20 N.Y.S. 148 | N.Y. Sup. Ct. | 1892
The defendant was incorporated as a savings institution by act of the legislature passed April 12,1851, (Laws 1851, c. 152.) It has accumulated up to the commencement of this action deposits to an amount exceeding $2,000,000. Its business affairs have been managed by 13 trustees, except that by death and resignations the number at this time is'reduced to 11. The treasurer and assistant treasurer were appointed in 1867, and have held their respective offices continuously from that time down to the time of their removal, in September and October last, respectively. About the 17th of September, 1891, a defalcation, resulting from the misappropriation and abstraction of its funds on the part of the treasurer and assistant treasurer, was discovered. Thereupon, at the instance of the trustees, the superintendent of the banking department began an official examination of the affairs of the bank, and afterwards the bank was closed, and a report of its condition made to the attorney general, pursuant to statute. Afterwards this action was commenced by the attorney general for the dissolution of the bank and the appointment of a receiver, and such proceedings were had that a temporary receiver was appointed, who duly qualified and entered upon the discharge of his duties. A careful "and accurate examination of the affairs of the bank by the superintendent disclosed that on the 1st day of November
A careful study of the situation as presented by the petitions, by the official certificate of the superintendent of the banking department, and by the various arguments and suggestions of counsel, induces in my mind the belief that such a course will be beneficial to all parties, in case it is found that there is power in the court to authorize it. Such a course will continuó in existence a long-established and hitherto useful institution, which has only now been impaired by the extraordinary misconduct of its treasurer and assistant treasurer. It will save to depositors a large amount of their funds, which must necessarily be consumed in expenses in case the action proceeds, or the bank is put in liquidation, and its assets distributed ratably among its creditors. It will save, moreover, to a large number of persons who are debtors to the institution, the loss that cannot be avoided from shrinkage in values, resulting from forced collections of mortgages, and will probably result in assisting to sustain generally the credit of business men who have at this time deposits in the bank. It has been the policy of this state for a long series of years to permit savings institutions, whose assets from any cause have shrunk below their liabilities, to resume business wherever it could be done upon a solvent basis; and this course has been uniformly, so far as I have been able to ascertain, recommended by the banking department. In 1879 this course was taken by Bank Superintendent Henry L. Lamb in the case of the Oswego City Savings Bank, and the supreme court permitted that institution, under like circumstances, to scale down its liabilities to depositors 10 per cent., and thereupon to resume business. Since that time the bank has been prosperous, and its deposits have steadily increased. In 1883, Bank-Superintendent A. B. Hepburn, in his annual report to the legislature, approved the policy thus pursued by Superintendent Lamb. In that report, he says: “Ho one can make a study of the failed savings banks without perceiving how much better it would have been for depositors in many instances had the deposits been scaled so as to render the bank solvent, and they have been allowed to continue business. This department, and the courts, now have by law sufficient power over the tenure of office of savings bank managers to secure the removal of incompetent or unfaithful men. With the funds still in the hands of trustees, under the direction of the court, and subject to the supervision of the superintendent, the depositors would have realized much more money, and the expensive management and costly and interminable litigation which succeeds insolvency as the night the day would have been avoided. It seems that our courts now have the power to reduce each individual deposit to an amount sufficient to render an insolvent savings bank solvent, and authorize the managers of the bank to charge against each
The remaining question is one of power. The statute which authorizes the institution of actions like the present provides that “the court before which such proceedings shall be instituted shall have power to grant such orders, and in its discretion from time to timé modify or revoke the same, and to grant such relief and render such judgment as the facts or evidence in the case and the situation of the parties and the interests involved shall seem to require.”
In the case of People v. Mechanics' & Traders' Sav. Inst., 92 N. Y. 7, the action was brought by a creditor (other than a depositor) to compel the receiver to pay certain judgments in favor of one Sistare, and it was substantially held that all creditors of savings banks, including depositors, stand upon an equal footing. The court says: “Upon insolvency, the assets and property of the corporation is a trust fund for the payment of creditors; and depositors, we think, stand as other creditors, having no greater, but equal, rights, to be paid ratably out of the insolvent estate. ” In the ease of Huntington v. Bank, 96 U. S. 388, speaking of savings banks, the court says: “It is not a commercial partnership; nor is it an artificial being, the members of which have property interests in it; nor is it strictly eleemosynary. Its purpose is rather to furnish a safe depository for the money of those members of the community disposed to intrust their property to its keeping. It is somewhat of the nature of such corporations as church wardens for the conservation of the goods of a parish, the college of surgeons for the promotion of medical science, or the society of antiquaries for the advancement of the study of antiquities. Its purpose is a public advantage, without any interest in its members. * * * It is, like many other savings institutions incorporated in England and in this country during the last sixty years, intended only for provident investment, in which the management and supervision are entirely out of the hands of the parties whose money is at stake, and which are quasi benevolent, and most useful because they hold out no encouragement to speculative dealing or commercial trading. * * * Very many such exist in this country. Among the earliest are some in Massachusetts, organized under a general law passed in 1834, which contained a provision that the income or profit of all deposits shall be divided among the depositors, with just deduction of reasonable expenses. They exist also in New York, Pennsylvania, Maine» Connecticut, and other states. Indeed, until recently, the primary idea of a savings bank has been that it is an institution in the hands of disinterested persons,, the profits of which, after deducting the necessary expenses of conducting the business, inure wholly to the benefit of the depositors in dividends or in a reserved surplus for their greater security.”
Courts of equity in other states have exercised the power here sought. In the Case of Newark Sav. Inst., 28 N. J. Eq. 552, the power to scale down deposits and authorize the resumption of business by savings institutions was distinctly declared and exercised. The chancellor says: “This court has jurisdiction over all trusts, as well where the trust is held by a corporation as where the trustee is an individual. A savings institution, such as the petitioner, is a mere trustee. It hás no stock. It receives the money of depositors for investment, and invests it on securities taken for the general benefit of the depositors. It is merely a large incorporated agency for receiving and loaning money on account of those to whom the money belongs. The interest received upon investments is to be ratably divided among the depositors. The depositors (in the absence of fraud on the part of the managers, from which personal liability would arise) have no recourse whatever for repayment of their principal or interest to anything except the general investments of the institution. The institution now before me was incorporated for the sole purpose of receiving and investing deposits. The design of the legislature in granting the charter was to promote industry and frugality, and preserve and husband the fruit of honest toil. It contemplated no benefit to the managers, but lo.oked only to the security and advantage of the depositors. The trust created is a general or public trust. No depositor has, under the charter or in equity, any right to any particular security in the hands of the institution for his deposit, more than any other depositor. All the assets,
It seems, therefore, that the application now made is supported by the provisions of the statute above quoted, and by well-considered adjudications in this and other states. I think the pow'er of the court is clear, and that the present presents a proper case for its exercise.
Laws 1882, c. 409, § 278, (2 Rev. St., 8th Ed., p. 1573.)