Wolverine Flagship Fund Trading Limited Vs.
134 A.3d 992
| N.J. Super. Ct. App. Div. | 2016Background
- Plaintiffs are hedge funds holding $19,210,000 principal of 5.00% convertible senior notes issued by American Oriental Bioengineering, Inc. (AOB) under a 2008 indenture; payment was AOB's unconditional obligation but notes were unsecured.
- Plaintiffs obtained a default money judgment in the Law Division against AOB for nonpayment.
- AOB's principal asset was a 33.7% certificated share interest in Aoxing Pharmaceutical Co., Inc.; the certificates were alleged to be physically held in China.
- Plaintiffs sued in Chancery seeking an injunction ordering Aoxing and its transfer agent (Olde Monmouth) to cancel/reissue the certificated shares and deliver them to the sheriff for execution.
- The Chancery judge denied the requested injunction, reaffirmed a consent order preventing Olde Monmouth from transferring/canceling the shares, and plaintiffs appealed.
- Central legal question: whether N.J.S.A. 12A:8-112 permits court-ordered reissuance or other equitable relief that bypasses the statute’s requirement of actual seizure of certificated securities held by a debtor.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a creditor may obtain equitable relief under N.J.S.A. 12A:8-112(e) to reach certificated securities without actual seizure | 12A:8-112(e) authorizes broad equitable aid (“by injunction or otherwise”) to reach certificated securities or to satisfy claims when securities cannot readily be reached, so the court may order reissuance or other relief | The statute’s §(a) requires actual seizure of the certificate; §(e)’s equitable aid does not override the possession/seizure requirement or permit reissuance by issuer | Court held §(a)’s actual-seizure rule controls; §(e) does not permit relief that circumvents seizure requirement; injunction limited to aiding seizure, not reissuance |
Key Cases Cited
- First National Bank v. Dyes, 638 S.W.2d 957 (Eleventh Circuit 1982) (statute affords creditor means to gain control of certificate from owner/holder, not a right to reissuance by issuer)
- Detox Indus., Inc. v. Gullett, 770 S.W.2d 954 (Tex. Ct. App. 1989) (turnover/reissue cannot be ordered where certificates are not in possession of debtor or a reachable third party)
- Inter-Regional Fin. Group, Inc. v. Hashemi, 562 F.2d 152 (2d Cir. 1977) (trial court ordered debtor to turn over certificated securities to sheriff — consistent with narrow §(e) relief)
- House v. Williams, 573 So.2d 1012 (Fla. Dist. Ct. App. 1991) (appellate court upheld order reissuing certificates to sheriff when location unknown, but opinion lacks analysis)