Dodd v. Una

• Decision Date: 30 November 1885
• Citation: 5 A. 155,40 N.J.E. 672
• Parties: DODD v. UNA and others.
• Court: New Jersey Supreme Court

5 A. 155

40 N.J.E. 672

DODD

v. UNA and others.

Court of Errors and Appeals of New Jersey.

November Term, 1885.

Appeal from order advised by Vice-chancellor Van Fleet. See Una v. Dodd, 39 N. J. Eq. 173.

The Newark Savings Institution was incorporated by act of the legislature approved February 25, 1847, providing as follows:

"Sec. 4. And be it enacted, that the said corporation may receive, as deposits, all sums of money which may be offered for the purpose of being invested, in such sums, and at such times, and on such terms, as the by-laws shall prescribe, which shall be invested accordingly, and shall be repaid to such depositor at such times, and with such interest, and under such regulations, as the board of managers shall, from time to time, prescribe.

"Sec. 5. And be it enacted, that it shall be the duty of the managers to regulate the rate of interest to be allowed to the depositors, so that they shall receive a ratable proportion, as near as may be, of the profits, after deducting therefrom all necessary expenses, and a reasonable surplus or contingent fund."

"Sec. 7. And be it enacted, that the said corporation shall invest no money in any other public stocks than such as are created under the laws of the United States, or of this state, nor on bonds and mortgages except on unincumbered real estate worth at least double the amount of the sum invested, nor in the stock or loans of any incorporated company whatever."

A supplement enacted that "the said corporation, in addition to the power of investing money in public stock, given in the seventh section of the act to which this is a supplement, may invest money in the public stocks of the states of New York, Ohio, Kentucky, and Massachusetts, authorized by the respective laws of said states, and also in the stocks of the city of Newark, in this state, and of the cities of New York and Brooklyn, in the state of New York, authorized by the laws of said states, respectively." Act March 5, 1850, § 2.

Another supplement, approved February 9, 1859, repealed so much of the sixth section of the act as prohibited compensation to managers for actual services, and gave power to invest in the stocks and bonds of states, and in the bonds of counties and cities, and to make temporary loans on personal securities, with collateral securities.

By-laws regulating the mode by which depositors could demand and withdraw deposits, and providing that no deposit should be withdrawn at any time without three months' notice to the institution, and that each depositor was required to subscribe the by-laws, and signify an assent thereto, were adopted.

On December 12, 1877, the bank presented a petition to the chancellor alleging its incorporation, and the powers conferred and duties imposed thereby; that it had organized in 1847, received and invested deposits to a very large amount, and, at one time, accumulated a large surplus; that its managers had invested between $2,000,000 and $3,000,000 in railroad bonds, and loans secured thereby; that from 1873 the assets had so depreciated that the question whether any of the surplus would remain would depend on the ultimate value of its railroad securities, and its ability to realize on mortgages affected by a fall in the value of real estate; that deposits had been largely withdrawn, and increasing withdrawals were expected unless the 90-day notice clause of the by-laws should be enforced; that its enforcement would work greater distrust, and impair, if not wholly destroy, its usefulness; that although it had available securities, from the proceeds of which such withdrawn deposits could be paid for a long time, its managers were advised and believed that they could not allow such a course to be pursued without violating their duties; that they believed that, by a careful management of their trust under the direction of the court, the existence and usefulness of the institution could be maintained, and its depositors secured from ultimate loss; that they regarded the institution as an incorporated agency for receiving and loaning money intrusted to it, and themselves as trustees of the depositors; that the assets on hand at any time were the property of depositors, in proportion to their deposits, each depositor's right being diminished by losses or increased by gains in investments; that they were unwilling to proceed in the execution of their trust without the direction of the court of chancery, being satisfied that, without such direction, they could not maintain the institution in public confidence, or secure absolute equality among the owners of its assets; and praying as follows: "(1) That an order may be made requiring that only such dividends shall be paid to depositors on the first day of January next as shall be authorized by the order of the court; (2) that an order may be made restraining the institution from paying to any depositor and any depositor from demanding, more than eighteen per cent. of his deposit until the further order of the court, which amount may be required and paid at any time thereafter on demand; (3) that this institution be required, by the order of the court, to abstain from disposing of any of its assets beyond the said eighteen per cent., except with the approval of the court, or some master to be designated for that purpose; (4) that an order may be made permitting the said institution to provide that all deposits hereafter made, and until further order of the court, shall be treated as special deposits, and invested only in the bonds of this state or city of Newark, or of the United States, and that separate accounts thereof be kept, and the actual interest received from such investments, deducting necessary expenses, be paid as dividends on such deposits, and that such deposits shall not be subject to any restrictions as to payment except such as are imposed by the by-laws heretofore adopted; (5) that the future administration of the said trust shall be under the control of the court so long as shall be deemed necessary to promote the interests and insure the permanency and prosperity of the institution; (6) that concurrently therewith this honorable court will cause such examination to be made into the affairs of said institution, and the situation and nature of its assets, as your honor may deem necessary as a basis for the future action of the court."

The petition was sworn to by appellant, and the following was signed by the managers: "We, the undersigned, managers of the Newark Savings Institution, hereby signify our concurrence in the above petition, and request its immediate presentation to the chancellor."

The court made the following order:

"Upon reading and filing the petition of the Newark Savings Institution, setting forth the situation and character of the securities in which the moneys deposited for investment under the provisions of its charter have been invested, and praying for the direction of this court in the administration of its trust, in order to secure absolute equality among the depositors, and promote the permanency and usefulness of the institution, for the causes set forth in said petition; and the court having fully considered the matters set forth in said petition, and being of opinion that the said institution is a public trustee of the funds in its hands belonging to its depositors, and that the administration thereof is under the control of this court, and that the facts set forth in said petition justify the exercise of such control in order to secure equality in the distribution and payment of said funds, and to enable the managers to administer their trust in such manner as, if practicable, to secure the depositors against ultimate loss, and promote the permanency and efficiency of the institution; and it further appearing to the satisfaction of the chancellor that the said institution will have received, at the close of this year, for interest on its investments during the last six months an amount more than sufficient to enable it to pay an interest of two per cent. on the deposits for the said term, and that it has on hand in cash, or its equivalent in United States bonds, sufficient to pay on demand eighteen per cent. of its deposits:

"It is thereupon, on the twelfth day of December, 1877, ordered by the chancellor that the said institution be authorized to credit and pay, on and after the second day of January next, an interest or dividend of two per cent. out of its earnings for the past six months, on such deposits as shall be then entitled to receive the same; that from and after the service of a copy of this order the Newark Savings institution do refrain from paying to any depositor any sums which in the aggregate shall exceed eighteen per centum of the amount of the deposit standing to the credit of such depositor at the close of the eleventh day of December, 1877, until the further order of this court; that the said institution shall hereafter, and until the further order of the court, refrain from making any disposition of its assets except the payments to depositors above mentioned, and its ordinary taxes and expenses, without the approval and order of the court; that all deposits in said institution made on or after the twelfth day of December, 1877, and until further order of the court, shall be treated as special deposits, and invested only in the bonds of this state, the city of Newark, or the United States, and that separate accounts thereof be kept, and the actual interest received thereon, deducting necessary expenses and taxes, be paid as dividends upon such special deposits, and that such deposits shall not be subject to any of the restrictions hereby imposed."

On June 12, 1880, a further order permitting a portion of investments on mortgages of real estate was passed. On June 10, 1884, a petition was presented to the court of chancery, by William Una and others, respondents herein, representing that they were...