author: Carton, J. A. D.

text:
    THE UNSATISFIED CLAIM AND JUDGMENT FUND BOARD AND JOSEPH POLAND, PLAINTIFFS-APPELLANTS, v. JOHN CLIFTON, THE ATLANTIC REFINING CO., CURTIS HINCKLEY, HARLEYSVILLE MUTUAL INSURANCE CO., GEORGE HAROLD LAUTERWASSER AND GEORGE HENRY LAUTERWASSER, DEFENDANTS-RESPONDENTS.
    Superior Court of New Jersey Appellate Division
    Argued September 27, 1971
    Decided November 3, 1971.

      Before Judges Sullivan, Leonard and Carton.

      Mr. Frank J. Skok argued the cause for appellants (Mr. Thomas J. Kapsalc of counsel; Messrs. Seifert, Frisch & Gruber, attorneys).

      Mr. Richard A. Amdur argued the cause for respondent, Harleysville Mutual Insurance Co. (Messrs. Hanlon, Argeris & Amdur, attorneys).
    Statement in lieu of brief filled on behalf of defendant Atlantic Refining Co. (Messrs. McCarter & English, attorneys).
    Statement in lieu of brief filed on behalf of defendants Lauterwasser (Messrs. Chamlin and Schottland, attorneys).
   The opinion of the court was delivered by

Carton, J. A. D.

Involved in this declaratory judgment action is the interpretation of an exclusionary clause in an automobile liability policy and the extent of its effect on the omnibus clause of the policy.

The pertinent factual background is substantially undisputed. One Poland was employed by John Clifton, who operated a service station which he leased from Atlantic Refining Co. A customer, Curtis Hinckley, left his automobile at the station to have the brakes repaired. He requested Poland to deliver the car to his store nearby once the repairs had been completed. After Poland removed the car from a hydraulic lift he realized the repairs had not been made. He asked his friend, Lanterwasser, to guide him while he returned the car to the lift. Unfortunately, the ear slipped, pinning Lanterwasser to the wall.

Lauterwasser and his guardian ad Mem sued Poland, Clifton, Hinckley and Atlantic. Poland and Clifton had no liability insurance and were represented by attorneys for the Unsatisfied Claim and Judgment Eund. Hinckley was insured by Harleysville Mutual Insurance Co. During the course of the trial of the negligence action the court granted Hinckley’s motion for summary judgment. His insurer, Harleysville, thereupon took the position that, because the named insured was relieved as a defendant, it had no further obligations under the policy. The Eund and Poland then brought this declaratory judgment action to determine whether Harleysville was required to defend Poland.

After the denial of plaintiff’s motion for summary judgment in the declaratory judgment action, plaintiffs Lauterwasser obtained verdicts against Poland aggregating $15,500. This appeal by the Eund and Poland is taken from the denial of summary judgment.

In denying plaintiffs’ motion for summary judgment the trial court adopted in substance defendant-insurer’s contention that the language of an exclusionary clause in the policy controlled. The court held that the clause must be deemed to be applicable to use of the automobile by Poland while he was employed or engaged in the automobile business. Therefore it had the effect of denying coverage. Cf. LeFelt v. Nasarow, 71 N. J. Super. 538 (Law Div. 1962), aff’d p. c. 76 N. J. Super. 576 (App. Div. 1962); cert. den. LeFelt v. Aetna Ins. Co., 39 N. J. 86 (1963); Providence Wash. Ins. Co. v. Glens Falls Ins. Co., 114 N. J. Super. 350 (Ch. Div. 1971), and Willis v. Security Insurance Group, 53 N. J. 260, aff’g 104 N. J. Super. 410 (Ch. Div. 1968).

The exclusionary clause involved provides:

EXCLUSIONS. This policy does not apply:
Under the Liability, Medical Expense and Accidental Death Benefit Coverages,
(g) to any automobile or trailer while maintained or used by any person while such person is employed or otherwise engaged in the automobile business, but this exclusion does not apply to the maintenance or use of an owned automobile (1) by the named insured or a relative, or (2) by any other insured in an automobile business in which the named insured has an interest as proprietor or partner.
sí #

We deem it unnecessary to consider the correctness of the trial court’s interpretation since we conclude that the exclusionary clause, thus construed, constituted an invalid attempt to limit the scope of protection intended to be afforded to persons using the vehicle with permission of the named insured.

The Motor Vehicle Responsibility Law requires that any liability insurance policy issued in this State shall designate the motor vehicle which is to be covered, and “insure the insured named therein and any other person using or responsible for the use of any such motor vehicle with the express or implied consent of the insured * * N. J. S. A. 39:6-46. This statute also prohibits any conflict between the form of the policy and the provisions of the act. N. J. S. A. 39:6-48.

The omnibus clause of the Harleysville policy which is designed to carry out this legislative mandate reads as follows :

PERSONS INSURED. Under the Liability and Medical Expense Coverages, the following are insureds:
(a) with respect to an owned automobile,
(1) the named insured,
(2) any other person using such automobile with the permission of the named insured, provided his actual operation or (if he is not operating) his other actual use thereof is within the scope of such permission * * *.

In Selected Risks Ins. Co. v. Zullo, 48 N. J. 362 (1966), the Supreme Court enunciated the principle that there can be no departure from the omnibus coverage described in N. J. S. A. 39 :6-46. It ruled (at 374) that the omnibus clause under consideration in that case must be read to accord with the public policy of this State as established by the Motor Vehicle Responsibility Law. Speaking for the court, Justice Proctor commented:

* * * It is highly unlikely that the Legislature would want to narrow the coverage in this area of remedial legislation * * *. Without clear language we will not find legislative intent to deny some innocent victims of motor torts the possibility of satisfying their just claims for damages against the insurance carrier of the owner of the motor vehicle who had given permission to the operator, [at 372-373]

Using this approach, the court in Willis v. Security Insurance Group, supra, voided endorsement to a policy as an invalid attempt to limit coverage under the omnibus clause. See also, Kish v. Motor Club of America, 108 N. J. Super. 405 (App. Div. 1970).

Poland, as a permitted user under the terms of the omnibus provision, was entitled to protection under the policy for the duration of his permitted use. We see no sound reason why such rights should be lost, abridged or suspended during the period of the permitted use simply because the permittee may arguably have been engaged in the automobile business. To hold otherwise would have the effect of denying to injured persons the possibility of recovering for their damages.

This view we deem to be consonant with the legislative philosophy as interpreted in Zullo and the eases which have followed it. Nothing in the statute evidences a. legislative intention to the contrary. It makes no difference that the limitation was sought to be accomplished through an exclusionary provision of the policy. To the extent that such clause may have the effect of limiting the protection afforded the permitted user under the omnibus clause, it must be held invalid. Zullo, 48 N. J. at 370.

We are not concerned with the fact that the insurer may have inserted the automobile business exclusion in the policy to protect itself against the greater hazards involved in that business and that the company may have intended thereby to make the exclusion applicable to permitted users. Nor is it of any significance that Poland’s employer could have obtained insurance covering the use of automobiles in its repair business. The existence of such insurance might involve a question of priorities with which we are not here concerned. Considerations of this kind must yield to the overriding policy expressed by the statute. See Zullo, supra-

Reversed and remanded with direction that summary judgment be entered in favor of plaintiffs Unsatisfied Claim and Judgment Pund Board and Joseph Poland, and against defendant Harleysville Mutual Insurance Co. No costs.


source: Caselaw Access Project

author: Furman, J. S. C.

license: Public Domain

text:
    OAKWOOD AT MADISON, INC., A CORPORATION OF THE STATE OF NEW JERSEY, BEREN CORPORATION, A CORPORATION OF THE STATE OF NEW JERSEY, DOROTHY MAE SHEPARD, LOUVENIA ALSTON, WILLIAM BAYLIS, BRENDA SMITH, LIZZIE WALKER AND GERALDINE YORK, PLAINTIFFS, v. THE TOWNSHIP OF MADISON AND THE STATE OF NEW JERSEY, DEFENDANTS.
    Superior Court of New Jersey Law Division
    Decided October 27, 1971.

      Mr. Frederick C. Mezey, Mr. Dennison Ray of the New York bar, admitted pro hac vice, and Mrs. Lois Thompson of the New York bar, admitted pro hac vice, for plaintiffs (Messrs. Mezey & Mezey, attorneys).

      Mr. Richard F. Plechner, for the defendant Township of Madison.

      Mr. Jonathan Weiner, Deputy Attorney General for defendant State of New Jersey (Mr. George F. Eugler, Attorney General, attorney).
   Furman, J. S. C.

This prerogative writ action challenges the constitutionality of the Zoning Act, N. J. S. A. 40:55~30 et seq., and the validity under that act of the Madison Township zoning ordinance adopted on September 25, 1970. Plaintiffs are two developers, who own vacant and develop-able land in Madison Township, and six individuals, all with low income, representing as a class those who reside outside the township and have sought housing there unsuccessfully because of the newly adopted zoning restrictions, including one and two-acre minimum lot sizes.

Madison Township is 42 square miles in the southeast corner of Middlesex County, extending from Raritan Bay westward. In two decades of explosive growth from 1950 to 1970, paralleling the trend in the county and region, its population mounted from 7,366 to 48,715. Most of the new housing was single-family in developments on 15,000 square foot or smaller lots, and since 1965 multi-family in garden apartments. Reflecting school construction and other expanded costs of government, the real property tax rate increased from one of the lowest in 1950 to the highest in 1970 in the county.

Despite this population surge much of the township, approximately 30% of its land area, excluding Cheesequake State Park, is vacant and developable. A member of the planning firm which submitted a new master plan in May 1970 testified that the township could hold a population of 200,000 without overcrowding.

A new township administration in 1970 determined to curb population growth significantly and thus to stahlize the tax rate. The township was to “catch its breath,” a phrase recurrent in the testimony. Because of exigencies of time arising from a court order in other litigation, the planning firm which was retained early in 1970 was given only two months within which to submit its proposal for a master plan. The deadline was met. The master plan proposal relied in part upon the studies of the township’s previous planning consultant. It purported to represent a shift in approach, from explosive growth on a patchwork basis to orderly growth in densely developed areas and the preservation of open areas. The new planning firm’s recommendations were followed, witli three important exceptions discussed infra, in the ensuing zoning ordinance.

The attack on the constitutionality of the Zoning Act is novel. By way of background plaintiffs suggest that the purposes of zoning, which were enacted in 1928, a time of relatively static population, are not commensurate with the general welfare today, a time of rapid population expansion. Specifically plaintiffs contend that the declared zoning purposes are fatally defective, thwarting the general welfare, because they fail to encompass housing needs.

N. J. S. A. 40:55-32 is as follows:

Suck regulations shall be in accordance with a comprehensive plan and designed for one or more of the following purposes: to lessen congestion in the streets; secure safety from fire, flood, panic and other dangers; promote health, morals or the general welfare; provide adequate light and air; prevent the overcrowding of land or buildings; avoid undue concentration of population. Such regulations shall be made with reasonable consideration, among other things, to the character of the district and its peculiar suitability for particular uses, and with a view of conserving the value of property and encouraging the most appropriate use of land throughout such municipality.

The New Jersey Constitution (1947), Art. IV, § VI, par. 2, empowered the Legislature to enact a zoning enabling law authorizing municipalities to adopt zoning ordinances to regulate land uses. N. J. S. A. 40 :55 — 30 et seq. was thereupon reenacted. The zoning enabling act is not immune from other constitutional requirements, including in conformity with the police power that it must be in reasonable furtherance of the public health, safety or general welfare. Fischer v. Bedminster Tp., 11 N. J. 194 (1952); Mansfield & Swett, Inc., v. West Orange, 120 N. J. L. 145 (Sup. Ct. 1938); cf. Ward v. Scott, 11 N. J. 117 (1952).

Provision for housing needs, local and regional, is not a specified purpose of zoning under N. J. S. A. 40:55-32, but promotion of the general welfare is. Although stated in the disjunctive as a zoning purpose, the general welfare must not be circumvented or flouted in municipal zoning. Harrington Glen, Inc., v. Mun. Bd. Adj., Leonia, 52 N. J. 22, 32 (1968); Roselle v. Wright, 21 N. J. 400, 410 (1956); Katobimar Realty Co. v. Webster, 20 N. J. 114, 122, 123 (1955); Schmidt v. Board of Adjustment, Newark, 9 N. J. 405, 416 (1952); Gabe Collins Realty, Inc., v. Margate City, 112 N. J. Super. 341 (App. Div. 1970).

Thus, it cannot be maintained that the Legislature in the Zoning Act has empowered municipalities to defy the general welfare or to ignore housing needs, insofar as such needs are embraced within the general welfare. Whether provision for housing needs is or is not enumerated as a purpose of zoning appears to be a legislative, not a judicial, judgment. The challenge to the constitutionality of the Zoning Act is therefore dismissed.

Alternatively, plaintiffs contend that the township zoning ordinance is invalid because it fails to promote reasonably the legislative purposes of the Zoning Act in several provisions dealing with single and multi-family housing which are so essential that the entire ordinance should be struck down.

About 55% of the land area of the township is zoned R40 or R80. The R80 zone is new, the R40 zone expanded. Minimum lot size is one acre in R40 and two acres in R80. Minimum floor space is 1500 square feet in R40 and 1600 square feet in R80. According to the former township engineer, 80% of R40 (or about 5500 acres) and 30% of R80 (or about 2500 acres) is vacant and developable. Minimal acreage is vacant and developable in the R7, RIO and R20 zones. Since the 1930s there has not been a development on two-acre lots within the township. Since 1964 only one subdivision plan for one-acre lots has been proposed. Land and construction costs are such that the minimum purchase price in R40 would be $45,000 and in R80 $50,000. Only those with incomes in the top 10% of the nation and county could finance new housing in E40; an even smaller percentage in E80.

The multi-family zones, which are scattered through the township, are so restricted in land area that no more than 500 to 700 additional units can be built in all. Three or more bedroom units are not permitted. Two bedroom units must be limited to 20% of the total units in any apartment development. New units must not exceed 200 in any year.

Madison Township, among other municipalities, is encouraging new industry. Industry is moving into the county and region from the central cities. Population continues to expand rapidly. New housing is in short supply. Congestion is worsening under deplorable living conditions in the central cities, both of the county and nearby. The ghetto population to an increasing extent is trapped, unable to find or afford adequate housing in the suburbs because of restrictive zoning. See N. J. S. A. 55:16-2 (L. 1967, c. 112) : “It is hereby declared that there is a severe housing shortage in the State. * * *”

The township concedes the invalidity of the limitation to 200 new multi-family units per year but defends all other provisions of the zoning ordinance which are challenged. Its contentions are that it is seeking a balanced community, encouraging high income and moderate income housing to balance its predominant low income housing, and protecting drainage systems where high density residential development might result in floods and surface drainage problems and interfere with and imperil underground water resources.

As recently stated by the Supreme Court in Harvard Enterprises, Inc., v. Bd. of Adj., Madison Tp., 56 N. J. 362 (1970), litigation arising out of prior zoning provisions in Madison Township:

* * * it should be noted that the judicial role in reviewing a zoning ordinance is tightly circumscribed. There is a strong presumption in favor of its validity, and the court cannot invalidate it, or any provision thereof, unless this presumption is overcome by a clear showing that it is arbitrary or unreasonable, [at 368]

The underlying objective of the ordinance under attack was fiscal zoning, zoning as a device to avoid school construction and other governmental costs incident to population expansion. Housing needs of the region were not taken into consideration in its enactment, according to several members of the township council and planning board.

The three recommendations in the proposed master plan which were rejected by the township' council and planning board all would have tended towards increased population and governmental services. The planning consultant advised no limitation on the number of bedrooms in multi-family apartment units, minimum floor spaces of 1100 square feet in the R40 zone and 1200 square feet in the R80 zone, and “floating zones” of high population density on less than half-acre minimum lots in any zone within the township but separated from each other, up to 100 houses in each floating zone.

Eiscal zoning per se is irrelevant to the statutory purposes of zoning. But the Supreme Court in Gruber v. Mayor, etc., Raritan Tp., 39 N. J. 1, 9 (1962) recognized that “alleviating the tax burden and the harmful school congestion” was a permissible zoning purpose if done reasonably and in furtherance of a comprehensive zoning plan. Gruber and the antecedent Newark, etc., Cream Co. v. Parsippany-Troy Hills Tp., 47 N. J. Super. 306 (Law Div. 1957), may be distinguished because they dealt with the pursuit of tax revenues through zoning for new industry, not the stabilization of the tax rate through zoning to exclude new low and moderate income housing.

In any event, the Madison Township zoning ordinance must stand or fall not as fiscal zoning. The test must be whether it promotes reasonably a balanced and well ordered plan for the entire municipality.

Several decisions have recognized balance within a municipality, which is in part undeveloped, as a valid zoning purpose. Kozesnik v. Montgomery Tp., 24 N. J. 154 (1957); Berdan v. Paterson, 1 N. J. 199, 205 (1948); Newark, etc., Cream Co. v. Parsippany-Troy Hills Tp., supra.

Fischer v. Bedminster Tp., supra, is the leading New Jersey decision sustaining a large minimum lot size, five acres over 85% of the municipality. Its rationale does not apply. Chief Justice Vanderbilt rested his holding on “preserving the character of the community, maintaining the value of property therein and devoting the land throughout the township for its most appropriate use.” The Madison Township zoning ordinance under attack has provided for one-acre and two-acre minimum lot sizes on largely vacant land, which as such has no established residential character or residential property values.

Other New Jersey decisions in favor of minimum lot requirements concern relatively small lot sizes in built-up communities. Bogert v. Washington Tp., 25 N. J. 57 (1957); Mountcrest Estates, Inc., v. Mayor, etc., Rockaway Tp., 96 N. J. Super. 149 (App. Div. 1967); Clary v. Eatontown, 41 N. J. Super. 47 (App. Div. 1956).

On the other hand, the highest courts of Pennsylvania and Virginia has struck down two, three, and four-acre minimum», lot requirements in undeveloped areas as invalid zoning, without reasonable relation to the general welfare. Appeal of Kit-Mar Builders, Inc., 439 Pa. 466, 268 A. 2d 765 (Sup. Ct. 1970); National Land and Investment Co. v. Kohn, 419 Pa. 504, 215 A. 2d 597 (Sup. Ct. 1965) ; Board of County Sup’rs of Fairfax County v. Carper, 200 Va. 653, 107 S. E. 2d 390 (Sup. Ct. App. 1959).

The Pennsylvania Supreme Court commented in National Land:

* * * Four acre zoning represents Easttown’s position that it does-not desire to accommodate those who are pressing for admittance to the township unless such admittance will not create any additionaE burdens upon governmental functions and services. The question posed is whether the township can stand in the way of the natural forces which send our growing population into hitherto undeveloped areas in search of a comfortable place to live. We have concluded not. A zoning ordinance whose primary purpose is to prevent the entrance of newcomers in order to avoid future burdens, economic and otherwise, upon the administration of public services and facilities can not be held valid, [at 612]

Minimum floor spaces by zoning were ruled valid in Lionshead Lake, Inc., v. Wayne Tp., 10 N. J. 165 (1952), an authority which is controlling if, in context with the entire challenged zoning ordinance, the minimum floor spaces of 1500 square feet in R40 and 1600 square feet in R80 serve the valid zoning purpose of a balanced community. See Nolan and Horade, “How Small A House? — Zoning for Minimum Space Requirements,” 67 Harv L. Rev. 967 (1954), and Haar, “Zoning for Minimum Standards: The Wayne Township Case,” 66 Harv. L. Rev. 1051 (1953).

In Madison Township’s approach to the objective of balance, its attempted cure is a worse malady than whatever imbalance existed. About 8000 acres of land, apparently prime for low or moderate income housing development, have been taken out of the reach of 90% of the population, prohibitive in land and construction costs. The acreage available for multi-family apartments units is minuscule. Eamilies with more than one child are barred from multifamily apartments because of the one and two bedroom restrictions, restrictions without any guise of a health or safety purpose.

The exclusionary approach in the ordinance under attack coincides in time with desperate housing needs in the county and region and expanding programs, federal and state, for subsidized housing for low income families.

Regional needs are a proper consideration in local zoning. DeSimone v. Greater Englewood Housing Corp. No. 1, 56 N. J. 428 (1970); Duffcon Concrete Products v. Cresskill, 1 N. J. 509, 513 (1949); Gartland v. Maywood, 45 N. J. Super. 1, 6 (App. Div. 1957); Molino v. Mayor, etc. Glassboro, 116 N. J. Super. 195, 204 (Law Div. 1971).

In pursuing the valid zoning purpose of a balanced community, a municipality must not ignore housing needs, that is, its fair proportion of the obligation to meet the housing needs of its own population and of the region. Housing needs are encompassed within the general welfare. The general welfare does not stop at each municipal boundary. Large areas of vacant and developable land should not be zoned, as Madison Township has, into such minimum lot sizes and with such other restrictions that regional as well as local housing needs are shunted aside. Vickers v. Tp. Com., Gloucester Tp., 37 N. J. 232 (1962), upholding a prohibition against trailer camps anywhere within a municipality, is not to the contrary.

The ordinance under attack must be held invalid because it fails to promote reasonably a balanced community in accordance with the general welfare, unless it is defensible on some other ground. Such other ground is urged, namely that low population density zoning provides protection against floods and other surface drainage problems and against diversion of water from an aquifer, an underground water resource.

Most of the R80 districts and a few of the R40 districts are along the course of four brooks running northwesterly through the township into South River. Deep Run, rising in Burnt Ely Bog, which is partially in the township, has overflowed its banks recurrently during heavy storms. Meadowland and woodland abut Matchaponix Brook, the western boundary of the township. Burnt Ely Bog, which is zoned R40 and R80, may be both an intake and a discharge area for the 45 square mile Englishtown aquifer.

Elood or drainage problems were not discussed in the proposed master plan of May 1970, in no specific detail in the studies of the previous planning consultant. There was no consideration in the record of alternative plans, such as retention basins. The common knowledge that impermeable surfaces, specifically roofs and streets, increase surface water run-off is insufficient to support the rozoning of substantially all vcaant land in the township into one and two acre zones. Similarly, whether the Englishtown aquifer would be imperiled by the development of the Burnt Ely Bog area is a specialized hydrological subject.

Only engineering data and expert opinion and, it may be, ecological data and expert opinion could justify the ordinance under attack. These were lacking both in the legislative process and at the trial. The record fails to substantiate that safeguarding against flood and surface drainage problems and protection of the Englishtown aquifer would be reasonably advanced by the sweeping zoning revision into low population density districts along the four water courses and elsewhere or the exclusionary limitations on multi-family apartment units.

For all the foregoing reasons the Madison Township zoning ordinance of September 25, 1970 is held to be invalid in its entirety.


author: Per Curiam.

text:
    STATE OF NEW JERSEY, TOWNSHIP OF SPRINGFIELD, PLAINTIFF-RESPONDENT, v. WILLIAM M. PACK, DEFENDANT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Argued October 18, 1971
    Decided November 4, 1971.

      Before Judges Coneord, Matthews and Eritz.

      Mr. Edward Pack argued the cause for appellant.

      Mr. Peter J. McDonald argued the cause for respondent.
   Per Curiam.

Defendant contends that Springfield’s ordinance prohibiting parking anywhere in the municipality between 2 a.m. and 6 a.m. is ineffectual because of the failure to post notice of the prohibition every 250 feet throughout every thoroughfare in the town. We disagree, and we affirm the several convictions of defendant for violation of the ordinance.

Although defendant concedes that signs informative of the ordinance regulation have been placed on every street leading into or out of the municipality, he contends that the 250-foot posting requirement is mandated by N. J. S. A. 39 :4-183.17, which directs that “in the case of prohibited and limited parking, signs shall be placed at the first and last point where the legal requirement is effective and at intervals of not greater than 250 feet.” The same section specifies, however, that

This subsection shall not apply to the spacing of prohibited or limited parking signs which apply only between the hours of sunset and sunrise.

We think the defendant’s position lacks merit for either of two alternative reasons.

1. Where the particular parking regulation is applicable throughout the entire municipality it is not reasonably to be deemed that the Legislature intended so burdensome and excessive a requirement as that such a notice must be posted every 250 feet on every municipal street. England v. Millburn Tp., 122 N. J. L. 462 (E. & A. 1939), so holds in effect.

2. The saving clause in relation to prohibition of parking between the hours of sunset and sunrise is applicable in the spirit if not precisely in the letter of the legislative language. The latter should give way to the former to accomplish a just and sensible result. Clearly the Legislature did not intend that an ordinance designed to discourage all-night parking throughout a municipality be hobbled with a 250-foot sign-spacing condition.

The spirit of the statutory requirement (N. J. S. A. 39:4-198) that signs be posted “at the places where the ordinance * * * is effective” is met, in the context of this situation, by placing the signs at each entrance into the municipality.

Affirmed.


author: Lane, J. A. D.

text:
    STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT, v. EARTHA PUGH, DEFENDANT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Submitted October 20, 1971
    Decided October 29, 1971.

      Before Judges Kilkenny, Labkecqub and Lane.

      Mr. Stanley O. Van Ness, Public Defender, attorney for appellant (Mr. Gerald T. Foley, Jr., Deputy Public Defender, of counsel and on the brief).

      Mr. Joseph P. Lordi, Essex County Prosecutor, attorney for respondent (Mr. David 8. Baime, Assistant Prosecutor, of counsel).
   The opinion of the court was delivered by

Lane, J. A. D.

Defendant appeals from a judgment of conviction of murder of Leon Port entered upon his plea of non vult. On May 10, 1967 he was sentenced to the New Jersey State Prison for life. For sufficient reasons, on May 10, 1971 we granted leave to file a notice of appeal as within time.

The Public Defender argues on behalf of defendant that his sentence was manifestly excessive. In a pro se brief defendant argues that he was deprived of due process because the trial court failed to hold a hearing to determine that he was competent to stand trial and failed to hold a hearing to determine that he was competent to enter a plea of non vult. Defendant also argues that in fact he was not competent to stand trial because he had no memory of the events leading to and at the time of the killing. Additionally, he contends that the plea of non vult was not voluntary.

In three separate indictments defendant was indicted for the murder of Leon Fort, the murder of Julius Ravin and an atrocious assault and battery upon George Ivory, all committed at or about the same time on November 12, 1965. The indictments were filed January 15, 1966. On January 31, 1966 defendant, represented by competent counsel, pleaded not guilty. The indictments were assigned for trial on May 16, 1966. On May 23, 1966 during the course of the trial the court declared a mistrial based upon reports from defendant’s and the State’s psychiatrists that he was suffering from chronic brain syndrome with psychotic reaction. He was transferred to the New Jersey State Hospital where lie remained until discharged December 9, 1966.

The indictments were again set down for trial on April 3, 196? before the same judge. Before the jury was selected defendant retracted the plea of not guilty and pleaded non vuli to the indictment charging the murder of Leon Port. Subsequently, the other two indictments were dismissed. Criminal Procedure Porm 13A had been completed by defendant. When the trial judge addressed defendant as to whether he was asking the court to accept the plea of non vult and whether he understood what the court was saying to him, defendant replied, “Not exactly good, sir.” The question was put to defendant in a simpler form. He said that he did understand it. When asked whether he understood that the effect of the plea of non vult was the same as the effect of the plea of guilty, defendant replied, “All I understand is what my lawyer told me.” When asked whether his plea was being voluntarily made, he said, “Yes, just like what my lawyer tells me.” Later in the hearing the following occurred:

THE COURT: You are doing it only because you want to do it?

DEPENDANT PUGH: Only because what my lawyer told me.

THE COURT: You want to do it after consultation with your lawyer ?

DEPENDANT PUGH: After I talked with my lawyer.

Defendant did say that he understood what he was doing after his lawyer had explained it to him.

At the sentencing his attorney advised the court that after defendant was released from the State Hospital, he was examined by the state psychiatrist and by a neurologist and a psychiatrist on his own behalf and judged to be competent to stand trial. When the court asked defendant whether he understood that the effect of the plea of non vult was to admit the charge, the defendant did not know what “admit” meant. He further said as to the incident, “I don’t know what happened.” Defendant said that he was doing “what my lawyer said.”

Defendant’s attorney advised the court that he had seen signed statements obtained by the State from persons who witnessed the event. Although the attorney represented to the court that he was unable to get any information about the incident from defendant because of his alleged lack of memory, the trial judge did not believe that there was in fact a lack of memory. He stated on the record that he thought defendant was “trying to play fast and loose with me.”

The presentenee report showed that defendant was 44 years old, married, with six children ranging in age from 8 through 20. The report contains a statement of defendant in which he outlined in detail the circumstances of the incident. The arrest record shows a number of minor violations plus a conviction in 1959 for the unlawful use of a dangerous weapon and a conviction in 1965 for assault and battery on a special police officer.

I

Defendant argues that the trial court’s failure to hold a hearing on his competency to stand trial or enter a non vult plea was a denial of due process.

A defendant cannot be put to trial if he has a condition of mental illness or retardation which prevents him from rationally comprehending his position and from consulting with counsel in the preparation of his defense. Pate v. Robinson, 383 U. S. 375, 377, 86 S. Ct. 836, 838, 15 L. Ed 2d 815, 817 (1966); Dusky v. United States, 362 U. S. 402, 80 S. Ct. 788, 789, 4 L. Ed. 2d 824, 825 (1960); State v. Caralluzzo, 49 N. J. 152, 153 (1967); State v. Lucas, 30 N. J. 37, 72 (1959). If the court either before or during the trial has facts brought to its attention which raise a bona fide doubt of the condition of defendant’s mind affecting his ability to comprehend his position or to assist in his defense, the question should be settled before proceeding further. State v. Lucas, supra, 30 N. J. at 73; State v. Auld, 2 N. J. 426, 435 (1949); State v. Peacock, 50 N. J. L. 34, 36 (Sup. Ct. 1887), rev’d on other grounds 50 N. J. L. 653 (E. & A. 1888). Before Pate v. Robinson, supra, 383 U. S. 375, 86 S. Ct. 836, our Supreme Court had said that while a court has the power to order an inquiry into the defendant’s mental qualifications to stand trial, failure to exercise the power will not be reviewed on appeal unless it clearly and convincingly appears that the defendant was incapable of standing trial. State v. Lucas, supra, 30 N. J. at 73. It is now a constitutional mandate that a state court hold a hearing on a defendant’s competency to stand trial where the evidence raises a bona fide doubt as to such competency. Pate v. Robinson, supra, 383 U. S. at 385, 86 S. Ct. 836.

The facts in this case do not indicate a bona fide doubt as to whether defendant had sufficient present ability to consult with his lawyer with a reasonable degree of rational understanding. They do not indicate a bona fide doubt as to whether he had a rational as well as factual understanding of the proceedings against him.

At the entering of the plea of non vult counsel for defendant stated to the court:

Your Honor, I have discussed with the defendant, explained to him, the prospects of pleading to one indictment, Indictment No. 818. I have explained to him the sentence possibilities and probabilities. I believe he understands them. He has filled out the Form 13-A. I have explained each question and answer to him and he has signed it.

Defendant is mildly retarded, with an I.Q. of 71. Apparently while in the military service he received a head injury. At the sentencing proceeding defendant told the court that he did not know what happened on the day of the killing because he had been hit in the head. When defendant entered his plea of non mill, the court repeatedly asked defendant if he understood the charges against him and knew what he was doing. Defendant’s response was that he understood what he was doing after his lawyer had explained the plea to him. At the sentencing the court again asked defendant if he understood the charges. The defendant at first responded that he did not know what happened at the time the crime occurred. He then was asked whether he knew a plea of non vult had the effect of admitting the truth of the charges. His response was that his lawyer explained the plea to him and he understood it as his lawyer had explained it and he followed his lawyer’s advice.

It is clear from the record that although defendant found it difficult to understand certain phraseology, he did understand when simpler words and sentence structure were used. There is nothing to indicate that defendant could not reasonably comprehend his position and consult with his lawyer.

Eederal courts have held that a judicial determination of mental competency to stand trial is required when there has been an earlier judicial determination of incompetency and no subsequent judicial determination of competency. Kelley v. United States, 95 U. S. App. D. C. 267, 221 F. 2d 822, 824 (1954); Gunther v. United States, 94 U. S. App. D. C. 243, 215 F. 2d 493, 496 (1954); Contee v. United States, 94 U. S. App. D. C. 297, 215 F. 2d 324, 328 (1954). Before the second trial, at defense counsel’s request defendant was examined by a psychiatrist and a neurologist and judged to be competent to stand trial. In addition the staff of the State Hospital and the state psychiatrist found defendant competent to stand trial. Defense counsel had informed the court at the sentencing that a neurologist and a psychiatrist had found defendant competent to stand trial. In addition at the time of sentencing, the court said that it had had the benefit of defendant’s presentence report. That report contained the opinion of the State’s psychiatrist given after defendant had been released from the State Hospital and returned to the Essex County Jail finding defendant competent to stand trial.

We have carefully reviewed pertinent records of the New Jersey State Hospital and the medical reports submitted by the State’s psychiatrist and by the defendant’s psychiatrist and neurologist.

The hospital record contains a notation of an examination on November 28, 1966. At that time the doctor stated, “The patient was seen as knowing sufficient details of his offense, had knowledge of his legal rights and the functions of the court and it appears that at this time, he is capable of assisting his attorne]" and following his advice.” The staff of the New Jersey State Hospital concurred in that finding. On December 1. 1966 the chief executive officer of the New Jersey State Hospital reported to the court that defendant was free of the symptoms which required his commitment and was “able to consult with counsel, assist in the preparation of his defense [and] participate in a trial.”

The state’s psychiatrist who examined defendant on March 29, 1967 concluded that he was able to understand the nature and quality of his behavior at the time of the offense, that he could cooperate with counsel in his own behalf and that he was capable of standing trial. The neurologist who examined on April 4, 1967 at the request of defense counsel concluded that defendant was not suffering any psychotic reaction and that he was able to cooperate with counsel. The psychiatrist who examined defendant at the request of defense counsel concluded, “On this occasion, he was found to be in good touch with his surroundings, correctly oriented in all spheres, displaying no evidences of any hallucinations, delusions or paranoid trends. He was considereed to be wholly competent and able to assist in his own defense and consult with his counsel.”

There was nothing before the court at the time the trial began or when the plea was accepted that would raise a bona fide doubt of the competency of the defendant to stand trial or to enter a plea of non vult. It is perfectly apparent that defendant’s counsel fully investigated the possibility of raising such issue. He concluded, and we believe rightfully, that there was no evidence to support any such contention.

There was no error in the failure to hold a hearing. State v. Hale, 116 N. J. Super. 106, 119 (Law Div. 1971); United States ex rel. Roberts v. Yeager, 402 F. 2d 918 (3 Cir. 1968). Cf. Whalem v. United States, 120 U. S. App. D. C. 331, 346 F. 2d 812, 817, cert. den. 382 U. S. 862, 86 S. Ct. 124, 15 L. Ed. 2d 100 (1965).

II

Defendant contends that he was incompetent to stand trial because he did not remember shooting anyone. The trial judge did not believe his statement to that effect. Our examination of the record convinces us that the trial judge was completely justified in reaching that conclusion.

Defendant signed a statement November 12, 1965 setting forth in detail exactly what happened at the time of the killings. A note in the hospital record under date of May 30, 1966 states, “He states that the argument pursued over change of a fifty dollar bill and this was the cause of the shooting episode. He claims he does not remember exactly what happened.” (Emphasis added). The report of the psychiatrist engaged by defense counsel states in part:

He related that he has been lodged in jail since (about) November 12, 1965, on a charge of “Murder.” He related that four or five days prior to that he had purchased a new 12-gauge bolt-action shotgun at Sears Roebuck, because his old gun was broken, and used this to go hunting; that for those several days wherein there were no jobs out of the Union Hall he had gone hunting with several different companions on separate days; that on some of those occasions it was down on Route 27 below New Brunswick. He also advised that on the morning of November 12, after checking in at the Union Hall and being advised by the Steward not to take a job that was available and to wait for a better one, he then invited several of his friends to go hunting but found that none could go that day. As a consequence, he joined a companion and then went to this man’s house and several other places for drinks •— but the details of where they went and what they consumed was rather hazy. He does recall, however, going to the Cotton Club and eventually becoming involved in an argument with “Shaky” over paying for his drinks with a $50 bill and that, consequently, after the argument went on for some time. Shaky struck him on the back of the head with a billyclub. Following that, he admitted that he was quite angry with Shaky, left the club, went out to secure the shotgun out of his car, and sometime later (the exact time was not certain, but he estimated it at about twenty minutes) he went seeking out Shaky in the liquor store next door and fired the gun at a person that he thought was Shaky. He was still quite disturbed to find that it was his good friend, “Yuddi.” (Presumed to be Julius, the owner of the club.) Then with patient effort, he was able to recall that he did re-enter the club and pursue Shaky by firing the shotgun twice until the latter fell to the floor. He then recalled other factors as he left the club and was pursued by somebody until apprehended by the police. He was able to recall fairly accurately the fact that they took him to police headquarters, obtained a statement, and, subsequent to that, he was taken to the hospital to have his head laceration repaired; finally, he vividly recalled speaking with you, as his attorney, and providing a more detailed and complete account of the events which led up to his incarceration.

Even if in fact defendant did not remember the details of the crime, he would still be competent to stand trial. Amnesia concerning the crime does not bar prosecution. United States v. Sullivan, 406 F. 2d 180, 185-186 (2 Cir. 1969); Arizona v. McClendon, 103 Ariz. 105, 437 P. 2d 421 (Sup. Ct. 1968); Reagon v. State, 251 N. E. 2d 829, 831 (Ind. Sup. Ct. 1969), cert. den. 397 U. S. 1042, 90 S. Ct. 1364, 25 L. Ed. 2d 653 (1970); Commonwealth ex rel. Cummins v. Price, 421 Pa. 396, 218 A. 2d 758 (Sup. Ct.), cert. den. 385 U. S. 869, 87 S. Ct. 136, 17 L. Ed. 2d 96 (1966). Cf. State v. Pacheco, 106 N. J. Super. 173, 177-180 (App Div. 1969), aff’d o. b. 54 N. J. 579 (1969), cert. den. 400 U. S. 834, 91 S. Ct. 68, 27 L. Ed. 2d 65 (1970). Compare, Wilson v. United States, 129 U. S. App. D. C. 107, 391 F. 2d 460 (1968). A contrary rule would unduly hamper the State’s interest in the prosecution of violators of its criminal laws and jeopardize the safety and security of other citizens. “A defendant is competent to stand trial if he can comprehend his position and consult intelligently with counsel in the preparation of his defense.” State v. Sinclair, 49 N. J. 525, 549 (1967). Amnesia concerning the crime does not render a defendant unable to comprehend his position or to consult intelligently with counsel in the preparation of his defense.

Defendant argues that the plea of non vult was not voluntary and therefore invalid. Defendant completed Criminal Procedure Form 13A which contains questions designed to ascertain defendant’s understanding of the charge against him and the consequence of the plea. N. J. S. A. 2A:113-3 provides for a plea of non vult to a charge of murder. R. R. 3:5-2 (a) (now R. 3:9-2) in effect at the time of defendant’s plea provided that a defendant may plead non vult for a crime punishable by death. The court may refuse to accept a plea of non vult and shall not accept it without first addressing the defendant personally and determining by inquiry that the plea is made voluntarily with understanding of the nature of the charge and the consequences of the plea. Although not specifically required by R. R. 3:5-2(a), the court must also determine that there was a factual basis for the plea. State v. Deutsch, 34 N. J. 190, 201 (1961). On an application to withdraw a non vult plea, the execution of Form 13A weighs heavily against a contention that the plea was not entered voluntarily and understandingly. It is not conclusive. State v. Herman, 47 N. J. 73, 77 (1966); State v. Deutsch, supra, 34 N. J. at 201.

It cannot be said that defendant was coerced into pleading non vult. At the time of the plea and sentencing defendant’s lawyer was with him. The trial court before accepting defendant’s plea and again before sentencing fully interrogated defendant and his counsel to make certain defendant knowingly executed Form 13A and fully understood the nature of the charge and the consequence of his plea. While defendant indicates that he was following the advice of his attorney, it is clear from the transcripts of the hearings that he understood the nature of the charge and the consequence of his plea. There is no indication that he was coerced into pleading non vult.

IV

Defendant’s last argument is that the sentence was excessive. While the appellate court has the power to review and modify sentences, such power must be exercised with extreme care. The court will overturn a sentence only upon a clear showing it was unduly punitive or there was an abuse of discretion by the sentencing judge. State v. Brown, 46 N. J. 96, 108 (1965); State v. Provoid, 110 N. J. Super. 547, 559 (App. Div. 1970). The burden of persuasion is on defendant. State v. Cox, 101 N. J. Super. 470 (App. Div. 1968), certif. den. 53 N. J. 510 (1969).

N. J. S. A. 2A:113-3 provides that if a plea of non vult on a murder charge is accepted, the sentence imposed shall be either imprisonment for life or the same as that for murder in the second degree (not more than 30 years).

Defendant argues that since he could not remember the shooting, all the elements of murder in the first degree were not present and consequently the court could not impose a life sentence. We have pointed out above that this argument is fallacious. Defendant has not shown that the sentence was an abuse of discretion.

The judgment of conviction is affirmed.


author: Seidman, J. C. C.

text:
    STATE OF NEW JERSEY, PLAINTIFF, v. NEW JERSEY NATIONAL BANK AND TRUST CO., A CORPORATION ORGANIZED UNDER THE LAWS OF THE UNITED STATES, DEFENDANT.
    Superior Court of New Jersey Chancery Division
    Decided October 27, 1971.

      Mr. Robert W. Dempsey, Deputy Attorney General, for plaintiff {Mr. George F. Kugler, Jr., Attorney General, attorney).

      Mr. Stephen G. Carton for defendant {Messrs. Carton, Nary, Witt & Arvanitis, attorneys).
   Seidman, J. C. C.

(temporarily assigned). This is an escheat action under N. J. S. 2A:37-11 et seq., the subject matter of which is unclaimed personal property held by the corporate defendant, consisting of shares of stock (including stock splits and stock dividends), ordinary cash dividends, and cash in lieu of stock dividends. During the course of these proceedings petitions were filed by claimants to portions of the property in question, and subsequently an order was entered by Judge Fritz adjudging the persons named therein to be the rightful and lawful owners of some of the shares of stock and cash in the hands of defendant.

What is left for determination is the escheatable status of the remaining unclaimed property. The parties have stipulated all pertinent facts and the issues have been submitted to the court for resolution. As framed by the State the questions are these:

“Is there any impediment existing to prevent the State from escheating each of the various types of property claimed in this litigation, and is there any limitation to the State’s right of escheat imposed by the fact that the defendant’s records show the last known address of the beneficial owner of the abandoned property to be in States other than New Jersey?”

The State contends that it can escheat all the property involved except where the last known address of the owner is in a state having an escheat law covering the type of property involved. The defendant concurs. In spite of the absence of apparent controversy between the parties, the court is obliged to determine the issues on the basis of existing law.

From the stipulated facts it appears that defendant institution was originally the Asbury Park and Ocean Grove Bank. Between October 1963 and April 1964 its name was New Jersey Trust Company; since then, except for a further change which occurred after the filing of this suit, it has been known as the New Jersey National Bank and Trust Company.

In 1961, as the result of a corporate reorganization, shares of new stock replaced existing shares at an exchange ratio of o.l to 1. Two years later, following a merger with the New Jersey Trust Company, the Asbury Park and Ocean Grove Bank stock was exchanged on a 1 for 1 basis for stock of the New Jersey Trust Company. The merger also provided for the 4 for 1 exchange of New Jersey Trust Company of Long Branch stock. New shares of stock were issued in the name of the New Jersey National Bank and Trust Company in 1964. This, however, was a name change only and did not affect the proprietary rights of the shareholders. A 4 for 1 stock split occurred in 1967.

After the institution of these proceedings defendant corporation merged with the Eirst Trenton National Bank, and its name was changed to the New Jersey National Bank. Eor every three shares formerly held, each shareholder received one .share of stock in the new institution.

Three percent stock dividends were declared annually from 1963 through 1969. A 5% stock dividend was declared in 1969, payable January 3, 1970. Cash was paid in lieu of fractional shares in each instance. Regular cash dividends were paid from 1954 onward.

The parties agree that all original shares of stock sought to be escheated have remained unclaimed for 14 successive years next preceding the institution of this suit, and that the dividends (stock and cash) and cash in lieu of fractional shares have been declared or paid within that 14-year period.

Defendant’s records reveal that the last known addresses of some of the stockholders involved are outside New Jersey, specifically, in California, Connecticut, Delaware, Florida, New York, Pennsylvania, Rhode Island, Virginia, District of Columbia and the United Kingdom.

N. J. S. 3A :3 7-13 provides that

Whenever the owner, beneficial owner, or person entitled to any personal property within this state, has been or shall be and remain unknown for the period of 14 successive years, or whenever the whereabouts of such owner, beneficial owner or person, has been or shall be and remain unknown for the period of 14 successive years, or whenever any personal property wherever situate has been or shall be and remain unclaimed for the period of 14 successive years, then, in any such event, such personal property shall escheat to the state.

Whether the State’s right of escheat is limited by the fact that the last known addresses of some of the beneficial owners of the unclaimed property are in states other than New Jersey presents no real problem. It is conceded that the controlling case is Texas v. New Jersey, 379 U. S. 674, 85 S. Ct. 626, 13 L. Ed. 2d 596 (1965), in which these principles wore established:

1. Intangible personal property, such as a debt which a person is entitled to collect, is subject to escheat only by the state of the last known address of the creditor, as shown on the debtor’s books and records.

2. Where there is no record of any address at all, the property is subject to escheat by the state of the debtor’s domicile, provided that another state could later escheat upon proof that the last known address of the creditor was within its borders, if its law made provision for the escheat of such property.

3. Where the last known address is in a state which does not have an applicable escheat statute, the state of the debtor’s domicile can escheat the property, subject to the right of the other state to recover it if and when its law made provision for the escheat of such property.

There is, of course, no doubt that New Jerseys has the unquestioned right to escheat intangible personal property where the last known address of the owner lies within the State. All the property sought to be escheated in these proceedings is intangible. The stipulation of facts includes a concession that Pennsylvania and California have applicable statutes and, consequently, any claims New Jersey may have asserted to property of persons whose last known addresses are in those states are now abandoned and relinquished.

In its supplemental memorandum of law the State notes that the names of persons whose last known addresses were in the state of New York, as well as in California and Pennsylvania, were not included in the notice of publication. Although the State is satisfied that California and Pennsylvania have appropriate escheat laws, it seems to be somewhat uncertain of the scope and effect of the Yew York statute. Acknowledging that it cannot escheat listed property in the names of persons whose last known addresses are in Yew York, because of the lack of notice to them, the State, nevertheless, according to its memorandum of law, “would appreciate and would agree to be bound by any guidance the Court may give concerning this property.”

Yotice of the escheat action must be given to the owner or person entitled to or having an interest in the personal property involved. N. J. S. 2A:37-18, 2A:37-19. Due process of law requires it. See State v. Standard Oil Co., 2 N. J. Super. 442 (Ch. Div. 1949), opinion supplemented 5 N. J. Super. 460 (Ch. Div. 1949), mod. 5 N. J. 281 (1950), aff’d 341 U. S. 428, 71 S. Ct. 822, 95 L. Ed. 1078 (1951). In view of the fact that Yew York owners have not been notified of these proceedings, they cannot be affected thereby, so that there is no need to construe the escheat law of that state. The court cannot give an advisory opinion on the subject. In re Judges in Chancery, 101 N. J. Eq. 9 (Ch. 1927).

The remaining states of Connecticut, Delaware, Florida, Rhode Island and Virginia, as well as the District of Columbia, do not have escheat laws which appear to cover the property in question. Accordingly, Yew Jersey has a superior right to escheat the personal property of owners whose last known addresses are in any of those states, subject, of course, to the right of such state to recover the property if and when its law makes provision for its escheat. With respect to the United Kingdom, counsel have not brought to the attention of the court any applicable escheat law therein. In any event, it is not necessary to determine at this time whether or to what extent the rules stated in Texas v. New Jersey, supra, would be applicable where a foreign country is involved.

As noted earlier herein, the court must determine the escheatability of the unclaimed personal property held by the corporate defendant, namely, shares of stock (including stock dividends), ordinary cash dividends, and cash in lieu of stock dividends. The pertinent statutory provision is N. J. S. 2A:37-11:

The term “personal property” as used in this article shall moan and include moneys, negotiable instruments, choses in action, interest, debts or demands due to the escheated estate, stocks, bonds, deposits, machinery, farm crops, live stock, fixtures, and every other kind of tangible or intangible property and the accretions thereon, up until the time of the commencement of the action for escheat, * * *. [Emphasis supplied]

1. Original shares of stock. There is no problem with respect to original shares of stock unclaimed for a period of 14 successive years next preceding the institution of this action, inasmuch as stocks are specifically included in the statutory definition of personal property.

2. Stock splits and exchanges. At various times over the years the stock of defendant bank or its predecessors has been either split or, when mergers occurred, exchanged for other shares on the basis of stated ratios. In some instances this has resulted in a proportionate increase in the number of shares held; in others, where there was an inverse ratio, such as 1 for 3, the number has been decreased. The inquiry is whether shares issued within the 14-year period by reason of exchanges or stock splits are subject to escheat where the original shares have been unclaimed for the statutory period.

It is universally recognized that a stock certificate is not to be confused with the shareholder’s interest in a corporation. It is merely evidence or a muniment of title, and not the property itself. Bijur v. Standard Distilling & Distributing Co., 74 N. J. Eq. 546 (Ch. 1908), aff’d 78 N. J. Eq. 582 (E. & A. 1911); Laden v. Baader, 134 N. J. Eq. 24 (Ch. 1943), aff’d 135 N. J. Eq. 13 (E. & A. 1944); Ward v. Jersey Central Power & Light Co., 136 N. J. Eq. 181 (Ch. 1945); Piechowski v. Matarese, 54 N. J. Super. 333 (App. Div. 1959). The shareholder’s rights, evidenced by the certificate, are (1) personal — the right to attend meetings, to vote, and the like; and (2) property — the right to share in the dividends of the corporation and in the distribution of its assets. Bijur v. Standard Distilling & Distributing Co., supra. A stock split represents no real change in the position of the shareholder. More shares are issued by reducing par or stated value. There has been no distribution in any sense. In re Arens Trust, 41 N. J. 364, 375 (1964). The shareholder’s interest in the corporation is exactly the same as it was prior to the split. No new rights have been created. The same is true of shares issued in exchange for those previously held. Even though this may have resulted from a merger of two institutions, with the resultant combination of assets, the shareholder’s rights have been neither increased nor diminished. It follows, therefore, that if corporate shares of stock unclaimed for 14 years are subject to escheat, exchange or split shares issued thereafter should also he escheatable, even though the 14-year period has not elapsed as to them.

3. Ordinary dividends. The present rule, enunciated by a closely divided court in State v. U. S. Steel Corp., 12 N. J. 38 (1953), aff’g 19 N. J. Super. 274 (Ch. Div. 1952), is that the escheat of stock does not include unclaimed dividends declared and paid within the 14-year period. The State urges that “it is time for this Court to reexamine that authority in light of present-day conditions, and by an enlightened interpolation of subsequent decisions, postulate a new rule from that which may have existed in an earlier day.”

In its decision, 12 N. J. at 47-48, the court said:

We find no merit in the State’s contention that the escheat of stock includes the unclaimed dividends within the 14-year period. The statute works a forfeiture and therefore must be strictly construed. McNeely v. Woodruff, 13 N. J. L. 352, 357 (Sup. Ct. 1833) ; 3 Sutherland, Construction (3d ed), secs. 5603 and 5604. It is a well settled principle that escheat and forfeiture are not favored by tlie law, and any doubt as to whether property is subject to escheat is resolved against the State. 19 Am. Jur., sec. 14, p. 387. There is nothing' in the theory of definitive right to include, as accretions of the stock, dividends declared within the 14-year period and unpaid for want of knowledge of the stockholders’ whereabouts. Dividends on stock constitute a portion of the accumulated surplus or profits of the enterprise allotted to the stockholders according to their several interests upon declaration of the dividend which becomes separate and distinct from the stock and ordinarily would not pass by the transfer of the stock by the stockholder unless the dividends were included in the contract. This is so even as to dividends declared before the transfer but not payable until after the transfer. Martindell v. Fiduciary Counsel, Inc., 133 N. J. Eq. 408, at page 415 (E. & A. 1943).
The Legislature could have provided for the escheat of dividends declared within 14 years, and the question is whether the Legislature intended to escheat such property. The legislative policy seems to be that before personal property can be escheated the owner or his whereabouts must be unknown for a period of 14 years, N. J. S. A. 2:53-17, and in the definition of personal property found in N. J. S. A. 2:53-15 the statute, inter alia, defines personal property to mean “stocks, bonds * * * and every other kind of tangible or intangible property and the accretions thereon.” The effect is to define and distinguish accretions as personal property separate and distinct from the property upon which it is an accretion. Thus, by the express terms of the act the dividends declared within the prescribed period of 14 years are not escheatable because the dividends declared within the 14-year period cannot be said to have remained unclaimed for that period.

Examination of subsequent decisions does not support the State’s argument that the court’s views have been eroded. The holding that dividends accruing within the 14-year period are not escheatable was restated in the case of State by Parsons v. Fidelity Union Trust Co., 25 N. J. 387 (1957). When the State suggests that there has been a shift to a more liberal construction, it misreads what the court actually said in the subsequent case of State by Parsons v. United States Steel Corp., 22 N. J. 341 (1956);

Nor do wo think that the statute is to be strictly construed so far as stakeholders are concerned. Defendant calls attention to State v. United States Steel Corporation, 12 N. J. 38, 47 (1953), where it was said :
It is a well settled principle that escheat and forfeiture are not favored by the law, and any doubt as to whether property is subject to escheat is resolved against the state.
The statement was made in response to the State’s argument that dividends declared by the corporation less than 14 years prior to suit should be subject to escheat under R. S. 2:53-17 (now N. J. S. 2A:37-13) providing for escheat of personal property after expiration of the 14 year period. We held that dividends which had not attained the 14 year vintage were not subject to escheat until that time, hut the declaration of strict interpretation was expressive of an attitude toward the unknown owner rather than the corporate debtor, [at 355]

See also State by Richman v. Sperry & Hutchinson Co., 23 N. J. 38, 43-44 (1956).

Even if there were merit to the contention that the present rule should be changed, this court is nevertheless bound to follow the opinion of the majority in the first U. S. Steel case, supra. State v. Echevarria, 38 N. J. Super. 415, 417 (Cty. Ct. 1955). The arguments for reversal of existing precedents are properly presented to the Supreme Court. Franco v. Davis, 51 N. J. 237, 238 (1968); Russ v. Metropolitan Life Ins. Co., 112 N. J. Super. 265, 285 (Law Div. 1970). It is also noteworthy that the Legislature has not amended the pertinent section of the statute in the intervening years.

4. Stock dividends. No reported case has been brought to the attention of the court which deals specifically with the escheatability of stock dividends declared within the 14-year period. The nature of such dividends and their differentiation from cash dividends and stock splits, are explained in the ease of In re Arens, supra:

AYhen a dividend is in cash, both the earned surplus and cash assets accounts of the corporation are reduced. Obviously it intends to, and does, distribute that amount of profits to its shareholders. A distribution in stock is, however, quite a different thing. In the case of the true ‘‘stock split,” no change whatever is made in any corporate accounts. More shares are issued to present holders simply by reducing par or stated value. There is obviously no distribution in any sense and clearly the new shares belong to, and are always assigned to, trust principal under any rule. A “stock dividend’’ — an unfortunate label in many instances — involves, on the other hand, a capitalization of earnings by a transfer on the corporate books, from the earned surplus account to a capital account, of an amount fixed by the corporation as the price paid, so to speak, for the new stock issued to the shareholders. Actually this does not amount to a distribution of earnings, but rather the opposite --- a decision to retain them permanently in the business, presumably as necessary or desirable to assure its growth and stability. * * [41 N. J. at 375]

We are not concerned here with tire treatment, as between principal and income, to be accorded the distribution of corporate securities held as assets of a trust.

It has been said that a stock dividend, which converts surplus assets into capital, takes nothing from the property of the corporation and adds nothing to the capital of the shareholder. The number of shares is increased, thus diminishing the value of each share but leaving the aggregate value o£ all the stock substantially the same. The only change is in the evidence which represents that interest, the new shares and the original shares representing the same proportional interest that the original shares represented before the issue of the new ones. 2 Fletcher, Cyclopedia Corporations (1971 rev.), § 5362.

Since the shareholder’s proportionate interest remains the same, there is a superficial resemblance between a stock dividend and a stock split. The difference is that a stock split does not produce a distribution of any kind, and the corporate accounts are unchanged, whereas the declaration of a stock dividend, though the shareholder’s interest is unaltered, requires a transfer on the corporate books from the earned surplus account to the capital account. Furthermore, a stock split is achieved merely by altering the par value of each share and increasing or decreasing the number of shares accordingly, so that the total value is not affected. A stock dividend, however, adds something of value to the shareholder’s portfolio, even though there is no change in the shareholder’s proportionate interest in the corporation.

The inquiry now is whether stock dividends are “accretions” within the meaning of the escheat statute. Judge Goldmann, sitting in the Chancery Division, commented in State v. United States Steel Corp., supra, 19 N. J. Super. at 302, that the term “accretion,” as related to corporate finance, “has received very limited consideration in the reported cases.” He said further:

• * * One is thrown back upon such standard non-legal works as Webster’s New International Dictionary (2d ed.), which defines “accretion” as “a. organic growth; enlargement, b. increase by external addition, or by accession of parts externally.” There is a cross-reference to “accrue,” which in turn is defined as “to come by way of increase or advantage; also, to arise or spring as a growth or result;” “to be added by ordered growth in process of time.”

In the first U. S. Steel case, supra, the Supreme Court said that there was nothing in the theory of definitive right to include dividends as accretions of the stock. The court did not define the word other than to hold that the effect of the statutory language was to “define and distinguish 'accretions’ as personal property separate and distinct from the property on which it is an 'accretion.’ ” The opinion assumes, without actually saying so, that ordinary dividends are accretions. The dissenting opinion supports the assumption to this extent:

Dividends on stock, whether declared before or within the 14-year period, are “accretions” in statutory contemplation. The majority, conceding this, * * * nevertheless holds that N. J. S. A. 2:35-15 is to be read as constituting “accretions” as an item in the catalog of escheatable items “separate and distinct from the property upon which it is an ‘accretion.’ ”

Whether the majority did in fact consider ordinary dividends as accretions need not detain us, although Judge Goldmann in the Chancery Division, supra, 19 N. J. Super. at 302, said that the “dividends in question are not accretions to the stock within these definitions, whose emphasis is upon organic growth, natural growth.” He suggested, in passing, that “a stock dividend might be held to be an ‘accretion’ upon an original share, as might subscription rights” (at 304); and it is a fair assumption that the Supreme Court would have so ruled, had the question been put squarely before it.

The conclusion to be reached, therefore, is that stock dividends are accretions within the meaning of the statute. That being so, U. S. Steel controls, so far as this court is concerned, and stock dividends declared within the 14-year period are not escheatable.

5. Cash in lieu of stock dividends. This deals witSa instances in which cash was paid in lieu of fractional shares. Such transactions necessarily involve a distribution to shareholders of corporate surplus which otherwise would have been appropriated to fixed capital. To this extent it is un~ distinguishable from an ordinary dividend. Consequently,, unclaimed cash in lieu of stock dividends is not escheatable within the 14-year period.

By reason of the foregoing, the court concludes that the State may escheat in these proceedings only original shares of stock held by defendant and unclaimed for a period of 14 or more successive years next preceding the institution} of this suit, together with such additional shares as have resulted from stock splits or replacements; provided, of course, the last known address of the owner is in this State' (or the owner is unknown), or is in a state which does not have an applicable escheat statute.