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State v. United States Steel Co.

Decided: March 16, 1953.


On certification to the Superior Court, Chancery Division.

For modification -- Chief Justice Vanderbilt, and Justices Oliphant, Wachenfeld and Burling. For affirmance -- Justices Heher, Jacobs and Brennan. The opinion of the court was delivered by Wachenfeld, J. Jacobs, J. (dissenting in part). William J. Brennan, Jr., J. (dissenting in part). Heher, J. (dissenting in part).


This appeal comes up directly from the Chancery Division of the Superior Court by the granting of the appellant's petition for certification.

The State, by proper proceedings, sought to escheat certain personal property in the possession of the company consisting of (1) claims for wages, (2) claims on unredeemed cafeteria coupons, (3) claims for amounts withheld from wages of former employees for the purchase of Liberty Bonds.

The time for filing an answer was extended from time to time pending the determination by this court of the case of State v. Standard Oil Co., 5 N.J. 281 (1950), which involved questions common to the instant litigation. On appeal to the United States Supreme Court, 341 U.S. 428, 71 S. Ct. 822, 95 L. Ed. 1078 (1951), the judgment entered here was affirmed.

It was subsequently stipulated judgment for the company be entered as to the unclaimed wages and unredeemed cafeteria

coupons, leaving to be determined only the question whether the sums deducted from the wages of employees for the purchase of Liberty Bonds were subject to escheat.

The pretrial order, limiting the issues, included the following: whether or not the claims for amounts withheld from wages for the purchase of Liberty Bonds were enforceable by the former employees against the company as of March 18, 1949, when the proceedings were commenced, and what the relationship was between the company and its employees with regard to the withholding. Was it trustee-cestui que trust, debtor and creditor, or depositor and depositary?

No testimony or evidence was offered, the parties relying upon the pleadings and the facts as stipulated.

Briefly, these indicated that prior to 1921 employees of the company subscribed for Liberty Bonds and the company purchased, with its own funds and in its own name, bonds sufficient to cover the subscriptions. Thereafter, it deducted an agreed sum from the weekly wages or salaries of the subscribing employees, upon the understanding that when the aggregate of such deductions equalled the face amount of a bond, the money so deducted would be considered as payment by the employee for the bond, which would then be delivered to him.

The amounts so deducted were not kept in a separate bank account but remained in the general funds of the company, which also kept records showing the respective amounts withheld from the wages or salaries of each employee who subscribed to the plan and by means of a separate bookkeeping account showed the aggregate of the amounts deducted. The balance of this bookkeeping account at any one time always reflected the total sums deducted less the value of bonds delivered and the sums paid to employees under the practice agreed upon. The general funds of the company always greatly exceeded the amount of this bookkeeping account.

In the instance where the company did not deliver any Liberty Bonds to an employee by reason of the fact that the total deductions from the wages or salary of said employee

did not equal the amount of the subscription, he was entitled to a return of the money paid in, without interest.

It was a necessary prerequisite to the right of any person to take advantage of the plan that he be and continue to be an employee of the company. When any subscriber to the plan was entitled to the return of the deductions but could not be located by the company, the latter credited a bookkeeping account entitled "Unclaimed Liberty Loan Subscriptions" with the amounts thereof, but the funds remained unsegregated.

The trial judge concluded there was no substantial difference between the stipulated facts in this case and those in the Standard Oil case, supra, and therefore felt "obliged to follow the ruling in the Standard Oil case." Judgment was accordingly entered for the State and the cause certified here for disposition on appeal.

The appellant now contends all the claims for amounts withheld from wages of former employees for the purchase of Liberty Bonds were barred by the statute of limitations, N.J.S. 2 A:14-1, long before the Escheat Act, N.J.S. 2 A:37-1 et seq., became effective. It insists the relationship between the defendant company and its former employees was always one of debtor and creditor and that any cause of action which an employee had for the return of the deductions accrued at the time he left the employ of the company. In no case did this occur later than the year 1921; hence, it is asserted the statutory period has long since run.

The State's theory is the amounts deducted constituted a trust fund held by the company for the use and benefit of the subscribers because they were to be devoted only to the specific purpose of purchasing Liberty Bonds for the employees, and the trust, it is claimed, continued until such time as that purpose had been accomplished or the moneys returned to the subscriber.

We are not impressed by the cases cited by the appellant to sustain its argument. In Tucker v. Linn, 57 A. 1017, 1018 (Ch. 1904) (not officially reported), the complainant attempted to prove she had given Linn about $1,000 and had

allowed him to deduct from her wages an additional $840 with the understanding Linn would pay her a better rate of interest on the money than she could receive by depositing it in bank. The court held, even assuming she had succeeded in proving these facts, they would establish Linn merely as a debtor and not as a trustee of the money received, saying:

"He could expend it, do with it as he pleased. He was not to hold that money in specie as a deposit for the benefit of the complainant, who trusted him with it, in which case one kind of a trust would exist; and he was not to pay it out for her use; and he was not to invest it in securities, and then hold the securities for her, the legal title to which would be in him and the equitable title to which would be in her. He was to appropriate that money, and pay her back, either on demand or at some future time, other money, equivalent to what he had borrowed, presumably, plus interest thereon. Now, whenever you have that kind of a transaction, you have ...

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