Conford, Foley and Halpern. The opinion of the court was delivered by Halpern, J.c.c. (temporarily assigned). Conford, J.A.D. (dissenting).
This is an appeal by the defendants from a judgment of the Superior Court (Chancery Division) in favor of the plaintiff Minnie Hansen, and against the defendants Adolph Janitschek, individually and as surviving partner of Rudolph Janitschek, and Adolph Janitschek, co-partners trading as New Jersey Art Foundry, John Janitschek Sons, Props., and Viola Janitschek, as executrix of the estate of Rudolph Janitschek, deceased. Plaintiff cross-appeals from so much of the judgment as denies her counsel fees and the court's allowance of simple interest at the rate of 4% per annum instead of 6% compounded.
The court concluded that plaintiff Minnie Hansen was defrauded by her partners, Rudolph and Adolph Janitschek (they were also her brothers) of her just share in certain partnership real estate. Judgment was rendered in her
favor against the defendants for $7,333.33, together with interest thereon at 4% per annum amounting to $3,613.70, making a total of $10,947.03, plus taxed costs.
The defendants contend the court should have granted their motion for a judgment at the end of plaintiff's case, and, in any event, the judgment should be reversed because the trial court's findings and conclusions were against the weight of the evidence. Without reviewing the testimony in detail, it is sufficient to say that the trial judge's ruling on the motion and his ultimate conclusions were fully supported by the record. Briefly stated, the court concluded plaintiff had proved that plaintiff and her brothers were part of a closely knit family group, inclusive of their late father, founder of the family business; plaintiff and her brothers were partners in the ownership of certain realty; plaintiff did not know the contents of the partnership and other agreements; plaintiff conveyed her one-third interest in certain of the partnership realty valued at $26,500 for $1,500 because of her brothers' misrepresentations and fraud in failing to advise her of all the material facts; and that plaintiff was defrauded thereby. Based on these findings the court properly applied the well-settled rule of law that where one party, having superior knowledge, misrepresents material facts to another, or fails to reveal material facts which he is under a duty to reveal, and thereby induces such other party to enter into an unconscionable bargain, such conduct constitutes fraud which will move a court of equity to grant relief. Nicholson v. Janeway , 16 N.J. Eq. 285 (Ch. 1863); Jaeggi v. Andrews , 124 N.J. Eq. 155 (Ch. 1938); Stark v. Reingold , 18 N.J. 251 (1955). This principle of law is applicable even if we assumed no confidential or dominant relationship existed between the parties. Jaeggi v. Andrews, supra; Forman v. Grant Lunch Corporation , 113 N.J. Eq. 175, 182, 183 (E. & A. 1933); but here the partnership relationship itself gave rise to mutual obligations of loyalty and fidelity between the partners. Stark v. Reingold, supra , 18 N.J. at page 261.
The defendants' defense of laches is likewise untenable. While about 11 years elapsed before plaintiff instituted this suit, the court was justified in concluding that plaintiff acted promptly after learning all the facts. Moreover, defendants failed to offer any proof of prejudice. Laches is a defense only if there is delay in enforcing a known right and prejudice has resulted to the other party because of such delay. Mitchell v. Alfred Hofmann, Inc. , 48 N.J. Super. 396 (App. Div. 1958), certification denied 26 N.J. 303 (1958); West Jersey Title and Guaranty Co. v. Industrial Trust Co. , 27 N.J. 144 (1958). Laches as a defense is not regarded favorably where the parties stand in a confidential relationship. Weisberg v. Koprowski , 17 N.J. 362 (1955). Furthermore, the defendants, having been found guilty of fraud, are estopped from using laches as a defense. Forman v. Grant Lunch Corporation, supra; Gallagher v. New England Mutual Life Ins. Co. of Boston , 19 N.J. 14 (1955).
The defendants argue the court erred in striking the testimony of the attorney, Benjamin E. Gordon, pertaining to statements allegedly made by plaintiff to him in 1947 which were held to be privileged. Gordon's testimony reveals that he knew "* * * the entire Janitschek family for almost 50 years." In his words, "* * * To me all the Janitscheks are the same. * * *" At the time of the trial he represented Adolph Janitschek, the estate of Rudolph Janitschek and the New Jersey Art Foundry, the company originally founded by John Janitschek, father of the parties to this suit. In 1947 he was consulted by plaintiff and her husband in connection with a mortgage loan hereinafter to be discussed; and in 1952 he represented them in the preparation of their last wills and testaments. From his own testimony it is clearly inferable that Gordon was a close friend, and would be considered by the ordinary layman as the "family lawyer" of the Janitschek family.
At the outset it is to be noted that there were two sets of statements allegedly made. The trial court permitted
the alleged 1958 statements to go into evidence. The disputed statements of 1947 occurred under the following circumstances: sometime in 1947 the plaintiff went to Gordon's law office for the purpose of engaging his services in obtaining a mortgage on her home. Gordon succeeded in getting one of his clients to advance the moneys; he made the necessary title searches; he drew all the required legal documents to consummate the transaction; and he was paid by plaintiff for his work. It was during the time Gordon was doing this work that plaintiff allegedly made the disputed statements to him pertaining to the title of the property being mortgaged. The defendants offered his testimony as proof on their behalf. The court allowed it into evidence, but after hearing the factual background from both sides, struck it out on the basis that the statements were made by a client to her attorney and were privileged. We agree.
The philosophy of the privileged communication doctrine between attorney and client, as we find it to exist in New Jersey, is best stated in the comment to Rule 210 of the A.L.I. Model Code of Evidence:
"In a society as complicated in structure as ours and governed by laws as complex and detailed as those imposed upon us, expert legal advice is essential. To the furnishing of such advice the fullest freedom and honesty of communication of pertinent facts is a pre-requisite. To induce clients to make such communications, the privilege to prevent their later disclosure is said by courts and commentators to be a necessity. The social good derived from the proper performance of the functions of lawyers acting for their clients is believed to outweigh the harm that may come from the suppression of the evidence in specific cases."
We are in accord with the view that this doctrine, since it results in the exclusion of evidence, is to be strictly limited to the purposes for which it exists. In re Selser , 15 N.J. 393, 405 (1954). Nevertheless, when the facts in a given case warrant it, the rule should be applied because the principle is deeply rooted in our jurisdiction. State v. Toscano , 13 N.J. 418 (1953); Stewart Equipment Co. v.
Gallo , 32 N.J. Super. 15 (Law Div. 1954). The rule is one of public policy and should be adhered to even though a party is injured thereby. State v. Krich , 123 N.J.L. 519 (Sup. Ct. 1939). For a full discussion of the problem see proposed Rule 26 in the Report of the Committee on the Revision of the Law of Evidence to the New Jersey Supreme Court , dated May 25, 1955, and the annotation therein contained. See also a discussion of the Selser case, supra , by Professor Lewis Tyree, of Rutgers University School of Law, in 9 Rutgers Law Review 298, wherein he says:
"The sanctity of the confidentiality of the attorney-client relationship emerges unscathed, in fact more cherishable, if anything, for having been so comprehensively re-visited in judicial opinion."
It is argued by defendants that the relationship of attorney and client did not exist between plaintiff and Gordon since he was acting for the lender, and the transaction was a business rather than a legal one within the meaning of the doctrine. We are of the opinion that the circumstances surrounding plaintiff's going to Gordon to obtain a mortgage loan created the attorney-client relationship with its privileged communication cloak.
The doctrine has been stated in various ways. In State v. Loponio , 85 N.J.L. 357, 360 (E. & A. 1913), the court said:
"Where, therefore (enlarging somewhat upon the language of Professor Wigmore), legal advice of any kind is sought from a duly-accredited professional legal advisor in his capacity as such, the communications relevant to that purpose, made in confidence by the client, are at his instance permanently protected from disclosure by himself, or by the legal advisor, or by the agent of either confidentially used to transmit the communications, except the client waives the protection." (Italics mine)
Jones on Evidence (4 th ed.), sec. 749, p. 1347, says:
"* * * it is sufficient if the statements have been made in the course of legitimate professional transactions between attorney and client as such, and relate to matters as to which the client has sought ...