Opinion
05-04-1887
In re NEWARK SAVINGS INST.
On chancellor's own motion.
A receiver was appointed for the Newark Savings Institution, May 16, 1884. The amount then due depositors on "new account" was $6,156,534.28. The estimated value of those of the assets of that account on which a value was put was $4,889,145.05. There were also other assets of the par value of $3,966,000 on which no value was placed because they were unmarketable, and had but a merely nominal value. They consisted principally of bonds and stock of the Chesapeake & Ohio Railroad Company. Out of the available assets, valued, as before stated, at $4,889,145.05, the receiver had realized, up to the first of September last, (he has realized more since then,) $4,558,905.49, besides $102,805.61 income thereon up to that date. A dividend of 60 per cent., requiring $3,693,920.56 to pay it, was declared payable July 1, 1884, within seven weeks from the time of the appointment of the receiver; and another one of 15 per cent., requiring $923,480.15 to pay it, was subsequently declared payable December 1, 1884; so that out of the $4,889,145.05 of available assets, and the income therefrom, dividends amounting to 75 per cent., and requiring for their payment $4,617,400.17, were declared within seven months from the appointment of the receiver. The remaining assets on that account, on the first of September last, consisted of $107,640 of first mortgage railroad bonds; $182,545.75 of bonds and mortgages of real estate; $2,925 of loans upon collaterals; $25,000 of Montclair Gas & Water bonds; and $45,052.15 in cash; altogether $363,162.90; and Chesapeake & Ohio Railroad Company bonds and stocks, (increased by payments of interest in stock since the appointment of the receiver,) the par value of which is $3,624,880; Old Dominion Land Company stock, $211,000; and first mortgage bonds of the New York, Woodhaven & Rockaway Railroad Company, $239,000; altogether $4,074,880. These latter assets are unmarketable, and have a merely nominal value. On the old account the receiver received assets valued at $963,327.26. He has realized from them, including interest, $399,880.20. He has paid out of this $283,968.85, including $222,458.96 borrowed by the managers from the new account on the credit of the assets of the old, and $28,883.66 dividends declared before his appointment, but not called for until afterwards. He had in hand on the first of September last, besides $11,591.35 of cash, assets valued at $637,530.80. They consisted of real estate, bonds and mortgages, railroad and state bonds, stocks, suspense account, and loans upon collaterals. The amount due depositors upon old account was, when the bank stopped payment, in 1877, about $11,000,000; and its assets of all kinds, not including accrued interest, were about $12,000,000. On this account, dividends, amounting altogether to 95 per cent., or $10,450,000, have been declared. From the foregoing statements it will appear that the remaining assets upon both accounts are in the main those for which there is either no ready sale or no market at all.
It is the design and policy of the court to close up the affairs of insolvent corporations in its hands to be administered with all the dispatch practicable, consistently with the advantage of those interested in the assets. In this case the only obstacle to an almost immediate closing of the trust is the unmarketable assets, which are of very large amount on both accounts, but notably so upon the new one. For the purpose of ascertaining whether an immediate disposition of those assets could be made without unreasonable sacrifice, an order was made in August last requiring the receiver to report upon the subject. He reported on the first of September last, that, in his judgment, a forced sale of the assets of the old account would result in an enormous loss, and be a criminal sacrifice of the interests of the depositors, and that, as to the unvalued assets of the new account, a forced sale would be ruinous, if, indeed, sale could be made at all; that they require very careful management; and that, if they receive it, they may be sold; and that if the sale be made judiciously, without crowding the market, and at a proper time, a large amount can be realized from them. After the coining in of that report, the chancellor,in order that he might obtain the opinion of other wholly disinterested persons expert in such matters, and of recognized experience and judgment, appointed Charles G. Rockwood and Theodore Macknet, Esqs., commissioners, to examine into the subject, and report to him whether the assets in question can be converted at once, without unreasonable sacrifice; and, if not, what course, in their opinion, should be taken with regard to them. They have reported that the proposition to dispose of the assets at once, without unreasonable sacrifice, should be executed so far as possible; but that the proposition to dispose of them without any regard to such sacrifice is, in their opinion, unwise and unjust. They recommend, substantially, that such of the assets as can be converted into cash at once, without unreasonable sacrifice, be so converted, and that as to the rest all possible diligence be used to dispose of them without such sacrifice. Notably, an important part of their recommendations is that the unmerchantable stocks and bonds and the real estate be offered at public auction, after full notice to all persons interested, at what is practically an upset price, and in proper lots or parcels to invite buyers. This plan commends itself to my judgment as a fair and promising method, and the best probably that can be devised. While the trusts should be closed as soon as possible, a just regard to the interests of the depositors forbids that dispatch be obtained by throwing away the property. Although all depositors are of course desirous of getting as large a dividend as possible out of the assets, those whose deposits were large are especially so; for, if there is to be loss, theirs will be greater than that of the others. Of the six millions of dollars due depositors on new account at the failure of the institution in 1884, over three and a half millions were due to those (in number more than 1,500) whose balances were over $1,000. And their balances ranged from $1,000 to over $27,000. The court can be guided by but one consideration in this matter; and that is the interest of the depositors at large. The plan proposed will give the depositors the opportunity to aid in finding purchasers for the assets, and it has the advantage of presenting the property for sale at public auction, under the most favorable circumstances and conditions.
An order will be made adopting it, and appointing the same commissioners, Messrs. Rockwood and Macknet, to fix the prices, and designate the lots or parcels for the sale.