Goldmann, Foley and Fulop. The opinion of the court was delivered by Fulop, J.c.c. (temporarily assigned).
Defendant, the Hillside National Bank (hereinafter referred to as the bank), appeals from a final judgment entered against it in the Law Division, Essex County, in an action in replevin for the return of seven bank passbooks representing deposits of $45,000 and interest, which had been pledged to the bank by the plaintiff to secure loans.
On February 28, 1958, March 25, 1958 and May 15, 1958, Mercury Automatic Fire Alarm Co., Inc., a New Jersey corporation (hereinafter referred to as Mercury), borrowed money from the bank on promissory notes. In order to secure repayment, Mercury assigned to the bank the proceeds of two contracts with the United States Army Engineers for the installation of fire alarm systems and related apparatus. As additional security, Mercury procured Eichler, the present plaintiff, and others to post savings
account passbooks representing deposits in the Hillside National Bank approximately equal to the amounts loaned.
The February 28 loan totalled $25,000. It was secured by assignment of the proceeds of Army contract #5677, by plaintiff's passbooks for $20,000, and by other passbooks for $7,500.
The March 25 and May 15 loans aggregated $30,000. These were secured by assignment of the proceeds of Army contract #8160, plaintiff's passbooks for $25,000 and another passbook for $5,000.
The transactions were evidenced by three separate written agreements between Eichler, Mercury and the bank. Eichler is designated as guarantor. The two agreements referring to Army contract #8160 provided that Eichler "does hereby pledge and hypothecate" the saving accounts "as additional collateral to secure to the bank the repayment of said promissory note or notes of the Borrower, or any renewals thereof, and any interest accrued thereon, together with all costs and expenses for collection * * *." The bank was authorized to "charge and deduct from said savings accounts herein pledged any unpaid balance due from the Borrower to the Bank on said promissory note or notes, or renewals thereof * * * in the event said contract shall not be fully performed by the Borrower and accepted" by the Army engineers "or in the event the bank shall not receive the moneys due thereon assigned to it by the Borrower within five months [three months] of the terminal date set forth in said contract."
United States Fidelity and Guaranty Company (hereinafter referred to as U.S.F. & G.) was the surety on performance bonds in connection with both Army contracts. On September 11, 1958 the surety instituted suit in the Chancery Division against Mercury and the bank and others alleging that Mercury had incurred debts for labor and materials for the performance of the Army contracts far in excess of the balances due to Mercury on said contracts and that the surety would be liable therefor as well as for
the completion of the contracts. U.S.F. & G. obtained a restraining order against the bank, enjoining it from cashing or using any checks or moneys due or to become due from the United States under the contracts which had been assigned to the bank.
On October 8, 1958 the preliminary restraint was continued except as to one check in the sum of $46,834.71, dated September 22, 1958, issued by the Government with respect to contract #8160 and delivered to the bank as assignee. As to this check Judge Kolovsky, sitting in the Chancery Division, ordered that the bank might negotiate and deposit it "without prejudice, however, as to the rights of the parties to the proceeds of the said check as said rights may ultimately be determined in final hearing of this case." The order further provided that:
"In no event is the sum * * * to be deemed by any person as a payment to the Hillside National Bank on account of the sums due to the Bank upon its loans to defendant Mercury Automatic Fire Alarm Co., Inc., until it is finally determined that the Hillside National Bank is entitled to retain such moneys as its own property in which event it shall be credited as a payment on account of or in satisfaction of said loan as of this date; * * *."
Plaintiff was never joined as a party to the Chancery Division suit. Defendant made a belated motion to consolidate the present action with the Chancery Division action, but the motion was opposed by plaintiff and denied by the court. However, plaintiff knew of the action by or before October 3, 1958. He testified that he procured a transcript of Judge Kolovsky's oral opinion and caused it to be delivered to the Army disbursing ...