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Perlmutter v. Derowe

Decided: March 1, 1971.

PAUL PERLMUTTER, SIDNEY KRONHEIM AND SAMUEL MEYERSON, PLAINTIFFS-RESPONDENTS,
v.
MARKUS DEROWE, DEFENDANT-APPELLANT



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

Hall

Plaintiffs sued defendant in the Law Division to recover $50,000 they had delivered to him, partly for their purchase of stock in a corporation in which he was a large stockholder, and partly as a loan, for certain specified purposes, to defendant personally or to the corporation with his personal guaranty. Allegedly the stock was not delivered and the loan not repaid. The transaction took place in New York; defendant is a resident of New Jersey.

On the basis of affidavits supporting the allegations of the complaint that defendant had fraudulently converted the money for other uses, original process was a capias ad respondendum (ca. re.) pursuant to N.J.S.A. 2A:15-42(d).*fn1

The writ issued on the ex parte order of a Superior Court Judge sitting in Essex County, which directed that defendant be held to bail in the amount of $50,000 (the amount of the alleged debt; see N.J.S.A. 2A:15-42), conditioned, in partial accord with R. 4:51-2(a) and (b), that he "render himself amenable to the orders and process of this Court at all times pending this action and to such process as may be issued to compel the performance of any judgment entered there."*fn2 The order also provided that upon arrest defendant was to be brought forthwith before a judge of the county.

The Sheriff of Essex County took defendant into custody under the writ at his home at 1:30 A.M. on December 1, 1969 and committed him to the county jail. Later that morning he and his attorney appeared before one of the judges in the county, who, we understand, informed them of the nature of the proceedings and denied an oral request for reduction of bail. Four days later defendant brought on a formal motion for discharge of the writ and to set aside the order to hold to bail. R. 4:51-3(a). The principal ground was that plaintiffs' affidavit-proofs, upon which the writ and order issued, were insufficient to establish that defendant fraudulently contracted the debt sued on. Defendant submitted his own affidavit, denying any fraud or misuse of the funds and stating he was completely insolvent and unable to pay back the money or raise the bail. Plaintiffs, who under the cited rule have the burden of proof on such a motion, offered answering affidavits and the matter was heard by the judge on the affidavits without oral testimony. The court found that plaintiffs' proofs were ample to establish the fraud required for the issuance of a ca. re. and denied the motion, remanding defendant to custody.

Defendant then sought leave to appeal the denial of the motion to the Appellate Division and for release from custody

pending the appeal. In his papers he raised for the first time the contention that incarceration for an alleged civil debt prior to a judgment in the suit, unless bail be furnished to secure the debt, is violative of the federal and state constitutions. A judge of the Appellate Division denied release and defendant then applied to this court. R. 2:2-2(b); 2:9-5(b) last sentence. Having some doubt about the proper interpretation of the previously quoted condition of a ca. re. bond, we granted leave to appeal from the trial court's order denying the motion to discharge the writ, and authorized defendant's release from custody upon the filing of a personal appearance surety bond in the sum of $25,000.*fn3 The bond was filed and defendant was released on December 19 after an incarceration of 19 days.

We may first quickly dispose of defendant's renewed contention that plaintiffs' proofs were insufficient to warrant the issuance of a ca. re. While it would have been more desirable for the trial court to have required the presentation of oral testimony, with cross-examination (R. 4:51-3(a)), than to have decided the matter on affidavits which contained much hearsay and conclusory statements, we think there was sufficient competent evidence before it from which the conclusion could reasonably be reached that the issuance of the writ was warranted, especially in light of the view in this state that it need not be shown that the original consensual agreement was contemporaneous with the fraudulent design of defendant. Allied Financial Corp. v. Steel Panel Sales Corp., 86 N.J. Super. 65, 74-75 (App. Div. 1964), certif. denied sub. nom. Allied Financial Corp. v. Financial Associates, Inc., 44 N.J. 411 (1965), and cases therein cited.

The main thrust of the original briefs and oral argument of the parties was directed to the constitutional contention of defendant previously mentioned. This was grounded on the assumption, indulged in not only by both counsel, but also by the judges who dealt with the matter below, that the modern condition of a ca. re. release bond, prescribed by R. 4:51-2(a) and (b) earlier quoted, amounts to a guarantee of payment by the surety of any judgment obtained against defendant in the suit. Our subsequent research led us to question this proposition and we requested supplemental memoranda. We are now thoroughly convinced that, despite an apparent popular conception to the contrary, the present bond condition, and indeed the prior form of condition prescribed until the predecessor of R. 4:51 was adopted effective January 1, 1952, does not constitute a guarantee of payment, but merely assures defendant's physical presence when ordered by the court, especially when his surrender is required pursuant to the corollary writ of capias ad satisfaciendum (ca. sa.) issued after judgment has gone against him in the action.

The reason for our conclusion requires a brief excursion into history. Both writs are ancient and were broadly used in the early English practice when imprisonment for debt was prevalent. That practice was followed in the early days of this state. For our purposes, however, we need not go back of our Constitution of 1844 which prohibited such imprisonment "in any action, or on any judgment founded upon contract, unless in cases of fraud; * * *." Art. I, par. 17. (The identical provision appears in our present constitution. Const. 1947, Art. I, par. 13). The effect was to leave the determination of what constituted fraud to the Legislature. Ex Parte Clark, 20 N.J.L. 648, 650 (Sup. Ct. 1846). The Legislature acted in 1846 (in connection with the revision of the laws authorized in ...


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