State by Richman v. W. U. Tel. Co.

• Decision Date: 20 December 1954
• Docket Number: No. A--47,A--47
• Citation: 110 A.2d 115,17 N.J. 149
• Parties: The STATE of New Jersey by Grover C. RICHMAN, Jr., Attorney General of the State of New Jersey, Plaintiff-Appellant, v. The WESTERN UNION TELEGRAPH COMPANY, Defendant-Respondent.
• Court: New Jersey Supreme Court

Page 149

17 N.J. 149

110 A.2d 115

The STATE of New Jersey by Grover C. RICHMAN, Jr., Attorney General of the State of New Jersey, Plaintiff-Appellant, v. The WESTERN UNION TELEGRAPH COMPANY, Defendant-Respondent.

No. A--47.

Supreme Court of New Jersey.

Argued Nov. 8, 1954.

Decided Dec. 20, 1954.

Charles J. Kehoe, Nutley, for appellant (Grover C. Richman, Jr., Trenton, attorney).

Augustine A. Repetto, Atlantic City, for respondent (Bolte & Repetto, Atlantic City, attorneys).

The opinion of the court was delivered by

WILLIAM J. BRENNAN, Jr., J.

The Superior Court, Chancery Division, dismissed the State's complaint which sought to escheat, under N.J.S. 2A:37--1 et seq., N.J.S.A., the amounts of telegraphic money orders originating more that 14 years ago at defendant's New Jersey offices which were not taken up by the payees at the places of destination nor refunded to the senders. The trial judge held that the relationship obtaining between the defendant and the sender of the telegraphic money order is not one of trust but of debtor and creditor, subject to the bar of the statute of limitations. The State's appeal is here upon certification of our own motion.

If the transactions between the senders and the defendant created debts, and not trusts, there was nothing to be escheated. Under the rule followed in this State there is no escheatable property in a chose in action upon which all remedy has been barred by the statute of limitations. State by Parsons v. Standard Oil Co., 5 N.J. 281, 74 A.2d 565 (1950), affirmed 341 U.S. 428, 71 S.Ct. 822, 95 L.Ed. 1078 (1951). On the other hand, if the more realistic concept of the substance of the relationship is one of trust, the obligations are property subject to escheat. State v. United States Steel Corp., 12 N.J. 38, 95 A.2d 734 (1953); State v. U.S. Steel Company, 12 N.J. 51, 95 A.2d 740 (1953).

I.

The defendant's telegraphic money order service has been familiar to the nation for decades, and has long been an important adjunct to defendant's primary business of transmitting telegraphic messages. The advantage of the service and its particular appeal is that it offers a speedy method of transmitting funds from place to place by having one office of the company telegraph another to pay out an amount of money, thus eliminating the delay of sending actual cash or check by mail or other slower means. The company carries on business in all 48 states and the District of Columbia and in foreign countries. The conduct of the business is regulated by the Interstate Commerce Commission and the Federal Communications Commission, as well as by the public-service regulatory bodies of the several states. Defendant handles millions of telegraphic money orders annually under tariff regulations in the form of rules applicable to the telegraphic money order service and filed with and approved by such regulatory bodies.

Whether a trust or a debt is created if one pays money to another in the business of transmitting funds to third persons is said to depend upon the manifested intention of the parties. State v. U.S. Steel Co., supra; Restatement, Trusts, c. 1, sec. 12, comment g. This is another way of saying that when the parties have no express understanding as to the nature of their relationship the law will attach the legal consequence from a consideration of their words and conduct in the light of all the circumstances and the customs and usages of the business. Whether or not the parties contemplate that the transmitter of the funds shall be entitled to the unrestricted use of them for its own profit in its business is usually viewed as the controlling factor. If the intention is that the money shall be kept or used as a separate fund for the benefit of the payer or a third person a trust is created. The mere mingling of the money paid with the transmitter's funds will not of itself compel the conclusion that the intended relationship was debtor and creditor. State v. U.S. Steel Co., supra. Such a conclusion usually results, however, when the court is able to say that the parties intended the transmitter to have the unrestricted use of the money in the carrying on of its ordinary business and to be liable only to pay a similar amount to the depositor or a third person. Restatement, supra.

In an illuminating article, Some Legal Problems Involved in the Transmission of Funds, 21 Col.L.Rev. 507 (1921), Harlan F. Stone, later Chief Justice of the United States, traced the development of the controlling principles from the original concept of the transmitter of funds as either bailee or fiduciary to the modern trend of judicial opinion which stresses the parties' adoption of the customs and usages of the business as the basis for treating persons commercially engaged in transmitting funds as debtors merely of their depositors, absent an express understanding or clear implication from their conduct that the funds are to be held in a fiduciary capacity. Bankers provided a transmittal service for centuries before the invention of the telegraph. Long before equity developed a law of trusts of personal property the law courts allowed an action in detinue for money bailed or an action for account for money received against a banker receiving money for transmittal to another. The transmitter was dealt with, not as an obligor in contract merely, but as a bailee or fiduciary, depending upon whether he undertook to pay over the identical money to the third person or simply to have on hand at all times a specifically identifiable sum of money with the duty to account for it upon an action of account. Anonymous, Y.B. 12 & 13 Edw. III 244 (1339); Brand v. Lisley, Yelv. 164, 80 Eng.Rep. 109 (1609); Sturtevant v. Orser, 24 N.Y. 538 (1862) were actions in detinue; Rynere v. Frere, Y.B. 3 Edw. III 42 (1310), 20 Selden 126; Robsert v. Andrews, Cro.Eliz. 82, 78 Eng.Rep. 341 (1588); Harrington v. Deane, Hob. 36, 80 Eng.Rep. 186 (1612), were suits to enforce the obligations by the common law action of account.

With the development of the business of modern banking in the course of which the banker receives the general deposits of his customers and uses them as current funds in his business, being free to use the funds entrusted to him as his own in making loans for his own profit, the English courts early defined the banker's legal relation to the customer as one of debtor and creditor, inferring this intent from the parties' adoption of the custom and practice of the business to permit the banker to deal with the funds as his own, and making no distinction between funds received on general deposit and funds received for transmission to another. In re Barned's Banking Co., 39 L.J.Ch. 635 (1870); Williams v. Everett, 14 East. 582 (1811); Grant v. Austin, 3 Price 58, 146 Eng.Rep. 191 (1816).

Some American courts, said Chief Justice Stone, 21 Col.L.Rev., at 510, while adopting this view as to general deposits, rejected it as to funds received for transmission, being influenced by 'traditional judicial bias rooted in the history of the subject in favor of holding the receiver of money for transmission to the duties and liabilities of a fiduciary. It is because the legal relationship of fiduciary and principal was worked out by courts of law, through the common law action of account and its successors, debt and Indebitatus assumpsit, without the aid of equity that we find in modern law a limited class of rights which in point of substantive law are identical with those created in favor of the beneficiaries of a trust by equity, but which unlike trusts may be enforced by an action at law.'

But where the custom and practice of the business permits the transmitter to use as his own money entrusted to his care, the permitted use, although consistent with a contractual obligation, is ordinarily inconsistent with the duty of the fiduciary, for which reason, as Professor Scott notes, 3 Scott on Trusts, sec. 532, p. 2542 (1939):

'The modern trend of opinion * * * is in accordance with the English view; and it is believed that these decisions are more in accordance with the intention of the parties and the customary course of practice in banking.'

The rule adopted in the Restatement of Trusts, supra, reflects the same conclusion.

New Jersey courts have followed the modern trend of opinion. A company engaged in the business of transmitting funds to foreign countries by cable order has been held to incur a mere contractual and not a fiduciary obligation. Katcher v. American Express Co., 94 N.J.L. 165, 109 A. 741, 743, (E. & A.1920). In that case our former court of last resort held that the transaction according to the ordinary course of business by which the sender paid American dollars to the Express Company at its Newark office for a cable order directed to the company's Russian correspondent to pay 1,000 rubles to a named person in Russia, was 'the purchase of a credit available in Russia.'

In the instant case the State makes no claim that the obligations sought to be escheated were incurred out of the ordinary course of defendant's business or under any express agreement that the moneys deposited were to be set apart in a separate fund and held as such for the account of the depositors or payees. The analysis of the course of business followed prior to 1938 in defendant's money order service, the details of which have been stipulated by the parties, satisfied the trial judge, as it satisfies us, that the relationship established between senders and the defendant must be deemed to be that of debtor and creditor.

We should note at the outset that the method devised by defendant for the conduct of the money order business has the approval of regulatory bodies, federal and state, which supervise its operation. The approved rules governing the service therefore enter into and become an integral part of the money order transaction. Western Union Tel. Co. v. Esteve Brothers & Co., 256 U.S. 566, 41...