Rudbart v. North Jersey District Water Supply Commission

PER CURIAM.

We granted certification, 122 N.J. 137, 584 A.2d 210 (1990), primarily to consider the contention of First Fidelity Bank, N.A., New Jersey (Fidelity) that “in a published decision without precedent in the United States the Appellate Division had ruled that every investment security, whether a stock, bond, note or in some other form, is a contract of adhesion subjecting every term of the agreement to post hoc review for fairness.” The Bank’s petition for certification recited that “[n]ot only does this decision threaten to wreak havoc with the federally-regulated national securities market, but it would lead to the courts of this state being inundated with a group of law suits— securities litigation — that is among the most complex known to the bar.”

We granted leave to the Attorney General of New Jersey to appear as amicus curiae because of his contention that

[t]his is the only decision extending the application of the doctrine of adhesion contracts to the sophisticated and highly-regulated world of securities transactions.
The decision has the potential of opening to scrutiny by the courts the terms and conditions of notes and securities that have been sold to the public by governmental agencies throughout the State. The transfer of securities in the primary and secondary market hinges upon the certainty of the terms of such securities, and the assurance that those terms cannot be overridden by judicial *348fiat. The broad implications of the decision by the Appellate Division could adversely affect on the sale of securities in this State.

The Attorney General suggested that the public debt financing to support the vast number of programs and projects necessary to the public health and welfare of the state would be endangered by the decision below. We agree that the doctrine of adhesion contracts should not be extended to regulated securities transactions. We now reverse the judgment of the Appellate Division, which was based on that court’s holding that the subject securities constituted a contract of adhesion, but remand the matter to the Law Division for resolution of the remaining claims asserted by the plaintiffs.

I

These consolidated class actions were brought on behalf of holders of notes issued by defendant North Jersey District Water Supply Commission (Commission) to recover damages arising from an early redemption of the notes effected by newspaper notice. Plaintiffs’ central claim was that notice by publication, although specifically provided for in the notes, was inadequate and unconscionable.

A.

The Commission, a public corporation, operates and maintains a public water system serving northern New Jersey. See N.J.S.A. 58:5-1 to -58. By resolutions adopted April 25 and May 23, 1984, the Commission authorized the issuance of $75,-000,000 in new project notes to provide interim financing for a portion of the cost of constructing a new water-supply facility and to pay certain outstanding obligations. See N.J.S.A. 58:5-44. The Commission and its underwriters, one of which was defendant Fidelity, negotiated the terms of the notes; Fidelity also was designated as the indenture trustee pursuant to N.J.S.A. 58:5-49 and as registrar/paying agent for the notes. The underwriters agreed to purchase the notes at the discount*349ed price of $73,800,000, intending to sell them on the secondary market at face value.

The project notes were issued on June 15, 1984. Issued in registered form, without coupons, in denominations of $5,000 or multiples thereof, the notes bore tax-free interest at the rate of 7% per annum payable on June 15th and December 15th. The notes fixed a June 15, 1987, maturity date, but, as set forth in both the Commission’s authorizing resolutions and the Official Statement offering the issue to the public, were subject to earlier optional redemption:

The Notes are subject to redemption prior to maturity as a whole at the option of the Commission on 30 days published notice in a newspaper or newspapers of general circulation in the City of Newark, New Jersey and in the City of New York, New York on the dates and at the prices below:
Redemption Period (both dates inclusive)
Redemption Price (percent of par value)
June 15, 1986 to December 14, 1986 101 %
December 15, 1986 and thereafter 100Vz%
If on the date fixed for redemption sufficient monies are available to the Trustee to pay the redemption price plus interest accrued to the date of redemption, the Notes shall cease to bear interest and shall not be deemed to be outstanding from such date.

The back of each of the issued notes bore similar language.

In the summer of 1985, the Commission decided to redeem the notes prior to maturity. In keeping with the procedures established in its 1984 resolutions, the Commission entered into an escrow deposit agreement with Fidelity, effective September 26, 1985, for the redemption of the notes on June 23, 1986. Among its other terms, the agreement provided for the Commission to deposit with Fidelity an escrow sum sufficient to pay the redemption price and interest until the redemption date, and for Fidelity to publish a notice of redemption in accordance with the note terms.

*350Although regular interest payments were mailed to registered noteholders on December 15, 1985, and June 15, 1986, neither those nor any other mailings informed the noteholders of the forthcoming early redemption. Fidelity did, however, provide the required notice by publication in The Star-Ledger, The New York Times, and The Wall Street Journal on May 23 and again on June 9, 1986. The June 3, 1986, issue of Moody’s Municipal & Government Manual also contained the call notice.

As of December 15, 1986, the holders of approximately $10,-000,000 of the notes still had not redeemed. A number of note-holders apparently made inquiries and complaints when they failed to receive their anticipated December 15, 1986, interest payments. Fidelity, at the Commission’s request, mailed notice in early 1987 to those holders who had not yet redeemed, but declined the Commission’s request to put the unredeemed funds in an interest-bearing account. The late-redeeming noteholders received the redemption price (101% of face value) and interest from June 15 to June 23, 1986, the date of redemption.

Plaintiffs filed separate actions in February and April 1987 on behalf of noteholders who allegedly had not learned of the redemption until after December 15, 1986. On various theories of negligence, conversion, breach of trust, constructive trust, and reformation, plaintiffs demanded that they be paid interest at the 7%% rate from June 23, 1986, until the dates that they submitted their notes for redemption or other appropriate relief. The two actions were consolidated for trial.

At about the same time, a third plaintiff brought suit on behalf of late-redeeming noteholders in the United States District Court, Ellovich v. First Fidelity Bank, N.A., No. 87-650 (D.N.J. Mar. 2, 1988). That case asserted federal securities-law claims as well as state-law causes of action. The district court dismissed the federal claims on a finding that the offering statement did not fail to disclose any material facts with respect to the nature and consequences of the early-redemption *351notice by publication. The court then dismissed the state-law claims for lack of subject matter jurisdiction, stating that “[t]he state court is the proper forum for the litigation of these causes of action.” The Third Circuit Court of Appeals affirmed. Ellovich v. First Fidelity Bank, N.A., 862 F.2d 307 (1988).

The parties in the present actions then cross-moved for summary judgment on liability, based on a filed stipulation of facts. In a letter opinion, the Law Division held that "the notice provision clearly indicates that the newspaper publication method outlined would be the only type of notice given to the bond [sic] holders,” and that “the failure to mail a notice to the plaintiffs when they could have, at the time they sent out interest checks,” did not give rise to a cause of action. The Law Division granted summary judgment for defendants, finding that “the agreed upon notice by publication is binding on the plaintiffs and * * * such a method is not deficient as a matter of law.” The court therefore entered judgment in favor of the Commission and Fidelity.

Before the Appellate Division, plaintiffs urged that the early-redemption notice by publication “was insufficient as a matter of law” and that the Commission and Fidelity had “converted [plaintiffs’] monies.” They argued that the noteholders “had no power to negotiate with either the Commission or First Fidelity regarding the terms of the notes or the redemption provisions thereof,” and that “[t]his is a classic example of a contract of adhesion.” That was plaintiffs’ first and entire reference to that theory of liability.

The Appellate Division adopted that theory. It reversed, holding that “a note or other security sold to the general investing public pursuant to standard form contractual provisions is a contract of adhesion”; that “[consequently, if the security contains an unfair provision or the issuer fails to deal fairly with the investors, the issuer and its agents may be liable for any resulting damages”; and that “the failure * * * to give mail notice of the early redemption of the project notes was *352unfair.” Rudbart v. North Jersey Dist. Water Supply Comm’n, 238 N.J.Super. 41, 47, 568 A.2d 1213 (1990). The court reasoned that investment securities are generally “drafted by the issuer and presented to the purchaser on a take it or leave it basis,” that the offering statements are “lengthy and difficult to understand,” and that “members of the general investing public cannot reasonably be expected to understand the entire offering statement before deciding whether to purchase a particular security.” Id. at 49, 568 A.2d 1213. Accordingly, courts should intervene “to afford protection to purchasers of securities from unconscionable contractual terms and other forms of overreaching by the issuers and their agents.” Ibid. The Appellate Division went on to hold that “the notice by publication provided by defendants did not constitute fair notice of the early redemption,” id. at 51, 568 A.2d 1213, and that “defendants did not show any legitimate business reason for failing to give notice by mail.” Id. at 56, 568 A.2d 1213. The court thus reversed and remanded for the determinations of damages and their allocation as between the Commission and Fidelity. Id. at 57, 568 A.2d 1213.

We granted certification and the Commission’s motion to supplement the record. We also granted leave to the State of New Jersey, the New Jersey Bankers Association, and the American Bankers Association to join as amid curiae.

II

Plaintiffs do not contend that the project notes are ambiguous, nor do they claim that the Commission or Fidelity committed fraud or violated federal or state securities laws. Ordinarily, then, contract law would make the terms of the notes fully binding on plaintiffs. That law, based on principles of freedom of contract, was well stated in Fivey v. Pennsylvania Railroad, 67 N.J.L. 627, 52 A. 472 (E. & A. 1902), in which the court enforced a release incorporated in a standard-form contract:

*353A party who enters into a contract in writing, without any fraud or imposition being practiced upon him, is conclusively presumed to understand and assent to its terms and legal effect. [Id. at 632, 52 A. 472 (quoting Rice v. Dwight Mfg. Co., 56 Mass. (2 Cush.) 80 (1848)).]

See also Henningsen v. Bloomfield Motors, Inc., 32 N.J. 358, 386, 161 A.2d 69 (1960) (“the basic tenet of freedom of competent parties to contract is a factor of importance”); Friedrich Kessler, Contracts of Adhesion — Some Thoughts About Freedom of Contract, 43 Colum.L.Rev. 629, 630 (1943) (hereinafter Kessler) (traditional contract principle is that “once the objective manifestations of assent are present, the author is bound”).

If an agreement is characterized as a “contract of adhesion” however, nonenforcement of its terms may be justified on other than such traditional grounds as fraud, duress, mistake, or illegality. See Todd D. Rakoff, Contracts of Adhesion: An Essay in Reconstruction, 96 Harv.L.Rev. 1174,1190-92 (1983) (hereinafter Rakoff). Although the term “has acquired many significations,” id. at 1176, the essential nature of a contract of adhesion is that it is presented on a take-it-or-leave-it basis, commonly in a standardized printed form, without opportunity for the “adhering” party to negotiate except perhaps on a few particulars. Id. at 1177; 3 Corbin on Contracts § 559C (Supp.1991); Kessler, supra, 43 Colum.L.Rev. at 632; Albert A. Ehrenzweig, Adhesion Contracts in the Conflict of Laws, 53 Colum.L.Rev. 1072, 1075 (1953); W. David Slawson, Standard Form Contracts and Democratic Control of Lawmaking Power, 84 Harv.L.Rev. 529, 530 (1971) (hereinafter Slawson). We have previously defined “contract of adhesion” in just those terms: “[a] contract where one party * * * must accept or reject the contract * * Vasquez v. Glassboro Serv. Ass’n, 83 N.J. 86, 104, 415 A.2d 1156 (1980). Such a contract “does not result from the consent of that party.” Ibid.; see also Slawson, supra, 84 Harv.L.Rev. at 530 (standard form contracts “are not, under any reasonable test, the agreement of the consumer or business recipient to whom they are delivered”). The distinct body of law surrounding contracts of adhesion represents the legal system’s effort to determine *354whether and to what extent such nonconsensual terms will be enforced. Rakoff, supra, 96 Harv.L.Rev. at 1230.

The project notes involved here unquestionably fit our definition of contracts of adhesion. That is, they were presented to the public on standardized printed forms, on a take-it-or-leave-it basis without opportunity for purchasers to negotiate any of the terms.1 But the observation that the notes fit the definition of contracts of adhesion is the beginning, not the end, of the inquiry: we must now determine as a matter of policy whether to enforce the unilaterally-fixed terms of the notes.

We have discussed those considerations in a number of earlier cases. The seminal case is Henningsen, supra, 32 N.J. 358, 161 A.2d 69, in which we invalidated an automobile manufacturer’s standard-form disclaimer of its implied warranty of merchantability. In justifying that deviation from ordinary contract-law principles, we noted that a car is “a common and necessary adjunct of daily life,” id. at 387, 161 A.2d 69, that the disclaimer form was used by the manufacturers of virtually all American passenger cars, id. at 390, 161 A.2d 69, that the “gross inequality of bargaining position * * * is thus apparent,” id. at 391, 161 A.2d 69, and that the disclaimer represented “a studied effort to frustrate” the legislative grant of implied-warranty protection. Id. at 404, 161 A.2d 69.

In Ellsworth Dobbs, Inc. v. Johnson, 50 N.J. 528, 236 A.2d 843 (1967), we similarly invalidated a provision of a standardized real-estate-brokerage contract that obligated the seller to *355pay a commission even if the buyer was financially unable or unwilling to complete the transaction. Relying on the “undue advantage” that arose from “monopolistic or practical control in the business transaction involved,” id. at 553, 236 A.2d 843, we held that the offending contractual term would “thwart” the judicially-declared public policy of the State. Id. at 552, 555, 236 A.2d 843. Such a contractual provision accordingly is unenforceable “[wjhenever there is substantial inequality of bargaining power, position or advantage between the broker and the other party involved.” Id. at 555, 236 A.2d 843.

We applied similar principles in Shell Oil Co. v. Marinello, 63 N.J. 402, 307 A.2d 598 (1973), cert. denied, 415 US. 920, 94 S.Ct. 1421, 39 L.Ed.2d 475 (1974), to invalidate the termination provision of an oil company’s lease and dealer agreement. We described the oil company as “the dominant party,” and found that its relationship with its dealer “lacks equality in the respective bargaining positions”; moreover, a dealer who has operated the station for a period of years “cannot afford to risk confrontation with the oil company.” Id. at 408, 307 A.2d 598. Because the parties’ “grossly disproportionate bargaining power” had produced a “grossly unfair” term that contravened “the extant public policy of this State,” we did not enforce that term. Id. at 408-09, 307 A.2d 598.

We again explored contracts of adhesion in Vasquez, supra, 83 N.J. 86, 415 A.2d 1156, in which we denied enforcement of a provision in a migrant worker’s contract permitting eviction of a worker immediately on termination of his employment. We noted that contracts should be enforced where “the parties are in positions of relative equality and * * * their consent is freely given.” Id. at 101, 415 A.2d 1156. However, we found that the migrant farmworker was in a position “analogous to that of a consumer who must accept a standardized form contract to purchase needed goods and services.” Id. at 103, 415 A.2d 1156. We also found that the eviction terms of the standard-form contract conflicted with the demonstrated policy of the New Jersey courts and Legislature “in providing legal protec*356tion for migrant farmworkers.” Id. at 99, 415 A.2d 1156. Because the contract “[did] not result from the [worker’s] consent,” we invalidated its “unconscionable” eviction provision. Id. at 104, 415 A.2d 1156; see also Kuzmiak v. Brookchester, Inc., 33 N.J.Super. 575, 111 A.2d 425 (App.Div.1955) (lease provision exculpating residential landlord from liability-held contrary to public policy).

Thus, in determining whether to enforce the terms of a contract of adhesion, courts have looked not only to the take-it- or-leave-it nature or the standardized form of the document but also to the subject matter of the contract, the parties’ relative bargaining positions, the degree of economic compulsion motivating the “adhering” party, and the public interests affected by the contract. Applying those criteria to the project notes, we find insufficient reason to invalidate the notice-by-publication term.

Ill

The three considerations that lead us to that conclusion derive primarily from the fact that the project notes were publicly-traded securities. First, no investor was under any economic pressure to buy the notes. The notes were not consumer necessities. Prospective investors could choose from a vast selection of alternative equity and debt investments, including bonds and notes with various call and notice provisions. They were not driven to accept the Commission’s notes because of a monopolistic market or any other economic constraint. Accordingly, the Commission did not enjoy a superior bargaining position permitting it to dictate its own terms. In short, the principal justifications for invalidating terms of a contract of adhesion are simply not present in a fully open and competitive securities market. Professor Slawson has cogently explained that reality:

What economists call “perfectly competitive markets” (the markets for commodities or corporate securities, for example) automatically balance supply and *357demand at a “market price,” below which no buyer can hope to buy and above which no seller can hope to sel}. A buyer for whom the products on such a market are essential buys them at prices and with other terms of sale that are adhesive, since he has no reasonable choice but to buy and, when he buys, no reasonable choice but to pay the prices and accept the other terms set by the market. Similarly, a seller for whom selling the product is essential sells at prices and other terms that are adhesive for him. But if the market is working free from improper influence, its lawmaking is legitimate. It is the mechanism through which society has implicitly chosen to enforce on buyers and sellers alike the prices and terms that meet the standards of supply and demand. Society has decided through its legitimate democratic processes that it wants those prices and terms imposed because theory teaches that they tend toward an optimum allocation of resources and are an incentive to efficiency. This decision serves as a standard of legitimacy, and since the contract is within this standard, it is legitimate and should be enforced. [Slawson, supra, 84 Haro. L.Rev. at 553-54.]

Cf. Madden v. Kaiser Found. Hosps., 17 Cal.3d 699, 131 Cal.Rptr. 882, 552 P.2d 1178 (1976) (where employee could select among several medical plans, some without arbitration provisions, arbitration provision of plan selected would be enforced against him).

Second, although securities are offered to the public on a take-it-or-leave-it basis, enforcement of their terms advances rather than contravenes well-established and important public policies. Securities are governed by Article 8 of the Uniform Commercial Code, N.J.S.A. 12A:8-101 to -408. See N.J.S.A. 12A:8-102; N.J.S.A. 12A:8-105(1). The Legislature has mandated that terms incorporated in such instruments shall be effective “[e]ven against a purchaser for value and without notice.” N.J.S.A. 12A:8-202(1). That provision, unique to investment securities and unlike the general Uniform Commercial Code principle that “[a] person ‘knows’ or has ‘knowledge’ of a fact when he has actual knowledge of it,” N.J.S.A. 12A:1-201(25), is designed to provide certainty and stability in the marketing of securities. Its purpose is explained in the Official Comment:

A purchaser must have some method of learning the terms of the security he is purchasing. The printing on the certificate or on the initial transaction statement (“ITS”) is designed to notify the purchaser of those terms. If he purchases without examining the certificate or ITS, he does so at his peril, since *358he is charged with notice of terms stated thereon. [KC.C. § 8-202 cmt. 1 (1977).]

We have recently observed that “the U.C.C. represents a comprehensive statutory scheme that satisfies the needs of the world of commerce, and courts should pause before extending judicial doctrines that might dislocate the legislative structure.” Spring Motors Distribs., Inc. v. Ford Motor Co., 98 N.J. 555, 577, 489 A.2d 660 (1985). The aim of Article 8 is to confer negotiability on securities; the statutory provisions should be implemented to ensure “ ‘the freedom of transferability which is essential to the negotiability of investment securities.’ ” 8 Anderson, Uniform Commercial Code § 8-105:3, :4 (3d ed. 1985) (quoting E.H. Hinds, Inc. v. Coolidge Bank & Trust Co., 6 Mass.App. 5, 372 N.E.2d 259, 263 (Mass.App.Ct.1978)). Subjecting the terms of Article 8 securities to continual judicial determinations of fairness would seriously impair the reliability and transferability of such instruments.2

Third, judicial review of the fairness of negotiable securities would be inconsistent with federal and state securities laws. Central to those statutes is the requirement of full disclosure of all material facts and the prohibition of fraudulent conduct in connection with the purchase or sale of securities. See 15 U.S.C.A. § 78j(b); N.J.S.A. 49:3-52(a) and (b). Both Congress and our Legislature have chosen to protect investors by assuring that they be given all materials necessary to make an informed decision; accordingly, the federal and state legislative schemes do not provide for governmental review — judicial or otherwise — of the risk, fairness, good sense, or other substantive qualities of the offered security. Introducing a judicial-fairness review would effectively reject those legislative judg*359ments in favor of a view that full disclosure does not provide adequate protection to an investor.3 Similarly inappropriate is the Appellate Division’s suggestion that terms of securities should be subject to a judicial-fairness review because the documents “are lengthy and difficult to understand.” 238 N.J.Super. at 49, 568 A.2d 1213. The forms of documents are dictated by, and their sufficiency is reviewable under, the securities laws.

We are satisfied that in light of the considerations we have stated, the asserted unfairness of the notice provision is not sufficient to justify judicial intrusion. Notice by publication does not contravene or frustrate any legislative policy. Moreover, although such notice may be constitutionally insufficient in certain settings, see, e.g., Mullane v. Central Hanover Bank & Trust Co., 339 US. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950), plaintiffs have not demonstrated any established judicial policy against contractual provisions for notice by publication. We recognize that the Securities and Exchange Commission’s recent guidelines for bond redemptions, SEC Exchange Act Release No. 23, 856 (Dec. 3,1986), encourage notice by mail and that the Model Debenture Indenture Provisions of the American Bar Foundation, American Bar Foundation Corporate Debt Financing Project, Model Debenture Provisions — All Registered Issues § 1105 at 68 (1967), also suggest that notice of early redemption should be given to registered holders by mail. Moreover, we have no doubt that notice by mail here would have been preferable. But those considerations are not of sufficient weight to overcome the policy considerations that *360properly restrain judicial oversight of the terms of publicly-traded securities.4

We do not read Van Gemert v. Boeing Co., 520 F.2d 1373 (2d Cir.), cert. denied, 423 U.S. 947, 96 S.Ct. 364, 46 L.Ed.2d 282 (1975), relied on by plaintiffs, as holding that a court may properly invalidate a notice-by-publication term of a security. In Van Gemert, holders of Boeing’s convertible debentures challenged as unreasonable the published notice given by Boeing of redemption of the debentures. Although the plaintiffs argued that the indenture agreement was “in the nature of a contract of adhesion” and thus any “unconscionable features * * * are unenforceable as a matter of policy,” id. at 1380, that court did not agree. Rather, it found that the newspaper notice was inadequate because the investors had not been adequately informed “by the prospectus or by the debentures” of the notice to be given. Id. at 1383. The court classified the limited scope of that holding in its later opinion after remand. See 553 F.2& 812 (1977). There the court stated that it had found “significant * * * the fact that the debentures did not explicitly set forth the type of notice [that the debenture holders] could expect” in the event of an early redemption, and accordingly had “held as a matter of law” what notice the debenture holders “were entitled to expect.” Id. at 815. See also Meckel v. Continental Resources Co., 758 F.2d 811 (2d Cir.1985), in which the same court described the Van Gemert holding as follows:

Those debentures contained no indication as to the type of notice of redemption that was to be provided. It was the total lack of a notice provision in the debentures that we held necessary as a condition precedent to an imposition of a duty to provide “reasonable” notice. [Id. at 816.]

As we have already noted, plaintiffs here do not dispute that the notes and the Official Statement fully disclosed that notice *361of redemption would be given by publication. If anything, Van Gemert suggests that such a fully disclosed term should be enforced.

We therefore conclude that although the project notes fit our literal definition of contracts of adhesion, plaintiffs are bound by the provision for notice by publication because of the unique policy considerations attendant on securities offerings.

IV

Having disagreed, then, with the Appellate Division’s sole basis for its decision, we would ordinarily remand the matter to the Appellate Division for consideration of whether plaintiffs’ complaint stated a cause of action for relief on any of the other theories pleaded, supra at 351, 605 A.2d at 684, such as negligence, conversion, or constructive trust. Because the case is now more than five years old, we believe it best to resolve those claims on the record before us. After oral argument, we afforded the parties and the amici the opportunity to file supplemental briefs on any theory of liability or defense previously pleaded.

Although we disagree with our concurring member, Judge Petrella, on the issue of whether the notice provisions of these notes should be enforced, we agree with that part of his factual analysis that demonstrates the overwhelming inequity of allowing Fidelity to notify its customers of the redemption date while keeping the other investors in the dark and, as a result, perhaps benefiting from the use of the retained money. Because the trial court granted defendants’ motion for summary judgment, we must grant to plaintiffs all the inferences that are favorable in the circumstances of this case.

Judge Petrella has outlined that Fidelity wore many hats with respect to this transaction. As an underwriter, it earned income (although it undoubtedly incurred a risk) by subscribing to a percentage of the notes for resale to its customers or for its own account. In addition, it served as an indenture trustee, *362which we take to mean that plaintiffs’ money was to pass through Fidelity’s hands as a stakeholder or escrow agent for the benefit of the noteholders. We believe that familiar principles of constructive trust apply to this latter function and entitle plaintiffs to at least a partial return of the interest earned on their money while it was retained by Fidelity.

Although plaintiffs’ Appellate Division brief may inartfully describe their complaint as “establishing] a cause of action for conversion,” the relief that they plainly sought under the first and third counts of the complaint established the theory of constructive trust as an alternative basis for relief. In their supplemental memorandum, plaintiffs asked the Court as an alternative to the 7%% interest under the notes, that they be awarded the “interest on such [unredeemed] funds” by virtue of a general duty of a trustee to invest funds of a beneficiary. For while plaintiffs sought to “reform the terms of the notes issued to require notice by mail,” they also sought to “impos[e] a constructive trust upon the unclaimed funds with all interest accrued thereon.” With all of the favorable inferences that we must accord to plaintiffs’ proofs, their complaint surely sets forth a claim to at least a partial return of any interest earned on these funds. Fidelity asserts that it deposited those funds in a non-interest-bearing account. There is no such thing as a non-interest-bearing account, for even those accounts that are denoted “non-interest-bearing” generate money for someone. For a bank, it might mean a change in margin requirements. The amici, American Bankers Association and New Jersey Bankers Association, make reference to the “float” on the unredeemed funds. Of such things we do not know but the clear implication is that interest was earned on those funds. We do know that in the companion litigation in the United States District Court, plaintiffs contended that the defendants’ failure to state that the bank, not the investors, would earn interest on funds remaining unclaimed after any optional redemption constituted a material misrepresentation in violation of SEC Rule 10b-5.

*363The district court concluded as a matter of law that Rule 10b-5 did not require the bank to disclose the fact that it would earn interest on the unclaimed deposits. That the bank was not required by federal law to disclose that fact does not entitle it to retain all the interest earned on the funds.

The Law Division misperceived plaintiffs’ claims to be limited to the demand that they be paid interest at the 7-7/8% interest rate from June 23, 1986, until they submitted their notes for redemption. As plaintiffs argued in their Appellate Division brief, all that need be established on those counts of the complaint asserting “conversion” of the funds was that “to allow either the Commission or Fidelity to benefit as a result of their failure to provide adequate notice of the redemption to the noteholders” would be unjust. (Emphasis added). Plaintiffs pointed out that Fidelity had held the escrow account “as a trust fund separate and apart from all other funds of the Commission or of the escrow account of First Fidelity for the sole benefit of the prior noteholders [holders of the 1984 project notes].”

As we have repeatedly emphasized, the concept of a constructive trust “ ‘is limited only by the inventiveness of men who find new ways to enrich themselves unjustly by grasping what should not belong to them.’ ” Bron v. Weintraub, 42 N.J. 87, 96, 199 A.2d 625 (1964) (quoting Latham, v. Father Divine, 299 N.Y. 22, 85 N.E.2d 168, 170 (1949)). In the circumstances of this case, there can hardly be any doubt that this was a highly unusual situation in which one of the defendants was aware that it was holding other people’s money as a result of selective unfairness. Deposition testimony of Alex Williams, Executive Vice-President of Fidelity, revealed that the bank’s investment department gave written or oral notice to its customers prior to the June 23, 1986 call date that the notes had been called. This notice was given whether or not those customers had safekeeping accounts with the bank. Williams stated that Fidelity felt it would be “good business” to inform its customers. According to Williams, Fidelity took this action essentially *364because the bank wanted to sell new bonds to its customers, to continue good customer relations, and to insure that its customers received notice. How far in advance of the June 23, 1986 call date Fidelity began notifying its customers is unclear. Williams also expressed the opinion, in response to the questions of the bank’s attorney, that Fidelity maintained the list of purchasers of the project notes in connection with its underwriting activities for the issuance of the notes. When asked if he could have obtained that information from the trust department, he speculated that the trust department would have said “[i]t would have been a conflict of interest on their part. I don’t know what they would have said because we didn’t ask for it.”5 If as the amici, Bankers’ Associations suggest, an agreement on the “float” may have been part of the transaction between Fidelity and the Commission, a further tension in Fidelity’s duties would be created.

Charles Hoos, Senior Vice-President of Fidelity, testified that he was in charge of the corporate trust department and was aware that Fidelity had elected to give written notice of the redemption of the notes to customers of its investment department. Fidelity took the position before the Law Division, and in a September 9, 1988 letter brief following the oral argument there, that nothing in the record indicated that the personal notifications given by the investment department of the bank were in any way a result of the bank’s position as trustee. It pointed to the deposition testimony of Fidelity’s personnel that the investment department routinely telephones customers with respect to any major developments as to securities it sold. Fidelity took the position that the deposition testimony demonstrated that a “Chinese wall” existed between the trust depart*365ment and the investment department that was kept intact during this transaction.

As trustee under the note issue (as well as in the other capacities) Fidelity presumably received significant fees for its responsibilities, which in part included protecting the rights of noteholders. In that fiduciary capacity, for which it was paid, Fidelity now insists that it had no obligation to notify any noteholders in any fashion other than by the method of publication as set forth in the Commission’s resolution. On the other hand, Fidelity admits that in its capacity as a bank, its investment department, which also receives fees for its services, including protection of customers, apparently undertook to give special notice to its own customers past and potential, with no obligation to do so. See Rudbart, supra, 238 N.J.Super. at 51 n. 4, 568 A.2d 1213. Thus, Fidelity argues that it can demand the benefits of both worlds, but without any additional obligations, particularly toward those who did not purchase the notes through it.

We need not debate whether an indenture trustee may be held to any fiduciary duty beyond that spelled out in the trust agreement. It is one thing not to surcharge a trustee for such an omission; it is quite another to let a trustee profit unfairly from a lack of fair dealing with the beneficiaries of its trust. The fact is that Fidelity decided to notify selectively its own customers. It acted in a manner that exhibited at least a lack of fair dealing and possibly a lack of good faith. This is a compelling case in which to apply the fairness doctrine because Fidelity was aware of the noteholders’ lack of notice but acted for only its own customers. Although Fidelity acted in multiple capacities it should not be allowed to assume duties with one hand and to reject them with the other to its own unjust enrichment.

In unjust-enrichment cases courts may presume that the parties “ ‘intended to deal fairly with one another [and will] employ the doctrine of quantum meruit [ ] or equitable reme*366dies such as constructive or resulting trusts’ in order to ensure that one party has not been unjustly enriched, and the other unjustly impoverished, on account of their dealings.” Carr v. Carr, 120 N.J. 336, 352, 576 A.2d 872 (1990) (quoting Kozlowski v. Kozlowski, 80 N.J. 378, 390-91, 403 A.2d 902 (1979) (Pashman, J., concurring)). That principle of fair dealing pervades all of our contract law. See Palisades Properties, Inc. v. Brunetti, 44 N.J. 117, 207 A.2d 522 (1965). Although that principle will not alter the terms of a written agreement, Marini v. Ireland, 56 N.J. 130, 143, 265 A.2d 526 (1970), allowing plaintiffs some portion of the return on their withheld funds does not in any sense alter the written terms of the agreement between these parties. Here, the bank knew or should have known that a large percentage of the noteholders would fail to receive notice of the early redemption, and knew exactly who they were. Nonetheless Fidelity did not take any steps to minimize the consequences of that failure, except to notify only its clients.

We can think of no fair reason, then, for holding that either defendant should be entitled to all of the income on plaintiffs’ unredeemed funds. Surely, Fidelity recognized that it was a sound business practice and therefore fair dealing to assume that the customers to whom it sold a share of the notes should receive additional notice of the redemption. This multi-hatted trustee cannot simply pick and choose among those with whom it had contractual relationships without invoking the law’s concern for “bringing about justice without reference to the intention of the parties.” St. Paul Fire & Marine Ins. Co. v. Indemnity Ins. Co. of N. Am., 32 N.J. 17, 22, 158 A.2d 825 (1960). There might be a case in which administrative inconvenience in calculating interest to noteholders who straggle in might justify a denial of any interest. But this is not such a case. The sums involved here were, by the Commission’s own account, described in depositions as “astronomical.”

In short, this case was far from ripe for summary disposition. No affidavit before this Court has resolved the question of *367whether a profit was made on the unclaimed funds (once as high as $25,000,000). Clearly, if the Commission shared any of the benefits with Fidelity it should be required to disgorge that amount. The pleadings and the depositions set forth an actionable claim for some equitable share of any income earned on plaintiffs’ funds. Because the liability we impose results from Fidelity’s decision to prefer its customers over other noteholders so that its noteholders could redeem by June 23, 1986, that date should be the beginning point in calculating profit earned on the unclaimed funds. Plaintiffs suggest that the trial court should allow some reasonable time, after the June 23, 1986 redemption date, within which to expect that the funds would have been invested. Because we impose no duty on the fiduciary for failure to invest the funds, the use of the redemption date will simplify the remand. All that need be done is to determine what profit accrued to whom from the retention of plaintiffs’ funds. Fidelity should be allowed all of its reasonable expenses but for any possible benefits it has unjustly accrued. Obviously, as the Commission points out, the funds had to be kept in liquid or very “short-term” investments or “overnights.” We expect that the parties can readily develop the record necessary to conclude the matter with respect to this issue. We do not predicate our holding on 12 C.F.R. § 9.10 or N.J.S.A. 17:9A-35(D), although we note that both appear to assume that unclaimed fiduciary funds will not have been held uninvested, will reflect “short-term” market rates, and will allow for recognition of the fiduciary’s cost or compensation for the services. Nor do we intend to create in this case, at this late date, a cause of action for breach of such directives. We intend only to remedy any unjust enrichment.

If the proofs disclose that the funds lay fallow and no benefit accrued to any of the defendants, then the court should dismiss the claims. We thus foresee no need for the trial court to have to resolve any issues of indemnification. By definition, it would appear that Fidelity will have suffered no loss (and needs no indemnification) when it disgorges only profit unjustly earned *368on plaintiffs’ funds. In addition, the court may choose to fashion a class remedy without requiring any further administrative effort by defendants, and determine a reasonable allocation, even if by rough measure, among the plaintiffs’ claims.

The judgment of the Appellate Division is reversed. The matter is remanded to the Law Division for further proceedings in accordance with this opinion.

The Chief Justice, Justices Handler and O’Hern, and Judges Gaulkin and Keefe join in Parts I, II, and III of the opinion. The Chief Justice, Justices Handler and O’Hem, and Judge Petrella join in Part IV.

Judge Petrella dissents from Parts I, II, and III of the opinion and files a separate opinion.

Judge Gaulkin files a separate opinion in which Justice Clifford and Judge Keefe join on the issue in Part IV of the opinion. They would enter judgment for the defendants.

Justice Clifford files a separate dissenting opinion and would enter judgment for the defendants for the reasons stated in his separate opinion.

The Commission and the underwriters negotiated the terms of the notes. However, although the underwriters presumably sought to enhance the attractiveness of the offer to prospective purchasers, the record does not indicate whether the negotiation addressed the interests of individual noteholders with respect to the form of early redemption notice or otherwise. See Lawrence E. Mitchell, The Fairness Rights of Corporate Bondholders, 65 N.Y.U. L.Rev. 1165, 1183 (1990). We thus reject defendants’ suggestion that the noteholders had in fact negotiated the notice provision through the underwriters.

Subjecting Commission notes to a judicial-fairness review could also undermine the statutory assurance that "[all] * * * provisions" of such obligations are “valid and legally binding contracts * * * enforceable by any * * * holder or holders." N.J.S.A. 58:5-48.

The ability of the courts to conduct such evaluations of securities is, at the very least, questionable. Some state securities laws do provide for a fairness review, commonly performed by a specially-constituted executive commission prior to the issuance of a security. That procedure not only provides some degree of expertise and consistency but also assures that an investor can still rely on the express terms of the security once issued. See Louis Loss, Fundamentals of Securities Regulation 13 n. 21 (1988).

We also note that in the special circumstances of this case, invalidation of the "notice" provision might have a peculiarly unfortunate effect: the Commission, a public agency, and hence its ratepayers, might be required to pay interest on an escrow fund that was not under its control and that may have generated no income for the Commission.

WilIiams's statement is premised on principles of fiduciary law that Fidelity at other points disavows, despite its designation as “trustee," the fact that under the resolutions it was holding funds “in trust,” and the heading “The Fiduciaries" in the Commission’s resolution of April 25, 1984, which Fidelity apparently accepted. Moreover, the September 1, 1985, Escrow Deposit Agreement refers to the bank “in its capacity as trustee.”