Union Mkt. Nat. Bank of Watertown v. Gardiner (In re Whitney's Estate)

• Decision Date: 12 September 1931
• Citation: 276 Mass. 490,177 N.E. 682
• Parties: UNION MARKET NAT. BANK OF WATERTOWN v. GARDINER et al. In re WHITNEY'S ESTATE.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

276 Mass. 490

177 N.E. 682

UNION MARKET NAT. BANK OF WATERTOWN

v. GARDINER et al.In re WHITNEY'S ESTATE.

Supreme Judicial Court of Massachusetts, Norfolk.

Sept. 12, 1931.

Appeal from Probate Court, Norfolk County; J. R. McCoole, Judge.

Petition by the Union Market National Bank of Watertown for the retention of assets by Robert H. Gardiner and others, executors of the estate of Ellerton P. Whitney, deceased, to satisfy a claim of the bank against the estate. From a decree of a probate court allowing the petition, the executors appeal.

Affirmed.

R. Homans and F. Adams, both of Boston, for appellants.

D. Burstein and V. C. Brink, both of Boston, for appellee.

RUGG, C. J.

This is an appeal from a decree of a probate court allowing a petition of the Union Market National Bank of Watertown for the retention of assets by the executors of the will of Ellerton P. Whitney to satisfy a claim alleged to be held by it against his estate. The relevant facts are these: The testator died in February, 1928; his will was allowed and the bonds of his executors were approved on March 21, 1928. The executors gave due notice of their appointment. The testator for several years and until his decease was the treasurer and a director of the Newton Sand and Gravel Company, a corporation organized under the laws of this commonwealth and hereafter termed the corporation. The corporation was indebted to the bank on a promissory note indorsed by the testator, on which payments have been made but on which a substantial balance is still due. No action was commenced to enforce the liability of the testator on this note within one year from the time of giving bonds by the executors, that is, by March 21, 1929, as required by G. L. c. 197, § 9. On December 3, 1929, the bank made written demand on the corporation for payment of the balance due on the note and the corporation neglected to pay it for ten days thereafter. On December 23, 1929, the bank brought a suit in equity to enforce the statutory liability of the testator as treasurer and director of the corporation. The bill in that suit contains allegations of facts as to conduct by the testator to establish such statutory liability. It also is alleged that knowledge of these facts did not come to the bank until December 3, 1929, when demand was made upon the corporation for the payment of the note. The statutory liability sought to be enforced is set out in G. L. c. 156, § 36, whereby it is provided, so far as here material, that the ‘president, treasurer and directors of every corporation shall be jointly and severally liable for all the debts and contracts of the corporation contracted or entered into while they are offers thereof if any stock is issued in violation of section fifteen of sixteen, or if any statement or report required by this chapter is made by them which is false in any material representation and which they know, or on reasonable examination could have known, to be false. * * *’

The cause of action thus described and the method of its enforcement are wholly the creature of the statute. They were unknown at the common law. Old Colony Boot & Shoe Co. v. Parker-Sampson-Adams Co., 183 Mass. 557, 559, 67 N. E. 870. The method of enforcement of such liability is set forth in G. L. c. 156, § 38, in these words: ‘* * * The president or treasurer, or a director * * * shall be held so liable under section thirty-six, * * * if before a suit to enforce such liability is brought by a creditor of said corporation, a written demand by or on behelf of the creditor upon such corporation for the payment of this claim has been made, and said corporation has for ten days thereafter neglected to pay it * * * after the said demand and neglect to pay the claim, any creditor may file a bill in equity * * * in behalf of himself and of such other creditors of the corporation, entitled to enforce their claims against the same defendants, as may join in the bill as plaintiffs, against it and all persons who are liable to the plaintiff as * * * officers. * * *’ Further provisions in the following section 39 are these: ‘Such suit shall not be discontinued by the plaintiff except by order of the court after notice to other creditors. It shall not * * * abate by reason of the death of a defendant, but his estate shall be liable in the hands of his executor, * * *’ if he becomes a party to the suit.

The present proceeding is founded on G. L. c. 197, § 13. Its pertinent words are: ‘A creditor of the deceased, whose right of action does not accrue within one years after the giving of the administration bond * * * may present his claim to the probate court at any time before the estate is fully administered; and if, upon examination thereof, the court finds that such claim is or may become justly due from the estate, it shall order the executor * * * to retain in his hands sufficient assets to satisfy the same. * * *’

The respondents contend that the claim of the bank founded on the statutory liability of the testator as officer of the corporation did not survive the death of the testator and that, not having been put in suit during his life, it cannot now be enforced. Although the action thus created by statute has often been referred to as penal, that is not decisive against its survival. ‘Such allusions are ordinarily descriptive, and not constructional.’ E. S. Parks Shellac Co. v. Harris, 237 Mass. 312, 318, 129 N. E. 617, 619, and cases reviewed. It was decided in Hudson v. J. B. Parker Machine Co., 173 Mass. 242, 53 N. E. 867, that under the statutes then in force this statutory liability of an officer of a corporation, even though not put in suit during his life, continued after his death against his property in the hands of an executor or administrator. Since that decision there has been no change in the governing statutes affecting this point. The circumstance that Pub. St. c. 106, § 66, continued in R. L. c. 110, § 64, was omitted from the revision found in St. 1903, c. 437, and does not appear in G. L. c. 156, wrought no change in this particular. That section was negative in form, did not create liability but limited a liability otherwise created, and related to liability resting on ownership of stock and not on conduct as an officer. Compare Gray v. Coffin, 9 Cush. 192, 199, and Mansur v. Pratt, 101 Mass. 60. It was stated in the course of the discussion in E. S. Parks Shellac Co. v. Jones, 265 Mass. 108, at page 113, 163 N. E. 883, that it was plain from G. L. c. 156, § 37, that the Legislature intended that this cause of action should survive the death of a party. This conclusion is fortified by G. L. c. 230, § 1, whereby it is provided that ‘an action which would have survived if commenced by or against the original party in his lifetime may be commenced and prosecuted by or against his executor or administrator.’ By the express terms of G. L. c. 156, § 39, already quoted, an action begun against such officer during his lifetime would survive his death. The word ‘action’ in said section 1 is used in a sense sufficiently comprehensive to include a suit in equity such as that here sought to be maintained. Boston v. Turner, 201 Mass. 190, 196, 87 N. E. 634; Pigeon's Case, 216 Mass. 51, 56, 102 N. E. 932, Ann. Cas. 1915A, 737;Ginzberg v. Wyman, 272 Mass. 499, 172 N. E. 614. The terms of said section 1 are not restricted to the actions which survive under G. L. c. 228.

The bank is a ‘creditor’ of the testator within the meaning of that word in G. L. c. 197, § 13. With respect to a claim of this character it was held in Nickerson v. Wheeler, 118 Mass. 295, that the liability was imposed by statute and should be construed with reference to the...