Appell v. Reiner

Decision Date01 November 1963
Docket NumberNo. F--2512,F--2512
PartiesFrederick W. APPELL, Plaintiff, v. Reobert J. REINER and Elsie Reiner, his wife, Defendants.
CourtNew Jersey Superior Court

Harold J. Brown, Bloomfield, for plaintiff (Joyce & Brown, Bloomfield, attorneys).

Martin J. Kole, Hackensack, for defendants.

COLLESTER, J.S.C.

Plaintiff Frederick W. Appell instituted an action in this court to foreclose two mortgages, allegedly in default, given by defendants Robert J. Reiner and Elsie Reiner, his wife. Defendants counter-claimed to cancel said mortgages on the ground, Inter alia, of a lack of consideration.

At the conclusion of plaintiff's case defendants moved pursuant to R.R. 4:42--2(b) to dismiss the complaint because upon the facts and law, plaintiff has shown no right to relief. They further sought judgment directing the cancellation of said mortgages. In view of the legal questions raised, the court elected to suspend completion of the trial pending submission of briefs, and decision on the motion was reserved.

At this stage of the proceedings all evidence presented and the legitimate inferences to be drawn therefrom must be resolved in favor of the plaintiff. Furthermore, the court does not weigh the testimony.

Plaintiff resides in New York and is a New York attorney. He is a member of the law firm of Austin, Burns, Appell and Smith, with offices at 535 Fifth Avenue, New York City. He is not a member of the Bar of the State of New Jersey. Defendants reside in Teaneck, New Jersey, in a home owned by Elsie Reiner. Robert J. Reiner owns and operates Reintex, Inc., a New Jersey corporation, which was engaged in the textile manufacturing business and occupied a factory building, owned by Reiner, located in Rochelle Park, New Jersey. Elsie Reiner owns one qualifying share of stock in said corporation.

Plaintiff had been a friend of defendants for many years. He had participated in the incorporation of Reintex, Inc. in 1950, had served as a director and had represented said corporation as its attorney under an annual retainer agreement. He terminated his connection with the corporation in 1954 or 1955. Plaintiff had also drawn the wills of both defendants, represented them in the purchase of their home in Teaneck, and performed other legal services on their behalf.

In September 1960 he represented Reiner in a contest over the will of the latter's father, who died a resident of the State of New York. At a conference with Reiner in his New York law office concerning the litigation, plaintiff was informed that a satisfactory settlement of the will contest would be of little benefit to Reiner since Reintex, Inc. was heavily in debt, business prospects were poor, and the money from the estate would go to pay creditors. Reiner advised plaintiff that his wife was personally liable as endorser on a $25,000 note of the corporation, and that he personally was liable on several large obligations of the corporation. Plaintiff testified that Reiner asked him to act as their attorney, to advise and assist them in their financial dilemma.

Plaintiff told Reiner, and later Mrs. Reiner, that he would act as their attorney for one year, his compensation to be dependent upon the extent of the services rendered by him. Upon learning that Reintex, Inc. had corporate liabilities of $224,661 and assets of $192,827, plaintiff advised defendants he must be 'secured' for the payment of his fee for legal services he would render. Plaintiff thereupon proposed that second mortgages be placed upon their respective properties as collateral security for his prospective fee. He said that such a procedure would serve a dual purpose--security to him and the 'insulation' of their property from their various creditors.

Accordingly, on October 20, 1960, one month after their initial agreement, defendants gave plaintiff a mortgage note in the sum of $10,000 and executed a mortgage in said sum encumbering their Teaneck residence which was owned by Elsie Reiner. Twelve days later, November 1, 1960, defendants gave plaintiff another mortgage note in the sum of $7,500 encumbering the Rochelle Park factory property owned by Robert J. Reiner. Both obligations were to mature in one year, bore interest at 6% Per annum payable quarterly, and required amortization payments of $1,000 every three months.

Plaintiff concedes the $17,500 obligations were not owed on the dates they were executed. On October 7, 1960 he had written a letter to defendants stating that his fees for current services rendered to them and Reintex, Inc., as of that date, were $250. He testified he had informed defendants in September 1960 that he estimated his legal fee for all services to be rendered would be $5,000.

When plaintiff was retained by defendants in September 1960, the primary obligations of Reintex, Inc. were: Peoples Trust Company of Paramus, N.J. (Peoples Trust Co.)--$25,000, secured by personal endorsements of Robert J. Reiner and Elsie Reiner; the Bank of Saddle Brook and Lodi, N.J (Saddle Brook Bank)--$25,000, secured by endorsement of Robert Reiner and pledged warehouse receipts for greige goods stored at Paterson, N.J.; Walter Kidde Acceptance Corp., Bloomfield, N.J. (Walter Kidde)--$15,214, secured by a conditional sales contract of Reintex, Inc.; John Stack of Garfield, N.J., insurance premiums due from Reintex, Inc.--$3,000, secured by a promissory note of Robert J. Reiner; The Chemstrand Corporation, New York City (Chemstrand)--$106,000, on which Robert J. Reiner was also personally liable; and $1,000 due to the aforesaid warehouse.

Plaintiff testified that he rendered legal services to defendants over a period from September 21, 1960 to March 12, 1962. He said his services consisted of numerous conferences with Robert J. Reiner in his New York office and numerous telephone conversations with him; that he 'summarized' defendants' assets and liabilities and investigated documents signed by them and held by the New Jersey banks; that he conferred with the bank officers personally in New Jersey, and by telephone and letter; that he conferred with Walter Kidde Acceptance Corp. at its office in New Jersey by telephone and letter; that he did the same with John Stack of Garfield, New Jersey, and that in May 1961 he held a conference in his New York office attended by Mr. and Mrs. Reiner and representatives of Chemstrand, at which time a settlement agreement between Reintex Inc. and Chemstrand was effected. In summary, plaintiff testified that he in some instances personally secured extensions of credit from Reintex creditors; in others he advised, directed and guided Reiner in obtaining such extensions; that he advised and guided Reiner in the methods of payment of such debts through the sale by Reiner of the greige goods, and that the final result was payment of all creditors except Chemstrand, where a settlement was effected, and Walter Kidde, who repossessed its machinery.

The evidence shows that after the granting of numerous extensions of time to pay creditors, Reintex, Inc. was able to sell its stored greige goods and all creditors were paid in full with the exception of Walter Kidde and Chemstrand. Walter Kidde repossessed its machinery and did not sue for a deficiency. Chemstrand on June 6, 1961 settled its claim of $106,298.95 against Reintex in return for the assignment of greige goods, accounts receivable and cash in the sum of $2,100. It is conceded that at no time throughout the period did any creditors threaten suit. During the proceedings to repossess the machines by Walter Kidde, plaintiff conferred with a New Jersey attorney to ascertain the New Jersey law applicable to such proceedings.

Plaintiff admits that in May 1961, during the conference with representatives of Chemstrand which resulted in the settlement of its claim, he told them his fee due from the Reiners was $5,000 and that he held second mortgages as security. He further admits that in conversations with other creditors of defendants he informed them he held second mortgages on the Reiners' properties.

On April 27, 1961 plaintiff submitted a bill in the sum of $500 to Reintex for services rendered concerning Walter Kidde's claim. It was unpaid. On June 1, 1961 plaintiff submitted a bill addressed to the individual defendants and Reintex, Inc. in the sum of $11,049.87, after crediting a payment of $250 made by Reintex, Inc. on October 27, 1960. On July 11, 1961 defendants paid plaintiff $1,045. On March 12, 1962 plaintiff submitted a supplemental bill for $1,078.11.

Defendants not having paid plaintiff's bills for services, the latter on March 23, 1962 filed his complaint to foreclose the two mortgages they had given him. He claims there is due $11,082.98, together with interest thereon.

Defendants move to dismiss this foreclosure action on the ground, Inter alia, that the consideration for said mortgages is based upon an illegal agreement which is void and against public policy, in that the mortgages were given as security to pay legal fees to one unauthorized to practice law. See Slater v. Gittleman, 104 N.J.Eq. 172, 144 A. 598 (E. & A. 1929).

While this is a mortgage foreclosure proceeding, equity looks to the substance rather than to the form. It is conceded by plaintiff that the money allegedly due and which is secured by the mortgages, represents the balance of a fee charged defendants for legal services which he rendered. Accordingly, this action must be viewed in the same light as a suit for legal fees.

The practice of law is not confined to the conduct of litigation in the courts, but is engaged in whenever and wherever legal knowledge, training, skill and ability are required. In general, all advice to clients, and all actions taken for them in matters connected with the law, constitute the practice of law. Under modern conditions it consists in no small part of work performed outside of a court and having no immediate...

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  • Mark W., Application of
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    ...290 Mich. 56, 62-4, 287 N.W. 377, 379-80 (1939); In Re Thompson, 574 S.W.2d 365, 366 (Mo. en banc 1978); Appell v. Reiner, 81 N.J.Super. 229, 236, 195 A.2d 310, 314 (1963); State, ex rel. v. Shattuck, 1 Ohio St.3d 272, 274, 439 N.E.2d 891, 892-93 (1982); State, ex rel. v. Schwarzwalder, 165......
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    ... ...         Recovery of compensation for legal services by one not authorized to practice law will not be permitted by our courts. Appell v. Reiner, 81 N.J.Super. 229, 239, 195 A.2d 310 (Ch.Div.1963), rev'd on other grds. 43 N.J. 313, 204 A.2d 146 (1964). Infante v. Gottesman, 233 ... ...
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