statute and therefore should not be deducted from or charged against plaintiff’s claim for payment. In considering this aspect of plaintiffs’ argument, we proceed on the assumption made by all the parties throughout this action and on this appeal, that recovery against the Eund may be made by both the wife, who sustains the bodily injuries in the accident, and the husband, who sustains the consequential loss resulting from such injuries. Cf. Jones, supra, at 18.

These statutory provisions set forth the requirements which the applicant must establish and which the court must also find have been satisfied before an order may be entered for payment from the Eund. They are in part concerned with substantive requirements and in part with procedural conditions relating to the nature of proof required.

N. J. S. A. 39 :6-70(m) and 71(b) contain references to amounts “received” by the applicant or plaintiff “by way of settlement.” Plaintiffs stress that these phrases inferentially recognize the husband’s historic right of a separate recovery for the negligent invasion of his interest. This language may lend support to this contention as well as to the assumption that consequential damages are properly the subject of a claim by the.husband against the Eund wholly separate and apart from that of his wife. It does not follow, however, that because the husband’s separate right of recovery may have been thus implicitly recognized, that the Legislature intended thereby to increase the maximum recovery permitted by the statute. The fact that the husband here is not technically the plaintiff or the applicant in this proceeding is not controlling. These sections must be interpreted in relation to the other provisions of the statute. They may not be attributed a meaning running counter to the basic policy embodied in N. J. 8. A. 39 :6—69 and 73, which proscribe a total payment in excess of $10,000 where only one person receives bodily injuries in a single accident.

Nor is recognition of the husband’s right to make a claim for his derivative damages apart from the primary claim of his wife in anywise inconsistent with the legislative intent of placing a maximum limit on the aggregate of both claims.

Upon the hypothesis that both husband and wife may properly make a separate claim against the Eund, that legislative intent is accomplished by treating the claims of both as one for purposes of determining the maximum payment permissible. The ultimate objective of providing a basic measure of relief from the claimant’s absorption of the entire economic loss occasioned by the accident would be subverted if the husband’s recovery, although entirely derivative in nature and arising solely because of the wife’s injury, should be treated as unrelated to the latter’s claim and not to be considered in conjunction with it.

These provisions of the statute requiring that amounts received in settlement by one must be deducted from the claim of the other may well be a legislative recognition, at least for purposes of receiving payments from the Eund, that “realistically * * * [the wife’s] overall experience depends upon her husband’s exchequer.” See Patusco, supra, at 373.

The facts of this case provide support for such an interpretation. Here both husband and wife acted in concert. They brought a common action against the uninsured defendant and other third parties. They were represented by the same attorneys in the settlement of the husband’s action and in this proceeding. Under such circumstances it would be contrary to the spirit as well as the letter of the statute not to require that amounts received by the husband must be deducted from plaintiff’s claim in this proceeding. Cf. Patusco, supra, at 374.

We observe that both the primary claim of the injured wife and the husband’s derivative claim are ordinarily settled or tried together, and together are made the basis of application for payment from the Eund. But if the separate claims of husband and wife are actually in competition with each other, and in the aggregate exceed the statutory maximum, payment of either, without regard to the claim of the other, may so diminish the amount available for payment to the other (or indeed exhaust the overall amount available) as to operate in an inequitable manner. Since we are not confronted with the latter situation here, we express no opinion as to whether and under what circumstances the court may make a protective order, establish priorities between the rival claims, or apportion between them.

The order for payment is reversed and judgment entered in favor of the Unsatisfied Claim and Judgment Eund Board.


author: Lora., J. S. C.

text:
    MILDRED GERHARD, INDIVIDUALLY AND GRACE BALLISTRERI AND MOSES DAVIS, EXECUTORS OF THE ESTATE OF HERBERT C. POLLARD, DECEASED, PLAINTIFFS, v. THE TRAVELERS INSURANCE COMPANY, AN INSURANCE CORPORATION, CALIFORNIA-TEXAS CORPORATION, A FOREIGN CORPORATION, AND CORNELIA M. HARRIS, ALSO KNOWN AS CORNELIA M. POLLARD, DEFENDANTS.
    Superior Court of New Jersey Chancery Division
    Decided November 7, 1969.

      Messrs. Lebson & Prigoff, attorneys for plaintiffs (Mr. Milton Prigojf appearing).

      Mr. Norman 8. Qostanza, attorney for defendant Travelers Insurance Company.

      Messrs. Morrison, Lloyd and (Briggs, attorneys for defendant Calif ornia-Texas Corporation (Mr. William B. Morrison appearing).
   Lora., J. S. C.

This is an action in which plaintiffs Mildred Gerhard, the daughter and sole beneficiary under the will of decedent Herbert Carson Pollard, and Grace Ballistreri and Moses Davis, executors of the estate of Herbert Carson Pollard, whose letters testamentary issued in Baltimore County, Maryland, bring suit on a life insurance policy which the deceased had held with defendant Travelers Insurance Company. Declaration is sought that either Mildred Gerhard or, in the alternative, the deceased’s estate is entitled to the policy proceeds.

Defendant California-Texas Corporation (Oaltex) obtained a group disability and death benefit insurance policy from Travelers. The deceased, an employee of Oaltex until 1959, was an insured under the group policy and, on September 20, 1951, while in Sumatra-Indonesia designated “Cornelia Meerbeek Pollard, wife” as his beneficiary by filing with Oaltex a change of beneficiary form which provided: “And the right is reserved to revoke this designation and subject to due notice to the Employer to nominate a new beneficiary.”

Paragraph two of the “Provisions” in the policy provided the manner in which the named beneficiary could be changed. That paragraph reads as follows:

2. Change of beneficiary. Any employee insured hereunder may designate a new beneficiary at any time by filing with the employer a written request for such change on forms furnished by the company, but such change shall become effective only upon endorsement thereof by the Employer on the insurance record card at the office of the Employer where the records of the Employee’s insurance under this policy are maintained.
Upon such endorsement, the change shall relate back to and take effect as of the date the Employee signed such request whether or not the Employee is living at the time of such endorsement but without prejudice to the Company on account of any payment made by it before such endorsement.

The certificate of insurance held by decedent, dated October 1, 1952, refers to the terms, conditions and provisions of the group life insurance policy covering employees of Caites issued by Travelers and states that a sum determined in accordance with the “Plan of Insurance” in said policy is payable to “Cornelia M. Pollard, wife as beneficiary,” and that “Payment of the amount of the Employee’s insurance under said Policy shall he made to the beneficiary designated by the Employee * * On the reverse side, and under the heading “Beneficiaries,” the certificate further provides:

Under the group policy the Employee has the right to change the beneficiary. If there be no beneficiary designated by the Employee or surviving at the death of the Employee, the group policy provides that payment shall be made as follows: To the wife or husband of the Employee, if living at the death of the Employee; if no wife or husband of the Employee be then living, to the surviving children of the Employee * * *.

However, the certificate itself does not set forth the manner in which a change of beneficiary is to be effectuated.

It is uncontroverted that the deceased never filed a written request to change beneficiary or a designation of beneficiary according to the provision in the policy, other than the one of September 20, 1951. However, on October 8, 1964 the deceased obtained a divorce from Cornelia Pollard in Circuit Court No. 2 of Baltimore City, Maryland. The divorce decree incorporated a separation agreement entered into on June 23, 1964, wherein Cornelia Pollard waived any further rights in the property of the deceased, the pertinent part reading as follows:

3. Pending the final decree of the Court, neither party will interfere with the rights or privileges of the other, and neither party will claim any rights in the ownership or property of the other, and all claims to each other’s property is [sic] expressly waived.
4. That the provisions of this stipulation shall be incorporated in any decree or order passed by the Court having jurisdiction of the matter.

It is clear there was no discussion of the insurance at the time of the divorce or at the time of the separation agreement, Mrs. Pollard, who was not represented by counsel, simply stating she was surrendering her rights to everything her husband had.

The insured Pollard died on April 7, 1965, and on April 14, 1965 Moses Davis, an executor of decedent’s estate, notified Caltex in writing of Pollard’s death and enclosed a copy of the executors’ appointment by the Orphans Court of Baltimore County. Subsequently, on April 19, 1965, Davis discussed the matter further with Caltex on the telephone.

By letter dated April 20, 1965 Caltex referred to Davis’ letter of April 14, 1965 and telephone conversation of April 19, 1965, but stated their records “confirm that Cornelia M. Pollard, wife •—■ is the designated beneficiary in connection with death benefits payable under the company’s insured Annuity and Group Life Insurance Plans. We will contact Mrs. Pollard directly.”

On April 21 or 22, 1969, Davis wrote H. E. McCabe, the Caltex benefits adviser, requesting that Caltex withhold any notification to the named beneficiary, Mrs. Pollard, due to the stipulation in the separation agreement and the divorce decree, by the terms of which neither party thereto “claimed any interest in the rights or estate of the other.” The following day Davis wrote a letter to the New York Claim Division of Travelers, notifying them

* * * to continue the demand oí Mrs. Gerhard that she has been designated beneficiary of the above issued certificated by her father, Herbert C. Pollard during the month of February, 1965, and that these certificated [sic] were given her as a inter vivos gift, and that I was present in the office of Mr. H. F. McCabe, Benefits Adviser of the Caltex Corporation when this matter was discussed with your representative or company over the telephone yesterday. Since I have furnished Mr. McCabe with copy of the Will of Mr. Pollard and the Stipulation in the divorce proceeding divorcing him from Cornelia Pollard, I am sure that you will find that Mrs. Gerhard is the rightful claimant under this policy.

Despite such notification by Davis and a subsequent visit to Caltex by Davis and Mrs. Gerhard, during which Davis expressed his intention to collect on the policy because he had possession of the same and Mrs. Gerhard had an inter vivos gift of the policy, and despite McCabe’s telephone conversation regarding the policy with Travelers in their presence, Caltex nonetheless notified Cornelia Pollard of her status as named beneficiary and stated that if she would forward a death certificate, they would pay her the proceeds. Caltex advised Travelers of Herbert Pollard’s death and of the divorce. Thereafter Caltex forwarded Travelers a copy of the deceased’s death certificate and a notarized proof of claim statement by Cornelia Pollard requesting payment of the insurance benefits through Caltex. Thereupon, on June 14, 1965, Travelers paid the insurance benefits to Cornelia Pollard.

After the deceased divorced plaintiff Mildred Gerhard’s mother and subsequently married Cornelia Pollard, plaintiff saw very little of him. However, in Eebruary 1965, having learned that her father was “emotionally ill” and living alone following the divorce from his second wife, she brought her father from Baltimore to her home in New Jersey where' he lived until his death in April 1965.

The testimony adduced by plaintiff concerning an inter vivos gift of the insurance certificate by the deceased to the plaintiff was contradictory. Mrs. Gerhard testified that after Moses Davis drew up the will for her father and it was executed in Baltimore on February 23, 1965, she brought him back to New Jersey that same day and thereupon, in New Jersey, the deceased handed his insurance policies (certificate) to plaintiff, saying, “These are my policies and I want jrou to have them.” Plaintiff testified that she thereafter had the policies in her possession continuously until, after decedent’s death on April 7, 1965, she turned them over to attorney Davis when she brought her father’s body back to Baltimore for burial.

This account is at variance with that of Davis in this regard. He testified that he received the policies (including the certificate here involved) on February 23, 1965 at the time the deceased signed his will in Davis’ Baltimore law office, first saying that Pollard delivered the policies to him, but then stating he thought that plaintiff handed him the policies to hold. In any event, he further testified he put them in the file in his office, simply noting at the time that defendant Mrs. Pollard was designated as beneficiary on the certificate. At best, the testimony leaves the court with considerable doubt that there was in fact an inter vivos gift of the certificate. It would appear that Davis had possession of the certificate. However, a finding of the existence or nonexistence of an inter vivos gift is not necessary for a determination of entitlement to the proceeds of the policy.

Cornelia Pollard is not a party to this action. Although the amended complaint named Cornelia Pollard as a party defendant, plaintiffs were unable to serve her in New Jersey and, since Mrs. Pollard is not a resident of this State and had no contacts with New Jersey, the attempt to serve her by mail outside the State was without effect. R. 4:4. Consequently, the court’s decision herein can in no way affect the rights of Mrs. Pollard.

The court actually does not have to determine the relative rights of plaintiff's and the named beneficiary to the insurance proceeds since this action involves only one claimant against an insurance company and a group policy holder, unlike most of the cases cited by counsel which involved situations in which the insurance company had interpleaded — Metropolitan Life Insurance Co. v. Woolf, 138 N. J. Eq. 450 (E. & A. 1946); Metropolitan Life Insurance Co. v. Dinzik, 141 N. J. Eq. 336 (Ch. 1948); Travelers’ Insurance Co. of Hartford v. Grant, 54 N. J. Eq. 208 (Ch. 1896); Metropolitan Life Insurance Co. v. Haggerty, 109 N. J. Eq. 663 (E. & A. 1932); Prudential Insurance Co. v. Deyerberg, 101 N. J. Eq. 90 (Ch. 1927); Prudential Insurance Co. of America v. Swanson, 111 N. J. Eq. 477 (E. & A. 1932); Prudential Insurance Co. of America v. Mantz, 128 N. J. Eq. 480 (Ch. 1941); Metropolitan Life Insurance Co. v. Tesauro, 94 N. J. Eq. 637 (Ch. 1923); Metropolitan Insurance Co. v. Clanton, 76 N. J. Eq. 4 (Ch. 1909) ; or in which the opposing claimants were otherwise before the court as the parties in interest—In re Chryssikos, 135 N. J. Eq. 451 (Prerog. 1944); Anderson v. Broad Street National Bank, 90 N. J. Eq. 78 (Ch. 1918); Sullivan v. Maroney, 76 N. J. Eq. 104 (Ch. 1909).

In the case at bar the only relevant question is whether, under the facts here present, the insurance company and group policy holder were entitled to rely on the express policy provisions specifying the procedure for changing beneficiaries, in view of their knowledge of the existence of an opposing claim.

Formal policy requirements for changing beneficiaries are, at least in part, designed for the protection of the insurance company. See Metropolitan Life Insurance Co. v. Woolf, supra, 138 N. J. Eq., at 452, 453. It follows, therefore, that an insurance company should ordinarily be permitted to rely on tlie absence of a change of beneficiary form in making payment to a named beneficiary. The mere fact that plaintiffs informed Caltex and Travelers of their claims prior to the disposition of the proceeds does not mean nor mandate that defendants were required to give heed to such claims.

As Judge Pashman pointed out in Strohsahl v. Equitable Life Assurance Society, 71 N. J. Super. 300 (Ch. Div. 1962). “The overwhelming majority rule concerning a change of beneficiary by will is, that the change of a beneficiary must be made in the manner set forth in the insurance policy and, absent a provision in the insurance contract, anjr attempt to make such a change by will is ineffectual.” He went on to say that the rule holding that an insurance company is ordinarily entitled to rely on a policy’s change of beneficiary requirements “is based upon the need for expeditious payment and disbursement of insurance proceeds. Any different solution could only result in protracted litigation, confusion, and needless delay”, (at 304, 305).

Apparently, it may have been more prudent for Travelers and Caltex, upon learning of the contested claims, to interplead, turning the $10,800 proceeds over to a court for a determination of the respective rights of the claimants and thereby voluntarily waiving their right to rely on the change of beneficiary provisions, Metropolitan Life Insurance Co. v. Woolf, supra, 138 N. J. Eq., at 457, but they were under no duty to do so.

The court need not decide whether plaintiffs, on being advised on or about May 1, 1965 that Caltex and Travelers were not going to pay them, could have protected their claims by seeking to enjoin the disposition of the proceeds; but, in any event, this was not done. Under the existing facts, therefore, the court holds that defendants were within their rights in paying the insurance proceeds to the named beneficiary.

Although it is the court’s conviction the foregoing reasoning is dispositive of the ease, however even if the defendants had no right to rely on the policy provisions, the result ■would be the same.

It is settled in New Jersey that a named beneficiary has a vested right to insurance proceeds, subject to divestment according to the terms of the policy. Sullivan v. Maroney, supra, 76 N. J. Eq., at 109, 110, aff’d. 77 N. J. Eq. 565 (E. & A. 1910); Prudential Insurance Co. of America v. Mantz, supra, 128 N. J. Eq., at 486; Strohsahl v. Equitable Life Assurance Society, supra, 71 N. J. Super., at 304; Metropolitan Life Insurance Co. v. Woolf, 138 N. J. Eq., at 454, 455; In re Posey, 89 N. J. Super. 293, 303 (Cty. Ct. 1965) aff’d per curiam 92 N. J. Super. 259 (App. Div. 1966).

The cases cited by plaintiffs to the contrary are based upon special circumstances not present here. In Haggerty, Grant, Deyerberg and Ghryssikos no vested rights of a named beneficiary were involved. Plaintiffs rely on the language in Ghryssikos which states that because “a plausible reason was advanced why deceased did not arrange for a formal change of beneficiary,” a gift to a third person not in conformity with the change of beneficiary clause would be upheld. As already mentioned, there was no named personal beneficiary in that case, the insured’s estate being the beneficiary under the policy. But even if the Ghryssikos reasoning were applicable here, the evidence fails to show a “plausible reason” for noncompliance in the present case.

The insured, who was “emotionally ill” when plaintiff Gerhard took him to New Jersey in February 1965 on the day he signed his will, died six months after his divorce and six weeks after making his will. However, the very fact that he was competent to make a will, that he did mention the policies to his daughter and attorney at the time, and his daughter’s testimony that he did not become ill between the execution of his will and his death which occurred almost ten months after the separation agreement was entered into, lead the court to conclude that he could have prepared and submitted a change of beneficiary form before his death.

There remains to be considered whether the rights of Cornelia Pollard were divested by the divorce and separation agreement under which she released her claims against her husband’s estate. In John Hancock Mutual Life Insurance Co. of Boston v. Heidrick, 135 N. J. Eq. 326 (Ch. 1944), it was held that a separation agreement between a husband and wife which contained a general release of all claims to each other’s estate did not divest the wife of her interest, as named beneficiary, since her claim under the policy was neither against him nor his estate, but was against the insurance company. Perhaps it may be said that case is distinguishable because the insurance policy made no express reservation of the insured’s right to change the beneficiary. However, after examining authority in other jurisdictions, it is my opinion that the result must be the same in the present case.

True, several California cases have held that a wife who is the named insurance beneficiary may relinquish her rights by means of a property settlement agreement without there being any change of beneficiary under the policy. Sullivan v. Union Oil Co., 16 Cal. 2d 229, 105 P. 2d 922 (Sup. Ct. 1940); Shaw v. Board of Administration, 109 Cal. App. 2d 770, 241 P. 2d 635 (D. Ct. App. 1952); see also Dudley v. Franklin Life Ins. Co. Or., 440 P. 2d 363 (Sup. Ct. 1968) and Tucker v. Brady, 305 F. 2d 550 (9 Cir. 1962), which applied California law, but these cases are not persuasive since they rely on the California rule that a policy beneficiary obtains no vested right but only a mere expectancy.

Moreover, even under the California rule, other cases have held that a general release under a separation agreement of a wife’s claims against her husband’s estate is insufficient to constitute a renunciation of her right to insurance proceeds as the named beneficiary if it does not clearly appear from the agreement that in addition to the segregation of the property of the spouses it was intended to deprive either spouse of the right to take under an insurance contract of the other. Prudential Insurance Co. of America v. Broad hurst, 157 Cal. App. 2d 375, 321 P. 2d 75 (D. Ct. App. 1958); Jenkins v. Jenkins, 112 Cal App. 402, 297 P. 56 (D. Ct. App. 1931). These cases hold also that the failure of an insured to change the beneficiary is indicative of an intent not to effect a change. 321 P. 2d, at 78.

It is the court’s conclusion that the reasoning in Wallace v. Mutual Benefit Life Insurance Co., 97 Minn. 27, 106 N. W. 84, 3 L. R. A., N. S., 478 (Sup. Ct. 1906), is applicable. There it was held that an agreement during the pending of divorce proceedings under which a wife relinquished all claims to her husband’s estate did not affect her continuing right as named beneficiary to the insurance proceeds, since a beneficiary obtains a vested right to insurance proceeds, which proceeds thereupon become part of her separate property, subject only to divestment as provided in the policy. Such proceeds are not part of the husband’s estate and consequently are not affected by a general release of all claims against the husband’s estate. 106 N. W., at 85.

While it is true that in the Wallace case no right to change the beneficiary was reserved, and her interest in the policy was subject to be divested only by her death, the lapse of time or the failure to pay premiums, and hence was free from the control of her husband, both interests were separate and distinct and her release referred only to her husband’s property, not to her property. She did not agree to release to him any interest in any property which she owned in her own right.

One further issue not raised by counsel deserves mention. The insurance certificate in question refers to the beneficiary as “Cornelia Meerbeek Pollard, wife.” It might be argued that such words indicate that upon termination of Mrs. Pollard’s status as wife of the insured, her status as beneficiary also terminated.

The general rule is that the addition of the words “husband” or “wife” in describing a named insurance beneficiary is descriptive only and must not be construed as a condition for the beneficiary’s recovery of the proceeds. An notation, “Divorce of insured and beneficiary as affecting the latter’s right in life insurance”, 175 A. L. R. 1220, 1226 (1948). See also 44 Am. Jur. 2d, § 1740, at 650, “Beneficiary divorced from insured.” This court is not aware of any decision in Yew Jersey on this issue, but there is good reason to apply such rule herein since an analogous rule has been applied in the construction of wills. Stothers v. Flieger, 13 N. J. Super. 379 (Ch. Div. 1951).

In view of all of the foregoing, the court concludes that defendants acted within their rights in their disposition of the insurance proceeds and that they violated no duty to plaintiffs. Accordingly, judgment will be entered in favor of defendants and against plaintiffs dismissing the complain''.


author: Mintz, J. S. C.

text:
    THOMAS J. O’NEILL, TRUSTEE IN BANKRUPTCY OF OFFICE BUILDINGS OF AMERICA, INC., FIRST JERSEY SERVICING CO., INC. AND FIRST JERSEY SECURITIES CORPORATION, BANKRUPTS, PLAINTIFF, v. ARTHUR A. LITTLE AND THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, A CORPORATION, DEFENDANTS.
    Superior Court of New Jersey Chancery Division
    Decided November 10, 1969.

      Mr. Frank J. Vecchione for plaintiff (Messrs. Crummy, Gibbons & O’Neill, attorneys).

      Mr. James E. Masterson for defendant Rev. Arthur A. Little (Messrs. Kleinberg, Moroney, Masterson & Schachter, attorneys).

      Mr. Charles W. Hutchinson for defendant The Equitable Life Assurance Society of the United States (Messrs. Lamb, Blake, Hutchinson & Dunne, attorneys).
   Mintz, J. S. C.

This is an action by a trustee in bankruptcy to set aside cash purchases of a series of annuity contracts made by the defendant Reverend Arthur A. Little (Rev. Little) with defendant The Equitable Life Assurance Society of the United States (Equitable). It is alleged that such purchases were made with intent to hinder, delay or defraud plaintiff, a creditor of Rev. Little, and should be set aside to the extent necessary to satisfj^ the judgment plaintiff subsequently obtained against Rev. Little.

On or about March 14, 1963 Rev. Little loaned $50,000 to Office Buildings of America, Inc. He was repaid $52,-500 by this corporation on May 15, 1963. On or about June 26, 1963 Office Buildings of America, Inc. and its related corporations filed petitions in bankruptcy. On September 24, 1963 plaintiff O’Neill was appointed trustee for said bankrupt corporations.

On October 3, 1963 Rev. Little entered into two annuity contracts with Equitable for which he paid a total of $50,000 in return for two lifetime annuities on which he was to receive the aggregate sum of $233.24 monthly. On October 14, 1963 he purchased a third annuity contract from Equitable for which he paid $15,000 designed to yield him $69.98 monthly.

On October 19, 1965 plaintiff’s counsel wrote Rev. Little that as a creditor of Office Buildings of America, Inc. he received from it the sum of $52,500 within four months of the filing of the petition in bankruptcy. The letter further states that such payment constituted a preference and demanded a return of said sum.

In the pretrial order Rev. Little acknowledged receipt of the letter but did not stipulate the date when the same was received. It may reasonably be inferred that he received this letter in the due course of mail. Alexander v. Rekoon, 104 N. J. L. 1 (Sup. Ct. 1928). It certainly was received prior to October 27, 1965. On that date Rev. Little entered into a fourth annuity contract with Equitable for which he paid $15,000 and which was to yield him $70.82 monthly. On December 20, 1965 plaintiff instituted an action in this court against Rev. Little seeking the return of the $52,500, claiming the same to have been a preferential payment.

On October 25, 1966 Rev. Little wrote to Nathan Hilton, the agent for Equitable, who apparently sold him the annuities, in which he inquired as to the four annuities already purchased:

1. Is an annuity purchased with your company in good faith unattachable ?
2. Can a judge in bankruptcy court issue an injunction? Can he take the annuities or a percentage of the money which I am now receiving from your company?

In that letter Rev. Little also stated that “The money to buy the annuities is now in question,” and further asked Mr. Hilton to “please keep this matter confidential.” Hilton referred Rev. Little’s letter for - reply to Charles W. Muller, assistant counsel for Equitable. On Hovember 4, 1966 Muller wrote Hilton that:

There is no statutory provision in New Jersey for annuities as there is for insurance whereby payments would be exempted from the claims of the annuitant’s creditors.
It does not follow, however, that the Trustee in Bankruptcy could necessarily attack Father Little’s annuities. These annuity contracts were entered into by the Equitable in good faith with Father Little. The consideration paid for those contracts is the property of the Equitable. Father Little has no right to surrender these contracts. His only right under each contract is to receive the monthly annuity payments as they become due provided he is alive on the due date.
If the Trustee in Bankruptcy is successful in claiming preference with respect to the repayment made to Father Little, it may be that he would ask the court to issue an order directing that annuity payments be made to him rather than to Father Little. Such an order, however, would not operate to alter the contracts so as to prevent the Equitable from insisting upon evidence of survival of the annuitant each time a monthly payment becomes due. Normally, this evidence is the personal endorsement of the annuitant on the monthly check. In the absence of such an endorsement, we would require the Trustee in Bankruptcy to furnish us with proof of Father Little’s survival each month. In the long run, it might be more difficult for the Trustee in Bankruptcy to collect the monthly instalments and he might conclude that he would not be justified in going to such an expense.

■ Muller authorized Hilton to deliver a copy of that letter to Rev. Little, and I am satisfied he did so. On December 3, 1966 Rev. Little entered into a fifth annuity contract with Equitable for which he paid Equitable $16,117.36 and which was to yield him $80 per month.

On June 15, 1967 a consent judgment was entered in favor of plaintiff and against Rev. Little for $23,000 on the complaint filed by the plaintiff on December 20, 1965. As a consequence of the purchase of the fifth annuity Rev. Little divested himself of all assets that might be reached by plaintiff to satisfy his judgment, except for the aggregate monthly payments of $454.04 to be received under the five annuity contracts.

N. J. S. A. 17:35B-10 became effective October 7, 1968 and provides that payments from annuity contracts up to $500 per month are not subject to execution or other legal process. The statute is applicable to annuity contracts issued prior and subsequent to its effective date. However, the exemption of annuity payments from execution or other legal process does not apply:

(1) * * * to amounts paid, with intent to defraud creditors, for or as consideration for any such annuity, with interest thereon, and of which the creditor has given the insurer written notice at its home office prior to the making' of the payments to the annuitant out of which the creditor seeks to recover. s-' * * \N. J. 8- A. 17 :35B-30(a) (Dl.

On January 10, 1969 an order was entered herein directing Equitable to make the monthly payments on the annuities to plaintiff, the same to be held in trust by plaintiff pendiug the further order of the court.

At the conclusion of the trial I ruled that plaintiff had failed to sustain his charge of fraud in connection with Rev. Little’s purchase of the first four annuities. I also concluded that the monthly payments on the first three annuities made by Equitable to plaintiff pursuant to the order of January 10, 1969 are to be returned to Rev. Little since they did not fall within the condemnation of N. J. 8. A. 17:35B-10(a)(1). It may be noted that the first three annuities were purchased by Rev. Little prior to his receipt of the letter of October 19, 1965 wherein plaintiff’s counsel for the first time asserted a claim against him. The validity of the fourth annuity sold on October 27, 1965 was sustained upon the proposition that Equitable sold this contract in good faith without notice of any claim of plaintiff against Rev. Little.

There remains for determination the issues of whether the monthly payments on the fourth and fifth annuity contracts are reachable by plaintiff in satisfaction of his judgment and whether the fifth annuity contract should be set aside.

The burden of establishing fraud rests upon the party averring it. It will not be presumed. It must be established by competent and satisfactory proof. Circumstances that are merely suspicious will not support an inference of fraud. Epstein v. Bendersky, 132 N. J. Eq. 30 (E. & A. 1942). True, Rev. Little purchased the fourth annuity about one week after he received notice of plaintiff’s original claim against him in the sum of $52,500. Prior thereto he had already invested $65,000 in annuities. It would appear that his purchase of the fourth annuity was merely a continuation of his investment program. I cannot conclude that this purchase was made “with intent to defraud creditors,” within the purview of N. J. B. A. 17:3SB-10. The letter of plaintiff’s counsel to Rev. Little dated October 19, 1965 is simply inadequate to support such a finding. Accordingly, the monthly payments on the fourth annuity contract are not subject to execution or other legal process. Plaintiff is directed to return to Rev. Little the monthly payments received thereon pursuant to the order of January 10, 1969.

N. J. S. A. 25:2-3 provides that:

Every conveyance, grant or alienation of real estate, or goods and chattels * * * whether made by writing or otherwise, and every judgment and execution which have been or shall be contrived in fraud, covin or collusion, with intent to hinder, delay or defraud creditors and others of their lawful actions, debts, damages or demands, shall be deemed and taken * * * to be utterly void and of no effect, any feigned consideration, color or other pretense to the contrary notwithstanding.

Where a conveyance or obligation is fraudulent as to a creditor, such creditor, when his claim has matured, may, as against any person except a purchaser for fair consideration, without knowledge of the fraud at the time of the purchase, disregard the conveyance and levy execution upon the property conveyed or such obligation. N. J. S. A. 25:2-15(a). Fair consideration is given for property when in exchange for such property or obligation, as a fair equivalent therefor and in good faith, property is conveyed or an antecedent debt satisfied. N. J. 8. A. 25:2-9(a). And, of course, every conveyance made with actual intent, as distinguished from intent presumed in law, to hinder, delay or defraud either present or future creditors is fraudulent. N. J. 8. A. 25 :2-13.

In order to set aside a conveyance to a third party as a fraud against creditors, the transferee must have participated in or have had knowledge of the transferor’s fraudulent purpose. Muirheid v. Smith, 35 N. J. Eq. 303, 308 (E. & A. 1882); Roe v. Moore, 35 N. J. Eq. 526 (E. & A. 1882). There is a distinction between one who purchases for present consideration, which is the situation of Equitable in the case at bar, and one who purchases in satisfaction of a pre-existing debt. As observed in Hersh v. Levinson Bros. Inc., 117 N. J. Eq. 131 (E. & A. 1934) :

* * * As to a conveyance made by a grantor actuated by such a fraudulent purpose, there is a well recognized distinction between one who purchases for a present consideration and one who purchases in satisfaction of a pre-existing debt. The former is in every sense a volunteer who, having no motive of interest prompting him to enter into the transaction, does so for the purpose of aiding the fraudulent purpose of the grantor. The latter has an interest to serve. He can keep out of the transaction only at the risk of losing his claim. The law casts upon him no duty of protecting other creditors. He has the same right to accept a voluntary preference that ho has to obtain a preference by superior diligence. He may know the fraudulent purpose of the grantor, but the law sees that he has a purpose of Ms own to serve, and if he goes no further than is necessary to serve that purpose, the law will not charge him with fraud by reason of such knowledge. * * ® [at 135]

See also, Smith v. Whitman, 39 N. J. 397, 405 (1963).

A transfer is not made in good faith if the transferee has knowledge of the fraudulent intent of his grantor or if he is aware of circumstances which should have put him on inquiry and which were equivalent to notice of said fraudulent intent. A leading authority for this proposition is Tantum v. Green, 21 N. J. Eq. 364 (E. & A. 1869), where the court stated:

The conclusion to which I have come is the same as that arrived at by the Chancellor, that though Dr. Tantum may not have had such knowledge of the intended fraud as to make his denial thereof perjury, yet he had notice of suspicious, unusual, and extraordinary circumstances, which should have put him on inquiry. That he paid full consideration for the assignments will not suffice. He must not only be a purchaser for value, but a bona, fide purchaser without notice of the fraudulent intent of the assignor, or of circumstances which should have put him on inquiry, and which were equivalent to notice, [at 369-370]

To same effect, see Equitable Life Assurance Society v. Patzowsky, 131 N. J. Eq. 49 (E. & A. 1942).

I am satisfied that Rev. Little purchased the fifth annuity on December 3, 1966 with a design to hinder and delay the plaintiff in satisfying the claim against him. He was encouraged to make this purchase while litigation was pending against him by virtue of Muller’s letter of November 4, 1966 wherein Muller indicated that the consideration paid for the four annuity contracts was the property of Equitable and “in the long run it might be more difficult for the Trustee in Bankruptcy to collect the monthly instalments and he might conclude that he would not be justified in going to such an expense.” Having parted with his remaining cash, Rev. Little thereafter agreed to the entry of a consent judgment against him for $23,000. Both Muller and Hilton were put on notice respecting Rev. Little’s concern that his annuities might be subject to execution. The knowledge acquired by the Equitable agents respecting matters lying within the scope of their duties is attributable to Equitable. Handleman v. Cox, 39 N. J. 95 (1963).

The circumstances surrounding the purchase of the fifth annuity were equivalent to notice to Equitable that Rov. Little’s design was to hinder and delay plaintiff in the collection of his claim. Yet with this knowledge it aided Rev. Little to insulate his assets (except his monthly payments on the annuities) from future execution by selling him the fifth annuity. And, of course, that annuity was purchased when plaintiff was asserting his full claim of $52,500 against Rev. Little. Accordingly, the fifth annuity contract dated December 3, 1966 will be set aside. Equitable is directed to pay plaintiff $16,117.36, the amount paid by Rev. Little for said annuity contract, less any payments made to plaintiff on said contract pursuant to the order of January 10, 1969. Said sums will be applied in reduction of the amount owed by Rev. Little on the consent judgment. Although Equitable made monthly payments to Rev. Little on this annuity contract prior to January 10, 1969, its knowledge and role in aiding Rev, Little disqualifies it from receiving credit for such payments.


author: Joelson, J. S. C.

text:
    PASSAIC VALLEY SEWERAGE COMMISSION, A PUBLIC CORPORATION, PLAINTIFF, v. CITY OF PATERSON, A MUNICIPAL CORPORATION OF THE STATE OF NEW JERSEY, DEFENDANT.
    Superior Court of New Jersey Law Division
    Decided November 7, 1969.

      Mr. Thomas E. Durkin, Jr., attorney for plaintiff.

      Mr. 8am Weiss, appeared for intervenor, City of Newark (Mr. Philip E. Gordon, attorney).

      Mr. Joseph L. Conn, attorney for defendant.
   Joelson, J. S. C.

The Passaic Yalley Sewerage Commission has filed a two-count complaint against the City of Paterson. In the first count it seeks judgment in the amount of $217,476.18, together with interest and costs, for the city’s share of “maintenance, repair and operation.” In the second count plaintiff alleges, in the alternative, that if it is not entitled to judgment on the first count for the cost of “maintenance, repair and operations,” it is entitled to judgment under N. J. 8. A. 58:14—13, which deals with “apportionment of cost of construction.”

Defendant has filed an answer contending that the expenses are for capital improvements for which the Commission is not authorized by law to assess defendant. Defendant has also filed a counterclaim seeking a declaratory judgment that in the event it must pay the claim of the Commission, it may finance the cost through the issuance of municipal bonds.

The City of Newark has intervened in the matter in support of the position of the Commission.

It is undisputed that Paterson is a contracting member municipality of the Passaic Yalley Sewerage Commission. That body was established pursuant to an act of the Legislature in 1902 (N. J. 8. A. 58:14—1). Paterson, although denying any obligation to pay for the work for which it has been billed, does concede that if it is required to pay, then the sum of $217,476.18 for which it has been billed is an accurate computation of the amount it would owe for operation, maintenance and repairs.

Commencing in the fiscal year 1962, after consultation with its contracting member municipalities and apparently with their approval, the Commission created a so-called “retainage fund” which was contributed to by the member municipalities. This fund was created and utilized for the purpose of maintaining, repairing and improving the sewerage system. Since the inception of the fund in 1962, and until 1969, all contracting municipalities, including Paterson, have paid their assessed share into the fund. In 1969 all the members except Paterson paid their assessed share.

The record discloses that the items for which the city has declined to pay its proportionate annual share, and the total cost of such items, are as follows: additional grit chambers and screen, oil and scum handling facilities, $7,200,000; repair to trunk sewer at Gouverneur Street, $1,000,000; chlorination facilities, $1,050,000; land purchase, $450,000; basin repair and modifications, $500,000, and general work around plant, $300,000.

Paterson paid that portion of its assessed annual share which it considered to represent current operations, but asserted that it is not obliged to pay any portion of the cost of the items in the paragraph immediately above, which it claims to be capital improvements. The court finds the refusal of the city to pay its total assessed share not to be justified, and that plaintiff is entitled to a judgment of $217,476.18.

It appears from the reading of the pertinent statutory provisions that the Legislature, both when the Passaic Valley Sewerage Commission was. created (N. J. S. A. 58 :14—1 et seq.) and when it was enlarged and improved in 1953 (N. J. S. A. 58:14-34.1 et seq.), intended that each contracting municipality pay its share of the cost of work necessary to be done from time to time to keep the system in a state of efficient operation. The testimony reveals that the expenditures for the projects for which Paterson has been billed are major repairs involving what normally may be regarded as capital improvements. However, it is the opinion of the court that the Legislature’s intent appears to include such items among those for which the contracting municipalities are financially responsible as maintenance, repairs and operations.

N. J. S. A. 58:14-13, which deals with the cost of the original construction of the sewer, plant and works, provides a formula for apportioning the construction costs among the contracting municipalities. N. J. S. A. 58:1!^15 then goes on to require that "the cost of maintenance, repair and operation of said sewer, plant and works shall * * * be apportioned annually to the respective municipalities entering into the contract,” and provides a formula for such assessment. The city contends that it is liable under neither N. J. S. A. 58:14^13 nor N. J. S. A. 58:14r-15.

It is an established rule of statutory construction that as between two possible constructions of a statute, the one should be adopted which effectuates rather than defeats the Legislature’s purpose. State Department of Civil Service v. Clark, 15 N. J. 334 (1954). Similarly, in Hasbrouck Heights Hospital Ass'n v. Borough of Hasbrouck Heights, 15 N. J. 447 (1954), the court said that “a statute should not be construed to permit its purpose to be defeated by evasion, and in an investigation of the law in this respect, the purpose of the statute must be examined and the practical results flowing from its enforcement.”

Certainly, it cannot reasonably be expected that the Legislature would have wished to establish the sewerage system without providing any method for paying for major repairs of a long-term nature which must be made in any project for its continued operation. If such an interpretation were to be placed upon the statute, the purpose of the legislation, which was to provide a satisfactory system of sewerage disposal would be defeated, and grave danger to the public health would ensue.

Reference should also be made to N. J. 8. A. 58:14-34.1 el seq. Although counsel for both parties have stipulated that it is not directly applicable to the case now under consideration, there is language in that statute which is helpful as a guideline in the present case.

N. J. S. A. 58:14-34.1 et seq. was enacted in 1953 because of the necessity to construct a more modern and effective system. It authorized a $10 million bond issue by the Commission for that purpose. In its declaration as to the need for repair, replacement and improvement the Legislature stated as follows in N. J. S. A. 58 :14-34.10 (d) :

the expense of meeting such need and providing repair, replacement and improvement, together with any amortization or interest charges in connection with such expense, is in substance and effect part of the cost of maintenance, repair and operation of the sewerage system.

Thus, it is apparent that the Legislature provided for the bond issue for the work required in 1953, not because it was legally impossible to have the necessary work done by the expense being shared annually by the contracting municipalities as a cost of maintenance, repair and operation, but because it then considered that the annual cost to each municipality would have been too burdensome. This conclusion is fortified by the fact that by its terms N. J. S. A. 58 :14-34.10(f) afforded “a practical means of relief * * * to permit and require the contracting municipalities as users of the sewerage system to meet and pay the expense of meeting such need on an economical and reasonable basis over a reasonable number of years.” Unfortunately for Paterson, no similar legislation has been enacted for the substantial projects which form the basis of the assessments presently under consideration.

Having established that plaintiff is entitled to judgment on the first count of its complaint, we now consider plaintiff’s demand for interest. The court is of the opinion that no such interest should be allowed. It is well established that interest should not be allowed “where the damages are unliquidated and not capable of ascertainment by mere computation, or where a serious and substantial controversy exists as to the amount due under a contract.” Jardine Estates, Inc. v. Donna Brook Corp., 42 N. J. Super. 332 (App. Div. 1956); Horst Co. v. Peter Breidt City Brewery, 94 N. J. L. 230 (E. & A. 1920).

In this ease the parties disagreed as to whether all of the items for which they were billed were proper charges against defendant. It might reasonably be argued that the municipality was responsible for the payment of some of the items, but not all. Furthermore, there was a very real controversy as to defendant’s liability. In Jar dine Estates, Inc. the court stated that there are no longer “hard and fast rules” concerning interest, and that principles of equity should be applied to accomplish justice in each particular case. In view of the foregoing, the court finds that because of the bona fide controversy between the parties, interest should not be allowed.

Einally, the court will deal with defendant’s counterclaim for a declaratory judgment that it may issue bonds in order to pay the amount assessed against it by plaintiff. There is no justiciable issue which would justify the court in rendering a declaratory judgment. This is based upon the fact that plaintiff alleges that a sum of money is due from defendant, but throughout this matter has consistently taken the position that it has no interest in the manner in which defendant raises that sum of money.

In New Jersey Turnpike Authority v. Parsons, 3 N. J. 235 (1949), the court considered an application for a declaratory judgment to approve a bond issue by plaintiff. Although finding that the facts in that case justified the use of the remedy, the court stated that the remedy “is circumscribed by the salutary qualifications that jurisdiction of the Courts may not be invoked in the absence of an actual controversy.” The Supreme Court then cited Borchard, Declaratory Judgments (2d ed. 1941), at 29:

Mot only must the plaintiff prove his tangible interest in obtaining a judgment, but the action must be adversary in character, that is, there must be a controversy between the plaintiff and a defendant, subject to the Court’s jurisdiction, having an interest in opposing his claim.

Likewise in New Jersey Bankers Ass’n v. Van Riper, 1 N. J. 193 (1948), the court insisted on the requirement that there be an adversary party before relief could be granted under the Declaratory Judgments Act, N. J. S. A. 2A :17-50. The court stated that while it was not unmindful of the salutary purposes of that act and the need for its liberal construction, there must be a party before the Court capable of undertaking “The defense or enforcement of an outstanding interest adverse to that which the plaintiff purports to represent.”

In the present case the defendant has submitted a brief and argued orally in support of its contention that it should be allowed to issue bonds, and has requested a declaratory judgment that it be authorized to do so. However, because plaintiff has taken no position on the matter, the court is without the opportunity to have had a presentation of the countervailing point of view. Therefore, the counterclaim seeking a declaratory judgment is hereby dismissed.