Holt v. United Sec. Life Ins & Trust Co.

• Decision Date: 01 March 1909
• Citation: 72 A. 301,76 N.J.L. 585
• Parties: HOLT v. UNITED SECURITY LIFE INS & TRUST CO.
• Court: New Jersey Supreme Court

72 A. 301

76 N.J.L. 585

HOLT

v. UNITED SECURITY LIFE INS & TRUST CO.

Court of Errors and Appeals of New Jersey.

March 1, 1909.

(Syllabus by the Court.)

Error to Supreme Court.

Action by Hiram Womble Holt, to the use of Frederic A. Chapman, against the United Security Life Insurance & Trust Company. Judgment for plaintiff, and defendant brings error. Affirmed.

Lewis Starr and Thompson & Cole, for plaintiff in error. Eli H. Chandler and George A. Bourgeois, for defendant in error.

PITNEY, Ch. The first trial of this action resulted in a judgment of nonsuit, which upon error was reversed by this court. Holt v. United Security Co., 74 N. J. Law, 795, 67 Atl. 118, 11 L. R. A. (N. S.) 100. The new trial thereupon granted resulted in a verdict in favor of the plaintiff for substantial damages, upon which judgment has been entered, and that judgment is now under review for alleged trial errors.

The following is the case presented by the record and bill of exceptions: Iu the fall of the year 1899 Chapman was in possession of a lot of land in Atlantic City, with a frame boarding house thereon, under a written agreement of purchase made between him and one Price, the owner. Chapman desired to complete his purchase, remove the old structure, and erect in its place a brick apartment house. In order to enable him to do this, he applied to the defendant for an advance of money. The new structure was to cost about $35,000. The defendant company, as its corporate name indicates, advanced money upon the combined security of policies of life insurance and mortgages upon land. The company, with full knowledge of Chapman's plans, at first accepted his application for an advance to the extent of $30,000. Afterwards the proposed advance was iucreased to $32,500, but the company refused to place so large a risk upon a single life. For this reason, and because of some difficulty or apprehended difficulty between Chapman and his wife, it was arranged between him and the company that Chapman, upon completing his purchase from Price, should procure the legal title to be placed in the name of Holt, in trust for Chapman; that the application for the loan should be in Holt's name, but for Chapman's benefit; that the advance should be secured by separate bonds and warrants of attorney, each executed by both Holt and Chapman, by separate life insurance agreements and policies upon the lives of Holt and of Chapman respectively, and by separate mortgages made by Holt to the defendant company. Upon these terms the company on or about December 1, 1899, agreed to advance the money upon completion of the building. Unless default were made in the payments of the premiums upon the Insurance policies (which were twenty-year endowment contracts), payment of the principal sums was not to be exacted until the death of Holt or of Chapman, respectively, or until the expiration of the 20 years; that is to say, not until the maturity of the policies. All of the necessary papers were executed, including the mortgages upon the land, and these latter were placed upon record on January 19th, Chapman having in the meantime procured his vendor, Price, to make a deed for the property to Holt as his nominee. Holt was the confidential bookkeeper of Chapman, and in the entire transaction was a mere figurehead for the latter. In reliance upon the agreement thus made by the defendant company, Chapman sold the frame building as it stood upon the land, with privilege of removal, and it was promptly removed. He also proceeded to make contracts with various parties for the furnishing of materials and doing the construction work of the new building. The work was in progress, and had reached a somewhat advanced stage, when the defendant, on April 18, 1900, wrote to Mr. Chandler, who was acting as attorney and agent for Chapman in the matter that it did not desire to make the proposed loan. After some time spent in vain protests, Chapman concluded to treat the refusal as final, and later brought this action to recover damages for the repudiation of the agreement. The case discloses that Chapman had obtained credit from his materialmen and contractors upon the strength of the defendant's agreement to advance the $32,500 upon completion of the building. When that agreement was repudiated, mechanics' lien suits were brought and judgments obtained therein, including liens upon the building, and, in order to prevent a sacrifice of the property by execution sale, he in January, 1901, effected a private sale of the property to Messrs. Sheppard & Hackney, upon terms that reimbursed him for a considerable part of the expenditures that had been made and liabilities that had been incurred in and about the erection of the new building, not, however, including the value of the frame building removed, the rental value of the property while the construction of the new building was under way, nor certain disbursements to be referred to below.

The numerous assignments of error refer principally to the refusal by the trial judge of motions made for a nonsuit, and for the direction of a verdict in favor of the defendant; to the refusal of the defendant's sixth request to charge, which related to an asserted justification of defendant's rescission of the agreement; and to the instructions given respecting the measure of damages.

The motions for nonsuit and for direction of a verdict were rested upon two points only:

First. That the action was improperly brought in the name of Holt to the use of Chapman. The argument is based upon the ground that the injury, if any, flowed to Chapman alone. This fact, which is sufficiently obvious, is a good reason for bringing the action for the use of Chapman, but is no reason for not bringing it in the name of Holt. Whether it should be brought in the name of Holt is a purely technical question, and depends upon whether the contract was in form made with Holt. We think there was at least evidence that it was so made in form. It is insisted that defendant's agreement is contained in its letter to Mr. Chandler dated November 22, 1899, approving Chapman's application for a loan of $30,000. But, as already mentioned, this arrangement was afterwards changed and the loan increased to $32,500, with security upon land, the title to which was to be put in Holt; and in a letter of December 6th the company wrote to Chandler that: "As we have no connection with Chapman in this loan, we think his name should not appear in any of the papers relating to it." From this and from certain other evidence in the case, it was a reasonable inference that, while both parties were consciously contracting in a matter of which the benefit on the one side was to flow to Chapman alone, they were at the same time consciously and for reasons satisfactory to themselves contracting in the name of Holt. Under strict common-law rules of practice and pleading, it would be necessary in such a situation to bring the action in the name of Holt as the party with whom the contract was made, and it would be proper for him at the same time to declare a trust in favor of Chapman for the proceeds of the suit. Such a trust is properly declared by reciting in the proceedings that Holt sues for the use of Chapman. Such was the familiar mode of pleading in actions upon an assigned chose in action. Sullivan v. Visconti, 68 N. J. Law, 543, 548, 53 Atl. 598, affirmed 69 N. J. Law, 452, 55 Atl. 1133. As pointed out in that case, it required a statute to enable the assignee of a chose in action to sue in his own name. The present is not an action by assignee, but is a suit by the nominal promisee in behalf of the party for whose benefit the promise was made, and from whom the consideration, moved. In such cases, when arising upon simple contracts, our courts have long recognized the right of the beneficiary to sue, even when the consideration did not move from him; otherwise in actions upon sealed contracts. Joslin v. N. J. Car Spring Co., 36 N. J. Law, 141; Cocks v. Varney, 45 N. J. Eq. 72, 17 Atl. 108; Crowell v. Hospital of St. Barnabas, 27 N. J. Eq. 650; Katzenbach v. Holt, 43 N. J. Eq. 536, 550, 12 Atl. 383; Jordan v. Laverty, 53 N. J. Law, 15, 20 Atl. 832; Styles v. Long Co., 67 N. J. Law, 413, 418, 51 Atl. 710. The same rule was applied to contracts under seal by P. L. 1898, p. 481, and P. L. 1902, p. 709. And see the practice act (P. L. 1903, p. 541, § 28). Therefore the present action might have been brought in the name of Chapman without the use of Holt's name. But the statute is permissive, not exclusive, and we see no reason to hold that the common-law method may not still be pursued. Moreover, the objection, if it were valid, relates to the merest matter of form, not at all affecting the fair trial and determination of the real question in controversy; and therefore, if it had been deemed tenable, it ought simply to have led to amendment in the trial court, or, failing that, in this court, under the very liberal policy prescribed by our practice act respecting amendments. P. L. 1903, p. 572, § 126; American Life Ins. Co. v. Day, 39 N. J. Law, 89, 91, 23 Am. Rep. 198; Farrier v. Schroeder, 40 N. J. Law, 601; Blackford v. Plainfield Gaslight Co., 43 N. J. Law, 438, 442; Ware v. Millville Fire Ins. Co., 45 N. J. Law, 177, 179; Finegan v. Moore, 46 N. J. Law, 602, 604; Jones v. Cook, 54 N. J. Law, 513, 517, 24 Atl. 758; Monmouth Park Ass'n v. Warren, 55 N. J. Law, 598, 601, 27 Atl. 932; Vunk v. Raritan River R. R. Co., 56 N. J. Law, 395, 399, 28 Atl. 593; Excelsior Electric Co. v. Sweet, 57 N. J. Law, 224, 226, 30 Atl. 553.

The second, and only remaining, ground upon which the motions were rested, was that by the contract the plaintiff's right to have the advance of money from the defendant was conditioned upon producing a search showing a marketable title, and that he failed to prove its production. Concerning this, it is sufficient to say that the repudiation by the defendant of its...