Allen v. Prudential Trust Co.

• Decision Date: 01 July 1922
• Parties: ALLEN, Com'r of Banks, v. PRUDENTIAL TRUST CO. et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

242 Mass. 78

136 N.E. 410

ALLEN, Com'r of Banks,

v.PRUDENTIAL TRUST CO. et al.

Supreme Judicial Court of Massachusetts, Suffolk.

July 1, 1922.

Report from Supreme Judicial Court, Suffolk County.

Suit by Joseph C. Allen, Commissioner of Banks, against the Prudential Trust Company and others, to enforce the statutory liability of the stockholders for the debts of the trust company. Reported by a single jusice to the full court. Decree for plaintiff.J. E. Hannigan, of Boston, for plaintiff.

Frank O. White, Harold Williams, Jr., and David J. Donahue, all of Boston (Barker, White & Williams, of Boston, of counsel), for defendant Hagerty.

Wm. Shaw McCallum, of Boston, for defendants Kneeland and others.

RUGG, C. J.

This is a petition by the commissioner of banks against the Prudential Trust Company, hereafter called the company, and its stockholders. The commissioner of banks has taken and retains possession of the property and business of the company under St. 1910, c. 399, as amended, now G. L. c. 167. No question is made of its inability to meet its obligations. The object of this suit is to collect from the stockholders of the company their statutory liability for its debts. It is alleged in the bill that a creditor obtained judgment against the company, that execution issued thereon, that demand for payment was refused by the company and for 30 days thereafter the company refused and neglected to exhibit to the officer any property subject to be taken on execution, and that the execution has been returned unsatisfied. In these respects there appears to have been compliance with the requirements of G. L. c. 158, § 46, prerequisite to the establishment of stockholders' liability. Nichols v. Taunton Safe Deposit & Trust Co., 203 Mass. 551, 554, 89 N. E. 1035. It also is alleged that the commissioner of banks by decree of court upon an appropriate petition has been authorized to enforce the liability of stockholders in accordance with the provisions of law.

[1] The single point in issue is whether on these facts the suit can be maintained on the determination of the commissioner of banks alone that an assessment of one hundred per cent. on the shares of stock is necessary to pay the creditors of the company or whether the stockholders are entitled to a hearing with full examination of the assets and liabilities of the company and a determination by the court of the necessity and amount of the assessment. The decision of this point depends upon the construction of the governing statutes. These are certain sections of G. L. c. 167, and chapter 172. The pertinent provisions as to the power of the commissioner of banks first were enacted in St. 1910, c. 399. The General Court then adopted in many respects a new policy concerning the supervision and the liquidation of trust and certain other banking companies organized under the laws of this Commonwealth. The powers of the state officials were greatly enlarged. The commissioner of banks was authorized on his own judgment and responsibility without the intervention of the court when enumerated facts were made to appear to him to take possession forthwith of the business and property of a banking corporation and to retain possession until it should resume business or until its affairs should be liquidated finally. Large powers as to such liquidation are conferred upon him.

[2] It already has been decided that the commissioner of banks in the liquidation of trust companies is an executive or administrative and not a judicial officer. When pursuant to the statute he takes and retains possession of the property and business of a trust company for the purposes of liquidation according to law, he is not a receiver. While clothed with some of the powers of a receiver and in many respects subject to the direction of the court, he nevertheless carries out a legislative policy and not a judicial direction. Greenfield Savings Bank v. Commonwealth, 211 Mass. 207, 209, 97 N. E. 927;Commonwealth v. Allen (Mass.) 133 N. E. 625.

Stockholders' liability of the kind here in suit has existed under the law for many years. See St. 1888, c. 413, § 14. The method for its enforcement by judgment creditors and by receivers, now set out in G. L. c. 172, § 24, also has long been a part of our law. When the power of the commissioner of banks was enlarged by St. 1910, c. 399, it was provided in section 4 that--

‘He may, if necessary to pay the debts of any such trust company, enforce the individual liability of the stockholders.’

These words are found without material change in G. L. c. 167, § 24.

It is manifest that this as well as some other provisions of our banking law were taken without substantial change and in almost the same words from the National Bank Act. It is provided in Rev. Sts. of U. S. § 5234 (U. S. Comp. St. § 9821) amongst other matters, that the appointee of the Comptroller of the Currency and under his direction--

‘may, if necessary to pay the debts of such association, enforce the individual liability of the stockholders.’

The liability sought to be enforced in the present proceeding is that established by G. L. c. 172, § 24, whereby shareholders are made--

‘personally liable, equally and ratably and not one for another, for all contracts, debts and engagements of the corporation to the amount of their stock therein at the par value thereof in addition to the amount invested in such shares.’

This form of liability goes back at least to St. 1888, c. 413, § 14. The liability of stockholders in national banks, as phrased in Rev. Sts. U. S. § 5151, is this:

‘The shareholders * * * shall be held individually responsible, equally and ratably, and not one for another, for all contracts, debts, and engagements of such association, to the extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares,’ with exceptions not here significant.

[3] The sections of our own statute and of the national banking law from which these provisions have been quoted cover in other essential particulars important aspects of the liquidation of banking institutionsto which they severally relate. Plainly the National Bank Act (13 Stat. 99) as to dissolution and liquidation was used as the model for our statute in this respect. In G. L. c. 167, § 34, as in section 5237 of Rev. Sts. of U. S. (U. S. Comp. St. § 9824), there is provision for distribution of the proceeds of liquidation after paying debts and expenses equitably among the stockholders. The inference is strong, if not irresistible, that in thus copying vital parts of our statute from the Act of Congress the General Court was content to accept also the meaning of the statutory words as expounded by the Supreme Court of the United States. It is an established rule that the adjudged interpretation of the words of a statute by the courts of the jurisdiction where it was enacted is intended to be adopted when afterwards the same statute is passed by the Legislature of another state or country. Courts of the later state or country commonly feel constrained to give to the statute the same construction as that earlier given it by the courts of the state or country first enacting it, in the absence of compelling reasons to the contrary. Commonwealth v. Hartnett, 3 Gray, 450;Pratt v. American Bell Telephone Co., 141 Mass. 225, 227, 5 N. E. 307,55 Am. Rep. 465;Ryalls v. Mechanics' Mills, 150 Mass. 190, 193, 22 N. E. 766,5 L. R. A. 667;McNicol's Case, 215 Mass. 497, 102 N. E. 697, L. R. A. 1916A, 306;Woods v. Woburn, 220 Mass. 416, 419, 107 N. E. 985, Ann. Cas. 1917A, 492;Ward v. Great Atlantic & Pacific Tea Co., 231 Mass. 90, 95, 120 N. E. 225, 5 A. L. R. 242.

The Supreme Court of the United States in 1869 interpreted the force and effect of the National Bank Act in respect of the power of Comptroller of the Currency and his appointee (called in the act ‘receiver’ although not appointed by a court) to enforce the liability of shareholders of national banks of whose assets he had taken possession. It was held in Kennedy v. Gibson, 8 Wall. (U. S.) 498, 505, 506 (19 L. Ed. 476), that--

‘The receiver is the instrument of the comptroller. * * * It is for the comptroller to decide when it is necessary to institute proceedings against the stockholders to enforce their personal liability, and whether the whole or a part, and if only a part, how much, shall be collected. These questions are referred to his judgment and discretion, and his determination is conclusive. The stockholders cannot controvert it. It is not to be questioned in the litigation that may ensue. He may make it at such time as he may deem proper, and upon such date as shall be satisfactory to him. This action on his part is indispensable, whenever the personal liability of the stockholders is sought to be enforced, and must precede the institution of suit by the receiver. * * * It would be attended with injurious consequences to forbid action against the stockholders until the precise amount necessary to be collected shall be formally ascertained. This would greatly protract the final settlement, and might be attended with large losses by insolvency and otherwise in the intervening time. The amount must depend in part upon the solvency of the debtors and the validity of the claims. Time will be consumed in the application of these tests, and the results in many cases cannot be foreseen. The same remarks apply to the enforced collections from the stockholders. A speedy adjustment is necessary to the efficiency and utility of the law; the interests of the creditors require it, and it was the obvious policy and purpose of Congress to give it. If too much be collected, it is provided by the statute, that any surplus which may remain after satisfying all demands against the association, shall be paid over to the stockholders. It is better they should pay more than may prove to be needed than that the evils of delay should...