New England Trust Co. v. Spaulding

• Decision Date: 30 December 1941
• Parties: NEW ENGLAND TRUST CO. v. SPAULDING et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

310 Mass. 424

38 N.E.2d 672

NEW ENGLAND TRUST CO.

v.SPAULDING et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Dec. 30, 1941.

Appeal from Superior Court, Suffolk County; Greenhalge, Judge.

Suit by the New England Trust Company against John T. Spaulding and another, executors, and others, for specific performance to enforce restrictions relative to the transfer of stock. From a final decree for plaintiff, defendants appeal.

Affirmed.

Before FIELD, C. J., and QUA, COX, and RONAN, JJ.

B. E. Eames, of Boston, for plaintiff.

P. B. Buzzell, of Boston, for defendants.

RONAN, Justice.

This is a bill for specific performance against the executors and trustees under the will of William S. Spaulding, who at the time of his death was a stockholder of the plaintiff, to enforce certain restrictions, relative to the transfer of its stock, providing for the purchase by the plaintiff of the stock of a deceased stockholder. The defendants appealed from a final decree ordering the transfer of the stock to the plaintiff upon the payment of a designated amount.

The case is here with a report of the evidence and a report of the material facts. Many of these facts do not seem to be in dispute. The plaintiff is a banking corporation created by St.1869, c. 182. The testator purchased the stock in different lots from 1891 to 1896, and he or his agents, upon delivery of the certificates, signed receipts agreeing to conform to the conditions and restrictions ‘therein referred to and to the By-Laws of the Company.’ The certificates stated that the shares were transferable ‘upon the conditions expressed in the By-Laws of the company printed upon the back of this Certificate.’ These by-laws, which appeared upon the reverse side of these certificates, in so far as now material provide that the executor of a deceased stockholder shall cause the shares to be appraised by the directors and shall offer said shares for such appraisal upon the request of the actuary or secretary of the plaintiff, and for the use of the corporation at the appraised value if the directors choose to purchase them, but that the executor may sell the shares to anyone if the directors do not purchase them for the corporation within ten days after they are offered by the executor. The request upon the executor shall not be made until after the payment of one dividend and the expiration of six months from the death of the owner, but the offer may be made at any earlier period ‘if the party shall prefer.’ By a vote of the majority of stockholders, the plaintiff, on February 5, 1902, adopted the provisions of R.L. c. 116, § 10, which, among other matters, provided that a banking corporation ‘may establish regulations controlling the assignment and transfer of its shares.’

The testator died August 15, 1937, and the defendant executors were appointed September 21, 1937. The defendant trustees were duly appointed on October 18, 1938. They received from the executors on December 7, 1938, the shares of the plaintiff as a part of the trust estate and now have possession of these shares. The accounts of the executors, including the final account, have been filed in the Probate Court.

The secretary of the plaintiff on December 29, 1938, made a written request of the executors to offer the stock for appraisal in accordance with the terms of the by-law. The directors on January 12, 1939, appraised the value of the stock and voted to purchase the shares for the purpose of re-allotting them to persons whom the officers believed would be desirable stockholders. The executors refused on April 26, 1939, to accept the appraised amount with interest from January 12, 1939, and refused to transfer the stock. The present bill was filed on July 27, 1939.

The defendants contend that this is a suit by a creditor of the testator which was not commenced within a year of the time the executors qualified, by the acceptance by the Probate Court of their bonds, for the performance of their trust and that, consequently, the suit is barred by G.L.(Ter.Ed.) c. 197, § 9, as amended by St.1933, c. 221, § 4. On the other hand, the plaintiff contends that the basis of its bill is the refusal of the executors to transfer the stock in accordance with its request of December 29, 1938, that the suit was seasonably brought within one year thereafter in accordance with G.L.(Ter.Ed.) c. 260, § 11, and that neither of these two last statutes applies as the bill seeks to enforce an equitable interest that the plaintiff has in the shares of stock. The determination of the issues thus presented depends entirely upon the nature of the obligations assumed by the decedent as a part of the transaction by which he acquired the stock.

We need not consider the authority of the plaintiff, hereinafter referred to as the bank, to promulgate by-laws purporting to govern the transfer of its shares, for the reasons mentioned in New England Trust Co. v. Abbott, 162 Mass. 148, 38 N.E. 432,27 L.R.A. 271, although since that decision the power of business corporations and banking corporations to establish restrictions upon transfer of their shares has been greatly broadened. G.L. (Ter.Ed.) c. 172, § 15, as amended by St.1934, c. 349, § 10. Barrett v. King, 181 Mass. 476, 63 N.E. 934;Silversmiths Co. v. Reed & Barton Corp., 199 Mass. 371, 85 N.E. 433;Adams v. Protective Union Co., 210 Mass. 172, 96 N.E. 74;Longyear v. Hardman, 219 Mass. 405, 106 N.E. 1012, Ann.Cas.1916D, 1200;Fopiano v. Italian Catholic Cemetery Association, 260 Mass. 99, 156 N.E. 708;Albert E. Touchet, Inc., v. Touchet, 264 Mass. 499, 163 N.E. 184;Anderson v. Bean, 272 Mass. 432, 172 N.E. 647, 72 A.L.R. 959. We do not, however, laying that issue to one side, intimate that these by-laws are invalid.

The testator at the time he purchased the shares entered into a contract with the bank that he would not transfer the shares without first offering them for appraisal and sale to the plaintiff, and that his executors would, at the request of the plaintiff, offer any of said stock that he owned at his death for appraisal and sale. The certificates were issued to him not only in consideration of the price paid, but also in consideration of his undertaking that these restrictions concerning the transfer of the shares would be complied with during his lifetime and after his death. New England Trust Co. v. Abbott, 162 Mass. 148, 38 N.E. 432,27 L.R.A. 271;Brown v. Little, Brown & Co., 269 Mass. 102, 168 N.E. 521, 66 A.L.R. 1284;Krauss v. Kuechler, 300 Mass. 346, 15 N.E.2d 207, 117 A.L.R. 1355;Searles v. Bar Harbor Banking & Trust Co., 128 Me. 34, 145 A. 391, 65 A.L.R. 1154.

One may make a contract that can be performed only after his death by his executors or administrators and will be binding upon his estate. Harlow v. Dehon, 111 Mass. 195;Phillips v. Blatchford, 137 Mass. 510;Krell v. Codman, 154 Mass. 454, 28 N.E. 578,14 L.R.A. 860, 26 Am.St.Rep. 260;Earle v. Angell, 157 Mass. 294, 32 N.E. 164;Early v. Moor, 249 Mass. 223, 144 N.E. 108, 33 A.L.R. 362;Hale v. Wilmarth, 274 Mass. 186, 188, 174 N.E. 232, 73 A.L.R. 980;United States v. Stevens, 302 U.S. 623, 58 S.Ct. 388, 82 L.Ed. 484. The executors held the shares subject to the right of the bank to purchase them in accordance with its contract with the decedent, and, upon the failure of the executors to comply with the terms of the contract, the bank could bring an action at law for damages, Wonson v. Fenno, 129 Mass. 405;Fitzgibbons v. White, 296 Mass. 468, 6 N.E.2d 429, or a bill in equity for specific performance where, as here, the stock was not readily procurable in the open market. Adams v. Messinger, 147 Mass. 185, 17 N.E. 491,9 Am.St.Rep. 679;Krauss v. Kuechler, 300 Mass. 346, 15 N.E.2d 207, 117 A.L.R. 1355. Whichever procedure the bank adopted, its rights depended upon the contract, and its cause of action accrued only after a demand by the bank and a refusal by the executors to transfer the stock in compliance with the restrictions. The executors had no greater rights in the shares of stock than did the testator, and they held them subject to the right of the bank to purchase them. The question is whether the bank, as the holder of what was substantially an option, stood in any better position than a creditor of the estate.

The short statute of limitations, G.L.(Ter.Ed.) c. 197, § 9, as amended provides that an executor or administrator shall not be held to answer any action of a creditor of the deceased unless the action is commenced within a year of his giving bond for the performance of his trust. The purpose of the statute is to expedite the settlement of estates. Stebbins v. Scott, 172 Mass. 356, 52 N.E. 535;Parker v. Rich, 297 Mass. 111, 8 N.E.2d 345;Spaulding v. McConnell, 307 Mass. 144, 29 N.E.2d 713. And, in view of its aim, the term ‘creditor’ as used therein has been given a broad and comprehensive meaning and includes one having a claim not only in contract but also in tort against the estate, and the word ‘action’ as appearing in the statute has been held to apply to proceedings both at law and in equity. Ginzberg v. Wyman, 272 Mass. 499,172 N.W. 614;Lynch v. Springfield Safe Deposit & Trust Co., 300 Mass. 14, 13 N.E.2d 611;Dietrick v. Hayward, 304 Mass. 623, 24 N.E.2d 683;Mulligan v. Hilton, 305 Mass. 5, 24 N.E.2d 676, 133 A.L.R. 376. The statute does not apply to suits to enforce equitable interests in property of a decedent in the possession of an executor, as such a suit is not only by a creditor to collect a debt but one by the holder of an equity to enforce his title. Johnson v. Ames, 11 Pick, 173;Nashua Savings Bank v. Abbott, 181 Mass. 531, 63 N.E. 1058,92 Am.St.Rep. 430;Stoneham Five Cents Savings Bank v. Johnson, 295 Mass. 390, 3 N.E.2d 730, 106 A.L.R. 1333.

Although the testator could not during his lifetime transfer his stock without first offering it for sale to the bank, he did not thereby continue to be a debtor of the bank so long as he continued to own the...