Milberg v. Seaboard Trust Co.

• Decision Date: 28 May 1951
• Docket Number: No. A--127,A--127
• Citation: 7 N.J. 236,81 A.2d 142
• Parties: MILBERG et al. v. SEABOARD TRUST CO. et al.
• Court: New Jersey Supreme Court

Page 236

7 N.J. 236

81 A.2d 142

MILBERG et al. v. SEABOARD TRUST CO. et al.

No. A--127.

Supreme Court of New Jersey.

Argued May 7, 1951.

Decided May 28, 1951.

E. Norman Wilson, Hoboken, argued the cause for appellant City of Hoboken (Dominick J. Marrone, Hoboken, attorney).

Henry Milberg, Jersey City, argued the cause for respondent Fanny Milberg (Milberg & Milberg, Jersey City, attorneys).

John Milton, Jersey City, argued the cause for respondents Hudson County Nat. Bank and Seaboard Trust Co. (Milton, McNulty & Augelli, Jersey City, attorneys for Hudson County Nat. Bank; Burke, Sheridan & Hourigan, Union City, attorneys for Seaboard Trust Co.).

The opinion of the court was delivered by

WACHENFELD, J.

This is an appeal from a judgment in the Superior Court confirming a Master's report and discharging the liquidating trustees of the Seaboard Trust Company. There is also an appeal from an order made by the court below directing the money involved in the litigation be paid into court and making allowances to the Master and to counsel.

Fanny Milberg originally appealed from the final judgment and the order of the Superior Court relating to the allowances of fees to counsel and to the Master. She, however, abandoned her appeal from the order supra and became a respondent as to this phase of the litigation. The cause was certified here on our own motion.

The question presented arose out of the liquidation of the Seaboard Trust Company, a banking institution in Hoboken, and the query was whether or not the liquidating trustees of that company discharged the full duty cast upon them by law in accepting the bid of $1,524,523.59 for the assets sold to the Hudson County National Bank, which also assumed the liabilities of the Seaboard Trust Company. The inquiry in substance is whether or not the purchase price was fair and reasonable.

The accepted price amounted to $30.49 per share and this was coupled with an offer by the Hudson County National Bank to pay $32 per share for all stock tendered for cancellation up to July 1, 1950, which date was subsequently extended to the time of the Master's hearing.

The Seaboard Trust Company came into being in 1933 as a result of the failure of the old Steneck Trust Company in Hoboken. Late in 1949, negotiations for its sale were entered into with the Hudson County National Bank resulting in the offer aforementioned. The proposal was reported to the stockholders of the Seaboard Trust Company by its board of directors, who were of the opinion that $32 a share was a fair price. There were 50,000 shares of the stock of the Seaboard Trust Company which were outstanding and as a result of the offer of the Hudson County National Bank 80 per cent of the 50,000 shares was acquired.

On April 10, 1950, at a meeting of the board of directors of the Seaboard Trust Company, a resolution for the dissolution of the Seaboard Trust Company was passed and was submitted to the stockholders at a meeting on April 27. Stockholders owning shares aggregating 39,484 voted in favor of dissolution and a certificate evidencing that fact was filed with the Commissioner of Banking and Insurance pursuant to the statute. On April 28, 1950, a certificate of the Banking Commissioner was issued, declaring that the Seaboard Trust Company should be dissolved.

On April 29, 1950, the directors of the Seaboard Trust Company, acting as trustees in dissolution, met to consider their course of action in liquidating the assets of the Seaboard Trust Company. They accepted the offer of the Hudson County National Bank to purchase the assets of the Seaboard Trust Company for the sum already stated and to assume the liabilities of the trust company.

The City of Hoboken held 6,582 shares of stock and Fanny Milberg was the owner of 18 shares. Many shares were held by other stockholders, some of whose addresses were unknown, who had not accepted the Hudson County National Bank's offer to buy at $32 per share.

Milberg and the City of Hoboken, when advised the Seaboard Trust Company was considering the matter of liquidation, made an application to the Superior Court for an order enjoining the meeting. The injunction was denied, the meeting was held, and the matter proceeded in the regular course, resulting in the appointment by the court of a Master to take testimony to determine whether or not the board of directors, acting as trustees in liquidation, discharged their full duty in disposing of the assets and if the value set by them, to wit, $30.49 per share, was a fair value for the assets so disposed of.

The appellant contends the purchase price offered was not fair and reasonable because the bank building was worth more than the $75,000 valuation placed upon it in the negotiations with the Hudson County National Bank and because nothing was paid for the good will of the Seaboard Trust Company although it was a going concern, had deposits of approximately $10,600,000 at the time of its absorption, was in a liquid condition, and had been in operation for over fifteen years.

As to the real estate, the appellant relies upon the testimony of an assessor of the City of Hoboken, who estimated its value to be $133,400. This figure was arrived at by the application of a formula capitalizing rental value based on 1/10 of one per cent of the first million dollars of deposits and 1/5 of one per cent of the excess of deposits over $1,000,000. The rarity of the acceptance of that formula was indicated by the evidence.

The Seaboard Trust Company was to be dissolved, its charter forfeited, its right to engage in banking business cancelled, and these circumstances made it at least questionable as to whether or not the formula relied upon was applicable, as the valuation so arrived at was based upon the use to which the premises were put, including as an integral part thereof the franchise granted by the state, which had then been surrendered.

The defendant's real estate appraiser, whose qualifications were not questioned, valued the property at $74,800. There was too the evidence of Mr. Furman, the president of the company, who testified the building was operated at a loss and the suggestion to him by one of the state bank examiners who thought the building was a burden to the bank.

The Master was unimpressed by the appellants' testimony and concluded that had failed to sustain the burden of proof assumed.

The issue here is not whether the land and building were actually worth more than $75,000 but is, as set forth in the pretrial order, 'whether or not the liquidating trustees * * * discharged the full duty cast upon them by law in accepting' the offer made by the Hudson County National Bank. The value of the real estate was therefore merely an item to be considered in concluding whether or not the trustees had discharged their legal responsibility.

The appellant also argues that at the time of the sale the Seaboard Trust Company was a going concern, and, while admitting that the transaction had the form of liquidation, insists a merger took place and therefore it was the duty of the trustees in liquidation to include 'good will' as an asset.

For several years prior to the sale, the president of the Seaboard Trust Company had been concerned about the future of small banks, including his own. His doubts about their ability to prosper were brought about by the fiscal policies of the government and were increased by the passage of the 1948 revision of the Banking Act by the State of New Jersey, R.S. 17:9A--1 et seq., N.J.S.A., which in his opinion seriously restricted the bank's freedom of action in making investments.

Supporting the president's apprehension, a field examiner of the Banking Department testified banking circles generally thought that sooner or later small banks would have to dissolve their activities, particularly in communities where there was strong competition, or they would have to merge with larger banks.

In Matawan Bank v. Matawan Tile Co., 2 N.J. 116, 65 A.2d 729, 734, (1949), we decided, referring to the statutes governing the dissolution of corporations: 'By express mandate of the statute the powers of the trustees in the administration of their trust extend only to winding up the affairs of the corporation and distributing its assets and to such other matters as may be necessarily incidental to the exercise of these functions. Manifestly, such grant of powers, even in the absence of the specific legislative proscription above quoted, does not contemplate the continuation of the business of the defunct corporation.'

The value of the good will of a business is naturally not susceptible of determination with exactitude, In re Hall, 94 N.J.Eq. 398, 119 A. 669 (Prerog. 1923), and if a corporation is to be dissolved and ceases to be a going concern, it is exceedingly doubtful whether its good will uncder...