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Davanne Realty Co. v. Brune

Decided: May 18, 1961.


Goldmann, Foley and Lewis. The opinion of the court was delivered by Goldmann, S.j.a.d.


Defendant Brune appeals from a Chancery Division judgment in a foreclosure action determining the amounts due to a certain judgment creditor and to defendants Cervase, fixing priorities, and directing a sale of the premises by the sheriff to raise and satisfy the monies owing.

In July 1959 plaintiff Davanne Realty Co. (Davanne) instituted an action to foreclose a first mortgage which defendant Brune had executed on November 1, 1948, covering premises at 31 Harrison Avenue, Harrison, New Jersey, to secure a $7,250 bond of even date. The complaint recited that Brune had on November 12, 1954 mortgaged the property to Finance & Factors Corp. for $9,000, which mortgage was assigned to defendant John Cervase, Trustee, on October 8, 1957. Further, that on October 10, 1956 Brune and his wife had conveyed the premises to Mary Cervase, John's wife. The Cervases were therefore named as defendants.

During the course of the proceedings Davanne assigned its mortgage to a third person and thereafter took no further part in the action. Its complaint has been dismissed. Cervase, who is a New Jersey attorney, continued the foreclosure action as assignee of the second mortgage. Brune then filed his answer as well as a cross-claim against the Cervases demanding an accounting and damages for breach of trust, waste and damage to the property. Extensive depositions were taken of Brune and John Cervase. These were admitted as an exhibit at the trial.

After taking the testimony of Cervase and Brune, the trial judge inquired whether it would be in the interest of justice to continue with other witnesses, and called on Brune's counsel as to what other proofs, if any, he had to offer. Counsel then indicated the witnesses he had in mind and

what their testimony would be. The judge concluded that nothing was to be gained by calling any of these witnesses, and therefore proceeded to deliver oral findings which find their reflection in the judgment entered.

At the heart of Brune's claim is the fact that there was an attorney-client relationship between Cervase and him, and that this confidential relationship was violated by Cervase, to Brune's damage. The same contention is vigorously projected before us. Brune claims that Cervase, as attorney, took advantage of him, and therefore all transactions between them should be rendered void and unenforceable, and Cervase made to answer in damages. The second point raised on appeal is that the conduct of the trial by the Chancery Division judge deprived Brune of an opportunity to be heard, and so denied him due process of law.

The Harrison property consisted of a bar and grill and several apartments. The tavern was operated by Peanut Bar and Grill, a corporation owned and controlled by Brune. The property was subject to three mortgages: a first mortgage held by Davanne; a chattel mortgage on the tavern, held by Finance & Factors, in the original sum of $9,000 and dated November 12, 1954, and a second mortgage of even date held by it as additional security for the chattel mortgage loan. At the time Cervase entered the picture in the fall of 1956, Brune was unable to pay Davanne and Finance & Factors the $100 a month and the $75 a week due under their respective mortgages. The mortgages were in default. Brune had judgments against him totalling more than $1,000. Creditors were pressing him from every side.

Brune's story is that he went to his friend Nesto about a loan, so that he might pay all his obligations, consolidate them into one mortgage, and obtain enough money to help rebuild the tavern business. He was referred to Nesto's attorney, Cervase. Brune claims that Cervase agreed to lend him $15,000, to be repaid at the rate of $100 a month for five years, with one final payment at the close of that period.

There is no written evidence or other proof of such an agreement. Defendant denies it, and the exhibits in evidence, bearing Brune's signature, give his story the lie. The trial judge, in the course of his oral conclusions, said he did not believe Brune, but did believe that he signed the several instruments involved in the transaction about to be described. We are in complete agreement with the trial judge's assessment of Brune's credibility. He was evasive both on depositions and on the witness stand. He could not recall important facts. His story did not hang together, and it was flatly contradicted by writings bearing his signature.

On October 15, 1956 Brune personally, and as president of Peanut Bar and Grill, signed an agreement whereby, in consideration of Cervase's obtaining extensions of the two real estate mortgages and the chattel mortgage, and advancing $2,400 to reduce the chattel mortgage and $1,200 to reduce the first mortgage, he agreed to repay Cervase in one year, with interest at 6%, and also to pay off the balances due on the mortgages. If Cervase elected to pay off any one or all of these mortgages, Brune consented to their being assigned to him. The agreement provided that the Harrison Avenue property was to be placed in the name of Cervase or his nominee as security for the money loaned. Peanut Bar and Grill was to pay Cervase $1,000 for "all legal and other charges." Brune personally agreed to pay Cervase for all legal services rendered during the year ending October 15, 1957, and Peanut Bar and Grill made a like agreement.

The property had actually been conveyed by Brune and his wife to Mary Cervase, John's wife and nominee, a few days before the execution of the agreement just described -- on October 10, 1956. Cervase received two notes of $500 each, one Brune's and the other Peanut Bar and Grill's. These represented the $1,000 mentioned in the agreement. Peanut Bar and Grill's note was concededly a bonus.

Cervase was successful in obtaining the mortgage extensions by agreeing to pay Davanne $100 a month for 12

months on behalf of Brune, and to guarantee to Finance & Factors 12 notes of $300 each for the ensuing year. As between Cervase and Brune, it was agreed in writing that Cervase would advance $2,400 on account of the 12 notes in the course of the year. The two men subsequently verbally agreed that as a matter of convenience Cervase would pay Finance & Factors $300 a month and Brune pay Davanne $100 a month. Brune was irregular in his payments; at the end of the year he had paid only approximately $700 of the $1,200 due under the extension agreement. Cervase, on his part, had paid $3,600 to Finance & Factors and approximately $200 to Davanne.

It would appear that all these transactions, as well as the negotiations surrounding them, were conducted with the knowledge of one Joseph Tedeschi, an attorney who had represented Brune in an insurance matter before October 1936 and again when the tavern business was sold to Brune's relatives, more than a year later, as mentioned below.

During the course of the extension year Peanut Bar and Grill became involved in a receivership action. Cervase appeared for it as counsel of record and succeeded in settling the matter for $472, advancing $272 of his own money. He charged $250 for these services.

Shortly before the 12-month extension period had run its course, Cervase became fearful that Brune would be unable to meet the $3,800 note representing the balance due Finance & Factors after it had been paid $3,600 on its 12 notes. Cervase claims he made this known to Tedeschi, and that Brune sought to assure him he would have the money when it came due. On October 8, 1957 Cervase purchased the second mortgage and chattel mortgage from Finance & Factors to secure himself against being wiped out by Brune's default and a consequent foreclosure. The balance then due was $3,800 but Cervase paid only $3,100 for the assignment, taking it in his name as trustee. This course was allegedly followed because he had obtained the $3,100 in part by borrowing on an insurance policy on which his daughters

were beneficiaries and in part by calling in an outstanding loan held in trust for the daughters.

In the latter part of December 1957 Brune contracted to sell Peanut Bar and Grill to relatives. The sale was closed two months later, the consideration being $5,000 in cash, paid to Brune, and $5,000 by way of assuming the outstanding chattel mortgage held by Cervase. Brune was represented by Tedeschi; the purchasers by an attorney who requested a lease from Brune as beneficial owner of the realty. Mary ...

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