State by Van Riper v. Atlantic City Elec. Co.

• Decision Date: 21 January 1957
• Docket Number: No. A--40,A--40
• Citation: 23 N.J. 259,128 A.2d 861
• Parties: STATE of New Jersey by Walter D. VAN RIPER, Attorney General of the State of New Jersey, Plaintiff-Appellant, v. ATLANTIC CITY ELECTRIC CO., Defendant-Respondent.
• Court: New Jersey Supreme Court

Page 259

23 N.J. 259

128 A.2d 861

STATE of New Jersey by Walter D. VAN RIPER, Attorney General of the State of New Jersey, Plaintiff-Appellant, v. ATLANTIC CITY ELECTRIC CO., Defendant-Respondent.

No. A--40.

Supreme Court of New Jersey.

Argued Oct. 22, 1956.

Reargued Dec. 3, 1956.

Decided Jan. 21, 1957.

David D. Furman, Deputy Atty. Gen., argued the cause for appellant (Grover C. Richman, Jr., Atty. Gen., attorney; Charles J. Kehoe, Asst. Deputy Atty. Gen., on the brief).

John Lloyd, Jr., Atlantic City, argued the cause for respondent (Lloyd, Horn, Megargee and Steedle, Atlantic City, attorneys).

The opinion of the court was delivered by

WACHENFELD, J.

This case adds another chapter to the large volume of litigation encountered in recent years relating to the State's powers of escheat. Here, the subject of dispute is unclaimed deposits given by consumers to secure the defendant against non-payment of charges for the services which it renders.

The Attorney General commenced this action pursuant to the authority vouchsafed by N.J.S. 2A:37--11 et seq., N.J.S.A., commonly referred to as the Fourteen-Year Personal Property Escheat Law. The complaint alleged the defendant, a public utility engaged in supplying electrical energy, had certain escheatable property within its possession and demanded a disclosure of its nature and amount. In reply, the defendant revealed it had received deposits from 4,356 customers in the aggregate amount of $18,416.44, which had remained unclaimed for 14 or more successive years previous to the institution of the State's suit. The defendant interposed an affirmative defense, however, claiming the applicable statute of limitations, R.S. 2:24--1, in force at the commencement of this proceeding, had barred the obtainment of any remedy by its obligees upon their choses in action and thereby negated the existence of any property rights escheatable to the State.

If the State had conceded the applicability of the six-year statute of limitations, it, of course, had no alternative to admitting the validity of the defendant's argument and the corresponding futility of its own cause. 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). It was the State's view, however, that the relationship between the defendant and its customers concerning the monies deposited as security partook sufficiently of the nature of a trust to preclude the running of the statute of limitations, at least until demand for a return was made upon the company. 2 Scott, Trusts, (1939 ed.) §§ 12.4, 219, 219.1.

The issue was joined upon stipulations in the pretrial order and an affidavit by defendant's secretary and assistant-treasurer stating the rules and practices which the company followed with respect to its requirement and treatment of security deposits.

After argument, the judge sitting below rendered an oral determination holding a contractual relationship of debtor and creditor within the purview of the statute of limitations existed between the defendant and the consumer-depositors, giving the defendant a vested right in its defense. State by Parsons v. Standard Oil Co., supra. We certified on our own motion while the appeal was pending in the Appellate Division.

The first issue is presented by the parties' differing interpretations of the record compiled below. The detailed statement of unclaimed consumers' deposits furnished by the defendant indicates that the subject deposits became inactive by disconnections of service through the years 1902 to 1934. Nevertheless, the State urges us to consider the issues as if the conditions surrounding the requirement of all the consumer deposits in litigation were governed by the regulations of the New Jersey Board of Public Utility Commissioners, adopted in 1928, and the 'Terms and Conditions of Service' filed with that administrative body by the defendant. See R.S. 48:2--29.5, N.J.S.A. enacted in 1935.

We think the stipulations of the parties, the affidavit of the defendant's secretary and assistant treasurer, and the oral determination by the trial judge conclusively establish a concession on the part of the defendant that these regulations and its own statement of 'Terms and Conditions' were applicable.

Since under the adversary system of litigation the responsibility for the course which the proceedings take lies upon the contesting parties, we concur in the State's argument that the defendant should be bound by its representations and stipulations made at the hearing below. The defendant should not be permitted upon appeal to alter its interpretation of the facts upon which the issue was framed and which has legitimately been relied upon by the State in its conduct of the cause. 50 Am.Jur., Stipulations, § 9; 83 C.J.S., Stipulations, § 24.

The provisions of the utility regulations which the parties agreed were relevant to the controversy read as follows 'Rule I. A water, gas or electric utility, where the credit of a customer is not established, may require a deposit reasonable in amount as a condition of supplying service. * * *

'Rule VIII. Upon closing any account the balance of any deposit remaining after the closing bill for service has been settled shall be returned promptly to the depositor with interest due.

'Rule IX. Interest at the rate of at least four per cent. per annum must be paid by each water, gas or electric utility on all deposits held by it to secure the payment of bills for metered service; provided that interest need not be paid if the service is short term or seasonal service.'

In accordance with the regulations of the New Jersey Board of Public Utility Commissioners, the defendant filed its tariffs and its 'Terms and Conditions of Service' governing the rendition of service to its customers, and these statements were accepted by the Board. The portion essential to the consideration of the appeal Sub judice reads:

'Deposits.

'A deposit may be required of the customer before service will be supplied. The company will pay interest on deposits so made at not less than such rate as may be required by the New Jersey Board of Public Utility Commissioners when such deposits are held by the company for a period of one year or longer. Retention by the company, prior to final settlement, of said deposit is not a payment or part payment of any bill for service. The company shall have a reasonable time in which to read and remove the meters and to ascertain that the obligations of the customer have been fully performed before being required to return any deposit.'

Apparently, there are no regulations defining the status of the deposits in the hands of a utility. Compare expressions in In re Rules Easton Gas Works, 2 N.J.Pub.Util.Rep. 393 (1914), with those in Case v. Boonton Electric Co., 4 N.J.Pub.Util.Rep. 568 (1916). It has been the defendant's invariable practice for many years to commingle such monies with its general funds. It has not maintained any physical segregation of the monies received as deposits from the remainder of its funds secured in the course of its business. When the obligation to refund such deposits accrued, the defendant made payment out of its general funds. When interest became due on any deposit, the source for its payment was the cash account of the company.

The State's initial contention is that the electric company sustained fiduciary obligations with respect to the monies received as security. It is too elementary to require citation as proof that a formal trust was never called into being, but the State asserts the relationship between defendant and the depositors is 'more realistically a trust relationship * * * than debtor-creditor.'

Whether a trust or a debt is created when one party pays money to another primarily depends upon their intentions. State v. United States Steel Co., 12 N.J. 51, 95 A.2d 740 (1953). Frequently there is no explicit understanding as to the terms upon which the payee is to hold the funds, and then the nature of the transaction must be divined through consideration of the parties' behavior and the attendant circumstances. State v. Western Union Telegraph Co., 17 N.J. 149, 110 A.2d 115 (1954); 1 Scott, Trusts, § 12.2 (1939 ed.); Restatement, Trusts, § 12, comment g. While no one element is necessarily decisive in light of the almost numberless variety of factual situations, there are certain essential principles which taken in conjunction control or vitally influence the interpretation to be given.

Probably the most important determinative of whether a debtor-creditor, as opposed to an informal trust, relationship is created lies in the provisions for the payment or non-payment of interest. Where the recipient of money obligates himself to pay a fixed rate of interest, regardless of whether the money is invested and without reference to the rate of return which it yields, it is only reasonable to expect, unless a contrary intention is clearly manifested by some other circumstance, that the recipient is to have the beneficial as well as the legal interest. Presumably a debt, involving only a personal obligation to repay the amount received at the proper time, is established. When a fixed rate of interest is paid, as here, there is a strong inference that the payee is entitled to use the money to suit his own convenience. 1 Scott, Trusts (1939 ed.) § 12.2; Restatement, Trusts, § 12, comment g.

In State v. United States Steel Co., supra, an identical problem was presented with respect to sums deducted from the wages of employees for the purpose of buying Liberty Bonds for which they had subscribed. We there held the statute of limitations had not run because the company acted as a trustee in exercising dominion over the funds collected for this specific purpose. Our opinion reflected the strong influence provisions for payment or non-payment of interest have upon our understanding of the...