Brodzinsky v. PulekBrodzinsky v. Pulek
Plaintiff, executrix and principal beneficiary under the last will and testament of her late father, Stanley Pulek, appeals from a judgment of the Chancery Division holding that a certain bond in the sum of $200,000, dated January 5, 1960, and the securing real estate and chattel mortgages of even amount of the
The judgment under review also determined that the defendant, Isabella Pulek, was entitled to be reimbursed from decedent‘s estate in the sum of $927.48 for an insurance premium paid by her, and the further sum of $23,799.04 advanced by her to satisfy a real estate mortgage on the business premises; and that she was entitled to be indemnified from the decedent‘s estate for any income tax claim that may be established against her in connection with the sale of the business. While the appeal is “from the whole of the final judgment” entered on November 8, 1961, the three points advanced by plaintiff in her brief and at oral argument for a reversal of the judgment relate only to plaintiff‘s alleged rights in the aforesaid bond and mortgages. Accordingly, we consider only that phase of the judgment.
The factual and legal issues involved herein have been comprehensively set forth in the opinion of the Chancery Division, reported in 70 N.J. Super. 63 (Ch. Div. 1961). We need not repeat them in extenso here. Our task is to determine whether the trial court‘s fact findings have adequate evidentiary support and whether proper legal conclusions have been drawn therefrom. While we may, and should when the record so warrants, make new or amended findings of fact in a case such as this, tried without a jury, having given due regard to the opportunity of the trial court to judge of the credibility of the witnesses, R.R. 1:5-4(b), we have been advised by our Supreme Court that “great care must be exercised not to transfer the proceeding into a completely de novo examination of the proof. * * * When the facts and inferences arising from them are not in dispute, there is rarely room for differences in their evaluation at the trial or appellate level.
We adopt as true the following basic facts which appear in the trial court‘s findings. The late Stanley Pulek and the defendant, Isabella Pulek, were married in May 1952 and remained as husband and wife until Stanley‘s death. Each had been previously married, and the plaintiff is Stanley‘s daughter by a prior marriage. Before his marriage to the defendant, Stanley operated a tavern and restaurant known as Stanley‘s Anchor Inn, at 105 Hawthorne Avenue, Newark, New Jersey. Upon their marriage the defendant took an active interest in the operation of the business, which subsequently prospered. In November 1953 Stanley and Isabella, his wife, acquired the stock interest in Peddie Realty Company, the corporation which owned the real estate upon which the business was conducted, and which subsequently acquired an adjoining parcel. The Peddie Realty Company stock was equally distributed between Stanley and the defendant. In 1955 the tavern license was issued in the names of both Stanley and Isabella and they overtly operated the business thereafter as partners.
The marriage between Stanley and Isabella “was a rocky one,” according to the finding of the trial judge. On July 16, 1954 they entered into a separation agreement prepared by Michael L. Mango, who essentially was Mr. Pulek‘s attorney but on occasion represented both of them
In December 1959 the decedent was anxious to sell the business, and ultimately the defendant wife concurred. An agreement of sale was entered into under date of December 8, 1959 with John Peterson and William Speros as buyers. This agreement provided for the sale of all the issued shares of stock of the Peddie Realty Company and all the right and title of Stanley and his wife Isabella in the tavern and restaurant business, including the liquor license, for the sum of $240,000. There was a down payment made of $40,000. Title was closed on January 5, 1960. Pursuant to the contract there were delivered to Stanley Pulek and his wife Isabella at the closing, the following instruments which are the subject of this litigation:
(a) Bond — Peddie Realty Company to Stanley Pulek and Isabella Pulek in the principal sum of $200,000 with interest at 5%, said principal and interest payable in monthly installments of $1,283.44 for a 21-year period.
(b) Real estate mortgage from Peddie Realty Company to Stanley Pulek and Isabella Pulek in the principal sum of $200,000, providing for the same monthly payments as prescribed in the bond.
(c) Chattel mortgage from Stanley‘s Anchor Inn Corp. to Stanley Pulek and Isabella Pulek covering the fixtures and equipment in the tavern and restaurant premises, likewise in the principal sum of $200,000 and providing for the same monthly payments.
The aforesaid bond and mortgages, running to Stanley Pulek and Isabella Pulek, did not specify on their face the manner in which Stanley and his wife had title thereto, thus giving rise to the issue to be resolved as to whether they held title as joint tenants under
“When any mortgage, covering real estate or chattels or both, shall hereafter be made and executed to, or assigned to, any husband and wife, such mortgage shall be held by such husband and wife as joint tenants and not as tenants in common, both as to the legal estate and the beneficial interest or debt thereby secured, unless otherwise therein provided.”
Plaintiff challenged the constitutionality of
“Equity looks to the substance, rather than the form.” Under this familiar equitable maxim, the real intention of the parties is the dominant test for evaluating the legal effect of a particular instrument. Thus, a deed absolute on its face will be construed in equity as a mortgage, if the latter was what the parties intended. Papsco v. Novak, 94 N.J. Eq. 642, 644 (Ch. 1923); Antonucci v. Gravina, 134 N.J. Eq. 79, 81 (Ch. 1943). So, too, a conveyance to a husband and wife as tenants by the entirety has been judicially converted into a sole ownership in the wife to achieve an equitable result. Luebbers v. Luebbers, 97 N.J. Eq. 172 (Ch. 1925). Again, when “the written instrument fails to express the real agreement or transaction,” either through a mistake common to both parties, or through the mistake of one party accompanied by the fraudulent knowledge and procurement of the other, there may be reformation. Downs v. Jersey Central Power & Light Co., 117 N.J. Eq. 138, 141 (E. & A. 1934). However, there must be clear and convincing proof “that the contract in its reformed, and not original, form is the one that the contracting parties understood and meant it to be; and as, in fact, it was but for the alleged mistake in its drafting.” Kuller v. Fire Ass‘n of Philadelphia, 124 N.J. Eq. 473, 475 (Ch. 1938).
Plaintiff first contends that
We are not concerned here with the rights of partnership creditors to follow partnership assets and to assert their priorities therein over individual creditors of the members of the firm. Also, the fact that the partnership continues after dissolution for the purposes of liquidation does not preclude the partners from making a distribution of assets as between themselves.
We are satisfied that upon sale of the business and real estate, with the consequent dissolution of the partnership, Stanley and Isabella Pulek did not intend to hold the purchase money mortgages as a copartnership. Their conduct exhibited a contrary intention, generated undoubtedly by their strained relationship. They requested the buyers to make out separate checks to each of them for one-half of the monthly payments. This was done for a brief period until the Puleks, on May 4, 1960, entered into an agreement with the Bloomfield Savings Bank, whereby the bond and mortgages were delivered to the bank as custodian, and the bank received the monthly payments and remitted one-half to defendant and one-half to decedent. Thus, none of the payments passed into or through any partnership account, or was used for any partnership purpose. Each of the parties wanted and had control of his own one-half of the payments received. Since the mortgages were never regarded as a partnership asset by the parties themselves, we conclude that they never intended their holding thereof to be as tenants by the copartnership.
Plaintiff‘s second contention is that, if a joint tenancy was created by
“A course of dealing followed by joint tenants in reference to the property jointly owned may by implication establish a severance, termination, or abandonment of the joint tenancy.
In Crooke v. De Vandes (1805), 11 Ves. Jr. 330, 32 Eng. Reprint 1115, Lord Eldon stated that the question of severance of a joint tenancy is mere matter of evidence, that it is not necessary to show a specific act of division of each part of the property `if there has been a general dealing, sufficient to manifest the intention to divide the whole.’
`There may be a severance by any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common.’ Williams v. Hensman (1861), 1 Johns. & H. 546, 70 Eng. Reprint 862, supra, Sec. 20.”
The joint tenancy in these mortgages, created by operation of law, was not severed by the unilateral act of either joint tenant during Stanley‘s lifetime. Neither transferred his or her interest in the mortgages to some third person, although Stanley approached one of the buyers of the business and realty, Peterson, on the day after title closed to see whether he would buy Stanley‘s “half interest in the mortgage.” There was also no express mutual agreement by which the parties undertook in so many words to convert the statutorily created joint tenancy into a tenancy in common.
We have noted above that “a course of dealing by joint tenants in reference to the property jointly owned may by implication establish a severance, termination, or abandonment of the joint tenancy.” 64 A.L.R.2d, pp. 949-950. Was the conduct of the parties and the course of dealing between them “sufficient to indicate that all parties mutually treated their interests as belonging to them in common“? 48 C.J.S. Joint Tenancy § 4, p. 928. Assuming that a joint tenancy in the mortgages was created by
We have already noted that Stanley and his wife insisted from the very beginning upon separate checks to each for
The marital relationship, a second marital venture for each, was not the harmonious kind. The strained feelings do not give rise to an implication that each desired the other to enjoy a right of survivorship in this very sizeable asset. Stanley‘s half interest in the $200,000 mortgages was his principal asset. Only three months prior, on October 30, 1959, he stated in his last will and testament, in which he designated his daughter by his prior marriage as principal beneficiary of his estate, that he made no provision for his wife because “I made ample provision for her and gave her an interest in my business and investments.”
Mrs. Pulek also exhibited her understanding that their holding of the mortgages was not as joint tenants, but rather as tenants in common. She insisted from the beginning, before the mortgages were drawn and thereafter, that the monthly payments on account of the mortgages must be in two separate checks, one for her and one for her husband. Her insistence on the separate checks induced Mango, the attorney, to believe that she and her husband intended that the mortgages to be prepared by him were to run in their favor as tenants in common. He testified that he drew the instruments with the intention of creating a tenancy in common and that he was then ignorant of the statute,
Later, when Mrs. Pulek consulted Mango to prepare the May 31, 1960 separation agreement, the gist of her instructions to him, according to his testimony, was that “she wanted a separation agreement drawn so that he would not bother her any further, and she wouldn‘t bother him, that the certain properties or assets which they had would belong to each separately, and she just wanted to end her married life with him. * * * whatever property she owned was to be her own separate property, and whatever property he owned was to be his separate property without any interference from each other.” She disclaimed at trial that she was then referring to jointly owned property.
However, on September 8, 1960, only two days before her husband committed suicide and while they were living separate and apart, she wrote him a note, in apparent exasperation at his conduct in coming to her for money when she was ill, stating therein:
“Please do not bother me again, as I can‘t take it. * * * Stan, I don‘t want any part of your mortgage as I have my own and I want my cash for myself for the stock market. I gave you more than half of all my money. I can‘t do any more.” (Emphasis added)
So far as we are aware, the only mortgage Stanley had and to which she was referring was his share of the $200,000 mortgage in both names.
Again, when Mango, in an effort to escape prosecution for embezzling her funds, came to her after her husband‘s death with a typewritten sheet and proposed that it be inserted as a substitute for a page in the May 31, 1960 separation agreement, which insert specifically provided that in the event Stanley predeceased her, she was to receive his one-half interest in the mortgages to her absolute use, she refused his proposition of the insert in exchange for her forgetting about his embezzlement of her funds, but she then asserted
“I told him I wouldn‘t do it; that I did not want anything that was not coming to me.”
If she had understood that she had a right of survivorship in these mortgages, her response to Mango would hardly have been couched in those words.
The trial court observed, “Mango‘s testimony respecting the proposed insert was incredible.” The trial judge obviously was referring to Mango‘s testimony that the insert was drawn as the result of a conversation he had with defendant. The defendant herself testified to the episode as we have described it. Furthermore, Mango‘s abortive attempt to substitute the insert in order to establish a right of survivorship in Mrs. Pulek‘s favor in these mortgages adds credence to his assertion that he understood that the instruments prepared by him created only a tenancy in common, due to his lack of awareness of
Thus, the cumulative effect of all the evidence clearly and convincingly persuades us that Mr. and Mrs. Pulek, by their conduct and course of dealing, mutually treated the subject mortgages as held by them as tenants in common, so that even if we assume that a joint tenancy therein was initially created under
While not necessary, in view of the above determination, we deem it expedient for the sake of completeness to consider plaintiff‘s third and final point. She maintains that a tenancy by the copartnership, or at least a tenancy in common was intended, but that the instruments prepared by Mango, the attorney, failed to express that intention because of his ignorance of the statute and a mutual mistake
We are not concerned here with any claim of a unilateral mistake on the part of one of the parties coupled with fraud or unconscionable conduct on the part of the other party, which would give rise to relief by way of reformation. 3 Pomeroy‘s Equity Jurisprudence (5th ed. 1941), § 847. There is no evidence of any inequitable conduct on the part of Mrs. Pulek which caused these mortgages to be drawn as they were. However, as the trial court correctly stated the rule applicable here:
“Equity will also afford relief if, after making an agreement, in the process of reducing it to a written form, the instrument by means of a mistake of law fails to express the contract which the parties actually entered into. 3 Pomeroy‘s Equity Jurisprudence, § 845 (5th ed. 1941).”
See, too, Kerr on Fraud and Mistake (7th ed. 1952) pp. 550-551. Do the facts in the instant case justify an application of that rule?
There were no discussions or specific instructions between the Puleks and their attorney, Mango, before the mortgages were drawn as to the form of ownership thereof, except that the mortgages were to be in both names and there were to be separate monthly checks for the two mortgagees. From his knowledge of the circumstances of the parties, their strained marital relations, the insistence upon separate checks, and that these were purchase money mortgages in part payment of assets being transferred, which the parties had owned without right of survivorship, Mango believed that their intention was to have a tenancy in common, although nothing was said particularly negating the idea of survivorship. Mango testified that he did not know about
That portion of the judgment of the Chancery Division holding that a joint tenancy existed in these mortgages is reversed and judgment will be entered declaring that Stanley Pulek and Isabella Pulek were tenants in common of these mortgages at the time of his death. In all other respects, the judgment is affirmed. Costs to the appellant.