Court Opinion

ID: 9696012
Source: CourtListenerOpinion
Date Created: 2023-08-25 18:33:46.817271+00
Date Added: 2024-06-11T18:20:17.966477
License: Public Domain

Jacobs, J. (dissenting).
The Escheat Act of 1946 appropriates to the State, for the common good, personal property which has been abandoned by its rightful owner. Its validity is no longer questioned. State v. Standard Oil Co., 5 N. J. 281 (1950), affirmed 341 U. S. 428, 71 S. Ct. 822, 95 L. Ed. 1078 (1951). As I read its terms, it embodies a positive legislative policy against dissipation of the escheated property through payment of counsel fees and costs to its custodian. This policy has been consistently honored by our trial courts and in none of the many escheat judgments which the State has obtained since 1946 was such allowance made. The result of the majority’s decision is to strike down this policy and adjudge that the trial judge who honored it had abused his discretion; since I find no persuasive reason for this action, I respectfully dissent.
I.
When the Escheat Act was enacted the Legislature was fully aware of the problem of costs and counsel fees. Thus, it expressly provided that from the escheated property the State Treasurer shall pay 5% to the escheator and the fees and expenses, to be fixed by the court, of the attorney who prosecuted the action for the State. N. J. S. A. 2:53-23; N. J. S. 2A :37-21. It deliberately omitted any provision for *23payment of fees and expenses to the defendant custodian but did provide that costs shall not be imposed against the defendant except where it has resisted the proceeding “without reasonable cause or justification.” N. J. S. A. 2:53-25; N. J. S. 2A :37-23. The overriding legislative purpose seems fairly evident; insofar as practicable, the abandoned property should be available to the State without diminution, thus lessening the burden of general taxation on its people; while the escheator and the attorney for the State may be entitled to be paid out of the property they have recovered for the State, the defendant custodian is not in a similar position and should not be permitted to expend it, in whole or in part, through charges for counsel fees and costs. In context, the provision directing the State Treasurer to pay the escheator and “such other fees and costs as the judgment shall direct” simply refers to permissible fees and costs within the act, such as those expressly allowable to the attorney for the State. N. J. S. A. 2:53-23; N. J. S. 2A:37-21. See State v. Otis Elevator Co., 19 N. J. Super. 107, 110 (Ch. Div. 1952).
The Administrative Director reports that from 1946 to Eebruary 11, 1953, 559 escheat proceedings were instituted; 286 of these resulted in final judgments for the State, 197 were still pending and 76 were dismissed; and in no instance did the trial court ever allow costs or counsel fee to the defendant custodian. This practical construction is meaningful (Cino v. Driscoll, 130 N. J. L. 535, 540 (Sup. Ct. 1943)); and it is not without significance that although escheat acts are now common throughout the states they generally omit provision for the allowance of costs or counsel fee to the custodian, and no decision by any court in Yew Jersey or elsewhere, sustaining such an allowance, is cited by the majority. To the contrary, see State v. First Wisconsin National Bank of Milwaukee, 250 Wis. 107, 26 N. W. 2d 161 (1947), where the Wisconsin Supreme Court found no difficulty in setting aside a trial court’s allowance of counsel fee to a defendant bank in a proceeding to escheat abandoned bank deposits.
*24II.
The majority opinion takes the position that the allowance of counsel fees and disbursements is entirely a matter of practice and is exclusively governed by Court Rule 3:54r-7. It relies upon decisions which related to controversies between private litigants and involved no escheat or comparable statutory policy. In the instant matter, we are not dealing with the allowance of counsel fees and costs in ordinary litigation between private parties. Cf. Jersey City v. Kelly, 134 N. J. L. 340, 345 (E. & A. 1946). We are dealing with abandoned property which, for want of a known owner, has passed to the State for the public good. The State has set up a complete method for its recovery and has declared all of the specific rights with respect thereto. It has directed that out of the property a certain amount shall be paid to the escheator, an additional amount shall be paid to the attorney for the State, and the balance shall be paid “into the general funds of the state.” Whether any others shall share in the State’s property would hardly be a simple matter of' practice as distinguished from substantive right; at least it would present mixed elements of substantive right and procedure in a field which is- of primary and special legislative concern. See Cohen v. Beneficial Industrial Loan Corp., 337 U. S. 541, 559, 69 S. Ct. 1221, 1231, 93 L. Ed. 1538, 1543 (1949),-where Justice Rutledge rightly pointed out that “in many situations procedure and substance are so interwoven that rational separation becomes well-nigh impossible.”
The doctrine of judicial supremacy in rule-making, announced in Winberry v. Salisbury, 5 N. J. 240, 255 (1950), has received considerable attention in academic circles. Dean Pound recently came to its defense (Pound, Procedure Under Rules of Court in New Jersey, 66 Harv. L. Rev. 38 (1952)), whereas others have questioned its constitutional basis and social implications. See Kaplan and Greene, The Legislature’s Relation to Judicial Rule-Making; An Appraisal of Winberry v. Salisbury, 65 Harv. L. Rev. 234 (1951); Heckel, Constitutional Law, 6 Rutgers L. Rev. 27, *2529 (1951). In any event, it represented an important departure from traditional constitutional concepts, both federal and state, and its ultimate vindication may well rest upon the measure of self-restraint in its application. Cf. Stone, J., in United States v. Butler, 297 U. S. 1, 78, 56 S. Ct. 312, 80 L. Ed. 477, 495 (1936).
In Como Farms, Inc. v. Foran, 6 N. J. Super. 306, 317 (App. Div. 1950) Judges Bigelow and Donges joined me in the suggestion that the doctrine of judicial supremacy in rule-making ought, as a matter of comity towards the Legislature, be accompanied by fair, recognition of important statutory policies in fields which are of special legislative concern. In taking a contrary approach the majority reject basic philosophies which have guided able judges in the past in their statesmanlike development of a strong and independent, though coordinate, judicial branch of government. One need but read the “political questions” cases including the opinions of Chief Justice Taney in Luther v. Borden, 7 How. (U. S.) 1, 12 L. Ed. 581 (1849), Chief Justice White in Pacific States Telephone and Telegraph Co. v. Oregon, 223 U. S. 118, 32 S. Ct. 224, 56 L. Ed. 377 (1912), and Chief Justice Hughes in Coleman v. Miller, 307 U. S. 433, 59 S. Ct. 972, 83 L. Ed. 1385 (1939), the “foreign relations” cases including the opinion of Justice Clarke in Oetjen v. Central Leather Co., 246 U. S. 297, 38 S. Ct. 309, 62 L. Ed. 726 (1918), and the “judicial deference” eases listed in the separate opinion of Justice Brandeis in Ashwander v. Tennessee Valley Authority, 297 U. S. 288, 341, 56 S. Ct. 466, 80 L. Ed. 688, 707 (1936) to recognize how effectively the United States Supreme Court has availed itself of the- instrument of selfdimitation in appropriate circumstances. See 2 Warren, The Supreme Court in United States History (1928), 193, 722; Finkelstein, Judicial Self-Limitation, 37 Harv. L. Rev. 338 (1924); Weston, Political Questions, 38 Harv. L. Rev. 296 (1925); Einkelstein, Further Rotes on Judicial Self-Limitation, 39 Harv. L. Rev. 221 (1925). Compare the famous dissenting opinion of Justice Stone (joined by Justices Brandéis and Cardozo) in United States *26v. Butter, supra, where he poignantly noted that while the other branches of government are always subject to judicial restraint the only check on the court’s assertion and exercise of power is its “own sense of self-restraint.”
In our State we find direct precedent for the view advanced in the Como Farms case. Thus, although our former Supreme Court admittedly had paramount rule-making power in its constitutional prerogative writ jurisdiction, it wisely gave recognition to reasonable legislative policies bearing on the exercise of that jurisdiction. See Owen v. Atlantic City, 125 N. J. L. 145, 147 (Sup. Ct. 1940); Traphagen v. Township of West Hoboken, 39 N. J. L. 232, 237 (Sup. Ct. 1877); Case, J., in Winberry v. Salisbury, supra, at p. 261. The majority refer to recent legislative revisions which have eliminated statutory provisions which were strictly procedural; it is noteworthy, however, that in these revisions the Legislature did not alter its policy relating to costs and counsel fees in escheat matters but, on the contrary, expressly reasserted it. See N. J. S. 24:37-21; N. J. S. 24:37-23, effective January 1, 1952. In view of the particular issue before us it may, at this juncture, be well to remind ourselves that in our democracy the executive and legislative branches of government are the ultimate guardians of the “welfare of the people in quite as great a degree as the courts.” Holmes, J., in Missouri, Kansas & Texas Railway Co. of Texas v. May, 194 U. S. 267, 270, 24 S. Ct. 638, 639, 48 L. Ed. 971, 973 (1904).
III.
When the new rule relating to counsel fees was under consideration in 1948 a choice of philosophies was presented to the court. Some advocated that counsel fees should be liberally available to successful litigants, particularly where the claim or defense of the losing litigant had no reasonable basis. See Goodhart, Costs, 38 Yale L. J. 849, 872 (1929); McCormick, Counsel Fees and Other Expenses, 15 Minn. L. Rev. 619, 625 (1931); 53 Col. L. Rev. 78, 94 (1953). But cf. Satterthwaite, Increasing Costs to be Paid by Losing *27Party, 46 N. J. L. J. 133 (1923). Others advocated that rigid restrictions be placed on the entire practice of judicial allowance of counsel fees, and pointed to the serious abuses and adverse public effects which had accompanied the practice in the Court of Chancery and elsewhere. This latter view was adopted by the court in Buie 3 :54^7 which prohibits the judicial allowance of counsel fees except in a few specially designated situations. See Janovsky v. American Motorists Insurance Co., 11 N. J. 1 (1952). When the Legislature sought to enlarge these situations it was met with a veto bearing the comment that it “would revive an unhappy practice that has been generally repudiated.” See Veto Messages of Hon. Alfred E. Driscoll, Governor of New Jersey (1950), p. 76:
Rule 3:54-7 permits counsel fees in matrimonial, foreclosure and probate actions and “out of a fund in court.” We are not concerned with the reasons which underlay the exceptions in favor of matrimonial, foreclosure and probate actions; we are, however, concerned here with the reason for the fund in court exception and its proper scope. In Katz v. Farber, 4 N. J. 333 (1950), Justice Case dealt with the subject at length but none of his illustrative instances bears on escheat proceedings. Obviously the fortuity that the litigation concerns and may result in the transfer of specific property and incidental accounting is no basis for departing from the principle that each litigant shall bear his own counsel fee; accordingly, it is clear that in specific performance, replevin, rescission and comparable adverse proceedings no allowance may generally be made under Buie 3 :54r-7. See Janovsky v. American Motorists Insurance Co., supra; Driscoll v. Burlington-Bristol Bridge Co., 8 N.J. 433, 495 (1952). Where, however, a party creates or preserves a fund not solely for the benefit of himself but for the benefit of a class whom he represents, it is only just that the others bear their fair share of the cost of the litigation. In the language of the leading case of Trustees v. Greenough, 105 U. S. 527, 532, 26 L. Ed. 1157, 1160 (1882), “they ought to contribute their due proportion of the expenses which he *28has fairly incurred. To make them a charge upon the fund is the most equitable way of securing such contribution.” See McCormiclc, supra, at p. 622; Note, Allowance of Attorneys’ Fees from a Fund in Court, 35 Col. L. Rev. 740 (1935). To the same effect see Cintas v. American Car & Foundry Co., 133 N. J. Eq. 301, 303 (Ch. 1943), affirmed 135 N. J. Eq. 305 (E. & A. 1944):
“The rule which applies to the matter before me is that a court of equity will, in the exercise of sound discretion, order an allowance of counsel fees, payable out of a fund, to a complainant or directly to his counsel where he has, at his own expense, either maintained a successful suit for the preservation, protection or increase of a common fund, or brought into court a fund in which others, similarly situated, may share. This custom or practice originated in the English courts and was based on the theory that the others who benefit should, in good conscience, bear their fair share of the burden of the litigation. Darnell’s Oh. Plead. & Prae. (6th Am. ed.) *1377; 14 Am. Jur. tit. ‘Costs’ §§ 70, 73, 74; 15 C. J. tit. ‘Costs’ § 210; 49 A. L. R. 1150 et seq.; 107 A. L. R. 749 et seq.; Trustees v. Greenough, 105 U. S. 527; 26 L. Ed. 1157; Sprague v. Ticonic National Bank, supra. [307 U. S. 161, 59 S. Ct. 777, 83 L. Ed. 1184] ; Merwin, Eq. & Eq. Plead. § 1018.”
Until today this court has strictly limited the fund in court rule in keeping with its underlying purpose. Thus in Driscoll v. Burlington-Bristol Bridge Co., supra, it disallowed counsel fee to the prevailing plaintiffs in an action to rescind an illegal purchase of property by a public body, pointing out that the proceeding was “not an action to create or preserve a fund for the benefit of a class of which the' plaintiffs are representatives.” Similarly, in Haines v. Burlington County Bridge Commission, 8 N. J. 539, 542 (1952),-it disallowed counsel fee to the plaintiffs in a taxpayers’ action, holding that “The fact that property which is the subject of litigation is under the control of the court through the issuance of temporary restraints” does not create a fund in court. And more recently in Janovsky v. American Motorists Insurance Co., supra, it declined to allow counsel fee to a plaintiff who tendered a fund into court and sought a determination as to whether he or the defendant was entitled to it, noting that “the plaintiff’s proceeding was not an action to *29create or protect a fund for the benefit of a class which he represented.” If the parties in these cases were justly denied counsel fee, how can it fairly be said that the trial court abused its discretion in disallowing counsel fee under the following facts presented to it in the instant matter?
The defendant Otis Elevator Company was in possession of corporate stock and dividends which had been unclaimed and abandoned for over 14 years by their unknown owners. The State duly instituted its action in the owners’ stead, and while it was pending this court sustained the constitutionality of the Escheat Act and its application to such abandoned property. Nevertheless, the defendant thereafter filed an answer which asserted that it had “acquired a vested and absolute right” to the abandoned property, relied upon the statute of limitations, and attacked the constitutionality of the act and the jurisdiction of the court. In an amended answer filed after the United States Supreme Court had affirmed the decision of this court the same defenses were reasserted. Indeed, I do not find in the record any formal withdrawal of its defenses or its groundless claim to the property on its own behalf, although apparently it did not press its claim at the trial. In view of the foregoing, the defendant was hardly in any better position than are losing claimants generally. See Janovsky v. American Motorists Insurance Co., supra; West v. St. James’ Episcopal Church, 83 N. J. Eq. 324, 326 (E. & A. 1914). In the West case Justice Parker, after noting that costs and counsel fees are ordinarily denied to unsuccessful claimants of funds in court, aptly suggested that a contrary doctrine would “encourage unnecessary and frivolous litigation.”
In State v. First Wisconsin National Bank of Milwaukee, supra, the Wisconsin Supreme Court, in denying counsel fee to the respondent bank in a proceeding to escheat abandoned bank deposits, said [250 Wis. 107, 26 N. W. 2d 162] :
“The sections in the statutes regulating costs do not warrant the allowance asked for by respondent. Nor does the rule apply which permits a court under some circumstances to make an allowance out of a fund created or preserved at the expense of a party or where a *30common fund is brought into court. The bank has not created this fund; it has done little more to preserve it than it was already bound to the depositors to do.”
The same may be said of the defendant Otis Elevator Company. It was the' custodian of property which rightfully belonged to unknown owners. These owners might have appeared at any time and in that event the defendant would have been obliged to remit without any deduction whatever and, indeed, might perhaps have been chargeable on the unclaimed dividends which, after the lapse of three years, it had placed in its general account and had benefited from over these many years. When the State replaced the unknown owners it acquired their rights in full, not in part. The defendant may not assert that it was placed under a special burden of searching its records for it was under preexisting obligation to maintain current records for the owners until payment or other legal discharge. Eurthermore, it mayr be noted that corporations, such as the defendant, are now frequently called upon to maintain voluminous records to aid government in realizing sums due as taxes and for other public purposes; whatever burden is entailed is amply justified by the consequent advancement of the public interest.
The majority assert that “it is only equitable that when it comes to the allowance of counsel fees the defendant be given at least as favorable consideration as the State.” No appeal was ever taken from the allowance to the attorney for the State and we are not concerned with it, although it seems clear that the respective allowances have no relation to each other. The defendant is seeking payment from property belonging to someone else, namely, the State. On the other' hand,' the State did not seek payment from anyone else’s property but simply requested the trial court to fix a reasonable amount payable from its own property. Perhaps it would have been politic for the Legislature to have omitted provision for special attorneys for the State and allowance to them. But that is exclusively a matter of legislative judgment and furnishes no basis for judicially initiating the practice of allowing counsel fees to custodians in escheat *31matters with consequent impairment of state revenues and incipient perils, remindful of a vanishing phase in history. See State v. Otis Elevator Co., supra, at p. 112.
I would affirm the judgment entered in the Chancery Division.