Rickenbach v. Noecker Shipbuilding Co.

• Decision Date: 29 March 1961
• Docket Number: No. C--918,C--918
• Citation: 169 A.2d 730,66 N.J.Super. 580
• Parties: Annie V. RICKENBACH, Individually and as Executrix of the Estate of Wilson B. Rickenbach, deceased, Plaintiff, v. NOECKER SHIPBUILDING CO., a New Jersey Corporation, Defendant.
• Court: New Jersey Superior Court

Page 580

66 N.J.Super. 580

169 A.2d 730

Annie V. RICKENBACH, Individually and as Executrix of the Estate of Wilson B. Rickenbach, deceased, Plaintiff, v. NOECKER SHIPBUILDING CO., a New Jersey Corporation, Defendant.

No. C--918.

Superior Court of New Jersey

Chancery Division.

March 29, 1961.

William C. Gotshalk, Camden, for plaintiff.

Hyland & Reberkenny, Camden (William F. Hyland, Camden, appearing), for receiver.

WICK, J.S.C.

This matter comes before the court on the claim of Majorie E. Noecker, administratrix c.t.a. of the estate of Samuel M. Noecker, deceased, against the Noecker Shipbuilding Co., in receivership.

The relevant facts in connection herewith are that the Noecker Shipbuilding Co. (hereafter referred to as the defendant corporation) operated a small shipyard for the construction and repair of wooden vessels in Camden, New Jersey. However, in recent years, due to the substitution of steel for wood in the construction of commercial vessels, it has suffered considerable financial adversities. Samuel M. Noecker (hereafter referred to as the claimant) was, for many years, the president and a substantial stockholder of the defendant corporation. The corporate records reveal that the defendant corporation was very closely held, having only five stockholders. As in the case of many closely held corporations, the defendant corporation was managed with the minimum of formality. The corporate records fail to reveal any evidence of a formal meeting of the board of directors; however, there is testimony that stockholders' meetings were occasionally held. The testimony also indicates that the claimant, as president, was the dominant person in the management of the defendant corporation. The claimant died on October 1, 1959, and shortly thereafter the defendant corporation suspended business due to the lack of work. Because of this suspension of business and its adverse financial condition, Robert E. Gladden, Esquire, was appointed by this court on December 4, 1959 as receiver for the defendant corporation.

Marjorie E. Noecker, as administratrix c.t.a. of the estate of the claimant, filed a claim with the receiver in the sum of $84,117 against the defendant corporation. This claim is based upon $64,959 allegedly advanced to the defendant corporation by the claimant for working capital, and $15,345 allegedly due the claimant as accrued salary. The receiver has only allowed $7,000 on the claim for advances, and made no allowance on the claim for accrued salary. The balance of the claim for advances was disallowed by the receiver because such debts were barred by the statute of limitations (N.J.S. 2A:14--1, N.J.S.A.). The claim for accrued salary was denied by the receiver because there is no evidence in the records of the defendant corporation that any salary was ever established for the claimant, nor is there an accrued salary account in the books of account available to the receiver for the period of this claim.

The advances by the claimant to the defendant corporation are represented by the following promissory notes, payable on demand:

                Note of 1/2/44   $16,537
                Note of 3/28/47    7,463
                Note of 3/19/50   10,000
                Note of 3/6/51    10,000
                Note of 1/2/53    13,956
                                 -------
                                 $57,956
                

There is no question that the statutory period had elapsed upon each of these notes before suit was filed. N.J.S. 2A:14--1, N.J.S.A., requires that recovery upon a contractual claim or liability not under seal must be brought within six years after the cause of action has accrued. On a promissory note payable on demand, the statute of limitations begins to run in favor of the maker from the date of execution and delivery of the note. See De Raismes v. De Raismes, 70 N.J.L. 15, 56 A. 170 (Sup.Ct.1903), affirmed 71 N.J.L. 680, 60 A. 1133 (E. & A. 1904); Renault v. L. N. Renault & Sons, 90 F.Supp. 630 (D.Ct.N.J.1950), wherein New Jersey Law was applied. Suit was not brought on these notes until November 25, 1959, some 6 years and 9 months after the date of the most recent note and some 15 years and 10 months after the earliest one.

However, even though recovery upon these notes had become barred by the statute of limitations, the defendant corporation still carried them as corporate liabilities on its corporate income tax returns and balance sheets. The claimant contends that this continued recognition of these notes by the defendant corporation constitutes an acknowledgment sufficient under N.J.S. 2A:14--24, N.J.S.A. to take these obligations out of the statute of limitations. N.J.S. 2A:14--24, N.J.S.A., provides:

'In actions at law grounded on any simple contract, no acknowledgment or promise by words only shall be deemed sufficient evidence of a new or continuing contract, so as to take any case out of the operation of this chapter, or to deprive any person of the benefit thereof, unless such acknowledgment or promise shall be made or continued by or in some writing to be signed by the party chargeable thereby * * *'

The receiver has disputed the claimant's position, contending that these corporate records do not satisfy the requirements of N.J.S. 2A:14--24, N.J.S.A. Thus, one of the issues to be decided herein by the court is whether these corporate tax returns and balance sheets on which the notes in question are carried are acknowledgments of the notes sufficient to remove them from the bar of the statute of limitations.

Neither respective counsel nor the court has been able to find any New Jersey decisions directly in point. However, it has long been established in New Jersey that an acknowledgment must be made to the creditor or intended to have been communicated to him. Swinley v. Force, 78 N.J.Eq. 52, 78 A. 249 (Ch.1911). Other jurisdictions, having this same requirement, have held that the inclusion of a debt upon a corporate income tax return is not an acknowledgment of the debt sufficient to remove the debt from the statute of limitations. See Trethewey v Green River Gorge, Inc., 17 Wash.2d 697, 136 P.2d 999 (Sup.Ct.1943); Weir v. Bauer, 75 Utah 498, 286 P. 936 (Sup.Ct.1930). The rationale upon which these decisions were based is that the returns were not made to the creditor. Although the claimant herein had signed these returns in his capacity as president, this act alone does not satisfy the requirement that the acknowledgment must be or intended to be communicated to him. The testimony indicates that these returns were prepared solely by Anthony J. Schunk, a director and vice-president of the defendant corporation, without the aid or knowledge of the creditor except of his signature. These returns were made to the Internal Revenue Service, and not to the claimant. In view of these facts, the court must hold that the corporate income tax returns herein do not constitute a writing sufficient to meet the requirements of N.J.S. 2A:14--24, N.J.S.A.

These notes were also carried upon the corporate balance sheet. The authorities are in disagreement as to the extent which inclusion of debts on the corporate balance sheet will remove these debts from the bar of the statute of limitations. Several jurisdictions have adopted the rule that the corporate balance sheet is a sufficient acknowledgment to take the debt out of the statute. In Victory Investment Corp. v. Muskogee Electric Traction Co., 150 F.2d 889, 161 A.L.R. 1436 (1945), certiorari denied 326 U.S. 774, 66 S.Ct. 232, 90 L.Ed. 467 (1945), the Tenth Circuit Court of Appeals, applying Oklahoma law, held that the inclusion of liability on mortgage bonds on the balance sheet prepared by the debtor for the trustee for the bondholders constitutes an acknowledgment of the debt sufficient to interrupt the Oklahoma statute of limitations. The California Supreme Court reached a similar result in Bank of America Nat. Trust & Savings Ass'n v. Hunter, 8 Cal.2d 592, 67 P.2d 99 (1937). The most recent decision adopting this principle is Whale Harbor SPA, Inc. v. Wood, 266 F.2d 953 (5 Cir.1959), interpreting Florida law. Also see 63 Harv.L.Rev. 362, wherein there is a discussion of the merits of the cases cited above and of several English decisions which also reach the same result; 54 C.J.S. Limitations of Actions § 314 p. 389.

The court has found two cases in which the inclusion of debts on the corporate balance sheet did not constitute an acknowledgment. Both of these cases are distinguishable factually from the case at bar. See Weir v. Bauer, supra, in which the plaintiff testified that he did not receive the reports upon which he was relying to toll the statute of limitations; Glass v. Driedborg, 296 Mich. 30, 295 N.W. 547 (Sup.Ct.1941), wherein the debtor, at the making of the financial statements which listed the obligations in question, stated that he 'couldn't or wouldn't pay these obligations.'

The claimant herein was not only president...