Court Opinion

ID: 9754730
Source: CourtListenerOpinion
Date Created: 2023-08-28 20:11:19.435313+00
Date Added: 2024-06-11T07:27:56.959419
License: Public Domain

Heher, J.
(concurring). The transfer of Clinton’s outstanding full and fractional shares of Preferred Stock B at the rate of $50 per share, plus accrued dividends, under the Clinton-Eidelity contract of sale made December 16, 1947, and consummated three days later, was to all intents and purposes a cash transaction. The price thus fixed, the full value of the stock, was made payable in cash on January 2, 1948, on presentation and surrender to Eidelity of the certificates of stock or scrip “against which payment was demanded, endorsed for cancellation by the owner or holder thereof, with the signatures duly guaranteed.” Clinton was thereupon effectually dissolved under B. 8. 17:4r-118, repealed by L. 1948, c. 67, N. J. 8. A. 17:9R, but not operative, section 17:9A-339, to invalidate a contract of a bank or its stockholders “lawfully done or entered into” prior to that enactment. The discontinuance of Clinton’s business was sanctioned by its directors, two-thirds in interest of the holders of stock and three-quarters in interest of all stockholders assenting; and thereupon, by force of B. 8. 17:4r-118, the corporation was “deemed to be dissolved,” save for “distributing its assets and otherwise settling its affairs.”
Had Eidelity then paid this portion of the purchase price directly to Clinton or its successor trustees in dissolution, the equitable title to the fund so created would have vested in the several holders of the particular stock, according to their distributive shares, wholly immune to the operation of the statute of limitations, N. J. 8. 2A :14^1; and, by the same token, Fidelity’s vicarious undertaking in this regard has the selfsame legal consequences, for Eidelity by the contract *402assumed payment of the part of the purchase price so reserved as the agent of Clinton and its trustees in dissolution, for convenience of payment and its own protection in the retirement of the stock. This, by the express terms of the contract that Fidelity “shall be deemed the agent” of Clinton and of its trustees in dissolution “for the purpose of receiving and cancelling the certificates of stock and scrip” of Clinton “to be presented and surrendered to it as hereinabove provided.” And Fidelity also undertook to “settle all affairs” of Clinton “and, at its own expense, complete its liquidation in all its aspects,” and “to save the trustees in dissolution * * * harmless from all liabilities with respect to such liquidation.”
On dissolution, Clinton was under obligation to make “reasonable provision for the protection” of the holders of the stock in question; and the contract, so read, satisfies this standard. United States Industrial Alcohol Co. v. Distilling Co. of America, 89 N. J. Eq. 177 (E. & A. 1918); New Jersey Title Guarantee & Trust Co. v. Berliner, 136 N. J. Eq. 162 (Ch. 1945).
Fidelity’s undertaking is in terms contractual, a promise to pay, not to hold the particular fund as a trust res for the benefit of the cestuis que trust. The true trust arises by a manifestation of an intention to create the requisite fiduciary relation, presently effective, and not a trust to arise at some future time. Scott on Trusts (2d ed.), sections 2.1, 2.6, 23, 26, 462.1; Restatement, Trusts, section 26. While we do not have here, the statute aside, an express trust founded upon a manifestation of an intention to create it, and subjecting Fidelity to equitable duties to deal with it for the benefit of others, there is yet a constructive trust raised in equity where a person holding title to property is under an equitable duty to convey it to another on the ground that he would be unjustly enriched were he permitted to retain it, a trust established by the law for reasons of justice. This equitable formula is applicable where the retention of the property or the beneficial interest therein would constitute an unconscionable advantage by the holder of the *403legal title, even though its acquisition was not wrongful. Where the property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity holds him accountable as a trustee; and this, notwithstanding the statute of frauds. Stretch v. Watson, 5 N. J. 268 (1950); Moses v. Moses, 140 N. J. Eq. 575 (E. & A. 1947). See Restatement, Trusts, sections 1, 2, 4-14.
The beneficiaries of an express trust are not barred by laches or by the statute of limitations from enforcing the trust merely because of lapse of time, Williams v. McKay, 40 N. J. Eq. 189 (E. & A. 1885); Scott, section 10.5; it is only where the trustee has repudiated the trust to the knowledge of the beneficiaries that they may become barred from enforcing the trust. But a constructive trustee ordinarily holds the property adversely to the beneficiary, and “if the beneficiary knows of the circumstances giving rise to the constructive trust,” he may be barred by “laches if he fails to sue within a reasonable time”; and laches depends upon the circumstances. Where the beneficiary of a constructive trust has “no reason to believe that the constructive trustee is holding the property adversely,” the beneficiary will not be barred by laches “even though he knows of the circumstances giving rise to'the constructive trust.” Scott, section 481.1. And see 34 Am. Jur., Limitation of Actions, section 108, noting that the statute of limitations is generally applied to trusts created by implication or operation of law.
But where, as here, the trust fund still remains in the possession of the person accountable as trustee, equity forbids as unconscionable the use of the statute of limitations to retain the beneficial interest as his own, for the very reason that his conscience was charged with the trusteeship at the outset. Compare Bovay v. H. M. Byllesly & Co., 27 Del. Ch. 381, 38 A. 2d 808, 174 A. L. R. 1201 (Sup. Ct. 1944), distinguishing, in regard to the statute of limitations, between a suit to compel corporate officers and directors to account for loss or damage resulting to the then bankrupt corporation through passive neglect of duty, without more, and a suit to *404require them to answer for wrongful acts of commission by which they had enriched themselves to the injury of the corporation. And see Baxter v. Moses, 77 Me. 465, 1 A. 350 (Sup. Ct. 1885); Kane v. Bloodgood, 7 Johns. Ch. (N. Y.) 90 (1823), affirmed 8 Cow. 360 (1826); also Annotation, 174 A. L. R. 1222.
There is no suggestion of prejudicial delay here; the shares at issue are held by persons unknown or whose whereabouts are and have been unknown for the escheat period. It is inconceivable that demand for payment by the stockholder himself would now be refused; and the State derives its escheatable interest from the holders of these shares, by right of succession to property bona vacantia as part of the common ownership, that is to say, the “interest of the unknown or absentee owner.” State, by Parsons v. Standard Oil Co., 5 N. J. 281 (1950), affirmed 341 U. S. 428, 71 S. Ct. 822, 95 L. Ed. 1078 (1951).
For these reasons, I concur in the judgment, as modified.