On appeal from the Monmouth County Circuit Court.
For the plaintiff-appellant, Bernard Freedman.
For the defendant-respondent, Lester C. Leonard.
The opinion of the court was delivered by
BODINE, J. The plaintiff, the trustee in bankruptcy of the estate of Kalman B. Mohel, appeals from a judgment of no cause of action. The defendant bank was closed by the commissioner of banking and insurance of this state December 31st, 1931. At the time of closing, the plaintiff, as trustee, had on deposit the sum of $10,018.50. The defendant was a depository designated by the United States District Court for the District of New Jersey, and had given a bond for the safety of funds of the bankrupt estates, pursuant to the statute and the rules of that court. During the time that the bank was being liquidated by the commissioner, a dividend was paid on the plaintiff's deposit in the sum of $500.93. He also received the sum of $4,970.02, his pro rata share of the recovery upon the bond mentioned. After the reopening of the bank on May 1st, 1933, pursuant to a plan approved by
the commissioner of banking and insurance, the plaintiff caused to be drawn a check to his order in the sum of $4,547.55, the precise amount of money to which he would have been entitled had the bank not closed or had it been liquidated completely by the commissioner of banking and insurance, and that official had been able to pay the depositors in full. The check not being paid, this action was brought.
Under the reorganization plan consummated, pursuant to chapter 116, Pamph. L. 1933, p. 241, as amended, and approved by the requisite number of depositors and stockholders, a certificate for thirty thousand shares of preferred stock was issued to a trustee for all depositors and other creditors of the bank. Each had a proportionate interest in this stock until the original liability of the defendant to each was paid in full, together with cumulative dividends at the rate of one-tenth of one per cent. per annum.
Section 6 of Pamph. L. 1933, p. 241 (at p. 243), is as follows: "Subscriptions to such preferred stock shall be paid for either in cash or by an offset in the same amount against any deposit balance or balances on the books of such bank, trust company or savings bank or partly by cash and partly by such offset against deposit balance or balances."
The situation on reopening of the bank was that without the consent of the plaintiff his account was charged by an offset in order to provide payment for his interest in the preferred stock issued under legislative authority. He, therefore, claims that the statute and the plan of reorganization adopted thereunder, in so far as it attempts to bind him, is unconstitutional and ineffective and that as a creditor of an insolvent corporation he cannot be compelled to take anything in lieu of his debt except money, and that he had a right to have the corporate assets sold and to receive a proportionate share of the money so received and that he cannot, because of his inactivity, be compelled to accept securities or an interest therein in lieu thereof. This undoubtedly is the rule in this state in the case of the winding up of the affairs of an insolvent business corporation. Lonsdale, &c., v. International, &c., 101 N.J. Eq. 554; Moore v. Splitdorf, 114 Id. 358.
The defendant, however, is incorporated under the Banking act of 1899, page 431, as amended (Pamph. L. 1913, p. 291), which permits the commissioner to take possession of the property of any bank that is in an unsound or unsafe condition, and to retain such possession until such bank shall, with his approval, resume its business or until its affairs be finally liquidated. Under the act of incorporation, banks and their contracts are subject to the control of the state.
Section 29 of the act, as amended, permits any creditor or stockholder of an insolvent bank to apply to the Court of Chancery for an injunction and the appointment of a ...