On appeal from Superior Court, Chancery Division, Monmouth County.
King, Deighan and Bilder. The opinion of the court was delivered by Deighan, J.A.D.
Defendants, Warner, Berman and Spitz, P.A., and Stephen Levitt appeal from that part of a judgment entered by the Chancery Division on June 20, 1983 requiring Spencer Blessing, an officer, director and shareholder of The Professional Agency, Inc. (Professional), to turn over his 50 1/2 shares of stock in the corporation to plaintiff, Lee R. Hill. Plaintiff cross-appeals from a dismissal of his complaint; (1) against Warner, Berman and Spitz, P.A. for possession of the books and records of The Professional Agency, Inc. and (2) against (a) Stephen Levitt for profits allegedly due from a subsidiary business in Middlesex County; (b) Spencer Blessing and Stephen Levitt for monies due on a promissory note in the sum of $12,000, and (c) against Blessing and Levitt for the imposition of a resulting or constructive trust on stock held by them. We affirm.
Since 1945 Hill has been the owner of a collection agency located in Newark, New Jersey. In 1962 he was the owner of three corporate entities, one of which was Professional, engaged in the collection agency business. He gave his son-in-law Spencer Blessing, Stephen Levitt and Rose Ilvento, all of whom had been associated with him for a long period of time, a 1/6 interest in each of the three corporations. In 1975, because of a serious illness and to avoid considerable inheritance and estate taxes, he transferred all of the stock in the three corporations to these same persons. While he divested himself of complete ownership of the corporations he nevertheless remained president of Professional, conducted its daily business and continued to receive the same compensation which he had been receiving for several years prior to the transfer of all of his interests.
In 1976 Hill also transferred title to property located in Asbury Park, New Jersey to Levitt and Blessing. He had previously purchased this property in his name as well as in the names of Levitt and Blessing and transferred the property to them for a tax deduction. He received a promissory note for $12,000 signed by Blessing and Levitt which he endorsed on its face as "paid in full" and also purportedly received $3,000 in cash. Actually, he never received, nor did he intend to receive, the cash payment.
In 1979 the stock of the corporations was re-distributed so that Blessing and Levitt each held 50 1/2 shares; Miss Ilvento held 66 shares and another employee, Edith Hoffman was given 33 shares. The shares of Ilvento and Hoffman were held in trust under a written agreement. All of the corporate records, including the stock certificates, were kept at the offices of the corporate accountants, defendants Warner, Berman and Spitz, P.A.
In 1979, while examining the corporate books at the accountants' office, Hill discovered a letter from Levitt to the accountants directing them not to take any action to change the structure or operations of the corporation without Levitt's consent. The letter was rather threatening and there was enclosed an agreement dated April 21, 1975 which provided:
WE THE UNDERSIGNED, PARTNERS IN MANY DIFFERENT STOCKS AND CORPORATIONS, DO HEREBY AGREE THAT WE CANNOT CHANGE OR MODIFY, IN ANY WAY, ANY OF THE CONTRACTS, PENSIONS, TRUST AGREEMENTS AND OTHER DOCUMENTS THAT WE MAY HAVE SIGNED AS STOCKHOLDERS IN OUR NUMEROUS CORPORATIONS AND BUSINESS VENTURES WITHOUT BOTH AGREEING.
WE ALSO AGREE THAT WE CANNOT SELL, PLEDGE OR DO ANYTHING WITH OUR STOCK IN ANY CORPORATION WE BOTH HAVE INTEREST IN WITHOUT BOTH PARTIES AGREEING. NOR CAN EITHER PARTY TAKE IT UPON THEMSELVES TO MAKE ANY MAJOR STOCKHOLDER, DIRECTOR OR BUSINESS DECISION WITHOUT BOTH AGREEING. THE PURPOSE OF THIS AGREEMENT IS TO AVOID CONFLICTS BETWEEN THE PARTIES ON THEIR MANY JOINT VENTURES.
The letter and agreement infuriated Hill who interpreted them to mean that Levitt did not trust him or the other two shareholders. Hill prepared an assignment dated October 12, 1979 for Blessing, Levitt, Ilvento and Hoffman to reassign all of the shares of Professional back to him. Blessing, Ilvento and Hoffman executed the assignment but Levitt refused.
Subsequently, Blessing sent an undated letter to Hill to cancel the assignment on the ground that he received no consideration for the assignment and that he did not have the right to assign the stock without the consent of Levitt. Blessing contended that he executed the assignment merely to keep peace in the family and that he was coerced into signing the assignment of his stock by Hill. Up to the time of the letter Hill made no attempt to transfer the stock to himself on the corporate books.
Hill instituted this action against the defendants Warner, Berman and Spitz, P.A. for possession of the books and records of the corporation; against Levitt and Blessing for monies due on the $12,000 promissory note; against Levitt for $7,648.79 for monies due from one of the corporate collection agencies, Middlesex-Union Collection Service, Inc.; against Blessing to require transfer of the 50 1/2 shares of stock in Professional from Blessing to him, and against Levitt and Blessing to impress a constructive trust or resulting trust on their stock.
The trial judge found that the October 12, 1979 transfer from Blessing to Hill of the 50 1/2 shares was a voluntary gift. He ruled that the Blessing and Levitt agreement did not prohibit the transfer and ordered that these shares be turned over to Hill. He also held that the 1975 transfer of the ownership in Professional by Hill to Blessing, Levitt and Ilvento did not create a trust but rather was an inter vivos gift to avoid inheritance taxes. He further held that Blessing and Levitt
were not liable on the $12,000 promissory note. The trial judge dismissed the claim concerning Middlesex-Union Collection Service, Inc., apparently on the ground that the corporation was not a party to the proceeding. Since it is not raised or briefed by Hill we will make no determination on that issue. See State v. Plainfield-Union Water Co., 75 N.J. Super. 571, 583 (App.Div.1962), aff'd 40 N.J. 280 (1963).
On this appeal defendants contend that the trial judge erred in upholding the assignment from Blessing to Hill because: (1) Blessing made a promise for which there was no consideration to transfer stock, which promise was revoked before the transfer; (2) Blessing had no authority or right to transfer his stock without the consent of Levitt, and (3) the relief granted to plaintiff was against Blessing who was not a party to the litigation.
Plaintiff urges that (1) since the corporate books and records including the certificates of stock were not in the possession of the stockholders, there is no requirement for delivery of the certificate pursuant to the Uniform Commercial Code, N.J.S.A. 12A:8-309 to effect transfer; (2) the restriction in the agreement between Blessing and Levitt on the transfer of stock is invalid and unenforceable; (3) plaintiff's initial transfer of stock in the corporation created a resulting trust or alternatively a constructive trust should be imposed on the stock, and (4) the trial judge erred in determining (a) no cause of action against defendants Warner, Berman and Spitz, P.A. for possession of the books and records of the corporation, and (b) that plaintiff was not entitled to recover on the promissory note.
The initial contention of defendants is that Spencer Blessing merely promised, without consideration, to transfer his stock in Professional, which promise was revoked before a transfer was made to plaintiff. Subsumed in this contention, and perhaps even more fundamental, is the argument that there was no delivery of the stock certificate to ...