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State v. Otis Elevator Co.

Decided: November 10, 1952.

THE STATE OF NEW JERSEY, BY THEODORE D. PARSONS, ATTORNEY-GENERAL OF THE STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT,
v.
OTIS ELEVATOR COMPANY, A CORPORATION, DEFENDANT-RESPONDENT, ABRAHAM GRENTHAL, SUBSTITUTED RECEIVER OF J. B. SKEHAN & CO., DEFENDANT-APPELLANT, AIDA M. RHODES, INDIVIDUALLY AND AS EXECUTRIX OF THE WILL OF FRANK C. RHODES, DEFENDANT



For affirmance -- Justices Wachenfeld, Burling, Jacobs and Brennan. For reversal -- Chief Justice Vanderbilt, and Justices Heher and Oliphant. The opinion of the court was delivered by Jacobs, J. Vanderbilt, C.J., (dissenting). Mr. Justice Heher and Mr. Justice Oliphant authorize me to say that they concur in this opinion.

Jacobs

[10 NJ Page 505] In 1949 the plaintiff State of New Jersey duly instituted its proceeding in the Chancery Division under L. 1946, c. 155, as amended (R.S. 2:53-15 et seq.), against the defendant Otis Elevator Company to escheat certain personal property in its custody or possession, including shares of its

corporate stock registered in the name of Frank C. Rhodes and the dividends thereon. In 1950 the defendant Abraham Grenthal, substituted receiver of J. B. Skehan & Co., claimed ownership of the Rhodes stock and dividends and in 1951 filed an answer asserting the basis of his claim. After trial the Chancery Division found that Grenthal had no valid claim and entered judgment declaring the personal property in the custody or possession of Otis Elevator Company to have escheated to the State. No appeal herein was taken except by Grenthal who duly filed his notice of appeal to the Appellate Division; his appeal has been certified to this court on its own motion.

In 1902 Certificate No. 1070 representing 35 shares of Otis Elevator Company stock was registered on the company's books in the name of Frank C. Rhodes, Bank of America, 44 Wall Street, New York, N.Y. Rhodes was an employee of the bank. A dividend check dated April 15, 1904, payable to Frank C. Rhodes, was cashed; no later dividend checks were ever cashed. Under date of October 20, 1909 the defendant Otis Elevator Company received a letter on the stationery of the Bank of America and signed Frank C. Rhodes, which returned a dividend check and stated:

"The certificate for the shares, which apparently still stand in my name upon your books, was endorsed by me and delivered to A.H. Vanderpoel, Esq., as Receiver of J. B. Skehan & Co., a number of years ago, and I have no further interest therein. I shall be obliged if you will note this fact upon your books in order that you may avoid sending me checks for future dividends, in the event that the present owner continues to omit to have the shares transferred."

There is no additional evidence to indicate that Certificate No. 1070 was in fact delivered to Vanderpoel. The original certificate has never been found, Vanderpoel never took any action bearing thereon, and the shares at all times remained registered in the name of Frank C. Rhodes. Nothing in the available records of the receivership of J. B. Skehan & Co. actually supports the position that Vanderpoel was entitled to or did receive the certificate. In January 1908 a stipulation

that the receivership action "be discontinued without costs" was signed by the receiver and his attorney, as well as by the attorneys for the parties plaintiff and defendant and the bonding company, and in February 1908 an order that the action be discontinued without costs was entered on motion of the receiver's attorney. Unless dereliction on the receiver's part is to be assumed, it might well be inferred that the receiver then retained no assets and that he either never had Certificate No. 1070 or had received it merely for transmission to another (perhaps a customer of the brokerage house of J. B. Skehan & Co.) as its rightful owner and had duly delivered it.

After the entry of the order of discontinuance in the receivership action, no further proceedings were taken therein until 1950 when Albert Lowenfels, as administrator of the estate of David Aaron, filed a petition for the appointment of a substituted receiver. His petition alleged, upon information and belief, that David Aaron, who died in 1896, was a proved creditor of J. B. Skehan & Co. which went into receivership in 1895, that the plaintiff and the defendant in the receivership action effected a discontinuance and "virtual termination of the receivership" on February 28, 1908 without notice to creditors, that there is an asset still existent and unadministered, and that a substituted receiver should be appointed with all the power and authority of the original receiver. On October 25, 1950 Grenthal was appointed by the New York Supreme Court as substituted receiver and thereafter asserted his claim to the Rhodes Certificate No. 1070 and its increments, including stock dividends and splitups and cash dividends. The answer filed by him in the lower court set forth, in accordance with R.S. 2:53-22, substantially the following alleged circumstances in support of his claim of ownership:

General Electric Company and Sprague Electric Company had made arrangements for the exchange of securities; Sprague stockholders were to deposit their shares with the trustee United States Mortgage & Trust Company for delivery

to General Electric and receive General Electric Bonds and Otis Elevator Company stock which General Electric held or was obtaining; on or about September 22, 1902 the Bank of America and its nominee Frank C. Rhodes deposited its holdings in Sprague with the trustee in accordance with the aforementioned arrangements; thereafter the trustee surrendered Otis stock which it had received from General for transfer and Certificate No. 1070 was issued in the name of Frank C. Rhodes, care of Bank of America, at 44 Wall Street, New York, N.Y.; on or about September 25, 1902 the trustee delivered Certificate No. 1070 and General bonds to the Bank of America; the Bank of America was a secured creditor of J. B. Skehan & Co. and obtained a court order confirming its right to sell its security conditioned upon its agreement to transfer any surplus to the receiver of J. B. Skehan & Co.; the debt of J. B. Skehan & Co. was paid in full and Bank of America had a surplus available for transfer to the receiver; accordingly, the Bank of America directed its nominee Frank C. Rhodes to endorse Certificate No. 1070 to Vanderpoel as receiver; Vanderpoel received the certificate but failed to effect a transfer and died in 1911 "without having accounted for his acts and proceedings as Receiver of the firm of J. B. Skehan & Co. and without leaving any trace of the records of the receivership estate or any unadministered assets remaining on hand. No trace of the aforesaid Certificate No. 1070 of Otis Elevator Company or other written evidence of the receivership's title to the 35 shares represented by said certificate can be found."

At the trial Grenthal sought to establish the foregoing, but because of the long lapse of time he was unable to produce any one having first-hand information. His sole witness was Bernard Cowen, a New York attorney who had conducted an examination of such records as remained available. The Chancery Division found, and we think rightly, that his testimony fell far short of establishing the essential links to the ...


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