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State v. Sperry & Hutchinson Co.

Decided: December 3, 1956.


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


The Chancery Division dismissed the State's complaint under the Custodial Escheat Act in response to the defendant's motion for judgment on the pleadings. Thereafter the State appealed to the Appellate Division and, while the appeal was pending there, we certified it on our own motion.

The State's complaint alleged that the defendant had custody, inter alia, of moneys payable to various persons by way of the right of redemption on trading stamps issued by the defendant and that such moneys had remained unclaimed for more than five years by owners whose whereabouts were unknown. The defendant's answer set forth 13 separate defenses which raised serious questions with respect to the provability and enforceability of the State's claim. However, the single issue (embraced within the thirteenth separate defense) passed upon by the Chancery Division and the only one now presented by the parties for this court's consideration, is whether the Custodial Escheat Act has any application whatever to cash obligations other than for dividends, interest and wages. The defendant's contention is that the act, as applied to a domestic corporation such as the defendant, covers "only moneys payable as dividends upon its capital stock, interest payable upon its formal instruments evidencing indebtedness and moneys payable as wages." On the other hand the State's contention is that the act covers the defendant's "cash obligations generally" and that the cause should be permitted to proceed to trial on the various issues raised in the pleadings. The Chancery Division accepted the defendant's contention and ordered that the complaint be dismissed and that judgment on the pleadings be entered in its favor. In the course of its oral opinion the Chancery Division expressed the view that escheat actions "are in the nature of a penalty in the sense that property rights are being

taken away from citizens by the absolute escheat or by the custody" and that it could not be held that "the Legislature meant the liberal interpretation of the word cash in Section 29 when it defines the provisions of the other subject matters in Section 30." The Chancery Division's references to sections 29 and 30 were to N.J.S. 2 A:37-29 and N.J.S. 2 A:37-30 which originated in L. 1951, c. 304, par. 5. We may freely refer to the history of this legislation for whatever aid it may furnish in ascertaining its true purpose and meaning. Lloyd v. Vermeulen, 22 N.J. 200, 206 (1956); Deaney v. Linen Thread Co., 19 N.J. 578, 583 (1955); Abbotts Dairies v. Armstrong, 14 N.J. 319, 323 (1954); State v. McCall, 14 N.J. 538, 545 (1954). See Caputo v. Best Foods, 17 N.J. 259, 264 (1955), where Justice Heher aptly noted that "the reason of the law, i.e., the motive which led to the making of it, is one of the most certain means of establishing the true sense of the words."

The New Jersey Legislature first asserted its sovereign power to escheat personal property generally by its passage of L. 1946, c. 155. See State by Van Riper v. American Sugar Refining Co., 20 N.J. 286 (1956). That act provides that whenever personal property within the State remains unclaimed for the period of 14 successive years it shall escheat to the State. Its definitions are comprehensive; thus, personal property includes moneys, negotiable instruments, choses in action, etc., and every other kind of tangible or intangible property; and unless a different meaning clearly appears from the context the word "owner" or "person" refers to corporations, associations, etc., as well as individuals. See N.J.S. 2 A:37-11; State, by Parsons, v. National Newark and Essex Banking Co., 31 N.J. Super. 246, 251 (Ch. Div. 1954). In State, by Parsons, v. Standard Oil Co., 5 N.J. 281 (1950), affirmed sub nom. Standard Oil Co. v. State of New Jersey, 341 U.S. 428, 71 S. Ct. 822, 95 L. Ed. 1078 (1951), this court held that the defendant corporation could successfully assert the six-year statute of limitations as a defense to the State's claim for

escheat of wages of former employees, interest (evidenced by bond coupons) and other miscellaneous cash obligations (evidenced by unpresented commercial bank checks) which had remained unclaimed for 14 years by owners whose whereabouts were unknown. Under this holding a substantial amount of such admittedly abandoned personal property might escape escheat with consequent harm to the public good; shortly after it was rendered the Legislature passed L. 1951, c. 304, which was primarily designed to enable the State to take custody of (and thereafter escheat) such personal property when it had remained unclaimed for five successive years.

In State, by Parsons, v. United States Steel Corp., 22 N.J. 341, 353 (1956), this court recently pointed out that "the lawmakers intended to provide a means whereby the State might assert its right in timely fashion to overcome the obstacle imposed by limitations." And in the same case it dispelled the notion that the 1951 enactment was to be construed narrowly; in the course of his opinion for the court Justice Burling said at p. 355:

"Nor do we think that the statute is to be strictly construed so far as stakeholders are concerned. Defendant calls attention to State v. United States Steel Corporation, 12 N.J. 38, 47 (1953), where it was said:

'It is a well-settled principle that escheat and forfeiture are not favored by the law, and any doubt as to whether property is subject to escheat is resolved against the State.'

The statement was made in response to the State's argument that dividends declared by the corporation less than 14 years prior to suit should be subject to escheat under R.S. 2:53-17 (now N.J.S. 2 A:37-13) providing for escheat of personal property after expiration of the 14 year period. We held that dividends which had not attained the 14 year vintage were not subject to escheat until that time, but the declaration of strict interpretation was expressive of an attitude toward the unknown owner rather than the corporate debtor."

We reaffirm the foregoing approach and reject the Chancery Division's view that the Custodial Escheat Act (L. 1951, c. 304 -- now N.J.S. 2 A:37-29; N.J.S. 2 A:37-30) is, ...

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