First Nat. Bank of Boston v. Nichols

• Decision Date: 03 April 1936
• Citation: 200 N.E. 869,294 Mass. 173
• Parties: FIRST NAT. BANK OF BOSTON v. NICHOLS et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

294 Mass. 173

200 N.E. 869

FIRST NAT. BANK OF BOSTON

v.NICHOLS et al.

Supreme Judicial Court of Massachusetts, Norfolk.

April 3, 1936.

Proceedings in the matter of the estate of Charles H. Farnsworth, deceased, wherein the First National Bank of Boston filed a petition against Philip Nichols and others, executors of the will of Charles H. Farnsworth, deceased, for an order directing the executors to retain in their hands sufficient assets to satisfy a claim of the petitioner. Decree for the petitioner, and the executors appeal.

Affirmed.Appeal from Probate Court, Norfolk County; McCoole, Judge.

P. Nichols and J. A. Boyer, both of Boston, for appellants.

J. T. Noonan and W. H. Gulliver, Jr., both of Boston, for appellee.

FIELD, Justice.

This is a petition brought on March 20, 1934, in the Probate Court under G.L. (Ter.Ed.) c. 197, § 13, by The First National Bank of Boston against the executorsof the will of Charles H. Farnsworth for an order directing the respondents to retain in their hands sufficient assets to satisfy a claim of the petitioner against the estate of the deceased. A decree was entered on March 21, 1934, directing the respondents to retain in their hands a fixed sum of money or assets sufficient readily to realize that amount in order to satisfy the claim of the petitioner. The respondents appealed. The case comes before us on the petition and the decree.

The question for decision is whether the Probate Court had power to make the decree upon any evidence which might have been presented under the petition. Conley v. Fenelon, 266 Mass. 340, 342, 165 N.E. 382. The case, therefore, is to be considered on the basis of the allegations of the petition.

Under G.L.(Ter.Ed.) c. 197, § 13, relief by way of an order for the retention of assets can be had by a ‘creditor of the deceased, whose right of action does not accrue within one year after the giving of the administration bond,’ that is, within the period of limitation fixed by G.L.(Ter.Ed.) c. 197, § 9, or ‘within such further time as may be allowed by any extension granted under section nine’-or in certain cases under another section (section 17) if such creditor presents ‘his claim to the probate court at any time before the estate is fully administered’ and ‘upon examination thereof, the court finds that such claim is or may become justly due from the estate.’ (The provisions for extension of time are not material in this proceeding.) On the allegations of the petition the deceased died February 11, 1933, the period of one year after the giving of the bond expired March 22, 1934, and the estate has not been fully administered. The respondents contend that the petitioner's right of action, if any, accrued before March 22, 1934, and, consequently, with respect to such right of action, the petitioner is not within the statute.

Material facts alleged in the petition with respect to the petitioner's right of action are these: The deceased was the real owner of shares of stock in The Atlantic National Bank of Boston, herein referred to as the bank, from May 6, 1932, until his death. ‘Pursuant to an agreement dated May 3, 1932, said The Atlantic National Bank of Boston transferred a very large part of its assets to * * * [the] petitioner in consideration of the agreement of * * * [the] petitioner to assume and pay liabilities of said The Atlantic National Bank of Boston, but by express provision, excluding the liability of said The Atlantic National Bank of Boston to its shareholders, as such. Said agreement, among other things, further contained the promise of said The Atlantic National Bank of Boston to * * * [the] petitioner that in the event that on April 30, 1935, or at the end of any month thereafter, but not later than the end of April 1936 * * * the liabilities assumed by * * * [the] petitioner * * * shall not have been repaid by liquidation * * * of the assets transferred by said The Atlantic National Bank of Boston, to * * * [the] petitioner, said The Atlantic National Bank of Boston, would on demand pay such unpaid balance to * * * [the] petitioner, and said agreement provided that such promise and liability of said The Atlantic National Bank of Boston should constitute an existing and accrued liability, debt, contract and engagement of said The Atlantic National Bank of Boston and the aforesaid statutory liability of shareholders of said The Atlantic National Bank of Boston for such debt, contract and engagement under the laws of the United States shall be and remain in full force and effect until such debt, contract or engagement shall have been paid in full.’ This agreement ‘was duly ratified, confirmed and adopted by the vote of the holders of more than two-thirds (2/3rds) of the shares' of the bank at a special meeting of the shareholders held on June 6, 1932.

At a meeting of the shareholders of the bank held on June 24, 1932, it was voted by holders of more than two thirds of the shares of said bank ‘to go into liquidation in accordance with Revised Statutes of the United States, §§ 5220 and 5221 (title 12, United States Code, §§ 181 and 182 [12 U.S.C.A. §§ 181, 182]).’ The ‘necessary proceedings required by said Revised Statutes of the United States have been and are being taken by said The Atlantic National Bank of Boston.’

The petitioner, as a creditor of said The Atlantic NationalBank of Boston, under the aforesaid agreement, will, in the event that on or before April 30, 1935, or on or before the date to which such date of April 30, 1935, may be extended * * * the liabilities assumed by * * * [the] petitioner * * * have not been repaid as in said agreement provided, be entitled * * * to enforce such unpaid liability as a debt, contract or engagement of said The Atlantic National Bank of Boston, imposed upon its several shareholders by the national banking laws of the United States' against shareholders.

A ‘substantial part of the assets transferred to * * * [the petitioner] by The Atlantic National Bank as aforesaid is still in process of liquidation and * * * the final results of such liquidation will not be known for some time, * * * such assets may be insufficient to repay the balance of the liabilities, as such liabilities have been defined in said agreement, assumed by * * * the petitioner not heretofore paid, and * * * if such assets so prove insufficient, The Atlantic National Bank will be unable on or before April 30, 1935, (or on or before such later date to which such date may be extended * * *) to pay the balance of such liabilities in accordance with its promise.’

The decree was right.

The deceased as a shareholder of the bank was subject to U.S.Rev.Stats. § 5151 (U.S.C., title 12, § 63, 12 U.S.C.A. § 63), which provides that, ‘The shareholders of every national banking association shall be held individually responsible* * * for all contracts, debts, and engagements of such association, to the extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares.’ See, also, Act Cong. Dec. 23, 1913, c. 6, § 23, 38 U.S.Stats. at Large, 273 (U.S.C., title 12, § 64 [12 U.S.C.A. § 64]). The contract between the petitioner and the bank was made before the shareholders of the bank voted that it go into liquidation in accordance with the statute providing for ‘voluntary dissolution.’ U.S.Rev.Stats. § 5220 (U.S.C., title 12, § 181 [12 U.S.C.A. § 181]). The validity of this contract is not attacked by the respondents. Similar contracts have been held valid. And shareholders are individually responsible for obligations of the bank created by such a contract, as for ‘contracts, debts, and engagements' of such bank. Wyman v. Wallace, 201 U.S. 230, 26 S.Ct. 495, 50 L.Ed. 738;Hightower v. American National Bank of Macon, Georgia, 263 U.S. 351, 44 S.Ct. 123, 68 L.Ed. 334.

However, the obligation of the bank under the contract, relied on by the petitioner as imposing individual liability on the estate of the deceased, was to pay to the petitioner on or before April 30, 1935 (or some later date to which by the terms of the contract time for payment might be extended), the unpaid balance of the liabilities of the bank assumed by the petitioner. This obligation was created during the lifetime of the deceased. But, according to the terms of the contract, the time for performance of this obligation would not arrive and, consequently, no right of action against the bank for breach thereof would accrue to the petitioner until more than one year had expired after the respondents gave bond as executors. Moreover, the voluntary liquidation of the bank was not a breach of this obligation for which a right of action against the bank accrued immediately to the petitioner. The vote for voluntary liquidation did not put an end to the corporate existence of the bank (Central National Bank v. Connecticut Mut. L. Insurance Co., 104 U.S. 54, 73, 74, 76, 26 L.Ed. 693) or render performance of the contract impossible according to its terms, though such vote imposed limitations on the bank's doing any new business not incidental to liquidation. Schrader v. Manufacturers' National Bank of Chicago, 133 U.S. 67, 75, 76, 10 S.Ct. 238, 33 L.Ed. 564. The vote for voluntary liquidation did not import insolvency of the bank (see City National Bank of Huron, S. D., v. Fuller (C.C.A.) 52 F.(2d) 870, 873, 79 A.L.R. 71), whatever would be the effect of such insolvency. Nor do allegations of the petition show that the bank has been judicially pronounced insolvent, that in fact it is insolvent or that a receiver thereof has been appointed under Act Cong. June 30, 1876, c. 156, § 1, 19 U.S.Stats. at Large, 63 (U.S.C., title 12, § 191 [12 U.S.C.A. § 191]). See Hightower v. American National Bank of Macon, Georgia, 263 U.S. 351, 360, 44 S.Ct. 123, 68 L.Ed. 334;Lovell v. St. Louis Mutual Life Ins. Co., 111 U.S. 264, 274, 4 S.Ct. 390, 28 L.Ed. 423, and Central Trust Co. of Illinois v. Chicago...