Commissioner of Banks v. Edwin T. Mcknight

• Decision Date: 05 January 1933
• Citation: 281 Mass. 467
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: COMMISSIONER OF BANKS v. EDWIN T. McKNIGHT & others.

281 Mass. 467

COMMISSIONER OF BANKS v. EDWIN T. McKNIGHT & others.

Supreme Judicial Court of Massachusetts, Suffolk.

January 5, 1933

December 14, 1932.

Present: RUGG, C.

J., CROSBY, PIERCE FIELD, & LUMMUS, JJ.

Trust Company, In liquidation: stockholder's liability. Statute Construction. Constitutional Law, Police power, Banking laws. Bankruptcy. Equity Pleading and Practice, Decree.

Where a statute enacted by the General Court is taken in large measure in the same words from a statute enacted in another jurisdiction the judicial interpretation of its words by courts of that other jurisdiction is presumed to have been intended to be adopted, in the absence of controlling reasons to the contrary. Per RUGG, C.J.

The commissioner of banks, in possession of an insolvent trust company closed for liquidation in 1931, was entitled to enforce against its then stockholders their individual liability under G.L. (Ter. Ed.) c. 172,

Section 24, for an assessment equal to the entire par value of their shares notwithstanding the circumstances that in 1925 an assessment of seventy per cent had been levied upon the same shares under Section 25 by vote of the directors following a notice from the commissioner of banks to the trust company, and that such assessment had been collected in full by payments by some of the then stockholders and by sale of the shares of the others at auction.

Whether, after an assessment has been levied under said Section 25, there is personal liability on the part of the shareholders to pay it or whether the only remedy for its collection is by sale of the shares at public auction as therein provided, was not decided.

Under G.L. (Ter. Ed.) c. 167, Section 24, the commissioner of banks may maintain a suit in equity to enforce the liability of the stockholders under said c. 172, Section 24, even though no judgment has been recovered against the trust company. Sections 22, 24 of G.L. (Ter. Ed.) c. 167, are constitutional.

Where one had bought stock in a trust company which was indorsed to him in blank and held by him, but for which no new certificate had been issued in his name, he was the owner of the shares and was liable for an assessment under G.L. (Ter. Ed.) c. 172, Section 24.

Where, after a holder of stock in a trust company had given a note to the company and as collateral security therefor had delivered to it his certificate of stock indorsed in blank, he was adjudicated a bankrupt and received his discharge as such and the trust company made proof of its claim against the bankrupt stating the collateral held by it, the implication was that the trustee in bankruptcy did not choose to accept title to the shares, although he had not transferred to the bankrupt any right, title or interest therein; the inference of ownership in the bankrupt arising from the fact that the certificates stood in his name was not overcome; and, the trust company having been closed in liquidation thereafter, he remained liable for an assessment under G.L.

(Ter. Ed.) c. 172, Section 24.

Although the bill in a suit in equity by the commissioner of banks to enforce the liability of a stockholder of an insolvent trust company under G.L. (Ter. Ed.) c. 172, Section 24, was taken pro confesso, it was held that, in view of findings by a master that he was not the real owner of shares and that the commissioner had elected to hold the real owner, no final decree should be entered against him.

BILL IN EQUITY, filed in the Supreme Judicial Court for the county of Suffolk on November 19, 1931, and afterwards amended, described in the opinion.

The suit was referred to a master, and subsequently was reserved by Pierce, J., for determination by the full court. Material facts are stated in the opinion.

J.V. Spalding, (G. Bolton with him,) for the plaintiff. R.P. Delano, (C.T. Cottrell & G.H. Chase with him,) for certain defendants.

H.M. Chase & G.H. Chase, for the defendant Bucek, submitted a brief. E. Kurland, for the defendant Rudnick, submitted a brief.

W.S. Thompson & J.O. Burdett, for the defendants Ammann and others, submitted a brief.

RUGG, C.J. This suit in equity is brought by the commissioner of banks, in possession for the purpose of liquidation of the insolvent Industrial Bank & Trust Company under powers conferred by G.L. (Ter. Ed.) c. 167, Section 22, to enforce for the benefit of its creditors the individual liability of its stockholders established by G.L. (Ter. Ed.) c. 172, Section 24. It was stipulated by the parties that the commissioner of banks pursuant to power conferred by said c. 172, Section 25 on December 9, 1924, instructed the bank to levy an assessment of seventy per cent of the par value of its stock upon all its stockholders as a condition of its continuance as a banking institution; that in consequence in February, 1925, the directors of the bank voted to levy such an assessment upon its stockholders; that in conformity to this vote certain stockholders made payment of the several amounts assessed on their shares and that stock on which the assessment was not paid was subsequently sold at auction in accordance with law and the amount of the assessment realized in that way, that thus the total amount of the seventy per cent of the par value of its capital stock was paid to the bank. There was no increase in the capitalization of the bank. All the shares outstanding on March 19, 1931, the date of the closing of the bank for liquidation, were outstanding at the time of the assessment of February, 1925, and were subject thereto. After the proceeds of that assessment were received by the bank it continued to do business without being in liquidation until March 19, 1931. The validity of that assessment of seventy per cent is not now questioned. Commercial National Bank v. Weinhard, 192 U.S. 243.

The one contention common to all the stockholding defendants is that their liability can be enforced in this proceeding to the extent of only thirty per cent because of the contribution of seventy per cent made in 1925 on account of the shares of stock now owned by them. The contention of the plaintiff is that he is entitled to collect the entire par value of the shares, regardless of the collection of the earlier assessment. The solution of the problem thus presented depends upon the construction of G.L. (Ter. Ed.) c. 172, Sections 24, 25. Power is conferred upon the commissioner of banks to enforce by suit in equity the individual liability of the stockholders in a trust company in his possession for purposes of liquidation. G.L. (Ter. Ed.) c. 167, Section 24. His determination as to the percentage of liability so to be enforced is final. His authority is plenary. This was decided after full discussion in Commissioner of Banks v. Prudential Trust Co. 242 Mass. 78 . That decision rested in large measure upon the fact that crucial provisions of our statutes were taken from the national banking act and that therefore the interpretation given them by the Supreme Court of the United States would be followed in the construction of similar clauses of our statutes. The principle controlling that decision was that where a statute enacted by the General Court is taken in large measure in the same words from a statute enacted in another jurisdiction, the judicial interpretation of its words by courts of that other jurisdiction is presumed to have been intended to be adopted, in the absence of controlling reasons to the contrary.

The material words of said Section 25 are that any trust company "whose capital stock has, in the opinion of the commissioner, become impaired by losses or otherwise, shall, within three months after receiving notice from the commissioner, pay the deficiency in the capital stock by assessment upon the stockholders pro rata to the shares held by each. If such corporation shall fail to pay such deficiency in its capital stock for three months after receiving such notice, the commissioner may apply to the supreme judicial court for an injunction; and if a stockholder of such corporation neglects or refuses, after three months' notice, to pay the assessment as provided in this section, the board of directors shall cause an amount of his stock sufficient to make good his assessment to be sold by public auction, after thirty days' notice given by posting such notice in the office of the corporation and by publishing it in a newspaper of the city or town where the corporation is located or in a newspaper published nearest thereto; and the balance, if any, shall be returned to such delinquent stockholder. This section shall not take away the right of creditors to enforce the liability of stockholders in such corporations, as provided in the preceding section, or the right of the commissioner to enforce such liability as provided in section twenty-four of chapter one hundred and sixty-seven, nor increase the general liability of such stockholders." Those words, with an exception presently to be noted, also were taken in the main in substance and effect from the national bank act, U.S. Rev. Sts. Section 5205. They were first incorporated into our statutory law by St. 1892, c. 327.

By a decision rendered in 1886 the similar words of the national bank act had been interpreted and construed in Delano v Butler, 118 U.S. 634. That decision held that the liability of a stockholder of a national bank in liquidation to an assessment to discharge his individual responsibility for debts, contracts and engagements of the bank under U.S. Rev. Sts. Section 5151 (similar to the liability established by G.L.c. 172, Section 24), was not diminished or in any way affected by a previous assessment paid under U.S. Rev. Sts. Section 5205 (similar to the assessment authorized by G.L.c. 172, Section 25), for...