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STEPHENS FUEL CO. v. BAY PARKWAY NAT. BANK OF BROO

April 2, 1935

STEPHENS FUEL CO., Inc., et al.
v.
BAY PARKWAY NAT. BANK OF BROOKLYN, N.Y., et al.



The opinion of the court was delivered by: GALSTON

GALSTON, District Judge.

This is a motion made pursuant to Equity Rules 29 and 33 (28 USCA § 723) to strike out answers interposed by a number of defendants on the ground of insufficiency in law and equity and on the further ground that the answer are sham and frivolous.

The suit is in equity brought by the Stephens Fuel Co., Inc., as a judgment creditor, on behalf of itself and all other creditors of the Bay Parkway National Bank of Brooklyn similarly situated, to enforce the statutory liability of the stockholders of the Bay Parkway National Bank under and by virtue of the provisions of the National Banking Act, title 12, c. 2, § 65, U.S. Code (12 USCA § 65). That section reads: "When any national banking association shall have gone into liquidation under the provisions of section 181 of this title, the individual liability of the shareholders provided for by section 63 of this title may be enforced by any creditor of such association, by bill in equity, in the nature of a creditor's bill, brought by such creditor on behalf of himself and of all other creditors of the association, against the shareholders thereof, in any court of the United States having original jurisdiction in equity for the district in which such association may have been located or established. (June 30, 1876, c. 156, § 2, 19 Stat. 63.)"

 It appears from the complaint that on March 31, 1931, the Bay Parkway National Bank entered into an agreement with the Lafayette National Bank for the payment by the latter bank of the claims of certain creditors of the Bay Parkway Bank, and the Lafayette Bank assumed the payment of the obligations of the former. In consideration thereof, the Bay Parkway Bank executed and delivered to the Lafayette Bank its note in the aggregate amount of the liabilities of the Bay Parkway Bank assumed by the agreement and for the purpose of securing that note the Bay Parkway Bank assigned all of its property to the Lafayette Bank.

 On September 29, 1931, the plaintiff, the Stephens Fuel Co., Inc., in an action against the Bay Parkway National Bank recovered a judgment in the sum of $3,410.86. Execution was issued and the judgment returned wholly unsatisfied on January 8, 1932, and remains wholly unsatisfied.

 The indebtedness to the Stephens Fuel Company was not one of those which the Lafayette Bank assumed and agreed to pay.

 The defendants are stockholers of the Bay Parkway National Bank and were the owners and holders of shares of stock, and are sought to be held for the payment of the claim of the plaintiff and other creditors similarly situated to the extent of the amount of their stock at the par value thereof.

 The agreement between the two banks was entered into subsequently to the adoption of a resolution by the board of directors of the Bay Parkway National Bank and its shareholders owning more than twothirds of the capital stock of the Bay Parkway National Bank issued and outstanding, and it is alleged was an agreement for the voluntary liquidation of the Bay Parkway National Bank.

 The answers set forth many denials, the most critical of which relate to the recovery of the judgment by the Stephens Fuel Co., Inc., against the Bay Parkway National Bank, the issuance of execution thereon, and to the fact that the judgment remains wholly unsatisfied.

 The plaintiffs, relying on Equity Rule 33, seek to have these denials stricken out.

 Equity Rule 33 (28 USCA § 723) is as follows: "Testing Sufficiency of Defense. -- Exceptions for insufficiency of an answer are abolished. But if an answer set up an affirmative defense, set-off or counter-claim, the plaintiff may, upon five days' notice, or such further time as the court may allow, test the sufficiency of the same by motion to strike out. If found insufficient but amendable the court may allow an amendment upon terms, or strike out the matter."

 It will be perceived that the relief is specifically limited to the striking out of affirmative defenses, set-offs and counterclaims.The rule remains silent as to negative defenses.

 Judge Morris, in Atlantic Refining Company v. Port Lobos Petroleum Corporation et al. (D.C.) 283 F. 701, in interpreting this rule, held that such portions of the answer as set forth direct denials of crucial allegations of the bill do not fall within the rule.

 I can interpret the rule in no other way. However, it is asserted that the denial of the existence of this judgment should be stricken out as sham and frivolous on the ground that it is well settled that denials of knowledge or information sufficient to form a belief which relate to matters of public record, open by law to everybody, are presumptively frivolous. Harley v. Plant, 210 N.Y. 405, 104 N.E. 946; Lloyd Sabaudo Societa Anonime Per Azioni v. Elting (D.C.) 46 F.2d 315. A sufficient ...


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