Bailey v. Allen (In re Tremont Trust Co.)

• Decision Date: 13 April 1923
• Parties: BAILEY et al. v. ALLEN, Commissioner of Banks. In re TREMONT TRUST CO.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

244 Mass. 499

138 N.E. 915

BAILEY et al.

v. ALLEN, Commissioner of Banks.In re TREMONT TRUST CO.

Supreme Judicial Court of Massachusetts, Suffolk.

April 13, 1923.

Appeal from Supreme Judicial Court, Suffolk County.

Suit by Hollis R. Bailey and others, receivers in bankruptcy of Burgess, Lang & Co., against Joseph C. Allen, Commissioner of Banks, to compel payment of a dividend on the bankrupt's claim against the Tremont Trust Company, being liquidated by the Commissioner. From a final decree dismissing the petition, plaintiffs appeal. Affirmed.

The commissioner took possession of Tremont Trust Company on February 17, 1921. On March 18, 1922, Burgess, Lang & Co. became bankrupt. At the date the commissioner took possession of the trust company, Burgess, Lang & Co. had a deposit in the commercial department of the trust company and was indebted to the savings department on a note, to secure payment of which it had pledged certain collateral security and the balance of any deposit which it might at any time have. A dividend had been declared on the deposit, which the commissioner claimed the right to apply on the note.

H. R. Bailey, of Boston, for appellants.

Howard W. Brown and Charles M. Storey, both of Boston, for appellee.

DE COURCY, J.

The commissioner of banks on February 17, 1921, took possession of the property and business of the Tremont Trust Company under G. L. c. 167, § 22, and has since been engaged in winding up its affairs. Among the assets of the savingsdepartment, and held as an investment of deposits therein, was a demand collateral note of Burgess, Lang & Co., for $50,000, dated July 2, 1920, payable to the trust company, and secured by a deposit of certain bonds and stocks. In the body of the note was the following:

‘The undersigned * * * as security for the payment of this and all other direct or contingent liabilities of the undersigned to the company * * * hereby pledge to the company the following property * * * and all additions thereto and substitutes therefor, and every balance of deposit account which the undersigned may at any time have with the company, and all right, title and interest of the undersigned in or to any property which has or shall come into the possession or custody of the company in any way, or for any purpose whatever, whether the company shall accept it for the purpose for which it is delivered to it or not; * * *. The company may, at any time, at its option, apply any or all of the net cash receipts from any said security, or any or all of any balance of deposit account of the undersigned with the company, to the payment in whole or in part of this or any of said other liabilities. * * *’

It appears that the proceeds of said note were deposited to the credit of Burgess, Lang & Co. in the commercial department of the trust company, on said July 2, 1920, and thereafter the account was active until the commissioner took possession, on February 17, 1921. On this last date the credit balance due Burgess, Lang & Co. was $12,039.64, and the commissioner, on June 7, 1921, issued to them a certificate of proof of claim for that amount, ‘subject to rights of set-off to be hereafter determined.’ On June 26, 1922, the commissioner, after being duly authorized by the court, notified depositors in the commercial department that a dividend of 16 2/3 per cent. was payable on claims which had been proved and allowed. Meanwhile Burgess, Lang & Co. had been petitioned into bankruptcy in March, 1922, and the plaintiffs appointed receivers. The dividend on the deposit in question, amounting to $2,006.60, was not paid to the plaintiffs, but was applied by the commissioner in part payment on said demand note. Other payments on the note, including the proceeds of collateral securities, have amounted to $30,699.60. The total, $32.706.20, leaves due on the note, irrespective of interest, a balance of $17,293.80. The collateral not yet sold has a...