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McSweeney v. Equitable Trust Co.

Decided: October 20, 1941.


On appeal from the Supreme Court.

For the plaintiff-appellant, Bilder, Bilder & Kaufman (Samuel Kaufman, Sanford Freedman and William T. Connor, of the Pennsylvania bar, of counsel).

For the defendant-respondent, David T. Wilentz (Louis J. Cohen, of counsel).


The opinion of the court was delivered by

DONGES, J. This is an appeal from a judgment of the Supreme Court, Atlantic County Circuit, entered in its favor, on motion of the defendant-respondent on the pleadings. Plaintiff moved to strike defendant's answer, which motion

was denied. 16 N.J. Mis. R. 193. Thereupon, defendant moved for judgment, which was granted. The essential facts are not in dispute.

The controversy arises out of the re-organization of the defendant-respondent bank pursuant to the provisions of chapter 116 of Pamph. L. 1933, as amended by chapter 287 of Pamph. L. 1933.

The complaint was in two counts, and is based upon the debtor and creditor relationship that existed between the parties from 1925 to 1933. Maurello v. Broadway Bank and Trust Co., 114 N.J.L. 167. The first count sought recovery of a checking account, and the second count sought recovery of a savings or interest account. It alleges that on September 1st, 1933, respondent repudiated its contracts with appellant to repay the deposits in cash and tendered, in lieu thereof, "shares of preferred stock of Equitable Trust Company."

The answer admitted the deposits of plaintiff, and that no payment thereof had been made; and that stock had been offered in lieu of the deposits. A number of special defenses were pleaded, setting up in detail financial conditions prevailing throughout the United States in 1933; that the banking holiday was declared by the President and made effective in this state by proclamation of the Governor; that respondent was not permitted to reopen on an unrestricted basis because it could not qualify for Federal Deposit Insurance required of all members of the Federal Reserve System; that, on March 14th, 1933, respondent was permitted to open on a restricted basis under the provisions of the Altman Act (Pamph. L. 1933, p. 43); that appellant received, on or about March 22d, 1933, credit on new accounts of 5% of her deposits, amounting to $9,223.49 in her savings account and $1,009.59 in her checking account, and that appellant continued her deposits and withdrawals from March 14th, 1933, and until respondent opened for normal business on February 1st, 1934, and thereafter and until the commencement of this suit, maintained an active account of deposits and withdrawals. The answer sets up the adoption of chapter 116 of the laws of 1933, page 241, approved April 12th, 1933, authorizing the reorganization of banks with the approval of

the Commissioner of Banking and Insurance, and permitting banks to amend their charters or certificates of incorporation and to reorganize by the issuance of preferred stock to depositors and creditors, each depositor to subscribe to a certain percentage of his claim for the stock to be issued; and by the amendment of the act (chapter 287, Pamph. L. 1933, p. 770), the plan of reorganization was to become effective when the Commissioner of Banking and Insurance was satisfied "that the plan of reorganization is fair and equitable as to all depositors, other creditors and stockholders and is in the public interest and shall have approved the plan subject to such conditions, restrictions and limitations as he may prescribe, and (2) when, after such notice of such reorganization as the Commissioner of Banking and Insurance may require, (a) depositors and other creditors of such bank, trust company or savings bank representing at least seventy-five per centum (75%) of its total deposits and other liabilities as shown by the books thereof, and (b) stockholders owning at least two-thirds of its outstanding capital stock as shown by the books thereof, shall have consented in writing to the plan of reorganization;" the act further provides that if the plan was approved and should become effective it would be binding on all depositors, creditors and stockholders whether or not they shall have consented to such plan of reorganization.

The answer sets up that on June 17th, 1933, a plan of reorganization was submitted to depositors of respondent, which provided for the conversion of the entire restricted deposits into cumulative non-assessable preferred stock at the rate of one share of stock for each $30 on deposit; $10 thereof to be capital and the balance of $20 to be surplus or reserve for contingencies; that cumulative dividends on the preferred stock were to be paid at the rate of 3% per annum on the par value of $10; that this stock was to be redeemed at $30 per share plus accrued dividends, and no dividends or other earnings were to be paid to the holders of common stock until all the preferred stock was redeemed and dividends thereon paid in full; unrestricted deposits, that is, those made after March 14th, 1933, were not affected by the plan. The record shows that appellant received such notice, with

an outline of the plan, in which appeared the following: "Further information desired by any depositors will be cheerfully given by any member of our ...

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