Opinion
129/320.
05-08-1941
In re LAWYERS & HOME-MAKERS BLDG. & LOAN ASS'N OF CITY OF NEWARK.
Joseph C. Braelow, of Newark, for counterclaimants. Louis J. Cohen, of Newark, amicus curiae.
Syllabus by the Court.
1. In compliance with the orders of the Commissioner of Banking and Insurance, the Lawyers and Home-Makers Building & Loan Association, from time to time made payments to "necessitous case" shareholders and to shareholders on the withdrawal list, as advances on account of such withdrawals.
2. On March 30, 1940, the Association became a liquidating corporation by virtue of R.S. 17:12-115, N.J.S.A. 17:12-115, it having sold in bulk a substantial part of its assets. Several dividends were thereafter declared but such dividends withheld from the members who had received payments on account of withdrawal of their shares and as "necessitous case" payments.
3. The payments referred to were made pursuant to R.S.17:12-53 and R.S. App.A:7-3 to 7, N.J.S.A. 17:12-53 and App.A:7-3 to App.A:7-7, which vest in the Commissioner of Banking and Insurance the power "to make orders for the purpose of conserving the assets" of such associations, which orders shall have the same force and effect as law (Veix v. Seneca Building & Loan Ass'n of Newark, 126 N.J.L. 314, 19 A.2d 219), and cannot be set off against present and future liquidating dividends to which such shareholders are entitled.
In the matter of the trust created by the liquidation and dissolution of the Lawyers and Home-Makers Building & Loan Association of the City of Newark, the directors of which petitioned the court for instructions. On a counter-claim, filed by Louis Abrams and another, for set-off of previous payments by the association to its shareholders against liquidating dividends.
Counterclaim denied.
Israel B. Greene, of Newark, for defendants.
Joseph C. Braelow, of Newark, for counterclaimants.
Louis J. Cohen, of Newark, amicus curiae.
STEIN, Vice Chancellor.
The Lawyers and Home-Makers Building & Loan Association, on March 30, 1940, sold and conveyed in bulk a substantial part of its assets pursuant to R.S. 17:12-115, N.J.S.A. 17:12-115, and thereupon became a liquidating corporation. Thereafter several liquidating dividends were declared by the directors of the corporation but distribution of such dividends to members who had received payments on account of withdrawal of their shares after March 1, 1933, was withheld.
The directors petitioned the court for instructions and their petition was dismissed. 128 N.J.Eq. 22, 15 A.2d 137. In that suit Louis Abrams and Gaston J. Prival (shareholders) filed answer and counterclaim praying that all payments heretofore made by the association to its shareholders either as advances on account of withdrawals or as "necessitous case" payments, be set off against dividends declared and paid and to be declared and paid in the future out of the assets of the association now in liquidation.
The matter is now before me on that counterclaim actually presented as a "crossbill".
The counterclaimants maintain (1) that such payments created preferences in violation of the principle of equality and mutuality among shareholders, and (2) that the orders of the Commissioner of Banking and Insurance under which the "necessitous case" payments were made are invalid.
Payment of the withdrawal value of shares is regulated by R.S. 17:12-53, N.J. S.A. 17:12-53. Additional powers to regulate the method of paying withdrawals and "to make orders for the purpose of conserving the assets of the building and loan associations" were conferred upon the Commissioner of Banking and Insurance by R.S. App.A:7-3 to 7, N.J.S.A. App.A: 7-3 to App.A:7-7.
The payment of withdrawals pursuant to R.S. 17:12-53, N.J.S.A. 17:12-53, followed the legislative scheme set down for the conduct of building and loan associations. The mere fact that some members have received more than other members because of their prior withdrawal does not create inequality nor does it destroy the mutuality among shareholders. It is merely an incident to membership in the association. It is not contemplated by the statute that upon dissolution or liquidation of an association whose assets are insufficient to meet the full paid in value of the shares, that advances made on account of withdrawals in accordance with the statute shall be set off against liquidating dividends. To do so would be to read into the act a provision not there. Such payments made to shareholders cannot be subject to a set-off any more than the shareholders receiving the same could be compelled to make a return thereof in a suit by the counterclaimants.
R.S. App.A:7-3 to 7, N.J.S.A. App. A:7-3 to App.A:7-7, by virtue of which the Commissioner of Banking and Insurance promulgated the orders under which payments to members in necessitous circumstances were made vests in the Commissioner the power "to make orders for the purpose of conserving the assets" of such associations, which shall have the same force and effect as law. Newark Twenty-One Building & Loan Association v. Zukerberg, 115 N.J.Eq. 579, 171 A. 804.
In the instant case order number one made by the Commissioner on March 14, 1933, provides that not more than 50% of the dues paid in by members shall be repaid or advanced on withdrawals or maturities; that if such fund is insufficient to meet all requests then such fund shall be paid as follows: first, in payment to members in necessitous circumstances not to exceed $50 to any one member in any one month; second, in payment to members whose shares had matured; third, in payment of withdrawals in multiples of $50 to each member in the order in which requests were filed. By order number 4 made November 8, 1933, further payments on account of maturities and withdrawals except in necessitous cases were to be discontinued until all tax liens on association owned properties were paid.
Concerning such orders made under R.S. 17:12-53 and R.S. App.A:7-3 to 7, N.J.S. A. 17:12-53 and App.A:7-3 to App.A:7-7, Justice Perskie speaking for the Court of Errors and Appeals in Veix v. Seneca Building & Loan Ass'n of Newark, 126 N. J.L. 314, 19 A.2d 219, 224, said:
"The powers thus conferred upon the Commissioner, and the objective sought to be attained, are altogether in accord withthe fixed policy of the state—to protect the activities and safety of building and loan associations; to safeguard the interests of those who deal with such associations; and to delegate or entrust the administration of that policy, pursuant to a definite standard, to the Commissioner of Banking and Insurance. * * * The challenged legislation is constitutional. Sommer v. Workingmen's B. & L. Ass'n [125 N.J.L. 83, 13 A.2d 793], supra. * * *
"Suffice to observe that, in our opinion, the order falls squarely within the scope or ambit of the legislation upon which it is bottomed. There is no merit to the argument that the order is fatal because of the provisions of the statute that orders made thereunder 'shall have the same force and effect as law and be binding on any and * * * all building and loan associations of this state'. The statute merely expressed the inherent attributes of a valid order made by an administrative officer. * * *"
The payments heretofore made by the association to shareholders on account of withdrawals or as "necessitous case" payments were made according to law and cannot be set off against present and future liquidating dividends.