*1 IN THE MATTER OF THE OF ESTATE HOFFMAN, ROBERT E. DECEASED.
Argued April 2, May 21, 1973. 1973 Decided *3 F. Mr. Guidone the cause for the Phillip argued appel Guidone, Beck, Reichstein & (Messrs. lant Hoffman Audrey Reichstein, counsel; Bonald Mr. Phillip Mr. attorneys; Guidone, F. brief).
Mr. L. Pachman Stuart the cause for the cross-ap- argued & at- Eisenberg, B. Clapp Brooks pellant Philip (Messrs. Pachman, Mr. Stuart L. on the torneys; brief).
Mr. Adrian M. Unger argued the cause for the respon Hoffman, dent R. Gene Executor Estate of Robert E. Hoffman, Milton M. deceased and Adrian M. (Messrs. Unger, Mr. Adrian M. attorneys; Unger and Mr. Law Kantor, Jr., rence on the brief).
The of the opinion Court was delivered by J. This case concerns the distribution Proctor, of two federal proceeds income tax refund checks totaling $31,284.89. checks Audrey The are to “Robert and payable Hoffman.” in- Robert is now deceased and his estate solvent. The sole assets are the available distribution checks, us is the and the before question money claims made priority respective Hoffman; Robert’s former wife his accountant Audrey Brooks; B. and Robert’s estate. Philip Robert and Hoffman were married on Eebru- Audrey 4, 1954. nisi ary Audrey granted judgment action for divorce on October 1965. The judgment children of the Audrey of the the three granted custody incor- and, in lieu of and child marriage alimony support, Audrey between entered into- porated separation agreement and Robert on June 1965. agreement provided
The that Robert $85 would pay per for Audrey’s week support, $125 week for the per sup- children. port payments would cease Audrey the death of either upon Robert or Audrey or her re- upon for each marriage; payments child would cease upon *4 the of attaining age twenty-one or upon emancipation. further agreement provided Robert would maintain $25,000 at least in life insurance' on life for сoverage each of three the children. rear
Audrey agreed the children and all provide for other of their expenses expressly to be required paid by Robert. also all promised convey family She to the rights $5,000. home payment Robert’s to her of upon Paragraph of the agreement concerned the filing joint income tax the years returns.for of their marriage: by days requested husband, so the “Within 5 after the shall wife necessary pertinent the husband with all and furnish information income, expenses gains as to her and taxable and losses for income purposes joint sign any tax and will Federal or state income tax re- necessary documents, provided they turns and other are not false or fraudulent, year years, any including year 1964, for or those for the during they which shall have been husband and If wife. the wife so, provisions support fails or refuses to do all herein for her shall maintenance forthwith be of no force and All effect. liabilities joint jointly on income tax returns heretofore and hereafter filed by parties by husband, indemnify shall be borne who will any expense hold arising any the wife harmless from claim or out of returns, except such that the wife shall be liable for taxes on dividends by per year and interest received her in excess of $500. and for taxes by her, computed on all income earned which taxes shall be as if such dividends, only interest and income her income and she were single. audits, examinations, All proceedings suits or other in connec- handled, tion with cost, expense, those shall returns at his own by by the husband and by him, counsel or the accountant selected but, request husband, at the participate of the shall wife therein papers reasonably required execute to the extent such counsel or such accountant. All refunds recovered with to those re- belong entirely turns husband, shall except as to the wife’s separate income, promptly sign any and the wife will or endorse re- ceipts, required vouchers or refund checks to effect the collection of such refunds the husband.” Paragraph agreement provided: .20 any agreement “The waiver of individual clause the within or part party upon per- failure of either to insist the strict any particular obligation formance of clause or shall not be considered agreement, a waiver of the remainder of the said but the balance of shall continue in full force and effect.” On February Audrey filed motion in the Chan- Division of cery the Superior Court to hold Robert contempt divorce decree. She ar- claimed for rearages support and the her children $1,050 1967; as of January 28, she also demanded proоf of the existence of the life insurance ben- policies efit the children and a full account of Robert’s financial *5 motion 30, 1967, March filed another Audrey
affairs. On had then order, arrearages for that the contempt alleging both $2,940. adjourned Chancery reached The Division date, without that defendant noting apparently motions for hospital psy- was without and confined to funds attorneys directed the However, care. the court chiatric financial situa- about Robert’s for confer the parties conference, from this resulted tion. Apparently nothing on April filed Audrey since a subsequent application at fix her arrearages in which 26, 1968, sought she interrogatories to serve $6,007, permission and asked for Au- In an filed financial affairs. order directed to Robert’s fix the motion to Audrey’s denied court gust but in contempt, granted and Robert hold arrearages to serve interrogatories. leave Hoffmаn on September 30, Robert died 1968. After death, the successor trustee of the Robert Hoffman Chevro- let Profit Employees Sharing Plan, judg- and Retirement decedent, of ment creditor action in brought Division which the trustee a deter- Chancery sought mination of the of in- federal rights two — $2,442.85 come tax refund checks. one The checks for 13, 1967, $28,842.04 June and received one for received n —(cid:127) 30, 1968 both and September are “Robert payable Hoffman,” were Audrey filing and issued as result of the tax 1965. joint years amended returns Brooks, The were by Philip returns filed prepared accountant for Hoffman. Robert The trustee asked checks, which in the turned possession Brooks, over to the court further checks pending proceedings. had Brooks, been mailed but refused to directly Audrey the first at time endorse check Robert died about the delivery the second. Di- 9, 1969, Chancery Subsequently, September vision ordered that last will and be ad- Robert’s testament probate mitted to letters be issued testamentary Hoffman, brother, as Gene the decedent’s executor *6 refund the that estate. The court also directed the tax checks he be executor; surrendered to the the checks the and that the by Audrey; pro- endorsed executor and ceeds' of the be in a trust account deposited pending checks determination No money. the court of the claims the further were taken in Division. Chancery the proceedings 11, 1970,
On November the executor filed complaint the Probate of Division Essex the County Court asking the estate of Hoffman Robert be declared insolvent. to the According account the executor, of estate filed by the only the assets $31,284.89, available were the amount of the federal two income tax refund checks. Total claims the аgainst estate were well excess of the proceeds the checks. Among the claims were due of balance $16,177.43 aon judgment entered July 1967, in favor of the Bank of Passaic Clifton, and the and judgment the amount of $68,185.81, entered July 1968, in favor of the trustee of the Robert Hoffman Employees Chevrolet and Profit Sharing Retirement Plan.
The court ordered that the the proceeds of be dis- checks tributed to N. J. 3A:2A-2.1 according The court thus directed that the be used for payment funeral expenses, the administration claim and the expenses, Passaic Clifton Bank, the with any funds remaining in partial go payment the the trustee of judgment the Robert Hoffman Chevrolet Employees Profit Sharing provides: 1 N. S. A. J. 3A :24r-2 preference following expenses and shall have and be “The debts decedent, according paid personal and out of the real estate of the following order: expenses. 1. Funeral expenses. Administration 2. preference 3. Debts entitled to the laws of United States. Hospital, physicians’ during 4. illness. nurses’ bills last Judgments according priority 5. entered the deceased to the respectively. of their entries given payment Preference shall not of one item over other paragraph except paragraph items of the same as stated in 5.” since
and Retirement Plan. The court determined that reduced Hoffman had neither nor Brooks Audrey Philip credi- claims judgments, they general their money tors subordinate to creditors. judgment the claims of the Division, and the Appellate Hoffman
Audrey appealed an unreported opinion In Brooks Philip cross-appealed. reasons for substantially affirmed Division Appellate certification we Court, granted County expressed cross-petition Hoffman of Audrey petition J. (1973). 62 N. Brooks. of Philip He seeks Brooks. Philip claim of We with the deal first $2,275 prepara- a fee of from the proceeds to collect Ho one disputes tax returns. income tion the revised *7 According fee. of the the amount reasonableness of Hoffman Robert 1966 Brooks, sometime in filed by affidavit in- high funds at borrowing that he had been told Brooks and com- stock in the speculating and had been terest rates then 1965. Brooks 1964 and years modities markets obtained refunds be might informed Hoffman income tax that filed in which wére if amended returns for 1964 1965 the in- deductions the interest taken as payments markets were and commodity vestment in the stock losses was with- claimed. At the time of discussion Hoffman this amended out funds. asked file prepare He Brooks to tax returns and Brooks for his services out promised pay money recovered, of the if in tax re- any, would be funds. Brooks “only states that he to do the work agreed because of decedent’s me pay proceeds out promise income any tax refunds that would be received.” Brooks had with Hoffman that tax refund arranged any cheeks would be delivered directly to Brooks.
The trial court held that Brooks had since not obtained a judgment Hoffman his claim that of simply creditor, a general and therefore it was subordinate to those N. preferred claims under J. S. A. 3A:2A-2. We believe trial court misconstrued Brooks’ Brooks position. does his claim J. raise under N. S. A. Rather, 3A:24-2. he
77 argues that the refund are subject to- equitable in his favor which .lien attached to the before the money statute is applied.
An
lien
be created
“may
execu
equitable
express
tory contracts
specific
then
or
relating
property
existing,
be
property to
afterward
and sometimes
are
acquired;
they
bono,
raised ex
et
aequo
to thе dictates of
according
equity
and conscience,
as where
contract
reimbursement could
law
implied at
. .
v.
Temple
Clinton Trust Company,
1
219,
226
In
See also
re
62 N.
(1948).
Loring,
J.
336, 341
Such a lien
(1973).
of a
right
nature
special
a fund
constitutes
or
charge
encumbrance
upon
fund. See 4 Pomeroy, Equity Jurisprudence
ed.
(5th
1941)
1233,
692;
Liens,
2d,
51 Am. Jur.
p.
22, p. 160. Where
§
§
one promises to
pay
services rendered out of a fund
created in whole or in part by the efforts of the promisee,
a lien in favor of the promisee will attach to the fund when
it comes into existence. See Morrison Flying Service v.
Bank,
Nat’l
Doming
404 F.
856,
2d
1968),
Cir.
(10th
cert. den. 393
1020,
U. S.
S. Ct.
114 N. J. at 573-574. 78 F. 2d 277 111, 85 66 D. C. Leopold,
In Wardman v. App. Ed. 33, L. 81 570, 57 Ct. cert. den. 299 U. S. S. (1936), lien an were equitable allowed tax accountants (1936), ob efforts which their of tax refund checks proceeds the be the agreement tained for client. The court found that ac fees for the tween the that the parties contemplated proceeds satisfied out the countants’ services should be ac sum due the refund, of the the that consequently as an countants constituted enforceable charge equitable Alexander, lien on the Barnes v. fax refund. also See 117, L. Ed. U. S. Ct. 530 (1914) (attorneys’ satisfied fund their contingent fee out of obtained through efforts). Hoffman that Robert disputed
None of has parties the received fee Brooks from the amount intended to the pay created the by the refund. the fund was Since through tax the Brooks, we think his claim falls within efforts of that lien. before others Accordingly, definition of equitable efforts, of his Brooks’ receive benefit that equity requires Pomеroy, claim be See 2 Equity Jurisprudence, satisfied. 948. Nat’l Bank v. also supra, p. See § Rutherford Co., H. R. & 114 N. We Bogle suprra, J. at 578-579. Eq. conclude that the claim of thus Brooks should satisfied from first the checks. proceeds the cheeks Hoffman’s claim
Audrey courts below to be simply also was determined reasons this re given of a creditor. Two general First, 20 of the Paragraph trial court said that sult. “specifically states that agreement settlement property any part failure of either party perform agreement the balance of agreement inop does not mean that ineffective,” or and it thus concluded that a breach erative Audrey from her Robert would not release promise endorse checks sole recognize ownership of However, we court think misconstrued proceeds. This provision this not intended to make paragraph. each рarty’s promises independent of *9 the other’s performance, but rather designed permit was one party waive obligations enforcement certain the agreement enforcing without from precluding party situation, remainder of the In the agreement. present this provision therefore from Audrey raising does not bar Robert’s breach of the her from agreement as her releasing with promise tax refunds.
The second reason the trial to subordinate court given claim breach of Audrey’s was that Robert’s alleged had a money not been reduced to judgment Audrey, her that of consequently only claim was general creditor to the claims subject accorded priority A. S. 3A:24-2. In her brief on con appeal, Audrey cedes that “the award alimony possesses the of a force law judgment only at in those cases where court has certified the nevertheless, аmount thereof.” she argues although never fixed arrearages by the court, her right proceeds of the checks is not de upon her pendent position Rather, as creditor. judgment she contends she is entitled before proceeds they be come assets of the estate and sirbject to distribution under J.N. 3A:24-2. tenant, first claims that she is a
Audrey joint thus entitled to the full amount of the checks. v. Mulligan She Ehrlich 104 N. J. L. 375 cites (E. A. 1928), & where it was held that there awas of sur right in a note vivorship payable jointly to husband and wife. However, present case Robert and Audrey were di vorced at the time the checks were issued. They were not as designated joint tenants in either Therefore, cheek. no of survivorship created, right we accordingly reject claim to Audrey’s the money take as Robert’s survivor. Audrey next if contends that she is not a tenant, joint she nonetheless had right to one half legal of the рroceeds as common. tenant In opposition claim, to her the execu- tor relies 17 of Paragraph the agreement in which Audrey declared that she would endorse the checks and that all of *10 argues The executor
the would to Robert. belong interest legal whatever gave up that this she provision she had in proceeds. agreement separation in the is that
While it true whatever convey and the checks to endorse Audrey promised her believe that Robert, we to retained legal interest she as inde be viewed cannot the checks covenant to endorse obligations of his of Robert’s pendent performance and to “Robert payable The checks were the agreement. was Hoffman,” required and endorsement Audrey’s Audrey J.N. See could be negotiated. before the checks Woodhouse, N. J. 550 In Woodhouse v. 12A:3-116. promises a wife to the hold this Court refused to (1954) to husband failed in because the she made an agreement settle property his in the perform promises agreement. in case allowed a credit against that ment in wife if she received payments husband’s to support husband failed to come from source. When the any other necessary job. meet his the wife found it to payments, get We the husband’s contention that her rejected employment income should be credited to his payments, stating support that justice inhibit the enforce “[sjalutary principles has ment of been promise counter-promise when broken.” 556. at Woodhouse, we think that Aud- in in case present
As on Rob- rey’s dependent the checks was promise to endorse under the agreement, ert’s of his performance obligations Audrey have intended that that would not parties was unable would have been forced to when Robert perform unwilling obligations Audrey or to fulfill own the children. in case
Although proof there no this establishing what extent the refund over- proceeds represent respective or losses of either is clear payments it to us that spouse, Audrey’s Robert believed in cooperation filing joint that return would value him. be of Robert considerable sought to insure would Audrey cooperate filing in the agreement specific provision returns including im- that the penalty to that effect. It should also be noted her covenant Audrey for her failure to posed perform her indi- information concerning Paragraph provide vidual income and deductions was that all provisions would of “no force maintenance effect." The Robert of this indicates that severity penalty viewed Audrey’s as of performance significant importance Moreover, to him. the fact Audrey’s cooperation return linked filing joint with her expressly right to us that the viewed the support suggests parties obliga- tions undertaken by Audrey in 17 as connected *11 Paragraph with Robert’s obligations of and maintenance. Un- circumstances, der these we think that a fair interpretation of the intent of the parties was that Audrey’s performance of her in 17 obligations was a Paragraph simple formality, the parties that themselves would not have viewed Aud- rey’s performance as independent of Robert’s responsibilities.
If Robert had to sought enforce Audrey’s prom alive, in 17 ise while he he would have had Paragraph to obtain an order directing equitable specific per formance. But it is well established that one who has material either broken some or un promise able his own an substantially perform obligations under cannot decree for get specific performance. Corbin, Contracts, 1175, 301-302, 1183, 5A pp. See § § Williston, Contracts, 339 11 831 p. (1964); p. § Restatement, Contracts 373. ed. In view of (3rd 1968) § we think failure to that perform, equity Robert’s requires trust be on of the checks. imposed proceeds constructive Castoro, et al. v. 51 N. J. 584 D’Ippolito, (1968); See Scott, Trusts, 3413 ed. think it p. (3rd 1967). We § unjust Robert’s estate to retain the full permit would of the tax refunds when Robert did not fulfill his proceeds and the children Audrey separation agree promises refunds were obtained with the cooperation ment. The believe she should not be to re- compelled and we Audrey, 82 her interest in the refunds without some
linquish protection of the she and the children have under the rights separation agreement.
While we believe that in Audrey retained equitable terest in the we it proceeds, recognize also is difficult to determine the exact In extent interest. light circumstances, Robert’s illness and his financial changed court of could have determined that Robert’s equity obliga tions have agreement should been modified to reflect ability with consideration for his financial pay obliga Schlemm, Schlemm, tions to others. See v. 31 N. J. 557, Chenitz, Flicker v. (1960); 55 N. J. Super. (App. Div. N. J. 1959), appeal consent, dismissed (1959). Under the think circumstances we the fairest re sult in order to protect the and the children rights Audrey with due regard interests of other is to claimants divide the proceeds the checks in according the legal terests of Audrey and they Robert as appear the face of the cheeks. after Accordingly, the satisfaction of the claim of Brooks, we hold that of the checks shall be apportioned between and the estate of Rob equally Audrey ert. not think our result prejudices justifi
We do any able interests of entitled to parties priority 2. The 3A:24— statute applies only to the prop *12 the decedent. Robert would not erty by owned have been able realize the the refunds unless proceeds Audrey to per formed her and in obligations, consequently equitable in those attached proceeds terest to the fund before it into Robert’s estate. See 7 New passed Clapp, Jersey Prac tice, Administration, Wills and 1280. §
We hold that Brooks’ fee should Philip be first satis fied from the of the refund checks. proceeds The remainder of the fund between evenly Audrey should divided and Hoffman. the estate Robert The estate’s share of the should be distributed in accordance with the order in priority provided 3A:24-2, the case
83. is to remanded the trial court for further con- proceedings sistent with this opinion. C. J. I
Weintraub, (concurring). join the opinion' of Mr. Proctor Justice hut add views, some further to part response the dissenting opinion.
The dissent in terms of speaks of “setoff” ins right the event оf I insolvency. think the is irrelevant. concept
Setoff deals with claims out distinct arising separate, transactions. The common law did not recognize right aof debtor to offset an claim he had independent against his creditor out of arising another transaction. rule That manifestly unfair, being equity intervened permit Jur., Counterclaim, 47 Am. offset, pp. § Setoff 714-716, and the insolvency of the was an plaintiff occasion Jur., for such intervention, Am. equitable Setoff Counterclaim, 720-721. pp. Equity “mu- required § with tuality” the claims to satisfy the concept an justice underlying In equitable right offset. it held that regard, usually fiduciary may he offset demand has aas nonfidueiary against the ben- The reason for that eficiary. limitation is readily under- standable; a fiduciary should abide trust, special insolvent, and if beneficiary becomes it would be in- permit fiduciary gain equitable over advantage another creditor the vehiclе of a through trust obligation, he had assumed. the issue here is not one
But of setoff. We not deal- are with claims out of arising distinct transactions. Rather ing with we are cross-claims contract. dealing single Technically, applicable concept is called “recoupment.” A defends claim recoupment very asserted disputing right to recover some plaintiff, plaintiff’s of what defensive, or all he demands. It is thus un- and, setoff, like the recoupment recognized by the common Jur., Counterclaim, Am. law. 47 713- 9, pp. § Setoff if a illustrate, 714. contractor seeks to building To recover *13 claims the contractor the owner who the contract price, a may assert or improperly failed to perform performed claim because or reduce the to defeat recoupment seeking pur- The owner or poor performance. of nonperformanсe to does not resort behalf of the contractor sued or on when he contests of “setoff” doctrine equitable to it would be absurd contractor’s claim. And of course a receiver in the contractor, or that a creditor of the say a position could claim insolvency, event of the contractor’s con- with to the than that of the contractor better the owner. claim alleged tractor’s to do with the has nothing doctrine of setoff Thus the a con single have mutual promises hand. We case at tax refund transfer title to the agreed The wife tract. to pay the husband husband, agreed to the checks and the children. The question her for herself moneys to her to transfer title should order whether equity her husband was default notwithstanding checks had to say odd indeed to she It would be in his promises. him from moneys him when due over moneys turn a to drive court I see nothing contract. the same Woodhouse, Woodhouse v. result. See anomalous J. N. 550 (1954). a to file for the opportunity bargained The husband incident, he her necessary gave As return. tax joint be He did not payable. refund which any might upon grip refund would transmit that she promise bargain dollar in default his obligations if he should even have It would been ask strange children. her and the if and it would be remarkable she covenant for that her any would be that asset natural it. The gave her would be applied thus came into hands which of his we are asked to interpolate Yet promise. broken to his his, to be “independent” promise that her covenant under the contract. Nothing default despite performed intent, or from his. from probable further could be and children an the wife upon obligation not visit would I *14 an obligation of fair dealing, the demands contrary so to and sen- did not obtain said, the husband which, as I have not have sought. could sibly of a court had the help
If himself asked the husband check notwithstand- endorse the her to compel of to equity of made would have been default, shrift his own short ing situation, of the the justice Sensitive to that application. avail- thus moneys, the have seen to it that would equity contract. under the to able, applied performance his was entitled conclude she easily would that end equity To security the checks as title to her share legal to claim due her. of what was for the payment hold as the parties And if would so between equity a how creditor am a loss to understand contract, I at bo result. It a different would can claim of the husband aof contract at the behest indeed alter the terms novel or a creditor, a elementary that a I think it creditor. stands insolvency, case of in the of creditors representаtive If contract. there is no net to the party in the shoes take. for them to debtor, is nothing their there sum due wife which the another ground upon is still I think there A. J.N. S. least in part. at prevail be entitled would and debts in which expenses for the order provides 3A:24-2 if controls and the stated order a shall paid decedent 3A:24—37. The fifth N. J. S. A. insolvent, is the estate is: category priority according against “Judgments to the entered the deceased respectively.” entries their with the are judg- wife’s compete
The claims which here If wife holds held other creditors. “judg- ments in time. is first decedent, judgment her ment” against a judgment is not judgment say I no reason see A was nisi judgment of the statute. within the meaning negotiated by parties agreement in fact entered. The “hereby ap- and was judgment incorporated jurisdiction however, continuing subject, proved, this Court to make award of as the subsequent alimony circumstances warrant.’ The called for husband to the wife and their three children at support stated rate. other the husband Among things, agreed maintain insurance on life for benefit of the children $25,000 to the extent of them. for each of judgment That a remains subject to modifica- in circumstances, tion upon change 2A:3A-23, does not militate the fact that judgment record shows motion judgment. was filed on March *15 10, 1967 the husband in to have held contempt failing to arrears and to him compel to pay perform the provision with insurance. life The matter was continued because of the husband’s illness and on 30, 1968 August the court ordered “that so much of Plaintiff’s Motion as to fix the amount of arrears seeks and to the De- adjudge fendant be and the contempt same are hereby denied” but ordered further that the wife is leave to granted serve written interrogatories “upon Defendant directed to income аnd financial earnings, affairs and that aforesaid matter be and the same hereby is continued with- out date and until said interrogatories are served and an- note that swered.” We the court although declined to fix the amount of the arrears on that contempt application, did wipe court out arrears or reduce the amount of the The a support obligation. husband never sought And judgment. modification of course the judgment was not vacated.
The arises whether question the wife’s claim is other a upon “judgment” than one because the amount of the was not fixed. It important arrears is to note what is not involved. The question is not whether arrears must be for other such a purposes, fixed as to obtain writ of execu- or a lien tion, to obtain on real or to command property,1 an 1When abstract of a nisi decree was filed with the clerk Supreme Chancery former Court under section 44 Act of 1902
87 We are con- jurisdiction. full faith and credit in another the dis- statute controlling cerned with priorities whether is estate, of an insolvent and the question tribution to be should be said some- what is undeniably judgment intendment of other than a within the judgment thing not fixed arrears was statute because the amount whether should matter another order. I see reason itwhy no the arrears were thus fixed. I assume the meant Legislature
Nor would denigrate from obligation one’s stemming support a judgment family The one’s obligation should family. milieu. own this It should be perhaps to hold its
able will not be of his bankrupt discharged mentioned due, or to or for the “for due become alimony liability C. A. of wife or child.” U. S. or support maintenance Markoe, v. Weimore U. S. S. Ct. See 35(a) (7). § upon L. Ed. 390 This exclusion rests (1904). rather than upon premise for the dependents concern in the bankrupt’s not to share ought dеpendents that such ob fully to leave the bankrupt objective estate. in hand, when, as the case at But pay. ligated of course decedent, of a the dependents is that estate solvent what distribution of exclusion in the aided would not be *16 them by permitting them expressed Concern for is remains. alimony 2A:16-18, 19), became (now installments A. the N. J. S. Stoy Stoy, property v. 41 installments matured. as the liens on real Eq. Warren, ; Eq. 1886) N. J. (E. v. 92 Warren & A. 370 N. J. (1958). annotation, 1921) ; (Ch. 2d 674-675 A. L. R. see 59 334 Rooney, Rooney In v. 102 have never been overruled. Those cases (Sup. 1926), not be held that a lien could it was N. L. 551 Ct. J. it did not for divorce because docketed decree claimed final being alimony, nisi decree that order the the order for contain Stoy Warren, distinguished Rooney had which not been docketed. holding accepting ground, that a their and I assume on that thus decree under a docketed would as the installments matured lien arisе Loan, Joseph Sons, N. J. 470 & Inc. v. nisi. In Harris Van judgments although (1957), alimony and maintenance said that we they obligations pecuniary judgments law in do not “resemble impose at the * * * they pronouncement, can take at the time of their citing alimony accrues,” form from Warren. that as the time time to claim what on a remains with other creditors basis along to theirs. To that end a should equal judgment — be treated as what it is a “judgment.” J. Temporarily (dissent Confokd, Assigned D., P. I ing with part). agree the Court’s determination of in favor of claim for priority services of the accountant Brooks. I with decision of court that disagree Mrs. Hoffman should take one-half share of the balance of the tax it, refund checks. As I see that result subverts the letter and intent of the decedents’ estates statute giving judgment creditors over preference creditors in dis general tribution of the estate. S. A. 3A:24-2. of this case
Preliminarily, prоper disposition requires- whether, from the terms of the apart separa resolution of beneficially the tax refund were tion agreement, rather than of Mrs. Hoffman. of the decedent property Mrs. Hoffman the refunds by has never been claimed It her or by are attributable to losses of hers. It payments taxes; and, that decedent as the paid is undisputed is that the refunds indicates, majority opinion proof tax filed at the decedent’s from amended returns emanated unclaimed deductions interest showing previously instance of the decedent. The estate would seem losses capital Carson, N. In re J. of the refund. See to be the owner any In the absence of direc Super. 1964). Ct. (Cty. issue, if for a remand to settle this there the court by tion it, I it for doubt about take any purposes to be thought is the tax refund checks discussion ensuing vis a vis of the decedent Mrs. beneficially property Hoffman.
In view Mrs. Hoffman by of the foregoing, agreement simply endorse tax refund checks over decedent any any her of his beneficial entitlement by recognition by exaction him of the covenant money, such nuisance claim in that any regard was to later prevent pay sup- her. One Decedent’s thing plain.
89 port a money not the of sur bargained-for equivalent render by Mrs. Hoffman of claim any right by of genuine her to future tax refunds. It was in of his recognition legal obligation to render a court by to her enforceable if pursued by her in cove litigation. separate respective ex nants mentioned were thus not dependent, independent, by to the limited extent made cept expressly dependent itself. The contract authorities language cited in the majority opinion are therefore applicable. Woodhouse, Woodhouse v. 15 N. J. 550 (1954). Cf. cоnsideration that where however, More is the to the point, intervenes, statute governs of debtor insolvency estate, an whether of claims of creditors priorities against of otherwise, of a the ultimate question decedent or application what the estate consists of for purposes statute, such a in relation to- cross-claims between estate creditor, and a a well-established by body is controlled law majority opinion. Generally, not consulted an creditor set off claim insolvent or his may against “mutual” claim any in representative against it 718, J. See 34 C. S. Executors Administrators solvent. § 14A:14-8; 704-705 N. J. A. pp. (1942); Bankruptcy Act, 11 C. A. Wills and 68, Clapp, Section U. S. 108(a); § Administration, 7, 7 N. Practice 8 J. nn. p. (1962) § & 9; Nutz v. A. W. Crone Murray-Nutz (Appeal of N. Pater 109 J. 95 Receivers v. Sons), 1931); & Eq. (E. Light son Gas L. 23 N. J. Ct. Company, 1852); (Sup. Green, Camden National Bank v. Eq. (Ch. aff'd 46 N. J. 1889), 1890). o. b. & A. But Eq. (E. case will be seen not present to present appropriate situation for set-off of mutual claims.
There has been diversity as to what consti- viewpoint claims, tutes mutuality of as such questions whether the claims must arise out of the same transaction or be held or between as owing original parties distinguished like; from see, or the 66 Am. assignees, e.g., Jur. 2d “Re- ceivers” 260-61 v. pp. Receivers Paterson (1973); § *18 90 White, L. v. 5 Light
Gas Harris Company, supra; however, 422 not con do 1819). Ct. Such (Sup. problems, thoroughly cern us does is here. What here matter is that it ob settled rule of that the set-off does not where apply trust, to the ligation gwasi-trust insolvent estate is one of or constructive to a fund or specific prop trust relation therefore erty beneficially insolvent, belonging his or its In a case representative. obligor such trust duty his to perform cannot set off his against obligation in trust a from the to the cestui due que money obligation Morris v. solvent to him. The “claims” are not “mutual.” Co., N. 27, App. 106 E. 753 (Ct. 213 N. Y. Windsor Trust Co., & 287 Insurance 1914); Indemnity re Consolidated In v. Rothstein E. 34, 1941); N. Y. 38 N. 2d 119 App. (Ct. Y. (Sup. Misc. 236 N. 2d 337 A/S, Autorist 37 2d S. 1140, 239 18 A 2d Ct., 1963), N. Y. Co. aff’d o. b. D. v. Perring Div. Ct., 1963); N. Y. 2d 653 (Sup. App. (Ct. Md. A. 516 Trust 171 190 Corporation, Baltimore 278 v. Improvement Selig, Fore App. 1937); Corporation Autler, F. 2d 143 Cir. In re 23 F. 1960); Supp. (S. (2 Sturr, D. N. Brust v. 128 F. 1938); (S. D. Y. Supp. Y. 135 (2 N. modified F. 2d 1955), on other grounds 1956). Cir. is the rule last stated salutary rationale of implicit
apparent. indirectly improve A creditor cannot be allowed as other creditors of insolvent priority status on his fiduciary estate by obligation disguising separate set-off part as a “mutual” claim of insolvent subject him. like On the The rule fits facts here a glove. factual above, made the tax-refund cheeks assumption was, decedent, of the and Mrs. Hoffman en- property tirely quasi- independently separation agreement, trustee of them for benefit. a case decedent’s Were this where the husband or the solvent, estate court was confronted with a him and solely default in support by a refusal her, to indorse the checks different situation would the result well But presented might differ. here an have insolvency and claims creditors by judgment intervened; the issue what constitutes merely equity as between rather husband, divorced wife and but contesting what is the correct decedents’ adjustment, of the light statute, estates and the claims of the wife competing — judgment creditors over indubitably this fund property of the. estate. The statute resolves that in favor of the issue judgment creditors. The courts must the statute.
If Mrs. Hoffman would a have been as quasi- regarded trustee of the fund for the in estate the absence of her covenant in the separation would, agreement, clearly as she she surely cannot qualify in that fiduciary obligation merely because regard covenanted in the affirmatively she to turn the money. over It further noted that it seems in may arbitrary, any event, to аward half Mrs. Hoffman the balance of the fund. Ho one knows as have yet Chancery what the Division would allowed her claim, on the regard to having changed circumstances of the decedent after the divorce. Moreover, as the has majority recognizes, she not established a beneficial in a right money joint as either tenant or a tenant common. The of the court’s logic opinion as to dependent all, if promises, at would accepted permit at most a remand for the determination of the amount of the sup- claim port as of death, and decedent’s of that allowance only. Allowance of one-half of the balance of the tax refund is arbitrary.
In reference to the added of ground decision proffered by the concurring opinion that the of divorce original judgment was a “judgment” within the creditor” “judgment priority established N. J. 2, 3A this is contrary to the :24— concession by appellant and in flat discord with existing law. In Madden v. 136 N. Madden. J. 132, 136 Eq. (E. & A. 1945), the highest court said: “In this state of arrearages do alimony not become vested in the former wife or take on the attributes judgment payment sum of fixed until court so orders. No such order was [the] made rule is based added.)
this ease. (Emphasis re judicial subject always are principle arrearages may justly require. vision as circumstances retroactively Practice,, Separation (Herr-Lodge N. J. Divorce & Marriage, Super. N. J. 570; v. Step Slep, 3d ed. p. 1963) § at all in effect 538, 542 1957). precepts These (Ch. Tancredi, Tancredi v. times here involved. See also footnote 1968). 262-263 Div. See Super. (App. 1, infra. J. S. A. N. and intent purpose
Reflection upon 3A:24-2, foregoing, persuades in the light statute. with the view is incompatible of the concurrence a claim policy that as a matter of The latter contemplates of a as money judgment of whatever nature reduced money as other judg fixed date should have priority all claims ments later and as against regardless entered fixed in a pecuniary adjudica antecedence if not origin estate tion. Suc'h a representative rule permits how with certainty of the records to know search estate as between creditors judgment distribute the others.1 *20 concurring opinion, taken 1 of the col in footnote casos cited 1The implied, present be, lectively, law to there that as not establish do judgment alimony automatically unadjudicated arrearages of become Sons, Joseph Indeed, they Harris & Inc. v. Van accrue. liens as apart enigmatic (1957), Loan, from the dictum therein 23 466 N. J. unadjudicated alimony concurrence, only quoted in holds judgment upon arrearages constitute a which exеcution can do not deliberately declares, says (at 471) such has but it also issue century requires Jersey (at 471), it for been New law by judgment, fixing arrearages in a stated and the of such amount judgment docket, arrearages entry in the civil to constitute the of that 472). holding Rooney Rooney, (at N. L. in v. 102 J. 551 lien 1926), effect, always (Sup. precisely and this has Ct. to the same Welser, Super. regarded v. since been as law. Welser 54 N. J. See Schettino, D., 555, (App. 1959) (per A. Div. later Justice 562-563 J. Rutgers Court) Hartman, ; Relations”,
of this 261, “Domestic 16 L. Rev. 272, (1962). approval Super. (54 N. 273 Welser cites with J. 561) holding Dufy Dufy, at the well-reasoned in v. 19 N. J. Misc. 382, (Ch. directly 1941), point issue, A. 2d 236 in instant It is not the courts to with quarrel legislative — policy decision so as that decision is long reasonably clear I as here think it is. The statute in is neutral — of the creditor to relationship the insolvent decedent a wife be it former alimony or claiming employees claiming breach of undеr a contract retirement plan (as apparently the case as to one of the If judgments here). the intent the concurring opinion is that the unadjudicated arrearages calculated down to the date of death, insolvent’s nunc pro tunc as of the date of the orde in are to be considered judgment that amount and on that date for purposes of N. J. :24-2, 3A the statutory priority policy is obviously subverted. If the intent of that opinion is, rather, to set priorities due, amounts and as of dates when, fix petitions to filed, arrearages there is still con n —(cid:127) flict with the also, no statutory but purpose object attempt opinion compare such amounts dates with those of the three in order to contesting judgments settle Moreover, out the priorities. ver either hypothesized sion of the concurrence conflicts with the theory result in the majority in which opinion, thе concurrence joins, awarding flat one-half of the balance of the fund the wife.
I would affirm the judgment the Appellate Division as modified to allow the claim of Brooks.
Justice joins Mountain in this partly dissenting opinion. right unadjudieated that a wife alimony- has no vested arrears of separation under a decree the executors of her deceased hus- band. contrary Warren, The obscure dictum to the in Warren v. Eq. 334, (Ch. 1921), concurrence, cited in has never followed; plainly been Chancery it misread Section 44 of the old Act (Comp. p. 425; 2A:16-18; 19; 20) Stat. ; now N. J. S. express Joseph Sons, Inc., supra, declaration in Harris & men *21 (23 472), tioned above N. overruling J. at of course has the effect of it. — remandment reversal and Chief Justice Wein- For Proctor, Jacobs, Justices Hall Sullivan traub —5. n — in part
For Justice Mountain and Judge affirmance Coneobd —2. SARBONE, THE MATTER OF
IN MORDECAI AT LAW. AN ATTORNEY Argued May 21, March 1973 Decided 1973. cause for Essex argued Frederick C. Mr. Vonhof Ethics Committee. County