On appeal from Superior Court, Chancery Division.
For modification -- Chief Justice Vanderbilt, and Justices Heher, Oliphant, Wachenfeld, Burling, Jacobs and Brennan. Opposed -- None. The opinion of the court was delivered by William J. Brennan, Jr., J. Heher, J. (dissenting in part). Mr. Justice Burling and Mr. Justice Jacobs join in this dissent. Heher, Burling and Jacobs, JJ., concurring in part.
We certified of our own motion these appeals and cross-appeals to the Appellate Division from a judgment entered in the Chancery Division. The trial judge filed two opinions, reported at 14 N.J. Super. 470 and 15 N.J. Super. 398.
On August 3, 1949, Salvatore Zingale was hospitalized in Brooklyn, New York, for a long standing mental ailment and on October 8, 1949, the New York Supreme Court adjudicated him a mental incompetent and appointed plaintiff Manufacturers Trust Company as the committee of his person and property. Plaintiff Mary Zingale, his wife, was appointed his guardian in the instant action.
On July 22, 1949, 12 days before his commitment, Zingale acquired the Hotel Davenport in Atlantic City from defendants Rubin and Gussie Podvin, taking title in the name of Salvatore Zingale, Inc., a corporation of this State organized for the purpose. Zingale held all of the outstanding stock of the corporation except two qualifying shares issued to his co-directors, Benjamin A. Rimm, an attorney, who organized the corporation, and Mr. Rimm's secretary. Zingale was named as president and chairman of the board.
The judgment on appeal, in pertinent parts, (1) set aside the sale of the hotel and nullified the deed and various bonds and mortgages and notes delivered in part payment of the purchase price. The instruments nullified included a promissory note of the corporation for $24,000 personally endorsed by Zingale, and a bond and mortgage of that amount, given to defendant, the Boardwalk National Bank of Atlantic City; these had replaced a bond and mortgage of the Podvins held by the bank, which, in the amount of $20,962.61, was ordered reinstated; (2) entered judgment in favor of plaintiffs against the Podvins in the sum of $15,338.90, representing cash paid by Zingale; (3) granted plaintiffs a lien upon the hotel in the sum of the judgment, subject, however, to the prior lien of the reinstated mortgage held by the
bank; (5) directed the plaintiffs to pay Mr. Rimm his charge of $400 for legal services in the transaction.
The appeals of the bank and of the Podvins challenge the provisions of the judgment setting aside the transaction, and the Podvins also challenge the personal judgment against Mrs. Podvin. The plaintiffs' appeals complain of the refusal of the trial court to enter personal judgment for $19,338.90, instead of $15,338.90, of the subordination of the lien of their judgment to the lien of the reinstated mortgage of the bank, and of the direction to pay Mr. Rimm the sum of $400.
Zingale is a cobbler by trade and was born in Italy. He speaks broken English but is unable to read or write English. He worked as a cobbler until 1942 when he started to sell novelty jewelry and simulated pearls from a small shop in Brooklyn, New York. His history of mental illness dates back to 1936. He was first hospitalized in 1945 and thereafter, until his final adjudication, underwent almost continuous treatments either as an ambulatory patient or in institutions, but without result. The uncontradicted medical testimony is that he was clearly mentally irresponsible from and after 1945 and utterly devoid of judgment or understanding of the meaning and effect of his acts in the instant transaction. His conduct however did not always betray his infirmity. The testimony of the several persons who dealt with him in the matter is in accord that his conduct invariably appeared normal to them and that they saw no evidences that he did not know what he was doing.
Defendant Rubin Podvin did not meet Zingale until some time in May, 1949. However, 15 months earlier Zingale, while on vacation in Atlantic City, in some manner met one Saslaff, a real estate broker with whom the Podvins had listed the hotel for sale. On February 2, 1948, Zingale signed a contract to purchase the hotel for $54,000 cash, and paid $4,000 deposit. On the same day he executed an application to defendant bank for a mortgage loan of $25,000, which the bank, by a 30-day letter commitment dated
February 11, 1948, approved for $22,000 after investigation of his credit rating at a New York bank where Zingale maintained a savings account. Meanwhile, however, Zingale had been committed on February 7 to a sanatorium on Long Island where he remained until March 13 undergoing electric shock treatments. His wife and son consulted New York attorneys who on February 20, 1948, wrote Saslaff and on February 27 wrote the bank advising of Zingale's mental incompetency and confinement and demanding that Saslaff return the $4,000 deposit.
Saslaff forwarded the letter to defendant Rubin Podvin in Florida. Podvin sent it to Clarence Blitz, his attorney, with a letter stating that it appeared to him that Zingale "wants to back out from the deal. * * * So please look for any loopholes." After writing the New York attorneys that Podvin had never seen Zingale and so knew nothing of his mental incapacity, Mr. Blitz prepared deeds and other instruments necessary to complete the transaction, had the Podvins execute them, and upon the closing date, March 2, 1948, attended at the place of closing and declared the $4,000 forfeited when Zingale, then in the sanatorium, did not appear.
The letter addressed to the bank was received by the assistant cashier, Mr. Drumm, and was not brought by him to the attention of any other bank officer. It was attached by Drumm to the application for loan and upon the expiration after 30 days of the life of the commitment was transferred with the application to the inactive files where it remained, forgotten until this suit was brought.
The Podvins invested additional money in improvements to the hotel and in May, 1949, were operating it. After his release from the sanatorium in March, 1948, Zingale continued receiving electric shock treatments from time to time but was not again confined in any institution until his final commitment in August, 1949. However, his two treating physicians examined him in March, 1949, and testified that at that time ...