these provisions, that the question submitted by the Legislature to the judgment of the managers of this institution was whether its further continuance would be a "public benefit," and is "expedient and desirable," as tested by the needs of a considerable number of depositors, and by the density of population in its neighborhood, and the reasonable promise of adequate support for its continu

ance.

The next question is this: Did the Legislature commit that important question of "advisability" to dissolve to the managers acting as trustees, such as I have described, disinterestedly and semijudicially, having in view only the interests of the public and the needs of the community; or did the Legislature intend that they might act in disregard of the object and purpose of their trust, and be guided in their judgment by their owu personal pecuniary interests? If the former, then the legislation relied on cannot aid them. It is a cardinal rule that all trustees must act disinterestedly; that they can do no act as such with the view of forwarding their own interests. Hence, authority given to a trustee to do any act, including, of course, the exercise of judgment, is presumed to be given to him in his character of trustee, and subject to the rules governing trustees; and, as above observed, he must in all things act disinterestedly. This is a rule of universal application, and governs all trustees, however appointed, and by whatever name described. Thus, commissioners appointed by a court to divide, or, in case of inability, to sell lands; the riparian commissioners, who are empowered to sell lands of the state under tide waters; also administrators empowered by the orphans' court to sell lands to pay debts; and others of that class -are subject to it, as well as trustees under a will or a family settlement. Each and every of them must in all things act disinterestedly. They cannot be either directly or indirectly interested in any sale that they make, or in any other act done as such trustees.

It is impossible to escape the conviction, on the case as now presented, that the managers were not acting disinterestedly in resolving that it was advisable to dissolve this institution, and that they were liable to be influenced in their judgment on that question by their individual interests, and hence were guilty of an abuse of the authority given them by the act invoked in their justification. The whole transaction, therefore, upon wellsettled principles, must be held to be prima facie void or voidable, and therefore subject to review in this court. If I am right in this conclusion, then the present restraint should be continued until final hearing, to the end that the merits of the question involved may be fully investigated and deliberately considered.

But the defendants by their answer attempt to justify their judgment of advisabili

ty by stating the grounds of their judgment. Their position was elaborately argued, and received my careful consideration, and I will state my views upon it. They say they were no longer obliged to keep up the organization of the savings bank, and that it was no longer "advisable" to do so, because its continued prosperity was threatened by the competition (1) of a national bank, and (2) by the trust company which they themselves had organized; and they say there was no necessity for its continuance, because their trust company offered an equally safe place of deposit in which their depositors might place their money. The language of the answer is: "That Bloomfield has a population of about eleven thousand, which has perhaps more than doubled since the organization of said savings institution." They likewise admit that such population includes many persons of moderate means, and that there are several factories and manufacturing establishments located in said town, and that the said savings institution was organized by public-spirited citizens of the town for the purpose for which all savings banks are intended to be organized, the encouragement of thrift and saving on the part of people of moderate means, and that no banking institution of any kind then existed in Bloomfield or Montclair. They show, however, that the occasion for the continuance of said savings institution no longer exists; that two other solvent and well-managed institutions have in the meantime been organized and are now in successful operation [referring to the national bank and the trust company], offering to the same class of persons an equally advantageous opportunity to deposit their savings. And, again, they say that the purpose and object they had in dissolving was because they considered it "advisable," in view of the fact that no longer a necessity seemed to exist therefor, and because ample opportunity was afforded to the depositors to enjoy even better privileges in institutions of high standing and good management.

With regard to their statement that the new trust company offered equal and better advantages for the class of depositors known as "savings bank depositors," I have to say that therein they are running counter, not only to the settled convictions of most of the intelligent and conservative citizens of the state, but to the clear and settled policy of the state, as manifested by the charter of every savings institution lately granted by it, and, more particularly, by the general savings bank act. Those charters, and especially the general savings bank act, which applies in most of its important features to those savings institutions which were already in existence at the time it was passed, put certain restrictions upon both the officers of the savings institution and upon their mode of conducting the business. They absolutely prohibit any savings bank officer or manager from having any pecuniary interest

in or deriving any benefit, directly or indirectly, from his bank, except his salary or fees paid him for his services, and which are subject, where not actually restricted by statute, to the approval of the Banking Department. Then the legislation just mentioned restricts the investment of the moneys of the depositors to a certain class of securities, which are of a character that come, as nearly as practicable, to insuring depositors against any loss. Experience of many years has shown all those who are versed in matters of this kind the value of these restrictions. They are based on the familiar principle that better security can be obtained for money loaned at a low rate of interest than for that loaned at a higher rate, and that the class of persons who patronize savings institutions are best served by a safe investment at a low rate, and as nearly as practicable free from hazard. Those restrictions are not found in the act regulating trust companies, and it is a well-known fact that the mode of investing their moneys and of making gains adopted in this country by trust companies is more hazardous than that allowed to savings banks under the restrictions imposed upon them. It is unnecessary to particularize the lines of business indulged in by trust companies which are hazardous. They are well known to all business men.

The general business of banking is divided into many classes, and some parts of each class of business may be carried on by the same institution; but the particular class of business indulged in by trust companies in this country, and by which they have made their principal gains, is probably well and briefly described by the author of the article on "Banking" in the ninth edition of the Encyclopedia Britannica, under the head of "Credit Companies" (page 328), thus: "Credit companies, such as the Crédit Foncier, the Crédit Mobilier, etc., etc., are strictly analogous to land mortgage banks, except that they invest their funds in loans on the security of general industrial undertakings, to which business they have added the function of negotiators of direct loans between companies formed for the conduct of such undertakings and the capitalist public. In doing this, the modern trust company frequently invests its own and its depositors' money in large blocks of fresh issues of corporate securities, based upon all sorts of modern enterprises, while as yet in their experimental stages, at what are supposed to be low prices, in the expectation of being able to sell them at an advance. This, I believe, is called | 'financing' a new enterprise. In marked contrast with this class of investments is that to which savings banks are by statute confined. They are first mortgage loans upon improved real estate, to the extent of not more than one-half its carefully appraised value. Besides these, they may invest as follows: In the stocks or bonds or interestbearing notes or obligations of the United

States, or those for which the faith of the United States is distinctly pledged; in the interest-bearing bonds of this state; in the bonds of any state in the Union that has not within ten years previously defaulted in the payment of any part of either principal or interest in any debt authorized by any Legislature of such state to be contracted; in the stocks or bonds of any city, town, county, or village of this state, issued pursuant to the authority of any law of this state; or of the cities of New York, Brooklyn, or Philadelphia; or in any interest-bearing obligations (other than those commonly known as 'improvement certificates') issued by the city, town, or borough in which such bank or institution shall be situated; in the bonds of any city or county of any state of the United States of America which have been or may be issued pursuant to the authority of any law of any such state; provided, that no such city or county has, within ten years previous to making such investment by any such savings bank or institution of this state, defaulted in the payment of any part of either principal or interest of any debt authorized by law of such state to be contracted; and provided, further, that the total indebtedness of any such city or county is limited by law to ten per cent. of its assessed valuation." "In first mortgage bonds of any railroad company which has paid dividends of not less than 4% per annum regularly on their entire capital stock for a period of not less than five years next previous to the purchase of such bonds; or in any consolidated mortgage bonds of any such company authorized to be issued to retire the entire bonded debt of such company." "In real estate strictly in accordance with the following provisions: (a) A plot whereon is erected, or may be erected, a building or buildings requisite for the convenient transaction of its business, and from portions of which, not required for its own use, a revenue may be derived. The cost of such building or buildings and lot shall in no case exceed 50% of the net surplus of such corporation." They are expressly prohibited from investing in any bank stock.

The fact that trust companies, during the great increase in business and general prosperity of the country, have been successful for several years past, is no guaranty that such success will continue in the future. It is rather to be apprehended that younger and weaker companies will be tempted, by the great success that has attended some of the operations of the older and stronger companies, to attempt to reap over the same ground that has already been gleaned, and in their confidence that they also may succeed, and in their anxiety for success, may meet with disaster. Be that as it may, that class of investment is quite outside those authorized by the savings bank act. The fortysixth section of the present savings bank act expressly prohibits any other banking

institution from doing what is called a "savings-bank business"; and I know of nothing in the national law authorizing the creation of national banks which saves them from being subject to the provisions of that act.

It is claimed by the defendants that trust companies are authorized, notwithstanding that act, to do a savings bank business, and they rely upon the eighteenth subdivision of the sixth section of the act concerning trust companies, revision of 1899, which is in this language: "To receive money on deposit to be subject to check or to be repaid in such manner and on such terms, and with or without interest, as may be agreed upon by the depositor and the said trust company." P. L. 1899, p. 455. I am unable to construe that section as repealing by implication the forty-sixth section of the savings bank act, above referred to, approved April 21, 1876 (P. L. 1876, p. 357), and which declares "that it shall not be lawful for any bank, banking association, firm, stock company, corporation or individual banker, to advertise or put forth a sign as a savings bank, either directly or indirectly, or in any way to solicit or receive deposits as a savings bank, except in the case of banks or deposit companies now authorized by law to receive deposits on interest, or banks incorporated under this act"; and then proceeds with the penalty-$100 a day for every day such offense shall be continued.

Now, the section in the trust company act above cited, and relied upon by the defendants to justify them in seeking savings deposits, does no more than authorize a trust company to do just what every business man or institution has a right to do without it, namely, to borrow money from whom he pleases, and at the best rate he can. Besides, the words "savings institution," or "savings bank," have come to have a special meaning in the minds of small savers, as indicating an institution especially adapted for the use of that class, and giving them a peculiarly safe place of deposit for their savings of the character above described, and legislation concerning banks and trust companies ought not to be construed to include savings banks deposits except by the use of very clear language. The truth is, that the defendants' whole position and argument on this part of the case entirely overlooks the spirit and object of the savings banks system of this and other states of the Union. Its governing principle, as already stated, is that it assures safe security with small interest, with no profit to the managers, as contradistinguished from large interest and less safe security. It is therefore quite improper to say that the class of persons I have mentioned were furnished by the national bank and the defendants' new trust company with a place of deposit for their money equally advantageous and secure as that of the defendant corporation. In coming to this conclusion I mean no disparagement to

the business of general banking as pursued by the trust companies and other banking institutions. It is a perfectly legitimate business, but, like all mercantile enterprises, however conservatively conducted, it has in it an element of speculation and hazard, and requires a talent for business management quite different from that required for a savings institution. It does not affect this reasoning to say that the two classes of business are to some degree intermingled, and that many persons, other than the classes above attempted to be described, do take advantage of savings institutions. This cannot be entirely avoided; but it is well known that the managers of such institutions generally graduate their dividends, giving to the smaller depositors a larger rate of interest than to the larger, thereby discouraging the use of the institution by those who are not within the scope of its proper province, and the managers can and do sometimes decline deposits from persons who apparently do not need to use a savings institution.

Counsel for complainant contends, and I agree with him, that the circulars above set forth are distinct and direct solicitations by the defendants for the receipt of savings deposits; and I think it is a clear breach in spirit, if not in letter, of the restrictive clause of the savings bank act above cited.

Again, it was asked, if the managers of a savings institution are indisposed to further continue its maintenance, can they be compelled to continue it against their will? It must be confessed that there is no express provision in the charter of the Bloomfield Savings Institution or in the general savings bank act for the continuance of the life of a savings bank when the officers shall determine not further to continue it. However, I think there is no difficulty in perpetuating its existence, if competent men can be found who are willing to undertake the task. The charter of the defendant corporation provides that the managers "may" fill any vacancies. But the sixteenth section of the general savings bank act (P. L. 1876, p. 346) is, by the fifty-second section thereof, made applicable to savings banks already organized; and that section declares that "all vacancies in such board, by death, resignation or otherwise, 'shall' be filled by the board of managers on approval by the State Board, with persons duly qualified by section two of this act, as soon as practicable, at a regular meeting after such vacancies shall occur." It was, therefore, clearly the duty of the defendants to fill any vacancies that might occur in the board of managers, and there was not the least difficulty in their doing so, in accordance with their duty, provided they could find proper men willing to assume the burden; and by a series of resignations and elections they could have worked an entire change in the personnel of the board. There is no pretense that they attempted to do this.

They further ask what course they could pursue in order to meet the competition of the national bank; and the answer is, they could appeal to the law to prevent that bank from seeking saving deposits. But it hardly lies in their mouth to claim that they were at all embarrassed by the competition of the national bank, when they themselves did not hesitate, before the national bank held out its advertisement, to start a trust company for the purpose of entering into a like competition with the savings institution, and without at the time, as they aver in their answer, having any intention of winding up that institution. So that they are in the position, on their theory, of not only not attempting to protect the savings institution against the competition of the national bank, but they are themselves chargeable with organizing an institution in direct and palpable competition with the savings institution.

It is asserted in the answer that, shortly after the open advertisement in September by the national bank for savings bank deposits, namely, in October and November, 1902, there occurred a marked falling off in the deposits of the savings institution. It is not shown how much of such alleged falling off was due to the competition of the national bank, and how much to that of the new trust company. Be that as it may, I find by the schedule inserted in the answer that the increase in the deposits for the whole year of 1902 was $73.386.11, about $8,000 more than for the previous year, and more than for any previous year. And I further find that the amount deposited in December, 1902, was $18,517.58, which was more than that of any previous December, except that of 1898; that it was nearly $7,000 more than in December, 1901. It seems to me that one of two inferences follow immediately from this showing: Either that there was no such falling off of deposits as the defendants claim, or some persons obtained an inkling of the defendants' intention, and made unusual deposits for the express purpose of sharing in the division of the surplus.

This review of the defense leads me to the conclusion that, so far as above considered, it cannot avail the defendants.

The remaining question is: Has the complainant a standing in this court to maintain this action? It was urged by counsel that only the Attorney General representing the state has such standing. I am entirely satisfied that he has such standing, and must presume that if the matter had been brought to his attention, and he had taken the same view of the law applicable thereto as I have taken, he would have acted. There was nothing before me to indicate that it had been brought to his attention in such manner as to require him to act; nor did I think it necessary or expedient to require him to be brought into the case as a party representing the public. But I am not ready to accede to the proposition that no individual has such

right. Complainant and her children are and have been for many years depositors in that institution. They are residents of Bloomfield, and a part of that portion of the great public for whose benefit the institution was created and maintained. They are thus interested both in their individual and representative characters in the continuance of the institution with all its beneficent results. But it was urged that they are not injured because they will receive back whatever money they originally deposited, with interest and a share of the surplus. But is it true that they are not injured in fact? Is it not supposable that they may prefer to have the institution continued, and its surplus devoted to giving it stability and strength in a financial storm, and at all times to contribute to the expenses of its management, rather than now to receive a share in their hands? And is not such the policy of the law? And, if so, are they not entitled to be heard both on their own account and that of other present and prospective depositors?

With regard to the division of the surplus. There is, indeed, no known mode of dividing a surplus of a savings bank, when such division becomes necessary, except among the bona fide depositors at the time of the dissolution. Morristown Sav. Inst. v. Roberts, 42 N. J. Eq. 496, 8 Atl. 315. But it does not follow that such division is just and equitable. It is a rule of convenience and necessity, not of equity. Consider, in that connection, the temptation of eleventh-hour people to come in as depositors in anticipation of dissolution. In fact, I am confirmed in the view I stated at the argument, that the attempt to make an equitable division of the surplus of a savings institution, such as we have to deal with here, presents an insoluble problem. That surplus is the result of the surplus earnings of all the money that has been deposited by all the depositors from the beginning of the bank. It is well known that many of those have already withdrawn, and thereby, as it has been well said, have abandoned their share in the surplus; but it by no means follows that the equitable rights of those who remain are any greater by such abandonment than they would have been without it. Then, of those who remain at the end, some have been depositors for a longer time than the others. The present case presents an example of that. In my opinion, the true status of a surplus is that it is held by the institution in trust for the benefit of the immediate community in assisting to maintain and perpetuate the existence of the institution.

It is admitted by the answer that the complainant and her children have been depositors for many years, and her equity is much greater than the new depositors'. This institution is, as I have said, a public institution, created and promoted by the state for the benefit of such as may deposit therein. The deposits of the complainant and her children

are not large, and it cannot be said that she is not one of those who come within the purview of the object of such institution. By becoming a depositor, she becomes peculiarly interested in the institution, and in its permanency and continuance, and that interest is over and above that of the public at large. She has a right to say that she prefers to have the institution continue, rather than to have it wound up and to take her share of the surplus, and, in my judgment, she has a right to say this, not only as a depositor, but as a citizen for whose benefit it was created. The object of an accumulation of surplus is, as before remarked, to guard against loss to the depositors in those ever recurring, but seldom expected, financial revulsions which from time to time sweep over the country and cause a temporary depreciation in the value of the best investments. The surplus also serves by its earnings to diminish the cost to the present depositors of the management of the institution. The complainant, then, may well come to the conclusion that it is more to her pecuniary interest to have that institution continue as a custodian of her deposit, than to receive back the amount of her deposit, with her share in the surplus. It is plain that the natural disposition of many depositors in an institution of this kind, with a large surplus, would be to have the same wound up, provided they get a share of the surplus. Hence, the larger the surplus, the more thoroughly established the institution, the greater the relative amount of its surplus to its deposits, the more anxious many of the depositors would be to have it wound up. And this peculiar situation tends to justify the conclusion at which I have arrived, that the Legislature intended the managers in this case to act judicially and judiciously and disinterestedly for the good of the public in the exercise of the judgment confided in them by the act of 1902.

For these reasons, I shall advise an order that the restraint be continued until the final hearing of the cause.

(64 N. J. E. 578)

FORST et al. v. KIRKPATRICK et al. (Court of Chancery of New Jersey. March 20, 1903.)

CONTRACT WITH FIRM-CHANGE OF FIRMCONTINUANCE OF BUSINESS-ENFORCEMENT BY NEW FIRM-PAYMENTS-APPLICATION.

1. Where a mortgage is given a firm, and thereafter one of the members retires, the new firm, although pursuing the same business and under the same name, cannot enforce the obligation unless the right to enforce it is acquired by a new contract.

2. Where, after the dissolution of a firm, an account with it is carried on as a running account with the succeeding firm, payments made to the succeeding firm, unless appropriated, will go to discharge the oldest items of the account.

Suit by Joseph M. Forst and others against Maria Kirkpatrick and others to foreclose a mortgage. Bill dismissed.

B. B. Hutchinson, for complainants. James Buchanan, for defendant Maria Kirkpatrick. Scott Scammell, for defendant Maria E. Vroom.

REED, V. C. The mortgage sought to be foreclosed was made by Alexander Kirkpatrick, the husband of Maria Kirkpatrick, the defendant, to Daniel P. Forst,, William H. Skirm, Charles W. Leeds, and Joseph M. Forst, partners trading as D. P. Forst & Co. It was executed March 18, 1875, and purported to be made to secure the sum of $1,300. Mr. Leeds and Mr. D. P. Forst are dead, and William H. Skirm has assigned his interest in all the assets of the firm to the present members of the firm of D. P. Forst & Co., who are the complainants.

On January 13, 1876, Alexander Kirkpatrick, through one Charles Huston, conveyed the property mortgaged to his wife Maria, who now owns the equity of redemption. Previous to and at the time the mortgage was made, the firm of D. P. Forst & Co. were wholesale dealers in groceries and provisions, and Alexander Kirkpatrick was a retail dealer in the same articles, and bought his supplies from the firm. At the date of the mortgage he owed the firm $1,286. Contemporaneous with the execution of the mortgage, the following paper was signed by the firm: "Whereas, Alexander Kirkpatrick and wife have this day executed and delivered to Daniel P. Forst, William H. Skirm, Charles W. Leeds, and Joseph M. Forst, partners trading as D. P. Forst & Co., a bond and mortgage on a certain lot of land and premises, situate on the easterly side of Clinton street, in the city of Trenton, N. J., securing the payment of the sum of $1,300, with interest in one year from the date thereof. Now we do hereby certify that the said bond and mortgage were executed and delivered to us as collateral security for the present and future indebtedness of the said Alexander Kirkpatrick to the said firm of D. P. Forst & Co." After the execution of these papers, Alexander Kirkpatrick continued to deal with D. P. Forst & Co. as before, and the amount due to the firm on March 18, 1875, was carried along as a part of the current account until the final close of the account on May 6, 1899. On January 31, 1879, Charles W. Leeds withdrew from the firm, releasing his interest therein to the remaining partners. On January 1, 1883, William S. Covert became a member of the firm. On May 9, 1897, Daniel P. Forst died, bequeathing his interest in the firm to Joseph M. Forst. July 1, 1901, William H. Skirm retired, transferring his interest to the remaining partners, the complainants herein. During the entire life of the current account between the parties, cash was received from time to time and credited to Alexander Kirkpatrick. In 1883, 1884, and 1886, certain payments were made by Mrs. Kirkpatrick, viz.: April 6, 1883, $50; May 31st, $25; June 27th, $25; September

On