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Realty and Security Co. v. Walden

Decided: April 30, 1937.


On appeal from the Passaic County Circuit Court.

For the plaintiff-respondent, Greenburg, Wilensky & Feinberg (Bernard Feinberg).

For the defendant-appellant, Minturn & Weinberger (Harry H. Weinberger).


The opinion of the court was delivered by

CASE, J. Plaintiff sued the defendant on his demand promissory note in the amount of $50,000, made by the defendant to his own order on November 23d, 1931, endorsed by him forthwith and discounted at Peoples Bank and Trust Company. Thereafter the note was endorsed by Peoples Bank and Trust Company to plaintiff, a holding company which took over certain of the bank's securities and paid cash therefor in order to permit the reorganization and reopening of the bank following financial stress. On the bringing of suit defendant filed answer and counter-claim which, on motion made and counter-affidavits filed, were struck. Summary judgment for plaintiff was entered and is now under appeal by the defendant.

Appellant's first point is that a motion to strike an answer is granted only in the clearest cases and when there are no facts presented entitling the defendant to defend. That is so.

His second point is that the plaintiff is not a holder in due course of the note in question. The ownership of the note by the plaintiff is not disputed. We shall assume that defenses valid as against the bank are valid as against the plaintiff.

The third and fourth points are that the bank breached the conditions upon which the note was delivered to it and that the conditional delivery of the note by the defendant and the failure of such conditions constitute a good legal defense. The facts upon which this argument is based are partly these: In November, 1931, appellant was a stockholder in, and a director and a vice-president of, Peoples Bank and Trust Company. It was contemplated that Peoples Bank and Trust Company would and should consolidate with certain other banks, but the entrance of the bank into that consolidation was prevented by the depreciation in the value of the bank's securities. The outstanding capital stock of the bank

was thirty-six thousand shares. Of that amount five hundred and twenty shares were in the name of the appellant. Further than that, eight hundred shares were in the names of appellant's daughters, one thousand shares were owned by a trust called "J. & J. Walden Trust," and six hundred and fifty-nine shares were registered in the name of Peoban & Company for Walden's benefit, although of these shares it is said by Walden -- and on this proceeding that assertion prevails -- that the trust and Peoban shares were in an irrevocable trust over which appellant had no control and that appellant's daughters, in that they were over twenty-one years of age, were the owners in their own right and held their stock independent of any control by him. However, appellant was substantially interested in the continued solvency and in the hoped-for prosperity of the bank. In that situation he with other interested persons -- officers, directors and stockholders, although all of the conferees were not officers or directors and not all of the officers and directors were conferees -- met informally, without any authority from the bank, at the home of one of the officers. Various of the persons then present -- Walden amongst them -- undertook to put cash funds into the hands of William H. Stevens, who was the president of the bank, to be applied by him in manner designated for the strengthening of the bank's financial structure; but there was no bank action giving instruction or delegation of power with regard to these contributions or any of them or the disposition thereof.

In the points under discussion appellant asserts that the note was accepted by the bank under the condition, orally imposed by him, that the proceeds when paid to Stevens as trustee were to be paid out by the latter in accordance with a determined arrangement, that the condition thus imposed was not carried out by Stevens and that consequently appellant was relieved from his obligation to repay the note. There is no writing by which a hint of any condition is given or which is consistent with the suggested condition.

The subscriptions made at the conference totaled the sum of $250,000, of which $221,890.87 ...

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