Craughwell v. Mousam River Trust Co.

• Decision Date: 23 August 1915
• Parties: CRAUGHWELL et al. v. MOUSAM RIVER TRUST CO.
• Court: Maine Supreme Court

95 A. 221

CRAUGHWELL et al.

v. MOUSAM RIVER TRUST CO.

Supreme Judicial Court of Maine.

Aug. 23, 1915.

Exceptions from Supreme Judicial Court, York County, in Equity.

Bill by William Craughwell and others against the Mousam River Trust Company for a receiver and to wind up the affairs of the corporation. The bill was dismissed, and plaintiffs excepted. Exceptions overruled.

Argued before SAVAGE, C. J., and SPEAR, KING, BIRD, and HANSON, JJ.

Hinckley & Hinckley, of Portland, for plaintiffs. Woodman & Whitehouse, of Portland, for defendant.

SAVAGE, C. J. Bill in equity brought by several stockholders against the Mousam River Trust Company, alleging in substance that through the fraud, neglect, and gross mismanagement of its officers the corporation is insolvent or in imminent danger of insolvency, and praying for the appointment of a receiver, the winding up of the affairs of the corporation, and so forth. On motion the bill was dismissed for want of jurisdiction, and the plaintiffs excepted. The bill was brought under the provisions of chapter 85 of the Laws of 1905, as amended by chapter 137 of the Laws of 1907.

The statute of 1905 provided that, "whenever any corporation shall become insolvent, or be in imminent danger of insolvency, or whenever through fraud, neglect or gross mismanagement of its affairs, * * * upon application of any creditor or stockholder by bill in equity" the court may issue an injunction restraining the corporation from doing business, appoint a receiver, and wind up its affairs. Prior to the amendment of 1907, the original statute, which declared that all claims not presented to the receiver as provided should "be forever barred," was held by the court to be a statute of bankruptcy (Moody v. Development Co., 102 Me. 374, 66 Atl. 967), and hence, under the federal Constitution (article 1, § 8), inoperative during the existence of the federal bankrupt law. Damon's Appeal, 70 Me. 153. Since the amendment of 1907, many proceedings have been brought under the statute, but in none has the constitutionality of the statute been questioned before the court; and, for the purposes of this case, we assume that the statute in its present form is operative.

In support of the decree of dismissal it is contended by the defendant that the statute of 1905 does not apply to trust companies, but that the power to bring proceedings of this character is vested solely in the bank commissioner. And this presents the precise question now to be considered and determined.

By Revised Statutes, c. 48, § 42, the bank examiner (now called the bank commissioner, Laws of 1909, c. 12) is given very broad powers of visitation and examination of savings banks, having free access to all their vaults, books, and papers, being empowered to inspect and examine all of their affairs and make such inquiries as are necessary to ascertain their condition. And such inquiries the bank officers are bound, under penalty, to answer upon oath, if so required. By section 44 the bank commissioner is authorized, in case he is of opinion that a bank is "insolvent, or that its condition is such as to render its further proceedings hazardous to the public or to those having funds in its custody, * * * to apply to the court for an injunction, appointment of a receiver, sequestration of assets," and so forth. By section 75 the bank commissioner is charged with the same duties and invested with the same powers with respect to loan and building associations, as to savings banks.

In 1899, in the case of Ulmer v. Loan & Building Ass'n, 93 Me. 302, 45 Atl. 32, a bill for injunction against ultra vires acts, brought by a stockholder, we had occasion to consider the various statutory provisions now embraced in Revised Statutes, c. 48, and referred to above, and were clearly of opinion that the power of invoking the interference of the court in cases of savings banks and loan and building associations was intended by the Legislature to be vested in the bank examiner alone. And, inasmuch as by Public Laws 1905, c. 12, the bank examiner is vested with the same authority over trust and banking companies as he has over savings banks, and is charged with the performance of the same duties in the one case as in the other, there can be no question that, but for the provisions of chapter 85 of the laws of the same year, the bank commissioner, and he alone, is authorized to bring receivership proceedings against a trust company.

But, say these plaintiffs, the law of 1905, enacted since the decision of the Ulmer Case, is very comprehensive in terms, and expressly includes "any," and therefore all, corporations. If this contention is sound, all savings banks and all loan and building associations, as well as all trust companies, may be proceeded against under the law of 1905, at the suit of any creditor or stockholder. If there were any considerable doubt respecting the legislative intent in this regard, the consequences of such a construction as is claimed by the plaintiffs must arrest attention, and may properly be considered. For, unless compelled to such a conclusion, we would be slow to think that the Legislature, contrary to all previous state policy, intended to subject all savings banks, and loan and building associations, and trust companies, to the uncontrolled attack of every creditor and every dissatisfied stockholder, and to subject them to receivership suits and winding up proceedings at the suit of those who may not know, and may not have the means of knowing, the condition of the institution, as the bank commissioner is bound to know it. Banking it necessarily a delicate business. To be successful it must retain public confidence. It must be managed with caution. Needless alarm must be prevented. If a bank is even charged with insolvency or mismanagement, the charge itself may start it on the road to financial ruin. The alarm caused by a causeless suit may break a strong bank. A slight and causeless alarm may result in a disastrous run upon a solvent savings bank. It has been the policy of the state hitherto to protect banks against such consequences. If a bank were a private institution, and the consequences which we have referred to were to visit only those who have chosen to associate together as stockholders, those consequences would be lamentable, but endurable. But a bank is not merely a private institution. It is in a very important sense a public institution, in that the public are deeply concerned in its well being. Its welfare affects not only its stockholders, but also its depositors. And besides stockholders and depositors, the business public itself is concerned. The...