The opinion of the court was delivered by: MOSCOWITZ
MOSCOWITZ, District Judge.
On October 24, 1934, three creditors of the Prudence Company, Inc., filed a petition for the reorganization of the corporation under section 77B of the Bankruptcy Act (11 USCA § 207). The Superintendent of Banks of the State of New York, who had theretofore taken possession of the property and business of the Prudence Company, Inc., pursuant to the authority vested in him by section 57 of the Banking Law of the State of New York, and three creditors of the debtor, filed answers controverting the material allegations of the petition and moved to dismiss the same for insufficiency and lack of jurisdiction on the part of the court. The decisions upon the issues of fact and questions of law raised by the pleadings and various motions interposed herein were reserved pending the trial.
The question for determination is whether this court has jurisdiction in the premises, i.e., whether the debtor is a corporation which could become a bankrupt under section 4 of the Bankruptcy Act, as amended in 1910 (11 USCA § 22), and therefore subject to reorganization under section 77B.
The Prudence Company, Inc., is an "investment company" incorporated under former article 7, § 290 et seq., entitled "Investment Companies" (now article 12-A, § 505 et seq.), of the Banking Law of the State of New York, being chapter 369 of the Laws of 1914. It could not transact business (other than organization) until authorized by the certificate of the Superintendent of Banks (section 506). It was required to make a deposit of securities "as a pledge of good faith and as a guaranty of compliance with the provisions of this chapter" (section 507), and it was required to make annual reports to the Superintendent of Banks, and penalized for failure to do so (section 513). There are other provisions regulating the conduct of the business of investment companies as well as the procedure for the supervision and liquidation of such companies (sections 57-83).
Under section 508 of the Banking Law, an investment company in addition to the powers conferred by the general and stock corporation laws of the state of New York may, subject to the restrictions and limitations contained in article 12-A, have the following powers:
"1. To sell, offer for sale or negotiate bonds or notes secured by deed of trust or mortgages on real property situated in this state or outside of this state, or choses in action owned, issued, negotiated or guaranteed by it; to advance money upon the security of such bonds, notes or choses in action; to purchase or otherwise acquire such bonds, notes or choses in action and to pledge them to secure the payment of collateral trust bonds or notes; to sell or otherwise negotiate such collateral trust bonds or notes, provided, however, that the grant of powers which an investment company may exercise pursuant to this subdivision one shall not be deemed to affect the right of a corporation now or hereafter organized pursuant to the provisions of any other statute to exercise similar powers; or to prevent the organization under the stock corporation law of a corporation for such purposes.
"1-a. To accept bills of exchange or drafts drawn upon it payable on demand or on time not exceeding one year from the date of acceptance; to issue letters of credit authorizing the holders thereof to draw drafts upon it at sight or on time not exceeding one year from the date of any such letter or credit; to discount, purchase or advance money on the security of bills of exchange, drafts, notes, acceptances, or other choses in action; to buy and sell coin, bullion and exchange; to issue, at any branch office authorized by the superintendent of banks pursuant to section fifty-one of this chapter and established in a country or province of Asia in which the principal local currency consists of silver coin or bullion, notes payable in the local currency to bearer on demand without interest; provided, however, that the total amount of such notes issued by any such investment company and outstanding at any one time shall not exceed twice the paid-in capital of such investment company and that there shall be kept on hand at each branch office where such notes are issued a reserve in silver bullion or in the local silver coin of at least fifty per centum of the notes so issued at such branch office.
"2. To receive money or property in instalments or otherwise from any person or persons, with or without an allowance of interest upon such instalments; to enter into any contract or undertaking with such persons for the withdrawal of such money or property, at any time, with any increase thereof, or for the payment to them or to any person of any sum of money at any time, either fixed or uncertain.
"3. To engage in the business of receiving deposits, provided that it shall not engage in such business in this state until it shall have first made such deposit of securities with the superintendent of banks as is required of trust companies by section one hundred and eighty-four of this chapter.
"4. To establish branches pursuant to section fifty-one of this chapter.
"5. To purchase, acquire, invest in and hold all or any of the stocks of any corporation, domestic or foreign, and to sell and dispose of all or any such stocks owned by it; provided, however, that the grant of powers which an investment company may exercise pursuant to this subdivision shall not be deemed to affect the right of a domestic corporation now or hereafter organized pursuant to the provisions of any other statute to exercise similar powers, nor to constitute 'the business of an investment company or any part thereof' within the meaning of section five hundred nineteen of this chapter, and further provided, that any such investment company shall not invest and keep invested an amount in excess of ten per centum of the capital and surplus of such investment company in any one moneyed corporation, nor an amount in all moneyed corporations in excess of thirty per centum of the capital and surplus of such investment company."
Section 509 contains restrictions upon the powers of investment companies, and subdivision 1 thereof reads as follows: "An investment company shall not: 1. Exercise the powers conferred by subdivision one-a of section five hundred and eight of this chapter, unless it shall have a paid-up capital stock of at least two million dollars; exercise, within this state, the powers conferred by both subdivisions one-a and three of section five hundred and eight of this chapter."
A further restriction is set forth in section 505, subd. 3 thereof, and in so far as the same is material states: "Neither preferred nor common stock shall be issued at less than the par value of such stock and the aggregate par value of the common stock issued and outstanding shall at least equal the aggregate par value of the preferred stock issued and outstanding, and the par value of the preferred stock shall be not less than five million dollars, provided, however, that no preferred stock shall be issued by an investment company exercising the powers conferred by subdivision three of section five hundred and eight of this article and no investment company having preferred stock issued and outstanding shall exercise said powers."
The Superintendent of Banks urges that section 508, subd. 3, supra, clearly indicates that the debtor is a banking corporation, because of the alleged grant of power therein to "engage in the business of receiving deposits.* * *" The remaining provision of this subdivision requiring that "it shall have first made such deposit of securities with the superintendent of banks as is required of trust companies by section one hundred and eighty-four of this chapter" is construed by ...