76 N.J. Eq. 347 | New York Court of Chancery | 1909
The substantial case disclosed by the' pleadings and proofs in this case is as follows: On August 27th, 1891, one Louis Briegs, being then the owner of ten shares, Series “A,” of the stock of the defendant, a building and loan association, assigned these shares to the Middlesex County Bank as collateral for a loan obtained from the bank. On the same date Rosa Briegs, his wife, assigned also to the bank five shares of stock in the same series, of which she was the owner, and as collateral for her loans or those of her husband. The constitution of the association provided that “certificates of stock may be transferred in person or by attorney in presence of the secretary, and shall be recorded in the books of the association.” The assignments to the bank authorized the transfer by the secretary on the books, but no transfer was made. The certificates for the shares, together with the assignments to the bank, were originally in the possession and control of George M. Yalentine, the cashier of the bank, and so continued until the
In the suit at law brought by complainant to recover the amount or value of the fifteen shares, it was held by the supreme court that the remedy, was in equity and not at law. Campbell, Receiver, v. Perth Amboy Loan Association (1901), 67 N. J. Law (38 Vr.) 71. The substantial ground of the decision, as I read it, was, that under the building and loan association laws, where shares had matured, the fund to be distributed among the shareholders was a trust fund, to be distributed under the direction of the court of chancery, if the directors failed to recognize a shareholder’s claim. The decision was not rested on the technical point that the declaration failed to aver that in fact the shares had matured (which would have been an amendable defect), neither was there any suggestion that if there had been an averment that there were other shares than Series “A,” a legal cause of action would have appeared upon the declaration of the directors, under its charter, that the shares had matured. The legislation providing for the issue of different series was referred to in the opinion (Ibid. 78), but no suggestion was made that in such case the maturity would occur by force of the declaration of the directors. And, as the failure to aver the existence of different series was also an amendable defect, the opinion must, I think, be fairly construed as intended to establish as the law of this case—first, that the mere declaration of the directors of the maturity of the shares was not sufficient to establish such maturity as to any one of a series of shares, and second, that the fund belonging to my series, when matured, was a trust fund for all the shareholders of the series, and on failure
The objection therefore that complainant’s remedy, if he have iany, is at law, made in the answer and pressed at the hearing, is not well founded.
Another technical objection to complainant’s recovery is also without merit. This is the objection that the charter of the Middlesex County Bank expired by limitation twenty years after its organization, and in 1892. It is claimed that the proceedings for extending the charter under the law of April 21st, 1876 (1 Gen. Stat. 1876 p. 972), were ineffective because this law was a supplement to the “Act concerning corporations,” and, as is claimed, did not apply to banking corporations. But the Corporation act of April 7th, 1875 (Revision), in many respects applied to all corporations, including banks, and contained some sections specially regulating the management of the affairs of banks (section 7 is one of them) as to dividends. This supplement has been acted on by the banking and insurance department as authorizing the extension of bank charters as well as others, and in-view of the facts that the original assignments of shares in this case was made before the termination of the original charter, and that the bank has been ever since, up to the time of its failure, a de facto corporation, making loans and discounts, and transacting a general banking business, the assignments should not be declared invalid because of supposed legal non-existence of the corporation during the loans secured by the assignments.
This issue of matured shares was not, however, a certificate evidencing or intended to evidence continued or existing rights as a member or shareholder, but was a satisfaction or settlement of the final rights of the shareholder on distribution of the assets or fund in which he was entitled to share, and the present inquiry is therefore further narrowed, and is, whether in reference to a transaction having the character of the final distribu
This payment or distribution was not, however, a payment in cash to the shareholder of record, but a payment or distribution by a non-negotiable certificate of indebtedness, issued to the assignee of the shareholder. The association had notice of this assignment and the certificate was issued as to the assignee. It must therefore be considered as if issued to the shareholder himself, and the designation as assignee, which was merely descriptive or convenient evidence of the character in which Valentine held it, was not, I think, essential to its issue to him, claiming it as assignee. The issue to him personally (being in fact the assignee of Briegs) was sufficient, and the omission of the designation did not make the issue, as between the corporation and
Complainant’s notice of its claim under the assignments does not appear to have been given until March 8th, 1901, the date alleged in the bill and admitted by the answer.
And it further appears by a letter of the complainant, as receiver, to the Amboy bank, dated November 9th, 1899, that the receiver (under a judgment and execution against Valentine) had levied on Valentine’s interest in these matured shares, subject to the Amboy bank’s claim, and in other shares, and that the receiver consented to a sale of this and other collateral by the Amboy bank to pay its loans to Valentine, notwithstanding the levy, and requested that the surplus only be held. The Amboy bank made the sale, purchased the stock, and then brought suit against the association for the payment, and received payment on the shares.
It does not appear that this consent to the sale was made with knowledge on the part of the receiver that the shares or any of them were issued to Valentine by the association to pay and satisfy the shares held by the receiver, and in the absence of such knowledge, the consent may not operate as a waiver of the receiver’s claim, or an es'toppel against asserting
The question, therefore, is, whether the certificate for matured shares having been issued in 1896 and paid in 1901 under these circumstances to a Iona, fide holder after suit, without notice .to the association of the claim on the part of the bank, which arose in 1891 by reason of the assignment of the original shares, can now be declared valid.
The bank’s right to the share on distribution arose in July, 1896, on the maturity of the shares, and it was then entitled, to demand the amounts coming to the Briegs. There was no provision in the charter or by-laws for the issuing of the matured share certificates, and the talcing of these by a shareholder was optional purely. If the shareholder be considered as a creditor of the association, and not a cestui que trust in a trust fund held for distribution, complainant’s right of action for the debt to Briegs, due from the association, accrued on the maturity of the shares, July 1st, 1896. The bill in the cause was filed in October, 1902, more than six years after this cause of action arose. The time fixed in the certificates issued for the payment (January 1st, 1907), fixed the period of suit for those who received the certificates, but for those only, and is of no avail to a creditor claiming the amount due July 1st, 1896, on shares, without regard to these certificates and adversely to the holder of the certificate actually issued.
But, as between the parties to this suit, I take it to be settled as the law of this case, by the decision in the Campbell suit, that the nature of the complainant’s right is that of an equitable interest in a fund held in trust by the association for distribution among the holders of shares in a matured series. The statute of limitations is not applicable to such trusts. In Condit v. Bigalow, 64. N. J. Eq. (19 Dick.) 504, 514, and Mills v. Hendershot (1905), 70 N. J. Eq. (4 Robb.) 258, 267, the New Jersey cases on the application of the statute in equity are considered. And, independent of the 'statute, delay on the part of the Middlesex County Bank and of the receiver in giving notice of the assignment of the shares, or of their claim under it, may
As to the Rosa Briegs shares, the defendant’s status is altogether different, and there is no equitable reason for depriving complainant of his' rights under the original assignments as collateral as well as under the Rosa Briegs assignment of 1901. The payment to Rosa Briegs of the amount due on four of these shares, if made at all, was made with full notice of complainant’s claim, and the payment of the value of one share to Valentine in 1901' was invalid. He claimed not under but adversely to her, an d the payment was at the risk of the association, which must look to its indemnity.
The complainant is entitled to a decree based on its rights to the shares of Rosa Briegs, and to the declared value, which is admitted by the answer. The decision in the Cunningham Case is effective in this case to establish the amount of recovery to which the decree is to be limited, and no further accounting is either necessary or proper.