Moore v. Conover

• Decision Date: 21 December 1937
• Parties: MOORE v. CONOVER et al.
• Court: New Jersey Court of Chancery

195 A. 833

MOORE

v. CONOVER et al.

Court of Chancery of New Jersey.

Dec. 21, 1937.

Syllabus by the Court.

1. Where, as herein, the Legislature reserved the right to alter, amend, or repeal a charter granted to a building and loan association under the act of 1849, Nixon's Dig. 1709-1868, p. 92, the reserved power became automatically a part of the charter of said corporation.

2. The right to alter, amend, or repeal charters may be reserved either by the State Constitution or by statute, and under such reserved power the state is authorized to make any alteration or amendment in the charter granted by it which will not defeat or substantially impair the object of the charter or any rights which have vested under it.

3. While the powers of a building and loan association incorporated under the Building and Loan Act of 1849, Nixon's Dig. 1709-1868, p. 92, may have authorized the isfinance of bonds in payment of maturities of running shares of stock, the right so to do was alterable at the discretion of the Legislature under its reserved power to alter and amend.

4. During the time that such an association may have had the right to issue bonds in payment of maturities, the holders of such bonds had a vested right to have them honored by payment, but did not have such a right to convert their maturities into bonds subsequent to legislation which altered the charter of the association and denied the right to issue bonds.

5. The Building and Loan Act of 1903, 1 Comp.St.1910, p. 334 et seq., § 1 et seq., after its effective date, defined the powers and restrictions applicable to all building and loan associations theretofore or thereafter incorporated and became the fundamental law governing such associations.

6. Prom the time when the Building and Loan Act of 1903 became effective, building and loan associations incorporated under prior laws of this state became subject to and bound by the provisions of the act of 1903, and contracts of such a building and loan association entered into by it after the date of the aforesaid act were subject to the provisions thereof.

7. The form of certificates issued by a building and loan association is not controlling in arriving at the true contract between a holder thereof and the association. It is the nature of the transaction as between the parties which determines the contract actually entered into.

8. The central idea of the Building and Loan Act of 1903, its supplements and amendments, 1 Comp.St.1910, p. 334 et seq., and Supps. § 27—R(l) et seq., is co-operation, equality, and mutuality, and courts seek so to construe contracts between the association and its stockholders as to further these principles, to the end that all shareholders shall occupy the same relative status as to debts and losses of the association and preferences be prevented.

Bill by Charles S. Moore, Conservator of the Atlantic City Loan & Building Association, against Ella Conover and others, in the nature of a quia timet to determine the rights and liability of holders of certain certificates issued by the Atlantic City Loan & Building Association and to enjoin actions at law which had been instituted by the holders against the Atlantic City Loan & Building Association.

Actions at law enjoined.

Moore & Butler, of Atlantic City, for complainant. Wm. M. & Thos. R. Clevenger, of Atlantic City (Clarence L. Cole, of Atlantic City, of counsel), for defendants Ella Conover Estate et al. Harcourt & Steelman, of Atlantic City (Fred G. Stickel, Jr., of Newark, of counsel), for defendants Frank Camp et al. Bourgeois & Coulomb, of Atlantic City, for defendant Reconstruction Finance Corporation. Cole & Cole, of Atlantic City, for defendants Mary G. Morse et al.

SOOY, Vice Chancellor.

This is a bill originally filed by Mr. Moore as conservator of the Atlantic City Loan & Building Association, hereinafter referred to as the Association, which Association has since been taken over by the Commissioner of Banking and Insurance, hereinafter referred to as the Commissioner, that official having been substituted as complainant.

Prior to the filing of the bill of complaint, suits at law had been instituted against the Association by holders of certain certificates issued by it to recover the amounts alleged to be due the several holders thereof and many more such suits were contemplated, so that, there being some 700 and upwards of these certificates, having a face value of $800,000, it became apparent that the rights and liabilities of these certificate holders should be determined by this court, with the result that the Commissioner filed his bill of complaint in the nature of a quia timet.

Representatives of all parties in interest have been brought into court through service on at least 10 per cent. in number and amount of each class of defendants, and each class so brought into court has filed answers, so that all the issues that should be determined have been raised by the pleadings and these pleadings do not question the jurisdiction of this court to completely dispose of the rights and liabilities of the Association and the defendants.

The answers filed represent the following classes of claims against the Association:

(a) Those owners of certificates who took them instead of cash for the running shares of stock which these owners had in the Association which had matured; (b) those owners of certificates who are not owners of running shares, but purchased the certificates in the open market; (c) those owners of certificates who purchased them from the Association and paid for them with the proceeds received from the Association for its running shares which had matured just immediately before the transaction was consummated; (d) those who held running shares not yet matured and upon which a mortgage loan had been obtained from the Association; (e) those who held running shares not yet matured; (f) those who had claims against the Association arising independently of stock or certificates, i. e., common creditors; and (g) the Commissioner of Banking and Insurance.

The certificates heretofore referred to which gave rise to the necessity of the present litigation are in the following form:

Type No. 1:

"No. — — —

— — — —Series

"Atlantic City Loan and Building Association of Atlantic City, New Jersey

" — — — Shares

$ — — —

"This is to certify, that the Atlantic City Loan and Building Association of Atlantic City, New Jersey, is indebted to — — — and — — — assigns in the sum of— — — dollars being the full value of Two Hundred Dollars per Share upon— — — Shares of the Stock of the said Association as appears by Certificate of Stock No. — — — with interest thereon at the rate of— — — per cent per annum until paid in accordance with the following provisions of the Constitution of the said Association:

"Section 8—When the value of any series of shares shall be two hundred dollars a share, the stockholders holding free shares shall receive the full value of their shares, either in cash or bonds bearing interest not to exceed 5 per cent"

"This Certificate is transferable on the books of the Association in person or by power of Attorney

"In witness whereof, the President and Secretary have hereunto attached their signatures and caused the seal of the said Association to be affixed at Atlantic City, N. J., this— — — day of — — — 19—. "— — — Secretary — — — — President"$$$ Type No. 2:

"No. — — —

— — — Series

"Atlantic City Loan and Building Association of Atlantic City, New Jersey

"— — — Shares

$— — —

"This is to certify that the Atlantic City Loan and Building Association of Atlantic City, New Jersey, is indebted to— — — and — — — assigns in the sum of— — — dollars, being the full value of Two Hundred Dollars per share upon — — — shares of the stock in the — — — series of stock of the Association as appears by Certificate of Stock No. — — —, with interest thereon at the rate of— — — per cent. per annum from the date hereof until paid. If this Certificate is outstanding for more than six months the said interest shall be paid semiannually. The indebtedness represented by this obligation shall become due upon ninety days' written notice to the Association but the Association shall have the right, at any time, to pay the principal of this obligation, together with interest to date of such payment.

"This Certificate is transferrable on the books of the Association in person or by power of Attorney.

"In witness whereof, the President and Secretary have hereunto attached their signatures and caused the seal of the said Association to be affixed at Atlantic City, N. J., this— — — day of — — — 19—.

"— — — —

— — — —

"Secretary President."

Type No. 3:

"No. — — —

— — — Series

"Atlantic City Loan and Building Association of Atlantic City, New Jersey

"— — — Shares

$— — —

"This is to certify/that the Atlantic City Loan & Building Association of Atlantic City, New Jersey, is indebted to— — — and — — — assigns in the sum of— — — dollars, being the full value of Two Hundred Dollars per Share upon— — — Shares of Stock of the said Association, as appears by Certificate of Stock No. — — — with interest thereon, at the rate of— — — per cent. per annum until paid in accordance with the following provisions of the Constitution of the said Association:

"Amendment III When the value of any Series shall be two hundred dollars a Share the stock holders shall receive the full amount of the value of their shares:

"Provided, That at no time shall more than one half of the funds in the treasury be applied to withdrawing stock holders. The preference of withdrawing shall be given to the highest bidder; the member so bidding being entitled to the value of one or all of his shares at the same rate of premium.

"This Certificate is transferrable on the books of the Association in person or by power of Attorney.

"In witness whereof the President and Secretary have hereunto attached their signatures and...