Lewis v. Lynn Inst. For Sav.

• Decision Date: 03 January 1889
• Parties: LEWIS v. LYNN INST. FOR SAVINGS.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

148 Mass. 235

19 N.E. 365

LEWIS v. LYNN INST. FOR SAVINGS.

Supreme Judicial Court of Massachusetts, Essex.

January 3, 1889

COUNSEL

J.R. Baldwin and H.F. Hurlburt, for plaintiff.

H.P Moulton and J.F. Hannan, for defendant.

OPINION

C ALLEN, J.

This case is certainly quite remarkable in its facts. More than 50 years ago the defendant savings bank closed upon its books the account of a female depositor by paying to her attorney the balance found to be due after making a deduction of 5 per cent. for losses sustained on its investments and the present action is brought by the administrator of her estate to recover the amount so deducted, with interest. The case calls upon us to look into the nature of the contract made by the savings bank with its depositors, under the system which then existed, and which has always prevailed in Massachusetts since savings banks began; and, in determining what the contract was, regard must be paid, not merely to the language used by the defendant in the books which it issued to its depositors, but to the circumstances under which the deposit was received, and the chartered powers and purposes of the institution itself.

The Lynn Institution for Savings was incorporated by St.1826, c. 20. Twenty-eight persons were named in the act, who, with such others as might be duly elected members, were made a corporation, with power to receive deposits, to be used and improved to the best advantage, and the income or profit thereof to be applied and divided among those making the deposits, and their executors, administrators, or assigns, in just proportion; the principal to be withdrawn at such times and in such manner as the corporation should direct and appoint. Other persons might be elected members, a president and other necessary officers might be chosen, and by-laws might be made; and it was provided that the officers should lay a statement of its affairs before any persons appointed by the legislature to examine the same, whenever required to do so, and that the legislature might at any time make further regulations for the government of the institution, and alter, amend, or repeal the act of incorporation at pleasure.

At the time of granting this charter there were no general laws in Massachusetts respecting savings banks, and but five earlier charters had been granted, viz.: by St.1816, c. 92, to the Provident Institution for Savings in Boston; by St.1818, c. 64, to the Institution for Savings in Salem; by St.1820, c. 210, to the Institution for Savings in Newburyport; by St.1825, c. 95, to the Institution for Savings in Roxbury; and by St.1825, c. 4, to the New Bedford Institution for Savings. The last one alone of the earlier charters contained similar provisions to that of the defendant, reserving the right of alteration, amendment, or repeal.

The first general legislation concerning savings banks was St.1834, c. 190, which was incorporated, with some additions, into Rev.St. c. 36, §§ 71-84. This legislation provided that every such corporation might receive on deposit, for the use and benefit of the depositors, all sums of money offered for that purpose, to a limited amount; prescribed the manner of investing the deposits; required that the income or profits of all deposits should be divided among the depositors, or their legal representatives, in just proportions, with a deduction of all reasonable expenses incurred in the management thereof; and provided that the principal deposits might be withdrawn at such time, or in such manner, as the corporation should in its by-laws direct. In the Revised Statutes provision was also made for an annual return, to the secretary of the commonwealth, by each institution, showing its condition. By St.1851, c. 127, a board of bank commissioners was established, with power, among other things, to visit and examine savings banks, and, in case of need, to apply to this court for an injunction and receivers, temporary or permanent.

It thus appears that a savings bank is an incorporated agency for receiving the moneys of depositors in small or moderate amounts, and investing them merely for the use and benefit of the depositors, who are to receive the advantage thereof in just proportion. At the outset, the chief purpose was to encourage frugality by affording to persons of small means an opportunity to have their savings cared for by persons of experience, who, by combining the deposits, could make advantageous investments not available for small investors. And this purpose still exists. The corporation had no capital stock, properly so called. There was no relation of privity between successive depositors, as there is between successive stockholders in an ordinary corporation. No profit or benefit accrued to the managers. It is a matter of familiar knowledge that in the earlier times the officers of savings banks, with the exception of the treasurer, usually received no pay for their services. It was so with the defendant. The savings bank book, upon which the deposit now sought to be recovered is shown, states that the savings bank would be open every Wednesday from 2 to 3 o'clock P.M and that the trustees and other officers would superintend the business without the smallest benefit to themselves; and one of the by-laws provides that the trustees shall never receive any emolument, but may allow a reasonable compensation to a treasurer, or such other officers as may be found necessary. Gradually, with the progress of time, a practice grew up among savings banks, which is now made compulsory by Pub.St. c. 116, § 24, of reserving a guaranty fund to meet possible losses; but the fundamental idea has never been departed from,--that all the funds and investments of a savings bank are held exclusively for...