Faulkner v. Lowell Trust Co.

• Decision Date: 15 February 1934
• Citation: 189 N.E. 215,285 Mass. 375
• Parties: FAULKNER et al. v. LOWELL TRUST CO. et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

285 Mass. 375

189 N.E. 215

FAULKNER et al.

v.LOWELL TRUST CO. et al.

Supreme Judicial Court of Massachusetts, Middlesex.

Feb. 15, 1934.

Appeal from Superior Court, Middlesex County; Pinanski, Judge.

Bill by Luther W. Faulkner and others against the Lowell Trust Company and others, wherein Arthur Guy, Commissioner of Banks, counterclaimed. From a final decree, plaintiffs appeal.

Affirmed.

Woodbury F. Howard, of Lowell, for appellants.

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

LUMMUS, Justice.

In order to aid in the financing of industries in Lowell and thereby to further the industrial progress of that city, an agreement was made on May 1, 1928, and signed by the Lowell Chamber of Commerce, the Appleton National Bank of Lowell, as ‘trustee,’ and various persons, including the plaintiffs, as ‘subscribers.’ Each subscriber agreed under seal to pay on demand to the trustee such sums as might be assessed upon him by the trustee, not exceeding in all a specified limit. The trustee agreed to furnish to any of five banks, including the trustee, making an industrial loan with the approval of the Board of Industrial Fund Directors, a certificate of participation in the obligations of the subscribers and in the additional security thereby afforded. The Chamber of Commerce was charged with the duty of appointing from the body of subscribers five of the ten members of the Board of Industrial Fund Directors, while each of the five banks named was to appoint one member, who was also required to be a subscriber. It was provided that ‘all votes recommending loans shall require at least seven (7) affirmative votes in order to be binding.’ The active business to be done under the agreement was to end on May 1, 1931.

On or about October 16, 1928, a loan of $25,000 was made to the Model Shoe Company by the defendant Lowell Trust Company, one of the five banks named in the agreement, and the trustee issued to that bank a participation certificate. Various renewals of the loan were made, all upon participation certificates, and the loan was reduced to $15,000. On April 26, 1931, the Board of Industrial Fund Directors voted to grant another participation certificate for another renewal of the loan, and such a certificate was issued upon the renewal of the loan by the Lowell Trust Company upon a demand note. When that vote of the Board of Industrial Fund Directors was taken, only seven members were present, so that the affirmative vote of every one was necessary for the approval of the renewal of the loan and the issue of a participation certificate. One of them was George M. Harrigan, then and for a long time past the president and a director of the Lowell Trust Company, the lender, and the agent of the Lowell Trust Company in the making and renewal of the loan.

On December 16, 1931, under order of the defendant commissioner of banks, the defendant Lowell Trust Company closed its doors and went into liquidation. On July 22, 1932, the loan to the Model Shoe Company, then amounting to $12,500 with interest from October 15, 1931, remaining unpaid, and that company having made an assignment for the benefit of its creditors, the Lowell Trust Company demanded of the trustee that it levy an assessment upon the subscribers to make good its loss, and the trustee threatened to levy such an assessment. The plaintiffs brought this bill on October 24, 1932, against the trustee, the Lowell Trust Company and the commissioner of banks, to restrain any such assessment and to obtain a cancellation of the participation certificate. The Lowell Chamber of Commerce, though not formally made a defendant, answered to the bill, and was treated as a party. Thus it became bound by the result of the case. First Baptist Church of Sharon v. Harper, 191 Mass. 196, 199, 210, 77 N. E. 778. Compare Hanscom v. Malden & Melrose Gas Light Co., 220 Mass. 1, 3, 107 N. E. 426, Ann. Cas. 1917A, 145. The defendant commissioner of banks, by way of counterclaim under Rule 32 of the Superior Court (1932), prays that an assessment may be ordered.

The Superior Court entered a final decree, giving relief on the counterclaim by ordering an assessment on the subscribers to be levied and collected. Impliedly the plaintiffs' bill was dismissed, though it would have been better practice had this been done expressly. The plaintiffs appealed.

This case does...