Newark evening star and Newark advertiser. [volume] (Newark, N.J.) 1909-1916, 1911-05-25
DIRECTORS HAVE
To REFUND FOR
BAD INVESTMENT
Court Decides Against Six Men,
berS of Milestone B. and L.
Associations Board.
OTHERS HAD PROTESTED
AGAINST STOCK PURCHASE
Stockholders Brought Suit After
Company Invested In Went
to the Wall.

a legal question of great Importance
to building and loan associations OF
the State was put up to vice-Chancel-
Tor Stevens today when he was asked
TO decide whether or not the directors
Of the Milestone Building and Loan AS
ISOLATION of East Milestone had a right
TO invest $4,000 in the preferred stock
OF the Somerville Wooden Mills. Allan
II. Strong, of New Brunswick, APP
peared in the court on behalf of George
N. Gerhard and twenty-one other
stockholders of the association, seeking
to make the directors responsible for
that amount, together with interest.
The mills went to the financial wall
in 1904. and the association was
stuck" in consequence.
At the conclusion OF the arguments
the vice-chancellor decided off-hand
that il had been clearly shown that
there should be a decree against six of
the directors, or their estates, who
were c~hargeable with liability, as they
had acted outside of their power in
making the investment. Some of the
directors, it appeared, had made a pro-
test and these are exempt from la
bility.
The six interests to make good are
the heirs of Welsh and Voorhees, and
the surviving directors, Thatcher, Van
Doren. Taylor and S. Manning
Wyckoff, who succeeded Cooper when
the latter got out
The question raised is one of wide
interest n great Importance to the
building n loan associations of the
State as it involves their right to make
investments along certain lines and the
personal liability of the directors IL the
results are disastrous. While the
transaction a it's peculiar features 1t
did not differ essentially from others of
a like kind of common occurrence.
Those named in the bill of complaint
as defendants are B. l.. Welsh, the
president of the association. who has
since died, but whose heirs are made
responsible; Peter V. S. Van Doren,
Thomas Cooper. John c. Thatcher,
Sewall o. B. Taylor. Edward Van H.
Voorhees, and Arthur Thomas. Mr..
Voorhees, is also now dead. Mr.. Cooper
got out Of the board in 1896, and Peter
Sutphen and Peter Garrison were
efterward elected upon 1t.
Capitalized at s450,000.
The mills wer capitalized at $3.50,
900, and at the time of the investment
there was a mortgage of $4,000 and
notes outstanding to the extent OF
5000, 900. The association. which made
its investment in 1896, 81, 900 in Janu-
airy of that year and 81, 800 in the fol-
lowing November. received dividends
until 1901, when the shaky condition
of the mills dried up that source Of
income. The plant afterwards 3old for
$50, 900, the creditors receiving 46 cents
on the dollar. but the association moth
ing. IT was organized April /, 1890,
and the first bill in which 1t Is in
terested rs filed in August, 1905.
In his argument Mr.. Strong, who was
associated with George E.. Pace. held
that the investment was not only con-
trary to the bylaws of the association.
but to the laws of the State.
Il insist" said Mr.. Strong, that
these directors should be held per-
sonally liable for the loss sustained, as
they had no right, either under the
laws of the association or the State, to
invest in an industrial corporation. It
is absolutely outside of the power Of
the directors of associations of the kind
to make such investments. They act
Illegally If they do this, and are re-
sponsible for the Illegal Investment