Goodhue v. State St. Trust Co.

• Decision Date: 02 April 1929
• Citation: 165 N.E. 701,267 Mass. 28
• Parties: GOODHUE v. STATE STREET TRUST CO. et al. SAME v. OLD COLONY TRUST CO. et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

267 Mass. 28

165 N.E. 701

GOODHUE

v.STATE STREET TRUST CO. et al.

SAME

v.OLD COLONY TRUST CO. et al.

Supreme Judicial Court of Massachusetts, Suffolk.

April 2, 1929.

Appeal from Supreme Judicial Court, Suffolk County.

Suits by L. Cushing Goodhue, administrator of the estate of George Burroughs, deceased, against the State Street Trust Company, the Old Colony Trust Company, Richards M. Bradley, and others, in which defendants Bradley and others filed crossbills. From final decrees dismissing the crossbills of respondents Bradley and others, they appeal. Modified and affirmed as modified in part, and affirmed in part, with directions.M. F. Hall, of Boston, for plaintiff.

R. Homans, of Boston, for Suter and others.

C. P. Curtis, Jr., of Boston, for Emmons.

J. P. Wright and R. G. Wellings, both of Boston, for Welch.

A. F. Converse, of Boston, for Baldwin's trustees.

A. B. Carey, of Boston, for State Street Trust Co.

J. Noble, of Boston, for Bacon's Ex'rs.

PIERCE, J.

These are two bills in equity brought by the administrator of the insolvent estate of George Burroughs, deceased, against the respondent trust companies, for an accounting of certain securities, or of the proceeds from a sale thereof, which Burroughs had pledged with them as collateral in substitution for other securities held by them as collateral, and to have them, or the proceeds of them, applied to the payment of loans made by the trust companies to the deceased, and the surplus turned over to the estate. All parties claiming any interest in the collateral were joined as parties respondent. All the respondents filed answers, and several filed cross bills making claim to portions of the collateral or to the proceeds thereof. All but the Bradley claimants admit priority rights in the trust companies, but they all deny any right in the administrator of the Burroughts estate or in other personal respondents to receive the surplus of the collateral. The Bradley claimants seek to recover the proceeds of the sale of certain specific securities from the State Street Trust Company. By stipulation all the securities have been sold and the proceeds held in the form of treasurer's checks. The cases were consolidated and referred to a master who filed a single report. No objections were filed to the report and an interlocutory decree was entered confirming it. A final decree in the case of the State Street Trust Company dismissed all cross bills except that of Augustus P. Loring, Jr., and Moses Williams, executors, and provided for the payment to them of the surplus after the satisfaction of the claim of the company against Burroughs. A final decree, in the case of the Old Colony Trust Company, dismissed all cross bills heard by the master except that of Augustus P. Loring, Jr., and Moses Williams, executors, and provided, after the satisfaction of the company's claim, for the payment of $4,827.08 to the said executors; and further provided that the balance, $2,393.48, be paid to the administrator of the estate of George Burroughs. The administrator of the Burroughs estate did not appeal from these decrees. The cases come before us on appeal from the final decrees dismissing the cross bills of certain claimants including that of Richards M. Bradley.

The facts taken from the master's report in substance are as follows: George Burroughs, the plaintiff's intestate, was killed on July 23, 1925. The administrator was appointed and duly qualified on August 11, 1925. The estate is insolvent and has been so represented in the probate court. For some years before his death Burroughs carried on business under the name of Burroughs & Company. He had no partner and his business consisted for the most part in dealing in the stocks of trusts and corporations organized to hold real estate. His dealings took this form: He would find a customer who wished to buy or sell a particular real estate stock at a given price; he would then hunt for one who was ready to buy at a higher price or sell at a lower, as the case might be, making his profit from the difference and receiving no commission. He conducted almost all the business of buying and selling real estate stocks that was done in the city of Boston. In all the transactions hereinafter referred to he was represented by a man named Hastings, who worked on a commission basis, receiving a percentage of the profits. Burroughs' financial standing was such that prudent persons who sold him stocks would deliver to him transferable certificates and wait patiently for their money, and those who bought stocks from him would pay him the purchase price and wait patiently for the delivery of their certificates.

In the meantime Burroughs borrowed money from the State Street Trust Company and from the Old Colony Trust Company, and pledged with each as security various real estate shares and stocks which he had obtained from customers.‘In one instance, stock so pledged had neither been bought nor sold by Burroughs but had been delivered to him by the owners in the hope that he might find a purchaser, in which event, Burroughs was to buy as usual on his own account.’ Two respondents, who filed cross bills, claim shares which they say Burroughs held for them and which he had pledged partly with one trust company and partly with the other; this fact made it impossible for the master to deal with each suit separately.

Six shares of Chicago Real Estate Trust pledged by Burroughs with the State Street Trust Company were claimed by Roland Gray, executor, and Richards M. Bradley who says he bought all six of these shares acting as undisclosed agent for Amy Suter and others who are named as complainants in the cross bill filed in the suit numbered 47,857 Eq. Gray filed a cross bill claiming the shares; his bill was dismissed. He has not appealed from the final decree and his claim is not now considered. Regarding these shares of stock the master, in substance, finds that on June 10, 1925, Gray agreed with Hastings upon the price per share for which Gray would sell the five shares he had. Gray delivered the certificate of these shares indorsed by him in blank to Hastings who gave a receipt therefor ‘To be accounted for.’ On June 11, 1925, Burroughs sent Gray a statement of the transaction and bought another share from Parkinson & Burr. On June 12, 1925, Burroughs sent the certificates and a certified copy of the will of Susan Green Dexter and a certificate of Gray's appointment as executor thereunder, to the Chicago Title & Trust Company with directions to the transfer office to transfer the shares into the name of Burroughs & Company. This Burroughs did without the knowledge or authority of Bradley or of Bradley's undisclosed principals. One June 22, 1925, the shares were transferred in accordance with Burroughs' directions and on June 26, he received from Chicago two new certificates, one for five shares, the other for one share, and both in the name of Burroughs & Company. On June 30, 1925, Burroughs pledged these certificates with the State Street Trust Company. He never paid Gray for the five shares obtained from him.

Sending statements on the regular printed ‘Sold’ form to Richards M. Bradley, Burroughs & Company sold Bradley on June 8, 1925, two shares, on June 9, 1925, three shares, and on June 10, one share of the Chicago Real Estate Trust. The master found that unquestionably the six shares with which Burroughs intended to fulfill his contact with Bradley were those bought of Gray and of Parkinson & Burr; and further found that at this time Burroughs had no other shares or certificates of the Chicago Real Estate Trust in his possession. It further is found that on June 20, eight days after the old certificates were mailed to Chicago, two days before the actual transfer, and six days before Burroughs received the new certificates, Hastings in a conversation with an agent of Bradley about the shares of the Chicago Real Estate Trust Bradley had bought, and in respect to paying for them, told the agent that Burroughs had the certificate ready for transfer; that Bradley at once paid Burroughs the purchase price and instructed him as to how the four shares which he had bought for his five daughters were to be transferred because he believed that Burroughs had the certificate or certificates ready for transfer. It is obvlous, as the master finds that Burroughs might have had the six shares transferred into the name of Richards M. Bradley or the names of his appointees at any time after June 11, and either before or after they were transferred into the name of Burroughs & Company and until he pledged them with the State Street Trust Company on June 30, 1925.

[1][2][3][4] It appears by the declaration of trust of the Chicago Real Estate Trust, a copy of which is appended to the master's report, that the interest of the beneficiaries shall be represented by transferable receipts, called by the master certificates, and that all property held by the trustees at the termination of the trust shall be sold and the proceeds divided among the ‘receipt-holders'; it further appears that the trustees may create a contingent fund or sinking fund in interest-bearing securities. The master finds that the greater part of the property in the trust was real estate but the trust owned about $500,000 in personal property. Under the agreement, the trust included real and personal property in one fund which was to be treated as personal property from the beginning, because of necessity all must be converted into personalty from the beginning in order to be one fund. Dana v. Treasurer & Receiver General, 227 Mass. 562, 116 N. E. 941;Priestley v. Treasurer & Receiver General, 230 Mass. 452, 120 N. E. 100;Baker v. Commissioner of Corporations & Taxation, 253 Mass. 130, 148 N. E. 593. Transferable receipts, sometimes called certificates in a voluntary unincorporated association, are equitable choses in action bearing a close resemblance to certificates of...