Bettle v. Republic Sav. & Loan Ass'n

• Decision Date: 15 August 1902
• Citation: 53 A. 11,63 N.J.L. 578
• Parties: BETTLE, Commissioner v. REPUBLIC SAVINGS & LOAN ASS'N.
• Court: New Jersey Court of Chancery

53 A. 11

63 N.J.L. 578

BETTLE, Commissioner

v. REPUBLIC SAVINGS & LOAN ASS'N.

Court of Chancery of New Jersey.

Aug. 15, 1902.

Bill for the appointment of a receiver, by William Bettle, as commissioner of banking and insurance, against the Republic Savings & Loan Association. Receiver appointed.

Thomas N. McOarter, Atty. Gen., for complainant.

Lindabury, Depue & Faulks, for defendant.

REED, V. C. The defendant is a corporation organized under an act to encourage the establishment of mutual loan and building associations. 1 Gen. St. p. 331. By an act passed in 1899 (P. L. 1899, p. 366) every such corporation is subjected to the inspection and supervision of the department of banking and insurance. By this act it is provided that, if it shall appear to the commissioner of banking and insurance, from any examination, that an association is insolvent, or exceediug its powers, or violating the law, or that its condition or methods of business are such as to render the continuation of its operation hazardous to the public or to those having funds in its custody, he shall have authority to apply to the chancellor for an injunction restraining said association from the transaction of further business, and for the appointment of a receiver. This application is made by the commissioner to restrain the defendant, and for the appointment of a receiver, under the third section of the act just mentioned. The defendant filed its certificate of incorporation on November 2, 1893. By article 7, § 3, of its original articles of association, it is provided that short-term stock may be issued, on which the monthly dues shall be 50 cents per share. When $50 shall have been paid on a share, no further payments will be required, and the holder will be entitled to receive thereafter cash dividends of $1.50 every six months until maturity of such share. Section 4 provides that long-term stock will be issued, on which the monthly dues shall be 25 cents per share. When $36 shall have been paid on a share, no further payments will be required, and the holder will be entitled to receive thereafter cash dividends of $1.08 every six months until maturity of such share. Section 5 provides that the board of directors shall have power to issue in the name of the corporation other kinds of stock, to be covered by such regulations as the board of directors may direct. In addition to the stock on the purely installment plan, the company has issued stock upon payment of a lump sum less than the par value of the certificate. It has also issued stock on which only dividends of 6 per cent. and 8 per cent., respectively, are paid in lieu of further participation in the profits. The examiners appointed by the commissioner by authority of the third section of the act of 1899 made a report dated May 14, 1902, from which it appeared that the total assets of the defendant were $625,695.19, and its total liability $695,166.68. The answer of the defendant denies the accuracy of these figures, and asserts that its assets are sufficient to pay its liabilities.

The books of the company show that the association has received from its members payments on account of dues and installments, exclusive of entrance fees, the sum of $973,822.48. It has received as profits on account of interest and premiums the sum of $170,103.56, and on account of rents $52,801.15; making a total of $222,904.71. In addition, it has received from the members, on account of fines and membership fees additional to the first monthly dues, redemption fees on the payment of loans, and miscellaneous expenses returned, the sum of $13,336.15, which, with the previous total, makes the entire sum received on account of profits $236,240.86. Its expenses have been as follows: On account of salaries, $207,117.76; commissions on collections, $12,086.88; agents' commissions in addition to first monthly dues, $40,523.37: for legal expenses, $14,565. 08; for furniture, $2,293.68. The total amount of these expenses is $276,586.77. In addition to these expenses, it has paid interest upon mortgages on property owned by the association, and interest upon money borrowed by it, to the amount of $34,647.31. It has paid for taxes, $32,323.92, and for improvements placed upon the real estate $14,902. These three items amount to $81,873.23. The total amount of its expenses foot up to $358,460.10. There has also been paid as profits to members the sum of $58,739.80. This sum, as I take it, is made up partly of interest paid upon the 6 per cent and 8 per cent. interest-bearing certificates. The expenses in excess of the profits during the life of the association up to the time of filing the report are $122,219.24, exclusive of the amount paid for profits; and including that amount, namely, $58,739.80, the expenses exceed the profits to the amount of $170,959.04. This amount, therefore, of $170,959.04, has been taken from the money actually paid in by members of the association,—money paid in without including the entrance fees also paid by the members, which went to the expense account of the association. It appears that the association has paid to withdrawing members the sum of $397,277.75. This, deducted from the amount actually paid in by members, exclusive of the entrance fees, leaves $576,544.73; but out of this has also been paid for expenses in excess of profits $170,959.04, which leaves of the amount paid in by members, in the hands of the association, the sum of $405,787.93. This amount of money, therefore, is supposed to be represented by property purchased with it, 'or other property into which such property purchased has been transmuted. Assuming that this sum has been expended directly or indirectly by the association in the acquisition of property, and the property so held is worth its cost, is it sufficient to pay the liabilities of the association? The liabilities of the association, as found by the examiners and stated in the affidavits of the complainant, excluding the amount due for principal and interest on account of mortgages upon the real estate of the association, and exclusive of the item $11, 180, payment due on the property, but which the defendant says has since been paid, leaves the amount of liabilities, according to the examiner's report, $411,375.66. The first item on this list of liabilities is for the amount due installment shareholders, put at $382,961.69. This liability is stated by the defendant at $404,600.98. The defendant states the liabilities of the...