In re N. Jersey Title Ins. Co.

• Citation: 184 A. 420
• Parties: In re NORTH JERSEY TITLE INS. CO.
• Decision Date: 15 April 1936
• Court: New Jersey Court of Chancery

184 A. 420

In re NORTH JERSEY TITLE INS. CO.

Court of Chancery of New Jersey.

April 15, 1936.

Syllabus by the Court.

1. Section 2, chapter 3 of the Laws of 1934 (N.J.St.Annual 1934, § 134—56D(2), is clearly a legislative direction vesting in trustees, appointed under the act, the assets, properties, rights, credits, and interests of the company, and the control of any trust created by, or the result of, any instrument issued by the company. The trustees' conduct of the administration of such acquired assets ana trusts is subject to the control and supervision of the Court of Chancery.

2. The tenure of a trustee is, in a proper case, within the control of a court of equity.

3. A trustee has no property right in the trust res as such rights are guaranteed within the language of the constitutional prohibition against the deprivation of property without due process of law.

4. One of the outstanding inherent powers of equity is to remove and substitute trustees under certain circumstances. This power is enlarged by the Legislature in chapter 3 of the Laws of 1934, as amended by chapter 64 (N.J.St.Annual 1934, § 134—56D(1) et seq.).

5. This court has no power to change the language, or the terms of parties to a contract. But, where a contract creates a trust, equlty may, under certain conditions, assume jurisdiction and modify the terms of the instrument creating it.

6. Contracts, or agreements, or deeds of trust, in many instances, are governed by the rules affecting trusts, rather than by those relating to contracts. Held, that the subject of the executed trust indenture in the instant case is not such an instrument as is guaranteed by the State and Federal Constitutions against impairment.

7. The constitutional prohibitions against the impairment of obligation, and deprivation of property without due process of law, are not always strictly applied; there is a certain amount of plasticity permitted to fit the circumstances.

8. Mortgage guaranty corporations, like banking institutions, building and loan associations, and insurance companies, are quasi-public corporations, peculiarly vested with a public interest, and so within the control of the Legislature, that an incidental impairment of the obligation of contract is insufficient to constitute legislation affecting them invalid.

9. Powers, the exercise of which can only be justified on the specific ground that they are police regulations, and which would otherwise be clearly prohibited by the constitution, can be such only as are necessary to the safety, comfort, or well-being of society, or so Imperatively required by the public necessity, as to lead to the conclusion that the framers of the Constitution could not as men of ordinary prudence and foresight, have intended to prohibit their exercise in the particular case, notwithstanding the language of the prohibition would otherwise include it.

10. The police power is a permanent right of sovereignty, and its exercise is not dependent upon an emergency.

11. The exercise of the so-called reserve power must be reasonable under the conditions, and the legislation must have a substantial relation to its object and must not be arbitrary or discriminatory.

In the matter of proceeding's under the Mortgage Guaranty Corporations Rehabilitation Act affecting the North Jersey Title Insurance Company, wherein trustees petitioned for authority to exercise and perform certain powers and duties. On order to show cause.

Order made absolute.

George F. Losche, of Hackensack, for Carl K. Withers, Com'r of Banking and Insurance of New Jersey, Daniel T. O'Regan and John Berg, trustees of North Jersey Title Ins. Co.

John Milton, of Jersey City, and William H. Wurts, of Hackensack, for Hackensack Trust Co.

George I. Marcus, of West Englewood, for Creditors' Protective Committee and Sarah E. Bird.

William M. Seufert, of Englewood, William J. Morrison, Jr., of Hackensack, and William Harris, of Newark, for certificate holders.

Herbert W. Britt, of Hackensack, pro se.

Julius Barr, of Newark, for Home Owners Loan Corporation.

Merritt Lane, of Newark, as amicus curiae.

EGAN, Vice Chancellor.

The trustees in the above-entitled matter, appointed under chapter 3, Laws of 1934, filed a petition under that act, as amended (N.J.St.Annual 1934, § 134—56D(1) et seq.), through which they sought authority, subject to the supervision and approval of the court, to exercise and perform certain powers and duties. Thereupon an order to show cause was issued on July 11, 1935. The order was not argued on the original return day, but was continued from time to time until March 30, 1936, when it was argued. It, among other things, provides:

"(4) In the name of the corporation or otherwise, to demand, sue for, collect, receive and take into their possession all the goods and chattels, rights and credits, moneys and effects, lands and tenements, books, papers, choses in action, bills, notes and property of every description of such corporation or any trust created by or the result of any instruments issued by the corporation in the course of its business or the result of any conduct of the corporation, and in their discretion to compound and settle with any debtor or creditor of such corporation or any such trust, or with persons having possession of its property or in any way responsible at law or in equity to such corporation or any such trust, upon such terms and conditions and in such manner as they shall deem just and beneficial to the corporation or trust, and in case of mutual dealings between the corporation and any person, to allow just setoffs in favor of such persons in all cases in which the same ought to be allowed according to law and equity."

"(11) In the name of the corporation or otherwise, to receive, collect and sue for the interest and principal of any bonds, mortgages or other security held by or under the control of such corporation or in any trust created by or the result of any instrument issued by said corporation in the course of its business or as a result of any conduct of the corporation or with respect to which the corporation has an agency by any instrument or by any foreclosure or other action thereon, take title to the property sold as a result of such action or deeded by an mortgagor or owner, in the same form and manner as they may take title to foreclosed properties;"

"(13) To turn over to holders of guaranteed mortgage investments, mortgages to which they are entitled under the assignments or certificate or other instruments held by them, or the properties held as a result of the foreclosure thereof, or the foreclosure decree in such case and to agree upon and compound and settle claims by or against the corporation in respect thereto, including the adjustment and the payment or collection or postponement or securing the equities or interests of the corporation therein by reason of advances made by it for interest, principal or other payments guaranteed by it or for taxes or other expenses;"

"(19) To secure the repayment of the certificates or other obligations of the Trustees by the mortgage, pledge, assignment, transfer in trust, or hypothecation of any or all of the property whether real, personal or mixed of such corporation or of the trusts which may come to their possession or be in their control;"

"(21) To administer the properties, rights, credits and interests which may come to their possession as one trust irrespective of the terms of any instruments made by said corporation in the conduct of its business, keeping proper books of account from which, in the event of ultimate liquidation the rights of the interested parties may be determined, charging against the separate interests of the parties such proportion of the cost of the general administration, including the repayment of any indebtedness incurred by the Trustees, as the Court may, upon such notice as it may prescribe, determine just and equitable;"

"(41) To authorize and direct the Hackensack Trust Company to deliver to the Trustees any and all property of whatever kind or nature which it has in its possession or under its control belonging to the corporation or any trust created by or the result of any instruments issued by the corporation in the course of its business or the result of any conduct of the corporation."

Opposition to the adoption of those quoted paragraphs, in substance, took the following form: (1) "To grant the trustees the powers they seek, will be to destroy the rights of the Hackensack Trust Company, and will be a taking of the property of the Hackensack Trust Company without due process of law in contravention of the Fourteenth Amendment of the Constitution of the United States, and a denial to the said Hackensack Trust Company of the equal protection of the law required to be given to it by the said Fourteenth Amendment of the Constitution of the United States." And that (2) "the said statute is unconstitutional and void in that it violates section 10, article 1 of the Constitution of the United States, providing that no state shall pass any law impairing the obligation of contracts; and that the said statute is unconstitutional and void in that it is contrary to the provisions of paragraph 3 section 7, article 4, of the Constitution of the State of New Jersey, which provides that the legislature shall not pass any law impairing the obligation of contracts, or depriving a party of any remedy, or enforcing a contract which existed when the contract was made." (3) "The said statute, if so construed as to authorize this court to substitute the trustees appointed by it pursuant to the said statute, for the trustee named in the respective trust indentures, would destroy the vested rights of the Hackensack Trust Company and would be a clear invasion of the trust company's rights under both the state and federal constitutions, and in that the said statute contravenes article 4, section 7, paragraph 4...