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    CAMDEN COUNTY WELFARE BOARD A CORPORATION OF THE STATE OF NEW JERSEY, PLAINTIFF, v. FEDERAL DEPOSIT INSURANCE CORPORATION, ET ALS., DEFENDANTS.
    Superior Court of New Jersey Chancery Division
    November 22, 1948.

      Mr. Fred L. Streng and Mr. Alexander Feinberg for complainant.

      Mr. Grover C. Richman, and Mr. Edward I. Berry, Jr., for defendant Federal Deposit Insurance Corporation.

      Messrs. Tyler & Tyler (by Mr. Joseph Beck Tyler), for counterclaimants.
   Haneman, J. S. C.

This is a complaint seeking the following relief by the plaintiff: — the removal of an alleged cloud on the title to a parcel of real estate resulting from a judgment levy made by the Federal Deposit Insurance Corporation; a judgment establishing the order of priority of alleged liens of the plaintiff and the Federal Deposit Insurance Corporation; the revival of a cancelled mortgage on the property involved and subrogation by the plaintiff to the rights of the original mortgagee, and for an injunction against further proceedings for -sale under the judgment levy by the Federal Deposit Insurance Corporation.

The defendant Bitler, by way of counterclaim, is seeking a judgment against the plaintiff arising out of a breach of a covenant in a deed from plaintiff to him, if the Federal Deposit Insurance Corporation’s judgment is determined to be an encumbrance on the premises. He seeks to recover not only the return of the purchase price, including a cancellation of a purchase money mortgage given to plaintiff, but various other expenditures made by him as well.

The defendant Watson, by way of counterclaim, is -seeking a judgment against Bitler arising out of a breach of several covenants in an agreement of sale executed by him and Bitler, if the Federal Deposit Insurance Corporation’s judgment is determined to -be -an encumbrance on the premises. He seeks to recover not only the return of the money paid on account of his purchase, but various other expenditures made by him, including the cost of improvements to the premises, and as well to be subrogated to any judgment rendered to Bitler against the Camden County Welfare Board.

The facts generally are not in dispute and I herewith specially find such facts to 'be as follows:

Annie Vandegrift obtained title to the premises commonly known as 119 North Eighth Avenue, Haddon Heights, New Jersey, on October 6, 1906.

On* November IS, 1930 the First National Bank and Trust Company of Blackwood, New Jersey, recovered several judgments against Edward H. Vandegrift, husband of Annie Vandegrift, and other defendants -as well.

On or about February 18, 1939 the said First National Bank and Trust Company of Blackwood, New Jersey assigned these judgments to the defendant, Federal Deposit Insurance Corporation.

. On May 29, 1936 Annie Vandegrift and Edward H. Vandegrift executed and delivered to the Haddon Heights Building and Loan Association a mortgage in the amount of $1000.00, which said mortgage was thereafter recorded on July 6, 1936.

On June 23, 1936 Annie Vandegrift and Edward H. Vandegrift, theretofore having made application to the -Camden County Welfare Board for old age assistance, entered into an agreement in conformity and compliance with P. L. 1936, chapter 31, page 61, section 10, (R. S. 44:7-14).

Under date of August 1, 1936 the Camden County Welfare Board executed a certificate of notice of agreement to reimburse which was recorded September 21, 1936 in the office of the Clerk of Camden County.

On December 10, 1941 Annie Vandegrift died, leaving -a last will and testament under and by virtue of the terms of which she devised the property here involved to her husband, Edward H. Vandegrift.

On March 3, 1942 -the Camden 'County Welfare Board executed a certificate of reimbursement, which was recorded on April 9, 1942 in the office of the Clerk of Camden County, exhibiting that advances had, to that date, been made to Annie Vandegrift in the amount of $1211.00.

On September 21, 1942 the Camden County Welfare Board recorded a certificate of reimbursement in the office of the Clerk of Camden County exhibiting that up to July of 1942 advances had been made to Edward H. Vandegrift in the sum of $1552.00.

On June 6, 1944 Edward H. Vandegrift died, -having left a will, under and by the terms of which he -devi-sed the property involved to his wife, Annie Vandegrift. She having predeceased him, title vested in his -heirs-at-law.

On September 7, 1944 the said heirs-at-law of Edward H. Vandegrift voluntarily -conveyed the premises involved to the Camden County Welfare Board in satisfaction of its -claim for reimbursement. Said deed was recorded on November 11, 1944, at which time the -said Camden County Welfare Board obtained affidavits of title from the grantors, which did not exhibit or show the judgment presently held by the -Federal Deposit Insurance Corporation.

On February 28, 1945 the-Camden County Welfare Board paid $200.00 on account of the mortgage above referred to, held by the Haddon Heights Building and Loan Association. -On March 31, 1945 said Camden County Welfare Board paid the sum of $578.74 -due the Haddon Heights 'Building and Loan Association, said -sum being the balance due on account of said mortgage. Prior to the -payments made on account of -said mortgage, the Camden County Welfare Board obtained from the Market Street Title -and Abstract -Company a search or abstract of title and thereafter obtained from said Market Street Title and Abstract -Company a title policy, on. neither of which instruments was there shown the judgment above referred to, now held by the Federal Deposit Insurance Corporation.

On April 12, 1945, said mortgage having been endorsed for cancellation, the same was recorded in the County Clerk’s office on the same day.

On April 6, 1945 the -Camden County Welfare Board -conveyed the premises in question to Raymond L. Bitler. A part of the purchase -price was satisfied by'the execution and delivery of a mortgage by him to the Camden County Welfare Board.

In the period of time that the said Raymond L. Bitler had title he expended various sums for repairs, improvements, taxes and fire insurance.

On March 26, 1945 Raymond L. Bitler entered into an agreement to sell the premises involved to Jesse W. Watson for a total consideration of $4250.00, said consideration being satisfied by the payment of $500.00 in cash and installment payments of $50.00 per month for 18 months, all of which said payments were made. Said agreement provided for a warranty deed, as follows:

“4. The title to be delivered shall be a marketable title and shall be free and clear of all encumbrances including municipal liens and assessments and liability for assessments for improvements now constructed (except as herein stated), this clause to be operative as of the date of this agreement, and the title is to be subject to all existing restrictions of record, the seller-, however, guarantees that there are no restrictions in any conveyance or plans of record affecting-the said premises, which will prohibit the use and/or occupancy thereof as a dwelling and the premises shall be conveyed in the same condition as the same now are, reasonable wear and tear excepted.”

Watson was given actual possession under the terms of said agreement.

During the time the -said Watson was in possession he expended various sums for improvements and repairs.

Watson, in preparation for final settlement and closing, ordered a title policy. Upon the receipt of the search the Federal Deposit Insurance Corporation’s judgment was disclosed. Upon advice thereof to Bitler and the plaintiff, after execution by Federal Deposit Insurance Corporation, this action was eventually commenced.

On September 4, 1946 the Federal Deposit Insurance Corporation issued an alias execution under its judgment against Nelson Dyer, et als.

On October 23, 1946 the Sheriff of Camden County advertised the premises for sale on November 22, 1946.

The first question to be determined is whether the Camden County Welfare Board is entitled to a lien upon the real estate here involved for money advanced for old age assistance to Annie Vandegrift and Edward H. Vandegrift. If the answer to this query is in the affirmative, then whether such lien is prior to the judgment now held by the Federal Deposit Insurance ■Corporation.

If the plaintiff is entitled to any lien on the premises it must be as a result of the provisions of R. S. 44:7-1 et seq., R. S. 44:7 — 14 provides, as far as here pertinent, in part as follows:

“Every county welfare board shall require, as a condition to granting assistance in any case, that all or any part of the property, either real or personal, of a person applying for old age assistance be pledged to said county as a guaranty for the reimbursement of the funds so granted as old age assistance pursuant to the provisions of this chapter, and the total amount of the assistance so granted shall become a lien upon any lands in the ownership of such person, which lien shall ha^e priority over all unrecorded encumbrances.”

There are generally three kinds of liens recognized in our judicial system, (1) common law; (2) equitable, and (3) statutory. There is, of course, no common law lien under which the plaintiff could claim any right of priority for the repayment of the monies advanced by it out of the real estate originally owned by Annie Vandegrift and subsequently by Edward H. Vandegrift, nor is the plaintiff entitled to an equitable lien by reason of its advancement. It becomes apparent, therefore, that the lien, if any, to which plaintiff was entitled must be a statutory lien and must arise as a result of the foregoing cited section of the Revised Statutes. The defendant Federal Deposit Insurance Corporation, if it is entitled to any priority, is so entitled by virtue of R. S. 2:27-252, and is entitled also only to a statutory lien.

-It becomes important to decide what the expression “lien upon any lands” as employed by the legislature, encompassed. The principal inquiry is to ascertain the intent of the legislature and the significance of the word “lien.”

In Cattell v. Rehrer, 94 N. J. Eq. 292, 119 Atl. Rep. 374, the court said, at page 294, as follows:

“Where, as here,' the liens asserted are both statutory liens, all decisions appear to be uniform to the effect that the primary inquiry is one of legislative intent.”

Generally, common law liens pertained exclusively to personal property, and normally required for their continued efficacy a continuance of possession in the lienor. Over the years, however, the word has acquired much more extended significance and i-s now generally recognized as a charge upon a particular piece of property, including realty, for the payment or discharge of a particular debt or duty in priority to the general debts or duty of the owner. 33 Amer. Jur. 421.

A lien has 'been defined as follows:

In Stansbury v. Patent Cloth Manufacturing Co., 5 N. J. Law 433;

“For what is a lien? What is its nature and operation? It is a French word, and originally signified a string, tie, or band, and in tho metaphorical sense in which the law uses it, it signifies such hold or claim upon a thing for the satisfaction of a debt, duty or demand, as that it cannot be taken away until the same be satisfied and paid. It is in this sense properly applicable, and I believe originally, in our books, only applied to chattels, things movable and easily passing from hand to hand; and with respect to these, this claim which one has upon them is metaphorically called a lien, a string, which binds them fast and holds them in his possession.”

In Lantermen v. Luby, 96 N. J. Law 255, 114 Atl. Rep. 325:

“Derivatively, the word ‘lien’ means a ‘string,’ a ‘tie,’ a ‘bind.’ Century Dictionary. Stansbury v. Patent Cloth Manufacturing Co., 5 N. J. L. 433. In its pure legal sense it ‘implies that one is in possession of property of another, and that he detains it as security for some demand which he has in respect to it.’ ”

Again, in Sullivan v. Clifton, 55 N. J. Law 324, 26 Atl. Rep. 964:

“It is one of the characteristics of common-law liens which arise, upon considerations of justice and policy, by operation of law, as distinguished from liens created by contract or statute, that the former, as a general rule, attach to the property itself without any reference to ownership, and override all other rights in the property, while tho latter are subordinate to all prior existing rights therein.”

The legislature, therefore, must be found to have intended by the quoted phraseology that for the monies advanced for old age assistance, the 'Camden County Welfare Board is entitled to have as security for the repayment thereof a claim upon the realty of the recipient prior to all other unrecorded claims (encumbrances) against said realty, and subject to have its debt -satisfied out of su-ch realty, subject to the rights of prior recorded claims (encumbrances).

How and when, then, did a lien attach to the realty ? Did it arise immediately upon the execution of the statutory agreement hereafter referred to, or was it necessary that -the -agreement or some notice thereof be filed or recorded in a public office?

There was no express legislative authority for the recording of the “notice of agreement to reimburse” whi-ch was recorded here on September 21, 1936. The argument -has been advanced that no lien -came into being until the plaintiff filed the certificate provided for in R. S. 44:7-15 and then only to the extent that such certificate exhibited the money actually advanced. This certificate was not filed until April 19, 1942. It would appear that the legislature intended first to create a lien by R. S. 44:7-14 upon the real estate -of the recipient of the old age assistance without requiring either the agreement or any notice thereof to be filed or -recorded in any public office, and then by R. S. 44:7-15 made a provision for the satisfaction and payment of the monies actually so advanced by providing that the proceedings for the enforcement of the lien should be identical with those for the enforcement of a judgment of law.

Objection has been made arguendo that there is no provision in the statute for the -registration, recordation or filing of the reimbursement agreement in -any public record and that, therefore, no public notice would be given to subsequent grantees, encumbrancers or lienors. The answer to this argument i-s to be found in Crucible Steel Co. v. Polack Tyre and Rubber Co., 92 N. J. Law 221, 104 Atl. Rep. 324, where the 'Court of Errors and Appeals, in considering the Garage Keepers’ Lien Act, said as follows:

“Counsel of appellant seems to have taken it for granted that the failure of the statute to make any provision for registration of the transaction in some official book of record where a chattel to which a lien has been attached, is permitted by the lienor to go out of his possession invalidates the statute and renders it unconstitutional. This is clearly not so.”

It is to be noted in passing that the legislature amended R. S. 44:7 — 14 in providing for a filing similar to that required under R. S. 44:7-15 and so removed any doubt now raised by Federal Deposit Insurance Corporation’s foregoing arguments.

Under R. S. 44:7-14 the lien was born and continued. The lien of the Camden Colrnty Welfare Board, therefore, having appended itself to the real estate of Annie Vandegrift on June 23, 1936, continued and was in existence on the date of her death, when her husband, by devise, became vested with the title.

Since it was the legislative intent to create a lien on the real estate of the recipient of old age assistance from the date of the agreement to reimburse, and since at that time title was vested in Annie Vandegrift, against whom the Federal Deposit Insurance Corporation had no judgment, and Edward H. Vandegrift did not obtain title until subsequent to such agreement of reimbursement, the Camden County Welfare Board is entitled to a prior lien on the premises to the extent of the money advanced by it for old age assistance during the continued ownership of Annie Vandegrift, i. e., up to December 10, 1941, the date of her death. This lien is prior to the judgment lien of Federal Deposit Insurance Corporation.

However, in considering the claimed priority of the lien of the Camden County Welfare Board over the Federal Deposit Insurance Corporation judgment, subsequent to the date of the death of Annie Vandegrift, we must reach a different conclusion. It must be remembered that on June 23, 1936, when the agreement to reimburse was executed, for which provision is made in R. S. 44:7-14, the fee title to the premises was vested in Annie Vandegrift, and her husband had merely an inchoate right of curtesy, to which its lien could not attach.

The priority of liens is determined by the date as of which they attach to the property involved. Majewski v. Greenberg, 101 N. J. Eq. 134, 136 Atl. Rep. 749. Immediately upon the death of Annie Vandegrift her husband became seized, through devise, of the fee title to the premises here involved. Upon such seizure of title the Federal Deposit Insurance Corporation immediately obtained a lien by virtue of the judgment recovered on November 15, 1930.

R. S. 44:7-14 very clearly makes the lien of the Camden County Welfare Board prior only to “all unrecorded encumbrances.” This demonstrates a clear intent not -to attempt to affect or disturb recorded encumbrances. A judgment is, of course, an encumbrance, and since this judgment was recorded or docketed, even though unknown to the Camden County Welfare Board, any advances thereafter made by it succeeded in creating a lien subject to existing recorded encumbrances, i. e., the lien of the Federal Deposit Insurance 'Corporation judgment. It is therefore here held that the judgment of the Federal Deposit Insurance Corporation is superior to any advances made by the Camden County Welfare Board subsequent to December 10, 1941, the date of the death of Annie Vandegrift.

In this situation, it becomes necessary to consider the demand of the Camden County Welfare Board for a reinstatement of the mortgage allegedly mistakenly paid off by it.

Diligent counsel have not cited any cases directly parallel to that now under consideration, nor has the court been able to discover any such New Jersey cases. There are, however, numerous reported decisions closely related by analogy to that which we are now considering, arising especially where an existing mortgagee, upon a refinancing and replacing of his mortgage, finds himself in a position where intervening lienors disturb or displace the original priority of his mortgage. In order to be relieved from such a situation it is necessary that the mortgagee’s mistake be one of fact and not of law, and further, that no other person be prejudiced or has changed his position in the reliance upon the discharge of the old mortgage.

Although the plaintiff might be held to have had constructive notice of the existence of the judgment, this fact in itself would not be sufficient, under certain circumstances, to preclude it from succeeding as prayed.

In Seeley v. Bacon, 34 Atl. Rep. 139, the court said: at page 141:

“Where the act clone by mistake is one calculated to induce others to take a line of conduct which will put them to loss if the mistake is corrected, it ought to be dear that the party asking for relief has been led into the mistake in spite of the employment of the highest degree of vigilance. Where, however, no one is injured by the mistake but the party himself, and no one has changed his position by reason of the act executed through the influence of the alleged mistake, I see no reason why the mistake should not be corrected, although the highest degree of vigilance has not been exercised.”

In Institute B. & L. Assn. v. Edwards, 81 N. J. Eq. 359, 86 Atl. Rep. 962, the court said:

“But what degree of vigilance is to be exercised must depend upon the facts of each case. Where the act done by mistake is one calculated to induce others to take a line of conduct which will put them to loss if the mistake is corrected, it ought to be clear that the party asking for relief has been led into the mistake in spite of the employment of the highest degree of vigilance. Where, however, no one is injured by the mistake but the party himself, and no one has changed his position by reason of the act executed through the influence of the alleged mistake, I see no reason why the mistake should not be corrected although the highest degree of vigilance has not been exercised.”

And again, at page 366,

“No injury or prejudice resulted to the judgment creditors, defendants herein, from the cancellation of the record of the mortgage in question; that mortgage was a valid first lien at the time the judgments were entered; the judgment creditors have done nothing because of or in reliance upon the cancellation of complainant’s mortgage. The relief sought is the re-establishment of the former relation of the parties, which relation has not been intentionally abandoned by eomjflainants. It is clear therefore, that if the relief here sought be refused, it must be upon the abstract theory that relief cannot be granted to one who has been negligent, even though the negligence has been harmless and has been wholly inoperative to injure anyone. The application of that doctrine to the present case would bo operative to visit a penalty on complainant for its harmless negligence to the amount of the judgments and to award the amount of that penalty to the judgment creditors who are clearly no more entitled to it than any stranger, except from the circumstance that they now occupy an artificial position in which they may avail themselves of it, for their judgments were entered by them as a lien on the equity of redemption of the mortgagor only. Unless negligence, when considered by a court of equity as a bar to equitable relief, is to be measured in the ascertainment of its inherent quality and force by its effect upon the interests of others, there would seem to be in this branch of equity jurisprudence a radical departure from the rules which have heretofore controlled both courts of law and equity in the administration of remedial justice.”

And again at page 367,

“And it may, I think, be appropriately added that the chief aim and purpose of our recording statutes is the protection from loss of innocent purchasers and encumbrancers who have changed their position to their detriment without notice, actual or constructive, of prior liens or conveyances. I am convinced that in a case of this nature, where no one has been injured by the mistake but the party comidainant and no one has changed his position by reason of the act which has been performed in consequence of the mistake, relief cannot bo properly denied upon the theory that a high degree of viliganco has not been exercised by complainant. The negligence, of complainant in failing to procure proper searches should, I think, be thus considered with reference to its effects on the rights of others, and, so considered, cannot be properly regarded as that type of culpable negligence which appropriately affords a bar to equitable relief. In addition to the eases already cited, the following cases, all essentially the same as the present case, do not regard the neglect of complainant to procure searches as operative to bar the relief of restoration of the canceled lien as against an intermediate encumbrancer. Pearee v. Buell, 22 Ore. 29, 33; Wooster v. Cavendar, 54 Ark. 153; Piper v. Headlee, 39 Ill. App. 93; Sledge v. Obenchain, 58 Miss. 670, 675; Geib v. Reynolds, 35 Minn. 331; Walters v. Walters, 73 Ind. 425; Cansler v. Salls, 54 Miss. 446.”

See also Jackson Trust Co. v. Gilkinson, 105 N. J. Eq. 116, 147 Atl. Rep. 113; Hutchinson v. Bramhall, 42 N. J. Eq. 372, 7 Atl. Rep. 873; Home Owners’ Loan Corp. v. Collins, 120 N. J. Eq. 266, 184 Atl. Rep. 621; Rieth v. Bebe Realty Associates, Inc., 122 N. J. Eq. 67, 192 Atl. Rep. 378; Cliffside Park etc. Co. v. Progressive, Theatres Inc., 122 N. J. Eq. 109, 192 Atl. 520; Chiehi & Lombardo Bldg. Co. v. Herrmann, 121 N. J. Eq. 252, 189 Atl. Rep. 625.

The plaintiff here exercised reasonable diligence prior to paying off the mortgage. There are here present no innocent third parties, whose interest attached to the realty subsequent to the cancellation of the mortgage, who woud be detrimentally affected if the cancelled mortgage were reinstated and the plaintiff subrogated to the rights of the original mortgagee.

The subrogation here requested is not the result of an express agreement but is the result of an equitable principle. Normally, as stated in Schmid v. First Camden National Bank & Trust Co., 130 N. J. Eq. 254, at page 266, 22 A. 2d 246,

“While subrogation is founded on principles of equity and even of benevolence, yet it will not be decreed in favor of a mere stranger or volunteer, who without any duty paid the debt of another. Anyone, being under no legal obligation or liability to pay and having no interest menaced by the continued existence of the debt, is a stranger, and if he pays the debt is a mere volunteer. 25 R. C. L., Subrogation, par. 11; Shinn v. Budd, 14 N. J. Eq. 234; North River Construction Company’s Case, 38 N. J. Eq. 433, 436; affirmed, sub nom. Upper v. Green, 40 N. J. Eq. 340; Fay v. Fay, 43 N. J. Eq. 438, 440; 11 Atl. Rep. 122; Pierson v. Phillips, 85 N. J. Eq. 60; 95 Atl. Rep. 622. Where, however, one has an interest which is jeopardized by the continued existence of a debt of another and, to protect that interest, pays the debt, he is not to be considered a volunteer. Suydam v. Voorhees, 58 N. J. Eq. 157; 43 Atl. Rep. 4; Hildreth v. Vineland Trust Co., 104 N. J. Eq. 317; 145 Atl. Rep. 625.
“ ‘It is unquestionably the rule that, when an obligation is discharged by one not primarily liable for it, but who believes himself to be acting either in the performance of a legal duty, or for the protection of a legal right, or at the request of the party ultimately bound, and even in certain other eases, favored by public policy, where none of the above circumstances may be present, the party thus discharging the obligations is entitled in equity to demand, for his reimbursement, and subject to any superior equities, the performance of the original obligation, and the application thereto of all securities and
collateral rights hold by the creditor. Polhemus v. Prudential Realty Corp., 74 N. J. L. 570, 572; First National Bank of Freehold v. Thompson, 61 N. J. Eq. 188; Pom. Eq. Jur. Sec. 2343; 60 C. J. 694.’ ”

The plaintiff, although not primarily liable, did pay off the mortgage for the protection of its legal right and is no stranger. Normally, the owner of the fee title will not be permitted to keep alive an encumbrance on real estate which he has satisfied. The theory of merger is one of ancient recognition. The question of whether the fee simple title obtained 'by one holding something less than such fee in realty, as for instance, a mortgage or other lien, will result in an extinguishment of the mortgage or lien, is one of intention. Here the plaintiff accepted a voluntary conveyance in satisfaction of the amount due it without recourse to the statutory method for realization on its lien, under the mistaken impression that its claim for reimbursement was paramount and that the realty was not otherwise encumbered, except for such mortgage. In this posture, had it known of the existence of the Federal Deposit Insurance Corporation’s judgment it could have refused the deed and, incidentally, not have paid the balance due on the mortgage. Predicated upon the above stated misapprehension, it did pay a debt which it was not primarily obligated to pay. Had it not so obtained the cancellation of the mortgage, the position of the Federal Deposit Insurance Corporation would have been the same as it now wpuld be if a revival of the mortgage were permitted. The lien of the judgment would then have been -subject to (1) the lien of the mortgage, and (2) the lien for the sum advanced for old -age assistance to Annie Vandegrift during her lifetime. Under the circumstances, it cannot be here said that the plaintiff should be held to have irrevocably intended to cancel the mortgage. Equity should, where as here there intervene no third parties’ rights, place the parties in as near the same position as that which they occupied at -the time of the action taken through a mistake of fact, and especially where the -result attained is merely the -reestablishment of the -status quo ante.

It is the general rule that -a pro tanto subrogation will not be decreed. However, where justice requires, a pro tanto subrogation may be decreed. Schmid v. First Camden National Bank & Trust Co., supra.

In view of the fact, therefore, that it appears -here that the position of the Federal Deposit Insurance Corporation as it existed at the time that the mortgage was paid off by plaintiff under a mistake of fact, would not be altered or changed if the mortgage were reinstated to the extent of the payment made by't-he plaintiff, it is ordered that such mortgage be reinstated to that extent.

Plaintiff -has argued that the Federal Deposit Insurance Corporation should be estopped from asserting the lien of its judgment, apparently relying upon Todd v. Exeter Land Co., 104 N. J. Eq. 431, 146 Atl. Rep. 303, where the court said as follows:

“The principle of equitable estoppel proceeds upon the ground that he who has been silent as to his alleged rights when he ought in good faith to have spoken, shall not be heard to speak when he ought to be silent. A person is not permitted to deny a state of things which by his culpable silence he has led another to believe existed and who has acted accordingly upon that belief. The doctrine always presupposes error on one side and fault or fraud upon the other, and some defect of which it would be inequitable for the party against whom the doctrine is asserted to take advantage.”

Suffice it to say in answer to this argument, that the Federal Deposit Insurance Corporation judgment was a matter of record of which plaintiff and the answering individual defendants had constructive notice for the purpose of this contention. There was here no culpable silence on the part of the Federal Deposit Insurance Corporation, nor was it required, in good faith, to speak. The record is void of any proof that the Federal Deposit Insurance Corporation had knowledge of the conveyance to Bitler or of the repairs and improvements made to the premises by him and Watson. If anything, the inference is present that Federal Deposit Insurance Corporation had no knowledge of these circumstances before their accomplishment. Federal Deposit Insurance Corporation is, therefore, not estopped from asserting its lien.

Plaintiff has demanded that the execution on the judgment after the death of Edward H. Vandegrift foe declared void.

At common law -a judgment did not survive the defendant against whom it was rendered. Although execution cannot issue except upon the compliance with statutory requirements upon the decease of a judgment debtor, the lien survives and continues. Freeman on Judgments, par. 1009, sec. 1085/4.

By statute, provision is made for the issuance of execution after death of one of several judgment debtors. R. S. 2:27-337. The Federal Deposit Insurance Corporation did not comply with the terms of this legislative enactment subsequent to the death of Edward H. Vandegrift and prior to the issuance of execution. Its present execution and levy is therefore void and will be set aside and for nothing holden.

Plaving disposed of the litigation insofar as the establishment of the relative -rights of plaintiff and Federal Deposit Insurance Corporation are concerned, it becomes necessary to consider the respective claims of defendants Bitler and Watson.

The conveyance to Bitler was by deed containing a covenant of general warranty. Such a warranty is tantamount to a covenant of quiet enjoyment. The -rule of damages is the same in one as in the other. Such a covenant is broken -by eviction, actual or constructive. Vol. 2, Commentaries on the Law of Real Property, Walsh, p. 435; Vol. 7, Thompson on Real Property, p. 216.

In order to -be entitled to damages there must be such eviction. In Kellog v. Platt, 33 N. J. Law 328, the court said at page 332:

“Generally, in books of authority, the words ouster, or eviction, are used in this connection in a qualified sense, different from the ordinary acceptation of those terms.”
“With more accuracy, Mr. Bawle considers the subject under two principal heads: first, where the dispossession is actual, and secondly, where there is a virtual or constructive eviction. Rawle on Covenants 256.”

And on page 334:

“It must not be supposed, however, that the existence of paramount title, and the acquisition of it by the covenantee by purchase, of his mere volition, will amount to a constructive eviction sufficient to support an action on the covenant of warranty. To adopt such a principle would bo to confound a covenant of warranty with covenants for seizin or against encumbrances, and to disregard the distinction which gives to the former its negotiable quality as an incident of the inheritance, and maintains it as a covenant unbroken, and therefore excludes it from the rule of the common law, that a chose in action is incapable of assignment. To preserve the quality of transmissibility in covenants of warranty, the obligation must be prospective to be incurred by some act done under the adverse title hostile to the title under which the covenantee holds, either by entry or the bringing of the suit — or at least by its assertion in some way, under such circumstances as shall induce a well founded belief that it will be enforced, under the menace of which the covenantee honestly yields, and he may be said to have suffered an involuntary loss of tho possession under his defective title. When a paramount title is asserted by such acts, or under the circumstances mentioned, a constructive eviction takes place, and the covenantee may abandon the possession, or purchase in the adverse title, and retain his remedy upon the covenant of warranty.”

See also Greenwood v. Robbins, 108 N. J. Eq. 122, 154 Atl. Rep. 333; Carter v. Executors of Denman, 23 N. J. Law 260.

The actual issuance of execution by the Federal Deposit Insurance Corporation on a judgment which is herein held to be a lien upon the premises, and its threat to continue to -attempt to satisfy its debt through issuance in the future, even though it is here held that the present execution is void, constitutes -a constructive eviction. Watson, who is in possession by reason of -Bitler’s title, is not in peaceable and undisturbed possession.

Bitler has counterclaimed for the damages resulting from a ■breach of the covenant of warranty and demands judgment for the amount of the consideration paid to plaintiff for the purchase, sums expended by him on the premises, and for such judgment as may be rendered'against him for the benefit of Watson, except for what monies were paid by Watson to him on account of the purchase. The deed to Bitler contains no covenants except that of warranty.

Under the overwhelming authority of the cases, in the absence of fraud, upon a breach of a covenant of warranty contained in a deed, a plaintiff is entitled only to the consideration actually paid by him, with interest thereon for six years, and costs of suit. No allowance can be made for such improvements made or other expenses incurred ’by a covenantee.

In Marsden v. White, 71 N. J. Eq. 224, 65 Atl. Rep. 181, the Court of Errors and Appeals said, at page 231;

“The exact amount for which the grantee could hold his grantor was thereby liquidated; hence it seems clear to me that no improvement such grantee chose to make upon the property could impose upon his grantor any greater burden. This is also true with respect to the warrant of title and the covenant for quiet enjoyment. The law prescribes just what one party may recover from the other for the breach of these covenants, and this measure of redress by legal intendment forms' part of the contract of the parties, so that the mere existence of such a covenant implies that the parties have agreed with each other, the one to accord and the other to accept, upon the happening of a certain event, a known measure of damages. Such measure of damages has not only, as pointed out by the learned vice chancellor, been established by the decisions of our ’Supreme Court from an early period (Stewart v. Drake, 9 N. J. Law (4 Halst.) 139; Holmes v. Sinnickson, 15 N. J. Law (3 Gr.) 313; Morris v. Rowan, 17 N. J. Law (2 Harr.) 305; De Long v. Spring Lake Co., 65 N. J. Law [36 Vr.) [1] 10); but has also, in principle, been followed by this Court in a case where the land had been appreciated by improvements, Gerbert v. Trustees, 59 N. J. L. (30 Vr.) 160.”

In Holmes's Ex’rs, v. Sinnickson, 15 N. J. Law 313, the court said:

“Not content to receive back the consideration money which was the value of the land at the time it was sold, together with six years’ interest to countervail his liability for mesne profits, and the costs of eviction, he has been struggling after other allowances, such as for improvements that he has put on the land, the formation of gardens, avenues, parks, palaces and the endless embellishments that taste and luxury can invent; but courts of justice have as firmly resisted all such claims, as being innovations on the common law measure of recompense. I shall not state any of the numerous cases that are to be found on this subject, because they have been collected and reviewed by Chancellor Kent with his usual ability, in 4 Kent’s Com. 463, and shall only give the result of them, in his words. — ‘The uniform rule is, to allow the consideration money, with interest, and costs, and no more.’ ”

The only case to the contrary is Hulse v. White, 1 N. J. Law 173, which is quite patently overruled by the foregoing cases.

There is -here no allegation or proof of fraud which would serve to increase the element of damages to which the covenantee, Bitter, would be entitled.

Bitler claims to be entitled to further damages by reason of the following clause in his agreement to purchase from plaintiff:

“4. The title to be delivered shall be a marketable title and shall be free and clear of all encumbrances including municipal liens and assessments and liability for assessments for improvements now constructed (except as herein stated), this clause to be operative as of the date of this agreement, and the title is to be subject to all existing restrictions of record, the seller, however, guarantees that there are no restrictions in any conveyance or plans of record affecting the said premises, which will prohibit the use and/or occupancy thereof as a dwelling and the premises shall be conveyed in the same condition as the same now are, reasonable wear and tear excepted.”

There is no 'covenant against encumbrances in his deed. Although his agreement of purchase contained a provision concerning freedom from encumbrances, he accepted a deed with merely a covenant of warranty. There is no proof of fraud nor any request for a reformation of this deed. Under normal circumstances the acceptance of a deed for land is to be deemed prima facie full execution of an executory contract to convey, unless the contract contains covenants collateral to the deed. To be deemed collateral and independent,' a covenant must not look to or be connected with the title, possession, quantity or emblements of land. Bogert v. Citizens First National Bank & Trust Co., 131 N. J. Law 218, 35 A. 2d 706; Dieckman v. Walser, 114 N. J. Eq. 382, 168 Atl. Rep. 582; Sprague v. Eypper & Beckmann, Inc., 114 N. J. Eq. 445, 168 Atl. Rep. 659.

The covenant in Bitler’s agreement for a “marketable title * * * free and clear of all encumbrances” was not a collateral covenant and his acceptance of the deed is deemed full execution of the agreement, and the latter becomes void.

In Dieckman v. Walser, supra, the Court of Errors and Appeals said, at page 385,

“It is the general rule that the acceptance of a deed for land is to be deemed prima facie full execution of an executory agreement to convey, and thenceforth the agreement becomes void, and the rights of the parties are to be determined by the deed, not by the agreement. Until consummated, an executory contract is subject to modification. In all cases, the deed, when accepted, is presumed to express the ultimate intent of the parties with regard to so much of the contract as it pur-ports to execute. The executed contract supersedes all prior negotiations and agreements, where the last contract covers the whole subject embraced in the prior one.”

Therefore, Bitler is entitled to a judgment against the plaintiff for the amount of the cash he paid to it, with interest and costs o'f this suit, and a cancellation of -his mortgage given to it.

Watson is here suing; not for a breach of a covenant of warranty, but rather for a breach of a covenant to convey with a warranty of title and a covenant against encumbrances.

The measure of damages for the breach of a covenant against encumbrances is set forth in Fagan v. Cadmus, 46 N. J. Law 441, affirmed, 47 N. J. Law 549, 4 Atl. Rep. 323, where the court said, at page 445:

“Tho measure of damages in action for a breach of the covenant against encumbrances differs in three classes of cases. First, where tho encumbrance is a debt which ha's been paid by the covenantee; second, where it might have been, but has not been, so paid; and third, where the encumbrance is such that it cannot be discharged, as a servitude or unmatured mortgage. In the first class of cases tho covenantee recovers what he has paid; in the second class he recovers nominal damages only, and in the third class he recovers an amount estimated as a compensation for the depreciated value of the land resulting from the existence of the encumbrance. Sedg. on Damages, 179.”

In the matter sub judice, Watson has made no payment on account of the judgment. Normally, he would be entitled only to nominal damages in this situation. The reason for such a rule finds its foundation in the pronouncement in Stewart v. Drake, 9 N. J. Law 139, where .the court said, at page 141:

“If there be a subsisting mortgage at the time of the conveyance, the grantee, under a covenant against encumbrances, may recover damages, because there is a breach, but they shall be nominal only, where he remains undisturbed, and has paid nothing to the mortgagee; for the encumbrance may be removed by the grantor, or he may be compelled by the mortgagee to discharge it, or the grantee may otherwise remain forever unaffected by it. If the grantee has extinguished the encumbrance, he shall then recover in damages the amount paid to extinguish it, if fair and reasonable, with interest, and in some cases, where an action on account of the encumbrance has been brought against him, the costs also of such action. Prescott v. Trueman, 4 Mass. 627, Dalavergne v. Norris, 7 Johns. 358, Stanard v. Eldridge, 16 Johns. 254. Funk v. Voneida, 11 Serg. and Raw. 109. These eases are, however, instances of partial encumbrances only ; where the grantee retains the land, but is subjected to a partial inconvenience, and they stand on the sound principle, that the grantee should be fully satisfied for the injury he has sustained, but that holding the land and deriving a partial benefit, his redress shall be conformed to such circumstances.”

See also Hasselbusch v. Mohmking, 76 N. J. Law 691, 73 Atl. Rep. 961. If hi-s suit were for a breach of a covenant to convey with a covenant of quiet enjoyment or of warranty only, no recovery could be had by Watson against Bitler, except for so much as if the covenant hg.d been included in a deed, i. e., the purchase price, with interest and costs. Drake v. Baker, 34 N. J. Law 358; Gerbert v. Trustees, 59 N. J. Law 160, 35 Atl. Rep. 1121; Smith v. Smith, 90 N. J. Law 282, 101 Atl. Rep. 254.

The question arises as to whether the presence of the right to recover only nominal damages for a breach of the covenant against encumbrances prevents the recovery of substantial damages for the breach of the covenant of warranty. The mere existence, however, of a -right to recover nominal damages for a breach of a -covenant against encumbrances will not prevent a recovery of substantial damages on -a covenant of warranty where there is an eviction, actual or constructive. Smith v. Wahl, 88 N. J. Law 623, 97 Atl. Rep. 261.

Therefore, Watson is entitled to recover from Bitler the amount of his purchase price, with interest and -cost-s, as aforesaid, upon the covenant of warranty, but is not entitled to recover any other sums.

Since Watson has requested that he be subrogated to the judgment which Bitler may recover against the -plaintiff, this request will be granted, subject as hereafter stated.

The plaintiff is granted thirty (30) days within which to obtain a release from the judgments -held by the Federal Deposit Insurance Corporation, and to cancel its own liens on the’premises. If this is obtained, the Camden County Welfare Board will not be subject to any judgment at the hands of 'Bitle-r. •Bitler, in turn, will not be -subject to any judgment at the hands of Watson and can convey the title he contracted to -convey to Watson.

If plaintiff does not obtain the foregoing release and cancel its liens, judgment will be entered for Watson against the Camden County Welfare Board in the amount of the purchase price paid to it by Bitler, and Bitler’s mortgage to it will be ordered surrendered and cancelled. Judgment will -also be entered for Watson against Bitler for the amount of the purchase price paid Bitler, less the amount of the judgment' granted to Watson against the Camden County Welfare Board. Interest and costs of this suit will also -be granted to both Bitler and Watson in accordance with the foregoing.


source: Caselaw Access Project

author: Stein, J. S. C.

license: Public Domain

text:
    VITRA SEAL CO. INC., A CORPORATION OF THE STATE OF NEW JERSEY, PLAINTIFF, v. MAUD H. JAYCOX, DEFENDANT.
    Superior Court of New Jersey Chancery Division
    Decided November 29, 1948.

      Mr. Leonard G. Brown, attorney for plaintiff.

      Messrs. Lyness & Bedell (Mr. Joseph I. Bedell appearing), attorneys for defendant.
   Stein, J. S. C.

This is an action for specific performance. The facts herein are stipulated by the parties hereto.

The defendant, Maud H. Jaycox, entered into a lease with plaintiff, Vitra Seal Co., Inc., a corporation of this state, November 15, 1946, for premises No. 5 Morris Avenue, Summit, N. J., consisting of a garage building and plot on which same is erected, together with a plot in the rear thereof, for the term of one year commencing December 1, 1946 and ending December 1, 1947. The lease among other things provided: “The Landlord hereby grants to the Tenant the option to purchase the leased premises for Thirty-eight hundred ($3,800.00) Dollars, payable ten (10%) per cent in cash upon the exercise of the' option and balance in cash upon closing of title thirty (30) days thereafter. Said opti.on may be exercised not sooner than November 1, 1947 nor later than December 1, 1947.”

The defendant is a married woman. Plaintiff has been in possession of the premises under the lease since November 15, 1946, and also under a former lease containing a similar option from the defendant, Maud H. Jaycox, as executrix under the will of her father, August C. Harr, since December 1, 1943.

The pláintiff exercised said option according to its terms. The defendant has refused to admit the validity of the option and to accept the tender of payment of the purchase price upon the ground that John T. Jaycox, the lessor’s husband, was not a party to the transaction and did not sign the lease.

Plaintiff has waived any indemnity against or compensation for any right of curtesy which the husband may have and offers full payment of the purchase price subject to the curtesy of the husband.

N. J. S. A. 37:2-16 confers upon any married woman “the right to bind herself by contract in the same manner and to the same extent as though she were unmarried, which contract shall be legal and obligatory, and may be 'enforced, in law or in equity, 'by and against such married woman in her own name and apart from her husband, and any contract relating to or affecting her estate, interest or right in her real property or that of her husband shall be valid without the joinder therein or consent thereto of her husband, but shall not affect any estate, interest or right of her husband in such real estate.”

N. J. S. A. 37:2-17 provides: “Any married woman may execute and deliver any instrument relating to or affecting her estate, interest or right in her real property or in that of her husband, with the same effect as if she were unmarried, and any such instrument shall be valid without the joinder therein or consent thereto of her husband; but no conveyance, deed, contract or act of such married woman shall affect any estate, interest or right of her husband in such property.”

The stipulation of the parties provided that resort may be had to the affidavits filed in this case in lieu of testimony taken in open court. The affidavits disclose nothing not embraced within the stipulated facts.

The Legislature by the cited enactments, removed the statutory restrictions long objectionable to married women and declared that any married woman might thereafter execute and deliver any instrument relating to or affecting her estate, or interest or right in her real property or that of her husband with the same effect as if she were unmarried, and to 'bind herself by contract in the same manner and to the same extent as though she were unmarried, and provided that such contract should be legal and obligatory, and enforceable in law or in equity against her. Kaffitz v. Clawson, 134 N. J. Eq. 494, 36 Atl. (2d) 215; Heinig v. Smellow, 138 N. J. Eq. 119, 47 Atl. (2d) 335, affirmed 139 N. J. Eq. 308, 50 Atl. (2d) 875.

The type and nature of the deed to be given is not mentioned in the option, and where that is so the grantor must convey good title in fee simple, by deed of bargain and sale, without covenants. Moran v. Fifteenth Ward B. & L. Assn., 131 N. J. Eq. 361, 365, 25 Atl. (2d) 426.

Judgment in favor of the plaintiff will be entered against the defendant requiring her to convey her right, title and interest to the premises in question subject to the curtesy of her husband upon payment by the plaintiff to the defendant of the full purchase price.


author: Haneman, J. S. C.

text:
    SALEM COUNTY BEAGLE CLUB, PLAINTIFF, v. WALTER DIGGS AND WILLIE G. DIGGS, HIS WIFE, AND CHARLES BAGBY AND LELAH ADELE BAGBY, HIS WIFE, DEFENDANTS.
    Superior Court of New Jersey Chancery Division
    Decided December 9, 1948.

      Mr. John M. Summerill, Jr. (Mr. Joseph Narrow, of counsel), for complainant.

      Messrs. Waddington & Tilton (by Mr. E. C. Waddington), for defendants.
   Haneman, J. S. C.

This is a suit seeking specific performance of an option for the sale of certain real estate to the plaintiff. The bill of complaint alleges that on June 18, 1945 one Walter Diggs entered into a lease with the plaintiff for a period of five years. The lease contained the following provision :

“AND IT IS FURTHER AGREED, between the party of the first part and the party of the second part hereof that if any time during tho term of this lease the party of the first part decides to sell his farm ho agrees to offer the same to the party of the second part for sale at the market price.”

Said lease was duly recorded in the Salem County Clerk’s office on February 20, 1946 in Book No. 268 of Deeds, page 161. Thereafter, and more particularly on August 5, 1947, and while the said lease was in full force and effect, the said Walter Diggs and Willie G. Diggs, his wife, conveyed said lands to Charles Bagby and Lelah Adele Bagby, without having first offered the same to plaintiff.

Defendants move to dismiss the bill of complaint for the reason that the plaintiff did not bring suit for specific performance within three months of the date of the lease, and that no lis pendens was filed in the office of the Clerk of Salem County within three months of the date of said lease, as required by the terms of R. S. 46:21-3, which reads as follows, insofar as here pertinent:

(‘Every hereafter recorded agreement for the sale or purchase of real estate situate in this state shall be absolutely void as against subsequent purchasers and mortgagees for value of such real estate, unless the vendee, his heirs, executors, administrators or assigns, shall commence'an action for the specific performance of such agreement, or for its rescission, or for the violation of any of the covenants therein contained, and shall file a notice of the pendency of such action in the office of the county recording officer of the county in which the affected real estate is situate, setting forth the title of the cause and the general object thereof, or (b) if no date shall be fixed in such agreement for its consummation, within three months after the date of such agreement.”

The sole question here involved is whether this is an “agreement for the sale or purchase of real estate” which contains no date for the consummation thereof. Plaintiff argues that the provisions of the lease do not come within the statutory definition, since this is not an agreement for the sale or purchase of real estate but is an option for an agreement.

In Schlein v. Gairoard, 127 N. J. Law 358, 22 Atl. (2d) 539, the court said at page 359:

“An option is a continuing offer upon a sufficient consideration. So long as it remains unaccepted it is a unilateral writing lacking the mutual elements of a contract, but when accepted an executory contract arises mutually binding upon the parties. The distinguishing characteristic of an option is that it imposes no binding obligation upon the person holding the option, aside from the consideration for the offer; but when the option, i. e., the continuing offer is accepted it ceases to be an option and becomes a mutually binding agreement of sale. 12 Am. Jur. 525, seo. 27.”

An option for which a consideration has been given is both an offer and a unilateral contract. Williston on Contracts, vol. 5, p. 4025; 12 Am. Jur. 525.

An option to purchase real estate is not an agreement or a contract for the purchase of real estate, but is a continuing offer for the purchase or sale of real estate. The statute in question contemplates a contract for the sale of real estate and not an option to enter into such a contract. The agreement sought here to be enforced is an agreement to offer but not a mutually binding agreement for the sale of real estate. Therefore, defendants must fail in their motion to dismiss, since an option such as is contained in the lease sub judice does not meet the definition of an agreement, as contemplated by the foregoing statute.

Since, the argument of said motion to dismiss, plaintiff has moved for a summary judgment on the pleadings, in accordance with R. S. 3:12-2. This motion' is denied, since the defendants still have time to file an answer on the merits.


author: Freund, J. S. C.

text:
    MONTCLAIR DISTRIBUTING CO., INC., A NEW JERSEY CORPORATION, PLAINTIFF, v. ARNOLD BAKERS, INC., A NEW YORK CORPORATION, ET ALS., DEFENDANTS.
    Superior Court of New Jersey Chancery Division
    Decided November 15, 1948.

      Messrs. Dunn & Bannon (Mr. James J. Bannon) for the plaintiff.

      Messrs. Autenreith & Rochester (Mr. Alfred A. Rochester) for the defendants, Arnold Bakers, Inc. and Arnold Bread Sales Corp.

      Mr. William J. Camarata, for defendant sub-distributors.

      Mr. Henry F. Schenk, for defendant sub-distributors.
   Freund, J. S. C.

The defendants, Arnold Bakers, Inc., and Arnold Bread Sales Corporation, have moved for summary judgment in their favor on the pleadings and affidavits in accordance with Rules 3:56-2 and 3:56-3. On the main issue between the plaintiff and these defendants, there appears to be no substantial disagreement on the facts.

On March 3, 1947, defendant, Arnold Bakers, Inc., referred to as the bakery, entered into a written contract with plaintiff’s assignors, whereby plaintiff was appointed the exclusive wholesale distributor of the bakery’s products within prescribed territory. Plaintiff in turn entered into contracts, some written, others oral, with sub-distributors who sold to retailers and they to consumers. The contract provided that “Bakery will sell its products * * * to wholesale distributor * * * at regular wholesale prices as determined from time to time * * * The bakery reserves the right to fix wholesale and retail prices pursuant to law.” Defendant, Arnold Bakers, Inc., entered into identical contracts with 22 other wholesale distributors in areas within 14 states. The contracts entered into between the plaintiff and its sub-distributors have identical provisions, except that the word "wholésale”' is omitted. The contract provided that the plaintiff could terminate the contract at any time upon 30 days’ notice, but the bakery had “no right to revoke or cancel this agreement, so long as the wholesale distributor faithfully carries out the terms of this agreement.”

The bakery from time to time fixed the prices of its products on all levels — to the wholesale distributors, sub-distributors, retailers and to the consumers. The plaintiff, however, sold the bakery’s products to the sub-distributors at a higher price than that stipulated by the bakery. Despite formal demand that it adhere to the price schedule and notice that the contract would be terminated, unless it conformed thereto, plaintiff persistently refused to comply, 'continuing to charge the higher prices; thereupon, defendant rescinded the contract. While additional reasons for rescission are asserted by defendant, I conclude that the principal cause was plaintiff’s insistence on selling defendant’s products at a price higher than that stipulated by defendant. Plaintiff asserts that the bakery has the power to fix minimum prices only; that it is at liberty to sell the merchandise at any higher price; and that a provision or construction to the contrary is void, and therefore an unlawful basis for rescission of the contract.

Defendant, Arnold Bread Sales Corporation, was organized by the defendant bakery and since the rescission of plaintiff’s contract, it has acted as distributor of bakery’s commodities, serving the sub-distributors formerly served by the plaintiff.

The complaint prays for an injunction against the bakery and the sales corporation from selling or delivering the baked goods to anyone other than the plaintiff in the exclusive area, and for a restraint against the sub-distributors from purchasing except from plaintiff.

Upon the filing of the complaint, plaintiff obtained an order to show cause why a preliminary injunction should not issue, and after argument thereon Judge Bigelow (then Vice-Chancellor) discharged it for reasons set forth in an unreported memorandum opinion. He held that (1) under R. S. 56:4-3 to 6, an agreement between a vendor and a vendee fixing a “stipulated” price is valid; (2) that plaintiff’s refusal to abide by the resale price fixed by defendant constituted a breach justifying rescission by the bakery; and (3) that the contract was unenforceable because of uncertainty. I concur in the' conclusions for these and additional reasons. The pleadings and affidavits filed since the argument on the order to show cause, merely elaborate upon and augment the facts above recited.

The motion for summary judgment in favor of the defendants should be granted. If the contract is 'certain and definite, plaintiff has violated it. If it is uncertain and vague, it is incapable of enforcement.

Plaintiff alludes to sales price differentials under which it operated prior to the execution of the contract. However, the contract upon its face purports to contain the whole agreement between the parties; it supersedes all prior agreements, and, in the absence of ambiguity, the rights, duties and obligations of the parties are to be determined therefrom. Naumberg v. Young, 44 N. J. Law 331 (Sup. Ct. 1882). Bellisfield v. Holcombe, 102 N. J. Eq. 20 (Ch. 1927). Where an ambiguous contract is susceptible of two meanings, one of which, if adopted, renders the contract contrary to public policy and void, and the other results in a lawful and valid contract, the latter meaning should be adopted. Kelly v. Guarantee Trust Co., 114 N. J. Eq. 110 (E. & A. 1933).

Our Fair Trade Act (R. S. 56:4-1 et seq.) provides that a contract is valid if it contains a provision “That the buyer will not resell such commodity except at the price stipulated by the vendor.” (R. S. 56:4 — 5a) A contract between a producer and a distributor requiring the buyer to resell at the absolute price fixed by the seller is enforceable. Johnson & Johnson v. Weissbard, 121 N. J. Eq. 585 (E. & A. 1937); Schenley Products Co. v. Franklin Stores Co., 124 N. J. Eq. 100 (E. & A. 1937); Pazen v. Silver Rod Stores, Inc., 130 N. J. Eq. 407 (E. & A. 1941); Frank Fischer, &c. Corp. v. Ritz Drug Co., 129 N. J. Eq. 105 (Ch. 1941).

Apart from the provisions of the Fair Trade Act, however, the relationship between the plaintiff and the defendant bakery enabled the defendant to fix an absolute price for the resale of its commodities, which the plaintiff was bound to obey. Under the contract,' defendant as producer and plaintiff as distributor became employer and independent contractor. One of the terms agreed to by the plaintiff was that the bakery reserved the right to fix wholesale and retail prices. The plan was of course devised for the purpose of enabling the bakery to distribute its products through wholesale dealers at price level fixed by it and to prevent the sale by the dealers at different and competing prices. A manufacturer or producer may fix the price at which his distributors shall sell his products. U. S. v. General Electric Co., 272 U. S. 476, 71 L. Ed. 362, 47 S. Ct. 192. Briggs v. Ford Motor Co., (C. C. A. 7, 1940) 113 Fed. (2d) 618; cert. denied, 311 U. S. 688, 85 L. Ed. 444, 61 S. Ct. 65.

There are distinctions between the rights, duties and obligations arising from the relations of principal and agent, master and servant, and employer and independent contractor. Restatement, Agency, sec. 2. Schomp v. Fuller Brush Company, 124 N. J. Law 487 (Sup. Ct. 1940), affirmed 126 N. J. Law 368 (E. & A. 1941); Singer Sewing, &c., Co. v. N. J. Unemployment &c., 128 N. J. Law 611 (Sup. Ct. 1942), affirmed 130 N. J. Law 173 (E. & A. 1943). But they all impose common principles (Restatement, Agency, sec. 429), such as observance of contractual undertakings (sec. 377), of loyalty and obedience (sec. 385). Thus, a sales representative is under a clear duty to implicitly follow and not depart from the price fixed by the producer where he has specifically agreed to sell at such fixed price or where he knows that the producer has a fixed price policy. (Restatement, Agency, secs. 61 and 424). Here is a case where plaintiff not only refused to adhere to the price fixed by the defendant, but actually itself fixed and sold the commodity at a higher price. In so doing, it violated the expressed condition of the agreement and failed to perform its service with that loyalty and obedience which the law demands. To accede to plaintiff’s contention that it could sell defendant’s products at any higher price than that fixed by defendant, would give plaintiff the power to remove defendant from the field by pricing its goods beyond competitive range. Plaintiff having failed to faithfully perform its contractual obligation, under the contract provisions and the law, defendant was justified in rescinding.

Moreover, the relief sought by plaintiff, even if it were otherwise entitled to it, can not be granted because of uncertainty in the contract. It provided for the sale of bakery products day by day throughout a period terminable only at the will of the plaintiff. There is no certainty or definiteness in the contract as to the quantity of goods to be sold or the price to be paid therefor. The agreement provided: “The bakery will sell its products every baking day to the wholesale distributor pursuant to the order which must be at the plant before 9:00 A. M. the day before delivery, at regular wholesale prices as determined from time to time. * * * The bakery reserves the right to fix wholesale and retail prices pursuant to law.” Hence, the essential terms were left to future determination. The quantity was left to the will of one party, and the price, to the other. To be valid and enforceable, the law requires reasonable certainty. Restatement, Contracts, sec. 32. With respect to price, it is clear that the price must not be merely a price suggested, or recommended by the owner of th.e product, Magazine Repeating Razor Co. v. Weissbard, 125 N. J. Eq. 593, (Ch. 1939); it must be a “fixed” price or a “stipulated” price, or there must be some method agreed upon for definitely ascertaining it. Schenley Products v. Franklin Stores, supra. In Briggs v. Ford Motor Car Co., supra, the contract provided:

“(2) Company will sell its products to dealer f. o. b. Detroit, Michigan, at such net list prices, or at such discounts from published list prices as are from time to time fixed by the company.”
“(5) List prices of all Ford products shall be subject to change at ■ any time and from time to time without obligation on the company to adjust with the dealer as to price of any product shipped.”

The court held the said provisions valid, saying:

“The net list prices and discounts from published list prices appearing in Paragraph 2 were well known to both parties. These net list prices and published list prices were the same to all dealers. They changed as necessity required. They were not lacking in definiteness, but provided a method whereby the prices could be definitely ascertained at any time.”

In this case, the contract does not stipulate any prices nor does it refer to or provide any definite method for ascertaining them. Andreula v. Slovak Gymnastic, &c., 140 N. J. Eq. 171 (E. & A. 1947).

The cases of Anderson & Brown Co. v. Anderson, (C. C. A. 7, 1947) 161 Fed. (2d) 974, and Red Wing Shoe Co. v. Shepherd Safety Shoe Corp., (C. C. A. 7, 1947) 164 Fed. (2d) 415, are directly in point. In the former case, the plaintiff sought the same relief as plaintiff in this case. The court said:

“Our ruling is, of course, not based on the mere fact the prices were not specifically fixed by the terms of the contract. It is Quite customary for agency agreements (as in Briggs v. Ford Motor Co., 7 Cir., 113 Fed. 2d 618) and other contracts involving the future delivery of goods to leave the element of price open for determination at a later date. However, while it is not essential that the price be specifically fixed by the contract, it is clear from the cases that there must be some, method agreed upon for definitely ascertaining it. U. S. v. Swift & Co., 270 U. S. 124; 46 S. Ct. 308, 70 L. Ed. 497. Briggs v. Ford, supra. The general rule is stated in Williston on Contracts (2nd Ed.), Vol. 1, Sec. 41. * * *
“We find no error in the ruling of the court that the contract sued upon was unenforceable, basing our decision on the absence therefrom of any enforceable provision for fixing prices for the goods involved.”

Summary judgment in favor of the defendants against the plaintiff will be entered.


author: Jayne, J. S. C.

text:
    HYMAN NISONOFF, PLAINTIFF, v. BERNARD P. CEREBE, DEFENDANT.
    Superior Court of New Jersey Chancery Division
    Decided December 10, 1948.

      Messrs. Burton, Seidman & Pressler (Mr. Baruch S. Seidman, of counsel), for the plaintiff.

      Mr. John E. Mullane, for the defendant.
   Jayne, J. S. C.

A circularity of transactions gives the subject matter of this litigation a somewhat novel aspect. The acknowledged facts are assembled from the pleadings.

On October 16, 1945, the plaintiff and his wife sold their food market business conducted at No. 499 Main Street, Spots-wood, New Jersey, to the defendant. The bill of sale embraced the following restrictive covenant:

“And the said Hyman Nisonoff and Lillian Nisonoff, for and in consideration of the sale of the business to the said Bernard Cerebe, do hereby covenant, promise and agree to and with the said Bernard Cerebe, his heirs, executors, administrators and assigns, that they will not, or will either of them, between October 16, 1945 and October 16, 1950, either solely or jointly, with or as agent for any person or persons, association or associations, corporation or corporations, directly or indirectly, carry on, engage in, or be interested in any manner in the carrying on, within five miles of the premises known by #499 Main Street, Spotswood, New Jersey, the business of a food store, or buying and selling any articles now sold by the sellers at the store at 499 Main Street, Spotswood, New Jersey. It is, however, expressly understood and agreed by and between the sellers and the purchaser that the above restrictive covenant shall not apply to the carrying on or engaging in such business within the corporate limits of the Borough of South River, New Jersey.”

The defendant was the owner of the premises in which the business was conducted and on or about March 1, 1948, he sold the business to Nick Columbis and others and executed and delivered to those vendees a lease of the store premises, in which instrument he covenanted that he would not re-engage in a similar business in the Borough of Spotswood, or within a radius of five miles thereof, during the term of the lease, or any renewal or extension thereof, except in a “wholesale capacity.”

On May 3, 1948, the plaintiff reacquired the business from Columbis and his associates, together with an assignment to him of the lease containing the covenant of the defendant-lessor.

I may pause here to state that the lease ran to the assigns of the lessees and an assignment of the lease was not forbidden by its terms.

The plaintiff, who has thus reacquired 'the business, prosecutes this action to enjoin the defendant from violating the negative covenant embodied in the lease. In defense the defendant interjects the initial covenant made by the plaintiff in the bill of sale of October 16, 1945, and by 'Counterclaim seeks its enforcement against the plaintiff. An order striking out such defenses and the counterclaim is now sought by the plaintiff.

Our adjudications oblige us to acknowledge that such covenants, if valid, may be expressly assigned with the business to which they appertain and frequently travel along with such sales from the sellers to the purchasers. Langberg v. Wagner, 101 N. J. Eq. 383, 139 Atl. 518; A. Fink & Sons v. Goldberg, 101 N. J. Eq. 644, 139 Atl. 408; Sandullo v. La Bruna, 111 N. J. Eq. 4, 160 Atl. 834.

The question here projected, however, is whether or not the negative covenant is extinguished upon the reacquisition by the covenantor of the business for the benefit and protection of which it was given.

Frankly I have been unable to uncover in the reported cases of our state any opinion exactly decisive of the point.

Certainly covenants of the character of which the foregoing is typical and which are intrinsic in the sale of a business have a very definite and discernible attachment to the business. They derive their vitality and beneficial value solely by reason of their association with the business sought thereby to be protected from competitive invasion. Trowbridge v. Denning, 80 N. J. Law 236, 77 Atl. 1068. It seems doubtful that such covenants could have any independent legal existence and escape the restraints of public policy in the absence of their relationship to the business. Francesco v. Smith, 143 N.Y. 488, 38 N.E. 980; Gompers v. Rochester, 56 Pa. 194.

It has been held that the substantive nature of the covenant must be understood and that the covenant does not constitute a district property right independent of the business it was designed to safeguard and that unless it is incident to that business, it cannot exist. Sickles v. Lauman, 169 N. W. 670, 4 A. L. R. 1073. I cogitate in vain what personal or property right of the defendant sustains any injury in consequence of the resumption by the original covenantor of the business enterprise in which the defendant and others no longer have any proprietary, or beneficial interest? It would seem to be fantastic to resolve that in a progression of sales a sequence and succession of such covenants would operate in law to prohibit every covenantor in the train of sales from reacquiring and conducting the business which he had previously sold.

Here the plaintiff has reacquired the full ownership of the business with which the original covenant was associated. It is my conviction that the revestment of the business in the covenantor in the circumstances of the instant case extinguished the covenant and has rendered it unenforceable against him by the defendant. Vide, 4 A. L. R. Anno. 1085.

An order will be entered striking out as insufficient in law the first, second, third, and fourth defenses averred in the answer and also the counterclaim.


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    THE FLEMINGTON NATIONAL BANK AND TRUST COMPANY, PLAINTIFF, v. ALBERT E. SINDLINGER, ET AL., DEFENDANTS.
    Superior Court of New Jersey Chancery Division
    Decided December 10, 1948.

      Messrs Herr & Fisher, for the plaintiff.

      Mr. Jacob E. Max, for defendant Thelma Sindlinger.
   Jayne, J. S. C.

The object of this action is to foreclose a mortgage executed by the defendants Albert E. Sindlinger and Thelma M. Sindlinger, his wife, to secure the payment of their accompanying bond. A second mortgagee and some twelve judgment creditors are joined as defendants.

An answer has been filed on behalf of the defendant Thelma M. Sindlinger in which she avers that she has previously offered instantly to pay to the plaintiff the “sum due with interest to date, and costs of this action, in exchange for an assignment of said mortgage sought'to he foreclosed,” which offer the plaintiff has rejected.'

The following quotations exhibit the insufficiency in law of that averment of the answer. Justice Van Syckel, speaking for the Court of Errors and Appeals in Bigelow v. Cassidy, 26 N. J. Eq. 557, held: “As a general rule, all persons who have acquired an interest in the lands mortgaged, when the mortgage is liable to be foreclosed, have a right to disengage the property from all incumbrances, when it becomes necessary to do so in order to make their own claims available or beneficial. * * * This does not carry the right to demand of the mortgagee an assignment of his security.”

In Ratner v. Gordon, 118 Atl. 338 (not otherwise reported), Vice-Chancellor Foster stated: “If petitioner’s contention that, by reason of her inchoate right of dower, she has an interest in the mortgaged premises that entitles her to redeem, be adopted, her application must still be denied because it appears, from the recitals of her petition and from her prayer for relief, that she has coupled her tender and offer of redemption' with a demand for the assignment to her of the mortgaged security. This demand she is not entitled to make; for, assuming she has the right to redeem, which I seriously doubt, her tender of payment must be unqualified. Admittedly such unqualified tender has not been made, and the "aid of this court to effectuate the redemption petitioner desires is sought solely to compel complainant to assign his securities to her.”

Additional authorities may be found cited in 93 A. L. R. 89, 111.

The answer then proceeds to declare that the plaintiff has declined to execute the assignment “in order that the arrangement to divest 'the defendant of her interest in the property may be carried out.” “This plaintiff is not equitable in its conduct and should be denied equitable relief.” The mere circumstance that the officers and directors of the bank are actuated in the prosecution of this suit by an improper motive, if established, would not defeat what otherwise appears to be the enforcement of a lawful right. Davis v. Flagg, 35 N. J. Eq. 491; Hodge v. United States Steel Corp., 64 N. J. Eq. 111, 53 Atl. 553; Bull v. International Power Co., 84 N. J. Eq. 6, 92 Atl. 796, affirmed 85 N. J. Eq. 206, 96 Atl. 364; Holly v. Kellogg, 85 N. J. Eq. 301, affirmed Ibid. 597, 98 Atl. 640; Vineland v. Maretti, 93 N. J. Eq. 513, 117 Atl. 483; Weiner v. Cullens, 97 N. J. Eq. 523, 128 Atl. 176; South Jersey Title, &c., Co. v. Ireland, 101 N. J. Eq. 818, 138 Atl. 898; Glorsky v. Wexler, 142 N. J. Eq. 55, 59 Atl. (2d) 233.

The remaining averments of the answer (a) that the value of the mortgaged premises is greatly in excess of the first mortgage lien and (b) that only a portion of the mortgaged premises should be exposed to sale, are unsubstantial as defenses.

I observe that Messrs. Herr and Fisher are the attorneys of record of the plaintiff and that Mr. Fisher of that firm acknowledged service of process in this cause for many of the defendant lienors. The practice of an attorney to represent both plaintiff and defendants in an action is not approved.

Vide, Morris v. Glaser, 106 N. J. Eq. 570, 151 Atl. 760; Ertag v. Cavallo Construction Co., 104 N. J. Eq. 331, 145 Atl. 627.

The motion to strike the answer is granted.


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    WILLIAM C. GALLOWAY AND KATHLEEN GALLOWAY, HIS WIFE, PLAINTIFFS, v. M. ADELAIDE L. EICHELLS, DEFENDANT.
    Superior Court of New Jersey Chancery Division
    Decided October 28, 1948.

      Mr. Ernest L. Quackenbush, for the plaintiffs.

      Mr. William M. McConnell, for the defendant.
   Freund, J. S. C.

The plaintiffs in their original complaint sought specific performance by the defendant of an oral agreement to make and execute a will in which her entire residuary estate, with, the exception of a legacy of $200 would be left to the plaintiffs; to enforce a trust upon a parcel of real estate, a residence owned by the defendant at No. 55 Kenwood Place, East Orange, New Jersey; and to restrain defendant from conveying, encumbering or otherwise disposing of said premises or in any way impairing the title thereto in derogation of the rights of the plaintiffs. The defendant moved to strike the complaint on two grounds, first, that plaintiffs have an adequate remedy at law, and, second, that the complaint was prematurely filed.

In substance, the complaint alleges that in 1941 plaintiff, William C. Galloway, an engineer, and his wife, Kathleen Galloway, a registered nurse and housewife, became intimate friends of the defendant and her husband, Herbert G. Eiehells, since deceased. Defendant and her husband were not in robust health. Plaintiff, Kathleen Galloway, rendered nursing services and household assistance to defendant and her husband, and plaintiff, William C. Galloway, rendered assistance in business affairs. The relationship of the parties developed to such a point that they moved into one household and shared expenses. This situation continued until October, 1946, when plaintiffs were forced to move from the premises because of defendant’s hostile attitude.

The core of the complaint is as follows: — “3. * * * As a result of services thus rendered and agreed to be rendered in the future, on or prior to August 18, 1943, the said defendant and her said husband agreed that in consideration for such services rendered and to be rendered they would make and execute similar wills in which the entire residuary estate of the survivor of them, with the exception of a legacy of $200 to be made to Mrs. Eichells’s sister, would be left to the complainants, upon condition that complainants make like wills bequeathing their estates to the defendant and her said husband, with which such conditions these complainants have complied.”

The complaint further alleges that the defendant’s husband died testate. By his will he gave his.estate to his wife, the defendant, providing therein that if she had predeceased him, the residuary estate would have gone to plaintiffs, that although-defendant executed a will similar in form to the will of her husband, plaintiffs are “informed and believe that the said defendant revoked the will so alleged to have been made by her and has executed a new will eliminating complainants from any provision thereunder, and has also threatened to make sale of said Kenwood Place residence and to take permanent residence outside the State of New Jersey.” Plaintiffs allege their willingness “to perform the undertakings on their part” and that they are “prevented from performing by reason of the action and attitude of the defendant.”

The primary issue raised in the instant case is whether under the stated facts the remedy of specific performance of the alleged oral agreement is available and enforceable in the lifetime of the defendant promisor, and whether restraint against alienation by defendant of her property ought to be imposed.

It is entirely settled that in an appropriate case upon presentation of the requisite proof specific performance of an oral agreement to make a will can be enforced White v. Risdon, 140 N. J. Eq. 613 (Ch. 1947); Epstein v. Fleck, 141 N. J. Eq. 486 (E. & A. 1947). While often spoken of as specific perform ance, however, “It is, of course, not technical specific performance ; since there is no attempt to compel the promisor to make a will. It is rather relief in the nature of specific performance. The real purpose of such a proceeding is to have the heirs, devisees, next-of-kin or personal representatives of the deceased promisor held as trustees of the property which the promisor had agreed to devise or bequeath, and to compel them to hold the legal title thereto for the benefit of the promisee.” Page on Wills (Lifetime ed.), vol. 4, sec. 1736, page 896; Johnson v. Hubbell, 10 N. J. Eq. 332 (Ch. 1855); Lawrence v. Prosser, 88 N. J. Eq. 43 (Ch. 1918); Pomeroy, Specific Performance (3rd ed.) sec. 191, page 490.

A contract such as plaintiffs allege, defendant may perform at any time during her lifetime; no breach can be assured as long as she lives; and equity has no present power to compel defendant to execute such a last will and testament. If defendant should die without leaving a valid will in accordance with her contract, the contract would then be broken. Page, vol. 4, sec. 1726-1733, pp. 878-890; Riley v. Allen, 54 N. J. Eq. 495 (Ch. 1896); Eggers v. Anderson, 63 N. J. Eq. 264 (E. & A. 1901); Van Meter v. Norris, 177 Atl. 799 (Sup. Ct. Pa. 1935); Bolman v. Overall, 80 Ala. 451, 2 So. 624; 60 Am. Rep. 107; Pomeroy, Specific Performance, sec. 191, p. 492.

Usually in a proper case when relief'is afforded in the lifetime of the promisor, particular property is involved and a trust is imposed or fastened or a lien created or enforced upon that property. Duvale v. Duvale, 54 N. J. Eq. 581 (Ch. 1896); 55 N. J. Eq. 589 (E. & A. 1897); 56 N. J. Eq. 375 (E. & A. 1897); Welsh v. Hour, 100 N. J. Eq. 417 (Ch. 1927); Hill v. Ribble, 132 N. J. Eq. 486 (Ch. 1942,). In the instant case, the agreement does not relate to any specific real estate or personal property, except defendant’s residuary estate, but there may be none at the time of defendant’s death. The case made by the plaintiffs does not warrant any judicial interference with the defendant in the use or enjoyment of her property in her lifetime. As Vice-Chancellor Baches said in Welsh v. Hour, supra, “There was no lien expressly created nor can the promise be impressed as a lien and enforced on any specific property of the promisor’s estate * * * There is nothing in the promise that fastens it upon any particular property, nor anything that will permit equity to affix property to it. For the breach of this naked promise, relief, if any, must be sought at law.”

An agreement such as alleged may, however, be repudiated by the promisor in his lifetime, and, in such instance, recovery may be had at law upon quantum meruit for services rendered. Van Horn v. Demarest, 76 N. J. Eq. 386 (Ch. 1909); Riley v. Allen, supra; Eggers v. Anderson, supra; Lawrence v. Prosser, supra; Duvale v. Duvale, supra. Indeed in recognition of this right, plaintiffs, after the argument on the motion to strike the complaint, amended their original complaint by adding two causes of action for quantum meruit for services rendered, one by the husband and the other by the wife.

While there has been a fusion of the Court of Chancery and some of the law courts into the Superior Court by the Constitution of 1947, Article VI, there are Chancery and Law Divisions in the Superior Court. Rule 3:40-2 governing civil practice in the Superior Court provides “ * * * If the primary right of the plaintiff is equitable or the principal relief sought is equitable, the action is to be brought in the Chancery Division, even though legal relief is demanded in addition or as an'alternate to equitable relief” and Rule 3:40-3 provides for “transfer of an action from one of the trial divisions to the other trial division.”

I have concluded that the motion to strike the original complaint should be granted. The only relief to which plaintiffs may be entitled under the two added causes of action is legal, namely, damages for the alleged renunciation of the asserted contract, on which issues the parties may have a trial by jury. The time for pleading to the amended complaint has not yet expired. Accordingly an order will be entered striking the original bill of complaint and transferring the added causes of action to the Law Division for trial.