Breslin v. New Jersey Investors, Inc.

• Decision Date: 23 June 1976
• Parties: , 19 UCC Rep.Serv. 863 John J. BRESLIN, Sole Surviving Trustee of the Trusts Created by the Last Will and Treatment of William O. Allison, Deceased, Plaintiff-Appellant, v. NEW JERSEY INVESTORS, INC., a New Jersey Corporation, Jenny G. Martin, Individually and as Executrix and Trustee under the Last Will and Testament of Ivar Martin, Deceased, et al., Defendants-Respondents.
• Court: New Jersey Supreme Court

Page 466

70 N.J. 466

361 A.2d 1, 19 UCC Rep.Serv. 863

John J. BRESLIN, Sole Surviving Trustee of the Trusts Created by the Last Will and Treatment of William O. Allison, Deceased, Plaintiff-Appellant, v. NEW JERSEY INVESTORS, INC., a New Jersey Corporation, Jenny G. Martin, Individually and as Executrix and Trustee under the Last Will and Testament of Ivar Martin, Deceased, et al., Defendants-Respondents.

Supreme Court of New Jersey.

Argued May 25, 1976.

Decided June 23, 1976.

James A. Major Hackensack, for plaintiff-appellant (Major & Major, Hackensack, attorneys).

Richard J. Sauerwein, Springfield, for defendants-respondents.

William F. Hyland, Atty. Gen., filed a Statement in Lieu of Brief (Stephen Skillman Asst. Atty. Gen., of counsel; Walter S. Ameika, Jr., Deputy Atty. Gen., on the brief).

The opinion of the Court was delivered by

CONFORD, P.J.A.D., Temporarily Assigned.

Plaintiff, as the sole surviving testamentary trustee of the William O. Allison estate, brought this action to recover for the conversion of assets of the estate. The Chancery Division held there was no cause of action against respondent Jenny G. Martin and her husband, Roy I. Martin, who had received a check on funds belonging to plaintiff's trust estate in payment for a mortgage sold by the Martins to the late Walter D. Van Riper under circumstances to be related. The Chancery Division held that the Martins were free from liability, Inter alia, as holders in due course of the check in question. The Appellate Division affirmed for the reasons stated in the oral conclusions of the trial judge. We granted certification, 68 N.J. 489, 348 A.2d 530 (1975), and now affirm.

Plaintiff and Van Riper, a since deceased member of the New Jersey bar, were testamentary trustees under the will of William A. Allison, deceased. All of the assets of the trust were held by a New Jersey corporation, Allison Land Company. Title to the shares of that corporation was in the names of the trustees as such. At the same time Van Riper was sole owner of all the shares of a New Jersey corporation named New Jersey Investors, Inc.

On January 30, 1970 Van Riper telephoned Daniel Amster, the attorney for the Martins expressing an interest in acquiring a mortgage held by the Martins on property owned by people named McGowan. Amster answered this inquiry by letter on February 2, 1970 informing Van Riper that the principal balance on the mortgage was $34,444.88, together with interest from November 28, 1969 at 6%. After another telephone call from Van Riper, Amster sent Van Riper on June 5, 1970 photocopies of the mortgage and of the Last Will and Testament of the late Ivar Martin. In his cover letter, Amster solicited suggestions from Van Riper as to the manner in which the mortgage might be assigned.

Van Riper wrote Amster on June 9, 1970 acknowledging receipt of the latter of June 5 with its enclosures, and saying:

'I am prepared to take over the assignment of this mortgage and would suggest doing so as of the 16th instant * * * I suggest you let me have the exact amount that will be due as of the 16th and I will have a certified check for you. The assignment should run to New Jersey Investors, Inc., a New Jersey corporation.

Van Riper's June 9 letter and all subsequent correspondence from him were on his law firm stationery.

On June 12, 1970, Amster's office forwarded to Van Riper an original and a copy of an assignment of the McGowan mortgage made out to New Jersey Investors, Inc. as assignee. Also enclosed were an original and copy of an estoppel certificate, and the original bond and mortgage. These documents were to be held in escrow by Van Riper until receipt by Amster of $36,812.40.

On June 16, 1970 Van Riper wrote Amster's office acknowledging receipt of the above documentation and stating that: 'In payment thereof, I am enclosing herewith our check to the order of January G. and Roy I. Martin in the sum of $34,156.01.' ¹

The letter further stated that, since the check was certified, Van Riper was proceeding to record the assignment. The check enclosed with Van Riper's letter was drawn on the account of Allison Land Company, 744 Broad Street, Newark, New Jersey, and was signed by Walter D. Van Riper, as President, and Gerald J. Kent, as Secretary. It was dated June 16, 1970 and contained the notation, 'Mortgage purchase'.

Amster's secretary forwarded the check to Roy I. Martin under cover letter dated June 17, 1970, explaining that it represented the amount due from New Jersey Investors, Inc. for the mortgage which had been assigned. A copy of this letter was sent to Van Riper who acknowledged it on June 18.

Amster wrote to the McGowans (the mortgagors) on June 17, 1970, advising them that their mortgage had been assigned to New Jersey Investors, Inc. and that all payments were to be made to that entity and mailed to its attorney, Walter D. Van Riper, Esquire. Subsequently, the McGowans sold their property and New Jersey Investors was given a check for the amount due on the mortgage.

Thereafter Van Riper died and New Jersey Investors, Inc. became insolvent. Plaintiff brought this action in 1973 against the Van Riper estate, New Jersey Investors, Inc., the Martins and Amster on the theory that they had all participated in the conversion of the trust funds represented by the Allison Land Company check executed by Van Riper. It was plaintiff's position in the trial court and on appeal that Amster and the Martins were on notice that Allison Land Company funds were being used by Van Riper for the purchase of a mortgage for the benefit of a different entity, I.e., New Jersey Investors, Inc., and that such knowledge was sufficient to charge them with liability as converters for the misapplication of the Allison (estate) funds even if they were without actual knowledge that the transaction was in fraud of the estate.

It should be made clear at this point that no contention is made that Amster and the Martins acted other than honestly and in good faith in this transaction--without knowledge that the Allison estate was being mulcted by Van Riper for his own benefit.

After trial, the Chancery Division judge entered judgment against the Van Riper estate and New Jersey Investors, Inc. for the amount of the check but dismissed the complaint against Amster and the Martins. He held they were not placed on inquiry of any wrongdoing in the transaction because they did not know that Allison Land Company was a trust, Van Riper had an excellent reputation, and it was not suspicious for one corporation to make payment for another. He also held that Martins to be holders in due course of the check.

In affirming, we find it sufficient, in exculpation of the Martins, that they were holders in due course of the Allison Land Company check, and, as to Amster, that he was merely their attorney in the negotiation of the transaction, without actual knowledge of any wrongdoing, and therefore cloaked with the same immunity in the matter as the Martins.

Under the Uniform Commercial Code (effective in this...