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Graham v. Onderdonk

Decided: October 24, 1960.


On appeal from Superior Court, Appellate Division.

For affirmance -- Chief Justice Weintraub, and Justices Burling, Jacobs, Francis, Proctor, Hall and Schettino. Opposed -- None. The opinion of the court was delivered by Burling, J.


Appellants, judgment creditors of C. Herbert Onderdonk, brought suit against Grace Onderdonk, the respondent in this appeal. The purpose of the litigation was to set aside a deed from C. Herbert Onderdonk, husband of the respondent, to Grace Onderdonk, which deed was dated November 16, 1956 and recorded December 17, 1956. The transfer, which concerned property located in the Borough of Bernardsville, Somerset County, New Jersey, allegedly had been made in fraud of creditors.

The suit was transferred from the Superior Court, Law Division, on the respondent's motion to the Superior Court, Chancery Division, and there consolidated with other actions against respondent and her husband seeking, inter alia, the same relief as appellants. At the conclusion of the trial, the trial judge held that there was a fair consideration for the transfer as defined in R.S. 25:2-9, and that therefore the transfer was not in fraud of creditors under R.S. 25:2-10 even though, according to the trial court's findings, C. Herbert Onderdonk held an interest in the property as a tenant by the entirety prior to the transfer. Appellants and their co-plaintiffs in the consolidated trial below appealed the judgment to the Superior Court, Appellate Division. That court affirmed the judgment below but not for the same reasons given by the trial court, holding instead that C. Herbert Onderdonk held an interest in the property in question only as a trustee by virtue of a resulting trust in

favor of his wife, with the consequence that the November 1956 deed could not be a transfer in fraud of creditors. Appellants alone sought certification, which we granted. 32 N.J. 351 (1960).

In our view of the case, it is only necessary to consider whether the husband held a beneficial interest in the property in question. Respondent argues that full equitable title to the property was at all times vested in her. Owing to the disagreement of the courts below on that question we will proceed to make new findings of fact. R.R. 1:5-4(b) provides:

"(b) on a review of any cause, criminal or civil, involving issues of fact not determined by the verdict of a jury, new or amended findings of fact may be made, but due regard shall be given to the opportunity of the trial court to judge of the credibility of the witnesses."

It was the practice of an appellate court reviewing a chancery decree to make an independent investigation of the facts. Naame v. Doughty, 109 N.J. Eq. 535 (E. & A. 1932); Cartan v. Phelps, 91 N.J. Eq. 312 (E. & A. 1920); Glenn v. Glenn, 142 N.J. Eq. 625 (E. & A. 1948). See Russo v. Governor of the State of New Jersey, 22 N.J. 156, 169 (1956); Toolan, Appellate Practice, in The New Practice, 330, 336 (Schnitzer ed. 1949). This power was given under the new court system in effect since 1948 to all reviewing courts in matters arising from a non-jury trial court determination. See Rule 1:2-20(a), repealed September 9, 1953; R.R. 1:5-3(a), effective September 9, 1953, repealed September 8, 1954; R.R. 1:5-4(b) effective September 8, 1954; Kidde Mfg. Co. v. Town of Bloomfield, 20 N.J. 52, 66 (1955); Pratico v. Rhodes, 17 N.J. 328, 335 (1955); State v. H.L., 61 N.J. Super. 432, 437 (App. Div. 1960). The disparate conclusions reached by the courts below on what we consider to be the decisive question in the case makes this appeal a fitting situation for the operation of R.R. 1:5-4(b).

When Grace Onderdonk married C. Herbert Onderdonk in February of 1936, she was financially independent, having inherited upon the death of her first husband in 1934 an estate of about $120,000. Consequently in 1938 she was able to contribute $20,000 to become a partner in a brokerage firm together with her husband and another person. She also loaned to her husband his monetary contribution to the partnership, a sum of $15,000. Ultimately, he paid $1,000 of this loan to respondent, and the remainder of the debt became the basis of a promissory note made by C. Herbert Onderdonk in favor of respondent. When this note became overdue, respondent obtained a renewal note from her husband. Thus the record suggests that respondent sought to maintain her separate estate and that she conducted her transactions with her husband according to business standards.

In 1948, respondent and her husband became interested in a single family dwelling in Bernardsville, New Jersey. They determined to purchase it, and secured the seller's approval to a price of $28,000. A mortgage application was made in the name of C. Herbert Onderdonk, although it appears that reports of the financial position of both respondent and her husband were offered in support of the mortgage application. The application was granted, and the proceeds of a mortgage loan were used to pay $15,000 of the purchase price. Respondent supplied the remainder of $13,000. She used money from her separate estate for that purpose.

The deed for the Bernardsville property was prepared in the name of C. Herbert Onderdonk and Grace Onderdonk as tenants by the entirety. Respondent testified that the deed was prepared in this manner and not in favor of herself alone because of the advice of the real estate agent connected with the transaction. This man, respondent said, stated that the mortgagee required title to be taken in the name of both ...

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