author: Carton, J. A. D.

text:
    ALBERT HEPNER, PLAINTIFF-APPELLANT, v. THE TOWNSHIP COMMITTEE OF THE TOWNSHIP OF LAWRENCE, DEFENDANT-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued April 19, 1971
    Decided June 14, 1971.

      Before Judges Conford, Kolovsky and Carton.

      Mr. William P. Doherty, Jr. argued the cause for appellant.

      Mr. Marvin M. Wodlinger argued the cause for respondent.
   The opinion of the court was delivered by

Carton, J. A. D.

Plaintiff, the assignee of a tax sale certificate to certain property in Cedarville, Lawrence Township, appeals from a judgment denying an injunction against demolition of the dwelling thereon by defendant township committee and dismissing his claim for damages.

The present controversy is the culmination of a longstanding dsipute between plaintiff and defendant municipality centering around the alleged substandard condition of the dwelling house on this property and the municipality’s efforts to compel plaintiff either to make the repairs necessary to render it habitable or to demolish it.

On October 14, 1965 the township building inspector sent plaintiff a declaration that the property was substandard and unfit for human habitation. The declaration ordered that the building be repaired or demolished within the next following 30 days and notified Hepner of a hearing scheduled on November 1, 1965. Plaintiff, through his attorney, reached an agreement with Lawrence’s representatives in which the township agreed not to demolish the building if Hepner would effectuate necessary repairs. It is undisputed that the building remained vacant and that certain repairs and renovations were undertaken by plaintiff.

According to the township, plaintiff was sent another notice on May 23, 1967 by regular mail declaring that these premises remained uninhabitable. While plaintiff denies ever receiving this notice, the complaint was never returned as undelivered. The notice required that the building be repaired or demolished within the next following 30 days and notified Hepner of a “hearing pursuant to ordinance 74 [to be held on June 12]. * * * You may file an answer to this complaint and appear then to answer these charges.”

The township’s representatives met on June 12; however, Hepner did not appear. The record reveals no minutes or findings of fact or any determination resulting from the hearing.

As a result of the June 12 meeting, plaintiff was personally served on- June 23 with a notice ordering plaintiff to demolish the property within 30 days because it remained in violation of the township ordinance.

The building not having been demolished as directed, on August 3, 1967 the township advertised that bids would be taken for its demolition on August 14. Plaintiff admitted reading this advertisement. At a meeting held by the township committee on the latter date, plaintiff, through his attorney, represented that the building was not in a dilapidated condition. The township decided to proceed with the demolition plans on the following day. That same day plaintiff obtained a temporary restraining order. However, a section of the building had already been destroyed. Plaintiff filed another complaint seeking damages for the destruction of his building.

After a plenary trial as to liability, the court concluded that the premises were, as of May 23, 1967 and thereafter, dangerous to life and health; that plaintiff had been given notice as required by N. J. S. A. 40:48-1(15) and N. J. S. A. 40:48-2.3 and 2.5; that the requisite statutory procedures had been complied with, and that plaintiff was entitled to no damages.

The issues to be resolved on this appeal are whether plaintiff had the requisite standing to challenge the validity of the demolition ordered pursuant to N. J. S. A. 40 :48-2.3 to 40 :48~2.12 by defendant township committee; whether the notice given to plaintiff complied with the requirements of N. J. S. A. 40:48-1(15), or N. J. S. A. 40:48-2.5 and N. J. S. A. 40 :48-2.7, and whether plaintiff could, under any circumstances, be entitled to damages for wrongful destruction of his property in light of N J. S. A. 40:48-2.8.

Preliminarily, we note that plaintiff is not entitled to advance the issue that N. J. S. A. 40:48-2.5 and N. J. S. A. 40 :48-2.6 are unconstitutional on the theory that the statutory scheme permits unfettered delegation of authority to an individual. We need not consider this contention since it is raised for the first time on appeal and without compliance with the provisions of B. 4:28-4(a) requiring notice to the Attorney General, who is not a party to the proceeding.

Plaintiff’s Standing

Plaintiff, as assignee of the tax lien on the property who is exercising effective possession and control of the premises, is entitled to the protection afforded "parties in interest” within the statutory definition, N. J. S. A. 40:48-2.4(e). That plaintiff’s interest is unrecorded is of no moment. The township had actual notice of it. On this basis he has the requisite standing to challenge the validity of the township’s actions.

Notice

The notice given by the municipality was inadequate to comply with the requirements of N. J. S. A. 40:48 — 1(15) or N. J. S. A. 40:48-2.5 and 40:48-2.7.

Lawrence Township Ordinance 74 was adopted pursuant to N. J. S. A. 40 :48-2.3 to 2.12 and must be interpreted in accordance with the notice and procedural requirements of that statutory authority. Even if it were held, as defendant urges, that the ordinance was adopted under the broader authority of N. J. S. A. 40:48-1(15) and that the notice requirements of that statute were applicable, the required specifics enumerated therein as to the content of the notice were not furnished by the municipality.

The latter statute N. J. S. 4. 40:48-1(15), directs that the municipality shall cause notice of the contemplated removal or destruction of the building to- be given. The notice must sufficiently describe the property so as to identify it and include “a description of the manner in which such removal or destruction is to be carried out.” The notice must also specify that "unless the building * * * is removed or destroyed within thirty days after the service of the notice, the municipality will proceed with the removal or destruction or cause it to be proceeded with. * * *” This information was not contained in any of the three notices sent to plaintiff.

Nor are we persuaded that the municipality gave proper notice of the hearing as required by N. J. S. A. 40:48-2.5(b), or that the building inspector adequately complied with 2.5(c), or that the notice was properly served under N. J. S. A. 40 :48 — 2.7.

The notice of October 14, 1965 did not formally comply with N. J. S. A. 40:48-2.5(b) since the complaint did not notify Hepner that he had the right to file an answer and to appear. Nevertheless, Hepner did appear through his attorney, who negotiated a settlement with the township in which Hepner agreed to make necessary repairs. The record does not reveal the specific terms of the settlement. However, we conclude that the municipality could not revert to this stale notice as a fulfillment of its statutory obligation.

First of all, it is undisputed that substantial repairs had been undertaken (although not completed). Without current notice that these renovations were unsatisfactory and a hearing considering this issue, the township could not undertake the demolition for failure to repair as required by the original complaint.

Secondly, the township did not follow the provisions set forth in its own complaint. The original complaint specified 30 days time in which to repair or remove the nuisance. After expiration of that period, the municipality did nothing for about 1% years. Plaintiff undertook substantial improvements on the property through May 23, 1967. Consequently, it would be inequitable to permit the township to proceed in the later action as if it were a consequence of the original complaint.

Notice of the instant proceeding was initiated by the complaint of May 23, 1967. This notice was sent to Hepner via regular mail. Service of the complaint in this manner did not meet the requirements of N. J. S. A. 40 :48-2.7 and Ordinance 74. These required that the complaint be served in person or by registered mail. Although the letter was not returned as undelivered, it was not demonstrated that plaintiff received the letter or had actual notice of its contents. Strict compliance with the notice requirements is mandatory in any proceeding where, as here, an intrusion on a substantial property right may result. Cf. Harrison v. Long Branch Tp., 21 N. J. Super. 605 (App. Div. 1952); Vanderhoven v. City of Rahway, 120 N. J. L. 610 (Sup. Ct. 1938); Rosenberg v. Sheen, 77 N. J. Eq. 476 (Ch. 1910). Therefore, we conclude that the notice dated May 23, 1967 has no effect, irrespective of its contents.

In any event, the “hearing” held on the May 23 complaint can be given no effect. N. J. S. A. 40:48-2.5(c) requires that the public officer make findings of fact in support of any determination that the building is unfit for human habitation or occupancy, and if the building be repairable the inspector is required to fix a reasonable time within which repairs shall be made. If the building is in such condition as to make it dangerous to' the health and safety of persons on or near the premises, then the officer may order the demolition of the building if the condition is not remedied.

Here, the building inspector’s only determination was made on May 23, 1967 and is1 embodied in the notice form. It does not appear that a hearing was held, although a “meeting” did take place. Hepner was not present. There were no written factual findings or even evidence that the deficiencies alleged in the complaint were accepted as fact.

This “determination” was not a sufficient compliance, in form or in substance, with the mandate of the statute, N. J. S. A. 40:48-2.5(e). This is especially so since there was a legitimate question as to whether a default had occurred (due to improper service) and also disagreement as to whether destruction of the building was a reasonable requirement as of that time. We observe that the May 23 notice purported to allow a further opportunity to complete the renovating process. Plaintiff had already begun repairs to several conditions listed as deficient in the May 23 complaint.

The notice of demolition personally served on June 23, 1967 did not remedy the deficiencies. That notice did not inform plaintiff of any right to a hearing, set a hearing date, or inform him that he had the right to answer the complaint and enter an appearance and present testimony. It merely recited that the township had already reached a decision as to the fate of plaintiff’s property without affording him an opportunity to contest the complaints lodged against him. See Vanderhoven v. Rahway, supra.

Damages

Lastly, we conclude that plaintiff is not barred from recovery of damages solely by reason of N. J. S. A. 40:48— 2.8. That section provides:

Any person aggrieved by an order issued by a public officer under this act may, within sixty days after the posting and service of such order, bring an action for injunctive relief to restrain the public officer from carrying out the provisions of the order and for any other appropriate relief. The court may proceed in the action in a summary manner or otherwise. The remedy herein provided shall be exclusive, and no person affected by an order of the public officer shall be entitled to recover any damages for action taken pursuant thereto, or because of noncompliance by any person with any order of the public officer.

The statute merely provides that injunctive relief shall be the exclusive relief from an order issued under this act (N. J. S. A. 40:48-2.3 to 2.12). The act does- not purport to afford protection or immunity to local officials or a municipality from the consequences of action taken without first complying, at least substantially, with the statutory provisions.. Any person aggrieved by such action wholly contrary to the-statute still retains any common law rights to recovery he may have for an injury claimed to be sustained. Cf. Harrison v. Long Branch Tp., supra. See also Albert v. City of Mountain Home, 81 Idaho 74, 337 P. 2d 377 (Sup. Ct. 1959) ; Michaud v. City of Bangor, 159 Me. 491, 196 A. 2d 106 (Me. Sup. Jud. Ct. 1963); Philbrick v. White, 106 N. H. 340, 211 A. 2d 852 (Sup. Ct. 1965) : Solly v. Toledo, 7 Ohio St. 2d 16, 218 N. E. 2d 463 (Sup. Ct. 1966). We express no opinion as to the proper measure of damages for the holder of a lien as opposed to the owner of the fee as this issue has not been argued or briefed.

That part of the judgment dismissing the injunction forbidding demolition of the building is reversed without prejudice, however, to defendant municipality’s right to initiate proceedings, in accordance with the statute and with the local ordinance, against the property and plaintiff’s interest therein.

That portion of the judgment dismissing plaintiff’s claim for damages is reversed and the matter remanded for a new trial as to this issue.


source: Caselaw Access Project

author: Lynch, J. S. C.

license: Public Domain

text:
    HELEN M. SHILOWITZ, PLAINTIFF, v. STEPHEN SHILOWITZ, INDIVIDUALLY AND WITH JUSTIN C. HARRIS, AS EXECUTORS OF AND TRUSTEES OF TRUSTS CREATED IN THE LAST WILL AND TESTAMENT OF CHARLES SHILOWITZ, DECEASED, DEFENDANTS.
    Superior Court of New Jersey Chancery Division
    Decided June 10, 1971.

      Mr. Thomas J. Brady for plaintiff (Messrs. Milton, Keane & DeBona, attorneys).

      Mr. Irwin I. Kimmelman and Mr. Albert G. Besser for defendants (Messrs. Hannoch, Weisman, Stern & Besser, attorneys).
   Lynch, J. S. C.

Plaintiff here seeks assignment of her widow’s dower from the rents and profits of a large highrise apartment building of which her husband died seized on September 25, 1968, and title to which is now held by defendant trustees under his last will and Testament.

In the main, the question is: in arriving at the money value of the widow’s dower in the rents and profits of the building, may the executor-trustees, in calculating the net rents available for plaintiff’s dower, deduct from the rents received: (a) a reserve for depreciation of the property; (b) amortization of the mortgage on the property at the time of decedent’s death; (c) interest on such mortgage; (d) a management fee of 4% of income. The trustees contend that such deductions are to be made before arriving at the net rents, 50% of which are to go to plaintiff as her dower interest. Plaintiff widow contends that such deductions may not be made. She also claims that she is entitled to exoneration from a mortgage on the property given to the Bowery Savings Bank (hereafter Bowery) on October 14, 1963, for the reason, so she says, that the indebtedness incurred at that time was one for which decedent was personally liable and that his personal estate was enhanced by the proceeds from that mortgage. She also seeks an award of counsel fees.

In contending that the aforementioned deductions should be made; the trustees submit their calculations of the widow’s dower interest based upon the following schedule:

Calculation of Widow’s Dower Interest Schedule “A”

Estate of Charles Shilowitz — River House Property Income Statement

Periods

10-1-68 3-1-69 3-1-70

to to to

2-28-69 2-28-70 2-28-71

Income Less: $103,000 $254,700 $296,600

Executors management fee 4% of income 4,100 10,200 11,900

Depreciation 26.600 59,100 60,900

Interest on mortgage 24,000 55,800 53,600

Other ordinary costs and expenses of operations 58.600 113,500 135,800

Total costs and expenses 113,300 238,600 262,200

Net income (loss) before mortgage amortization (10,300) 16,100 34,400

Mortgage amortization 15,000 31,200 32,900

Amount available for Dower None None 1,500

The schedule submitted, while admittedly inexact as to the figures used, is nevertheless sufficiently representative to demonstrate the drastic consequences to the widow’s dower interest if the contentions of the trustees are to be sustained. Thus, by reference to the last column of the schedule, covering the period from March 1, 1970, to February 28, 1971, the trustees contend that the net rents (as they conceive them and based on the figures used in the schedule) amount to $1500. Therefore, the trustees would allow the widow, since she is entitled to one-half of the net rents as her dower interest, $750 for the year specified. As will be seen, in arriving at that result the trustees claim deductions for a “reserve for depreciation” in the amount of $60,900, plus amortization payments of $32,900, totalling $93,800 for the year. If these deductions were not to be allowed, then the net rents would amount to $95,300 and the widow’s dower interest of 50% would yield to her the sum of $47,650 for the year involved. Eurther, if the trustees were not permitted to deduct the interest on the mortgage in the amount of $53,600 for the same period, the net rents and her share thereof for dower would be proportionately increased.

We shall first recount the history of the property, for it has relevance — at least as to the issue of plaintiff’s claim for exoneration from the mortgage to Bowery.

History of the property

In 1953 decedent Charles Shilowitz acquired the tract in question in his own name for the purpose of erecting a multi-story apartment thereon. He formed River House Corporation, a New Jersey corporation, to which he conveyed the property on January 13, 1955. Plaintiff joined in the conveyance, thus releasing her then inchoate right of dower. Simultaneously with this conveyance the corporation executed a mortgage in the amount of $800,000 to the Brooklyn Savings Bank (hereafter Brooklyn) which was recast to $1,000,000 in 1957. Only the corporation was a party to these bonds and mortgages; decedent was not.

In 1963 the corporation was dissolved and, pursuant to a plan of liquidation, the property was conveyed once again to decedent, subject to the existing Brooklyn mortgage. Decedent did not assume the mortgage.

On October 14, 1963, decedent conveyed the River House property to his secretary, Rose Perolano, plaintiff again releasing her then inchoate right of dower by joining in the deed. On the same day Rose Perolano executed a new mortgage to the Bowery in the amount of $1,150,000, out of which proceeds the Brooklyn mortgage, then amounting to $789,516.48 (hereafter rounded to $790,000), was satisfied. Decedent was not obligated on that mortgage or its accompanying bond. Eose Perolano thereupon immediately re-conveyed the premises to decedent.

It is conceded that Eose Perolano, decedent’s secretary, was a “straw man,” used merely as a conduit through whom the title was intended to be, and ultimately was, returned to decedent in his own name. Defendant trustees contend that the main purpose of thus using the secretary was to immunize decedent from personal liability for the liens and debts then to be incurred. As will be seen below, such lack of personal liability is the crucial fact upon which defendants rest their argument that the widow is not entitled to exoneration from the Bowery mortgage.

Plaintiff further contends that of the $1,150,000 mortgage proceeds from .Bowery, only $790,000 thereof was used to pay off the prior mortgage to Brooklyn. She further contends that the remaining sum of approximately $360,000 obtained from Bowery became the personal funds of decedent, that he was personally liable for the $360,000, and at least to that extent the widow was entitled to exoneration from the mortgage. Defendants assert that decedent obtained no personal benefit from the proceeds of the Bowery mortgage, that he was not personally liable thereon, and that therefore plaintiff is not entitled to exoneration.

We shall discuss the issues seriatim.

Depreciation

Bluntly put, the principal question here really is whether or not the widow, as doweress, should be responsible, to any extent, for depreciation of the building. In other words, should there be a deduction made from the net rents and profits, one-half of which would be owing to the widow for her dower interest, which deduction would be used to create a “reserve for depreciation”?

Defendant trustees argue for such deduction, first, by analogizing a widow’s dower rights to those of an ordinary life beneficiary under a trust or legal life estate, and, second, by citing some authorities, usually in the context of a trust, which would advocate a deduction for depreciation in arriving at a life beneficiary’s share during his or her life.

The trustees acknowledge that Vice-Chancellor Bigelow, in In re Roth, 139 N. J. Eq. 588 (Prerog. 1947), held that depreciation was not to be deducted from a life tenant’s share. But, say the trustees, Both has been criticized. They cite 5 N. J. Practice (Clapp, Wills and Administration), § 442 (1969 Supp. at 131), and authorities cited therein, for their contention that a reserve for depreciation must be deducted. See particularly, notes, 60 Harv. L. Rev. 952 (1947); 63 Harv. L. Rev. 180 (1949); 55 Mich. L. Rev. 857 (1957); 4 U. Fla. L. Rev. 41 (1951); and Restatement, 2d Trusts § 239, comment (h) (1959), for critiques in a peculiarly trust (as opposed to dower) context. Defendants further direct the court’s attention to eases cited in Clapp, op. cit., for their contentions here. In particular, their reliance is upon In re Kaplan’s Will, 195 Misc. 132, 88 N. Y. S. 2d 851 (Surr. Ct. 1949), and In re Warner’s Trust, 263 Minn. 449; 117 N. W. 2d 224 (Sup. Ct. 1962). Eurther, they argue that Both incorrectly ignored Vice-Chancellor Stein’s earlier opinion in Fidelity Union Trust Co. v. McGraw, 138 N. J. Eq. 415 (Ch. 1946) which held that under the testamentary trust there involved, a reserve for depreciation must be charged against income.

Defendant’s argument is fallacious for several reasons. It would urge upon this court a decision which, as to dower, has never appeared in any reported ease. Nor has it been advocated for application in a dower context by Clapp, op. cit., or any of the law review articles or other authorities cited by the trustees. Nevertheless, defendants would have a widow’s dower thus diluted in face of the fact that from the earliest times dower has been deemed a favorite of the law. “Lord Bacon said as early as 1641 that it was then 'the common byword in the law that the law favored three things: (1) Life, (2) liberty, (3) dower’ (Bacon, Uses, p. 37).” 17A Am. Jur., Dower, § 5 at 285. And in 25 Am. Jur. 2d Dower and Courtesy, § 16, at 92:

The Year-Books and other early reports show the vigilance of the courts in watching over widow's’ interests. Some of the authorities have declared that dower is one of the positive institutions of the state, founded in policy.

In In re Alexander, 53 N. J. Eq. 96 (Ch. 1894), it was said:

“Dower was, indeed, proverbially the foster-child of the law, and so highly was it rated in the catalogue of social rights, as to be placed in the same scale of importance with liberty and life.” Park, Dower, 2; Co. Litt. 124b. When it had attached by the seizin of the husband, it could not he discharged hy any aet of his, although the owner of the fee, without the wife’s concurrent, [at 99; emphasis added]

See also, Shannon v. Watt, 87 N. J. Eq. 142 (Ch. 1916), aff’d 87 N. J. Eq. 611 (E. & A. 1917). Attempts to subvert or thwart a widow’s dower will be closely and harshly scrutinized. Cf. 7 Clapp, op. cit., § 1667. Dower has been established as our legislative policy since 1799 (see Pat. Laws 343) and is now provided for in N. J. S. A. 3A:35-1 et seq. Before a court can indulge in so drastic an emasculation of the estate of dower as is here urged, it should expect to find either legislative revision of the Dower Act or decisional authority posing a clear and compelling mandate. Neither appears here.

While it is true that there is a degree of similarity between a widow’s life tenancy in dower and a life estate created by a testator or settlor of a trust, the analogy, so far as relevant here, is more apparent than real. In the analysis of a trust or legal life estate the dominant inquiry is directed to the intent of the settlor or testator. Cf. Fidelity Union Trust Co. v. Robert, 36 N. J. 561 (1962). As to dower, the relevant intent is that of the Legislature, in the light of the scrupulous protection of a widow’s dower interest which has so long been provided. There is no room here, as there is in a trust context, for a husband’s intent to impinge upon his widow’s interest. Therefore, defendants’ reliance on eases involving trusts is misplaced.

Thus it is with respect to defendants’ citation of Fidelity Union Trust Co. v. McGraw, supra. That case involved construction of a trust. Dower was not involved. True, it was there held that an allowance for depreciation of property should be made against income in determining the remaining share due to the widow of the testator who had created the trust. It is perfectly apparent that the court, in deciding that depreciation must be charged against income, did so upon an analysis of the testator’s intent in the creation of the trust, and, more particularly, with his intent as to whether or not there should be a provision made for depreciation. The vice-chancellor’s task was made relatively easy in the latter respect, for paragraph Fourteenth of the will read: “With respect to any real estate which the Trustees may hold as part of the principal of any of the trusts, my Trustees shall be empowered to make such provision for deterioration and obsolescence with respect thereto as in their judgment may be wise.” The trustees, seeking instructions, urged that they should be authorized to make an allowance for depreciation. Vice-Chancellor Stein said:

The creation of a sinking fund to provide against deterioration and obsolescence of the property held in trust in the manner here urged by complainants is consistent with the authorization granted complainants by paragraph ‘Fourteenth’ of the will, when read in connection with that portion of paragraph ‘Fifth’ of the will which authorizes the complainants to retain as an asset of the trusts any real property held by decedent at the time of his death, and when considered in the light of the history of the decedent’s transactions in respect of the lease of the property in question, it becomes apparent that the testator intended to authorize complainants to do that for which they now seek judicial approval.” [138 N. J. Eq., at 421; emphasis added]

Ou the other hand, in In re Roth, supra, Vice-Chancellor Bigelow held, in considering a trust wherein the widow was the life beneficiary, that depreciation may not be charged against income in determining the widow’s share. He said:

The remaindermen urge that on the resettlement of the accounts, a depreciation reserve be created by charging income annually with a sum equal to some reasonable percentage of the value of the buildings as at testator’s death. Such a course is in harmony with modern accounting practice, but generally, as between life tenant and remaindermen, the latter must bear any loss due to depreciation and obsolescence. Mrs. Sameth cannot be required to suffer a deduction from income for the creation of a sinking fund to offset such a loss. Laflin v. Commissioner of Internal Revenue, 69 F. 2d 460, 7 Cir. A tenant for life is bound to repair only to the extent of preventing permissive or actual waste. Kearney’s Ex’r. v. Kearney, 17 N. J. Eq. 59, and 504. In fulfillment of this duty, it is said that he must keep the premises in as good repair as when his estate began, not excepting ordinary wear and tear. If, in the course of time, a new roof is needed, he should put it on; if paint wears off, he is bound to repaint. In re Steele, 19 N. J. Eq. 120; Murch v. Smith Manufacturing Co., 47 N. J. Eq. 193. But he is under no obligation in respect to the loss of economic value of a building which normally occurs. [139 N. J. Eq., at 596; emphasis added]

Defendants lely heavily upon the New York Surrogate’s Court decision in In re Kaplan’s Will, supra. Kaplan stands almost totally alone for the proposition that trustees are under a duty to set up a reserve for depreciation. Many cases in New York have held to the contrary. Cf. those cited in 3 Scott on Trusts (3d ed. 1967), § 239.4, at 2049. Needless to say, Kaplan does not involve dower. Shepardizing reveals that Kaplan has been cited on many occasions in New York and other states, but only one case has cited it with approval, In re Dahlmann’s Estate, 95 N. Y. S. 2d 74 (Surr. Ct. 1949). The precedential value of Dahlmann is weakened, however, by the fact that all parties there had consented to the setting aside of a reserve, and that the court limited its approval of the reserve to one providing only for physical (as opposed to economic) depreciation. Nevertheless, both Kaplan and Dahlmann were criticized and repudiated by coordinate surrogates in In re Davies’ Estate, 197 Misc. 827, 96 N. Y. S. 2d 191 (Surr. Ct.), aff’d 277 App. Div. 1021, 100 N. Y. S. 2d 710 (App. Div. 1950), and In re Ball’s Will, 197 Misc. 1047, 96 N. Y. S. 2d 201 (Surr. Ct. 1950). Ball (at 203 of 96 N. Y. S. 2d) referred to Kaplan and Duhlmann as based on “tenuous distinctions,” and expressly followed the holding and analysis of Davies, supra. Since then, Davies has generally been held to control. See 3 Scott, loc. cit. The New York Court of Appeals in In re Hubbell’s Will, 302 N. Y. 246, 97 N. E. 2d 888, 47 A. L. R. 2d 176 (1951), expressly refused to reach the question. However, in In re Clarke’s Trust, 306 N. Y. 733, 117 N. E. 2d 910 (1954), the same court affirmed, per curiam, a lower court decision following a line of cases stemming from In re Davies, Estate, supra.

It was in Davies that the holding in Kaplan was met “head on” and was effectively repudiated in a thorough and analytical opinion by Surrogate Collins. He demonstrated the distinction between “a loss in value due to depreciation and a loss caused by the failure of a trustee faithfully to perform his duty to malee repairs and to maintain the premises in proper condition.” He said:

Much that is said in argument about depreciation of buildings is really meant to refer to real estate that is not maintained in proper condition. The distinction between the two must be kept clearly in mind. The present proceeding in no way involves any question respecting the trustee’s performance of that duty or of liability for failure to perform it. [96 N. Y. S. 2d at 197]

Surrogate Collins established that the Hew York rule had always been clearly understood as prohibiting a trustee from charging real property income with depreciation, at least (in a trust context) in the absence of a contrary direction in the will. He cited many Hew York decisions in support, and commented:

It is significant that in all that time, no decision, other than the one relied on by the special guardian [In re Kaplan’s Will, supra], has ever held that' a trustee must deduct from income annual sums to offset depreciation of real property. [At 197, 198; emphasis the court’s]

The court added that the New York rule had been in force in other jurisdictions, citing, among others, Vice-Chancellor Bigelow’s opinion in In re Roth, supra.

Lastly, as to defendants’ specific citations, we come to In re Warner's Trust, supra. A reading of that decision reveals that it avails defendants nothing. It is true that it ultimately resulted in a holding that a reserve for depreciation should be charged against the gross receipts for the building involved. But again, the case did not involve dower, but rather the construction of a trust, and the decision rested primarily on an analysis of the intent of the settlor of the inter vivos trust under consideration. Even in that context it will be noted that the court approached its decision cautiously, with several caveats. At the outset, it warned that it was necessary to recognize the type of depreciation which was being dealt with, i. e., physical depreciation alone, and added: “It may be conceded that economic depreciation must be absorbed by the corpus or principal of the trust the same as economic appreciation inures to the benefit of the corpus of the trust.” 117 N. W. 2d at 231; emphasis added. It is just such a reserve for economic depreciation that defendant trustees here would lift from the shoulders, of the corpus remainderman and impose upon the life tenant here.

Again, in Warner, the court cautioned that, in considering the whole subject of depreciation, it should be kept in mind that:

* * * it is clear that the argument that general business practices should be applied to trust matters cannot be carried out entirely. In business accounting, we deal ordinarily with property owned by an individual or corporate enterprise in which there is no necessity for balancing the respective rights of those entitled to the income and those who eventually will become entitled to the corpus. [117 N. W. 2d at 231, 232; emphasis added]

It will he recalled that Vice-Chancellor Bigelow, in Roth, supra, while conceding that setting aside of a reserve for depreciation might be in harmony with “modern accounting practice," also rejected such a standard when balancing the respective rights of a life tenant and remainderman. The problem which we have here necessarily does involve the respective rights of the doweress and the ultimate remainder-man. We are not presently concerned with "modern accounting practice.” Lastly, said the court in In re Warner’s Trust, supra, 117 N. W. 2d at 232, business practices have been greatly influenced by tax considerations which do not necessarily bear importance in dealing with trust matters. Neither do such considerations have any place in a case involving admeasurement of a widow’s dower.

Further, the trustees, in attempting to shift the burden from the remainderman to the life tenant in dower would impose upon her the cost of permanently preserving the present worth of the building. The increments to corpus thereby necessitated would redound only to the benefit of the remainderman upon ultimate distribution. In effect, she would be charged with the cost of a permanent improvement. It has long been established that the net rentals available for a widow’s dower interest are calculated after deductions only for current charges such as taxes, interest on mortgages, repairs, insurance and other proper expenses. 7 Clapp, op. cit., § 1676, and cases cited therein. She is bound to repair only to the extent of preventing permissive or actual waste. As it was said in Kearney’s Ex’r v. Kearney, 17 N. J. Eq. 504, 509 (E. & A. 1864): "As tenant for life she will of course be accountable for waste, but will be required to make no other repairs than such as are necessary to prevent waste.” (Emphasis added). She is “under no obligation in respect to the loss of economic value of a building which normally occurs.” In re Roth, 139 N. J. Eq. at 596, emphasis added. See also Burton v. Mellis, 75 N. J. Eq. 10 (Ch. 1909); Gerhardt v. Sullivan, 107 N. J. Eq. 374 (Ch. 1930); Alt v. Kwiatek, 128 N. J. Eq. 469 (Ch. 1941).

In Hudson County Nat’l Bank v. Woodruff, 122 N. J. Eq. 444 (Ch. 1937), modified on other grounds, 123 N. J. Eq. 585 (E. & A. 1938), the question arose as to whether or not in a trust the cost of rehabilitating properties (as distinct from ordinary maintenance and repair costs) should be paid from income or corpus. The court said:

It follows as a result of the life tenant’s duty to do his part in maintaining the value of the properties, that the cost of repairs consisting of such changes in the structure as are designed and required merely to keep it intact and in its original operating condition, are properly chargeable to and should be paid out of income. On the other hand the life tenant ought not to he required to permit income due him to he used to enrich the remaindermen. 4 Bogert on Trusts and Trustees, 2326, par. 803. If the changes to the property are of such a nature that they by increasing its utility and productivity, will add value to it, as turned over to the remaindermen, they probably should be paid for out of corpus, [at 451 emphasis added]

If the life tenant were to be charged with a reserve for depreciation she would be required “to permit income due [her] to be used to enrich the remainderman,” contrary to the foregoing well established rule. Yet defendants would now upset judicial construction, long and repeatedly asserted, and unaltered by any legislative change. “A rule that has been so long accepted is not to be discarded readily or nullified by tenuous distinctions.” In re Davies’ Estate, supra, 96 N. Y. S. 2d at 198.

Apart from precedent, let us examine the rationality of defendants’ contentions. The crucial determinant is the reason for creating the depreciation reserve, at least when it is permitted. Given the fact that a building or other tangible improvement on realty will deteriorate and shrink in value with the passage of time, a reserve for depreciation is set aside to stand in place of the building or to contribute to expenditures aimed at maintaining its value. This maintenance of the value is undertaken for the purpose of maintaining the subject premises as a “quantum,” a fixed monetary value, so that successive tenants or beneficiaries may enjoy it fully, without suffering the diminution of the ravages of time. Compare 3 Scott, op. cit., § 239.4, with Isaacs, “Principal-Quantum or Res?”, 46 Harv. L. Rev. 776 (1933).

The underlying assumption behind this maintenance of value is that successive tenants have a right to enjoy the property undiminished by the shrinkage wrought by decay and obsolescence. In a trust, be it inter vivos or testamentary, this may well be true; the allocation is a function of the intent of the testator. However, a life tenant is not responsible to the remainderman for combating depreciation, unless the intention of the creator of a trust or life estate clearly ordains it. Ordinarily a life tenant’s responsibility is merely to refrain from the active commission of waste upon the premises. N. J. S. A. 2A :65-2; Dolid v. Leatherkraft Corp., 39 N. J. Super. 194 (App. Div. 1956); Roth, supra, at 596.

More specifically, with respect to dower it is said that:

With respect to repairs it should be observed that in general a life tenant is bound to keep his premises in as good a state of repair as they were when the life tenancy began. Murch v. Smith Mfg. Co., 47 N. J. Eq. 193, 20 A. 213 (Ch. 1890). In this regard the widow is put on the same footing as other tenants for life. Haulenbeck v. Cronkright, 23 N. J. Eq. 407, 409 (Ch. 1873), affirmed 25 N. J. Eq. 513 (E. & A. 1874). Hence the widow should be chargeable with ordinary repairs required to put the premises in as good repair as at the husband’s death “including (as it has been held in one unre~ ported case) the renewal of any part of the building thereon, that may, because of decay or ordinary wear require renewal.” 7 Clapp, op. cit., § 1676, at 403, n. 6; [emphasis added]

The widow’s position is akin to that of a legal life tenant, but not at all similar to that of an income beneficiary under a trust. The doweress must suffer the “natural depreciation” of the property insofar as it contributes to a lower rental income therefrom. She must also pay the ordinary expenses required to keep the property in “as good a state of repair as they were when the life tenancy began.” Beyond ordinary wear and tear, however, she need not provide for major structural improvements, nor anticipate obsolescence.

In the case at bar the widow cannot enjoy actual possession of the property, due to the impossibility of partition without great prejudice. N. J. S. A. 3A:36-3. The parties have not chosen to assign her a lump sum. R. 4:63-3. And she is to take constructive possession of her dower interest by means of receiving her share of the annual rents and profits.

Just as we have seen that the widow need not be charged with improvements to benefit the remainderman (see Hudson County Nat'l. Bank v. Woodruff, supra), the converse is also true. That is, the widow ought not to be unduly benefited at the remainderman’s expense. It might be suggested that, absolved of the duty to provide for depreciation, plaintiff is in a better position than she would be in, had she enjoyed actual possession of the real estate. This would be because plaintiff would, arguably, be insulated from suffering the effects of depreciation during her life.

In this case, that injustice simply does not arise. It is apparent that plaintiff will be fulfilling her limited obligations to the remainderman without defendants’ proffered reserve. This is so because (a) she is responsible for everyday repairs the purpose of which is to maintain the building from ordinary wear and tear, and (b) the economic depreciation of the building will presumably inure to her detriment in the form of lower rental income.

Therefore, neither (a) public policy with respect to dower as established by the legislature, (b) judicial precedent, or (c) reason, supports defendants’ attempt to deduct a “reserve for depreciation” in diminution of the widow’s dower. Plaintiff’s exception to the attempt to do so is sustained.

Exoneration

Plaintiff claims exoneration from the obligation of the mortgage, including interest thereon, owing to Bowery. Defendants deny such exoneration because, they say, decedent Shilowitz did not render himself personally liable for such obligation nor did he intend that he should be personally liable therefor. All parties recognize the applicable rule as to exoneration. It was stated in Campbell v. Campbell, 140 N. J. Eq. 144 (Ch. 1947), wherein Vice-Chancellor Berry quoted from the ease of McLenahan v. McLenahan and Johnston, 18 N. J. Eq. 101 (Ch. 1866) as follows:

In McLenahan v. McLenahan, supra (at p. 103), Chancellor Zabriskie said:
“Although the personal estate is the primary fund for the payment of the debts of a decedent, the rule is limited to debts created by him, or for which he has rendered himself personally liable, directly or primarily. Where lands subject to a mortgage debt, not created by the decedent, descend or are devised, the heir or devisee takes them cum onere, and is not entitled to have the debt paid out of the personal estate, unless the decedent has directly assumed the debt, intending (emphasis added) to make it a charge on her personal estate, or shall have so directed expressly by his will. It is not enough that he has assumed to pay the debt, or has rendered himself liable to be called on directly by the creditor to pay it.
“The authorities, ancient and modern, are uniform on these principles, although there is some difference as to what shall show the intention to assume the mortgage debt as a primary lien on the purchaser and his personal estate.” (Italics mine.)
In Gerhardt v. Sullivan, supra (107 N. J. Eq. at p. 376), Vice-Chancellor Backes stated the rule and the underlying reasons therefor as follows:
“The right of the widow to call upon the personal estate to clear the land of encumbrances given to secure the husband’s debts, in favor of her dower, rests upon the rule that the personal estate is the primary fund out of which his debts are to be paid and out of which it is presumed he intended they should be paid, and on the ground that the husband’s personal estate was enhanced by the proceeds from the encumbrance put on the land. The rule, originally evolved to the advantage of the heir at law, and extended to widows, comprehends the debts of the husband whether incurred and secured by' his land before or after marriage.” (Italics mine.)
Note that in this statement it is: (1) the husband’s debts which are to be paid out of the personal estate; and (2) that it is “presumed he intended they should be paid” out of the personal estate; and (3) that the husband’s personal estate was enhanced by the proceeds from the mortgage encumbrances, [at 148, 149; emphasis added].

It is clear that when decedent (and his wife) joined in the deed to his secretary, Eose Perolano, who gave the mortgage to Bowery and then conveyed the property back to Shilowitz alone, it was Shilowitz’ intent that he not be bound personally, on that obligation. The very purpose of using Perolano as a “straw man” was that he not be personally liable. In fact, he was not. Therefore, at least as to the amount used from the proceeds of that mortgage to pay off the $790,000 due on the prior existing mortgage to Brooklyn, there could be no exoneration.

Plaintiff presses further with respect to exoneration, however, by contending that the excess over said $790,000, i. e., the difference between that sum and the amount of the Bowery mortgage of $1,150,000, should be subject to exoneration ; this for the reason, says plaintiff, that said excess sum was used by the decedent to purchase bonds for his personal estate which was thereby enhanced by the proceeds of the mortgage.

In making this contention it is the plaintiff’s burden to prove the fact by clear and convincing evidence. N. J. S. A. 2A:81-2; see, Germann v. Matriss, 55 N. J. 193 (1970). The only evidence introduced was that of a brother-in-law of decedent, Mr. Brigadier, who testified that decedent had said to him on several occasions that he would have about $300,000 above what he needed to pay off the “existing liens”; that he intended to purchase tax exempt bonds, and that decedent later said that he had in fact invested $300,000 in tax exempt bonds. But, pointedly, he did not say “where the money had come from” to make the purchase. Plaintiff points further to the fact that at the time of decedent’s death the inheritance tax return showed tax exempt bonds in the amount of approximately $245,000. I am not persuaded by this testimony that in fact the excess over the $790,000 Brooklyn mortgage was so used that decedent’s personal estate was enhanced thereby. And, since I find that decedent was not personally obligated on the Bowery mortgage the general rule which would preclude exoneration with respect to this mortgage is applicable. I hold that plaintiff is not entitled to exoneration therefrom.

Amortization

As to amortization, defendants attempt the syllogistic argument that, since plaintiff is not entitled to exoneration from the mortgage on the property, and since her dower interest is subject to the mortgage, it follows that she is responsible for her share of amortization payments to be made upon it. The fallacy lies in the unarticnlated minor premise that holding property subject to a mortgage is the same as assuming it or being liable thereon, or that as a life tenant doweress she is responsible thereon. True, to avoid foreclosure, payments must be maintained by someone having an interest in the property, and a doweress has such an interest which might motivate her to make such payments. But that fact does not settle the question as to which party, between doweress and remainderman, is responsible for them.

As we have steen, counsel have analogized the position of a doweress both to that of a life tenant at law and of the income beneficiary of a trust. We note once again that dower is a peculiar estate, with incidents which do not easily lend themselves to the analogies suggested. However, it will be necessary to analyze the parties’ contentions to see where they are reconcilable with these peculiarities.

Proceeding from their argument that plaintiff is not entitled to exoneration, defendants next contend that there was no intent on the part of the deceased husband that his wife’s dower interest be free from mortgage liability, either as to interest or principal. The fallacies here are threefold. First, as we saw above when considering depreciation, allocation of expenses and receipts between principal and income is determined by the intent of the creator of the interest be he grantor of a deed, settlor of a trust, or testator. Here, the creator of the interest is not the late Charles Shilowitz; it is the Legislature which enacted the dower statute (N. J. S. A. 3A:36-3). Therefore, any consideration of decedent’s intent for this purpose is irrelevant.

Secondly, when we consider general trust principles (which defendants have unsuccessfully tried to avoid with the argument considered immediately above), we find that while interest on a mortgage may properly be charged against income, amortization of principal accrues against the corpus or principal of the trust. 3 Scott, op. cit., § 233.2, at 1902, n. 1; Restatement, Trusts 2d, § 233(2), comment (e) (1959); 5 Clapp, op. cii., § 418, at 710, n. 1, and cases cited therein.

Thirdly, it is most inconsistent for defendants to rely on trust principles with respect to deductions for a depreciation reserve, and then disavow the same principles with respect to amortization. True, we have conceded that dower is a unique and peculiar estate, not susceptible of easy characterization. However, our view of its incidents departs from that asserted by defendants in both of these areas.

We must, however, deal with defendants’ citation of Bahr v. Cooper, 141 N. J. Eq. 584 (Ch. 1948), in which the court specifically referred to payments on account of interest and principal as proper charges against a widow’s dower share. It is true that, in that case, payments on account of principal were held chargeable against the dower interest. A careful reading of the opinion of Vice-Chancellor Eielder and an examination of the file therein demonstrates the following: The deceased husband died seized of three income-producing parcels (or, as it will appear, properties held for the production of income). He gave his wife a $3,000 legacy in lieu of dower “ ‘because of her unkind and inhuman treatment’ of him.” Id. at 589. She was subsequently declared incompetent and her guardian brought suit for among other things, instructions as to whether to opt for the $3,000 legacy or to take a dower share over and against the will. The court remarked that the question of charges against the dower interest (to be allocated, as here, out of rents and profits) had not properly been raised in the pleadings. Id. at 585. Nevertheless the issue was dealt with. Although the court mentioned amortization of principal as a proper charge against income, it went further to state that the property would not produce sufficient income, with or without the charges contended for, to outweigh acceptance of the $3,000 gift in lieu of dower. Therefore, allowances for principal amortization were of no significance in the decision. In view of the haphazard way in which the amortization issue was raised in Bahr, along with the elements of obiter dictum in the court’s pronouncement, we must view its precedential value as suspect and unintended to the effect now claimed by defendant trustees here. This is especially so when we see the bulk of analogous authority to the contrary.

The court in Bahr (141 N. J. Eq. at 586) cited the following cases in support of the charges against income for dower purposes: Shields v. Hunt, 39 N. J. Eq. 485 (Ch. 1885); Lloyd v. Turner, 70 N. J. Eq. 425 ACh. 1905), and Alt v. Kwiatek, supra. Defendants in addition have cited Campbell v. Campbell, Gerhardt v. Sullivan, and McLenahan v. McLenahan and Johnston, all supra, for the same proposition, i. e., that the widow’s dower interest is chargeable with, among other things, both interest and principal on mortgages. The court has considered all these cases, along with the case of Burton v. Mellis, supra, often cited in the cases above. While some of the cases deal with the question of exoneration (discussed above) and some mention mortgage interest as a proper charge, not one discusses or even refers to principal amortization as chargeable against dower.

In sum, we find no support for charging dower with amortization from the cases cited in Bahr v. Cooper, supra, or from that case itself. Defendants’ cited authorities and asserted reasoning are similarly unavailing. We therefore follow the general rule and charge amortization to the remainderman and not to the life tenant. No deduction will be made from Mrs. Shilowitz’ portion of rents and profits for amortization of principal.

Interest on mortgage

On the face of the pleadings, plaintiff claims to be entitled to payment without deduction even for mortgage interest, and so we must deal with this claim too. It appears from plaintiff’s briefs and argument that her claim for freedom from interest is based entirely on her asserted right to exoneration. In default of exoneration, she concedes liability for mortgage interest. In view of onr findings and holding on the exoneration question, plaintiff’s claim here must fail. A life tenant’s and a doweress’ responsibility for interest on mortgages has long been recognized. See Alt v. Kwiatek, supra, 128 N. J. Eq. at 474; 7 Clapp, op. cit., § 1676.

Management fee

At trial, counsel for defendant trustees stated that they would be "satisfied” with a management fee of 4% of gross rentals. Thus, allowance for such a foe is made in the Schedule set forth above.

Defendants produced as a witness one Herbert Bernfeld, a real estate broker, fully competent in this area. In his opinion a 5% fee would be reasonable. Also called as a witness for the defense was Justin C. Harris, a co-executor-trustee of decedent’s estate. He testified to the services rendered by the executors in the management of the property, including their attendance to problems such as overseeing operation of the building on a day-to-day basis, reviewing credit statements and general qualifications of prospective tenants, reviewing all leases and negotiating with prospective tenants regarding their qualifications, tenant relations, study of comparable rents in other buildings, maintenance of equipment and purchase of replacements thereof when needed, examination of insurance coverage, and general day-to-day maintenance of the building. Harris, a certified public accountant, also prepares the financial statements for the building.

On cross-examination, Harris testified that $12,000 was allowed for office expenses, salaries and other expenses related to management. This is in addition to the 4% fee set forth in the schedule and is included therein under the heading: "other ordinary costs and expenses of operations.”

I find that a reasonable management fee for this building is 5% of the gross rentals. However, Bernfeld, defendants’ witness, testified that if his firm were to manage a building for 5% of the rentals, it would have provided the clerical help and office expenses- necessary for the task. In other words, all necessary expenses to manage the property would be subsumed in the 5% management fee. I therefore hold that defendants may charge a management fee of 5% of the rentals, but may not allocate any further sum under “other ordinary costs and expenses of operations,” or elsewhere, for office and clerical help for salaries and office expenses related to management. The $12,000 now provided for under “other ordinary costs and expenses of other operations” is therefore disallowed.

Counsel fees

Plaintiff applies for counsel fees to be charged against decedent’s estate. Her sole reliance is on the case of Risley v. Kirkman, 56 N. J. 464 (1970).

R. 4:42-9 is the only source for the award of a counsel fee. Sunset Beach Amusement Corp. v. Belk, 33 N. J. 162, 167 (1960). The general policy is that every litigant is to bear his own costs. Id.; State v. Otis Elevator Co., 12 N. J. 1, 10 (1953).

The rule provides exceptions thereto for specific situations such as where there is a “fund in court.” R. 4:42-9 (a) (2). In order for an attorney to be entitled to compensation for his services from a “fund in court” he must have aided directly in creating, preserving or protecting the fund. In re Kleinberg, reported sub nom. In re Pynn-Hawley Co., 63 N. J. Super. 50, 55 (Cty. Ct. 1960). He is not entitled to such an award if his client sues merely for his own interest or benefit. Sunset Beach Amusement Corp. v. Belk, supra, 33 N. J. at 168.

Here plaintiff sues only for her own benefit in that she seeks to establish the amount of her dower. She has done nothing to create, preserve or protect any funds in court for the benefit of any members of a class. Katz v. Farber, 4 N. J. 333, 344 (1950).

With respect to Risley v. Kirkman, supra, plaintiff’s reliance is misplaced. In that case there were two questions: first, whether plaintiff was entitled to dower, and second, whether a constructive trust would be imposed on decedent’s estate predicated on his oral promise to give plaintiff a weekly income for the rest of her life. She won on the question of constructive trust and it was in connection with that subject —■ and not dower — that counsel fees were awarded. The court said:

To require the widow to bear the cost of establishing the trust and its terms would, on the facts of this case, run against the very purpose of the trust, i. e. the fulfillment of the testator’s primary aim that her actual needs be met. The allowance, however, must he confined to so much of the services as are fairly allocable to this facet of the case alone.” [56 N. J. at 471 emphasis added]

In Risley, no fees were awarded on the issue of dower.

Plaintiff’s application for counsel fees is denied. No costs.

      N. J. S. A. 3A :36-3.

      Tlie foregoing depreciation was established as a straightline depreciation assuming a 20-year useful life after the death of decedent. At trial the parties stipulated that, assuming depreciation were to be deducted, it should be calculated on the basis of a 24-year useful life. The parties further agreed that the figures in the schedule are not necessarily accurate and the court is not to be concerned with the exact figures which will be ultimately used to calculate the dower interest.


author: Hartman, J. C. C.

text:
    ROBERT C. GOODPASTURE AND BARBARA P. GOODPASTURE, HIS WIFE, PLAINTIFFS, v. JOAN H. GOODPASTURE, DEFENDANT.
    Superior Court of New Jersey Chancery Division
    Decided May 25, 1971.

      Messrs. Kasen, Schnitzer, & Kraemer (Mr. Daniel G. Kasen, appearing), attorneys for plaintiffs.

      Messrs. Ryan, Foster & Garofalo (Mr. William Ryan, Esq., appearing), attorneys for defendant.
   Hartman, J. C. C.

(temporarily assigned). Plaintiff sues to partition real estate, the former matrimonial home of the parties. Defendant, his former wife, seeks to prevent it. The central question to be decided is whether plaintiff’s unilaterally undertaken obligations regarding use and occupation of the home by defendant and the child, entered in his ex parte Nevada divorce proceedings on his own motion, constitute a waiver of his right to partition or estop him from asserting that claim. I find no case directly in point.

The relevant facts are not in dispute. The parties met sometime in the late summer or early fall of 1958. Each had been married and divorced, and each had two children by the former marriages. They were married on July 2, 1959. Defendant sold her Florida property (granted to her in her prior Florida divorce proceedings) and applied the proceeds of that sale to the purchase of a home in Montclair. In 1963 their Montclair home was sold and the appreciated net proceeds were nsed to purchase 34 Maple Drive in North Caldwell, as tenants by the entirety. This is the matrimonial home which plaintiff now seeks to partition. It is presently being occupied by defendant, her 18-year-old youngest son by her first marriage, and Margot, the only child of this marriage, now eight years of age.

Defendant’s answer alleges that plaintiff deserted her in June 1965. There is nothing before the court to indicate how she got along for the following two years. In any event, he filed an action for divorce against defendant in Clark County, Nevada, in 1967. Service of that complaint was made on defendant in New Jersey on February 9, 1967. Defendant filed no appearance in the action nor did she participate in the Nevada proceedings in any manner. On March 3, 1967 “defendant not being present personally, and not being represented by counsel or any other person,” the Nevada district judge granted plaintiff an absolute divorce on the ground of “extreme cruelty, mental in nature.”

In view of the issue before this court, the findings of the Nevada judge and his adjudications are set forth as follows:

1. That for a period longer than six weeks immediately preceding the verification of said complaint, plaintiff has been and still is, an actual bona fide resident of the State of Nevada.
2. That plaintiff and defendant intermarried at Montclair, New Jersey, on or about July 2, 1959, and ever since have been and still are, husband and wile.
3. That there is one minor child the issue of said marriage, to wit: MARGOT, born September 1, 1902; that plaintiff is willing and able to pay to defendant the sum of $100.00 per month for the support and maintenance of said child until she reaches the age of majorily so long as he is accorded reasonable visitation rights with said daughter.
4. That plain! iff is willing to be required to itay monthly mortgage payments, property taxes and property insurance on the jointly owned property of the parties, located at 34 Maple Drive, North Caldwell, New Jersey, so long as he retains an interest therein and so long as the defendant does not remarry and continues to live in said residence with said daughter.
5. That plaintiff is ready to be required to pay to defendant as and for alimony the reasonable monthly sum of $180.00 so long as she does not remarry; and, in tlie event that plaintiff is no longer required to make payments on the residence at 34 Maple Drive, then said alimony shall be increased by the monthly sum o£ $160.00, making a total of $340.00 per month until defendant remarries.
6. That since the said marriage of the parties, defendant has treated plaintiff with extreme cruelty, mental in nature, without just cause therefor, and that plaintiff’s health was, and is, thereby and therefrom impaired.
7. That the Court has jurisdiction as to the plaintiff herein.
NOW, THEREFORE, upon the above findings, and good cause appearing therefor, upon motion of JACK G. PERRY, attorney for plaintiff,
IT IS ORDERED, ADJUDGED AND DECREED that the bonds of matrimony now and heretofore existing between plaintiff and defendant, be, and the same hereby are, wholly dissolved and set aside, and that plaintiff, ROBERT C. GOODPASTURE, be, and he is hereby, decreed an absolute and final decree of divorce from the defendant, and the parties hereto and each of them are hereby restored to the status of single, unmarried persons.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that plaintiff pay the sum of $100.00 per month for the support and maintenance of his child, MARGOT, until said child reaches age majority, so long as he is accorded reasonable visitation rights with said daughter.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that plaintiff pay the monthly mortgage payments, property taxes and property insurance on the jointly owned property of the parties, located at 34 Maple Drive, North Caldwell, New Jersey, so long as the defendant does not remarry and continues to live in said residence with said daughter.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that plaintiff pay to defendant as and for alimony, the sum of $180.00 per month so long as she does not remarry; and, in the event that plaintiff is no longer required to make payments on the residence at 34 Maple Drive, then said alimony shall be increased by the monthly sum of $160.00, making a total of $340.00 per month until defendant remarries.
DATED and DONE in Open Court, this 3rd day of March, 1967.

It is not disputed that following the entry of the Nevada decree of divorce plaintiff made the support payments pursuant to the provisions thereof, including the payments for the mortgage, taxes and insurance on the New Jersey home. Thereafter, defendant brought an action against plaintiff in the Supreme Court of New York (plaintiff had remarried following his Nevada divorce and was apparently then living in New York) for a declaratory judgment adjudging his last marriage to be null and void and of no force and effect. After six days of hearings in that court a judgment was filed on July 24, 1968 declaring plaintiff’s Nevada divorce to be a valid one and entitled to full faith and credit.

From the date of the entry of plaintiff’s ex parie decree in Nevada on March 3, 1967, to the present time, including the time of the pendency of the New York proceedings attacking the validity of that decree, plaintiff has regularly made the payments of alimony and support for defendant and their child and has faithfully and regularly made the mortgage, tax and insurance payments in accordance with the Nevada decree.

The validity of the Nevada decree dissolving the marriage having been laid to rest in the New York proceedings, the latter judgment compels its respect under the Full Faith and Credit Clause of the Federal Constitution. Kram v. Kram, 52 N. J. 545 (1968), and cases cited therein. So long as the parties remained husband and wife they enjoyed an estate by the entirety in the matrimonial home which could not be partitioned. But with the entry of the valid Nevada divorce the estate by the entirety was automatically, by operation of law, converted into one of tenancy in common. Eberle v. Somonek, 24 N. J. Super. 366 (Ch. Div. 1953) aff’d. p. c. 27 N. J. Super. 279 (App. Div. 1953).

x\s to matrimonial co-tenants, the right to partition between them is an absolute one. Drachenberg v. Drachenberg, 142 N. J. Eq. 127 (E. & A. 1947), Michalski v. Michalski, 50 N. J. Super. 454, 460 (App. Div. 1958). A husband’s abandonment of his wife and his refusal to support her is no defense to his rights in his property. Pentek v. Pentek, 117 N. J. Eq. 292 (Ch. 1934); that it is the family home is no defense. Heldt v. Heldt, 29 Ill. 2d 61, 193 N. E. 2d 7 (1963). An oral agreement not to partition interests in real property is not a defense since it is affected by the statute of frauds. Brands v. Cassedy, 124 N. J. Eq. 417 (Ch. 1938), aff’d 125 N. J. Eq. 346 (E. & A. 1939).

This absolute right, however, is subject to some limitations. Thus, written agreements not to partition are sanctioned if they are fair and equitable. Property settlement agreements between husband and wife, to the extent they are equitable and fair, are enforceable in equity. An agreement not to partition must be reasonable as to time, and may be expressed or implied. Hotchkin v. Hotchkin, 105 N. J. Super. 475 (Ch. Div. 1969) (involving partition of personal property); Michalski v. Michalski, supra (where co-tenants’ agreement not to partition until one of them should die —• wife was more than 70, the husband more than 60 —• was held not to be an unreasonable period of restraint -on partition).

Plaintiff fixed his own terms for the support and maintenance of his wife and child. He was fully aware of his title interest in his Hew Jersey property. By his own unilateral act, memorialized as such in his divorce decree, he gave assurance to his wife — to all intents and purposes a promise — that so long as she remained in the home and was unmarried, and as long as the child was here with her, she was safeguarded with a roof over their heads and he would keep up the mortgage and tax payments and keep the home insured. He was represented by counsel. It is to be presumed that he knew, or should have known, that with a valid divorce decree the right of partition was his. If he did not know it, reasonable inquiry would have disclosed the fact.

In effect he represented to his wife by his terms, albeit unilaterally, that she could have the use and occupancy of the home; he knew or is presumed to know what he was doing; he must have intended that she should accept his terms — as she in fact did; she did accept the payments and the benefit of his provisions, thus relying on his promises. All these factors are significant and essential elements of an equitable estoppel. Its foundation is justice and good conscience, its purpose to prevent unconscientious and inequitable assertions or enforcement of claims which, but for an estoppel, could otherwise be enforced. Thomas v. Camden Trust Co., 59 N. J. Super. 142 (Law Div. 1959).

In Flammia v. Maller, 66 N. J. Super. 440 (App. Div. 1961), it was held:

Equitable estoppel embodies the doctrine that one may not repudiate an act done or a position assumed where that course would work injustice to another who, having the right to do- so, relied thereon. McAlpine v. Garfield, 25 N. J. Misc. 477, 480 (Cir. Ct. 1947), aff'd. 137 N. J. L. 197 (E. & A. 1948). The essence of equitable estoppel is that one is precluded from taking a position inconsistent with that previously assumed and intended to influence another’s conduct, if such repudiation would not be responsive to the demands of justice and good conscience in that it would effect an unjust result as regards the latter. An essential element is that the party claiming the estoppel actually relied upon the conduct of the party said to be estopped, and because of such reliance changed his position, and this to his prejudice, [at 448-449.]

It should be noted that the inclusion of support provisions in his ex parie divorce decree was totally unnecessary to those proceedings. Nevada never had in personam jurisdiction over defendant. Those provisions, purely in personam, could not be binding on defendant, if she chose to disregard them, in any jurisdiction, including Nevada. Isserman v. Isserman, 11 N. J. 106 (1952); concurring opinion of Mr. Justice Douglas in Esenwein v. Commonwealth ex rel. Esenwein, 325 U. S. 279, 65 S. Ct. 1118, 89 L. Ed. 1608, 157 A. L. R. 1396 (1945); Pennoyer v. Neff, 95 U. S. 714, 24 L. Ed. 565 (1877).

Estoppel in pais is an equitable doctrine. Under it a party is not permitted the right to repudiate acts done or positions taken or assumed by him when there has been reliance thereon and prejudice would result to the other party. Such injustice should not be permitted. Kufta v. Hughson, 46 N. J. Super. 222 (Ch. Div. 1957).

A waiver connotes a voluntary and intentional relinquishment of a known right or claim. It operates unilaterally and without regard to the rights of others. Mer chants Indem. Corp. of N. Y. v. Eggleston, 68 N. J. Super. 235 (App. Div. 1961), aff’d 37 N. J. 114 (1963). The intention to waive need not be manifested expressly “but may be spelled out from a state of facts exhibiting full knowledge of circumstances producing a right and continuing indifference to the exercise of that right.” Poray v. Royal Globe Ins. Co., 90 N. J. Super. 454 (Law Div. 1966), citing Merchants, supra (from page 354).

I find as a fact that plaintiff knowingly created by his own acts a situation which was relied upon hy defendant. He has therefore “waived” any right he might otherwise •have had to partition the property, and he is “estopped” from asserting his claim to partition. The conditions to defendant’s right to use and occupy the premises still exist and I find the same to be reasonable as 1» the period of time defendant may enjoy that possession. To hold otherwise would in my view be inequitable.

Equity regards that as done which in good conscience should b© done. Martindell v. Fiduciary Counsel, Inc., 133 N. J. Eq. 408, 413 (E. & A. 1943). It is reasonable to assume that, having had legal advice in Hew Jersey before he traveled to Hevada to secure a divorce, defendant was apprised of the calculated risks he was taking. Hew Jersey law permits a wife to sue in separate' maintenance in disregard of a husband’s ex parte divorce secured in another state. N. J. S. 3A:34-34.1. A wife is not precluded from attempting an attack on that type of divorce. It would appear that plaintiff’s purpose in entering the support provisions in a decree of a sister state whose jurisdiction did not extend in personam over his wife was to induce her by the very nature of those provisions to take no action against him in the area where she had a legal right to pursue him. Having accomplished that end, he .should not be permitted to change his mind now.

We find no case law in this State which construes a judgment to be a contract. Yet, just as a contract creates rights and obligations, a judgment judicially declares rights and obligations flowing from a contract, as, for example, a suit to specifically perform or enforce an agreement. Clark v. Brown, 101 N. J. Super. 405 (Law Div. 1968); West Jersey Title, etc., Co. v. Industrial Trust Co., 27 N. J. 144 (1958). The facts of our case support a finding that an implied contract was created between the parties. Cf. Specht v. Eastwood-Nealley Corp., 34 N. J. Super. 156 (App. Div. 1965) (an implied contract found from a unilaterally set up pension). We have an offer and an acceptance. The acceptance is evident from defendant’s receipt without complaint of the monies forthcoming by reason of the support provisions of the Nevada decree. The plaintiff was under a common law duty to support; we therefore have a valid consideration for the contract. What plaintiff unilaterally proposed in Nevada eventually carried the imprimatur of a court order. Defendant had a right to rely upon it. By relying upon that order she was “lulled into a feeling of security with reference to the authoritative value” of that order. See Bowers v. Bowers, 132 N. J. Eq. 431 (E. & A. 1942).

By a subsequent move in these proceedings plaintiff sought to introduce evidence, through his own oral testimony, of his intention with regard to his offer in Nevada. He was permitted to testify, subject to the right of defendant’s counsel to move to strike all or any part of that testimony as being inadmissible. The expressed language in the decree is neither dubious, ambiguous nor uncertain; it is clear and plain. Plaintiff was not only represented by Nevada counsel but also conceded that he might have received legal advice as to his right to partition from New Jersey counsel before he left for Nevada. Parol or extrinsic evidence is not available to him. Naumberg v. Young, 44 N. J. L. 331 (Sup. Ct. 1882); Farber v. Shell Oil Co., 47 N. J. Super. 48 (App. Div. 1957); Casriel v. King, 2 N. J. 45 (1949). Defendant’s reserved motion to strike all of plaintiff’s testimony regarding his “intention” as violative of the parol evidence rule is therefore granted.

Plaintiff’s complaint for partition is dismissed.


author: Camarata, J. S. C.

text:
    MICHAEL C. MICHAUD, PLAINTIFF, v. WILLIAM F. YEOMANS, ESSEX COUNTY COMMISSIONER OF REGISTRATION, DEFENDANT.
    Superior Court of New Jersey Law Division
    Decided June 1, 1971.

      Mr. Francis P. McQuade, for plaintiff.

      Mr. Dennis J. Quinn, Deputy Attorney General, for defendant (Mr. George F. Kugler, Jr., Attorney General of New Jersey, attorney).
   Camarata, J. S. C.

In October 1970 plaintiff was a student at Seton Hall University (hereinafter university) residing in one of the dormitories on campus. On or about October 15, 1970 he applied to the Clerk of South Orange to register as a voter, which the Clerk refused to do. Eor determination is whether plaintiff, as a student at the university, was entitled to register and vote from the 5th Election District in South Orange.

On October 19, 1970 plaintiff, pursuant to N. J. S. A. 19:4-4.5, filed a verified statement with the Commissioner of Registration (hereinafter referred to as Commissioner) Hp.tt.irig forth his domicile as the university. The cited statute provides, among other things, that the filing of the statement

* * * shall be prima facie evidence that the place of residence in this State identified therein is the domicile of the affiant. In the absence of evidence contrary thereto appearing either in said statement or otherwise, the affiant shall be entitled to register or reregister within the voting district where such domicile is located, provided he possesses all other qualifications entitling him to do so * * * [Emphasis added]

The Commissioner refused to register him.

Generally, a student is presumed not to have the right to vote in the municipality where a university is located. 29 C. J. S. Elections § 22 at 80; 25 Am. Jur. 2d, Elections, § 71; Annotation 98 A. L. R. 2d 487 (1964). He must overcome this presumption by a preponderance of the evidence. Brueckmann v. Frignoca, 9 N. J. Misc. 128 (Cir. Ct. 1931). The burden of establishing the fact of domicile is on the party who relies on it. Domicile is factual. and each case must be evaluated and determined by its own facts and circumstances. Lea v. Lea, 18 N. J. 1 (1955).

It is in this legal context that the cited statutory presumption of plaintiff’s statement creating a prima facie fact of domicile must be judged.

The cited statute permits acceptance of plaintiff’s statement as to domicile in the absence of evidence appearing in the statement or otherwise. Part of the contrary evidence before the Commissioner were answers in plaintiff’s statement filed on October 19, 1970, wherein plaintiff listed two addresses as residences: Port Mott State Park, Salem, New Jersey (hereinafter Port Mott) and 400 South Orange Avenue, South Orange.

The cited statute permits the Commissioner to act in a summary manner. He may or may not conduct an investigation and may or may not require additional information from the affiant. It appears neither was done or requested by the Commissioner at the time plaintiff filed his statement.

At the hearing before this court plaintiff’s counsel stated that the Commissioner’s attorney had, after the suit was instituted, propounded interrogatories which plaintiff answered. This the Commissioner could have done at the time the statement was filed by plaintiff. Plaintiff’s counsel conceded that if it had been done, the probabilities were that the Commissioner’s decision would be the same.

To now remand the matter to the Commissioner would serve no useful purpose. The interrogatories will he considered as propounded by the Commissioner nunc pro tunc October 19, 1970. The court concludes that the Commissioner rebutted the presumption or prima facie, evidence of domicile as set forth in the cited statute.

In In re McCarthy, 18 N. J. Misc. 5, 7 (Cir. Ct. 1939), the court, in considering an election matter, referred to temporary residences and held that a temporary residence is not an actual residence, as contemplated by the laws of our State. The court included "seats of learning” as temporary residences.

This court has not been referred to a Hew Jers'ey case exactly in point where a student has been permitted to vote from a university. Cases in other jurisdictions are factually distinguishable from the instant one, e. g. Reiner v. Board of Elections, Onondaga County, 54 Misc. 2d 1030, 283 N. Y. S. 2d 963 (Sup. Ct. 1967); Robbins v. Chamlerlain, 297 N. Y. 108, 75 N. E. 2d 617 (Ct. App. 1947); Chomeau v. Roth, 230 Mo. App. 709, 72 S. W. 2d 997 (App. Ct. 1934).

In Reiner petitioners sought to register to vote. The board of Elections denied registration on the ground they were not residents of Hew York because their presence in that state was premised on their status as students at an institution of learning. On appeal the court reversed the board stating:

They are married, have left their parental firesides, and have gone on their own. Simply because they are engaged in the enterprise of furthering their education and are living on money saved from prior labors does not mean that they have not acquired a hona fide residence in their Election District. Their automobile is registered in Onondaga County, they own furniture and personal effects * * * and have opened a savings account in the community. [Emphasis added]

In Chomeau the students were permitted to vote. They were attending a seminary to be educated for the ministry in the Lutheran Church. When they left their homes to enter the seminary, they did so with the intention of not returning to their homes permanently. Upon their graduation they were subject to call to one of the Lutheran congregations or missions in any part of the world.

In Rollins the court permitted the petitioners to vote. They were students who were living with their wives and children in an apartment in a housing development. The court held that each man was actually the head of a family unit consisting in most casees of himself and his wife, and said:

These students are family men, not college boys away from their parental homes. True, their tenure of occupancy at Shanks Village can continue only while they are students, but, since they have no other homes, their tenure is temporary or indefinite only in the same sense as the tenure of the occupant of a city apartment house.

In the instant ease, in order for the plaintiff to establish his right to register to vote, he mnst show that his fixed domicile or permanent home is the university. A residence and domicile are not synonymous. The difference is one of intention. In order for a person to acquire a domicile it is necessary- that there be an intention not only to live at the place but also to make a home there. State v. Benny, 20 N. J. 238, 251 (1955); Perri v. Kisselbach, 34 N. J. 84, 87 (1961); State v. Atti, 127 N. J. L. 39 (Sup. Ct. 1941), aff’d o.b., 128 N. J. L. 318 (E. & A. 1942). A person may have more than one residence but he may not have more than one domicile. State v. Atti.

Having considered the testimony, the exhibits and the interrogatories, the court concludes that plaintiff has not, by a preponderance of the evidence, demonstrated ox rebutted the presumption that as a student he is not domiciled at the university. The following evidence is, contrary: plaintiff’s stay at the university is contingent upon his being a student; he has no key to a room at the university; he gives his parents’ address, Fort Mott, on records of employment, driver’s license, draft board, social security, Blue Cross, bank loans and to the registrar of the university; he filed his income tax returns from Fort Mott, with any refund to be sent to Fort Mott; he has no clothes at the university; his grades are sent to his parents’ home at Fort Mott; he made employment applications in Salem, New Jersey, and his mail is to be forwarded to his sister’s home in Pennsylvania.

The court concludes that (a) plaintiff did not intend to give up Ms residence or his domicile at his parents’ home in Fort Mott, nor did he intend to make the University his permanent address. Vanderpoel v. O’Hanlon, 53 Iowa 246 [5] N. W. 119 (1880) ; and (b) on October 19, 1970, he was not domiciled at the university.

The Commisioner’s action in denying the plaintiff the right to register and vote from the university is affirmed.


author: Breslin, R. W., J. C. C.

text:
    CONTINENTAL NATIONAL AMERICAN GROUP AND GEORGE TOMA AND PARKWAY AUTO BODY COMPANY, PLAINTIFFS, v. PEDRO PLUDA, PETER MATERA AND NATIONAL UNION INSURANCE COMPANY, DEFENDANTS.
    Superior Court of New Jersey Law Division
    Decided May 26, 1971.

      Messrs. DeYoe, DeYoe & Guiney, attorneys for plaintiffs.

      Messrs. Gelman & Gelmam,, attorneys for defendant Pedro Pluda.

      Messrs. Bergamino and DeGone, attorneys for defendants Peter Matera and National Union Insurance Company.
   Breslin, R. W., J. C. C.

This is an action for summary judgment arising out of a motor vehicle negligence action in which the two insurance companies involved disputed coverage and the payment of fees for the defense of said action.

It appears that on November 6, 1966 plaintiff George Toma was operating a 1964 Cadillac, owned by the defendant Peter Matera, in a westerly direction on Boute 3 in the Township of East Eutherford, New Jersey, when he struck the rear of a 1966 Chevrolet owned and operated by defendant Pedro Pluda. Toma, a licensed used car salesman, had come into possession of the car on November 5, 1966, having been given it by Matera for the purpose of showing it to a prospective purchaser at a social event that evening. Toma is insured by Continental National American Group (Continental), policy No'. 215-64-13, whereas Matera has coverage with National Union Insurance Company (National Union), under policy No. ACE 980134.

There is a suit presently pending for personal injuries in the Superior Court, Docket L 42915-67, wherein Pedro Pluda is plaintiff and George Toma, individually and doing business as Parkway Auto Body, and Peter Matera are defendants. Continental undertook to defend said action after a refusal by National Union.

This action is concerned with two closely related issues: (1) Which insurance company will be designated the primary insurer and be responsible for coverage of the accident and for the defense of said suit? (2) If the excess insurer defends said action after the primary insurer declined to do so, is it entitled to a recovery of expenses and counsel fees?

The specific exclusion upon which National Union rests its defense reads as follows:

This policy does not apply under Part I:
(d) to any haulaway, tank, truck, tank trailer, or any automobile used therewith, owned, hired or held for sale by the named insured and not being delivered, demonstrated or tested; or to any watercraft, while away from the premises or to any aircraft; [emphasis added]

This type of exclusion is intended to eliminate coverage of persons using automobiles in the automobile business for purposes other than delivery, demonstration or testing. Other automobile liability insurance policies have in the past contained various forms of exclusion clauses referring to garages, automobile repair shops and filling stations. Eor the most part, the provisions of such clauses have expressly eliminated persons engaged in those businesses from those added as insureds by the omnibus clause of the policy. LeFelt v. Nasarow, 71 N. J. Super. 538 (Law Div. 1962).

Under the New Jersey statutes an omnibus clause should have a broad interpretation, N. J. S. A. 39:6-46 (a,) providing, in part, that policies shall:

Designate * * * all motor vehicles with respect to which coverage is intended to be granted thereby, and insure the insured named therein and any other person using or responsible for the use of any such motor vehicle with the express or implied consent of the insured. * * * [Emphasis added].

This broad form interpretation of the omnibus clause has been applied in many cases where the insurance companies have tried to restrict their coverage. In Selected Risks Ins. Co. v. Zullo, 48 N. J. 362 (1966), the insurance company sought to restrict its omnibus clause to persons who drove the insured’s car with his permission and in no way deviated from that scope of permission. The Supreme Court, in holding said clause invalid, stated:

A policy so offered must have the broad form omnibus coverage set forth in N. J. S. A. 39:6 — 46 and 48(a). A policy which purports to have a more restrictive omnibus coverage is automatically amended to conform to the statutory standard. [At 373]

To let the insurance company limit coverage through an exclusion would permit a deviation from the statutory mandate as to the content and scope of the omnibus clauses of an automobile liability insurance policy. Willis v. Security Ins. Group, 104 N. J. Super. 410 (Ch. Div. 1968). Said exclusion is amended to conform to the statutory standard.

Whether one considers Toma an agent of Matera because of his intent to show a potential customer the automobile, or whether one simply considers him “another insured,” he would come under the policy of insurance issued by National Union to Matera and thus they become the primary insurer, with Continental as the excess insurer.

It is the law of this State that an insurer must provide a defense for its insured where the allegations of the complaint, upon its face, fall within the risk insured against. Ohio Casualty Ins. Co. v. Flanagin, 44 N. J. 504, 512 (1965); West v. MacDonald, 103 N. J. Super. 201, 212 (App. Div. 1968); aff’d 52 N. J. 536 (1968). The obligation to defend falls squarely upon Rational Union and it will be held liable for coverage.

Thus our second issue arises: if the primary insurer refuses to defend and the excess insurer defends said action, is it entitled to a recovery of expenses and counsel fees?

This precise issue has not been decided in Rew Jersey and notice must be taken that other jurisdictions are in conflict on this point. Fireman’s Fund Ins. Co. v. North Carolina Farm Bureau Mutual Ins. Co., 269 N. C. 358, 152 S. E. 2d 513 (Sup. Ct. 1967). The most prominent theories being, (1) to divide the costs of defense equally among the insurers, or a pro rata share equal to the amount of coverage, and (2) treating the duty to defend as personal, between the insured and insurer, so that only the defending company will have to pay.

In adopting the first theory above, the public policy of the State is important. Insurance is not just a personal obligation between the insured and insurer but it is a way to establish financial responsibility. If insurance companies were not forced to act responsibly, then their purpose and value would diminish.

In the recent case of Burd v. Sussex Mutual Ins. Co., 56 N. J. 383 (1970), in describing the approaches an insurance company can take, the court said:

And of course if the carrier does not defend, it will have to reimburse the insured for the cost of defense if the tort judgment is held to be within the covenant to pay.

That case was between an insured and an insurer, and not two insurers, as under our facts. A footnote in Butler v. Bonner and Barnewall, Inc., 56 N. J. 567 (1970), in referring to such a recovery states that in Rew Jersey “Whether any such right exists as to the former is an open question,” and subsequently cites Gray v. Zurich Ins. Co., 65 Cal. 2d 263, 54 Cal. Rptr. 104, 419 P. 2d 168 (Sup. Ct. 1966), which allows recovery of expenses and counsel fees.

In State Farm Mutual Auto Ins. Co. v. Travelers Ins. Co., 57 N. J. 174 (1970), the Supreme Court goes even further and states that:

A distinction based on whether the dispute is between carriers or individuals would only lead to confusion and spawn unnecessary litigation.

In Zurich Ins. Co. v. New Amsterdam Cas. Co., 117 Ga. App. 426, 160 S. E. 2d 603 (Sup. Ct. 1968) W/ while operating Steele’s truck, collided with L. L. sued Master Mix, Inc., W’s employer, and Master Mix called on plaintiff, its insurer, to defend said action. Plaintiff in turn called on defendant, insurer of Steele, to defend, contending it had primary coverage. Defendant refused and plaintiff sought reimbursement for defending. In holding that plaintiff could recover, the court subrogated plaintiff to the position of Master Mix, saying:

Since we have held that Master Mix, Inc., is an insured of New Amsterdam Insurance Company, and that the liability of this plaintiff is for excess coverage, the necessary conclusions under the precedents above cited are (1) that this plaintiff had a duty to defend regardless of its position as excess rather than primary carrier, and (2) that by its initial contract with its insured it has the right to recover from the defendant insurer in the same manner that its insured would have had, had Master Mix, Inc., defended the case and paid off the judgment.

In National Farmers Union Prop. and Cas. Co., v. Farmers Ins. Group, 14 Utah 2d 89, 377 P. 2d 786 (Sup. Ct. 1963), an automobile operator’s insurer sought to recover from the automobile owner’s insurer, attorneys’ fees and court costs incurred in defense of a suit against the operator sued for property damage. The court held the operator’s insurer as the excess carrier and granted judgment to recover from the owner’s insurer as primary carrier under the right of subrogation for expenses incurred in defending said action after the primary carrier’s refusal to defend. The court noted that:

Plaintiff, in assuming the defense of Morgan, was no volunteer. It was obligated so to do under the terms of its policy after the defendant had refused. It is specious to say that Morgan incurred no expense and, therefore, there is no subrogation. Had Morgan paid these expenses and then been reimbursed by plaintiff, the latter would then have subrogation rights against the defendant. We do not think that this latter procedure is necessary to establish the rights of an excess insurance carrier under the circumstances of this case. Subrogation is an equitable device to compel the ultimate discharge of a debt or obligation by the one who in good conscience ought to pay or discharge it.

I therefore find that Continental is the excess insurer and is entitled to be reimbursed for court expenses and attorney’s fees, in the amount of $365, for handling the preliminary defense of said action, when the responsibility was actually upon National Union.