Comm'r of Banks v. Chase Sec. Corp.
| Decision Date | 20 September 1937 |
| Citation | 10 N.E.2d 472,298 Mass. 285 |
| Parties | COMMISSIONER OF BANKS v. CHASE SECURITIES CORPORATION. BRANDEGEE v. SAME. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
OPINION TEXT STARTS HERE
Exceptions from Superior Court, Suffolk County; Weed, Judge.
Two actions of contract by the Commissioner of Banks in possession of the Lowell Trust Company and by Marry B. Brandegee, respectively, against the Chase Securities Corporation, tried together by a judge of the superior court sitting without a jury. From findings in favor of plaintiffs in the respective sums of $21,983 and $27,230, with interest, plaintiffs and defendant save exceptions. Plaintiffs' exceptions are waived if defendant's exceptions are overruled.
Defendant's exceptions overruled, and plaintiffs' exceptions waived.J. B. Abrams, T. A. Mullen, and A. Garceau, all of Boston, for plaintiffs.
J. L. Hall, M. Jenckes, and R. Donaldson, all of Boston, for defendant.
These two actions of contract, brought by writs dated August 13, 1934, were tried together by a judge of the Superior Court sitting without a jury. The plaintiff in the first case is the commissioner of banks in possession of the Lowell Trust Company (herein referred to as the trust company). The plaintiff in the other case is Mary B. Brandegee. The defendant in each case is the Chase Securities Corporation, a corporation organized under the laws of the State of New York (herein referred to as the corporation). Each action is brought to recover the purchase price of stock in the defendant corporation (together with stock of the Chase National Bank) purchased from said corporation by the plaintiff in that action and is based on the ground that the sale of such stock was in violation of the Sale of Securities Act. Each declaration is in two counts: the first, a count alleging the sale of such stock in violation of the statute; the second, a count for money had and received. In each case the defendant pleaded a general denial and ratification. The trial judge filed ‘Findings' in which he found generally for the plaintiffs, made rulings of law and specific findings of fact, and granted and denied requests for rulings made by the plaintiffs and by the defendant. The cases come before us on the defendant's exceptions to the exclusion of evidence, to the granting of the plaintiffs' requests for rulings, to the refusal to grant requests for rulings made by it, ‘to the rulings of law made in * * * [the] decision and to the findings of fact therein contained so far as they are not supported by the testimony and exhibits in the cases,’ and to the denial of the defendant's motions to reopen the cases for the introduction of further evidence; and on the plaintiffs' exceptions to the exclusion of evidence and the denial of their requests for rulings. The plaintiffs' exceptions are waived if the exceptions of the defendant are overruled.
The defendant's bill of exceptions contains the ‘Findings' of the judge and all the evidence material to the exceptions. Most of the evidence is in effect summarized in the subsidiary findings of the judge and need not be stated separately. Moreover, the questions of law involved in the defendant's contentions are properly raised in some form by its exceptions and discussion of specific exceptions in detail is not required.
The transactions relied on by the plaintiffs as sales of securities took place in 1929 and 1930. In 1929 the trust company paid to the defendant, at its office in Boston, the sum of $23,350 and thereafter received four receipts of the Bankers Trust Company issued in its name, each representing twenty-five shares of the stock of the Chase National Bank (herein referred to as the bank) and twenty-five shares of the stock of the defendant. In 1930 the plaintiff Brandegee paid to the defendant at its office in Boston the sum of $30,175 and thereafter received three “duplex' certificates,' each for one hundred shares of the bank and one hundred shares of the defendant. The documents and transactions are hereinafter more fully described. The statute in force at the time of the transactions was St.1921, c. 499, § 1, which added to the General Laws a new chapter-chapter 110A-and became effective August 26, 1921, with amendments thereto made prior to the time of these transactions. The statute as so amended is embodied in (G.L.(Ter.Ed.) c. 110A, and is referred to herein as the Sale of Securities Act. By St.1932, c. 290, the General Laws were amended by striking out chapter 110A and inserting a new chapter in place thereof. It is not contended in these cases that the liabilities of the defendant are affected by this amendment. See, however, McGray v. Hornblower (Mass.) 10 N.E.(2d) 501, decided this day. G.L.(Ter.Ed) c. 110A prohibits the sale of certain securities unless statements, as therein described, have been filed with the commission of public utilities. Significant portions of this chapter are set out in a footnote.1 Section 4 applies to a ‘security * * * that has been sold in this commonwealth prior to June first, nineteen hundred and twenty-one,’ and section 5 applies to a security ‘to which the preceding section does not apply.’ In each case the judge found that the Bankers Trust Company receipts were sold in the Commonwealth prior to June 1, 1921, and ruled, at the request of the defendant, that ‘there is no cause of action arising out of section 5.’ The general findings for the plaintiffs, therefore, are based upon section 4.
The general and special findings in each case are to stand if warranted upon any possible view of the evidence and not vitiated by error of law. And the general finding imports a finding of facts, so far as warranted by the evidence, not inconsistent with the special findings. Moss v. Old Colony Trust Co., 246 Mass. 139, 143, 140 N.E. 803;Board of Assessors of Boston v. Garland School of Home Making (Mass.) 6 N.E.(2d) 374.
It is settled by our decisions that-subject to limitations not here material, see Norwood Trust Co. v. Twenty-Four Federal Street Corp. (Mass.) 3 N.E.(2d) 826, a purchaser through the medium of a ‘sale,’ as defined in the statute and subject to its provisions, of a ‘security,’ so defined and subject, in violation of such provisions, can maintain an action at law against the seller to recover the price paid for such security (Kneeland v. Emerton, 280 Mass. 371, 183 N.E. 155, 87 A.L.R. 1;Bauer v. Bond & Goodwin, Inc., 285 Mass. 117, 120, 188 N.E. 708;Grueby v. Chase Harris Forbes Corp. [Mass.] 197 N.E. 624, 100 A.L.R. 1414) provided the purchaser, after acquiring full knowledge of material facts, has not chosen to continue to hold this security and deal with it as his own (Cummings v. Hotchkin Co. [Mass.] 197 N.E. 473;Goodwin v. Simpson [Mass.] 197 N.E. 628), but makes a proper tender to the seller of the security and the benefits derived therefrom. Grueby v. Chase Harris Forbes Corp. (Mass.) 197 N.E. 624, 100 A.L.R. 1414;Norwood Trust Co. v. Twenty-Four Federal Street Corp. (Mass.) 3 N.E.(2d) 826. The right to recover the consideration paid, though the transaction is illegal and fully executed, rests on the ground that the purchaser belongs to the class of persons which the statute aims to protect, that the prohibition of the statute does not apply to the purchaser but applies only to the seller, and that the purchaser does not participate in the wrongdoing with full knowledge of material facts. Kneeland v. Emerton, 280 Mass. 371, 378-379, 383, 183 N.E. 155, 87 A.L.R. 1;Goodwin v. Simpson (Mass.) 197 N.E. 628. See Williston on Contracts, § 1789; Am. Law Inst. Restatement, Contracts, § 604. This ground of recovery fails when the purchaser, after acquiring such knowledge, continues to hold the security and to deal with it as his own. Cummings v. Hotchkin Co. (Mass.) 197 N.E. 473.
First. The finding in each case-express or implied-that there was a violation of the Sale of Securities Act was not vitiated by error of law.
There was evidence that on March 21, 1917, the bank was capitalized at $10,000,000, consisting of one hundred thousand shares of the par value of $100 each. Findings of the judge bearing on the original transactions and the subject matter thereof-as to which there is no controversy- included the following: The defendant corporation ‘was organized under the Business Corporation Law of New York on May 26, 1917’ by a committee of stockholders of the bank. Its charter ‘is comprehensive in its scope and includes dealing in securities. No-par value shares to the number of 100,000 were to be issued. The amount of its capital with which to carry on business was fixed at $2,500,000 and the consideration for which it might issue and sell its authorized shares, at $25 a share in cash or its equivalent in property. Express provision is made that no share of the Corporation issued to a stockholder of the Bank as such, or any interest therein, shall It is also provided expressly that all receiving shares of the stock of the Corporation as stockholders of the Bank, and those claiming under or through them, irrevocably designate and appoint the ‘depositary with which shares of this corporation...
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