Cooper v. Fid. Trust Co.

• Decision Date: 11 January 1934
• Citation: 170 A. 726
• Parties: COOPER, Bank Com'r v. FIDELITY TRUST CO. In re BEANE.
• Court: Maine Supreme Court

170 A. 726

COOPER, Bank Com'r

v. FIDELITY TRUST CO.In re BEANE.

Supreme Judicial Court of Maine.

Jan. 11, 1934.

On Agreed Statement of Facts from Supreme Judicial Court, Cumberland County, in Equity.

Proceedings by Thomas A. Cooper, State Rank Commissioner, against the Fidelity Trust Company, wherein a conservator was appointed for the Fidelity Trust Company, and wherein Emery O. Beane, receiver of Financial Institutions, Incorporated, filed a petition to obtain payment of dividends directed to be paid by the conservator of the Fidelity Trust Company but retained by the conservator, pursuant to the provisions of the decree ordering distribution. The case was reported to the law court for a final determination, and the report was accompanied by an' agreed statement of facts.

Petition denied.

Argued before PATTANGALL, C. J., and DUNN, STURGIS, BARNES, and THAXTER, JJ.

Beane & Beane, of Augusta, for plaintiff.

Frank H. Haskell and John F. Dana, both of Portland, for defendant.

STURGIS, Justice.

On petition in equity filed by the bank commissioner of Maine in accordance with chapter 93 of the Public Laws of 1933, and known as the "Emergency Banking Act," the Supreme Judicial Court on March 18, 1933, appointed a conservator for the Fidelity Trust Company, a state trust and banking corporation located at Portland, and thereafter the conservator accepted and qualified for said trust, entered upon the discharge of his duties, and in due course his appointment was confirmed and made permanent.

On April 4, 1933, liquidation of the Fidelity Trust Company having been begun, the conservator petitioned the court for authority to enforce the individual liability of the bank's stockholders (R, S. c. 57, § 93), and, after due notice and hearing, it was ordered, adjudged, and decreed:

"That the assets of the defendant corporation are not sufficient to pay its indebtedness, and that there is due to the creditors of said Fidelity Trust Company the sum of at least one million dollars ($1,000,000.00) in excess of the amount that can be realized from its remaining assets, and that an assessment of 100% upon the whole capital stock of said Fidelity Trust Company amounting to one million dollars ($1,000,000.00) upon all the stockholders thereof be, and the same hereby is, made and declared, and that the said Robert Braun, Conservator, be and hereby is authorized and directed to collect from each owner of record of the stock of said Fidelity Trust Company on the eighteenth day of March, 1933, the date when said Conservator was appointed in this case, a sum equal to the par ralue of his or her stock, to be used in payment of the claims of said creditors * * * "

The conservator thereupon began proceedings to enforce the payment of the assessment.

When the conservator was appointed, Financial Institutions, Inc., a corporation having its principal place of business at Augusta, was the owner of 5,308 shares of the capital stock of the Fidelity Trust Company of a total par value of $530,800, and was also a depositor, having a credit in the form of a demand or checking account which amounted to $38,747.66. It is now insolvent and in receivership, the petitioner in this proceeding having on May' 25, 1033, been duly appointed its receiver upon a bill in equity filed in the Supreme Judicial Court for the County of Kennebec.

On June 9, 1933, by decree duly entered as of that date, the conservator of the Fidelity Trust Company was directed to pay to all of its demand depositors and others entitled to share on a parity therewith, a dividend amounting to 20 per cent. of their deposits or claims, subject, however, to the following conditions:

"In case of all stockholders in the said Trust Company who have demand deposits or claims against it, the Conservator may in his discretion retain until further order of Court twenty (20) per cent of any demand deposit or claim against said Trust Company held by such stockholder, and in the event that the said Conservator has reason to believe that it may be difficult to collect the liability from such stockholder, he shall retain such twenty (20) per cent."

The receiver of Financial Institutions, Inc., here seeks to recover the 20 per cent. dividend of $7,749.53 which was so declared upon its deposit in the Fidelity Trust Company but is retained by the conservator of that bank pursuant to the provisions of the decree ordering the distribution and under a claim of the right to set off the liability of Financial Institutions, Inc., as a stockholder.

When this cause came on for hearing, the sitting Justice, being of the opinion that important questions of law were involved, with the consent of all the parties and interveners, reported it to the Law Court for final determination. The report is accompanied by an agreed statement which, saving the issue here directly involved, admits the existence of all facts which have been recited and the validity of all proceedings before the court.

Conservators appointed under the Emergency Banking" Act are given all "The rights, powers and privileges of receivers of banks and trust companies, including the right and power to enforce stockholders' liability." Section 4, c. 93, P. L. 1933. These general powers are enlarged but not limited by the special powers there conferred, which relate to borrowing money, pledging assets, distributing dividends, and receiving deposits, and are not here involved. When, therefore, in such a proceeding, the court elects to liquidate a trust company through a conservator and does not appoint a receiver or trustee as permitted by section 11 of the act, the conservator, except as the statute otherwise expressly provides, is governed by the general rules applicable to receivers of trust and banking companies, and in that branch of the law we must find guidance for the determination of the question which has arisen here.

By statute, a receiver of a trust and banking company in this state is authorized "to take possession of its property and effects, subject to such rules and orders as are from time to time prescribed by the supreme judicial court or the superior court, or by any justice thereof in vacation." R. S. c. 57, §§ 85, 52. As this statute, has been construed, such a receiver is an officer of the court, subject to its rules and orders and even his possession is the possession by the court. He takes no title to the property or assets of the trust company and receives his authority to act solely from the court. "Without that authority, given originally, or by subsequent ratification, no act of [his] is valid." Glidden v. Rines, 124 Me. 286, 292, 128 A. 4, 6.' In exercising the "rights, powers and privileges of receivers of banks and trust companies," the conservator is subject to and must abide by these rules. He is a ministerial officer of the Supreme Judicial Court which, contrary to the general statute, is given exclusive jurisdiction over conservators of trust companies, and he is subject at all times and in all matters to the direction and control of the court, which is the source of his authority and to which he is bound to render strict obedience. The conservator's power and right to enforce the liability of the stockholders of the trust company, expressly conferred by the Emergency Banking Act and defined by reference in the general law applicable to receivers, appearing as R. S. c. 57, § 93, is subject to the same limitations. In that statute, it is expressly stated that the individual liability of the stockholders in a trust and banking company, when made to appear, can only be enforced "under proper orders of the court."

The conservator could not disregard the decree of June 9, 1933, wherein he was directed to retain the dividends then declared which were payable to any stockholder whose liability he had reason to believe might be difficult to collect. Financial Institutions, Inc., had already on May 25, 1933, been decreed insolvent and the petitioner had been appointed its receiver. The conservator obviously then had sound reason to believe that the liability of this stockholder would be difficult to collect and, until otherwise ordered by the court, it was his duty to retain the dividend declared upon its deposit. Unless the court exceeded its authority in this matter in the first instance, or because of the equities of the case should now modify the order, the action of the conservator must be confirmed.

The stockholders in a trust and banking company in this state are "individually responsible, equally and ratably, and not one for the other, for all contracts, debts, and engagements of such corporation, to a sum equal to the amount of the par value of the shares owned by each in addition to the amount invested in said shares." R. S. c. 57, § 93. The liability which the stockholders of the corporation assume when they become shareholders accrues when the court having jurisdiction of the proceeding properly decrees that a resort to the statutory liability of the shareholders is necessary, and fixes the amount thereof. Johnson v. Libby, 111 Me. 204, 210, 88 A. 647, Ann. Cas. 1916C, 681. The liability is no part of the corporate assets. Flynn v. Banking & Trust Company, 104 Me. 141, 147, 69 A. 771, 19 L. R. A. (N. S.) 428, 129 Am. St. Rep. 378. It is created for the benefit of the creditors of the corporation and was formerly enforceable only by the creditors. Pulsifer v. Greene, 96 Me. 438, 445, 52 A. 921. Now, since the amendment appearing in P. L. 1905, c. 19, and retained in the current statute, has come into effect, it can only be enforced for the benefit of the creditors by the receiver of the corporation or a conservator having the powers of a receiver. R. S. c. 57, § 93; P. L. 1933, c. 93, § 4.

The moneys which come into the possession of a receiver or conservator as the proceeds from the collection of the liability of stockholders are available for and must be applied ratably to "all contracts,...