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Judson v. Peoples Bank and Trust Co.

Decided: December 13, 1954.


On appeal from Superior Court, Chancery Division.

For reversal -- Chief Justice Vanderbilt, and Justices Heher, Oliphant, Wachenfeld, Burling, Jacobs and Brennan. For affirmance -- None. The opinion of the court was delivered by William J. Brennan, Jr., J. Heher, J. (concurring). Mr. Justice Wachenfeld joins in this opinion. Heher and Wachenfeld, JJ., concurring in result.


Plaintiffs' complaint alleges that the five defendants fraudulently conspired to oust them from control of Tuttle Brothers, Inc., a New Jersey corporation doing business in Westfield, by inducing them to part with their common voting stock, over 90% of the outstanding shares, at an unconscionable price less than a tenth of its value.

Plaintiffs accepted $2,500 from two of the defendants, Peoples Bank and Trust Company of Westfield and the estate of Charles M. Smith (Smith had been an officer of the bank, which is the executor of his will), and consent judgments of dismissal were entered as to them. Summary judgments were thereafter entered in favor of the remaining defendants, Bankers Commercial Corporation, John C. Evans and the Sturdy Company, a New Jersey corporation solely owned by said Evans. The appeal is from the summary judgments and was certified here of our own motion while pending in the Appellate Division.

Summary judgment was granted first to Bankers Commercial Corporation (which we shall designate "Bankers")

upon its motion based on a supporting affidavit of the president of Peoples Bank and Trust Company and "the pleadings and papers on file," which included the depositions of plaintiff Thomas H. Judson, Jr., of the defendant John C. Evans, and of Raymond J. Conlan, a vice-president of Bankers, together with a comprehensive pretrial order and the mentioned judgments of dismissal. In an opinion filed by the trial judge two grounds were given, first, that the allegations as to Bankers "cannot be sustained because they are untrue. This defendant did not conspire with the other defendants to unlawfully wrest control of Tuttle from the plaintiffs"; and, second, that the settlement with Peoples Bank and Trust Company and the Estate of Charles M. Smith, in the form taken, operated as an acceptance of satisfaction discharging all defendants.

After the opinion was filed, defendants John C. Evans and the Sturdy Company moved for and were granted summary judgments, apparently upon the second ground.


The summary judgment in Bankers' favor is not supportable upon the first ground. We consider that the trial judge improperly decided from conflicting proofs the material fact of Bankers' participation in the allegedly fraudulent scheme and thus misconceived the judicial function in the summary judgment procedure. The role of the judge in that procedure is to determine whether there is a genuine issue as to a material fact, but not to decide the issue if he finds it to exist. See Asbill and Snell, Summary Judgment Under the Federal Rules, 51 Mich. L. Rev., 1143, 1155 (1953).

The summary judgment procedure was first introduced in England in 1855 and in New Jersey, among the first of the states, in our Practice Act of 1912. Clark and Samenov, The Summary Judgment, 38 Yale L.J. 423, 424, 442 (1929). Originally restricted to creditor claimants suing to recover upon liquidated debts and demands, modern procedural

systems, particularly those like New Jersey's, modeled upon the Federal Rules of Civil Procedure, 28 U.S.C.A., make summary judgment procedure available in any civil action and to claimants and defending parties alike. R.R. 4:58. It is designed to provide a prompt, businesslike and inexpensive method of disposing of any cause which a discriminating search of the merits in the pleadings, depositions and admissions on file, together with the affidavits submitted on the motion clearly shows not to present any genuine issue of material fact requiring disposition at a trial. Shientag, 4 Ford. L. Rev. 186 (1935). In conjunction with the pretrial discovery and pretrial conference procedures, the summary judgment procedure aims at "the swift uncovering of the merits and either their effective disposition or their advancement toward prompt resolution by trial." Clark, The Summary Judgment, 36 Minn. L. Rev. 567, 579 (1952). Even when a case for summary judgment is not made out, the procedure can be a valuable adjunct to pretrial conference procedure when, as may be done under R.R. 4:58-4, there results an order specifying the facts that exist without substantial controversy and directing such further proceedings in the action as are just. Cooper v. Jeter, 17 N.J. Super. 180 (Cty. Ct. 1951).

The standards of decision governing the grant or denial of a summary judgment emphasize that a party opposing a motion is not to be denied a trial unless the moving party sustains the burden of showing clearly the absence of a genuine issue of material fact. At the same time, the standards are to be applied with discriminating care so as not to defeat a summary judgment if the movant is justly entitled to one.

Thus it is the movant's burden to exclude any reasonable doubt as to the existence of any genuine issue of material fact, 6 Moore's Federal Practice, par. 56.15(3). The phrasing of our rule, R.R. 4:58-3, slightly different from Federal Rule 56(c), underscores this in the requirement that the absence of undisputed material facts must appear "palpably."

All inferences of doubt are drawn against the movant in favor of the opponent of the motion. The papers supporting the motion are closely scrutinized and the opposing papers indulgently treated, Templeton v. Borough of Glen Rock, 11 N.J. Super. 1, 4 (App. Div. 1950). And it is not to be concluded that palpably no genuine issue as to any material fact exists solely because the evidence opposing the claimed fact strikes the judge as being incredible. Arnstein v. Porter, 154 F.2d 464, 469 (C.C.A. 2 1946). Issues of credibility are ordinarily for the trier of fact, and the judge does not function as a trier of fact in determining a motion for summary judgment. Where the judge questions the inherent credibility of the matter offered in opposition there are other alternatives to the rejection of the matter and the grant of the motion. Under R.R. 4:58-5 "leave to proceed may be given unconditionally, or upon such terms as to giving security, or time or mode of trial, or otherwise, as may be deemed just."

However, if the opposing party offers no affidavits or matter in opposition, or only facts which are immaterial or of an insubstantial nature, a mere scintilla, 5 Vanderbilt L. Rev. 607, 613 (1952), "fanciful, frivolous, gauzy or merely suspicious," 6 Moore, Federal Practice, par. 56.13(3), he will not be heard to complain if the court grants summary judgment, taking as true the statement of uncontradicted facts in the papers relied upon by the moving party, such papers themselves not otherwise showing the existence of an issue of material fact. Taub v. Taub, 9 N.J. Super. 219 (App. Div. 1950); Lauchert v. American S.S. Co., 65 F. Supp. 703, 707 (D.C.W.D.N.Y. 1946). Nor is summary judgment to be denied if other papers pertinent to the motion show palpably the absence of any issue of material fact, although the allegations of the pleadings, standing alone, may raise such an issue. Summary judgment procedure pierces the allegations of the pleadings to show that the facts are otherwise than as alleged. Wade v. Six Park View Corp., 27 N.J. Super. 469 (App. Div. 1953). [17 NJ Page 76] Where, as here, the opposing party charges the moving party with willful fraud and must probe the conscience of the moving party (or its officers, when, as here, a corporation) to prove his case, or in any case where the subjective elements of willfulness, intent or good faith of the moving party are material to the claim or defense of the opposing party, a conclusion from papers alone that palpably there exists no genuine issue of material fact will ordinarily be very difficult to sustain. The telltale factor of demeanor in the presence of the trier of fact often assumes such vital importance in such cases that the opposing party should generally not be denied the opportunity to have the moving party, or its officers, appear on the witness stand before the trier of fact. Cf. Cooper v. Jeter, supra; Hummel v. Riordon, 56 F. Supp. 983, 987 (D.C.N.D.E.D. Ill. 1944); Mayflower Industries v. Thor Corp., 15 N.J. Super. 139, 155 (Ch. Div. 1951). Indeed, subjective elements aside, a note of caution has been sounded as to any case where the opposing party must prove his claim or defense from what he can draw from the other party. Bozant v. Bank of New York, 156 F.2d 787, 790 (C.C.A. 2 1946). On the other hand, it should be noted that R.R. 4:58-7 dealing with such situations provides that "should it appear from the affidavits of a party opposing the motion that he cannot for reasons stated present by affidavit facts essential to justify his opposition, the court may deny the motion or may order a continuance to permit affidavits to be obtained or depositions to be taken or discovery to be had, or may make such other order as is just." Plainly, the rule contemplates that a denial of the motion for summary judgment is not always to be the result. The motion may be held and decided after the opposing party has availed himself of an opportunity to develop through affidavits or depositions material necessary to justify his opposition. This expedient has been adopted even in fraud cases. Peckham v. Ronrico Corp., 7 F.R.D. 324 (D.C.P.R. 1947), reversed on other grounds 171 F.2d 653 (C.C.A. 1, 1948); cf. Standard Accident Insurance

Co. v. Pellecchia, 27 N.J. Super. 189, 195 (Law Div. 1953), reversed 15 N.J. 162 (1954); see also 51 Mich. L. Rev., supra, p. 1170.

Both this court and the Appellate Division, Templeton v. Borough of Glen Rock, supra, have been constrained to remark the disproportionate number of reversals of summary judgment made necessary on appeal by the failure to observe the limits of the form and purpose of the procedure. In such cases it is manifest that the ends the procedure is designed to serve are defeated. Time is lost and not saved and expenses are added, not avoided. Commentators upon experience under the federal rule have made kindred observations. Doehler Metal Furniture Co. v. United States, 149 F.2d 130, 135 (C.C.A. 2 1945). These undesirable results may be easily avoided, suggests Judge Clark, 36 Minn. L. Rev., supra, 579, through recognition that in reaching decision upon a motion for summary judgment

"* * * What is needed is the application of common sense, good judgment, and decisive action, on the one hand, not to shut a deserving litigant from his trial and, on the other, not to allow harassment of an equally deserving suitor for immediate relief by a long and worthless trial."

To which Asbill and Snell, at 51 Mich. L. Rev., supra, 1172, add:

"If these general rules are applied by the courts with discernment and care, the summary judgment procedure, without unjustly depriving a party of a trial, can effectively eliminate from crowded court calendars cases in which a trial would serve no useful purpose and cases in which the threat of a trial is used to coerce a settlement."


From the facts and the inferences therefrom in plaintiffs' favor to be drawn from this record, it plainly appears that the trial judge erred in resting the summary judgment in Bankers' favor upon the first ground given to support the determination.

Plaintiffs in 1945 owned 2370 of the 2578 outstanding shares of common voting stock of Tuttle Brothers, Inc. (which we will designate "Tuttle company"). There was also an outstanding preferred non-voting class of stock. During the depression, in 1935, the Tuttle company had given a $240,000 mortgage jointly to the defendant Peoples Bank and Trust Company and another bank, The Westfield Trust Company, now defunct and being liquidated by the Federal Deposit Insurance Company. Plaintiff Thomas H. Judson, Jr., was the president and defendant John C. Evans the treasurer of the Tuttle company when the mortgage was placed. Evans owned only 123 shares of the common stock and no preferred.

In 1941 defendant Peoples Bank and Trust Company was dissatisfied with the Tuttle company management and, to protect its loan, required the company to submit to the direction and supervision of the business by one of the bank's own officers, the late Charles M. Smith. Evans found favor in Smith's eyes and became his right-hand man, taking on the responsibility for the conduct of the business under Smith's direction. In 1942 Smith had plaintiff Thomas H. Judson, Jr., step down from the presidency to be replaced by Evans. To Evans, however, Smith remained "the boss" who "called the tune."

The company prospered on war orders and in 1944 earned $64,960, equivalent to $25 per share of common stock, and had a book net worth of $466,415, or about $160 per common share.

Evans became unhappy with his lot. He complained to Smith that he was doing all the work and the stockholders were getting all the profit. He threatened to quit to start his own business. Smith persuaded him to stay, with the promise that he, Smith, would try to work out a plan for Evans to get the Tuttle company business. He told Evans that the plaintiffs must not learn what was afoot because they would not favor having Evans in control. Everyone thereafter concerned with the plan kept the secret so well

that plaintiffs did not learn that Evans had become sole owner of the company until five years later when the company was in bankruptcy and Evans disclosed the details during examination of him before a referee in bankruptcy.

Plaintiff Thomas H. Judson, Jr., was the spokesman for the other plaintiff members of his family. It is not clear from the record just when Smith began to put pressure on Judson to have the family sell their common stock. The fair inference is that, if it began earlier, it increased in intensity when Evans, apparently early in March 1945, interested a New York lawyer, Rager, to organize a syndicate to raise $100,000 to buy out both the preferred and common stock. That sum would provide about $15 per common share. Evans had no means of his own and Rager agreed to loan him $20,000 with which to purchase a 20% interest in the syndicate.

The trier of fact might reasonably find that Smith's campaign to get the plaintiffs to sell was grounded upon deliberate false representations. Judson held Smith in the highest regard and greatly admired his business judgment. In Judson's words, "I trusted Mr. Smith more than I have ever trusted any other man in my life." Smith's story to Judson, contrary to the fact, was that a wealthy friend of Smith wanted to buy a business for his son. Smith told Judson that this was a wonderful opportunity for the family to get out, that with the war's end the business was sure to come on hard times and the banks, his own and the Federal Deposit Insurance Company, would "close in" leaving the stockholders nothing. He analyzed the balance sheet item by item and told Judson in effect that the book values were grossly inflated and certainly would not realize anything in excess of the $186,000 then due the banks on the mortgage. He counselled Judson, "You boys will get nothing if you don't take this. You better take the $15 and run. That is the best I can do for you."

Trusting Smith and believing he was acting the part of friend of the family, Judson and the ...

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