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State v. Plainfield-Union Water Co.

Decided: July 19, 1962.

STATE OF NEW JERSEY, BY DAVID D. FURMAN, ATTORNEY GENERAL, PLAINTIFF-APPELLANT AND CROSS-RESPONDENT,
v.
PLAINFIELD-UNION WATER COMPANY, A NEW JERSEY CORPORATION, DEFENDANT-RESPONDENT AND CROSS-APPELLANT. STATE OF NEW JERSEY, BY DAVID D. FURMAN, ATTORNEY GENERAL, PLAINTIFF-APPELLANT AND CROSS-RESPONDENT, V. ELIZABETHTOWN WATER CO. CONSOLIDATED, A NEW JERSEY CORPORATION, DEFENDANT-RESPONDENT AND CROSS-APPELLANT



Conford, Gaulkin and Kilkenny. The opinion of the court was delivered by Kilkenny, J.A.D.

Kilkenny

The State of New Jersey sued the defendant water companies (hereinafter distinguished as "Plainfield-Union" and "Elizabethtown" -- though consolidated since June 30, 1961) to obtain custody of certain moneys in their possession and unclaimed for more than five years by the persons entitled thereto, pursuant to the provisions of the Custodial Escheat Act, N.J.S. 2A:37-29 et seq. , effective July 13, 1951. Suit in each instance was in the Superior Court, Chancery Division. The Plainfield-Union complaint was filed on April 10, 1959 and the complaint against Elizabethtown was filed on March 26, 1957.

The moneys involved in the Plainfield-Union case are (1) wage claims; (2) deposits for the security of the payment of bills; and (3) refunds due under certain water main extension agreements. In the Elizabethtown action, besides the aforesaid three items the State also sought custody of (4) dividends declared but unpaid; (5) checks issued but not presented for payment; and (6) a bond coupon #87 payable to bearer in the amount of $25 as of May 1927.

In the suit against Plainfield-Union, the trial court rendered a judgment giving custody to the State of (1) wage claims aggregating $129.47; (2) deposits for the security of the payment of bills in the amount of $474.88, including 4% interest; and (3) refunds due under certain main extension agreements in the amount of $24,952.91, limiting the State's right of custody in each instance to amounts which became due and payable between July 13, 1945 (six years prior to the effective date of the Custodial Escheat Act, supra) and April 9, 1954 (five years prior to the institution of the action). It denied the State custody of any amounts which became due and payable before July 13, 1945 on the ground that they were debts from the company to the depositors barred by the statute of limitations at the time of the adoption of the Custodial Escheat Act and thus beyond the purview of that act. State by Parsons v. United

States Steel Corp. , 22 N.J. 341 (1956). Cf. State by Parsons v. Standard Oil Co. , 5 N.J. 281 (1950).

The trial court also held that as between the depositors and the utility, after the company had returned the amount called for under certain formulae in the extension agreements, the utility was under no further obligation to the depositors even though the amount returned was not equal to the full amount deposited. It therefore held that there was no right of escheat to such sums even where the statute of limitations had not run on the claim.

The judgment in the Elizabethtown case awarded custody to the State of (a) dividends aggregating $6471.50 which became due and payable prior to March 18, 1952 as to which there is no dispute; and the following items which became due and payable between July 13, 1945 (six years before the effective date of the Custodial Escheat Act) and March 18, 1952 (five years before institution of this suit), to wit., (b) deposits for the security of the payment of bills in the amount of $2479.11, including 4% interest; (c) wage claims in the amount of $56.33; (d) checks not presented for payment in the amount of $319.10; and (e) refunds due under certain main extension agreements in the amount of $4922.14. It also gave the State custody of the $25 due on the 1927 bond coupon, concluding that this item had not been commingled with the company's funds, had been deposited with the National State Bank of Elizabeth for safekeeping for the benefit of the bondholder and was, therefore, a trust against which the statute of limitations would not run.

As in Plainfield-Union, the trial court denied the State custody of any sums payable or refundable by Elizabethtown prior to July 13, 1945 because of the statute of limitations, holding that the relationship of the company to the obligee was that of debtor and creditor and claims dating beyond that date not within the purview of the act. It also held that even where the statute of limitations had not run on the claim there was no right of escheat except as to those

sums returnable under the formulae in the extension agreements, even though such sums were not equal to the full amount deposited.

In both cases the trial courts held that notwithstanding the statute of limitations, custody of deposits refundable under the main extension agreements since July 13, 1945 should be awarded to the State because the water companies admittedly never reported these escheatable funds to the State as required by N.J.S. 2A:37-42 and were thereby estopped from relying upon the statute of limitations for the six-year period prior to July 13, 1951, the effective date of the Custodial Escheat Act, N.J.S. 2A:37-29 et seq. State by Parsons v. United States Steel Corp., supra.

The State has appealed only from those portions of the judgments which denied it custody of all unrefunded balances of deposits made under the main extension agreements. It argues that the depositors under these agreements were entitled to a return of their deposits in full and were not limited to a right to such amounts as were specified by the formulae in the agreements; that these deposits were trust funds, and not mere debts; and that, as such, the statute of limitations does not apply thereto.

The defendant water companies cross-appealed from those parts of the judgments which gave the State custody of any sums due and payable since July 13, 1945 though more than six years prior to the institution of the respective suits, contending that such sums are debts barred by the six-year statute of limitations, N.J.S. 2A:14-1, ...


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