Court Opinion

ID: 9648170
Source: CourtListenerOpinion
Date Created: 2023-08-23 14:07:02.749642+00
Date Added: 2024-06-11T18:11:56.810664
License: Public Domain

Jacobs, J.
(dissenting). The result reached is not a just one nor is it compelled by any procedural rule. This was not ordinary litigation in which each litigant may fairly be expected to take care of his own expenses. It was extended litigation in which the managing fiduciary or trustee of a joint venture was found to have committed flagrant acts of fraud and misappropriation and in which the trial court directed that the misappropriated funds be restored and administered by a court-appointed receiver. That it would be inequitable to compel the defrauded coadventurer to bear all of his heavy legal costs rather than have them come, at least in some reasonable part, from the funds restored to the joint venture and being administered by the court’s receiver, seems to me entirely evident.
In Tevander v. Ruysdael, 299 F. 746 (7 Cir. 1924), the Court of Appeals for the Seventh Circuit found little difficulty in reaching a just result in a comparable situation though the federal practice was like ours (R. R. 4:55-7) in having ordinary litigants bear their own legal expenses while providing for equitable exceptions including so-called “fund” cases. See 6 Moore, Federal Practice § 54.77(2) (2d ed. 1965); Sprague v. Ticonic National Bank, 307 U. S. 161, 164-167, 59 S. Ct. 777, 83 L. Ed. 1184, 1186-1187 (1939). The plaintiff and defendant in Tevander were in copartnership when the defendant misappropriated assets and transferred them to a corporation. The plaintiff brought a pro-*153eeeding to have the transfer declared void and the misappropriated assets delivered to a receiver for distribution. She prevailed and sought to have her legal expenses taxed against the defendant. In holding that she was entitled to relief, the court concluded that the restored fund should hear the expenses, pointing out that it would be a “harsh and inequitable rule” that would compel the plaintiff to bear all of her legal costs in the circumstances presented. 299 F., at p. 749.
The plaintiff Grober does not seek to impose an additional charge against the wrongdoing fiduciary or trustee individually as was sought in Liberty Title & Trust Co. v. Plews, 6 N. J. 28 (1950). He seeks to and does bring himself within the literal term of R. R. 4:55-7 which vests discretionary authority in the trial court to make an allowance out ef a “fund in court.” This term is, of course, not self-defining and its content will turn on what the court puts into it. Thus in State v. Otis Elevator Co., 12 N. J. 1 (1953), it was held that an escheat proceeding by the State against the defendant corporation to compel it to turn over abandoned property to the State involved a,fund in court though that would hardly be so in any strict sense. See 12 N. J., at pp. 26-31.
In Katz v. Farber, 4 N. J. 333 (1950), a fund in court was found to be present where the purchaser obtained specific performance and deposited the purchase price with the clerk for distribution to the sellers who were in a dispute as to their respective interests. In the course of his opinion for the Court, Justice Case illustrated the broad scope of the term without, however, suggesting that his illustrations, though clearly enough to cover the plaintiff Grober’s case, were intended to he exhaustive or that there was to he no equitable flexibility or individualization (Sprague v. Ticonic National Bank, supra, 307 U. S., at p. 167, 59 S. Ct., at p. 780, 83 L. Ed., at p. 1187) in the application of the rule:
“The words ‘fund in court’ in Nobile v. Bartletta, supra [112 N. J. Eq. 304], and Universal Indemnity Insurance Co. v. Caltagirone, supra [119 N. J. Eq. 491], were clearly intended to include such cases as came within the classification ‘administration of trusts’ mentioned *154in the Stetser case [Stetser v. American Stores Co., 125 N. J. L. 275]. There is a fund in court ‘where the court has jurisdiction over the fund or estate,’ In re Fisher, supra [In re Fisher’s Estate, 115 N. J. Eq. 329], or ‘where trust funds in the control of the court are being administered,’ Clements v. Clements, supra [129 N. J. Eq. 350]. Thus an accounting by the executor, or an administrator or a trustee figuratively brings his fund into court. There may be such a fund when the money is actually in the custody of the court and is the subject of the litigation; also, by analogy, when a litigant by court intercession creates, produces or protects, as in the Cintas case, supra [Antas v. American Car & Foundry Co., 133 N. J. Eq. 301], a fund for the benefit of a class of which he is one so that in good conscience the cost of the proceeding should be visited in proper proportion upon the moneys which are thus produced or preserved for the members of the entire class although all did not participate in the litigation.” 4 N. J., at p. 344.
Here the Appellate Division, relying in part on Sarner v. Sarner, 38 N. J. 463 (1962), found that there was a fund in court and remanded the matter for the trial court’s exercise of its discretionary power under R. R. 4:55-7. Grober v. Kahn, 88 N. J. Super. 343, 352-358 (1965). In rejecting this course, the majority seems to take the position that, the compelling equitable considerations notwithstanding, the plaintiff Grober cannot bring himself within the fund in court rule since his action was actually brought for his own benefit and not as a member of a larger class. Viewed realistically, the plaintiffs in Sarner also brought their action for their own benefit and not as members of a larger class; and while it is true that in form their action was for the benefit of the corporate entity, if form is to be dispositive but equity is not to be ignored, we may readily view the joint venture here as the entity and the proceeding as having been brought for its benefit. See X—L Liquors v. Taylor, 17 N. J. 444, 454-455 (1955); Tevander v. Ruysdael, supra, 299 F. 746. However, this need not be pursued, since the absence of a class to be benefited beyond the plaintiff himself is not necessarily a bar. See United States v. Equitable Trust Co., 283 U. S. 738, 51 S. Ct. 639, 75 L. Ed. 1379 (1931); State v. Otis Elevator Co., supra.
*155In Otis, Chief Justice Vanderbilt pointed out that “one does not need to find a class to support the doctrine of a fund in court.” 12 N. J., at pp. 10-11. He cited Katz v. Farber, supra, and also the Equitable Trust case where the Supreme Court permitted the charging of counsel fees to the fund, in a proceeding brought on behalf of an incompetent Indian for recovery of his property which had been dissipated with the approval of the Secretary of the Interior. Justice Van Devanter pointed out that it is a general rule in courts of equity “that a trust fund which has been recovered or preserved through their intervention may be charged with the costs and expenses, including reasonable attorneys’ fees, incurred in that behalf.” 283 U. S., at p. 744, 51 S. Ct., at p. 641. 75 L. Ed., at p. 1384. In a recent comment on Sarner, Otis and Equitable Trust, it was noted that “no class need exist at all” and that “substituted for that requirement is a situation which compels an innocent party to institute proceedings to protect the fund itself if his own rights are not to be destroyed.” Note, “Allowance of Counsel Fees Out of a “Fund in Court’: The New Jersey Experience,” 17 Rutgers L. Rev. 634, 641 (1963).
A rigid approach would perhaps have been understandable in the days immediately following constitutional revision when the abuses in Chancery were viewed as a continuing threat. But that was almost two decades ago, Chancery has become but a fading memory, and we are now confronted with more troublesome problems which call for comprehensive restudy of R. R. 4:55-7. See Bergen Builders, Inc. v. Horizon Developers, Inc., 44 N. J. 435, 438-439 (1965) (concurring opinion). In the meantime, the rule should be administered with a proper measure of equitable flexibility and with full recognition that here, as elsewhere, “justice is the polestar.” New Jersey Highway Authority v. Renner, 18 N. J. 485, 495 (1955); see R. R. 1:27 A; Handelman v. Handelman, 17 N. J. 1, 10 (1954); Martindell v. Martindell, 21 N. J. 341, 349 (1956).
Justice Schettino joins this dissent.
*156For reversal — Chief Justice Weintraub and Justices Francis, Proctor and Hall — 4.
For affirmance — Justices Jacobs and Schettino — -2.