Opinion
06-29-1936
DALY v. WATSON.
L. Edward Herrmann, of Jersey City, for complainant. Herr & Kaufmann, of Hoboken, for defendant
Suit by Mary A. Daly against Ripley Watson. On final hearing.
Decree for complainant.
Decree affirmed by Court of Errors and Appeals (190 A. 323).
See, also, 118 N.J.Eq. 258, 178 A. 781.
L. Edward Herrmann, of Jersey City, for complainant.
Herr & Kaufmann, of Hoboken, for defendant
EGAN, Vice Chancellor.
The complainant is approximately 80 years of age. In the year 1926, she engaged the defendant, an attorney and counselor at law of this state, whose business, in part, consisted in placing and investing his clients' money in bonds and mortgages, to invest moneys in bond and mortgage, on a two-family house and lot, located on Rock street, in the city of Jersey City. The following year she again consulted him about a further investment of $3,000 in bond and mortgage. He agreed to invest the money in a bond and mortgage on a house and lot. Complainant said he notified her that he had a suitable investment for her, and "He told me what a fine house it was and two lots" (testimony p. 9). The complainant's daughter, Josephine K. Daly, testifying, said (testimony p. 7): "Yes, I called up Mr. Watson and told him that Mamma had $3000., which she wished to place out on first mortgage, and that she wished that the money be placed on a home. Later on Mr. Watson notified me that he had such an investment, and made arrangements for Mamma to go down to his office, which she did, and I met her there.
"Q. What occurred then? A. When we went there, Mr. Watson says, 'Mrs. Daly I have a nice investment on a house and two lots.'"
The defendant stated (testimony p. 96) that, "I said I thought that they had a little better security than usual, because there was two lots and a building on the two lots." Relying upon the representations of the defendant, complainant says she gave him the sum of $3,000. The defendant, instead of placing the money on a mortgage covering the kind of property which he led her to believe would be the security, placed it on a mortgage covering property in North Bergen, consisting of two lots with an "old shed" on it used as a "cheese factory." Daly v. Watson (Court of Errors & Appeals) 118 N.J.Eq. 258, 178 A. 781.
The complainant says that the defendant retained the papers, the bond and mortgage, insurance, etc.; and that he collected the interest as it became due and forwarded the same to her. On one occasion, in May, 1927, when the mortgagor defaulted in the payment of interest, the defendant paid her $90, the amount due, by forwarding her his check, although he had not, up to that time, collected it from the mortgagor. The complainant, in November, 1931, learned that the taxes and an assessment against the property remained unpaid. She then caused an investigation to be made and discovered for the first time that the building on the property, given as security for her loan, was not a home, a residence, or a two family house, but it was an "old shed." The complainant then demanded that the defendant take an assignment of the bond and mortgage and pay her the amount due thereunder; that, he refused to do. The defendant denied that the building was an "old shed." He contends that it was a building constructed about 1926 which was in good condition and used as a cheese factory. The evidence convinces me that the complainant clearly indicated to defendant the kind of security she desired. He agreed to furnish it. He failed in his promise and placed the money without complainant's knowledge on property which in no way resembled a house or dwelling; that being contrary to his instructions.
In his defense the defendant denies that he acted for the complainant in the capacity of an attorney or counselor at law; that he, in fact, represented her as a broker, or a real estate agent, only, without the existence of any relationship of trust or confidence.
The defendant, on cross-examination, was asked (testimony p. 108):
"Q. And did you at any time tell Mrs. Daly that you were investing in a cheese factory? A. Oh no, nothing was asked about that.
"Q. You did not volunteer to ask her if she was willing to let you invest $3000 in a cheese factory? A. She never asked me.
The defendant testified that he told the complainant and her daughter, Josephine K. Daly, that the premises in question consisted of two lots and a "building." He said (testimony p. 96): "I said I thought that they had a little better security than usual, because there was two lots and a building on the two lots."
Part of the testimony of the complainant is as follows:
"A. Yes, sir, we went to his office. My daughter got off at noon time. When we went in he had the papers made up. Mr. Watson said to me 'this is a very fine investment.' He said 'there is a nice house and two lots', and we was more than pleased, and he had the paper made up and so Isigned it. My daughter had to go back to work then and as we was going out or was going to go out he said 'If you wish you can leave the papers here, they will be safe.' Then Miss Borret she spoke up and she said 'they will be safe here'; and I thought Mr. Watson did a nice thing when he offered to be so kind as to take care of my papers in his safe, and I thought what a nice man he was, and how he was looking after my interest and trying to secure a good mortgage for me, and so we did that.
Josephine Daly, the daughter of the complainant, in part, testified:
"Q. When did you first go to the defendant with the idea in mind of investing some money? A. In 1926.
"Q. Will you tell the court what happened the first time you saw Mr. Watson? A. Yes. I called up Mr. Watson and told him that mama had $3,000.00 which she wished to place out on first mortgage, and that she wished that money placed on a home. Later on Mr. Watson notified me that he had such an investment and made arrangement for mama to go down to his office, which she did, and I met her there.
"Q. What occurred there? A. And then when we got there Mr. Watson says, 'Mrs. Daly, I have a nice investment on a house and two lots.'
"Q. Where was the property? A. In North Bergen."
The defendant denies that there was any relation of trust or confidence existing between the complainant and himself. He testified (testimony pp. 116, 117):
"Q. You made no investigation as to whether the assessments for the improvements on the streets had been confirmed, or if confirmed had been paid? A. There was no duty cast upon me."
Complainant said that she "left everything in his (defendant's) hands." (Depositions p. 31.) She had intrusted other investments to the care of the defendant, and from all the facts and circumstances, I am convinced that she placed her utmost faith, her trust and her confidence in him, as her attorney. She relied on his judgment, his recommendations and advice. He, presumably, inspected the properties which he offered as security. He knew what security the complainant desired for the moneys she loaned. He was able to and did persuade her, and she relied upon him. In Dwyer v. Anderson, 113 N. J.Eq. 210, at page 213, 166 A. 293, 294, the following appears: "An attorney at law is a quasi public officer. He is an officer of the court, and charged with the duty of assisting in its administration. Both courts and lawyers should welcome any inquiry into the fairness of transactions between attorney and client, and courts should never hesitate to condemn where the conduct of the attorney has been unconscionable. In no other way can the high reputation of the legal profession, of which its members are justly proud, be maintained. Raimondi v. Bianchi, 100 N.J.Eq. 238, 134 A. 866. The confidence which the relation begets between attorney and client, and the influence which the attorney thereby acquires, has always led to a very close scrutiny of all transactions between them. The burden always rests upon the lawyer to establish perfect fairness, adequacy, and equity of negotiations with his client, and, in the absence of such proof, courts of equity treat the case as one of constructive fraud. Condit v. Blackwell, 22 N.J.Eq. 481."
It was said in the case of In re Romaine's Will, 113 N.J.Eq. 477, 167 A. 683, 689, affirmed in 115 N.J.Eq. 173, 170 A. 16: "In Dwyer v. Anderson, 113 N.J.Eq. 210, 166 A. 293, it was held that all transactions of an attorney with his client will be carefully scrutinized, to the end that the client may be protected from his own credulity, and from the influence which the relation of attorney and client generates, and that courts of equity intervene, upon consideration of public policy, to prevent fraud and abuse of confidence and influence, and to compel fidelity in the performance of fiduciary duty. * * * And the court further says (113 N.J.Eq. 210, at p. 214, 166 A. 293, 294): 'In transactions such as these, the court leans most strongly against the attorney, who, while acting as such, has business relations with his client on his own account. Perkins v. Deal Beach Realty Co., 92 N.J.Eq. 526, 114 A. 853.' And on the same page the court says: 'A court of equity intervenes upon consideration of public policy, to prevent fraud and abuse of confidence and influence, and to compel fidelity in the performance of fiduciary duty. Relief will be afforded in equity in all transactions in which influence has been acquired and abused, in which confidence has been reposed and betrayed. Proff v. Shirvanian, 110 N.J.Eq. 639, 160 A. 844.'"
I am satisfied that the complainant is entitled to the relief prayed for.