Renold v. Withers
| Decision Date | 07 March 1936 |
| Docket Number | No. 5303.,5303. |
| Citation | 13 F. Supp. 921 |
| Parties | RENOLD v. WITHERS et al. |
| Court | U.S. District Court — District of New Jersey |
Nicholas A. Tomasulo, of Roselle Park, N. J. (John Warren, of Jersey City, N. J., of counsel), for complainant.
Louis J. Cohen, of Newark, N. J. (Merritt Lane, of Newark, N. J., of counsel), for defendants Withers, Minier, Thomson, Cohen, and Roselle Park Building & Loan Association.
Cox & Walburg and Rudolph H. Heydt, all of Newark, N. J., for defendants Drake, McDevitt, Wood, Harwood Fish, Jr., Woodruff, Wanderweg, Thompson, Goddard, Gunter, Camillo, Jentsch, Coniglio, and Loeser.
Complainant in this cause is the holder of 50 shares of Roselle Park Building & Loan stock. The association conducted its business in the town of Roselle Park, Union county, N. J., and was of considerable proportions, having assets running into the millions of dollars and shareholders numbering 3500 in recent years.
The complainant brings his bill against a number of defendants, of whom Carl K. Withers is commissioner of banking and insurance of New Jersey, Ernest A. Minier is deputy commissioner of banking and insurance, Andrew Thomson is a special assistant deputy commissioner and is the executive in charge of the association, and Louis J. Cohen, who was counsel designated by the commissioner. The other defendants were officers and directors of the association at the time it was taken into possession by the then commissioner of banking and insurance, William H. Kelly, on September 8, 1934, and the association is likewise made defendant.
William H. Kelly was succeeded by Carl K. Withers as commissioner of banking and insurance on April 29, 1935, but Commissioner Withers has continued the subordinate officers Minier, Thomson, and Cohen, in their respective capacities above mentioned.
The complainant charges that there has been no liquidation, merger, or return of the affairs of the association to its directors, and that the purpose of the officials of the banking and insurance department, appointed by Commissioner Kelly and continued by his successor, Commissioner Withers, was to "disband the board of directors and disorganize the corporate structure of the defendant association and deprive all the shareholders, who were members of the defendant association, of the services of their elected representatives, as such, to safeguard and protect the interest of such members, so that the elected representatives of the members of the defendant association could not inquire into or supervise the acts and expenditures of the Commissioners of Banking and Insurance in possession of the property and business of the defendant association and their deputies, counsel, agents, employees and contractors, and so that there would be no person or persons to act officially on behalf of the defendant association to receive notices of applications of the Commissioners of Banking and Insurance for approval of the Court of Chancery of allowances and expenses of the Commissioners of Banking and Insurance, so that the board of directors of defendant association could not, on behalf of the defendant association and its members, employ and instruct counsel to object in the Court of Chancery to proposed allowances and expenses, so that the board of directors of defendant association would not, through its examining committee, ascertain the facts in this bill of complaint set forth, so that the board of directors of the defendant association would not employ counsel and authorize him on behalf of the defendant association to apply to the Court of Chancery to enjoin further proceedings of the Commissioner of Banking and Insurance, or enjoin him from doing acts as herein alleged, which are not in, but are in fact against, the best interests of the members and shareholders of defendant association or for such other relief as may be equitable and just and so that there would be no board of directors of defendant association to receive the business and assets of the defendant association, and so that the Commissioner of Banking and Insurance could, as a condition for the return of the association, appoint officers and directors of defendant association."
It is further charged, among other things, that "having induced the officers and the members of the board of directors of the defendant association to refrain from functioning as such to the extent permitted and required by law during possession of the defendant association by the Commissioner of Banking and Insurance, and having thus prevented the holding of meetings of shareholders, the said Ernest A. Minier and Louis J. Cohen took upon themselves the active conduct and direction of the affairs of the defendant association, without check by the elected representatives of the shareholders of the defendant association and in total disregard of the statutes of the State of New Jersey as to requiring approval of all allowances and expenses of the Commissioner of Banking and Insurance in possession on notice to the defendant association, as hereinafter alleged."
It is further charged that the said Ernest A. Minier and Louis J. Cohen, "with the acquiescence of the defendant, Andrew Thomson and with the approval of the said Commissioners of Banking and Insurance respectively, during their terms of office, assumed the power of allocating the business of the defendant association and determining all policies thereof and deprived the said Andrew Thomson as Special Assistant Deputy Commissioner of Banking and Insurance and as the executive in charge, of any power in connection with the administration of the affairs of the defendant association, in so far as the appraisal of assets, the allocation of the insurance business and the care, management, upkeep and sale of the real estate of the defendant association was concerned, and ousted the then local attorneys of the defendant association, and gave to Louis J. Cohen all of the legal business of the defendant association, in violation of the statutes of the State of New Jersey aforesaid, employed one David Cronheim, a realtor of Newark, Essex County, a close friend and former associate of the said Ernest A. Minier, to appraise the Union County assets of the defendant association, at an expense to the defendant association of $6292.00; gave to the said David Cronheim all of the insurance which those operating the association during the Commissioners' possession could control; gave to the said David Cronheim the exclusive management and sale of all of the Union County real estate of the defendant association; gave to the said David Cronheim all of the tax appellate work of the defendant association; prevented the said Andrew Thomson, the executive in charge of the affairs of the defendant association during the possession by the Commissioner of Banking and Insurance, from awarding contracts for the repair and improvement of the defendant association real estate, and gave all of such work, without competitive bids and at excessive prices, to the Whitney Company, a corporation of the State of New Jersey, with offices in the City of Newark, County of Essex and State of New Jersey, and managed and controlled by one or more friends and former close business associates of the said Ernest A. Minier, and ordered that no contractors of Roselle, or Roselle Park, or of Union County could bid directly upon work to be done for the defendant association during the possession by the Commissioners of Banking and Insurance, but required all of such contractors in the event that they desired to bid upon such work, to submit their bids to the Whitney Company who, in the event that the work was performed by such local contractors, charged the defendant association a higher price than charged by the local contractors."
The bill of complaint further charges an inequitable distribution of losses upon certain of the membership of the association in that it was the vested right of complainant and all other members of the association holding cumulative shares, in the event that losses or anticipated losses in such association should exceed the sum of its applicable reserves and current profits, to have the losses charged proportionately to all members, regardless of the type of shares held by them. The complainant specifically charges that the said commissioner of banking and insurance, in the month of August, 1935, recaptured distributed dividends which had been previously declared and credited to the long and short-term installment and single-payment shares of the defendant association. Upon such declaration and credit, such funds became part of these shares and of the capital of the association and the property of the members to whose shares they had been credited. The commissioner's action in regard to the application of these funds, the complainant alleged, was in violation of the terms and provisions of the membership contract of the complainant with the association, based on the provisions of its constitution and the applicable statute of the state of New Jersey in such case-made and provided, in view of the fact that the earnings of the holders of income shares remained undisturbed by him.
Other irregularities are set forth in the bill in considerable detail, as, for instance, the sending out of the statement by the commissioner under date of August 20, 1935, which, complainant alleges, was incomplete, deceptive, confusing, and not the kind of a statement required to be issued to shareholders under the applicable statute.
The complaint contains a number of prayers for relief, among them, that the court adjudicate the rights of the complainant and all other members and creditors of the association and fully administer the association, decreeing that the dividends theretofore allegedly recaptured by the commissioner of banking and insurance be recredited so that the losses would be proportioned on all classes of members of the association.
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Wandell v. Jefferson Building & Loan Ass'n
...Matthews v. Rodgers, supra, 284 U.S. 521, 525, 52 S.Ct. 217, 76 L.Ed. 447. See, also, the opinion of Judge Forman in Renold v. Withers (D.C.) 13 F.Supp. 921, and the opinion of this court in Fulia et al. v. Warranty Building & Loan Association, 5 F.Supp. In view of the facts here presented ......