Commissioner of Banks v. Harrigan

• Decision Date: 03 July 1935
• Citation: 197 N.E. 92,291 Mass. 353
• Parties: COMMISSIONER OF BANKS v. HARRIGAN et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

291 Mass. 353

197 N.E. 92

COMMISSIONER OF BANKS v. HARRIGAN et al.

Supreme Judicial Court of Massachusetts, Suffolk.

July 3, 1935

Report from Supreme Judicial Court, Suffolk County.

Suit in equity by the Commissioner of Banks against George M Harrigan and others. On report respecting motions for jury issues.

Affirmed.

J. M. Graham, of Boston, for plaintiff.

W. F Howard, of Boston, for defendants.

RUGG Chief Justice.

This is a suit in equity under G. L. (Ter. Ed.) c. 167, § 24, by the commissioner of banks against seventeen directors of the Lowell Trust Company, now in process of liquidation by the petitioner. The object of the suit is to recover for the benefit of the creditors and stockholders of the trust company for losses suffered by it through breaches of the fiduciary duties of the defendants as directors. The trust company had conducted in accordance with statutory authority both commercial and savings departments. Without narrating in detail the numerous allegations in the bill of complaint it is sufficient to say that they raise issues as to a great number of independent transactions wherein breaches of fiduciary obligations of the defendants as directors are described. The liability of the different defendants as to each transaction is not necessarily joint or common, but the conduct of each defendant with reference to each transaction must be considered separately. The defendants were directors at different times during the years 1925 to 1931, and some of them were members of the finance and investment committees of the directors on different dates. The breaches of fiduciary duty thus described relate to many different affairs and arise in numerous different ways. The principal defendants have filed answers which in effect are denials of the allegations of the bill. Thirteen of the principal defendants have filed a claim for trial by jury and a motion for the framing of jury issues. The single justice ruled as matter of law that the defendants had no constitutional right to a trial by jury. So far as addressed to his discretion, jury trial and issues to a jury were denied. The defendants rely upon article 15 of the Declaration of Rights of the Constitution of this Commonwealth, which is in these words: ‘ In all controversies concerning property, and in all suits between two or more persons, except in cases in which it has heretofore been otherways used and practised, the parties have a right to a trial by jury; and this method of procedure shall be held sacred, unless, in causes arising on the high seas, and such as relate to mariners' wages, the legislature shall hereafter find it necessary to alter it.’

The scope and meaning of the constitutional right here asserted were explained in Parker v. Simpson, 180 Mass. 334, 351, 352, 355, 62 N.E. 401, 408, in an opinion of convincing fullness by Hammond, J. In substance and effect it was there decided that those who settled the Colony and Province of Massachusetts ‘ were English subjects, and as such brought with them to this country the general principles of English law, so far as applicable to their situation. In England there were two general systems of jurisprudence working side by side, not inconsistent with each other, but each necessary to the full enjoyment of English liberty. in one there was an absolute trial by jury; in the other, the right to such a trial was at the discretion of the court. Our ancestors brought the rights equitable as well as legal. * * * The article as it now stands is a declaration of the common-law right to a trial by jury, and in no way is inconsistent with the establishment of a court of chancery having general jurisdiction, as it was at the time of the adoption of the constitution, and proceeding in accordance with its fundamental rules of practice as then existing. One of these rules was that trial by jury should be at the discretion of the court.’ Therefore, whether in any particular case the right to a trial by jury is preserved depends upon the question whether the subject matter of the cause of action is one pertaining to equity jurisprudence as generally understood in England and Massachusetts at the time of the adoption of the Constitution. The jurisdiction over breaches of trust is one of the earliest branches of equity. The preservation and enforcement of trusts, the ascertainment of violations of duty respecting the management and execution of trusts, and the establishment of the extent of injury caused by infraction of fiduciary obligations, whether they arise out of express or implied, direct or constructive trusts, constitute a familiar division of chancery jurisprudence. Equity also assumes jurisdiction not infrequently for the purpose of preventing multiplicity of suits. 2 Story, Equity Jurisprudence, 647, 648.

It is a general principle that directors of corporations are fiduciaries bound to the strictest good faith in the performance of their duties in respect to the management of corporate functions. Although not liable for honest mistakes of judgment, directors are required to act with an eye single to the welfare of the corporation. Elliott v. Baker, 194 Mass. 518, 523, 80 N.E. 450; Abbot v. Waltham Watch Co., 260 Mass. 81, 96, 156 N.E. 897; Beaudette v Graham, 267 Mass. 7, 12, 165 N.E. 671. The Lowell Trust Company...