Board of Directors of Ajax Electrothermic Corp. v. First Nat. Bank of Princeton, A--32

• Decision Date: 21 November 1960
• Docket Number: No. A--32,A--32
• Citation: 33 N.J. 456,165 A.2d 513
• Parties: BOARD OF DIRECTORS OF AJAX ELECTROTHERMIC CORPORATION, Plaintiff-Respondent, v. FIRST NATIONAL BANK OF PRINCETON et al., Defendants-Respondents, and David D. Furman, Attorney General of New Jersey, Defendant-Appellant.
• Court: New Jersey Supreme Court

Page 456

33 N.J. 456

165 A.2d 513

BOARD OF DIRECTORS OF AJAX ELECTROTHERMIC CORPORATION Plaintiff-Respondent, v. FIRST NATIONAL BANK OF PRINCETON et al., Defendants-Respondents and David D. Furman, Attorney General of New Jersey, Defendant-Appellant.

No. A--32.

Supreme Court of New Jersey.

Argued Oct. 25, 1960.

Decided Nov. 21, 1960.

Murry Brochin, Deputy Atty. Gen., for defendant-appellant (David D. Furman, Atty. Gen., pro se; Morton I. Greenberg, Deputy Atty. Gen., on the brief).

H. Collin Minton, Jr., Trenton, for the plaintiff-respondent and defendants-respondents.

Minton, Dismore & Bohlinger, Trenton, for plaintiff-respondent Board of Directors of Ajax Electrothermic Corp. (H. Collin Minton, Jr., Trenton, on the brief).

Scammell & Reese, Trenton, for defendant-respondent First Group of Employees (Mr. J. Mitchell Reese, Trenton, on the brief).

Backes & Backes, Trenton, for defendant-respondent Second Group of Employees (Herbert W. Backes, Trenton, on the brief).

Katzenbach, Gildea & Rudner, Trenton, for defendant-respondent Third Group of Employees (Horace J. Farlee, Trenton, on the brief).

John F. McCarthy, Jr., Princeton, for defendant-respondent Edith Northrup (Peter T. Bacsik, Princeton, on the brief).

Maurice E. Gold, Trenton, for defendant-respondent First Trenton Nat. Bank, Adm'r c.t.a. of Estate of George F. Applegate, deceased.

Abbotts & Abbotts and John Abbotts, Trenton, for defendant-respondent Frank Chestnut.

Scott, Fox & Walsh and Frank V. Walsh, Jr., Trenton, for defendant-respondent Howard F. Tomlinson, individually, etc.

Mason, Griffin, Moore & Cook, Princeton, for defendant-respondent First Nat. Bank of Princeton, trustee of trust under last will and testament of Edwin Fitch Northrup, deceased (Mr. Ralph S. Mason, of counsel).

The opinion of the court was delivered by

PROCTOR, J.

This is an appeal from a judgment of the Superior Court, Chancery Division, permitting acceleration and termination of a testamentary trust. The Attorney General took an appeal which this court certified on its own motion before hearing in the Appellate Division.

On April 29, 1940 Edwin Fitch Northrup died, leaving a will, dated January 31, 1939, which established a trust with net income to go to his wife for life. She died on May 8, 1945. The remainder of the will provides in pertinent part:

'Tenth: I direct that upon the death of my wife, Margaret J. S. Northrup, that an amount not exceeding One Hundred and Fifty ($150.00) monthly be paid to my sister, Edith Northrup, during her natural life, out of the net income from the aforesaid trust and not otherwise, and that the balance of the net income from the trust herein created be paid over to the Ajax Electrothermic Corporation, to be used directly and not indirectly for the sole benefit of the officials and employees of the Ajax Electrothermic Corporation, such determination and distribution to be made by the Board of Directors of said Corporation.

'Eleventh: I direct that upon the deaths of my wife, Margaret J. S. Northrup, and my sister, Edith Northrup, that the trust herein created shall terminate and the balance of the interest and the principal remaining be paid over to the Ajax Electrothermic Corporation, absolutely, to be used directly and not indirectly for the sole benefit of the officials and employees of the Ajax Electrothermic Corporation, such determination and distribution to be made by the Board of Directors of said Corporation.

'Twelfth: In the event the Ajax Electrothermic Corporation is merged, amalgamated, reorganized, sold, or combined with some other corporation or institution, then, upon the occasion of any of the aforesaid events of this paragraph, I direct that my trustee shall determine to the best of its ability if the personnel of the aforesaid Ajax Electrothermic Corporation remains intact, substantially as a whole, either independently, or in connection with others; and upon such determination pay over to such organization, institution, or otherwise, funds and property as herein provided in substitution to the said Ajax Electrothermic Corporation. It is definitely understood that any action of my executor and trustee under the provision of this paragraph shall be final without liability or responsibility to any party or parties whatsoever.

'Thirteenth: I direct, in the event the said Ajax Electrothermic Corporation, or such other parties as determined by my executor and trustee entitled to benefits hereunder in accordance with item tenth hereof cannot be assembled or ascertained, refuses or is prohibited to accept any or all of the benefits hereby created, that my estate shall be disposed of as follows; namely: That my executor and trustee is hereby authorized to give and bequeath the rest, residue and remainder of my estate to some worthy charity, or charities, at the discretion of my executor and trustee, except that the term charity, or charities, as used herein shall not be construed to include any Church, or religious organization of any kind whatever. It is definitely understood that any action of my executor and trustee under the provision of this paragraph shall be final, without liability or responsibility to any party, or parties, whatever.'

The testator's sister, Edith Northrup, is still alive.

In 1950, the Ajax Electrothermic Corporation (Ajax) and Edith Northrup brought an action against the trustee, First National Bank of Princeton, seeking acceleration and termination of the trust. It was alleged that Ajax had purchased for Edith Northrup an annuity contract paying $200 per month, in return for which she gave to the trustee a release of her $150 per month life interest in the trust. The Chancery Division dismissed the action for failure to join Ajax employees and the Attorney General as representative of the unnamed charities. This court affirmed the judgment of the Chancery Division on the alternative grounds that (1) future Ajax employees and the Attorney General were indispensable parties, and (2) acceleration at that time would be contrary to the testator's intent. Ajax Electrothermic Corp. v. First Nat. Bank of Princeton, 7 N.J. 82, 80 A.2d 559 (1951)

In a subsequent proceeding, the Chancery Division entered a judgment by consent on January 10, 1952, approving a plan for distribution of the balance of the net trust income, after payment of Edith Northrup's $150 per month, among officials and employees of Ajax. The present action arose on a motion by the Board of Directors of Ajax to modify the judgment of January 10, 1952, so as now to permit acceleration and termination of the trust. All officials and employees of Ajax, Edith Northrup, and the Attorney General were notified of the present motion and joined as defendants. At a hearing on the motion the evidence was as follows:

On April 30, 1959 Ajax sold its assets to Magnethermic Corporation. Ajax is now an investment company operating under the name of Ajax Electrothermic Investments, Inc., and no longer engages in manufacturing operations. The contract of sale provided that, insofar as possible, Ajax personnel were to be employed in their former capacities with the purchaser-corporation. Ajax personnel are now employed by Magnethermic; none remains in the employ of Ajax. At the time of the sale, former officials and employees of Ajax 'remained intact, substantially as a whole,' so that they could be readily identified as a group within Magnethermic. These persons are now being transferred to various divisions of Magnethermic and no longer 'remain intact, substantially as a whole.'

After the sale to Magnethermic, directors of Ajax Electrothermic Investments, Inc., passed a resolution providing for the distribution of the trust Corpus to those employed by Ajax on April 30, 1959 (the date of sale) and who had been employed for a calendar year during the period from May 8, 1945 to April 30, 1959. The plan also included provisions for those employed for a calendar year during that period who had retired or died. All parties but the Attorney General have agreed to the acceleration and the plan of distribution; the surviving life tenant, Edith Northrup, has agreed to accept an annuity of $200 per month in lieu of her interest in the trust.

As mentioned above, the trial court granted plaintiff's motion, and the judgment of January 10, 1952 was modified to provide for the termination of the trust and distribution of the Corpus according to the plan approved by the former officials and employees of Ajax.

The Attorney General alone appealed as the representative of the unnamed charities having a contingent interest under paragraph 13. In his brief, he urges reversal of the judgment below on two grounds: (1) acceleration of the trust is barred by the judgment of this court in the prior appeal, and (2) acceleration would result in a distribution contrary to the testator's intent.

I

Effect of this court's prior determination.

In affirming the dismissal of the original action for acceleration, we held that the trust could not be accelerated at that time for two reasons. First, acceleration would have resulted in a distribution of trust Corpus contrary to testator's intent. We noted that the testamentary provisions for officials and employees of Ajax were intended to perpetuate the corporation by promoting the individual interests of those who were serving it; and to effectuate such purpose persons employed by Ajax at the death of Edith Northrup were to receive the trust Corpus. The personnel of Ajax would normally change from time to time; employees at the time of the action might not be employees at the death of Edith Northrup, and those employed at the time of her death might not have been employed at the time of the action. In other words, the remaindermen entitled to the trust Corpus could not have been ascertained at the time of the action. Therefore, acceleration and termination of the trust would have resulted in a distribution...