Alfred Mills, for complainant. Theo. Little and S. H. Little, for the two classes of depositors.
Bill for relief. On final hearing.
Alfred Mills, for complainant.
Theo. Little and S. H. Little, for the two classes of depositors.
RUNYON, Ch. This suit is brought to get instructions from the court as to the disposition to be made of the surplus held by the complainant, a savings institution, which has gone into voluntary liquidation. Some of the defendants are the representatives of two classes of persons, viz., those who were depositors when the proceedings for winding up the institution were instituted, and those who before that time had been depositors, but had withdrawn their deposits, and were not such then. The attorney general is also a party in behalf of the state. The institution was incorporated by special charter in 1867, (P. L. 1867, p. 797.) By the fourth section of the charter it was authorized to receive as deposits all sums of money which might be offered for that purpose, and to invest them in such amounts, and at such times, and on such terms, as its by-laws might prescribe; and it was authorized to execute all trusts of every description relating to the care, safe-keeping, and investment of moneys intrusted to it by any person or persons, by will or otherwise, or by the order of any court. By the fifth section it was provided that it should be the duty of the managers, from time to time, to regulate the rate of interest to be allowed and paid to depositors, so that they might receive as nearly as could be a ratable proportion of the profits, after deducting therefrom ail necessary expenses, and retaining a reasonable surplus or contingent fund; and that such rate of interest might be so regulated by the managers that the interest allowed to such depositors as should have $1,000 or more on deposit should be 1 per centum per annum less than the interest allowed to other depositors. By the sixth section it was provided that no emolument or compensation should be received, either directly or indirectly, by the president or other managers for their services. When the institution took the proceedings (they were taken in this court) for winding up its business, it had a surplus of $20,342.19. The number of persons who were depositors at that time is 1,665, and the number of all those who have been at any time depositors is 5,706.
The right to ask for instructions and directions in "this case is based upon the assumption that the relation of trustee and cestui que trust exists between the managers and depositors. The doctrine that such relation does exist between such parties, laid down in Newark Sav. Inst. Case, 28 N. J. Eq. 552, and upon which the judicial action taken in that matter was founded, has not been disapproved by the court of last resort, although the action based upon it in that instance was not sanctioned. Dodd v. Una, 40 N. J. Eq. 672, 5 Atl. Rep. 155. I think it may safely be assumed that the relation exists, at least to such an extent as to authorize the parties to call upon this court for directions, where necessary, in reference to the distribution of the assets of a solvent savings bank upon the winding up of the institution. The law of 1878 provides for the case of insolvency. This court would assuredly take jurisdiction of this matter at the suit of a depositor.
In Cramer v. Bird, L. R. 6 Eq. 143, where a corporation (a company authorized to make and maintain a railway and harbor) lawfully transferred its undertaking to another company, in pursuance of an act of parliament which recited that the powers of the firstmentioned company were extinct, and then authorized the transfer, and the directors had a balance of several thousand pounds in their hands, it was held that a bill by a stockholder to compel distribution of the balance would lie.
Again, the bill in this case is in the nature of an interpleader. It being impossible to bring in all the parties interested, some of each class have been made defendants, and they have appeared. The managers have no claim to the surplus. Their trust is a naked trust. The charter expressly declares that they shall receive no emolument or compensation, either directly or indirectly. It provides that the depositors shall receive, as interest, their ratable proportions of the profits, after deducting necessary expenses, and retaining a reasonable surplus or contingent fund. Neither the bank nor the managers could derive any benefit from any deposit, or the produce thereof. Grant, Banks, 614; Huntington v. Savings Bank, 96 U. S. 388. The state has no right to the surplus. Nor have those who were depositors, but withdrew their deposits before the institution of the winding-up proceedings, any claim to it. The surplus was created and maintained for the protection of the depositors from loss by reason of the depreciation of securities, etc.,—to protect them against the casualties and contingencies to which the funds of the institution were liable, and which might impair their deposits. It stood as such indemnity for the depositors who were such for the time being. So long as a person continued to be a depositor, so long it stood for his protection, and when, by withdrawing his funds, he ceased to be a depositor, his interest in it was at an end. He thus relinquished his interest in it, and as he would not be liable to contribute to any loss to which the remaining depositors might be subjected, so, on the other band, he would not be entitled to any participation in the surplus.
The thirty-second section of the act concerning savings banks (P. L. 1876, p. 352) makes it the duty of the managers of every corporation subject to that act to regulate the rate of interest or dividends, not to exceed 6 per centum per annum upon the deposits, in such manner that depositors shall receive as nearly as may be all the profits of the corporation after deducting necessary expenses, and reserving such amount as the managers may deem expedient as a surplus fund for the security of depositors, which, to the amount of 15 per centum of their deposits, the managers are thereby authorized to accumulate gradually, and to hold to meet any contingency or loss in the business of the corporation from the depreciation of its securities or otherwise. It provides, also, that it shall be the duty of the managers of any such corporation, the surplus of which amounts to 15 per centum of its deposits, to divide equally, at least once in three years, the accumulation beyond the authorized surplus us an extra dividend to depositors in excess of the regular dividends authorizedby the act. This latter provision is a legislative recognition of the principle that the surplus which a savings institution has when wound up belongs to those who are the depositors at that time. Those depositors, being the only persons interested in the assets of the corporation at the time of winding up, are entitled to a ratable distribution among themselves according to the amount of their respective deposits of those assets, after paying the debts of the corporation to other creditors. In Hannon v. Williams, 34 N. J. Eq. 255, it was said by the court of errors and appeals that in prosperity the depositors of a savings bank are the stockholders among whom profits are divided.
The expenses of this suit will be paid out of the fund.