Williams v. McKay

• Decision Date: 12 December 1889
• Citation: 46 N.J.E. 26,18 A. 824
• Parties: WILLIAMS v. MCKAY et al. SAME v. REILLY'S EX'RS.
• Court: New Jersey Court of Chancery

18 A. 824

46 N.J.E. 26

WILLIAMS

v. MCKAY et al.

SAME

v. REILLY'S EX'RS.

Court of Chancery of New Jersey.

Dec. 12, 1889.

On bills, answers, replications, and proofs.

Washington B. Williams, receiver, pro se. Theodore Runyon, for Patrick Reilly's executors. A. G. Garretson, for Patrick Kelly and John Murphy. James B. Vredenburyh and William M. Dougherty, for James Keary and Patrick Meehan. Gilbert Collins, for Hugh W. McKay, Patrick Sheeran, Thomas C. O'Callaghan, Henry Carrol, Matthew Monks, Jeremiah C. Sweeney's executors, and Owen T. W. McDonald's executors. William A. Lewis, for Patrick Farrelly.

MCGILL, Ch. By the first mentioned of these suits the receiver of the Mechanics' & Laborers' Savings Bank seeks to charge Sidney B. Bevans, George P. Brock, Henry Carroll, Adam J. Dittmar, James W. Donelan, AEneas Fitzpatrick, Patrick Farrelly, John Halliard, James Keary, Patrick Kelly, Hugh W. McKay, John McBride, John McGuigan, executors of Owen T. W. McDonald, Patrick Meehan, John Miller, Matthew Monks, John Murphy, Thomas C. O'Callaghan, Charles W. Perveil, the executors of Patrick Reilly, James J. Reid, the executors of Jeremiah Sweeney, Patrick Sheeran, and Robert Smyth, with liabilities for losses to that savings bank while the persons named were its managers, and to recover therefor. The right to the relief asked for is based upon the alleged negligence of those officers in the management of the affairs of the bank. The delinquencies charged were classified when this case was heard upon demurrer, (Williams v. McKay, 40 N. J Eq. 189, 194,) as follows: "First, in the investment of moneys, in a large number of specified instances, on insufficient landed security, and in the violation of the charter of the company; second, in the loaning of other moneys on mere personal security; third, in permitting the president of the bank, one John Halliard, to withdraw, without giving adequate security, and to apply to his own use, the funds of the bank; and, fourth, in the failure to require the president to give bond for the faithful performance of his official duties." The bill in the first-mentioned suit contained allegations of dereliction of duty on the part of Patrick Reilly as treasurer of the bank, in which he alone was concerned, which, in Williams v. Halliard, 38 N. J. Eq. 382, were said to be too vague and indefinite to require an answer. Upon appeal, the court of errors and appeals (40 N. J. Eq. 204,) acquiesced in this view of those allegations, and held, because they were so vague and uncertain as not to require an answer, that they did not render the bill multifarious. This determination led to the commencement of a suit against Reilly alone, for dereliction of duties as treasurer of the bank, in allowing the bank's moneys to be unlawfully withdrawn, and to be used for unlawful and improper loans, and in failing to protect such moneys from such uses. By order of this court made on the 10th day of January, 1887, the two suits were consolidated; and they are therefore now to be determined together, as though they were one action.

The Mechanics' & Laborers' Savings Bank was incorporated by act of the legislature of this state, approved March 3, 1869. P. L. 177. Among its corporators were the defendants John McBride, AEneas Fitzpatrick, Patrick Reilly, Sidney B. Bevans, Francis Stoveken, Charles W. Perveil, James Keary, Thomas C. O'Callaghan, Patrick Sheeran, Hugh W. McKay, Henry Carroll, and John Halliard. The charter provided, among other things, that the bank should be conducted by 15 managers, who should fill vacancies in their number; that the meetings of the managers should be held semi-annually, on the first Monday of the months of June and December, and as much oftener as a majority of the managers should consider expedient; that the managers should have power to choose a president, vice-president, treasurer, and such other officers as they should deem necessary; that all officers so chosen should respectively give such security for their fidelity and good conduct as the managers might from time to time require; that the corporation might receive deposits of money, and accept and execute all trusts confided to it; that all deposits of money received by it should be used and improved to the best advantage, and that the income and profit thereof, after the deduction of reasonable and necessary expenses, should be divided among the depositors in just proportion; that the principal should be repaid to the depositors, under regulations prescribed by the managers, and that the corporation should have power to make by-laws. The tenth section of the charter is in the following language "That said corporation shall invest no money in any public stock other than such as are created under the laws of the United States or the states of New Jersey, New York, or in the public stocks of Jersey City or Newark, in this state, or of the cities of New York or Brooklyn, in the state of New York, authorized by the laws of those states, respectively, nor on bond and mortgage, except on real estate worth at least double the amount of the sum invested above all incumbrances, nor in stock of any incorporated company whatever."

On March 15, 1869, a majority of the corporators met and organized the bank, and on the 8th of June, in the same year, adopted by-laws. Those by-laws provided that the officers of the board of managers should be a president, vice-president, secretary, treasurer, and a finance committee and an executive committee, composed of three members each, in addition to the president and vice-president, who were to be ex officio members thereof. That the order of business at the meetings of the board of managers should be—First, the reading of the minutes of the last regular, and of any subsequent, meeting of the board; second, the reading of the minutes of the finance committee, and passing upon its rules and recommendations; third, the reading of the reports of special committees; fourth, the reading of the treasurer's report and general statement; fifth, motions, suggestions, and remarks upon the business investments of the board, present and prospective, and upon the condition of the bank's affairs; sixth, unfinished business; and, seventh, new business. Also, that the president should execute all releases, satisfaction pieces, and other documents requiring the common seal of the bank, and, with the treasurer, have charge of the seal, and of all bonds and mortgages, and other property and securities of the bank. By the eighth section the secretary was required, among other duties, to keep an account of the moneys received and paid out, to collect interest on bonds and all debts due to the hank, and to cause his collections to be deposited in some bank to be named by the managers. He was also to keep the minutes of the meetings of the managers, and a book in which all applications for loans should be entered. The ninth section made it the duty of the treasurer to have custody and charge of all the securities and all evidences of indebtedness to the bank, and to report at the quarterly meetings of the managers (a) the cash on hand at the beginning of the quarter; (b) the amount received from depositors; (c) the amount received for interest on bonds and mortgages and loans, and other securities; (d) the amount of principal of all investments paid in; (e) the amount paid to depositors, and for salaries and petty expenses; and (f) the amount invested, and in what security, and all amounts paid and received during the quarter. By the next section, it was made the duty of the finance committee to attend to all applications for loans, and to meet, as occasion might require, for the purpose of investing and loaning the funds. The executive committee's duty was defined by the eleventh section to be, to take general charge and government of the bank, and make temporary rules for its regulation; also, to examine the books of account and securities of the bank, and, at the regular semi-annual meetings of the managers, report what dividend should be paid to depositors. The twenty-first section provided that the bank should not be obliged to pay any money to depositors, except upon 30 days' notice to the treasurer, and the twenty-second section provided that all checks should be drawn by the treasurer and countersigned by the president, or, in his absence, by the vice-president, and be made payable to the order of the person for whose benefit the same should be intended, and that no payments, under any circumstances, above $25 should be made otherwise than by check upon some bank of deposit in which the institution had funds. At the same meeting at which the by-laws were adopted, 7 additional managers were chosen, although at that time the charter provided that the institution should be managed by 15 directors, and the 15 corporators had determined that they should be such 15 directors. Among the additional 7 persons thus chosen were the defendants Meehan, Smyth, McGuigan, Dittmar, and Miller. By supplement to the charter approved April 5, 1871, (P. L. 1326,) authority was given to increase the managers to such number as the corporation might direct, and the semi-annual meeting days fixed by the charter wore changed to the months of May and November. Subsequent to the approval of this act, on May 15, 1871, the 7 additional managers who were chosen on June 8, 1869, were re-elected, and by resolution their acts as managers from June 8, 1869, were ratified. By a further supplement to the charter, approved March 27, 1873, (P. L. 1300,) it was provided that the bank should be conducted by 24 managers, to be elected from the depositors in the institution by the board of managers, as it then existed, at its next meeting; and that the persons thus chosen should divide themselves into three classes at the next regular meeting of managers after the passage of the supplement, the term of the first class to expire on the second...