On appeal from the Supreme Court.
For the appellant, Minturn & Weinberger.
For the respondents, Leber & Ruback.
The opinion of the court was delivered by
LLOYD, J. The actions in these cases were to recover installments of interest on a note for $2,300,000 given to the New Jersey Bankers Securities Company by Weinberger in satisfaction of claims which the company had against him based on mismanagement of its affairs. An identical answer was set up to each action. On motion and affidavits the answers were stricken out and judgment entered for the plaintiffs. The defendant appeals and the actions were consolidated in this court for purposes of the appeal and will be so dealt with.
From the uncontradicted affidavits filed in support of the motions, it appears that the company is a New Jersey corporation
incorporated in 1927. As its name implies it was a financial institution, the result of a plan devised by Weinberger and in which he was the moving spirit, its directors being employes or associates in his law office. Its plan of action involved principally the purchases and consequent control of other banking institutions. The company started its business transactions at its first meeting by the purchase of large blocks of stock owned by Weinberger in other corporations. From time to time the board of directors was changed -- enlarged by the substitution or addition of well known citizens; the charter was amended to increase the number of shares from three hundred thousand to two million and a sales campaign inaugurated for their sale, the latter characterized by questionable methods both in law and morals, including the purchase of its own stock at ruinous prices to boost the market for the shares and to bolster the sales campaign. This and other conduct of its affairs attracted public attention, became the subject of legislative investigation and finally induced the filing of a stockholders' bill in Chancery seeking the removal of the officers and directors, an accounting by Weinberger for moneys received by him in excess of the true value of certain securities sold by him to the company.
The suit developed damaging evidence of mismanagement and resulted in the resignation of Weinberger both as president, to which office he had been elected, and as a director, and also the resignation of certain of the other officers and directors. New officers and directors were elected and the new management made demands on the old officers and directors for the refund of the moneys representing the losses resulting from this mismanagement. Suit was later threatened to enforce the claim and this resulted in an offer by Weinberger to compromise by giving the note on which installments of interest were claimed in the pending actions, the company in return to surrender, on payment of the note and interest, certain stock and other collateral, return the note and cancel all claims against the old officers and directors. The offer was accepted by the directors, ratified by the stockholders,
approved by the Chancellor and the note for $2,300,000 delivered by Weinberger to the company. Later receivers were appointed by the Chancellor and the note came into their hands as assets of the corporation.
The note was dated October 4th, 1928, and called for the quarterly payment of interest, one installment of which fell due on June 4th, 1930, and was not paid. Suit was brought thereon and resulted in a judgment for the plaintiffs. To that action defenses were filed and on motion struck out. The answer was identical with the ones now before us.
The first answer here presented is that at the time the settlement was made it was agreed that the stock forming in part the consideration of the note, was represented by the new president to be worth $11 per share; that the continued existence of the corporation was necessary to the performance of the contract; that on May 20th, 1930, the Court of Chancery intervened in the affairs of the company and appointed receivers and thereby destroyed the subject-matter of the contract, namely, the value of the stock. The answer goes on ...