author: Ackerman, J. S. C.

text:
    ELIZABETH RUSS, PLAINTIFF, v. METROPOLITAN LIFE INSURANCE COMPANY, A CORPORATION OF THE STATE OF NEW YORK, DEFENDANT.
    Superior Court of New Jersey Law Division
    Decided November 9, 1970.

      Mr. Sol D. Kapelsohn for plaintiff (Messrs. Kapelsohn, Lerner, Leuchter & Beitman, attorneys).

      Mr. John L. McGoldrick for defendant {Mr. Eugene N. Haring, of counsel, Messrs. McCarter & English, attorneys).
   Ackerman, J. S. C.

This matter is before the court on plaintiff’s motion for judgment. It raises the question whether a life insurance policy may still be declared invalid after the death of the insured on the ground of equitable fraud and, in particular, it involves consideration of the scope and effect of the recent decision of the Supreme Court in Johnson v. Metropolitan Life Insurance Company, 53 N. J. 423 (1969), with respect to that point.

I

Plaintiff, Elizabeth Euss, is the beneficiary of an insurance policy issued by defendant on March 1, 1968 on the life of her son George C. Euss, Jr. The insured died at the age of 36 on September 25, 1968, approximately seven months after the issuance of the policy. Defendant declined to pay and this suit was instituted to collect death benefits under the policy in the amount of $4,000.

Defendant filed an answer denying liability and also a counterclaim praying that the complaint be dismissed and that the policy be declared void and rescinded because it was obtained by fraud. The counterclaim is based upon alleged false answers given by the insured to certain questions in the application for insurance dated February 10, 1968. The portion of the application which relates to the insured’s past and present condition of health and his medical history consisted of five questions, numbered 15 through 19. It is alleged that all but one of these questions were answered falsely either in whole or in part.

Question 15 is the first of the questions in the medical sequence:

15. In past 5 years, have any physicians or other practitioners examined, advised, or treated you? No.

It is alleged that the said answer was false in fact in that the insured “was examined, advised, and treated by physicians at the Essex County Overbrook Hospital, Cedar Grove, Hew Jersey, from June 23, 1962 until August 4, 1962, and on a second occasion, from August 14, 1967 to October 6, 1967.”

Question 16, which calls for information as to treatment, etc., for specific diseases or conditions, is alleged to have been falsely answered as follows:

16. Have you ever received treatment, attention or advice from any physician or other practitioner for, or been told by any physician or other practitioner that you had:
(d) epilepsy, paralysis, dizziness, or any mental disorder? No.

It is alleged that the answer was false in fact because the insured “had physical defects and impairments of health including chronic brain syndrome associated with alcoholism and psychotic reaction for which [he] was hospitalized at the Essex County Overbrook Hospital, Cedar Grove, New Jersey, from June 33, 1963 until August 4, 1963 and for which Mellaril, Noludra, and Paraldehyde were administered”, and that he “had physical defects and impairments of health including schizophrenic reaction, catatonic type, acute brain syndrome, and alcohol intoxication with psychotic reaction for which he was admitted and treated at the Essex County Overbrook Hospital, Cedar Grove, New Jersey, during the period August 14, 1967 to October 6, 1967 because of heavy drinking since 1959, withdrawal, and the stuporous loss of contact with reality. While so hospitalized, the said George 0. Buss, Jr., demonstrated an episode of catatonia and was placed on various tranquilizers, including Thorazine and Noludar.”

Question 18 consisted of two parts and it is alleged that both were falsely answered. Question 18(a) and the answer thereto are as follows:

18 (a) Have you any physical defect, or have you been aware of any impairments of health not revealed above? No.
It is alleged that said answer was false in fact for the same reasons that the answer to question question 16 was false.
Question 18(b) and the answer thereto are:
18 (b) In the past 6 months, have you taken any prescribed medication or have you been advised to restrict your diet or living habits? No.
(If yes, state details below, who recommended, and give reason).

It is alleged that the answer to this question was false in fact in that the insured “had taken the prescribed medicines, Thorazine and Noludar and various tranquilizers during his hospitalization at the Essex County Overbrook Hospital from August 14, 1967 to October 6, 1967 for heavy drinking, withdrawal from reality, and catatonic stupor, and during which he received a diagnosis of schizophrenic reaction, catatonic type, acute brain syndrome, and alcohol intoxication with psychotic reaction.”

The last question alleged to have been falsely answered is as follows:

19. For any ‘YES’ answer to questions 15-18 identify question and give full details. * * *

The application form provides space for details with columns headed “question,” “disorder, symptoms or other reasons for consultation,” “dates and duration,” “treatment received or recommended,” and “name and address of each physician or other practitioner and each hospital.” The space for answers to this question was left blank by the insured.

Defendant claims that this answer was false in fact for the same reasons that the answers to questions 16, 16, 18(a) and 18(b) were false.

The counterclaim further alleges that the answers were material to the risk and were relied upon by defendant in the issuance of the policy; that defendant had elected to rescind the policy and had tendered to plaintiff the sum of $42.84 representing the premiums received on the policy, and that the tender had been refused.

It was specifically alleged in the counterclaim that equitable fraud rather than legal fraud was charged. Paragraph 21 thereof states:

21. The defendant does not allege in this Counterclaim that the aforesaid misrepresentations were made knowingly or with intent to deceive, but the defendant does allege that they were false in fact and material to the risk. The defendant further says that in view of the rules of law and evidence governing the defense of actions at law, it has no adequate relief save but by resort to the equitable power of this Court.

In her answer to the counterclaim for rescission, plaintiff generally pleaded lack of knowledge or information sufficient to form a belief as to the allegations with respect to the answers in the application and the falsity thereof. But she denied defendant’s allegations that the said answers were material to the risk and relied upon by defendant in issuing the policy. And in answer to paragraph 21 of the counterclaim she alleged that “if false statements were made by George C. Russ, Jr. they were not knowingly made, nor were they made with intent to deceive.”

Thereafter plaintiff filed the motion now before the court. It prays for “summary judgment” on the ground that there exists no genuine issue as to any material fact and that she is entitled to judgment as a matter of law. No affidavits of any kind were filed by the parties, however, and it is obvious that they conceive the motion to be one simply to test whether the counterclaim for recission based upon equitable fraud states a claim upon which relief can be granted. Eor the purpose of the motion plaintiff concedes the truth of the allegations of the counterclaim. Taking defendant’s concession that it “alleges” only equitable fraud, it is plaintiff’s contention that the decision of the Supreme Court in the Johnson case has changed the law and that, overruling a long line of cases to the contrary, it is dispositive authority that a life insurance policy can no longer be rescinded for equitable fraud after the insured has died.

There is no doubt that the issue is squarely presented here as to whether equitable fraud, as distinguished from legal fraud, will afford a basis for rescission. Some of the questions in the application alleged to have been falsely answered are subjective questions and some are objective. As to subjective questions, such as questions 16 and 18(a), it is now well settled that in order to establish even equitable fraud, defendant must prove not only that the insured actually had a mental disorder or other physical defect or impairment of health but also that he knew that he had it. In other words, such questions are construed as seeking to probe the insured’s state of mind, and if a negative answer is a correct statement of his knowledge and belief, it is not a misrepresentation at all —• it is neither legal nor equitable fraud. See Johnson, supra; Shapiro v. Metropolitan Life Insurance Co., 114 N. J. Eq. 378 (E. & A. 1933); Colonial Life Ins. Co. of America v. Mazur, 25 N. J. Super. 254, 260 (Ch. Div. 1953); Ettelson v. Metropolitan Life Insurance Co., 164 F. 2d 660 (3 Cir. 1947). However, if the answer is not a correct statement of his state of mind, the answer is probably legal fraud as well as equitable fraud. In such ease the answer would be a willful untruth and, although arguably there might still be lacking the intent to deceive which is an essential ingredient of legal fraud, it would certainly be a “knowing” misrepresentation. See Duff v. Prudential Ins. Co., 90 N. J. L. 646, 648 (E. & A. 1917).

The language used by defendant in paragraph 31 of the counterclaim is the classic form of allegation for asserting equitable fraud which has been employed in pleadings over the years. Cf. 3 N. J. Practice, (Marsh and Fischler), Practice Forms (rev. ed. 1960), § 389, at 151. Although it states that defendant does not allege that the misrepresentations were made “knowingly” and therefore might be said to omit a necessary element to charge equitable fraud with respect to the answers to subjective questions, I have assumed, for the purpose of this motion, that it suffices in its present form, or would be deemed to be amended, to charge equitable fraud to the fullest possible extent with respect to the answers to both subjective and objective questions. The existing allegations are clearly sufficient to charge equitable fraud with respect to the answers to questions 15 and 18(b), which are objective questions and called for fact answers. Locicero v. John Hancock Mutual Life Ins. Co., 32 N. J. Super. 300 (App. Div. 1954).

We therefore have equitable fraud charged as to the answers to both subjective and objective questions and the issue is directly raised as to whether equitable fraud, as distinguished from legal fraud, will still warrant rescission or whether the insurer must prove intent to deceive.

II

We now turn to the Johnson case. Does it have the effect which plaintiff claims that it does? After careful consideration, I am of the opinion that it does not and that her motion must be denied.

The Johnson case did not involve a life insurance policy. It involved a suit by an insured on a health and accident policy to collect for total disability, resulting from a disease of the brain, which was alleged to have commenced approximately one year and eight months after the policy was issued. The policy was issued in accordance with the statutes prescribing the policy provisions required in health and accident policies, N. J. 8. A. 17:38-13.1 et seq., and not those prescribing the provisions required in life insurance policies, N. J. S. A. 17:3A-15 et seq. The insurance company defended the suit on the ground that the insured had been guilty of equitable fraud, in that false answers had been given by him to two questions in the application for the policy. The gist of the fraud charged was that the insured had falsely answered “no” to the question whether he had ever been treated for or told that he had heart disease, and that he did not give details, including names of physicians, with respect to treatment or consultations for that condition. The cause of the insured’s disability was not related to any heart condition which the insured allegedly concealed.

The ease was tried before a jury on the theory of equitable fraud, with special interrogatories given to the jury, which found that the insured did not in fact have a heart disease. Judgment was entered in plaintiff’s favor. The Appellate Division reversed on the ground that there was equitable fraud material to the risk, regardless of the existence of heart disease, in the failure of the insured to disclose his treatments by physicians. Johnson v. Metropolitan Life Ins. Co., 99 N. J. Super. 463 (1968). The Supreme Court reversed and reinstated the judgment in favor of plaintiff on several grounds.

The first ground was that there was in fact no equitable fraud, or fraud of any kind, committed by the insured in his answers to the application. The court interpreted the question as to whether the insured had been treated for or told that he had heart disease as a subjective one which required that there be proof not only that he had the disease but knew it, and it held that the jury’s verdict that he did not have the disease was amply supported by the evidence and was dispositive of the point. It interpreted the question with respect to providing details as to treatment by physicians as not to require such data where the advice given by the doctors was that there was no disease or condition or where the treatment was merely for a passing indisposition. The Supreme Court therefore held that on the facts there was no equitable fraud.

The second ground for decision, and the one directly involved here, was predicated upon the Supreme Court’s interpretation and construction of the contestability provisions of the statutes relating to health and accident policies and of the policy clause based thereon which was actually contained in the policy in suit.

Before considering what the Supreme Court held in Johnson with respect to the statutes there involved, it is pertinent to note that by virtue of paragraph (c.) of N. J. S. A. 17:35-15, which provides mandatory standard provisions for life insurance policies, all life policies must contain an “incontestable” clause as follows:

c. That the policy shall constitute the entire contract between the parties and that after it has been in force during the lifetime of the insured a specified time not later than two years from its date, shall be incontestable, except for nonpayment of premiums and for violation of its express conditions, if any, relating to hazardous travel, residence or occupation, in which case the liability of the company may be limited to a definitely determinable reduced amount, which shall not be less than the full reserve for the policy and any dividend additions, and except also, at the option of the company, with respect to provisions relative to benefits in the event of total and permanent disability, and provisions which grant additional insurance specifically against death by accident.

It is clear that this statute, by exclusion, provides that the ordinary life policy cannot be rescinded after two years for fraud in the application therefor, whether it be legal fraud or equitable fraud, and that no defense based upon fraud may be asserted to defeat a claim on the policy after the contestable period has expired. It is also clear, as conceded in Johnson> that it has been held for many years that, within the period provided in the two-year incontestability clause, life policies may be rescinded and defenses asserted based upon equitable fraud as well as legal fraud, even after the death of the insured. Among the many cases in point so holding are Metropolitan Life Insurance Co. v. Lodzinski, 124 N. J. Eq. 357 (E. & A. 1938); Metropolitan Life Insurance Co. v. Tarnowski, 130 N. J. Eq. 1 (E. & A. 1941); Metropolitan Life Insurance Co. v. Chambers, 142 N. J. Eq. 440 (Ch. 1948); Ettelson v. Metropolitan Life Insurance Co., supra; Colonial Life Ins. Co. of America v. Mazur, supra; Locicero v. John Hancock Mutual Life Ins. Co., supra; Gallagher v. New England Mutual Life Insurance Co. of Boston, 19 N. J. 14 (1955); Equitable Life Assurance Society of the United States v. New Horizons, Inc., 28 N. J. 307 (1958), and Parker Precision Products Co. v. Metropolitan Life Insurance Co., 407 F. 2d 1070 (3 Cir. 1969), and other cases cited therein. And see Hoagland v. Supreme Council, Royal Arcanium, 70 N. J. Eq. 607 (Ch. 1905).

The main provision construed by the Supreme Court in Johnson is N. J. S. A. 17:38 — 13.2(A), which requires that health and accident policies contain:

(2) A provision as follows:
Time limit on certain defenses: (a) After three years from the date of issue of this policy no misstatements, except fraudulent misstatements, made by the applicant in the application for such policy shall be used to void the policy or to deny a claim for loss incurred or disability (as defined in the policy) commencing after the expiration of such three-year period.
(The foregoing policy provision shall not be so construed as to effect any legal requirement for avoidance of a policy or denial of a claim during such initial three-year period. * * *)

Also considered by the Supreme Court in its decision in Johnson was the provision in N. J. S. A. 17:38-13.4 relating to applications for health and accident policies, which provides in part:

(O) The falsity of any statement in the application for any policy covered by this act may not bar the right to recovery thereunder unless such false statement materially affected either the acceptance of the risk or the hazard assumed by the insurer.

The provision in the policy involved in the Johnson case contained a two-year limitation rather than the longer three-year period which the statute would permit, but, except for that, the provision contained the language required by the “time limit on certain defenses” provision of N. J. 8. A. 17:38-13.2 (A) quoted above. The insurer’s attempt to rescind for equitable fraud came after expiration of the two-year period.

It was during the course of its opinion dealing with the construction of the contestability provision that the Supreme Court made the statements (Johnson v. Metropolitan Life Ins. Co., 53 N. J. 423 at 436-438) which plaintiff relies upon as holding that equitable fraud no longer provides the basis for rescission of life policies after the insured has died and that prior decisions holding to the contrary have been discredited and overruled.

In this regard Chief Justice Weintraub, writing for a uanimous court, started with the premise that the statute was “drawn on the hypothesis that in its absence an insurer could rescind a policy for an innocent misrepresentation of a material fact. Our cases so held, even after the insured loss had occurred” (53 N. J. at 436). Thereafter followed statements critical of such cases. The court said:

* * * Most of them related to life insurance as to which the rule persisted despite a statutory enactment that “all statements purporting to be made by the insured shall, in the absence of fraud, be deemed representations and not warranties.” N. J. S. A. 17:34-15d. That statute was construed to require in actions at law, not only a material misrepresentation, but also an intent to deceive, Urback v. Metropolitan Life Ins. Co., supra, 130 N. J. L. [210] at 211-212, but, curiously, that interpretation of the statute somehow was not accepted as a binding statement of legislative policy in the Court of Chancery, which continued to relieve an insurer for a material misrepresentation innocently made. Equitable Life Assurance Society of United States v. New Horizons, Inc., supra, 28 N. J. [307] at 314. One Vice Chancellor understandably thought the statute should mean the same thing in a court of equity and hence to require proof of a fraudulent intent, Shapiro v. Metropolitan Life Ins. Co., 110 N. J. Eq. 287, 289 (Ch. 1932), but the Court of Errors and Appeals affirmed his judgment without commenting upon that proposition. Instead it found the claimant there should prevail on the ground that questions relating, to diseases or state of health were addressed also to the insured’s knowledge and belief, 114 N. J. Eq. 378, 381 (E. & A. 1933), a concept which antedated that decision and served to ameliorate the rule permitting an insurer to undo the contract for an honest material misrepresentation. [53 N. J. at 436-437]

The court then made the following observations as to the nature of equitable fraud and the fairness of applying that doctrine in favor of an insurer after loss had occurred:

Equitable fraud is obscured by its label. Fraud connotes an intent to do wrong. When one misrepresents innocently, there is no such intent. Still it may be wrong to insist upon an advantage thus obtained, and when that is so, a refusal to undo the transaction could be characterized as “fraudulent.” Du Bois v. Nugent, 69 N. J. Eq. 145, 151 (Ch. 1905) ; 3 Pomeroy, Equity Jurisprudence (5th ed 1941), § 888, pp. 492—495. But if the status quo cannot be restored, a new element is added, for the question then is which of two innocent parties should bear a loss that has intervened. So with respect to an insurance risk, the return of the premium would hardly restore the insured to his prior situation. The issue is not solved by denouncing the insured in terms of fraud. Insurance companies do invite business, and when they offer to take a risk upon the applicant’s representations rather than upon their own medical examination and investigation, they know that an honest response to the questions they phras.e is all they can expect. Thus “equitable fraud” is a debatable doctrine after the loss. So it is aptly said in 5 Williston, Contracts (Rev. ed. Williston and Thompson 1937), § 1500, pp. 4191-4192, that “It is to be remembered also that rescission presupposes a restoration of the status quo, and this may be impossible, for example, where after the death of one whose life was insured, the insurer discovers innocent misrepresentations made by the insured in procuring the policy.” Under 2 Restatement, Contracts (1932), § 486, comment a, illustration 1, rescission would be denied after loss unless there was an intent to deceive. Cf. Merchants Indemnity Corp. v. Eggleston, supra, 37 N. J. [114], at 124; but see N. Y. Life Insurance Co. v. Weiss, 133 N. J. Eq. 375, 379 (1943). [53 N. J. at 437, 438]

The court then stated that “[w]ith this background we approach the issues of statutory construction.” (53 N. J. at 438).

The crucial issue was the meaning of the words, “After three years * * * no misstatements, except fraudulent misstatements, * * * shall be used to void the policy * * *” as used in N. J. S. A. 17:38-13.2(A). The insurer argued that the words “fraudulent misstatements” were broad enough to include both legal fraud and equitable fraud and that the policy therefore remained rescindable after the expiration of the three-year statutory period (two years, under the policy provision) for both kinds of fraud. Thei court held that this would accomplish nothing for the insured and stated that it was unmistakable that the purpose of the provision was to improve the position of the insured. The insurer argued in the alternative that the words would aecomplish something by foreclosing the right to rescind for “immaterial” misstatements, but the court pointed out that this was already foreclosed by the provision of N. J. S. A. 17:38-13.4(0), quoted above, that a false! statement in an application for a health and accident policy will not bar recovery unless it “materially affected either the acceptance of the risk or the hazard assumed by the insurer.” The court therefore concluded that the words “except fraudulent misstatements,” in order to have significance, meant fraudulent misstatements in the sense of legal fraud, made with intent to deceive, as distinguished from equitable fraud.

The net result was that the Supreme Court held in Johnson that the proper construction of the mandatory contestable provision for inclusion in health and accident policies is that for the contestable period of three years (one year longer than the contestable period for life insurance policies), such policy may be voided for legal fraud or equitable fraud, but that after the expiration of the three-year period, such policy may be voided only for legal fraud. The court stated:

Thus the statute, as we interpret it, boils down to the proposition that after two years the policy may not be voided for a misstatement in the application unless the misstatement is “fraudulent” as we have defined the word, * * *. * *• * * * * * *
* * * As we have said, the insurer has really lost little or none of what in justice it ought to have when it is permitted to void the policy at any time at all upon proof of fraudulent misstatements. * >:? :|i # * ❖ * *
Here the pleading challenging the validity of the contract was filed well beyond the time limit. The insurer could not rely upon equitable fraud. Under this statute, it remained free to assert the misstatements were made with an intent to deceive. As we have said, it did not defend on that basis. [53 N. J. at 441-443; emphasis supplied]

It is therefore apparent that, despite the remarks referred to above, the Supreme Court in Johnson nevertheless construed the statute before it as authorizing and sanctioning rescission of health and accident policies for equitable fraud during the three-year initial contestable period. Par from “overruling” the doctrine of equitable fraud or forbidding its application in rescission cases after loss has occurred, it did just the opposite. In the circumstances, the decision obviously cannot be deemed to have overruled the long line of cases holding that equitable fraud may be asserted during the two-year contestability period to void a life insurance policy even though the insured has died.

It is true that the underlying basis for the holding in Johnson, in continuing the viability of equitable fraud to the extent that it did there with respect to health and accident policies, appears to be that the court felt that the Legislature, by the terms of the statute which it enacted with reference to such policies, recognized the doctrine of equitable fraud and in essence expressly provided that equitable fraud should be a basis for rescission during the initial contestable period. Plaintiff here argues that, although the court was bound to enforce the legislative will in Johnson, the remarks in its opinion indicate that, where the court is free to act, it will refuse to apply equitable fraud after loss has occurred, and that, specifically in life insurance policy cases which involve different statutory provisions, it will no longer permit rescission for equitable fraud after death of the insured.

Por several reasons this argument is not persuasive and cannot help plaintiff before this court. In the first place, the remarks of the Supreme Court in Johnson were expressly stated to have been by way of background to the specific problem before it of construing the statute there involved. The court stated that equitable fraud is a “debatable doctrine” after loss has occurred, but it is clear that it did not there undertake to fully resolve and decide the “debate.” It was speaking in a case involving health and accident policies. There are many arguments pro and con which can be addressed to it in connection with the determination of the continued applicability of equitable fraud in life insurance policy cases, and it may well be that after full review it will reaffirm the existing authorities which permit rescission of such policies for equitable fraud. It is strongly urged by defendant that the decision in Johnson supports such reaffirmation and that the court, following the pattern of its decision in Johnson, will conclude that existing legislative provisions, either because of the express terms thereof or because of legislative inaction and acquiescence after long-standing judicial construction thereof, contain the legislative pronouncement that equitable fraud is a basis for rescission in life insurance policy cases and that the same is binding upon the court, just as it was in Johnson.

In this connection, wholly apart from arguments which may be based upon other statutes relating to life insurance policies generally, it is contended that the express reference in the life insurance incontestability clause (N. J. S. A. 17:34-15(c)) to exceptions for optional provisions with respect to the contestability of disability and accident clauses has the effect, by permitting the carry-over of the contestable provisions involved and construed in Johnson, of indicating the legislative will that the same rule applies to life policies and to health and accident policies, and that equitable fraud may therefore be relied upon for rescission of life insurance policies during the contestable period. It is also contended that the same conclusion is to be drawn from the fact that by L. 1968, c. 319, comprising N. J. S. A. 17:35B-1 through 14, certain provisions were enacted which apply in common to life insurance policies and to health and accident policies and that, by virtue of N. J. S. A. 17:35B-14, the provisions of N. J. S. A. 17:38-13.4(e), quoted above, which had application only to health and accident policies, were repealed and an identical provision, N. J. S. A. 17:35B-3(d), applicable not only to health and accident policies but also, for the first time, to life insurance policies, was enacted providing that the "falsity of any statement in the application for any policy covered by this act may not bar the right to recovery thereunder unless such false statement materially affected either the acceptance of the risk or the hazard assumed by the insurer.” (Emphasis supplied). It is also urged that other legislative provisions with respect to contestability in other types of insurance may have some bearing in determining, as was held in Johnson with respect to health and accident policies, that the Legislature intended and provided that life insuranee policies may be voided for equitable fraud during the contestable period. See N. J. S. A. 17:34-32(2) and (3); N. J. S. A. 17:35-13; N. J. S. A. 17:44A-20; N J. S. A. 17:14A-21(i) and (1); N. J. S. A. 17:45-5(i) and (j); N. J. S. A. 17:35B-l(d).

Both parties base arguments on the provisions of N. J. S. A. 17:34-15(d), which provides that life insurance policies shall contain a provision that” the policy shall contain the entire contract between the parties, and nothing shall be incorporated therein by reference to any * * * application * * * unless * * * attached to the policy when issued, and all statements purporting to be made by the insured shall, in the absence of fraud, be deemed representations and not warranties.” Plaintiff argues that the interpretation of this statute in the law courts, as pointed out in Johnson, is that the statute requires proof of legal fraud and shows that the Legislature did not intend that equitable fraud be applied in life insurance policy rescission cases. Deefndant counters that by virtue of the long line of cases actually allowing rescission for equitable fraud the contrary is true. Moreover, although it is conceded that the criticism in Johnson is sound and there has been apparent inconsistency in the applications of the statute in the law courts and the equity courts, defendant strongly contends that the fault lies with the “interpretation” of the statute given in the law courts, and that the statute was never intended to affect in any way the question whether legal fraud or equitable fraud should be required for rescission. It is claimed that this can readily be demonstrated to the high court, which, so far as can be gleaned from reported opinions, has never really passed upon the point, and that the cloud upon the doctrine of equitable fraud in this regard is not warranted. It is claimed that the statute has in fact been properly applied both at law and in equity, since both courts have, subsequent to the enactment of the statute, allowed rescission only for material misstatements contained in applications for life policies.

It is also contended by defendant that, even if Johnson is to be construed as adopting the rule of Williston, Contracts, § 1500, and Restatement, Contracts § 486, that there can be no rescission for innocent misrepresentations after the death of the insured in life insurance policy cases because there can be no restoration to the status quo, it is apparent that the court in Johnson did not undertake to make a definitive pronouncement in that regard which would be applicable in all eases. Defendant points out that full and perfect restoration to the status quo is not always required. See 12 Willision, Contracts (3d ed. Jaeger, 1970) §§ 1529-1530, and see §§ 1508-1513, 1525. It is contended that, if the insured was in fact uninsurable before the issuance of the policy sought to be rescinded, there is no problem with return to status quo even under the Restatement rule as fairly interpreted. It cites the recent decision in Equitable Life Assur. Soc. of United States v. New Horizons, Inc., 28 N. J. 307 (1958). There rescission for equitable fraud of a “key-man” life insurance policy was granted after death of the insured, and the court said:

Defendant attempts to emphasize the equities of its position by pointing out that an adverse decision will deprive it of insurance protection upon which it had relied and that such deprivation will be effected despite the absence of any wrongdoing on its part. The answer to this is twofold. First, the terms and intention of the insurance contract may not be flouted. Second, defendant was not entitled to any protection since Yafchak was uninsurable * * * [28 N. J. at 316; Emphasis supplied.]

It is therefore apparent that the soundness of plaintiff’s contentions as to the scope and effect of the decision in Johnson is, at the very least, open to some question, and this leads to the second reason for the rejection of her arguments. In the circumstances, they are not properly addressed to this court. As a trial judge I am bound to follow the direct rulings of our highest court, acknowledged in Johnson to exist, until these decisions have clearly been overruled. It is not my function or prerogative to ignore existing precedents even if I were to believe that the Supreme Court would repudiate them. The arguments for reversal are properly presented to that court. See Franco v. Davis, 51 N. J. 237, 238 (1968); Mannillo v. Gorski, 100 N. J. Super. 140 (Ch. Div. 1968) remanded for trial, 54 N. J. 378 (1969); In re Arens, 72 N. J. Super. 310 (Cty. Ct. 1962), rev. on other grounds 41 N. J. 364 (1964); Fox v. Board of Education, West Milford Tp., 93 N. J. Super. 544 (Law Div. 1967). Since the Supreme Court is the final arbiter, the intent to alter settled law of the State cannot be attributed to it in the absence of express, clear disapproval of existing law and a definite repudiation of decisions establishing that law. Cohen v. Cohen, 121 N. J. Eq. 299 (Ch. 1936); see Furr v. Metropolitan Life Ins. Co., 111 N. J. Super. 596 (Law Div. 1970). There is no such clear disapproval or repudiation in Johnson.

It is therefore concluded that rescission of a life insurance policy may still be granted during the contestable period for equitable fraud and that defendant’s counterclaim states a claim upon which relief can be granted. Plaintiff’s motion is denied.

       The same section of the statute contains a further provision, not directly material hero, that with respect to certain policies, as defined therein, the said policies may contain, “in lieu of the foregoing,” an “incontestable” clause as follows:
      After this policy has been in force for a period of three years during the lifetime of the insured (excluding any period during which the insured is disabled), it shall become incontestable as to the statements contained in the application.
      See Lindsay v. United States Life Ins. Co., 80 N. J. Super. 465 (Law Div. 1963), holding that such clause, similar to the life insurance policy incontestable clause, bars rescission for any kind of fraud in the application after expiration of the period of contestability.

       Defendant’s arguments may be summarized as follows: N. J. S. A. 17:34-15 (d) was originally enacted by L. 1907, c. 72, and was taken from a 1906 New York statute. It is contended that the clear purpose of the statute, which for the first time required that applications be attached to policies if they were to be part of the contract, was to avoid the existing rule that statements in the contract were warranties and that policies could be avoided at law for immaterial untrue statements in warranties even though there was no fraud. See Metropolitan Life Ins. Co. v. McTague, 49 N. J. L. 587 (Sup. Ct. 1887) ; Fish v. Metropolitan Life Ins. Co., 73 N. J. L. 619 (E. & A. 1905), affirmed 75 N. J. L. 822 (E. & A. 1907). So far as representations were concerned, as distinguished from warranties, it was already well established, both at law and in equity, that there could be rescission for material misrepresentations, but not for immaterial misrepresentations, but it was also settled that relief could be granted for equitable fraud in equity but only for legal fraud in the courts of law. The statute, it is claimed, was designed to make all statements in applications representations rather than warranties to prevent rescission for immaterial false statements but not to affect the quantum of proof of fraud in the two branches of the courts. This, defendant states, was the construction of the statute given in Prudential Insurance Co. of America v. Merritt-Chapman & Scott Corp., 111 N. J. Eq. 166 (Ch. 1932), but for some reason this decision has been overlooked and ignored in subsequent cases, at least in the law courts.
      At first there was no problem with the statute in the law courts. See Guarraia v. Metropolitan Life Ins. Co., 90 N. J. L. 682, 683 (E. & A. 1917), where the court said with reference to the statute, “The result of this seems to be that [statements in the application] are made the legal equivalent of representations in any ease, and we must look for fraud in order to vitiate the policy.” (Emphasis supplied.) See also Duff v. Prudential Ins. Co., supra. However, in Prahm v. Prudential Insurance Co., 97 N. J. L. 206 (March 1922), and Kerpchak v. John Hancock Mutual Life Ins. Co., 97 N. J. L. 196 (June 1922), Justice Trenchard, writing for the Court of Errors and Appeals, stated a test which, though arguably not intended to be a construction that the statute required legal fraud for rescission, was susceptible of that interpretation. In Shapiro v. Metropolitan Life Ins. Co., 110 N. J. Eq. 287 (1932), Vice-Chancellor Bigelow took this statement to be a construction of the statute by the highest court, binding both in law and equity, but the Court of Errors and Appeals added to the confusion by affirming on other grounds and by “passing” the issue of the insurer’s obligation to prove legal fraud. 114 N. J. Eq. 378 (1933). As pointed out in Metropolitan Life Ins. Co. v. Stern, 124 N. J. Eq. 391, 396 (Ch. 1938), there was considerable doubt among members of the bar after Shapiro as to whether equitable fraud was still a ground for rescission of insurance policies in the Court of Chancery, but this doubt was removed by the decision in Metropolitan Life Ins. Co. v. Lodzinski, 124 N. J. Eq. 357 (E. & A. 1938). In spite of the decision in Lodzinski and the subsequent decision in Metropolitan Life Ins. Co. v. Tarnowski, 130 N. J. Eq. 1 (E. & A. 1941), affirming the continued viability of equitable fraud, the high court expressly held in Urback v. Metropolitan Life Ins. Co., 130 N. J. L. 210 (E. & A. 1943) that the “settled interpretation” of the statute was that it required legal fraud to avoid an insurance policy at law.
      The defendant contends that the true interpretation and meaning of the statute is that which is set forth in Vice-Chancellor Berry’s opinion in Prudential Insurance Co. of America v. Merritt-Chapman & Scott Corp. supra, and in Eastern District Piece Dye Works v. Traveler’s Ins. Co. 234 N. Y. 441, 138 N. E. 401 (Ct. App. 1923) and Minsker v. John Hancock Mutual Life Ins., Co. 254 N. Y. 333, 173
        N. E. 4 (Ct. App. 1930), which held that the statute did not affect the quantum of proof of fraud required. See also Emmerglick,' “Cancellation of Life Insurance Policies for Fraud,” 3 Mercer Beasley L. Rev. 60, 79-82 (1934). It is claimed that, as Emmerglick pointed out (at 80), the words “in the absence of fraud” in the statute really added nothing to it:
      The obvious intent of the legislature was to preserve for the assured’s representations their character as such. This was the only object it sought to accomplish by the provision in question. It was not undertaking to define the nature of the fraud for which a policy might be rescinded. The use of the words “in the absence of fraud”, must be considered in connection with the purpose of their context. Since that purpose was to retain the distinction between warranties and representations, this phrase cannot be regarded as a legislative definition of fraud. In a recent decision Vice Chancellor Berry pointed this out obiter, and called attention to the fact that the statute was patterned after a New York enactment which had been so construed. It is apparent that the legislature, out of an abundance of caution, endeavored to make it clear that the assured’s representations should continue to be such only in the absence of fraud. If that appeared then they would necessarily become misrepresentations.
      Defendant points out that in subsequent similar statutes the words “in the absence of fraud” have been omitted by the Legislature. See N. J. S. A. 17:.34 — 32 (2) relating to group insurance, N. J. S. A. 17:44A-20 relating to fraternal benefit certificates, and N. J. S. A. 17:45-5(i) applying to mutual benefit associations.


source: Caselaw Access Project

author: Pee Curiam.

license: Public Domain

text:
    STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT, v. PROFESSIONAL CREDIT CORPORATION, A CORPORATION OF THE STATE OF NEW JERSEY, AND ROBERT J. BUDNICK, DEFENDANTS-APPELLANTS, AND ALBERT L. BELAUSKAS, RICHARD MULCHANEY, WILLIAM LEROY LAWLER, MILES TOLMAN AND THEODORE ASIN, DEFENDANTS.
    Superior Court of New Jersey Appellate Division
    Argued November 10, 1970
    Decided November 23, 1970.

      .Before Judges Kilkenny, Halpern and Lane.

      Mr. Howard M. 8trog<er argued the cause for appellants (Mr. Joseph J. Afflito, Attorney; Mr. Stroger of counsel and on the brief).

      Mr. Vincent J. Sgro, Assistant Prosecutor, argued the cause for respondent (Mr. Robert N. McAllister, Jr., Atlantic County Prosecutor, attorney; Mr. Ernest M. Curtis, Assistant Prosecutor, of counsel and on the brief).
   Pee Curiam.

Professional Credit Corporation and Richard J. Budnick, its president, appeal from judgments of conviction of obtaining money under false pretenses (N. J. 8. A. 2A:111-1). The corporation was fined $500. The individual was sentenced to the New Jersey State Prison for a term of not less than two nor more than three years which was suspended. He was placed on probation for two years and fined $1000.

Two indictments were returned against defendants. The first indictment in two counts charged them with obtaining $7.50 from Marie Somers, under false pretenses in violation of N. J. S. A. 2A:111-1. The second count .charged that the individual defendants used the corporate defendant to obtain the money under false pretenses. The second indictment charged the corporation and the individual defendants with conspiracy to obtain money under false pretenses (N. J. S. A. 2A:98-1 and 2), the overt act being obtaining $7.50 from Marie Somers.

The trial court granted judgments of acquittal as to defendants Mulchaney and Asin. The verdict of the jury found the corporation and Budniek guilty on the first count of the indictment but not guilty on the other charges. The remaining defendants, Belauskas, Lawler and Tolman, were found not guilty of all charges against them.

The motion for a new trial urging, among other grounds, that the verdict was against the weight of the evidence was denied. On appeal defendants argue that the trial court judge erred in denying their motion for judgment of acquittal; that the verdict against them constituted a manifest denial of justice resulting from the admission of irrelevant and prejudicial evidence; that there was error in the charge to the jury, and that there was error in the admission of testimony concerning defendants’ transactions with debtors other than Marie Somers.

The corporate defendant is a collection agency. The indictments grew out of the collection by it of a bill owing from Marie Somers to Dr. Maurice! Gordon in the amount of $61.20. The corporation sent Mrs. Somers a notice that the account had been sent to it for collection. The notice stated that the amount due was $68.70, of which $7.50' was interest. Ultimately Mrs. Somers paid $68.70; however, she submitted two checks drawn upon an account with insufficient funds for which the collection agency was charged $4 by its bank. The State contends that by demanding $7.50 interest and by collecting $7.50, the corporation obtained money m violation of N. J. S. A. 2A:111-1. Under the agreement between the doctor and the collection agency, the fee of the collection agency was to be 50% of whatever was collected. The collection agency turned $32.60 over to the doctor.

The evidence shows that when the doctor turned over his accounts to the collection agency, he spent about ten minutes with the corporation’s representative. There was no discussion between them as to whether interest was to be collected or not. It is clear that the doctor expected the agency to follow its usual practice.

There was no evidence of any deception or fraud practiced by defendants against Mrs. Somers. The demand sent to her clearly stated that of the amount claimed $7.50 represented interest. It is contended by the State that the doctor never authorized the collection agency to demand or collect interest. Mere lack of such authorization does not prohibit a collection agency from collecting the full amount due from a debtor to the creditor, which is the amount of the claim plus interest. An undertaking to pay interest may be implied. Mahoney v. Minsky, 39 N. J. 208, 212 (1963); 45 Am. Jur. 2d, Interest and Usury, § 38 at 41. Viewing the evidence and the inferences reasonably to be drawn therefrom in the light most favorable to the prosecution, as- we must (State v. Franklin, 52 N. J. 386, 406 (1968)), we hold that a jury could not reasonably find defendants guilty beyond a reasonable doubt of obtaining money by false pretenses. Insofar as Mrs. Somers was concerned, there was insufficient evidence to show a fraudulent intent on the part of defendants. Cf. State v. Greco, 29 N. J. 94, 98 (1959). Defendants were not indicted for any crime that they may have committed against Dr. Gordon.

The motion for a judgment of acquittal on behalf of all of the defendants should have been granted.

At the time of the1 oral argument on the appeal we learned that there are other complaints upon which indictments have either been returned against these defendants or upon which indictments may be sought. Because there may be other trials involving these defendants similar to the one now before the court, we comment upon the admission into evidence of testimony of the corporation’s practice of “gagging” and “dunning” in its attempts to collect on its accounts. “Gagging” was described as deceiving someone to obtain information about the creditor. In the factual setting of this indictment, testimony concerning “gagging” and “dunning” was completely irrelevant and its admission was prejudicial error.

The trial court admitted testimony concerning other accounts collected by the corporate defendant. This testimony tended to show that although the corporation collected interest on such other accounts, it did not pay the interest over to its client. In our opinion, the testimony had no relevance to the' charge of obtaining money from Mrs. Somers by false pretenses or to the conspiracy charge. The evidence was not admissible under Buie 55 of the Buies of Evidence.

It is not necessary for us to deal with the court’s charge.

The judgments of conviction are reversed and judgments of acquittal are entered in favor of Professional Credit Corporation and Robert J. Budnick.


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

text:
    UNITED TRANSPORTATION UNION, PLAINTIFF-APPELLANT, v. STATE OF NEW JERSEY, DEPARTMENT OF TRANSPORTATION, COMMUTER OPERATING AGENCY. AND PENNSYLYANIA-READING SEASHORE LINES, DEFENDANTS-RESPONDENTS.
    Superior Court of New Jersey Appellate Division
    Argued November 9, 1970
    Decided November 18, 1970.

      Before Judges Goldmann, Leonard and Mountain.

      Mr. Roger E. McGlynn argued the cause for appellant (Messrs. McGlynn, Stein & Eberiel, attorneys).

      Mr. Blaine E. Oapehart argued the cause for respondent railroad (Messrs. Oapehart & Scatchan-d, attorneys).

      Mr. Stephen Skillman, Assistant Attorney General, filed a statement in lieu of brief for respondent Agency (Mr. George F. Eugler, Jr., Attorney General, attorney).
   The opinion of the court was delivered by

Goldmann, P. J. A. D.

Plaintiff union appeals from a decision of the Commuter Operating Agency of the Department of Transportation granting a petition brought by the Pennsylvania-Reading Seashore Lines (railroad) for permission to discontinue passenger trains Nos. 756, 773, 758 and 769. No. 758 is a morning train from Glassboro to Camden and 769 is the late afternoon train from Camden to Glassboro. No. 756 is the early morning train from Mill-ville to Camden and 773 the late afternoon train in the opposite direction. The trains are designed and scheduled to serve commuter traffic between the respective points.

Eollowing a public hearing the Agency rendered its decision authorizing the discontinuance of the trains, to be effective upon 30 days’ notice to passengers. We granted the union’s motion for a stay of the discontinuance pending appeal.

The sole issue raised by the Agency relates to the refusal of the examiner to require or permit evidence to be received as to the railroad’s freight operations and revenues. When counsel for the union, on cross-examination of the railroad’s expert witness Diffenderfer, inquired as to freight revenues, the reply was that “freight operation is not a part of this division.” A protracted legal argument followed when counsel asked the witness whether he' had freight figures for the railroad. The argument concluded with the following exchange between the hearer and the witness:

MB. DAY, [the hearer] Does the PRSL, Mr. Diffenderfer, make money as a whole? Does it show a profit on its whole operation? THE WITNESS: PRSL does not show a profit as a whole. MR. DAY: Does it show any profits on its freight operation? THE WITNESS: No, the freight operation shows some loss.

The witness explained that his information came from a report made by the railroad to the Interstate Commerce Commission under the Commission’s rules for reporting the railroad’s revenues and expenses.

The railroad had entered into a contract with the Department of Transportation pursuant to the Transportation Act of 1966 (N. J. S. A. 27:1A — 1 et seq.), under whose terms it was required to furnish specified passenger service. Such an agreement permits the carrier, during the life of the contract, to apply for changes in passenger service and applicable fares, including a decrease in the number of trains. N. J. S. A. 27 :lA-24. That section of the statute directs that the agency, prior to making any determination with respect to such an application, shall hold a public hearing on notice. The statute further provides that:

* * * In acting on any such petition the agency shall give due consideration to the following factors:
(a) The availability of alternative means of public transportation.
(b) The potential cost of continuing the service sought to be curtailed or discontinued.
(c) The eost to the State of providing alternative transportation facilities either by common carrier or highway improvement.
(d) The resulting effect on State and local population trends, economic values and tax revenues.

As was said in Brotherhood of R. R. Trainmen v. Central Railroad Co. of N. J., 47 N. J. 508 (1966), the problem of passing upon an application for discontinuance of certain passenger trains is basically an administrative one.

The experience of the Commissioner [here, the Agency] in dealing with the very difficult task of protecting the public interest in a particular area of passenger travel and at the same time serving the greater public interest of preserving the over-all system of railroad passenger service, must carry considerable weight on judicial review. A presumption of validity is accorded his orders, and a person challenging them has a heavy burden of demonstrating they have no substantial support on the facts. * * * [at 516-517]

If the subject is debatable, the Agency’s determination must •be upheld; this court can interfere with a determination only when it is plainly demonstrated to be arbitrary. In re Petition of Erie-Lackawanna R. R. Co., 48 N. J. 567, 570 (1967). The rule thus applied in discontinuance cases is simply a specific application of the broader rule that in general limits appellate review of an administrative ruling to a determination of whether the administrative agency’s action is supported by substantial credible evidence present in the whole of the record.

As N. J. S. A. 27 :lA-24 makes clear, the Legislature has set out the criteria to be considered in a discontinuance proceeding. Examination of the record discloses that the testimony offered by the railroad carefully covered each of the enumerated factors. We therefore conclude that there is substantial credible evidence present in the whole of the record to support the Agency’s determination. Alternative means of public transportation are available. The potential cost of continuing the four trains would result in a substantial net loss; Diffenderfer testified that the trains average 29, 31, 17 and 12 passengers, respectively, producing only $10,998 in income for a six-month period, resulting in a net loss of $106,781. (On a fully allocated basis, the total 1969 passenger deficit was $1,081,879, after consideration of the State’s contract payments.) Even if every seat on the four trains was occupied, there would still be a deficit in the passenger service.

The record also establishes that the granting of the application to discontinue the trains will not result in any expenditure by the State in providing alternate transportation facilities. Finally, the record supports the Agency’s determination that there would not be any appreciable adverse effect on population trends, economic values and tax revenues.

In cases decided before the adoption of the Transportation Act of 1966, it was stated that the financial success of the railroad as a whole is one of the important elements to be considered, In re N. J. & N. Y. R. R. Co., 12 N. J. 281, 289 (1953), and that on an application for discontinuance the railroad’s freight revenues are not to be overlooked, In re Central R. R. Co. of N. J., 29 N. J. Super. 32, 34 (App. Div. 1953); Susquehanna Transit Commuters Ass’n v. Board of Public Utility Comm’rs, 55 N. J. Super. 377, 393 (App. Div. 1959). In Pennsylvania R. R. Co. v. Board of Public Utility Comm’rs, 48 N. J. Super. 216, 226 (1957), we said that a railroad may not benefit from its lucrative freight business and at the same time disavow its obligation to provide adequate passenger service because it finds it unprofitable to do so.

However, in Bayonne v. Palmer, 47 N. J. 520 (1966), plaintiffs contended that the railroad had to continue its passenger service, no matter how great the monetary loss, so long as it continued its freight service at a profit. The court (at 526) noted that it could not be said with any degree of certainty or beyond reasonable doubt that a railroad carrying passengers and freight cannot abandon all or part of its passenger service if it is suffering a substantial continuing financial loss and if there has been a substantial decrease in public demand for its service. It went on to say (at 529), after referring to Southern Ry. Co. v. North Carolina, 376 U. S. 93, 84 S. Ct. 564, 11 L. Ed. 2d 541 (1964), and the passage by our Legislature of L. 1962, c. 191, and L. 1964, c. 88 (the predecessors of L. 1966, c. 301 and L. 1967, c. 71, here involved), that

* * * it cannot be said to be clearly unreasonable for our legislators to doubt that such carriers would be compelled to continue the intrastate [passenger] service in whole or in part simply because the freight operations were in some measure profitable, or even sufficiently profitable to produce some over-all net profit on the combined passenger and freight service. * * *

Continuing, the court then quoted from the Southern Ry. Co. case, as follows:

* * * neither the profitability of such freight operations as are fortuitously conducted on the same line as a given passenger service nor the profitability of all operations within any given State bears any practical relationship either to the public’s need for the service in question or to the burden which the deficit imposes on interstate commerce.

In the exercise of our original jurisdiction we have examined the railroad’s annual reports for 1967, 1968 and 1969 filed with the Interstate Commerce Commission and our Department of Public Utilities. Net railway operating income show losses in those years of $3,785,056, $3,926,440 and $3,769,153, respectively. Of these losses, total freight service accounted for $2,558,775, $2,840,894 and $2,687,274, for the respective years. Thus, the railroad not only showed substantial losses in passenger service, but also in its freight service.

The Agency’s determination is accordingly affirmed.


text:
    SYDNEY KAPLAN AND HYMAN F. KAPLAN, PLAINTIFFS-RESPONDENTS, v. SLEEP E HOLLOW MOTEL CO., A LIMITED PARTNERSHIP, ET ALS., DEFENDANTS-APPELLANTS, AND SUPERIOR INVESTMENTS, INC., INTERVENOR-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued September 28, 1970
    Decided November 24, 1970.

      Before Judges Goldmans, Leonard and Mountain.

      Mr. Sam Weiss argued the cause for appellants (Messrs. Strong, Strong, Gavarny & Longhi, attorneys).

      Mr. G. Henry Weston argued the cause for respondents Kaplan (Messrs. Weston and Kravitz> attorneys).

      Mr. Seymour I. Marcus argued the cause for intervenorrespondent (Messrs. Levy, Levy> Albert & Marcus, attorneys).
   The opinion of the court was delivered by

Goldmann, P. J. A. D.

Defendant in foreclosure, Sleep E Hollow Motel Co. (Motel), applied to the Chancery Division for an order vacating the sheriff’s sale and allowing it to redeem the property by payment of the mortgage, interest. fees and costs in full, on the grounds that “the sale was unconscionable and that the defendant was prevented from attending the said sale through misunderstanding and mistake and that the sale price for said premises was inadequate.” On October 37, 1969 the Chancery judge entered an order dismissing the objections, confirming the sale and directing the sheriff to deliver a deed, but not before November 1, 1969. This appeal followed, accompanied by a motion that we stay the order. We denied the stay and directed the sheriff to immediately execute and deliver a proper deed upon receipt of the foreclosure sale bid price.

Motel, a limited partnership, executed a $300,000 real and chattel mortgage to plaintiffs Sydney and Hyman Kaplan on August 31, 1963. The mortgage being in default, plaintiffs instituted foreclosure proceedings on Majr 14, 1969 and moved for the appointment of an operating receiver. The parties then entered into a stipulation and consent order whereby defendants agreed to pay the three quarters of taxes past due, the amount owing under a financing statement held by the Ewing Bank and Trust Company (some $9,500 and interest), the judgment held by the Eug Mart (about $20,000) and under which the sheriff had levied on certain Motel personal property, all overdue mortgage instalments plus interest, and a $1,500 fee to plaintiffs’ attorney. Defendants consented to the appointment of plaintiff Sydney Kaplan as operating receiver to take charge of the assests of defendant World Wide Eealty Associates, Inc., t/a Sleep E Hollow Motel Co. It was agreed that the mentioned payments were to be made no later than June 12, 1969; otherwise, Kaplan was authorized to enter into possession of the premises immediately as operating receiver. The stipulated payments were not made, with the result that final judgment in foreclosure was entered July 10, 1969. A writ of execution issued in due course to the Sheriff of Mercer County, who then proceeded to make his levy and advertise the sale of the premises to be held September 3, 1969.

On September 3, 1969 defendants orally applied to Judge Kingfield, then attending the Judicial Conference, for an adjournment. Based upon the representations of defendant Eoute, general partner of Motel, and his counsel, and also on Eoute’s affidavit, the judge adjourned the sale until September 17. Eoute’s affidavit stated that he had been making efforts to refinance the mortgage; that International Funding and Insurance Associates had granted Motel a mortgage commitment, which was not consummated; and that “I have now arranged for the refinancing of this mortgage by Republic Motel Corporation of America, 1328 Shunk Street, Philadelphia, Pennsylvania who plan to take over an assignment of Plaintiff’s mortgage and to pay off Plaintiff in full * * Continuing, Eoute requested an adjournment of the sheriff’s sale for at least one week and preferably two weeks to complete the refinancing.

Moreover, on September 2, 1969 Motel’s counsel had written the sheriff confirming the request he had made for a one-week postponement of the scheduled September 3 sale, “for the reason that John A. Eoute, one of the general partners of the defendant company, has arranged for the purchase of the mortgage to satisfy the claims of the plaintiffs.”

On September 17, 1969 a further application for adjournment was made to Chancery Division Judge Fritz, based on affidavits of defendant Eoute and his counsel. Eoute stated that Republic Motel Corporation of America was definitely planning to purchase the mortgage and pay the foreclosure judgment in full, but its attorney, Barton Banks, said he needed about ten days to complete all details. Counsel’s affidavit was to the same effect and requested a two-week adjournment. At the argument on adjournment defendants’ attorney told Judge Fritz that “I have verified that it is a valid commitment. There is a contract.” Banks had told him they would need ten days to finalize the matter. Judge Fritz granted a three-week adjournment of the sale to October 8, 1969, stating that “I am attaching the admonition of counsel [for plaintiffs] that there shall be no further adjournment. * * * It will take a clear and convincing demonstration of extraordinary and exigent circumstances for the defendants to obtain any relief beyond this.”

The sheriff’s sale took place on October 8, 1969, the premises being sold to Peter J. Bonanni, assignor of respondent Superior Investments, Inc., for $266,248.80. This was $100 higher than plaintiffs’ bid, which was in the full amount due on the mortgage, interest, taxed costs and sheriff’s fees. . Although other persons had attended the sale, neither defendants nor anyone on their behalf was present.

Before the sheriff could execute and deliver his deed, defendants filed a notice of motion on October 20, 1969, returnable October 24, to set the sale aside and allow redemption. Plaintiffs’ attorney moved ex parte to accelerate the hearing, since the sheriff had set October 22 as the date for delivering his deed. Judge Fritz denied acceleration and put the matter down for argument on October 24, stating, “I will entertain no motion for an adjournment short of the death of counsel.” Plaintiffs’ attorney insisted that he would have to have a certified check in full on the 24th. Defendants’ attorney assured the judge that he would not return to court on that day without a certified check in his hands.

At the very start of the hearing on October 24 Judge Fritz inquired of defendants’ counsel whether he had the certified check, reminding him of the promise he had made a few days before. Counsel adndtted he had no funds with him but was prepared to deposit $5,000. In the course of the argument he said that “we can get a mortgage commitment of $150,000 and could pay cash of $100,000; that’s $250,000.” Then, and for the first time, he argued that the mortgagors were entitled to a credit against the judgment for funds in the hands of the receiver as a result of his operating the motel since June. He repeatedly stated that the receiver had taken in $50,000.

Neither on October 24 nor on the continued date of the argument on October 27 did counsel present any proof of a binding mortgage commitment of $150,000 or that $100,000 was in hand and immediately available. Moreover, the $50,000 figure referred to by counsel was without foundation, plaintiffs’ attorney representing that an audit of the books over the past weekend showed a net profit to October 24 of only $20,775.50, before receiver’s expenses and fees.

Judge Fritz made extensive findings of fact and concluded that the real estate had been sold at its highest and best price, the money needed for redemption was not available at that time, there were no equities in defendants’ favor, they were too late in demanding an accounting, and since plaintiffs were not mortgagees in possession defendants were not entitled to an accounting until the completion of the receiver’s duties. He then entered the order here under appeal.

We observe that on January 7, 1970, the return day of an order to show cause why the operating receiver’s account should not be allowed, Judge Eritz, having heard the argument of counsel, found that the accounting procedure employed was proper and sufficient, the account in “meticulous shape” and that the receiver’s services were extensive and necessary. Accordingly, he approved and allowed the account, which showed a balance of $19,610.02, and granted the receiver an allowance of $6,450, the balance, net of that allowance and fees, to be paid to the Superior Court Clerk.

Defendants have never contended that the sheriff’s sale was not in all respects legal and proper. We observe that the $266,248.80 bid of Bonanni was subject to an announcement made at the sheriff’s sale by which the purchaser became liable to pay certain obligations in addition to the bid: overdue real estate taxes of about $9,500, the $9,500 interest due on the financing statement held by the Ewing Bank and Trust Company, plus interest, and the Rug Mart judgment of some $20,000 on which the sheriff had levied. Although Motel, in its notice of motion to set aside the sheriff’s sale and to redeem the property, gave as reasons that the sale was unconscionable, that Motel was prevented from attending the sale through misunderstanding and mistake, and the sale price was inadequate, we find no basis-whatever in the record for these claims. The sale was not unconscionable, nothing prevented Motel from attending the sale, and the property was sold at its highest and best price in the circumstances. We therefore conclude that there was no legal or equitable ground upon which the Chancery Division judge could possibly have based a determination invalidating the sheriff’s sale.

Redemption under a mortgage is a favored right in equity. Hardyston Nat’l Bank of Hamburg, New Jersey v. Tartamella, 56 N. J. 508, 513 (1970). As the Chief Justice there pointed out, our prior decisions were in conflict as to whether the right to redeem was cut off by a judicial sale or persisted until confirmation. Hardyston settled the matter by concluding that “the just course is to permit the mortgagor to redeem within the ten-day period fixed by R. 4:65-5 for objections to the sale and until an order confirming the sale if objections are filed under the rule.”

The facts of this case establish no equitable basis upon which redemption could have been allowed. Motel had for some time, even preceding the bringing of the foreclosure action, unsuccessfully attempted refinancing. The attempt to get an open-end first mortgage loan from International Funding and Insurance Associates had fallen through in July 1969. Meanwhile, and in order to gain time, defendants entered into the stipulation and consent order of June 9, 1969 agreeing to the appointment of an operating receiver who was to take possession if past due taxes, the Ewing bank and Eug Mart obligations, and overdue mortgage installments plus a counsel fee, were not paid by June 12 — an undertaking which, as noted above, Motel was unable to meet. A new source of possible refinancing was allegedly found in Philadelphia through Eepublic Motel Corporation of America, represented by Barton Banks. Attached to the affidavit filed by general partner Eoute in support of the motion to set aside the sheriff’s sale and to redeem was a purported agreement dated September 9, 1969 between Eepublic Motel Corporation of America and Motel granting Eepublic an option to buy the motel property for $400,000 within 90 days of the sheriff’s sale, both real and personal property to be free of all liens and encumbrances, Eepublic to obtain an assignment of the mortgage and postponement of the pending sale. The agreement was signed by Eoute as Motel’s general partner and on behalf of World Wide Eoalty Associates, Inc. The signature for Eepublic Motel Corporation is illegible. Barton Banks filed an affidavit with the court stating that he had examined the alleged agreement; that there was no such corporation as Eepublic Motel Corporation of America; that he had reserved the name Eepublic Motel Corporation of America with the Secretary of the Commonwealth of Pennsylvania, but no corporate certificate was ever filed and he was the only owner of the name; that only he could sign for the de facto corporation; that he examined the signature on the agreement and it was not his, and no one had authority to sign it.

The judges who adjourned the sheriff’s sale from September 3 to September 17, and again to October 8, 1969, relied upon the repeated representations of Eoute and Motel’s counsel that they had a firm commitment for refinancing. The refinancing never came to pass.

Einally, at the time of the arguments on October 24 and 27 in connection with the motion to vacate the sale and redeem, all that defendants were able to produce was the $5,000 check, despite the firm promise of counsel that he would not appear unless he had the full amount in hand. The most he could give the judge by way of reassurance was that he could manage $100,000 cash and a mortgage for $150,000. This was nothing more than a qualified redemption, and an insubstantial one on its face in light of what the judge knew of the fruitless attempts to refinance over the preceding months.

The argument that the mortgagor was entitled to have a credit for the monies in the receiver’s hands was a last-minute claim. It had never before been asserted — not in the motion to set the sale aside and redeem, or otherwise. An operating receiver appointed in foreclosure proceedings holds the property as an arm of the court for the benefit of all parties to the action. His position is not that of the mortgagee; rather, he stands in the shoes of the mortgagor. Equitable Life Assurance Society of United States v. Patzowsky, 122 N. J. L. 482, 484 (E. & A. 1939). His duty is to manage the property to the best advantage, and eventually to account to the court, as was done here. The fund collected by the receiver is held by him until the determination of the litigation, when it will be ordered distributed after approval of his account and the payment of allowances. The net avails will be distributed to those parties-encumbraneers who have established that the foreelositre sale resulted in a deficiency, in the order of their priority. Any surplus remaining will then be paid to the mortgagor. See N. J. Title Guarantee and Trust Co. v. Cone & Co., 64 N. J. Eq. 45 (Ch. 1902); cf. Last v. Winkel, 86 N. J. Eq. 356 (Ch. 1916), aff’d o.b. ibid. 431.

In summary, we hold that the sale was valid in all respects, that defendants did not make an unqualified tender of the amount due by way of redemption, and that their belated demand for an accounting by the receiver not only came too late, but would not have changed their redemption offer into a fully qualified one. We perceive no' equity that would stand in their favor.

Affirmed.


author: Halpeen, J. A. D.

text:
    STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT, v. RALPH D. BUTLER, DEFENDANT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Argued November 4, 1970
    Decided November 20, 1970.

      Before Judges Kilkenny, Halpeen and Lane.

      Mr. William J. Bohr, Assistant Deputy Public Defender, argued the cause for appellant (Mr. Stanley C. Van Ness, Public Defender, attorney).

      Mr. R. Benjamin Cohen, Assistant Prosecutor, argued the cause for respondent (Mr. Joseph P. Lordi, Essex County Prosecutor, attorney).
   The opinion of the court was delivered by

Halpeen, J. A. D.

Defendant appeals from a denial of his application for post-conviction relief.

The undisputed facts are that when defendant was arrested in his apartment the police found 16 decks of heroin in his jacket and two packs of marihuana on the ground beneath his window which had been thrown there by defendant. He was charged in separate indictments with (a) unlawful “possession of a narcotic drug, to wit: mari/uana,” and (b) with unlawful “possession of a narcotic drug, to wit: Heroin,” both contrary to N. J. S. A. 24:18-4. Both charges resulted from an arrest made on February 20, 1965.

Defendant pled guilty to both indictments. He was sentenced on the marihuana charge to a term of two to three years in the Hew Jersey State Prison, to run concurrently with a sentence he was then serving, and fined $25. He was sentenced on the heroin charge to a term of two to three 3rears in the New Jersey State Prison, to run consecutively to the sentence imposed on the marihuana charge, and fined $25.

The principal issue presented is whether the simultaneous unlawful possession of marihuana and heroin constitutes two separate and distinct crimes under N. J. S. A. 24:18-4. We have concluded that defendant could be guilty of only one offense — namely, the unlawful possession of narcotic drugs.

Eor a detailed history of the Uniform Narcotic Drug Law, as adopted in New Jersey in 1933, and for a definition of the term “possess,” see State v. Reed, 34 N. J. 554 (1961). At the time of the offense N. J. S. A. 24:18 — 4 provided:

It shall be unlawful for any person to manufacture, possess, have under his control, sell, prescribe, administer, dispense or compound any narcotic drug, except as authorized by this chapter.

Unquestionably, the Legislature has the power to proscribe two or more separate and distinct criminal acts within the same statute. Our function is to ascertain whether such was the legislative intent. State v. Juliano, 52 N. J. 232, 235 (1968) ; 4 Wharton’s Criminal Law and Procedure, § 1778 at 630 (1957). Giving the language used in the statute its accepted meaning, it is obvious the Legislature intended to proscribe the acts individually set forth in the statute, i. e. to “sell,” “prescribe,” “administer,” “dispense,” “manufacture,” “possess,” or “compound” any narcotic drug, except as authorized by law. The essence of the charges was the unlawful possession of heroin and marihuana — both of which are narcotic drugs as defined in N. J. S. A. 24:18-2. This single act of possession, which occurred at one time and in one place, cannot be the basis for multiple offenses. It would do violence to the Legislature’s intent to sajr that if a person had ten different types of narcotic drugs in his possession at one time that he would be guilty of ten separate crimes. If such were the intent, the Legislature would have said so in clear language.

While the issue confronting us is novel in New Jersey, what the courts have said in analogous situations are in accord with our view. Thus, where a defendant has but a single ultimate criminal objective (in the instant case unlawful possession of narcotic drugs), only one offense is committed. See State v. La Fera, 35 N. J. 75, 91 (1961). One act of arson resulting in three deaths was held to be a single criminal transaction. State v. Mills, 51 N. J. 277, 289 (1968), cert. den. 393 U. S. 832, 89 S. Ct. 105, 21 L. Ed. 2d 104 (1968). The defendant in State v. DiRienzo, 53 N. J. 360 (1969), was caught with goods in his possession stolen from various places; the court held his receipt of the stolen goods was but a single violation.

A case directly in point is Braden v. United States, 270 F. 441 (8 Cir. 1920), where the defendant was charged in five separate counts with having five distinct narcotic drugs in his possession at the same time. In holding that defendant could be convicted on only one count for possession the court said:

It is further contended that the sentence imposed by the trial court is excessive. This contention is based on the fact that, although defendant was convicted on four counts, the transaction upon which said four counts are based was the finding of defendant in possession on the 16th day of November, 1918, at his flat in St. Paul, Minn., of the four different drugs mentioned in counts 6, 7, 8, and 9, said drugs being morphine sulphate, cocaine, heroin, and smoking opium, all derivatives of opium except cocaine, which is a derivative of coca leaves. Counsel for the United States contend that the words “any of the aforesaid drugs,” as used in section 8, permit him to base a count upon each drug found in the possession of the defendant although the drugs were all found at the same time and place. We do not think that any such significance can be given to the word “any.” The use of this word simply means that, if the defendant under the required circumstances should be found in possession of any of said drugs, he would be guilty. If a person steals four horses from the barn of another, all being of different color, it would not be competent to charge the thief with four different larcenies when the horses were all taken at the same time and place. Another illustration would be the larceny of articles of merchandise from a store. If twelve articles were all taken at the same time and place, we do not think it would be competent to charge the thief with twelve different larcenies. If the test as to whether there were four different offenses arising out of the transaction in this case or only one was as stated by this court in Munson v. McClaughry, 198 Fed. 72, 117 C. C. A. 180, 42 L. R. A. (N. S.) 302, and followed in Stevens v. McClaughry, 207 Fed. 18, 125 C. C. A. 102, 51 L. R. A. (N. S.) 390, there would be no question in our opinion but that the facts in this case constituted but one offense, [at 443-444]

See also Parmagini v. United States, 42 F. 2d 721 (9 Cir. 1930), cert. den. 283 U. S. 818, 51 S. Ct. 344, 75 L. Ed. 1434 (1931), and United States v. Martin, 302 F. Supp. 498 (U. S. D. C. 1969), where the defendant, charged with possession of heroin and cocaine, was held guilty of only one violation.

To unlawfully “possess” various narcotic drugs at one time and place is a single offense; nevertheless, under N. J. S. A. 28:18-4, the single act of possession may give rise to several crimes such as possession and sale, see State v. McDonald, 92 N. J. Super. 448 (App. Div. 1966), or possession and dispensing, see State v. Harris, 63 N. J. Super. 184 (App. Div. 1960).

In construing the Legislature’s intent, as expressed in N. J. S. A. 24:18-4, it is significant, although not controlling, that what is proscribed is contained in one short sentence. To adopt the State’s argument that simultaneous unlawful possession of different narcotic drugs gives rise to separate offenses would be fractionalizing the statute. This we should not do unless the statute in clear terms requires it. This principle was enunciated in Gore v. United States, 357 U. S. 386, 391, 78 S. Ct. 1280, 2 L. Ed. 2d 1405 (1958), in which case the court sustained convictions for three distinct offenses arising from one sale of illicit drugs, in violation of three statutes passed in three separate years. In holding that Congress intended them to be separate crimes, the court said:

It seems more daring than convincing to suggest that three different enactments, each relating to a separate way of closing in on illicit distribution of narcotics, passed at three different periods, for each of which a separate punishment was declared by Congress, somehow or other ought to have carried with them an implied indication by Congress that if all these three different restrictions were disregarded but, forsooth, in the course of one transaction, the defendant should be treated as though he committed only one of these offenses.
This situation is toto coelo different from the one that led to our decision in Bell v. United States, 349 U. S. 81, 75 S. Ct. 620, 99 L. Ed. 905. That case involved application of the Mann Act — a single provision making it a crime to transport a woman in interstate commerce for purposes of prostitution. We held that the transportation of more than one woman as a single transaction is to be dealt with as a single offense, for the reason that when Congress has not explicitly stated what the unit of offense is, the doubt will be judicially resolved in favor of lenity.
It is one thing for a single transaction to include several units relating to proscribed conduct under a single provision of á statute. It is a wholly different thing to evolve a rule of lenity for three violations of three separate offenses created by Congress at three different times, all to the end of dealing more and more strictly with, and seeking to throttle more and more by different legal devices, the traffic in narcotics. Both in the unfolding of the substantive provisions of law and in the scale of punishments, Congress has manifested an attitude not of lenity'but of severity toward violation of the narcotics laws, [at 390-391, 78 S. Ct. at 1283-1284.]

The State contends its position finds support in State v. Juliano, supra. We disagree. In Juliano the court merely held that N. J. S. A. 2A:112-3 proscribed bookmaking on various types of betting or gambling on races or contests, and that where a defendant made book on more than one type of event, a separate count would lie for each type of conduct.

Since we have no way of knowing what sentence the trial judge would have imposed had he known only one offense was involved, we consolidate the two indictments to charge one offense of illegal possession of narcotic drugs, and remand the cause to him for resentencing. State v. Mills, supra, 51 N. J. at 289. The trial judge, in resentencing defendant, is free to consider all present aspects of the case, including the time elapsed since the original conviction, the term served, defendant’s conduct since his conviction, defendant’s current behavior, and to impose such sentence as may be appropriate.

Reversed and remanded for resentencing.


author: Mintz, J. A. D.

text:
    FRANK GIORDANO, BY HIS GUARDIAN AD LITEM JOHN GIORDANO AND JOHN GIORDANO, INDIVIDUALLY, PLAINTIFFS-APPELLANTS, v. VIRGINIA HARRIS MARIANO AND THE ESTATE OF DANIEL HARRIS, JOINTLY, SEVERALLY AND IN THE ALTERNATIVE, DEFENDANTS-RESPONDENTS.
    Superior Court of New Jersey Appellate Division
    Submitted September 22, 1970
    Decided November 24, 1970.

      Before Judges Lewis, Matthews and Mintz.

      Messrs. Schlesinger, Manuel and Schlosser, for appellants (Mr. Alfred A. Faxon, III, on the brief).

      Messrs. Taylor, Bischoff, Williams & Martin, for respondents (Mr. O. Paul Crawshaw, of counsel and on the brief).
   The opinion of the court was delivered by .

Mintz, J. A. D.

Plaintiffs appeal from a judgment dismissing their complaint following a motion for involuntary dismissal at the close of plaintiffs’ case.

In passing upon defendants’ motion to dismiss, the cour* was required to consider the proofs in the light most favorable to plaintiffs and to accord them the benefit of the most favorable inferences reasonably to be drawn from the proofs. If viewed in this light reasonable minds could differ, then the motion must be denied. Dolson v. Anastasia, 55 N. J. 2, 5 (1969); Melone v. Jersey Central Power and Light Co., 18 N. J. 163 (1955). Applying that standard we are satisfied that the proofs presented a jury question and that the dismissal was error.

On June 9, 1962 infant -plaintiff Erank Giordano, then about 11^2 years old, was invited to attend a birthday party at defendants’ home in Cherry Hill. He had never previously been to the home. A sliding full-length glass panel door served as an entrance to the recreation room. A concrete patio estimated to be about ten feet square adjoined the entrance, and to the rear thereof was a back yard.

There was testimony to the effect that it was still light when infant plaintiff arrived. Eventually he joined the group of children in the rear yard. After it became dark there was a call for the children to come inside for ice cream and, in response, infant plaintiff and a youngster Steven Cappuccio began running or racing toward the house. As they reached the house plaintiff was slightly ahead of his friend and was still running toward what he believed to be an open doorway. As it turned out, the sliding, full-length glass panel door had been closed. Infant plaintiff crashed into the door sustaining extensive cuts on his face.

Infant plaintiff testified that “it was like pitch black” when the accident occurred; that there was no light in the rear yard, the only illumination coming from the recreation room to which the glass door led. He explained he had passed through the doorway earlier in the evening, at which time the door was fully open and that, to his belief, it had not been closed and was still open up to the time of the accident. "While he stated he was aware that the doorway he had passed through employed a sliding glass door, he also admitted he had not looked to see if there were any markings on the door. He further said he saw no markings on the door as he ran toward it and, in addition, did not notice a handle on the door.

infant plaintiff’s mother testified that upon being advised of the accident she went to the hospital and there met defendant Mrs. Mariano (formerly Mrs. Harris) and her husband. According to the mother, Mrs. Mariano turned to her husband and told him the doors were dangerous and added, “I always told you I didn’t like those doors. * * * it could have been one of our children.”

Portions of a deposition given by defendant Mrs. Mariano were read into the record. Of significance is her statement that while she was not specifically aware if the doors were open or closed at the time of the accident, the last time she saw the doors before the accident they were closed. She added that to her knowledge no one used them from the time she saw them closed until the accident. Of further pertinence is her testimony that the door was unmarked save for a metal lip of natural aluminum color which protruded about three or four inches, used for a handle. She also admitted that she gave no warning to the children to beware of the door.

Also read into the record were portions of a deposition given by Steven CappucciO'. His testimony substantiated in large part that of the infant plaintiff, as he indicated that the door had been opened and to his knowledge had remained so for the evening, basing this statement on his observation of people passing through the doorway without opening or closing the door. He could not remember if there was any light outside but said there was light coming from the house. He further testified that he did not strike the door himself because, as he neared the doorway, he could see a reflection caused by an unidentified source. It was his belief that he could see the reflection because he approached the door at an angle, whereas plaintiff could not see the reflection because he approached the door head-on.

In granting defendants’ motion for involuntary dismissal the trial judge stated he was convinced there was not sufficient proof presented by an expert or otherwise that the unmarked glass door was sufficient to create an unreasonable risk of danger to a gratuitous licensee. He further stated that he was sure that the average property owner does not realize that an unmarked glass door creates an unreasonable risk.

The infant plaintiff was a social guest. 2 Restatement, Torts, § 331 (1934) defines a social guest as a gratuitous licensee, and this classification has been accepted. Berger v. Shapiro, 30 N. J. 89, 96 (1959). In Berger the court held that the home host guest relationship law is encompassed in the Restatement, supra, § 342. That section then read as follows:

A possessor of land is subject to liability for bodily harm caused to gratuitous licensees by a natural or artificial condition thereon if, but only if, he
(a) knows of the condition and realizes that it involves an unreasonable risk to them and has reason to believe that they will not discover the condition or realize the risk, and
(b) invites or permits them to enter or remain upon the land, without exercising reasonable care.
(i) to make the condition reasonably safe, or
(ii) to warn them of the condition and the risk involved therein.

In 1963 the Restatement was revised and the responsibility of the possessor of land expanded, for 2 Restatement, Torts 2d, § 342 now imposes liability upon him if he “knows or has reason to know of the condition and should realize that it involves an unreasonable risk of harm to such licensees.” The inquiry is not whether defendants realized the condition held any risk but whether a reasonable man would he cognizant of it. Berger, supra; Taneian v. Meghrigian, 15 N. J. 267, 277 (1954). Since, however, defendant Mrs. Mariano observed the door closed prior to the accident, she had actual knowledge of the condition and is accountable under either formulation.

There is the further problem as to whether we are here concerned only with a condition, i. e., the unmarked glass doors and the absence of any exterior lighting, or additionally, an activity on the part of defendants. Defendants, in permitting the glass doors to remain open and later causing or permitting them to be closed, may have actively and negligently participated in the creation of a dangerous situation. Cf. Mistretta v. Alessi, 45 N. J. Super. 176, 180 (App. Div. 1957); Cropanese v. Martinez, 35 N. J. Super. 118 (App. Div. 1957); 2 Restatement, Torts 2d, § 341. But see Shannon v. Butler Homes, Inc., 102 Ariz. 312, 428 P. 2d 990 (Sup. Ct. 1967).

The issue here presented has been decided in other jurisdictions with conflicting results. In several instances courts have denied recovery to invitees and licensees on the ground that the plaintiff simply had to see the glass panel because it had a frame of metal, a handle and was situated where a door was expected to be. See e. g., Rosenberg v. Hartman, 313 Mass. 54, 46 N. E. 2d 406 (Sup. Jud. Ct. 1943); Valunas v. J. J. Newberry Co., Inc., 336 Mass. 305, 145 N. E. 2d 685 (Sup. Jud. Ct. 1957); Pettigrew v. Nite-Cap, Inc., 63 So. 2d 492 (Fla. Sup. Ct. 1953); Acme Laundry Company v. Ford, 284 S. W. 2d 745 (Tex. Civ. App. 1955); Bua v. Fernandez, 15 N. Y. 2d 664, 255 N. Y. S. 2d 877, 204 N. E. 2d 207 (Ct. App. 1964); Brand v. Pope, 103 Ga. App. 489, 119 S. E. 2d 723 (Ct. App. 1961).

Other courts, with whom we agree, have reached opposite results, holding that a jury question is presented. The most notable of these is Shannon v. Butler Homes, Inc., 102 Ariz. 312, 428 P. 2d 990 (1967), where the Arizona Supreme Court carefully examined a situation in which an 8-year-old child licensee walked through a glass panel which she believed to be an open space. In that case the court held the duty of defendant depended on the circumstances, principally stating that where a child is involved, a duty to warn may be created, whereas none would exist were the case to involve an adult. See 2 Restatement, Torts 2d, § 342, comment (b) at 210. Additionally, the court indicated that an allegation of a deceptive illusion created by an unmarked glass door when viewed under certain lighting conditions, constituted a sufficient allegation of a hidden peril to an infant who was without warning thereof, and if sustained by the evidence raised a jury question respecting the host-owner’s liability. Kemline v. Simonds, 231 Cal. App. 2d 165, 41 Cal. Rptr. 653 (D. Ct. App. 1964), also involved a child licensee running into a glass door. Again the court undertook an examination of relevant factual criteria, including the age of the child, the fact that the panel in question had been sometimes left opened and sometimes kept closed during the day, and the fact that the lighting contributed to the child’s belief of an open door. The court concluded that the evidence presented a jury question respecting the liability of the host-owner to the child licensee. In so doing the court noted (at 656) : that “the trier of the fact reasonably could find that simple precaution such as colored tape, metal strips or other markings on or across the glass panel would have remedied or at least substantially reduced the danger of such condition at small cost to defendants.” Finally, the case of Downey v. Lackey, 11 Ariz. App. 528, 466 P. 2d 401 (Ct. App. 1970), should be noted for its statement that “in borderline eases what constitutes a hidden peril is for the jury.” 466 P. 2d at 405.

These cases should not be read to mean that every time a licensee walks through a glass door a jury question is presented. Undoubtedly, situations will occur where plaintiff’s failure to observe is so patent that no different conclusion could be reached. What these cases do indicate is that courts, reviewing evidence similar to that adduced in the instant case, i. e., a pattern of an open door, lack of markings, poor lighting, age of the injured party, have found a jury determination appropriate.

The absence of any expert testimony on behalf of plaintiffs is not crucial. Although “if is obvious that an expert need not be called to inform a jury as to the nature of a condition caused by a missing brick in the top step of a porch,” Berger, supra, 30 N. J. at 102, it is equally obvious that an expert need not be called to inform a jury that a transparent unmarked glass door, open and later closed, adjacent to an unlighted patio area on a “pitch black night,” may constitute an unreasonable! risk of harm to an 11%-year-old boy. We do not perceive that plaintiffs’ case is grounded upon substandard or inherently dangerous construction of the glass door. Bather, the issue is whether the door in the context of the attendant circumstances created a dangerous condition to infant plaintiff. The questions of foreseeability and reasonableness are ordinarily matters for and easily comprehended by a jury. Angel v. Rand Express Lines, 66 N. J. Super. 77 (App. Div. 1962).

The proofs are such that the minds of reasonable men may differ as to the conclusion to be drawn from the facts. Accordingly, the issue should haYe been submitted to the jury for determination.

Eeversed and remanded for a new trial.