author: Seidman, J. C. C.

text:
    PETRA FELICIANO, ADMINISTRATRIX AD PROSEQUENDUM . OF THE ESTATE OF CARMEN RIVERA, DECEASED; ADMINISTRATRIX AD PROSEQUENDUM AND GENERAL ADMINISTRATRIX OF THE ESTATE OF ANGEL RIVERA, DECEASED; ADMINISTRATRIX AD PROSEQUENDUM AND GENERAL ADMINISTRATRIX OF THE ESTATE OF EDWIN RIVERA, DECEASED; KENNETH RIVERA, AN INFANT, BY HIS GUARDIAN AD LITEM, PETRA FELICIANO; AND GILBERT RIVERA, AN INFANT, BY HIS GUARDIAN AD LITEM, PETRA FELICIANO, PLAINTIFFS, v. JOHNNY OGLESBY, ADMINISTRATOR AD LITEM OF THE ESTATE OF GEORGE WASHINGTON, DECEASED, DEFENDANT. LUDELL BRADFORD, ADMINISTRATRIX AD PROSEQUENDUM OF THE ESTATE OF JAMES BRADFORD, JR., . DECEASED, PLAINTIFF, v. JOHNNY OGLESBY, ADMINISTRATOR AD LITEM OF THE ESTATE OF GEORGE WASHINGTON, DECEASED, DEFENDANT. ELIZABETH BUSH, ADMINISTRATRIX AD PROSEQUENDUM OF THE ESTATE OF FREDDIE BUSH, JR., DECEASED; AND ROBERT L. SIMMONS, ADMINISTRATOR AD PROSEQUENDUM OF THE ESTATE OF MANNIE SIMMONS, JR., DECEASED, PLAINTIFFS, v. JOHNNY OGLESBY, ADMINISTRATOR AD LITEM OF THE ESTATE OF GEORGE WASHINGTON, DECEASED, DEFENDANT.
    Superior Court of New Jersey Law Division
    Decided July 23, 1968.

      Mr. Solomon Lubow for plaintiff Petra Feliciano, administratix ad prosequendum, etc., and others (Messrs. Ghazin & . Ghazin, attorneys).

      Mr. Nathan D. Weiss for plaintiff Ludell Bradford, administratrix ad prosequendum, etc. (Messrs. Weiss and Feiner, attorneys); and for plaintiffs Elizabeth Bush, ad- ■ ministratrix ad prosequendum, etc., and Robert L. Simmons, administrator ad prosequendum, etc. (Mr. Harry Eisenberg, attorney).

      Mr. Daniel Kaplinslcy for the Unsatisfied Claim and Judgment Fund '(Messrs. Vogel and Kaplinslcy, attorneys).
   Seidman, J. C. C.

(temporarily assigned). These proceedings, before the court on the applications of judgment creditors, pursuant to N. J. 8. A. 39 :6—69, for payment by the Unsatisfied Claim and Judgment Fund, present a problem which does not appear to have been determined previously in any reported decision in this State.

The basic issue is whether a. nonresident claimant who has obtained judgments against an uninsured tortfeasor is entitled to pa3rment by the Fund, where moneys have been or will be received by reason of uninsured motorist coverage in an automobile policy issued in New York, the insurer having the right to reimbursement from the proceeds of any settlement with or judgment against the uninsured tortfeasor.

On March 20, 1965 Angel Rivera, a resident of New York, was driving a station wagon in a general westerly direction along Route 22 in the Newark area. He was accompanied by his wife Carmen; three of their infant children, Edwin, .Kenneth and Gilbert, and two friends, Carmen Romeu and Adela Gorgas. Proceeding east was another automobile, operated by one George Washington, in which James Bradford, Jr., Freddie Bush, Jr., and Mannie Simmons, Jr. were riding as passengers, all residents of New Jersey. Suddenly and unaccountably the Washington car swerved from the eastbound lane into the path of the Rivera car. In the ensuing collision all the occupants of the Washington car and Mrs. Rivera were killed instantly. Angel Rivera died after three days. His son Edwin suffered a severe head wound and remained in a coma until his death 2years later. The injuries sustained by the other occupants of the Rivera car were relatively minor.

Subsequently, Petra Feliciano instituted suit as administratrix ad prosequendum of the estates of Angel Rivera, Carmen Rivera and Edwin Rivera; as general administratrix of the estates of Angel Rivera and Edwin Rivera, and as guardian ad litem of Kenneth and Gilbert Rivera. She joined as parties defendant Johnny Oglesby, administrator ad litem of the estate of George Washington; Alice Farrell, and John T. Vitolo. Mrs. Farrell and Vitolo were operators of automobiles to the rear of the Rivera car which had become entangled in the collision. Complaints against these defendants, and also against Petra Feliciano as personal representative of the estate of Angel Rivera, were filed by Ludell Bradford, administratrix ad prosequendum of the estate of James Bradford, Jr.; Elizabeth Bush, administratrix ad prosequendum of the estate of Freddie Bush, Jr., and Robert L. Simmons, administrator ad prosequendum of the estate of Mannie Simmons, Jr. The claims of Carmen Romeu and Adela Gorgas are not involved herein.

At a trial of the consolidated cases, limited to the issue of liability, the jury found, in response to interrogatories, that the negligence of George Washington was the sole proximate cause of the collision. Thereafter, by consent of counsel, the court tried the damage phase of the cases without a jury. Judgments were entered in favor of Petra Feliciano, in her several representative capacities, totalling $142,303. Awards were also made in the respective sums of $70,745 for the death of James Bradford, Jr.; $15,804 for the death of Freddie Bush, Jr., and $11,635 for the death of Mannie Simmons, Jr. All the judgment creditors now seek payment by the Fund in such proportions as the court may determine. The insolvency of the Washington estate is conceded.

Although the Fund interposes a pro forma objection to the Bradford, Bush and Simmons, applications, no supporting facts have been submitted. The court is satisfied that these judgment creditors are entitled to their pro-rated shares, subject to the maximum limits prescribed by N. J. 8. A. 39:6-69(a) and (6).

The Fund also resists the Feliciano application, contending that the members of the Rivera family are not qualified persons as defined in N. J. 8. A. 39 :6-62 and, in addition, that they are ineligible to receive payment because of the existence of insurance coverage. The other applicants, whose shares obviously would be diminished if the Feliciano judgments were to participate in the distribution, join in opposing the application.

At the time of the tragic accident the Rivera car was insured under a policy issued by Public Service Mutual Insurance Company, which provided for protection against uninsured motorists. The limits of coverage for an accident were $10,000 for one person killed or injured, and $20,000 for more than one. The insuring agreement (termed Coverage J) was

“To pay all sums which the insured or his legal representative shall be legally entitled to recover as damages from the owner or operator of an uninsured automobile because of bodily injury, sickness or disease, including death resulting therefrom, hereinafter called ‘bodily injury’, sustained by the insured, caused by accident and arising out of the ownership, maintenance or use of such uninsured automobile; provided, for the purposes of this coverage, determination as to whether the insured or such representative is legally entitled to recover such damages, and if so the amount thereof, shall he made hy agreement hettveen the insured or such representative and the company or, if they fail to agree, hy arbitration.” (Emphasis supplied)

“Insured,” as defined in the policy includes “the named insured and any relative” and “any other person while occupying an insured vehicle.”

I

The Fund argues that, by virtue of the uninsured motorists coverage, New York does not afford New Jersey residents recourse of a substantially similar chraaeter to that provided by the New Jersey Fund law; consequently, Mrs. Feliciano, in her representative capacity, is not a qualified person within the meaning of our statute. See Betz v. Director of Division of Motor Vehicles, 27 N. J. 324 (1958). There is no merit to the contention.

The term “qualified person,” under N. J. 8. A: 39:6-62, includes a resident of another' state in which “recourse-is afforded, to residents of this State, of substantially similar character to that provided for by this act.” In 1958, by enactment of the Motor Vehicle Accident Indemnification Corporation Law, L. 1958, c. 759, 27 McKinney’s Consol. Laws, “Insurance Law,” c. 28, § 600 et seq., New York created an unsatisfied claim and judgment fund comparable to ours, deemed by the Attorney General of this State to provide recourse of substantially like character. See Rudnick v. Bentler, 66 N. J. Super. 224, 229 (App. Div. 1961).

The point is made that if a New Jersey resident holding a policy containing such coverage were killed or injured in New York by the negligence of an uninsured motorist of that state, the New Jersey resident would not be a qualified person within the meaning of the New York statute. Even if that were so, it does not necessarily follow that reciprocity of remedy is affected thereby.

The New York plan combines the features of compulsory uninsured motorists coverage and those of a fund for the payment of unsatisfied claims and judgments. Claims are divided into two classes, one consisting of “insured persons” and the other of those not protected by insurance but within the definition of “qualified person.”

Section 601(b)(1) of the New York statute declares a resident, other than an insured, to be qualified to prosecute a claim against the Motor Vehicle Accident Indemnification Corporation. An “insured” is defined as a person covered by a policy of insurance containing the provisions required by the statute, including uninsured motorists coverage. Application of Culver, 33 Misc. 2d 346, 225 N. Y. S. 2d 666 (Sup. Ct. 1962). Such person cannot seek compensation from the corporation. His remedy is contained in his policy. See Application of Sinclair, 33 Misc. 2d 226, 225 N. Y. S. 2d 668 (Sup. Ct. 1962); Application of Motor Vehicle Accident Indemnification Corp., 227 N. Y. S. 2d 868 (Sup. Ct. 1961); Application of Caits, 38 Misc. 2d 522, 237 N. Y. S. 2d 287 (Sup. Ct. 1962); Application of Gra her, 38 Misc. 2d 969, 239 N. Y. S. 2d 332 (Sup. Ct. 1963); Application of Edwards v. Motor Vehicle Accident Indemnification Corp., 25 A. D. 2d 420, 266 N. Y. S. 2d 460 (App. Div. 1966).

A qualified nonresident, under § 601(6)(2), is “A resident of another state, territory or federal district of the United States or province of the Dominion of Canada, or foreign country, in which recourse is afforded, to residents of this state, of substantially similar character to that provided for by this article, or his legal representative.” Excepting the words “or his legal representative,” the language of § 601(6)(2) is identical with that contained in N. J. 8. A. 39:6-62. It is clear that each state provides a nonresident substantially similar relief, and that reciprocity exists. A New Jersey resident, involved in an accident in New York with an uninsured vehicle, would not be treated differently from a New York resident similarly involved in this State. The limitation of qualification to one other than an insured, though applicable to residents under § 601(6) (1), is not contained in § 601(6) (2), dealing with nonresidents.

II

Counsel for Mrs. Feliciano advised the court at oral argument of the insurer’s intent to pay over the proceeds of its policy. He also expressed his belief that the insurer would waive any claim to reimbursement from moneys received from the Fund. The court gave counsel time to procure such waiver, but the insurer, on advice of its counsel, has declined to furnish it. The applicant’s position, notwithstanding, as expressed in Mrs. Feliciano’s supporting affidavit, is that “the amount and amounts which may be received or collectible under ‘Coverage J’ etc., are not deductible under the Unsatisfied Claim and Judgment Fund law, from any moneys which may be due to plaintiff applicant, and that in the event of payment to any person under said Part IY, the insurer shall not be entitled to the extent of such payment to the proceeds of said judgment dated May 28, 1968.”

The claimant cites the case of Pearson v. State of North Dakota Unsatisfied Judgment Fund, 114 N. W. 2d 257 (N. D. Sup. Ct. 1962), as being on all fours with the one at bar. In that case plaintiff, who had been injured in a collision with an uninsured automobile while riding as a passenger in an insured car, obtained a judgment against the uninsured tortfeasor and then sought recovery from the Fund, although she had collected a sum equal to the amount of the judgment under the uninsured motorist coverage of her host’s policy. The court held that since the insurance moneys did not constitute collection of part of the judgment, the amount could not be deducted from the proceeds of the Fund.

Pearson is distinguishable at least by the fact that the insurer had waived its right of subrogation, so that any claim for reimbursement and the effect thereof were not in issue. Furthermore, the North Dakota statute, at that time, entitled a judgment creditor to apply to the court for an order directing payment of the judgment out of the Fund, merely upon a showing that judment had been obtained for damages arising out of the debtor’s ownership, maintenance, operation or use of a motor vehicle in the state; that execution had been issued and returned unsatisfied; that the amount realized on the sale of property that may have been seized was insufficient; that the debtor had been examined to determine his assets as well as the existence of automobile insurance, and that an exhaustive search and inquiry to discover assets was unsuccessful. The only limitation on the amount payable from the Fund was that “In cases where the judgment creditor has effected the collection of a part of his judgment from any source, the amount authorized to be paid from such fund shall be the difference between the amount of the judgment, provided that it does not exceed five thousand dollars, and the amount realized thereon.” There were no provisions comparable to those contained in subsection (l) and (m) of N. J. 8. A. 39 :6-70. It is of interest to note that the North Dakota statute has since been amended so as to require the deduction of moneys received from an uninsured motorist policy and to prohibit the assignment or subrogation of the right to recover from the Fund.

In any event, the opposition does not contend that the insurance proceeds are subject to N. J. 8. A. 39 :6-71, which requires the deduction only of “Any amount which the plaintiff has received or can collect by way of payments upon the judgment or by way of settlement of the cause of action, in whole or in part, from or on behalf of any person other than the judgment debtor * * *” (emphasis supplied). It is agreed that the proceeds here are not from or on behalf of any other person against whom a cause of action existed. See also N. J. 8. A. 39:6-70 (m).

The issue is not whether the moneys received or to be received are deductible; it is whether the claimant entitled to such moneys in the circumstances of this case is eligible to make further claim against the Fund.

Ill

The Fund urges that the provisions of subsection (J) of N.J. S. A. 39 :6-70 are applicable in that there exists a policy of liability insurance under the terms of which the insurer is liable to pay, in whole or in part, the amount of the judgment, and that the money sought will be paid to an insurer to reimburse or otherwise indemnify it in respect to any amount paid or payable by it by virtue of such policy. Therefore, it is contended, the applicant is not eligible to be paid by the Fund. The opposing assertion is that the uninsured motorist provision of the policy does not impose upon the insured liability for the amount of the judgment. It is argued that under the policy the determination of whether the insured is legally entitled to recover damages, and the amount thereof, is to be made by agreement between the insured and the company or by arbitration; consequently, the obligation of the insured is only to pay such sums as may be determined by agreement or arbitration and not by judgment resulting from litigation between the insured and the tortfeasor.

The Supreme Court of Appeals of Virginia, construing the uninsured motorist law of that state in the case of Horne v. Superior Life Ins. Co., 203 Va. 282, 123 S. E. 2d 401 (1962) held:

"It is not the purpose of the uninsured motorist law to provide coverage for the uninsured vehicle, but its object is to afford the insured additional protection in event of an accident. Here, Aetna (the uninsured motorist carrier) does not stand in the shoes of Washington (the uninsured motorist). Its policy does not insure Washington against liability. It insures [those] protected under the policy against inadequate compensation. Aetna’s liability to its insured is contractual, even though it is based upon the contingency of a third party’s tort liability, and [the] employer, Superior [or its insurance carrier], does not become a third party [temporary] under the insurance contract.”

The applicability of subsection (l) depends upon the existence of a policy of insurance whereby the insurer is liable to pay, in whole or in part, the amount of the judgment. Since the policy in question does not insure the tortfeasor, and since the liability of the insurer depends upon its agreement with the insured or arbitration, it cannot be said that the insurer is liable to pay, in whole or in part, the judgments obtained in behalf of the Riveras. It is apparent, therefore, that subsection (l) does not determine the eligibility, or lack thereof, of the applicant in this case.

IV

The critical determination to be made is the status of the applicant; that is, whether she is a member of a class intended to be benefited by the statute.

Incorporated in the policy of insurance issued to Rivera was a “Trust Agreement” which provided that in the event of payment made to any person by reason of the uninsured motorist coverage:

“(a) the company shall be entitled to the extent of such payment to the proceeds of any settlement or judgment that may result from the exercise of any right of recovery of such person against any person or organization legally responsible for the bodily injury because of which such payment is made;
(b) such person shall hold in trust for the benefit of the company all rights of recovery which he shall have against such other person or organization because of the damages which are the subject of claim made under this Part;
(c) such person shall do whatever is proper to secure and shall do nothing after loss to prejudice such rights;
(d) if requested in writing by the company, such person shall take, through any representative designated by the company, such action as may be necessary or appropriate to recover such payment as damages from such other person or organization, such action to he taken in the name of such person; in the event of a recovery, the company shall be reimbursed out of such recovery for expenses, costs and attorneys’ fees incurred by it in connection therewith;
(e) such person shall execute and deliver to the company such instruments and papers as may be appropriate to secure the rights and obligations of such person and the company established by this provision.”

The trust agreement creates a right of subrogation. The insurer is unequivocally entitled to the proceeds of any settlement or judgment resulting from the exercise by the insured of a right of recovery against the tortfeasor. The right of recovery is held in trust by the insured for the benefit of the insurer. It is clear that the application now before the court, though ostensibly that of a judgment creditor, is actually made by one acting as trustee for and in behalf of the insurer.

The applicant’s contention that the insurer would have no right to moneys received from the Fund is specious. Such payments, were they to be made, would, in the words of the trust agreement, “result from the exercise of any rights of recovery” against a person legally responsible for the bodily injury.

The purpose of the Fund is to provide a measure of relief to persons who sustain losses or injury inflicted by financially irresponsible or unidentified operators of motor vehicles, where such persons would otherwise be remediless. Dixon v. Gassert, 26 N. J. L. 5 (1958); Corrigan v. Gassert, 27 N. J. 227, 233 (1958); Douglas v. Harris, 35 N. J. 270, 279 (1961); Moan v. Coombs, 47 N. J. 348, 351 (1966); Licata v. Lutz, 48 N. J. 255, 258 (1961); Holmberg v. Aten, 68 N. J. Super. 73, 83 (App. Div. 1961); Parrot v. Chiselko, 74 N. J. Super. 138, 142 (App. Div. 1962); Dietz v. Meyer, 79 N. J. Super. 194, 196 (App. Div. 1963); Downing v. Stewart, 85 N. J. Super. 62, 66 (App. Div. 1964); Wharton v. Knox and U. C. & J. F. Board, 98 N. J. Super. 61 (App. Div. 1967), certification denied 51 N. J. 186 (1968); Proskurnja v. Elder, 73 N. J. Super. 466, 473-474 (Law Div. 1962); Selimo v. Hartshorn, 99 N. J. Super. 146, 157 (Law Div. 1968); Lindsay v. Boles, 61 N. J. Super. 516, 519 (Cty. Ct. 1960).

The Fund is held in trust for the stated purposes and for the costs of administration. Wormack v. Howard, 33 N. J. 139, 143 (1960). The public interest demands that the Fund be administered in a fashion to assure that only those persons legitimately entitled to participate in its benefits are paid therefrom. This is a duty imposed by public policy and' owed to the contributors as well as to the general public. Douglas v. Harris, supra. The judiciary of this State is the guardian of the trust moneys represented by the statutory Fund. Szczesny v. Vasquez, 71 N. J. Super. 347, 358 (App. Div. 1962).

Obviously, losses and damages were inflicted upon the Rivera family by a financially irresponsible operator of a motor vehicle. Nevertheless, it does not appear that they are remediless. The creation of an Unsatisfied Claim and Judgment Fund such as ours has not been the only solution to the social problem of compensating victims of a negligent, uninsured and judgment-proof motorist. There has also been formulated for inclusion in automobile policies, as in New York, where such provision is mandatory, uninsured motorist coverage designed to afford payment to the insured, within prescribed limits, of all sums which he or his legal representative is legally entitled to recover as damages from the owner or operator of an uninsured aritomobile. See Donaldson, “Uninsured Motorist Coverage,” Insurance L. J., (January, 1967); Annotation, “Liabilities under ‘Uninsured Motorists Coverage/ ” 79 A. L. R. 2d 1252. Although the Fund is financed from additional registration fees levied upon uninsured vehicles and assessments against insurers, whereas uninsured motorist coverage is a contractual relationship between the insurer and the insured providing protection for which a premium is charged, the end result is the same.

The Fund is not intended to make every claimant whole, but only to provide some measure of relief to those persons who come within the class intended to be protected; and before coverage can be extended to any applicant he must clearly demonstrate that he is a member of the class for whose benefit the Fund was established. Wormach v. Howard, supra.

It is the view of the court that a result which would permit the applicant to receive moneys from the Fund and then- transmit them to the insurer would be repugnant to the spirit, if not the letter, of the statute, and would thwart the purpose for which the Fund was created. A statute will not be construed so as to reach an absurd or anomalous result. Robson v. Rodriquez, 26 N. J. 517, 518 (1958). It is the proper function of the judiciary to give effect to the obvious intent of the Legislature, and to that end words used may be expanded or limited according to the manifest reason and purpose of the law. New Capitol Bar & Grill Corp. v. Division of Employment. Security, 25 N. J. 155, 160 (1957); Alexander v. New Jersey Power & Light Co., 21 N. J. 373, 378 (1956); Wright v. Vogt, 7 N. J. 1, 6 (1951); Glick v. Trustees of Free Public Library, 2 N. J. 579, 584 (1949); Schock v. Board of Review, Div. Empl. Sec., 89 N. J. Super. 118, 124 (App. Div. 1965).

The applicant’s right to receive compensation from the insurer, the amount of which in this case is equal to the limits of the Fund, coupled with the terms of the trust agreement, leads to the conclusion that no further claim can be made against the Fund. She does not seek payment in her own behalf; she is acting for and as the alter ego of the insurer. In short, the applicant is for all practical purposes the insurer. The Unsatisfied Claim and Judgment Fund was not designed to benefit that class.

In the case of Tschider v. Burtts, 149 N. W. 2d 710 (1967), the North Dakota Supreme Court held, in a comparable situation, as follows:

“The insureds’ right to recover from the Fund no longer exists in this case because they assigned their rights to the insurer. The insurer paid the full amount of their respective claims for damages sustained because of bodily injuries suffered as a result of an automobile accident in which the uninsured financially irresponsible wrongdoer was the driver, and recovered judgment against the wrongdoer for the full amount it paid out. The insureds have received full compensation for the injuries suffered. There is nothing in the terms of the Unsatisfied Judgment Act that indicates an intention to relieve an insurer of its responsibility for its own contractual obligation or to reimburse an insurer for payments made under its insurance contract. The purpose of the Fund was not to set up a free reinsurance plan for insurers of those who have suffered bodily injury by financially irresponsible motorists. The Unsatisfied Judgment Fund was established in North Dakota in 1947 (Chapter 274, Session Laws of 1947). Uninsured motorists’ coverage at that time was virtually unknown, if not completely unknown. It cannot be said the legislature considered uninsured—motorist coverage at the time the Unsatisfied Judgment Fund Act was passed. In our opinion, the insurer did not acquire a right under the Unsatisfied Judgment Act for an order directing payment of its judgment out of the Unsatisfied Judgment Fund. The Ontario Court of Appeal, under a statute similar to ours, come to the same conclusion. Merkur v. Wilson’s Transport, Ltd., 1955, Vol. 5 1). L. R., page 778.”

The application for payment by the Fund, made in behalf of Petra Feliciano in her several representative capacities, is dismissed.

The applications for payment by the Fund, made in behalf of the Bradford, Bush and Simmons estates, are granted. Since the judgments exceed the allowable limits prescribed in N. J. 8. A. 39 :6-69 (5), the three claimants are entitled to a total amount of $20,000, that sum to be prorated among them. See Garcia v. Morales, 47 N. J. 269 (1966).

An order will be presented, consented to as to form, or settled on notice, disallowing the application made in behalf of Petra Feliciano and directing the Treasurer to make payment from the Fund to the representatives of the Bradford, Bush and Simmons estates on a prorated basis.


source: Caselaw Access Project

author: Schwartz, J. C. C.

license: Public Domain

text:
    IN THE MATTER OF THE ESTATE OF ANGELO CARPENTIERO, DECEASED.
    Middlesex County Court Probate Division
    Decided June 24, 1968.

      Air. David Sapiro for executrix of the estate (Messrs. Buss cG Sapiro, attorneys).

      Air. Edwin G. Scored for Hahnemann Medical College and Hospital, a corporation, creditor.

      Air. William G. Moran, Jr. tor Grant Plumbing Co., creditor {Air. J. Schuyler Huff, attorney).

      Mr. Isadore M. Zamost for Aaron & Co., Inc., creditor.
   Schwartz, J. C. C.

General creditors of this insolvent estate protest a preference to a hospital for services rendered “during the last illness.” The hospital claims its preference under N. J. S. 3A :24-2 :

“The following expenses and debts shall have preference and be paid out of the personal and real estate of the decedent, according to the following order:
1. Funeral expenses.
2. Administration expenses.
3. Debts entitled to a preference under the laws of the United States.
4. Hospital, physicians’ and nurses’ Mils during the last illness.
5. Judgments entered against the deceased according to the priority of their entries respectively. * * (Emphasis supplied)

The claim rests on the following facts: Dr. Paul Jennings, a cardiologist, treated decedent for rheumatic heart disease and coronary heart disease and referred him to the hospital for a “serious” heart operation. The patient was admitted on September 20, 1966 and discharged on November 2, 19'66. Thereafter, decedent saw Dr. Jennings on November 8 and December 23, 1966, did not keep an appointment for January 30, 1967, and died on January 31, 1967. Decedent was 48 years old on the date of death. The cause of death noted on the death certificate was “coronary occlusion, coronary insufficiency, rheumatic heart disease.” Dr. Jennings stated his patient continued to have chest pain and symptoms of heart failure, episodes of elevated temperature and coughs, and that his condition “deteriorated after discharge”; that on December 23, 1966 he still suffered from rheumatic heart disease and coronary heart disease and was continued on digitalis, penicillin and diuretic and coronary dilation; that “he never recovered from the condition” for which he was sent to the hospital; that between November 8 and December 23, 1966 “he got worse”; that no other conditions intervened between discharge from the hospital and death—“it was the same thing”; that he died of acute coronary occlusion and the rheumatic heart disease, which complicated each other, lessening chances of a successful operation; that following discharge the doctor advised him to rest at home and did not know he was working at his plumbing business.

The widow said her husband, a plumber, emploj^ed one full-time man and one part-time man; that at the time of his discharge from the hospital he “didn’t look like himself” and experienced great difficulty in walking; that he remained at home and used the phone for his business, and only went to supply houses and to make job estimates; that following his discharge he always complained, didn’t sleep and had chest and arm pains; that he was limited in his activities for about six months prior to the operation but he did even less after the operation; that her daughter accompanied decedent on his visits to the doctor; and that he had suffered from rheumatic fever since childhood.

Witnesses for the general creditors testified that decedent purchased plumbing supplies after his discharge; that his volume was not as much following his discharge as before—■ “maybe half”; that his physical involvement was less following his discharge and that the plumbing houses helped him load supplies because “all knew his condition.”

The question presented is whether the services rendered by the hospital were services “'during the last illness,” within the contemplation of N. J. 8. 3A :24-2, taking into consideration the fact that the decedent lived for three months after his discharge from the hospital, resumed the operation of his plumbing business, visited his doctor only twice before his death, and died suddenly.

The fundamental canon of statutory construction is to divine the intent of the Legislature. I find no reported case in New Jersey dealing with the meaning of “during the last illness,” the phrase in N. J. 8. 3A :24r-%.

“The'order of payment prescribed by the common law was, first, funeral charges and the expenses of administration; second, debts of record; third, debts by specialty; and, fourth, simple contract debts. Haines v. Price, Spen. 480; Grif. Reg. 1281, note.” Bowes v. United States, 127 N. J. Eq. 132, 136 (Ch. 1940).

Claims of a medical nature were not preferred at the common law.

The early statutes granted a preference to physicians’ bills “during the last sickness.” L. 1898, c. 234, § 66, p. 738; Rev. of 1877, p. 764, § 58; Rev. Stat. p. 346 § 2 of 1847. In 1916 the statute was broadened to include nurses’ bills “during the last sickness.” L. 1916, c. 35, § 1, p. 62. In 1941 the statute was broadened again to include hospitals’ bills “during the last sickness.” L. 1941, c. 228, § 1, p. 646. In the 1951 revision of Tille 3, “last sickness” was changed to read “last illness.” N. J. 8. 3A :24-2.

I am unable to find any record of legislative motivation for the statute, save for the “Statement” annexed to the 1941 amendment:

“The purpose of this proposed amendment is to include hospitals as preferred claimants for hospitalization rendered during the last sickness of the decedent. As hospitals are charitable in nature, they are entitled to this protection.” (Emphasis supplied)

Similar statutes have been construed in other jurisdictions. In Maine, the court said:

“The object which the Legislature had in view doubtless was that a sick man, though possessecl of but very little property, should be in no danger of suffering by reason of the want of medical advice and assistance, even where unfeeling physicians, if there are any such, would be tempted to refuse or withdraw their professional attentions, apprehending they might lose their reward.” Huse v. Brown, 8 Me. (Greenl.) 167 (1831), quoted in McLean v. Breen, 183 S. W., 394, 397 (Tex. Civ. App. 1916).

With equal probability it could be surmised that the Legislature also sought to assure medical attention to those hesitating to seek it because unwilling to be the object of charity and to assure the status attached to a paying patient.

The phrase “last illness” has been construed in other situations such as nuncupative wills. Annotation, 9 A. L. B. 462, 464 (1920). The majority view, to which New Jersey adhered, requires that the nuncupation take place during “extremis.”

“That is, the law contemplates sudden and severe illness immediately preceding physical dissolution, when there is neither time nor opportunity to make a written will, and therefore, in such case, if there is to be a will, it must of necessity be a merely verbal one.” Carroll v. Bonham, 42 N. J. Eq. 625, 627 (Prerog. 1887).

The suddenness and severity of the illness is a sine que non regarding a nuncupative will. Courts which have considered this issue do not restrict the preference to medical services rendered in extremis or in sudden illness situations. Recovery of health sufficient to exclude a nuncupative will would not rule out a hospital preference. The reasons for the rule in each respective area appear to be anchored in distinctly different theories. In the will situation, time will not permit reduction to writing. The overriding legislative intent in the preference statute appears to be a decent regard that medical services be rendered to those in need.

The period to be included within the phrase “last sickness”, has been restricted in eases involving a trust (McLean v. Breen, 219 S. W. 1089) (Tex. Com. App. 1920); a federal pension (U. S. v. Fresbie, 28 F. 808 5th Cir. 1886); a gift to avoid dower (Rice v. Waddill, 605, 168 Mo. 99 (67 S. W. 605 (Sup. Ct. 1902); and gifts causa mortis (Robson v. Robson’s Adm’r, 3 Del. Ch. 51 (Ch. 1886); Weston v. Hight, 17 Me. 287 (Sup. Jud. Ct.) (1840).

The considerations involved in the meaning of trust provisions and pension laws have no relation to the object of a statutory preference. The consideration of contemplation of death inheres in situations concerning gifts causa mortis and to avoid dower; but contemplation of death is not an express requirement of our act, and I see no basis for its implication.

In McLean v. Crow, 88 Cal. 644, 26 P. 596 (Sup. Ct. 1891), the court, considering a preference, said in dictum that “last sickness” means something more than services rendered in extremis, and something more than the same phrase in statutes authorizing nuncupative wills. Other states have construed similar statutes liberally. See Annotation, 9 A. L. R. 462, 464 (1920).

The statutory language is “during the last illness.” “During” is defined as “in the time of” and “after the commencement and before the expiration of.” “Last illness” is defined as the “illness terminating in person’s death.” Blade’s Law Dictionary (4th ed.). Any other cause of death appears beyond the legislative intent. For example, if a patient discharged from a hospital met with an accident on the way home, and died of injuries entirely unrelated to the condition treated, it seems quite plain that a preference to such hospital claim was not contemplated.

Other courts have considered several subordinate questions as relevant: the period between the date of last treatment and date of death; the patient’s condition on discharge, his prognosis, and his recovery or lack of it; the regularity of medical attention and the recovery of the patient to an extent sufficient to permit his attending to his ordinary and business affairs over some period following the rendition of services. See Annotation, 9 A. L. R., supra. While no case in any jurisdiction has been found involving a hospital bill, I cannot distinguish it from a physician’s or a nurse’s bill. When a long period of time intervenes between hospital discharge and death, it would be unreasonable to construe the intent of the Legislature to be to unfairly subordinate debts incurred during such period. The court is of the opinion that the Legislature did not intend that a hospital be permitted to rest on its claim for an undue period while others extend credit to permit the former patient to continue a normal life and to earn a living. Under such circumstances a creditor’s humane and decent regard for a man’s promise to pay ought not to result in prejudice.

The time lapse from hospital discharge to death was about three months in the instant case. The expert testimony indicated the operation was serious; that the patient was still under the doctor’s care; that he was still on medication; that he never recovered from the condition; that he did not improve following discharge; that “he got worse”, that “no other conditions intervened between operation and death”, that decedent’s condition was complicated by two diseases of the heart; that patient was advised not to participate in his plumbing business; and that death resulted from coronary occlusion. Other testimony indicated decedent did not fully participate in his plumbing business following discharge; that he was not the same man although he had confined somewhat his work prior to his hospitalization as well; and that the plumbing houses helped him load supplies because of their konwledge of his condition.

“The last illness within the meaning of a statute, giving preference to the expenses thereof, is the illness which terminated in the patient’s death and the right to a preference is limited to services performed and expenses incurred during that illness, but unless the period is designated by statute, no particular period preceding death can be fixed as constituting the last illness, as the duration of such illness must vary considerably according to the nature of the disease and the condition of the patient. While it has been held that such a statute must be strictly construed, it has also been held that it should be liberally construed, and the expression cannot be limited in meaning to the period during which decedent was in extremis; but on the other hand it relates to the proximate, and not the remote cause of death, and a claim for medical attendance cannot be made to cover a long period during which the patient lingered, partially convalescent, the attendance being broken off during the convalescent period and then renewed on decedent’s relapse, especially where there had been a change of physicians.” 34 C. J. S. Executors and Administrators § 461, at pp. 317-318 (1942).

This preceding statement has been said to be a summary of all the decisions and to express the meaning and application given to the preference statutes by the courts generally. Proto v. Chenoweth, 40 Ariz. 312, 11 P. 2d 950-951. (Sup. Ct. 1932).

In Proto, the court said (at p. 952) that “last illness” is not elastic enough to cover all those ills to which old age is heir, but picks out the particular illness which terminates in death. And further:

“* * * to allow a physician purposely or negligently to postpone collecting for his services until after his patient is dead, even though the patient during much or all of the time was able to be up and around and transact business, is giving the phrase a rather more liberal meaning than was ever intended, we apprehend.” (at p. 952)

“Last illness” is to be judged in the light of the above and accorded a reasonable interpretation. In the case of a patient suffering for some long period from a chronic or incurable condition or a disease of a progressive nature during which, while receiving medical attention, he also is able to attend to his affairs, other creditors should be fairly considered. Here, the patient was advised not to work. That he did do some work is not controlling. That he should not have worked, rather than the fact that he did, seems the proper inquiry.

In Huse v. Brown, supra, decedent died six months after the last treatment, which covered the period from January 19 to June 28, 1928 and he died on December 16, 1928. He had cancer of the nose for about two years and engaged in some personal attention to his farm during the summer of 1928 and was abroad the following autumn. The preference was sustained.

The period to be preferred is the interval commencing when a patient is permanently stricken and does not recover from the ravages of a long-standing condition, and not the treatment over a long period covering months or years. Proto v. Chenoweth, supra. Any other construction would lead to extremely large medical claims prejudicial to other worthy claims, and would favor dilatory practices on the part of medical claimants.

The intent of our Legislature ought not be given a more confining construction than that given by other courts to physicians’ and nurses’ bills. As with physicians and nurses, the services rendered by a hospital are medical in nature. The reasoning as to legislative intent regarding physicians’ bills would apply with equal force to a hospital bill. In no perceivable way does the public nature of the institution weaken the claim.

Physicians and nnrses were preferred prior to the 1941 amendment. They are not charitable. The legislative objectives as above stated appeal to reason, and hospitals ought to be regarded in the same way. Their charitable nature evidently persuaded our Legislature to “include” them on a par with physicians and nurses, but there is no apparent reason to apply a more limited scope to hospital claims.

I find that the proximate cause of death was the condition for which decedent was treated at the hospital. I find that the services rendered by the hospital for the treatment of this condition, from which he never recovered, were services during his last illness within the intent and meaning of the statute. The period of three months from the hospital discharge to the patient’s death is not so inordinate as to require the denial of a preference.

The general creditors contend that the hospital has substituted decedent’s wife as the debtor and that this substitution constituted a novation.

On September 20, 1966 both decedent and his wife signed a form agreeing to pay for the services rendered at the hospital.

To constitute novation, there must be an agreement between the creditor, the old debtor and the new debtor to. substitute the new debtor for the old debtor and to release the latter. J. Shlainsey, Inc. v. Aitken, 127 N. J. L. 246, 248 (E. & A. 1941). Novation is never presumed. Id.

In Sixteenth Ward, &c., Ass’n v. Reliable Loan &c., Co. 125 N. J. Eq. 340 (E. & A. 1938) the court stated:

“* * * Novation is generally accepted to mean that there being a contract in existence, some new contract is substituted for it, either between the same or different parties, the consideration mutually being the discharge of the old contract. Morecraft v. Allen, 78 N. J. L. 729; Cooke v. McAdoo, 85 N. J. L. 692. In order to effect a novation there must be a clear and definite intention on the part of all concerned that such is the purpose of the agreement, for it is a well settled principle that novation is never to be presumed. The intention by the obligor that the existing debt should be discharged by the new obligation must be concurred in by both debtor and creditor. The existence of such an intention need not be shown by express words to that effect, but the same may be implied from the facts and circumstances attending the transaction and the conduct of the parties thereafter. Griffin v. Cunningham, 183 Mass. 505; 67 N. E. 660; 20 R. C. L. 366; 46 C. J. 580.” (at pp. 342-343)

In Tolland v. Lista, 46 N. J. Super. 272 (App. Div. 1957), the court said:

“In order to effect a novation there must be a clear and definite intention on the part of all concerned that such is the purpose of the agreement, for it is a well-settled principle that novation is never to be presumed.” (at p. 277)

The date on the form is the date of the admission to the hospital. The facts indicate that the signing of the form was an original undertaking having no reference to any prior obligation of any party. Nothing in the facts presented to the court indicate a novation, either directly or by implication.

A general creditor also urges that the pendency of a suit by the hospital against decedent’s wife for the bill and the hospital’s claim for a preference against the estate are inconsistent and support the denial of a preference. No authority was presented for this contention. In my opinion, this argument has no merit.

The court has not been advised whether the hospital Will be paid in full if it is granted a preference. There may be a claim against the wife for a deficiency. In any event, there cannot be more than one full recovery.


author: Bky-Nildsen, D. C. J.

text:
    STATE BOARD OF MEDICAL EXAMINERS OF NEW JERSEY, PLAINTIFF, v. WARREN HOSPITAL, A NEW JERSEY CORPORATION, DEFENDANT.
    District Court Warren County
    Decided June 27, 1968.

      Mr. Howard M. Kaplan, Deputy Attorney General, for plaintiff (Mr. Arthur J. Sills, Attorney General of New Jersey, attorney).

      Mr. James V. Tirrell, Jr. for defendant.
   Bky-Nildsen, D. C. J.

This appears to be a case of novel impression. Plaintiff sues for a penalty alleging that defendant, a non-profit corporation, violated N. J. S. A. 45:9-22 during the year 1966 and other times, by employing, for a stated salary, one Walter K. Peters, M.D., an unlicensed individual, to practice medicine during such times at its hospital in Phillipsburg, New Jersey.

The evidence clearly showed that during the period in question, Dr. Peters was a physician licensed to practice medicine by the Commonwealth of Pennsylvania, but not so licensed in New Jersey. A letter contract, dated April 13, 1965, between defendant and Dr. Peters, provided among other things that Dr. Peters was to be “Director of Medical Education and Emergency Room Physician.” Referring to Dr. Peters, the letter provided, passim: “your major responsibility will be the complete Medical Education Program of Warren Hospital in all phases * * * Your other major responsibility will be Emergency Room Physician. This responsibility will no doubt utilize most of your time, however, not to the point of neglecting the Educational Program. Your work week will be five and one-half days subject to being available for emergency call * * *. Your salary will be $12,000 per year effective April 1, 1965 and $13,500 when you are licensed.”

Yoluminous patient case records produced by plaintiff from the defendant’s files clearly show the diagnosis and treatment of a large number of patients at Warren Hospital during 1966 by Dr. Peters, in his capacity as an hospital employee. In the interest of shortening the trial, defendant’s counsel stipulated that Dr. Peters was practicing medicine within the definition of that term contained in N. J. S. A. 45:9—5.1 (as an employee of Warren Hospital) during the year 1966. There is no doubt, therefore, that defendant, Warren Hospital, employed for a stated salary, $12,000 per year, Walter K. Peters, M.D., a person not regularly licensed to practice medicine in this State, to practice medicine therein, that Dr. Peters did in fact practice medicine as such employee in Warren Hospital during the year 1966. This conduct clearly would constitute a violation by defendant of N. J. 8. A. 45:9-22 unless, as contended by the defendant, the statute does not apply.

Defendant makes two points in its contention that N. J. 8. A. 45 :9—22 does not apply: first, that the conduct of Dr. Peters was excepted from the operation of N. J. 8. A. 45:9-22 by the terms of subsection (c) of N. J. 8. A. 45:9-21; and second, that the Legislature never intended N. J. S. A. 45:9-22 to apply to bona fide approved hospitals, and to the professional conduct of its staff physicians, since such personnel were subject to supervision by the hospitals wherein they are employed. N. J. S. A. 45:9-21 (c) provides “The prohibitory provisions of this chapter (N. J. 8. A. 45:9-1 et seq.) shall not apply to the following . . .

e. A physician or surgeon of another State of the United States and duly authorized under the laws thereof to practice medicine or surgery therein, if such practitioner does not open an office or place for the practice of his profession in this State,” (Parenthetic reference to N. J. S. A. 45:9-1 et seq. supplied)

To permit defendant to develop factual support for its first contention, the court admitted testimony from which it appeared that Dr. Peters had no special office; and kept no patient records apart from the hospital case records; had no professional sign giving notice to the public of his availability for professional services independent of those rendered as an employee of the defendant; had no separate telephone listing; and was in all of his activities subject to the rules, regulations and by-laws of the defendant.

Incidental to defendant’s second point of contention, the court allowed defendant to produce its By-laws to demonstrate that at Warren Hospital the Out-Patient Department (Emergency Room) was supervised by a committee of the Medical and Dental Staff, that Warren Hospital is a properly organized independent non-profit association of this State; that it is fully accredited and approved by the Joint Commission on Accreditation of Hospitals, a national organization; and that it follows accepted procedures in its business practices and that its medical and surgical personnel and facilities are under the supervision of a qualified and competent professional staff. The echelons of professional management and supervision were outlined in testimony from which it would appear that the work of Dr. Peters was subject to control and supervision by the Medical and Dental Staff and its Committee with regard to his Emergency Room service, and while not clearly stated, it might be assumed that his work as Director of Medical Education would also be subject to some staff regulations. In passing, it might be said in fairness to the defendant and to Dr. Peters, that from all of the evidence it was abundantly clear that Dr. Peters discharged his responsibilities to the defendant and its patients whom he served, with a high degree of professional competence.

Defense counsel urged that the legislative scheme of regulation contained in N. J. 8. A. 45:9-l &t seq. is concerned only with the practice of medicine by individuals, lest the public be victimized by unlicensed persons unskilled in the art of healing, and that it was never the intention of this legislation to regulate hospitals, or indeed those who practice the healing arts as supervised employees of approved hospitals. A construction of the statute as binding upon hospitals, defendant insists, would work an unreasonable hardship not only upon hospitals; but the general public, particularly in view of an alleged shortage of physicians. While this point of view is not without plausibility and, if properly presented to the Legislature, might possibly be considered to be of sufficient merit to warrant a statutory amendment, this court is not at liberty to indulge in presumptions that the legislature intended something more or less than what it actually wrote into law. A court is obliged to interpret and enforce the legislative will as written, and may not, under the guise of construction, substitute a different meaning, even though it might honestly regard the alternative as more desirable.

When the application of a statute is involved, it is the duty of the court to determine the legislative intention from the plain meaning of the statute and to apply the statutory provision, in the light of that intention, to the fact. Legislative intention with respect to particular parts of a statute can be understood only when the passage or section is considered in its proper context. To reach an understanding of the legislative intent, it is essential to ascertain the purpose for which the entire statute was enacted, and the mischief it was designed to eliminate. The legislative plan or scheme, gathered from the statutory enactment when read in the full light of its history, purpose and context, should be effected. Albert F. Ruehl Co. v. Board of Trustees of Schools for Industrial Education, 85 N. J. Super. 4 (Law Div. 1964); State v. Gill, 47 N. J. 441 (1966); Seatrain Lines v. Medina, 39 N. J. 222 (1963). Moreover, the court must consider and give effect to all of the provisions of a statute. An inference of surplusage in a legislative enactment should not be readily entertained, and no statutory language should, if reasonably available, be found to be inoperative, superfluous or meaningless. Foy v. Dayko, 82 N. J. Super. 8 (App. Div. 1964); Board of Education of the City of Hackensack v. City of Hackensack, 63 N. J. Super. 560 (App. Div. 1960). A court certainly may not read out express provisions which continue to make sense on sheer speculation that the Legislative meant to delete it or by some strained enlargement of an exception. Delaware River Port Authority v. Hughes, 46 N. J. 451 (1966) The nature of the subject matter, contextual setting, and statutes in pari materia must all be viewed together in seeking legislative intent, and the import of particular words and phrases are controlled accordingly. It is to be assumed that each word and phrase in a statute was incorporated by design of the Legislative, and the statute must be construed as a whole, giving effect to each and every portion thereof, in a manner consistent with the general scheme and intent of the whole. Labeda v. Clark, 40 N. J. 424 (1963); Ruehle, supra.

Since N. J. 8. A. 45:9-22 is penal in nature, it should be read strictly to avoid construction which would lead to an unjust penalty, but strict construction does not warrant a narrow or limited meaning inconsistent with the obvious intent and purpose of the Legislative. State v, Brown, 67 N. J. Super. 450 (App. Div.) This section, among other things, does indeed contain a general prohibition against the practice of medicine and/or surgery or chiropractic, in this State by any person without such person first having obtained a license, as provided in Article 9, or any supplement thereto, or contrary to any of the provisions of such article or any supplement thereto, and provides that any such person who violates any of the provisions of this Chapter, or any supplement thereto, shall be liable to a penalty of two hundred dollars ($200.00) for the first offense. But there is more. Following the prohibitory language with respect to individuals, the statute clearly goes on to include within the proscription: "any person, company or association who shall employ for a stated salary or otherwise, or aid or assist any person not regularly licensed to practice medicine and/or surgery or chiropractic in this State, to practice medicine and/or surgery or chiropractic therein, or who violates any of the provisions of this chapter or any supplement thereto, shall be liable to a penalty of two hundred dollars ($200.00), for the first offense.” The statute provides for the recovery of the penalty by and in the name of the State Board of Medical Examiners, in a summary manner pursuant to the Penalty Enforcement Law (N. J. 8. 2A :58-l et seq.) and the Rules of the Supreme Court.

This section is consistent with the entire plan and purpose of the Legislature in this Article, which is an expression of the Legislature’s concern with an important problem of public health and welfare and the creation of a statutory method of dealing with it. Clearly within its police power, the Legislature has attempted to protect the public against the obvious danger of exposure to inexperienced, ignorant, incompetent, deceptive and fraudulent persons, who might hold themselves out as practitioners of the healing arts. It has resorted to the classic device of requiring all persons, before engaging in the practice of medicine and/or surgery or chiropractic in this State, to first obtain a license therefore in this State. It delegated jurisdiction over the licensing and supervision of such persons, to the State Board of Medical Examiners, and provided for the organization, and powers of that Board. The.section under consideration in this case is a vital part of the Legislature’s scheme to implement the delegated powers and duties of the Board by providing a method of enforcement. It saw fit, in enacting this section to provide for the enforcement of the provisions of the whole article not only against the individuals who might personally seek to engage in the practice of medicine without having first having obtained a license in this State, but also reached out to prevent other persons, companies and associations from employing for a stated salary or otherwise, or aiding or assisting any persons not regularly licensed, to practice medicine and/or surgery or chiropractic in this State, and from otherwise violating any of the provisions of Article 9. It subjected such persons, companies and associations to the same penalties for violation as were provided for unlicensed practitioners in violation. This court concludes from a reading of the entire Article that the Legislature clearly intended to include as a "person, company or association” hospitals incorporated under the provisions of the Act to Incorporate Associations not for Pecuniary Benefit, and the Acts supplemental thereto and Amendatory thereof, recited in the defendant’s Charter, and now codified as N. J. 8. A. 15:1-1 ei seq. Indeed, without in any way intending to limit the legislative intent or the operative scope of the statute, it would seem that hospitals were among the very persons, companies or associations which the Legislature probably had foremost in its mind. This conclusion is consistent with the inclusion among the exceptions from the operation of N. J. 8. A. 45:9-22, subsection (d) of N. J. 8. A. 45:9-21, which permits, under certain limitations and conditions, unlicensed persons to serve as members of the resident medical staffs of legally incorporated charitable or municipal hospitals or asylums approved by the Board; and subsection (n) of the same section which permits unlicensed persons holding the degrees of M.D. or D.O., under certain circumstances and conditions, to be employed as members of the medical staff of a State or County institution, or as members of the teaching or scientific staff of a State agency.

We turn next to defendant’s contention that it is not in violation of N. J. 8. A. 45:9-22 because it alleges Dr. Peters did not “open an office or place for the practice of his profession in this State,” and therefore comes within the exception set forth in N. J. 8. A. 45:9—21 (c). The court is satisfied that Dr. Peters did not in the conventional sense of the terms open an office or place for the practice of his profession in this State. While it may be that had Dr. Peters, a duly licensed physician in Pennsylvania, merely visited and treated his own patients at Warren Hospital, the provisions of N. J. 8. A. 45:9-21(c) might be applicable to him, Dr. Peters did not do that. He had no patients of his own. He was employed by the defendant, for a stated salary, as a member of its staff to diagnose and treat its patients in its out patient department or emergency room. He was a full time employee obliged to be on duty at the hospital five and one half days per week and was also subject to emergency call.

N. J. 8. A. 45:9-22 is a general prohibition against the practice of medicine and/or surgery or chiropractic in this State by persons not licensed therefor by this State, and it is also general in its prohibition of persons, companies and associations who employ such unlicensed persons for stated salary or otherwise to practice medicine and/or surgery or chiropractic in this State. The statute is clear, unequivocal, and general in its application. Any exceptions in its operation are spelled out in N. J. 8. A. 45:9—21. As a general rule of construction, enumerated exceptions in a statute indicate legislative intent that the statute shall be applied to all cases not specifically excepted. State v. Reed, 34 N. J. 554, 91 A. L. R. 2d 797 (1961); State v. MacDonald, 92 N. J. Super. 448 (App. Div. 1966). While in construing a statute, a court must endeavor to give it the interpretation which best serves the entire legislative plan represented thereby, and where a statute is penal in nature, the construction adopted must emanate from the' clearly expressed legislative purpose to that effect, New Jersey State Board of Optometrists v. Koenigsberg, 33 N. J. Super. 387 (App. Div 1954); the court may not write in additional qualifications which the Legislature pointedly omitted in drafting its own enactment. Marrarca v. Harbo, 76 N. J. Super. 429, Modified 41 N. J. 569.

It is noteworthy to observe that N. J. S. A. 45:9-21 {d) as presently enacted, superseded subsection (e) of the former statute which exempted from the prohibition “a person while actually serving as a member of the resident medical staff of any legally incorporated charitable or municipal hospital or asylum.” The present subsection {d) carries those very words over but adds a qualification. Subsection (c) to which the defendant points for exemption, is limited to “physician [s] or surgeon [s] of another State of the United States and duly [licensed] to practice medicine or surgery therein.” Subsection {d) of the old statute, which the present Subsection (c) superseded, permitted physicians of foreign countries as well. Further indications of a legislative trend toward a limitation of the exceptions in N. J. 8. A. 45:9-21, are evident by a comparison of the current subjections (a), (6), and (k), with subsections (a), (c) and (n) respectively of the old statute. Each change has brought with it further limitation upon the exception. It would seem, therefore, that contrary to defendant’s contention that the Legislature is not concerned with physicians who are practicing in approved hospitals, that the Legislature appears to be increasingly vigilant in its concern for the public health and welfare. The manifest purpose of this law is clear. The general prohibition is clear. It is a settled rule of construction that exceptions to legislative measures are generally to be strictly but reasonably construed, consistent with the manifest reason and purpose of the law. Palkoski v. Garcia, 19 N. J. 175. This court holds that the exception contained in N. J. 8. A. 45:9-21(c) is not applicable to the facts in this case; that the defendant is in violation of N. J. 8. A. 45:9-22; and is therefore, subject to the mandatory penalty therein provided. Accordingly, judgment is given to plaintiff in the sum of $200.00.


author: Halpern, A. J. S. C.

text:
    STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT, v. FLEMING WOODARD, DEFENDANT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Argued June 17, 1968
    Decided July 8, 1968.

      Before Judges Coneord, Labrecque and Halpern.

      Miss Susan T. Sinins, Assistant Deputy Public Defender, argued the cause for appellant (Mr. Peter Murray, Public Defender, attorney).

      Mr. Alan Siller, Assistant County Prosecutor, argued the cause for respondent (Mr. Joseph P. Lordi, Essex County Prosecutor, attorney).
   Halpern, A. J. S. C.

(temporarily assigned). Defendant appeals from a judgment of conviction for armed robbery. He bases his appeal on four grounds: (1) the court erred in allowing testimony by the State’s witnesses identifying defendant before and at trial, the circumstances attending the out-of-court identification being such as to deprive him of a fair trial and a denial of due process; (2) the court erred in refusing to permit defendant to call an alibi witness; (3) the court erred in its supplementary instructions to the jury, and (4) his assigned counsel (not the present counsel on appeal) was so incompetent as to deprive him of the effective assistance of counsel.

The State’s proofs indicate that about 3 p.m. on April 27, 1967 an armed robber entered the offices of the Atlantic Manufacturing Company in Newark, New Jersey, held up and robbed its executive vice-president, Joseph Skopaz, and an employee, Minerva Almodovar, and escaped with the sum of $716. The robber was not masked and stood five or six feet from the victims. Skopaz testified he was close enough to the robber so that he could count the bullets in the gun. In addition there was a short exchange of conversation between the victims and the robber. The victims furnished the police with the license number and make of the get-away car and a description of the robber.

Identification of Defendant

The day following the robbery the police showed the victims four photographs of different persons, but they were unable to identify the robber. That same day, the police paraded two men about an hour apart, on the sidewalk some seven feet in front of the Atlantic offices, while the victims peered through the slats of Venetian blinds. They were unable to identify the first man. They did immediately identify defendant as the second man. Mrs. Almodovar said defendant was handcuffed to a policeman. Skopaz did not remember whether he was handcuffed. A detective testified he thought the defendant was handcuffed but not to another policeman, and that the handcuffing was concealed. Eor purposes of this opinion we assume defendant was handcuffed in a manner apparent to the identifying witnesses.

Both victims made positive identifications of the defendant at the trial. Skopaz further testified that his identification was based on what he remembered from the robbery and was not influenced by the out-of-court identification.

Defendant objected to the State’s identification testimony on the ground that the circumstances attending the out-of-court identification were such as to violate his right to counsel, both under the rule of Miranda v. State of Arizona, 384 U. S. 436, 86 S. CV. 1602, 16 L. Ed. 2d 694 (1966), and that of Wade v. United States, 388 U. S. 218, 87 S. Ct. 1926, 18 L. Ed. 2d 1149 (1967). In the course of the colloquy between court and counsel it was clear defendant had in mind, in addition to the absence of counsel at the time of the identification, that the circumstances surrounding the identification were so unfair as to taint the in-court identification. This was based on the reasoning in Wade, supra, that an out-of-court identification made under circumstances suggestive to the witnesses of the belief of the police that the suspect being exhibited is the guilty party has a tendency to cause the witnesses to rely upon that identification rather than the observation made at the time of the criminal occurrence, when identifying the defendant in court (388 U. S., at pp. 232-237, 87 S. Ct. 1926).

The trial court apparently did not recognize the thrust of the latter feature of the defendant’s objections. It did not rule on it. It did rule that the Miranda objection was not applicable because the focus of the investigation had not yet sufficiently concentrated on defendant (defendant has not relied upon Miranda on this appeal and we do not discuss the point any further). It further held that the right of a defendant to counsel at a lineup was not applicable in this case because the out-of-court identification had occurred prior to the decision of the Wade ease on June 12, 1967. See Stovall v. Denno, 388 U. S. 293, 87 S. Ct. 1967, 18 L. Ed. 2d 1199 (1967). However, it did rule that there was sufficient indication of possible unfairness in the circumstances surrounding the out-of-court identification as to warrant the excluding of the out-of-court identification on the basis of Rule 4 of the Rules of Evidence (1957) (prejudicial danger outweighing value of the evidence from a probative standpoint). Defendant declined to accept this offer, feeling that he ought to have the evidence of the out-of-court identification in the record in order to attempt to convince the jury that the circumstances attending it were such as to taint the reliability of the in-court identification.

Notwithstanding the waiver of the court’s offer, aforementioned, defendant never abandoned his position that the in-court identification by the victims should be barred because tainted by the circumstances surrounding the out-of-court identification. As already noted, this particular objection was never ruled upon by the trial judge. We construe Wade to hold that in such a situation the trial judge should make his own determination as to whether, given an unfair prior confrontation for identification, the State can “establish by clear and convincing evidence that the in-court identifications were based upon observations of the suspect other than the [out-of-court] identification” (388 U. S., at p. 240, 87 S. Ct., at p. 1939); People v. Ballott, 20 N. Y. 2d 600, 286 N. Y. S. 2d 1, 233 N. E. 2d 103 (Ct. App. 1967).

Undoubtedly the parading of defendant before the two victims, whether handcuffed to a detective or handcuffed and accompanied by a detective, constituted a confrontation violative of elementary principles of fairness in out-of court identification. See Wade, supra, 388 U. S., at page 234, 87 S. Ct., at page 1936, referring to the method of identification employed in Stovall v. Denno, supra, where the suspect was presented to the witness alone, handcuffed to police officers, as representing “a situation * * * clearly conveying the suggestion to the witness that the one presented is believed guilty by the police.”

In these circumstances we would ordinarily be inclined to remand the matter to the trial judge for a determination of the issue as to whether the totality of the circumstances establishes clearly and convincingly that the in-court identification was the independent product of the observation of defendant by the witnesses at the time of the robbery and not substantially contributed to by the circumstances of the out-of-court identification. In the present instance, however, the trial judge has passed away, and there is no opportunity to do this. Under the circumstances, we think it entirely consonant with the interests of justice for this court to consider whether the proof of record is sufficiently clear to enable us to make that fact determination, and we have decided that it is.

The closeness of the robber to the victim witnesses at the time of the robbery, and the added opportunity for carefulness of identification by the circumstance of some conversation between the robber and the witnesses, plus the positiveness with which Skopaz testified at the trial on cross-examination that the out-of-court identification did not contribute to his in-eourt identification but that the latter was derived entirely from his observations at the time of the robbery, satisfy us that it is clearly and convincingly established that the in-eourt identifications are not tainted by the circumstances of the out-of-court confrontation and identification. See also State v. Matlack, 4.9 N. J. 491 (1967) and Simmons v. United States, 390 U. S. 377, 88 S. Ct. 967, 19 L. Ed. 2d 1247 (1968), where the United States Supreme Court was satisfied that notwithstanding a less than ideal pretrial identification of defendant from various photographs, the identification of defendant by the witnesses at the trial was such as to warrant a conclusion that there was no taint from the prior out-of-court identificaions. The court stated that the in-court identification would be set aside only if the improper out-of-court identification was “so impermissibly suggestive as to give rise to a very substantial likelihood of irreparable misidentifieation.” The court further concluded that in the circumstances of the case before it there was little chance that the procedure utilized led to misidentification of defendant. The court noted that the robbery took place in the afternoon in a well-lighted bank and that the robbers wore no masks. This is closely comparable to the present facts.

The fact that the victims were shown four photographs with negative results and that prior to their out-of-court identification of defendant another individual was shown to them does not bear particularly on the issue we have to decide here one way or the other.

We thus conclude that on the record before us we are justified in finding as a fact that defendant was not prejudiced by being permitted to be identified in court by the victims of this robbery.

The Alibi Witness

Defendant contends the court erred in not permitting him to call an alibi witness, thereby depriving him of due process of law. The issue arose thusly: During the cross-examination of the State’s last witness counsel conferred with the court out of the jury’s presence. The discussion dealt with whether defendant would testify in his own defense in view of his prior criminal record. Defense counsel at that point, for the first time, indicated that if defendant decided to testify he wanted to call an alibi witness, even though defendant had failed to comply with B. R. 3 :5—9 in not furnishing the data called for in the rule. Ultimately, defendant decided not to testify, so that his conditional request to offer an alibi witness was inferentially withdrawn.

In any event, R. R. 3:5-9 makes it discretionary with the court as to whether a noncompliance with its provisions will be waived. Considering the lateness of the application, the failure of defendant to indicate who the alleged alibi witness was or that he was even available, the court’s refusal to waive the provisions of the rule was a sound exercise of his discretion. To have waived the provisions of the rule, at that point in the trial, would have been highly unfair and prejudicial to the State — and an adjournment to allow the State to investigate the witness, and the information furnished, would not have cured this eleventh hour application. State v. Baldwin, 47 N. J. 379 (1966); State v. Garvin, 44 N. J. 268 (1965).

Supplementary Instructions to Jury

Defendant urges two issues of alleged error which occurred after the jury had retired to consider its verdict. They will be dealt with separately.

About an hour after the jury retired it asked to see the notes used by Detective Earley to refresh his recollection. The court denied the request telling the jury the notes had not been marked in evidence but only for identification, and therefore the jury could not have them. Defendant objected to this supplemental charge. He contends it may have misled the jurors to disregard any discrepancies they may have found to exist between the notes and Earley’s testimony. This is a very nebulous objection and presupposes that the jury, when it made its request, had decided there was or might be some discrepancy. We should not be called upon to speculate. The supplemental instruction given was legally correct and, when considered in the light of the original charge, informed the jurors that they were the sole judges of the facts, and that “any views of mine are totally irrelevant, and it is your recollection of the evidence and your determination of the issues of the facts which will control.” Reading the original and supplemental charges as a whole, the jury could not have been misled. If it was error not to charge as requested by defendant, it was harmless error.

The jury returned a second time and posed the following question:

“Agreement has been reached that a witness was 100 percent sure in his/her own mind when identifying a defendant. Does it follow that the jurors are bound to accept the identification as correct?”

The court immediately gave the following supplemental charge to the jury:

“Now, the court cannot specifically help you in the determination of who to believe and where the truth lies. It is up to you to decide that.
If a witness testifies that he or she made this identification, it is up to you to decide whether or not to believe that witness and whether that is enough evidence to convict or acquit this defendant— I should say not acquit, but convict. You must decide after weighing the evidence, after weighing the credibility of each witness, whether or not you feel that the State has sustained its burden of proving this defendant guilty beyond a reasonable doubt.
In the search for the truth, you will consider what the witnesses said on the stand, and the impression they made upon you in the giving of their testimony as to truthfulness. You will consider the interest that they may have in the outcome of the ease, and, in general, use your good common sense and experience in reaching a conclusion as to where the truth lies in this prosecution.
So, therefore to specifically answer this question, you are not bound to accept the testimony of anybody if you don’t want to; but, if you are satisfied that they are telling the truth, and after weighing it and deciding that they are telling the truth and you are satisfied that the State has proven the defendant guilty beyond a reasonable doubt, then you must, of course, convict.
On the other hand, if after you have heard the testimony, and even though there is this 100 percent identification as is characterized by you in this note, you still feel this man is not guilty beyond a reasonable doubt, then you must acquit him.
Now, you may return to your deliberations.”

No objection was made by defendant to this supplemental charge. He now contends it was inadequate in that the jurors “might have retired with the impression that if they believed the witness was telling the truth as he or she knew it that they were bound to accept the testimony.”

We are again asked to speculate on what the jury might have done. Considering the original charge and this supplemental charge made in response to the last question, it is highly improbable that the jury retired under the impression that it necessarily had to believe a witness who was “100 percent sure” of the identification made. Counsel for defendant must have come to the same conclusion since he did not object to the supplemental charge. Having failed to object, we should not reverse unless we find plain error to exist. State v. Hipplewith, 33 N. J. 300, 315 (I960). No such plain error exists here.

Ineffective Assistance of Counsel

Defendant contends he was ineffectively represented in that trial counsel did not move, before trial, to suppress evidence of the out-of-court identification; failed to properly argue the law on the admissibility of the identification testimony; failed to adequately explain to defendant the consequences of his waiving the court’s contemplated ruling on the exclusion of the out-of-court identification, and failed to supply the State with the data called for under the alibi rule, all to defendant’s prejudice.

A conviction, otherwise valid, will be reversed on appeal because of the ineffectiveness or inadequacy of counsel only if what he did, or failed to do, is of such magnitude as to thwart the fundamental guaranty of a fair trial. State v. Dennis, 43 N. J. 418 (1964). Putting it another way, to warrant reversal, defense counsel must have been so incompetent as to make the trial a farce or mockery of justice. Rivera v. United States, 318 F. 2d 606 (9 Cir. 1963); State v. Bentley, 46 N. J. Super. 193 (App. Div. 1957).

We have examined and considered the entire record and find no justification or basis for the charges of ineffective representation. Defense counsel has been an active practitioner for about 40 years and his efforts on behalf of defendant indicate good trial preparation and technique. When experienced trial counsel adopts certain strategy in the trial of a case, and it turns out to be fruitless, such cannot be the basis for a reversal. State v. Williams, 39 N. J. 471, 489 (1963).

The conviction is affirmed.


author: Per Curiam.

text:
    HERBERT JACOBS, PLAINTIFF-APPELLANT, v. ROSALYN JACOBS, DEFENDANT-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued June 17, 1968
    Decided August 12, 1968.

      Before Judges Conford, Labrecque and Halpern.

      Mr. Seymour M. Karas argued the cause for appellant (Mr. Emil Weisser, attorney).

      Mr. Robert J. 0. McGoid argued the cause for respondent (Messrs. Schneider & Morgan, attorneys).
   Per Curiam.

Plaintiff Herbert Jacobs petitioned the Superior Court, Chancery Division to order his divorced wife, defendant Eosalyn Jacobs, to show cause why she should not produce their minor daughter Debora for depositions and be restrained from further proceeding with an action instituted by her in New York seeking redress for injuries sustained by Debora in 1&&6. Prom the denial of the requested relief plaintiff brings this appeal.

Two children, Marsha and Debora, were born of the marriage between the parties. On May 22, 19-66, while playing in the parking lot adjoining their apartment (Carlton Towers) in Passaic, Debora’s left hand became caught -in an electronically activated mechanical gate which guarded the parking lot entrance, causing allegedly severe and permanent injuries. Extensive medical treatment was required, the cost of which was discharged by or on behalf of Herbert, the father. Debora is still receiving treatment and while we are uninformed as to the extent thereof Herbert apparently continues to pay for her treatment.

Some time after the accident, Herbert instituted a divorce action against his wife. On April 11, 1967, a judgment nisi was entered in the Chancery Division granting the divorce. Custody of the children was awarded to Rosalyn. Herbert was ordered to pay the sum of $75 weekly for their support and maintenance and to “pay for all medical, dental, hospital, drug and nursing bills for said minor children.” A property settlement agreement entered into by the parties was incorporated into the decree. Under the agreement Herbert further agreed to “pay any * * * medical * * * bills incurred by Wife or the children which are or may be still unpaid, incurred prior to the entry of the order for support in the divorce action.”

On June 13, 1967, Rosalyn, through New York attorneys, instituted an action in New York seeking redress for Debora’s injuries. The complaint sought recovery for Debora’s injuries as her guardian ad litem. It also contained a claim for the loss of her services and for medical expenses. Named as parties defendants were the owners of the apartment, Carlton Tower Company, a partnership having its principal office in New York, the managers of the apartment, Delta Sales Corporation, a Mississippi corporation authorized to do business in New York, and Auto-Magic Door Opener Corporation, a New York corporation which had manufactured, installed and maintained the mechanical gate.

On August 1, 1967 Herbert instituted a second action, in his own right and as guardian ad litem for Debora, in the Law Division, Passaic County against Carlton Tower Companjq for the child’s injuries. In his individual claim he sought recovery for loss of the child’s services and for medical expenses.

Carlton Tower Company answered Herbert’s complaint through its New Jersey attorneys. They thereafter sought to take Debora’s deposition but were informed by Herbert’s attorney that Rosalyn, upon the advice of her New York attorneys, would not produce her.

Herbert thereupon filed the present petition to compel production of the child and restrain defendant from further proceeding with the New York action. In denying the relief sought the court ruled that under N. J.' 8. A. 9 :1-1 Rosalyn was the proper party to sue for loss of the child’s services; that while the parent who actually pays for medical expenses caused or incurred as the result of tortious conduct is entitled to recover such expenditures, here Rosalyn had unequivocally represented to the court at the hearing that Herbert would be reimbursed for such expenditures, therefore she and not Herbert should be permitted to maintain the action for medical expenses.

Absent from the opinion is discussion of the court’s reasons for denying the request that the child be produced for deposition by Carlton Tower Company. Since the propriety of the denial has not been briefed or argued, and will become moot because of the disposition of this appeal, we need not be concerned with it. B. B. 1:7-1 (c); Cannon v. Krakowitch, 54 N. J. Super. 93, 96 (App. Div. 1959)

Parenthetically, we note that Carlton Tower Company has moved to dismiss Herbert’s action against it in the Law Division. Argument on that motion has been held in abeyance pending our decision here.

Proceeding then to the main issue, we are called upon to determine whether the lower court’s refusal to enjoin Rosalyn from further proceeding with her New York suit was error and, if not, whether the order entered thereon adequately safeguarded plaintiff Herbert Jacobs’ interest in recovering, in the New York action, the medical expenses incurred and to be incurred by him as a result of the allegedly tortious conduct of defendants. We conclude that while the motion to restrain the prosecution of defendant’s action in New York was properly denied, the interests of the plaintiff father were not adequately safeguarded.

We are in agreement that on the facts before us N. J. S. A. 9:1-1 precludes an order restraining defendant from further proceeding in New York with her claim for loss of the child’s services. See Pangborn v. Central Railroad Co. of N. J., 32 N. J. Super. 289, 299 (App. Div. 1954), modified on other grounds 18 N. J. 84 (1955); Brennan v. Biber, 93 N. J. Super. 351, 371 (Law Div. 1966), affirmed 99 N. J. Super. 247 (App. Div. 1968). As to the claim for medical expenses, the parent whose funds are used to pay, or who remains legally obligated to pay such expenses, is the one generally entitled to recover therefor. Brennan v. Biber, supra, at p. 362; Bush v. Bush, 95 N. J. Super. 368, 379—380 (Law Div. 1967). Here it is agreed that the medical expenses were paid by plaintiff, either directly or by insurance companies on his behalf under policies the premiums for which were paid by him. Under the terms of the divorce decree he remains legally obligated to pay any future expenses for Debora’s treatment.

We are not satisfied that plaintiff’s interest in recovering the expenses incurred or to be incurred by him were adequately protected by the oral representation at the hearing below that he would be reimbursed at a future date for his out-of-pocket medical expenses and “insurance premiums.” Denial of the relief sought by plaintiff’s petition should be made conditional upon the segregation of all sums recovered, whether by judgment, settlement or otherwise, for the past, present and future medical expenses of Debora, and the execution of a written agreement by the defendant providing, in substance, that any manies recovered or received by her therefor are to be held by her in trust for the purpose of satisfying plaintiff’s lawful claim thereto. From such fund, an amount representing all sums paid by plaintiff prior to April 11, 1967, the date of the decree nisi, whether directly or through payment by insurance companies on plaintiff’s behalf, shall be forthwith paid over to plaintiff. Upon the cessation of treatment for Debora’s injuries, or upon her attaining her majority, whichever occurs sooner, the balance held in trust by defendant shall be paid over to plaintiff to the extent of any additional sums paid by him or on his behalf from April 11, 1967 onward.

The order of the Chancery Division is directed to be modified accordingly, and as modified, it is affirmed.

No costs.


text:
    CAMBRIDGE ACCEPTANCE CORPORATION, A CORPORATION OF THE STATE OF NEW JERSEY, PLAINTIFF-APPELLANT, v. LEO HOCKSTEIN AND SYLVIA HOCKSTEIN, DEFENDANTS-RESPONDENTS.
    Superior Court of New Jersey Appellate Division
    Argued May 20, 1968
    Decided August 19, 1968.

      Before Judges Confokd, Coiaester and Larrecque.

      Mr. Herman J. Ziegler argued the cause for appellant.

      Mr. Robert Silver argued the cause for respondents (Mr. Martin Simon, attorney).
   Per Curiam.

We refer to the opinion filed in the Chancery Division for the essential facts and background of this litigation. Cambridge Acceptance Corp. v. American National Motor Inns, Inc., 96 N. J. Super. 183 (Ch. Div. 1967). We .are in substantial accord with the factual findings therein made, except as qualified hereinafter. We are also in agreement with the judgment entered in favor of the respondents below, but not necessarily for all of the reasons stated in the opinion of the trial judge.

The trial court stated its conception of the issue involved as follows (96 N. J. Super., at p. 200):

“If an owner of lands subordinates his fee title to a mortgage to be given by his lessee, and the instruments of subordination demonstrate an intent that the funds obtained from an obligation secured by such mortgage be used for construction purposes, is the interest of the mortgagee or his assignee in the land superior to that of the owner in the absence of proof that the funds were spent for construction purposes?”

In the course of the opinion that query was answered in the negative (Id., at p. 204). If that conclusion may be read as dependent upon a distinction in principle between the subordination by an owner of his fee interest to the subsequent lien of an incumbrancer dealing with a lessee (the instant situation) and the subordination of the interest of a prior lienor to that of a later one, with the subsequent lien in both cases purported to cover advances for construction on the premises (Id., at pp. 200-201), we see no such distinction. In both instances the holder of a senior interest in land is subordinating to a junior interest in order to gain the added security of an improvement on the land. Policy and equitable considerations in resolving any dispute between the competing interests, arising out of a diversion of construction moneys from the contemplated improvement of the land, seem equally pertinent in both instances.

If the decision below rests on any finding that the documents or negotiations in the case spell out any stipulation, either express or by clear implication, between the owner and First National that the owner’s subordination was limited to a lien for such moneys advanced by First National only as should actually be applied to construction of the motel, we disagree with that finding. So far as the documents signed by the Hocksteins are concerned they evidence no more than an intent and expectation on their part that the lessee should promptly build a 52-unit motel on the premises and an undertaking by them to subordinate the lease [sic; conceded to mean, “subordinate the owner’s fee”] to any mortgages (up to $5,500 per motel unit) placed by the tenant on the demised premises to obtain part or all of the financing whereby to construct the motel. As much probably can be said of the intention and expectation of almost any subordinator of an interest (lien or otherwise) in land who agrees to subordinate that interest to the lien to be taken by a construction lender—i. e., an expectation and intention that the construction will actually take place by use of the money borrowed.

Yet it is the general view, recognized by respectable authority, that absent an express stipulation between the subordinator and the construction lender conditioning the scope of the subordination, diversion of the construction money by the borrower from its contemplated use will not dislodge the advanced lienor from his bargained-for priority “in the absence of collusion with the mortgagor in diverting the money from its purpose.” IY American Law of Property, § 16.106D, p. 218 (1952; A. James Casner, Editor); 1 Jones on Mortgages, § 742, p. 1105 (1928); Note, 42 Yale L. J. 980, 982 (1933); Brooklyn Trust Co. v. Fairfield Gardens, 260 N. Y. 16, 182 N. E. 231 (Ct. App. 1932); Gill v. Mission Savings & Loan Association, 236 Gal. App. 2d 753, 46 Cal. Rptr. 456 (D. Ct. App.1965); Matthews v. Hinton, 234 Cal. App. 2d 736, 44 Cal. Rptr. 692, 697 (D. Ct. App. 1965); Iowa Loan & Trust Co. v. Plewe, 202 Iowa 79, 209 N. W. 399 (Sup. Ct. 1926), commented on in 12 Iowa L. Rev. 201,203 (1927); Anglo-American Savings & Loan Association v. Campbell, 13 App. D. C. 581, 43 L. R. A. 622 (1898).

Where, however, the construction mortgagee expressly agrees with the subordinator to see to it that the proceeds of his loan will be applied to construction of the improvement he will be held to his agreement and will lose his priority as to any advance not going into the construction. Albert & Kernahan v. Franklin Arms, 104 N. J. Eq. 446 (E. & A. 1929); Joralman v. McPhee, 31 Colo. 26, 71 P. 419 (Sup. Ct. 1903); see Wayne International Building & Loan Association v. Moats, 149 Ind. 123, 48 N. E. 793 (Sup. Ct. 1897).

The trial court regarded the present case as controlled by Albert & Kernahan v. Franklin Arms, supra. (96 N. J. Super., at p. 203). However, we do not read the opinion-in that ease as authority to the effect that the mere knowledge by a construction mortgagee that a prior lienor has given a subordination for the purpose of enabling the borrower to secure construction moneys to improve the premises operates per se to convert the construction lender into a guarantor to the subordinator that all money advanced on the loan will be applied to construction by the borrower. This may or may not some day be declared to be the law of New Jersey. The case before us does not require a resolution of the question. Albert & Kernahan finds there was an express understanding between the subordinating mortgagee and the construction mortgagee “that the money to be advanced [on the loan] should be appropriated to the payment of expenses incurred in the erection of the apartment house,” (104 N. J. Eq., at p. 447), and that the subordination was therefore so limited by agreement. The case has since been so understood. Vanderhoff v. Wasco, 109 N. J. Eq. 463, 467 (Ch. 1932). Note, 42 Yale L. J., op. cit., supra (at. p. 983, n. 8).

Notwithstanding all of the foregoing, we nevertheless agree with the holding in the Chancery Division in favor of the owners of the property. While, -under general principles of mortgage subordination law outlined above, a constructiqn lender taking -the benefit of a subordination is not a guarantor to the subordinate or liable to him for mere negligence in seeing to the appropriation of the moneys to the construction, we think plain principles of equity at least call for such a construction lender to make and administer the loan in the conventional manner of a construction lender rather than mask what is essentially a loan on the general credit and reliability of'the borrower and the security of the land value as a construction loan, and act accordingly in disbursing the funds. We are firm in the conclusion, and so find, that the latter is what the First National did here, and in violation of the owner’s equitable rights. To the extent that this theory may underlie the decision of the Chancery Division, we are in accord.

. Aside from looking at the site, appraising the land, and being satisfied that a necessary variance, building permit, building contract (between corporations in the same proprietorship) and storm drain and access permit were obtained or entered into, First National in fixing the $100,000 limit for the loan and in advancing the funds which it did was totally oblivious of and seemingly disinterested in what the borrower actually did with the money or whether it was applied to the construction of this projected motel. The $100,000 was described by its president as “just an agreed figure,” and he admitted he did not know whether the money went into this motel or one of the several others which First National was simultaneously financing for the borrower. There was concededly no intention to advance the money in accordance with “stages of construction,” whether site preparation or otherwise. While the president characterized this loan as designed to enable site preparation, he admitted that in filing $100,000 as the face amount he placed substantial reliance on the appraised value of the land, on which First National was to get a first lien. This supports other cogent evidence that neither lender nor borrower really contemplated that any substantial part of the money advanced was necessarily to go into construction of this particular motel, even if “site preparation” were regarded as construction.

While the trial court found that First National had acted in good faith, we construe this as meaning no more than that it was not conniving with the borrower to defraud the owner of the land. The trial court’s general fact-finding is consistent with our conclusion that First National never conceived this loan as, or undertook to administer it in the manner of a conventional construction loan. The Hock-steins were equitably entitled, in all the circumstances, to expect that it would do so, and must have relied on that expectation in executing the subordination. The failure of First National in this regard was probably a factor in the fiasco which ensued, and it should be and is now equitably estopped from asserting the subordination in derogation of the owners’ fee interest.

We agree with the trial court that none of the several items of alleged “construction” claimed to have been financed by the moneys advanced by First National was satisfactorily proven so to have been.

Judgment affirmed.

       This case is probably dictum on the specific proposition asserted (at p. 234). The losing subordinator argued that its expectations were frustrated in that the building loan agreement called for erection of garages along with an apartment house. The garages could not be erected because of zoning restrictions. This was not known to the construction lender until the building was well advanced. But all the lender’s advances went into the construction. The court held the construction lender had the right to waive the condition as to the garages in order to safeguard its security, as provided for in the agreement.

       It is interesting that the same day this loan was closed and the first $57,500 advanced, two other motel “construction” loans were closed between First National and the borrower, each in the face amount of $100,000, with initial advances of $57,500 ($7,500 being returned as a bonus in each case), just as in the instant transaction.