Verdi v. Jefferson Trust Co.

• Decision Date: 14 April 1938
• Citation: 198 A. 543,123 N.J.Eq. 446
• Parties: VERDI v. JEFFERSON TRUST CO. et al.
• Court: New Jersey Court of Chancery

198 A. 543

123 N.J.Eq. 446

VERDI

v. JEFFERSON TRUST CO. et al.

Court of Chancery of New Jersey.

April 14, 1938.

Syllabus by the Court.

Where the complainant, an accommodation indorser on a promissory note, through an oral agreement with the defendant trust company's agent or representative, changes his position thereon and becomes a joint maker, and the trust company having knowledge of the situation stood idly and silently by with the intent not to be bound by its agent's representations, designing to accept whatever advantage would result from the change, such attitude is reprehensible and this court should and will afford relief under the circumstances.

Suit by M. Edward Verdi against the Jefferson Trust Company and others to restrain the named defendant from prosecution of a law action against him on a note and for a decree declaring him to be the true and equitable owner of a savings account in the named defendant.

Decree for the complainant.

Collins & Corbin, of Jersey City, for complainant. Richard Doherty, of Jersey City, for defendant Jefferson Trust Co.

EGAN, Vice Chancellor.

The complainant and John F. Via Cava are joint makers of a note for $8,500, dated February 2, 1933, payable to the defendant trust company. The complainant alleges an oral agreement with the trust company, by which he was to be chargeable with only one-half of the face of the note. The trust company is under the supervision of the commissioner of banking and insurance of the state of New Jersey, and is in liquidation under the provisions of the Altman Act. R.S.1937, 17:4-102. 17:4-105 to 17:4-110, 17:4-112 to 17:4-115. N.J.St.Annual 1931, § § 17—24, 17—29. It instituted an action in the New Jersey Supreme Court against the complainant and Via Cava, to recover the face amount of the note—$8,500. The complainant applied for, and obtained from this court, a preliminary restraint against the prosecution of the law action.

The bill contains a second cause of action whereby the complainant seeks a decree declaring him to be the true and equitable owner of a savings account in the defendant trust company, amounting to $2,637.45, and numbered 35779. The savings account was opened by complainant's father, Antonio Verdi, on January 30, 1930. The complainant alleges the account is his and that his father, in opening the account, opened it for him as his agent, and did so pursuant to his directions. Antonio died on August 5, 1936. The bill seeks to enjoin the defendants from instituting, or prosecuting any actions against the complainant for the purpose of collecting any indebtedness which he may owe to the trust company until he receives credit by way of set-off of the balance of said bank account against any such indebtedness.

The defendant trust company's claim against the complainant appears to arise out of a transaction between one Daniel J. Marotta and John F. Via Cava, who borrowed $30,000 from the defendant trust company on a promissory note some time in December, 1928, or later. Before the loan was granted, the trust company in sisted upon Marotta and Via Cava obtaining an indorser upon the note. The complainant was procured for the purpose. He signed the note as an accommodation indorser. Marotta and Via Cava signed as makers. Payments were made on account of the note at different periods; and by April, 1932, the principal of the loan was reduced to $8,500.

In the year 1932, the trust company employed one Murdock Claney, as "credit manager." It paid him an annual salary of $6,000. Claney testified, and his testimony is supported by Zaremba, the secretary and treasurer of the trust company, that his duty, in part, was to collect moneys owed to the trust company on commercial paper.

Via Cava, in April, 1932, was indebted to the trust company in the sum of $68,000 on promissory notes, in addition to his liability on the note of $8,500. He was also liable as principal on a $10,000 bond secured by a mortgage on real estate. Via Cava deposited as security with the trust company for these obligations his life insurance policy and certain real and personal assets. When he deposited these securities, he applied to the trust company for an additional loan of $6,000. The trust company allowed the loan of $6,000 upon certain conditions as expressed in Exhibit C-6. Via Cava was engaged as a fruit dealer in the city of New York. He did business under the name of Crocco & Co., and Crocco Fruit Company. Out of the loan of $6,000 the trust company advanced, at the direction of Via Cava, $4,500 of it to Crocco & Co., or Crocco Fruit Company; the balance of $1,500 was loaned in the name of John's wife, Eva Via Cava. The latter sum was held by the bank and applied to the interest on Via Cava's obligations. The $4,500 was used by Via Cava to finance his New York City fruit business.

Via Cava testified that at the time he deposited his securities with the trust company, he directed, in the event of a sale of the securities, that from the proceeds thereof, the $8,500 note should be first satisfied, and if any balance then remained, the same was to be applied on account of his other indebtedness.

In January, 1933, Verdi conferred with Claney, the credit manager of the trust company, in the course of which he stated that he wanted the trust company to reduce to judgment its claim against all parties on the note; or, in the alternative, to permit him to make a separate note as maker, in the amount of $4,250 in satisfaction of his obligation under the note. Claney testified that he had a credit investigation of Verdi made, which convinced him that except so far as his salary was concerned, Verdi was judgment proof. Marotta, who was the joint maker with Via Cava, had become financially worthless, and would sign no renewal notes.

Via Cava and the complainant both signed the $8,500 note as makers. The testimony of the complainant, and of Claney, was, in effect, that the bank agreed to hold Verdi liable for only one-half of the face value of the note—or the sum of $4,250. Verdi says that in consequence of such agreement, on March 28, 1933, he made a payment to the trust company of $1,762.80 against the note indebtedness of $8,500, and, that, thereupon, he with Via Cava executed a new note for the balance of the principal—or $6,835.

Claney severed his relation with the trust company on May 1, 1933. The lastmentioned note became due on May 3, 1933, and Verdi then refused to execute a renewal of it, but he did agree to pay his share of the balance which, he declared, remained due under his oral agreement with the trust company through Claney.

The executive committee, and the board of directors of the trust company, then refused to accept Verdi's offer. However, in October, 1934, the directors of the trust company offered to settle with Verdi for approximately $2,300. Verdi said he, then, was not in a position to pay the trust company the sum of $2,300. Subsequently, Verdi did offer to pay that sum to the deputy commissioner of the department of banking and insurance, but the deputy commissioner maintained he was without authority to accept any amount less than 100 per cent. cash.

Later, the law action was instituted against Verdi, and a judgment by default was entered against him on November 13, 1935. The judgment was afterward reopened by an order made by Chief Justice Brogan, dated April 15, 1937, and Verdi was permitted to plead in a limited degree in defense to the action. Then, this suit was instituted.

In his testimony relating to the allegations in the bill of complaint about the savings account, Verdi said that on January 3, 1930, he handed his father $4,750 and told him to deposit it in the trust company in a savings account in his, Antonio's name. He said he explained to his father at the time that he was not to consider the money as a gift to him; but that in the event anything happened to him, the complainant, he then could claim it as such. The complainant retained the bank book. There were withdrawals from the account made by Antonio. The withdrawals were made at the complainant's direction; and the moneys so withdrawn were turned over by Antonio to the complainant. All the moneys deposited in the account were given, for such purpose, by the complainant to Antonio.

Complainant said that prior to Antonio's death, he made several demands upon the officials of the trust company to permit him to set-off the balance of the savings account against his, complainant's debt, but they refused to comply with the request. The complainant submitted to the commissioner of banking and insurance proof of his ownership of the account, which was accompanied by renunciations of all persons who might possibly have an interest in the account; but the commissioner refused to grant the set-off.

In an action at law upon a written instrument, neither party to the action will be permitted to introduce evidence, either oral or written, tending to prove that prior to or contemporaneously with the execution of the writing, the parties agreed to terms contrary to those included in the written instrument. Naumberg v. Young, Sup. 1882, 44 N.J.L. 331, 43 Am.Rep. 380; Commonwealth Roofing Co. v. Palmer Leather Co., Err. & App. 1902, 67 N.J.L. 566, 52 A. 389; Gerli v. National Mill Supply Co., 78 N.J.L. 1, 73 A. 252, affirmed Err. & App. 1910, 80 N.J.L. 464, 78 A. 1134; Castelbaum v. Wolfson, Err. & App. 1918, 92 N.J.L. 165, 104 A. 84; Church v. National N. & E. Banking Co., Err. & App. 1921, 97 N.J.L. 237, 116 A. 620, 22 A.L.R. 524. The policy of equity is to follow the law; but it will not do so where such a course will create an unfair, and perhaps fraudulent, advantage by one party over another through the exclusion of evidence under the so-called parol evidence rule.

Vice Chancellor Pitney, in O'Brien v. Paterson Brewing & Malting Co., 69 N.J. Eq. 117, 61 A. 437, distinguished between parol evidence introduced for the purpose of varying the terms of a...