[161 NJSuper Page 499] Defendant Joseph F. Bradway, Jr. is president and chairman of the board of directors of Guarantee Bank, a banking corporation of the State of New Jersey (hereinafter, the bank.) Plaintiff is a stockholder and director of the bank.
On or about July 22, 1977 plaintiff filed a complaint alleging violations of various provisions of the Banking Act of 1948, N.J.S.A. 17:9A-1 et seq. The complaint alleges that by virtue of making overdrafts on accounts maintained by him with the bank, defendant defaulted in an undisputed obligation to the bank in the years of 1974, 1975 and 1976, thereby violating N.J.S.A. 17:9A-104, which provides that a director "who defaults for thirty days in payment of an undisputed obligation to the bank, shall cease to be a director."
Plaintiff filed the present action seeking to permanently remove defendant from the board for violations of the statute.
On November 18, 1974 a routine audit of the bank by the FDIC and the Banking Department of New Jersey revealed overdrafts in various checking accounts of Bradway. The principal of the overdrafts was, admittedly, voluntarily paid in full shortly after Bradway was notified of them; however, they had remained on the books in excess of 30 days, in violation of the statute.
On December 24, 1974, at a meeting of the full board of directors of the bank, the chairman of the board announced that Bradway had been disqualified as a director by virtue of the provisions of N.J.S.A. 17:9A-104 and that a vacancy therefor existed on the board. Bradway had made full disclosure to the board concerning the overdrafts. He had further voluntarily repaid both principal and interest on the amount of the overdrafts. The shareholders of the bank were on notice of the fact of Bradway's overdrafts due to the large amount of publicity engendered by the situation. By a unanimous vote of the board, Bradway was re-elected as a director to fill the vacancy. During the years 1974-1976 further overdrafts were made by Bradway on various accounts maintained by himself and members of his immediate family. In July 1977 plaintiff filed the present action seeking a mandatory injunction permanently removing defendant from the board of directors of the bank, and a declaratory judgment that defendant is ineligible to hold the office of director
or officer of the Guarantee Bank. After commencement of the suit Bradway requested the firm of Haskins & Sells, certified public accountants, to compute the interest which might be applicable for the six checking accounts at Guarantee Bank on all of the overdrafts occurring between 1973 and 1976. Based on the highest interest charges that might be applicable, the accountants computed the amount which would be due if interest were chargeable on overdrafts. Bradway voluntarily paid this amount.
During the years 1975 to 1978 Bradway was re-elected to the board at the shareholders meeting held in April of each year. In April 1978 Bradway had repaid all of the overdrafts in his checking accounts and was re-elected by shareholders, who had knowledge of the overdrafts due to the filing of the present law suit and the attendant publicity.
At the conclusion of argument on the motion to dismiss for failure to state a claim upon which relief can be granted, I requested additional memoranda searching out similar statutory or case law from other jurisdictions which would aid in interpreting N.J.S.A. 17:9A-104, due to the absence of any history on the statute in New Jersey.
From a review of the cases cited, I have no doubt but that N.J.S.A. 17:9A-104 is self-executing, not requiring any action on the part of the Banking Commissioner. As a corollary to this, plaintiff has the right to privately enforce the provisions of the statute. This is an effective supplement to the supervisory function of the Banking Commissioner, particularly in light of the fact that the Banking Commissioner has declined to act. Plaintiff is a stockholder of the bank, and therefore certainly has a right to protect his holdings. This does not imply an encroachment upon the administrative sphere. There is a strong policy of maintaining harmonious relationships between administrative and judicial bodies. This was recently affirmed in Brunetti v. New Milford , 68 N.J. 576 (1975):
This Court has recognized that the exhaustion of remedies requirement is a rule of practice designed to ...