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Fidelis Factors Corp. v. Hatchery

Decided: July 31, 1957.

FIDELIS FACTORS CORPORATION, PLAINTIFF-RESPONDENT,
v.
DULANE HATCHERY, LTD., A CORPORATION OF NEW JERSEY, ET AL., DEFENDANTS, AND NATHAN SINOWAY, DEFENDANT-APPELLANT



Hughes, Price and Coolahan. The opinion of the court was delivered by Hughes, J.s.c. (temporarily assigned).

Hughes

This appeal raises substantial questions of some difficulty. At the outset, we commend the practice followed by the learned judge of the Chancery Division in staying (for sufficient time to permit appeal and application for temporary appellate relief pending decision) that part of the judgment below which would have caused the arrest of the appellant upon the writ of capias ad satisfaciendum. This action was based upon the frank concession of the learned court below of doubt in reaching a basic conclusion of fact and its acknowledgment also of "close questions of law" underlying its decision. In these circumstances, particularly where human freedom is to be circumscribed in a case of manifest doubt, it is in the best tradition of our judicial philosophy that "* * * justice is the polestar * * *" (Yannuzzi v. United States Casualty Co. , 19 N.J. 201 (1955)), that appellate review be accommodated to eliminate, insofar as can be done, the possibility of mistake.

We are conscious of similar doubts upon our examination of the record, which presents the following factual and legal situation: -- On March 5, 1956, the defendant DuLane Hatchery, Ltd., a corporation, being indebted to United Feed Company, Inc., a corporation, executed and delivered a chattel mortgage to secure its note in the sum of $4,732.77, covering stipulated quantities of poultry assertedly owned by mortgagor. It is apparent from the record that this obligation was to secure an indebtedness already owing such mortgagee for the cost of feed and the like sold by it to mortgagor, and to induce a continued delivery of such items for the maintenance of its flocks of chickens. The appellant, as secretary of the corporate mortgagor, signed his name thereon after the word "attest" and opposite the signatures of defendants, Isaac Friedman and Jack Bartner, who had

executed this mortgage, under the corporate seal, as vice president and "chairman," respectively. This mortgage was duly recorded in conformity with the statute. On June 22, 1956, United Feed validly assigned this obligation to the present plaintiff, and due recordation thereof was had. There was default in payment provided for by the instrument and United Feed declined further sales of feed on credit. About July 18, 1956 Mr. Samuelson, president of United Feed, investigating personally at the premises of the DuLane Hatchery company, observed a scene of alarming inactivity and ascertained from a neighbor that a night or two before, several truckloads of chickens had been removed. Samuelson promptly alerted the assignee holder of the mortgage and on the following day he and its representative went to the DuLane Hatchery premises, saw Mr. Friedman, who was apparently in charge, and elicited from him an admission that all but a remnant of the poultry covered by the mortgage had been sold. His explanation offered in mitigation was legally immaterial and unnecessary of discussion here.

The assignee and present plaintiff filed its complaint on October 15, 1956 to foreclose the chattel mortgage and for other relief, including the appointment of a receiver in the foreclosure. In separate counts against each of the individual defendants, plaintiff charged them, respectively, with fraudulent and unlawful participation by instigation, aid and assistance in the fraudulent and unlawful conversion by DuLane Hatchery, Ltd. of the property affected by the chattel mortgage and on the basis thereof sought money judgments in fraud and other relief, including the issuance against such respective parties of writs of capias ad satisfaciendum. All defendants were served but failed to appear or answer, and the court took testimony ex parte on the basis of such default. As a result, judgment was entered on December 21, 1956 for the amount due on the mortgage, in fraud, against the corporate and the three individual defendants. Additionally, the court ordered the issuance of writs of capias against Friedman and Sinoway. The transcript of the proofs taken incident to the entry of that judgment indicated that

the court initially felt that while the evidence established the responsibility of Friedman for "* * * managing and disposing of the property * * *," so that the capias should issue against him, the evidence was insufficient so to implicate Bartner and Sinoway. Plaintiff's attorney did not persist in seeking such relief against Bartner, but urged the court to reconsider as to Sinoway, and the court, on its own motion, took further proofs which led it to the determination that the capias should also be ordered against the latter. The writ issued in obedience to this judgment against Sinoway on December 26, 1956, and he soon moved to set aside the judgment against him on grounds of mistake and excusable neglect, as contemplated by R.R. 4:62-2 (arising from proofs touching upon the financial collapse of the operation, including the intended bankruptcy of DuLane Hatchery, Ltd., asserted confusion on the part of Sinoway as to his position in facing the various claims being made, and inconclusive conversations had by him with a Mr. Briggs of a firm of attorneys), and the existence of a meritorious defense to the action. Counter proofs by affidavit were filed and the court directed another hearing, at which it heard anew the opposing versions of fact bearing upon the implication of Sinoway in acts which would justify the issuance as to him of a capias order.

In doing so it was the obvious intention of the learned court to reopen the issue as to the culpable participation of Sinoway in whatever fraudulent acts were deemed to justify the original issuance of the writ of capias. We reach this conclusion by reference to the court's findings of fact and conclusions of law gleaned from his recitation of same from the bench and incorporated as well in his order of March 5, 1957 denying the motion to vacate the judgment. Aside from the judgment as a whole, reflecting as it did an award of money damages against the corporate and three individual defendants, we perceive quite clearly that the court considered and determined de novo the implication of Sinoway on the question of the propriety of seizing him on capias. We quote from the court's verbal decision:

"The Court: My findings are as follows: This is, in effect, an application to reopen or set aside a judgment already entered ex parte in this cause, a judgment based upon oral proof in this court by Mr. Rosenstein through witnesses of his client. So that the findings, although technically are for the purpose of reopening a judgment, as a result of hearings had before this court I must assume that the entire litigation is before the court even as if there had been no final judgment. * * *"

The court then proceeded to analyze the factual connection of Sinoway with the transaction, determining although "* * * concededly in doubt as to this question * * *" that Sinoway was not a mere ministerial party to the chattel mortgage by the manner in which he signed it, but a culpable participant in acts encompassed by the capias statute. Although finding that he was negligent in not defending the litigation initially (cf. R.R. 4:62-2, supra), this fact was not the determinative basis for the court's decision, for he said from the bench:

"* * * And finally the court finds that both defendants were negligent in the protection of their interests in not obtaining ...


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