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

text:
    STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT, v. JOHN FUDALI, DEFENDANT-APPELLANT. LLOYD W. MC CORKLE, COMMISSIONER, NEW JERSEY DEPARTMENT OF INSTITUTIONS AND AGENCIES, INTERVENOR.
    Superior Court of New Jersey Appellate Division
    Argued December 7, 1970
    Decided February 23, 1971.

      Before Judges Goldmann, Leonabd and Mountain.

      Mr. William J. Cleary, Jr., assigned attorney, argued the cause for appellant.

      Mr. Edward C. Megill, Assistant Prosecutor, argued the cause for respondent (Mr. Geoffrey Gaulhin, Hudson County Prosecutor, attorney).

      Mr. Joseph T. Maloney, Deputy Attorney General, argued the cause for intervenor (Mr. George F. Kugler, Jr-, Attorney General, attorney).
   The opinion of the court was delivered by

Goldmann, P. J. A. D.

Defendant appeals from a County Court order denying his petition for post-conviction relief seeking a reconsideration of sentence.

The Hudson County grand jury had returned three indictments charging defendant and two others, in four counts, with armed robbery and unarmed robbery, and also armed and unarmed assault with intent to steal. He pleaded guilty to the first counts of two of the indictments charging him with armed robbery and was sentenced on each indictment to State Prison terms of A-6 years for robbery and 2-3 years for being armed. However, the sentences were made to run concurrently, the result being that defendant received a State Prison sentence of 6-9 years.

Defendant was on parole from the Bordentown Reformatory at the time of the sentences. His commitment there had resulted from his plea of guilty to armed robbery, for which he had been sentenced to serve an indeterminate term at Bordentown not to exceed five years. The time remaining on the Bordentown sentence at the time of his parole was two years and eight months. On arrival at the State Prison defendant was informed that his parole from Bordentown had been revoked, that his remaining Bordentown sentence was being transferred to the State Prison, and that he would serve that sentence after he had completed the State Prison sentences just imposed for armed robbery.

The State Prison sentences were imposed on June 28, 1968. On August 5 following the chief executive officer at the Bordentown institution requested authority to transfer defendant to the State Prison, noting that the reformatory parole had been revoked on March 13, 1968 and that two years and eight months of the reformatory sentence remained to be served. The head of the Division of Correction and Parole, in regular course, approved the transfer and requested the Commissioner of Institutions and Agencies to enter an OTder of transfer. Ho did so, as authorized by N. J. S. A. 30:4-85.

One year later defendant filed his petition for post-conviction relief, claiming there had been a violation of N. J. S. A. 30:4-148. That statute provides that courts, in sentencing to the reformatory, shall not fix the duration of sentence, but the time which any person shall serve in the reformatory or on parole shall not in any case exceed five years or the maximum term provided by law for the crime for which the prisoner was convicted and sentenced, where such maximum is less than five years. Further, the term may be terminated by the reformatory board of managers in accordance with rules and regulations formally adopted. The same judge who had accepted defendant’s plea and imposed the State Prison sentences treated the petition as one for reconsideration of sentence and denied the application. This appeal ensued, and we granted the Commissioner of Institutions and Agencies leave to intervene.

Defendant’s main argument is that the .Bordentown Beformatory sentence remaining to be served should run concurrently with the State Prison sentences. This argument is divided into two parts, the first dealing with the Commissioner’s power under N. J. S. A. 30:4-85, and the second with the legislative philosophy of rehabilitation and what the judiciary’s attitude toward it should be.

N. J. S. A. 30:4-85 provides that “Any inmate of any correctional institution * * * may be transferred to any other such correctional institution by order of the commissioner directing such transfer, either upon the application of the chief executive officer or upon the initiative of the commissioner.” The statute further provides that any inmate of a correctional institution for males, of the age of 18, may be transferred to the State Prison if it shall appear to the satisfaction of the Commissioner after recommendation by a special classification review board that such inmate cannot properly be confined in such institution and that his transfer will operate for the general benefit and welfare of the inmate population of the institution from which he is to be transferred.

Defendant’s transfer was regular in all respects. The Bordentown chief executive officer had requested it, the Division of Correction and Parole had approved it, and the Commissioner, acting well within the discretionary authority given him by the statute, entered a proper order.

Although defendant’s first conviction for armed robbery could have resulted in a State Prison sentence, a reformatory sentence under N. J. S. A. 30:4r-148 was imposed, apparently in the hope that the less severe confinement would result in a measure of rehabilitation. That hope was not realized, for upon being paroled on December 15, 1967 after serving a little more than two years at the reformatory, defendant within less than a month and on January 10 joined with two others to again commit armed robbery. The sentencing judge this time wisely determined that a reformatory sentence was not appropriate, and accordingly imposed the concurrent State Prison sentences referred to earlier in this opinion.

Defendant claims that the transfer will substantially affect his rights: if he is kept in State Prison to serve not only Ills most recent sentences but the balance of the reformatory term, any possible future parole will be entirely at the discretion of the State Parole Board. He insists that parole jurisdiction should be shared by the reformatory board of managers as well as by the State Parole Board, the former operating in the case of the reformatory sentence remaining to be served and the latter in the ease of the State Prison sentences. This argument is without merit. Having requested the transfer which the Commissioner approved, the reformatory board of managers gave up all further jurisdiction over defendant. Defendant had invited the transfer by his own anti-social action almost immediately after being released on parole.

Under the second aspect of the main argument defendant contends that N. J. S. A. 30:4-123.41 requires that the State Prison authorities treat the balance of the reformatory sentence as concurrent with the State Prison sentence and, further, concurrency is required if rehabilitation be the aim. The applicability of that section escapes us. The immediately preceding section, N. J. S. A. 30 :4-123.40, authorizes the State Parole Board to release on parole any prisoner confined in the State Prison serving an indeterminate sentence, having been transferred thereto from a reformatory to which he was originally sentenced and committed. N. J. S. A. 30:4-123.41 states that such release upon parole shall be accomplished in exactly the same manner as in the case of a prisoner serving an indeterminate reformatory sentence, and in accordance with the rules and regulations prescribed by the State Parole Board.

The real question here, of course, is not what the latter statute provides, but rather defendant’s claim that the balance of time remaining on Ms reformatory sentence should be served concurrently with the sentences imposed for the crimes he committed while on parole. Our law is to the contrary.

When defendant was released from the Bordentown Beformatory he accepted certain conditions attached to the parole. Condition No. 2 stated that if he violated any of the conditions, his parole might be revoked and, in the discretion of the board of managers, defendant be required to serve the balance of time remaining on his sentence as of the date of release, without allowance for time spent on parole prior to its revocation. Condition No. 4 was that defendant obey all laws. Consistent with these conditions the Borden-town board of managers revoked defendant’s parole and directed that he serve the remaining two years and eight months of his reformatory sentence after he had served the State Prison sentences. The effect of the Commissioner’s order of transfer was that all jurisdiction of the reformatory board of managers ceased, including the right to parole, and the State Parole Board took over jurisdiction under N. J. S. A. 30:4-123.40.

The claim that N. J. S. A. 30 :4-123.41 requires that the balance of time remaining on defendant’s reformatory sentence be served concurrently with the sentence imposed for the armed robberies committed while on parole runs contrary to our holding in Chenachowicz v. State, 39 N. J. Super. 571 (1956), aff’d 22 N. J. 83 (1956), cert. den. 352 U. S. 897, 77 S. Ct. 136, 1 L. Ed. 2d 89 (1957). We there held that when a parolee committed a crime while on parole and by reason thereof his parole was revoked, the balance of the term remaining on his parole sentence was to be served after he had served the sentence imposed for the crime he had subsequently committed. By accepting the conditions contained in the parole granted from his reformatory sentence, defendant knew that if he was found guilty of any violation of law while on parole, the reformatory board of managers could in its discretion direct that he serve out the balance of time remaining on his reformatory sentence. They so directed when they revoked his parole.

In State v. Grant, 102 N. J. Super. 164, 170 (1968), we held that if the court imposing sentence for a crime committed on parole desired to have that sentence run concurrently with the balance of parole time owing, the sentencing judge had legal authority to so direct, and the State Prison officials would be bound despite the language of N. J. S. A. 30:4-123.27. However, absent such direction by the sentencing judge, the sentence imposed by him was to be deemed to he served consecutive to service of the incomplete sentence on which parole was previously granted. (At 171)

(N. J. S. A. 30:4-123.27 provides that if a person is confined in an institution other than that from which he was originally paroled and is there serving a sentence for a crime committed after his parole, the board of managers of the institution from which he was paroled could issue and send its warrant to the chief executive officer of the institution where the prisoner was confined, and such warrant would serve as sufficient authority to detain the prisoner and to cause his retaking to and reimprisonment in the institution from which he was originally paroled.)

The judge who sentenced defendant to State Prison did not state that the sentence was to run concurrently with the balance of reformatory parole time still owing. At the post-conviction hearing he indicated that at the time he imposed the original State Prison sentences he had not been aware that defendant was on parole — actually, the fact that defendant was on parole was clearly stated at the time defendant pleaded guilty — hut that had he known it, the sentences would have been the same, i. they would not have been made to run concurrently with the balance of the reformatory sentence. In light of defendant’s criminal record, we find no abuse of discretion on the part of the sentencing judge in not directing that the reformatory and State Prison sentences run concurrently.

The Commissioner’s brief argues that defendant’s challenge to the propriety of transferring the balance of reformatory time to the State Prison should have been pursued under R. 2:2-3(a) (2), which requires that an appeal be taken to the Appellate Division to review final decisions or actions of any state administrative agency or officer, rather than by an application for post-conviction relief and an appeal from its denial. We have passed the point to deal with the merits.

Defendant will have to serve his sentence for the armed robberies committed while on parole, following which he will serve the remainder of his reformatory term — all in the State Prison to which he has been transferred. Any application for parole will have to be addressed to the State Parole Board, the reformatory board of managers having closed its file on defendant.

Affirmed.


source: Caselaw Access Project

author: Kolovsky, J. A. D. Conford, P. J. A. D.

license: Public Domain

text:
    STATE OF NEW JERSEY, PLAINTIFF-APPELLANT, v. WAYNE EDWARD GAMMONS, DEFENDANT-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued January 11, 1971
    Decided February 23, 1971.

      Before Judges Contoed, Kolovsky and Caetok.

      Mr. Klson P. Kendall, Assistant Prosecutor, argued the cause for appellant {Mr. Leo Kaplowitz, Union County Prosecutor, attorney; Mr. Arthur J. Timms, Assistant Prosecutor, on the brief).
    Respondent did not file a brief.
   The opinion of the court was delivered by

Kolovsky, J. A. D.

The State appeals, upon leave granted, from an order suppressing evidence, a revolver found by the police in the glove compartment of defendant’s automobile.

The trial court ruled that the police had conducted an “unreasonable search and seizure.” However, we conclude that' in the factual circumstances of this case, as found by the trial court, the police officers’ procedures and their search of defendant’s automobile were justified and reasonable. We therefore reverse.

In making its findings of fact, the trial court gave full credence to- the testimony of the police officers involved, Officers Hall and Machnik.

On the day in question, defendant’s Cadillac automobile collided with a Union Township police car. Officer Hall and another officer were dispatched to the scene to investigate the accident. By the time Hall arrived defendant had al-. ready been removed to a hospital. After investigating the accident, obtaining the names of witnesses and drawing a diagram of the scene, Hall went to the hospital and spoke to defendant. Although defendant said that both his driver’s license and the registration certificate were in his wallet, only the driver’s license was there. Hall then telephoned police headquarters and told the dispatcher, Officer Machnik, that defendant did not have the registration certificate and that “possibly” it was still in the car.

Machnik informed his superior officer and eventually suggested that the police towing service, which was taking defendant’s disabled ear to a service station, first bring the car to police headquarters. This was done. Machnik entered the car, removed the keys from the ignition and opened the locked glove compartment intending only, as the court found, to look for the registration certificate. The certificate was not there but the glove compartment did contain a fully loaded five-shot revolver. Shortly thereafter Officer Donnelly, who had accompanied Machnik to the car, found the registration certificate among some debris on the car floor.

In our view, the action taken by the police officers was proper and there is no basis for characterizing their search as unreasonable. “It is unreasonableness which is the Fourth Amendment’s standard.” Wyman v. James, 400 U. S. 309 91 S. Ct. 381, 386, 27 L. Ed. 2d 408 (1971).

The police officers were obligated to investigate the accident and submit a written report with respect thereto. N. J. S. A. 39:4-131. That obligation required, among other things, that they procure and examine not only the licenses issued to the drivers of the vehicles but also the registrations of the automobiles involved. By law, N. J. S. A. 39:3-29, the driver’s license and registration certificate are required to be in the possession of the driver at all times and to be exhibited upon request to a police officer so that he may determine, among other things, the “correctness of the registration certificate, as it relates to the registration number and numbeT plates of the motor vehicle for which it was issued.”

The validity of the statutory requirement is evident. Indeed, it has been held that the police practice of establishing roadblocks or other temporary stoppage of automobiles on the highway “for license and motor vehicle registration checks [is not] an illegal invasion of the motorists right of privacy, contrary to the provisions of the Fourth Amendment of the United States Constitution and Art. I, par. 7 of the Constitution of New Jersey” and that such practice “represents a valid exercise of the State’s police power in furtherance of the State’s legitimate interest.” State v. Kabayama, 98 N. J. Super. 85, 87-88 (App. Div. 1967), aff’d o. b. 52 N. J. 507 (1968).

When defendant could not produce his registration certificate at the hospital, Officer Hall made the perfectly logical deduction that it might still be in the damaged car which the police had the right to search for evidence of ownership in view of defendant’s failure to produce the certificate. State v. Boykins, 50 N. J. 73, 77 (1967) ; People v. Prochnau, 251 Cal. App. 2d 22, 59 Cal. Rptr. 265, 270 (D. Ct. App. 1967).

Machnik, in turn, looked for the registration in the glove compartment, the logical place to look. See People v. Pro chnau, supra. There was nothing improper or unreasonable in his doing so.

The dissenting opinion emphasizes defendant’s testimony that he had, at the scene of the accident, shown an unidentified police officer both his driver’s license and the registration certificate. The court made no finding as to the credibility of that testimony. And, contrary to what is stated in the dissenting opinion, we find nothing in the report of Officer Uandolfi, admitted into evidence as a joint exhibit because Landolfi was hospitalized, which tends to corroborate defendant.

Further, even if defendant’s testimony be accepted as true, it in no wise impairs the reasonableness of the conduct of Officers Hall, Machnik and Donnelly. There is no evidence that they knew of the alleged prior exhibition of the registration certificate to another police officer. Indeed, on cross-examination by defense counsel, both Officers Hall and Machnik denied that they had been told by other police officers that defendant had shown them the registration certificate at the scene of the accident.

The order suppressing evidence is reversed.

Conford, P. J. A. D.

(dissenting) I am of the view that the trial judge was right in holding the search of the glove compartment of defendant’s automobile unconstitutional and suppressing the product of that search. A fuller look at the facts will be helpful.

This incident arose out of a garden-variety automobile accident between defendant’s vehicle and a local police patrol car in which the police-driver, as well as defendant and his passenger, were injured. All the injured were removed to the hospital. Defendant sustained head injuries and was obviously in a stunned condition immediately after the accident.

A total of eight or nine police officers was involved in the ensuing investigation at the scene. At least two of them (not Officer Hall, who arrived after defendant was removed to the hospital) interrogated defendant at the scene. According to defendant, he was interrogated by two officers and asked for and showed at least one of them both his driver’s license and the registration certificate before he was removed from the car. This was not controverted by any proof of the State, and tends to be corroborated by the report of Officer Landolfi, who was there before defendant was removed, and which shows (a) that he “checked” defendant’s vehicle; (b) that Officer Bndney also went to defendant’s car, and (c) defendant’s name and address as well as the vehicle plate number. The probability that defendant showed the certificate at the scene is also supported by the fact that it was later found by the police on the floor of the car. Defendant said he normally kept the certificate on the sun-visor. (He may in his dazed condition have dropped it on the floor inadvertently after showing it to a police officer or it may have fallen there subsequently in the course of removal of the vehicle from the scene.)

There is not the remotest suggestion in this case that the police suspected defendant of wrongdoing of any nature, traffic or otherwise — least of all stealing the car he was driving. The collective activity of Officers Hall, Machnik and Donnelly was for the purpose only of obtaining information needed to fill out and file with the Division of Motor Vehicles the accident report required under N. J. S. A. 39:4—131. Such a report is designed to assist the Division in performance of its administrative functions in relation to financial security (see N. J. S. A. 39:4—130) and compliance by drivers and owners with various requirements of the motor vehicle laws. Conceding that information as to the serial number and other details of the car shown on the registration certificate is called for by the form, it is evident that that information could have readily been supplied by the Division of Motor Vehicles from its own records, given the name of the owner, his address, the license plate number and the general description of the car, all of which were known to the police.

Officer Hall did not ask defendant for permission to look for the certificate in the car or to send someone out to the car for it. Defendant had not committed any violation of the law in not having the certificate on his person at the hospital. It was only necessary that he have it in his possession while driving a car, N. J. S. A. 39:3-29; and in this case it is certain that he had had such possession while driving, and it is highly probable that one of the investigating officers at the scene knew that fact.

The stark issue presented is whether the interest of a citizen in freedom from warrantless intrusion into a constitutionally protected area is to be sacrificed to the interest of police officers in the expeditious performance of an administrative function related to the operation and financial security of operators and owners of motor vehicles, and totally irrelevant, in the particular circumstances, to any investigation or remote suspicion of crime or even of a traffic violation. (“It was just an accident,” testified Officer Hall.) In my view, there can be only one correct answer to the question.

In Camara v. Municipal Court, 387 U. S. 523, 87 S. Ct. 1727, 18 L. Ed. 2d 930 (1967), and See v. Seattle, 387 U. S. 541, 87 S. Ct. 1737, 18 L. Ed. 2d 943 (1967), the Supreme Court held the basic Fourth Amendment requirement of a warrant applicable, and issuance of a warrant necessary, to justify entry into constitutionally protected premises, even where the entry was for administrative inspection purposes, and not to seek out evidence of commission of crime. Eespending to an argument like that made here by the State — that the inspection was not done to find “evidence of criminal action” — the court responded, in Camara:

Since the inspector does not ask that the property owner open his doors to a search for “evidence of criminal action” which may be used to secure the owner’s criminal conviction, historic interests of “self-protection” jointly protected by the Fourth and Fifth Amendments are said not to be involved, but only the less intense “right to be secure from intrusion into personal privacy.” * * *
We may agree that a routine inspection of the physical condition of private property is a less hostile intrusion than the typical policeman’s search for the fruits and instrumentalities of crime. * * * But we cannot agree that the Fourth Amendment interests at stake in these inspection cases are merely “peripheral.” It is purely/ anomalous to say that the individual and his private property are fully protected by the Fourth Amendment onhj when the individual is suspected of criminal behavior. [387 U. S. at 530, 87 S. Ct. at 1731] ; (emphasis added.)

Thus the innocuousness of the officers’ purpose in unlocking the glove compartment and searching it is irrevelant. The high constitutional value of security of one’s “effects” (Fourth Amendment) from warrantless intrusion cannot be so simply depreciated. “Eyes may not be closed to the infringement o£ a constitutional right because the officer was well-meaning or the transgression is deemed slight; and erosions must at all times be carefully guarded against lest they lead to the destruction of the right itself.” Jacobs, J., in State v. Maori, 39 N. J. 250, 265 (1963).

The court’s reliance on State v. Boykins, 50 N. J. 73, 77 (1967), does not support its decision. The dictum there that if an operator is unable to produce proof of registration, the officer may search the car for evidence of ownership, is here inapplicable as defendant was not operating the car when asked for the certificate and since the suspicion that would arguably be engendered by such default by an operator is not present where, as here, the owner is asked for the registration certificate while on a hospital bed after an accident. As noted above, the statute requires production of the certificate only by one then operating a vehicle. Moreover, the evidence here negates any notion that the officers had any doubt or suspicion as to defendant’s ownership.

While Boykins, supra, and other of our New Jersey decisions cogently emphasize the care with which search questions involving moving vehicles as distinguished from fixed premises must be approached, it remains the law that, except as limited by considerations pertinent to the mobility of a motor vehicle in relation to its potential use for crime, Boykins, passim, automobiles represent a substantial category of normal repository of personal effects of the citizenry at large, and, generally speaking, are and should he within the protection of the Fourth Amendment. See Dyke v. Taylor Implement Mfg. Co., 391 U. S. 316, 331-333, 88 S. Ct. 1472, 20 L. Ed. 3d 538 (1968); State v. Wade, 89 N. J. Super. 139, 157 (App. Div. 1965). No New Jersey case says the opposite.

The most recent and comprehensive authoritative consideration of the constitutional law of search and seizure in relation to automobiles is the opinion in Chambers v. Maroney, 399 U. S. 42, 90 S. Ct. 1975, 36 L. Ed. 2d 419 (1970). The United States Supreme Court there reviewed the cases since Carroll v. United States, 367 U. S. 132, 45 S. Ct. 380, 69 L. Ed. 543 (1935), leading to the now solid doctrine that because of its mobility a motor vehicle may generally be searched without a warrant, but only on probable cause to believe the car contains objects including evidence which the police are entitled to seize (399 U. S. at 48, 90 S. Ct. 1975). Yet, even in stating that broad category of exception from the warrant requirement, the court took the precaution of saying (at 50, 90 S. Ct. at 1980) : “Neither Carroll, supra, nor other cases in this Court require or suggest that in every conceivable circumstance the search of an auto even with probable cause may be made without the extra protection for privacy which a warrant affords.” The Chambers court held that a warrantless search of a car which would there have been justified by strong probable cause at the time the car was stopped on the highway could as well be made at the police station to which the car had been removed for convenience after being stopped. The court found “little to choose in terms of practical consequences” between the two search situations thus compared (at 52, 90 S. Ct. 1975). Seven members of the court joined in the opinion on the search validity question. Mr. Justice Harlan, alone, dissented (at 55, 90 S. Ct. 1975), finding the search invalid because the car was immobile at the police station and because obtaining a search warrant was therefore practicable (at 61-65, 90 S. Ct. 1975).

We thus have a contemporaneous expression of the Hnited States Supreme Court, in which all the voting justices joined to the extent of reaffirming previously stated minimum requirements of probable cause for a warrantless search of an automobile. In my view, that authoritative determination supersedes any previous inconsistent eases and precludes any holding that, without regard to its guidelines, and without coming within one of the other established exceptions to the requirement of a warrant, a warrantless search of an automobile is valid merely because “reasonable” from the ad hoc standpoint of a police officer doing his job without thought of Fourth Amendment requirements or rights of citizens to privacy in their effects. See Chimel v. California, 395 U. S. 752, 764-765, 89 S. Ct. 2034, 2041, 23 L. Ed. 2d 685 (1969), holding that “reasonableness” is to be assayed on considerations “relevant to Fourth Amendment interests,” not on “a subjective view regarding the acceptability of certain sorts of police conduct.”

The United States Supreme Court has on at least three separate occasions during the last few years emphasized that basically “reasonableness,” for Fourth Amendment purposes, is equatable with the obtaining of a valid search warrant “except in certain carefully defined classes of cases” (the oft-referred to “exceptions”) : Blackmun, J., in Wyman v. James, supra, 400 U. S. 309 at 316, 91 S. Ct. 381 at 385, 27 L. Ed. 2d 408; White, J., in Camara v. Municipal Court, supra, 387 U. S. at 528-529, 87 S. Ct. 1727; and Stewart, J., in Vale v. Louisiana, 399 U. S. 30, 34, 90 S. Ct. 1969, 26 L. Ed. 2d 409 (1970) ; see also State v. Macri, supra 39 N. J. at 254.

It may be suggested that in the instant case the emphasis on the need for a search warrant is irrelevant because the police had no intent to enter the glove compartment to find evidence of crime and could not have obtained a valid search warrant if they sought one. But any such observation simply underscores the absence of justification, as against preeminent Fourth Amendment values and safeguards, for the intrusion upon the privacy of defendant’s effects. That fact gains emphasis from the consideration that no important law enforcement objective would have been lost if the police had sought the information needed for the accident report in the other readily available ways mentioned above if consent for the search could not be obtained.

I think the approach and the decision of the trial court in this matter were correct, and I would sustain it.

       The force and effect of Camara and See are not weakened by Wyman v. James, 400 U. S. 309, 91 S. Ct. 381, 27 L. Ed. 2d 408 (January 12, 1971), which cites those cases as continuing authority and iterates that “* * * one’s Fourth Amendment protection subsists apart from his being suspected of criminal behavior.” That case held no unconstitutional search was involved in the refusal of a state to provide welfare benefits to a person who refuses to allow a home inspection visit required as a condition for benefits under the law. Basically the case holds there was no search involved at all, as indeed there was not, and that imposition of the condition of home visits for receipt of benefits invaded no Fourth Amendment rights. The decision and its rationale are not apposite here.

       Distinguish a case like Cooper v. California, 386 U. S. 58, 87 S. Ct. 788, 17 L. Ed. 2d 730 (1987), where, as pointed out in Dyke v. Taylor Implement Mfg. Co., supra, 391 U. S. at 221-222, 88 S. Ct. 1472, a state statute required the vehicle to be impounded pending forfeiture proceedings. Presumably, requirements of a warrant for a car search are also subject to the standard exceptions of consent, search incidental to valid arrest and emergent or necessitous circumstances.

       Where the language used, quoting from Katz v. United States, 339 U. S. 347, 357, 88 S. Ct. 507, 514, 19 L. Ed. 2d 576 (1967), was: “only in ‘a few specifically established and well-delineated’ situations.”
      “Reasonableness” is also applied as a dominant factor when the United States Supreme Court considers whether to enlarge or narrow the “exceptions” to the general prerequisite of a search warrant. See, e. g., Terry v. Ohio, 392 U. S. 1, 8-10, 88 S. Ct. 1868, 20 L. Ed. 2d 889 (1968) (the “stop and frisk” exception) ; Warden, Maryland Penitentiary v. Hayden, 387 U. S. 294, 298-299, 87 S. Ct. 1642, 18 L. Ed. 2d 782 (1967) (the “hot pursuit” type of exigent circumstance exception) ; Chimel v. California, supra, 395 U. S. at 764-765, 89 S. Ct. 2034 (search incident to arrest).


author: Heine, J. S. C.

text:
    JOAN HOLMES, PLAINTIFF, v. EVERETT L. RUSS, SR., AND ROBERT L. HOLMES, DEFENDANTS.
    Superior Court of New Jersey Law Division
    Decided February 16, 1971.

      Mr. Arnold N. Fishman appeared for plaintiff. (Messrs. Weinberg and Fishman, attorneys.)

      Mr. Arthur Montano appeared for defendant, Holmes. (Messrs. Xisselman, Devine, D'eighan ds Montano, attorneys.)

      Mr. J. Bobert McOroarty appeared for defendant, Russ. (Messrs. Orlando and Orlando, attorneys).
   Heine, J. S. C.

This case involves the availability of the statute of limitations as a defense to an interspousal suit for personal injuries.

Plaintiff, Joan Holmes, was a passenger in an automobile driven by her husband, Robert L. Holmes, which collided with an automobile operated by Everett L. Russ, Sr., on December 22, 1967. As a result of this collision, plaintiff sustained personal injuries and on January 24, 1968, instituted suit against Euss. An action for property damage was commenced on behalf of Robert L. Holmes by his collision insurance carrier against Russ on August 19, 1968, in the Camden County District Court. These actions were consolidated on January 17, 1969 for trial. Thereafter, on the basis of the decision in Immer v. Risko, 56 N. J. 482 (1970), plaintiff sought leave and was granted permission to file an amended complaint including her husband as a defendant. The amended complaint was filed on September 23, 1970. The answer filed on behalf of the husband denied negligence and raised the statute of limitations as a separate defense. At the trial on the issue of liability only the jury returned a verdict against both defendants. The husband then filed a motion to dismiss the complaint on the ground that the plaintiff’s action against him was barred by the statute of limitations.

Prior to Immer v. Rislco, supra, which abolished the inter-spousal immunity doctrine as it applied to automobile negligence actions, a wife could not sue her husband in tort for his wrongful acts toward her and a joint tortfeasor was precluded from seeking contribution from the erring spouse. Kennedy v. Camp, 14 N. J. 390 (1954). The recent opinion by Judge Waugh in Barrow v. Hanover Township and the County of Morris, 112 N. J. Super. 396 (Law Div. 1970), holding that Immer v. Rislco, supra, should be applied retrospectively, eradicates the interspousal incapacity to sue only as it applies to actions accrued after July 10, 1968. A tortfeasor acting prior to July 10, 1968 would still possess the defense of the two-year statute of limitations.

N. J. S. 2A:14—2 provides:

Every action at law for an injury to the person caused by the wrongful act, neglect or default of any person within this state shall be commenced within 2 years next after the cause of any such action shall have accrued.

A statute of limitation is one of repose. Miller v. Board of Chosen Freeholders, Hudson County, 10 N. J. 398, 403 (1952). It has always been held that'when a right of action has become barred under existing laws, the right to rely upon the statutory defense is a vested right. Thorpe v. Corwin, 20 N. J. L. 311, 316 (Sup. Ct. 1844); Ryder v. Wilson’s Ex’rs, 41 N. J. L. 9 (Sup. Ct. 1879); Moore v. State, 43 N. J. L. 203 (E. & A. 1881); State by Parsons v. Standard Oil Co., 5 N. J. 281 (1950), affirmed 341 U. S. 428, 71 S. Ct. 822, 95 L. Ed, 1078 (1951); Miller v. Board of Chosen Freeholders, Hudson County, supra; Burns v. Bethlehem Steel Co., 20 N. J. 37 (1955); Rex. v. Hunter, 26 N. J. 489 (1958).

Once the right to rely upon the statutory defense becomes vested it cannot be rescinded or disturbed by subsequent legislation. Ryder v. Wilson’s Ex’rs, supra, 41 N. J. L. at p. 11; Moore v. State, supra, 43 N. J. L. at p. 206-208; State v. Standard Oil Co., supra, 5 N. J. at p. 293-294; Burns v. Bethlehem Steel Co., supra, 20 N. J. at p. 42. If the vested right may not be rescinded, abrogated or impaired by subsequent legislation it may not be done by judicial decision. Markey v. Robert Hall Clothes of Paterson, 27 N. J. Super. 417, 421 (Cty. Ct. 1953).

Plaintiff argues that Immer v. Risko, supra, created a cause of action and therefore the statute of limitations commenced to run from July 10, 1970, the date of that decision. This argument is specious. Immer v. Risko, supra, made no attempt to deal with, let alone destroy, the defense of the statute of limitations. It did not revive any stale causes of action. It merely struck down a previously admitted defense of interspousal immunity. The cause of action was always there from its date of accrual, which of course, was December 22, 1967, the date of the collision.

Plaintiff does.not argue that her husband was made a defendant tO' her action before the expiration of the two-year period of limitations. Bather, she asserts that as a result of the consolidation of the cases, which was allowed on January 17, 1969, her husband became a “party” to her action and was thereby placed on notice of any and all possible claims she might have against him.

In answer and in support of liis motion, defendant Holmes argues that the County district court suit was a subrogation action brought by his collision insurance carrier; that he was merely a nominal party to that action and at no time controlled the litigation therein; that the first true notice of the personal injury claim against him was that of September 23, 1970; and that the fact that he was a nominal party to the consolidated action should not bar his right to dismissal in the prime action, citing Reardon v. Allen, 88 N. J. Super. 560 (Law Div. 1965), and the cases therein cited.

The court agrees. If the property damage subrogation action cannot be used to defeat a plaintiff’s more serious claim for personal injuries, then the mere institution of such suit should not be used to defeat the subrogee’s right to assert a vested defense to a serious claim for personal injuries.

The question remaining is whether the order for consolidation of January 17, 1969, wherein the cases of plaintiff and her husband against Buss were joined for trial, afforded defendant Holmes sufficient notice of plaintiff’s claim against him so as to avoid the statutory bar.

A review of the history, operation and instruction of R-4:38 “(Consolidation: Separate trials)” reveals that the object of the rule is to foster the grand design to litigate entire controversies as a unit. Ajamian v. Schlanger, 14 N. J. 483, 485 (1954); N. J. Highway Authority v. Renner, 18 N. J. 485, 492 (1955); Korff v. G and G Corp., 21 N. J. 558, 567 (1956); Ritepoint Co. v. Fell, 6 N. J. Super. 219, 222 (App. Div. 1950); Hnath v. Hnath, 47 N. J. Super. 461, 469 (App. Div. 1957). The gains of this procedure are the avoidance of multiplicity of litigation, duplication of judicial labor, inconsistent judgments, delay and expense. Garrou v. Teaneck Tryon Co., 11 N. J. 294, 304 (1953); Robertson v. Biernacka, 9 N. J. Super. 591, 595 (Ch. Div. 1950); Judson v. Peoples Bank & Trust Co. of Westfield, 17 N. J. Super. 143, 145 (Ch. Div. 1951); 2 Schnitzer and Wildstein, N. J. Rules Serv. AIV 1495 to 1499. Howhere is it asserted that consolidation was meant to be a substitute for formal notice of a claim against a party. The opinions in Lawlor v. Cloverleaf Memorial Park, Inc., 56 N. J. 326 (1970); Greco v. Valley Fair Enterprises, 105 N. J. Super. 582 (App. Div. 1969); Ioannou v. Ivy Hill Pk. Section Four, Inc. v. Otis Elevator Company, 112 N. J. Super. 28 (Law Div. 1970), and DeSisto v. Linden, 80 N. J. Super. 398 (Law Div. 1963), lead to the conclusion that the consolidated action by no means apprised Robert Holmes, who was merely the nominal party to the property damage claim, that he was to be made a defendant in his wife’s action for personal injuries, where, the only assertion of his liability was defendant’s answering allegation that Holmes was contributorily negligent and where at the time of consolidation the doctrine of inter-spousal immunity was accorded full force and effect.

In Lawlor, Greco and DeSisto, supra, the third-party defendants, whom the plaintiffs were seeking to make direct defendants, had been served with the third-party complaint and were at least third-party defendants within the two-year statutory period. They had actual, formal notice within that period of the nature and existence of the litigation and that they were parties defendant thereto. A timely original pleading, i. e., the third-party complaint, had been filed to which the amended complaint, though filed beyond the statutory period, could relate back. Ho third-party complaint ever issued against Robert Holmes in the case before this court. And while it is not meant to be asserted that Holmes was unaware of the nature and existence of his wife’s suit against Russ, the fact that his only formal notice of the action being brought against him was that filed on September 23, 1970, long after the statutory period had run, cannot be avoided.

The requirement of “formal” notice was recognized in Lawlor, supra:

When the third-party complaint was filed, the Hospital and the Doctor vrere made formally aware that they were being charged with negligence in the care of Mrs. Lawlor and that they were being sought to be held liable for the damages suffered by Mrs. Lawlor as the result of their negligence. From that point on they could not lie in repose but were called upon to prepare and defend. [56 N. J. at p. 343]

The notice requirement was of prime concern to the court in Ioannou v. Ivy Hill Pk. Section Four, Inc., supra, and it went to great lengths to find that the requirement of notice was satisfied holding (at 112 N. J. Super. p. 33) that “neither actual service nor such [actual] filing within the statutory period are necessary and * * * the making of the motion to serve the third-party complaint within the two year period renders the Lawlor doctrine applicable and avoids the bar of the statute of limitations, even though the third-party defendants may have actually been unaware of the plaintiffs’ action during the statutory period.” But, the court, (112 N. J. Super. at p. 36) was mindful of the fact that “(t)he important thing was that the third-party action had been commenced, as far as the third-party defendant was concerned, prior to the expiration of the statutory period, in accordance with our rules, and that there was an original pleading, i. e., the third-party complaint, which antedated the running of the statute, to which there was relation back.” In the case at hand the motion for an order permitting plaintiff to file and serve an amended complaint including her husband as a defendant was filed on July 14, 1970, again far beyond the statutory period.

The motion to dismiss the complaint as to the defendant Holmes is granted.


author: McKenzie, J. D. C.

text:
    ROBERT TOKER t/a BUDGET ASSOCIATES OF NEW JERSEY, PLAINTIFF v. WILLIAM WESTERMAN AND LISA WESTERMAN, DEFENDANTS.
    District Court Union County
    Decided November 2, 1970.

      Mr. Joseph Samson, for plaintiff (Messrs. Heilman & Samson, attorneys).

      Mr. Robert Brotman of the Union County Legal Services Corp., attorney for the defendants.
   McKenzie, J. D. C.

On November 7, 1966 plaintiff’s assignor, People’s Poods of New Jersey, sold a refrigerator-freezer to defendant under a retail installment contract. The cash price for the unit was $899.98. With sales tax, group life insurance and time price differential the total amount was $1,229.76, to be paid in 36 monthly installments of $34.16 each.

Defendants made payments over a period of time, but resist payment of the balance in the sum of $573.89, claiming that the unit was so greatly over-priced as to make the contract unenforceable under N. J. S. 12A:2-302.

Unconscionable Contract or Clause.
(1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.
(2) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination.

At the trial defendant presented an appliance dealer who had inspected the refrigerator-freezer in question. He stated that the same had a capacity of approximately 18 cubic feet,was not frost-free, and, with no special features, was known in the trade as a stripped unit. He' estimated the reasonable retail price at the time of sale as between $350 and $400. He testified that the most expensive refrigerator-freezer of comparable size, with such additional features as butter temperature control and frost-free operation, at that time sold for $500.

The questions presented are simply whether or not the contract price for the unit is unconscionable, and, if so, whether the provisions of the cited section of the Uniform Commercial Code apply.

The Code does not define the term “unconscionable.” Elsewhere an unconscionable contract has been defined as:

* * * one such as no man in Ms senses and not under a delusion would make on the one hand, and as no honest and fair man would accept on the other. To what extent inadequacy of consideration must go to make a contract unconscionable is difficult to state, except in abstract terms, which gives but little practical help. It has been said that there must be an inequality so strong, gross, and manifest that it must be impossible to state it to a man of common sense without producing an exclamation at the inequality of it. 43 Words and Phrases p. 143.

It is apparent that the court should not allow the statutory provision in question to be used as a manipulative tool to allow a purchaser to avoid the consequences of a bargain which he later finds to be unfavorable. Suffice it to say that in the instant case the court finds as shocking, and therefore unconscionable, the sale of goods for approximately %y2 times their reasonable retail value. This is particularly so where, as here, the sale was made by a door-to-door salesman for a dealer who therefore would have less overhead expense than a dealer maintaining a store or showroom. In addition, it appeared that defendants during the course of the payments they made to plaintiff were obliged to seek welfare assistance.

A flagrantly excessive purchase price was held to be within the intendment of N. J. S. 12A:2-302 in the case of Toker v. Perl, 103 N. J. Super. 500 (Law Div. 1966). There the same dealer as in the present ease sold a refrigerator-freezer to defendant for a purchase price of $799.95. The court found that the maximum value of the unit was $300 and held the excessive price to be unconscionable. The claim for the balance of the purchase price was therefore held to be unenforceable under the statute. On appeal, the Appellate Division affirmed. Toker v. Perl, 108 N. J. Super. 129, (1969). However, defendants there charged, and the trial court found, that the dealer had fraudulently procured defendant’s signatures to the contract. The affirmance of the Appellate Division was on this ground alone, the court specifically expressing no opinion on the finding of the trial court that the excessive price of the unit also rendered the contract unenforceable.

There appear to bo no other cases in New Jersey on this precise point and the reported eases in other states are sparse. However, it would also appear that those states which have considered this question have uniformly hold that the purchase price alone may be found to be unconscionable, therefore bringing the statutory provision into play. See Froslifresh Corp. v. Reynoso, 52 Misc. 2d 26, 274 N. Y. S. 2d 757 (Sup. Ct. 1966), rev’d on other grounds, 54 Misc. 2d 119, 281 N. Y. S. 2d 964 (App. Div. 1967); Central Budget Corp. v. Sanchez, 53 Misc. 2d 620, 279 N. Y. S. 2d 391, 392 (Sup. Ct. 1967); American Home Improvement, Inc. v. MacIver, 105 N. H. 435, 201 A. 2d 886 (Sup. Ct. 1964). Compare Starr Credit Corp. v. Molina, 59 Misc. 2d 290, 298 N. Y. S. 2d 570 (Civ. Ct. 1969) in which the court refused to hold the purchase price of the home freezer to be unconscionable where there was no evidence offered to show the true market price of the item.

In Frostifresh Corp. v. Reynoso, supra, the Appellate Court upheld the finding of unconscionability where a home freezer costing the plaintiff $348 was sold to a welfare recipient for a total price, including time-priee-differential, of $1,145.88. However, it also reversed the lower court in permitting the seller to recover only the cost of the item, holding that the seller was entitled to the reasonable profit. These decisions are clearly in the mainstream of current judicial concepts in the area of consumer goods, as set forth by our Supreme Court:

* * * Although courts continue to recognize that persons should not be unnecessarily restricted in their freedom to contract, there is an increasing willingness to invalidate unconscionable contractual provisions which clearly tend to injure the public in some way. [Ellsworth Dobbs, Inc. v. Johnson, 50 N. J. 528 (1967)]

In the instant case the court finds that in receiving a total of $655.85 plaintiff and his assignor have received a reasonable sum. The payment of the balance of the purchase price will therefore not be enforced. Judgment for defendants.


author: Halpern, J. A. D.

text:
    RAYMOND J. DAVIS, PLAINTIFF, v. ROBERT J. RODDIE, DEFENDANT AND THIRD PARTY PLAINTIFF-RESPONDENT, v. NEW JERSEY MANUFACTURERS INSURANCE COMPANY, THIRD PARTY DEFENDANT-APPELLANT AND FOURTH PARTY PLAINTIFF, v. BROADWAY BANK AND TRUST COMPANY, FOURTH PARTY DEFENDANT.
    Superior Court of New Jersey Appellate Division
    Argued February 17, 1971
    Decided March 1, 1971.

      Before Judges Kilkenny, Halpern and Lane.

      Mr. Bichard B. Gatenacci argued the cause for Third Party defendant-appellant, Kew Jersey Manufacturers Insurance Company, (Messrs. Hughes, McFlroy, Gonnell, Foley & Geiser, attorneys; Mr. Gatenacci of counsel and on the brief).

      Mr. Jonathan Kohn argued the cause for defendant and Third Party plaintiff-respondent, Robert J. Roddie, (Mr. James J). Butler, attorney: Mr. Kolm of counsel and on the brief).
   The opinion of the court was delivered by

Halpern, J. A. D.

Eor convenience, the defendant and third-party plaintiff-respondent will he referred to as “Rod-die”; the third-party defendant-appellant as “N. J. M.”; and the fourth-party defendant as “bank.” N. J. M. appeals from a judgment against it in favor of Roddie on the third-party complaint. The facts are as follows:

Roddie, an assigned risk under the Motor Vehicle Security-Responsibility Law (N. J. S. A. 39:6-23 et seq.), obtained auto liability insurance from N. J. M. through Clarke, an insurance broker. This enabled him to own and drive a car in New Jersey. He borrowed $251.67 from the hank to pay the premium on the policy. Simultaneously with the issuance of the policy on January 27, 1967, Roddie executed a note and financing agreement with the bank which is recognized and referred to in the policy issued to Roddie by N. J. M. as will later appear.

The note agreement required Roddie to make eight monthly payments to the hank of $23.86 commencing on February 27, 1967. The note agreement authorized the hank to pay N. J. M. the full premium due, and in the event of Roddie’s default it provided:

4. Default by tbe undersigned insured in the payment of any installment hereunder when due shall render the whole unpaid balance of principal hereof immediately due and payable, without notice, and if default continues for ten (10) days thereafter, shall constitute an election hy the undersigned insured to cancel said policy. It is agreed that, in such event, the undersigned insured will promptly return the policy and the payee is hereby authorized to notify the insurance company of such cancellation, and to collect and receive from such company ail returned or unearned premium for application as above mentioned. It is also agreed that the undersigned insured will pay all cancellation fees.
5. To effectuate the foregoing, said insurance company is hereby authorized and directed: * * *
(b) To pay any unearned premium to said payee which may become due on account of cancellation of said policy at any time by the undersigned insured, the payee or the insurance company; * * *.

The relevant portions of the insurance policy provided:

14. Cancelation: This policy may be canceled by the named insured by surrender thereof to the company or any of its authorized agents or by mailing to the company written notice stating when thereafter the cancelation shall be effective. This policy may be canceled by the company by mailing to the named Insured at the address shown in this policy written notice stating when not less than ten days thereafter such cancelation shall be effective. The mailing of notice as aforesaid shall be sufficient proof of notice. The time of the surrender or the effective date and hour of cancelation stated in the notice shall become the end of the policy period. Delivery of such written notice either by the named insured or by the company shall be equivalent to mailing.
If the named insured cancels, earned premium shall be computed in accordance with the customary short rate table and procedure. If the company cancels, earned premium shall be computed pro rata. Premium adjustment may be made either at the time cancelation is effected or as soon as practicable after cancelation becomes effective, but payment or tender of unearned premium is not a condition of cancelation.

The endorsements on the policy, which were added because of the loan by the bank, provided:

It is understood and agreed that:
Item 1. All or part of the premium for this policy has been financed by the Policyholder or Named Insured (hereinafter called the Policyholder) through Broadway Bank & Trust Oo. 51 Broadway Paterson, New Jersey (hereinafter called the Lender), under conditions agreed to as between the Policyholder and said Lender.
Item 2. The Policyholder has given the Lender the authority to notify the Company to request cancellation of this policy for his failure to pay any premium loan installment, and specifically directs the Company to receive and honor any such request as though in fact made by the Policyholder to the Company.
Item 3. If the Company cancels the policy it will be with advance notice to the Policyholder and the Lender.
Item 4. In recognition of the agreement between the Policyholder and the Lender, the Company agrees that it will, upon receipt by it of a request from the Lender, cancel this policy in accordance with the policy cancellation clause and return all unearned portion of the premium to the Lender.

When Roddie failed to make his required monthly payment on March 27, 1967, the bank on April 3, 1967 mailed him a notice of default which stated in large print, among other things, “MAIL YOUR PAYMENT TODAY TO AVOID CANCELLATION OE YOUR INSURANCE.” A copy of the notice was sent to Clarke. Roddie was still in default on April 11, 1967 when the bank wrote and directed N. J. M. to cancel the policy and remit to it the unearned premium. Copies of the letter were sent to Roddie and Clarke. (Although Roddie denied receiving it, his copy of the notice was received in evidence).

On April 13, 1967 N. J. M. received the bank’s direction to cancel Rod die’s policy, and on the same day cancelled it in accordance with its undertaking in the policy. On April 26, 1967, N. J. M. notified the Director of Motor Vehicles of the cancellation pursuant to N. J. S. A. 39:6-40, and advised him the cancellation was effective as of May 8, 1967. The Director advised Roddie that his driving and registration privileges were suspended, effective May 11, 1967, because of his failure to comply with N. J. S. A. 39:6-23, et seq. The Director ordered Roddie to surrender his driver’s license and car registration certificate immediately.

On May 23, 1967 Roddie was involved in an auto accident with plaintiff Davis, which is the subject matter of the underlying suit in this case. At the time of the. accident defendant was driving without a valid license.

Roddie, by way of third-party complaint against N. J. M., sought indemnification from N. J. M. for any money judgment Davis might obtain against him, as well as Ms costs for defending the suit. N. J. M., by way of fourth-party complaint against the bank, sought indemnification from the bank in the event it was held liable to Roddie.

The court tried the issues between Roddie, N. J. M. and the bank before a jury, prior to trying the claim by Davis against Roddie. At the end of all the proofs, the court determined as a matter of law that the policy had been improperly cancelled, and that N. J. M. was required to defend the suit by Davis against Roddie, and pay any resulting money judgment. No disposition was made of N. J. M.’s claim against the bank. This appeal is by N. J. M. from the judgment entered on the court’s determination. Since no objection was raised to N. J. M.’s taking a direct appeal, rather than applying for leave to appeal, we will decide the issues raised since they have been fully briefed and argued.

The thrust of N. J. M.’s contention on this appeal is that it properly cancelled Roddie’s policy when directed to do so by the bank prior to the date of the accident. In effect, the cancellation was by Roddie through his authorized agent. We agree.

We are mindful that in considering defenses to claims on insurance contracts we should protect “the ordinary policyholder untutored in the intricacies of insurance * * * and that it is likewise [the insurance company’s] obligation to make policy provisions, especially those relating to coverage, exclusions and vital conditions, plain, clear and prominent to the layman.” Harr v. Allstate Insurance Co., 54 N. J. 287, 303-304 (1969). We are also mindful that we should construe all contracts “in accord with justice and common sense and the probable intention of the parties. It is to be interpreted as a business transaction entered into by practical men to accomplish an honest and straight-forward end. * * *[A] contract must be construed as a whole and the intention of the parties is to be collected from the entire instrument and not from detached portions.” Krosnowski v. Krosnowski, 22 N. J. 376, 387 (1956). These same principles apply to insurance contracts. 1 Couch on Insurance 2d, § 15:17 at 671.

Thus viewed, we find that the provisions in the note agreement and insurance policy, hereinbefore set forth, axe crystal clear that if Roddie defaulted in his payments to the Bank, it could, as his agent, cancel the policy and recoup the un-

earned premiums to apply on the loan. By the terms of the insurance policy N. J. M. was duty bound to cancel the policy when requested by the bank.

As best we can ascertain from the poor transcript furnished us, the trial judge found for Roddie on the basis that “no proper cancellation has been proven in this case,” and that public policy required prior notice by N. J. M. to Roddie of the cancellation to make it effectual because he was an assigned risk. Roddie points to the insurance policy which provides that the bank is given the authority by Rod-die only “to notify the company [N. J. M.] to request cancellation of this policy for his failure to pay any premium loan installment.” He argues this did not give the bank the right to cancel, but merely authorized it to request cancellation. We find that such interpretation of the word “request” is too narrow and strained in light of the obvious intent of the parties, as exprescd in the note agreement and insurance policy, that it was an absolute right to demand or order a cancellation.

Assigned risk policies which are paid for under note agreements similar to the one in the instant ease are not against public policy and are enforceable. See Sweers v. Malloy, 28 A. D. 2d 955, 281 N. Y. S. 2d 693 (App. Div. 1967); Hayes v. Hartford Accident and Indemnity Co., 274 N. C. 73, 161 S. E. 2d 552 (Sup. Ct. 1968); Daniels v. Nationwide Mutual Insurance Co., 258 N. C. 660, 129 S. E. 2d 314 (Sup. Ct. 1963); Chamberlain v. Employers’ Liability Assur. Corp., 289 Mass. 412, 194 N. E. 310 (Sup. Jud. Ct. 1935). In fact, such agreements are beneficial to persons like Roddie, who otherwise would be deprived of the privilege to operate a car, as well as to the public, who are protected against Roddie’s negligence to the extent of the insurance in force during the life of the policy.

Roddie further contends that item 3 of the endorsement set forth above required N. J. M. to give Roddie advance notice of any cancellation, which N. J. M. failed to do. Here again, in reading Items 1, 2, 3 and 4 of the endorsement it is clear that item 8 applies only if N. J. M. cancels the policy — here, it was Roddie, through his authorized agent, the bank, that cancelled the policy, and N. J. M. had no alternative but to comply with the provisions in items 2 and 4 of the endorsement.

It is significant that the Legislature enacted N. J. S. A. 17:16D-13, effective July 30, 1968. While the statute is inapplicable to the instant case, it makes specific provision for cancellation when a premium finance agreement is in effect, and the power is given the lender to cancel for nonpayment. The procedure outlined in the statute for cancellation on nonpayment by the lender is substantially what the bank and N. J. M. did in the instant case. It is also significant that the Legislature in authorizing the lender to cancel for nonpayment, provided that “the premium finance company may thereafter request in the name of the insured, cancellation of such insurance contract * * (Emphasis added)

In summary, since the note agreement and the insurance policy permitted cancellation by N. J. M. at the bank’s direction, and since the requisite notices were given by the bank to Roddie and by N. J. M. to the Director of Motor Vehicles, and the policy was cancelled before the accident in question, Roddie has no claim against N. J. M.

The judgment entered below is reversed, and a judgment of dismissal entered in favor of N. J. M. and against Roddie. It follows that the fourth-party complaint is moot and is hereby dismissed.


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

text:
    JOHN PICCO, INDIVIDUALLY AND AS GUARDIAN AD LITEM OF FREDERICK PICCO, AN INFANT, PLAINTIFF-RESPONDENT, v. FORDS DINER, INC., A NEW JERSEY CORPORATION, DEFENDANT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Argued February 8, 1971
    Decided March 1, 1971.

      Before Judges Sullivan, Collestek and Labbecque.

      Mr. Thomas P. McHugh argued the cause for appellant {Messrs. Gurry <& Gonlan, attorneys).

      Mr. Andrew M. RocTcman argued the cause for respondent {Messrs. Levinson, Conover, Lieberman & Fink, attorneys).
   The opinion of the court was delivered by

Sullivan, P. J. A. D.

Plaintiffs sued defendant corporation, the operator of a diner, for damages resulting from injuries suffered by the infant plaintiff while a patron at the diner when he was assaulted by unknown persons in the parking lot at the rear of the diner.

The infant plaintiff and a companion had driven to defendant’s diner at about 11 p.m. for coffee. The parking spaces in front of the diner were occupied and plaintiff, who was driving, went around to the rear of the diner and parked in the area also provided there for diner patrons. Plaintiff and his companion went into the diner and had coffee. Plaintiff left the diner ahead of his companion who was paying the check. As plaintiff walked around to the rear parking, area he was assaulted by unknown persons and received serious injuries. The proofs showed that there were two spotlights and a fluorescent light in the rear of the diner, but both plaintiff and his companion testified that none of these lights was on at the time of the assault. The basis of plaintiffs’ claim of negligence was the duty owed the infant plaintiff, as a patron, and the alleged foreseeability of a criminal assault on a patron in the unlighted rear area during night hours.

The jury found in favor of plaintiffs and awarded total damages of $4,300. On motion, the trial court set the damage award aside as inadequate (plaintiffs’ specials were $3,300), and ordered a new trial on damages only. At the retrial, plaintiffs were awarded $9,000.

Defendant argues that the evidence failed to present a jury issue as to liability and that its motion for judgment, and judgment notwithstanding the verdict, should have been granted. Specifically, it is argued that in the absence of any proof of a crime area or prior assaults on diner patrons, defendant could not have reasonably anticipated such an occurrence and was under no duty to provide lighting in the rear parking area as a means of discouraging possible criminal assaults.

The question is a close one. However, we conclude that the trial judge correctly held that a jury issue was involved. The infant plaintiff was a business invitee on the premises. One of the facilities provided for use of patrons was the rear parking area. Defendant was under a duty to use reasonable means to protect patrons from mishap while using the area. Absence of any night illumination of this parking area might reasonably be considered a dereliction on the part of defendant, which contributed proximately to the criminal assault. 3 Restatement, Torts 2d, § 448 (1966). It is common knowledge that lighting an area during nighttime hours deters criminal activity. We think that a jury could reasonably conclude that the relationship between the parties created a duty to provide illumination as a protection. As stated in Goldberg v. Housing Authority of New ark, 38 N. J. 578, 583 (1962), “Whether a duty exists is ultimately a question of fairness. The inquiry involves a weighing of the relationship of the parties, the nature of the risk, and the public interest in the proposed solution.” Here, there was some evidence that lighting facilities were furnished, although they were not on at the time.

While we hold that a jury issue as to liability was presented, we conclude that the trial court erred in refusing to permit defendant’s only witness, Manglaris, to testify because his name had not been furnished as a person having knowledge of the facts concerning the accident in the answer to interrogatories. This ruling effectively prevented defendant from presenting to the jury its sole defense to plaintiffs’ suit, namely, that there was lighting in the rear parking area which was turned on at the time of the assault. Plaintiffs would not have been surprised or prejudiced by allowing Manglaris to testify. Manglaris had signed the answers to interrogatories on behalf of defendant, which answers disclosed that he was on the premises on the night of the assault and what the lighting conditions were in the front and rear of the diner. In Reilly v. Spiegelhalter, 100 N. J. Super. 276 (App. Div. 1968), we held that where there is an unwitting failure to supply a name in answer to an interrogatory, the court should weigh the effect of the failure in the particular case, the basic objective being to give each party his day in court while at the same time protecting the other party from surprise or prejudice. Here, defendant was foreclosed from having the jury consider its only defense to plaintiffs’ suit. Because of this the issue of liability must be retried.

The assessment of damages is something else. This question was tried twice, the second time apart from the issue of liability. Both parties agree that the $9,000 award is sustainable on the proofs. We see no good reason for retrying the issue of damages. The $9,000 award will stand subject to the outcome of the retrial of the liability issue. No costs on this appeal.


author: Carton, J. A. D.

text:
    TITO CARFAGNINI, PLAINTIFF-APPELLANT, v. SERVICE LIFE INSURANCE CO. OF OMAHA, AN INSURANCE COMPANY DOING BUSINESS IN THE STATE OF NEW JERSEY, DEFENDANT-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued February 1, 1971
    Decided March 1, 1971.

      Before Judges Conford, Kolovsky and Carton.

      Mr. Leonard Meyerson argued the cause for appellant (Messrs. Miller, Rochman, Meyerson <& Miller, attorneys).

      Mr. John R. McNeill argued the cause for respondent (Messrs. Beggans and Stevens, attorneys).
   The opinion of the court was delivered by

Carton, J. A. D.

Plaintiff insured brought this action against defendant Service Life Insurance Company of Omaha to recover benefits claimed to be due under a hospitalization insurance policy. Defendant denied liability on the ground that the policy had lapsed for failure to pay the premium before the expiration of the 31-day grace period specified in the policy, which provides:

A grace period of 31 days will be granted for the payment of every renewal premium during which period this policy shall remain in force and if any such renewal premium be unpaid at the office of the Company in Omaha, Nebraska, or to its duly authorized agent on or before the expiration of the grace period, this policy shall thereupon automatically terminate.

Although admitting nonpayment of the last premium due, plaintiff insists that the insurance company remained liable because it failed to afford proper notice of the premium due in accordance with its custom of doing so. The policy contained no express provision requiring the giving of such notice.

The court granted defendant’s motion for summary judgment and plaintiff appeals.

Certain facts appear undisputed. Plaintiff insured was issued the policy on October 23, 1951. At that time, according to his application, he resided at 237 Monticello Avenue, Jersey City, New Jersey. The receipt issued by the company for the first premium payment recited the same home address. A company notice for a premium due November 24, 1954 and acknowledged by the insured showed he still resided at that address.

Evidently sometime between 1954 and 1965 the insured moved from 237 Monticello Avenue to 543 Mercer Street in Jersey City. The company received notice in some manner of that change of address since another form issued by it setting forth a fable of adjusted premiums effective on April 1, 1961 showed 543 Mercer Street as the. insured’s address.

The affidavit of the company’s vice-president in support of the motion for summary judgment is to the following effect: Since 1959 the company mailed “premium due notices” to each of its policyholders about 20 days before the due date of the coming premium. Company records indicate that since 1959 Carfagnini’s address had been 543 Mercer Street, Jersey City. No recordation of any notice of change of that address had been made. A “premium due notice” was mailed to the insured at the Mercer Street address, on or about Eebruary 6, 1968 and was returned by the postoffice bearing the notation “address unknown.” No payment was received from Carfagnini. The company maintained the policy in force until Eebruary 25, 1968. In accordance with company practice of sending an additional notice to a policyholder neglecting to pay the next due premium, a “courtesy reminder notice” was mailed to the Mercer Street address on or about March 18, 1968. This notice was returned to the insuxance company' by the postoffiee with the notation “Moved, not forwardable.”

In his affidavit in opposition to the motion, Oarfagnini stated that when he changed his address from 237 Monticello Avenue to 543 Mercer Street, Jersey City, he did not fill out a change of address form nor did he include any notation “with respect to any change of address.” His recollection was that he simply wrote his then new address on “the envelope” and enclosed a check or money order bearing that same address. He stated that he tendered payment of premiums only upon receipt of a notice of premium due. Listing his address as 15 Orchard Street, Jersey City, on the money order and as the return address on the envelope, he paid the premium due for the coming year on February 20, 1967. He received no notice of premium due or notice that the policy had been cancelled or had lapsed until after he had been hospitalized and had incurred the medical expense.

Attached to Carfagnini’s affidavit was a photostatic copy of a cheek drawn upon the Metropolitan Federal Savings and Loan Association, dated February 20, 1967, in the amount of $52.05 -— the amount of the premium — payable to Service Life Insurance Company of Omaha. The cheek bore Carfagnini’s signature, below which appeared “15 Orchard St., Jersey City” as his address.

We conclude that the summary judgment was improperly granted. Plaintiff-insured’s affidavit created issues of fact requiring a plenary trial. His contention that his failure to pay the last premium flowed directly from his failure to receive the regular premium notice on which he had come to rely over the years is a colorable one. If given credence, this reliance constitutes an estoppel against the company’s forfeiture of his policy.

The company’s contention, advanced for the first time on appeal, that it had no duty to forward premium notices to the insured, ignores the very interest an insurance company seeks to serve. Such an interpretation of its relationship with the insured would create a means by which the insurer could declare a forfeiture when it was in the interest of the company to invoke the express policy provisions, yet permit the insurer to waive such provisions and collect the premiums when it was in its interest to do so. Accordingly, when an insurer establishes a practice of giving notice of premiums due so as to lead the insured to believe that such notice will be given regularly, the insurer cannot declare a forfeiture for nonpayment of premium if such nonpayment is attributable to the insurer's failure to provide the notice. The majority rule is that an insurer’s custom of giving regular notices of the time for payment of premiums constitutes a waiver or estoppel on the insurer. See 14 Appleman, Insurance Law & Practice § 8199. We deem that view to be sound. Any expressions to the contrary contained in Lloyd v. Massachusetts Accident Co., 125 N. J. Eq. 320 (Ch. 1939), and Prudential Insurance Co. v. Milonas, 118 N. J. Eq. 343 (Ch. 1935), are not in line with the salutary modern views of the obligations of insurance companies to their assureds and are disapproved. See Bowler v. Fidelity & Casualty Co. of N. Y., 53 N. J. 313, 326 (1969).

The remaining issue posed here is whether the evidence could support the view that the insurance company inadequately fulfilled the duty of affording notice of the premium due on February 25, 1968 so as to preclude the granting of summary judgment in its favor. The allegation contained in the insured’s affidavit indicating that the company had recognized his previous change of address upon receipt of the money order or check hearing his name and address and the envelope bearing his return address without any formal change of address notification, coupled with proof that the February 20, 1967 payment was made in similar fashion showing a further change of address, gives rise to a question of fact as to whether the company was negligent in failing to> note plaintiff’s latest address.

Also relevant to the issue of negligence was the return of the letters containing the last premium notices to the company by the postal authorities, one with the notation on the envelope “address unknown” and the other with the words “Moved, not forwardable.” The question arises as to whether the company was negligent in cheeking its records or in failing to make further investigation to ascertain if its files disclosed any other address for this policyholder.

The judgment is reversed and the matter remanded for a plenary trial and adjudication on these issues and any other issues as the parties may properly raise. No costs. We do not retain jurisdiction.


author: Mountain, J. A. D.

text:
    MORRISON STEEL CO., PLAINTIFF-RESPONDENT, v. WILLIAM N. GURTMAN, DEFENDANT-APPELLANT, AND JOSEPH R. MATTHEWS AND ALFRED DIEMER, DEFENDANTS. WILLIAM N. GURTMAN, THIRD-PARTY PLAINTIFF-APPELLANT, v. GRAVER WATER CONDITIONING CO., A DIVISION OF UNION TANK CAR COMPANY, A FOREIGN CORPORATION, THIRD-PARTY DEFENDANT-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued November 30, 1970
    Decided March 2, 1971.

      Before Judges Goldmann, Leonard and Mountain.

      Mr. Aaron Z. Schomer argued the cause for defendant-third party plaintiff-appellant (Messrs. Gurtman and Schomer, attorneys; Mr. Schomer, on the brief).

      Mr. Oblo F. Blazelc argued the cause for defendant, Joseph K. Matthews.

      Samuel H. Davis argued the cause for plaintiff-respondent (Messrs. Davis and Roth, attorneys; Mr. Davis, on the brief).

      Mr. Kenneth F. Kunzman argued the cause for third-party defendant-respondent (Messrs. Hughes, McFlroy, Connell, Foley and Geiser, attorneys; Mr. Kunzman, on the brief).
   The opinion of the court was delivered by

Mountain, J. A. D.

Defendants Gurtman and Matthews appeal from a Chancery Division judgment entered against them in favor of plaintiff in the sum of $16,188.66 together with costs.

A brief summary of the facts is necessary to an understanding of the issues involved. Plaintiff was a supplier of steel to Paterson Boiler and Tank, Inc. (Paterson). Defendants Gurtman and Matthews were officers of Paterson. The latter manufactured and sold finished steel and aluminum products to various customers, including York Separators (York). Paterson had a checking account with Bank of Passaic and Clifton, not now a party to this suit.

In December 1966 plaintiff, under the protection of a perfected security agreement, shipped materials to Paterson which it used in manufacturing a product sold to York. In payment York issued its check to Paterson in the amount of $25,248. The check was deposited by Gurtman, apparently with the knowledge of Matthews, in Paterson’s regular checking account in Bank of Passaic and Clifton. Paterson then issued its cheek in the sum of $22,954.44 to the order of plaintiff in payment of the materials originally received. This check was deposited for collection, but prior thereto and on May 5, 1967 Paterson filed a petition in the Federal District Court for the District of New Jersey under Chapter XI of the Bankruptcy Act. The check issued to plaintiff by Paterson was not paid. The bank then charged Paterson’s account by way of set-off with the balance due on a loan owed by Paterson to the bank in the amount of $8,028, together with the sum of $10,320.99 due the bank under a letter of credit it had issued in favor of Paterson. The balance of the account, $9,917, was turned over to the receiver appointed in the Chapter XI proceeding and thereafter, upon application being made by plaintiff in the federal court, was paid to it, less the sum of $750 allocated to administration expense. The present suit was brought against the individual defendants as officers and directors of Paterson, the theory of the case being that they are liable for having converted assets in the hands of Paterson which constituted security properly belonging to plaintiff.

The Chancery Division judge found in favor of plaintiff on the ground that the individual defendants, as such officers and directors, owed a duty to plaintiff, as a secured creditor of Paterson, to protect assets that came through their hands and that were properly subject to its security agreement. The deposit in Paterson’s checking account of the funds received from York, thus exposing them to an exercise by the bank of its right of set-off, was held to be a breach of this duty and to constitute a conversion. In view of the trial judge’s conclusion that conversion took the form of subjecting the proceeds received from York to an improper and unacceptable risk, namely, the possibility that the bank might exercise a right of set-off, we are faced with an initial inquiry as to whether the bank did or did not have this right under the facts as they existed when the deposit was made and the bank charged the account. The issue was not determined by the trial judge; it was apparently assumed that the right did exist. It is true that at one point the individual defendants suggested or requested that the bank be made a party to the suit •— presumably to test the validity of its right of set-off — but no formal motion looking to this end was ever made. Clearly, if the bank had no right of set-off, then the deposit of the proceeds in the account did not subject the funds to this risk and cannot be considered a conversion. We deem it essential, therefore, to determine whether or not the right did actually exist.

In examining this question we think attention must first be focused upon the Uniform Commercial Code. N. J. S. A. 12A:9-306, dealing with a secured party’s rights on disposition of collateral, reads in pertinent part, as follows:

(1) “Proceeds” includes whatever is received when collateral or proceeds is sold, exchanged, collected or otherwise disposed of. The term also includes the account arising when the right to payment is earned under a contract right. Money, checks and the like are “cash proceeds”. All other proceeds are “non-cash proceeds”.
(2) Except where this Chapter otherwise provides, a security interest continues in collateral notwithstanding sale, exchange or other disposition thereof by the debtor unless his action was authorized by the secured party in the security agreement or otherwise, and also continues in any identifiable proceeds including collections received by the debtor.
(3) The security interest in proceeds is a continuously perfected security interest if the interest in the original collateral was perfected but it ceases to be a perfected security interest and becomes unperfected ten days after receipt of the proceeds by the debtor unless
(a) a filed financing statement covering the original collateral also covers proceeds; or
(b) the security interest in the proceeds is perfected before the expiration of the ten day period.
(4) In the event of insolvency proceedings instituted by or against a debtor, a secured party with a perfected security, intez’est izz proceeds has a perfected security interest
(a) in identifiable non-cash proceeds;
(b) in identifiable cash proceeds in the form of money which is not commingled with other money or deposited in a bank account prior to the insolvency proceedings;
(c) in identifiable cash proceeds in the form of checks and the like which are not deposited in a bank account prior to the insolvency proceedings; and ■
(d) in all cash and bank accounts of the debtor, if other cash proceeds have been commingled or deposited in a bank account,
but the perfected security interest under this paragraph (d) is
( i) subject to any right of set-off; and
(ii) limited to an amount not greater than the amount of any cash proceeds received by the debtor within ten days before the institution of the insolvency proceedings and commingled or deposited in a bank account prior to the insolvency proceedings less the amount of cash proceeds received by the debtor and paid over to the secured party during the ten day period.

Initially it may be noted that the financing statement filed by plaintiff does cover the proceeds of collateral, thus bringing plaintiff within the favor of paragraph (3) (a) quoted above. It should be further observed that we are here concerned with “insolvency proceedings” as this phrase is used in the Code.

“Insolvency proceedings” includes any assignment for the benefit of creditors or other proceedings intended to liquidate or rehabilitate the estate of the person involved. [N. J. S. A. 12A:1-201 (22)]

A Chapter XI proceeding is of course designed and intended to rehabilitate the estate of the debtor and hence clearly comes within the scope of this definition.

Applying section 12A:9-306 of the Code quoted above to the facts of this case, it seems clear that under paragraphs (2) and (3) plaintiff had a continuing security interest in the check received by Paterson from York (“identifiable proceeds including collections received by the debtor”) from the moment of its receipt to the time of its deposit, and that this was a “continuously perfected security interest.” The cheek was deposited May 3 and the Chapter XI petition was filed and a receiver appointed May 5. Thus, paragraph (4), applicable to “insolvency proceedings,” came into play. It will at once be seen that subparagraphs (a), (b) and (c) of paragraph (4) are inapplicable and that we are solely concerned with subparagraph (d). The language of this subsection of the Code was modeled upon section 10 of the Uniform Trust Eeceipts Act (R. S. 46:35-10), expressly repealed by N. J. S. A. 12A:10-105). The legislative intent in each case is clear — to create a security interest in unidentifiable proceeds. Henson, “ ‘Proceeds’ Under the Uniform Commercial Code,” 2 UCC Rep. 566, 578-584 (1966), reprinted from 65 Col. L. Rev. 232 (1965); Note, “Entruster’s Eight to Proceeds of Sale Under § 10 of the Uniform Trust Receipts Act,” 66 Yale L. J. 922 (1957).

Generally, as is true here, proceeds will have been rendered unidentifiable by having been commingled with other funds in a single bank account. The security interest in unidentifiable proceeds thus arises upon the intervention of insolvency proceedings coupled with a commingling. The Code broadly extends this “perfected security interest” to “all cash and bank accounts of the debtor,” limited, however, to the amount of proceeds received within ten days of insolvency, less any portion thereof paid over to the secured party by the debtor during that period. Here all proceeds were received within the ten-day period and no part thereof was paid to plaintiff. Plaintiff would thus appear to have had a perfected security interest in the entire bank account following the deposit (commingling) on May 3 and the initiation of an insolvency proceeding on May 5. But the interest might yet be affected by the second limitation imposed by the statute, namely, that it is “subject to any right of set-off.”

Whether or not a right of set-off exists is to be determined by the law of New Jersey. This determination is unaffected by the Uniform Commercial Code. N. J. S. A. 12A:9-104(i). Appellants suggest that the advent of a bankruptcy proceeding causes the question as to whether there should be a right of set-off to become a matter of federal law. It is certainly true that whether or not this right may be exercised in a bankruptcy proceeding is a matter for decision by the federal court but it does not follow that the existence of the right is to be so determined. Section 68, sub. a of the Bankruptcy Act, 11 U. S. C. A. § 108 makes specific provision for set-off. It is obvious, however, that whether or not there is a valid and enforceable claim or obligation to be used as a set-off depends on applicable state law. Where a question arises that is not specifically covered by section 68, courts will apply substantive state law relating to the asserted right of set-off —■ as for example the imputation of payments on a plurality of obligations held by a creditor. 4 Collier, Bankruptcy (14th ed. 1942), § 68.06 at 736. Similarly, since the Bankruptcy Act is silent upon the point, the question as to whether a bank may exercise a right of set-off, sometimes loosely referred to as a banker’s lien, with respect to funds in its debtor’s bank account which do not in fact belong to the debtor, is a matter for determination by the laws of the state.

It is to be noted that this perfected security interest in non-identifiable cash and bank accounts, where the funds have been commingled or deposited and cannot be directly traced, is subject to the bank’s right of set-off as determined by state law. [Henson, op. cit. at 579; emphasis supplied]

As previously mentioned, plaintiff made application in the federal court to be paid that portion of the bank account which had been transferred by the bank to the receiver and this application was granted. The bankruptcy court thus explicitly acknowledged the validity of the secured creditor’s perfected security interest in this fund. We are therefore not called upon to consider the possibly thoublesome issue as to whether section 12A:9-306(4) (d) does or does not conflict with certain sections of the Bankruptcy Act. As to this question, see Countryman, “Code Security Interests in Bankruptcy,” 75 Com. L. J. 269 (1970); Kennedy, “The Impact of the Uniform Commercial Code on Insolvency: Article 9.” 67 Com. L. J. 113 (1962); Note, “Toward Commercial Reasonableness: An Examination of Some of the Conflicts between Article 9 of the Uniform Commercial Code and the Bankruptcy Act,” 19 Syracuse L. Rev. 939, 953-957 (1968).

Does our law, especially since the adoption of the Uniform Commercial Code, afford a bank a right of set-off superior to the perfected security interest—born of agreement and protected by statute—possessed by plaintiff? Middle Atlantic Credit Corp. v. First Pa. Banking & Trust Co., 199 Pa. Super. 456, 185 A. 2d 818 (Super. Ct. 1962), is instructive. There, as here, the debtor deposited funds, which admittedly came under the protection of a valid security agreement, in its checking account in the defendant bank. Upon the initiation of a Chapter XI proceeding the bank claimed and exercised a right of set-off against the borrower’s individual obligation to it. The court first noted that section 9— 306(4) (d) of the Code did not create a right of set-off. Turning to Pennsylvania law, and in reliance upon Sherts v. Fulton National Bank, 34-2 Pa. 337, 21 A. 2d 18 (Sup. Ct. 1941), the court held that the bank had no right of set-off since the latter case had established as the law of the state that a bank may not set off funds that have been deposited in the borrower’s checking account, in which a third party has an interest, regardless of whether the bank knew or had reason to know that the funds were not those of the debtor.

Turning, then, to the law of our own State, we do not find the applicable rule as clearly laid down as was true in Pennsylvania. Since this case must be remanded for further proceedings, including the taking of additional testimony, we consider it appropriate to comment somewhat more fully upon this point.

It is everywhere recognized that where a bank has knowledge that deposits made by a debtor in his own name are in fact the property of a third person, or that some third person has an interest therein, then no right of set-off may properly be asserted. A similar rule should apply where the bank has knowledge or notice of such facts as to put it upon inquiry as to the true character of the deposit. Annotation: “Bank’s Right to Apply Third Person’s Funds, Deposited in Debtor’s Name, on Debtor’s Obligation,” 8 A. L. R. 3d 235, 239 (1966). Accordingly, if the trial court should find, after receiving evidence directed to the issue, that such knowledge or notice existed on the part of the bank, it would follow that the right of set-off had been improperly exercised. On the other hand, if the court should find that the bank had no such knowledge or notice, it must then decide, in the light of the full record, whether the bank possessed a right of set-off the exercise of which could defeat plaintiff’s security interest. American Lumberman's, etc., Co. v. Bradley Const. Co., 127 N. J. Eq. 500 (Ch. 1940), aff’d 129 N. J. Eq. 278 (E. & A. 1941), and Frank Briscoe Co., Inc. v. Suburban Trust Co., 100 N. J. Super. 431 (App. Div. 1968), certif. den. 52 N. J. 161 (1968), would seem to favor a holding that a right of set-off may exist. Compare, however, Associates Discount Corp. v. Fidelity Union Trust Co., 111 N. J. Super. 353 (Law Div. 1970) — not an insolvency proceeding — which questions, in light of the language and legislative intent of the Uniform Commercial Code, the continued validity or relevance of the earlier decisions cited above.

We believe that the ultimate question of appellant’s liability should be reviewed and reassessed in the light of the trial court’s determination upon the issue of set-off and in the light of the full record which will then be before it.

Since no decision on the issue of set-off would hind the bank were it not a party to the suit, the cause is remanded ro the trial court with directions that the individual defendants proceed forthwith to join Bank of Passaic and Clifton as an additional party, proceedings to be undertaken thereafter consistent with the views expressed above, all under the direction of the trial court.

Gurtman sought by way of third-party action against Graver to be indemnified by it on the theory that its failure to pay Paterson $11,040.36 created the situation which induced plaintiff to sue him. If anyone had a right to bring such a third-party action, it was Paterson. But overlooking that, the matter is resolved by reference to the law of indemnity, discussed in Adler’s Quality Bakery, Inc. v. Gaseteria, Inc., 32 N. J. 55 (1960). There was no liability, primary, secondary or otherwise, against Graver in plaintiff’s, favor. Graver had no contract, agreement or any dealings whatever with plaintiff; it was merely a general creditor which suffered when Paterson went bankrupt. Indeed, at the moment when Paterson filed its petition under Chapter XI, it was indebted to Graver for more than $90,000. What Gurtman apparently seeks is to benefit by an allegel contract between Paterson and Graver, to the end that he may be indemnified for an act on his part which plaintiff alleges was tortious as amounting to conversion of corporate funds in which plaintiff had a security interest. The action of the trial judge in granting summary judgment in favor of third-party defendant Graver Water Conditioning Co., is affirmed.

The case is remandad for further proceedings not inconsistent with this opinion. We retain jurisdiction and urge that the matter go forward with all convenient speed.