Plaintiff Frederick W. Appell instituted an action in this court to foreclose two mortgages, allegedly in default, given by defendants Robert J. Reiner and Elsie Reiner, his wife. Defendants counterclaimed to cancel said mortgages on the ground, inter alia , of a lack of consideration.
At the conclusion of plaintiff's case defendants moved pursuant to R.R. 4:42-2(b) to dismiss the complaint because,
upon the facts and law, plaintiff has shown no right to relief. They further sought judgment directing the cancellation of said mortgages. In view of the legal questions raised, the court elected to suspend completion of the trial pending submission of briefs, and decision on the motion was reserved.
At this stage of the proceedings all evidence presented and the legitimate inferences to be drawn therefrom must be resolved in favor of the plaintiff. Furthermore, the court does not weigh the testimony.
Plaintiff resides in New York and is a New York attorney. He is a member of the law firm of Austin, Burns, Appell and Smith, with offices at 535 Fifth Avenue, New York City. He is not a member of the Bar of the State of New Jersey. Defendants reside in Teaneck, New Jersey, in a home owned by Elsie Reiner. Robert J. Reiner owns and operates Reintex, Inc., a New Jersey corporation, which was engaged in the textile manufacturing business and occupied a factory building, owned by Reiner, located in Rochelle Park, New Jersey. Elsie Reiner owns one qualifying share of stock in said corporation.
Plaintiff had been a friend of defendants for many years. He had participated in the incorporation of Reintex, Inc. in 1950, had served as a director and had represented said corporation as its attorney under an annual retainer agreement. He terminated his connection with the corporation in 1954 or 1955. Plaintiff had also drawn the wills of both defendants, represented them in the purchase of their home in Teaneck, and performed other legal services on their behalf.
In September 1960 he represented Reiner in a contest over the will of the latter's father, who died a resident of the State of New York. At a conference with Reiner in his New York law office concerning the litigation, plaintiff was informed that a satisfactory settlement of the will contest would be of little benefit to Reiner since Reintex, Inc. was heavily in debt, business prospects were poor, and the money from the estate would go to pay creditors. Reiner advised plaintiff that his wife was personally liable as endorser on a $25,000 note of the
corporation, and that he personally was liable on several large obligations of the corporation. Plaintiff testified that Reiner asked him to act as their attorney, to advise and assist them in their financial dilemma.
Plaintiff told Reiner, and later Mrs. Reiner, that he would act as their attorney for one year, his compensation to be dependent upon the extent of the services rendered by him. Upon learning that Reintex, Inc. had corporate liabilities of $224,661 and assets of $192,827, plaintiff advised defendants he must be "secured" for the payment of his fee for legal services he would render. Plaintiff thereupon proposed that second mortgages be placed upon their respective properties as collateral security for his prospective fee. He said that such a procedure would serve a dual purpose -- security to him and the "insulation" of their property from their various creditors.
Accordingly, on October 20, 1960, one month after their initial agreement, defendants gave plaintiff a mortgage note in the sum of $10,000 and executed a mortgage in said sum encumbering their Teaneck residence which was owned by Elsie Reiner. Twelve days later, November 1, 1960, defendants gave plaintiff another mortgage note in the sum of $7,500 encumbering the Rochelle Park factory property owned by Robert J. Reiner. Both obligations were to mature in one year, bore interest at 6% per annum payable quarterly, and required amortization payments of $1,000 every three months.
Plaintiff concedes the $17,500 obligations were not owed on the dates they were executed. On October 7, 1960 he had written a letter to defendants stating that his fees for current services rendered to them and Reintex, Inc., as of that date, were $250. He testified he had informed defendants in September 1960 that he estimated his legal fee for all services to be rendered would be $5,000.
When plaintiff was retained by defendants in September 1960, the primary obligations of Reintex, Inc. were: Peoples Trust Company of Paramus, N.J. (Peoples Trust Co.) -- $25,000, secured by personal endorsements of Robert J. Reiner and Elsie Reiner; the Bank of Saddle Brook and Lodi, N.J.
(Saddle Brook Bank) -- $25,000, secured by endorsement of Robert Reiner and pledged warehouse receipts for greige goods stored at Paterson, N.J.; Walter Kidde Acceptance Corp., Bloomfield, N.J. (Walter Kidde) -- $15,214, secured by a conditional sales contract of Reintex, Inc.; John Stack of Garfield, N.J., insurance premiums due from Reintex, Inc. -- $3,000, secured by a promissory note of Robert J. Reiner; The Chemstrand Corporation, New York City ...