In Re New Jersey Title Guarantee & Trust Co. Appeal Of Perry

• Decision Date: 24 September 1943
• Docket Number: Nos. 208, 209.,s. 208, 209.
• Parties: In re NEW JERSEY TITLE GUARANTEE & TRUST CO. Appeal of PERRY et al.
• Court: New Jersey Supreme Court

33 A.2d 873

In re NEW JERSEY TITLE GUARANTEE & TRUST CO.

Appeal of PERRY et al.

Nos. 208, 209.

Court of Errors and Appeals of New Jersey.

Sept. 24, 1943.

Appeal from Court of Chancery.

In the matter of the New Jersey Title Guarantee & Trust Company in liquidation, by Eugene E. Agger, Commissioner of Banking and Insurance. From an interlocutory order, 133 N.J.Eq. 9, 29 A.2d 719, referring to a special master the task of taking testimony as to the value of the company's assets specially pledged to secure its indebtedness to certain creditors, Louise E. Perry and others appeal.

Reversed.

The ‘bankruptcy rule’ that the secured creditor of an insolvent desiring to participate in the general fund must either first exhaust his security and credit the proceeds on his claim, or else credit the value of the security upon his claim and prove for the difference, vests in the creditor the right of election which course he will pursue.

Harry Lane and Alfred R. Becker, both of Jersey City, for appellants.

John P. Nugent, of Jersey City, for respondent.

PARKER, Justice.

The appeals are from an interlocutory order dated November 30, 1942, referring to a Special Master the task of taking testimony as to the value of certain assets of the defunct corporation, which were specially pledged to secure moneys owing from the corporation to a class of creditors which includes the appellants, to the end that it be determined whether the specific assets are sufficient to satisfy the claims of these creditors, or are insufficient and, if so, to what extent. The order prescribed that the ‘value’ of the assets in question ‘is to be the fair value as of February 14, 1939’, the date when affairs of the corporation were taken over by the Commissioner of Banking and Insurance.

The order is predicated upon the so-called ‘bankruptcy rule’ which we have expressly declared to be applicable in the case of this very corporation. Prashker v. New Jersey Title, etc., Co., 130 N.J.Eq. 102, 17 A.2d 303, affirmed in 130 N.J.Eq. 391, 22 A.2d 259. That rule requires a secured creditor desiring to participate in the general fund available for creditors ‘first to exhaust his security and credit the proceeds on his claim, or to credit its value upon his claim and prove for the balance, it being optional with him to surrender his security and prove for his full claim,’ Page 395 of 130 N.J.Eq., page 261 of 22 A.2d. Appellants are unwilling to surrender the security, and desire ‘to exhaust the security and credit the proceeds on the claim.’ They object to a mere appraisement of the security in a judicial proceeding, looking toward an ascertainment by expert testimony of a valuation existing in February, 1939, nearly four years prior to the order appealed from, which is dated November 30, 1942.

The securities pledged consist of bonds and mortgages covering various parcels of real estate. These, with other securities not pledged, were taken over by the Commissioner of Banking and Insurance in 1939. The appellants applied to the Court of...