Case Name: MINNIE HANSEN, PLAINTIFF-RESPONDENT AND CROSS-APPELLANT, v. ADOLPH JANITSCHEK, INDIVIDUALLY, ETC., ET ALS., DEFENDANTS-APPELLANTS AND CROSS-RESPONDENTS
Court: New Jersey Superior Court, Appellate Division
Jurisdiction: New Jersey
Decision Date: 1959-10-19
Citations: 57 N.J. Super. 418
Docket Number: 
Parties: MINNIE HANSEN, PLAINTIFF-RESPONDENT AND CROSS-APPELLANT, v. ADOLPH JANITSCHEK, INDIVIDUALLY, ETC., ET ALS., DEFENDANTS-APPELLANTS AND CROSS-RESPONDENTS.
Judges: 
Reporter: New Jersey Superior Court Reports
Volume: 57
Pages: 418–436

Head Matter:
MINNIE HANSEN, PLAINTIFF-RESPONDENT AND CROSS-APPELLANT, v. ADOLPH JANITSCHEK, INDIVIDUALLY, ETC., ET ALS., DEFENDANTS-APPELLANTS AND CROSS-RESPONDENTS.
Superior Court of New Jersey Appellate Division
Argued September 14, 1959
Decided October 19, 1959.
Before Judges Conford, Foley and Halpern.
Mr. Joseph C. Glavin argued the cause for defendants-appellants and cross-respondents.
Mr. Samuel R. Blaine argued the cause for plaintiff-respondent and cross-appellant (Mr. Louis Auerbacher, Jr., attorney).

Opinion:
The opinion of the court was delivered by
Halpern, J. C. C.
(temporarily assigned). This is an appeal by the defendants from a judgment of the Superior Court (Chancery Division) in favor of the plaintiff Minnie Ilansen, and against the defendants Adolph Janitsehek, individually and as surviving partner of Budolph Janitsehek, and Adolph Janitsehek, co-partners trading as New Jersey Art Foundry, John Janitsehek Sons, Props., and Viola Janitsehek, as executrix of the estate of Budolph Janitsehek,. deceased. Plaintiff cross-appeals from so much of the judgment as denies her counsel fees and the court's allowance of simple interest at the rate of 4% per annum instead of 6% compounded.
The court concluded that plaintiff Minnie Ilansen was defrauded by her partners, Budolph and Adolph Janitsehek (they were also her brothers) of her just share in certain partnership real estate. Judgment was rendered in her favor against the defendants for $7,333.33, together with interest thereon at 4% per annum amounting to $3,613.70, making a total of $10,947.03, plus taxed costs.
The defendants contend the court should have granted their motion for a judgment at the end of plaintiff's case, and, in any event, the judgment should be reversed because the trial court's findings and conclusions were against the weight of the evidence. Without reviewing the testimony in detail, it is sufficient to say that the trial judge's ruling on the motion and his ultimate conclusions were fully supported by the record. Briefly stated, the court concluded plaintiff had proved that plaintiff and her brothers were part of a closely knit family group, inclusive of their late father, founder of the family business; plaintiff and her brothers were partners in the ownership of certain realty; plaintiff did not know the contents of the partnership and other agreements; plaintiff conveyed her one-third interest in certain of the partnership realty valued at $26,500 for $1.500 because of her brothers' misrepresentations and fraud in failing to advise her of all the material facts; and that plaintiff was defrauded thereby. Based on these findings the court properly applied the well-settled rule of law that where one party, having superior knowledge, misrepresents material facts to another, or fails to reveal material facts which he is under a duty to reveal, and thereby induces such other party to enter into an unconscionable bargain, such conduct constitutes fraud which will move a court of equity to grant relief. Nicholson v. Janeway, 16 N. J. Eq. 285 (Ch. 1863); Jaeggi v. Andrews, 124 N. J. Eq. 155 (Ch. 1938); Stark v. Reingold, 18 N. J. 251 (1955). This principle of law is applicable even if we assumed no confidential or dominant relationship existed between the parties. Jaeggi v. Andrews, supra; Forman v. Grant Lunch Corporation, 113 N. J. Eq. 175, 182, 183 (E. & A. 1933); but here the partnership relationship itself gave rise to mutual obligations of loyalty and fidelity between the partners. Stark v. Reingold, supra, 18 N. J. at page 261.
13-5] The defendants' defense of laches is likewise untenable. While about 11 years elapsed before plaintiff instituted this suit, the court was justified in concluding that plaintiff acted promptly after learning all the facts. Moreover, defendants failed to offer any proof of prejudice. Laches is a defense only if there is delay in enforcing a known right and prejudice has resulted to the other party because of such delay. Mitchell v. Alfred Hofmann, Inc., 48 N. J. Super. 396 (App. Div. 1958), certification denied 26 N. J. 303 (1958); West Jersey Title and Guaranty Co. v. Industrial Trust Co., 27 N. J. 144 (1958). Laches as a defense is not regarded favorably whore the parties stand in a confidential relationship. Weisberg v. Koprowski, 17 N. J. 362 (1955). Furthermore, the defendants, having been found guilty of fraud, are estopped from using laches as a defense. Forman v. Grant Lunch Corporation, supra; Gallagher v. New England Mutual Life Ins. Co. of Boston, 19 N. J. 14 (1955).
The defendants argue the court erred in striking the testimony of the attorney, Benjamin E. Gordon, pertaining to statements allegedly made by plaintiff to him in 1947 which were held to be privileged. Gordon's testimony reveals that he knew " the entire Janitschek family for almost 50 years." In his words, " To me all the Janitscheks are the same. " At the time of the trial he represented Adolph Janitschek, the estate of Ttudolph Janitschek and the Mew Jersey Art Foundry, the company originally founded by John Janitschek, father of the parties to this suit. In 1947 he was consulted by plaintiff and her husband in connection with a mortgage loan hereinafter to bo discussed; and in 1952 ho represented them in the preparation of their last wills and testaments. From his own testimony it is clearly inferable that Gordon was a close friend, and would be considered by the ordinary layman as the "family lawyer" of the Janitschek family.
At the outset it is- to be noted that there were two sets of statements allegedly made. The trial court per mitted the alleged 1958 statements to go into evidence. The disputed statements of 1947 occurred under the following 'circumstances: sometime in 1947 the plaintiff went to Gordon's law office for the purpose of engaging his services in obtaining a mortgage on her home. Gordon succeeded in getting one of his clients to advance the moneys; he made the necessary title searches; he drew all the required legal documents to consummate the transaction; and he was paid by plaintiff for his work. It was during the time Gordon was doing this work that plaintiff allegedly made the disputed statements to him pertaining to the title of the property being mortgaged. The defendants offered his testimony as proof on their behalf. The' court allowed it into evidence, but after hearing the factual background from both sides, struck it out on the basis that the statements were made by a client to her attorney and were privileged. We agree.
The philosophy of the privileged communication doctrine between attorney and client, as we find it to exist in New Jersey, is best stated in the comment to Buie 210 of the A. L. I. Model Code of Evidence:
"In a society as complicated in structure as ours and governed by laws as complex and detailed as those imposed upon us, expert legal advice is essential. To the furnishing of such advice the fullest freedom and honesty of communication of pertinent facts is a prerequisite. To induce clients to make such communications, the privilege to prevent their later disclosure is said by courts and commentators to be a necessity. The social good derived from the proper performance of the functions of lawyers acting for their clients is believed to outweigh the harm that may come from the suppression of the evidence in specific eases."
We are in accord with the view that this doctrine, since it results in the exclusion of evidence, is to be strictly limited to the purposes for which it exists. In re Selser, 15 N. J. 393, 405 (1954). Nevertheless, when the facts in a given case warrant it, the rule should be applied because the principle is deeply rooted in our jurisdiction. State v. Toscano, 13 N. J. 418 (1953); Stewart Equipment Co. v. Gallo, 32 N. J. Super. 15 (Law Div. 1954). The rule is one of public policy and should be adhered to even though a party is injured thereby. State v. Krich, 123 N. J. L. 519 (Sup. Ct. 1939). Eor a full discussion of the problem see proposed Buie 36 in the Report of the Committee on the Revision of the Law of Evidence to the New Jersey Supreme Court, dated May 35, 1955, and the annotation therein contained. See also a discussion of the Selser case, supra, by Professor Lewis Tyree, of Eutgers University School of Law, in 9 Rutgers Law Review 398, wherein he says:
"The sanctity of the confidentiality of the attorney-client relationship emerges unscathed, in fact more cherishable, if anything, for having been so comprehensively re-visited in judicial opinion."
It is argued by defendants that the relationship of attorney and client did not exist between plaintiff and Gordon since he was acting for the lender, and the transaction was a business rather than a legal one within the meaning of the doctrine. We are of the opinion that the circumstances surrounding plaintiff's going to Gordon to obtain a mortgage loan created the attorney-client relationship with its privileged communication cloak.
The doctrine has been stated in various ways. In State v. Loponio, 85 N. J. L. 357, 360 (E. & A. 1913), the court said:
"Where, therefore (enlarging somewhat upon the language of Professor Wigmore), legal adviee of any hind is sought from a duly-accredited professional legal advisor in his capacity as such, the communications relevant to that purpose, made in confidence by the client, are at his instance permanently protected from disclosure by himself, or by the legal advisor, or by the agent of either confidentially used to transmit the communications, except the client waives the protection." (Italics mine)
Jones on Evidence (4th ed.), sec. 749, p. 1347, says:
" it is sufficient if the statements have been made in the course of legitimate professional transactions between attorney and client as such, and relate to matters as to which the client has sought the attorney's professional aid or adviee
In 58 Am. Jur., Witnesses, sec. 485, p. 272, the rule is stated thus:
"A communication between attorney and client is protected regardless of the matter about which advice is sought, provided it is a proper matter for professional aid and assistance."
Wigmore on Evidence (3d ed. 1940), sec. 2296, p. 569, states it thus:
"It is not,easy to frame a definite test for distinguishing legal from non-legal advice. Where the general purpose concerns legal rights and obligations, a particular incidental transaction would receive 'protection, though in itself it were merely commercial in nature >> the most that can be said, by way of generalization, is that a matter committed to a professional legal adviser is prima facie so committed for the sake of the legal advice which may be more or less desirable for some aspect of the matter, and is therefore within the privilege, unless it clearly appears to be lacking in aspects requiring legal advice.
Obviously, much depends upon the circumstances of individual transactions."
Wigmore recognizes that there is a conflict of decisions on this problem and concludes that the ultimate decision rests upon the facts in each case. Eor decisions closely analogous to the present case he cites Turquand v. Knight, 2 M. & W. 98, 150 Eng. Rep. 685 (Ex. 1836), for the holding that "consultation of an attorney for procuring a loan, held privileged." He also cites Doe v. Watkins, 3 Bing (N. C.) 421, 132 Eng. Rep. 472 (C. P. 1837), for the holding that "communications by a person desiring to obtain a loan, and seeking an attorney 0., acting for a lender, held privileged; C. was to assist professionally in raising the money for the applicant."
Conversations between client and attorney pertaining to the obtaining of a loan incident to the purchase of real estate have been held privileged. 58 Am. Jur. sec. 480, p. 269. See also Vought's Ex'rs v. Vought, 50 N. J. Eq. 177 (Ch. 1892); Palatini v. Sarian, 15 N. J. Super. 34 (App. Div. 1951).
The doctrine is applicable even though it was the first occasion on which the client sought the advice or aid of the attorney. It is even applicable if the attorney ultimately refuses to act as his attorney. State v. Loponio, supra.
It was the duty of the trial court, in the first instance, to determine whether the relationship existed between plaintiff and Gordon. The opinion of the attorney on the subject is not binding on the court. As stated by the court In re Selser, supra, 15 N. J. at pages 404, 405:
"The final determination of the existence of the privilege, however, rests with the court,
There is even authority that such a determination by the trial court is conclusive on appeal. 58 Am. Jur. sec. 482, pp. 269, 210. However, wo need not go that far. There was ample proof in this case for the trial judge to conclude that plaintiff consulted Gordon as her legal adviser rather than merely as an individual to get her a mortgage loan. Shelley v. Landry, 97 N. H. 27, 79 A. 2d 626 (Sup. Ct. 1951). The instant case is one where a prospective borrower goes to her lawyer, in the first instance, for his legal assistance in getting a mortgage loan, as distinguished from the case where a prospective borrower goes to a bank and is referred to the ban ids lawyer to consummate the transaction. In the latter case the defendants' argument would be more persuasive.
The remaining grounds for reversal urged by defendants have been considered and found to be without merit.
Plaintiff cross-appeals, seeking to reverse so much of the judgment as allows her only 4% interest per annum on the amount found to be due to her. Plaintiff argues interest should have been compounded at 6% per annum. The cases cited by plaintiff to support her position are inapplicable and clearly distinguishable from the present case. The cited cases are concerned with the mismanagement of trust funds, and in those cases the court, in its discretion, allowed 6% compound interest as punishment of the trustee for his wrongdoing.
The trial judge saw and heard all the parties and their witnesses. He had the opportunity of getting the "feel" of the case and having found fraud to exist exercised his discretion and allowed interest at 4% per annum. The amount of interest allowed depends upon the facts of each case. The court in its sound discretion may allow interest as damages for the detention of a debt; or as punishment for a wrong committed; or to accomplish justice. Jardine Estates, Inc. v. Donna Brook Corporation, 42 N. J. Super. 332 (App. Div. 1956); Hankin v. Hamilton Township Board of Education, 47 N. J. Super. 70 (App. Div. 1957), certification denied 25 N. J. 489 (1957); Consolidated Police and Firemen's Pension Fund Commission v. City of Passaic, 23 N. J. 645 (1957).
The court's decision on such a matter will not be disturbed on appeal unless it was arbitrary and unreasonable. The court's action here was reasonable and is affirmed. See East Ridgelawn Cemetery v. Winne, 11 N. J. 459 (1953).
Plaintiff also cross-appeals from so much of the judgment as denies her request for "counsel fees." Her argument is based on paragraph 14 of the partnership agreement which reads as follows:
"Fourteenth: Any partner who shall violate any of the terms, provisions and conditions of this agreement, shall in addition to being subject to other remedies, liabilities and other obligations herein imposed upon him therefor, keep and save harmless the partnership property and shall also indemnify the other parties from any and all claims, demands and actions which may arise out of, or by reason of such a violation of any of the terms, provisions and conditions hereof."
In effect, she contends that as part of the contemplated damages under the indemnity clause she should be reimbursed for moneys paid her attorney in bringing this suit. At the outset it should be noted that there was no proof offered by plaintiff on this subject. Furthermore, a reading of the contract clearly shows that paragraph 14 is a standard "save harmless" clause and relates to actions by third parties and not to actions between the parties to the indemnity agreement. The disputed clause protects an innocent partner from claims by strangers because of the wrongful acts of another partner. It was never intended to cover such a situation as is presented in the case at bar. Therefore plaintiff is not entitled to be reimbursed for her attorney's fees because of the indemnity clause.
The cases which enforce agreements compelling a defaulting party to pay reasonable attorney's fees, and which are not limited by R. R. 4:55-7, are clearly distinguishable from the present case. See Maryland Credit Finance Corporation v. Reeves, 45 N. J. Super. 205 (App. Div. 1957); Congdon v. Jersey Construction Co., 55 N. J. Super. 571 (App. Div. 1959).
Nor can plaintiff get counsel fees under R. R. 4:55-7, since she clearly does not come within the exceptions contained in the rule.
For the foregoing reasons the decision of the court below is affirmed, in all particulars. Neither side having prevailed on their respective appeals, no costs will be allowed on this appeal.