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Cronheim v. Tennant

Decided: June 30, 1959.

DAVID CRONHEIM AND RUTH SAMPSON, INDIVIDUALLY, AND RUTH SAMPSON AS REPRESENTATIVE OF THE HOLDERS OF VOTING TRUST CERTIFICATES FOR CLASS "A" STOCK, AND HOLDERS OF CLASS "B" STOCK OF THE TWENTY-SIX JOURNAL SQUARE CORPORATION IN DISSOLUTION, WHO DID NOT RECEIVE THEIR FIRST, SECOND, OR THIRD LIQUIDATING DIVIDENDS, PLAINTIFFS-APPELLANTS,
v.
GEORGE G. TENNANT, JR., AND JOHN A. HARTPENCE, DEFENDANTS-RESPONDENTS



For affirmance -- Chief Justice Weintraub, and Justices Burling, Jacobs, Francis, Proctor, Hall and Schettino. For reversal -- None. The opinion of the court was delivered by Schettino, J.

Schettino

Appeal is taken from a Superior Court, Chancery Division, judgment, granting defendants' motions for a change of venue and to strike the complaint on the ground that it fails to state a claim for relief and to dismiss the action with prejudice. Plaintiffs appealed to the Appellate Division and we certified under R.R. 1:10-1(a).

As we view the present litigation, plaintiffs are attempting to nullify by a collateral attack a final judgment and a supplemental order entered in a previous action entitled Tennant v. Wolf, Superior Court, Chancery Division, Bergen County, Docket No. C-1956-49 (hereafter referred to as the Tennant suit). The judgment is dated January 12, 1951 and the supplemental order is dated January 25, 1952. By the terms of the judgment the records of the corporation involved, with certain exceptions therein noted, were directed to be destroyed and all claims, except those specifically referred to, were forever barred. The impact of the Tennant case judgment and order produced this present action. In the

present suit, the trial court considered the record in the Tennant suit.

A factual history of the Tennant suit is necessary for the present determinations. The Twenty-six Journal Square Corporation in dissolution (hereafter referred to as "Journal Square") was a successor corporation to Union Labor Investment Corporation, a bankrupt. Journal Square was incorporated about March 15, 1937, for the purpose of taking title to and holding the bankrupt's assets which included a business property and office building. By a federal court order in reorganization proceedings, one of the present defendants, Tennant, and two others were appointed voting trustees to hold all of the Class "A" or voting stock of Journal Square. These three and two others served as officers and directors of Journal Square from March 15, 1937 up to December 31, 1946.

On December 31, 1946, in accordance with a more than two-thirds vote of all classes of stockholders and with the unanimous vote of the five directors and pursuant to R.S. 14:13-1, a certificate of voluntary dissolution was filed with the Secretary of State of New Jersey on behalf of Journal Square. Thereafter, the same five men served as trustees in dissolution. After all creditors were paid, the trustees declared and distributed three liquidating dividends on March 25, 1947, February 16, 1948 and January 25, 1950. The total sum of the three dividends, at $15.05 per share, amounted to more than $395,000. Plaintiff, Ruth Sampson, admittedly received her first two dividend checks but did not receive her third dividend of $1,994.38.

On June 7, 1950 defendant Tennant, through his attorney, defendant Hartpence, filed the Tennant suit seeking to compel his co-trustees to submit an accounting to the court. After due notice to all parties in interest, an order was entered, directing the trustees to prepare and file an account. The account covered the period from December 19, 1946 through August 31, 1950, and as of October 2, 1950 showed a balance in cash amounting to $1,398.48, as well as deposits

of $10,295.35 representing the total of uncashed dividend checks which had been mailed to stockholders at their last known address and returned to Journal Square as undeliverable.

On October 20, 1950 an order was issued and made returnable on January 12, 1951, directing all stockholders and other parties who might have an interest to show cause why the account should not be approved, why accounting fees should not be paid, why the trustees should not be authorized to abandon all interest in a certain judgment claim (not here relevant), why all Journal Square's records except shareholder lists should not be ordered destroyed, and why the trustees should not be discharged after payment and disbursement of fees and allowances. The order specifically stated that payments of compensation and fees were to be made "so far as there may be no other funds available, from the amounts now on deposit in the several liquidating dividend accounts presently maintained." On November 8, 1950 a copy of the order was mailed to each of the numerous stockholders and voting trust certificate holders. Some of the notices were returned because the addressees could not be located by the post office. Additionally, as required by the order, the notice was published in a Jersey City newspaper once a month during four successive months prior to January 12, 1951.

On the return day, January 12, 1951, an order was signed allowing compensation of $750 to an accounting firm; $3,500 to defendant Tennant, for services as statutory trustee; and $2,500 to defendant Hartpence, for services as the statutory trustee's attorney. All compensation was directed to be paid at first from the balance of cash on hand, and then from the funds on deposit in the unclaimed liquidating dividend accounts. The order also provided that the balance remaining after such payments was to be turned ...


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