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NEW JERSEY BELL TEL. CO. v. BOWER

June 14, 1934

NEW JERSEY BELL TELEPHONE CO. et al.
v.
BOWER



The opinion of the court was delivered by: AVIS

This action is instituted by four corporations, two of them being New Jersey Bell Telephone Company and Ocean City Water Service Company, both corporations of, and operating as public utility corporations in, the state of New Jersey; the third, the Agincourt Land Corporation representing the Jersey Central Power & Light Company, a utility corporation operating in the state of New Jersey; and the fourth, the Franklin Real Estate Company, representing the Atlantic City Electric Company.

Complainants allege that each of these corporations loaned $12,500 to the First National Bank of Ocean City (hereinafter called bank) in the early part of the year 1932 (a total of $50,000); that these cash loans were secured by four mortgages executed by Ocean City Securities Corporation and delivered to each of the complainants in the sum of $12,500 each, being concurrent second liens upon certain real estate of mortgagor, subject to a first mortgage of $100,000 held by Camden Safe Deposit & Trust Company. It is further alleged that the real estate so mortgaged was sold under foreclosure of the first mortgage, and the equity of the second mortgages in said real estate extinguished; that First National Bank of Ocean City was subsequently declared insolvent by the Comptroller of the Currency, and a receiver appointed; that claims, as common creditors, were filed by each complainant, and rejected by the receiver. The bill recites the institution of a suit at law in this court by complainants against defendant, the filing of an answer by defendant, setting up the defense that the claimed moneys were not due from the bank, but that the loans were made to the Ocean City Securities Corporation.

 The bill then alleges that the stock of the Ocean City Securities Corporation is, and was, entirely owned by the bank, and that the bank is liable directly, or as the holder of all of the stock of the affiliate or subsidiary.

 The bill alleges that the defense interposed is inequitable and prays:

 (1) For subpoena.

 (2) For restraint against receiver, enjoining him from asserting this defense in the action at law.

 (3) For a decree that the moneys were loaned to the First National Bank of Ocean City.

 (4) For an adjudication validating the claims filed with the receiver.

 (5) That the receiver make discovery and disclosure concerning the relationship between the bank and Ocean City Securities Corporation.

 (6) That the receiver make discovery and disclosure of the facts and circumstances under which he claims the Ocean City Securities Corporation borrowed the money referred to therein.

 The answer filed admits the general facts, but in the answer and defenses denies the obligation of the bank to pay, and claims that the moneys advanced by complainants were advanced upon the security of the mortgages to be executed by Ocean City Securities Corporation, and that there was no understanding by the bank, or any legal or valid obligation of the bank, to pay any of the moneys so advanced.

 The court has some doubt as to the equities of the bill, but in view of the fact that no contention on this question is raised by defendant, that the prayers of the bill appear to be so framed as to dispose of the entire controversy, and that the pleadings, proofs, and argument of both litigants indicate the intention of all parties to dispose of the entire controversy in the instant case, the court will decide the case on its merits.

 It appears that in the fall of 1930 the bank took over the assets and assumed the obligations of the Ocean City Title & Trust Company, a banking institution of Ocean City, N.J. Included in the assets was all of the stock of a subsidiary company, the Ocean City Securities Corporation, which held the title to the land at the southerly corner of Eighth and Absbury avenues, Ocean City, upon which was erected a large building, the first floor of which was adapted to, and used for, banking purposes. The other floors were rented for business and office purposes to sundry corporations and individuals. Upon this purchase or merger the bank moved from its banking building ...


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