author: Labrecqtje, J. A. D.

text:
    IN THE MATTER OF THE ESTATE OF ALBERT D. SMITH, DECEASED. FIDELITY UNION TRUST COMPANY, TRUSTEE, ETC., PLAINTIFF-RESPONDENT, v. THE HOUSE OF THE GOOD SHEPHERD, DEFENDANT-APPELLANT, AND JEFFREY A. RANDOLPH, ALICE P. RANDOLPH AND ROBIN ROS HIGHLEY, MINORS, THROUGH THEIR GUARDIAN AD LITEM ALFRED C. CLAPP, AND LOUISE H. RANDOLPH, DEFENDANTS-RESPONDENTS AND CROSS-APPELLANTS, AND PETER ROS AND TIMOTHY H. ROS AND CRISTINA ROS, MINORS, THROUGH THEIR GUARDIAN AD LITEM STEPHEN B. WILEY, DEFENDANTS-RESPONDENTS AND CROSS-APPELLANTS.
    Superior Court of New Jersey Appellate Division
    Argued January 13, 1969
    Decided February 4, 1969.

      Before Judges Gaulkin, Collestek and Labkecqíje.

      Mr. Robert B. Kroner argued the cause for appellant The House of the Good Shepherd (Messrs. Holley & Kroner, attorneys) .

      Mr. Alfred C. Clapp argued the cause for respondent Louise H. Randolph and pro se as guardian ad litem for respondents and cross-appellants Jeffrey A. Randolph, Alice P. Randolph and Robin Ros Highley, minors (Messrs. Clapp & Eisenberg, attorneys).

      Mr. Stephen B. Wiley argued the cause pro se as guardian ad litem for respondents and cross-appellants Peter Ros, Timothy H. Ros and Cristina Ros, minors.

      Messrs. Biker, Danzig, Scherer & Brown filed a statement in lieu of brief for respondent Fidelity Union Trust Company {Mr. William C. Connelly, of counsel).
   The opinion of the court was delivered by

Labrecqtje, J. A. D.

Appellant The House of the Good Shepherd appeals from a judgment of the Essex County Court directing that the income from two trust funds administered by plaintiff Fidelity Union Trust Co. be paid over to the children of Alice H. S. Randolph, deceased, a great granddaughter of the testator.

Decedent died on October 17, 1913, survived by his wife Nellie Gasper Smith, his daughter Mary Alice Smith Hallock (Freefield), and-his granddaughters Louise St. John Hallock (Ros) and Mary Alice Hallock (Shackelton). His will, which was duly admitted to probate by the Surrogate of Essex- County, provided,-in pertinent part, as follows:

“FOURTEENTH: All the rest, residue and remainder of my estate, * * * I direct my executors to divide into two equal parts and of them I dispose as follows:
a. I give and bequeath one of such parts to Fidelity Trust. Company of Newark, New Jersey, to have and to hold the same upon the following trusts, that is to say:
(2) To pay over the net income thereof to my wife, Nellie Gasper Smith, during her life, and upon her decease, if my daughter, Mary Alice Smith Hallock, survive me to pay the said net income to her during her life and upon the decease of both my said wife and daughter, to pay the said net income in equal shares to my grandchildren, during the lives of my said granddaughters, Alice May Hallock and Louise St. John Hallock, and the survivor of them, the issue of each deceased grandchild to stand in the parent’s place, and upon the decease of the survivor of my said two granddaughters to divide the principle [sic] with all accumulations of income in equal shares and pay over the same to all of my grandchildren, the issue of every deceased grandchild (including my said two granddaughters) to stand in the parent’s place.
(3) If, however, at the decease of my said wife, my daughter and both my said two granddaughters, no lineal descendant of mine shall then survive, I direct the principal thereof with all accumulations of income to be distributed equally among the Orange Memorial Hospital, the House of the Good Shepherd, located in the City of Orange, New Jersey, the Orange Orphan Society, located in the City of East Orang’e and the Young Men’s Christian Association of the Oranges.
b. I give and bequeath the other one-half of said residue to said Fidelity Trust Company to have and to hold the same upon the following- trusts, viz:—
(2) To pay the net income arising therefrom to my daughter, Mary Alice Smith Hallock, during the term of her natural life and upon her decease to pay the net income in equal shares to my grandchildren during the lives of both my said granddaughters, Alice May Hallock and Louise St. John Hallock, and the survivor of them, the issue of each deceased grandchild to stand in the parent’s place, and upon the decease of the survivor of my said two granddaughters to divide and pay over the principal with all accumulations of income in equal shares to all of my grandchildren, the issue of every deceased grandchild (including my said two granddaughters) to stand in the parent’s place.
(3) If, however, upon the decease of my said daughter and both my said two granddaughters, no lineal descendant of mind [sic] shall then survive, I direct, the principal thereof with all accumulations of income to be distributed equally among the Orange Memorial Hospital, the House of the Good Shepherd located in the City of Orange, New Jersey, the Orange Orphan Society, located in the City of East Orange, and the Young Men’s Christian Association of the Oranges.”

For purposes of convenience the trusts provided in paragraphs (a) and (b) will he hereafter referred to as Trusts A and B, respectively.

Mary Alice Smith Hallock Freefield, testator’s daughter, died on December 31, 1945. One of her two children, Louise St. John Hallock Ros is living. Her only other child, Alice May Hallock Shaekelton, died in 1915 leaving a daughter, Alice H. S. Randolph, whose death on January 23, 1967 precipitated the present controversy. Alice left surviving her three children, Louise H. Randolph, Jeffrey A. Randolph, and Alice P. Randolph. Testator’s widow Nellie Gasper Smith died in 1956.

Louise St. John Hallock Ros adopted two children, Patricia L. R. Highley, who died in 1964 survived by Robin R. Highley, and Peter H. Ros, who is living and currently has three children, Peter S. Ros, Timothy H. Ros and Cristina Ros.

Prior to the death of Alice H. S. Randolph one-half of the income from Trusts A and B was being paid to her as the surviving child of her mother Alice May Hallock Shaekelton, testator’s granddaughter, and the remaining one-half to Louise St. John Hallock Ros, testator’s granddaughter.

Plaintiff Fidelit3r Union Trust Compaq, as trustee under the two trusts, presented its second intermediate account and requested directions as to the distribution of the income from the trust estates which it had been previously pa3dng to Mrs. Randolph. The County Court determined that it should be paid to her children Louise H. Randolph, Jeffrey A. Randolph and Alice R. Randolph. The concomitant judgment provided, in paragraph 18 thereof, that nothing therein contained should be construed as a determination as to the proper method of distributing the corpus of the two trusts upon their later termination.

The House of the Good Shepherd appeals from the award of the income to the children of Alice H. S. Eandolph and they and the grandchildren of Louise St. John Hallock Eos cross-appeal as to paragraph 18 of the judgment.

Appellant The House of the Good Shepherd contends that the grandchildren of Alice May Hallock Shackelton, i. e., the children of Alice H. S. Eandolph, are not the “issue” of the former because the word “issue” is limited in its significance by the subsequent use of the words “parent’s place” and refers only to the children of testator’s granddaughters and not to their children’s children, citing Sibley v. Perry, 7 Ves. 522, 32 Eng. Rep. 211 (Ch. 1802), and Coyle v. Coyle, 73 N. J. Eq. 528 (Ch. 1907). For this reason it urges that the income formerly paid to Alice H. S. Eandolph should not be paid to her children but to Louise St. John Hallock Eos, and that upon her death the corpus should be paid to the charities named in the will (one of which is appellant).

Eespondents urge that any ambiguity inherent in testator’s use of the phrase in question in subparagraph (2) is cleared up and controlled by the unambiguous language of the gift over contained in subparagraph (3), which provides for its vesting when “no lineal descendant of mine shall then survive.” They urge that “issue” as here used indicated a per stirpes, rather than per capita, distribution of income to descendants to the remotest degree.

Our primary function in construing a will is to ascertain and give effect to the intention of the testator. In re Cook, 44 N. J. 1, 6 (1965) ; In re Conway, 92 N. J. Super. 428, 434 (App. Div. 1966), remanded for modification 50 N. J. 525 (1967). In considering doubtful provisions in a will, an interpretation benefiting kindred is favored as against strangers. Rosencrans v. Fry, 12 N. J. 88, 95 (1953). Except in a plain case where the intent of a testator to disinherit is clear, the heirs at law of a testator will not be disinherited. Creech v. McVaugh, 140 N. J. Eq. 272, 279 (Ch. 1947).

In general, it is the duty of the court to reconcile, if possible, any apparent contradictions of the language of a will so as to invest it with a consistent and reasonable meaning and thereby give effect to the testamentary intention. National State Bank of Newark v. Nadeau, 57 N. J. Super. 53, 63 (App. Div. 1959).

The parties are in general agreement that at common law the use of the unqualified word “issue” in a will signified progeny to the remotest degree. Plainfield Trust Co. v. Hagedorn, 28 N. J. 483, 488 (1958); Pierson v. Jones, 108 N. J. Eq. 453, 455 (Ch. 1931), affirmed 111 N. J. Eq. 357 (E. & A. 1932). Here, however, appellant calls for application of the rule, first enunciated by Lord Eldon in Sibley v. Perry, supra, that when the word “issue” is used in collocation with the word “parent” it carries a restricted meaning and is limited to children of the parent named. The rule was applied in this State in Coyle v. Coyle, supra, where a will which provided that “if any of my said children shall have died, leaving lawful issue, such issue shall take the share their parent would have taken if living,” was held to include only the testator’s grandchildren. See also Skinner v. Boyd, 98 N. J. Eq. 55 (Ch. 1925), affirmed 100 N. J. Eq. 355 (E. & A. 1926); Hopkins v. Dimock, 138 N. J. Eq. 434, 439 (Ch. 1946), affirmed 140 N. J. Eq. 182 (E. & A. 1947).

Respondents urge that the cited rule is not an inflexible one and that from other portions of the will it is clear that the words “the issue of each deceased grandchild to stand in the parent’s place” have reference to the issue of each grandchild to the remotest degree. We agree.

Nine years after Coyle v. Coyle, supra, our highest court approved the following statement by Vice-Chancellor Howell in Dennis v. Dennis, 86 N. J. Eq. 423 (E. & A. 1916):

“It may be said that the case of Sibley v. Perry has been much criticised (Coyle v. Coyle, supra), but it has been followed with very little, if any, diminution of its force as a precedent. In Maynard v. Wright, 26 Bev. 285, Sir John Romilly, M. K., says: ‘It is clear that the word “issue” is nomen generalissimum, and that it includes the latest descendants unless its meaning be restricted ami cut down by words to be found in the will. On the other hand, it is also clear that where issue are substituted for parent, the word “issue,” is restricted to the children of the parent spoken of. But this rule of construction may again be controlled by the general nature and scope of the whole will and by the use of the word “issue" in other parts of the will which may enlarge this construction and restore the word to its original comprehensive meaning.’ ” (at p. 428; emphasis added.)

In Pierson v. Jones, supra, Vice-Chancellor Berry reiterated the exception cited above but applied the Sibley rule in the absence of language in other parts of the will which would call for a different construction.

The exception to the Sibley rule referred to in Maynard v. Wright had been applied in Ross v. Ross, 20 Beav. 645, 52 Eng. Rep. 753 (Rolls Ct. 1855). In that case the testator had given a fund to his niece for life and after her death to her children and the issue then living of children then dead, the issue to ialee the “share which their parent would have been entitled to, if he or she had survived” the niece, with gifts on similar terms to other nieces and their issue, and a provision that it should become part of the residue “in case all my said nieces shall depart this life without leaving a child or issue of a child living at their respective deaths.” There the Master of the Bolls, Sir John Eomilly, held that, standing alone, the latter clause was:

“* * * so unambiguous, that I should be violating the ordinary and obvious meaning which is put upon the word ‘issue,’ where there is no expression used which could, in the slightest degree, control it, if I did not give it its full effect upon the present occasion. If it bears this meaning in this clause of the will, why is it not to bear the same meaning in the clause which I have already read? * * *” (20 Beav., at p. 652, 52 Eng. Rep., at p. 756)

He thereupon construed the word “issue,” as used in conjunction with the phrase the “share which their parent would have been entitled to,” to coincide with the gift over, holding that it was not confined to the children of the niece but could refer to a grandchild of the niece as well.

Ross v. Ross was followed in Ralph v. Carrick, L. R. 11 Ch. D. 873 (Ct. App. 1879), where the court, reversing the Chancery Division, held that use of the unambiguous word “descendants” in the gift over controlled an ambiguous clause in the original gift. In that case the testator gave a fund to his wife for life and then to the children of his aunt “the descendants (if any) of those who may have died being entitled to the benefit which their deceased parent would have received had he or she been then alive,” with gifts to other aunts and their descendants; and providing that the portions should fall into the residue “should there be no children or lawful descendants of any of my aunts above named remaining at the time these bequests shall become payable.” Referring to Ross v. Ross Brett, L. J., noted:

“It is an authority for holding that where the word ‘issue’ is used in its more extended meaning in the gift over, that more extended meaning is to be carried back to the former part of the will, though the word is there in collocation with parents, and that the case is thus taken out of the operation of the rule in Sibley v. Perry.” (11 Ch. D., at p. 885)

Cotton, L. J., held that “descendants” as used in the gift over was used in its ordinary unrestricted sense and observed :

“I think it is a sound principle that when there are ambiguous words in the original gift you should not construe the gift over in a restrictive sense which it does not otherwise bear, but should construe the ambiguous words contained in the previous gift so as to agree with the unambiguous words contained in the gift over.” (at p. 888)

James, L. J., opined that the result would have been the same had the word “issue” been used in place of “descendants,” (at p. 883). Both Ross and Ralph were abstracted and cited in 2 Jarman on Wills (6th Amer. ed. 1893), 109, as supporting the proposition that “if in such a case there follows a gift over on a general failure of 'issue’ of the original legatee, this [Sibley] construction is excluded.”

Here, to construe “issue” as meaning children in sub-paragraph (2) and descendants in subparagraph (3), would leave a hiatus between the termination of the trust, conditioned upon default of children of grandchildren of the testator, and the taking effect of the gift over, conditioned upon the default of issue of the testator. Alternatively, should subparagraph (3) be construed to refer only to testator’s lineal descendants who are children of Ms granddaughters, the gifts over to charity would become effective to the exclusion of other direct descendants of the testator (the grandchildren of his granddaughters) — a result not favored by the law unless clearly compelled by the words of the will. Creech v. McVaugh, supra, 140 N. J. Eq., at p. 279; 95 C. J. S. Wills § 616, p. 840 (1957)

In line with our obligation to reconcile, if possible, the two paragraphs, we incline to the view that the unambiguous phrase “no lineal descendants of mine” in subparagraph (3) clearly means that the gifts over were not to become effective until there was a failure of testator’s issue to the remotest degree. Since this is an integral part of testator’s complete plan in connection with Trusts /V and B, we are likewise of the opinion that the word “issue” used in subparagraph (2) should be construed to include descendants to the remotest degree. The direction that “the issue * * * stand in the parents place” evidences testator’s intention that the distribution of income should be per stirpes. See Restatement, Property, § 292, p. 1550, comment (f) ; In Matter of Farmers Loan & Trust Co., 213 N. Y. 168, 107 N. E. 340, 342-343, 2 A. L. R. 910 (Ct. App. 1914).

The language used in other parts of the will supports this construction. In earlier clauses the testator demonstrated his awareness of the difference between “children” and “issue” and made use of the latter in terms of “descendants.” In paragraphs (b) and (c) of article Sixth of the will he provided that if a granddaughter should die leaving issue surviving, such issue should “stand in her place” in the distribution of principal. In paragraphs (e) and (f) of article Eighth he provided a gift to take effect upon the death of his wife and daughter, “to her [his daughter's] children (my grandchildren), share and share alike, the issue of any deceased child to take the parent's place,” with various gifts over “[s]hould my said daughter, her children and their issue predecease my said wife so that there shall be left no lawful lineal descendant of my blood.” In paragraph (d) of the Ninth article he used the word “children” when he plainly intended that only immediate offspring should share; and in article Tenth, paragraph (e) he provided that the corpus of a $475,000 trust should be payable to certain charities there named “if * * * no grandchild of mine or issue of any then survive.” Such use of words lends color to testator’s use of similar or related words in article Fourteenth. 5 American Law of Property (A. J. Casner ed. 1952), § 22.36; cf. Dulfon v. Keasbey, 111 N. J. Eq. 223, 228 (Ch. 1932); Fidelity-Philadelphia Trust Co. v. Jameson, 137 N. J. Eq. 385, 390 (Ch. 1946).

We note in passing that it is not at all clear that in 1911, when the will was executed, the scrivener was aware of the possible impact of Sibley. While it had been followed — not without some hesitation — by Vice-Chancellor Learning in Coyle v. Coyle in 1907, it was not until live years after the will was drawn and three years after testator’s death that it received the imprimatur of our highest court in Dennis v. Dennis.

By reason of the foregoing we find it unnecessary to pass upon respondents' contention that the Sibley rule should be overruled altogether. It has been much criticized. Dennis v. Dennis, supra, 86 N. J. Eq., at p. 428. In Ralph v. Carrick, supra, 11 Ch. D., at p. 884, Lord Justice Brett observed, “I should have no objection to be present at the funeral of Sibley v. Perry. See also Coyle v. Coyle, supra, 73 N. J. Eq. pp. 530—531; In Matter of Farmers Loan & Trust Co., supra, 107 N. E., at pp. 342-343; Dixon v. Pendleton, 90 S. C. 8, 72 S. E. 501, 2 A. L. R. 915 (Sup. Ct. 1911); Union Safe Deposit and Trust Co. v. Dudley, 104 Me. 297, 72 A. 166 (Sup. Jud. Ct. 1908); In re Hippel, Hippel v. Hewitt, 2 All. E. R. 476, 479 (Ct. App. 1945); 3 Powell on Real Property, § 360 (1967) ; 5 American Law of Property (A. J. Casner ed. 1952), § 22.38. However, since it was approved in Dennis v. Dennis, supra, and has been applied with little, if any, modification since that time, we incline to the view that any decision as to its continued effectiveness should emanate from our present highest court. In re Hartung, 52 N. J. Super. 508, 511 (App. Div. 1958).

Turning to the cross-appeals seeking the deletion of paragraph 18 from the judgment, we are satisfied and hold that since the question whether the present decision as to the distribution of income was to have a determinative effect in any subsequent action over the distribution of corpus was neither raised nor argued below, and since, in construing the provisions of the trust dealing with income, recourse has been had to the provisions dealing with corpus, no future court, when called upon to interpret identical language as to corpus, should be barred from considering the res judicata effect of fhe present judgment. The issue of whether the adopted children of Louise St. John Halloek Eos or their descendants are eligible to participate in the distribution of corpus was avoided by the trial court as premature, and, of course, we express no opinion thereon. Its reservation for future consideration does not depend upon the presence of paragraph 18.

The judgment of the County Court is accordingly modified to strike therefrom paragraph 18 and, as modified, is affirmed.

        N. J. S. 3A :3A-1 which provides that where provision is made for the benefit of issue and no contrary intention is expressed, such issue shall take per stirpes, is of no assistance since it affects only ihe wills of persons dying after its effective date, May 17, 1952. See In re Moses, 58 N. J. Super. 67 (App. Div. 1959), affirmed 32 N. J. 341 (1960).


source: Caselaw Access Project

author: Leoüstakd, J. A. D.

license: Public Domain

text:
    JALA CORPORATION, A CORPORATION OF THE STATE OF NEW JERSEY, JACK SALL, THEODORE SALL, CARL GELMAN AND JEROME J. GELMAN, AS THEIR INTERESTS MAY APPEAR, PLAINTIFFS-RESPONDENTS, v. BERKELEY SAVINGS AND LOAN ASSOCIATION OF NEWARK, NEW JERSEY, DEFENDANT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Argued January 13, 1969
    Decided February 6, 1969.

      Before Judges Coistfobb, Kilkenny and Leonard.

      Mr. Herman Fast argued the cause for appellant (Messrs. Fast & Fast, attorneys).

      Mr. Paul Seligman argued the cause for respondents (Messrs. Gelman and Gelman, attorneys).
   The opinion of the court was delivered by

Leoüstakd, J. A. D.

After a trial without jury defendant appeals from a judgment entered against it in the sum of $2,820.30 plus interest and costs.

The stipulated facts follow: On March 6, 1964 plaintiff corporation purchased a certain tract of land located in Newark, upon which there was erected a four-story apartment house. In order to finance this purchase plaintiffs gave defendant a mortgage and promissory note' in the amount of $100,000, to run for a 20-year term at 6% interest.

During December 1966 the State of New Jersey, by the Commissioner1 of Transportation (State), filed a verified complaint in the Superior Court, Law Division, Essex County, whereby it sought to condemn the mortgaged property for state highway purposes. Plaintiffs and defendant herein, among others, were made parties defendant to that action. On or about December 22, 1966 the State filed a declaration of taking of the property, wherein it stated that “just compensation for the taking is $152,500.” On December 28, 1966 the State deposited said sum with the Clerk of the Superior Court.

By letter dated December 29, 1966 the State advised plaintiffs and defendant of the aforesaid deposit and their right to make application for the withdrawal thereof. Thereafter, during February 1967 plaintiffs made application to the court for distribution of the funds deposited. Their attorney prepared and sent to all interested parties, including defendant, a form of consent order for signature. At that time, plaintiffs’ and defendant’s attorneys had a telephone conversation in which the latter stated that his client would not sign the order unless plaintiffs guaranteed full payment of its lien out of the disbursed funds. This was agreed to and the attorneys further agreed that the distribution check would be endorsed by plaintiffs and forwarded to defendant’s attorneys so that all liens would be paid therefrom prior to disbursement to plaintiffs. This understanding was confirmed by a letter dated February 10, 1967. Pursuant to this arrangement, all parties, including defendant, signed a consent order giving the State the right to enter and take possession of the property and authorizing the Clerk to pay $152,500 to plaintiffs. Thereafter a check was issued by the Superior Court to plaintiffs, which they endorsed and forwarded to defendant’s attorneys on March 3, 1967.

On or about March 10, 1967 defendant made distribution of the fund. Defendant retained $95,634.37. (Plaintiffs had made the required monthly payments of principal and interest from the original date of the mortgage until the taking by the State.) It paid the second mortgagee the full amount due him, retained $2,000 in escrow for taxes (subsequently paid to plaintiffs) and sent to plaintiffs the sum of $40,445.60. Included in the sum retained by defendant was $470.05 for one month’s interest until the date of payment.

Also included in the funds so retained was the sum of $2,820.30 as a prepayment charge levied against plaintiffs, which defendant asserted it was entitled to collect by reason of the following clause contained in the mortgage:

“It is further understood and agreed that the mortgagors shall have the further right and privilege to make payment of the unpaid balance hereof at any time during the first 5 years of the term hereof, provided there is paid in addition to the amount due hereunder for principal and interest a sum equal to six months’ interest computed on the unpaid balance of said mortgage as a prepayment privilege fee.”

Plaintiffs do not dispute any portion of the distribution made by defendant except its retention of the prepayment charge. When defendant refused to remit this sum they instituted the present action to recover $2,820.30. Following a noirjury trial, upon agreed facts, the trial court entered judgment in favor of plaintiffs and against defendant.

Defendant first contends that it is entitled to the benefit of its executed contract, absolute in its terms, and that the trial court erred in creating an exception that the parties themselves did not include. Defendant argues that through the use of the above-recited prepayment clause the parties agreed that defendant’s funds would remain invested for a period of at least five years. To safeguard this investment it was further agreed that in the event plaintiffs desired to prepay the mortgage during that period they would have to pay the prepayment charge therein set forth. Defendant thus asserts that since the contract does not provide that the prepayment clause was to be ineffective in the event of a taking by eminent domain, the trial court’s determination was inequitable.

On the other hand, plaintiffs assert that the prepayment clause is not applicable to the instant situation because they did not voluntarily exercise any “right” or “privilege” within the meaning of that clause but were required by operation of law to prepay the mortgage.

Preliminarily, it is to be noted that plaintiffs do not challenge the validity of a prepayment clause such as contained in the instant mortgage. The controversy specifically involves the application of the clause, which contained no express provision for the contingency of condemnation of the premises by the State for public use, to a situation where the premises were so condemned within the time period during which the clause calls for a prepayment fee. The issue is novel in this State.

However, the precise question was before the court in Associated Schools, Inc. v. Dade County, 209 So. 2d 489 (Fla. D. Ct. App. 1968), wherein it was held that the mortgagee was not entitled to prepayment penalties but only to the return of its principal and interest accrued until the date of distribution of the proceeds of the condemnation funds. In reaching that conclusion the court relied upon a prior decision of the Supreme Court of Florida, Shavers v. Duval County, 73 So. 2d 684 (1954).

In Shavers the property owned by the mortgagor was taken by eminent domain proceedings and the mortgagee demanded interest for the full period of the mortgage. The court denied the mortgagee’s demand and allowed the mortgagee only accrued interest to the date of the distribution of the condemnation funds. The court said:

“* * * jg uyged by the mortgagee that the mortgage note of which it is the owner specifically states that the note is secured by a mortgage and is subject to all of the covenants contained therein; that the mortgage and note do not contain a stipulation according to the maker the privilege of prepayment; that under the terms of their agreement the mortgagors contracted to pay the principal plus the interest according to the tenor and terms of the mortgage and note for the full period of the mortgage; and that to require the mortgagee to accept less than full interest up to the maturity date of the note and mortgage would amount to an impairment of the obligation of the contract in violation of the State and Federal Constitutions.” (at p. 688) * Hs $ * He H'- He *
“The protection against the impairment of the obligation of the contract is no greater than other guarantees contained in the Constitution * *. These freedoms and rights are not absolute — each of them is subject to lawful restraints and limitations. * * * Absolute freedom and liberty to own or acquire property would ignore the police power which restrains the nse of property and the other right of eminent domain by which private property is acquired for public, use. There is no such thing under our constitutional system of government as absolute liberty or freedom, without limitation and restraint.” (at pp. 689-690; emphasis added) >.* * * * * »
“It would be unfair and contrary to the principles of equity and good conscience for the mortgagee to have the principal of the note and the free use and enjoyment thereof and at the same time require the mortgagor or the condemnor to pay it interest on that same principal for no other reason than that a naked legal provision of the note and mortgage, at the time it was executed, required that the mortgagor should do so.” (at p. 691)
“Even though the security for the payment of its note is changed by operation of law, there has been no impairment of its contract. Full value for the land taken has been paid. It [the mortgagee] must, look to the money instead of the real estate. Such terms and conditions were not provided for in the mortgage deed but all the provisions of the Consiitution and the Statutes existing at the time the mortgage and note were executed were a part of the contract and it knew that such a change in the contract might be brought about by reason of eminent domain proceedings, as provided for under the law. If this constituted an impairment of the obligation of the contract, then the impairment was provided for in the Constitution and (he laws.” (at p. 692; emphasis added)

Another case of persuasive influence is Chestnut Corp. v. Bankers Bond & Mortgage Co., 395 Pa. 153, 149 A. 2d 48, 70 A. L. R. 2d 1331 (Sup. Ct. 1959). In that case a rider attached to a long-term bond and mortgage stipulated that the mortgagor should have the right to prepay the entire principal debt during the third, fourth and fifth years of the term, provided that there should also be paid accrued interest to the date of payment and in addition a sum equal to 2% of the amount of principal so paid. Two years and some eight months after the execution of the mortgage the building on the premises was completely destroyed by fire. The building had been insured against loss by fire, with the proceeds payable to the parties as their interest might appear. Thus, the insurance company paid the mortgagee its principal debt, accrued interest and in addition a sum of $5,491.31, representing 2% consideration for prepayment of the principal mortgage debt. The court, in holding that the mortgagee was not entitled to the prepayment bonus or penalty, said:

“The mortgagee was paid the entire unpaid principal balance of the mortgage plus accrued interest not because of any desire on the part of the plaintiff to prepay the debt, nor in compliance with the exact terms of the Rider, but solely because of the fire and the provisions with respect thereto in the fire insurance policies. * * *
Neither the bond.nor the mortgage specifically or expressly provides for the exact situation which has arisen, namely, a prepayment of the entire principal loan with interest during the premium period, due not to a voluntary election of prepayment but to a fire. If defendant (the obligee-mortgagee) believed it should be entitled to the premium under these circumstances it could easily and should have so provided in the bond and/or mortgage. In the absence of such a provision we believe that defendant who received the entire unpaid principal and accrued interest of its mortgage is not entitled to the prepayment premium.”

We agree with the logic of and the conclusions reached in the three above-cited cases, and we regard the analogy of the Pennsylvania case as pertinent to the present situation. Thus, in the instant case we find that plaintiffs did not voluntarily exercise any “right” or “privilege” to prepay the unpaid balance of the mortgage, as was contemplated by the prepayment clause contained in the mortgage. Bather, the mortgagee was prepaid by reason of the fact that the State pursuant to its paramount right of eminent domain took the property for public use. As a result of this action by the State the mortgagor’s fee interest in the premises and the mortgagee’s lien thereon were destroyed, and by operation of law both were transmuted to a present right to the funds deposited by the State with the clerk of the court. We cannot construe the language of the prepayment clause to make it applicable to the instant situation. Bather, we hold that the parties in inserting this clause did not contemplate a taking of the premises by eminent domain. As was said in Chestnut Corp., supra, “If defendant (the obligee-mortgagee) believed it should be entitled to the premium under these circumstances it could easily and should have so provided in the bond and/or mortgage. In the absence of such a provision we believe that defendant who received the entire unpaid principal and accrued interest of its mortgage is not entitled to the prepayment premium.”

Defendant’s argument that plaintiffs exercised “the right and privilege” of prepayment by making application for and by withdrawing the funds from court is without merit. The record indicates that although the application for withdrawal was made by plaintiffs as the record owners of the premises, the funds were actually withdrawn by the joint efforts of plaintiffs and defendant. Pursuant to prior arrangements, defendant signed the consent order for payment of the funds; the State’s draft received by plaintiffs was immediately endorsed to the order of defendant. Defendant then cleared it and made distribution of the proceeds thereof and promptly cancelled its mortgage. Since the State required payment and discharge of defendant’s lien as a prerequisite to the withdrawal of its deposit, these funds would not have been paid without defendant’s consent.

Pierce County v. King, 47 Wash. 2d 328, 287 P. 2d 316 (Sup. Ct. 1955), relied upon by defendant, is inapposite. That case involved a vendor-vendee relationship under an executory land contract. Further, the contract did not contain a prepayment clause and the vendors were only claiming interest “for the remaining life of the contract.” In any event, it is worthy of note that the court therein by way of final determination gave the vendors the election of (a) taking the balance of the purchase price (which was on deposit with the registry of the court) “in a lump sum, and no more” or (b) leaving such sum in the registry together with the disputed interest, and being paid monthly principal and interest installments in accordance with the terms of the contract, until the entire sum on deposit was thus disbursed.

For the respective rights of a vendor and a vendee where premises that are under an executory contract of sale are taken by eminent domain, see State v. New Jersey Zinc Co., 40 N. J. 560 (1963); Delancey & Stockton Corp. v. Reliable & Co., 134 N. J. Eq. 71 (E. & A. 1943); Von Waldheim v. Englewood Heights Estates, Inc., 115 N. J. L. 220 (E. & A. 1935); Hartman v. Church Construction Co., 101 N. J. Eq. 512 (Ch. Div. 1927).

Defendant next contends that the prepayment charge may be considered as a loss incidental to the condemnation proceedings and therefore plaintiffs could have recovered the amount thereof from the State as part of their just compensation. This point is frivolous. When premises are taken by eminent domain the owner thereof is entitled to be paid “the fair market value” thereof. Trenton v. Lenzner, 16 N. J. 465, 475-476 (1954). A prepayment charge as here claimed is not a factor to be considered in arriving at fair value nor is it an element of damage incidental to the taking. Knoxville Housing Authority, Inc. v. Bush, 56 Tenn. App. 464, 408 S. W. 2d 407 (Ct. App. 1966).

Those having interest in the property less than ownership or claims arising by reason of the condemnation can only be compensated by appropriate division of the fund thereby created, to the extent to which they are entitled. Sucli claimants may not receive separate and additional compensation. State v. New Jersey Zinc Co., supra, 40 N. J., at p. 574. To allow plaintiffs this additional sum for the purpose of paying it over to defendant as a prepayment fee would be indirectly allowing defendant separate compensation above the fair value of the property.

Judgment affirmed.


author: Per Curiam.

text:
    ROBERT E. WILLIAMS, PLAINTIFF-APPELLANT, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, A CORPORATION OF THE STATE OF ILLINOIS, DEFENDANT-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued January 20, 1969
    Decided February 18, 1969.

      Before Judges Coneoed, Kilkenny and Leonard.

      Mr. Charles L. Morgan argued the clause for appellant.

      Mr. Ralph W. Campbell argued the cause for respondent (Messrs. Campbell, Mangini, Foley, Lee and Murphy, attorneys).
   Per Curiam.

The judgment entered herein is affirmed substantially for the reasons stated by Judge Salvest in the Law Division, 99 N. J. Super. 377 (1968).

Additionally, the insurance policy issued by defendant under “Definitions” provides: “Damages— wherever used with respect to coverage A [Bodily Injury Liability] includes damages for care and loss of service,” (Emphasis added). This definition clearly establishes that a husband’s per quod claim is included in the $25,000 policy limitation “for all damages arising out of bodily injury sustained by one person in any one accident * *


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

text:
    MANHATTAN TRAILER COURT AND TRAILER SALES, INC., A NEW JERSEY CORPORATION, PETITIONER-RESPONDENT, v. TOWNSHIP OF NORTH BERGEN IN THE COUNTY OF HUDSON, A TAXING DISTRICT OF THE STATE OF NEW JERSEY, RESPONDENT-APPELLANT, AND DIVISION OF TAX APPEALS IN THE DEPARTMENT OF THE TREASURY, RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued February 3, 1969
    Decided February 19, 1969.

      Before Judges Sullivan, Poley and Lewis.

      Mr. Nicholas 8. 8chloeder argued the cause for respondent-appellant.

      Mr. Leo Rosenblum argued the cause for petitioner-respondent.
   The opinion of the court was delivered by

Sullivan, S. J. A. D.

This appeal involves the issue whether house trailers (mobile homes) parked in a trailer camp are taxable as real property. The Division of Tax Appeals ruled that, on the facts presented, the trailers were not permanently affixed to the realty and were not taxable as improvements on real property. The township has appealed this ruling. Por reasons hereinafter detailed, we affirm the Division ruling.

Manhattan Trailer Court and Trailer Sales Inc. (Manhattan), petitioner herein, is the owner of a two-acre tract of land in the Township of North Bergen. The litigation involves that part of the tract on which Manhattan operates a trailer court containing spaces for some 50 house trailers. The spaces are rented on a daily, weekly or monthly basis and have utility connections for sewer, water, electricity and telephone.

House trailers are fitted with wheels and are towed by another vehicle to which they are coupled or hitched. While traveling over public roads they are subject to motor vehicle laws and are required to display a trailer license.

When a trailer parks in an assigned space in petitioner’s trailer court, it is stabilized with blocks or jacks. (None is on permanent foundations.) Then the utilities are connected. (Every trailer has plug-in and hook-up facilities for the utilities.) The overall operation takes about an hour. To leave the trailer court the process is reversed in the same length of time.

In all cases the wheels remain on the trailers. However, the owners of trailers staying an appreciable length of time sometime put a cloth or metal curtain around the bottom of the trailer to add to its appearance by concealing the wheels and stabilizers and also provide a storage space.

With the exception of one or two of the trailers parked in the court by Manhattan in connection with its trailer sales operations, the remaining trailers are owned by their occupants.

Of the 4? trailers occupying the court at the time the appeal was heard, six or seven rented on a daily basis and were considered transients. Half of the remaining 40 trailers were there less than a year. The remaining trailers have been there for varying periods of time of more than a year, with one or two of them having stayed eight or nine years, and one 11 or 12 years. Except for the transients, most of the persons living in the trailer court are registered voters in the municipality.

The township contends that the present type of house traihu- is so substantial in nature that when parked in a trailer camp, stabilized, and connected to the utilities, it can be said to be permanently affixed to the land. It is also contended that the length of time a given house trailer remains in a court evidences an “animus manendi” and is a material factor to be considered in resolving the question presented.

No one can quarrel with the proposition that house trailers should pay their fair share of the cost of the municipal services which they enjoy. The problem is in deciding how such share can best be determined and payment thereof enforced.

In New York by statute (Real Property Tax Law, Consol. Laws, c 50-a), trailers or mobile homes have been classified as real property in order to overcome earlier court decisions that they could not be taxed as real property. Pennsylvania has attempted to solve the problem via a statutory amendment which provides for the taxing of house trailers permanently attached to the land. See Annotation, “Taxation, as real estate, of trailers or mobile homes”, 86 A. L. R. 2d 277 (1962). Some jurisdictions levy a personal property tax on house trailers.

It has been suggested that there are too many administrative difficulties involved in attempting to tax house trailers as real or personal property and that a sounder solution of the problem lies in imposing a license or franchise tax on trailer courts, or collecting an occupancy or parking fee from trailer occupants on a daily, weekly or monthly basis. For a general discussion of the subject see: “Towards An Equitable and Workable Program of Mobile Home Taxation”, 71 Yale L. J. 702 (1962); see also, 48 Iowa L. Rev. 16, 50-57 (1962).

The present real estate tax statute in New Jersey contains the provision that “all real property shall be assessed * * N. J. S. A. 54:4-23.

Under the statute structures so integrated with the land as to constitute a part of the realty are taxable as such. Becker v. Little Ferry, 125 N. J. L. 141 (Sup. Ct. 1940), affirmed 126 N. J. L. 338 (E. & A. 1941). Therefore the question is whether the house trailers involved, under the facts and circumstances presented, are to be considered as permanent structures on the real property.

We are satisfied that the uncontroverted proofs, heretofore detailed, amply support the Division’s finding that these trailers are not permanently affixed to the realty within the meaning of our real estate tax statute and may not be taxed as real property.

Affirmed.


text:
    STATE BOARD OF MEDICAL EXAMINERS OF NEW JERSEY, PLAINTIFF-RESPONDENT, v. WARREN HOSPITAL, A NEW JERSEY CORPORATION, DEFENDANT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Argued February 13, 1969
    Decided February 21, 1969.
    Before Judges Goldmann, Kolovsky and Carton.

      Mr. James A. Tirrell, Jr. argued the cause for appellant.

      Mr. Howard M. Kaplan, Deputy Attorney General, argued the cause for respondent {Mr. Arthur J. Sills, Attorney General, attorney; Mr. Stephen Slcittman, Deputy Attorney General, of counsel).
   Per Curiam.

The judgment is affirmed substantially for the reasons expressed in Judge Bry-Nildsen’s opinion reported in 102 N. J. Super. 407 (Cty. D. Ct. 1968).


author: Wick, J. S. C.

text:
    CHARLES F. WILLIS AND ALLSTATE INSURANCE COMPANY, PLAINTIFFS, v. SECURITY INSURANCE GROUP, DEFENDANT.
    Superior Court of New Jersey Chancery Division
    Decided January 19, 1968.

      Mr. Michael Patrick King for plaintiffs (Messrs. Kisselman, Devine, Deighan & Montano, attorneys).

      Mr. Michael A. Orlando for defendant {Messrs. Orlando & Cummins, attorneys).
   Wick, J. S. C.

This is a declaratory judgment action brought by Charles F. Willis and his carrier Allstate Insurance Company for a declaration of the rights of the parties relating to certain automobile liability policies. The facts are as set forth below.

This dispute arises out of an automobile accident occurring on August 31, 1964 on Nicholson Road in the Borough of Audubon. The vehicle, a 1964 Ford, operated by Willis, was owned by Ruffu Ford, Inc., an Atlantic City automobile dealer. The vehicle carried Ruffu Ford, Inc.’s dealer’s tags and Willis was operating it with the permission of Robert W. White, the general sales manager of Ruffu Ford. At the time of the accident there were two liability policies in effect. Allstate had issued a “Crusader” policy which was a standard $10,000/20,000 automobile liability policy in favor of Willis. This policy covered, among other things, all cars owned by Willis and driven by him or by anyone with his permission. It also extended coverage to Willis’ driving of “non-owned” vehicles. However, if there was other insurance available with respect to nonowned vehicles, Allstate’s policy was to be only “excess insurance” over any other collectible amounts. Allstate contends that the garage liability policy issued by Security in favor of Rufiu is available to protect Willis and therefore Allstate’s coverage in this situation is excess only. The Security policy in Endorsement No. 4 specifically excludes from its omnibus clause individuals driving the insured’s car with his permission where such persons have available valid and collectible insurance under their own policies with the minimum limits of $10,000/-20,000. Security therefore contends that since Willis’ policy with Allstate covered nonowned vehicles, it was not responsible for coverage in the accident of August 31, 1964.

It is the contention of Allstate Insurance Co. that the limitation in defendant’s omnibus clause, as set forth above, is void as against the polie3r of this State in regard to the financial responsibility laws for automobile owners and drivers. In the alternative, Allstate contends that even if this clause is valid, Security is liable under its policy because Willis’ use of the Ruffu automobile was “in the automobile business,” a use specifically excluded from coverage by Allstate’s polúrjr, thus negating the condition for non-liability under the Security policy, namely, availability of valid collectible insurance under the driver’s own policy.

Since a determination of whether or not Willis was operating the Ruffu automobile “in the automobile business” ma,j obviate the necessity of delving into the validity or non-validity of defendant’s Endorsement No. 4, the Court will make that determination first.

The stipulated facts and depositions indicate that the vehicle in question was being used as a demonstrator at the time of the accident. Allstate contends that such use was a “use in the automobile business by the insured” and therefore specifically excluded from coverage by the policy. If that exclusion applies to Willis in this situation, Security would be liable whether Endorsement No. 4 is valid or not. Plaintiff Allstate cites the case of LeFelt v. Nasarow, 71 N. J. Super. 538 (Super. Ct. 1962), affirmed per curiam 76 N. J. Super. 576 (App. Div. 1962), certiorari denied LeFelt v. Aetna Insurance Company, 39 N. J. 86 (1963), in support of its position. That case involved the use of a vehicle in the process of being repaired by a part-time repairman on a test run by the repairman to determine whether the car was roadworthy. It was during this test run that the ear was involved in an accident. In holding that the use was not “in an automobile business” within the moaning of an exclusion identical to that in the instant case, the court heavily relied upon the Washington case of McCree v. Jenning, 55 Wash. 2d 725, 349 P. 2d 1071 (Sup. Ct. 1960). The McCree case considered in detail the precise meaning of the exclusionary language and was acknowledged as strongly authoritative by the New Jersey court. The court in that case stated:

“It would appear evident, therefore, that an automobile ‘used in the automobile business,’ would bo one which was employed for some purpose in connection with that business. For example, * * * an automobile used for demonstration purposes, * * * would be ‘used in the business’.”

All state contends that this statement clearly fits the situation in the ease at bar and that it is therefore not liable. The court interprets the McCree statement to be inapplicable to the facts at hand. The specific language of the exclusionary clause in the instant case states that the insured is not covered when driving a “n on-owned automobile while used in an automobile business by the insured.” The insured here was not using the demonstrator in an automobile business. He was merely making use of a car furnished to him by someone using it in the automobile business. It goes without saying that Willis would have been covered were he driving an automobile borrowed from a friend. For all practical purposes, use of a demonstrator amounts to nothing more than borrowing the car from a dealer rather than a friend. Can there be any valid justification for distinguishing between the two so far as coverage is concerned? The court thinks not. Certainly, the insurance risk would be no different in either case. At the same time, it stands to reason that the purpose of having an “automobile business” exclusion is to protect the company against the greater risks involved in that business than in normal everyday use of a car.

The court is aware of the Florida case of Hodapp v. Shelby Mutual Ins. Co., 166 So. 2d 772 (App. Ct. 1964), which holds that the prospective purchaser driving a demonstrator is using it in the automobile business. However, it is the court’s opinion that the better reasoning is to the contrary. The true meaning of the exclusionary clause is that it would exclude a dealer or the agent of a dealer if they were insured under the Allstate policy while driving nonowned vehicles in the operation of their business, but it would not exclude a prospective purchaser who is, in effect, operating it for his own benefit.

Having reached this conclusion it becomes necessary to determine the validity of the Endorsement No. 4 of Security’s policy. For if this endorsement is valid, Allstate must be primarily liable for the accident in question should Willis be found negligent in that cause. Allstate claims that since Endorsement No. 4 limits coverage under the omnibus clause of the policy to persons driving the insured’s autos with his permission who do not have insurance coverage of their own, this clause is void as against the public policy of this State. In support of this position Allstate cites the recent case of Selected Risks Insurance Company v. Zullo, 48 N. J. 362 (1966). In that case an insurance company attempted to limit coverage under its omnibus clause such that persons who drove an insured’s car with his permission were protected only if they deviated in no way from the scope of that permission. After discussing the history of the Financial Responsibility Law requiring that persons registering their automobiles must prove financial responsibility either in the form of insurance or by paying an additional registration fee, the Supreme Court of this State decided that the policy behind this law was to be assured of “having financially responsible persons available to meet the claims of persons wrongfully injured in automobile accidents” (at p. 371). Limiting an omnibus clause which in any way obstructed this policy would be declared invalid.

Were this as far as the court went in Zullo, the limitation of coverage under the omnibus clause in the instant case might well be upheld. Dor a ruling in favor of Security would in no way deprive persons wrongfully injured from having “financially responsible persons available,” nor would they go uncompensated. Indeed, Security’s omnibus clause only disclaimed coverage if the permitted driver was covered under his own policy, and then only to the limits of that coverage. However, in ruling that the limited omnibus clause in Zullo was invalid, the court went much further than a mere statement of policy. It emphasized the point that this policy dictated that “there may be no departure from the omnibus coverage described in section 46 of the Security-Responsibility Act, * * (at p. 374)

The court further stated :

“A policy * * * must have the broad form omnibus coverage set forth in N. J. S. A. 39:6-46(a). A policy which purports to have a more restrictive omnibus coverage is automatically amended to conform to the statutory standard.” (at p. 373)

N. J. S. A. 39:6-46 (a) specifically requires that a policy shall “insure the insured named therein and any other person using or responsible for the use of any such motor vehicle with the express or implied consent of the insured, * * (Emphasis supplied)

In light of the foregoing facts and circumstances the court has no alternative then but to hold Endorsement No. 4 invalid and to rule that Security Insurance Company is nrimarily liable under the policy issued by it to Ruffu Dord.


author: Herbert, J. S. C.

text:
    EVA CREGO AND ANTHONY J. CREGO, PLAINTIFFS, v. GLORIA MONFILETTO, INDIVIDUALLY AND AS ADMINISTRATRIX OF THE ESTATE OF JAMES V. BERGONZI, ERNEST MONFILETTO, RITA HAYNES, ALSO KNOWN AS RITA HAYES, FRANK HAYNES, ALSO KNOWN AS FRANK HAYES, JAMES McCARTHY, MRS. JAMES McCarthy, ANTHONY D’URSO, UNITED BONDING INSURANCE CO. AND U. S. INTERNAL REVENUE SERVICE, DEFENDANTS.
    Superior Court of New Jersey Chancery Division
    Decided—January 24, 1969.

      Mr. Frank A. Palmieri, attorney for plaintiffs {Mr. Ralph A. Yacavino appearing).

      Messrs. Beninati & La Morte, attorneys for defendants Gloria Monfiletto and Ernest Monfiletto {Mr. Salvatore J. Beninati appearing).
   Herbert, J. S. C.

This is a suit for partition. James V. Bergonzi died February 1, 1965 without leaving a will. At death he owned an undivided one-half interest in a parcel of real estate located partly in East Orange and partly in Orange. He had no wife and no children, but was survived by a brother, several sisters and several nieces and nephews who were the children of a deceased sister.

Descent of the real estate of James Bergonzi is governed by N. J. S. 3A :4-4, which reads as follows:

“If there be no husband or widow, the intestate’s property, real and personal, shall descend and be distributed equally among the children and such persons as legally represent any child who may have died; and if there be no child, nor any legal representative of any child, then equally among the parents and brothers and sisters, and the representatives of deceased brothers and sisters.”

Applying this statute to the facts thus far stated would present no difficulties; however, there is a special problem in the case. Two of James nieces, daughters of his dead sister, were adopted some years ago by Joseph and Angelina Bergonzi, the parents of James and the grandparents of the girls. As a result, did each of the girls inherit as a sister of James? That is the question now to be answered.

Our statute dealing with the rights of inheritance of an adopted child is N. J. S. A. 9:3-30 (L. 1953, c. 264). A minor amendment which took effect after James died, L. 1966, c. 196, is not important here. The pertinent statutory language is:

“A. The entry of a judgment of adoption shall terminate all relationships between the child and his parents, and shall terminate all rights, duties and obligations of any person which are founded upon such relationships including rights of inheritance under the intestate laws of this State; * * ®.
B. The entry of a judgment of adoption shall establish the same relationships, rights, duties and obligations between the child and the adopting parent as if such child were born to such adopting parent in lawful wedlock. In applying the intestate laws of this State, an adopted child shall have the same rights of inheritance as if horn to the adopting parent in lawful wedlock. * * *”

Tlie sentence I liave underlined is the significant one. Plaintiff argues it should be construed to apply solely to rights of inheritance between the adopted child' and adopting parents. I think there is no support for such argument in the wording of the statute; and it would have been a simple matter to make clear that inheritance between parent and child was all that was meant, if that had been the meaning. Moreover, Palmer v. Kingsley, 27 N. J. 425 (1958) held N. J. S. A. 9:3-30(B) applicable to the relationship between adopted children and the mother of the adopting parent, thereby recognizing that the statute goes beyond the limited scope for which plaintiff is now contending. Palmer was a tax case in which the testatrix made substantial bequests to her daughter’s adopted children. The Division of Taxation assessed inheritance tax at the 8% rate appropriate for unrelated beneficiaries and refused to use the 1% rate provided for transfers to a child “or the issue of any child.” N. J. S. A. 54:34-2. After pointing out that the problem was one of legislative construction rather than interpretation of a will, the court quoted from N. J. S. A. 9:3-30(B) and said:

“This language leaves no doubt as to the Legislature’s intention to confer upon an adopted child the same status which is conferred upon a natural child by our statutes regulating the transfer of a decedent’s property. Equal status comprehends equal treatment in regard to the incidence of taxation upon all such transfers. The conclusion is inescapable that the Legislature intended that an adopted child be included within the meaning of the word ‘issue’ as it appears in the Transfer Inheritance Tax Act.” (at p. 431)

On the basis of the legislative language as well as the authority of Palmer v. Kingsley, supra, I conclude that the statute created for these two daughters of James’s deceased sister the same status under our intestate laws as though they had been born his sisters. Consequently, each of them inherited from him as a sister under N. J. S. 3A :4—4. Also, by being adopted each of them lost the right to the inheritance which she would otherwise have been entitled to as a niece of James. N. J. S. A. 9:3-30(A).

There is in 43 A. L. R. 2d 1183 et seq. (1955) an annotation entitled “Right of adopted child to inherit from kindred of adoptive parent.” Authorities from other jurisdictions are collected there. The author makes it clear that many courts have held particular adoption statutes do not confer the right to inherit from kindred of the adopting parent. However, a number of courts have recognized such a right under statutes reasonably comparable to our own: Riley v. Day, 88 Kan. 503, 129 P. 524, 44 L. R. A., N. S. 296 (Sup. Ct. 1913); Kolb v. Ruhl’s Adm’r, 303 Ky. 604, 198 S. W. 2d 326 (Ct. App. 1946); Re Cadwell, 26 Wyo. 412, 186 P. 499 (Sup. Ct. 1920); In Re Nelson’s Estate, 266 Wis. 617, 64 N. W. 2d 406 (Sup. Ct. 1954); McIntyre v. Hardesty, 347 Mo. 805, 149 S. W. 2d 334 (Sup. Ct. 1941).


author: Wick, J. S. O.

text:
    SEABROOK FARMS, INC., PLAINTIFF, v. COMMERCIAL INSURANCE COMPANY OF NEWARK, N. J., DEFENDANT.
    Superior Court of New Jersey Chancery Division
    Decided February 5, 1969.

      Mr. Samuel P. Orlando for plaintiff (Messrs. Orlando & Cummins, attorneys).

      Mr. Peter J. Devine, Jr. for defendant (Messrs. Kisselman, Devine, Deighan & Montano, attorneys).
   Wick, J. S. O.

This is a declaratory judgment action in which the insured, Seabrook Farms, Inc. (hereinafter Sea-brook), seeks a determination that the insurer, Commercial Insurance Company of Newark, N. J. (hereinafter Commercial) was not legally justified in cancelling Seabrook’s insurance policy because of alleged nonpayment of premiums where, in fact, Commercial’s agent failed to remit such premiums. By its counterclaim Commercial seeks payment of $25,000, which it claims is the portion of the premium chargeable to Seabrook.

Based on the evidence presented at trial I find the relevant facts to be the following: From 1960 to 1966 Parkwood Company (hereinafter Parkwood), an insurance brokerage company incorporated in New Jersey, was authorized by Sea-brook to secure virtually all types of its insurance coverage. John Apgar, the president and chief stockholder of Park-wood, handled Seabrook’s insurance matters with the carriers through Donald G. McAllister, the general manager of Seabrook. It also appears from the testimony that at various times during the 15-year period prior to 1960 Apgar’s relationship with the Seabrook enterprise had been that of insurance advisor, insurance broker, executive, and even assistant to the president.

In April 1966 Apgar and McAllister held discussions regarding the expiration on May 1, 1966 of a three-year comprehensive business insurance policy held by Transamerica Insurance Company and which had been procured by Apgar. At this time McAllister instructed Apgar to secure proper insurance coverage in a company other than Transamerica. Soon thereafter Apgar informed McAllister that it would be necessary to have a check for $15,000 as an advance on premiums because some of the prospective insurers wanted some security in light of the financial difficulties one of the Seabrook subsidiaries was experiencing. Thus, on April 38, 1966 Seabrook issued to Apgar a check for $15,000 payable to Parkwood for “Advance on Policies — Dwellings, Liability, and Eire.” In this regard Apgar contacted several insurance íarriers who declined to insure Seabrook; however, he did manage to get Selected Risks to assume temporary coverage from May 1, 1966 to June 10, 1966.

On June 3, 1966 Seabrook sent a second check to Apgar in the amount of $10,000, also payable to Parkwood as an advance on premiums. I have concluded from the evidence that it was on or about June 7, 1966 that Commercial had its first indirect contact with either Parkwood or Seabrook. At that time Commercial, through one of its agents other than Parkwood, agreed to accept the coverage of Seabrook subject to the approval of the underwriting committee. On June 10, 1966 Commercial issued a temporary binder, and on the same date Apgar was designated as an authorized agent for Commercial (as evidenced by a certificate to this effect filed with the New Jersey Commissioner of Banking and Insurance). Commercial extended its binder until December 5, 1966, at which time it issued the comprehensive business policy which is the subject of this suit. Commercial sent the policy to Apgar by mail, and he hand delivered the policy to McAllister on December 7, 1966, together with an invoice for $60,000, the total premiums for three years. MeAllister drew a check payable to Parkwood Company in the amount of $35,000 which, added to the $25,000 already advanced by Seabrook, constituted payment in full of the premium due. Apgar gave a receipted bill to McAllister.

None of the check payments made by Seabrook to Park-wood was transmitted to Commercial. Consequently, on June 27, 1967 Commercial notified Seabrook that the policy was being cancelled for nonpayment of premiums. Several days later Commercial reinstated the policy on a mutual agreement between Seabrook and it, but it has continued to hold Seabrook liable for $25,000 of the premiums while recognizing that it would be responsible for $35,000 of them.

Seabrook takes the position that Parkwood, through its agent John Apgar, was either the agent or broker of Commercial; that as such Parkwood was authorized by Commercial to deliver the business insurance policy to Seabrook; that the delivery of the policy gave Parkwood the authority to collect the premium; that Seabrook did in fact make three premium payments to Parkwood in checks in the amount of $15,000, $10,000 and $35,000, respectively, and that therefore Commercial received .full payment of the premium. As support for this proposition Seabrook relies on decisions in several jurisdictions and on N. J. 8. A. 17: 22-6.2a, which deal with the authorization entitling an agent or broker to receive insurance premiums on behalf of an insurer.

Defendant Commercial, on the other hand, concedes liability with respect to the premium payment made to Park-wood on December 7, 1966, but it argues that the two previous payments of April 28 and June 2, 1966 should not be charged to it because no principal-agent or insurer-broker relationship existed at those times. Commercial maintains its position, whether Parkwood is determined to be an agent or a broker. See N. J. 8. A. 17 :22-6.1 and 17:22-6.2.

Under common-law principles of agency, when an insurer entrusts an insurance policy to an agent for the purpose of delivering the policy to and collecting the premiums from the insured, the insured’s payment of such premiums to the agent is deemed payment to the insurer. Reck v. Prudential Ins. Co., 116 N. J. L. 444 (Sup. Ct. 1936); 44 C. J. S. Insurance § 272, p. 1084. Moreover, the mere delivery of the policy to the agent is generally held to establish the agent’s implied or apparent authority to collect the premium for the insurer. Bohlinger v. Ward & Company, 34 N. J. Super. 583, 591 (App. Div. 1955); Appleman, Insurance Law and Practice, § 7985, p. 236. Thus where an insurance company enabled the party to solicit and deliver automobile, fire and liability policies, the court held that the party had the appearance of an agent authorized to collect the premiums; therefore, the company would be liable to the insured for the unearned premiums on a cancelled policy, notwithstanding that it did not receive the premiums which had been paid by the insured to the agent. Zriny v. Hartford Fire Ins. Co., 10 N. J. Misc. 181, 158 A. 430 (Sup. Ct. 1932). Similarly, where the insurer entrusts a broker with a policy which is to be delivered to the insured, New Jersey courts charge the insurer with responsibility for the premiums. Mt. Vernon Fire Ins. Co. v. Gillian, 95 N. J. Super. 279 (App. Div. 1967).

In the present case neither the foregoing rules nor the authorities relied upon by plaintiff in support of its position are dispositive of the issue in question. Here the issue involves the alleged liability of the insurer, Commercial, for premimus paid to the agent Parkwood prior to the delivery of any insurance policy or binder and prior to any acts establishing a principal-agent relationship between Parkwood or Apgar and Commercial. On the other hand, in all the cases cited by plaintiff in its brief the facts or events (i. e., delivery of the policy, designation of person as registered agent of insurer), which gave rise to the agent’s implied or apparent authority to receive the premiums, preceded the actual or constructive receipt of payment by the agent. Zriny v. Hartford Fire Ins. Co., supra; Transcontinental Oil Co. v. Atlas Assurance Co., 278 Pa. 558, 123 A. 497 (Pa. Sup. Ct. 1924); Pearl Assurance Co. v. National Ins. Agency, 150 Pa. Super. 265, 28 A. 2d 334 (Pa. Super. Ct. 1942) ; Norwalk Tire & R. Co. v. Manufacturers’ Casualty Ins. Co., 145 A. 44 (Conn. Sup. Ct. Err. 1929); Hartford Accident and Indemnity Co. v. Cooper Park Development Corp. (unreported, U. S. Dist. Ct. N. J. 1948); Mt. Vernon Fire Ins. Co. v. Gillian, supra. Accordingly, the insurer’s responsibility for premiums is prospective in point of time from the creation of the agency relationship. The agency does not operate retroactively so as to charge an insurer for any monies received by the agent from the insured prior to the date which the agency was effective.

Based on these generally accepted principles of actual and apparent authority, cf. Restatement, Agency 2d, §§ 7, 8 (1958), I hold that Commercial did not authorize Parkwood or Apgar to collect any premiums prior to June 10, 1966 because I find no evidence of a principal-agent relationship before that date. The check payments sent to Parkwood on April 28 and June 2, 1966 should be charged against Sea-brook. However, the check payment made December 7, 1966 should be charged to Commercial.

Plaintiff urges that N. J. S. A. 17:22-6.2a (L. 1966, c. 50, § 1) compels a different result. This statute provides the following:

“Any insurer which delivers in this State to any insurance broker a contract of insurance (other than a contract of life insurance, or life, accident or health insurance) pursuant to the application or request of such broker, acting for an insured other than himself, shall be deemed to have authorized such broker to receive on its behalf payment of any premium which is due on such contract at the time of its issuance or delivery or payment of any installment of such premium or any additional premium which becomes due or payable thereafter on such contract, provided such payment is received by such broker within 90 days after the due date of such premium or installment thereof or after the date of delivery of statement by the insurer of such additional premium.”

As pointed out in Mt. Vernon Fire Ins. Co. v. Gillian, supra, at p. 283, the statute is a codification of existing New Jersey common law. Accordingly, the reasoning set forth previously with respect to the absence of an insurer’s responsibility for payments received by the agent prior to the creation of an agency relationship should be applicable here.

The only other case construing the above New Jersey statute is Kubeck v. Concord Insurance Co., 103 N. J. Super. 525 (Ch. 1968); but that case is distinguishable from the instant one. There Kubech, the insured, sought a judgment to compel Concord Insurance Company to reinstate an automobile liability policy which had been cancelled for alleged nonpayment of premiums. According to the findings of fact, Kubech went to the office of the insurance broher in July 1966. At that time one of the principals of the broher age company indicated that he would place the insurance with Concord. Subsequently Concord issued the policy to Kubech through the broher, who delivered it but did not attach an invoice. In late August the broher billed Kubech, who sent the premium payment, but the payment was never remitted to Concord. Thus, Concord sent a notice of cancellation to Kubech on October 6, 1966.

Judge Matthews held that the cancellation of the policy was void and unenforceable for the reason that under N. J. S. A. 17:22-6.2(a) the insurer is charged with receipt of a premium where the broher is entrusted with the delivery of the policy to the insured and, under the avowed practice of the insurer, was responsible for the collection of the premium from Kubech and the payment of same to the insurer. With respect to the purpose of the statute the court pointed out:

“* * * N. J. S. A. 17:22-6.2a, was enacted to protect the insurance buying public from tbe misappropriation, conversion, or other misconduct of an insurance broker in those instances where an insurer uses the broker to effect the delivery of the policy of insurance and to collect the premiums due for it. The statute clearly creates a principal-agent relationship between the insurer and the broker in those instances where the insurer uses the broker to deliver a policy of insurance and collect and remit premiums due thereon.”

Measured against the statutory policy, the facts in the instant case show that Seabrook was in a better position than Commercial to protect itself against misappropriation since it had prior dealings with Parkwood and Apgar for a number of years and had advanced Parkwood $25,000 before Commercial had any contact with any of these persons.

The case of Zak v. Fidelity Phenix Ins. Co., 58 Ill. App. 2d 341, 208 N. E. 2d 29 (App. Ct. 1965), affirmed on other grounds, 34 Ill. 2d 438, 216 N. E. 2d 113 (Sup. Ct. 1966), is distinguishable from the instant case because it did not involve payments made by a prospective insured to one who subsequently established a broker or agent relationship with the insurance carrier. A case which is more on point is Lezak v. National Grange Mutual Ins. Co., 233 N. Y. S. 2d 607 (Sup. Ct. 1962). There the insurance company issued an automobile policy to the insured through a licensed insurance broker in December 1957. The policy was renewed in December 1958 through the broker. Then, in November 1959, the insured sent a cheek to the broker in the amount of the premium for a second renewal (starting December 1959). The broker never paid the last premium to the insurance company; consequently, the policy was cancelled in February 1960. Plaintiff sued for a judgment, declaring his insurance policy was effective. He relied on a New York statute (Insurance Law, McKinney’s Consol. Laws, c. 28, § 121), almost identical to N. J. S. A. 17:22—6.2a.

The court discussed the common-law agency rules, referred to the statute and stated:

“The authority of the broker to act in his dual capacity, under the above section, extends only to the period in which the policy remains in force and after its delivery to him * * *. It necessarily excludes the period between which the broker is engaged by the prospective insured to secure a policy of insurance and the receipt of the policy from the insurer by the broker. During this interval he is in privity solely with his customer and does not establish any privity with any insurance company until the latter impliedly consents to his collection of the premium by delivering the policy of insurance to him.” (at p. 609)

I do not necessarily agree with the result in Lezak, but I do believe the foregoing statement should be applied to this case.

Based on the foregoing, a judgment on defendant’s counter-claim for $25,000 should be entered.


author: Simpson, J. C. C.

text:
    BERNARD J. DOOLEY, PLAINTIFF, v. METROPOLITAN LIFE INSURANCE COMPANY, A CORPORATION OF THE STATE OF NEW JERSEY, DEFENDANT.
    Superior Court of New Jersey Law Division
    Decided February 10, 1969.

      Mr. 8. Victor DeLucia for plaintiff (Messrs. Smith and Clayton, attorneys).

      Mr. John L. McQoldriclc argued the cause for defendant (Messrs. McCarter & English, attorneys).
   Simpson, J. C. C.

(temporarily assigned). At about midnight, May 19-20, 1967, James Hanley parked his 1967 Mustang in front of a store he operated in Greenwood Lake, New York. He left the keys in the ear; when he returned after picking up a package from the store his car was gone. A few mimites later a “file 1” police radio broadcast alerted all patrol cars, and within seconds Patrolmen Lyons and Schaefer spotted the car going south on Jersey Avenue. The police car pulled directly behind the Mustang and put on its dome light, but the Mustang pulled around several preceding cars and “took off.” The ensuing pursuit, at high speeds with dome light flashing and siren wailing, ended a few minutes and miles later, about a mile and a half from the New Jersey border. Thomas Dooley, operating the Mustang without the owner’s permission, failed to negotiate a curve, lost control of the vehicle, ran off the roadway and struck a pole, sustaining serious injuries resulting in his death an hour later. At the crash site and before Dooley, age 20, was taken to a hospital — and while he was unconscious — a police captain “advised him of his rights and told him he was under arrest for grand larceny.”

Plaintiff, as beneficiary, collected the face amount of life insurance under a policy issued by defendant to his son, and sues for the double indemnity benefit payable on proof of death “as the result, directly and independently of all other causes, of bodily injury caused solely by external, violent and accidental means.” Defendant refuses to pay the “additional indemnity benefit”, (1) denying that the death was the result of accidental means since it was the foreseeable, natural and probable consequence of decedent’s actions, and (2) asserting that public policy precludes recovery, even in the absence of a “violation of law” exclusionary clause, since death resulted from the commission of a crime.

With respect to (1) plaintiff relies upon Schwartz v. John Hancock Mut. Life Ins. Co., 96 N. J. Super. 520 (Law Div. 1967), affirmed 99 N. J. Super. 223 (App. Div. 1968), certification denied 51 N. J. 393 (1968), and as to (2) he relies upon the absence of a specific applicable exclusionary clause and contends that there is no New Jersey public policy precluding recovery under the facts which he contends, at most prove guilt of “joyriding” rather than larceny.

I

The facts of this case are similar to those in Schwartz, supra, except that here Dooley operated the Mustang without the owner’s permission. There is no significant difference in the “accidental means” clauses of the policies, but in Schwartz there was an exclusion for death resulting from “participation in an assault or a felony” while Dooley’s policy exclusion was where death “results from committing an assault.” Defendant does not contend that Dooley’s conduct was an assault within this exclusion. Decedent and the beneficiary resided in New Jersey, the policy was issued in this State, and it is unquestioned that in construing the policy clauses the law of New Jersey applies. Kievit v. Loyal Protective Life Ins. Co., 34 N. J. 475, 491—492 (1961). Such construction should be liberal rather than literal, as aptly summarized by Justice Jacobs in Kievit, supra:

“When members of the public purchase policies of insurance they are entitled to the broad measure of protection necessary to fulfill their reasonable expectations. They should not be subjected to technical encumbrances or to hidden pitfalls and their policies should be construed liberally in their favor to the end that coverage is afforded ‘to the full extent that any fair interpretation will allow’ [citations omitted].” (at p. 482)

Just as in Schwartz, the policy here contains no exclusion for unnecessary, voluntary exposure to danger, so that defendant’s reliance upon the accidental means clause is misplaced. The crash, which was the proximate cause of the injuries and death,- resulted from failure to negotiate a curve in the road, which was an unexpected, unforeseen and unusual extent constituting accidental means under settled New Jersey law. Furthermore, for insurance contract purposes, an insured is not deemed to intend all the probable or foreseeable consequences of his conduct, and recovery is only precluded where there is a reasonable basis for his belief that his conduct makes serious injury or death a virtual certainty. Schwartz, supra, at page 530. In this ease, it is reasonable to conclude that Dooley believed his conduct would result in escape or apprehension, but not that he expected serious injury or death.

II

The effect of decedent’s conduct, as constituting a “violation of law” in the absence of a specific policy exclusion and in the context presented, does not appear to have been previously considered in this State. The case law in other jurisdictions appears to be about evenly divided. Annotation, “Liability under life or accident policy not containing a ‘violation of law’ clause, for death or injury resulting from violation of law by insured”, 23 A. L. R. 2d 1105 (1952). Generally, where there is such a policy exclusion, traffic violations have been held to be within a “violation of law” clause, but some cases hold to the contrary. See Annotation, “Traffic violation as violation of law within provision of life or accident insurance policy or certificate excepting death or injury due to violation of law”, 125 A. L. R. 1104 (1940). Absent an exclusionary clause, most of the cases denying recovery assert a public policy to avoid encouragement of criminal activity. Those allowing recovery usually find insufficient culpability by the insured, or reason that innocent beneficiaries or creditors should not be deprived of the proceeds because of the insured’s conduct. Obviously, a balancing of competing interests is involved, but in the case presented the burden of persuasion is upon the insurer, since it had the power and did not provide a policy exclusion.

At the time of the occurrence, New Jersey had statutes under which decedent’s conduct might be found to constitute a traffic violation, violation of the Disorderly Persons Act, or one or more misdemeanors or high misdemeanors. Thus the conduct may have violated any number of provisions of our Traffic Act, such as speeding and reckless driving. It also may have been the disorderly persons offense of unlawful taking of a motor vehicle (N. J. S. 2A :170-38) often referred to as “joy-riding.” Even more serious, if the requisite “intent” were found, inferred or presumed, decedent, had he lived, might have been guilty of larceny (N. J. S. 2A: 119-2), receiving stolen property (N. J. S. 2A:139-1), or receiving a stolen motor vehicle (N. J. S. 2A: 139-3). Since it is not disputed that New York had somewhat similar statutes at the time, decedent’s conduct under the law of the lex loci delicti might likewise be characterized as a traffic violation, disorderly persons offense, or criminal offense. Under our center of gravity and grouping of contacts choice of law doctrine, Mellk v. Sarahson, 49 N. J. 226 (1967); Mullane v. Stavola, 101 N. J. Super. 184 (Law Div. 1968), New Jersey law would be applicable if there was a conflict in characterization of the conduct, since our law is most relevant in determining whether of not a New Jersey beneficiary can recover under a New Jersey contract. New York’s interest terminated with recovery of the vehicle and the death of Thomas Dooley.

The problem, of course, is not to determine if Dooley was “guilty” of one or more of the statutory violations ranging from a relatively minor traffc offense to a high misdemeanor, for that could unfairly amount to a posthumous conviction without any of the traditional protections accorded an accused. Instead, since there was no policy exclusion, there must be a recovery unless defendant has proved, by a preponderance of the evidence, such conduct by decedent as to deny double indemnity benefits on some overriding public policy basis. Since the insurer has paid the ordinary life insurance benefit, it follows that there is no assertion of a public policy requiring such forfeiture, even though the death occurred while decedent was committing a violation of law. No reason appears why the public policy considerations should he different as to the ordinary and accidental death benefits.

Judgment for plaintiff.