Starr v. Berry

• Decision Date: 20 January 1958
• Docket Number: No. A--29,A--29
• Citation: 138 A.2d 44,25 N.J. 573
• Parties: Nathan C. STARR, Rosamond Starr Belt and Frederic H. Starr, Plaintiffs-Appellants, v. Raymond H. BERRY, John J. McCue, Scott Lumber Company, a corporation of New Jersey, Sadie M. Johnston, Executrix of the Last Will and Testament of Lester A. Johnston, deceased, William Starr Richard F. S. Starr, and Ruth Starr Rose, Defendants-Respondents.
• Court: New Jersey Supreme Court

Page 573

25 N.J. 573

138 A.2d 44

Nathan C. STARR, Rosamond Starr Belt and Frederic H. Starr Plaintiffs-Appellants, v. Raymond H. BERRY, John J. McCue, Scott Lumber Company, a corporation of New Jersey, Sadie M. Johnston, Executrix of the Last Will and Testament of Lester A. Johnston, deceased William Starr Richard F. S. Starr, and Ruth Starr Rose Defendants-Respondents.

No. A--29.

Supreme Court of New Jersey.

Argued Nov. 4, 12, 1957.

Decided Jan. 20, 1958.

Roger C. Ward, Newark, plaintiffs-appellants (Pitney, Hardin & Ward, Newark, attorneys; John R. Hardin, Frank C. O'Brien, Roger C. Ward, Newark, of counsel).

Israel B. Greene, Newark, for defendant-respondent Raymond H. Berry (Israel B. Greene, Newark, of counsel; Murry Brochin, Passaic, on the brief).

Charles Danzig, Newark, for defendant-respondent Scott Lumber Co. (Riker, Emery & Danzig, Newark, attorneys; Charles Danzig, Newark, of counsel).

James M. Dunn, Paterson, for defendant-respondent Sadie M. Johnston, executrix of estate of Lester A. Johnston, deceased.

James D. Carpenter, Jersey City, for defendant-respondent John J. McCue (Carpenter, Bennett, Beggans & Morrissey, Jersey City, attorneys).

The opinion of the court was delivered by

WEINTRAUB, C.J.

The Chancery Division of the Superior Court dismissed the complaint under the doctrine of Forum non conveniens. Plaintiffs appealed to the Appellate Division and we certified the pending appeal on our own motion. Also before us is a motion to dismiss the appeal on the ground that plaintiffs accepted the benefits of the judgment they attack.

I.

We first will consider the motion to dismiss the appeal. The judgment provided in part that if plaintiffs should institute an action in California within 90 days from the date thereof, defendants shall accept service and appear generally. Plaintiffs sought a stay from the Appellate Division, but their application was opposed and denied, apparently on the ground that compliance within the 90-day period would not entail hardship. Having no alternative, plaintiffs instituted a suit in California and called for acceptance of service of process. There of course was no intention to abandon the pending appeal, but nonetheless defendants urge the appeal should be dismissed, relying upon the principle involved in In re Mortgage Guaranty Corporations' Rehabilitation Act, 137 N.J.Eq. 193, 44 A.2d 205 (E. & A.1945).

We find no merit in the motion. In no realistic sense can it be said plaintiffs accepted the benefit of the judgment. Rather, plaintiffs sought to avoid its effect and started the California action to preserve their claims, should the judgment be affirmed after the expiration of the 90-day period. If the judgment in so many words had provided that plaintiffs must choose between an appeal and a right to sue in California, its arbitrariness would be plain. Yet such is precisely the meaning which defendants ask us to give it. Plaintiffs were entitled both to appeal and provisionally to institute the new suit. The motion to dismiss is accordingly denied.

II.

We proceed to the merits of the appeal. The factual narration is, of course, solely for present purposes and should not be viewed as findings for the purpose of trial.

William J. Starr died a resident of Wisconsin on December 12, 1921. By his will, there probated, he created a trust for a period of years for the benefit of his widow and six children. The Res included lands in Wisconsin, Michigan and California, as well as sundry personal properties. The bulk of the assets being non-liquid, claims against the estate of some $300,000 could not be satisfied. In 1936, as the terminal date of the testamentary trust approached, the beneficiaries retained defendant, Raymond H. Berry, a member of the New Jersey Bar, upon an agreement to pay him 10% Of the ultimate yield to them.

Berry achieved a solution. The claims were reduced to about $144,000, secured by a mortgage to a trustee. To provide the cash to meet the mortgage, measures had to be taken to liquidate decedent's holdings in timberlands in Shasta County, California. They consisted of 320.9 acres in fee, an undivided 7/16th interest in 12,383.70 acres, an undivided 1/2 interest in 400 acres, and an undivided 5/12th interest in 4,040.76 acres. The co-owners were Red River Lumber Company of California U. Morgan Davies of Wisconsin, and E. Kent Swift of Massachusetts.

Swift was willing to participate in a solution if the Starr heirs combined their interests to permit united action on their behalf. To that end Berry prepared a trust agreement dated July 15, 1937, whereby the widow and the Starr children constituted Lester A. Johnston of Paterson, New Jersey, the trustee (Johnston died in 1954 and his executrix is a party defendant). Two of the children then lived in New Jersey, one in Massachusetts, one in California, and two and the widow in Maryland. (As of the time of suit, the Starr children lived in Maryland, Virginia and Florida and had succeeded to the widow's interest upon her death). The trust agreement provided:

'The Trust hereby created shall be deemed a New Jersey trust and shall in all respects be governed by the laws of the State of New Jersey.'

It further provided that 'as a matter of good faith, the Trustee is required to consult in all matters with the counsel for the Trustors and said Trustee shall be under no liability for any loss arising from any action taken or omitted to be taken by him at the direction of counsel for the Trustors.' It seems clear that Berry was intended for the role of counsel for the trustors. He in fact served as counsel for both Johnston, the initial trustee, and defendant, John J. McCue, who succeeded Johnston in 1954 upon the latter's death. The trust had its office in Berry's office at Newark, and over the years Berry prepared the annual reports of the trustee and received compensation for service as counsel for the trustee. Plaintiffs allege that Berry in fact was the dominant figure in the administration of the trust, in their words, a 'de facto trustee.'

On April 15, 1938, as part of the overall program, a 'stumpage contract' was made by Johnston and the three co-owners of the timberlands which George A. Scott and John Fossett, whereby the latter undertook to cut and pay for specified merchantiable timber at prescribed rates and times. The success of the plan depended upon adequate milling facilities to be furnished by Scott and Fossett. On April 23, 1938 Johnston, as trustee, Swift and Davies entered into an 'agency contract' with Berry whereby Berry agreed to act as agent to supervise the performance of the stumpage contract, he to be paid 15% Of the gross amount received under the stumpage contract and from other exploitations of the holdings.

Scott and Fossett soon ran into fnancial difficulties. To salvage the situation, Berry induced Swift and one Coolidge to invest moneys to complete the Scott mill. To that end the defendant, Scott Lumber Company, Inc., was formed as a corporation of New Jersey in 1938. Berry handled the incorporation and received 125 shares of the initial issue of 1,500 shares for his services. The stumpage contract was transferred to the company, Scott receiving 750 of the shares. Scott left the company in 1939 and a Mr. Moore came in to manage it. In 1942 Moore severed his connection, whereupon Swift, who by then had furnished substantial sums, induced Berry to give up the practice of law and devote full time to the operation of the Scott company. In 1946 Berry acquired an additional 125 shares by purchase from Coolidge.

To summarize Berry's situation at this juncture, he was or had been attorney for the Starr heirs (Berry contends his representation ended with the mortgage to the trustee for the creditors of the decedent in 1937); he was counsel for the Starr trustee, and according to plaintiffs the trustee in fact; he was agent for three of the four co-owners to supervise the performance of the stumpage contract; he was a director, officer and general manager of the Scott company which held the stumpage contract, and as well a stockholder, with 250 shares of the total issue which apparently at some point was reduced to 915. It is this aggregation of interests which underlies plaintiffs' claim that Berry violated fiduciary obligations.

We turn now to a summary of the issues in the litigation.

The first count attacks the sale to the Scott company in 1955 of the Starr interest in the timberlands and stumpage contract. By 1954 it became apparent, in Berry's words in a letter of August 20, 1954 to his employers under the agency contract, 'that a legal attack may be made upon all past Agency transactions.' Plaintiff, Nathan Starr, had indicated dissatisfaction. The same letter stated that Nathan' attorney said 'he felt that I (Berry) had been involved in too many contradictory positions of trust,' and suggested Berry find a purchaser for Nathan's interest. Berry concluded his letter by saying, 'I do not care to continue in a fiduciary capacity where I am deliberately threatened with a law suit, even though I do not feel that that law suit has any merit whatsoever.' We gather tha California counsel for the Scott company shortly thereafter questioned the continuation of Berry's several roles. At any rate, since over the years the Starr heirs had proposed sale of their interests, the Scott company in the summer of 1955 came forward with an offer. All of the Starr heirs, except Nathan, expressly agreed to the sale, and Nathan accepted his share of the proceeds, aying he did so without prejudice. Plaintiffs charge the selling price was $1,225,677.34 less than actual value.

The difference in valuation is due in part to the circumstance that the Scott company assumed the continued validity of the stumpage contract, whereas plaintiffs' expert valued the interests free of the contract, presumably because plaintiffs assail the contract as improvident when made and...