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Colozzi v. Bevko Inc.

Decided: January 10, 1955.

CHARLES C. COLOZZI, PLAINTIFF,
v.
BEVKO, INC., A CORPORATION OF THE STATE OF NEW JERSEY, CHARLES MAXWELL ALRICH, EDWARD O'HARA AND CLIFFORD C. CORSON, DEFENDANTS



On appeal from Superior Court, Law Division.

For affirmance -- Chief Justice Vanderbilt, and Justices Wachenfeld, Burling, Jacobs and Brennan. For reversal -- Justices Heher and Oliphant. The opinion of the court was delivered by Burling, J.

Burling

This appeal stems from proceedings in aid of execution on a judgment entered in a civil action in the Superior Court, Law Division. The appeal was taken from a final order entered by the Superior Court, Law Division, filed June 10, 1954, which vacated restraints upon the sale by the respondent, Theodore Blumberg, a resident of Pennsylvania who was not a party to the original action, of certain promissory notes made by Bevko, Inc., a New Jersey corporation, to, respectively, the defendants Charles Maxwell Alrich, Edward O'Hara and Clifford Corson. Blumberg's claim that he held the notes as collateral security for indebtedness of Alrich, O'Hara and Corson, was sustained by the order. James Hunter, III, a receiver appointed in aid of the execution in the principal action, appealed to the Superior Court, Appellate Division. Prior to hearing there the appeal was certified on our own motion.

Charles C. Colozzi, the plaintiff in the principal action, recovered a judgment for $30,000 against the defendants Alrich, O'Hara and Corson. Defendant Bevko, Inc. had secured a judgment of dismissal. The present appeal does not involve the validity of these judgments.

On March 18, 1954 the Sheriff of Camden County, pursuant to a writ of execution issued under Colozzi's judgment, levied upon the right, title and interest of Alrich, O'Hara and Corson in and to certain stock certificates and notes in the possession of Blumberg's attorneys, Starr, Summerill & Davis, in Camden, New Jersey. Blumberg, through his attorneys, on March 31, 1954 delivered a notice in writing to the Sheriff of Camden County, under the provisions of N.J.S. 2 A:17-29, making claim to the stock certificates and notes. The property in question (i.e., levied upon by the sheriff and subsequently claimed by Blumberg) was as follows: Certificate No. 1 issued by Bevko, Inc. to Alrich, representing 25 shares of capital stock of Bevko, Inc.; Certificate No. 2 issued by Bevko, Inc. to Corson, representing 25 shares of capital stock of Bevko, Inc.; Certificate No. 3 issued by Bevko, Inc. to O'Hara, representing 25 shares of

capital stock of Bevko, Inc.; note made by Bevko, Inc., payable to Alrich, in the amount of $20,000; note made by Bevko, Inc., payable to Corson, in the amount of $20,000; and note made by Bevko, Inc. to O'Hara, in amount of $20,000.

On April 28, 1954 the Superior Court, Law Division, pursuant to N.J.S. 2 A:17-65 and 66, on motion of the plaintiff Colozzi, ordered Blumberg and the defendants Alrich, O'Hara and Corson, and each of them, restrained until further order of the court, from assigning, negotiating or otherwise transferring the above-mentioned stock certificates issued by Bevko, Inc. This order, which was filed April 29, 1954, appointed James Hunter, III (herein referred to as the receiver) as receiver of any right, title and interest of Alrich, O'Hara and Corson in the three promissory notes of Bevko, Inc., hereinbefore referred to, subject to any interest of Blumberg therein.

The receiver, by a subsequent motion, sought an order directing the delivery to him of the notes of Bevko, Inc., hereinbefore referred to, and adjudicating and determining Blumberg's rights therein. Blumberg made an opposing motion, seeking an order allowing Blumberg to sell his interest in the three notes of Bevko, Inc., hereinbefore referred to. These motions appear to have been addressed to the Superior Court, Law Division, under and by virtue of R.R. 4:75-2. Cf. R.R. 4:76; N.J.S. 2 A:17-67.

At a hearing on May 13, 1954 on these two motions neither Blumberg nor the receiver addressed any objection to the other's motion adjectively. Blumberg's attorney agreed that the proceedings called for "a determination of who has the right to possession of these notes" and that Blumberg had appeared to the extent necessary "to protect what rights he has in the matter."

The facts disclosed during reception of evidence on these motions were that Alrich, O'Hara and Corson were principal stockholders of Bevko, Inc., a New Jersey corporation. Bevko, Inc. required financing for a project undertaken by it, and Alrich, O'Hara and Corson obtained the necessary [17 NJ Page 200] funds from Blumberg. Blumberg, called as a witness by the receiver, testified that on February 25, 1953, at his office in Philadelphia, Pennsylvania, he met with Alrich, O'Hara and Corson, Sidney Bookbinder, their attorney, and William Schwab, Blumberg's attorney. He testified that the three Bevko, Inc. notes ($20,000 each) were prepared and signed at that meeting, were delivered to him (Blumberg) then and were held by him thereafter. He testified that at the same meeting a written financing contract was entered into between him (Blumberg), Alrich, O'Hara and Corson. The financing contract was identified and placed in evidence. The gist of the financing contract was that Blumberg agreed to loan $25,000 each to Alrich, O'Hara and Corson; each of the latter was immediately to invest $5,000 in Bevko, Inc. and loan $20,000 to Bevko, Inc., and receive a corporate note therefor. Each was to "give to Blumberg an individual note to be secured by their issued shares (i.e., 25% each), of the said corporation." Paragraph 11 of the agreement provided that in the event of liquidation of Bevko, Inc. prior to its fulfillment of contracts (attached to the agreement), the assets should be distributed according to their investment, the investment of each of Alrich, O'Hara and Corson being identified as $5,000. Blumberg testified that Alrich, O'Hara and Corson delivered their individual notes to him on the same day. Mr. Bookbinder, called as a witness by the receiver, testified that the Bevko, Inc. notes were pledged to Blumberg as collateral for the three $25,000 loans. The Bevko, Inc. notes were not endorsed by Alrich, O'Hara and Corson. Mr. Bookbinder testified the individual notes (as distinguished from the Bevko, Inc. notes) were made by Alrich, O'Hara and Corson on February 26, 1953. He predicated the statement upon the date written on the individuals' notes and did not expressly deny the making thereof on February 25, 1953. Each of the individuals' respective $25,000 notes referred to the delivery of Bevko, Inc. stock to Blumberg as collateral security, and these individuals' notes also provided "THE ABOVE COLLATERAL SECURITY and any heretofore or which may hereafter" be deposited with Blumberg

"and any other property of maker in (Blumberg's) possession, * * * shall stand as one general continuing collateral security * * *" for the individuals' obligations to Blumberg. The receiver asserted that "This being executed in Pennsylvania, Pennsylvania law will control." The receiver introduced evidence of pertinent Pennsylvania law. Blumberg did not object to the introduction of Pennsylvania law into the case, and on this appeal concedes generally its applicability.

The Superior Court, Law Division, determined on the evidence that the Bevko, Inc. notes in question had been validly pledged to Blumberg as collateral security. The court entered an order embodying this determination, releasing these notes from restraint and authorizing Blumberg to sell these notes. This is the order subjected to the receiver's present appeal.

The questions involved in this appeal include whether (1) the Superior Court, Law Division, had jurisdiction to determine Blumberg's rights in the Bevko, Inc. notes; (2) Pennsylvania or New Jersey law applies to determine the validity of the pledge; (3) judicial notice of Pennsylvania law may be taken in this case; (4) the evidence should be permitted to support a pledge in the light of the parol evidence rule, i.e., whether there was a variation of the terms of the written agreement and collateral notes of the individuals, Alrich, O'Hara and Corson; (5) the absence of endorsement by the payees of Bevko, Inc. notes defeated the pledge.

I. JURISDICTION

Blumberg contended on this appeal that the Superior Court, Law Division, lacked jurisdiction to enter a determination deciding his rights in and to the Bevko, Inc. notes in question. We find no merit in this contention. Blumberg filed a notice of claim to the notes under N.J.S. 2 A:17-29. He did not avail himself of the statutory procedure made available to him by N.J.S. 2 A:17-29, supra, to try out his

claim of property, but he (by his attorneys) acknowledged service of notices of motion and appeared generally in the proceedings in aid of execution and in fact moved for affirmative relief therein prior to making any suggestion or objection that he was not subject to the jurisdiction of the court. Cf. White v. White, 16 N.J. 458 (1954); State v. U.S. Steel Corp., 12 N.J. 38, 43 (1953); Trautman v. Higbie, 10 N.J. 239, 242-243 (1952); In re Van Winkle, 3 N.J. 348, 360-361 (1950); R.R. 4:4-6. Compare Whalen v. Young, 15 N.J. 321, 333-334 (1954).

II. APPLICABILITY OF PENNSYLVANIA LAW

The receiver asserted, and Blumberg conceded, on this appeal, that Pennsylvania law governs the validity of the alleged pledge of the Bevko, Inc. notes in question to Blumberg. The evidence is uncontradicted that the pledge, if any, was effected in Pennsylvania, and the obligations of Alrich, O'Hara and Corson were to be met there. Validity of a contract is to be determined by the law of the place of contract. Staedler v. Staedler, 6 N.J. 380, 389 (1951). Under the circumstances of the present case Pennsylvania law clearly applies. Cf. Mill Factors Corporation v. Guardian Trust Co., 107 N.J.L. 529 (E. & A. 1931); ...


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