Judson v. Peoples Bank and Trust Co.

Hehek, J.

(dissenting in part). I concur in the conclusion of my colleagues that the representations made to the Judsons were “flagrantly fraudulent,55 “affirmative misrepresentations55 justifiably inducing reliance, and that Bankers Commercial Corporation knowingly participated in the combination to cheat and defraud.

But, in the admeasurement of the - damages, adherence is not given to the rule that the frauddoer is liable for all damages naturally and proximately ensuing from the wrong, which in equity may include the disgorging of all profits attributable to the fraud. Smith v. Duffy, 57 N. J. L. 679 (E. & A. 1895); Driscoll v. Burlington-Bristol Bridge Co., 8 N. J. 433 (1952); Zeliff v. Sabatino, 15 N. J. 70 (1954); Falk v. Hoffman, 233 N. Y. 199 , 135 N. E. 243 (Ct. App. 1924). McMynn v. Richardson-Phenix Co., 186 Wis. 442 , 201 N. W. 272 (Sup. Ct. 1924). Compare Magee v. Holland, 27 N. J. L. 86 (Sup. Ct. 1858); Crater v. Binninger, 33 N. J. L. 513 (E. & A. 1869). And all who act in concert are liable for the entire result. The payments to Rager, Smith and Bankers all came from the funds of the Tuttle corporation; and it is of no consequence in this view that they were made subsequent to the day set for the valuation of the corporate stock.

And, by the same token, only the actual cost of the preferred stock to the participants in the conspiracy should be considered in assessing the value of the common stock.

I am also persuaded that an undervaluation of the corporate real estate unduly impaired the value of the stock *40 in the determination embodied in the judgment under review. It suffices to say in this regard that defendants’ witness, Yan Horn, who fixed the value of the real estate at $190,000, had in 1948 appraised the same property at $350,000.

And, for the reasons given in the concurring opinion rendered on the earlier hearing of the cause, 17 N. J. 67, 94 (1954), the statutorily-given right of contribution does not comprehend this class of cases. Unlike the Uniform Tortfeasors Contribution Act, then recommended by the National Conference of Commissioners on Uniform State Laws, 9 U. L. A. 156, section 3 of our statute, N. J. S. 2A :53A-3, in express terms confines the operation of the principle to cases where “injury or damage” is suffered by any person as a result of the “wrongful act, neglect or default of joint tortfeasors,” for which a money judgment is recovered. The word “tort” manifestly has a more extensive meaning than “wrongful act”; otherwise, the departure in terms would have no significance whatever. Indeed, as pointed out on the prior submission, there is a distinction of substance between these expressions that has pervaded the law of contribution from the very beginning; and this differentiation has since been given recognition by the National Conference of Commissioners in their 1955 recommendations, of which more hereafter.

“Wrongful act,” as used in our statute, is characterized by its associates “neglect or default,” the whole meaning the positive and the negative breaches of duty in nature the same * * * acts of commission and omissions and failures not intentional, willfully criminal, fraudulent or tainted with moral turpitude. The immemorial rule denying contribution between those who knowingly and willfully do grievous injury to person or property in the pursuit of a conspiratorial design is founded in sound public morality. There is no conceivable reason of policy why willful fraud-doers and partioeps criminis should have the benefit of the essentially equitable doctrine of contribution.

These principles were given due recognition by the National Conference of Commissioners in their submission of a sub *41 stitute act in 1955, to “reconcile the serious variations which exist and, if generally adopted would eliminate the presently existing confusion” and the complete lack of uniformity, circumstances which had induced the Commissioners to withdraw the Model Act of 1939 “for further study and revision.” Yew Jersey is there classified as one of six states “which declare the right to contribution and leave most questions to the courts.” Handbook of the National Conference of Commissioners on Uniform State Laws (1955), p. 216 et seq.

Section 1(c) of the proposed substitute provides:

“There is no right of contribution in favor of any tortfeasor who has intentionally [wilfully or wantonly] caused or contributed to the injury or wrongful death.”

And the Commissioners’ comment on this sub-section thus:

“Intentional, wilful and wanton. * * * The 1939 Act was silent on the matter. The policy here followed is that of the original rule as to contribution, that the court will not aid an intentional wrongdoer in a cause of action which is founded on his own wrong. In cases of concerted battery, for example, there appears to be little reason to shift any .part of the liability to another.

Two valid reasons exist for extending the exclusion- to wilful and wanton acts causing or contributing to the injury.

In the first place wilful and wanton acts seem naturally to belong in the same class with intentional wrongs and to imply moral turpitude on the part of the wrongdoer. The policy of the section as drafted adopts the law of those states which do not recognize classification of negligence into degrees. It is intended to convey the idea that there is a difference between negligence and wilful or wanton misconduct.

In the second place, by excluding wilful and wanton actors from the right to contribution, we eliminate most of the arguments urged for a rule allocating the shares of liability on the basis of relative degrees of fault.

In many states ‘gross and wanton negligence’ in guest statutes is construed to mean wilful and wanton conduct. This is the rule which should be applied in determining the right of contribution under this act.

Brackets have been placed around the words ‘wilfully or wantonly’ so that they may be omitted in those states where by definition of the terms they mean something less than they imply and where by including them the bar of the remedy would be too broad.”

*42 ■ Conspiratorial fraud of the class now before us was not within the design of the Model Act of 1939. The Commissioners themselves say the draft “was silent on the matter.” Much less can it be said that this “flagrantly fraudulent” conduct was a “wrongful act, neglect or default” subject to contribution in the statutory sense. In his recent work on torts, Dean Prosser concludes that the rule denying contribution in favor of “negligent tortfeasors” is “in full retreat,” and “in due course of time the pressure of opinion will compel its abolition,” but “As to wilful wrongdoers, or those who are guilty of the most flagrant forms of misconduct, there is no indication of any desire or tendency to relax the original rule.” Prosser, Law of Torts (2d ed. 1955), section 46. Apart from the stated considerations of policy underlying the rule that where the defendants act in concert, the act of one is the act of all, and each is liable for the entire loss, the denial of contribution in such circumstances makes for deterrence from conspiratorial fraud. Thweatt’s Adm’r v. Jones, 1 Rand., Va., 328 (Va. 1825) ; Peck v. Ellis, 2 Johns. Ch., N. Y., 131 (N. Y. 1816). See also Prosser, “Joint Torts and Several Liability," 25 Cal. L. Rev. 413 (1937).

I would modify the judgment accordingly.

For affirmance and modification — -Chief Justice Weintraub, and Justices Heher, Oliphant, Wacheneeld, Burling and Jacobs — 6.

Opposed — Hone.

Hei-ier, J., dissenting in part.