State v. Otis Elevator Co.

• Citation: 12 N.J. 1,95 A.2d 715
• Decision Date: 16 March 1953
• Docket Number: No. A--14,A--14
• Parties: STATE v. OTIS ELEVATOR CO. et al.
• Court: United States State Supreme Court (New Jersey)

Page 1

12 N.J. 1

95 A.2d 715

STATE v. OTIS ELEVATOR CO. et al.

No. A--14.

Supreme Court of New Jersey.

Argued Sept. 22 and 30, 1952.

Decided March 16, 1953.

Waldron M. Ward, Newark, argued the cause for the appellant Otis Elevator Co. (Pitney, Hardin & Ward, Newark, attorneys; Robert P. Hazlehurst, Jr., and Arthur J. Martin, Jr., Newark, on the brief).

Aaron Van Poznak, Newark, specially appointed by the Atty. Gen., argued the cause for the respondent State.

Sol Phillips Perlman, Trenton, argued the cause for Abraham Grenthal, substituted receiver of J. B. Skehan & Co.

The opinion of the court was delivered by

VANDERBILT, C.J.

The State of New Jersey instituted this action in the Chancery Division of the Superior Court pursuant to the provisions of the Escheat Act (L.1946, c. 155, as amended and supplemented; N.J.S.A. 2:53--15 to 32; now N.J.S. 2A:37--11 to 28), N.J.S.A., alleging that the Otis Elevator Company had in its custody or possession certain personal property, described in general terms only, that had escheated to the State. As provided in N.J.S.A. 2:53--21, the Otis Elevator Company was ordered by the court to answer the complaint, to retain all escheatable personal property then in its custody or possession until the further order of the court and to disclose to the plaintiff in its answer such information regarding such escheatable personal property as was pertinent and would cause a speedy determination of the action. After successive stipulations extending the time to answer until the final disposition by this court of the test case of State 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), the Otis Elevator Company filed its answer setting forth all the information called for by the order of the court, including detailed schedules showing the names and last known addresses of the record owners of all unclaimed personal property in its custody or possession together with the nature and amounts of such property. In addition in its answer the Otis Elevator Company asserted various defenses relating to the jurisdiction of the court, the constitutionality of the Escheat Act, and the applicability of the statute of limitations.

According to the answer of the Otis Elevator Company, the bulk of the unclaimed personal property in its custody or possession consisted of stock registered in the name of Frank C. Rhodes. Claim to this stock was made by Abraham Grenthal, substituted receiver of the firm of J. B. Skehan & Co., in an independent action instituted in New York against the Otis Elevator Company and Mrs. Frank C. Rhodes, as executrix of the estate of her deceased husband. The institution of the New York action accasioned an amendment of the complaint filed in this escheat proceeding so as to include Grenthal and Mrs. Rhodes as parties defendant; an amendment of the answer filed by the Otis Elevator Company setting forth as an additional defense the possibility that it might be subject to double liability; and the filing by Grenthal of an answer to the amended complaint claiming the Rhodes' stock. Default was entered against Mrs. Rhodes for failure to answer. At the hearing the Grenthal claim was fully litigated, but the Otis Elevator Company, although it had raised various defenses in its answer, did not contest the escheat of any of the personal property sought by the State.

The judgment of the court entered on March 3, 1952, disallowed the Grenthal claim; declared all the personal property reported by the Otis Elevator Company in its answer to have escheated to the State and directed that it be turned over to the State Treasurer; discharged the Otis Elevator Company of all liability with respect to the escheated property; and directed that the State Treasurer pay out of the escheated property a counsel fee of $7,000 plus costs and disbursements to the attorney who had prosecuted the action for the State, a fee of $2,788.30 as a reward to the escheator, and a fee of $100 to the officer appointed by the court to take depositions. The request of the Otis Elevator Company for the allowance of reasonable counsel fees and disbursements was denied. So much of this judgment as disallowed the claim of Grenthal to the Rhodes' stock has been affirmed by this court on a separate appeal, State v. Otis Elevator Company, 10 N.J. 504, 92 A.2d 385 (1952). The present appeal by the Otis Elevator Company seeks a review of only that portion of the judgment denying its request for the allowance of counsel fees and disbursements.

Two main questions are presented on this appeal: may an allowance of counsel fees be made to a defendant in proceedings under N.J.S.A. 2:53--15 et seq. to escheat personal property and, if so, should an allowance have been made to the defendant Otis Elevator Company?

I

This is the first case in which it has been contended that counsel fees are a matter of substantive law. From the outset in New Jersey, following English precedents, the allowance of costs and counsel fees had been uniformly considered by the courts of this State to be a matter of procedure rather than of substantive law. Rader v. Southeasterly Road District, 36 N.J.L. 273 (Sup.Ct.1873); Murphy v. George Brown & Co., 91 N.J.L. 412, 103 A. 28 (Sup.Ct.1918); Igoe Brothers v. National Surety Co., 112 N.J.L. 243, 169 A. 841, 96 A.L.R. 1422 (E. & A.1934); Robinson v. Jackson, 187 A. 918, 14 N.J.Misc. 866 (C.P.1936); Savitt v. L. & F. Construction Co., 124 N.J.L. 173, 10 A.2d 728 (E. & A.1940), affirming 123 N.J.L. 149, 8 A.2d 110 (Sup.Ct.1939). In accordance with this uniformly accepted view the Supreme Court, in the exercise of the rule-making power over practice and procedure granted it by Article VI, Section II, paragraph 3 of the Constitution of 1947, promulgated Rule 3:54--7 relating to counsel fees to be effective September 15, 1948, coincidentally with the Judicial Article of the Constitution. Rule 3:54--7 in its original form provided that no fee for legal services should be allowed in the taxed costs or othewise, except in (a) matrimonial actions, (b) out of a fund in court, (c) in uncontested actions for the foreclosure of mortgages, or (d) 'as provided by these rules by law with respect to any action, whether or not there is a fund in court.' On January 21, 1949, paragraph (d) of the rule was amended by adding the qualification that 'the authority, heretofore vested in the Court of Chancery for the granting of counsel fees in causes generally, is hereby superseded.'

In the case of John S. Westervelt's Sons v. Regency, Inc., 3 N.J. 472, 70 A.2d 767 (1950), the Supreme Court first had occasion to consider the constitutionality, meaning and effect of the rule. It there unanimously held, 3 N.J. at pages 477--478, 70 A.2d at page 770:

'The rule as originally written is not ambiguous when considered as a whole. It was adopted in the exercise of the rule-making power relating to practice and procedure conferred upon the Court by Article VI, Section II, paragraph 3 of the Constitution of 1947. It was plainly designed to be self-contained and exclusive. The cited amendment (of paragraph (d)) of the rule makes clear the purpose to supersede in this regard the powers of the old Court of Chancery, not the statutory authority lodged in the Chancery Division of the Superior Court by force of subdivision (d) of the rule as appellant would construe it. The amendment was but a clarification of the original purpose, not an amendment of that purpose. * * * The phrase 'by law' is operative In futuro; it has no retrospective significance; it was not intended that the conflicting preexisting statutes should remain in force. The rule covers the field to the exclusion of all else.'

The next case dealing with the rule was Katz v. Farber, 4 N.J. 333, 72 A.2d 862 (1950), where it was held 'There is a fund in court 'where the court has jurisdiction over the fund or estate." 4 N.J. at page 344, 72 A.2d at page 868. Then came Liberty Title & Trust Co. v. Plews, 6 N.J. 28, at page 44, 77 A.2d 219, at page 226 (1950), where we held:

'In Rule 3:54--7 this court has specifically enumerated the types of actions in which allowances to counsel may be made, and the discretion of the trial court is limited to the granting or denying of allowances in such actions.'

As of the time of the decision in Liberty Title & Trust Co. v. Plews, supra, in addition to permitting an allowance of counsel fees in the types of actions and situations hereinbefore specifically mentioned in paragraphs (a), (b), (c), and (d) of Rule 3:54--7, an allowance of counsel fees was also permitted by Rule 1:2--28 on appeals in certain cases (made applicable to the Appellate Division of the Superior Court by virtue of Rule 4:2--6); by Rule 2:12--1 providing for the allowance of reasonable compensation to assigned counsel in murder cases; and by Rule 5:2--5, providing for the allowance of counsel fees on workmen's compensation appeals. Shortly after Liberty Title & Trust Co. v. Plews, supra, was decided, the Supreme Court on December 7, 1950 again amended Rule 3:54--7 by deleting from paragraph (d) the words 'or by law.' The effect of that amendment was to bar an allowance of counsel fees in all cases except those specifically provided for in the rules themselves, thereby completely eliminating any statutory basis for such an allowance. It is readily apparent, therefore, that authority for the allowance of counsel fees is to be found exclusively in Rule 3:54--7. For the sake of completeness it should be noted that Rule 3:54--7 was last amended effective January 1, 1952, by the addition of paragraph (e) dealing specifically with the allowance of counsel fees in probate actions.

That Rule 3:54--7 now constitutes the exclusive source of authority for the allowance of counsel fees was most recently reiterated by the Supreme Court in Driscoll v. Burlington-Bristol Bridge Co., 8 N.J. 433, at page 495, 86 A.2d...