Broderick v. Abrams

• Decision Date: 30 January 1934
• Citation: 170 A. 214
• Parties: BRODERICK, Superintendent of Banks of New York v. ABRAMS et al.
• Court: New Jersey Supreme Court

170 A. 214

BRODERICK, Superintendent of Banks of New York

v. ABRAMS et al.

Supreme Court of New Jersey.

Jan. 30, 1934.

Action by Joseph A. Broderick. as Superintendent of Banks of the State of New York, against Benjamin Abrams and others. On motion by various defendants to strike out the complaint as to them respectively.

Motions granted.

Argued before PARKER, J., at Chambers.

McDermott, Enright & Carpenter, of Jersey City (Arthur Offier, of New York City, on the brief), for plaintiff.

Walter J. Bilder, of Newark, Eichmann & Seiden, of Jersey City, Howard Ewart, of Toms River, Gross & Gross, of Jersey City, Harrison & Roche, of Newark, and Lichtenstein, Schwartz & Friedenberg, of Hoboken, for various moving defendants.

PARKER, Justice.

One of the grounds originally urged was misjoinder of parties; the facts being that several hundred defendants have been joined in what is nominally one action, but several hundred actions combined for convenience, as stockholders of the defunct Bank of the United States, and are severally charged with individual liability to the extent of the par value of the shares held by them respectively.

I disposed of this objection in another case a few weeks ago. See Beatty v. Lincoln Bus Co., 169 A. 286, 11 N. J. Misc. 938, memorandum filed December 11, 1933.

The other principal ground is that, by the statute of 1897 (section 94b of the Corporation Act, as reprinted in Compiled Statutes), it is enacted that "no action or proceeding shall be maintained in any court of law of this state against any stockholder, * * * of any domestic or foreign corporation by or on behalf of any creditor of such corporation to enforce any statutory personal liability of such stockholder, * * * for or upon any debt, default or obligation of such corporation, whether such statutory personal liability be deemed penal or contractual, if such statutory personal liability be created by or arise from the statutes or laws of any other state or foreign country, and no pending or future action or proceeding to enforce any such statutory personal liability shall be maintained in any court of this state other than in a nature of an equitable accounting for the proportionate benefit of all parties interested, to which such corporation and its legal representatives, if any, and all of its creditors and all of its stockholders shall be necessary parties." 2 Comp. St. 1910, p. 1656, § 94b.

The proposition advanced by the defendants is that this statute, which it is admitted was in existence in New Jersey before the organization of the Bank of the United States, bars any such action as the present one, which is by a quasi receiver not appointed by any court but ex officio pursuant to statute, and for the benefit of all the creditors (and principally the depositors) of the defunct Bank of the United States.

One answer made to this by plaintiff is that the case is not within the language of the statute. Another answer made is that, if it is within the language of the statute, there is an impairment of the obligation of a contract. A third answer made seems to be that to deny the right of action in this case would be in defiance of the full faith and credit clause of the United States Constitution (article 4, § 1).

An abstract of the complaint is perhaps necessary. It is in two counts, but they are both alike, except that the second count merely charges certain "equitable" owners of shares with the alleged responsibility for 100 per cent. assessment; whereas the first count relates to the "legal" owners, who are in far greater number.

The averments are that plaintiff is and was on December 11, 1930, the superintendent of banks of the state of New York; that the Bank of the United States is a corporation organized under the banking law of that state and doing business in the city of New York; that its capital amounted to $25,000,000, and the stock was owned by nearly 21,000 stockholders all over the United States and in foreign countries; that on December 11, 1930, by virtue of the Banking Law and in view of the financial condition of the bank, the plaintiff, as New York superintendent of banks, took possession of its business and property and is engaged in liquidating the institution pursuant to section 57 of the New York Banking Law of 1914 (Consol. Laws c. 2). We need not go into details as to the ground assigned for his action, as no question is now raised on that score.

Paragraphs 4 and 5 of the complaint go on to say that on May 6, 1931, pursuant to section 72, plaintiff gave notice to the creditors to present their claims, which notices were mailed and advertised, and that the time for presentation expired on June 29th, whereupon the plaintiff determined that the assets were not sufficient to pay the creditors in full, and that there was due by the bank to depositors and creditors a sum in excess of $30,000,000 over the reasonable value of assets, which deficiency still exists. That amount is in excess of the par value of all the stock.

Paragraph 6 of the complaint quotes the statute of New York which provides that "the stockholders of every corporation and joint-stock association for banking purposes, shall be individually responsible to the amount of their respective share or shares of stock in any such corporation or association, for all its debts and liabilities of every kind."

Paragraph 7 quotes section 80 of the same Banking Law to the effect that, whenever a liability as above exists, and the superintendent has taken possession and has notified creditors to present their claims, and the time to present claims has expired, and he has determined from his examination that the reasonable value of the assets is not sufficient to pay in full, he may enforce the individual liability of such stockholders in whole or in part. Then follow a number of provisions about making demand on the stockholders, and what the demand shall contain, and how it shall be made, and what date shall be fixed, and "in case any such stockholder shall fail or neglect to pay such assessment within the time fixed in said notice, the superintendent shall have a cause of action, in his own name as superintendent of banks, against such stockholder either severally or jointly with other stockholders of such corporation, for the amount of such unpaid assessment or assessments, together with interest thereon from the date when such assessment was, by the terms of said notice, due and payable. In any such action, the written statement of the superintendent, under his hand and seal of office, reciting his determination to enforce the individual liability, or any part thereof, of such stockholders, and setting forth the value of the assets of such corporation and the liabilities thereof, as determined by him after examination and investigation, shall be presumptive evidence of such facts as...