Opinion ID: 1921694
Heading Depth: 1
Heading Rank: 1

Heading: permanent dividend order.

Text: To the Treasurer of the UNITED STATES STEEL CORPORATION, 71 Broadway, New York City. Please pay, by cheque on New York, to the order of ____ by mail to the following post office address ____ all dividends due, and which may hereafter be due, on all shares of the Capital Stock, Preferred and Common, of the United States Steel Corporation, now standing, and which may hereafter stand of record in my name on the books of the said Corporation, until this order shall be revoked in writing by me, or, in case of my death, by my legal representatives. The trial court found as a fact that there is nothing in the dividend orders or forms of notice under consideration which could be construed as a positive agreement, `or for that matter any agreement that the check would be received as payment. The common law rule is that a check or promissory note, either of the debtor or a third person, received for a debt, is not payment if not itself paid, except in cases where it is positively agreed to be received as payment. Freeholders of Middlesex v. Thomas, 20 N.J. Eq. 39 ( Ch. 1869); Weisberger v. J.G. Corporation, 107 N.J. Eq. 61 ( E. & A. 1930); Condenser Service, etc., Co. v. Mycalex Corporation of America, 7 N.J. Super. 427 ( Law Div. 1950); 70 C.J.S., Payment, § 24, p. 233. The construction urged by the appellant would do violence to the intention of the parties. Obviously, the purpose of the inquiry as to the stockholders' addresses and the authorization to forward the checks to them at the given addresses was to insure delivery of the checks and to save the stockholders and the company the inconvenience of personal calls for the payment of the dividend. Certainly there was no agreement for the substitution of a new right of action either in debt or on the check in place of the stockholders' rights as cestuis que trust in the funds set aside from the general mass of corporation funds for the payment of dividends. State v. Standard Oil Co., supra, at p. 302. The rule of law was correctly applied in that decision and the fact that it had not been so declared by the courts at the time these dividend orders were mailed has no effect on its verity, efficacy or existence. McDermott v. Paterson, 122 N.J.L. 81, at p. 86 ( E. & A. 1939). No agreements for so substantial a change in the rights and equities of the parties can be fairly implied from the circumstances here presented. It is certain that such change was never within the contemplation of the parties; certainly not within the contemplation of the stockholders who undoubtedly considered the inquiry as designed to insure the delivery of the checks, not to alter the nature of the right of action. Indeed, no stockholders gave any thought to the possibility of the check being dishonored. Nothing short of an express agreement to accept the new obligation for the old would alter the character of the relationship. There is a trusteeship as to dividends which continued until the dividend is actually paid, unless the parties by agreement waive that relation in favor of another. The State in its cross-appeal argues that the judgment of escheat entered below should include the unclaimed dividends, not only those declared 14 years or more prior to the institution of this action but also those declared within the 14-year period. N.J.S.A. 2:53-17 provides: Whenever the owner, beneficial owner, or person entitled to any personal property within this State, has been or shall be and remain unknown for the period of fourteen successive years, or whenever the whereabouts of such owner, beneficial owner or person, has been or shall be and remain unknown for the period of fourteen successive years, or whenever any personal property wherever situate has been or shall be and remain unclaimed for the period of fourteen successive years, then, in any such event, such personal property shall escheat to the State. The term personal property as defined in the act, N.J.S.A. 2:53-15, includes:    moneys, negotiable instruments, choses in action, interest, debts or demands due to the escheated estate, stocks, bonds, deposits, machinery, farm crops, live stock, fixtures, and every other kind of tangible or intangible property and the accretions thereon, up until the time of the filing of the bill of escheat, but shall not mean and include real property or property in the custody of any court in this State, nor any personal property covered by chapter one hundred ninety-nine of the laws of one thousand nine hundred and forty-five. (Italics supplied.) We find no merit in the State's contention that the escheat of stock includes the unclaimed dividends within the 14-year period. The statute works a forfeiture and therefore must be strictly construed. McNeely v. Woodruff, 13 N.J.L. 352, 357 ( Sup. Ct. 1833); 3 Sutherland, Construction (3 d ed. ), secs. 5603 and 5604. 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. 19 Am. Jur., sec. 14, p. 387. There is nothing in the theory of definitive right to include, as accretions of the stock, dividends declared within the 14-year period and unpaid for want of knowledge of the stockholders' whereabouts. Dividends on stock constitute a portion of the accumulated surplus or profits of the enterprise allotted to the stockholders according to their several interests upon declaration of the dividend which becomes separate and distinct from the stock and ordinarily would not pass by the transfer of the stock by the stockholder unless the dividends were included in the contract. This is so even as to dividends declared before the transfer but not payable until after the transfer. Martindell v. Fiduciary Counsel, Inc., 133 N.J. Eq. 408, at page 415 ( E. & A. 1943). The Legislature could have provided for the escheat of dividends declared within 14 years, and the question is whether the Legislature intended to escheat such property. The legislative policy seems to be that before personal property can be escheated the owner or his whereabouts must be unknown for a period of 14 years, N.J.S.A. 2:53-17, and in the definition of personal property found in N.J.S.A. 2:53-15 the statute, inter alia, defines personal property to mean stocks, bonds    and every other kind of tangible or intangible property and the accretions thereon. The effect is to define and distinguish accretions as personal property separate and distinct from the property upon which it is an accretion. Thus, by the express terms of the act the dividends declared within the prescribed period of 14 years are not escheatable because the dividends declared within the 14-year period cannot be said to have remained unclaimed for that period. When the judgment below was entered decision was reserved on appellant's application for a counsel fee until this court should pass upon the question in a cause pending before us, and jurisdiction was retained for this purpose in the event that a counsel fee should be sustained. In State v. Otis Elevator Co., 12 N.J. 1, we determined that a counsel fee can be allowed in an action in escheat in a proper case, but where, as here, the defendant actively opposed the escheat, claiming title in itself, no counsel fee should be awarded. The judgment below is affirmed. HEHER, J. (concurring). I join in the affirmance of the judgment, and generally for the reasons expressed in the opinion of Mr. Justice Oliphant. As to the subject matter of the State's cross-appeal, the unclaimed dividends declared within 14 years prior to the filing of the complaint herein, the statutory principle invoked raises a rebuttable presumption of abandonment where the subject personal property has been or shall be and remain unclaimed for the period of fourteen successive years ( N.J.S.A. 2:53-17), and where the proceeding is grounded in this principle, unclaimed dividends declared within that period are not escheatable. But, for the reasons stated in my dissenting opinion in State v. Otis Elevator Co., 12 N.J. 1, I would not allow a counsel fee to the appellant custodian. WILLIAM J. BRENNAN, JR., J. (dissenting in part). I dissent from the affirmance of the judgment as it relates to the State's cross-appeal. I think that the escheat of the stock should include therewith the dividends thereon declared within 14 years. Dividends on stock, whether declared before or within the 14-year period, are accretions in statutory contemplation. The majority, conceding this, and also conceding that The Legislature could have provided for the escheat of dividends declared within 14 years, nevertheless holds that N.J.S.A. 2:35-15 is to be read as constituting accretions as an item in the catalog of escheatable items separate and distinct from the property upon which it is an `accretion,' and that the condition to an escheat that the personal property shall be and remain unclaimed for the period of fourteen successive years is therefore applicable to an accretion. I cannot agree. The majority view is tenable only if we are to admit the existence of a redundancy in the statute. The clause immediately preceding the reference to accretions is and every other kind of tangible or intangible property, which, accepting the majority interpretation, is embracive of accretions in existence over 14 years and would make wholly empty of significance the added and accretions thereon. We should strive wherever possible to give substance and meaning to every word in a statute. That can readily be done here by reading the statute as it is clear to me the Legislature intended it to be read, that is, as saying that stocks, bonds, deposits, machinery, farm crops, livestock, fixtures and every other kind of tangible or intangible property shall be escheatable if unclaimed for the period of 14 successive years, in which case, not the property alone, but as well the accretions thereon in existence at the time of the filing of the bill of escheat, and without regard to the time when such accretions came into existence, are to be escheated with and as part of the property. The impractical consequences which result under the majority's interpretation are illustrated by what is happening in this case. The stock goes over to the State under the judgment. Dividends declared as long ago as 1901 were unclaimed upon some of it. But only the dividends declared to 1934 escheat under the judgment. Those declared and unclaimed from 1934 to the time of the filing of the bill of escheat in 1948 remain with the custodian. The State and the parties must be put to the expense of further litigation (the State must decide whether to bring one action after the 14 years have elapsed as to the dividend last declared, or to bring several as the time runs as to one or some of them), and to what purpose? None suggests itself. In the absence of a very plainly indicated legislative intent to bring about this undesirable result we should not interpret the statute to produce it. I am convinced that not only is such intention not to be found in the language of the statute but that on the contrary the Legislature has plainly evinced its desire to avoid it.