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State v. Fidelity Union Trust Co.

Decided: December 9, 1957.

THE STATE OF NEW JERSEY BY THEODORE D. PARSONS, ATTORNEY-GENERAL OF THE STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT,
v.
FIDELITY UNION TRUST COMPANY, A BANKING CORPORATION OF THE STATE OF NEW JERSEY, DEFENDANT-APPELLANT, AND CLINTON TRUST COMPANY, A BANKING CORPORATION OF THE STATE OF NEW JERSEY (IN DISSOLUTION), DEFENDANT-APPELLANT



On appeal from Superior Court, Chancery Division.

For modification -- Chief Justice Weintraub, and Justices Heher, Burling, Jacobs, Francis and Proctor. Opposed -- None. The opinion of the court was delivered by Burling, J. Heher, J. (concurring). Jacobs, J. (concurring). Heher and Jacobs, JJ., concurring in result.

Burling

These are appeals by the defendants, Fidelity Union Trust Company and Clinton Trust Company, from the judgment of the Chancery Division of the Superior Court in favor of the State, providing for the escheat of certain personal property pursuant to the provisions of the 14 year escheat statute, N.J.S. 2 A:37-11 et seq. We certified the matter on our own motion while it was pending in the Appellate Division.

In 1934, pursuant to a plan of reorganization, the Clinton Trust Company issued to persons entitled thereto full shares and fractional scrip certificates of a newly created class of stock known as Preferred Stock "B." Dividends were subsequently declared by the Clinton Trust Company on the outstanding full shares of this Preferred Class "B" stock from February 27, 1934 through April 1, 1947 at the rate of 75 cents per share per annum. No dividends were declared on the fractional shares but a fund was established by the Clinton Trust Company to provide for the payment of such dividends at the rate of 75 cents per full share per annum, when full shares were issued against fractional shares surrendered. These scrip certificates issued by Clinton in 1934 to persons only entitled to fractional portions of full shares expressly provided that all dividends on these fractional shares would be held by the company and paid only on full shares.

There are presently outstanding stock certificates for 218 full shares of Preferred Stock "B" of Clinton. No dividends have been claimed by the holders of 111 of such shares since April 1, 1942. These unclaimed dividends amount to $541.50.

There are also outstanding approximately 3,500 fractional certificates of Preferred Stock "B" which aggregate approximately 750 full shares. Prior to January 2, 1948 no claim could have been made by the holders of any of these fractional certificates for dividends unless and until they had acquired a sufficient number to constitute a full share or

shares. These rights changed on that date due to the bulk assets purchase of the Clinton Trust Company by Fidelity Union Trust Company.

Late in 1947 Fidelity Union and Clinton entered into an agreement whereby Fidelity Union acquired the assets and assumed the liabilities of Clinton and specifically undertook to pay to each holder of a share of Preferred Stock "B" the sum of $50 per share and to pay to the holders of fractional shares a proportionate part of $50 per share and in addition whatever dividends had accrued on the fractional shares from February 27, 1934 to January 2, 1948.

This action was commenced on August 15, 1950 against the Fidelity Union Trust Company alone seeking to escheat certain personal property held in the custody of Fidelity Union which had been unclaimed for 14 years pursuant to the 14-year escheat statute, N.J.S. 2 A:37-11 to 37-28, supra. No particular reference was made to the Clinton shares or the dividends thereon. As a result of Fidelity Union's answer to that complaint and further proceedings in the matter, it became apparent that the personal property here in issue primarily involved the rights and obligations between the Clinton Trust Company and the holders of its Preferred Stock "B" and only secondarily involved the Fidelity Union by reason of its bulk assets purchase. In view of the issues, it was thought desirable that Clinton be made a party to the litigation. On March 19, 1956, prior to the trial of the issues raised, an application was made by the State for leave to file an amended complaint joining the Clinton Trust Company as a party defendant in the action. This application was granted and an amended complaint was filed by the State on April 11, 1956, naming the Clinton Trust Company as an additional defendant in this action. This amended complaint is substantially a duplicate of the original complaint filed against the Fidelity Union Trust Company except that the allegations are also directed to the Clinton Trust Company.

Fidelity Union filed an answer to this amended complaint as did Clinton and both continued to participate in the litigation as parties and still do.

Subsequently, Fidelity Union moved to vacate that order granting permission to file an amended complaint and either to dismiss the action against Clinton or to sever that action from the action against Fidelity Union. On this question the trial court held that the joinder was not invalid under N.J.S. 2 A:37-24, which provides:

"It shall be lawful to join more than 1 escheatable property or estate and more than 1 defendant having possession thereof in 1 action where it appears that the amount of escheatable property in each case does not exceed $1,000."

The trial court also held that the full shares of Preferred Stock "B" of Clinton upon which dividends had been declared prior to April 2, 1942, but not claimed by the holders since that date, and those unclaimed dividends to April 2, 1942 that were carried on Clinton's books as an obligation on the date of the merger, were escheatable to the State. It further held that the choses in action of the shareholders of outstanding full and fractional shares of Preferred Stock "B" to obtain from Fidelity Union $50 per share or a pro rata portion of $50 per share plus the accrued dividends were also escheatable to the State. Here the court denied the contention of Fidelity Union that claims on these choses against it were contractual and barred by the statute of limitations on the ground that the funds representing these shares were a trust fund unaffected by any limitation. The court also held that the outstanding full shares on which dividends had been declared and paid subsequent to April 2, 1942 and the dividends not paid thereon were not subject to escheat because the 14-year period had not expired at the time of the institution of the action against Clinton.

The court's judgment, entered December 13, 1956, provided that upon the completion of the proceedings for escheat the Fidelity Union Trust Company should pay to the State:

"(a) For 111 full shares $5,550.00

(b) Dividend accruing from 2/28/47 69.93

(c) For unclaimed dividend checks 541.50

(d) For fractional shares aggregating approximately 750

shares 37,468.40

(e) For dividends accrued on fractional shares to January

1, 1948 7,782.96

$51,412.79

(f) Amount due to holders of 2503 fractional shares

having a value of less than $1.00, ...


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