National Republican., 1874-07-03
FREEDMAN'S SAYINGS AND
TRUST COMPANY.
LETTER FROM MR.. T. ]. DURANT.

| The suspension Of this institution appears to
have been brought about by the recent act Of
Congress amending the charter, which was ap-
proved June 2S, 1874. 1t provides that ons half
of the special deposits received after the pas
sage Of this act shall be invested in real estate
security situated in the vicinity Of the branch
where the deposits have been made, and the
remaining half in United States bonds.
Thus the money deposited in the bank since
June % cannot be used to pay depositors pre-
yious to that date, for they are in the nature of
special deposits; in other words, It starts Q new
bank TO all intents and purposes from June
%. This prevents the bank from taking the
money deposited since that date to pay those
who have complied with the rule Of sixty days
notice of withdrawal of deposits now daily ma
turing.
To pay its depositors previous to June %, the
bank would be compelled in some manner to
realize upon the assets held previous to that
date.
Mr.. Frederick Douglass, president, sub
mitted the subject for legal advice in the shape
of queries, which ELECTED the following:
! WASHINGTON, D. c., June ., 1874.
To the Offers and Trustees Of fhs FreedmGHs Say
GENTLEMEN: Mr.. Douglass has placed in
my hands, for an opinion in writing, series of
six questions, and respectfully submit them
/ here with my answers.
First. May the trustees Of the Freedman's
Savings and Trust Company, under the amend
ment Of charter enacted June, 1874, refuse for
any reason payment in full to such of its de-
positors as have given notice sixty days in ad-
vance of their intention to withdraw their de-
positsl
Answer.-The company, as understand,
has, by proper notice to depositors, informed
them that they shall be paid at the end of
sixty days from the time they signify their de-
sire to withdraw their deposits. This promise
| on the one side, and notice given in accordance
with it on the other, forms a valid contract,
which the company is not at liberty to change.
The general principle Of law would prohibit it,
and it is prohibited by the closing language of
the eighth section of the act Of March 8, 1865,
incorporating the company. [See 18th Statutes
at Large, page 512. l find nothing in the
amendatory legislation of June. 1874, to change
this view, and consequently l hold that the
trustees cannot refuse payment to depositors
| in full who have given notice sixty days in ad-
vance of their intention to withdraw their de-
posits.
Second-May the trustees pay part of any
depository account against the bank, and take
an obligation in writing from the said depositor
that he or she will not demand any part of the
sum which may remain until all other deposi-
tors shall have received like equal proper
tioDl
Answer.-I understand this question to be
| whether, by voluntary and unrestrained agree
ment between the company and the depositor,
an arrangement can be made. There is no
legal objection TO such contract, the depositor
being left free to make it or not, as he pleases
Third.-Should the company now pay fifty
per cent. of q depositor's account without
taking any written obligation as above as to
remainder, should such payment be included
as part of his or her pro rcta share of the
assets of the company on the final settlement 7
Answer. In the absence of such voluntary
contract as is described in the second question
and answer, the payment of fifty per cent. of
depostor's account would be final, and not
subject to any future modification by the action
| Of the company, and no such payment could be
included as 3 part of the depOsitor's pro rata
share of the assets Of the company on final
! settlement.
Fourth. May the trustees do either of these
things without reaching the point where they
are bound to place the bank in the hands of the
| commissioners
Answer. As already shown the trustees can
do but one of the things alluded to, namely,
make the agreement implied in the second
question and answer. Such a contract would
not bring them to the point of placing the bank
! in the hands of commissioners; that event, in
deed, By the terms of the sections third and
seventh Of the act of June, 1874; can only occur
at the discretion of the trustees or on the order
Of Congress.
FftlR-Can the trustees place the old de-
positors' accounts in the hands of commission
ers, and still continue the bank under their con-
| troll in relation to the new or special deposi-
| tors!
| Answer.-The business of the corporation
/ cannot be separated in such wise as to make it
solvent for one class of interests and insolvent
for another. The expressions of the act of
| June, 1874, leave no doubt on the subject.
When it shall be deemed advisable TO close up
the business of the company, commissioners
are to be appointed "to take charge Of all the
property and effects, close up the principal and
subordinate branches, collect from the branches
| all the deposits they have on hand, +" &C, &c.
Examining these provisions with those of the
eighth section it becomes manifest that all the
business OF the company is to proceed together
and all be closed at the same time.
SiZth.-May the trustees invest one half of
the amount received from special depOsitors in
undoubted real estate loans now held as assets
by the company at the principal Office, as q
temporary means of bringing the bank under
the general arrangement contemplated by the
amendment of the charter in question:
Answer.-The company can on no account,
and for no consideration, invest the special de-
posits received from branches in any other
way than that prescribed by the first section Of
the act of June, 1874: that is, one half on real
estate security situated in the vicinity of the
branch where the deposits have been made,
and the remaining halfin United States bonds;
or, when such q measure may be necessary, to
deposit 1t to meet current expenses, as pro-
vided in the closing woris of the first section
of the act referred to.
Special deposits made at the bank in Wash
ington city might, perhaps, under certain
| construction Of the law, be deemed to rest on
a different footing, but the spirit of the law is
against the distinction; and its design is TO in
sure the Investment of the funds of new deposi-
tors in new securities. The object of the
amendatory legislation of June. 1874, was to
keep the funds Of new depositors from any en-
tangling contract with the pre-existing securi-
| ties. THos. J. DURANT.
| The bank was opened yesterday for the pur-
pose of explaining to customers the position in
which the trustees find themselves. No de-
posits were received or paid. The case bears
| particularly hard upon cases where the sixty
days required notice had been served and just
expired. No further action will be taken until
commissioners are appointed, when 1t is hoped
that by careful management, in realizing upon
the assets, all depositors may be paid nearly in