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Duratron Corp. v. Republic Stuyvesant Corp.

Decided: June 23, 1967.


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


Defendant Jacobs, a former vice-president of defendant Republic Stuyvesant Corporation ("Republic" hereinafter), appeals from a judgment against him, another officer, Irene Vitullo, who was assistant secretary, and the corporation, for damages sustained by plaintiff through their fraud.

The alleged fraud, found proven by the trial court sitting without a jury, consisted of the borrowing of money from plaintiff against the purported collateral of real estate mortgages owned by Republic which that company was actually simultaneously selling and assigning to others while delivering forged bonds of the obligors and worthless assignments of the mortgages to plaintiff. The judgment against defendant Jacobs is in the sum of $131,907, involving nine separate transactions.

The only substantial ground of appeal advanced is that the knowing participation of Jacobs in the fraudulent transactions was not sufficiently established. We find miscellaneous other contentions of defendant, generally as to rulings on evidence, to be without merit and not to require discussion.

There is no dispute but that Republic, through one or more of its officers, did defraud plaintiff to the extent of somewhat above the amount of the judgment against Jacobs. There is, moreover, little doubt from the evidence that defendant Vitullo, who does not appeal, was a direct and knowing participant in the fraud, the proofs against her being more directly inculpatory than those against Jacobs. However, Jacobs ranked above her in the corporate hierarchy and occupied a desk alongside hers in the office while these transactions were being effected.

Jacobs, as vice-president, executed all nine assignments of mortgage to plaintiff over a period of about a month (June 1964) and on the same day as each such assignment he also executed in the same capacity an assignment of the identical mortgage to an apparently bona fide purchaser thereof. Republic thus came into double funds for each mortgage, concealing from plaintiff the fact that the mortgages assigned to it had simultaneously been sold for value to others.

Neither Jacobs nor Vitullo took the stand to refute the implications of their guilt, and Jacobs' defense, purportedly established through the testimony of his secretarial assistants while associated by Republic, was that he merely signed stacks of blank assignment forms when so requested. It was argued on his behalf that he knew nothing about the frauds when they were taking place. No officer or director of the defendant corporate organization, however, nor anyone else, testified in support of that assertion.

An officer of plaintiff testified that after the frauds were revealed (by which time defendant had left the Republic organization) Jacobs told him he knew of the double assignments and that at a meeting of the board of directors in June 1964 Mrs. Vitullo was instructed to "clean them up."

Jacobs did not specify to the officer when he first learned of the situation, indicate that he was in anywise surprised, or explain how his signature was to be found on all sets of the double assignments in the nine instances here involved. (There were other frauds practised on behalf of Republic on plaintiff but not connected to Jacobs by the proofs.)

In an action for damages, fraud may be established by the preponderance or greater weight of the evidence. Fischetto Paper Mill Supply, Inc. v. Quigley Co., Inc., 3 N.J. 149 (1949); Armel v. Crewick, 71 N.J. Super. 213 (App. Div. 1961). The trial court after a careful review of the proofs found in a formal opinion against Jacobs on the issue of his knowing participation in the frauds. We cannot say that the finding could not reasonably have been made on sufficient credible evidence adduced by plaintiff. State v. Johnson, 42 N.J. 146, 162 (1964).

However, Jacobs now argues that the trial court improperly threw into the evidential scales against him an adverse inference from his failure to take the stand in his own defense, thereby impairing his constitutional privilege against ...

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