Bailey v. Commissioner of Banks

• Decision Date: 13 April 1923
• Citation: 244 Mass. 499
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: HOLLIS R. BAILEY & another, receivers, v. COMMISSIONER OF BANKS.

244 Mass. 499

HOLLIS R. BAILEY & another, receivers, v. COMMISSIONER OF BANKS.

Supreme Judicial Court of Massachusetts, Suffolk.

April 13, 1923

March 9, 1923.

Present: RUGG, C.

J., BRALEY, DE COURCY, & CROSBY, JJ.

Trust Company, In liquidation. Bankruptcy, Preference. Bills and Notes.

The receiver in bankruptcy of a partnership is not entitled to receive from the commissioner of banks, in possession under G.L.c. 167 Section 22, of the property and business of an insolvent trust company having a savings department, a dividend upon a deposit made by the partnership while solvent in the commercial department of the trust company, if a demand note made by the partnership while solvent and more than four months before bankruptcy and secured among other things by "every balance of deposit account which the makers might at any time have with" the trust company, is held by the savings department of the trust company and there is due thereon an amount in excess of the dividend upon the deposit in the commercial department; but the commissioner may apply such dividend toward payment of the note, and such application does not effect an unlawful preference under the bankruptcy act.

BILL IN EQUITY filed in the Supreme Judicial Court on November 29, 1922, by the receivers in bankruptcy of a partnership against the commissioner of banks for the Commonwealth in possession of the property and business of Tremont Trust Company seeking payment to the plaintiffs of a dividend declared by the commissioner upon a deposit made by the partnership in the commercial department of the trust company.

The suit was heard by Pierce, J., upon the bill and answer and agreed facts which so far as material are described in the opinion. Material facts are described in the opinion.

By order of the single justice a final decree was entered dismissing the bill; and the plaintiffs appealed.

H. R. Bailey, for the plaintiffs. H. W. Brown, for the defendant.

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, Section 22, and has since been engaged in winding up its affairs. Among the assets of the savings department, and held as an investment of deposits therein, was a demand collateral note of Burgess, Lang and Company 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 and Company 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 and Company was $12,039.64; and the commissioner, on June 7, 1921, issued to them a certificate of proof of claim for that...